DeFi in the Next Bull Cycle | Stani Kulechov, Robert Leshner

Transcript

the second thing that I think is ripe for like a D5 reinvention is the introduction of like zero knowledge Technologies um into like the l1's into the D5 applications into all of these things and this is to like unlock like actual like institutional on-chain usage when I talk to Banks and hedge funds they're like huh like why would I want everyone to like know my position at all times like that's such a disadvantage like why would I want to use uniswap and get front run or like have like some like Mev like extract most of my money like D5 doesn't actually work for like real Wall Street it's like a lot of the sentiment of like Wall Street but zero knowledge proofs and technology has the potential to change this

all right guys welcome back to another episode of bell curve this is the last episode interview episode of the season after this episode we're gonna do uh Mike and I are gonna sit down uh and just kind of recap the episode and talk to you guys about season two but for this episode we have uh two giants of D5 we've got Rob leschner uh who started compound and stani kulachov who started Ave um if you guys don't know who they are uh just actually shocking if you're listening to the show and don't know who they are so I'm assuming everyone knows who they are um but they are uh to the CEOs of two of the biggest D5 protocols um and we really wanted to bring them on to this episode to just talk about like kind of tie the entire season together right so we've talked about like under

collateralized lending like fixed rates uh and this new like this big like defy unlock that we think is going to happen and we wanted to tie that entire thing together but then really what we wanted to talk about too is just like we've talked a lot about these kind of hyper specific uh Niche areas within crypto like fixed rates uh interest rate swaps under collateralized loans and we really wanted to talk to them about uh the next D5 bull cycle like what D5 is going to look like in 2024 and in 2025 and really excited to be joined on this episode not by Mike Mike is uh traveling in actually I think in in Africa right now but uh really excited to be joined by Dan Smith

who is one of our research analysts so Dan uh excited to have you on this phone appreciate it hopefully I can fill the big shoes for Mike yeah we'll say we'll say Mike has uh they're not not too big of shoes to fill so I think he'll uh he'll do just fine but what do you think of this episode I I thought it was a good one yeah it definitely was obviously like you mentioned too uh pretty critical people to the the success of D5 that we've seen um you know they've been been around the space for quite a while and have a lot of insights just that they've kind of developed over the years so definitely two Heavy Hitters yeah I think you guys will really enjoy this episode we talked a lot about just like tying things together getting their take on under collateralized loans the

episode went in an interesting place talking about Dow treasury management which uh little sneak peek is going to be one of the big themes of season two um so we talked a lot about Dow treasury management talked a lot about under collateralized loans um and then tied everything together by talking about just their predictions for the next uh the next bull market in crypto so hope you guys enjoy this uh see you on the other side of the episode all right everyone welcome back to the final episode of bell curve for those who have been following along this entire season we've been exploring this big thesis that c5's implosion will move a lot of capital on chain uh and the next Bull cycle uh for D5 will be kicked off by fixed rates uh fixed rate lend

and borrow will unlock um will enable like companies and Dows to basically borrow um uh from the capital markets from these debt Capital markets instead of just using equity in like tokens to raise Capital that'll unlock a lot of capital flowing into the debt markets and that could potentially kick off this big debt uh spurred cycle we've seen we had Vance and Michael come on talking about C5 is dead Long Live D5 we had Tushar from multi-coin talking about the makings of a D5 credit boom we had Simon from volts and Allen niemberg talking about the fixed rate lending unlock Sid and Teddy came on to talk about unclaughterized lending Tristan and udolph talking about on-chain derivatives and options Ben Foreman episode came out last week talking about

who are the bar hours and D5 today and today we are joined by stani from Ave and Rob leschner from compound stani Rob welcome to the show guys great to be here happy to be here as well yeah great to have you guys I think I want to start with maybe a basic question and then we can get deeper into the weeds um I think a lot of folks when kind of CFI was imploding uh we're like this is really good for D5 everyone's like look at um uh like a D5 D5 made it through D5 didn't really blow up and that was kind of like the main talking point I would say for folks in defy um and I think a lot of people thought that a lot of capital would flow out of C5 and move into defy uh like now we're what three four months removed from this

like big C5 implosion do you guys think this was a turning point for defy um or like did this really only matter to those who are already in defy like I I guess what if maybe Robin have you kick it off like what do you think have been the long-term impacts of this C5 implosion on D5 yeah it's a great question I think the changes are going to be more long-term focused than they are short-term focused um you know in the short term yes there's like expectations of like Capital movement like oh my goodness like we can't trust C5 things anymore like pull your money move it somewhere else and that's the short-term impact but I think the long-term impact is much more important so and this comes down to like a common understanding and a narrative so you know I I've always

watched Bitcoin for the last you know million years um and people always you know viewed Bitcoin as something that like it was important because it was outside of the control of you know established you know monetary policy and everyone sort of like got that over time and you know a wide audience was able to like sort of understand this message and understand this narrative D5 over the past couple years has never really had a catalyst moment to help people understand the why defy um in my opinion I told recently so people have been able to say for years Donnie and I and a lot of other Founders have been saying like oh D5 is more transparent you know it's more autonomous it doesn't have like you know the human error that like plagues a lot

of C5 and like C5 businesses but like no one really like got that pain point or like saw it up close and personal until this summer and this summer you know everybody went from being like Oh I'll just give all my money to that company and they'll do a good job to like watching this C5 meltdown and say like oh I finally understand why Defy is like so important like with these like Niche people have been saying for the last couple years this is the first event that I think is eye-opening for like the mass media the mass public the mass user the mass politician like this is like the first time I think people are certainly get it and it's not going to immediately translate into additional

use but in the long term I think it's like a structural Tailwind for all of D5 to have an event that was like like an explanation of like and a justification and a Vindication of defy yeah Stony how do you feel about that do you agree with Rob here yeah I have I have definitely the same uh same Vibes in the sense that you know we we we've been building um together me and Rob uh for a few years now decent just finance and it's basically uh passion to us and something that we really really care about um but also kind of like we all in in business finance we still are a very small uh community and there's different reasons and and benefits why

um we're building um the ecosystem and and I've been watching from from this side of how the kind of like a centralized Finance part uh works and I I personally believe like um whether it's like C5 blowing up or let's say Banks or B5 none of these things are good for um General in for economy or for people who are uh using and trusting these systems but um what's interesting there is that we're in DFI trying to kind of like mitigate some of the risks that we've seen um happen in in finance where you know you give custody of your funds and you have lack of transparency and uh crypto in general has been a space where you've

seen a lot of service providers uh building up uh on the top of the open source infrastructure um and what we're seeing is that um you know you don't really have this ability what is happening on some of these service providers and what D5 is um fascinating it actually provides an info structure where you have that transparency and and you mitigate a lot of the risks and and usually you care about them as Rob said that um when things um go to the wrong way so when we actually start seeing that many of these Market participants are taking excessive risk and at the same time there's lack of disabilities and you can't withdraw

your funds out of the these providers and then we start to care about uh decentral's Finance because that's that those protocols were the only ones where many of the participants paid their loans so I definitely think it it kind of like brings up the um idea why we're building and why we're doing this um but like unfortunately it always requires this kind of like an event to happen yeah I so I think um I think you guys like hit what was the narrative and what still is the narrative really well which is like okay this this is D5 Shining Moment everything is Unchained it's very transparent it's auditable you didn't have these like massive margin

calls necessarily with that likes like sent C5 companies underwater and eventually cause them to really go under uh there's one big difference though that maybe folks in D5 don't talk about as much which is it didn't blow up because it's over collateralized in D5 right which is uh different than how traditional Capital markets work where you have under collateralized lending um I'm just curious like so in our episode with Tushar I think it was episode two or three of the Season he pointed out that under collateralized lending without the ability to have legal recourse after a delinquent borrower is troublesome and maybe can't scale so I'm just curious to hear how both of you guys maybe Rob if you could kick it off like how you guys are approaching and thinking about under

collateralized lending right now well we're not so much um you know I think you know one of the things that makes defy so effective is that it's able to function very efficiently on chain which with a very small computer program that doesn't really require much human judgment um anywhere you know why well all the collateral is stored in this very small computer program and when a user needs to be liquidated the collateral is already there and you don't ever have to you know take anything off chain um it's very efficient and simple and when you start to bring uncollateralized into it either it's more complicated on chain computation there's a lot of

startups trying to do like credit scores and data analysis to be able to do like smart contract driven decision making which I think is like still a long way away or the recourse has to be done off chain and like liquidation is slow and it's cumbersome and it's inefficient um D5 simply put works really well with collateral um you know there's not yet that many examples of it working that well uncollateralized I think over time there's gonna be more and more experiments there's like 7 000 startups chasing this problem right now but D5 works today and it has worked yesterday and the year before and the year before extremely well with almost no issues for collateralized borrowing and I just think that's because it's easy it's

trivial uncollateralized is so much harder of a problem and you know D5 didn't have any issues because we like were using something that we know works like you know we can also scale this thing that we know works like right now today like it's like it's not a proof of concept it's like production grade in a lot of places so I think that's the biggest difference is that uncollateralized hasn't been proven to work yet C5 businesses have struggled with this for so long three arrows Capital ripped everybody's faces off um you know uncollateral it's just a much harder problem set than we have all the collateral in our hands we can liquidate it instantly yeah Rob do you think that uh and then Stony I want to get your take on this Rob do you think

that you guys just won't go after the under collateralized lending market and someone else will and someone else will figure it out or you just think that like Capital markets in the future will maybe be a more collateralized system than they are today but but more but but much more efficient too because things will move faster yeah I mean it's a great question I mean I do think um collateral based systems are just radically more efficient like the majority of Finance is based on collateral not credit um you know I I think there's going to be a role for the extension of credit based on the character and the the you know identity of something but I I just think that collateral based

systems can be so much larger and so much more effective yeah stani uh Rob mentioned that 7 000 startups taking on under collateralized loans and FICO and credit scores to an outsider I don't know if you guys have officially announced this and I'm totally speculating here but when I look at something like lens protocol this is maybe your guys's solution to like on-chain credit score FICO social reputation for Lending to peers I'm just curious how like maybe two-part question here like how you think about under collateralized lending and like what's the role of something like a lens a decentralized social network in in under collateralized Lending yeah I mean the the way they like we have undercoletos Landing today is is

basically I mean I really admire the the ambition of of some of these uh converter projects going after the um idea um and and also like um I I see that many of the lending activities it's actually Landing between peers that are uh funds that that take a lot of risk so in in most of the cases it's not actually um lending to finance a some sort of impactful uh opportunity and and for me um since uh uh very beginning and before even in um whole decentralized finance and finding ethereum like for me like I tried to find a way to um kind of like use uh Finance in a way to provide access and I think like what

we have done in decentralized finance is that we created this like a global um access to This Global liquidity Market that works quite effectively because you don't uh rely on those paper agreements and you have Smart contract based execution but once you go down the line where you need some sort of enforcement uh Things become trickier especially trust border loan transactions and and agreements and I think like um uh there's definitely like a lot of opportunity in finding uh more optimistic ways of actually financing and creating impact but the risks are completely different than it than it's in collateral based lending

systems I do believe that on chain uh data and especially like on unchain social graph uh where you have mutual connections and you create your own graph and using blockchain a way to verify that uh graph it provides a lot of value um for example being able to use that value somewhere where you're doing credit risk assessment when you are let's say moving from one country to another and using kind of like a global verified data on different use cases but solely by itself it's it's it's a bit too far away I won't say I I would love to use uh something like a social graph or any

on-chain verified data uh even your dial voting record um in the compound protocol or the other protocol and use that as a as a way as additional data to verify uh your trades working at and and being able to uh to passport but I think we're still like very far uh away but we will see a lot of attempts because it's such a ambitious uh uh challenge um to solve yeah I think I I have a feeling that's going to be one of the big I mean it's already getting funded like there are so many companies doing like FICO or unchain credit or on-chain reputations but I have a feeling one or two of them really takes off in the next Bull Run maybe doesn't fully get extreme product Market fit but I have a feeling

one or two of them probably do make it what one thing I want to get your take on is um shoot who was it it was um it was either Alan or Teddy maybe Teddy Woodward from notional was talking about the lone collateralized being loans being collateralized by like native tokens and whether or not this is like an under collateralized loan or a collateralized loan right because you really just I think it was Alan right like you're really just taking a bet on the business's future cash flows either way uh and it was it was actually Teddy from notional he's like I he thinks that this is going to be the cause of the next bubble um which is you have like tokens rally even more because of it there's more borrowing because the token price goes up and it eventually could cause this really intense reflexive unwind

um but I'm just curious like Rob what do you think of uh uh cool like maybe collateral or I don't even know what to call them but like loans that are collateralized by a native token of a Dao um and the Dow uses that to capitalize their business instead of just issuing more equity yeah I mean there's efficiencies and inefficiencies to this like we haven't really seen too many Dows and like the protocol level borrowing yet um it's a great idea but like it it's still in its like first chapter right um can I can I just like stop you there and just say what like why is that and I want to hear the answer to the other question but like why haven't we seen more of that is it because all the rates are variable like why is that well no I think it has nothing to do with the

rates I I think we've seen very few protocols really and there's a lot of talk of like treasury management and like the protocol space like even like the basics of like treasury management are like still in like chapter one for all of these different protocols right and we've seen like very little experimentation like we've seen a couple different protocols go totally Hog Wild but like for the most part like treasury management isn't that big of a concept yet at the protocol level right most protocols aren't trading they're not borrowing they're not like like even in like the basics of like treasury management and so like borrowing for a protocol is like in my mind more complicated than like selling off governance tokens for a

stable coin or something like that like it's just like one level more advanced of like a cash management and treasury management strategy so I like I I think like the reason why we haven't seen too much of it yet is that like we're still chapter one of just treasury management for protocols um and I think we will see protocols become financially sophisticated in managing their own assets at like a protocol level but like it's also possible that something else entirely occurs and like it just never takes off like what if instead of every protocol has to figure out treasury management by the way like none of them really have like qualified Finance people what if like treasuries of protocols figure out a way to like give

all the money to like an actual off-chain hedge fund or something that like is actually really good at this and has 4 000 people that are unbelievably sophisticated and all they do is manage treasuries so like I don't know how it's going to shake out and like what the right Market structure is long term like maybe a decentralized community is really shitty at like governing and managing a bucket of money most of the cases so far are like a decentralized community governing a bucket of money even total fails so like maybe that's not what happens maybe like an outside like off-chain thing figures out how to manage money on behalf of protocols yeah who knows I I have a thesis on this I want to get your guys's take on it I don't think communities and Dows can manage their own treasuries not because

they're inept and not because they don't know how to manage money then people people inside of dows know how to manage money uh it's because of the community it's because of the community backlash so let's say I'm stunning and I want to manage our base treasury um if I'm and I have a ton of Ave sitting in my treasury if I'm today I'm like oh I need to get more in usdc or I need to get more like I I need to take less risk on Ave and I go sell 50 of my Ave or even 10 of my Ave not only could that spook the market but it could like your community is like well why are you selling of it like you should be long of it you're like no I am long of it it's my company but like but like I need

dollars I need to sit in dollars I need to sit in something safe so like I actually think that outsourced model of Treasury management is going to be huge not because they're better at managing treasuries but because it takes away that like that Community pressure on you to to manage it so starting I'm curious yeah yeah basically like it takes the emotion out of the the the the transaction so no I agree I I mean we've seen like a few attempts on the treasure management and it's it's so very basic so um I know there's like without the community there's been like a um swap between the other and balancer uh communities and and some small kind of like tweaks uh here and there

um but you know I just feel like not everything has to be like actually like a protocol level manage thing and and something that I'm personally wearing okay excited to see where the Arabic community has been taking is that there's a lot of service provider companies like Gauntlet and Chaos Labs that are providing various services and then you have treasure Management Services provided as well as a service so but it's effectively it's still very early and like how optimized you really want to be and what you're mentioned which is very interesting like there isn't that many actually like uh you know Professionals in the space doing it it's just like a lot of ideas coming in

and experimentations you know and some of these Protocols are growing substantially uh big enough that you know you can't really anymore experiment the same way as you could do with a smaller uh Dao and you need to have a lot of actually um modeling and data to to back up what you're doing so and then there is because it's a dial effectively so then you have like people who like the idea people don't like the idea everyone has their own like stake in in various of this um uh initiatives so it becomes very much of uh um like uh governance yeah um will you do you guys think you I mean the way that most protocols have raised

capital is just by some sort of equity right whether you call that a token or you raise a VC round whatever you want to call it do you see compounding are they raising from the debt markets in the next couple of years like is it like either on-chain debt or or just off chain like normal normal debt markets like is that something that you guys see happening or is equity still just uh so cheap in in the land of tokens that that there's no reason that there's no reason to tap the debt markets I'll let Sony answer that well on the trigger for uh for that result I mean there's stablecoin liquidity is is quite cheap at the moment um because of the market conditions so

but that introduces the the element of um credit but like um I I will see some sort of like whatever you borrow right you have to pay back so you have to pack it some uh interesting way I mean the other protocol is getting Revenue as a reserve factor and you know you can use that Revenue current it's used for protocol development uh funding different developers and risk management and even actually uh funny as it is a bit of Treasury management as well so um but like some some way somehow you need to repay that uh whatever you borrowed so like protocol revenue is good but you know yields are going down

as well so like like I I really want to send a message that is like that we need more uh conservative approach on what we're doing because the stakes are going and increasingly going higher um and I that's my my higher I can figure worry do you guys I'm trying to pull out some things that I think could occur in the next bull market and trying to earn even in just like the next cycle of D5 I'm trying to pull some things out of you guys that that maybe you guys think could happen one thing that we've discussed on the show is uh like lending and borrowing or really borrowing against a Dao's future cash flows so like let's use um I don't know uniswap just because that's been one that's been in the in the

narrative recently like could uniswap could you see uniswap borrowing on an Ave or a compound or or maybe a different platform against their future cash flows or really any protocol that spits off Capital is that something that you guys see happening in the next cycle maybe Rob can I pick on you for that one I mean it's hard to say I I think you know you might see it um you know but it's one of these things that like is going to be up to their community and like you know so far we have not seen that many protocols using other protocols so it's like you know a financial tool um and this goes back to my earlier point about just like treasury

management it's just super simple like if there was like an overwhelming need two that I think they would do that I think they would figure it out I think they would like develop a strategy for it but you know I don't think there's any indication yet that there's like a important need to um and that they would need to do that before some other strategy like just like selling off tokens or whatever you see like also like the ability like if you have a like a Dao and you know you have token Supply and if you feel like you know you can actually uh put more tokens into the market and get more new uh you know participants that are

excited what you're building that could be still way to go like as soon as relatively um attractive model basic conditions huh I wanna I wanna pivot a little and talk about fixed rates because Rob one of our big Theses on the show and then Dan I'm going to toss this question over to you for the next question but Rob one of your uh what one of our things that we've talked about on the show so far is like fixed rates are going to or like interest rate swaps and like this whole Market gets developed then we get fixed better fixed rates like cheaper fixed rates I know you guys rolled out of the fixed rate thing Stanley you guys have had something for a little while at Ave and that will unlock more Capital flowing into like that means like block works as a company or like a dow or a

protocol could borrow on chain because if you're if we're a company like we don't want to borrow variable rate because that would that that's really risky as a company Dan I want to toss it over to you for the next question related to like maybe something around fixed rates and yields because I think rob you would push back on that thesis but yeah so uh you know I'll be a compound kind of both been uh driven primarily around the uh variable rate uh debt markets and you know somewhere around like 90 90 or so even higher than that up to like 95 96 of the loans on Ave right now are driven by these variable rates um but you know they also do have this fixed rate product that kind of readjusts as the markets move um but generally stays in a relatively

fixed rate and then of course compounds launching the they launched the compound treasury last year and now they're enabling uh credit accredited institutions to borrow uh at fixed rates around six percent uh so yeah Rob maybe I'll start with you on this one and you just kind of talked about this renewed focus on fixed rates and uh kind of how you see that coming in line with institutional demand uh and also curious around like the mechanism that can ensure that six percent yeah so fixed rates you know fundamentally like it's a question of like fixed for how long right are we talking about like duration risk at this point like you know in traditional Finance fixed rate comes with a very specific duration or maturity right and

so this even the word fix means very different things right um when it comes to Defying crypto markets so first off I think the important thing to understand is that everyone has a different like expectation of time right um crypto moves much more quickly than the traditional world like a month can feel like five years like so much happens in a short period of time that even when you say fixed rate like I don't think most people are expecting like fixed rate like you see in traditional Finance like a 10-year instrument like that would just seem like so absurd and crypto right um so I think like fundamentally like fixed rate and crypto like in people's heads it's like fixed for a month like fixed for three months fixed for what

period of time right it's definitely not like gears like we see in traditional finances like default like tenor right so within that I think like talking to Market participants like a lot of borrowers do prefer fixed rates over variable rates I think and I'm speculating here that like you don't see more adoption on Ave because the fixed rate is always higher than the variable rate so people just say like oh just borrow variable until it does its thing but like the fixed rate is always higher so like people just are also greedy and choose the lower rate which is why you don't see a lot of it um but like bar was prefer fixed right like when you talk to them you're like oh like what do you want to do like what are you trying to accomplish like they all sort of like the predictability of

like a known cost that can't go up on them you don't see the same as much I think on the supply side where people are like you know it's more like idle cash it's more like you know things that aren't being deployed elsewhere or like there's an understanding that like it's temporary like you know I don't think like the suppliers of liquidity care as much about fixed rate I do think there's a bias though on the borrower side that appreciates the predictability especially because borrowers are like I'm going to be borrowing for you know I know how long no one else knows how long I'm gonna buy a house or I'm gonna like invest in some startup or I'm gonna like do this thing like they have more of an idea of like what they're doing with the borrowed assets and for what period of time

um so I think that's the next bias that like is inherent in crypto that's like you know a little different I think like the opposite's probably true and like you know the rest of the world like duration and like fixed is like a risk and like it adds risks like both people earning an interest rate and paying an interest rate like it literally just creates unnecessary like Financial exposure because the rates come generally like from the Federal Reserve and central banks and like when they move rates like someone with a fixed rate is losing like someone with a fixed rate is benefiting who is it right and it's like it that's just like perceived as a Financial Risk to like both sides of the equation if you can

eliminate that Financial Risk great um so we'll see how the market unfolds you know one of the things that we've done at compound is through compound treasury which is an Institutional business built on top of the compound protocol focus on fixed rates um for the clients so um clients that are providing liquidity we're borrowing from compound treasury do have a fixed rate the terms are you know they're not in the years they're negotiated with each client but you know it's in the it's in the expectation of months not years and not like a week yeah that's focus on the shorter term makes a lot of sense like right I think like we always say a month in D5 feels like a year so uh that makes a lot of

sense and I think another great point you brought up was really around like if I'm a user and I go on a lending protocol to take out a loan I see two numbers I'm like always picking the lower one right like to me it's like okay if I I feel like a lot I have a this thesis that a lot of the users today that are borrowing are probably just like trying to take levered bets on like an eighth position for example or a rapidcoin position um so how do you see the user base today like what does the average borrower on a compound or Ave look like uh and and how do you see that shifting going forward does the introduction of more uh lower fixed rates kind of change that into a more institutional borrower yeah from Office perspective

um I I would definitely like what I think that things that the institutions sometimes mention is is um having more uh I would say like a stable or predictable rate um is is is something that they could be look they are looking after as well um you know that that helps also to understand the kind of like a like a business and Commercial case on using something like this interest Finance um but I I think like end of the day like the the fixed rates uh become valuable when you're going into a bigger scale and a more longer term um relationship um with uh with a protocol so I I think

that's where where it becomes very valuable but I think over time as D5 scales and it proves itself as a global liquidity Market um I I think there is going to be a lot of opportunity and in terms of the uh rates at the moment I think most of the users within the D5 ecosystem they're they're pretty much like complaining about the lower yields um which when you look at your you know traditional Financial infrastructure and banking like it's not actually uh that bad but it's obviously the best time at the moment but I think it's more about like the the predictability and being able to uh hedge your risk is what's

valuable but that that that happens when we go more into scale uh 200 billion or 100 billion in D5 it's just such a like a tiny uh thing of of the whole financial ecosystem um so it's still very early what what triggers people wanting to borrow for the longer term right like like what's a what's a main long like a 30-year mortgage or something like a 30-year mortgage is not a thing that exists in nature like it's a you have to use interest rate swaps to lock in rates it's like not this you have to like there's a lot that goes on behind the scenes of a 30-year mortgage obviously like what causes people to want to borrow even on a five-year rate or something or even on a two-year rate

right like what what kicks that off is it just the size of the market is it uh protocols coming in and borrowing like what stany what do you what do you think kicks off that like demand for longer term borrow well one thing I can say is that you know I I talk to a lot of people who are using these interests finance and uh in my peer group um there are a lot of people who actually have most of their uh Network in uh digital assets so so because obviously they've been working in the space for yeah yeah so so that's that's an interesting thing and and some of the finance goals are for example you know buying a house or paying for tuition um or or buying cars so there are a lot

of use cases where actually the the uh The Borrowed capital is going back to the economy and you're financing a goal in real life so not everything is actually related to uh to borrowing from one protocol uh and moving the funds to another there's actually usage on on and this relationships especially when it comes to financing fully or partially your home with your unlocked capital um from your portfolio that's a long-term relationship how important do you guys think that um the eth staking rate is to defy like uh Rob I think you're the one who just said

this like 10 minutes ago like in in traditional Capital markets you have like the fed and you have a Libor and like you have these like set rates basically and we've never had that in crypto until you could argue this like the state the stake rate basically um and the capital that like this proof of stake systems uh spits off uh Rob do you think that this is the new base rate of crypto and that like this whole yield curve gets built on the back of that base right now well it's definitely going to be the base rate of ethereum right and I think it'll become the base rate therefore of ether and I think that's going to like trickle down to most D5 applications in one way or another um you know it'll change the economics of like lping ether in a uniswap pool or

it'll change the economics of using ether's collateral on compound or Ave where makered out right it's going to change the economics of pretty much everything so there's now like a four percent opportunity cost um and I think you'll see that like over time bleed into pretty much everything else that gets built in the ecosystem and I I think it'll become like the like the base assumption like everything has to do whatever ether returns otherwise like what's the point I'll just like you know realize that through ether in one way or another so I I think we'll start to see overtime more and more One Finance applications built around the stake and yields we're already seeing it we're already seeing huge demand for you know liquids taking products leveraging them

up like hedging them like all of this we're gonna see more and more of that as um Satan takes off and two we're going to see like the interest rates from ether like like osmosis and be absorbed into like all these other applications one way or another so that's pretty interesting and like you mentioned that it would potentially change the Dynamics of the lping uh in a liquidity pools do you think so right now on UD swap the most uh volume driving pool is the usdc eth pair uh by quite a considerable margin do you think it'd start to make more sense for that pair to become like a usdc paired with steak teeth so at least the LPS are earning a portion of that staking rewards uh or like how do you see that Dynamic really shaking out with

in terms of affecting uh liquidity pool no I mean I do so like you know fundamentally like if you know a uniswap D3 LP position you know I haven't looked lately but let's just say like ether usdc is yielding 20 right like that 20 is offset by all the impermanent loss like it's very different if you're earning 24 or 16 or like whatever like four percent in either direction is a big difference when you know the total yield to cover all of the impermanent loss is like not that huge to begin with if it's like oh we're earning 80 like who cares like whatever like it's not gonna make that big of a difference but I I do think it starts to become like really important

that staking yield opportunity cost hmm that's interesting does um I mean just on that note like does five years from now will any eth circulate in the system or will it all just be like steak circulating in the system well I think there's going to be a lot of ether circulating in the system because you know let's just say a year from now you're gonna be able to unstake either right right now it's pretty much a one-way Bridge or you're like I'm staking it well like in like a year like a lot of eth will un like it'll circulate but like maybe like next Bull Run I don't know when the next Bull Run's gonna be like but like take me forward to like three to five years like I feel like it's just gonna be steep moving around well I expect it because you'll be able to unstake you'll be more

likely to stake in the first place right so yes like a lot more ether like there's going to be less of a reason to like hold ether unstakes like the average person who's not transacting a lot will just say like oh of course let's take all my ether if I'm not like using it in D5 like or nfts or whatever on a daily basis like you may as well stake it which means that like all the ethernets left over is going to be the circulating like we're going to use this for like fees and like you know costs um ether but like you know I think they'll they'll be enough there for like all the liquidity needs of all the users because you can always make more of it by unstaking so I don't think it's going to necessarily lead to like some like crazy Supply shock

yeah you know I do think participation rates will go up which will decrease taking yield but like that's good too Stoney has it um would you say staked eth has had a negative like a substantially negative impact on your guys's business because you used to the only way to get like let's call it four percent in crypto or five percent was like I don't know you lend you lend on a bar online platform or on a protocol and now you can just like maybe drop your eth into Lido and get four or five percent so like what's been the I mean there are a lot of positive things for Ave obviously from from this uh from from staking but like what are the negative things and like how I guess how negative has it been on on Ava well the interesting part is that if

there is uh staking eat demand it it drives it out of the um the other protocol obviously um but that's that basically um demand will be replaced with with new needs because that creates a market opportunity within the orbit uh protocol and um it's actually pretty interesting because slido is you know it's it's tokenized uh liquid it so uh within the other protocol you can you can use it um as a collateral and unlock some of the uh Capital as well I mean there is some of the users are actually um taking that they're taking into Lido taking the stake to eat and using that

as a collateral uh to borrow more it and leveraging their staking positions to some extent but I think like in some ways I would believe that you know the D5 it rates will follow a bit this taking yields and I guess like that like broader like negative impacts um you know it's um yeah I I guess like the more chance changing part for the whole staking it at this part is that it's one way right so you know it's it's kind of like a bit inefficient market so so for example things like steak eat um in tokenos fashion will obviously

trade in a lower um uh value than the underlying because that's that's where the opportunity is people who don't have the time to wait until these Shanghai upgrade you know they they might want to sell exit their stake the position you know obviously that's something that adds risk into the equation so you have to be mindful of all the multi-value ratios where when you're using something like state state as a collateral in the um protocol I want to get your guys's take on um real world assets actually right and just like where on where on chain yield comes from actually not maybe zooming

out from where where the yield comes from like I just want to get you guys to take on real world assets right because there was a really hotly contested topic specifically with like maker I feel like it's been a pretty hot topic recently um right you have like I think the maker argument would be like you can increase the total addressable market and like just the size of the protocol uh and the supply of the of the loans if you bring on real world assets maybe the downside is um if you're trying to create this like censorship resistant protocol and now you're onboarding a bunch of like capital from a bank um or like real estate or something like that and now you're intimately tied into the traditional like off chain system so Rob what are your thoughts on just real world assets as Supply

well first of all I hate the phrase real world asset because it's Broad and it's confusing ether is a real world asset okay both things on a blockchain are real world assets they exist like I think what people really mean is off-chain asset and I think when you start to like describe it as off-chain assets the risks and the opportunities become more clear and so I think there's really like two things that like people think about in terms of off-chain assets one is away from accessing off-chain assets on chain like I want to figure out how to get like treasury yields on like U.S treasuries on chain somehow the other is how do we bring some like asset or exposure to it or a contract or

an agreement like onto the blockchain and like um like securitize or tokenize like something like entirely different like one is like reaching out and one is like pulling in but like in both cases it's like how do we interact with something off chain um there's also like this third component which is like oracles and price information where it's like that's like the first like Taste of like off-chain assets because like how do we get off chain data onto a blockchain but all of this is just you know a simple way of saying like the opportunity is huge okay like but the risks are also huge the minute you start to have like things that can't be entirely contained in a smart contract I mean you're required to have some like

off-chain interactions is when you start to like reach outside of like predictability and Automation and into sort of predictability and like sort of Automation and like all of the things that are inefficient about traditional finance and traditional assets and so the market is massive when you start to bring in off-chain assets but I think you start to lose a lot of the efficiency that comes from fully on-chain systems that are you know completely predictable completely autonomous completely transparent you know and completely self-contained uh stani is it do you think it's worth the I'd honestly just call it like a headache like a colossal headache to

deal with off-chain assets but it obviously increases pretty drastically the the size the size uh of the Supply right like do you in your mind is it worth it the simple things yeah like any like um um tokenizing cash balances um like we have done with usdc that's um that supposed to be very useful for across the whole default ecosystem um but when it gets a bit more complex that's where uh it gets trickier I mean some of these um projects like centrifuge they have done very interesting work on tokenizing um receivables and and making it a bit more uh simpler but also like there's

different kinds of like uh Earth chain assets of uh Robert is saying um which are very complex like real estate and you know it's like you have to start to have like multiple layers of kind of like a challenge yes and obviously there's ways to transfer the risk away um but I I kind of like believe um in Simplicity when it comes to uh this real world assets and and kind of like what we've seen uh so far yeah it's funny I remember a conversation with the head of jpmorgan's crypto team like two years ago and she was like we're tokenizing we're gonna token I was like like JB Morgan script team is not really doing anything impactful and they're like uh she's like we're gonna tokenize U.S treasuries I was like why

would anyone want tokenized treasuries like the yield is like two percent three percent and here in D5 we've got like 20 and now here I am sitting here October 2020 and I'm like damn I wish these tokenized treasuries were uh were real and so like man maybe maybe JP Morgan beat up beat folks to the punch here that'll be interesting to see so uh Rob I like the way you laid it out though it's like you've got you've got things that like produce yield already it's like tokenizing treasuries and then you've got things that you're like having to basically pull into defy uh that like it's not as simple so I think that's a good way to look at it Dan anything else on um like real world assets anything that you're curious about uh I think we kind of hit it all right

there I mean yeah I just think like the Oracle problem really becomes kind of push further into the Forefront I mean chain Link's our best option right now but uh like they still are like they still have some multi-sig impact there you know like we we don't know all the signers and uh there is still some some questions around the security there so I think it's really just about expanding uh kind of like how we bring off-chain data on-chain and really starting from the ground up I think it's very important there yeah all right uh stania Rob I don't know who wants to take this but are you guys worried about do you are you worried about kind of the like maker concern of censorship like building an entirely censorship resistant protocol

like 100 censorship resistant if you want to do that you would not onboard real world assets but you also kind of drastically limit your the supply of the uh so Rob I'm curious how you think about that well in order to do that you'd have to not have any off-chain asset like usdc usdc yeah as an off-chain asset yeah wbtc is an off-chain asset fundamentally you wouldn't allow any asset that had an off chain component to it which really starts to limit the scope I mean I think almost every DFI protocol supports usdc and supports wbtc and has already passed the point of like actual censorship resistance fundamentally

there's some protocols that are taking like a Back to Basics approach and like only supporting things that are fully on chain and like that's really cool but I think I think like right now fundamentally like almost every defy application if you had like a coordinated like Nation level attack like could obviously like censor or destroy a D5 protocol like Point Blank That's True um so then the question is like what what standards are you looking for right like if you know that like you know usdc blacklisting the address will like destroy pretty much any protocol like Maker Now compound the Ave unit swap like whatever like that would be an existential like issue and it would like

harm users tremendously if like that's already a risk and like the application already supports usdc like where do you draw the line is it like well you know I know that we're taking ustc risk but we're also taking risk of some Bank refusing to pay us back at maker down like there's some series of lines you draw in real world assets and like maybe you're completely cool with like the usdc alone rest but you're not cool with you know any random Quirk can like you know have a finding and like you know someone doesn't have to pay things back to a D5 protocol instead of it being like one potential actor it's like well now there's like any Court can like screw it over so like there's a lot of different places you can draw the line

um and it'll be really interesting to see how all of this evolves I think Maker Now probably feels the biggest need in the pain point right now because in a lot of ways they're the most at risk of like a government saying like now we don't like that like you made your own money like no thanks like like that because it's big and like they've had a lot of success and they have like it's a huge non-fully one-to-one Reserve back stable coin and right now governments hate non-fully reserved one-to-one backstable coins all of a sudden after UST imploded so you know I think maker now might want to draw the line sooner than other D5 protocols that are like can take more censorship risk like

if there's anyone out there that can't bear as much censorship risk because they're at higher risk of censorship it's probably something like maker now that needs to be more conservative about those risks Stony like I'm just really curious to see like there's all these regulatory things going on and then you guys decide to launch a stable coin like obviously probably big risks but also colossal rewards so like what was the business decision behind this and why did you guys do this I mean if you look kind of like the um the the other protocol effectively it's it's a um uh it's it's a market of different uh stable points there so many of these stable points they have a different kind of uh narrative or I would say even set up so we have usdc

that that that's basically um the Open Eyes um uh balances from from a circle there is uh there's also maker dose dye so having a stable Point within the RB ecosystem really helps uh in certain cases with the liquidity crunches and and diversified uh those uh stable Point pools as well but also it gives a it gives a bit more kind of like a predictive for the oven Community to to effectively govern uh their own stable coins so and I think it's like it's it's not like the the other community like the the the go

stable coin is replacing the the other ones that are in the market it's uh effectively is something that is um more of uh uh supplement um into the whole uh stable coin ecosystem but division is is quite um more I would say uh bigger in the sense that we uh we believe that um you know especially with the layer choose um stable points can become very valuable tool for uh not just insurance payments but solving uh real world problems across the world um during last month for example I was in Argentina and something very fascinating I uh realized that how much

stable coins are actually used to escape the inflation that the local locals have with their own currency which is uh roughly 100 so whatever you're earning today uh one year later you have half of the value in your hands and most of these stable coin transactions aren't actually done in this interest Finance um they're actually done in a centralized exchange on a Tron blockchain from one binance account to another so to basically just showcases kind of like how much how people are relying on uh the centralized systems in some of the uh regions so I think like there's sort of

impact that you can do on the stable coin aspect but also that there's definitely like diversity that is um a beneficial for the uh of a community as well end of the day but it's something that's kind of like additive than than actually replacing anything yeah I think that's really interesting I definitely agree that stable coins are probably one of the uh the biggest use cases for crypto and and we kind of see that coming through um and as a lending protocol you definitely sit in this like unique situation where building in a stable coin uh around your protocol or into your protocol makes makes a lot of sense right because in the current state uh without a stable coin you need lenders

to then use their assets to provide to the borrower but with your own stable coin you obviously have the unique ability to say okay once we have borrow demand we can mint our own stablecoin to to act as this uh this this the asset being went and I definitely creates an interesting ability for the protocol to generate more revenue for itself um as well just to continue to grow and scale and we've seen other protocols do this right like of course maker Dow uh has dye that they use and we've seen frax launch fraxland to complement their stable coin um and you know Sam K uh Sam Chasm the founder of facts has kind of called this the Trinity right like they have the look they leverage their liquidity through the curve protocol uh they now have fraxel in their own uh their own

lending protocol um and of course they're unstable coin and so we kind of see Ave moving in this direction uh do you think that there's value to kind of having like these three cornerstones or pillars of D5 with uh like liquidity uh lending and a stable coin I think that the the the the bigger values in in overall in the D5 ecosystem where you can actually go from one protocol to another uh from one Community to another uh and actually see transparently how these different communities are assessing uh risk uh for example and and and then adjusting those phase parameters within the communities and I think the value of uh decentralization is that uh we don't

have one single place where people come and actually decide upon um something like a um a policy or interest rate for a stable coin but you actually have multiple different um variations uh for that and I think that's and if you look at the technical um the implementation is and the idea of the go stable coin is that you are when you supply your assets into the other protocol you are earning on your collateral so it's kind of like a different um type of a model that we currently see but for me mainly it's about having those different decentralized communities and and their

own risk assessments and then that we don't have kind of like a one um like I would not see like B5 being successful if there's like one stable coin rules everything you know and there's one place where you actually have to go and give your ideas and you know vote upon um let's say interest rates or some other strategies I would say I would say more if that there's multiple different kinds of communities that have their own ways to manage risks and govern their protocol and then they can learn from each other and that creates a lot of interesting um learnings I think that will be the the pad to go yeah I think that makes a lot of sense kind of like fragmenting or

sharding the risk of running a stable coin across many stable coins rather than kind of compounding that into one um Rob with the launch of compound three it looks like usdc is really the base asset in that ecosystem um so just launching a stable coin kind of makes sense for compound or are you going to stay uh in a different in a different direction and kind of using usdc as that base currency yes so compound three is meant to be this like really simple like borrowing protocol building block that can be deployed on as many evm chains as folks want um once it gets deployed on many evm chains then you can do some really cool magical things with like bridging assets between chains bridging positions between chains all this really cool stuff

um but it sort of reduces the need to create a stable coin fundamentally um you know so I'm actually really excited to see how and where compound 3 evolves to um there's a lot of different things that can become but I don't necessarily think that like a native stablecoin um is one of them it's possible Community developers say like actually it's really cool like let's add it like and I'll be surprised um but it's like the default case I don't think there's going to be a stable coin I think it's just like slightly unnecessary um and fragments the ecosystem a little bit more than massive usdc it has its risks but it's also super efficient awesome yeah and that's probably a great segue to kind of get into like scaling

in the cross chain World um you know I kind of curious to hear your take on like building uh the the experience you had with building compound Gateway kind of building in the polka dot experience I remember when dydx I think it was uh when they pivoted over to the cosmos ecosystem you tweeted out something like relatively bullish on like how Cosmos is interesting Tech um and I just kind of like love to hear your take on uh your findings from building in polka dot as well as kind of how you think uh the growth in the cosmos ecosystem will kind of play a role in is compound interested in kind of pursuing something over in that ecosystem yeah so to quickly rewind and summarize you know compound Gateway was meant to be basically an app chain that would run compound

like a compound like Market with assets from every single blockchain and the way it was going to do this was by launching a app chain or L1 and then having Bridges to all these other base chains and this was like a way to say like okay there's one cohesive Market where you can share liquidity with assets from everything really cool idea I mean honestly like it's if it works it's incredible but as of 2020 2021 the technical challenges of building this were really high um a great example is we've seen almost every bridge get hacked over the last like year and a half bridges are extremely dangerous and complicated to build safely it can be done there's lots

of things being built correctly and safely but to have as a strategy okay we're gonna have one chain and like with custom Bridges to everywhere else you know it was too much of a technical risk to launch in a lot of ways and I think that over time that decision has been Vindicated um just seeing how difficult it is to run Bridges safely the that strategy doesn't really work for an app chain that doesn't need to connect to other blockchains I actually think it works great I think like a dydx where like all they have to do is let you get like USD coin in there and then like trade Galore and they don't have to bridge to every other blockchain like that's a really good like approach four and a half chain if it can be like

so self-contained um so I think it'll be much more successful than the strategy that we originally were like researching and when it comes to like platform I do think that like there's a reason why you're starting to see so many different you know new shades launch on Cosmos versus other platforms most of the new like app chains or we're going to launch in L1 are doing it in the cosmos ecosystem I think the user experience and Cosmos is still really rough in terms of like how wallets work and how like connecting to different like James works and like how bridging assets works and like all this stuff is like really crude but for launching and going live with like your own chain I

think it's the best technology that I've seen um so far versus other platforms yeah I want to agree with Robert on this the the the the the bridging part it's so it's super difficult to to build secure Bridges and we've seen like recently even like one of the best builders in the space have tried to do that so it's got quite difficult I believe in absence to the extent that you um could actually then um inherit the security for example from ethereum and kind of like uh have this uh roller function so that's that's something that could be very valuable um in creating part of like a micro ecosystems for for for for um

uh for these communities that are effectively um going to that path so I think that's an interesting uh path to take and especially like less riskier than uh kind of like having the bridging uh activity because I want to start to wrap this up with just thinking about the next cycle um Rob I I have such good memories of defy summer and just remember like I just I will give you credit like I do like here's my memory of D5 summer uh covid March of 2020 uh fed kicks into action does a bunch of money printing people freak out about inflation uh people uh Bitcoin narrative uh comes

into play with like Bitcoin is now this inflation hedge Paul Tudor Jones calls Bitcoin the fastest horse in the race like May 2020 uh and then you guys did your uh like liquidity farming yield farming uh look like liquidity farming and not just man like that and then like Wi-Fi a lot of things named after Foods a lot of yams uh and like you know the uniswap airdrop and which are like boom like Off to the Races like honestly probably the best summer I've ever had uh just real a lot of fun and like no sleep and um I'm just curious if you think that we will get something that crazy again in defy um and if and if so what what kicks It Off yeah that's a great question and you know what I look back on that time and

like what I thought made it like crazy and cool was like you had a protocol that was working you had a governance system like already built and when like the token was launched right you had this basic process of like essentially saying like we're gonna give away something that like is already live it already works there's already governance like everything is ready like at the time the token was released and that was like a new model and it was designed to be the exact opposite of like the Ico model where it was like there's a token and nothing else like right it was designed to be the exact options like there's a token and like if it ends here like you literally have a whole thing to run like have fun like you know I can quit and go on vacation and like

everything works still so like enjoy it like and that's what was so new about it um and I think what set off like a lot of other things of like hey like we can like you know go about like creating and releasing tokens differently they don't have to be vaporware and like maybe one day or something tokens can actually like do things for real and so that's what I think like set off this like amazing moment of like experimentation that summer um a lot of the tokens that were launched you could like do cool things with like unlike you know back in the day what comes next to give us that level of excitement I mean there's a lot of things that could do it right so one I think like actual like gaming that's fun and like can like attract a

huge audience has the potential to like totally shake up like how we experience crypto I think no knock against any project or like any team most of the games in existence today that like are like web 3 plus gaming are like really not fun at all most of like the played Iron stuff is not fun at all right it's like fun to make money but like the games are all horrible I think gaming like is like this huge untapped opportunity that like can possibly get like 100 million people like into crypto like for real like I'm like you had a hundred million people and like Suddenly It's like crazy town again right so I think gaming is the first one that like is ripe the second thing that I think is ripe for like a D5 reinvention is the

introduction of like zero knowledge Technologies um into like L ones into the D5 applications into all of these things and this is to like unlock like actual like institutional on-chain usage like when I talk to Banks and hedge funds they're like huh like why would I want everyone to like know my position at all times like that's such a disadvantage like why would I want to use uniswap and get front run or like have like some like Mev like extract most of my money like D5 doesn't actually work for like real Wall Street there's like a lot of the sentiment of like Wall Street but zero knowledge proofs and technology has the potential to change this so this could be like yeah of course I can trade on this on-chain decks and like you know there's

deep liquidity and it works like uniform V3 but like no one can front run me and I can't like have an Mev like rip out my value and like it just works and like oh my goodness like I like this is cool like I I think like it has the potential to actually bring in like the wave of Institutions like everyone says is coming but like hasn't really come for defy yet because you can build new things that are like Wall Street grade that like really there's not much Wall Street great today um so I think like ZK technology is like the second like crazy Catalyst for like a whole new class of users that like makes this crazy again and lastly I think like the third thing that can like set this off is just like you know like Global

macroeconomics right like if we enter an era where people are like okay we can't trust existing assets for whatever reason whether it's like central banks or like you know pandemics or whatever it's like people can't trust the existing asset classes that's when they're like excited and willing to explore and that's when like you have like like the market conditions for like people to experiment and like with new assets and new models and new projects and new like you know base level like Financial Primitives and like like that'll be a right marketing condition so like any of those three things I think can like get us like into like you know a wild era I I love that on Number One gaming I completely agree Santiago's been

hammering that home to me and just just like you need to get more excited about gaming so I'm I I agree with you and I know Santiago would agree too on um on the macro I think you're I think you're spot on on um on uh zero knowledge I have a question there like will this get built on something like a starkware or is it like at what layer like will this be like zks at the uh who's building this Joe Carlson uh espresso systems like zk's at the layer one or like all built on a like a ZK layer too like what does this actually look like yeah I'm I'm mid-wit so like I don't have like this sort of like you and me both my friends yeah but I I think there are like L1 chains that are designed to be like privacy first and like it's

possible they catch on it's possible that like systems on top of ethereum catch on it's possible that like applications themselves are able to embed like zero note into the application layer like you can imagine like a compound or a uniswap that like just works for you but like no one really knows like who's using it just that like it it has the correct collateral or it has the right liquidity there's a lot of ways this could unfold and like I don't know I think like something's gonna work and like it's gonna happen and surprise us like it's so hard to predict ahead of time like which thing is going to be the thing like that's the Catalyst but like something's gonna work yeah Rob you're on the right show by the way the the show is literally called belt curve so you've uh you've come to the right place

uh stani I want to ask someone who's on the the right side of the bell curve here uh uh in terms of just like what you see I'm gonna ask Rob like you the same question I asked Rob which is like D5 summer craziness like do we see something similar and and if so what what kicks it off and I don't know if you would agree with Rob's three predictions or like agree but maybe add one or two or like take things out I'm just what what do you think about that yeah I would say like Rob's predictions are are those that are very kind of like ripe at the moment so there's there's sort of value in in what you could do actually with gaming um and also um especially with C case and what kind of benefits it uh provides and for me

like I'm kind of like thinking like I I would see a lot of value um and um attraction that D5 can actually uh bring still and and there's there's Innovation what you can build but I think like I I see like literally as as like a broader economy as well and that you know we build this amazing D5 infrastructure within the larger economy um and where I'm like focusing personally um quite a lot is um building more of that non-financial uh path into uh using blockchain and what I what I'm thinking is that social media is one of the places where you have a lot of potential

because currently we uh we interact with each other we're using a very big platforms but we don't have the ability to for example Port your um your audience whatever you create in in crypto Twitter into somewhere else or you know if you're a Creator um and you will you have an audience in Tick Tock you can't really Port it into a new application that that might come so I think that being able to own your uh social presence and at the same time having the ability to connect with your peers directly and and publish and broadcast content is very valuable uh also for the direct modernization

perspective but it also does what D5 did so you know you change the Dynamics that you have with let's say what you have with Finance you could do the same with um social because you know when the users are owning their own um self-expression and they're like um social media profiles and their connections it's the applications and algorithms that have to actually like fight and uh serve the users and and the users have the flexibility to uh make the choice without leaving their followers and their whole social uh Capital uh behind and then that on-chain verified Social Capital can be used in different use cases as well for example

in uh uh gaming and I think gaming itself becomes more social and those users then that come to this like non-financial utility pathway into blockchain they will start using V5 um some of them one way um or another so kind of I'm kind of like a bigger believer in this space and also I think like um a lot of things have to be done in terms of the user experience that you should you know sign transactions pay gals and you know you you should be able to onboard relatively quickly and I think we have to just change a lot of concepts for example we can't think about wallets in a way that you know we store all our position in addresses but we actually have to divide the idea of

wallets that you might have a wallet for low transaction value and you have something but you're using D5 and this year completely separate um categories and that way we create more uh adoption into the uh space as well so that's where like basically I'm very passionate about at the moment I just want to agree with stani I think that is an excellent thing that can be a massive Catalyst for the entire space yeah I would also have to agree there like just when I think about like onboarding like my mom or something into crypto right like getting her to use the logistics of them at a mask and managing you know her her own money where like one fat finger and you permanently lost half your net worth from sending it to it and the wrong address is that's just

not where adoption adoption to the masses needs to go right like people come to crypto because like the the ideas that of decentralization and like monetization people love the concepts there and it's just like okay that's fine for this certain subset of people and like we can all we all kind of know this is the wild west and like we can play by these rules uh but like with the last bull market and the terror blow up like real people do get hurt when these things happen uh so yeah I just think we need to figure out a way to make uh crypto just more accessible in general so love the concept around that so Sunny love that and uh just one quick question to follow up on like the digital identity Social Capital concept do you think that that's like uh just kind of a

bigger unlock for defy itself or do you kind of think like think of that as like a whole new market like a comparable sub sector to D5 as a whole well I think I'm like I I see identity more of a spectrum than than like kind of like that's what that that's like what lens is trying to do from the like profile perspective is just to kind of like tie your social presence into um kind of like a one bucket which becomes a bit of identity but I think like everything you do on chain uh as a spectrum is I then today and also off chain and you might have different things that you know also like are like data points of identity it might be your passport you know your your routines and

your habits uh you know the the way you communicate and the protocols you use on chain so like I think there's a lot of like footprint that we're uh living out and I I've seen some stuff like where you are using that that footprint in MP5 and region score is one funny example where you know you can get uh the experience based on like your region scores so for example if you're too new in the space maybe you shouldn't be able to access uh some of the more kind of like um risk yourself that is in uh B5 but also like finding the the products that you might be interested in or hey um the the governance proposals that you can contribute so I think there is there's definitely value in in fighting

your appetite maybe maybe that's the place to to find things guys last question here then I promise we'll wrap it up is uh just on in terms of um we had Ben Forman from parify on the last episode and he's just really really excited about permission defy and in his take permission defy will be orders of magnitude larger than permission listify um I'm just curious if you guys agree with that thesis or not I disagree with the thesis I think the magic of permissionless is that the entire world can use it the entire world can build it the entire world can grow on it you can have a D5 protocol with interfaces and businesses built on top of it from around the world like it's like so much bigger potentially than

having to essentially you know limit the audience or manually approve things or whitelist things I just think like the scope of how big something can get is so much bigger when it's permissionless and the interface is on top of it can be permissioned I think the market structure that evolves over time is one which there's open permissionless D5 protocols and the institutions that provide access to customers whether they're a bank or a brokerage or an application or the ones that are like validating permissions generally and I think that's like the end state for a lot of this to happen I think if Bitcoin were permissioned it would be worth 0.00 I think nobody would use it I think

permissioned is like creates like a claustrophobic system that like can't grow like you're stimulating the growth of it and so I I vehemently disagree with Ben on this I uh I take the opposite deal uh the like if you take us to that end state will the front ends of will the front ends of this system like well folks go to compound and go to Ave in 10 years or will they go to like the the 600 different like front ends that like just the world has built on top of compound well the front ends in like 10 years to this stuff it's like people are gonna like use compounding Ave through their JPMorgan account that they don't even know if it's like running on D fire that or like you know we were talking

about this today like you could it might not even be financial apps like you could go to Zillow and zillows plugged in directly to compound Anova and like you get your mortgage directly on Zillow instead of having to go to the bank you usually when like a consumer trades on coinbase like sometimes it comes from their order book and sometimes it comes from uniswap like whatever gets the better price and like the user doesn't even know they're using a D5 protocol like I think like over time more and more stuff is going to run on these systems without people even noticing or caring or like having to know the difference just like I don't care that I can like spit up my own email server like I just know that like Gmail is like a good way to do email like and so I use it because

it's easy eventually you're gonna have easy ways to like do finance and like it just so happens that the like the infrastructure deep down but now below is D5 do you guys want to own those front ends um as as the end of the day like business Builders and entrepreneurs do you want to own those front ends or you're like I'm just going to make my protocol as amazing as humanly possible and let the world build on top of them well I can't just say that you know like a lot of the um uh attraction comes from from different bullets and different Integrations so like it's um you know I I think the the beauty of the decentralization is that like you have multiple sources actually using these uh protocols and and that makes the the

idea of of the decentralization like nothing really stops to run a um a front end that maybe has a different kind of experience or value-added services and I think that's how um you know like uh what you think is working so you have you know the ethereum networking you can run with open source software you can run a get node but you know a lot of people use um you know like services like Alchemy or interior and also you have businesses built on top of the like open like permissionless infrastructure so I I think kind of like uh like that there can be value being built and I don't see why um why not as long as it's like the axis is decentralized and permissionless

awesome guys I think this is a good place to wrap appreciate you guys giving us uh so much time I think this was an amazing end to the season um and yeah we're all uh wishing you guys both best of luck thanks everybody thank you cheers thank you guys all right everyone other side of the episode man that episode did not disappoint Dan what'd you think it was it was killer I I really liked uh kind of how we got into some of the deeper more like ideological discussions especially around like uh uh you know as permission D5 the answer uh and I like Lesnar's take on just kind of like no like one of the core attendance of defy and I think actually Vance hit this in the very first episode of the Season uh was when you're building in defy the one of the biggest draws is the global

wallet distribution you're building products for the entire Globe like those that's your customer base and that's something we haven't really seen before uh and you know Rob kind of went into detail about how that's just a bigger value prop than building for like institutions like yes institutions have the money on a relative basis uh but you know the global wall distribution could be a pretty big Catalyst for uh kind of just broader market adoption honestly yeah I I mean I think it's just it just shows the difference between building and web 2 versus web 3 like this Relentless focus on the protocol and then just letting the market run wild and build whatever they want to build on top so Rob's kind of like I mean reading between the lines is kind of like I don't give a crap if it's permissioned or permission list or like what gets

built on top he's like I'm just hyper focused on building uh the most lend the the best performance uh most performant best London borrow protocol and anyone can build whatever they want on top of it I just thought he also had one more like interesting comment around like like obviously you know like building a defy You're Building like these autonomous protocols that run just strictly on code with very limited to no human interaction but like sometimes you forget that even like as someone who spends all day every day like reading about protocols analyzing these things like you forget that and he's like you know I just want to like build this product and I can just like step away from and like go on vacation uh just like really puts that into tone like they're like building these multi-generational protocols um that they're just self-sufficient I

again and sometimes you just kind of like forget that it's good to hear it yeah it really is I mean just like the scale if this stuff is successful the scale of it is pretty mind-boggling right I think it's I mean it's interesting like talking to investors versus talking to builders right the amount of knowledge that's uh stani and Rob have to know about what else is going on in defy uh is really interesting to try to wrap your head around right it's like the amount that they need to know about uh building in cross-chain Worlds scaling other l1s like their competitors on like how just honestly how debt markets work uh how lending and borrowing works like credit versus collateral uh it's I mean it's just impressive I think these two guys are really impressive yeah and it was

also great to hear like stani's focus on like wanting to build like ease of access into D5 right I know I gave the example about like my mom using crypto and like that seemed to be like almost a priority to him and like having how do you onboard the new class of users um and I think that's a really difficult question because a lot of the core tenants of crypto in general is like immutability and finality and like yes those are great things to like this current subset of users but it's like how do you enable that to actually be adopted by like the broader masses where like people make mistakes that's just like you have to build a product that is able to withstand those kinds of things and that's just like a super tough question to answer right now yeah I heard you

talking about this on the last episode of empire about reversible transactions which I think is a interesting topic though I'm a little uh skeptical of it but I I don't know I actually might push back on the your mom on the your mom thing on the uh on the ease of onboarding it's like I don't think people on board into anything because it's easy to use um and like Let Me Maybe I I think people onboard into a new technology because they have to use it because they're literally forced to use it right like let's take credit cards for example if you were uh like as credit cards were starting to take like to to like go mainstream um there are a lot of people who have fought using credit cards and they

wanted to keep using cash it wasn't until stores literally said you can't use cashier that credit cards became ubiquitous right um and I guess maybe even before that when stores were just like uh yeah like I'll take your cash but it's like so much easier like can you just swipe your credit card like when it just became like a norm a normalized thing but I guess that I mean I think that and I think that has less to do with um like ease of use and more to do with just like how much is this stuff apparent in your day-to-day life which crypto right now is not in you you can live you can live a full life and not interact with crypto right so so yeah maybe it's less about onboarding and then like more of his like user retention right like if I

send a trip if like my first time ever using crypto and I like type in someone's address manually because I haven't figured out there's a QR code thing or whatever and I miss one one letter right that I just you know blasted a thousand dollars into into nothingness then like that would be like a scarring moment be like okay this isn't for me and like never come back so I don't know maybe yeah maybe it's less about onboarding and it's more about like ux in general yeah it was interesting how much the conversation kept getting pulled back to just like treasury management um and like that I actually found that part of the conversation so interesting which I'm super excited about because that is the theme of next season right talking about Dow treasury management uh and like scaling Dows operating Dows

lessons from Dows um managing Dao's uh success stories like how Dows can become better off uh can can operate and scale better and that's actually the theme of season two which Mike and I'll get into soon but like uh I just I I think I learned a lot just hearing how like stani and Rob really Stoney uh in some of his thoughts on it like how he thinks about running a treasury it's super interesting especially that part about Outsourcing treasury management not because um I'm glad they agreed with my thesis they're like not because you can't do it internally but because the community almost like won't let you do it successfully internally right yeah you just get people like yelling oh you're diluting us if you know you're just trying to diverse I the treasury's

Holdings and I think Stanley called that like taking the emotion out of it uh it's a great way to phrase it and yeah I really agree with that yeah anything else any other big takeaways from the app uh getting in like the stable coin conversation I thought it was pretty interesting how Rob was like yeah I know like that makes sense in some situations but for us like we're gonna kind of we're just not focused on that um and I also really liked hearing his like take away from uh the attempt to go multi-chain and like the world just kind of like wasn't ready for it um about the world like the tech stack I thought that was like really interesting and you know you kind of think like okay is that because that was kind of like try to run through polka dot and like building on

substrate and it's like there's a smaller development Community there like does that have anything to do with it uh but like inherently yes bridges are risky like anybody in crypto knows that the experience is brutal like you bridge away and you just wait for your assets to come you're like oh what's going on here uh it's just not a comfortable experience um but yeah I know that was just like I don't know I'm excited to see if like if that really plays out and or if like the app chain thesis really does take off and we see the cosmos space just really start to grow uh in the next Bull Run there are these small decisions in crypto that you think of you know it's funny to think about like if they went the other way how different would the space look right like if compound had

chose cause uh compound had chose Cosmos instead of polka dot and had a better experience and had built their own app chain like how much more the app chain thesis would have taken off it's just interesting to think about those uh little decisions that maybe went this way instead of that way and I think the last thing that I found really interesting was Rob's description really simple framing of like real world at like I I said Real World assets and he said I wouldn't think of them I wouldn't call them real world assets eth is a real world asset I'd call them on-chain assets and off-chain assets um and basically he bucketed them into like two different big buckets one is like assets that kind of already produced yield and you just need to tokenize it like a treasury first assets that you almost like have to pull into

uh uh crypto Capital markets tokenized tokenize them pull them into crypto Capital markets use them as Supply in a in a lending platform and then that and then that's how they generate the yield so I I just love that framing I thought it was a really nice way to think about it totally agree like what do you think that like I just try to think like okay what's going to bring like this next wave of borrowers in and it's like okay let's say like the local coffee shop down the street wants to start a sec open a second store they need a million dollars to do it what needs to happen for that the owner of that store be like I'm gonna go get this loan from compound like maybe they have the assets in the bank they can do it in an over-cladalized way but they want to be

more Capital efficient and and just kind of deposit that as collateral take up the loan like what's going to bring that uh that borrower into defy I think there's only one thing that brings anyone into crypto well there's probably two things one is money um and the second thing is just a better products experience right like when you first I don't know if you remember like your first time ever trading on you to swap it was mind-blowing for me I connected metamask and traded I was like wait what like that was it like I didn't kyc I didn't AML I didn't like create an account I didn't like I have to wire funds from like my bank account I was like this is mind-blowing and I think um people are gonna have that experience once mortgages like some something related to mortgages because I don't I

don't know if you own a home uh down there in Atlanta uh but I I got my first house during covid and I got my first mortgage and it took three freaking months to get this thing because I'm a I'm a business owner and like they don't that you know if you're getting a mortgage they don't they hate business owners and they hate entrepreneurs I'll I'll just tell you that and uh and they definitely hate crypto which most of my assets are in crypto it's like I'm as risky as you can get like I own a business and I uh and uh and and most of my net worth is in crypto so it was so freaking hard to get this mortgage and I think there are a lot of people who like don't fit into the mold of what a bank wants when they get a

mortgage and that is going to like that's just a better product getting a mortgage on chain and it doesn't exist yet but but it will exist yeah I totally agree I love that answer yeah so anyways man thanks for joining me uh see you guys next week for the final episode of bell curve with Mike we're going to recap the season and give you guys the details on season two foreign [Music]