The Atlendis Labs team was pleased to welcome Taureau, founder and Lead Dev at ZigZag Exchange and Stéphane, Co-Founder and CTO at Atlendis Labs, to answer questions picked from the Atlendis Community and learn more about ZigZag and ZigZag’s partnership with Atlendis.
Stéphane: Hello everyone. I am very happy to be here, especially because we are joined by Taureau from ZigZag today.
Thank you Stéphane, we are very happy to have you here again! You have been our guest before, but for those who don’t know you already, could you briefly introduce yourself and your role at Atlendis Labs?
Stéphane: Sure. I am the CTO and co-founder of Atlendis Labs. I have been in blockchain since 2017, and previously I worked at ConsenSys as a Developer. I handle all the technical aspects of developing the Atlendis protocol, and in particular everything that’s related to our smart contracts. I have also coordinated audit missions for Atlendis’ smart contracts with our external auditors and I worked closely with the technical team on the launch of V1 last spring.
Hello Taureau, and thank you very much for tuning in with us today. Can you introduce yourself and share a bit of your background?
Taureau: I’m from the US, currently live in California, and I have a background in robotics from way back now. I began in crypto in 2017 when I started building for projects in the space. I’ve been a block producer for EOS and was a contributor for Everipedia, a blockchain based encyclopedia. We did the largest airdrop on EOS back in 2018.
What is the story behind your pseudonym?
Taureau: Because of taureau – it means bull in French.
Cool, now our non-french audience learned how to be “bullish” in another language. On to ZigZag now, can you tell us how ZigZag Exchange was born?
Taureau: I was working on an OTC exchange, where I was doing trades for Brazil and other emerging markets. I got the idea to build a DEX that everyone can use, and started developing it on my own. It became its own project.
Could you explain what ZigZag is and how it works?
Taureau: ZigZag is an order book exchange, so the big upside compared to a typical AMM is that it’s much more capital efficient. With a few millions of dollars, we can run books that are as competitive as Uniswap. The downside right now is that we can’t have liquidity pools, but we’re fixing that. Pretty soon we’ll have an order book and liquidity pools tied together and that’ll be the killer feature.
Was ZigZag specifically designed for L2s?
Taureau: Yeah it was because I didn’t think that L1s could scale high enough to handle the kind of exchanges we wanted to build back then.
So how are things going right now, are you still developing on Arbitrum, zkSync and Starknet?
Taureau: zkSync and Arbitrum for sure. We’re on pause with StarkNet. Though we’ll still attend the launch when zkSync 2.0 and StarkNet come out.
StarkNet we’re on pause because their API changes a lot. We have to rewrite the smart contract. Waiting for them to stabilize the code. Then we’ll start.
Ok. What guided your expansion to these three layer 2s specifically – Arbitrum, zkSync and StarkNet?
Taureau: We were starting to max out our traction on zkSync – we processed more than 50% of transactions there – so we thought where do we go next? Arbitrum had a lot of traction and was a natural choice.
As for StarkNet, their chain API changes a lot, and every time it does we have to rewrite our smart contracts. We are waiting for them to stabilize their code and for the throughput to increase and we’ll start developing again.
How does ZigZag compare to your competition, like DyDx on Starknet?
Taureau: We don’t have a futures exchange yet, but we’re going to add one in like 6 months or so. It’s a different model like DyDx is a pure order book on StarkNet or on Cosmos. They’re on isolated chains where they don’t have to interact with anyone else. Which is kind of what you need to run a proper order book. We’re trying to make it work while still being on an open system, and it changes a lot of things. We don’t ask people to lock tokens in a smart contract, they trade directly. So there’s a lot of things you can do with our model that you can’t with DyDx, but it makes it much more complicated to develop.
Thank you for this information. Now regarding your team, can you tell us a little about who is behind ZigZag?
Taureau: The entire team is anonymous and made up of 6 people in total. I’m the only one based in the US, the rest is remote international. They come from East Asia, Europe and Israel.
Trooper, and myself are the main devs, currently writing smart contracts for the liquidity pools. Julian and Lineout are working on marketing and community, Sigman is our trader, and Monke is our head of PR.
Cool. And what is the team’s current roadmap for ZigZag?
Taureau: Currently we have zkSync and Arbitrum live, next we’re building liquidity pools and features. Right now we’ve developed an order book and the two features that are coming up are liquidity pools and futures. I’ve also written the code for our bridge between zkSync and Ethereum. I don’t have too much interest in it, there’s a lot of competition for bridges. For the zkSync one, we needed to develop it since there was no option to onboard users on ZigZag.
Nice! Yeah you were mentioning it earlier and these sound like really promising features. Now let’s talk a little about Atlendis and ZigZag. Why did ZigZag choose to borrow on the Atlendis protocol?
Taureau: I use the Atlendis protocol and I’m a big fan of it. I really like the Atlendis UI, the user experience, how there’s an order book for the interest rate, and you can pick which borrower you want to lend to. It felt like a good fit for our protocol. We can borrow from whoever we want and lenders can choose the rate they want to lend at.
What use-cases is ZigZag using Atlendis’ borrowing pools for?
Taureau: We need to borrow for market making. To make the markets, we have 30 to 40 markets on zkSync and we’re the largest market maker on the majority of those, there are about 70-80 market-makers that do a lot smaller amounts, so we need the funds to take buy and sell orders from our clients. We like to have our own liquidity in-house to make sure there’s a decent amount of liquidity on the platform. The current batch of funds is used on Arbitrum to make markets on ETH and wBTC.
Now to a trickier question, could you share your perspective on June 20th’s event, the crypto market crash and following downgrading of ZigZag by Credora – formerly X-Margin?
Taureau: Yes, we lost money in the UST event. Not because we were holding UST, but because we were market makers for UST at the time. So what we were actually short of UST going into the event, we borrowed a bunch of money and sold it to purchase ETH and wBTC to make markets in both those things. What we had an issue with was our price feeds, we misconfigured our price feeds. We had our price feeds set to USDC. Around the UST event, we incurred no loss due to direct UST exposure, we never held actual UST on our books. The reason we lost a lot was that we misconfigured a cloud of our price feeds. Price feeds for like Terra based markets were using UST prices, so when the price collapsed on UST our price feeds didn’t update with that, so smart traders started dumping their tokens on us.
At the time we had an open loan with Atlendis when all this went down, and we got downgraded. I was cool with the downgrade, we lost money, we showed that we weren’t the best market maker, that we could potentially lose money, so we got downgraded. We weren’t ever insolvent, we restructured our debt but we haven’t missed a payment to one of our creditors yet. At one point, Credora wanted us to sign some transactions from our market maker accounts, but most of our funds were on zkSync which isn’t an EVM chain, so we couldn’t just sign a tx and prove them in Credora’s system. So we had to say “these are our accounts” and they had to trust that these were really our accounts, we had no other ways of proving it and we couldn’t stop market making to sign some transactions on mainnet or whatever – we would have had to be down for a few days, and it would have been way worse, like we’re actually insolvent at this point.
How is ZigZag funded other than from borrowing?
Taureau: We raised about 10M from 2 VCs in March 2022, unfortunately we lost most of that money during the UST collapse. We have about 2 million left that we use to pay salaries and do market making and on top of that we have also borrowed money from various lending platforms and we use it for market making and things like that.
How is ZigZag governed?
Taureau: Right now we’re not governed. Right now we have a treasury, we have things that need to be governed. And the SEC basically saying that if you vote in a DAO you’re liable kinda made me think that we shouldn’t have a DAO. Instead we should just dissolve our treasury. All the money we’ve borrowed, we’re repaying it and we’re separating our market maker from the protocol and we’re dissolving our treasury, doing buybacks on the token. All the fees we accumulate, we’re going to have a smart contract to directly do that too and buyback tokens. What that will do is that it will set up a situation where there’s nothing to govern, there’s no treasury, the fee is fixed and constant at 0.05%. That’s it, if there’s no governance, no salaries being paid and no treasury, there’s no argument to be made that we’re any kind of centralized protocol, we’re completely decentralized. None of us take salaries, we have tokens and we hope they appreciate in value in the future.
What is up with ZigZag’s token and will there be an airdrop?
Taureau: The token holders are going to be able to vote on an airdrop. Personally, I don’t see a ton of value to an airdrop. It bloats the token supply, it creates a bunch of selling pressure. We’ve talked to our token holders and none of them wants an airdrop because they think it’s going to destroy the value of the token. And I don’t think right now that people would hold the token. If we airdrop maybe in a year or two from now when the market’s improving, I could see people holding the token and a better argument made for doing airdrop then. Right now It doesn’t seem like it’s going to create value for the protocol.
What is next for ZigZag?
Taureau: We will start launching liquidity pools soon so you’ll be able to deposit liquidity with ZigZag trustlessly and earn yield, on Arbitrum for now and on zkSync when zkSync 2.0 launches.
Stéphane: Thanks everyone for joining. We’ve been very busy lately but it’s for a good cause, and the Atlendis Labs team has been working on many exciting things these past few weeks. Be sure to stay tuned because we have a lot of exciting news coming soon!
Thanks again to our two guests for being with us today and to the community for joining us as well and for asking questions. We look forward to our next community call. In the meantime, please feel free to reach out to us on Discord if you have any questions or feedback.
Thank you everyone and take care!