AMA Highlights – Plasm Network & Acala Network
By Daniel Dal Bello, Director.
October 30, 2020 – 10 min read.
On Friday 30 October, we welcomed Sota Watanabe of Plasm Network and Bette Chen of Acala Network into the Hillrise Capital Telegram chat for an AMA. Both startups share a common interest in the Polkadot architecture and are two of the most anticipated projects building in this growing ecosystem.
Sota Watanabe is the CEO of Stake Technologies based in Tokyo, Japan. Stake Technologies are the developer of Plasm Network – the leading smart contract platform being built on Polkadot to support cutting-edge layer-2 applications.
Bette Chen is a founder of both Acala Network and Laminar. Acala Network is the de facto decentralized finance hub for Polkadot, providing infrastructure and services for the DeFi ecosystem.
In this post, we have compiled key questions and answers from our AMA event.
Daniel Dal Bello
Welcome to you both and thanks very much for being here today. I’d like to start with introductions from you both and to your projects. Also it would be great to hear about how you both know each other!
Welcome and thank you for joining us, I’m looking forward to learning more about your projects and the Polkadot ecosystem!
Hello everyone. Thank you for having me. I am Sota Watanabe, a founder of Plasm Network, a scalable smart contract platform on Polkadot supporting cutting edge layer-2 solutions.
I used to be a blockchain researcher at the University of Tokyo and now I am a task force member of the Web3 council led by the Japanese government. Our vision is to make Web3.0 scalable that’s why we are building a scalable public blockchain on Polkadot. I met Bette and the Acala team around 1 year ago, so I may have known them actually before they founded Acala. We both participated in the Web3 Bootcamp and UC Berkeley Xceleration program, so Acala is our good friend.
Hi, great to be here. This is Bette, Cofounder of Acala. I have an engineering background and was a developer in a previous life, then I went to the dark side of product management. Acala so far is an engineer-centric team, the majority of the folks are engineers, so I’m happy to be the wildcard and also compliment my team’s skill set!
Acala is the DeFi hub for Polkadot and is also launching a DeFi hub for Kusama – Karura Network. Both provide DeFi infrastructure and services for the ecosystem. We’ve built a minimum set of DeFi primitives to bootstrap the ecosystem & liquidity, namely a stablecoin, DEX, and trustless staking derivative.
I met Sota at Hangzhou Substrate Hackathon last year. And we were both part of the Berkeley Blockchain Xcelerator – it’s fairly awesome to ‘grow up’ with good folks in the ecosystem together.
When we discuss governance this is also particularly relevant to Plasm Network. Your project is “a community-led project with the vision of turning this platform into a DAO”. What does the future of Plasm look like? Will you dissolve the official entity locally and transition to a fully decentralized governance model?
Great question! Yes, we aim to make a DAO. Currently our network is PoA [Proof of Authority] since we have a lot of stuff we have to implement. But in the future, it will be PoS [Proof of Stake] and we will enable on-chain governance. That’s why we have done Lockdrops. Fair launch is really important to make a DAO. Currently Plasm Network is led by Stake Technologies, inc. However, we will close the company and I will make a new foundation later this year. In the long run, I will close the foundation as well and I will contribute to the network as a single open source contributor.
Daniel Dal Bello
Your ACA token is used as a network utility token, governance token and contingency solution. Although you have several angles for utilization, we see a lot of projects who after years of having a live network still struggle to provide sufficient utility to the token for holders to actively engage in the network.
How is Acala approaching token utility in a way to ensure future value, and how do you see the utility of your token growing over the next few years?
Great question. It’s worth stepping back to understand that Polkadot is the layer-0, providing security via PoS economics. But it does not dictate the economics of dApps or chains connecting to it, meaning you can design an economy including how fees work that suit your particular use case, independent of Polkadot.
And this is what Acala did.
• Acala is a fully-fledged blockchain that has it’s own economy, it generates revenue from fees, and various DeFi protocols.
• Acala has a soveriegn wealth fund (‘dSWF’) that manages the profit and reinvests for ‘perpetuation’ of the network. This dSWF is collectively owned by ACA holders.
• ACA holders also collectively decide when and how the network should be upgraded or improved. For example, if we want to change the interest rate, then ACA holders can collectively decide & execute that. Also if we have a new improvement, say ‘Quality of Service’ for Oracle price feeds, then ACA holders can decide to upgrade and use the new feature collectively. All forkless by on-chain governance.
Also dApps built on Acala can also enjoy customized economic models – e.g. smart contracts can use a subscription model rather than the plain pay-as-you-go model, or stake to subsidize free transactions. Acala is also accepting various tokens as the native fee token (‘FlexFee’) – e.g. BTC, maybe ETH, USDC, so when you’re transferring USD, you pay USD as fees.
“dApps built on Acala can also enjoy customized economic models – e.g. smart contracts can use a subscription model rather than the plain pay-as-you-go model, or stake to subsidize free transactions.”
Daniel Dal Bello
Thanks for clarifying some of the governance points. So, your token holders will be able to actively engage in governance and vote on those larger decisions such as network upgrades that you mentioned. You’re clearly very focused on positioning as the de facto DeFi hub for Polkadot – which is really interesting to us. What’s your more general view on DAOs and governance tokens in the DeFi world?
We don’t believe if you declare you’re a DeFi chain, then people will come and build/use just because you’re 10,000 times faster or cheaper than existing solutions. Our approach is to build a great suite of DeFi products (a stablecoin, DEX, and staking derivative) to serve the Polkadot community first, then the wider crypto community, and also build liquidity – we’ve integrated with cross-chain liquidity to bring BTC, Ethereum ERC-20 and other assets onto Acala/Polkadot. Our Ren integration is an example, and there are others to come.
We’re also selected into the Chicago DeFi Alliance, which has helped bootstrap liquidity for Synthetix, dYdX and other projects, so hopefully we’ll help build great cross-chain liquidity for the wider Polkadot ecosystem as well.
Daniel Dal Bello
The approach with the DeFi products you mentioned is a great base and with the integration of the cross-chain capability… well, we’re excited about Acala.
Thanks! We’ve also added EVM support. The way Substrate works make innovation happen at an exponential rate across the entire Polkadot ecosystem. EVM is one of the modules available to Substrate that you can plug & play, if there’s improvement, you simply upgrade without a hardfork. So, teams like Acala & Plasm can focus more on solving specific domain problems.
Sota, Ethereum is without a doubt the tried and tested smart contract environment. While it has issues it’s arguably still the most relevant layer-1 ecosystem when we discuss smart contracts and especially with the growing DeFi trend. What’s the significance of supporting the Ethereum Virtual Machine as well as WebAssembly in the context of Plasm?
Is this something of a stepping stone to a broader move solely to Polkadot in the future?
Yeah Ethereum is obviously the best smart contract platform but there are a lot of issues like gas costs etc. For us, the EVM [Ethereum Virtual Machine] is a sort of an obsolete technology since WASM [WebAssembly] is much faster and more secure. On Plasm, you can use both EVM and WASM. If you would like to replace your smart contracts on Ethereum, you just need to deploy the contract on our EVM and if you would like to make a “bette” application, you can use WASM.
“On Plasm, you can use both EVM and WASM. If you would like to replace your smart contracts on Ethereum, you just need to deploy the contract on our EVM and if you would like to make a “bette” application, you can use WASM.”
For me, it seems that ETH2.0 takes 3-5 years. ETH1.0 should have been updated in 2016/2017 according to the original plan. Polkadot has a sharding-ish architecture like ETH2.0 (not the same). And we are implementing the vertical scalability (Rollups). In this sense, we are building Polkadot2.0 which is similar to ETH3.0 (ETH2.0 + Rollups).
Daniel Dal Bello
We’ve briefly touched on this, but let’s talk now about some of the cross-collaboration for you both. Your projects have aligned as strategic partners. We’ve read in your blog posts that this partnership is all about building a cross-chain finance hub and stablecoin protocol. How did this partnership come about and what progress has been made so far?
In terms of Acala & Plasm, I’m interested in XCMP – Cross-chain Messaging Passing. Through XCMP, we would like to import a stablecoin, and we may be able to help them build layer-2 on Acala. One of our focus areas is the DEX. Uniswap starts using Optimistic Rollups on Ethereum. We also support Rollups and a Rollups DEX on Polkadot sounds great.
SushiSwap recently started investigating Polkadot and they may come to this ecosystem – maybe Uniswap as well. I would like to support Uniswap or build a DEX by ourselves. A DEX can be built both on Plasm and on Acala. We can make it together.
Adding to the EVM value proposition on Substrate chains like Acala, you can write code in the familiar Solidity language and deploy on the EVM, but you can literally break out of the Solidity sandbox – that is the biggest value-add.
1. Your Solidity contract can have a custom gas schedule, e.g. native subscription support, or fees paid in your ERC20, not ETH nor ACA.
2. You can tap into Acala’s DeFi primitives, listed on a DEX, and tap into the liquidity and user base, also cross-chain capability, e.g. easily cross to Plasm for layer-2 use cases.
3. You can enable on-chain governance, your ERC20 can be used as a governance token to vote for smart contract upgrades (no complex migration code needs to be written or any backdoors need to be set), you can upgrade without a fork.
Daniel Dal Bello
How did you both first become introduced to this ecosystem and want to become involved? Ultimately, why did you decide to go ahead and build in this new environment rather than a more tested space like Ethereum?
In my opinion, Polkadot and IPFS are the frontier of Web3.0. I have a passion more for Web3.0 than on the world computer. 2 years ago, Dr. Gavin Wood came to Tokyo and I organized a meetup. Luckily, we could hear a lot about Web3.0 and started building products in the ecosystem.
We (myself and two other co-founders in Acala, Ruitao & Bryan) were building on Substrate 2+ years ago, that was before Substrate 1.0, we might have been one of the only commercial teams outside of Parity building at that time. So we have a long history with Gavin’s team and the tech.
Our other project Laminar was originally going to deploy on Ethereum, we had the entire product built in Solidity, but ditched the deployment plan, as it’s not feasible to open a shop on Ethereum any more, it’s so costly, so congested, whale-heavy, the ‘democratize DeFi for everyone’ is a far-away ethos.
“We had the entire product built in Solidity, but ditched the deployment plan, as it’s not feasible to open a shop on Ethereum any more…”
Daniel Dal Bello
How do you see the Polkadot ecosystem evolving to compete in the blockchain landscape over the coming months and then years? Ethereum 2.0 is perpetually on the horizon, does that worry you in any sense?
Polkadot is competing with Ethereum in some sense. We are carefully checking the status of XCMP and ETH 2.0. Polkadot can’t have network effects without XCMP. Once it is fully enabled, I believe many projects start building on Polkadot and it’s Parachains. The most important thing is the network effect. Ethereum is much better at this moment.
“Once it is fully enabled, I believe many projects start building on Polkadot and it’s Parachains. The most important thing is the network effect. Ethereum is much better at this moment.”
ETH 2.0 is actually cool, but it seems a long wait – the Beacon Chain is basically Polkadot’s Relay Chain, it’s still in test phase. The 32 shards are basically Parachains, but the exact mechanism for communication has yet to be finalized.
We also looked at Cosmos, when evaluating possible platforms to build on, Cosmos have customizable shards, which is similar to Polkadot, but literally you need to raise a huge amount of money to bootstrap security, imaging hundreds of chains raising ~100 million each for a DeFi focused protocol, security is highly important, so leveraging off Polkadot’s 5 billion market cap from day one, and also having a ‘graduation’ path to be independent one day is more commercially viable. The future is multi-chain. It’s probably lesser about who competes with who or who’s killer of whom, it’s more about how chains can be connected just like the internet, and how we can grow the pie bigger together to attract bigger mainstream users.
Chains are like the human species, the more diverse they are, the more robust, the more resilient, the more specialization, the more efficient, provided they are all connected and work in collaboration. I see Polkadot as one of the enablers for this ‘multi-chain’ vision, it will elevate Ethereum’s capacity and capability, Ethereum will be one of the most advanced smart contract chains connected to Polkadot.
“The future is multi-chain. It’s probably lesser about who competes with who or who’s killer of whom, it’s more about how chains can be connected just like the internet, and how we can grow the pie bigger together to attract bigger mainstream users.”