Curve Founder: The Next Massive Expansion Is Coming (New Thesis)

Transcript

We are back with our weekly stable coin segment presented by FRA. Today we've got Michael Argov of Curve. He's been building in the space for a number of years. Curve was one of the OG pioneers of the stable coin space. Uh it's an absolute pleasure uh to have you on the show today, Michael. Um I'm excited because stable coins feels like one of the few industries where we have a super cycle going on. talking about tokenization, talking about prediction markets, talking about pers, but it feels like the industry itself is kind of underpinned by stable coins. You're a leader in stable coin infrastructure.

Curve has been around underpinning stable coins for a long long time. Uh you're also very very technical, so I'm excited to get into some of the depths here. Um you've got yield basis as well, which is a little bit of a newer project, but uh today I think we're going to focus a little bit more on curve. Um, and so, you know, you've spent six years plus developing liquidity infrastructure for stable coins through Curve. Um, you know, we were we were very in the weeds, uh, when Curve was originally getting built. It was among the DeFi Legos and it was, you know, specifically for stable coins.

Maybe you could talk us through some of the more, you know, recent like advancements in stable coins and curve. I also want to get your opinion on the open US dollar that consortium stable coin that we that we heard. Uh obviously circle and tether have been you know kind of the the the leaders in the space. Curve obviously as well uh in this space more on the liquidity infrastructure side. >> Maybe you could just give us a little bit of a primer >> you know on your take on stable coins. Where are we at today? And I want to get your take on open US dollar.

>> Right. Right. Yeah. So today is somewhat different from what it was in OG times. In OG times, we had a lot of experimentation happening with fully decentralized stable coins or maybe not so decentralized, but I would say in some ways um in some ways algorithmic, right? Like even collateral debt position is algorithmic and it undeniably works. There are quite a few today. But um yeah, so uh some stable coins are like that and some stable coins are redeemable um powered by um deposits somewhere. So Tether, USDC and

newer stable coins like PIUSD, USDG and whatever, right? Um, and I think most recently we have mostly a lot of push with redeemable stable coins because uh many players started realizing it's uh probably probably something good to participate in but at the same time it's not not easy because uh there are existing players like uh tether and circle you mentioned. Yeah, abs. Absolutely. Tether and circle redeemable stable coins, algorithmic stable coins were sort of like, you know, the big thing. We obviously saw what happened to Terara, you know, USDT, uh, excuse me, Terra USD. And, you know,

this had some fundamental, uh, you know, mechanism design flaws as a part of it. >> Um, >> not only that, yes. >> Yeah, absolutely. There was there was plenty of, uh, shenanigans happening uh, with Terra. So as we're thinking through like the [snorts] mechanism design for stablecoin infrastructure as we prepare for institutional liquidity come on chain I think that is what we're seeing play out we're seeing the likes of JP Morgan banks financial institutions everyone is thinking through tokenization and stable coins are a very fundamental part of tokenization >> can you give us maybe an update on how curve is tackling stable coins in this more maybe modern stable coin era.

>> Um, yeah. Well, originally what st what curve was designed for is to swap between stable coins of the same denomination. That was what it started with, right? And uh it was well the need was clear. there was stable coin like D for example which which is decentralized and you would want to uh exchange it to USDC or USDT which you essentially withdraw to your bank account or whatever uh or you know doing the reverse as well right uh today it's more like exchanging between redeemable stable coins but you know with the same

uh with the same algorithm it works uh and basically this infrastructure plays a role of some sort of bridge connecting different stable coins. Maybe some stable coin redeems better in the US. Maybe some stable coin better redeems in Europe or in Asia or maybe I don't know maybe there is something special in New York like bit license and you need another stable coin and curve essentially under underpinned liquidity between all those kinds of stable coins all the time but you know that's a part

of curve right uh we we have multiple things going on But this is probably the earliest uh like something curve started with and it's probably still the biggest part. >> Yeah. Um Okay. And now another part of the stable coin world that has been sort of the the subject of mixed opinions. Um I've heard people say that, you know, we're going to get non- US dollar denominated stable coins. It's going to overpower the US dollar uh you know, portion of the market. And then others say, you know, there really is no reason for non- US dollar stable coins to exist and the FX market, you know, is essentially dominated by the US dollar.

I also want to talk to you about Forex. What does it look like when the Forex market is brought on chain? >> Is there a reason to tokenize and create non- US dollar stable coins? Where where do you stand on this issue? >> Yeah. Well, that's interesting because this process of tokenizing non US dollars stable coins started pretty early is still in OG times. I think it was uh Stasis Euro uh Euro S to uh to essentially as a first uh Euro stable coin but um well few others appeared and they are useful. I must say that um and maybe more useful is not something like

circles uh euro c um well euro is great because you know it's supported in multiple exchanges but indeed when you go on an exchange maybe maybe you don't really need that kind of stuff but um there are stable coins which you can redeem directly to your bank account like you know you have euro stable coin and uh redeem it to IBAN and there we go. There are a few like that like manarium for example [snorts] and they um also exist for quite some time but what happened most recently um fintex appeared fintex which u essentially made crypto cards and they do have these

effects um effects need right and it appears that effects they can get is not all not always good it's Okay. But they can do better, right? and they started using these um well just just started so it's not like not a big use but it's notable and I started noticing demand onchain like real demand which um which powers uh which is kind of powered by these uh fintexs um real demand for to exchange between euro and US dollar >> for example or or Swiss Frank. There is

a Swiss Frank stable coin which you can sort of redeem um Franken coin and I did use that quite a bit to pay bills. Uh it works and uh yeah you just can go on curve and you know buy it and pay bills and it works and it this whole process appears to be well because it's on all onchain appears to be actually actually faster than what I do in banks for some reason. For me it's more convenient for crypton natives it will be more convenient as well for uh people who come from USD world to pay in euros I

don't know u but it does seem to be sometimes more economical >> but here is the thing um I actually calculated how much will it take uh to to get fx happening on chain like if you do it Um I don't know if you do a big push for that what should it be? It appears that well you need to get access to markets with very very small spread. Well not you but arbitrage traders. So they will have to buy on chain redeem uh swap in some um you know some external markets and arbitrage back to the chain.

So what sort of spread should be there? It appears that spread which for make that working should be just several beeps very very small and these spreads are not usually not usually available to uh to like uh to anyone. Uh they are available to banks but minimum amount to trade is big like I don't know a million or something. So pools on chain should be fairly huge to power that like probably hundreds of millions or a billion like really a little too big. Uh so it didn't happen um it didn't happen as a big push right but that's only true if all your trades

are arbitrage trades. uh if you have real demand then you can have very small pools and they will do the job to do well to have real demand you need to have real users who do that and real users started appearing these fint tags so I'm very optimistic about um about FX moving onchain but it will not move like you know with banks doing tokenizing things and then doing big FX push on chain. It looks like it's happening the other way around from small to big >> and um yeah, so I think we will have some years um of growth of effects on

chain. It's hardly noticeable today, but let's see what it will be in a couple of years. Yeah, I you I've been sort of thinking this through this thesis out loud on this show and I'm curious as it relates to FX and just generally whether you you seem to agree with it, which is that the consumers are really they have their consumer behavior ingrained in them. When we go buy a cup of coffee or or really anything these days, we just tap our card. And the way in which this gets presented to us is just a number on a screen. This number is how much money I have in my bank account. I tap my card and the number

gets smaller. That money ends up in the merchants's account. Their number gets bigger. >> Behind this number in my bank, they have fiveyear treasuries, 10-year treasuries. They have mortgages in this person. They have bank deposits. They have li assets and liabilities. They don't show any of that to me. And so from my perspective, everything is just this number and I have my consumer behavior is just tap this card, number gets smaller, get my things. Merchant, same thing except their number gets bigger when I buy the thing. My my theory is that all of this can stay the same. I can tap my card. I can see the number. Everything behind the scenes. It can be the bank that

determines, okay, fiveyear treasury, 10-year Treasury, stable coins. Before, no, there was no stable coins. But now, they can choose to hold on the bank's balance sheet, hold on their balance sheet, stable coins, right next to all these other assets, mortgages, liabilities, assets, and they can still just show me the number. My consumer behavior never has to change. And so to consumers and to merchants and we've been thinking through this about how people are going to adopt stable coins or point of sale systems and all these things, none of that has to change. It's can it can be up to the banks that are cing a lot of these cash assets to choose to denominate their balance sheet

in stable coins. And from the consumer perspective, everything stays the same except money gets into the account faster. the the ups and the downs the the processing when we see pending transactions it just takes less time for it to for it to be processed and maybe it's cheaper in fees everything else can be done by the bank through the settlement of transactions up to them as far as how they denominate their balance sheet I I'd like to get your your you know do you do you see like is this the right way to think about the adoption cycle of stable coins in 2026 and maybe we can also think through later about how this applies to the foreign exchange market.

>> Yeah, possibly this is right like integration of stable coins as infrastructure, right? But also um well I'm as a as a user I just I only put stable coins in my cards today. I I don't use uh bank cards. I use this um cards which are filled with stable coins. So I just send stable coins there. That's more convenient for me. But you know I'm cryptonative. There are a few other cryptonative people like that. Um but yeah, it's um it's quite possible that uh all this stable coin stuff that it could happen actually

outside the financial institutions that maybe maybe users will will hold stable coins, right? And maybe it's it will be only like uh entries and exits and point of sale terminals and stuff like that which is uh which is processed by financial institutions. >> And I I often have this this thought when I'm thinking about the adoption cycles of new technology. Sometimes it feels like an evolution which is a bit more peaceful. Other times it feels like a revolution, maybe a little bit more violent, right? And like people do change their consumer behavior, right?

The former, the peaceful evolution feels a little bit easier. You know, maybe it takes a longer time frame, but it happens slowly and somewhat easily over time, maybe without us even noticing. Whereas the the more violent revolution is, you know, there is a reason for you to change your behavior and choose to use stable coins rather than the banks doing it for you. Obviously yourself, you're you're an innovator, early adopter in this world. You've chosen to ch to to put stable coins onto your cards and use that in your everyday purchases. Do you think most people are going to take the revolutionary approach and and you know do the do the the mental work to choose stable coins or do

you think >> they will choose stable coins only if they have problems not choosing stable coins? I think like if they have problems with banks like banks being too slow or banks not opening banks bank accounts for them or something they will use stable coins. >> Mhm. >> But if they don't have any issues they probably won't. >> Right. And so a lot of people on the show they come on they say every asset will be tokenized. Digital assets are every asset. And if we do end up with every asset on chain, eventually all of those people, they will have their assets on chain. Do you think the majority of people are going to be

taking this revolutionary approach because banks have a lot of problems or do you think banks will figure it out? They'll figure out that this technology is important and it's inevitable and they will implement it for people on their behalf before the people end up migrating off and doing it themselves. Well, I think it will be sort of hybrid because you still do need to interact with real world and this is where banks will probably inevitably take the lead. So, people probably will use this um I don't know this infrastructure a little bit more directly or packaged in into some more kind of trustless products. But you still need uh the old

good players to interact with real world. >> And how does Curve fit into this? Like you know every chain and company and application these days seems like it it has this institutional strategy. Like how do you see institutions using Curve for stable coin settlement and execution maybe differently than consumers might use this protocol? Yeah, I think with institutions it could could be that FX is a right angle actually. Um otherwise institutions they they actually had quite a bit of problems using DI. They would love to but they they are not allowed to do it

easily. And these barriers they disappear not immediately. It takes time. I think if you open the flood gates at some point that will work but uh since the you know these floodgates don't disappear immediately right then some services are being built to interact uh with blockchain directly and in institutions still take their part like for example you can deposit stable coins in a bank in Switzerland in with many banks actually already and that actually will work. Um but yeah uh but

whatever you do with a stable coin like maybe let's say I don't know I want to buy stocks with stable coin and maybe for me it's easier to go on chain if they are on traded on chain and do it than to go with my bank and I don't even know what what should I do to do it. It's uh so um unclear I would say well if you are in the US it's it's fairly easy you go to I don't know E trade or whatever and buy it fairly easily or whatever whatever you do. Uh if you are here and you want to buy American stock I don't know actually where to go. So

and with crypto it's kind of I don't know it's it's easier. You have a whole world open to you. No, no registration needed. Just, you know, just have your wallet and and you go. >> Yeah. And part of, you know, the access the access that we have once, you know, we have this wallet. Uh we are we essentially have global access to all of the assets that are on chain, but we need those assets to be on chain to begin with. I I've said on the show and and I I like this. I'm curious what you think about it. like a a dollar that's onchain tends to stay on chain and you know a dollar offchain tends to stay

onchain. The friction is when we try to cross the bridge. Now in order for us to do that and and us to get access to all these things and the world open up to us, we need all of these assets to be on chain to begin with. And equities are a great example of this because you know in order for us to get access to equities, we first need to move those onchain. Um and it feels like stable coins are kind of the gateway, right? We it was initially the first thing that we got tokenized. >> Stable coins are the gateway. Absolutely. And yeah, um if stable coins of non US dollar stable coins are more convenient for some locations, yes, probably probably another potential gateway. Um but yes, absolutely. And uh

tokenized assets they um they can have lots of benefits apart from access from being onchain. Like you can have innovative products like yield bases based on uh built on top of those right for why wouldn't you be able to earn yield on your stocks even if they are not producing uh dividends right so what if they are not dividend stocks but you still have them increasing uh in one or other way right so maybe it's not just buying and selling and uh that's interesting that's what Defi is about.

>> Mhm. >> Yeah. Yeah. And and yield basis is a great example of this. Making an asset productive even when like you're saying it's not paying dividends. Um >> like Bitcoin. >> Exactly. Bitcoin is a great non-ividend producing >> and [laughter] and Ether kind of kind of pays dividends. >> Yeah, it does. It does. Um yeah, Sailor could uh Michael Sailor could could certainly use it to his benefit these days. Um >> absolutely. We, you know, we're continuously seeing this. We're seeing the adoption play out. Um, FX is coming online, but it it it, you know, it has this friction between the fiat system and uh and the onchain system. Once we are in the onchain world and we have all

these assets here, access is open. It's much more seamless. Have you considered moving cur like taking curve into a position where it's able to facilitate a fiat cash leg like the famously on curve you know you have these tri pools and whatnot right >> all of that is smart contract enforced and and it makes it you know codified but the hard part now and and I think the hard part maybe a few years ago in 2020 2021 was exactly this we didn't have the onchain primitives to underpin a protocol that was able to facilitate the trading between these stable coins and we needed that. Now it feels like the hard part is like it's almost like the non-technical stuff. It's like the

it's like the boring regulatory the boring like you know like paperwork that is required when you're working in like the offchain world. It feels like we've got like a lot of zero to one in the onchain world. But now the most inefficient part, the part that needs the innovation is like the the the on-ramping because once we have it on chain, we have a lot more infrastructure built out. Have you considered adding like a a fiat component to curve? >> Yeah, I thought about it, but but you know, I think that maybe uh maybe um maybe people who are who have more experience in that boring part should be doing the boring part, right? So there

are plenty of things which are not completely solved in uh in the complex world right so impermanent loss being one but fx is not quite solved I'm hearing from these uh from these uh gateways essentially right so we've got this euro right we can change euro to dollar using banking but we are finding that in efficient. We want to do it onchain but where is the liquidity? We want liquidity, right? So this needs to be properly solved. This is a problem, right? So they they are really telling

that and uh I think um yeah so so infrastructure part is not quite solved. We have something but not everything. And um yeah, you of course you can do it like um well you can do it in it in an almost order book way. you can hire market makers instead of um instead of centralized exchanges they do market making on unis swap 3 and whatever and it will sort of work but like it um it it is actually less efficient than it can be when it's fully automated I believe right so automated market making is not yet fully solved right and we

have plenty of work to do >> got it yep and there's pioneers out out there that are that are working on this. And so what I'm what I'm hearing is, you know, right now you've got this Europe this euro to US dollar, you know, forex industry that is to the tune of billions if not more, you know, uh, every day, every week. And so bringing that onchain is more efficient. Can we use the same infrastructure like you know to go from euro to USD? Is it as simple as going from, you know, fracks to curve USD to onchain assets once they're tokenized or >> that's the idea. It's not as simple algorithmically though. It's it's actually harder technically, but it is

possible to do it uh to feel it that simple, right? It it just uh well, it wasn't fully figured out. So, it's quite a bit of research which is needed. But this research probably would have happened earlier on curve. I did make uh pools which support euro back in what 2022 or something right but um these were not quite well optimized because there was no demand almost but now the demand is picking up and it's not just what we see it's even those uh those companies are even asking what can you

do right so so this started happening happening and demand is finally there and we need to we need to actually optimize these things and this will inevitably happen >> and could you give us a bit of a clue as to what optimizations can be done like where are you focusing and spending your resources >> right right so in this particular area um it's all about how you manage your concentrated liquidity First automatic market makers like unis swap one or two did not have concentrated liquidity. Curve from the very beginning did have concentrated

liquidity. Probably it was the first AMM with concentrated liquidity but it was concentrated about around one price $1, right? Um in 2021 um I made crypto swap which essentially automatically managed concentrated liquidity. Uh but for like very volatile pairs it was well it was given an advantage but uh you still would have this impermanent loss issue. So not so interesting uh for euro to dollar right for euro to dollar or Swiss Frank to to dollar to euro right um for these

currencies um you well prices don't change that much so liquidity in principle can out earn the impairment loss uh but you do need real demand and it it's just it just got here. Now the tricky part is how do you manage this concentrated liquidity on unis swap 3 and four you have market makers essentially moving these ticks around right and uh that is a lossy process and even in curve pools like curve fx pools it is also a lossy process but pools themselves they measure losses and manage it and by the way uh the same kind of pools apparently

underpin yield basis right so yield basis is using that and well it's removing impermanent loss but to actually earn you do need concentrated liquidity and concentrated liquidity which is automatically managed and this is what we uh what we do and a lot of research is focusing on how to manage concentrated liquidity automatically in a way which is actually like maximizing the returns and uh we are I think we're doing fairly well here.

>> Okay. So, it's all around the the market >> the the market ma makers. It's the it's the active management of liquidity, the concentrated liquidity where it's positioned and >> and we are trying to do it without market makers, right? So, it's automatic market makers like you have smart contracts doing market making without market making firms. And actually for market making firms, it probably doesn't even make much of an economic sense when it's small to do market making for FX because let's say you have all these fintexs but like uh FX market making just like stable coin market making is not um well not necessarily lucrative

because if even if you measure those fees over that small scale at which it is happening at the moment it's not necess necessarily interesting. That's what actually centralized exchanges thought about uh exchanging stable coins to stable coins until curve appeared. When curve appeared, it appeared that actually exchanging stable coins to stable coins even USD to USD produces enough fees to feed the the demand uh of people to to earn something, right? And well, it grew up to what curve is. The same thing can happen with FX I think but it's just not going to be that quickly growing or maybe it will but not

not yet right so there is some uh there are some season effects here I think uh as well at the moment we can we have sort of um slow natural growth of this area but it's actually happening finally and Maybe at some point it will become explosive growth. I don't know. But we need to work uh on these things now. >> Yeah. Well, uh stable coins are a foundational pillar for everything else that's happening on chain. Um and so we need this infrastructure. We need the these protocols to work. Uh Michael, thanks so much uh for joining and and

taking some time today as well as all of your hard work in the stable coin space and helping to uh helping to underpin our industry as a whole. Uh always appreciate it, guys. Check out Curve and Yield Basis and uh go give Michael a follow on Twitter. He's he's always pulling up some good some good stuff there. Thanks again, Mike. >> Thank you. >> We'll see you next time. >> Bye.