Congratulations Fluid Token

Hi, this is Charles Hoskinson broadcasting live from warm, sunny Colorado. Always warm, always sunny, sometimes Colorado. I wanted to share something that's really cool. Seldom do we see this happen, and when it does, you have to give credit where credit is due. So, Fluid Tokens just announced today, February 21, 2025, at 3:56 p.

m., that the first Babble fee transaction on mainnet has been executed. Babble fees are officially on Cardano. It's pretty cool, and there's the transaction ID right there. Congratulations to that team!

This is a big deal, and I wanted to read off some of the blog posts so you guys get an understanding of what we're working on here. Back on February 24, 2021, Agalo wrote a lovely blog post, which I'll link here for you guys to take a look at. Basically, the long and short of it is that we wanted to come up with a mechanism where you didn't have to use ADA for transaction fees on the Cardano network. In Douglas Adams' classic, "The Hitchhiker's Guide to the Galaxy," a Babble fish is a creature that allows you to hear any language translated into your own. This fantasy of universal translation ensures meaningful interaction despite the myriad different languages in the galaxy.

In the cryptocurrency space, smart contract platforms enable the development of myriad custom tokens. Is it possible to interact with the platform using your preferred token only? If there were a Babble fee mechanism to translate the token you use to one that the platform requires for posting a transaction, it would be revolutionary. Common wisdom in blockchain systems suggests that posting a valid transaction must incur a cost to the sender. The argument is that without such a constraint, there is nothing to stop anyone from overloading the system with trivial transactions, saturating its capacity, and rendering it unusable.

Given this tenet, a frequently made query is that in any blockchain system where user-defined tokens are supported, it should be prohibited to pay transaction fees in such tokens. Instead, transactions should carry a fee in the native token of the platform, which is acceptable to all participants as being valuable. This causes tribalism inside the cryptocurrency space, where your native token is the only one that matters because you pay the fees in it. Arguably, such a restriction is undesirable. But how is it possible to circumvent the insuring and seemingly inevitable vulnerability?

The art of the possible—cryptography and game theory—have been known to make possible what seems impossible. Celebrated examples include key exchange over public channels, Merkel puzzles, and auctions where being truthful is the rational thing to do. First, let us recall how native assets work in Cardano. Tokens can be created according to a minting policy, and they are treated natively in the ledger along with ADA. Cardano's ledger adopts the extended UTXO model, and issuing a valid transaction requires consuming one or more UTXOs.

You have inputs and outputs; you have a collection of inputs, and then your outputs are the UTXOs. In Cardano, a UTXO may carry not just ADA but, in fact, a token bundle. This is the color coins component, so we call it CNA, which contains multiple different tokens, both fungible and non-fungible. In this way, it is possible to write transactions that transfer multiple different tokens in a single UTXO. So, Satoshi had this idea but never fully implemented it.

Transaction fees in the ledger are denominated in ADA according to a function fixed as a ledger parameter. By the way, you guys have control over a powerful feature of Cardano's extended UTXO model: the fees required for a valid transaction can be predicted precisely prior to posting it. This is a property that Ethereum does not have; it’s unique to us and one of our competitive differentiators. In Ethereum, the fees needed for a transaction may change during the time it takes for the transaction to settle since other transactions may affect the ledger state in between and influence the required cost of processing. That's because it's a global state system, while we have local determinism only in Cardano.

Let’s consider a thought experiment to help us move closer to our objective of Babble fees. Imagine that it is possible to issue a transaction that declares a liability denominated in ADA equal to the amount of fees that the transaction issuer is supposed to pay. You declare liability; that's the first step. Such a transaction would not be admissible to the ledger; however, it can be perceived as an open offer that asks for the liability to be covered. In other words, you’ve made your transaction from your personal concern to the network’s concern because everybody potentially could see it.

Why would anyone respond to such an offer? To entice a response, assuming the token bundle concept already present in Cardano, the transaction can offer some amount of tokens to whoever covers the liability, so they get a fee for that. This suggests a spot trade between ADA and the offered token at a certain exchange rate. Consider now a block producer that sees such a transaction. The block producer can create a matching transaction absorbing the liability, covering it with ADA, as well as claiming the tokens that are on offer.

So, when I say that you can pay DeFi fees in Cardano using Bitcoin, Bitcoin can be offered, and somebody can cover the ADA cost and get transaction fees in Bitcoin. Your SPOs can make Bitcoin by suitably extending the ledger rules. The transaction with the liability, as well as its matching transaction, becomes admissible to the ledger as a group. There’s this concept of matching it and bundling it, and then you submit the bundle together. There’s a proposer and a receiver, so there’s always a counterparty.

Due to the absorption of the liability, the two transactions become properly priced in ADA as a whole, and hence it does not break the ledger bookkeeping rules in terms of ADA fees. As a result, the transaction with the liability settles, and we have achieved our objective. By the way, as a subset of this behavior, you can do fee transactions too and have somebody else pay your transaction fee. Users can submit transactions priced in any tokens they possess, and providing a block producer is willing to take them up on the spot trade, have them settle in the ledger as regular transactions. Now, this was an idea that we came up with back in 2021.

What happened was that Paulina worked with the innovation team and wrote a proper SIP for this Cardano Improvement Proposal called nested transactions, where she extended the concept to a whole concept of validation zones. The basic idea is that you have this thing where somebody initiates a partial transaction and declares an intent, and then that intent is captured and received by a counterparty. The counterparty builds that transaction, it gets batched and bundled, and then transmitted. This is a really cool area of blockchain design. In fact, there’s a whole blockchain that does nothing but intents.

One of the small cap ones that’s been floating around for a little while, at least a few years, is called Aoma, and it is the intent machine. They have a cool little website here, the intent machine. In general, you kind of have four steps to all these things: you have intent, so you declare what you want; then you search for counterparties that are capable of doing that; after you have a search for counterparties, you’ll have solvers who figure out how to put the thing together; and then after that, you’ll have settlement, so it actually gets posted on the chain. By having a standard for this, it can be done as a global concern. Now, you can bypass global concerns and create a smart contract to do this instead, and that’s what Fluid did.

They actually implemented and beat everybody to the mark. There’s an active ongoing effort to bring validation zones into Cardano because it begins the intent-driven design of the system. But in the interim, we were beaten to the mark by one of the Cardano projects, and they actually got this working. It is an essential component of Bitcoin DeFi, and congratulations to that team. They’ve done an amazing job bringing that to bear.

every now and then you see something, and you get really proud of it. You say, "Wow, they read the assignment, and they did the homework." You don’t have to trust me; you can see the transaction proof is actually in the pudding. Noma, by the way, is one of the very few cryptocurrencies actually implemented in Elixir. Looking at their GitHub repo is pretty cool.

So, what do we care about intents? Well, intents are what are called a complexity abstraction scheme; it’s a declarative language. If exactly what you want and exactly how to do it, you tell the computer what to do. That’s procedural programming. For example, let’s say you want to go to a location, you want to go to a party.

It’s almost the old MapQuest days where you have the printout step by step: go two miles down this way, take a left, go a mile and a half this way, take a right, go a mile down this way. That’s step by step. A taxi is declarative. You sit in a taxi and say, "Take me to Grand Central Station." The taxi driver makes the decision on how to get there.

You have an intent, and they deliver that intent. The taxi driver is the counterparty, and he solves that problem. The actual act of driving you there is the settlement of that transaction when you arrive. This is super important for wallets living in a multi-chain, multi-DApp DeFi environment because you’ll have an intent like, "I want to liquidate 400 of token XYZ at the best available price." Do you want to tell it what DEX to use?

Do you want to tell it exactly when to execute that order? No. Or, "I want to initiate a transaction and delegate to the most profitable stake pool for the circumstances." Do you want to go and find that pool, look at all the different fees, and see which one to manually select and click? No.

You just want it to be solved. The concept of validation zones opens up the possibility of intent-driven blockchain design. When you start really thinking about that, you realize large amounts of finance and consumer behavior are declarative in nature, not procedural. If you’re building cryptocurrency wallets, the more you can push to the declarative world, the easier it is to build a wallet because you just have the user specify intent, and then the blockchain or some other mechanism figures out how to execute that intent on behalf of the user. It’s the next generation of blockchain systems.

What’s cool is that UTXO is hand-in-glove built for this type of thinking. You get that local determinism; it’s very easy to batch transactions. It’s much harder to do that with a global system that has a global state and an EVM-style model because there’s non-determinism in the system. Everybody’s view is a little bit different, whereas everybody’s view is the same in Cardano land. You have that local determinism.

It’s actually pretty cool because you can run a lot of these intent engines off-chain in state channels like Hydra for auctions and all kinds of interesting applications. Yet again, our design decisions as a system have put us far ahead of the game. This opens up Cardano for tourism. It’s an essential component of the partner chain strategy. Babble fees are one part; AVS is another part—actively validated services.

When Cardano wakes up and starts talking to other cryptocurrencies, their inbound transactions with them paying in Ether, Bitcoin, Solana, and other things are like tourists visiting your country. They pay in dollars, euros, and pounds, but the local currency goes up in value because it’s purchased in the process of the transaction. The tourist is using their credit card; they don’t see that transaction. They think they’re paying in dollars, and they don’t realize that they’ve actually settled in something else. It’s pretty cool when you think about it.

The more tourism, the more prosperous the country becomes, a trade surplus. That’s something that excited me a little bit today. Intent from blockchain is actually something that our CTO, Ramon, is very interested in, and I am very interested in. It’s the future in many respects, especially when you start talking about AI getting involved because AI can help sort out how to construct things in an optimal way and match people in an optimal way. When we start talking about multi-chain signatures and hybrid applications, you are talking about a world where you have many different things going on in different networks, and somebody has to put all those ideas together into one transaction with a proposer, a counterparty who is the builder and solver of that, and then it has to settle.

It’s a very interesting pattern that’s only going to get more complicated over time, especially when privacy is involved. What if the proposer doesn’t want to reveal who they are, but there’s intent out there? There is a way to break that chain of custody. So, congratulations to the Fluid Token team. We are very proud of you guys for starting this process and getting it done.

We can’t wait to see the results of what you’ve done. It will certainly influence some of the thinking that goes into validation zones and the evolution of Cardano as a whole. It just shows you how smart our community is. They do their homework, they get it done, and in some cases, they get it done better than most. Cheers, everyone!