In this interview, we would like to introduce you Sergey Shashev, co-founder of broxus.com and the initiator of Free TON DeFi Sub-governance. We will learn about his experience in algorithmic trading, development, crypto projects and DeFi. In addition, Sergey will tell us about how the direction of scoring in Russian science was developed with his help and what DeFi are missing now.
Svetoslav Bauer: Sergey, thanks for coming. You are an important member of the Free TON community and DeFi Sub-governance. We would love to know more about you. Tell us about your background and what you do for Free TON? How did you get into the Free TON?
Sergey Shashev: Yes, well, I’ll be glad to tell you about myself
Svetoslav Bauer: Please tell us about your education, what did you do before Free TON? What is your background?
Sergey Shashev: I have basic higher education. I am a circuit engineer. My specialty is automated control information processing systems. That’s why, I always say that I have worked in my all my life.
What did I do? .. For 7 years I worked with algorithmic trading when I was a student. Probably all possible options in different specializations: Russian exchanges, American exchanges, Forex. There was a lot.
At first, I programmed all the strategies by myself, and then I assembled my own team. We did another thing: we looked for market inefficiencies. And then … somewhere in 2013 we decided to try a little bit different thing. Because there is such a specificity in algorithmic trading that when you do it, you drop out of society … completely. That is it, you basically don’t need people: you don’t have meetings, you don’t have clients. There is only your team, computer, graphics and mathematics. There is nothing else at all. You start to really run wild. You also start gaining weight because you don’t go anywhere. It’s the second problem.
Then I worked for a Russian integrator. Since 2013 I have been working on such a topic as “Big Data ML NLP”. We have learned to work well with texts. For example, search engines and individual systems for analyzing various data (including texts). One of the largest projects that we did was a scoring system for all Russian science. The system contained 100,000,000 documents for analysis in Russian and English. The system analyzed “give money or not give”, depending on the proposal. The system compared the proposal with all database and patents. I did this for 4 years. I raised this direction. There were 3 of us at the beginning. And then, when I was leaving, there were already 40 people in project.
I left because I was tired of working with the Russian public sector. There are some nuances in the work. And in 2017, I went back to business. At first, I thought it would be the same thing- data analysis and marketing. But it was 2017 … and guess what I started doing ?! ..
Earlier I bought bitcoins for $ 270. I found that they cost a lot more. Ethereum and some other ICO appeared in our world … In general, madness has overtaken this world. I rubbed the elbows a little bit and realized that this is all very interesting, but there are very big risks. Besides, I was not an expert in this area at this time.
Then I started trading with my team, because things that have not worked in the American market for 15 years already worked perfectly in the crypto market. That’s it, I really mean all things: trivial geographic arbitrage, triplets, market making, working with large orders. Everything worked so ineffectively that it was possible to make money on it.
Svetoslav Bauer: Why didn’t it work in conventional markets?
Sergey Shashev: In the US market there is a huge competition and it’s competition of market leaders. There are tens of thousands of people doing this. For example,I with my guys and strategies, and JP Morgan or Goldman Sachs “sits” in front of you, or someone else of those guys who have thousands of engineers and the best brains in the world, who have different speeds of development and unlimited resources. And it’s hard to compete with them. You go there with a Mosin–Nagant, and there are already transformers with lasers. That’s it, the chances are very low.
And the crypto market has not yet had a large number of trading professionals. Everyone was buying thoughtlessly, shouting “Ripple rocket! ..” and so on. In 2017, there weren’t so many traders in this market. And so, there was an opportunity to compete. And as soon as I saw that the competition increased, then I left the market, because I know these guys, I know what they can do and it is not rational to fight against them, this arms race is very expensive.
Then, step by step, for about a year we were engaged in various development in the cryptosphere in order to gain experience and build our own intellectual base. These were exchanges, bots, wallet infrastructure, a system for cold storage, various kinds of multisig in different blockchains. So gradually I assembled a very strong engineering team who knew how to do all this.
We had a strong intellectual base. And when I heard about TON, then, of course, I wanted to touch the mighty and great … And we started developing for TON.
Svetoslav Bauer: Wait a minute, we’ll talk about TON later. What blockchains have you work with?
Sergey Shashev: Ethereum, Bitcoin, NEM, NEO, a couple of custom blockchains who used the Tendermint (Cosmos) fork. We worked with these 5 different blockchains.
Ruslan Soluyanov: I googled your story and was very surprised because you have a lot of experience in different areas: this is big data, and development, and work with the public sector, and now you are in crypto. Not everyone can boast such experience. How difficult was it for you to interact with the state and can the blockchain, including our cool TON, improve, simplify and solve these problems in any way, or is it impossible?
Sergey Shashev: Well, let’s first clarify which state we are talking about.
Ruslan Soluyanov: I’ve found your work about the “Anti-Corruption search“, it publicly available. I really wanted to read it, but had’t enough time for it. And I’m very curious: which of this article could be applied to the blockchain? Could you tell? I would like to know about this in the context of the Russian state, and then how will it go.
Sergey Shashev: It is not easy to do this in Russia, because we have a very changeable environment both in legislation and in the top management of the state, ministries and large companies. It was 2017 and if you remember, there were talks about the crypto-ruble, Buterin came and I had very high expectations of what would happen in Russia. Unfortunately, this did not happen. And instead of liberalization, the trend has changed.
That is it, it is difficult to work with government agencies. Because, I repeat, there is a very changeable environment, everything is quite bureaucratized and, in general, state structures are not about innovation. I would rather see it work for “Severstal” ( because it is one of the most innovative companies I have worked with. Already in 2018, they had test projects in blockchain. Perhaps better projects than Russia will ever have.
Ruslan Soluyanov: Therefore, do you think that it will first start with private companies, and after it maybe someday be at the state level?
Sergey Shashev: Yes. First, all this will be used by private companies. But the application of cryptocurrency in a state like China is like a “bombshell”. This is a doubling, tripling of the growth rate of GDP. Because in fact what is a Crypto yuan? This is absolute transparency of financial flows for the state, there is no need for pension funds with their buildings, because the system will be at the level of smart contracts. This is absolute transparency of financial flows for the state. Now there will be no need for pension funds with their buildings, because the system will be at the level of smart contracts.
In principle, the implementation of a digital cryptocurrency, conventionally a crypto-ruble, is a colossal economic breakthrough for the country. But this is a process that requires a legislative framework, and the corresponding working business processes, and the corresponding people on the ground. But this is a process that requires both a legislative framework and the development of appropriate working business processes and the corresponding people on the ground. Therefore, China has its own kind of democracy, its own atmosphere, due to which they are the first to pick up this trend. It won’t be so soon in Russia.
Ruslan Soluyanov: As you said earlier, you were involved in big data development and text analysis. At the same time, if you study the Internet a little in a combination of blockchain and data science, then there will be many different articles about this, but I could not find an answer to the question of how blockchain can help and save Data Science and “why hair should become thick and silky.”
Sergey Shashev: Data science does not need to be saved, everything is good there, even very good.
Ruslan Soluyanov: He does not need to blockchain and he could easily live without it?
Sergey Shashev: Yes. Data science is a very complex system — it is data collection, processing, algorithms and everything else. Therefore, to write a blockchain for it … It is rather a problem about the sets of immutable data that will be stored. But this is not some big headache that is worth to wasting your time.
Ruslan Soluyanov: So, it’s not worth our time.
Sergey Shashev: Yes, that’s right.
Ruslan Soluyanov: Since you already had experience in the crypto industry, do you have projects that we can touch, that solve some business problem, a project you are proud of. The essence of which is not to buy one ruble and sell for two. What, by the way, is the whole crypto world at the moment. Free TON is attracted by this, that there are few such things in it.
Sergey Shashev: Yes, this is Broxus. This company was quite cash positive even before Free TON. Our platform is used by a large number of companies, because we provide an opportunity at the API level to solve all the headache associated with the crypto infrastructure. This is about any technique, any exchanges, matchings, invoicing, etc. Therefore, Broxus is a project that I am very proud of.
Ruslan Soluyanov: Great, thanks. I think we can now talk about DeFi.
Sergey Shashev: Yes. Everything about DeFi is very interesting. I try to follow trends.And the fact that DeFi will explode was already evident this spring. We have done with a partner a crypto fund that deals with industrial yield farming. And we managed to do it just in time. There were significant assets and Compound started to take off.
We had a lot of assets. We have used a variety of protocols. On the one hand, since I have practical experience in DeFi, we work with different protocols every day, and on the other hand, we worked quite actively in Free TON. This was due to the fact that, on the one hand, since I have practical experience in DeFi, we work with different protocols every day, and on the other hand, we worked quite actively in Free TON. In August-September 2020, we had an absolutely understandable hypothesis based on the current Ethereum speeds and the cost of transactions in it (at the peak, transactions cost $ 15). The cost of the claim, Сompound, the entire chain of opening and closing a deposit was $ 700 in August. And you realize that if you have a million dollars, then okay, no problem, you just bear the transaction costs. And if you have $ 10,000, then there is no market for you, because your transaction costs will be comparable to anything that can be farmed.
Therefore, the DeFi market for small retail is closed. Now there are some projects, communities, but that’s not it. An idea arose, a hypothesis “why not try to use Free TON as a tool of a certain level for all this”, make bridges and Uniswap and accumulate small investors for whom commissions will be low in Free TON, and then open a balance position in popular DeFi protocols,a lot of value in commissions for small investors. This was the original idea. And then this idea developed to the level that part of the money supply in TON Crystals (and it is colossal in affiliate networks) is partially put into yield farming in order to pull liquidity from other blockchains. Due to this delay Ethereum with $ 100 million of liquidity in the Free TON — this is quite a real problem that can be solved.
I discussed this idea about DeFi with the initiators who launched Free TON. But first I came to Free TON as a client and said: “Guys, if bridges, Uniswap, DEX and systems appeared in Free TON, then it will be a colossal opportunity to hog a part of the market from Ethereum. And Solana and Polkadot are doing the same.” They told me: “Well, great. Do it.” I say, “I don’t have such many resources at Broxus, although we have a lot of engineers.” They answered me: “Well, try to make Sub-governance and assemble different teams who will work with this.”
And, in fact, after this, DeFi Sub-governance appeared.
Salty palo: Sergey, I just have more in-depth questions about DeFi. And you have already begun to preemptively answer these questions. I would like to ask questions from a person who does not yet understand TON and its architecture very well. planned for at least DeFi: bridges, stablecoins, DEX, issuance of secured assets. And at what stage is it all, if you have already started some implementation of this?
Sergey Shashev: The sequence of what you said is correct, give or take. To make something work, you need bridges to get started with liquidity. In order for trade it should be decentralized exchanges and the system must have its own DEX, Uniswap and stablecoins. When you have all this, then it is enough to start issuing various smart contracts where you can issue loans, deposits and launch DeFi projects. DeFi projects in Free TON are impossible without these three components.
The first thing you need is bridges. One of the bridges is Free TON → Ethereum. I hope that we will launch it by the end of the year in its initial form. We actually launched it in October to test the mechanics. And this was the first thing in Free TON where you could send Ethereum or stablecoin and receive it in Free TON. But this is not a bridge yet, since it is not a decentralized thing, only we had the keys. It was a small test of mechanics in which we saw that it was possible to do this. The bridge for Polkadot is being actively developed. This is already done by the team that we had the opportunity to attract.
If we talk about DEX, we have held competitions for architecture and have proposals for implementation.
If we talk about stablecoin, I don’t remember if the competition was started. But it is either already launched or will be launched soon. And I’m sure the implementation will be proposed.
When somebody asked, “How can we help you?», we answer that our key task is to find many engineering teams which will be able to solve such problems. The number of teams that can make a bridge between blockchains around the world is probably within 100. Because this requires colossal competence, there are a lot of engineers who are an old hand at developing in blockchain.
Salty palo: I understood. As you just said, the implementation of the Ethereum → Free TON bridge is currently planned, right?
Sergey Shashev: Yes.
Salty palo: And in the opposite direction?
Sergey Shashev: This is a two-way bridge.
Salty palo: Oh, well, that’s great. Because often, as a regular DeFi user, it would be very convenient for me to trade TON Crystals on Uniswap, where I can do it and where it is convenient for me.
Sergey Shashev: Of course, the bridge will be two-way, and this is one of our tasks. Bridge makes it possible to tokenize TON Crystals to the Ethereum network and enter to all DEXs.
Salty palo: Yes, that would be wonderful. And then the next question. As you know, before Ethereum, there were already attempts to build DeFi. The oldest and most prominent example was BitShares with their DEX on-chain and loaned assets. But nevertheless, the popular DeFi came with Ethereum, although they were not the first in this case. BitShares is older and began to implement it earlier. What do you think is the most important for successful DeFi on blockchain? Is it the right technology stack, efficient developers who are on this particular blockchain, or something else entirely?
Sergey Shashev: The most important — is security. Because if it is safe and it brings money, then a lot of liquidity comes in. Until it’s not safe, there will be no good liquidity.
Actually, what happened in the DeFi market. In the beginning, makerdao.com entered the market. And there, step by step, a billion appeared on platforms. Everyone saw that it was possible, that there could be a project with a billion dollars in liquidity. Also Compound with a genius yield farming mechanic, after which everyone, like “ran to do it. But Compound was the first to stand out, and about the big bucks. And so, fundraising in DeFi has gone exponentially. There are currently $ 13–15 billion in DeFi protocols. And there will be much more of them when the insurance mechanism starts working at full capacity. Because institutional investors are currently afraid of DeFi. For them, the risk of cyberattacks is unacceptable. Now you can easily ensure a maximum of a million dollars. But you won’t be able to insure $ 100 million. When the insurance market gets big, then a huge amount of money will be in this market.
Salty palo: As I understand you, are you talking about nexusmutual.io?
Sergey Shashev: Yes, that’s right. Well, not only them, but they are the most famous. There are twenty projects who are working on this.
Salty palo: Since we mentioned this, what about the good old Bitcoin and what models of the implementation of the wrapped Bitcoin do you think are the most suitable for Free TON? Could it be like WBTC (Wrapped Bitcoin)?
Sergey Shashev: Definitely not like WBTC, since it is a centralized solution, in which there are signers, organizations, etc. It is rather closer to RenBTC and there will be a competition for that too. So far, no team has emerged that could potentially do this. This is quite a long engineering work and before this team does it, it will be possible to use WBTC in Free TON.
Salty palo: Good. It turns out that it will be possible to avoid a difficult situation where it is necessary to write everything under Free TON, if you already have a bridge between Ethereum and Free TON ready and take those BTCs that are made on ECDSA nodes (talking about tBTC by Keep. Network), right?
Sergey Shashev: Yes, that will be enough to start. And then everyone should have their own fundamental joints with all blockchains.
Salty palo: Perfectly. DeFi is, of course, good and new, but still, most of the concepts that exist now were invented a long time ago in the classic markets, as you mentioned at the beginning, and they are only adapting to work on the blockchain. Tell us what financial instruments you would like to see on the Free TON blockchain in the future and how it will be possible to implement it? Can we say forward-looking that they have not even begun to develop yet, but what would you like to see?
Sergey Shashev: I would like to see a lot of different designs of stablecoin technology. I also want to get to the level of combination smart contracts and Co, which allows launching CDBC, because DeFi and Co is a relatively small story, although it seems big for the next 2–3 years. And in 3–4 years, in my opinion, either some “sovereign” cryptocurrencies of states are launched on your platform, or you are on the sidelines. This is the result we should arrive at in four years.
Salty palo: This will be the base for the basic tools. Do I understand you correctly?
Sergey Shashev: No. At the beginning, everything related to the classics: trading, bridge, stablecons in different implementations, various yield farming mechanics, insurance. And step by step we need to get to the CDBC.
Salty palo: I would like to ask this, maybe a little tricky question about vampire attacks — vampire attacks on liquidity. You already talked about this ten minutes ago, that it is doable. How ethical do you think this is and is it generally possible to implement such vampire attacks by Free TON on Ethereum or any other blockchain?
Sergey Shashev: In general, I think that cryptocurrency is not about ethics. I think it is not at all appropriate to talk about ethics here.
Salty palo: I see. That is, in general, you are open to any interesting and not entirely ethical approaches when it comes to luring more liquidity? I am not saying that this is bad, but simply asking a question because I also do not think that it’s is bad.
Sergey Shashev: There is no concept of good or bad because the basic world of cryptocurrencies is not about ethics.
Salty palo: I see. I just remember the most striking example of Sushi Swap, which at first appeared as a simple vampire attack, but now it’s a separate project that has its own liquidity.
Sergey Shashev: It was a very cool story. Now there is Binance, there are all the others, and their real values are almost equal. To put it right: their real flow of funds and the strength of the ecosystem are equal. So if Binance wanted to do such an attack on Uniswap, why not. The attempt would be very interesting.
Salty palo: With the current Free TON tokenomics, which would be optimal for small DeFi. Very volatile token, which causes rapid public interest, thus luring in liquidity and we can say the theatrical effect is obtained, or on the contrary, a more stable reliable in terms of price token under which produced assets, which serves as a stable unit of account? And if this can be somehow influenced, how do you think?
Sergey Shashev: TON Crystal, according to the initial concept, should not be expensive, that is it, a certain range in which it is likely to be located, and this is why it will be so — because we have a large mass of tokens that will gradually enter the market through affiliate programs in the first place. And therefore, the task that the community will need to solve is to do so that the speed of new affiliate networks and the release of tokens there does not exceed the emergence of demand in those affiliate networks that have already started working and the utility of this token is formed. If we successfully solve this equation as a community, then, in principle, the token will be quite stable and will fluctuate in a not very large range. I believe this will be a great success for the entire network.
Salty Palo: Got it. Thank you very much, Sergey, my questions are over. It was nice to talk to you.
Ruslan Soluyanov: May I ask you a question? You talked about the unethical nature of cryptocurrencies. What do you mean by this expression?
Sergey Shashev: Basic cryptocurrency is freedom, and this freedom has two sides. On the one hand, it is the ability to send money anywhere in the world. On the other hand, you can never distinguish one transaction from another transaction where the money sent to and why it is sent. Therefore, there have always been many dark forces around cryptocurrencies that use this tool.
As for the new projects which have been launched in recent years, they also have a goal … Let us recall 2017: how many scammers who came, they were also far from ethics. That is it, if you carefully look at what Binance is actually doing now, it is also very difficult to call some things ethical there. It’s just business.
Ruslan Soluyanov: You may have read this interview with Adam Beck, literally in the summer, if I’m not mistaken, he said that he does not see the difference between Ethereum, Cardano, NEO, and any other blockchain projects. He said that they have a founder and want to achieve their own goal. mostly in a commercial sense. Do you agree with that? This is a continuation of your statement that this is primarily a business.
Sergey Shashev: Of course, absolutely all cryptocurrencies pursue profit in a commercial sense.
Ruslan Soluyanov: This is understandable, but let’s say, if we are talking about Bitcoin, it is decentralized. So, it is not clear who created it and what its future is. I have lowered to the ordinary people level who ask simple questions. And so I just wanted to clarify: do you agree that these are the interests of the founders? If you take the same Cardano staking, most of which is in the Cardano pools themselves. Because of this, many people in the community started having questions, because this is one of the largest projects where a large number of pools were launched at once and they work in a decentralized manner, but the question is that most of the pools are control by them. And this raises a bunch of questions, but do you think TON should be completely different, should it follow exactly the Bitcoin path or not? The question is complex.
Sergey Shashev: No, actually the question is very simple. Free TON is fairly decentralized from the start, the network was launched by several companies. The competition allowed hundreds more players to enter: somewhere they are companies, somewhere private people. And therefore, I think that by the end of the year Free TON will be one of the top blockchains in terms of decentralization. And at the same time, there is no such thing that there is someone whose number of nodes in the network is disproportionately large. No one, not even the Initials. We are initial validators, we have 3 nodes in the network. Ok, 4 nodes will appear, but this stake is 3 million tokens, and the sum of everyone who won the Magister Ludi contest is 300 million tokens. That is it, you see, the weight of the initial validator is 1%. This is not 50 or 30% of the network.
Ruslan Soluyanov: I understand, thank you.
Sergey Shashev: The lack of flash loans is not the cornerstone of the success of DeFi, although there are ideas on how to do it even in asynchronous mode.
Svetoslav Bauer: Now I would like to move on. And ask you more about Sub-governance. What exactly are you doing there? What are the rest of the community doing?
- I deal with strategy and selection of new teams, communication with them, scoring, i.e. I see who can really do something useful for the community.
- Vlad Ponomarev is more involved in administrative functions in Sub-governance. Alexander Wat helps him with this.
- Alexey Vorobyov communicates with various payment systems and funds, deals with b2b — affiliate programs which will make sense when the first DeFi projects are launched. Nimrud and Vladimir Kanin are doing about the same thing. In fact, each of them has his own area of responsibility, which they deal with. I guess I told everyone about.
Svetoslav Bauer: Good. The next question: What, in your opinion, should be done in the Sub-governance team to make the work more effective?
Sergey Shashev: Probably, we’re shorthanded, i.e. people who can prepare competitions with high quality. Because, for example, the same contests for stablecoins or Bitcoin — in theory, this could have been done a little earlier, and we would buy a little bit time, about two weeks.
We don’t have enough scooters. These are the people who will bring in new teams to work on DeFi projects. Again, the bottleneck right now is the teams.
Ruslan Soluyanov: If you look at other crypto projects, you will understand that there are always problems with people. What do you think is the reason for this? Is it related to a high threshold of skills, misunderstanding of the project, fear that this is another scam? What is the main problem?
Sergey Shashev: I think this set of problems, because the number of professional engineers in the industry is very small. These are several thousand people now. In fact, in order to have a team who will make a bridge with Polkadot, I spent a lot of time communicating with other teams, persuading them to start working with Free TON. They say: “For us, this project is not yet clear, but in Polkadot everything is cool, we are already in CoinMarketCap, the project is in the top 10 projects on the list, so your proposal is not very interesting.” I tell them: “Well, there you have serial number 20, and in Free TON you can get numbers 1 and 2.”This was one of the arguments that worked. Because cryptocurrency is a multidisciplinary thing. This is about engineering, and about cybersecurity, and about the economy, and about business development, and about law and many, many things at the same time. And therefore, in order to do something, write, for example, a bridge, you have to work closely with different blockchains until this about 2–3 years. And the cryptocurrency became popular only 3 years ago.
Ruslan Soluyanov: And one more question, if you don’t mind. When you were looking for new teams who were ready to create bridges and develop DeFi, did you feel the same effect that came from Durov and the SEC. Was this the reason why people did not want to take on the development?
Sergey Shashev: No, it was not.
Ivan Kotelnikov: Cool, no more questions.
Sergey Shashev: If there are no questions, then goodbye to everyone. I really hope that this interview posted by you will bring us at least two new teams!
Salty palo: Thank you, Sergey, it was very interesting.