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Block by Block: A Show on Web3 Growth Marketing
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Block by Block: A Show on Web3 Growth Marketing
[PODCAST] Karel Kubat from Union Labs on Building a Composable, Trust-Minimized Modular Ethereum
Summary
Karel Kubat, CEO of Union, lays out a bold vision for a decentralized coordination layer that can unlock true interoperability in crypto. He breaks down why bridging is still broken, why ZK is more than hype, and why Bitcoin needs to be more than digital gold. From security risks to UX gaps to regulatory pressure, this conversation covers the hard problems and how Union is solving them.
Takeaways
– Union is building a decentralized coordination layer to connect ecosystems without sacrificing sovereignty
– Interoperability is not a feature, it’s the future, especially for assets like Bitcoin
– ZK tech offers powerful efficiency and trust guarantees for cross-chain operations
– Union’s mainnet beta is focused on bootstrapping use cases in the Bitcoin ecosystem
– Bitcoin in DeFi isn’t optional, it’s the next unlock for serious liquidity
– Real-world asset (RWA) integration is a priority for Union’s long-term roadmap
– Bridge security remains a major attack surface and demands a new approach
– UX in cross-chain bridging is still painful, Union wants to fix that
– Go-to-market strategy targets underserved, long-tail assets and app developers
– Regulatory shifts will shape product and protocol design going forward
Timeline
– (00:00) Introduction to Union and Its Vision
– (02:43) The Importance of Interoperability in Blockchain
– (05:30) Union’s Unique Approach to ZK Technology
– (08:15) Building Bridges: Union’s Role in the Bitcoin Ecosystem
– (10:58) Unlocking Bitcoin’s Potential in DeFi
– (13:40) Real-World Asset Integration and Future Plans
– (16:33) Security and Trust in Blockchain Bridges
– (19:24) User Experience and the Future of Bridging
– (22:07) Union’s Go-to-Market Strategy and Community Engagement
– (24:42) The Role of Regulation in Union’s Future
– (27:27) Conclusion and Future Outlook
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Today on the show, we're joined by Karel Kubat, founder and CEO of Union, a decentralized coordination layer built for the modular future. If you're curious about how infra can get composable without losing sovereignty, or how Union plans to scale Ethereum without abstracting it away, this episode is for you. Welcome, Karel. Yeah. Thank you so much for having me Peter. Let's get right into it. What's the core problem Union is solving and why is now the right time for it? Yeah, so it's a problem that people are probably very accustomed with. um It's the problem of blockchains transferring value between each other, communicating with each other. And basically, how can we have a world where there are thousands of blockchains, some large, some small, some L1s, some L2s, be interoperable in an efficient manner without actually getting rid of the core reason why we use blockchains, which is censorship resistance and decentralization. got it. Now I've interviewed a number of projects in the space. uh When you say composability, immediately think of, know, uh Celestia, Espresso, um and then with the ZK stuff, you know, I've interviewed Boundless, um RISC-0, before Boundless, and also Sysynced and other projects in the ZK space. Lots of ZK projects, actually. And that seems to be kind of a core component of composability, is like, um is the ZK piece. Tell us kind of, uh you've described union as a coordination layer. So for listeners, maybe explain what that means and why a coordination layer is important for um interoperability between chains. Yeah, so fundamentally when you try to do inter-opposite data between chains, you need to have both chains agree on a source of truth. And that's what we in general refer to as coordination here. How do you make the destination site aware that funds were burned or that um a user submitted a set of bytes to be sent as a message itself? The reason this fits into ZK as well very much is that actually solving this problem either requires you to do some very heavy computation on chain or it requires you to just like discard that and say we have an oracle or we just fully trust a relay or a committee to provide us with the data. Now just trusting an oracle I find like the least elegant solution because why am I using blockchains if not because I want to trust codes not entities and the heavy on-chain computation you solve by using ZK. because effectively you can scale compute from the compute off chain and then just verify a very tiny proof on chain for the work that you're doing. If you're not using an oracle, what are you doing? So in our case, what we do effectively is we monitor what we call the source blockchain. We monitor their validators, their block header, all of this goes into a circuits and is being put into a proof. And that proof is submitted on the destination site. Generating this proof can be done by anyone because that's kind of the magic of zero knowledge proofs. The prover cannot commit fraud, right? It's mathematically impossible to construct an incorrect. So in the end, what you have is a system that only relies on the source blockchain. And that's already a security assumption that the user has because that's where their funds are currently parked on. And so we add no additional security assumptions. So you guys, so Union built it on ZK Circuit. We did, yeah. Union has been around for two and a half years now. And so you mentioned risk zero. We work with them. But especially two and half years ago, the VM wasn't performing enough for the work that we do. It still isn't. Like, Union is about a factor 100 times more efficient with the custom circuits than it is with the general purpose VM, which kind of makes sense. Like, we optimized, of course, for our solution specifically. uh But uh we're looking actually to start leveraging more general purpose VMs down the road as well. that just allows us to expand much more quickly. That's uh a tremendous amount of work to build your own ZK circuit. um And from what you just described, it's because you had a very special purpose chain versus a general ZK VM. Do you see a trend where as chains becoming less general purpose and focused more on a specific domain, do you see that trend happening? So what I meant here by ZKVM is like leveraging like risk zeros technology or succincts SP1. What is the case though is the moment you tread outside of what basically everyone is doing, which is like... doing a CK EVM, indeed the tech stack has to become more custom overall. Like let's say like generating a CKP of hyperliquid would be quite complex because actually a lot of the trading engine itself happens outside of their EVM deployments. So this is something where CK is still a little bit behind and work is being done to basically incorporate those techs as well. In our case though, for us actually a lot of the performance gains are really on like the low level cryptographic sites. Like how do we prove hashes faster than Vis0 can do that? Because in the end, like tracking validators, tracking a change consensus involves checking block headers, checking signatures. And so it's like basically compute intensive, especially within kind of a circuit. Yeah. What stage is Union in right now? Testnet, Mainnet? So we are in kind of main net beta. So right now around the kind of Babylon Bitcoin ecosystem, Union is the main bridge being used. We're expanding to more BSNs as well. So Plume, Sui, and basically becoming the main bridge around this entire ecosystem. Lines kind of well with what we initially set out to build, right? We don't add twist assumptions on the tech. that aligns very well with people who hold Bitcoin because obviously they're usually a bit more on the Cypherpunk side as well as they don't want to have any risks that they're going to lose their BTC. Look to expand to other chains as well and what we kind of consider like our full main net is when the token and decentralized governance goes live as well. So for kind of on-tension purposes like the core tech stack is actually like in production and securing a relatively large amount. I think about a hundred million in Bridge TPL at the moment, within the largest transfer we saw being 20 million transfer dollars. That's tremendous. uh You mentioned Babylon. I know the folks there pretty well. um I'd love to hear how uh Babylon is uh utilizing union. What does that integration look like? So Babylon of course has their like a Genesis L1. And so if we're going to have all DeFi activity on there right now, all TPL on there, and that's origin transfer through union on the chain. Then on top of that, Babylon kind of forms a larger network of blockchains where A, they obviously rent security from Babylon that's provided through state BTC. And then in exchange, they usually pay a portion of their inflation. tokens at these chains means. And so we are working with the Babylon team towards a solution where these repayments to the Babylon L1 all go through union. So you can kind of imagine Babylon being the center of the BSN ecosystem and union being the mesh network that connects all these different chains together. The architecture, did you have to do anything custom because of the Bitcoin piece or no? So in this case, no. Babylon's core tech was quite well suited for us to integrate. For some of the BSNs, we do have to take some other new consensus mechanisms into account. But overall, we were able to leverage our existing stats. What we see right now, what makes our life a lot easier as well, is L1s that used to do optimistic verification mechanisms move towards being fully ZK-provable. And so for us, that makes unions life a lot easier. This union really works well with fully provable architectures. I see a couple of other Bitcoin projects on the ecosystem page. You've got Korn, as well as Bob or B.O.B. um What do you think about uh BTC-Fi? it feels like now is the right time for BTC-Fi, but I've seen, um other than union, I haven't seen kind of really broader integrations with other ecosystems. Yeah, so indeed like within the BTC kind of five focused projects, we still see a lot of wild gardens to be honest. They have usually some type of way to get access to Bitcoin derivatives and then they kind of live on their own L1 or their own L2. So that's something that we look to solve. Because I think currently that's preventing BTC5 from actually being the most dominant sector. Obviously I have all stables as well. And I really like to see increased like real life utilization of crypto. But I actually think that BTC5 should be the biggest sector within crypto, right? Bitcoin being the king makes the most sense. What we currently lack, I think in the space is... ways to get real revenue at larger scales. So Bitcoin obviously offers a tremendous amount of potential TVL. DeFi protocols at the moment are not able to properly serve that yet. And so I think some solutions that we work on will massively improve this as well. What we've seen happen too is uh big fragmentation. across BTC derivatives. So we've seen, I don't know how many BTC LSTs we have and state versions of these, but it's quite a tremendous amount. So we're currently working with Babylon and the wider ecosystem on OuroBTC, which is kind of our solution to this, which is an aggregated Bitcoin LST that basically allows users to have a single asset that they can use across the entire BSN ecosystem. I think fixing the fragmentation problem is one of the key things in composability, right? And uh when you think of DeFi, it's been really a closed kind of loop system where there isn't very much new capital coming in. It's just kind of us kind of interacting with each other. so unlocking the potential for Bitcoin in DeFi is massive. I mean, that could unlock so much liquidity. I think another area too where um where the pie can grow is the addition of BTC plus some of these other ecosystems like Doge or XRP or uh Cardano. Like DeFi doesn't exist in those ecosystems. And by the way, I don't know anything about those ecosystems, but I do know DeFi doesn't really exist. And so nobody's earning yield on their capital. And so the potential to unlock yield and defy in those ecosystems, I think is interesting. Have you looked at those ecosystems at all? Yeah, especially to Cardano from a technical perspective, it's an integration that we really would like to do because Cardano itself fits nicely into the way you can kind of do this verification. And I fully agree with you. It's actually a very skeptical market where you can get massive unlocks. And if you're the first provider to even provide like a couple of percent fields to uh as large a user base as that, uh those are massive unlocks, of course. Still, I'm uh most interested in Bitcoin because we see so much happening in the kind of centralized space, right? With um Mars Science Search and think Stretcher, the new product from Sailor as well. So there's apparently a massive appetite to earn yield on Bitcoin for companies to hold Bitcoin, for countries to have strategic Bitcoin as well. And it'd be such a massive shame, of course, if in the end we were to do that in the centralized space, right? If we're going to hold a decentralized asset, but not actually have it be utilized in DeFi as well. You mentioned Plume. um Is Union doing some work in the real world asset space? Yeah, that's something as well. So things kind of are starting to understand what we are wanting to build with Union here, which is not just a blockchain to blockchain bridge, but really a connector to real world assets, Threadfy, um Tify, whatever you want to call it. We really see our products as just a means to give people with assets access to new destinations to earn yields. And those destinations can indeed be other blockchains, right? might find higher yields of new opportunities or potentially bringing in money from real world assets. So we're looking to collaborate with Clu on building some of these structures as well. And here too, think specific assets tailored towards the wider BSN ecosystem as well as just the wider cross-chain ecosystem could do really well. Assets with zero bridge transfer fees, fast bridging times. potentially uh yield from any chain. So you don't necessarily need to keep it in one specific chain. I think those will do quite well too. And we're looking to basically build those in the next two years. I mean everything you're saying, you're painting a picture like union is both, there's a ZK component, there's a bridge component, there's an oracle component. Or to get rid of it. So it's like, I mean you're painting a very kind of complicated kind of protocol. maybe share with us kind of like, I understand that in the modular space, know, composability and fragmentation is an issue and union aims to solve that problem. um And the architecture sounds quite complex. Could you maybe share with us a little bit about that? Yeah, so I think the best way to try to picture union is almost like Amazon, where we are both the data center with like database services, with internet services, even hosting services, all in the service in the end of supplying like the bridge protocol. And a bridge protocol, if you look at it from a high level overview, really means assets issuance. That's really what you're doing in the goods. A bridge. like locks funds on one chain or burns them and issues new assets on the other chain. The moment you realize that, you start thinking, hmm, can we maybe like issue different types of assets, right? Can we leverage the bridge technology to combine yields, for example, or to indeed compose protocols better by leveraging that asset issuance site? And if you push that like all the way to the max, you realize, hey, we could issue assets from the real world as well. and make that connectivity. And so that's how we looked at Union. We have that like base technology stack um finished. We now have this core that we can use to rapidly connect to new ecosystems without adding trust assumptions. So that's like a kind of a cool part as well. uh And now we can really look into how do we make Union technically the biggest glue between all assets that go on chain in some form or another. And so indeed like quite complex with moving components. But the components are very nicely stacked. It's not like a big spaghetti where we think, let's try to do this as well. Let's, let's build something new. It's where we look at the core tech stack and we realize, Hey, actually what we've built here is not just a bridge. It's actually this other product as well. And that's where we're looking to expand into it. We realized this when we did the Babylon launch. So you mentioned like Bob and corn. So Babylon used Union for their uh airdrop distribution as the clinical bridge for Baby. We're not only like doing the bridge operations themselves, we're working with wallets, explorers, dexes, the L2 teams themselves to get the assets listed, to get it all functional across the entire stack. And that's kind of made us realize that asset issuance is probably the wave order for us. Wow. um As you're talking, I'm thinking, if a union is successful in the way that you envision, what are the incumbents that are at risk? Are bridges no longer needed? I would say, look, the bridges we truly hope to overthrow are the intent-based bridges. So relay, across, and co. And if you'll allow me to quickly do a quick educational session on the difference between them and Union. Intent-based bridges are effectively traders. And they will manage multiple wallets on different chains. A user will request, like, $10 on this chain. And they kind of do like quick calculation to say, this profitable? Yes or no. Right. Like, should I take this, this offer and they look at gas costs, they look at the fee users willing to pay. They look at, can I like go into an exchange to sell it for something? Like they make the full calculation. But as you can imagine operating a bridge like that is actually very complex. If you want to do this for like thousands of assets across thousands of chains, you do a really complex inventory management. And that's one of the reasons why you see these bridge protocols be. really good at supporting like major assets like USDT, USDC, Solana and ETH, but for the like mint and longer tail, it really falls off and they can only do really tiny transfers or non-transfers at all. We kind of want to make sure that just every asset like has 100 % support by basically saying you don't need to do inventory management, asset issuers can register with union, they can just do mint and burn operations and suddenly like you can transfer everywhere without any liquidity concerns. That's like the first thing we want to do because that's kind of like the best possible solution that can like theoretically exist. And I'm an engineer from my background. I've been an engineer for seven years. I love thinking about like what's the, the theorist collect most optimal solution might take longer to build, but where does the space end up heading in the end? And that's what we built with union. The other thing that we really want to achieve is get rid of this like paper transfer model. If you look at bridging right now. It's very much like global remittance, where you're like $100. And depending on the chain, you might be charged $0.05 or $5 or $20 even as a fee. It really depends on the liquidity and which bridge you are using. I don't think that's great for US. And it's also not good for builders that want to build new chains. Because if you know your users are going to pay in premium to actually get into your ecosystem, you're not going to get as many users. this like asset issuance angle allows us to do with union is start earning our revenue from the yields being earned on the assets issues. So you can imagine the future of union. It's actually where union has 10 billion bridge TVL outstanding is making 50 basis points on that. And because of that is offering free bridge transfers for all assets. Which is great for users, right? No fee at all, no guest tokens necessary. It just immediately works. And at scale, we don't actually care about like individual transfers going on. We just care about like availability of assets everywhere. Okay, I'm better understanding now. um Tell me if I'm wrong in thinking this way. So the current model for a lot of these rollups is they spin up a rollup and then they use something like Altlayer or Caldera or Gelato as a rollup as a service provider, which then provides them the crater of the rollup with uh kind of a buffet of services they can pick. you know, a bridge here, they can pick a data availability service there. And so they can they kind of pick, pick and choose from from the roll up as a service provider and all the services available there. um Union feels like it, it doesn't need a roll up as a service provider, because it is a kind of a one stop shop. It's like you get all of it with Union. Yeah, I mean, we don't provide data availability services. uh If you want my whole take, think DA is slightly overrated. And the technology behind it is extremely cool. But I actually think for security guarantees, it's less necessary overall. I'm actually a big L1 maxi, where I think that's a true blockchain actually can operate extremely efficiently overall. And indeed what we kind of then provide is a native bridge connection. So no need to shuffle around liquidity. But on top of that, like a native bridge connection to like all chains out there. So it's not like I'm a rollercoaster, I'm an L1 and my native bridge goes to Ethereum or and everyone needs to route through that. What we offer is how about you get a native connection to every single chain you connect to. And then when we connect the next ecosystem as well, you automatically get that connection too. So as you connect more ecosystem, you really get extremely good scalability. Okay, that is actually really, really cool. um Because as you were speaking, I was thinking primarily like within the EVM ecosystem of kind of roll ups to each other, to the Ethereum layer one, but union can go anywhere. Yeah, that's correct. So we already have support for ah like Cosmos-based chains, although it's not because people mainly associate Cosmos with Atom, but a lot of chains in the hood are using the Cosmos SDK, including Hyperliquid, for example. So it's a very widely used tech stack. We support EVM chains, of course, and L2s. We support move-based uh chains as well. And we're working now on supporting Solana as well. And so with that, actually have really wide coverage as well compared to a lot of other bridge providers. That's very interesting. um I've spoken with a number of Solana based projects that I spoke with soon, also with Eclipse. And I wonder, would Union be kind of a competitor to them or a collaborator? collaborator, we're looking to once again be like the mesh network between them and other chains. So really providing them with the solution to do faster bridging to more ecosystems. In this case, for example, I foresee that our way for collaborating with them really will be access to Bitcoin derivatives, right? As BTCFly keeps gaining more and more traction, we see that most of our inbound requests as well are getting access to those assets. Let's talk about that. You mentioned inbound. um It feels like as a um protocol, there's kind of like the demand side or the supply side is you have this service, right? And then you have a bunch of BD or sales relationships with other protocols and services within the ecosystem. oh I guess what does the demand side look like? um Like who, you mentioned inbound requests, who is asking for um integration? Yeah, so we see demand from like two sides. We see indeed folks who have assets looking to get into new chains, right? They might have the potential for like a liquidity deal or their uh LPs and investors into a new protocol and they need to see liquidity there. And so they need like a bridge connection to that new ecosystem. Or we see the other way around, like a new ecosystem is being built and they need a bridge connection. They don't know yet where they're going to get TVL from or how. but they know in the end they're gonna need that bridge connection. And then the third category, which excites me the most is what we see with DeFi protocols like Azure Finance, for example, where they basically have built this chain abstracted products where you do like staking, LPing into different DeFi protocols through them, and they don't even tell you if it's on a different chain or not. So you can liquid stake baby with them, for example. And then they show you DeFi opportunities and they have actually gone out to different ecosystems and figured out like ways to get additional yields or your liquid stakes, baby tokens. But to the end user, they kind of don't show you that a bridge transfer is happening. They're using union for this in a fully automated way. And those are kind of like the nice chain abstracted synergies that I love to see, right? In the end. If it's like a Web2 company is using a third party software as a service provider under the hood, you're not displaying that to your user, right? You just provide them with like one comprehensive product that does it all for them. And so there we see way more builders coming in right now, leveraging that as well. Because you need to kind of very well suited for this programmatic type of access. From a go-to-market perspective, it feels like um one of the key layers that Union is aiming to, I guess, replace are bridges. uh And you've said it a couple of times, this mesh network between ecosystems. As a protocol developer, bridges are very kind of ubiquitous at this point. That's kind of one of the first things people think about. How are you positioning Union to someone like a brand new protocol or let's say a layer two or something and they want access or interoperability with another ecosystem or chain. But the first thing they think about is like how do I bridge to that chain? um And so then they look at the number of bridges that are available and then kind of a BD conversation happens. How do you insert union into that conversation? Because they're probably not thinking about union at the very beginning because it's new. Mm-hmm. this idea of bridges is so, I guess it's so prevalent now. ah What does that good of market look like? Yeah. So if you kind of look at the options that they have right now, then really it's still like quite limited to the few biggest ones because as a new ecosystem, you will always need kind of the original native bridge. You can use like relay and across for like fast transfers, but they need an underlying bridge to rebalance themselves. And that's what makes it difficult. Right. So you need that like one canonical bridge that all the bridge operators can use for rebalancing. And so this one canonical bridge that you have has to be the most secure bridge as well. Like this is where lot of builders are very worried about because if this is the one that gets hacked, then your entire ecosystem immediately falls apart completely, right? Like all your DeFi protocols and users are effectively fully worked. So what we see L2 builders do is quite often uh use like the native bridge that's part of their SDK. The downside there is that usually it has like a seven day withdrawal window, for example. So that's not ideal for users. And it's even not ideal for other bridges to build upon. So I kind of described like how intent-based bridges to rebalancing a seven day rebalance operation is an incredibly long operation, right? The crisis fluctuates in the meantime. It takes a long time to regain your capital. So actually in our conversations, usually they've heard about Junion because we're a little bit more well known at the moment. But also like what we kind of offer them is something they like. Because we offer them both the secure components, but I think our slowest connection that we run right now takes about 30 minutes to settle. So actually like before, it's like a rebalancing bridge to be used for rebalancers. We're actually very effective as well. There's a lot of education that we do, of course, on the whole CK component here and why this is indeed like kind of the end state and the best that can be done. The big alternative that we see them use is layer zero. with it's like DVN architecture because the DVNs are quite flexible. The downside is you need to build like your own Oracle to kind of run this DVN yourself. So in the end, that makes a rollup team, not only a rollup team, it makes them a partial bridge team. And that's something that I as a builder don't really like. I don't feel we should be into a future where... every single asset and every single L1 and L2 is also running a bridge because then effectively gets in this world where there's a thousand weak points, right? And where many teams are running a bridge while it's not their core competency. And that's what we kind of have seen happen as well when you try to do something like that. And that's the biggest opportunity for hackers to come in because obviously an L2 team has lots of other things to worry about as well. Yeah, I think the weakest link issue is really a big one. um I led growth at Harmony. um And I was there when our bridge was hacked by North Korea, by the Lazarus Group. And over $100 million of uh assets was stolen. so the security is really top of mind for me. And bridges are... are really scary. so um tell us kind of your thoughts around the security piece and um how Union kind of addresses that. Yeah. So, in the end, like if you have the Oracle based bridge model, really what you're doing is you have one server or a couple of servers from somewhere and those servers each have their own wallet, their own private key and they're using that to sign transfers. And so that immediately gives an in for attackers like the Dessers group, right? Because basically, can you get into that server, then you can get take control of the bridge. And it also means what happened. Yeah. That also means that like as a bridge operator, all of the sudden you cannot like trust your own employees anymore, right? Like, cause they might be infiltrants. You need to run like a whole different level of security basically. So that's the first thing that we saw to fix. Like we wanted to create a system where. Effectively, even if I wanted to hack the bridge myself, I couldn't. If me and the entire engineering team were to try to do so, we ourselves would not be able to do so. Because if we can't, then definitely Lazarus can't, at least by accessing physical machines. ah The second layer, of course, is smart contract risk. And smart contract risks, in the end, if you have a bug in your protocol and your protocol doesn't do what it's supposed to do, then you always have a problem. You also work with auditors, you do formal verification, you do various ways to verify that your contracts actually work as they're supposed to work. And that's kind of the best that we can do right now. But taking away that component of there is no like authority, there is no private key that controls the entire system. That really is what gets the highest level of security that's achievable right now. It also plays really into why you need a social centralized because for the same reason that like I can't hack union. I also can't take down Union. I can't decide to flip the switch and shut down the bridge protocol. Basically, as long as there's someone willing to relay, to spin up a server, start generating CKPs, Union will keep on operating. And this is what protocols like Boundless are so interesting as well. Because with a very widely distributed proving market, you always have access to parties that will generate CKPs. And so now you really have this unstoppable flywheel, where effectively you really cannot take down union at all. You know, from a user experience perspective, um I think people in crypto kind of take for granted that you just have to bridge to other ecosystems. But if you step back, like bridging is such a bad user experience, like it is such a pain in the ass and it takes a lot of time. It's just, it's a terrible experience. And so what I'm seeing right now is I'm seeing kind of a trend of super apps where they abstract the bridging piece. um so that users don't have to proactively bridge. The bridge happens kind of underneath. And so one of the super apps that I'm familiar with is something called Infinex, which is from Kane Warwick. they've branded this term called swaging, where if I need to do a swap between a salon asset and a Ethereum asset, I can just do it on the interface, and then the bridge happens beneath. and it's abstracted away from the user and I don't even know about it and just kind of happens. um What's your thoughts on these super apps where they're trying to abstract some of really painful kind of operations so that the user doesn't have to deal with it? Yeah, this is exactly where I think the space has to move towards. Kind of like the, I don't think I've touched on that yet, but switching and such usually under the hoods, like it has to select a bridge, get some quotes, find the best route. And so once again, this usually works really well for major assets and for the long tail, usually not as well. And same with like it supports really big chains, quite well, but smaller chains and common chains, not as well. I think we can kind of get the best of both worlds by making like all switching under the hood powered by CK based bridges. of course, union, but I think that basically all bridges will switch over to using CK and then using like mint and burn models because then effectively for like parties like Infinix, there will always be a route available. Like there's no like, we don't even know if it's possible to do this bridge hop here. just know you can always do the hop. And on top of that, kind of the fee itself will be just the fee necessary to generate the CKP. So you get like a really good execution for your user as well. And that's what I kind of meant with like CK based purchases is the end stage for this. Like that's the best we can do. And then with on top of that, like super apps and to be honest, like every app becoming a super app and just having this functionality built in, that's going to provide the best experience for users. Then we're going to see switching take like two seconds in total. If every single app supports it directly, it will truly end up in a world where users really don't know which chain is holding their money at a single moment. They just know how much they have across all connected chains. Yeah, I'm really looking forward to that world because then we get closer to kind of a Web2 experience where I don't have to deal with these finite operations. I just want my work done. I just want to do a swap and then get on with my life. And I think we just take it for granted, people in crypto just take it for granted that we have to, em like we don't have to feel as much pain as we do. And it is really, really painful. I fully agree. Like it's, one of the limiting factors. And. And the moment we obviously like a great appetite for crypto assets and trade by space. But I think because we haven't solved this core issue yet, we don't see an appetite for the core technology. And that's a massive failure for crypto in general. So my biggest fear actually is not that like union will lose out to other bridges or that there'll be like. a new unlock in blockchain tech and indeed, you can become users. That's still a win for me because then crypto wins. My biggest fear is that the real world is going to look at crypto in the end and say, we'll take Bitcoin and ETH and we'll do some stuff on Solana. We'll take the assets, but we're all just going to run fully centralized infra because the blockchains themselves are completely unusable. internet capital markets actually running them on this. way too painful to do for any single party. That to me would be true failure for the space, right? Then indeed like the last 10 years would have been for nothing at all. I could have just kind of stopped at Bitcoin and called it a day. That's why I see like the union's mission actually being so critical because it's kind of proving that potentially like years and years of R &D by so many different parties to show like this is the scalable system actually making that usable as well. Yeah, you've mentioned long tail assets a couple of times. It feels like that is one go to market strategy that Union is going after because the large majors already have support through these bridges. But getting support for the long tail assets is a huge pain. Integration time takes a long time. Getting the attention of the bigger bridges um is difficult. um but union can serve the long tail and the long tail is potentially very very large. Is that one of the key go-to-market strategies that union is taking? Yeah, exactly. I mean, think when people like here long tail, they might think like, indeed, like assets with low FTV or markets cap, but that's not the case at all. have to imagine if there's a defi protocol that accepts USDC and will mint like a state USDC with additional yields that has gone from a major assets to now a long tail asset, right? And the same goes for more complex positions. So you really have to see that like, if you want to like increase defi utilization, find better ways to gain yields, we're basically constantly minting wrapped assets that have the yields bundled in that now become long-tail assets that maybe you want to transfer again to another chain to gain further yields on top. So potentially, I think like the long-tail assets might actually at some point form like 90 % of bridge traffic if only we can unlock it right. Because I think right now what we see of course is we some of the major stable players really win out with the amount of stables they have issued. But we see so many cost capable of increasing the yields, then we can of course put them in Pendle to look in the yield at a certain rate. We can then mint like another derivative of that to potentially put on hyperliquids so that we can back our curbs by it. And so in the end, like there's so many synergies we can find this. That's why I love blockchain by the way, because like it truly creates like this kind of pure platonic mathematical universe of opportunities, right? And as long as you're smart enough to find like the synergy between a couple of assets, you can have a really good financial products. But so far, it's just extremely hard to do. And we see that we have many teams who kind of want to collaborate and just don't find like a route to do so because they can't get the bridge operation to work. I think that's a brilliant insight that you've made. mean, the idea that some of these majors and then the liquid derivative of that major is no longer a major, but it's actually a long tail asset. then over time, the cumulative uh impact of the long tail could be larger than the head. that's kind of where Union is playing. It's addressing that. And this idea of kind of rehypothecation of a major then gets, then a derivative, then a liquid staking derivative of that. um As it gets more, as we create more derivatives, like that is technically the long tail. And then getting support for that becomes more and more difficult. And with union addressing that, I think is a very large market. And I think that's a really good place to play. Yeah, and it creates a flood for itself because right now the reason why you might not create more derivatives is because there's no like additional utility for them, right? So you're of forced to try to get back into a major, but they should unlock more utility for derivatives all of sudden. You will create like increase the mint rates as well. So I think right now like actually the overall utilization is still quite low and like the amount of like people farming with their stables and yields on it is not as high as it could be. And that's also, I think, overall for the world's a major issue because it means that there's a few smart players out there right now who can like navigate this bridge hell, right, and actually find like the maximum yields and get richer than everyone else. And that means that like for lot of regular people, they're basically out there losing money every day. And I feel the true power of crypto is that we initially set out to create a system where everyone can get rich get access to the same yield, not just like bankers, right, who might have access to private capital, but make everyone capable of being successful as long as they're smart with their money. So solving this issue potentially has like wider meaning as well, because otherwise in the end crypto just works to like enrich the top 1 % of crypto users instead of everyone looking to better their life. Now, um another go-to-market I'm thinking about is, know, the union could be the best friend of these trading bots um that's looking for, you know, the cheapest route and the highest yield. And if union provides that, then it can become the go-to-market for all of these bots. Yeah, so that's kind of what, why I usually said like what I see you need at some point transform into is not necessarily a bridge, but a party that provides you with yield opportunities. I can kind of tell you like, yeah, like. We have a bridge connection to Sui and there indeed there's like 2 % additional yields on this asset and provide you with a way in a single click to actually access that. I don't necessarily think it's like just going to be our team like building the front end solution for this. I think we'll see uh more DeFi protocols like Azure kind of directly integrate that. But in the end, like Union is kind of the infra provider that enables this. Let's talk about the community. um For a very technical product like this, I imagine you've got developers, you've got protocols that are part of the community. um What about people that are not technical? And what are some ways in which they can contribute and be part of the community? Yeah, indeed like Union actually for the longest time had an extremely tiny community. It took us a year and a half to gain some infamy and traction, I would say, on our socials because we were still very developer focused. Over time, like our investments into ZK education, explaining that we do start to pay off. The way I see it right now, like if you want to get involved in Union, um There's of course, like our socials, writing educational content. What we see right now happening, which is quite fun is with this whole group of junior engineers who are kind of building out initial products on our APIs and helping each other out. So love seeing that. As the space changed with the info file as well, we had to kind of move with that as well. So we do work with Kaito and have a leaderboard that to me is a bit of a like double-edged sword. On the one hand, it increases like retraction in your socials, but on the other hand, this is kind of mercenary attention as well. But InfoFi, I'm afraid, just changed the game for every single project out there. And you have to move with the game, I'm afraid. But for folks that are willing to kind of learn more about Union, I think we actually probably are one of the most accessible projects to really get into CK and understand like the most like... The best use case, because if I look right now at the biggest ZK projects, they're succinct and boundless in union. And union is actually like leveraging ZK to solve a real use case. Boundless and succinct are suppliers. They will generate zero knowledge proofs for you. But union like requires it, actually looks at like, how do we solve a problem for our end users in the most efficient way? And so ZK is not the objective. ZK is just from our analysis, like what's the best way to solve this issue? Hope you came up with it. I like that framing because what I've seen, at least from Sysynct and others, is ZK is like the end game. It's actually not the end game. It's a path to whatever the user wants. It's a pragmatic approach, I think. um I like that. I like the framing that you provided. Yeah, which is why, like, if you look at union, might say this is complex. So there's loads of different stuff that happens, but that's kind of because like union, I don't know if you're familiar with the company, ASML, the Dutch company that makes the massive machines that in the end produce CPUs. ASML is like extremely complex because effectively it's like the final step in a really long supply line of loads of different companies that each builds like extremely complex. like modules that go into this final machine and they like assemble and design it. is almost the same where Union is like the final engineering group that has to deal with all of the different CK stacks, all of the different blockchain stacks, all of the different assets type, wallets, RPCs, integrations. So it's where things of course get complex because always at the final end of the supply line where everything comes together is where you get the most complexity here. But that also makes it so much fun. Because even if maybe like cryptography is not really what you enjoy that much, there's so much like fundamental uh blockchain engineering going on at Union, but also just like understanding the markets, right? Having to think more about the high level, like which assets do users want to use or which ecosystems do we invest in? As a bridge provider, for example, you usually want to invest in something that doesn't have traction right now, because the thing that has traction already, like has a bridge, is already ongoing. You have to think what's going to be big in six months so we can make the appropriate technological investment right now. And that's kind of what we discussed, right, doing with BTC5 as well. Shirts are picking up now. And what we started building for it about six months ago to make sure we would be in the spot now. One final topic I want to get into is our institutions, um especially since the regulatory framework in the US is changing. Now there's tremendous support from the White House and with, I think the White House came out with a report last week and then another one this week, which is very in support of liquid staking and that uh liquid assets or liquid staking assets are not uh securities. Are you, is the union looking at institutions and maybe how to work with them? Yeah, especially on the Bitcoin side you see this because now there's so many Bitcoin treasury companies out there and I suspect that actually in the future as well we'll see more countries take up strategic Bitcoin positions as well. And then the question of course becomes what are the yield opportunities on these treasuries, right? And here once again, like now you get into this interesting play if every single country has a strategic Bitcoin reserve. Now the infrastructure that supports this isn't just looking for the highest yields, it's almost a national security type infrastructure, right? And so then especially you're going to look for what provides the highest security, right? What doesn't allow for backdoors by the Lazarus Group, for example, that can actually secure the underlying assets. So union is almost like... made for this like hypothetical builds that we're to see within like 10 years I think where every single country has a strategic Bitcoin reserve and they're all looking for ways to get yields but also not have any risk to one of their like neighboring countries or even worse like North Korea or Russia. That's really fascinating and it's encouraging that you're looking towards that and looking at how to work with institutions and governments in the future. uh Karel, is there anything that we haven't talked about today that you want to? I think I gave you a pretty good uh outlook on what we're trying to build with Union. I think normally what I try to really convey to people is that Union was founded by six engineers, me including. So our roots are truly a bunch of guys geeking out, wanting to build the coolest technology that they could possibly build. And you'll see this if you go back to our socials. You also see it in the way that we act on our socials, we're considered like sarcastic, degenerate. And this is definitely developer culture. Developers are known to be very dry and sarcastic. But that's all because of the passion we have for what we do. We're not here to basically create a company filled with suits that try to be way too formal. We're truly trying to potentially be kind of like the last group of Cypher products in crypto building something truly novel and cool. And that means that we like build in the open. So you see our community members post screenshots of what they saw on our GitHub. We don't have a private repo where we work on secrets. everything is fully in public and that's truly part of our ethos as well. And so I hope that for your listeners that people kind of hear this and they like this attitude as well because it's what got me originally into crypto as well. Kind of the openness and truly being able to see what others are doing. Awesome. Well, I'll put in the show notes all of the relevant URLs so that people can learn and become involved with Union. For those listening, union.build is the website. Go check them out. Thanks, Karel. Thanks so much Peter.
