DeFi by Design EP#76: The Evolution Of Money Markets w 0vix

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 guys welcome back to the d5 youtube channel here today to talk about what is going on in the world of money markets in d5 um so would be happy to touch on and explain to you all kind of where we got um the concept of lending and borrowing from kind of where we're pushing this forward uh and what our friend gary here is building of course here today with rob i'm talking

about d5 rob good morning as your shirt says gm sir gm guys yeah i was listening to a podcast the andreessen horowitz one with bankless just a couple days ago and um one of the points andreessen hit on was like such a fundamental aspect of like capitalism was like the right to land like the the title to land um kind of just open up this new world economy where you could start to borrow off of that land um and without that title without that deed you really like you had no claim to your property so it's really interesting seeing this evolve into like an on-chain

world where now there is you know the the right to ownership you have tokenized ownership on chain um and and it's creating all of these composable types of protocols like money markets where you can borrow off of that and then you know build out a more robust economy so yeah gary i know you're a seasoned veteran when it comes to this stuff so i'm stoked to uh you know hear about your mental model when it comes to these money markets um and then of course what what's going on at uh ovix so yeah sure uh thanks thanks uh first of all uh rob and i need to to have you back on it's it's it's a pleasure uh big fans and uh the whole the whole team are are big fans of what you guys do and uh yeah

happy to see you still uh here surviving the storm uh that we're currently in and um yeah it's it's it's um it's it's it's those are exciting times because everything that has happened uh not just in the last couple of weeks but i think also in the last couple of months has shown us that we need something more solidified or maybe something that is more battle tested trustworthy in a trustless way one might say um so something that is still in its core very decentralized and permissionless and trustless nonetheless that gives you that gives you a clear

indication of how risky it is what what you're doing here and and especially when it comes to money markets which um i think we can all agree is at its core or is a core element of of a lot of d5 protocols they wouldn't be able to function without efficient money markets and um this is basically where where overx comes in and from day one uh building and and setting up uh the architecture behind ovigs uh the first and foremost principle was how can it be how can this be as secure as it gets maybe even more secure than the increments

and and b um have it more um i guess easier to understand what kind of risks you're entering in terms of also interest rate risk because obviously when it comes to money market uh you have to understand that there are interest rates at play that can go in up as well as down depending on different circumstance and different different factors and this is where yeah this is where where we thought with all weeks we can really make a difference and um all weeks is basically a native money market to polygon because we generally believe we can support the broader polygon defy ecosystem of what we've done here and um i think also

polygon is quite supportive of that idea um and we're very very bullish on on everything also they're doing with all the zk um uh technology and polygon edge and super nets um i think most people are not even aware how deep that rabbit uh hole can go in the next uh quarters and and years uh given all those new technical innovations and ovix uh will be um you know at core very very deeply embedded into that nice what do you think about uh the the concept of isolated pools in money markets right now like that kind of came out with like rory capital and like ave

v3 did it like what's that about um yeah i mean it's it's it's something users ask ask for quite quite quite a lot um and always we haven't started with uh isolated tools just yet usually you do isolate pools for more volatile risky tokens right so for instance if you would uh list something like apecoin or or um you know something new that is not really that is potentially quite hyped or just you know um entered the the the market just recently and you don't know how volatile that that token can be or that asset and and um you want to see how it goes this is

where an isolated market makes a lot of sense um having said that it will by definition most likely be more expensive and hence less user friendly so um yeah we're in full support of that we we're not starting with isolated markets just yet we have six essentially blue chips so free stable coins and bitcoin ethereum and matic uh but that's definitely something on our roadmap and could you give us a yeah i was just curious because of the risk as you're saying i just thought it was like i don't know it's a it's an innovation in the step of the right direction of making the money market concept but at the end of the day it all comes

down to uh supply and demand right so you see with other money markets sometimes they list tokens in an isolated way and almost no one is really keen on on using that market so at the end of the day you also have to have a good sense of yeah what is it that users want what is it that that makes sense to put engineering effort in and uh what what what does make sense also maybe from a broader ecosystem perspective this is something we we're looking at so would this also make sense to uh to support the polygon ecosystem given that we're we're so deeply embedded within that yeah the the risk isolation is a trade-off you know for capital

efficiency where you know like you said it's a le it's a less user friendly experience but ultimately like it prevents the uh the pool that that asset from systemically you know putting the other pools at risk right um could you give us an overview of of what xerovix is and maybe draw some similarities and differences between the the other modding markets sure on the market um so so uh at core um opix is a new money market that is as i said deeply embedded within the polygon ecosystem so this is i guess one thing that distinguishes us a bit from from others because um

quite a few other blockchains also layer twos we see they have kind of a native money market and we felt a polygon didn't really uh so much i mean there are some money marks on polygon but uh we got the sense also after talking to the polygon team that there wasn't really one focusing specifically on that ecosystem so so that was one thing that that we felt is needed and second of all a more um uh sustainable way to pay our rewards right so when you pay out rewards for using a money market for you know you want to incentivize lending or you want to incentivize uh borrowing uh you there are different ways how to do that and the most common way was just dump some

governance token on on the on the users increase basically artificially the apy with that and then they start using that and then they start dumping their token your mission schedule goes goes haywire and then essentially you end up with a token that is uh you know significantly lost a lot of its value just because you just used it for for for for incentives and and and uh rewards so um we we're a big fan of uh the veto economic model the way curve has shown us it can work and this creates essentially a more uh sustainable way to reward users to use

the platform and creates a more essentially more positive feedback loop uh when it comes to you know uh what you can do then with the ve tokens that you get after locking the tokens that you received as a reward and that and this also kind of increases a competition uh between markets so let's say there will be a default protocol that really wants to boost their bitcoin yield on all wix whereas there's another one that wants to increase their uh yield on their on the eth market uh they would then start to compete against each other and try to influence voters as we know it as as it's being called in the curve world bribe voters to essentially uh boost uh one or the other yield right because

there will be a fixed mission schedule of the rewards on a daily basis and then there will be voting for for people once they lock their uh tokens that they receive as a reward to receive ve tokens or both escrow tokens to then basically influence uh the way rewards are being paid out and distributed so this is this is i guess one other key uh distinction that we have from from most other uh money markets another thing that we're very proud of is uh our dynamic interest rate um uh and and uh models that we embedding with the four weeks so essentially when there's excess market volatility like we've seen in the last couple of weeks usually what happens especially with

borrower rates they start going up there's something known as the as a jump rate model where there's a kink once the utilization uh hits a certain level right meaning once too many people start boring and not enough people continued continuously deposit uh funds uh so there's always enough liquidity to borrow so usually when this utilization rate goes too high the interest rates start increasing by a lot so you might borrow i don't know use dc for two percent the one minute and the next minute it goes up to as high as let's say 10 right and this is due to the fact that interest rate models with most money markets are designed that way so we redesigned actually that model and we

published a whole research paper um on that and you can find it on obigz.com under research where basically we've shown how with access market volatility there are ways to kind of flatten that kink and essentially flatten the curve and have a more gradual increase in interest rates and this is what we're going to do with with always something no one has done really before at least on on on on a active money market and other than that and this is probably the most exciting thing that we we're doing uh we will be the first money market um to support a lot of polygon edge

chains or super net chains so blockchains that will run off the polygon blockchain as a service solution which is known as polygon edge super nets so this is very exciting i can't share too many details on what great fintech companies or enterprise companies are joining those those um i guess those products but um it's it's definitely a way to bring essentially defy to the next couple of million uh users or new users around the globe so we're very excited about that cool what exactly um does it mean when

you have a like a like polygon as a service or a blockchain so yeah the way poignant supernets work and and they have a great website where we can read way more about that but in in its essence it's basically a fully evm uh compatible uh uh blockchain which has like a modular architecture so it can be pos or poa it can be private or it can be public um and um basically uh you can transfer you know erc20 nfts or web currencies from from from from the pos uh blockchain which is the normal polygon blockchain to to

basically polygon edge and you basically dock through a normal you know json rfc um and essentially by that uh you you uh can offer through this internal bridge let's say uh services from from the prs chain to to essentially polygon edge and um the way they build it it's very easy to use to onboard enterprise and fintech type of business cases or or companies to that to that chain and i'm not too sure in detail how power chains work but it goes a bit also into into what power chains uh have been doing and uh yeah this is this is a really huge

use case also for d5 so um this this will basically help a lot a lot of uh new use cases to come up um and i think this will this will be a way where where d file can or how d5 can evolve yes so polygon edge kind of rolls up it it has like a modular architecture like you're saying and then each of these modules roll up to the proof-of-stake polygon chain which in turn you know goes and posts to the ethereum main chain when it comes to uh ovix that operating on the pos chain yeah what is the the frame framework or design of the

modular chains interacting with ovix which rests on the on the proof of stake chain you know obviously these other uh app specific uh side chains are you know they're they're not on the pos chain so what is what does that interaction look like is it is it you know really cross chain because they're on their own you know modular roll-up and they're interacting with the pos chain could you just kind of like i guess lay out like the design model of how you know a user on an app specific chain would interact with sure so so first of all um it's it's it's it is multi-chain uh we don't call it cross chain because usually people understand

something else with cross chain but we use the term multi-chain because essentially those are different chains be it public or private chains that basically uh are sitting next to the main polygon pos chain and when it comes from the user experience so imagine some fintech right um i don't want to use any names because actually some of them might be developing already those kind of solutions but let's say some mobile banking app uh wherever right wants to put part of that back end on on the blockchain right and uh obviously building your own blockchain uh you know tons of there's tons of stuff you have

to do so with polygon edge and super nets it's basically blockchain as a service solution um um especially geared towards enterprise level customers or fintech uh fintech customers and part of that backend can be just put on this let's say private or even public chain and let's call it abc chain right they can call it whatever they want so from a user perspective or end user perspective they won't even realize there is polygon working in the background um they will they will think they're interacting with that particular chain right of that app or that enterprise solution and in the background same as they won't really notice there's polygon working in the back they won't

potentially even notice there's ovigs or any uh default protocol for that matter working in the back right and so so we call it i guess invisible tech because essentially you could then provide defy yields to non-defy customers right without the those let's call them non-default customers even realizing those yields come from d5 i think this is really um where where where i see a lot of potential coming up in the next months and years right cool so so i'm i'm still curious why you guys chose to uh

go on polygon and not like a one i guess uh one of the the other solutions like i like a layer two um is it because you is it the tie it's kind of like with gogo or is it the part of like like what is you know obviously we just touched on a lot of these but i guess just briefly like why not other layers so i mean yeah we've been around for a while uh seeing um you know some some some blockchains uh you know doing well others not so much and uh i mean uh at the end of the day yeah it's like it's it's you have to have some sort of conviction but to be honest lately it's not very hard to to find arguments again

or i mean it's it's not very easy to find arguments against polygon right they've been delivering they've been doing amazing work um they have amazing products uh marketing they have great business development they they know how to scale uh and they're ready to scale they have to tech to scale um they're very close to to ethereum and and uh essentially it's asic almost as secure as it can get given given the validation through the ethereum chain um so so there's not much you can you can you can really say against them but this is just if you compare them on on let's say a base basic level once you dig deeper and

you understand the zk uh um uh world map and the polygon engine supernet roadmap i mean then it's almost impossible to really look at any other chain and i don't say this because i don't know i'm some polygon max here maybe you can call me polygon maxi but um at its forum a maxi of scalability and usability and and and something that that you can really use to bring in the next 100 million users and i don't see many uh i guess initiatives by the other chains to make that happen anytime soon right a lot of people are talking about that but i don't see many chains maybe there are

one two others that really actually uh uh uh talk the talk and walk the walk right so so um and they're a great team to work with very easy to to speak to um that they've been around um and and uh very easy to to to to work with um and i think yeah that that so there are a number of reasons yeah the evolution of kind of the the modular chains is is opening up you know all these centralized companies to go and create their own permissioned blockchains just by you know spinning off from one of these blockchain as a service providers and it sounds like polygon really has a good foothold in some of those you know

you mentioned the business development there's not many arguments against it so it's very easy for a uh a company like a centralized institution to go and create their own blockchain and then they can start to you know whitelist their own users they can you know create their own validator set and then ultimately roll up into a secure chain and that that design model i think was kind of pioneered by you know cosmos with their proof of stake hub and then the app chains that kind of surround it um and you know there wasn't a lot of zk like development happening on cosmos but polygon is you know kind of recreated that same model where it's very easy to spin up a side chain

and now they have the the zk implementation kind of following you know in the wind where it sounds like they're gonna start to implement some of the zk models where you know these other permission chains can interact with the utmost scalability uh and at the same time plug into the existing ethereum framework um so yeah i'm curious like how does that's the kicker that's the kicker the the ethereum kind of uh backstop makes it uh makes it very attractive absolutely yeah rob what are you curious about about how you're gonna get your next 100x on on the money market so let's go actually i

actually have a inclination that like these other app specific chains like i wouldn't even be able to transact on like it i'm getting the sense a lot of them are going to be permission permission and you know maybe like there's but for different use cases exactly exactly maybe that's my question to gary's like what are some of the use cases of these permission chains that we're not seeing on the you know open permission list on chain world right now yeah like we're in the trenches gary what are some of the like you know what's gonna bring some corporations in or something um yeah um one use case and and that's that's kind of obvious and given my background fintech i'm 100 convinced of that is that

anything that makes your back end work cheaper and can become and at the same time more scalable and at the same time support some uh some web free or or a blockchain use case that you might be developing and i can tell you most fintech companies are already developing or strongly thinking about developing a blockchain use case um there won't be many ways to to do that unless you either build your own blockchain or you partner up with a blockchain in a way where you use some sort of modular service so so um be it deposits and loans that's that's i guess an obvious use case and this is directly

connected then i guess to what we do and define um other than that uh mass payments uh remittance i mean i don't have to tell you that that you know if you look at the at the bottom line cost there's no cheaper way in the world to send mass amounts of funds essentially from one place to another um than than than on the blockchain right try it i mean and and and and obviously there's still this issue of on-ramping and off-ramping but i think this is just a temporary thing because uh a there's way more crypto adoption all over the world so actually some people are happy to receive crypto

instead of fiat and b i think the the the events that we're seeing now uh uh unfolding in the world um i think on-ramping off-ramping will be something that that will just become a like yeah and utility like i don't know like paypaling someone or i don't know so um yeah you know you know how like in the last few cycles it's been like icos and nfts and d5 like do you think in the next cycle or two if you will like what what we'll be buying tokens of is like businesses that are jet lag that are like kind of doing like these these permission blockchains are like

businesses that have their token that are making clear money that's not necessarily in d5 nfts but perhaps as a like you know like i don't know like a d like a remittance yeah a remittance service or like uh you know like uh a decentralized uber like i mean that's always thrown out there but like do you think uh we're headed towards like more business blockchain kind of collaborations where we're almost investing in like companies but there's still like 100 percent kind of like you know so i generally think almost all companies we know and love and like will create a token one way or or or the other and this token might be an mft and as we know tons of those companies are doing that

as we speak right like be it adidas or some gaming company etc uh whereas others will actually create the erc20 token or something along those lines that can be used for rewards for just you know engagement driving trying to drive up in engagement within within their user base um or just actually create a token that represents some sort of value of that service or company or whatnot so uh will this be the driver of the next wave of or hype uh wave

um i don't know but i can i wouldn't be surprised if that would be the case so um from from all the talks that we are having and all the all the partners that we're working with um i'm i'm i wouldn't be surprised that within the next six to twelve months there's a complete new wave of use cases coming up that people wouldn't even imagine that that could that you know uh that that could happen and uh yeah and they will and it will feel seem like a seamless transition it won't be it won't feel like oh i have to rethink the way i use that service oh i have to completely rethink uh the user interface of the user experience people will think they

still use their that's called quote unquote web 2 service but actually part or all of it will run already on the blockchain yeah and it seems like we had to we like had to conquer like the money aspect first like that's what everybody kind of has been building towards and then nfts kind of just shattered that that kind of freaking like pre pre-notion of like all right you need to focus on my like culture is almost like an easier thing to tap into but i think like for your focus like the fintech side like taking fintech apps and integrating on the back end like ovi x landing and borrowing yield through d5 that's probably like

the most i would say like those entities are probably going to get a lot of traction in the coming years perhaps more so than like fully integrating like into everyday life but like i think we start to see those fintech apps not custodial perhaps even um you know just really giving a different experience to money for people almost um and then one of them should we'll probably hit it big in terms of like be like everybody your friends will have it without you telling them about it and then that's i don't think just one of them i think a number of them yeah yeah and you know yeah i don't know if this is uh hopium or fud and you mentioned kind of like the next you know six to 12 months kind of like the the

permission blockchain uh you know businesses that are launching a token but they have maybe an off-chain business model that generates revenue for the token holders um kind of extending that out you know 12 months to maybe you know 36. um you know the the fed i don't know if you want to call them a business or a non-profit or you know they have financial goals whatever you want to call them you know the the cbdc i think could could be one of these permissioned like chains and then all of the validator sets you know could be you know these banks that are interacting with the fed on a daily basis like in the in the instance of like a cbdc how does uh something like these side chains and

you know maybe banks on these side chains plug into a money market like like um you know you know maybe you look like the banks that are interacting with it or the users or the fed you know just kind of maybe paint a little bit more around that picture if you would sure so um i mean cbdc's um are i think are very special use case of course uh it might become the biggest use case of them all uh might be be something that is part of the transition of of bringing fiat to to the chain um it's really tough to say and and um i'm just not i i don't feel too

comfortable being exactly predicting where where this this is headed what i do know though is traditional financial companies live in a fully regulated environment and there are very good reasons for that and um i generally believe if they have to find ways also talk to regulators to understand for more innovation to happen they need to essentially create new rules and new legislation and we're just you know seeing the the the we're just in the early we're still in the early days of that because um i definitely see a world

where a non-custodial fully decentralized protocol can be embedded in a centralized regulated uh custodial corporation right um but for now this is still we're still experimenting at best um because most of those corporations they're just too afraid to to enter that space because it's uncharted territory so so i think this is where really legislation has to has to as to drive things and and people that are in corporations and ceos that are interested in that and decision makers need to basically stand up and raise their voice for this

to happen faster but this will definitely happen and uh i think central banks might play a key role in that but um i think they have so many issues right now with rising interest rates and and the global economy um i don't know if that's really on uh on their mind right now but i wouldn't be surprised if uh they're definitely spending way more resource on that than than they ever have in the past yeah it seemed like the regulation was injecting itself at kind of a token level and like treating each of these tokens as you know potentially securities and now with these permission chains regulation might insert itself at the chain level where it requires maybe

a kyc on each wallet and you know so on and so forth um but like you're saying yeah commission d5 yeah i mean i guess cd5 right is like permissioned blockchains i guess i guess um yeah one thing one thing i'm worried about is i'm not worried but something that this has been a lot on my mind lately is uh um how if really if people really care about decentralization as much as we in d5 uh like to think um and and the best example are all you know most c5 solutions um and and any other centralized i guess

crypto crypto offerings yeah it's stable coins like stable coins are like so inherently centralized the good ones like what is more risky is stable coin or like holding a holding down i think people thought performance and it's the positive consequences of decentralization that you know users appreciate but is it it's like you know the centralization risk is only is only a risk once it happens and uh if it's not you know ongoing it's not something that is uh a benefit to the system you know it's just kind of like undercover um and it's it's just over time that it you know uncovers itself as a benefit to the to the overall

sphere of users gary i've got a decentralized question that kind of builds off rob's point there there's obviously pros and cons to each biblical and this is obviously not any sort of financial advice but like to you which is riskier die or usbc or which would you prefer to hold it's a good one why i like both [Applause] lack of options these days um [Music] i can just tell you from my very subjective perspective which is

definitely not advice and definitely not something that maybe someone else should should use but [Music] i kind of know the teams behind both of those projects uh um which gives me gives me gives me already something to to relate to even though uh maker dao is arguably one if not the most decentralized dow out there you there's i'm there's still people making decisions and calling the shots behind that and people that get things delegated to etc and

having met those people i know those guys know what they're talking about and they have a strategy in place and they have people that are very good at executing that strategy so even though they are decentralized and there are processes in place to to make decisions um in the name of the dow that one one member of the dow count can't make on their own um i still feel because there are still human beings behind that that that um you can you can meet and shake their hand and talk to them and understand uh their reasoning um that's why it still gives me this trustworthiness even though by design shouldn't

right and the circle yeah it's like a private company right and and and they they have um they have also a governance process etc but uh inherently they're they're they're they're led like normal business i guess with shareholders and stuff so it's a tough one i i guess i'm happy to have both and not be overexposed in one or the other you raise good points yeah and that's it's a tough one i i i i you know at heart i'm more i'm more leaning towards decentralization of course right but it's tough so okay so to your point then which which is more risky which would you rather hold again not

advice bitcoin or die i know it's like yeah it's kind of a it's not because we're actually quite volatile but like think about like we had a very uh similar discussion to that to that and in in in in our team essentially you know the way the treasury is managed and and um the treasury um of the dow obviously also makes makes uh some supposed to make some profits and we basically discuss so what should be the profits be be be counted in should it be something like bitcoin or or a dollar don't dominated or dollar packed uh stable coin

and we do have bitcoin maxis that that say obviously bitcoin and then you don't have any uh foreign exchange risk and others that just for them it's easier to to to i guess think in in dollar terms say um yeah let's let's uh do it in in dollars so it's really in terms of what kind of flavor um prefer uh me personally i start understanding more how bitcoin can become really uh an alternative to to to most of uh of people's i guess

uh funds in terms of the way they do accounting so i i definitely have friends that that always uh uh try to transfer whatever they're thinking uh let's say transfer their salary mentally into how much is it in bitcoin well this car costs so much in bitcoin or this this laptop costs so many bitcoins and others don't so it really comes to it comes down what you prefer i still use dollar terms in my head so i guess i would i would probably uh answer that question with going into something that is dollar denominated but

in one or two or three years time might give you a different answer to that question yeah and bear markets are like downturns you your brain automatically seeks away from you to protect which is documented it's like it's like you know bitcoin times yeah i mean it's just it's just an interesting dynamic really it's like i mean if stable coins can be like frozen by certain parties or loose peg and stuff it's like whoa like you know what you're getting when you sign up for bitcoin it's like you're getting a super volatile store of value that i mean you're somehow so convicted in um yeah it's interesting to see the uh the development of course because of usd but more importantly just seeing things

happen and unfold about uh the risk of certain stable coins but it's always good to kind of get thought process going on like okay like what are my convictions what are my kind of ethos and like how do you kind of balance what you stand for and what you think will make the most money kind of investing in crypto and yeah and whatnot there's probably there's many fun lines like denominating in usd is paying for convenience like you know on a long enough time horizon bitcoin's all always been in a bull market like if the thesis continues you know your your store value like to maximize wealth is going to be in bitcoin and then to uh you know to pay your expenses to to denominate and pay salaries like you

know most most are still tracking those kinds of expenses in usd so like it's almost like a convenience factor but gary's the next banker he wasn't trading on pitch checks against bitcoin back in 2017 if i would have my bank or wherever i was working would have had some exposure to crypto man i would uh yeah i would i would start way earlier uh um then then i did i came very late to the party because i was first of all burned my hands in the first an initial 17 or not the initial but the 1718 uh ball bull

and bust uh cycle boom and bust cycle and then i was i was i kept on being skeptical again for for until before summer happened which was already almost too late so yeah unfortunately that's i wish i would have been uh it's all right man yeah don't we always stay we're still down let's create our own bank on a ck polygon side chain exactly that's that's what i'm talking about oh man um gary it's been a yeah it's been a pleasure as we kind of wrap up how can our community get involved with ovic's you know what you guys got coming out yeah so first of all make sure to join um our discord on telegram

and twitter we got tons of news to share in the coming weeks and months um we have a token uh coming up but you will find more details on those channels about this and last but not least there will be a very exciting air drop happening for for uh the community and make sure to join uh to join those channels to find out more on this because um i think it will be really um an exciting journey uh starting starting very very soon so yeah very very excited no matter what the market does i mean um we're in here for the for the long game

and and yeah very very um yeah exactly i'm stuck with this and uh i hope you guys also uh gonna continue the great work you do because i think we need way more on this and i would love to come on again um to talk a bit more about zk because i think um like when it's closer to to to you know being more easily implementable in the next coming months i think this is something a lot of people would want to know more about so i'm very excited about about those developments yeah yeah we're super uh excited about zk as well and jared's always a pleasure so uh you know

very very excited about gogo and ovix um and yeah until next time yeah thank you guys really appreciate that