Building Crypto Cities

Transcript

Let's see. Hello, good morning. Today I'm going to spend the next 5-10 minutes talking about uh our vision and our attempt to actually bring an economy on chain. Uh so actually giving substance to all the markets that we built, all the infrastructure that we built for the last 10 years. And how a group of builders independently are converging towards this thesis uh of crypto cities. My name is Max Lomu.

I've been in the crypto space since 2018. I spent the last uh years talking with hundreds of builders as a grant manager for the Arbitrum DAO. The Arbitrum DAO Arbitrum is one of the biggest layer twos in the space. The DAO has set up a grant program to support early-stage builders. And um that's how I started to talk to people and projects and understanding what building, what they were trying to achieve. And so we we started to look at how do we bring more value on chain? And in order to do that, we we had to set stop for a second and look at what we have today. What what we have built in the past 10 years and how we can use that to bring more revenue, more value

inside. So first of all, we have a programmable pool of liquidity, right? The stable coins, more than 300 billions already. Uh that is global. You can move it for a fraction of a cent. Uh you can access it from anywhere. And I would say it's been quite battle-tested, right? We have a few we had a few hacks, a few issues, but right now we are in a stage where we know the infrastructure is ready. The biggest issue is that all the value that is created on chain normally comes from a closed-loop mechanism. People speculate. They have they generate they some yield they generated. Yes, the uh you know, we we found ways to compose

and elaborate on that yield in various mechanisms, but it's always the same value get they get recycled and recycled again. So naturally, when the speculation phase dries out like it's happening right now, all the DeFi projects, all the attractiveness of that yield starts to diminishes. So what is happening is that people have started to tokenize new things, right? We started to we started to tokenize this real-world assets. There's about billions right now, but only a few percentage of that is actively used on chain, meaning that right now the vast majority of those assets are simple representation of something that exists in the off-chain world and it's been brought on chain as an as a normal ledger, as a pure ledger.

At the same time, the potential market to tokenize things that are generating yield and are generating new form of revenues is huge. Like there is there is a similar compared to adjacent adjacent markets to what we're doing, uh it's a two trillion market. So what what we decided to do? We said, "Okay, what is what is continuously creating revenue? What is continuously creating yield that we can bring on chain?" And we identified businesses with recurring revenues as the lowest-hanging fruit, as the primary market, so that we could bring their cash flows uh we can take their cash flows, bring them on chain, and use that cash flow as a yield, as an additional yield for this for the economy.

Uh the flow is pretty straightforward. We have this liquidity that is uh you know, already on chain, whether it's retail, institutional, the liquidity that DAO treasuries have. We we injected into the local businesses uh that have recurring revenues, they generate cash flow. We take that cash flow, we bring it back on chain in the form of yield. And that's where it makes sense to combine it with all the infrastructure that we made, whether it is DeFi, whether it's a prediction market or hedge it, uh whether it's AI agents or and so on.

Um so we in the past, you know, half, we built a network of more than 10 10 businesses. Uh they have uh more than 20 millions already generating this type of yield. Uh I brought here three examples, uh but there are many. If you guys want to chat later about what is what is what can be done, I'll be happy to. Uh some projects are tokenizing real estate, right? They're renting it out, so they they get liquidity from this on-chain world. They buy apartments, they buy flats, they rent them out, and then the yield the the rent is being brought back on chain and distributed. Uh other projects like Fractalized, they have bought a commercial vessel a chemical commercial vessels. They

rented it out for 5 years, and so now they know they have this revenue coming in continuously and they're able to redistribute it continuously on chain with a very interesting return so far. The Bulla team is uh has started to reach out to all the suppliers that had credit against Walmart and other big retailers, so triple-A rated uh um uh companies, and uh they are doing invoice factoring for those suppliers. So anticipating they have they have to wait for 30 days to receive the payments from Walmart and other retailers, uh they go to those guys and say, "Hey, I will give you the cash immediately in exchange for a a fee, of course, and then in 30 days when you get paid, I'll

I'll take the cash back." And so they've been selling these discounted kind of invoices uh for the past 3 years with zero defaults and uh with you know, very interesting returns compared to the risk that I exposed to. Uh the Doola team is another interesting example. These guys are based in Hong Kong. They wanted to help small-medium enterprises to expand and grow. So they go to uh laundromat businesses, they go to charging the charging towers or car washes. And they say, "Hey, do you want to expand your operations? Uh we will give you the liquidity. We'll give you the money to do that. You want to buy a new washing machine in your in your shop? You we we can buy it for you. And then we have an IoT sensor that is

recording every time the washing machine is used. And uh and so we know how much revenue you're generating, and also we can take a cut of that and then bring it back on chain." Um So these are some of the things that are already happening, they've been happening for the past 3 years. Uh there is a many more many more use cases that are interesting that are coming up. We are exploring municipal bonds, we are exploring buy now, pay later mechanism for freelancers or small-medium enterprises, uh student loans, trade finance, of course, it's a it's a huge world, but also IoT-backed loans.

I think this is an interesting example because we realized that in order to have more uh tailored or or or different type of loans that are not feasible for the traditional sectors, we had to start collecting different type of data and have a way to make sure that that data is correct. And so a team built a verification system using zero-knowledge proof and TLS, the transport layer system, uh to basically collect in a private way, in a confidential way, either financial or non-financial data uh by sensors, by you know, accessing the POS machines, uh to be able to verify that a condition in the in the in

the company that is taking a loan is verified or not, is correct or not. Uh so for example, they are able to see if you have enough enough cash in your bank account, if you are able to uh if you have purchased from a specific supplier or not without having to know all the exact data, without having to know your full financial statement. They're able to access these confidential conditions, yes or no, the uh businesses, which is what they want. And at the same time, it gives more confidence to the lenders or to the uh other side of the marketplace.

You know, once we have this yield that is flowing back on chain, I think it gets exciting again to see uh what can happen on the in the DeFi world. So that yield can then be composed, decomposed, adjusted according to the risk profile of the investors or the liquidity providers. So you can take the yield and tranche it into senior, junior, spectrum between the two. Uh you can use that asset as collateral. If you want to leverage it, you can enable credit, early exit. Uh you can obviously hedge it, you know, those those type of businesses with prediction markets, with other type of platforms. So all this mechanism have are that have been built for the past years are now useful for a new type of yield, a new type of revenue that is coming

back on chain. What are we looking for? So this is an ecosystem that is growing. We are looking for more people that want to contribute to it, they want to work with us. We are looking for either businesses with uh cash flows, with these recurring revenues, uh that might want to get extra liquidity. At the same time, we are looking for capital allocators, people that have a certain risk profile, they want to invest into this type of uh yield-generating assets, or wallets and distribution platforms. Thank you very much for your time.

Um yeah, I'm looking forward to catching up.