Helios Horizons - Episode 4 - Exploring On-Chain Perpetual Markets and the Future of DeFi with Jonathan Caras

JB Carthy: 0:00

So, yeah, thanks for everyone for joining us again here. Welcome to Helios Horizons, episode 4. Each week we just explore exciting topics from Web3 with thought leaders in the space. This week we have Jonathan Caras, Head of Communications at Levana, offering us an introduction to on-chain perpetual markets. And, listeners, remember, share this space for the chance to win some LVN, some INJ, some EGLD. We like to share the love. Let's dive in and, Jonathan, I obviously know you well, obviously, being involved with Levana, it's a pleasure to welcome you on to Helios Horizons and maybe offer listeners a brief intro to yourself and Levana.

Jonathan Caras: 0:38

Sure, so I've been in this space since 2016. So I can't even count how many years that is at this point, but it's a long time. I was a Head of Research at a crypto fund called Lion Chain Capital. I uh kick-started the business development department at Starkware, was there for almost two years, was a part of Delphi Labs. The Luna Guard, Guard got into Cosmos around 2021.

Jonathan Caras: 1:13

After the collapse of Terra, we launched Levana, which is a peer-to-pool perpetual swap platform. We launched it on Osmosis, Injective and Sei. Since the launch in July of last year, we've had about 23,000 unique users of the protocol. We've had about $2.5 billion of trading volume. We've collected, I think, a little over $3 million of fees and we launched recently the LVN token, which governs the protocol and controls, or will control through staking and governance, which markets are launched, how they're configured and how fees are distributed. So, super excited about that.

Jonathan Caras: 2:08

If you're an LVN holder today, there's a lot of different opportunities for you. You can stake on Osmosis, on Shade, on Mito we're on Kujira and a few different other platforms, and the team most recently have launched a bunch of different meme markets. So we've got Bonk and Doge and Dog wif Hat and a few others and our bread and butter, I think, is really, you know, launching a staked token purpose market, actually use those stake tokens as collateral to either earn additional yield or to provide collateral for opening leverage trades. So it's a pretty unique protocol, very popular within Cosmos and happy to delve into anything else that we want to talk about.

JB Carthy: 3:24

No 100%, and thanks for that comprehensive introduction to Levana. And I think something that, like our listeners here at Helios Horizons will probably be interested in is we are staking providers for injective. So any INJ holders might be particularly interested in this discussion today and because obviously levana are on Injective. So, leading on from that, maybe for users who are unfamiliar with some of the terms that you were chatting about, in simple terms, what is a perpetual swap market? What is an on-chain perps market?

Jonathan Caras: 4:01

Sure. So the most popular trading within crypto is called spot trading. So that means that you know if I've got stable coins, I can swap those stable coins for crypto assets, you know. So I might trade USDT for Injective, I might trade USDC for Osmo or for Atom. But essentially, I've only, I've got a very limited amount of choices here. I can either go long by holding the underlying asset or I can be out of the market by holding stable coins. So those are my two options.

Jonathan Caras: 4:40

Now, with perpetuals, you've got a much wider set of options where I can.

Jonathan Caras: 4:48

You know I could take a leverage position where you know if let's, you know if it was, if it moved in in the direction that you expected, that you would benefit 10% because you were 10 times leverage what the market was.

Jonathan Caras: 5:14

And you know if you didn't want to be and Levana supports on on its various markets up to 50% leverage, and also if you wanted to profit from the market going down.

Jonathan Caras: 5:28

So then you'd be able to take a short position. And now this could be good if you're a degen, but it could also be very great if you just want to hedge, like, let's say, for example, that you were staking to a validator and the market just went up a whole bunch and you wanted to be able to take some profit off the table. So, you know, instead of removing your validator position, you might decide that you just want to take a short, which essentially lowers your exposure to the underlying asset without forcing you to pay any of the fees or take any penalties, or, you know, to be adversely affected from messing with your first position. So, within traditional finance, I mean, derivative markets, perpetual markets, are an incredibly useful general purpose trading tool and we're very excited to bring a really easy perpetual market to a number of different chains and to over 40 different assets within crypto.

JB Carthy: 6:42

Thanks for that really great introduction, really great explanation about a perpetual swap market offers, use and I think that example is very interesting for obviously staking providers here and the ability for people to maybe take profits or secure profits or secure their portfolio a little bit without actually having to like withdraw from the underlying position or move it all into stables and the opportunities that on-chain perpetuals will offer people to maybe manage and grow and their DeFi portfolios and allow them to employ a greater variety of strategies and how they engage with the space and the assets is definitely going to be interesting going forward. And maybe obviously you touched touched on earlier at the start. You have like a long history in the space, going back a number of years, and I suppose what inspired you most to become involved with the Levana, what makes Levana, do you see, different to other perp markets and what problems does it solve specifically in that on-chain perp space?

Jonathan Caras: 7:49

Well, I think that the peer-to-pool model, everything being on-chain, no need for an off-chain order book, makes it really easy to launch new markets. You have the ability to launch on different chains. Ultimately, what the goal of Levana is, is permissionless markets. So where you'll be able to, you know, just like with Uniswap, anybody is able to create their own, you know, market. So too, with Levana, that's the ultimate goal is that anybody will be able to just, spin up a new market and collateralize that.

JB Carthy: 8:45

So you want to bring like purpose and on-chain perpetrating to a wider variety of assets, as with the name, as the name suggests Levana, and leverage any asset and maybe you can. Actually it's a, it's an interesting story to the name and maybe you can go into a little bit a bit about why you chose the name Levana and I know you told me a couple of times but the listeners might find it interesting and all the little kind of nuances that went into it.

Jonathan Caras: 9:09

Sure, yeah, Levana is an acronym for leverage any asset, and the goal is to make a really simple platform that enables any market that exists on spot within crypto to have a leverage counter. You know a component to it, so it is. You know it's been, you know it's been a lot of fun building out Levana and you know there's a lot of opportunity within the leverage space. There's about, I think, 84 different perps that we've, uh, we've seen launch over the past couple years um and uh. Right now, Levana, I think, is like, you know, is in the more popular end of the market and you know we just continue to grow.

JB Carthy: 10:10

And remember, guys, if you're tuning in and listening to the space, remember to share it for the chance to win some LVN, some INJ and or some EGLD. And we just like to give back to the people who give up their time to tune in and join us on these spaces. And moving on a little bit maybe from the trading aspect and maybe moving on to other opportunities in the market space or other opportunities that are available to users to earn yield and I know on Levana it's possible to earn yield in other ways than simply trading or predicting the direction of the markets and maybe you could go into a little bit about this and why it might be a unique opportunity for users to try.

Jonathan Caras: 10:58

Well, you know, the simplest thing is to just take a long position or take a short position.

Jonathan Caras: 11:04

But you might actually take a delta neutral or market neutral position by holding a long position outside of Levana.

Jonathan Caras: 11:12

So maybe you are long on Helix or on Osmosis DEX or on Binance and then you're short on.

Jonathan Caras: 11:24

Levana, so you might pick up a funding rate on Levana, which you know we, you know people, if you, if you take the less popular side of the trade, in many cases you, you know you get paid fees for that, so you might take, you might end up getting paid to actually go short. And then you know, and then if you're, if you're dealing with a liquid staked token or or you're farming somewhere else, you know you might be paid to go long, so you can actually get paid both sides of the trade, or you're farming somewhere else, you know you might be paid to go long, so you can actually get paid both sides of the trade and you're not actually exposed to the underlying asset, but, you end up getting paid anyways.

JB Carthy: 12:10

statistically I think I was looking at it the other day I think almost 90% of day traders are unprofitable and maybe Levana offers users the opportunity to benefit from this and maybe going a little bit more into the opportunity to provide liquidity to the markets.

Jonathan Caras: 12:26

Well, you definitely don't need to trade to get involved with Levana. You could just be a liquidity provider. You know you could bet on the house and so from that perspective, you're essentially anticipating that most traders are going collect fees from trader positions. Now you are exposing yourself to the risk of trader wins, which would become yours as the house loses. But in general, as you said, most traders over the long term end up losing.

JB Carthy: 13:09

Yes, and that obviously leaves an opportunity in that space. So maybe moving on a little bit, if you want to dive in a little bit, to maybe what's next for Levana, the next steps on the roadmap for Levana, and then we're just going to maybe take a couple of questions from the audience and we'll leave it with and chat a little bit about maybe the wider Web3 and the wider DeFi space. But and what's next for Levana in terms of what are the next steps in the roadmap and what are you excited about for Levana in the next few months?

Jonathan Caras: 13:42

So we're building out the governance portal. You know which is the next major milestone and that will be heading to the public. It's on private testnet right now. It'll be heading to public testnet, you know, over the next, I think, two weeks and after that, just more great features to improve the trading experience. We've got more integration with various L2s on Bitcoin and, in general, just feedback from the community which primarily impacts our prioritization of improving the trading experience.

JB Carthy: 14:37

For sure, 100%. I'm just going to open the floor to any if anyone wants to come up from the audience, maybe ask a question or join the discussion, if there's anything that anyone would like to maybe touch on or ask, and if you want to stick up your hand or request to speak and we'll be happy to invite you up. I see Zayne in the audience and he's one of our youngest members and, I think, over from new zealand, australia, that direction, and he keeps compounding his staking rewards every week or every month, so he's on a great journey. I see a few other familiar faces there. Cornish, Xdorsoft, Cris.

JB Carthy: 15:16

If any of you guys want to pop up and ask a question, feel free to request to speak. I'm going to invite you up. Hello, Zayne, as well. Pleasure to see you in here. Yeah, no, 100%. So while maybe we're waiting to see if anyone wants to pop up and ask a question, I suppose, Jonathan, is there anything in the DeFi space as a whole that particularly excites you here or any developments on a wider level that are interesting to you at the moment?

Jonathan Caras: 15:45

I mean, you know we're excited about the whole restaking environment. We're excited to see how Bitcoin integrates better into DeFi. You know, and just in general, you know, we think that the market has been captivated by memes and it's unclear, you know, long meme scene, meme season will last, but, you know, definitely excited for when projects that are you know, have a little bit more depth to them start getting more of a focus.

JB Carthy: 16:32

The focus on maybe building and the focus on maybe substance behind projects in the space and I think that focus on security and fundamentals first is a movement that's going to have to come to the forefront a little bit more in the space. It's obviously evident with the different events that happen, with people maybe having wallet drains and different like protocols being attacked and things like that that the focus always has to be when managing users, funds, having that security and that fundamentally sound foundation and at the forefront, one thing I particularly am interested, interested in over the next few months, is the movement of interoperability and seeing where it leads, and I think it's going to be very, very interesting in terms of it's not going to matter so much where, let's say, protocols are built or where products or platforms are built. I think, with things like Axelar and Wormhole and Entangle coming forward and offering significantly improved interoperability and bridging solutions than was available maybe even less than 12 months ago or just over 12 months ago, I think the interoperability and the ability to move liquidity between chains and between protocols is going to lead to increased competition and efficiency in the space, which is something I'm personally excited for.

JB Carthy: 17:49

I think it's going to bring the space forward a lot. I think the same way, let's say, the actual performance of the chains have been improved by, let's say, the competitive nature of needing to attract users. So they're all looking to become more scalable, more cost effective and provide a better user experience. And I think the same way, the chains are endeavoring to provide a better user user experience. The protocols that focus on the user experience and focus on the fundamentals are going to have a better chance at attracting and finding the right users because of the ability to transfer liquidity a little bit more seamlessly between chains. I think that's going to be an interesting development over the next few months.

Jonathan Caras: 18:34

Yeah, definitely, I agree. I think that as the user experience around moving funds improves, then it just you know which. We're seeing bridges get better every day, then it becomes more opportunity at the application layer, to do things that you know, that that drastically change the user experience, and then that's really where we're focused on.

JB Carthy: 19:17

It's been a pleasure to have a chat and I don't think there's any questions from the audience. And don't, don't forget, guys, and if you still share the space and give people the opportunity to find it, we're going to host a giveaway, probably tomorrow and for people who shared the space, so don't forget to click on the like and give it a little share. Spread the word about what we're trying to do here, have interesting discussions about Web3, about DeFi, about the space, and bring education to the community, bring information to the community. And but, Jonathan, do you have any maybe final words? You want to leave everyone here with and before we maybe call it a day no, that's you know.

Jonathan Caras: 19:58

It was a great space. I really enjoyed the time and I appreciate it and, I look forward to catching guys for the next one.

JB Carthy: 20:06

No problem, no problem, and it was. It was a pleasure to host. I see Kevin. I see Kevin popped in here and he's the man. He's the man who runs Helios here. If you want to pop up and say hello, he might be busy. There's no problem with that, and but it was a pleasure to have you on and Jonathan thanks for joining and thanks to everyone for listening in. Great to see you all here and hope to see you again next week. Awesome, all right, thanks.

Jonathan Caras: 20:35

No problem, have a great evening. Thanks everyone, guys. All right Bye.