Sommelier cofounders, Jack Zampolin and Taariq Lewis, are joined by team member Mantas Vidutis to discuss what happened last week at Sommelier and, in the process, drop some serious alpha about the Sommelier chain’s future direction.
Jack kicks off with a high-level summary of last week’s flurry of governance activity.
“We had a community spend proposal to stage the funds for the airdrop. We had a parameter change proposal to increase the quorum for governance proposals, which is also passed. Finally, we had an upgrade proposal. Right now the Sommelier chain is pretty sleepy so we allowed the chain to be offline for a bit while we were organizing everyone for the upgrade. We tried to do the upgrade on Monday, but the upgrade handler we wrote didn’t properly set the last store index. And, that doesn’t mean a whole lot to a lot of people, and honestly it didn’t mean a thing to me until earlier this week. But, the upshot of that was we were unable to bring the network back online. We’ve exported the state and we are going to be bringing the network back online, I think, Friday is the current schedule. But that’s kind of the issue that we ran into, mid-program upgrade handler.”
Taariq probes: “One of the curious things I want to think about is what did we learn from it? I notice that the mainnet has been running for quite a while, and this upgrade brought things to the surface that I’m not sure that other Cosmos chains might experience. Was it something unique and interesting and something we want to share with folks who are in Cosmos ecosystems and thinking about chain upgrades?”
Jack notes a key difference in chain upgrades from his earlier Cosmos experience:
“Zaki and I when we first started doing Cosmos stuff, all of the upgrades were this kind of dump state -- restart the chain with a new history. And, since Stargate we got a bunch of new tools to make upgrades easier, but the upshot of that is this is kind of the first one of the new format that Zaki and I have done together. And there’s some tricks to writing these upgrade handlers and the documentation on those is hidden in a bunch of places. And, there are some gotchas, one of which we ran into. I think that writing up a little bit of detail on what were the upgrade handler issues we ran into would be a good way to share some learnings with the Cosmos community as a whole.”
Taariq observes that as Cosmos chains begin to increase in the TVL they’re handling -- “we’re already in the billions” -- he thinks that everybody in the Cosmos ecosystem should know about how to do great upgrades as they become more automated and more complex.
“That’s true. I took part in the Kava upgrade this morning, they upgraded to IBC and they did one of these dump-state restart upgrades and there were a number of issues with that. Which is why we built this new system -- and Osmosis has been using this fairly consistently. The last Cosmos hub upgrade, actually two of them took place that way. Akash has an upgrade coming up, it’s going to be one of these, and as the chains get more experienced with that, this is already the only way people do upgrades now. It’s much nicer than the old method.”
Taariq is super excited for his team to reconnect with validators, as Sommelier has the new state coming online and the new chain ID we will see this upgrade.
“Look out, we have announcements coming! And, for validators who are on the Twitterspaces or reading this in transcript, it should be noted we will be reaching out to you directly via the Sommelier protocol team to inform you and bring you into when the next upgrade activity we can connect to coordinate and make sure that you’re aware of what’s happening. So great there, and thank you Jack.”
In other good news, Sommelier has had its first posting of a proposal Cellar for Uniswap v3 in anticipation of the upcoming Sommelier chain upgrade and Cabernet Franc. Taariq thought it would be helpful to walk folks through how they could think about building a Sommelier Cellar so the community can get involved in proposing others. He and Jack are joined by team member, Mantas Vidutis, who tuned in from somewhere where the weather was “Just a touch above freezing.”
“I thought it would be nice if we could talk about the various components of a Cellar. We wrote them up into five pieces, and I’ll go through each piece and ask for help to talk about how it works in the Sommelier protocol.
“You should think of a Sommelier Cellar as essentially a TVL of money, so a vault of money where transactions are managed by the Sommelier validator set. The validators themselves are essentially controlling and voting on the messages that move funds for users on Ethereum, currently via the Gravity Bridge. So, I’m going to start with how does this all work in five big areas.
Taariq kicks off discussion of the first main area seen in the first proposed Cellar, which will automatically be rebalancing and moving range orders for liquidity providers on Uniswap v3.
When prices move on Uniswap v3, they will change and so the Cellar is going to get information from Sommelier’s data or strategy providers. Taariq asks Jack: “How would you describe it? That they’re sending information on how to rebalance--or move transactions around--on Uniswap v3? What would you say that looks when we think of the architecture?” Jack replies:
“Each of these validators on the Sommelier chain has their own connection to one of these data providers. And, that connection to the data providers will be to provide them with the information to help them intelligently manage each of these different Cellars that the Sommelier chain manages. Right now we’ve been talking about Uniswap v3, so we’ve been working quite a bit on an open-source architecture for validators to go run their own data providers and you can think of each of the validators as running an independent store of data where they’re pulling how the liquidity should be distributed within these Uniswap v3 pools that we’re managing.”
The next step after that is managed by a piece of software called Steward. Taariq prompts Jack: “Would you say that Steward is a piece of software that manages the receiving of this information from the data providers and then brings it to the validator data set?” Jack observes:
“Yes. There needs to be a communicator between essentially a traditional database that has all of the price data in it, it helps make the decisions on when to rebalance this liquidity. In Cosmos transactions basically, the way that the validator submits this information in the chain is via a transaction. And, Steward is the piece that sits in the middle.”
Congratulations to team member Collin for getting those integration tests passing so Steward is ready for release!
The Sommelier Blockchain and the Sommelier Gravity Bridge are next, which is pretty straightforward. But, Taariq observes: “Sommelier, blockchain, Cosmos SDK, Tendermint -- we know that, but also it has IBC capabilities already built in and active. So, you’d say Sommelier is both an IBC active ready chain as well as an Ethereum Bridge chain. Anything else?”
“Yeah. Taariq. You know this just as anyone else, but this team -- me Zaki, Mantas, and all the folks here -- we’ve been building in this cross-chain ecosystem for the last couple of years and IBC is definitely the most advanced cross-chain protocol that only relies on the trust assumptions of the blockchains that we run it against. And, there’s Gravity Bridge, which is an extension of that work. Sommelier’s design and the engineering team and expertise that we have here is all about interoperability, and it’s all about this ability to manage things on a number of different chains. Obviously Ethereum, and we’ve got a huge focus here on Ethereum smart contracts and the ability to manage those via the SOMM chain, and we’ve got a lot of exciting other Cellars that are coming after this Uniswap one. Maybe Mantas can take a minute to talk about how we’re generalizing this work we’ve done for Uniswap, hence the ability for the Somm chain to manage arbitrary smart contracts over on Ethereum, which is the next big release that we’re working on. And that’s going to rely heavily on this data-provider architecture that we have as well, which is really cool, so, we’re pretty excited about that.”
Mantas provides a high-level view of how the Gravity Bridge sends these Uniswap messages to essentially the Uniswap Ethereum contracts.
“The Gravity Bridge has never really known what was being used to send across it. You write a custom module that takes advantage of the Gravity Bridge and it does some enforcement there to make sure that you are doing what you intend to do. I’m trying to write a module that’s a bit more open ended so that you can take advantage of the Gravity Bridge just to send messages directly instead of only transferring tokens and sending specific API-encoded messages. So, if you can do that then you get to avoid a few of the unpleasant quirks of Gravity Bridge in Cosmos, which is the fairly slow iteration time of native modules, they require a chain stop to upgrade.”
Taariq interjects: “Oh, we know what that feels like!”
“So, essentially, we’re moving the responsibility of enforcement of the message schema out of the validators and into an external binary. The validators are still going to need to verify that the body of the message has popular approval, but they won’t necessarily need to know what it is or what it’s trying to do, just that it is the popular choice to be sent to Ethereum.”
“The upshot of that is basically that right now we have this very specific application that we’ve built and we’ve spent a long time on that only does this very specific thing around Uniswap v3 liquidity. And, if you’ve been in Twitter Spaces you’ve heard us talk about this fairly extensively, and the improvement that Mantas is talking about will enable us to have arbitrary management of smart contracts on Ethereum-based chains, and to do that in a much more extensible way that allows us to add these things much more quickly than previous architectures.”
Taariq sums it up: “So Sommelier is going headfirst and fully embracing the multichain world in an aggressive way with these new improvements coming on the Gravity Bridge. This is just awesome news! And, again, you heard it here folks: The secret alpha coming from Sommelier is ‘Gravity Bridge being extensible for arbitrary messages across any EVM protocol.’”
Anybody permissionlessly can write a smart contract in Solidity that they would like to have run on Sommelier. “So, there is a Solidity smart contract that will be for the web USD 5.0% pool,” notes Taariq. Jack explains how a Cellar contract gets voted on to be permitted to be managed by the Sommelier validator set.
“Right now there’s a governance proposal where once the Cellar contract is deployed and the ownership has been transferred over to the Gravity contract on Ethereum. We need to submit a governance proposal to the Sommelier chain to say, ‘hey, this is something that we’re going to track’ and then the validators begin voting on the way there.
“So, I just glossed over a fairly complex, multistage process. Right now if somebody needs to deploy a contract they need to transfer over to the Gravity contract and then once that happens there’s this governance process.That is how it works right now with Uniswap. I think there’s a number of potential different architectures that we could have here. One would be just a single governance proposal on the Sommelier chain that will deploy the new contract as owned by the Gravity contract to start, as well as register this new contract that’s something that needs to be managed by the validator set. That would be a smoother flow and enable a less clunky deployment. So, right now it is a fairly complex multistage process and as we iterate on future versions of the module that will be smoothed out and the automated deployment that will make things much easier.”
To Jack’s point, Taariq notes:
“It’s only clunky because this is the first Cellar proposal ever on Sommelier. And, we encourage the community as the community thinks about new Cellar ideas, I think you’re saying what’s going to happen is this process is going to get even faster, even smoother, even more efficient, because the permissionless aspect of submitting these proposals will allow a feedback mechanism to occur on Sommelier that will allow us to reach some of these goals you’re talking about -- making it less clunky and maybe less inefficient. So, I’m really excited to say that, hey this is the first Cellar, and I’m also excited that we can share this with the community and say please, if you have a Cellar idea for managing liquidity on Ethereum, and right now we’ve only started with Uniswap v3…”
Jack interjects: Taariq, do you want to talk about the AAVE Cellar a little bit?
“Oh my goodness! Dude, I’ve got to hide something? You’re going to make me talk about the AAVE Cellar? Alright. Well, let’s tease it out and say that although we started with Uniswap v3, to your point Jack, we are not a Uniswap v3 protocol. We are a protocol to manage liquidity wherever it may exist in the Ethereum ecosystem. And, I’m super excited to share that, yes, looking at Cellars that go well here on Uniswap v3 -- for example, AAVE was the first Cellar that we at Volume essentially started working on outside of Uniswap v3 -- looks very attractive as a way to incentivize folks who are currently AAVE lenders to take advantage of the Somm network for managing movement of their liquidity in the AAVE ecosystem.I want to say that , gain, that Cellar proposal is currently in production and we’re super excited about the work that both Jack and Mantas are doing to allow that Cellar now to be permitted. And, there’s more. We have lots more Cellars coming well beyond AAVE that are super exciting.I just want to give a shout out to the Volume team of Bryan Colligan and Kirin Hughes who have come up with some great ideas. And, Jack, you know some of the things they’re talking about. This is Cellar season. And, we’re super excited to see some of these new Cellar ideas that do not depend on Uniswap come to light and get published.
So, we’re asking the community: What do you think? We’re sure you’ll come up with even better ideas for Cellars as we launch.
Meanwhile, the airdrop will be coming as we bring the network online, so if you are currently a Somm community member, please make sure to test our airdrop site at airdrop.sommelier.finance. Taariq says: “We have a lot of folks asking, ‘Are these real tokens?’ No, we’re still in the testnets but we’re super excited to get folks to keep testing, let us know what we they see as we continue to roll out to what’s a chain restart.”
Now that we’ve covered all the main components of what it takes to launch a Sommelier Cellar, a word about fee structure. Taariq asks: “When somebody proposes a Cellar, who can they offer fees to? Do they just offer fees to the liquidity providers, or can they offer fees to the validators? Is there an opportunity then for them to incentivize those folks with the development of the Cellar contract?”
“Ethereum, you’re able to take arbitrary fees for these given contracts and pay them out to whatever kind of contract address that you want. Obviously, the Sommelier validators and token holders are going to be much more amenable to adopting a Cellar if they’re getting paid fees, so that will be an important part. But, this sort of flexibility in a smart contracting program also enables us to pay out the strategy authors and have a more complex fee system. I think that as we move forward, there are a number of traditional fee systems we can look at that have been done in the past in different Ethereum contracts. But, I expect to see this as a major area of experimentation and evolution going forward with these Cellars.
“What about bribing validators?” asks Taariq. “Would it be insane for Cellar proposers to bribe validators for their votes for a particular Cellar strategy?”
“Well, this is like getting into the Curveland,” says Jack. “Curveland literally runs on bribery. That is a potential future for Somm. I think that in order to do that effectively, we would need to write some bribery protocols into the Somm chain. Maybe some other open source idea will present itself as the community evolves and sees what we deployed. My experience in blockchain is that voluntary cooperation tends to provide the best experience for financial outcomes and bribery tends to be not a part of that. Anyway, it will be interesting to see how Somm evolves and whether or not we see factions form, which is what we’ve seen in Curve, and in these various liquidity mining things.”
We can’t predict the future, but we definitely see an interesting future for Sommelier with what we are just about to launch. Thank you to the protocol team for jumping on and debugging chain state with us. And, as always, thank you to the validators.
Please visit airdrop.sommelier.finance to test out the airdrop. And, safe travels to Zaki as he comes from a successful CFC San Moritz.
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