Latest / The Paul Barron Crypto Show / DeFi Panic After MASSIVE Exploit!🔥XRP Contagion Exposure?🚨Flare CEO INTERVIEW

Transcript

DeFi Panic After MASSIVE Exploit!🔥XRP Contagion Exposure?🚨Flare CEO INTERVIEW · The Paul Barron Crypto Show

• 0:00
  Speaker 1: A laire zero hack hits us over the weekend, and
• 0:02
  Speaker 1: we'll break it all down for you. I've got a
• 0:03
  Speaker 1: special interview also with Hugo coming in from Flare Networks.
• 0:08
  Speaker 1: Before we get started, I do you want to thank
• 0:09
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• 0:12
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• 0:15
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• 0:17
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• 0:20
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• 0:23
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• 0:27
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• 0:30
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• 0:37
  Speaker 2: If you're brand new to crypto, this is the best
• 0:39
  Speaker 2: place to do it.
• 0:40
  Speaker 1: So, as you know, the kelp Dow incident hit over
• 0:42
  Speaker 1: the weekend, a lot of things happen. Kelp Dow was
• 0:45
  Speaker 1: exploited for approximately two hundred and ninety million Preliminary indicators
• 0:49
  Speaker 1: suggests attribution to a highly sophisticated state actor. Maybe at
• 0:54
  Speaker 1: I'm questioning everything right now because you look at the
• 0:58
  Speaker 1: amount of bitcoin that say a Lazarus group or possibly
• 1:02
  Speaker 1: even the Chinese have access to. They don't want their
• 1:06
  Speaker 1: assets to go down in value because that will essentially
• 1:08
  Speaker 1: defund a lot of their programs. So I'm just wondering
• 1:10
  Speaker 1: who has the most to gain from this happening at
• 1:15
  Speaker 1: this time, like right before Clarity is rolling out. I'm
• 1:19
  Speaker 1: not saying names, but I'm just saying, this may not
• 1:22
  Speaker 1: be the bad guys that we think it is actually
• 1:26
  Speaker 1: out there anything that is supposed to lair zero. This
• 1:28
  Speaker 1: is the issue right now that of course has start
• 1:30
  Speaker 1: to occur. It's not really an issue on AVE, but
• 1:33
  Speaker 1: because AVE is involved in the transactions that layer zero
• 1:38
  Speaker 1: is integrated into, that's the issue that of course is
• 1:42
  Speaker 1: perking up. And of course that starts to hit the
• 1:45
  Speaker 1: issue of liquidity, and AVE is solvent fully solvent, not
• 1:51
  Speaker 1: it is not liquid is the issue because there's such
• 1:53
  Speaker 1: a flight of capital right now that are trying to
• 1:57
  Speaker 1: deal with these bad loans. So you've got this occurring,
• 2:00
  Speaker 1: and it's not just AVE. We're starting to see this
• 2:01
  Speaker 1: across a lot of different protocols, a lot of different
• 2:04
  Speaker 1: platforms out there. You can kind of see right here
• 2:07
  Speaker 1: utilization rate is the issue right there.
• 2:09
  Speaker 2: At one hundred percent.
• 2:10
  Speaker 1: So this is most likely going to happen for a
• 2:12
  Speaker 1: little bit longer before we start to see things normalize.
• 2:15
  Speaker 1: And I don't want to get into the technical details.
• 2:18
  Speaker 1: I'm going to have Hugo talk a little bit more
• 2:20
  Speaker 1: about that here in a minute. We'll have him on
• 2:22
  Speaker 1: to break this down, but it is an issue that
• 2:25
  Speaker 1: I think a lot of people need to understand. And
• 2:26
  Speaker 1: the other thing that you look at right now is
• 2:28
  Speaker 1: these bridges continue to really collateral is what I would say,
• 2:33
  Speaker 1: is still radioactive in the side of serious money and
• 2:36
  Speaker 1: the eyes of serious money. And that's the concern I
• 2:39
  Speaker 1: have because now when you have institutional capital not looking
• 2:42
  Speaker 1: at this as an alternative as many of these platforms
• 2:45
  Speaker 1: and many of these institutional players are really trying to
• 2:48
  Speaker 1: figure out what is their roadmap in DeFi so when
• 2:51
  Speaker 1: you consider, it really boils down to bridges.
• 2:53
  Speaker 2: So don't just look at layer zero.
• 2:56
  Speaker 1: You have to look at any bridge out there that's
• 2:59
  Speaker 1: be wormhole. Even if you look at Flair, which we'll
• 3:01
  Speaker 1: talk to Hugo on. But it remains to be seen
• 3:04
  Speaker 1: how much bad debt each one is going to occur
• 3:07
  Speaker 1: and this is the number of defive protocols that deal
• 3:11
  Speaker 1: are of course, are dealing with restaked eth because this
• 3:15
  Speaker 1: is money leaving DeFi at an unprecedented rate. And these
• 3:18
  Speaker 1: are a lot of different areas that aren't really exposed,
• 3:22
  Speaker 1: but because of what happened here on layer zero and AVE,
• 3:26
  Speaker 1: this of course is what we're dealing with right now.
• 3:29
  Speaker 1: Further into this, this, of course, I think is interesting.
• 3:32
  Speaker 2: He dropped a thread. This is a good one too.
• 3:34
  Speaker 1: Of all the protocols that had to freeze their interrop
• 3:36
  Speaker 1: because of the layer zero being compromised. If you go
• 3:39
  Speaker 1: down there, there's athena Ether, Pi, Tron, Curve, Finance, Biggo, rap, Bitcoin.
• 3:45
  Speaker 2: All of these were frozen because of this.
• 3:48
  Speaker 1: Even Big pengu came in even though it wasn't affected
• 3:52
  Speaker 1: by the restaked eth exploit.
• 3:54
  Speaker 2: Morpho Agora. Guys, this is a big.
• 3:58
  Speaker 1: Event in crypto, and it comes at a very very
• 4:01
  Speaker 1: bad time because what we're dealing with right now is clarity.
• 4:06
  Speaker 1: This of course gets the banks in a position where
• 4:09
  Speaker 1: they could essentially let this die because it really boils
• 4:12
  Speaker 1: down to timing right now in DC, and it looks
• 4:17
  Speaker 1: like it's going to continue to be pushed timing with
• 4:19
  Speaker 1: this happening right now is just just very very I'm
• 4:24
  Speaker 1: questioning it for sure. All right, So let's go over
• 4:26
  Speaker 1: to this tweet here AIXBT. This is getting into the
• 4:30
  Speaker 1: project of AVE getting ready to launch a new service,
• 4:33
  Speaker 1: and essentially this is going to have exposure that would
• 4:36
  Speaker 1: launch that would have similar assets to what happened here
• 4:39
  Speaker 1: in this exploit, so that may get a complete new
• 4:42
  Speaker 1: roadmap heading forward. And remember AVE is kind of like
• 4:46
  Speaker 1: the Federal Reserve for DeFi, and that to me, this
• 4:50
  Speaker 1: kind of issue occurring right now with AVE, and it's
• 4:53
  Speaker 1: not with AVE, with calp Dow that's where the vector occurred.
• 4:57
  Speaker 1: That of course, was because of layer zero. This, of course, though,
• 5:01
  Speaker 1: is the assets being affected, which of course set in
• 5:04
  Speaker 1: AVE in most of these scenarios. So a lot of
• 5:07
  Speaker 1: things happening right now. Other things I want to kind
• 5:09
  Speaker 1: of hit on right here. This was vitallic four years ago,
• 5:12
  Speaker 1: foreshadowing what's happening right now. I'm optimistic about a multi
• 5:15
  Speaker 1: chain ecosystem, but the big concern he had was crosschain
• 5:20
  Speaker 1: applications bridges, which is what we're talking about further into it.
• 5:24
  Speaker 1: The problem gets worth when you go beyond t chains
• 5:27
  Speaker 1: and cross chain activity has an anti network effect. So
• 5:31
  Speaker 1: this is an issue that has been a problem for
• 5:34
  Speaker 1: quite some time and it now has raised its ugly head.
• 5:38
  Speaker 1: And if you guys remember we did a video with
• 5:40
  Speaker 1: the team on EZ which was one of the eight
• 5:44
  Speaker 1: CC advancements that happened at that last conference. And what
• 5:49
  Speaker 1: it simply is designed for is Ethereum going to a
• 5:52
  Speaker 1: bridgeless chain, and this may accelerate a lot of different
• 5:57
  Speaker 1: projects starting to move to that. Because that was played
• 6:00
  Speaker 1: for this summer, I just wonder if that's going to
• 6:02
  Speaker 1: have a major implication on that. What I'm a little
• 6:05
  Speaker 1: bit more concerned about right now is XRP. This was
• 6:08
  Speaker 1: a question right here and thoughts on Flair, And this
• 6:11
  Speaker 1: wasn't in reference to the exploit that just happened.
• 6:14
  Speaker 2: It was just in general.
• 6:16
  Speaker 1: He's asking David Schwartz, and he asked They asked him
• 6:18
  Speaker 1: specifically about Flair and he stated that right now is
• 6:23
  Speaker 1: a fairly negative and he didn't remember why, but he still.
• 6:26
  Speaker 2: Didn't like it.
• 6:27
  Speaker 1: He hasn't put much thought to it at that time.
• 6:29
  Speaker 1: I think they're probably putting some thought to it now.
• 6:31
  Speaker 1: So we wanted to bring on someone who has exposure
• 6:34
  Speaker 1: to Lair Zero, that being Flair along with many others
• 6:39
  Speaker 1: and get their viewpoint on this, because this will at
• 6:42
  Speaker 1: least have somebody that has the kind of situation that
• 6:45
  Speaker 1: could be at risk and what they're doing about it.
• 6:47
  Speaker 1: I want to bring on Hugo from Flair to kind
• 6:51
  Speaker 1: of break it down.
• 6:51
  Speaker 2: Great to have you back you, how are you great?
• 6:53
  Speaker 3: Thanks Pool, thanks for having me.
• 6:55
  Speaker 1: Some of the takeaways that we have on this, We
• 6:59
  Speaker 1: wanted to get your opinion on where you think this
• 7:01
  Speaker 1: is going. First up is let's just go right into
• 7:04
  Speaker 1: cross chain bridges, because this, of course is the biggest
• 7:07
  Speaker 1: issue right now. This adds one hundred percent risk exposure,
• 7:11
  Speaker 1: therefore won't be used by big money going forward. Do
• 7:14
  Speaker 1: you agree that that's probably going to be the case
• 7:16
  Speaker 1: from here for no.
• 7:18
  Speaker 3: I don't. I think that cross chain bridges are incredibly
• 7:21
  Speaker 3: valuable to be able to take advantage of liquidity and
• 7:24
  Speaker 3: trading conditions on other networks. You know, if you look
• 7:28
  Speaker 3: even Rippled together with hex Trust and LA zero have
• 7:34
  Speaker 3: just released wrap tex RP on Salona. I think it's
• 7:39
  Speaker 3: a question of how bridges are structured, how individual teams
• 7:43
  Speaker 3: that are using bridges are structuring their variable security. So
• 7:49
  Speaker 3: if you look at the hat that happened of the
• 7:50
  Speaker 3: weekend with kelptow, pretty much the principal reason for that
• 7:55
  Speaker 3: hack was that kelpdow were not using the recommended even
• 8:00
  Speaker 3: the minimum recommended security setting for a layer zero type bridge.
• 8:05
  Speaker 3: A lays zero is a messaging service, and you know
• 8:08
  Speaker 3: that they at a minimum suggest using two different dvns. Now,
• 8:14
  Speaker 3: celtaw was using one DVN, right, and therefore if that
• 8:17
  Speaker 3: singular party gets hacked, then then we saw what happened.
• 8:25
  Speaker 3: Everything in blockchain is about minimizing a single points of
• 8:29
  Speaker 3: failure and effectively maximizing the number of nodes you have
• 8:33
  Speaker 3: looking at something. So I'm not certain that cross chain
• 8:39
  Speaker 3: bridges are going to go away, pretty certain they won't,
• 8:43
  Speaker 3: but I can certainly see that you know, it certainly
• 8:46
  Speaker 3: gives you pause for thought.
• 8:47
  Speaker 1: Well, I think to your point is having the redundancy
• 8:50
  Speaker 1: there on these should be the barre. I'm kind of curious, now,
• 8:53
  Speaker 1: why would this have not really been you know, addressed
• 8:57
  Speaker 1: before this of course occurred. It's kind of like an obvious,
• 9:01
  Speaker 1: too late thing now, but it just seems like this
• 9:03
  Speaker 1: would be a natural redundancy strategy.
• 9:07
  Speaker 2: Why do you think that happened.
• 9:08
  Speaker 3: Yeah, I think, Look as I think it was Donald
• 9:12
  Speaker 3: Rumsfeld that said that, you know there are no unknowns,
• 9:14
  Speaker 3: there are unknown and there are unknown unknowns. Right, this
• 9:18
  Speaker 3: security setting was a known thing. You can't you can't
• 9:23
  Speaker 3: protect against every single hack on any network of any software,
• 9:29
  Speaker 3: especially in an age of AI. But to do the
• 9:31
  Speaker 3: basic minimum seems to be like a sensible thing that
• 9:35
  Speaker 3: people to do. And I don't understand why that wasn't done.
• 9:38
  Speaker 1: Do you think that AVE will, whether it's justifiable or unjustly,
• 9:44
  Speaker 1: held responsible for other protocols mistakes, especially like this, as
• 9:48
  Speaker 1: soon as any leverage event happens, you're not even holding
• 9:52
  Speaker 1: the token.
• 9:53
  Speaker 3: I think when you introduce an asset to a protocol,
• 9:58
  Speaker 3: and you know, Garve has a governance mechanism to do that,
• 10:02
  Speaker 3: but I'm not entirely certain. You know, it's really up
• 10:05
  Speaker 3: to it's up to whatever the governance mechanism or however
• 10:08
  Speaker 3: an asset is introduced to a protocol, and you know,
• 10:12
  Speaker 3: if it was governance that approved that, then they incorrectly
• 10:16
  Speaker 3: approved it, or effectively they should have they should have
• 10:19
  Speaker 3: known and if it wasn't made clear to the token
• 10:21
  Speaker 3: holders who voted for that asset, to be used as collateral.
• 10:25
  Speaker 3: Then you know that's a that's a problem in in
• 10:28
  Speaker 3: of itself.
• 10:28
  Speaker 1: Yeah, obviously yields right now are currently too low in
• 10:33
  Speaker 1: DeFi to justify the added risk. Do you think the
• 10:35
  Speaker 1: market's going to adjust any very much.
• 10:38
  Speaker 3: I see yields increase. If you want create of security,
• 10:41
  Speaker 3: you've got to actually see higher yields that you know.
• 10:44
  Speaker 3: One of the reasons why you might have low of
• 10:47
  Speaker 3: security is people are not able to earn money from applets,
• 10:50
  Speaker 3: from building applications, or it's hard to earn money, so
• 10:54
  Speaker 3: they run smaller teams, so they have less eyes on
• 10:58
  Speaker 3: you know, on the target. They have less less ability
• 11:02
  Speaker 3: to really quantify the risks they're taking. So I think,
• 11:05
  Speaker 3: you know, I would like to see yield to just
• 11:07
  Speaker 3: upwards a lot.
• 11:09
  Speaker 1: Yeah, they would have to well, and this is to
• 11:11
  Speaker 1: your point, this would generate a lot more. I think
• 11:13
  Speaker 1: security in the in the.
• 11:15
  Speaker 3: Space absolutely absolutely. I had this conversation tonight. I would
• 11:19
  Speaker 3: like to build, you know, an application using flares data
• 11:23
  Speaker 3: protocols to be able to analyze the security of lots
• 11:25
  Speaker 3: of various different applications across the whole space. Now, the reality,
• 11:30
  Speaker 3: the reality is that we could build that protocol. I
• 11:32
  Speaker 3: don't know if it can be economically viable. I see.
• 11:35
  Speaker 1: Do you think the market is going to now assume
• 11:39
  Speaker 1: that every vault is exposed to a hack or potentially
• 11:42
  Speaker 1: a hack panic? And would it add more volatility across
• 11:45
  Speaker 1: DeFi especially TVL going on.
• 11:48
  Speaker 3: So I certainly think people will be analyzing what's what's
• 11:52
  Speaker 3: in volts, what the composition of an application is, how
• 11:54
  Speaker 3: where there's assets come from, how how are they bridged
• 11:57
  Speaker 3: if they are bridged. Obviously you will you'll see and
• 12:00
  Speaker 3: we have seen a very fast removal of capital from
• 12:04
  Speaker 3: applications advance. That's the right move. I expect to see
• 12:10
  Speaker 3: a reasonable amount of that being added back over the
• 12:12
  Speaker 3: next couple of weeks, maybe the next month or so,
• 12:14
  Speaker 3: as people get scripts with what is in the applicational
• 12:17
  Speaker 3: vault and how it is secured. But I do think
• 12:20
  Speaker 3: it means that people are going to have to take
• 12:22
  Speaker 3: a lot more time looking at what's going on within
• 12:25
  Speaker 3: the protocol they're using.
• 12:27
  Speaker 1: I was looking at this tweet right here. This is
• 12:30
  Speaker 1: AIXBT and the breakdown because it shows the AV four
• 12:35
  Speaker 1: they're launching has new collateral framework, likely another four to
• 12:39
  Speaker 1: six billion. But here we go with now, potentially a
• 12:44
  Speaker 1: forced leveraging event that could occur. Do you think that
• 12:47
  Speaker 1: would slow things down for assets and liquidity coming back
• 12:52
  Speaker 1: into the market.
• 12:53
  Speaker 3: Well, obviously, if there is a forced t leveraging event,
• 12:56
  Speaker 3: it certainly would reduce liquidity coming back into the market
• 13:00
  Speaker 3: because people are not suddenly not able to borrow on
• 13:02
  Speaker 3: those tokens. That said, it is that said, it is
• 13:06
  Speaker 3: trivial to add add moretivs. You know. We we've been
• 13:12
  Speaker 3: looking at this the last two days, were adding more
• 13:15
  Speaker 3: dvns to our our fx r P that is bridged
• 13:19
  Speaker 3: out of Flare. So we use layers zero to bridge
• 13:23
  Speaker 3: fx r P out of Flare, and we use our
• 13:26
  Speaker 3: own bridge to bridge x ORP from the x ORP
• 13:29
  Speaker 3: letter to Flare. So when you want to bridge from Flair,
• 13:32
  Speaker 3: your x ORP from Flair to let's say Ethereum or
• 13:36
  Speaker 3: a monad or any of those chains, we use layers zero.
• 13:39
  Speaker 3: We are also adding more vns and that's why we're
• 13:42
  Speaker 3: still paused on on the fx or P bridge out
• 13:46
  Speaker 3: of Flair. I think we'll be adding two more devans,
• 13:49
  Speaker 3: so we're a total of four dvns, so.
• 13:51
  Speaker 1: You have four versus what helped out had it won.
• 13:54
  Speaker 1: All right, So okay, so explain first the process of
• 13:58
  Speaker 1: how the the exploit occurred, because I think I have
• 14:03
  Speaker 1: a little bit of a diagram here and maybe you
• 14:06
  Speaker 1: can tell me.
• 14:06
  Speaker 2: Is this correct?
• 14:07
  Speaker 1: Because you got the RPC compromise and then that forced
• 14:11
  Speaker 1: the failover in the DVN. Is that essentially the process
• 14:15
  Speaker 1: in which this occurred.
• 14:16
  Speaker 3: Well, the rpc's effectively reported false information right to those using.
• 14:25
  Speaker 1: The chain, okay, and then that of course moved. All right,
• 14:28
  Speaker 1: So in your situation, explain how that would not occur
• 14:33
  Speaker 1: with regards to with flair, in regards to flair, with.
• 14:36
  Speaker 3: Regards to flair with lays zero or what are we
• 14:38
  Speaker 3: talking about on lay zero? Yeah, so for flares bridging
• 14:41
  Speaker 3: using lays zero, which again is bridging xorp onto other
• 14:45
  Speaker 3: networks from the flare. It's not that it couldn't happen,
• 14:48
  Speaker 3: it's just that we have a much larger set, So
• 14:51
  Speaker 3: we have four dvns rather than okay, so the probability
• 14:55
  Speaker 3: of being able to hack all four simultaneously, and it's
• 14:58
  Speaker 3: a four or four agreement mech So it's not three
• 15:01
  Speaker 3: or four, it's not two or four, it's four or four.
• 15:03
  Speaker 3: All four dvns have to agree. So the probability of
• 15:06
  Speaker 3: being able to attack all four simultaneously, given their totally
• 15:10
  Speaker 3: different clients, that totally different code basis, is you know,
• 15:15
  Speaker 3: vanishingly low.
• 15:16
  Speaker 1: Yeah, all right, so okay, I see your point. Okay,
• 15:20
  Speaker 1: so you look at l rts right now, temporarily very toxic.
• 15:24
  Speaker 1: Do you think the market is just going to focus
• 15:26
  Speaker 1: on LST's to minimize risk.
• 15:29
  Speaker 3: Why would ll rts be toxic? I think it's just
• 15:34
  Speaker 3: a specific one. I don't think one's outside of Culptow
• 15:38
  Speaker 3: are affected.
• 15:38
  Speaker 1: Do you think that the market is at all worried
• 15:41
  Speaker 1: about other lrt's right now?
• 15:43
  Speaker 2: When you look at.
• 15:44
  Speaker 1: What happened over the weekend, do we see any kind
• 15:47
  Speaker 1: of contagent potential that could roll out of this.
• 15:50
  Speaker 3: There would be contagent for lots that are using one
• 15:53
  Speaker 3: of one set up, but this was not a This
• 15:58
  Speaker 3: was not an issue with that lots itself.
• 16:01
  Speaker 1: Okay, okay, So platform freezing should be more clearly presented
• 16:06
  Speaker 1: on websites and wallets. Right now, everybody's using Twitter to
• 16:11
  Speaker 1: find out what's going on. Because if you look at
• 16:14
  Speaker 1: over on ave, I'll just jump to their website real quick.
• 16:17
  Speaker 1: You've got to see there's really no narrative here of
• 16:20
  Speaker 1: explaining something that's happened in the market. It looks like
• 16:23
  Speaker 1: just a regular day in crypto over there, but if
• 16:26
  Speaker 1: you go to Twitter, it's it's quite a bit different.
• 16:28
  Speaker 2: Do you think that should be updated?
• 16:30
  Speaker 3: I think there's certainly ui improvements that could be made,
• 16:33
  Speaker 3: but I think our a is also quite good at
• 16:35
  Speaker 3: putting out information.
• 16:36
  Speaker 1: All right, So right now, Institutional Capital has been talking
• 16:41
  Speaker 1: about Vault products and launches. We've had several of them
• 16:45
  Speaker 1: on our show, bit Wise Franklin Templeton, both of them.
• 16:48
  Speaker 1: Do you think they'll end up pausing their upcoming Vault
• 16:51
  Speaker 1: product launches based on the happenings over the weekend?
• 16:54
  Speaker 3: No, I'd be surprised. Nothing to do with the vaults.
• 16:57
  Speaker 1: Do you think they'll be ready to go? No problem.
• 17:00
  Speaker 1: What are you what would you be worried about right
• 17:03
  Speaker 1: now that you would say, Okay, these are potentially some
• 17:07
  Speaker 1: areas of concern.
• 17:08
  Speaker 3: I'm worried about the entire attack surface of all code
• 17:12
  Speaker 3: with increasing capabilities of AI, you know, I think that's fundamentally,
• 17:20
  Speaker 3: you know, something that is a very very big difference
• 17:23
  Speaker 3: and one of the reasons why you're seeing a lot
• 17:26
  Speaker 3: of these hacks, you know, I think, but I also
• 17:29
  Speaker 3: think it will effectively make everything stronger of the long term,
• 17:34
  Speaker 3: let's just hope that you know, as many players as
• 17:37
  Speaker 3: possible survive.
• 17:38
  Speaker 1: Yeah, so you think it's really just a race right
• 17:42
  Speaker 1: now being able to fortify a lot of these platforms
• 17:46
  Speaker 1: and protocols based on what these attack vectors are doing
• 17:49
  Speaker 1: at the speed of which they're doing it.
• 17:51
  Speaker 3: It's the same Web two as Web three. It's everyone,
• 17:56
  Speaker 3: everyone's affected. I think there are some separations. I think
• 17:59
  Speaker 3: for too long DeFi has been working on a kind
• 18:02
  Speaker 3: of we've got to make money as movable as possible,
• 18:07
  Speaker 3: you know, as able to you know, for instance, there
• 18:10
  Speaker 3: are very few protocols that put limits on how much
• 18:13
  Speaker 3: can be bridged across chains. So you know, one of
• 18:16
  Speaker 3: the things we did, if I may shill Flare for
• 18:18
  Speaker 3: a second with with EFFXSRP, is that we introduce the
• 18:23
  Speaker 3: agent system where agents have to be more than three
• 18:27
  Speaker 3: times over collateralized both in stables and in flare, so
• 18:31
  Speaker 3: they have more collateral than is necessary. And this introduces
• 18:36
  Speaker 3: a speed limit on the bridge because you can't mint
• 18:40
  Speaker 3: more than the agents have collateral, and the agents take
• 18:44
  Speaker 3: the risk for something going wrong. So that is effectively,
• 18:49
  Speaker 3: you know, we've thought about a flaw, We've thought about
• 18:51
  Speaker 3: risk as much as we can, made compromises in the
• 18:55
  Speaker 3: protocols in order to alleviate risk as much as possible.
• 19:00
  Speaker 1: That kind of counteract the whole benefits of what DeFi
• 19:04
  Speaker 1: really is if you start to put a lot of
• 19:07
  Speaker 1: these limitations on it.
• 19:08
  Speaker 3: I mean, I think there's a sensible balance between limitations
• 19:11
  Speaker 3: and security, right. I don't think you need to be
• 19:16
  Speaker 3: able to transfer two hundred and ninety million across chain
• 19:20
  Speaker 3: without anyone asking any quit, without any protocol going going
• 19:24
  Speaker 3: hang on what's happening here, and then immediately deposit that
• 19:28
  Speaker 3: as collateral and borrow against it. I think having you know,
• 19:32
  Speaker 3: speed bumps in systems. You know, if someone really wants
• 19:35
  Speaker 3: to get two hundred ninety million to a chain, they
• 19:38
  Speaker 3: can wait ten minutes if they want to, if that's
• 19:40
  Speaker 3: important to them. I just think that there's a happy balance,
• 19:43
  Speaker 3: and we hope at FLAIR that we've struck the right balance.
• 19:48
  Speaker 1: You look at unaffected protocols and tokens right now, they
• 19:51
  Speaker 1: already have shown that they will halt out of precaution,
• 19:54
  Speaker 1: even though they're not even related to this hag you
• 19:56
  Speaker 1: think this is just a short term people kind of
• 19:59
  Speaker 1: freaking out on this again.
• 20:01
  Speaker 3: I think there's been so many AI sist attacks that
• 20:05
  Speaker 3: people are and we paused FX or P and still
• 20:08
  Speaker 3: paused that. You know, you just don't necessarily know what's
• 20:12
  Speaker 3: happening until you know, Especially if you're all, you know,
• 20:16
  Speaker 3: relying on something, you want to know what the details
• 20:21
  Speaker 3: are before you allow that risk to propagate.
• 20:25
  Speaker 1: We had the e Z people on last week talking
• 20:28
  Speaker 1: about the ethereum economic zone. What that meant for the
• 20:32
  Speaker 1: evolution of bridges. Do you think this is going to
• 20:35
  Speaker 1: be an absolute must adopt pretty soon?
• 20:37
  Speaker 3: I don't know anything about the ethereum economic science.
• 20:40
  Speaker 1: Okay, all right? Do you think there's enough being done?
• 20:43
  Speaker 1: And like you mentioned earlier in even in Web two,
• 20:47
  Speaker 1: do you think there's enough being done across all of
• 20:51
  Speaker 1: basically Internet and e commerce and online banking, crypto in general.
• 20:56
  Speaker 3: Look, everyone who's everyone who's responsible is scrambling as fast
• 21:01
  Speaker 3: as they can to get and get on the glass.
• 21:04
  Speaker 3: It's called I can't remember what they call it, but
• 21:07
  Speaker 3: get access to mythos. We are, you know, we we
• 21:13
  Speaker 3: want to run mythos over flair or get a third
• 21:16
  Speaker 3: party to do so as quickly as possible. You know,
• 21:19
  Speaker 3: the whole industry is, you know, all the responsible people
• 21:23
  Speaker 3: in the industry are taking this threat extremely seriously. I
• 21:26
  Speaker 3: think banks probably are, I hope they are. That said,
• 21:30
  Speaker 3: they also don't always have the best security, so we'll see.
• 21:33
  Speaker 1: You know, that's the area that concerns me is just
• 21:35
  Speaker 1: traditional finance.
• 21:37
  Speaker 3: Yeah, yeah, just government's concerned me more. I mean, oh yeah,
• 21:43
  Speaker 3: the amount of information that I suspect it's going to
• 21:46
  Speaker 3: be leaked from government databases terrifying.
• 21:48
  Speaker 2: What's next for Flair?
• 21:49
  Speaker 1: I know, I'll see you out at the XRP event,
• 21:51
  Speaker 1: But you guys have anything coming up.
• 21:53
  Speaker 3: In Las Vegas. I think we've got a fair few
• 21:56
  Speaker 3: things coming up, but mostly you know, we've been looking
• 22:00
  Speaker 3: now well, i'd say the last three months that okay,
• 22:03
  Speaker 3: what how do we build out our security even more?
• 22:06
  Speaker 3: And you know that's that's pretty much the whole team's
• 22:10
  Speaker 3: day to stage job these days is you know, how
• 22:12
  Speaker 3: do we how do we know? What what are we
• 22:14
  Speaker 3: doing that we should be What are we doing that
• 22:16
  Speaker 3: we shouldn't be doing? What what should we be doing?
• 22:19
  Speaker 3: Where we're upgrading f assets to V one point three
• 22:24
  Speaker 3: had a lot of security conversations around that. We're still
• 22:27
  Speaker 3: very confident it's it's a very secure version. It will
• 22:31
  Speaker 3: be tested on Songbird first, as all our protocols are.
• 22:35
  Speaker 3: But you know that will the upgrade to V one
• 22:38
  Speaker 3: point three will be amazing because one you'll be able
• 22:41
  Speaker 3: to mint directly against the core vault. This means that
• 22:44
  Speaker 3: you're you'll be able to mint more. We've had to
• 22:47
  Speaker 3: design new security parameters for that so that you can
• 22:51
  Speaker 3: only mint a certain amount, but from the against the
• 22:54
  Speaker 3: core vault before before there's a cutoff. Lots of dynamics,
• 22:59
  Speaker 3: secure aspects. I mean, I could break down here how
• 23:03
  Speaker 3: the how the FXRP system works, which you know is
• 23:07
  Speaker 3: quite a lengthy conversation, but one of the things coming
• 23:10
  Speaker 3: up in V one point three is the ability to
• 23:11
  Speaker 3: mint tag So you're be able to mint FXRP with
• 23:15
  Speaker 3: XRP directly from an exchange, which I think is quite nice.
• 23:19
  Speaker 1: Yeah, that will be good. Okay, So your current situation
• 23:23
  Speaker 1: right now with f ass ads, what protocol are you
• 23:26
  Speaker 1: guys under right now as all of this is going on,
• 23:29
  Speaker 1: and when what is the timeline for this to play
• 23:33
  Speaker 1: out for you?
• 23:33
  Speaker 3: So for f assets right now, we're on V one
• 23:36
  Speaker 3: point two. We'll be upgrading to V one point three
• 23:40
  Speaker 3: on Songbird. I would imagine next week or so, test
• 23:44
  Speaker 3: it for a period of time on Songboard, and then
• 23:48
  Speaker 3: upgrade it to Flair. Really exciting to have mint tag
• 23:51
  Speaker 3: because you can just withdraw XRP from any exchange to Flair.
• 23:54
  Speaker 1: That's going to be cool.
• 23:55
  Speaker 2: I love it.
• 23:56
  Speaker 1: F ass ads XRP being affected right now. Obviously protocol
• 24:01
  Speaker 1: you guys freezing assets to kind of you know, deal
• 24:04
  Speaker 1: with the security elements. What is next step for you
• 24:07
  Speaker 1: on getting that back to normal operation.
• 24:10
  Speaker 3: Yep. So to be clear, f assets is not frozen.
• 24:13
  Speaker 3: FXRP is definitely not frozen, operating perfectly as normal on Flare.
• 24:18
  Speaker 3: What is frozen is FXRP from Flare to other networks. OK,
• 24:24
  Speaker 3: you can bridge your x RP to Flare and you
• 24:28
  Speaker 3: can bridge it back again absolutely normally. That was never
• 24:31
  Speaker 3: frozen because that doesn't use lasers zero. What we use
• 24:34
  Speaker 3: layers zero for is FXRP to Ethereum fx RP to
• 24:37
  Speaker 3: Monad FXRP to base and back to Flair. We've kept
• 24:43
  Speaker 3: that frozen. We use a higher DVN standard than was
• 24:47
  Speaker 3: used by KELP obviously, but we're now upgrading the DVN
• 24:51
  Speaker 3: standard so that we have more dvns to make it
• 24:54
  Speaker 3: even more secure. So we're moving from two dvns to
• 24:57
  Speaker 3: four dPNs.
• 24:59
  Speaker 2: How long will that take?
• 25:00
  Speaker 3: That will take a couple of days.
• 25:01
  Speaker 1: Okay, so a couple of days on that things back
• 25:05
  Speaker 1: to hopefully back to normal and DeFi here with much
• 25:08
  Speaker 1: more security protocols going in place. So it's been it's
• 25:12
  Speaker 1: been good having you on. Thank you so much, Hugo
• 25:14
  Speaker 1: for jumping in on late notice. We appreciate it.
• 25:16
  Speaker 3: Thank you so much for your time.
• 25:18
  Speaker 1: All Right, So, whether you like what Hugo had to
• 25:21
  Speaker 1: say or not, I still think this is the worst
• 25:24
  Speaker 1: issue that has happened in DeFi yet we are, and
• 25:27
  Speaker 1: the reason really boils down to the exposure and the
• 25:30
  Speaker 1: amount of contagion. This potentially because Ave wasn't you know.
• 25:34
  Speaker 1: Just the fact that we have this happening on Ave
• 25:37
  Speaker 1: because of a layer zero issue alone kind of sets
• 25:41
  Speaker 1: up DeFi in a very bad way. And I think
• 25:43
  Speaker 1: this is at the timing here of what's going on
• 25:45
  Speaker 1: with Clarity and all the regulatory scenarios that are playing
• 25:47
  Speaker 1: out in DC right now, just not good for crypto today.
• 25:52
  Speaker 1: Now We're going to cover this uh situation as hopefully
• 25:55
  Speaker 1: this starts to resolve out. Of course, the interesting thing
• 25:58
  Speaker 1: here eth and Bitcoin both not really affected in terms
• 26:02
  Speaker 1: of price because of what was happening, granted or Michael
• 26:06
  Speaker 1: Saylor and also Tom Lee going out and buying exorbitant
• 26:10
  Speaker 1: amounts of both assets maybe to continue.
• 26:13
  Speaker 2: To support it. We're going to cover that.
• 26:15
  Speaker 1: There's a lot more happening this week, so stay tuned.
• 26:24
  Speaker 1: If you like this video, like and subscribe, drop a
• 26:27
  Speaker 1: comment down below, and also join our free private member group.
• 26:30
  Speaker 2: The link is in the description.