It might sound like a myth, but the idea of zero-loss cryptocurrency transactions is becoming a reality. It is going to be possible at least in the decentralized finance (DeFi) space on the Telos blockchain. E-Crypto News reached out to Douglas Horn, the Chief architect of the Telos Blockchain for more on this and other issues. Here is what he had to say.
Douglas Horn Chief Architect Telos Blockchain
Congratulations on the addition of new decentralized finance (DeFi) tokens! What’s next for Telos?
Over the past few months Telos added bridges to Bitcoin, Ethereum and Binance Smart Chain as well as Uniswap, PancakeSwap, and centralized exchanges–with bigger CEXs about to be announced. Adding these first pegged ERC-20 tokens has been a great step and there will be more to follow with ample liquidity on Tswaps.com and other AMMs. Our next steps are to increase DeFi on Telos both natively and on our EVM that we’re preparing to move to our mainnet. These will offer unparalleled performance for DeFi and of course all the other uses for Telos.
How will zero-loss cryptocurrency transactions work within the Telos ecosystem?
Zero-loss or “profit-or-cancel” transactions work the same way thatflash loans operate, by canceling a transaction if the lender dapp is not repaid in full. Telos puts this capability into the hands of the users, on their own behalf, to offer this loss protection for their own account. On Telos it’s possible to compare the beginning ending balances of an account before a transaction is finalized. That allows users to define the end state they expect to receive–a higher balance–and cancel the entire transaction if that is not achieved. We will have an interface for this to allow DeFi traders on Telos to eliminate the chance of surprise outcomes from their trades.
What do you think the impact of Zero-Loss transactions will be on the DeFi space and the general cryptospace?
I think people will want to use it and will be a lot less excited about platforms where they can still have bad surprises at the end of a transaction. If you can prevent losses so that your composed trades are all either profitable or they just cancel, wouldn’t you want to use that for everything–especially when the platform it’s on has half-second transaction execution, no frontrunning risk, little chance of congestion, and negligible to non-existent gas fees.
How has the year 2021 been for Telos and all the projects within the Telos ecosystem?
Really good so far. We are working from our ambitious public roadmap and we’re doing pretty well bringing out big new features and tools. We implemented our liquidity improvement plan over the first quarter and the token is a sustained 10x over where we started the year at. Now we’re about to launch Telos EVM, dStor decentralized storage, and a lot more. We’ll be on DappRadar soon and people will be able to see the dapps that are making Telos one of the highest performing blockchains around.
The increase in token price has been great for the obvious reasons, but also it lets us professionalize a number of roles that had previously been done by the very busy block producers. For example, the Telos Core Devs will soon be announcing several new dedicated full time developers and a new satellite office. This will help us do more and release new features at more predictable intervals. We are also doing executive searches for key roles in the Telos Foundation. This is how Telos graduates from a grassroots project to a world leader.
Please, can you tell us more about Telos SureProfit work?
Telos is already poised to revolutionize DeFi by making it competitive at far lower trade sizes. Right now on Ethereum the gas costs make it hard to profit with trades that are less than several thousand dollars. BSC lowers that profitability threshold somewhat to a few hundred dollars, but DeFi on Telos and Telos EVM will take that down to the level where people all over the world can afford to participate. Think about even $5 trades that can still be profitable because the gas prices aren’t eating up all the gains. So the context is that people all over the world at many economic levels will finally be able to benefit from DeFi on Telos.
With that being the case, it will be important to make the landscape much easier and safer to use. Telos SureProfit is a great example of that. It’s going to simply prevent losses from happening. At first this will be used by the DeFi-savvy traders, but we plan to have no-code tools to make DeFi a graphical interface where people can just draw lines between the different money Legos they want to use. I expect that SureProfit will be the last piece in everyone’s action composition. There’s actually not all that much to it–the code will just check balances before finalizing. What’s unique is that most platforms don’t have the ability to make these balance comparisons within the transaction. Telos makes this possible.
What are your thoughts on the recent expansion of Non-Fungible Tokens (NFTs)?
I’m excited to see the explosion of NFTs. I think that they are in their most basic form right now as art and collectables that are barely scratching the surface of what NFTs can become. The T-Bond NFTs that Telos has to help projects raise new funds are a good example of this. They are a financial product and will become a form of collateral for DeFi lending platforms and more. But I see NFTs as ideal for licenses, tokenization of real-world assets, ticketing for travel and entertainment…just to start.
Are there any plans for Telos to support NFT minting this year?
There are already three NFT standards on Telos and our largest native NFT marketplace, AreaXNFT.com has recently done a new upgrade that makes it even faster to create NFTs with various properties, like T-Bond-type token lockup for example. There’s a lot of trading of artwork for such a comparatively small community. Game assets and collectables are easy wins here and you will see a number of these on the new games coming to Telos through various platforms like Qudo and AreaX.
What do you think are the limitations to the NFT marketplace expansion?
Storage is going to be a really big one. Unless your assets are on a form of decentralized storage, then you’re at the mercy of the storage nodes. But most IPFS-based storage can be really slow and even lose assets permanently. That’s why we have been working on dStor, which is a highly performant, highly available decentralized storage system that works differently than Filecoin, for example. It will leverage the massive unused capacity for storage from underutilized data centers and fiber-to-the-home subscribers to create a global storage network where there will always be a node close to any user and it won’t matter if a node or two go down because every file will be inexpensively stored on ten more. So people won’t have to worry about whether the image they paid a lot of money to own is going to still be around next year or next month.
Beyond that, I think that NFTs are currently most limited by imagination, but that won’t last long as exciting new ways to use them start expanding people’s views of what they could be. From there, I think we will see the tokenization of real estate and other property in a way that is going to start getting governments and traditional business concerned about being excised from the process of recording and transferring ownership. So you’ll see some new laws need to be made to address this much more streamlined and fractionalized method of recording and transferring asset ownership.
Please, can you tell us more about the T-bond fundraising mechanism?
Raising funds by selling tokens has a built-in problem that people won’t buy without a discount but many buyers will instantly sell if they can to book the gain from the discount, which sinks the token price. In ICOs they used to lock up the tokens for some months but no one liked that because holders were just stuck with illiquid assets–which means that issuers need to offer even greater discounts to entice them. T-Bond NFTs solve this Catch-22 by locking up the fungible tokens in a bond-like NFT. The T-Bonds each have a maturity date when tokens can become liquid again–they can’t be sold on liquid token markets until that date, but they can be sold as T-Bond NFTs on NFT markets any time.
All the fungible tokens in a T-Bond NFT are locked up in it from the time it is created until the tokens are made liquid again at maturity. There’s no settlement event that would make the T-Bonds like a security–the tokens are always only in the current owner’s possession. These tokens can’t hit exchanges to sink the price, but the holders always have the option of selling them on the secondary T-Bond market. These will also be great instruments for loan collateralization and other DeFi purposes. We expect several offerings and a thriving secondary market.
With a known amount of locked fungible tokens and fixed maturity date, the T-Bonds can be sold at a discount which implies a yield. A T-Bond with 10,000 TLOS that matures in 6 months may sell for 9,700 TLOS while one that matures in 1 month might sell for 9,950 TLOS. That implies a yield of around 6% APR for example–but each asset will be different reflecting its relative strength…and that means there can be money made by speculation or hedging with these as if they were crypto derivatives. For example, TLOS T-Bonds will change value based on REX staking rewards one can earn relative to T-Bonds. Traders can bet against future REX staking yields as just one example. We named them T-Bonds because they work similarly to how US Treasury bonds (T-Bills) work from a purchaser’s standpoint.
What are your reasons for not adding Telos SureProfit to the Telos EVM?
SureProfit will not be available on Telos EVM for the same reason it isn’t on Ethereum or any other EVM platform–there’s no way to easily do this with Solidity code. The Telos smart contract platform offers some coding advantages that make this possible. There are probably some more elegant uses of code we’ll discover as DeFi on Telos heats up. In fact, I’m playing with some more fun ideas right now!
Apart from the Telos EVM, are there other blockchain bridges that you guys are implementing this year?
Telos is definitely building bridges to other chains. So far we have bridges to Bitcoin, Ethereum, and BSC. Telos EVM will actually get its own dedicated bridge from Ethereum so users don’t have to interact with native Telos accounts if they don’t care to. I expect we will have at least three more by the end of the year. I see the industry moving from blockchains to a “Blockmesh” where multiple chains are interconnected at many points with each offering its best features to the others. Telos is going to be offering a number of oracle services to other chains starting with governance and moving on to other services like identity management, anonymous smart contract transactions, proof-of-location services and more. Telos users will certainly also benefit from value or services provided from other chains. For example, Bitcoin is likely to rule the store-of-value use case for a long time, but you can’t make one-satoshi payments on almost any platform but Telos because of transaction fees. So this is a great symbiosis. I would look for links to Chainlink, Cardano, Solana, Ravencoin, Hive and others this year. But the most exciting thing about these bridges is that they will be able to convey deterministic smart contract actions triggered from one chain to another. That’s what will allow users to vote essentially for free on Telos (there will be a small fee for the ballot creation, of course) and then send the results to Ethereum smart contracts. This will make governance available to more Ethereum users, reduce Ethereum congestion, and make the whole process more efficient. Telos Decide will replace Aragon as the governance engine of choice for Ethereum due to these lower costs because only the final transaction will need to be broadcast back to the Ethereum chain.
Do you have any price projections for Bitcoin this year?
$125,000 by October is my guess.
What impact do you think Telos will have on the decentralized finance (DeFi) ecosystem?
Telos will bring DeFi to people who aren’t already crypto rich. It will pave the way for traders at many more economic strata to participate, which is desperately needed. Telos will also solve frontrunning and “sandwich trading” which are value theft committed by the large mining pools by putting their own trades ahead of real users to syphon off much of their gains. It won’t happen on Telos or Telos EVM because there’s no public mempool or variable gas fees.
The speed of Telos will actually create a new type of front-running for slower chains though. Bots will be able to see big transactions in the mempools of other chains and rapidly trade against them on Telos just due to the faster block times and cross-chain oracles that will normalize prices across the Blockmesh. When this happens, the fastest chains will ultimately push trading off of the slower chains. Further, the smaller the transaction fees a chain demands, the more granular the price mismatches a trader can exploit. So with Telos where there can be no gas fees whatsoever, or extremely low fees on Telos EVM, you will see that arbitrage opportunities getting snapped up by smaller traders before they even become economically viable on higher fee chains.
Telos traders will snap up $20-50 worth of arbitrage opportunities over and over again before they can grow into the $3,000 opportunity that an Ethereum arbitrageur would require to be profitable. So those larger trades just won’t happen. You’ll see bot-based micro-arbitrage smoothing out any rough edges in pricing before other chains can even afford to participate.
Eventually, you are likely to see the high speed, low fee chains like Telos and Solana carrying the majority of DeFi traffic. People kid themselves that the platforms that have large communities of existing users today have an ongoing advantage, but the reality is inescapable: these faster, cheaper chains will mop up all the opportunities in front of DeFi traders on Ethereum and BSC and the traders will be forced to go there because no arbitrage opportunities will actually filter down to Ethereum. Ethereum will be used for large, non-fungible trades like land titles, oil sales and the like. There will still be tons of high-level commerce there, but it won’t be fast enough or granular enough for DeFi anymore. This change is likely to be seen by the end of this year.
How has the performance of the Telos governance engine been so far?
The Telos Decide governance engine is unparalleled by anything on or off of blockchain. It offers modular, configurable governance through polling, voting, elections, committee management, resource allocation, and document amendment–all transparently and deterministically controlled by the blockchain with the security of elliptical curve cryptography. It already addresses every conceivable need in transparent governance, leaving only secret-ballot elections unaddressed (for now).
Despite these advantages, Decide has not yet reached the number of users it should have because our user interfaces were lacking. Fortunately, this problem is about to be solved in a big way. My company, GoodBlock, is about to release the Decide Voter mobile app that will let iOS and Android users take advantage of all of these voting features from their mobile devices with a great user experience. GoodBlock will also be releasing its enterprise version of Decide that will bring the same core functionality to Enterprise users with versions of the product specifically designed for large corporate, government and industry consortia user bases.
Do you think Telos Decide will be the de-facto governance engine of decentralized platforms? Please tell us the reasons for your answer.
Without question it will be. The Decide governance engine has this use case essentially to itself at this point. By the end of the year you will see it used by some surprisingly large players as well as by all kinds of small organizations eager for a way to better govern themselves. It’s cool how many will be using the same underlying engine because it means that people will not have to learn different ways to participate in governance. Decide is pretty intuitive at the voter level and I see people rapidly becoming less accepting of old world voting options once they’ve experienced the ease, speed, and transparency of Telos Decide.
With easy interfaces and the ability to be used by everything from college clubs to international unions to city governments to corporate governance by major corporations or whole industries that will be standardizing on blockchain-based sourcing and supply chain management, Telos Decide will quickly be adopted across the spectrum. Combined with some of the other advances I mentioned above, like smart bridges, industries that find themselves using VeChain for their supply chains, for example, will no doubt bridge to Telos Decide governance systems for efficiency, ease of use, and participation in the industry standard toolset. Telos Decide will be to governance what Google is to search, except that we made Decide open source and permissionless from the start.
What problems do you think decentralized finance (DeFI) solves?
Access to financial services and a more level playing field. Finance has always been the province of the rich and well connected. DeFi will break down those barriers even more than electronic trading and brokerages did in the last decade.
The other great impact will be market efficiency. There’s this myth of efficient markets, but it is clearly not true today. However, when anyone in the world can scope out inefficiencies via a smartphone or run a cheap bot to trade against the thinnest margins of inefficiency, there will be orders of magnitude more market efficiency because people across the planet will spend time searching for small ways to make money across ever more diverse markets until there’s just no room for any kind of price mismatch between any two assets because there will always be someone looking for ways to earn revenue through arbitrage–even in very small transactions. Remember, with essentially fee-less trading comes the ability to profit from price mismatches at ever more granular levels.
Where do you see the Telos blockchain in the next three years with all the new stuff you’re pulling off?
In three years, Bitcoin and Ethereum will still be the #1 and #2 blockchains and there will be a handful of other chains right behind them that are providing key backbone services of the Web3 internet to each other and all the many chains below. These top 5-7 chains will be what everyone thinks of as the Blockmesh–the interconnected web of value, identity, governance and trade that everyone uses daily in hundreds of ways. Telos will unquestionably be one of these core chains comprising the Blockmesh.