DeFi by Design EP#62: Interest Rate Environment Impacts on DeFi w Notional Finance

Transcript

welcome to d5 by design where we talk all things blockchain and cryptocurrency while striving to educate empower and enrich it's your boy andy and welcome back to the defy slate youtube channel smash the like button on this video that really helps us out and sit back and enjoy the content thank you very much what's going on y'all welcome to episode 62 of the d5 by design podcast hosted with with your boy andy and rob uh and today is another day in d5 uh which i've aged 300 years in the last one and a half years but at least my crypto wallet looks better than it did two years ago right that's no i'm joking but here we are having a good time learning about d5 again um and primitives that are going to keep popping up as we grow uh the

overall ecosystem i remember when we first started there was hardly any places to get like yield on stables that were um you know that didn't have such high fluctuations now we've come such a long way to receive all sorts of um you know locking mechanisms and bribes and votings and fix rates and i mean all sorts of stuff so um you know today we're gonna get into some of the nitty gritty of the evolution of yields in d5 kind of what's to come um in terms of d5 primitives specifically with regards to fixed rates and how we can lock in fixed rates on not just stables but also on um you know ethan rap bitcoin and other assets as well so you can kind of turn risk assets into uh basically

guaranteed yield uh uh creation or generation um of yield assets which really is going to be a big a big turning point for a lot of institutions so uh here today with teddy as well from notional finance um you know he's been building in the fixed rate world for some time but before we hop over there uh let's see what rob's up to oh yep what's going on guys um super stoked had teddy on the pod today uh we you know we we've covered uh quite a bit of yield farming across different chains and not too much on on fixed rates which is where notional finances is building and making their mark um stable coins other other you know bitcoin or eth um

fixed rates are a primitive that that exists in traditional finance and unlocking them on decentralized finance is going to have quite a few breakout points we anticipate um so we'll talk about uh how notional kind of achieves these rates and um the the new products that are coming out on notionals and some of their collaborations across the different web you know across web three and uh their different partnerships so i'll go ahead pass it over to teddy and let him introduce himself hey everybody um andy and rob thanks for having me on i'm excited to be here as as uh as you guys have said you know i'm i'm teddy i'm the co-founder of notional uh and notional is a

fixed-rate lending and borrowing protocol on ethereum we've been around for about two years now um that's two years of hard work uh and uh just about three months ago we launched notion of v2 and our protocol token which has been awesome and took like a lot of time and effort to get there but today we have something like 460 million dollars in tbl uh we've done like 260 million dollars of actual lending borrowing um and just like things are really kind of taking off for us and and uh exploding in a lot of different directions um which has been you know really exciting and

uh i look forward to you know sharing some of that stuff with you guys today super yeah um kind i guess getting started with uh with stable coins and and how they uh fit into the the ecosystem over at notional um i saw an article the other day about usdc minting natively on on avalanche um and and that's super cool that they're kind of going cross-chain but uh a statistic in there that i thought was like really really captivating was that there was 40 billion dollars in stable coins issued um and and that starts to compete with like the size of like national banks and and really up there in terms of some of the largest uh

institutions in assets under management um i'm curious how you kind of see the stablecoin uh lending and borrowing environment kind of evolving and then what types of uh interactions something like notional finance might have as a protocol with a traditional bank or a traditional institution that's kind of managing fixed rates uh in in more so the traditional world uh yeah man that's that's a great question so i think like um so i'll start by saying that uh you know fixed rights are super new in defy but if you look like in like traditional finance i mean they're everywhere right

and it's like in general you know when you you know like have a savings account or or whatever you have with your bank they're going to tell you what rate you're going to earn and um you can pretty well rely on that rate not changing right and and generally they do that because people just prefer to know what rate they're going to earn um and i think it's it's something that you're you're also seeing in crypto so it's like uh you know i think there's been more of a push by like you know people like coinbase uh and and even compound to offer a product that's like gives more mainstream people like the d5 yields

right like you know like uh coinbase wanted to launch the coinbase urn product um circle launched uh uh you know a fixed fixed-rate product for institutions um and so i think that there's generally a recognition that that uh you know mainstream users want fixed rates and i think what's what's really interesting now is that like you know these products that that people are offering i think the coinbase earn thing was like a four percent yield right four percent yield on your usdc that's what they're going to give people and right now on notional you can get like nine percent fixed under usdc and and so basically what i think that

means is that like you know if you're somebody who knows how to use defy and like is relatively savvy um and you go direct to the source which is notional you can get an extra five percentage points right rather than going through something like you know coinbase or one of these centralized services that's gonna like make the interaction a lot easier for you um and but then what they're going to do is they're going to take a spread um and so i think that that's probably how it's going to shake out in in the future you know it's like because i i think if you know if you're being honest like the number of people that are that you know are understand defy enough to know how to

use it and like really want to do it and are like willing to jump through all those hoops like it's not it's it's not most people you know and so if those people will be able to go direct to the source and and you know get paid more because of it um but i think that like uh you know ultimately i guess we see notionals kind of like uh you know being sort of like an institutional back end right where the front end is going to be like you know something like a coinbase urn where they just handle all the hard complicated weird stuff of interacting with blockchain and just give mainstream users something that they understand and that they want in an easy way right but again you know if you

know how to use the blockchain and you're willing to do it it pays to do that right because you can cut through the intermediary uh yeah yeah yeah and that that i think encapsulates uh cd5 into a fairly concise description you got uh customers of centralized services that are willing to pay a spread for that convenience where whether you're whether you're you know it doesn't really matter who you're interacting with it's it's using something like notional in defy in the back end but you know some some people just aren't so familiar to take that step and and log in with metamask connect to the application themselves so

you know they'll pay coinbase kind of like a convenience fee um but it does point to to the improvements that decentralized finance is making over uh traditional finance and i think it is like peer-to-peer you know opens up more market access more capital efficiency and this is what leads to potentially a greater risk-free rate if you will in d5 compared to what we've seen in in traditional finance yeah i think yeah and just just uh just to make a note here i think like the the cool thing is like so if you look at traditional finance and and just so everybody knows my my personal background was in traditional finance i i was a

interest rate swap trader at an investment bank and like so i think here's the interesting thing right so so the the risk-free rate in traditional finance is like you can park your money at the federal reserve right um and you can earn whatever their policy rate is on your excess cash uh but the thing is not everybody can do that right it's only like very very large financial institutions that have the ability to put their money with the fed so it's like a closed system right it's like a gated system right and then you as you're just like some regular guy you have to go interact with one of these banks and they can you know uh their financial intermediary so they

take a spread between what they can earn on the back end and what and what they're gonna pay you and and the thing with defy is that like ultimately like yes these centralized services will exist to give you convenience but you can always go direct to the source if you want to right and that is like fundamentally different yeah yeah uh to make the analogy uh you know centralized services like coinbase that are providing you this nice front end and taking a spread are analogous to commercial banks uh and how they provide kind of that that convenience layer to the fed in in the traditional financial

finance case it's you know much more um enforced you have you can't interact directly with the fed you have to use a bank whereas in d5 you have the option do you want to take the more convenient route or do you want to expose yourself to some higher rates and and you know put a little bit more work in but ultimately reap more of the rewards yeah yeah and i think over time people will will get there but um i think people are very satisfied with the four percent on coinbase the eight percent on nexo the 10 on crypto.com and perhaps um a business move could be to reach out to these

teams and hopefully get on a call with them and offer them and explain to them what you what you have to offer at you know a product like notion i'll be like hey you know why don't you guys take some of that take some you know eight trillion dollars no i'm kidding but you know take those hundreds of millions you guys have deposited just bring them on over here right um so you know in essence that's what they're doing um you know one one slight concern that i have is is something that i that rob had brought up which was this new kind of concept of fixed rate fixed rates on uh non-stable assets so ethan wrapped bitcoin at d5 um could you walk us through kind of how that is created and um i'd like to hit on some of my you

know potential uh consequences or downfalls of of offering fixed rates on volatile assets uh yeah sure man so um i'll give you guys kind of a quick run through of like uh the little technical overview that i give everybody um so so basically uh the core concept emotional is called fcash fcash is like a zero coupon bond in that it is defined by a currency type and a maturity date so june 1st 2022 usdc is an f cash token now that token is transferable and tradable uh you can do whatever you want with it and on june 1st 2022 so on maturity it can

be redeemed for one usdc on notional right so an f cash token represents a given currency at a specific future date right and the way we enable uh lending and borrowing at fixed rates is by allowing people to trade between you know usdc today and usdc on june 1st right and the exchange rate at which you make that trade implies a fixed interest rate over that period of time so you know that's that's kind of in the nutshell that's like the basics of how we do fixed rates now as it applies to uh you know more volatile assets like ethan wrapped bitcoin um you can also

lend and borrow eth and rep bitcoin on notional as well right uh and i think you know to date we have seen much more volume on stable coins so people are much much more interested in lending and borrowing usdc and die we've seen a little bit we haven't seen nothing though we've seen a little bit about volume on ethan bitcoin um but just much less i think in general people are are more interested in borrowing eth and bitcoin than lending uh just because i think like uh you know the the interest rates on ethe like aren't that high um so i you know it's not

not super attractive to lend uh just because there's just so much everywhere and defines i think it's kind of hard to get yield on your youth and yeah yeah the only way is like yesterday but that's just yeah yeah but like maybe this goes more uh like it is a bit more relevant when eth2 comes out and and staking actually contributes to securing the network and running a validator node that you know that potentially has at least uh at least similar if not if not more um interest potential than uh or or you can maybe even boil it down

to like value creation of the network more so than than lending um since in staking you're you're helping to secure the network you're earning revenue from that it might it might exceed some of the earning potential that is received through lending and borrowing yeah no i think that's i think that's a good call i mean i think that like you know we already sort of have that right with the uh you know like lido and steak deeth and and i you know i'm not super familiar with the east staking kind of ecosystem right now um but so we already sort of have that right where there's like a way for you to earn interest on your eth um and i don't think it's i don't think it's made like a huge impact on the market because there's still a

ton of you know if you look on like compound rave there's still a ton of yeast sitting there earning zero right um and so people feel you know for whatever reason that it's that it's worth it to have to keep having it sit there but i think that you know as eth2 comes online and it's like less risky to stake your eth right i think that i do think it's going to change things um yeah by just having like this ultimate risk-free yield on capital right so i think i think that will change things yeah yeah i don't know nobody and nobody ever knows how like i i think that that's an important point to note yeah yeah i i think we'll see eth2 uh

you know roll out in phases which which we're already seeing on the development standpoint like they had kind of the merge of the the beacon chain and and the the existing chain um uh yeah yeah we'll see it roll out in in phases that and as far as i understand it first it'll be proof of stake we'll get some different native staking options to to help secure the network and then later on maybe a year or two still further down the road that's when we'll get sharding um the the increase in scalability and and the increase in throughput lower the transactions and and so on um but but initially it might be more in terms of the the uh securing the network through proof of stake and get value

creation and that right um and we can we can touch i guess on some of the potential concerns of of hitting uh fixed rates on on uh volatile assets um are there you know are there any that you guys are are um you have kind of top of mind at notional that you're looking to mitigate uh you know through the protocol uh oh as in um as in use cases use cases for for for fixed rates on youth and bitcoin yeah yeah so so how how are you um you know someone someone can can short there's some different you know positions that that people can take and strategies to

to take um and i guess the one one concern that comes to mind and then we can get into the use cases is um if the rate is backed up by uh kind of a volatile asset itself it's not necessarily risk-free and i think that is a concern that people might uh you know might point to um maybe you can shed some light on on on how that is uh clarified or mitigated on on notional yeah sure thing man so so basically like it's uh you know the volatile the asset is volatile but the interest that you're paying or earning is denominated in the underlying so like if

you're lending eth you're getting eth interest back in return so like no matter what the eth usd price does like the amount of eth you hold is always going to go up by like two percent a year or whatever the interest rate that you're lending at is so uh you know in dollar terms yeah you're you're i mean who knows where where the value of your eat is going to go but it's but it's all like denominated in the same currency so it's it's not an issue from a risk standpoint uh yeah if that makes any sense yeah yeah yeah it does and and you don't mind muting no sure um and and uh

when you know someone is able to to capture or have that level of of uh guarantee on a rate that they know that they're getting it opens up a world of opportunities that they can then go and and do other things either either hedge and take risk off or potentially take more risk on uh depending on their on their bias at any given time and that kind of you know opens up many different use cases where i is i think where you were headed yeah yeah yeah that's right so so i think like you know something that you can do right is like it's just it if you know like as a let's say you're a borrower right and and and right now you can you can borrow eth for up to six months at a

fixed rate um and the and the borrowing rates are really low right so it's i think you know in the area of one to two percent um and so it's it's just sort of like okay well that means that you know what you can do is you can let's say you have some stables and you know right now you can lend your stables on notional for nine percent for six months so you can go take your usdc lend it at nine percent and then uh and then actually you can borrow ether fixed on notional against your loan so so you can you can lend it at nine percent which is already pretty good right and then you say okay well actually i'm going to borrow some eath against that loan so i'm not giving up

any of my interest i'm just going to borrow some heath and i'm going to do it at like you know two percent uh annualized for six months and then i know that i've just i've got this eth now and i'm only paying two percent uh for the next six months and so because i have that certainty on my costs i just is it like allows you to plan right it just allows you to say like okay i know i can beat two percent return um on this over the next six months right i know i can do that and so then you can just focus on on uh you know putting you know putting your eat into steak to eat for example where you can be really really confident that you're going to earn more than the two

percent you're paying on your loan right and you know that that's true uh like you can be a lot more confident in that because you know that the rate you're paying isn't going to increase so it just gives you the certainty like by like giving you more certainty it just opens up what you can do i think it's like you know that's that's the basic idea yeah definitely yeah and in that in that strategy you know you you have to repay what you borrow in that currency so someone that takes eth borrows it and then you know maybe sells it then you're short eve but just just borrowing eth you're able to take it at principle and then arbitrage the rate kind of across

the multi-chain like you're saying you can you can take it you can go stake it in a validator node um and that might be a really a really uh lucrative but also popular use cases borrowing eth and then going and staking it in in a validator um you know to earn kind of that that extra reward um and and able you're able to capture you know the the few percent arbitrage in between those rates and at the same time you still keep your exposure um because you are you are borrowing it but you're you're not going and selling it you're you're actually continuing to maintain exposure as the uh as the asset increases yeah yeah that's right that's right um

yeah so i think i mean it's really exciting yeah yeah that's awesome and maybe you can talk more about the the product that notional launched recently the partnership with index uh because i think that really does capture and hit on uh really all the areas that that we've talked to up until this point yeah man so so i think you know what i'll say is that uh you know basically so we launched in november um we launched notion v2 in november and we like the tvl of the platform just like skyrocketed right and which is huge for us and uh uh you know there's a ton of like a ton of stuff that we had to do immediately um just to make sure that

everything kept working because we were getting way more attention and interest than we ever got before right and like so there's a ton of like backlog of stuff but then you know starting about about a month ago we sort of had capacity to um to do what we always wanted to do with notional which was which was to like uh you know integrate it into other protocols and like you know form partnerships and just build products that incorporate fixed rates and so we have like you know a number of these products that are going to be coming online this quarter which i'm just like really excited about uh and and you know one of them is is what you just brought up right which is um this collaboration with index coupe uh so so earlier i think it was last

week so maybe last thursday um they published the initial proposal on their on their governance forum um i don't know if you guys have show notes or something and want to link to it there but but um they publish this proposal for uh d5's first like it's like a bond etf right so so uh you can think of in traditional finance where you know and and probably nobody does this because like buying like well i think you know i take that back the the the bond etf market is really huge and and yes trillions of dollars and whatever but but nobody in crypto probably does it because the yields are so low um but uh but basically what this etf does this etf within index coupe is it's going to

be a way for people to buy into a fund that's going to lend fixed on notional and automatically roll over the loan on behalf of the user so it gives the user totally passive exposure to the sort of like high fixed interest rates on notional so it's going to be a stable yield that is reliably higher than what you're going to get on compound or ave and it's going gonna just it's gonna be stable because like it's made up of fixed-rate instruments on notional um so we're super you know excited about that and and love to be working with index coupe they've been awesome so far

and just to be honest it's just great working with other people in d5 and i think it's kind of the you know the magic of what we're all doing here is that it's so easy to integrate and like form partnerships because all the all the code's open source you know and like uh yeah and that's that's just huge yeah yeah the the composability is uh is awesome and it leads to so much collaboration across different teams and and how all of this is really a positive song game and and we're creating more opportunities and um again increasing scalability increasing throughput and and capital efficiency and uh it leads to to greater opportunities out there um the the bond

etf that you mentioned you know people don't use it in traditional finance the d gens that you know might be listening or might be accustomed to crypto like you said because the rates are so low but d5 fixes this d5 makes the yields higher and now this this product becomes an opportunity in crypto that is uh attractive to kind of the the demographic that is uh trading stablecoin staking um and and earning some interest on on their crypto yeah yeah that's that's absolutely right right i i think like um i mean that's you know that's what's so cool about d5 is what we can like uh you know one that just the the yields are higher the interest rates are

greater but i think also what's what's so cool is like you know like this collaboration with notional and index like um you know it's obviously everything takes takes work takes a lot of work but like i mean it's so much easier than i just i can only imagine like what it must take to launch an etf like in traditional finance like i'm sure it takes like two years 20 million dollars and and like 100 people working on it right like i i think that you know is so cool about defy is that like you know like it's relatively frictionless right like and of course i'll say it again you know it's like

everything takes more work than you expected to but but like uh you know it's just cool that like we can just you know like talk to this other team and decide to work together and just like produce a product that like you know without all these barriers to doing it you know and that's like that's i think what's from from from a builder's perspective and as an entrepreneur i think that like that's awesome i i that that makes me like working here in crypto yeah the the pace of innovation is uh is so much more it's so much accelerated in defined i think it's i mean it goes to the

philosophy to a certain extent and the openness you know in d5 we build bridges in traditional finance they build barriers like it's it's much more open and it leads to a rapid pace of of um of innovation kind of through all through through open source code it's many more iterations um i think over time because people are using the same code it's all relying on the same building blocks which has its advantages and disadvantages right advantages you know people are always iterating on the same code so they're using what works and then they're replacing what doesn't and then there's disadvantages when there is kind of a underlying issue um it permeates kind of throughout the

entire industry and we've seen how you know that that kind of can manifest um but ultimately through kind of like all of this uh cross checking and through these different protocols using the same building blocks people um they they discover those those bugs and they're able to solve them and then continue building uh building building better building greater things um and it's super cool to see and we're kind of seeing it um in in many different areas um if you have any thoughts on there and then and then switching gears a bit more to uh the interest rate stuff yeah no i i think i think that's true i think like um you know i think the the thing the thing

with bugs and and and sort of building stuff and d5 is it's like it's a really interesting it's really interesting i i guess i because i think you know when we've we've encountered some of this stuff ourselves like you know notional has never been hacked but you know we've been uh like like we take security super seriously i mean we we've been through multiple rounds of audits and and like you know we've had people identify vulnerabilities uh in our code and like um you know patch those as as quickly as possible uh but like so you know we've we've you know experienced this part of defy and i think that like

you know i would love to say that uh that d5 is only going to get safer and more secure and and and that is true in the long run in the long run for sure um but i do think that like ultimately there's there's a lot more room to grow and innovate and i think that you know more like d5 is gonna stay risky for a while in my opinion you know it's just because like you can't do new things you know it's like it's like what you were saying rob like like uh um you know people building off off of each other's code and like uh using the same

code and stuff like that so that's true um you know there is a lot of like code sharing but you know ultimately if you want to do something new you usually have to like actually write new code you know and like every time somebody does something new like notional is like it's a big code base and we wrote it all ourselves it's not a fork of anything else you know and like any time you do that like i mean uh it's you know risk goes just hand in hand with innovation and doing something new you know and i think that defy is going to continue doing new stuff and so there's gonna i think there's gonna continue being this like ongoing sort of security risk which you know in one sense is gonna

uh keep d5 interest rates high and keep rewards high because people are gonna be scared of using d5 stuff for a while and not everybody but but like but a lot of people are going to be a little scared of using sort of newer defy stuff but that's going to keep the returns high for the people who who are willing to use it um yeah and so i think you know it's just going to be um i and it's obviously gonna continue to be stressful for anybody that's innovating in d5 uh yeah for for a while so it's not gonna get boring anytime soon anyway yeah yeah that that's a i agree i i think you know kind of as

the uh as they you know maybe the high interest rates are because people are scared and then there's not enough there's not as much liquidity as there would be if you know everyone kind of understood like hey this is better than a bank you know and all the liquidity floods the interest rates go down but you know i think that does point to it and and uh another another reason why we might see or i guess the like kind of the way that these these you call them security risks but they're almost like they're all they're almost like uh systemic bugs that are starting to come they're they're showing themselves almost in in uh more of a game theory sense than like a system uh design flaw the the game theory design has gaps in it which lead

to arbitrage opportunities it's not so much that these these underlying fundamentals that have bugs are are really like smart contract bugs like no audits have gotten much more popular and there there's any any uh like base layer protocol like uniswap curve they've been audited through and through and then there's other other applications building on those protocols but those security uh pitfalls have really been have really been invalidated and uh you know audited to the extent that now most of the um bugs if you will are arbitrage opportunities because they come more from this game theory type of flaw yeah i mean i i think what you know what

i'll say to that is is i you know definitely the smart contract bugs like they're they're still they're still there so those those aren't completely gone for sure um but yeah i mean i think the longer that the longer the system remains unchained unchanged and sitting there you know those those bugs get worked out right and i think like something like something like a compound and and i suppose compounds not not a great example so i'm not gonna use that i'll use unit swap right like you just want v2 it's been there for years um pretty high confidence that it doesn't have any bugs uh so so yes but and as the game theory thing like you know it's it's interesting because

it's almost like what is a bug you know is is that a bug you know it's it's sort of like like it's it produces a bad outcome but it's like not clear that it's really a bug you know and it's like uh it's interesting because like it makes me think of like you know 2008 where it's like that's what that was you know it's kind of like that was like a a system design flaw you know it's like kind of similar to these like uh stuff that we have to deal with in d5 now like like the sort of economic attacks like kind of like you're talking about which is it's just interesting yeah yeah yeah and uh kind of you know leveraging your your experience

as a uh interest rate swap trader back you know back in the day what what's your take on uh the interest rate environment now you know it's uh today's january 18th a couple weeks ago they announced they're gonna start you know tapering um these rates or excuse me they're gonna start increasing the rates um you know what what's your take on kind of the interest rate environment in the us yep um i think everybody seems to think the rates are going up um which you know i think like i think is is necessary so i think the federal reserve has to do something to to maintain credibility and and i think what they what they

really look at is like the they're looking at these like cpi prints but they're also looking at inflation expectations and they need to show people that like they're actually going to stop this thing right because inflation is you know it's not entirely psychological but like but there's like you know what they're really worried about is like people just getting you know having a mindset change that's like okay now just inflation is a normal thing you know like that's what they're trying to not have happen right and so they need to they need to act aggressively to make sure that people don't just like

you know feel like okay well i guess i guess this is just how things are now you know and i think that they are very like they're gonna do that and the uh the necessary consequence of them doing that is rates will go higher right like if rates aren't going higher it means that people don't believe that they're that they're serious about fighting inflation um and they have to make sure people believe that they're serious so i i think that like at least in the short term i i think rates like have to go higher now having said that um you know i think that they're also dealing with like the kind of tension of like

um you know how how much higher can rates go before bad things start happening you know i'm like for one like you know what like the interest expense of the us government uh like just goes through the roof uh uh and also just you know we've been in a low rate environment for like like 15 years or something and it's just impossible to know um it's impossible to know like what is lurking there under the surface you know if rates go up 400 basis points like who knows what what would happen who knows you know and so i think it's it's you know to be honest the they're kind

of in between a rock and a hard place i think rates are going to go up in the short term um but yeah i mean hopefully nothing bad happens i mean like i i think that like the like the the best kind of outcome here is that you know rates go up a couple percentage points and inflation subsides in the short term and so they're the fed isn't forced to to move rates higher than that because i think if rates go up more than a few percentage points like i think some really bad things could happen so so you know um i don't think they're gonna they're gonna want to do that and and hopefully we're in a place where they're not forced to do that because then i think we'd be in a position where we're

choosing between a bad outcome and a really bad outcome so like hopefully that doesn't happen yeah yeah yeah and and you know some of those bad outcomes to it you know asset prices going down the housing market going down and you know just kind of uh going into a uh uh recession essentially um yeah and and they're kind of stuck between preventing that which no one of course wants the these asset prices to to decline extensively um and this this psychological transition of inflation and you know it always being around and it's just being a normal

thing uh can you unpack i you know why why is this a a uh thing that why why is this mindset um so dangerous um yeah i mean i i think like you know to be honest it's it's kind of like if inflation like if if inflation really starts to to increase like to a point where people you know you get this kind of mind mindset shift it's it like you know it tears at the social fabric and and it's because like ultimately it means that you can't plan for the

future you know it's like part of like what keeps society as a cohesive thing and like what keeps people acting in a way that's pro-social and like and not violent and just like generally nice um is sort of long-term stability you know and it's like if you have seven to ten percent of inflation then how how in the heck are you going to plan for your retirement you know or like or you know how like and so then it's you it's you stop thinking of like you know it shortens it forces you to shorten your time frame from like i'm thinking

down the road to like i how could you even think down the road when when like the value of your assets is decreasing by 10 a year and so then you're forced to think short term and everybody thinks short term and then it's just like then it's just pandemonium you know and and like yeah and i think that that's that's ultimately and you know they can talk about the effect that that has on like business decision making and all that stuff and that's very true but it's also like it's just the effect on societies is i think pretty dark yeah yeah yeah and you know it's concerning because we see a lot of inflation in d5 there's a lot of liquidity mining and

tokens uh that are are generating high apys because they're printing new printing new money and they're inflating their own currency and paying that out as an interest rate and not really you know crea they're creating value though because that that is kind of what d5 is doing is it's in again capital efficiency uh liquidity and scalability it's this technology is bringing new value to the ecosystem um and then they're choosing to kind of pay out that value in the form of new tokens um and i'm i'm curious kind of as uh the digital wave as technology continues to evolve and and uh improve people in in

not just d5 but in the traditional world as well um you know does inflation kind of need to keep up with this um and like what i mean is like uh you know if i'm not sure if you know you're too familiar with andrew wang and like his his whole thing but like automation is coming right so as automation starts to innovate people and and uh the the i guess hypothesis is that people are going to start doing things with their time other than working they're going to do more creative tasks and and through that create more value um so you know do does inflation kind of need to keep up with this innovation um and like you

know keep putting new money into the into the environment so that uh the creative tasks can kind of use it effectively or is that you know somewhat of a fallacy and and um you know kind of it we need to shorten our our time frame or i guess no sorry we need to lengthen our time frame so that we're still planning ahead and and uh you know down the road we're not going to have um capital that is 20 30 40 depreciated from where it is today yeah i mean i think like uh um so i think i just make a distinction between uh money supply inflation and price inflation so generally when when people talk about

inflation that they're talking about price inflation right um but like you know inflation the money supply does not like is is a different thing right it's just like that there's sort of more money around that doesn't necessarily lead to prices going up um uh it can right and and uh you know it's it's not crazy for it to do that but it's also like if there's move if there's new stuff to buy then then this then the price of the old stuff doesn't necessarily have to go up right because there's just new things to buy you know i think and that's like in in a lot of ways that's sort of like what economic growth is about right it's just like if it's just constantly

creating new things to do for people you know such that there's new things to buy um yeah and that's i think that's kind of i mean maybe that's what that's kind of a point you were hitting on robbie yeah absolutely i think that frames the question really well is is the the inflation is is a you know people are investing it they're they're using it for research and and they're going and learning new things to build new products and again if we are using this money to build new things it's not going to increase the price of the old things the the things that are antiquated those things are going to stay the same and people are going to use the new money to create new things um

and i guess that frames the question of uh you know we're now increasing scalability we're increasing the pace of innovation at which new things can be created does that necessitate a higher inflation rate a higher monetary supply inflation rate to go create all these new things uh that's interesting yeah yeah i mean i think like uh so i think if you you know first of all like if you just talk about crypto exclusively right so like like that's our own little crypto economy right you are absolutely seeing uh increases in the money supply right like it's like all this all this money coming in uh and you know there have been

uh tons of headlines about it right uh you know the big venture i suppose not so much anymore but um at least over the last six months or something you you would see these huge capital raises uh you know venture funds raising all this money and all that and and that's effectively what that's doing right so it's and it's not just the venture firms it's it's also retail and and everybody else coming in buying tokens uh they are inflating the money supply on crypto right and and you know uh if there were only if nothing new was created then i guess the price of everything would just go up but but like that isn't true right there there is new stuff being created all the

time and and i think that you know you can never perfectly match the two right like money coming in new stuff being made but like i think in general like you know over time it it like it finds an equilibrium and and so i think that you know that that is what's happening right so it's like people have sort of figured out that all right well there's gonna be all this new stuff going on right and uh and so the money has has come in uh to support that right yeah yeah yeah and i was playing devil's advocate a bit in the uh in the psychological in you know in you can't have the mindset of inflation as normal uh you know i was

kind of like toying with that idea you know what if inflation kind of is normal and it's all for creating new value um you know maybe the ideal situation is a is a trend where we're increasing the monetary supply and you know also at the same time being cognizant that we we don't want to raise um raise prices of con consumer goods right no absolutely dude i mean that's like to be honest that's easy because that is exactly what the federal reserve tries to do right because like everybody wants you know like you know you don't want to you don't want to put so much money in there that you just start pushing the price up of stuff you try and you try and expand the money supply as there are increased

opportunities and increased things to do with that money right like that is the job of the federal reserve right um and so uh that is the ideal situation and i think that's it's kind of like the just like a capitalist economic system if you have a growing population like you just you constantly need new stuff to do you just constantly need news yeah like new places where you can put your money new new kinds of things being built new jobs to be had you know like it's just it's a it's a constant need and and so i you know i think hopefully uh and defy and and and all this other stuff has has created a lot of wealth

and has created you know a lot of jobs already and hopefully it can it can create more you know and and uh and that's just i mean that's just good solid economic growth right yeah yeah yeah and and d5 is uh is it is providing this opportunity uh for all that economic growth and uh yeah man we're we're super thankful for for you and the notional team uh contributing to to all of uh this new financial infrastructure and it it's it's pushing us forward it's it's uh evolving into a system with less flaws you know we're not gonna say there's no flaws but but we're getting uh to a more efficient system and one with less flaws so yeah super super cool what you guys are doing over at notional

and uh and thanks for coming on the podcast today yeah thanks thanks thanks a lot for having me man i appreciate appreciate the time and i think by the way i think that's the right attitude right it's like it's never going to be perfect but uh this is this is a different financial system built for a whole new kind of economy and hopefully it's going to be a little bit better than the last one yeah 100 and you know before we hop off uh it's notional dot finance yeah that's right notional data awesome and where can the audience find you on on twitter uh or discord you know what how should people interact and uh get involved yeah yeah for sure so so uh you know follow notional uh it's at notional finance one word um obviously

um and uh uh and then hop in the the the discord um so it's discord.now perfect awesome cheers man thanks all right thanks a lot see you robbie