A conversation with Markus Schmitt about his journey from AI consulting to founding Propeller Heads, creating Tycho, and building innovative solutions for the Uniswap ecosystem.

What got you into DeFi initially?
It was European interest rates in 2021 when our bank called us saying we have to pay negative interest rates. That was the final drop where I thought, 'There has to be a better way.’

In 2021, a friend sent me the Liquity white paper. This was the best possible entry for me - reading it introduced me to so many concepts and to the fundamental structure of this industry. What I really felt when I read that white paper was this immense, novel design space that these teams were navigating. It reminded me a lot of our work in AI, where we were consulting biotech companies on analyzing blood and genome data. My absolute favorite part of our work was turning research papers into products.

In crypto, it was even cleaner - extremely research-driven product development. The connection between research and code is often just weeks, whereas in most other fields it's months at least, or many years. That was extremely motivating to dig deeper into.

How did Propeller Heads come to exist?
We love research-driven product development and building infrastructure.

In 2022, we focused on helping protocols stabilize with custom keeper bots and building cross-chain arbitrage solutions. Then we got more into solving after I saw Anoma’s talk about intents.

We built a CoWSwap solver and were very successful for about 18 months, becoming one of the top solvers. But we always knew this was an exploratory phase - we didn't want to be a trading team long-term, but rather build infrastructure products.

In mid-2023, we conceptualized what became Tycho. In January 2024, I wrote the Turbine white paper, a v4 hook, which emerged from over a year of MEV research. We released the first part of Tycho in November 2023, completed it in March 2024, and the alpha of Turbine is coming next month.

What made you want to build in the Uniswap ecosystem?
Having worked with many trading interfaces as a solver, it was clear that Uniswap's designs had deep research behind them. You can see it in Uniswap’s white papers - they think things through deeply and address problems other teams overlook.

I also appreciate how Uniswap isn't duplicitous. In their frontend, they clearly show fees without hiding anything. This transparency is an important value when building an alternative to centralized systems.

So when we had the opportunity to build on Uniswap, it was clear we wanted to use Uniswap v4 for our hook. Uniswap had built trust with us over time, and we expected them to have the most thought-through solution.

Tell me about Tycho on Unichain.
Tycho just went live on Unichain in April, and you can already trade over every Uniswap v2, v3 and v4 pool on Unichain. It emerged to address the integration challenge we faced as solvers. We were constantly integrating DEXes - understanding how they work, tracking storage slots, implementing their logic locally - which is completely unscalable and adds little value, especially since every solver team does the same work.

Meanwhile, new DEXes face a cold start problem: they can't get flow without liquidity, but can't attract liquidity without flow. They need router integrations, but routers won't prioritize them until they're already successful.

Our solution is an open-source library that standardizes DEX interfaces. From a solver's perspective, you don't need to understand how a DEX works internally - you just call standardized functions like 'What's the spot price?' or 'How much output for this input?'

DEXes can self-integrate using our SDK, giving even the smallest hook access to major routing engines. Today, around 20% of CoWSwap flow (about $1.5B monthly) is handled by solvers using Tycho.

We're also seeing market makers from centralized exchanges, who previously avoided on-chain trading due to its complexity, now entering the space thanks to this lower barrier to entry.

Why is open source so important for Tycho?
Trading infrastructure is fundamentally about trust. You trust a black box router to do the best job for you, but the incentives in closed-source solutions are misaligned with users. There's always an incentive to extract value in ways users can't detect.

Having an open-source system aligns you with users because there's nothing to hide. It creates a virtuous cycle: being transparent means you build for users' best interests, and users trust you more because they can verify everything.

This is the fundamental difference between DeFi and TradFi. Blockchain technology expresses and perpetuates values of transparency and alignment through its design. It's not a coincidence that trades are on-chain, smart contracts are visible, and protocols are open source - this alignment by design makes DeFi fundamentally different.

What advice do you have for new builders?
Self-directed research really pays off in this industry. Don't take anything for granted - check the logic behind your assumptions and be very conscious of what you actually know versus what you're assuming.

The most useful new products are often hiding behind incorrect assumptions or 'common sense' that's never been tested. Because this industry is so fresh, if you dig anywhere with a research-driven approach, you're bound to discover something interesting.

Also, don't limit yourself by thinking certain applications are too ambitious. Everything is possible if you have a good reason to build it. Look for the best solution, then go after it - the confidence will come with time.

How can people get involved with Propeller Heads and its projects?
Tycho has an active community of contributors – you can join our telegram group at tycho.build – and we do community calls every month or two, in the last one the Uniswap Foundation for example presented Tycho on Unichain.

The easiest way to get started trading on any DEX on mainnet or unichain, including Uniswap v4, is the Tycho Quickstart – takes you less than 5 min to make your first trade on Uniswap v4 and start building a searcher, market maker or solver.

To stay updated with our research and upcoming announcements, follow us on Twitter. We also regularly post new research on our blog.

Note: The views expressed herein may not reflect the views of the Uniswap Foundation. This interview is provided for informational purposes only and does not constitute legal, financial, or professional advice.