Resilient DeFi with Kirk Hutchison | Layer Zero

The idea that we're gonna today in 2022 create an immutable system that will work forever with no changes is ridiculous, right? Um every system that's ever been made has been changed a lot. Uh Ethereum's a lot different than it was when it started. Bitcoin's a lot different than it was when it started. There's nothing that will work without change and be adopted and used long term without change. However, you can get it so that the procedures for change are less subject to abuse.

Welcome to Layer Zero.

Layer Zero is a podcast of unscripted conversations with the people that make up the Ethereum community. Crypto is built by code but is composed by people, and each individual member of the crypto community has their own story to tell.

Cypherpunks understood that the code they write impacts the people that use it, and Layer Zero focuses on the people behind the code because Ethereum is people all the way down, and it always has been.

Today on Layer Zero, I'm talking with Kirk Hutchison of Volt. And Volt is an inflation hedge stablecoin. It's a stable coin that is hopefully designed to uh restore and retain its value as inflation goes up and up and up, which is a very timely conversation. However, we don't actually start the conversation there. Kirk has been uh recommended to me by many, many different people from across the DeFi ecosystem with universal consensus about this giga brain nature of this guy Kirk. And so, in order to meet this guy Kirk and get to know why everyone respects him, I just decided to pull him straight onto a podcast. And so

We dive down the rabbit hole of some very primitive DeFi concepts that we haven't really revisited in Bankless for a very long time. This concept of no magic numbers when we design our DeFi protocols. Anything arbitrary in a DeFi protocol is fragile. And if it's fragile, it's gonna break. And so we talk about that concept. He also is very, very attuned to the world of monetary policy and economics and trying to apply the lessons of TradFi and like economic history into the lessons of DeFi. So rather than this being like a more typical layer zero episode where I'm actually trying to go into like the soul and personality of our guests, this is me just trying to figure out how uh Kirk thinks and what he's trying to do and what does what he prioritize. And I find a ton of alignment with what he is building.

How he's building it and what he's modeling it after. And so I hope you guys follow me down this rabbit hole of understanding Kirk and also understanding Volt's Volt and seeing where all of this goes when the ecosystem that Kirk uh envisions for the for the DeFi ecosystem uh comes to fruition. So let's go ahead and get right into the show.

Right after we get to some of these fantastic sponsors that make the show possible. Big List Nation, I'm here with Kirk Hutchison, co founder of Volt Protocol. And Kirk has been universally recommended to me from by a number of people who I know and trust in the crypto space. The word gigabrain uh has been used a number of times to describe Kirk. Uh, I don't know where this conversation is going to go, but I have a feeling it's going to be a good one. Kirk, welcome to the show.

Thank you so much, David. I'm really excited to be here and

um, you know, flattered by the kind words that people have said of me. I've definitely

Am like, you know, kind of a theory cell as far as crypto stuff. I come from a very

mechanism nerd, like look into the history, look into all the nitty gritty of it. Um, and I feel very grateful for the opportunity to build and practice that now. Um, but

um yeah, that's how I'd introduce myself.

Fantastic. Yeah, crypto definitely offers a blank slate for thinkers to

begin to tinker. So like uh ooh, I like that line. Uh thinker's gonna tinker. Uh so as a as a thinker, Kirk, what do you think about? What what what are the subject matters that you often uh ideate in your imagination?

Well, the thing that got me

into crypto in the first place was, like many people, in general, the idea of censorship resistance, not just money. Um, you know, things like social networks as well. Uh and I

Took a brief sojourn trying to be a Solidity dev. I was never a particularly good one, although I gained useful insights by trying to learn that.

I became fixated after a while on the problem of

scalability in governance

and how, you know, if you look at like token governance models today, such as MakerDAO,

how they decide to tune parameters in the system or add new collaterals,

there's quite a bottleneck of attention. Uh, you know, the attention of the whole DAO at one time is not very scalable. And so I was thinking a lot about that problem.

Especially in the context of big

stable coins.

And that's what drew me to

fuse and you know Rari Capital and the Tribe Dow ultimately was

looking at more permissionless lending markets and thinking how could you

govern deployment of PCB or lending capacity in one of those markets in a more scalable market based approach.

And that was what was my original idea that let was behind Vault. It's been quite a

journey since then and a lot of other elements. And the scope of the problem for me has expanded into the question of.

Really, how can you correctly make a decentral bank?

Uh, you know, the

fully symmetrical currency and credit markets and everything, you know, all the types of things that people need banks for,

uh, in a

totally transparent on chain way that is governed ideally by markets and not by votes.

Uh, because

the votes are where it gets sticky. Um and

Think anything that is like asynchronous decision making, not very ideal for like a continuously running open system. That's why Ethereum or blockchains are so good is because they don't go down or they're not supposed to, right? There's always always there and it can't be disrupted. Um so having

some of the principles about what makes L1 so good and thinking about can we take that

um

into these you know applications and you know make further strides in the design is really what I'm obsessed with and how we could

um

yeah, I I'm inspired a lot by what exists. I also am inspired a lot by TradFi and learning about everything, how that works. And I think that there's a lot to learn.

As far as

building those functions, but not necessarily in the same package

on chain.

Yeah, I have a feeling this is going to be a pretty uh brainy and uh technical show. So I definitely as we go along want to take some time to define some stuff uh Ed to make sure that all the listeners are keeping up with us. Uh you used a term which I have not heard in a very long time a decentral bank. Uh now that that term of decentral bank is something um

I think I think I might have memeed this thing in 2018 when I was first getting into the world of content production and using it to describe Maker Dow. It was like I understood MakerDAO at the time to be like a c a version of a central bank as in it controlled interest rates, it had a monetary policy, it had like assets and liabilities, uh, but it was decentralized. And so, like, well, how do you talk about these things? Well, like, let's call it a decentral bank. Meme never really caught on. But I think uh as we extrapolate from 2018 to where we are now.

I think what you're leaning into is like there is a more rather than Maker Dow being the decentral bank, there is the concept of a decentral bank. And MakerDAO is now just like one flavor of that or one implementation of that. And I'm getting the idea that Volt is an alternative flavor of a decentral bank. But before we go with into Volt, can you talk about the concept of a decentral bank? You use some other words that I'd like you to define as well, as in a fully symmetric currency. That one left a question mark in my head, as well as asynchronous votes. So can we talk about like the model of a decentral bank for a model and then talk about those two uh dynamics of a uh components of decentral bank symmetric currencies and asynchronous asynchronous votes? Can you talk about those things?

That sounds great. So if we I think maybe we should start by just asking about like

in a modern context, what is money?

And since pretty much, you know, at least the Industrial Revolution,

money means

either a currency issued by, you know,

a central bank,

um, or maybe a deposit at a bank that issues its own independent notes. Um, and usually

This represents some kind of like a hard money

value,

you know, which could be gold, it could be central bank notes.