Variational Founder: $50M Series A, RWA Perps, And TradFi Onchain (Why Now)

Indexed: 2026-05-20

[00:00:00]Lucas, man, welcome to the show. Good to have you. Congrats on the raise announcement.

[00:00:03]>> Great. Thanks so much. I'm excited to be here.

[00:00:06]>> Absolutely. Congrats.

[00:00:07]>> Appreciate you working with us through the time zones. [laughter] >> Absolutely.

[00:00:12]>> Yeah. Um Lucas, uh I mean, PEPS feels like uh the modality of the future. It feels like everyone is excited about uh bringing what we've called high quality assets on chain. uh you guys have uh raised $50 million uh to do just this to bring RWA's onchain in a purpose modality. Um would love you know a bit about the story uh you know as first maybe you know about yourself and variational and then we'll we'll get into the rays in particular.

[00:00:42]>> Yeah, let me let me uh share a little bit about that. It's one of my favorite topics like who doesn't like talking about themselves, right? Um I'll try to keep it >> Yeah, exactly. I'll keep it succinct but there's some fun nuggets here. Um I've actually been in the uh broadly like quant trading, high frequency trading and crypto space for the last 10 years or so working the entire time with my co-founder Edward U. Uh we started out uh after meeting at university in Colombia at Columbia in New York. Uh we were kind of a dorm room founding story.

[00:01:10]I was the first person he met on campus.

[00:01:11]We were adjacent in the dorm room halls and we quickly became friends. We were in similar research labs. Uh he studied applied math. I studied computer science and we were all working on kind of topics and machine learning and Beijian stats and kind of these types of things.

[00:01:24]Uh we ended up, you know, being very close throughout uh college and we started a hedge fund. We were crazy enough right out of university. This was called Q Capital. Uh it was in New York.

[00:01:33]We ran that for a few years. Raised some uh pretty large rounds to the GP and then a large LP seed. We actually acquired by um our series A investor digital currency group uh Barry Silbert's firm and then uh I spent some time at Genesis Trading as the VP of engineering Ed was at Quant Research. Um Genesis trading was one of the largest OCC desks in crypto at the time. So we helped them build out their single dealer platform electronic market making system lots of other really fun infrastructure. That was kind of during their hyperrowth phase uh from 2019 to 2021. So it was a great seat in the ecosystem to uh kind of see everything that was happening, build up uh many pieces that are similar to the things we're working on now and uh build a great view of kind of the ecosystem. Uh in lateuh 21 heading into 22, we left Genesis after kind of finishing our our time there and we started variational.

[00:02:22]Variational's early time was actually this is not as well known was actually as a prop shop like kind of a prop trading firm. We're very active in OTC derivatives like OTC options as well as uh on a lot of other D5 protocols kind of from the 22 23 24 era. Um so if you can name one of the protocols from that era, we probably had some form of a tendril in it. We had some wins, we had some losses. It was a very volatile time in the markets as I'm sure you guys remember with uh you know Luna and FTX and everything but also tons of innovation happening. You know that's when DYDX was really hitting product market fit and also the earliest versions of Hyperlid. So we've been around the block. We've kind of seen it all and uh you know I like to sometimes compare our DNA, our story to a few of the other successful teams in the space coming very much from a trading background of the last 10 years HFT and then kind of that dorm room founding story and bond that I built with Ed. So it's a it's a fun one.

[00:03:11]>> Yeah, Robbie and I also share a similar dorm room founding story from freshman year at the University of Florida. um we you know we don't need to get into all of that now but um what what has been one of the biggest obstacles or challenges to building variational through the years like what has been uh a persistent kind of obstacle or what what wasn't as easy as perhaps you had anticipated it to be up to this point um and then similarly what was easier than you expected to build such a successful app >> that's a great question well to be honest I mean crypto markets are brutal.

[00:03:48]Um, you know, I feel like all of us have been through so many ups and downs and phases and cycles over these last, you know, five to 10 years that we've been in this market. Wouldn't trade it for the world, but that's the the real answer to your question. So, you know, truly, which do I even pick? Um, I'd say one of the biggest challenges probably was trading through and being very active in DeFi and even on centralized exchanges around the time of the Luna collapse, FTX collapse. Um it taught us a lot of lessons uh about risk management about kind of mistakes that were made um that we saw uh that have informed our perspective on um you know how to to run a successful protocol in the space and how to try to defend against that. Um I also think this is where we started you know having the first seedlings of idea of moving from doing more of like quant and prop trading which we had done for you know 6 to 8 years to that point and starting to think about building uh we saw some gaps in the market right uh we saw that there were pretty limited tools for people to uh kind of face each other peer-to-peer to settle and clear things on chain and I think this is one of the big reasons we saw not just with us but with hyperlquid and many others a kind of a new renaissance and resurgence of defi as you know a trustless way to be interacting or transacting in these types of derivatives. So that was one that I saw amongst many other stories.

[00:04:58]Um I'm sure you guys you know remember that time in the market but uh those were crazy crazy days. Um on the plus side I would say I've been really happy and proud with how the team pivoted from frankly like very very different types of products. Like of course there's a lot of pieces within variational overall architecture that look like trading and prop trading infrastructure and we're solving a lot of the same problems. you know that's why so many trading teams I think end up in having a lot of success kind of building in DeFi but on the other hand um there was a lot to learn right everything from consumer marketing and growth all the way over to how we interact a little bit more with directly building and deploying onchain primitives the security related to those things and so on and so forth um but I'd say that that the team really spun up very quickly there and at this point now that we've hit some product market fit and had some success you know the the growth story is compounding and it's really great to see the team kind of come into its own.

[00:05:51]>> Yeah. Yeah.

[00:05:52]>> Incredible. Uh Lucas, let's not bury the lead here. You guys uh closed one of the largest uh fundraiser series A rounds for DeFi in 2026. Uh Dragonfly is the lead. Dragonfly is one of the the few funds that is able to uh close or lead these these rounds at this scale as DeFi matures. Um you also variational also launched RWA uh perpetuals today and so it feels that like these are related.

[00:06:20]This was a strategic decision to announce their fund raise at the same time as launching these perpetual markets for RWAs. Why choose to launch these two things together? Why the RWA focus and the fund raise here uh at the same time? How are these related?

[00:06:36]>> Yeah, great question. I mean we really view these as two sides of the same coin. All right. like our investors kind of arrived at their conviction because of our RWA roadmap. This is something that variational's been building towards for quite some time. In fact, um, as I'm sure we'll cover a little bit later in the pod, varational uses a very different type of overall design. It's it's not a club, it's not an order book, it's RFQ with kind of aggregated liquidity. And we've been using that architecture intentionally with an eye towards uh bringing some of the trady liquidity or let's say all the trady liquidity on chain. Um so this was the vision we were pitching when we talked to you know investors not just recently but honestly many months and even years ago and I think that's uh kind of the the big the big thing that everyone's been waiting for. Um so why you know why why work with Dragonfly? Why announce these things at the same time? I mean, I think principally we partner together to tackle RWAs. We partner together to bring Tradfi liquidity on chain. And I think it makes the most sense to tie these and show like, hey, these are the level of buyin, commitment, and institutional capital that we have to deploy and we're very serious about solving this problem.

[00:07:40]>> Yeah.

[00:07:40]>> Yeah. And I mean, Lucas, I'd love to just have you extrapolate a bit about the vision that you have for variational. Um, I think that a lot of the industry has been kind of pigeonholed into this idea of we're building all of these DeFi protocols and applications for the crypto asset ecosystem and kind of what that entails, all of the traders on chain, all of the assets onchain. But Rob and I have been very firmly, you know, pushing this idea that this tokenization tokenization spectrum starting with stable coins, highquality, lowrisk assets, moving all the way down the risk curve to equities to private credit to anything that you can really kind of fathom from a higher risk perspective is well underway. Uh, and just yesterday there was some news from the SEC that came out about a tokenization innovation exemption as well. kind of what is the broader vision here for variational? I have a feeling it's not just trade Bitcoin and ETH up to 100x 247. I think there's something bigger here. What is your what is your kind of like top down vision for what this app can become?

[00:08:48]>> I'll answer that in two parts. So I'll give you on the consumer side, right? I think as you said it comes from being user focused, right? We're we're not interested in building tech for tech's sake. We're interested in solving problems um that like what are onchain users actually want to trade and I think exactly as you said onchain users want to trade not just uh what we have currently which is 450 different crypto markets all with market leading liquidity all with zero fees all on chain as perpetuals but they want to trade the same level of UX deposit and go zero fees etc but on perpetuals and CFDs for hundreds of different uh trady markets right they want to trade stocks they want to trade commodities they want to trade global global equities not just in the US but they want to trade them in Korea and Japan and beyond. Um and we've seen this demand. I mean, you know, let's also not talk about the elephant in the room too much, but of course, hyperlquid validated that this is like a massive massive market and I think I agree with you that it's only going to expand, but fundamentally what we see in the market is everyone's kind of uh solving it in the same way with the same limitations, which is every time we build a new order book, we have to bootstrap liquidity. Um, which means it takes some time to find those dealers, find those market makers. And for the majority of listings that we've seen in the market so far, we find that they're they're pretty thin. They're difficult to trade. they have high execution costs. So, we're listening to the users.

[00:10:04]We're seeing the exact same thesis that I think you just mentioned that, you know, users want to trade everything in one place. They want to have access to global markets with the same quality liquidity that they're used to in Tradfi. So, this is bucket one. I promise a two-part answer. This is for the retail side. Let's say for the uh you know the everyday trader we our vision is trade hundreds of different uh per and CFDs not just crypto but all of the global markets that we can get our hands into with trady quality liquidity and that's what our model enables. The second part though as you alluded to is um we actually have a product called variational pro and it's something that we don't get too deep into right now since there's so much and that we can do with omni and so far that we can take the retail per trading side but as I mentioned our background actually comes from institutional trading you know OTC derivatives structured products options and we see a world out there applications variational protocol not just to retail trading but actually to helping to solve the ways that institutions trade options hedge with structured products and beyond And I share that exact same idea. You know, as we see more tokenization, a better uh kind of regulatory framework, we'll see not as retail but institutions having a massive uptake in these things. And we can give the we can build a product that helps solve both at the same time. And that's something that really excites us um going forward.

[00:11:18]>> Yeah. And Lucas, let's kind of just get your opinion on why perp as a product is a superior product to uh you know zero date options or very short-term options.

[00:11:29]Why do you feel that pers are a superior product?

[00:11:32]>> Pers are simple. Um that's really the the key idea, right? What what do you want when you're trading a derivative as a retail investor? You want the ability to long or short, right? You also want the ability to trade with leverage and kind of express a size in your position.

[00:11:46]But what you don't want is to necessarily think about all sorts of time decay of your Greeks and your higher order risk factors and you know these uh very nuanced things that relate to options trading. I think zero DTE options and some of the other types of tools we've seen built for retail traders are amazing. I actually think with AI we'll see a little bit of resurgence of retail users trading these things as AI tools and LM can help them with trade ideas with you know digesting and thinking through different types of constructions but a we're not quite there yet. I do have some interest in solving that problem later down the line. But B, the reality is PES and CFDs, they're simple. They change linearly with the underlying. They give me everything I want as a retail trader, which is again long and short and some leverage. Um, and the ability to use USD as collateral, USDC, but without kind of adding all that extra complexity um that I think a lot of users honestly fall prey to.

[00:12:36]>> Yeah. Um Lucas, looking at some of the stats here, you know, obviously this is uh with very very recently launched RWA markets. Uh so the the full suite of products is is starting to become available. Um I think also it's still restricted in some ge geographic locations. Uh but even despite all this, uh upwards of four and a half or so billion dollars of volume over the last seven days uh and I think upwards of 16 or 17 billion dollars over the last 30 days. Uh, so there's still significant significant volume here. Um, with the most recent raise, $50 million from Dragonfly, how do you plan on utilizing this capital to accelerate open interest, accelerate volume, and and you know, take this thing to to 50 and hundred billion dollars?

[00:13:23]>> Yeah. I I point out that um our first set of RWAs, as you mentioned, just went live um quite literally last night uh Asia time. Um so, you know, let's call it 24 hours ago or so. Um what this means is the existing uh kind of traction you see on the platform comes from our zero fee model, our aggregation of liquidity which gives high quality execution to our users and the huge menu of things we have to trade on the crypto side, these 450 different per. Um but fundamentally the thing I'm most excited about and Dragonfly is most excited about and we're really happy to be getting out into the world today is that you know the vision here is not just 4 to 50 crypto per but it's hundreds and hundreds of additional um RWA markets to trade. So what are we using that capital for? Well, fundamentally the problem that we're solving to put it more succinctly than than my earlier answer to Andy is we're bringing Tradfi liquidity on chain, right? Like that's fundamentally what our architecture enables and it's fundamentally what I think is missing kind of the missing link to not just have five or 10 different tradable assets like we do currently on chain, but to have that huge menu. Um, so it takes capital, it takes real institutional might to partner with tier one US institutions, with those big trady players, dealers, market makers, and others that you have to in order to solve that. We've solved it on kind of the protocol architecture design, and we've proven the model to to what you just mentioned um in terms of our existing volumes and stats. But I think we'll see an exponential increase from here. Um, of course, that's what I hope. I'm drinking my own Kool-Aid. Uh, but I think the demand's there. I think that the product is really going to be a step function uh once we start rolling out these phase 2 markets is what we call it these trady liquidity porting on chain and that's coming in the next few weeks.

[00:15:02]>> Yeah. And we we know that there's significant demand for this modality and and this can be applied to all asset classes given the size of the asset classes that are starting to become available on variational and the quality of those asset classes. I'm curious, do you anticipate that trading volume, open interest will in in these RWA markets will eclipse that of the native crypto assets? And and if so, you know, how long do you think until you you end up with, you know, greater than 50% of the the open interest on variational is in these RWA either equity RWA commodities markets?

[00:15:41]>> The short answer is very soon. Um, and I I can give you some data on this, right?

[00:15:45]uh we we'll see a very similar path to what we've seen on Hyperlquid with HIPP3 and and Trade XYZ. Um love their team, love that what they've been doing, but to the point of them validating the market. I mean, to my knowledge, more than 50% of Hyperlid's volume and and probably a pretty similar percent of their OI is now driven by RDBA markets.

[00:16:02]Probably changes a little bit on a day-to-day basis, but I think variational will achieve a similar parody very soon. Um, frankly, you know, it depends on the market cycle, but right now I think many retail traders are more interested in trading say AI stocks, um, memory stocks, semiconductors, these types of things than at least certain mid and longtail crypto assets. Of course, cycles change.

[00:16:22]You know, there's always kind of a a hot new thing, which is great. But our goal is to give that full set of optionality uh to retail users on our platform. So, so they can trade whatever they want all in one place. Um but I really think as we roll out more markets in the coming few weeks uh it will happen very very soon. Um HIPP3 show the adoption curve here is fast if you provide high quality products and again I I think they did a great job but I'd say there's high quality execution on five or 10 markets right now there I think we'll be able to do so on 100 plus which is going to be very very exciting. Yeah, Lucas, let's talk about some of the design choices that you guys have made um specifically around the way that the uh the taker and maker orders happen as well as around kind of the the RFQ system which will kind of lead us into the revenue and buybacks and this whole conversation.

[00:17:15]Why why do you feel that the variational RFQ model is superior to the order book model of something like a hyperlquid?

[00:17:26]>> Yeah, I think fundamentally um RFQ and order books are they're different sides of the same coin, right? They're they're at the end of the day ways to to match orders. So I also want to draw a distinction that limit order books are great. We rely on limit order books.

[00:17:43]They're used for price discovery.

[00:17:45]Exchanges are necessary to variational and enter to the markets. In the same way we have hyperlquid in crypto, but we also have, you know, NASDAQ and NAS and CME and all the other, you know, traditional exchanges that you might be very familiar with. Um but also in traditional finance we have this idea of kind of brokerage style um let's call it liquidity aggregation or routing which essentially means that rather than it being the infrastructure layer play um for most retail users what they want is access to the most liquidity. They don't want to trade on just one book which might not be the deepest book in the world they want to trade on as much liquidity as possible. In other words get the lowest execution cost so they keep more of their profits. Um this is really what we're solving for with our model. So what's the difference is we're not trying to be the venue for price discovery. We're trying to be the venue venue for best execution. And what that means is rather than building a limit order book which is again used especially by algo traders for that price discovery and really rapid level trading RFQ allows us to quote a really really excellent price all in to the user on the one side and then aggregate the liquidity on the other end for hedging on on the other side. Um, so this is the fundamental difference in our model, but it's also the fundamental thing that allows us to bring that trady liquidity on chain rather than trying to rebuild it every single time we do a new listing in a new order book.

[00:19:00]>> And then does that because you have a zero fee model on that uh you know on the platform at large. Does that end up looking something similar to how lighter has a zero fee model but then earns revenue via the effectively by market making and then is able to to do their buybacks. How do you how do you guys generate revenue that will uh ideally for the community end up being used for token buybacks for a future token? I know you can't speak probably on the token side, but how does the revenue generation on variational work and kind of generally do you have any plans to change that to accelerate that? How does how does that process work? Yeah, so variational is revenue generating right now um despite our zero fees and our goal at the end of the day with this model again as I said is liquidity aggregation and high quality execution for users and a big part of high quality execution is zero fees so but it's a great question a very fair question it sounds sometimes too good to be true if there's zero fees and great execution how does varational make money um just a quick point of uh kind of explanation you were mentioning lighter and I'd also use the example in traditional markets of say Robin Hood these are other zero fee trading platforms that make what's called a payment for order flow so that's what you were just alluding to, which is the idea that they don't have to charge their retail users uh fees, but they make money by selling the order flow out to market makers who are filling the other side of the order. Um, selling the order flow, I think, is uh let's just say there's been many articles written by people smarter than myself about the potential um game theoretic misalignment there. But let's just say the money has to come from somewhere and the market makers are are the biggest beneficiary of this arrangement. In fact, they're usually taking back a small portion of the profits that they make to the the platform where they bought the order flow from. It makes intuitive sense, right? They're not going to pay more for the order flow than they can monetize themselves. Um, on variational, this is the other side of our, you know, coin for the architecture. We talked about RFQ and liquidity aggregation, but the other big um kind of difference between variational and other platforms is that OOLP, Omni's liquidity provider on variational is the system that takes the other side of retail orders immediately.

[00:21:03]So for every retail trader, they're what we call a taker. OLP is always the other side of the trade, the maker. Um OLP's job is to then go and aggregate liquidity to hedge it as cheaply or as quickly as possible. Um but in other words, we're able to socal, I like to say, squeeze the limit or juice the lemon before we do that. We are the maker that can kind of uh juice the quality of that retail flow a little bit before we pass it along. But this is a win-win. We provide zero fee trading to retail users. we aggregate a lot more liquidity which gives them high quality execution >> and then we are able to kind of keep it within the platform this monetization of the retail flow is what we'd usually call it um to a very small degree and then we go and hedge it ourselves um but in the past we've used mechanisms like loss refunds in the future we're planning on something called a spread rebates or other types of rebates on the platform but our overall vision is to keep that revenue source within the platform rather than leaking it out to the market makers and then having them kick a small amount that through PF we want to monetize it within one platform and be able to share some of that with the users or frankly just take a smaller spread at the top line and zero fees which is another way of sharing the value with the users >> and then you plan on having zero fees you know no pun intended but perpetually for the existence of the product >> yes correct correct um variational is you know stable or revenue generating uh without fees um and again conceptually we can compare it a little bit to payment for order flow but imagine instead of uh sending the order flow mostly to be monetized by the external party and then getting a little bit of a kickback variational attempts to squeeze that lemon uh on the other side of the retailers directly before hedging. Um so this is the fundamental mechanism by which we generate revenue but it's a kind of a win-winwin.

[00:22:45]>> What do you mean by squeeze the lemon in this case? Like when when you're talking about juicing the order flow before passing it off to the market makers, what what what is that process?

[00:22:55]fundamentally um it just comes down to the efficiency of hedging and uh you know how we can um efficiently aggregate that liquidity out. Um so this is the same that any other market maker would do in the same way you know Citadel might be on the other side of a Robin Hood trade. Once they assume the other side of the retail order, their job is to either internalize that trade or hedge it onto another venue as cheaply and as quickly as they can. But obviously in some sense they're they're being compensated for that. Um, so we try to do that ourselves a little bit more efficiently sometimes and also a little bit more within the same platform before it goes out to these external parties for hedging. And what that allows is again we can keep more of it within the protocol. We like to call it not leaking the value externally.

[00:23:39]>> Right. Right. So you can internalize some more of that activity rather than hedging it out to some third party. You can fulfill more of it yourself. Um, >> and Lucas, does that just scale based on volume? your revenues are simply scalable linearly based on volume >> roughly. Um, okay.

[00:23:59]>> I don't want to overpromise here, but you know, one thing that we're excited about, I'll just use the general comparable that market making is a business that gets more efficient at scale, not less efficient. Um, so we're excited about the fact that we've already been able to achieve some reasonable scale with OOLP and variational at our current activity in crypto. But as we get bigger, we're able to offer even better and better execution to our users because of the economy of scale, because of internalization as Rob was just mentioning and a few other things. So these are you know one facets and I don't want to get too technical but these are like a few facets of the way in which we can you know kind of again have that virtuous cycle providing really really high quality execution zero fees great aggregation of liquidity but still generate revenue and over time I hope yeah indeed more revenue as volumes go up.

[00:24:43]>> Lucas this might be a silly question but the Robin Hood example uh feels like it's a good comparison uh for for a variety of reasons. you mentioned, you know, payment for order flow. You know, the the Wall Street Bets era, 2020, 2021 GameStop meme stock craze happened on Robin Hood. Um, and it was it was very very uh at the center of uh that that whole wave. I'm I'm curious because, you know, variational is also doing payment for order flow. Robin Hood was doing that.

[00:25:17]Um, you know, Robin Hood kind of got in this situation where it halted trading on GameStop because it was maybe favoring market makers, right? Because th that those were ultimately the customers. H how do you prevent variational from falling into a similar position where you know you guys are halting the retail traders because you've got to pro protect the market makers?

[00:25:40]>> Well, a few key points here. Um, number one is not to nitpick too much on technical terms, but I would not call variational payment for order flow. Um, since as I was saying, it's very conceptually similar in terms of where is the money coming from or the revenue coming from. Uh, but we are uh kind of filling the other side of the order ourselves and then passing on the hedging flow as opposed to letting a market maker fill the other side directly and then paying us for that.

[00:26:02]That's the payment for the flow side.

[00:26:04]Um, but you know, again, very close in terms of concept, but it does allow us to get to keep that revenue within the platform and return some of that value back to users over time. That's that's part of our vision. Um, secondly, as as far as it relates to the GameStop and so on, um, one interesting thing that I'll point out, which, you know, might be a little bit too much of debate tactics, just attacking the premise, but um, I think this does become more and more of a concern when we're talking about nonlinear derivatives, things like options and so on. If I recall correctly, that was uh the main instrument being used by a lot of the retail speculators. Um yes, it's it's possible to very quickly have certain dealers get into hot water. Um let's just say broadly with the trading dynamics that we had around that time.

[00:26:43]Um this is very different for linear derivatives. It's very different for the types of relationships and even um the way we have constructed you know settlement procedures and the relationships on the other end of the flow. And it's also a reason why we're working towards you know redundancies and liquidity provider side and all sorts of mechanisms to to fairly protect the users. So it's top of mind. I think it is something we think about but on the other hand at the risk of dodging the question a little bit too much. Um it doesn't have as much of a direct analog to to risks that I would necessarily consider day-to-day on on the things that we're listing right now.

[00:27:14]>> Yeah. Understood. One of the things that I and Rob, one of the things that I love about this whole per kind of dynamic that's ongoing right now is that it almost resurfaces this like integrated versus modular or modular versus monolithic kind of conversation. You know, you could argue you've got a couple of these lighter hyperlid operating on their own chain. Hyperlid 16 nodes much more of like, you know, less secure than a lighter. lighters ZK proofs have just been uh reran effectively as of like this week uh suggesting that you can exit the the chain you know given any any event you don't need any help from the uh admin wallet or from the multi-IG and so there's a lot of like ZK things happening there that make that pretty cool hyper on the other hand much less secure I think you could argue in terms of their node architecture as well as their multi-yc design and then you've got Salana's been absolutely at the helm the last week with tolli and phoenix trade just a smart contract on Salana variational similar built on arbitrum one uh kind of has a has an interesting tech uh technical setup there Lucas I'm just curious like where you stand on the optimal infrastructure design for per right obviously you need extreme extremely fast execution uh you want security you want um you know you all of your users to be safe. And then there's also the composability question.

[00:28:46]How do you how do you think about the optimal design for uh a per exchange and why why have you chosen to build on arbitum and kind of do things in the way that you have?

[00:29:00]>> Yeah, there's a nuanced answer to this question which I'll I'll try to unpack a bit, but I think it's an important one to ask, right? Because at the end of the day, what this really gets at is two sides. Um, one is user experience and the other is security and trust. Right?

[00:29:13]On the user experience side, you mentioned things like quick execution.

[00:29:16]I'd even just say like easy deposits, right? Like bridging. What's the wallet infrastructure look like? Of course, for any kind of large scale like L1, you know, a Salana or any built out L2 like an arbitrum. Um, these are relatively solved problems. So, let's kind of check that box a little bit in terms of transaction throughput and some of the more nuanced reasons why. For example, lighter runs on their own L1. It's very impressive technology. I did see the the ZK proofs as well. Like I think their team's doing a great job. Um but you know they make specific technical decisions because what I was saying earlier like they're building a price discovery venue. They're building a limit order book. They have to build for high frequency traders and different use cases than what we're considering. Um at the end of the day on Omni for Pers trading we're obsessed with you know the idea of like a retail trader right not an institution not a high frequency trader. We try to solve user experience problems and therefore the technical problems that come up for that use case.

[00:30:10]For RFQ um RFQ a common misconception I I see taking a small detour is that RFQ is for example like has extra extremely high latency or bad execution. Um on Omni your quote request is getting refreshed in real time. You know it's a few milliseconds right like for any normal trader this is very very fast right but it is true that like Omni is not built for HFT. So you know certain of our technical decisions as it related to building on arbitum one and and our ability to do that in terms of the block times did come downstream from the fact that we use just a completely different architecture but again the architecture is solving for tradi liquidity on chain and the best use case for for retail not for HFT price discovery um which is just very different as it relates to the other side of your question which is kind of the the privacy and security and let's just call it safety side that is a big reason why we chose arbitum and again this isn't to the detriment of other great chains like Salana and many others but um in particular right I think users can trust like we are running their capital we're running the the system transparently on arbitrum one if you sign up to variational you deploy your funds into a what we call settlement pool it's a new smart contract that we spin up for every single user you can see it there uh it's on the the main arbitrum one chain um you know there's some there's some value in there that I I feel so this is um a very high quality I think substrate for us to build on um and in terms of kind of the the spectrum term of let's say hyperl liquid to to a lighter and there's a lot of things that could go into how we compare those but I think that they're built with different sets of trade-offs. I think variational kind of straddles somewhere on that spectrum.

[00:31:45]But the bigger things we were thinking about was again how do we solve for trust and security and then how do we solve for the UX side. And I'm I'm happy that with the decisions that we made there so far gi given that there's a lot of trade-offs that are made, you know, across this entire spectrum. Some are built more high frequency, some are built more for execution.

[00:32:04]I we've also been talking a lot on this show about the power law and how, you know, th this market feels as if it's getting more mature and you have the leaders that are starting to run away with, you know, with the game. Do you think that there's room for, you know, several perpetuals exchanges to all compete for market share? Um, or do you think that this follows the typical power law kind of 4:2 to one ratio of, you know, what a 2:3 winner market could look like?

[00:32:34]Firstly, I'll separate that question into exchanges versus brokerage-like models where we're really competing in in a second piece. In fact, um the the fortune article that went live a little bit earlier used an important quote where I think I was saying we don't view hyperlquid and lighter as direct competitors in many ways. As I said, exchanges are an infrastructure layer piece. They're very necessary piece. We can and will trade on those types of venues in the future in the same way that we trade on many other exchanges.

[00:32:57]Just like I'm mentioning how we're aggregating tradfi liquidity. We're not a we're we're a user of you know downstream in some sense of CME and CBOE and these types of exchanges um kind of through our our tech stack handwave a little bit. Um but you know we don't we don't see as a direct competitor to answer on the exchange side because I think that's an interesting one. I personally think that there is a power law and that there will be a small set of winners. Um and there's a lot of economy of scale there. Um, right. Like as we described, order books, you have to build up that liquidity and and have those maker relationships and there's a lot of an economy of scale. So, do I think it'll just be one long-term? Not necessarily. Uh, but do I think there's going to be 10, 15, 20 exchanges, specifically limit order book exchanges?

[00:33:40]Um, maybe not, unless we are really segmenting by product in the same way we have different global exchanges or exchanges for derivatives versus spot in the US. As it comes to brokerages, um, firstly, this is a wide openen category.

[00:33:52]something we're we're really excited about or broker like let's say. Um so this is asking the question of like you know if you build a retail facing product and try to again solve for aggregation and zero fees and so on it looks very different. Um I think we're one of the the first in this category that that's going to scale out and we're very excited about that. I'm sure there will be more. Um brokerages are something that we see specialized in various geographies and product types. I mean think of how many you can think off the top of your head say in the US market Robin Hood Fidelity Schwab etc etc. um you know we'll see different carve out different parts of the ecosystem but at the same way in the same example of course there are a few big winners and they become durable because you know users are sticky and we think we can give them for example for us a great product and uh have a very durable edge there.

[00:34:38]>> Beautiful. Lucas, last thing from us.

[00:34:40]Um, anything any words to the variational community, the early traders, the early OOLP adopters and depositors and users, big rays, RWAs are out. You know, there's there's a lot of excitement. People are kind of coming back to the market. If you're if you're watching a few markets, it's a gigab bull. If you're watching the majors and some other markets, you're down bad.

[00:35:03]People want to feel something. anything any words to the community?

[00:35:08]>> Well, to our community, I think it first always has to start with a with a thank you. Um, you know, as I think Rob was mentioning, quoting a couple stats a little bit ago. Um, you know, it's been amazing to see the the adoption of the variational platform. It's been great to see it hit product market fit to kind of prove out our brokerage- like model, our zero fee trading model. And then, you know, this is what we're delivering our our ultimate vision. Um, we partner with Dragonfly. We have the capital we need at the partnerships we need and we're bringing the Tradfi liquidity on chain.

[00:35:34]It's a big thank you to everyone who's been there early in the process with us using the early versions of variational helping be part of that journey, helping prove out the model, and it's it's up to us to continue to scale it from here.

[00:35:44]Um, but to the community and and even to people who might be familiar with variational for the first time from some of the the press we're doing today and this great conversation, um, try out the platform, share the feedback with us.

[00:35:55]There's tons of new RWBA markets coming soon. I hope more than a hundred. We're actively hiring. Um, we check Discord every day. We are a crypton native team in that that sense. We are deeply plugged into our community and we're constantly watching. So many of the best ideas, listing requests, etc. come directly from our community. We love for more people to be a part and to help us usher in this new era of RBA trading on chain.

[00:36:19]>> $50 million series A. Shout out to the new hire, Justin. Let's go, man. Yes, sir. Let's go, Lucas. Great episode.

[00:36:28]Thanks for joining us, man.

[00:36:29]>> Yeah. Thanks so much for the time, guys.

[00:36:30]really fun chat.