A Deep Dive into Nibiru

We recently announced the Nibiru Community Sale scheduled for February 1, 2024 at 18:00 UTC.

Nibiru is a breakthrough L1 blockchain powering a smart contract hub with DeFi, tokenized real-world assets (RWAs), dev gas royalties, and much more.

In our conversation with the Nibiru team, we explored the real-world issue they solve, why they chose to build on Cosmos, the future of on-chain derivatives, their growth strategy, and recent gaming partnerships.

Let’s dive in.

1. What is Nibiru and what problem does it solve?

Nibiru Chain is a breakthrough Layer 1 blockchain and smart contract ecosystem providing superior throughput and unparalleled security. Nibiru aims to be the most developer-friendly and user-friendly smart contract ecosystem, leading the charge toward mainstream Web3 adoption by innovating at each layer of the stack: dApp development, infrastructure, consensus, a comprehensive developer toolkit, and value accrual.

On-chain crypto suffers from fragmentation, with each application nestled within its own unique ecosystem. This fragmentation, a natural outcome of development by a diverse group of global builders, has led to rapid innovation but also to unnecessary complexity.

Applications and blockchains are often developed in isolation, lacking a central body to integrate them into a larger ecosystem. This creates challenges for users and developers who want to have a seamless application or development journey. The key to broader adoption lies in improving the usability and scalability of these systems. Making Web3 accessible to a wider audience is a crucial next step forward.

2. Why did you choose to build using the Cosmos SDK?

Choosing the Cosmos SDK to build Nibiru Chain was as much a pragmatic decision as it was a strategic one. Several of Nibiru’s core contributors have substantial experience at projects like Tendermint, Sommelier, or as innovators and maintainers of the Cosmos SDK itself. But beyond the team’s familiarity, building with the Cosmos SDK brings several advantages that give it technical superiority along dimensions like scalability, interoperability, and low-level flexibility that position it as one of the few formidable contenders to modern scaling solutions like Ethereum Layer 2s.

• Strategic Benefits of Interchain Connectivity: The SDK stands out for its modular design and support for infinite horizontal scaling via the Inter-Blockchain communication (IBC) protocol. These two factors enable developers to build customized, sovereign chains while maintaining the ability to interoperate with other IBC networks in the ecosystem by default. That’s why projects like dYdX, Wormhole Gateway (Wormhole bridge over IBC), Composable Finance (Polkadot and Kusama over IBC), Landslide (Avalanche over IBC), Axelar, and Injective have chosen to build with the Cosmos stack: for ease of use and to unlock emergent capabilities greater than the sum of the parts.
• Improved Development Efficiency / Time-to-Market: Base Tendermint Core provides an upper limit of about 10,000 TPS (Buchman, 2016 on p.65-70) for a single zone/network without any enhancements or optimizations. On top of this, the Cosmos SDK provides out-of-the-box functionality like staking, decentralized governance, a fungible token standard, and strong abstractions to avoid the complexity of dealing with the consensus layer directly. It lets teams focus on core differentiation and product features rather than re-building common blockchain functionality from scratch.

3. There are so many incredible L1s out there. What makes Nibiru more developer-friendly and user-friendly than other smart contract platforms?

On developer-friendliness:

1. Security of Wasm VM: Smart contracts in Nibiru's primary execution engine (Wasm) are impervious to the vast majority of common attack vectors, such as reentrancy, arithmetic overflow/underflow, ERC20 short address attacks, and many others that plague the Web3 landscape. This means high-reliability apps can be brought to life more rapidly and scale to serve the growing cryptocurrency user base.
2. Familiarity of EVM: On top of this, EVM support will come to Nibiru Chain in 2024. For developers, the ability to build and deploy applications in a familiar EVM environment with a lower barrier to entry is a major plus. They can continue to use existing tooling like Solidity, Truffle, Remix, and Metamask, all while enjoying the benefits of improved scalability, faster time to finality, inter-blockchain composability (IBC), and modularity with Wasm smart contracts. Nibiru Chain will adapt the Ethereum protocol logic from Geth (Go-Ethereum) to enable nodes to operate with execution environments for both Wasm VM and the EVM simultaneously.
3. Multi-language SDKs: We developed high-quality software development kits (SDKs) in several popular languages like Python (popular in data science and programmatic trading), JavaScript/TypeScript (most widely used programming language across all domains), Golang (common in Web3, particularly the Cosmos stack), and Rust (for CosmWasm smart contract developers).
4. GraphQL API for Simplified Data Handling: The Nibiru team developed Nibi-Indexer, a service that listens to blockchain events, messages, and transactions to store data into structured database tables for easier historical retrieval and searchability. Initially built as an internal tool, the indexer now powers an open GraphQL API. Nibi-Indexer is similar in spirit to the protocol-specific API’s of The Graph, except it’s general-purpose, providing utility to the entire network.
5. Low-latency Decentralized Oracle: On the Nibiru blockchain, validator operator nodes act as oracles by coming to consensus on off-chain data and publishing votes on the network with transactions. This system ensures data integrity, as validators risk being jailed or slashed in the event of misbehavior or inaccurate data submission. Speed of the oracle is limited only by the time it takes blocks to finalize at just 1.4 seconds. Smart contracts also have first-class support for querying merkle-ized data from the oracle.

On user-friendliness:

1. Unified Web Application and dApp Registry: Nibiru Chain plans to introduce a unified web application, integrating numerous decentralized applications (dApps) for enhanced user experience. This platform will also feature a comprehensive registry, making it easier for users to discover and interact with a wide array of dApps. This initiative aims to streamline user interaction within the Nibiru ecosystem, offering a central portal for decentralized services.
2. Lower Gas Fees:  Nibiru Chain prioritizes affordability by maintaining lower gas fees compared to many other L1 platforms. This cost-efficiency makes it more accessible for a wider range of users and developers, facilitating more transactions and interactions on the network without the burden of high costs.
3. Performance and Parallelization: Nibiru helps obviate the tradeoffs between addressing decentralization, security, and scalability in tandem. Nibiru Chain achieves high throughput and reduced block times, which significantly decreases potential network congestion.  This leads to smoother and more reliable transaction processing.
4. An added benefit of having a scalable network that can process more messages and transactions is that it opens the door for consumer-focused, real-time applications. The enhanced throughput and parallelization capabilities of Nibiru Chain make it an ideal platform for real-time consumer applications. This technological edge opens up new possibilities for developers to create innovative, responsive applications similar to what we see in Web2.

4. On-chain derivative volumes lag behind spot volumes, with DeFi exchanges accounting for only about 5% of total volumes. Given how bullish Nibiru is on on-chain derivatives, what do you see as the main growth catalysts for this sector?

Much of this belief stems from analyzing what happened in the centralized exchange (CEX) context. There’s an emergent trend in the digital asset space where sectors in DeFi tend toward the size and volume of their CeFi counterparts over time. This happened with spot markets as Uniswap in aggregate tended toward meeting or exceeding the volume of exchanges like Coinbase, Kraken, and Kucoin. Spot order books were the dominant model until Uniswap created a new one capable of similar capital efficiency and ease of use in a non-custodial manner.

The same pattern occurred with centralized lending versus decentralized lending in the case of Aave and Compound. These decentralized exchanges (DEXs), although initially much smaller than their CEX counterparts, have grown to become the most popular lending platforms for digital assets because they were able to provide the same utility as Binance Loans and OKX Loans except with much more transparency and decentralization.

Why then are on-chain, DeFi derivatives smaller than DeFi spot markets in terms of usage? Simple: DeFi derivatives have not sufficiently caught up to CeFi derivatives in terms of execution speed, low maker and taker fees, or liquidity locked. Derivatives are still in their “spot order book” phase, so to speak.

Taking a quick survey of exchange volumes on CoinMarketCap (dated Jan 29, 2024), the top 5 CEXs in the derivatives category are Binance, Bybit, OKX, Bitget, and Kucoin.

Volumes for derivatives on all of these exchanges are much higher than spot volumes: More than a 3x difference for Binance, 4x for Bybit, 9x for OKX, and so on. And if you pull the same data to make this comparison on almost any day, you’ll see a similar pattern, where the derivative usage is higher than spot. Or at least, that’s been the case for the past few years.

Some of the top players in the DeFi derivatives space include dYdX (Ethereum L2 + dYdX chain), Hyperliquid (Arbitrum),  GMX (Arbitrum, Avalanche), ApolloX (BSC), and Drift Protocol (Solana). Each of these protocols has different trade-offs in terms of capital efficiency, maker and taker fees, front-running risk, available liquidity, and execution speed. However, all of them are worse than futures offered on Binance, Bybit, OKX, etc. Looking purely from the perspective of the trading experience and technical capabilities offered, decentralized derivatives are subpar when compared with centralized offerings due to their complexity and the sheer difficulty of building products in a purely smart-contract driven manner.

With that said, the derivative space is highly competitive and continues to evolve and innovate rapidly. One of these decentralized players can still emerge as the “Uniswap for DeFi derivatives”, and if this hypothetical exchange follows suit from spot and lending, it should mirror the pattern of centralized exchanges and supersede spot volumes several times over. That’s the crux of why the Nibiru team is bullish on derivatives.

CeFi derivatives win out in terms of (1) available liquidity, (2) lower fees for trades, (3) order matching and trade execution speeds, whereas DeFi derivatives win in terms of:

• Transparency: The downfall of centralized exchanges and platforms such as Celsius, Voyager, and FTX underscores the risks and lack of transparency inherent in centralized systems. Despite the potential of web3, there's a pressing need for more transparency and accountability. In traditional finance, practices like "B-Books," where brokerages act as the counterparty to trades, have sparked concerns over market manipulation. On-chain derivatives, by contrast, offer inherent transparency, promoting fairness in the market.
• Composability/Interoperability: On-chain derivatives have an advantage in being able to integrate seamlessly with other DeFi products on a shared blockchain infrastructure. This enables direct interactions without intermediaries, fostering innovative solutions like loans backed by derivative contracts, clever utilization  of NFTs for trading-related metadata, or the creation of entirely new asset classes.

User experience, especially given the complexity of derivatives trading, has been a barrier, keeping the domain largely in the hands of advanced users. Nibiru aims to offer the capabilities necessary to bridge this gap, making it possible to offer the flexibility, ease of use, and capital efficiency of a large centralized exchange without the drawbacks like off-chain settlements, discretionary fund custody, or advantages for designated market makers.

5. You recently announced several notable gaming partnerships. How do you see Nibiru plugging into the Web3 gaming space?

With over three billion players worldwide, the gaming industry has attracted numerous demographics and age groups. Web3 enables players true ownership over in-game assets and cross-game compatibility. This gives players a new level of interaction by allowing them to own, trade, and sell in-game assets which in turn increases engagement and retention. There has been a surge of traditional web2 games moving onto the blockchain with Web3 gaming representing one of the largest verticals that have reached accepted product-market fit in-market.

It’s not only the Nibiru community that finds joy in gaming as a central pastime. Nibiru goes beyond merely embodying gaming as a core vertical, but also provides the solution toolkit necessary to do so. Game developers choose Nibiru for its ability to handle 40,000 transactions per second (TPS) coupled with instant finality.

Gaming studios and developers can leverage Nibiru Chain's tech stack for:

• Tokenization: In-game assets as NFTs for ownership and trade.
• Security: Players have access to in-game economies in a secure manner which utilizes CosmWasm smart contracts, all verified and provable on Nibiru’s blockchain.
• Performance: Provide high transaction throughput and low latency; crucial for smooth gaming experiences.
• Interoperability: In-game assets can serve multiple purposes and use cases; powerful and accessible toolkits for developers
• Royalties: Asset creators can be rewarded and earn fees each time their creations are transacted.

Nibiru has partnered with the Blockchain Gaming Alliance, which will allow Nibiru and its ecosystem partners to further penetrate the broader gaming communities.

Current Nibiru announced games include mobile RPGs and prize-based savings games. These genres have the potential to bring on a substantial initial user base via an exciting, accessible, and familiar gaming experience. Building on this foundation, Nibiru plans to extend its reach into additional verticals including fully on-chain games, card games, strategy games, puzzle games, racing games, and more.

6. What mechanisms are in place to ensure the sustainable growth and decentralization of the protocol?

A) Foundation Delegation Program

Validators are essential for maintaining the health, performance, and security of the network. In recognition of this, Nibiru Chain has implemented a delegation program aimed at distributing the Foundation's tokens to a select group of active validators who make significant contributions to the ecosystem.

The program is guided by three primary objectives:

1. Recognition and Incentivization: It aims to acknowledge and reward validators who actively enhance the ecosystem. This recognition serves as a motivation for continued engagement and greater contribution.

2. Enhancing Decentralization and Accessibility: The program seeks to level the playing field for smaller, independent validators. By facilitating their access to voting power and commission earnings, it reduces the need for substantial initial capital, thereby increasing decentralization.

3. Promoting Balanced Stake Distribution: A key focus of the program is to ensure a diverse and balanced distribution of stakes. This is achieved by delegating across a variety of validator types, geographies, and service providers, thereby mitigating the risk of any single validator accumulating excessive control over the network due to disproportionate voting power.

B) Nibiru Chain Grants Program

To encourage external development, Nibiru offers a grants program to provide financial support, mentorship, and other resources to developers committed to enhancing the Nibiru ecosystem. Interested community members are encouraged to develop (1) resources that make building on Nibiru easier and (2) applications across a wide range of domains in Web3 such as DeFi, gaming, payments, real-world assets (RWAs), NFTs, and more.

For more information: [Requests for Protocols (RFPs)]  [Nibiru Grants]

C) On-Chain Governance

Nibiru Chain is a community-driven, decentralized blockchain, utilizing the Tendermint Consensus algorithm for delegated proof of stake. Within this framework, the NIBI token serves dual functions: it is used both for paying gas fees and for securing the network. This security is vital for the generation of new blocks and the validation of transactions on the chain.

In the staking process, users commit their NIBI tokens as a form of locked capital. This action is integral to participating in the network's consensus mechanism, whereby stakers contribute to adding new blocks to the chain. As a reward for their contribution, stakers receive returns proportional to the volume of tokens they have staked.

One critical aspect of this mechanism is the concept of "slashing." If a validator operator acts in a malicious manner or attempts to compromise the network, they risk losing their staked tokens as a form of penalty. This "slashing" serves as a powerful deterrent, discouraging validators from engaging in dishonest or harmful activities.

Beyond securing the network and block production, staking NIBI tokens also grants users the ability to engage in decentralized governance. This on-chain governance process allows members of the Nibiru ecosystem to collectively make decisions and influence changes in the protocol. They do this by voting on various "proposals," with their voting power being directly proportional to the amount of NIBI they have staked. This mechanism ensures that those who have a stake in the network have a say in its evolution. For a more detailed understanding of this process, see ”Governance and NIBI” in the Nibiru Chain Docs.

7. What is the best way to get involved in the Nibiru community?

• Join Nibiru community channels like Discord, Telegram or follow for updates on Twitter and YouTube.
• Apply to become an ambassador
• Contact the team directly
• Learn More: Docs | Nibiru Chain

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