The Future of Base DeFi With Aerodrome, Morpho, and Moonwell | Livestream

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A quick shout out to today's sponsor, Katana. We'll hear more from Katana later in today's episode. [Music] Nothing said on Xerox Research is a recommendation to buy or sell securities or tokens. This podcast is forformational purposes only, and any views expressed by anyone on the show are solely our opinions, not financial advice. Pokio, Ryan, and our guests may hold positions in the company's funds, or projects discussed. >> All righty. Welcome back to another episode of Xerox Research live stream. Today joined by not my co-host Bako, but Mark Arjun instead. Uh Bach couldn't make it today. He's feeling a little down. Um and it's we're having a bit of a base day today. Um kicking things off

here with Alex uh at Dumos Labs or core contributor to Air Drrome as some of you may know. Um and we'll be following that up with a couple other bass teams later on today. But how are you guys doing today? Glad to have you on, Alex. >> Oh boy. Got to get myself off mute. Good morning. Thanks for having me. >> Yeah, all good. It's Monday and I'm ready to start the week. >> Heck yeah. Uh before we kick it into anything, uh I just want to do a quick run through. Uh Block Works, we are still hiring research data research data analysts. We're looking for folks that love to dig into onchain data, um, build dashboards, understand SQL, building and

deciphering onchain data. So, if that's you, someone you know, um, let them know, apply today. Find find the link in the show notes or on the blockworks.co website, uh, to apply. We're always looking for great talent. Um, we've hired a few people across, you know, the research team, the data team advisory team over the past several months and, uh, I think we're still looking for more. So if you're interested, reach out and we'd love to hear from you. Um, and we don't have to show any conferences. D was concluded. So, uh, we'll skip that one for this week. Uh, otherwise, I think we can kind of jump into it for today. Um, and chat with Alex here about Airrums. I guess maybe Alex, if you want to just lead things off, give give the viewers a little bit of a background on

yourself on Droos on Airrum. Uh, and we'll go from there. >> Yeah. Um, so yeah, it's great to be here. Um, great to, I guess, meet meet some of your folks in in real life. I mainly know you as PFPs on online. Uh, so yeah, on myself, you know, I think like a lot of people in crypto, very wild, twisty turny career journey that got me here. worked in politics, worked in tech, worked in consulting, got the DeFi bug, uh, you know, DeFi summer 2021.

Um, was having so much fun doing that while locked in my apartment. Just decided to quit my job. Um, had no real idea to do what, but all I knew is I wanted to spend all my time in this space learning it. uh had the good fortune right to uh start contributing to a variety of projects. Um in doing so met a handful of other very smart people uh in Discord. Um this was organized around the launch of Solidly, right, which was Andre Cron's sort of last big project, the last cycle. And um we saw an opportunity to sort of take the the model and the foundation that uh Andre uh had had built with Solidly and uh

adapt it, right, and continue to improve it and roll it out. And so initially it was with Veladrome on Optimism mainet and it quickly rose the ranks to become kind of the leading AMM on optimism and then extended across the optimism super chain. So it's now across about 11 chains and uh Aerome obviously on on base uh we were very very early uh onto bass and have been the the leading exchange on base since day one. And so Dromos right is uh I guess new in terms of being a sort of name and public identity uh but is a thing that's been around for that three-year journey right

so it's the development company uh that builds the metadex right the sort of liquidity operating system that powers both drrome and aerodrome and yeah just last week we went live um so you now get to sort of see the faces and names of this uh incredible leadership team that has contributed to both Feladrome and Aeradrome built the uh built out the sort of metadex operating system and uh we will be having a big event in New York um to talk a little bit about the future uh on November 12th.

>> Awesome. Thanks for the the background there. Uh maybe to kick things off since you talked a bit about sort of the foundations with like Solidly and the sort of v 33 model. I guess this is this is something you know we've had um you know like the Pendle founder on before um talking about his you know misgivings maybe with that tokconomics design. I guess I'd be curious from your perspective you know whether with aeromer um the various projects there whether this particular tokconomics model has like worked out for you. If you were to redo things again from you know zero would you go with the same model or or adapt a different design? it it receives a bit of you know criticism kind of broadly within the industry today.

>> Yeah. Um I think I would take uh a step back first and just think a little bit about you know dexes right and so the history of dexes right is initially you had of course bang core which took this idea that Vitalic had of this uh you know AMM which was you know at that point still a very revolutionary idea that you could bring this onchain and create these marketplaces in decentralized ways and then you had unis swap I think really perfect that that model, right? But um the unis swap side is still fundamentally a two-sided marketplace. So you've got traders um who come and exchange tokens, pay fees, those fees are paid to the liquidity providers in exchange for them putting

up the tokens that are being swapped through. And uh it's an elegant thing. I think the idea that this could just be a two-sided marketplace, but the failure of it, I think, was exposed, you know, with the Sushi Swap vampire attack. And I know that this is like almost ancient history now, so it's probably useful like to go back and remember how significant that was, but 50% of Uniswap's TVL uh was vamped away by Uniswap or by Sushi Swap in about a week. So, what did that teach us kind of about a two-sided marketplace? It's that if you can provide any degree of additional value on talk in the form of a token, you know that liquidity

providers which are the bedrock of an exchange um are incredibly mercenary and will move you know at the drop of a hat. So then you saw Uniswap of course go and introduce a token I think very much as a response to this because they had I think been publicly very skeptical on whether or not a token was needed in these systems but that was a pretty existential push and so they rolled out their own token and so now you do in some ways on unis swap have a three sided marketplace but it's kind of with one leg of the stool uh chopped off and it's something totally separate right because The unis swap token is still fundamentally just a governance token

and what it's primarily used for is um to be sold uh by team and by insiders to subsidize the costs of the system you know the foundation various contributors audits marketing things like that and you know to date hasn't had any sort of value acrruel flowback to it. So if you think about you are a participant in that system, uh your token is basically mainly used to subsidize 100% fee take that LPS can continue to have because otherwise there'd be some sort of value needed to come out of that system to sort of pay for these broader costs. So I think when we think about the BE

tokconomics model right and how it layers on to these three stakeholder groups right traders, liquidity providers and token operators right the folks sort of operating the protocol. The job that needs to be done by any system is it needs to ensure that traders get the best execution on their trades. You can only give that to traders if you're giving LPS the best reward. So that's got to be fees and some. And then you're giving operators, you know, the full current and future productive value of the exchange. And that's trading fees certainly, but there's a whole bunch of other things, right? We've shown the ability to internalize the value of incentives, which like on unis swap you'd have to go

to Merkel, like a third party to incentivize on top. We can internalize that into the system. And then most recently with our community launch model, right, which is uh basically a sort of onchain version of Binance Alpha where rather than giving up 10% of your token supply to market makers or to a centralized exchange, you give a much smaller amount to VE Arrow. Bring that value from a token launch into the system. wrap it all in the token, the fees, the incentives, the launches, and of course, there's much more you can internalize and then direct that token to liquidity providers to give them a much higher reward than um, you know, any sort of feebased decks. So, I think

for us, um, the broad strokes of the model, we have, you know, run our head against any number of different ways to modify it or change it or improve on it. And in fact, there's been like, you know, a flood of other iterations on the original Solidly model that you've seen where people think, you know, hey, maybe we've discovered some way to offset this particular aspect of it and that'll make it better. But usually what it ends up doing is just kind of breaking what is a very carefully calibrated uh system. So, um, we do think that there is a lot that can be done, but it's definitely more in dialing things in versus overhauling it

because as of right now, um, you know, Aerome is not only the second largest decks across EVM, second only to Uniswap, it's the highest revenue producing DEX by a large um, margin. Um and it has shown an ability right to dominate uh the metadex model dominate against unis swap against curve against fluid anywhere they compete head-to-head. So the mo like no deck since unis swap has shown this ability to have that sort of comprehensive uh edge and that goes I think straight to the core of the tokconomics themselves.

And so you know I don't think I would change anything massively fundamentally. I think there's a lot you could do to continue to to dial it in. Um, and I think like most of the folks who are uh more critical of it, you know, they're critical of the path that it took to get to a more like refined version of it. You know, what Curve did, what a lot of other VE systems have done. But it really does depend on things like you can't have extractive teams in there. You can't have privileged intermediaries. you have to return the full current and future productive value to the token and all of those types of things. But if you do it, I think aerodromed its dominance are proof that

it works. >> Yeah, I think that's a great point you make. Um clearly if you know if internally the goal is to you know lock and then stake the receive or you know sell this the received rewards continuously and you know not be aligned with the protocol then um your outcome is not going to be maybe the desired result that other token holders are looking for. I guess maybe as a follow-up question to that um I saw that Airdrome has started a new programmatic buyback model as well recently. Um and then I guess as part of that the the purpose there is to buy back the tokens but then lock them as well. Um I guess you know maybe you can speak to this as well like how does this play into the

model like what are the thoughts here on incorporating a buyback? Obviously buybacks have become a big sort of like broader narrative as it comes to uh value acrruel to tokens lately. Yeah, it's pretty cool. Actually, we don't get the chance to talk about this very much, so I'm excited to because as far as I know, um, Arrow is the only token that both distributes 100% of the revenue that the protocol produces to voters, right, the people participating in the system. But on top of that, about 30% of the lock supply. So that means about 30% of the total revenue gets put into buybacks and those buybacks go into

locks, right? And because locks are four years and 98% of all locks are perpetually kept max lock, that's basically a permanent remove from circulation. And so um this has been going on this sort of buybacks uh for quite some time. There's three sort of versions of it. There's uh the relays which are um you know users and protocols who've deposited their locked position into a relay and the relay votes takes those rewards autocompounds them back into arrow um locks it all as veer um there is the flight school program um which goes and buys back and locks and then redistributes the locks as a boost

to anybody goes locks their token. So if you lock, you know, you might get like a 40 50% boost on your lock, which is pretty incredible based just on tokens that were bought back. And then there is uh public goods. And public goods has always had the ability to be more strategic uh about when it is actually buying back, right? The first two are programmatic. That's just going to happen each and every week. Uh the public goods fund can be a bit more strategic. They can look at fundamental metrics associated with the protocol.

They can be looking at um uh you know overall market sentiment. They can be doing all this sort of stuff. And so the change here is not that uh these sort of buybacks haven't been happening for some time as you can see in this chart. it is that now that there's an actual sort of algorithmic you know much more sort of trady philosophy uh underpinning them to ensure that they are doing those buybacks those locks um at the most optimal times but the net of this is very cool right because if you think about the top 50 tokens um about 90% of them don't pass on any yield whatsoever and this is a model right that not only

distributes 100% of the revenue But then on top of that, there's this extra 30% putting that buy pressure, lock pressure right back into it. And so I think it's like very very differentiated, especially when the standard is your tokens are sold. Great points. Um that makes a lot of sense. I think um great coverage of sort of the broader tokconomics and and kind of revenue model there. I guess maybe in the context of aerodyum is sort of like a leading venue on base and maybe the relationship with Coinbase there. Um you

know Bass and Coinbase, they've they've sort of been slowly starting to integrate onchain products sort of into their broader strategy with the exchange and the and the Coinbase app. Uh I'm guessing I'm I'm curious if you guys have seen a material change. You know, I think one of the bigger changes was Coinbase integrating DEX routing on Bass natively into their app. Um, so curious if you've seen that, you know, impact air drum trading volumes. Um, maybe the CB assets as as a piece of that. Um, broad thoughts there.

>> Yeah. Um, yeah, maybe separated out. I'll hit the CB assets portion first because that has been incredible, right? Um you know uh Aerodrome now hosts not only the top wrapped ETH pool uh anywhere in DeFi uh but the top Bitcoin pool uh onchain Bitcoin pool right anywhere in DeFi and the top FX pool right in EURC to USDC anywhere in DeFi and we're seeing the rest of the sort of class of CB assets CB XRP CB Doge um continuing to sort of grow in their uh adoption and we think this is super powerful to make you know

base and error drone the sort of top venue to trade all the best assets um at the best rates um that to know that the asset that you're trading with right on these majors is one to one on Coinbase they're just incredible products and yes we've seen a lot there and we think there's a lot more uh growth to go to bring every top traded token to base and to deliver the best trading execution ution um on them. The other side of that though of the sort of DEX integration, I mean this is the sort of thing that we've been talking about in DeFi for a long time, right? that the promise was that you could build um incredible new decentralized tools and and platforms,

dexes, lending markets, things like that that unlocks primitives, product services that uh are not possible in Trapfi or at least you can even deliver them much more efficiently um than what they can deliver in in Trafi. And with these sort of integrations, we're seeing the first uh like literal expressions of like the DeFi mullet, right? This is Tradfi in the front. This is DeFi in the back. And it is like mutually beneficial to everybody because um for Coinbase, they get to now offer to their customers products and services that they would never have been able to deliver themselves in centralized ways or at

least it would have been very costly. might have in uh invited a lot of legal and regulatory overhead, all this sort of stuff. They just get to be the distribution arm of these amazing things um like Dex pools um like the uh Bitcoin lending product and things like that. And I would expect we we see a lot more. And then on the DeFi side, our protocols now get a level of distribution that is frankly unprecedented because while it might feel like there's maybe a lot of people in DeFi, uh, relative to 100 million Coinbase users, I mean, it's it's nothing. And to have now any token that trades on Aerome available to every customer on Coinbase or at least it's

not fully global but all US customers sans New York and continuing to roll out um is like a massive increase like orders of magnitude in the access that people now have to our protocol to all the tokens that launch there. Um two observations from it so far. Um, one is, uh, we're definitely seeing trading volume from Coinbase increasing, uh, but it's, I think it's slow and steady right now, um, in the sense of, uh, they've just completed the roll out. There's not a lot of work that's been done yet around sort of discovery and helping people find these things and stuff like that. And so, I think we're just in the earliest days of seeing their users, you know, adopt and tap

into these things. Um but I think what we have seen on the other side that has been an order of magnitude change is the amount of inbound interest in coming and launching and deploying on base and on air drone because just think about this for most folks who have been building right and launching tokens and that could be any form of token that could be utility coins, governance coins, it could be memes, it could be creators, it could be like whatever it the like pinnacle, right, or the the big threshold so many people want to hit is gosh, I want to get it listed on a centralized exchange one day. You know,

I will know I've really done good work, you know, if I am trading on Coinbase, on Binance, etc. And what this integration gives to these projects is the ability to get that distribution in just a few clicks, right? you just show up, you deploy on on aerome on base and you are trading in the coinbase front end. Um, and that has meant that we have seen a massive influx of projects. These are projects from other ecosystems who are looking to bridge their stuff over to base. Um, we've seen an influx of projects that were thinking about launching on another network now wanting to do it on base. And I think it makes a

ton of sense because that that is just a level of distribution that is so differentiated that it's very difficult I think for other chains and networks to compete with it. Um and uh yeah, so it's been crazy. And then you combine that with our community launch model, right? And this way that you can sort of launch your token um in a fair launch way, right? At 10x the efficiency of traditional sort of centralized exchange um offerings here and still trade on a centralized exchange in day one. And it's just been kind of overwhelming amount of demand. And I think you'll continue to see that in like the coming months. Um, with all the folks sort of bringing their tokens over to base,

>> I'm curious with with with that increased distribution, do you have any insight into whether it's coming more from the retail or institutional side or is it still too early to tell? >> I think it's still too early to tell. Um, I think I would love to see, you know, deeper and better analytics on it. I've given given that feedback to the the Coinbase team. uh quite quite a bit and understandable why maybe they want to keep it a bit close to the chest right now. They want to make sure nobody's gaming things, stuff like that. But um I mean I would expect that most of the initial push here is is around retail access, right? Um, but over time I would definitely expect like I believe

their self-custodial wallet or the smart wallet that is now basically the backend of you know Coinbase users being able to uh tap into these things is also integrated into their institutional products. So I think the vision is Coinbase becomes the everything exchange and it's not just even the coins we know today but this is how I think Coinbase in a compliant way brings their customers uh tokenized stocks, equities, real world assets, you know, and they will want to offer both their institutional and retail customers access to these things built on DeFi rails.

>> Yeah. Awesome. That makes sense. And my followup was I'm I mean I I love the D5 thesis. I've been a believer in it for some time and I love to see it playing out in real life. Um, but to kind of, you know, maybe throw a little wrench here. Um, is there a risk to this defy with it? Like, you know, they normally say you control the users, you control the flow, you control the margin. Um, you know, maybe, you know, Coinbase can go a different way, they can integrate other partners, like you know, maybe Aerodrome Aerodrome wants to build out its own distribution. Like, you know, talk me through on that.

>> Yeah. Um, so it it's interesting because if you think about traditional listings, um Coinbase had to invest, you know, unbelievable amounts of time, energy into every single listing, right? They could list thousands of tokens. Um, they could not list millions of tokens. And if you think about the collapsing life cycles of tokens, even if Coinbase on a Sunday calls in the entire legal compliance, onchain team, listing team to like get something done, you might have already missed the primary window whereby that asset's going to be a really great one to trade on your exchange, right? So on one side of it, I think this is great for

Coinbase because a centralized entity is never going to be able to keep up with the pace of permissionless issuance. Um, and a centralized entity is never going to want to take on all the risk of all these types of assets that is unlocked by these permissionless rails. And so for Coinbase, it's best of both worlds. You get to increase by several orders of magnitude the number of products and services um you can distribute to customers. you can take the same amount of fee on top as I think Brian has said that they will be doing like on DEX trades um while uh also you know just growing massively what you can distribute right um so that's definitely a win for them u but I also think it's kind of a cool model for uh base because

they're also going to earn at least something on every bit of the sequencer uh revenue produced as a portion of distributing these onchain rails And when that flow hits Aeradrome, they've got a locked token position. Coinbase Ventur's largest liquid investment that I know of was their purchase of Aerrow tokens on the open market and they've locked those tokens. So they have a claim on the fees generated by flow that hits us through their own front end. So I think there's an argument on that side that uh they actually have a model here to uh grow um their basically margin on all of this activity while growing the amount of activity that they can uh

generate. But then on the other side, I think there's the contrast of somebody like Uniswap who they would be the example. They do want to go out there and fight for the distribution, right? They monetize their front end. So if you're not using their front end, the labs entity doesn't make money. So they're competing with Coinbase. Um they're going to be compete competing in essence with Robin Hood with anybody else who wants to play here. They also have a competitive wallet product. So they're competing with all the wallet providers and the you know frontends and they now have a chain. So now they're in a competitive position with you know all the different chain ecosystems they previously supported. I think our vision is that there will be a lot of DeFi mullets and we want to be that sort of

neutral infrastructure layer that is distributed by all of them and that we will like maintain our edge by ensuring that we are always the venue that provides the best execution um for them. So we are the natural layer for them to tap into. And also by the way, you know, just like Coinbase, any of them can come take a stake in the the protocol, right? And participate and earn rewards in the same way as anybody else while still maintaining its neutrality and all of that sort of stuff. So I think it's the best of both worlds on both sides. It's difficult to see um you know who wouldn't win here or in collapsing it you know if it doesn't have more cost uh than gain but yeah I

think it's very important for us to not try to compete with the distribution layer we want to enable every distribution layer >> I I really love that answer um the existing synergies with base with coinbase the way the neutrality of the layer plus the framework of the other competition on distribution layers is what kind of like sets this DeFi wallet up for longer term longer term success. That's great. Thanks. >> Yep. Great points overall and I think you know we're seeing more teams lean into this obviously Coinbase but you know we've seen Binance experimenting with this with their Binance Alpha Launchpad and other integrations with the onchain sort of trading ecosystem.

So uh I think it makes a ton of sense. Um well we are out of time with you Alex but uh I guess if you want to give one last shout out to uh any of the the teams drumlabser drrome drrome um where can people find you? Oh. Um, you can find me. I'm WGME Alexander on on Twitter. You can find Veladrome Aerad Drrome Vi on Twitter, but then uh yeah, Dromos Labs. And uh if you haven't already, if you are in New York, uh definitely check out our announcement and RSVP for the big event. We've got some exciting stuff to share. So, we hope you're there and if not, we will also be live streaming it around the

world. >> Awesome. Thanks so much for coming on today, Alex. appreciate it. >> Thanks so much, guys. >> Have a good one. >> Uh before we pull in, we've got Merlin from Morpho joining us here in a second. I want to do a quick shout out to our sponsor for today's stream. Uh quick shout out to Katana. Katana is an L2 built for DeFi and is pioneering the ecosystem category of productive TVL, believing that change should be graded on how efficiently assets are put to work in DeFi rather than just total value locked. From now until the end of November, users that bridge to Katana can earn boosted yield from CAT incentive campaigns, added vault bridge yield, and other chain revenue. Follow the link in today's show notes to get started.

All right. And I see we do have Merlin here joining us. Thanks for coming on today, Merlin. How are you doing? >> All right. >> How are you? >> Great. Uh glad we could have you on for a bit of our uh kind of base base coverage episode today. Uh representing Morpho. Um I guess if you want to kick things off just give us some background on yourself and on Morpho um to get things going and we'll go from there. >> Right. Um background on me I don't know we we started uh we studied Moro during the our high school uh something that so we we started as students in our dorm rooms. Uh we spotted some in inefficiencies in D5 protocols at the time in the learning space and so we

started working on that. uh we raised a first round which allowed us to um actually pay for the audit and the legal aspect which was a crazy amount at the beginning and because we were student we had like we had no money at all. Um so it allowed us to to kickstart that and we created what we called at the time morpho optimizers that were that protocol on top of existing landing pools and um actually we reached like two billions while it was like in the middle of the b market. So very uh very high growth but we realized that landing pool were had like a many many inefficiencies and tradeoffs and so we realized hey let's let's start our own

landing protocol that was fully independent and that that fixed all those issues. Um and this is why we we we build moral moral v1 and now has uh 13 billions of total deposit across many different chains. Um especially base which is maybe the second uh this is the second largest uh instance of the mofo protocol. So that's it uh that's it in a few lines. >> Gotcha. Um, I guess more recently this year you guys announced Morpho V2 with fixed rate fixedterm loans. I guess I'm curious any thoughts you have there on sort of the initial roll out like usage

um and where you're thinking about that product kind of longer term. >> Yeah. Um so I think so for v1 is quite different already from like existing lending pools because you have isolated markets um and you have this lending primitive where you can create permissionlessly create any market that you want with any collateral any loan assets and on top of that you have vaults that are managed and created by risk creator how we call that and each creator can create their own vault that target a specific risk profile and so you can create different um resistiv for instance one that is low risk low rewards and one that is high risk high rewards so it's very different from the

one size fits all model of a landing landing pool so uh the cool thing is here you can like the risk is a spectrum and then that is continuous so you can really cater to many many different risk profiles um there are some caveat is because market isolated you there's some like a uh liquidity fragmentation around that that we solve in some ways but it's not it's not out of the box um and in a world where there's I I don't know thousands or even millions of tokenized assets reward asset that are tokenized equities that come on chain etc you you have the intrusion that if everything is isolated uh you have a lot of uh

liquidity fragmentation and if you put everything in one one single protocol Then if user are exposed to that it does not scale it will blow up at some point. Um and with V2 actually what uh what what we're it will be an intentbased protocol with fixer fixed rate fixer and the intentbased things uh means that you don't have liquidity fragmentation anymore because as a lender or a borrower you can express to which asset you want to be exposed to and you don't have to commit into one specific market but you say okay I'm a lender I want to lend against every instance different via uh flavors I would say of BTC let's

say or maybe I want to expose to this specific asset or only to people that have ki one two but not three and you can just express the this intent you don't have to commit your capital and whenever there's someone that match those requirements then the liquidity is lent to that person so that solve a lot of the problem that that defy is facing currently where you can see like some protocol that needs to deploy totally different instance uh just because it's reward asset focused or um anyway so that's for the the intentbased design and there's the fixed rate fixture uh fixed rate it's because I mean there's a

lot of demand for that usually if you using trify rails it's usually fixed rate uh rate at least for on the for Boring side and this is a huge demand and in fact it's a very nice primitive to have on chain and it makes the whole mor design much much be better and efficient. So that's why we have the fixed rate and fixed term is um if you have fixed rate you always have fixed term else that means that the the rate can can will change at some point. Um yeah yeah I think that's like you mentioned in chartpie there's it's always fixed

rates that's something this space has been missing for some time. We we we need fixed rates to kind of have like set the the interest rate market and to build derivatives and more more useful and complex um instruments on top of it. Just very briefly, can you maybe explain to the audience how you achieve these fixed rates like as opposed to how they were done in the past? >> Yeah. So first I think that one in any businesses there's one thing that is super important is timing your solution with the maturity of the market.

So at the time like um I think there were very early experiments of fixed rate in a space where people were not super u proficient and mature enough to understand the product and and deal with that and there was not enough liquidity etc. Um and so the instant having instantaneous experience um that you had uh with the first landing pool design was insane. It was an insane improvement in type of UX. You can you could deposit and withdraw at any time and and everything was super smooth. You you had like just one button to click. Um so and MO optimizer at the time had the same experience. uh the the the value prop at

that time. We were saying like same risk parameters um same experience but better rates and it it was just a whole thing but we realized that it won't scale to all the I mean to all the opportunities that are currently in the world and so we need a way to scale it and and this is why we moved to the uh to move for v1 um but obviously it was still viable rate because it's it was still the the easiest path to build that uh but now we have creators uh I mean the the the word creator was kind of coined by by by by morpher team actually and and now we have all those kind of risk creator risk

managers that are coming on on chain and that they have like built a knowledge and also some are from the trifi space and they're bringing that on chain um and so we have like much more professional and mature teams that know how it works and they will be able to apply all their knowledge not in a try fairy world but in defy and that will makes like dealing with fixed rate much much easier because instead of having the user to oh I need to roll my position or those kind of things people will just deposit into a vault and this is this will be the creator that will roll the position take care of the

liquidity management and those kind of things which is quite complex X if you're not if you're like a user even me I don't want to to to do that job it's it's completely like a risk creator job >> so in essence like curators end up sort of pricing out you know a lot of the terms for some of these fixed rate fixed term vaults basically and then users can choose to >> yeah exactly so you can like as a lender or bore you cannot be on on both sides so you can take offers so you can you check the book and all the offers and you can take uh whatever the which one you want but you can also make offers.

So you can play on both sides and and be maker or taker. Gotcha. That makes a lot of sense. Um I guess maybe maybe as part of this I think um you know obviously a lot of Morphos's growth we've seen as a result of integrations and you know the Coinbase base one is is probably the largest to date. I would guess the Coinbase rolled out >> uh lending BTC uh through the Coinbase app but then it you know interacts with Bass and Morpho OnBase um to do that. uh I guess from your perspective like can you talk about the impact of that integration like where you see that relationship with Coinbase and Base

going longer term? >> So first I I think it was kind of a zero to one in the DeFi industry in the sense that and and you were talking a bit earlier about the DeFi millet etc. And this is something that we're strongly pushing because we think that if we want to grow the pie and we want to grow the the DeFi space, we need to bring more like the the trifi or at least the the retail users liquidity on chain and to do to do so of course they can set up like I don't know ledger wallet and and take care of the seed phrase etc. But mo

most of of those users like some of them like they don't care. They just want a super nice UX and one click button and get access to the best yield. uh because at the end of the day this is the only thing that they they care about is I don't know like protecting their p purchasing power and we think that the defy mullet is kind of the Trojan horse to um put more more users into the defy space and how to do that is by providing that UX that insane UX that is already provided by usually fintex in the world uh neo banks and and and and just as as as fintex they have an interest into integrating defy because you can provide

better rates you don't rely on banks or try rails so you you can own better own all the the stack and the products um also from an operational cost perspective it's it's way uh way cheaper so you can take more margin make more profit and all of this uh at the same time providing the best product to your user. So there's a real real interest on the fintex side. For the user, it's better because they have like better rates and for the defy it's better because deeper liquidity means better rates, better price, etc. And with Coinbase, even though it's a centralized exchange that is cryptonative, etc., A

big part of their strategy is actually to provide a very nice user experience through them uh the the Coinbase main app. And this is why it was super important is because this is the biggest integration of like a very um fintech like experience with a D5 protocol in the back end with no intermediary between both and and that's just create that that just created a playbook uh for I think many many more uh integration that have happened following that but also are in the pipe.

Yeah, I guess can you speak to maybe some of those other integrations or sort of how you're thinking about that growth playbook like from here? Is it I know morpho has been deployed on you know a bunch of EVM chains. So I guess how are you guys thinking broadly about you know growth of the program? >> Yeah. So maybe I can talk you a bit about the playbook first. uh actually where so Coinbase they started integrating the the borrow side but usually uh integrators will actually deploy on the earn side and then integrate borrow while Coinbase did the opposite but both works and the cool thing that you can do if you create those two products like borrowing against a collateral and lending um in their case it's USDC um now you can lend

USDC and borrow USDC against Bitcoin. And the cool thing is that the the USDC that is lent by by their their users is directly lent to other users on Coinbase that wants to borrow uh Bitcoin um sorry borrow USDC against their Bitcoin. So you see that it creates a very nice flywheel where the supply uh just like feels the demand and everything is like internal internal at Coinbase and uh it's on base. So it's it's just like grow the their um their network.

So it's very nice and there's a lot of uh fintex or centralized exchange that can exact do exactly the same thing on mofu on on bay or on over chains and um and by the way on bay you see like over um so there's a cryptonative fintech that is called deb block that has integrated more for on base and they are lending us and because there's such demand for boring USDC on base thanks to coinbase users there's always like a very high rate uh just for to provide like some figures I think there's 1.5 billions of bitcoin as collateral uh from coin to to borrow almost I don't

know maybe 1 billion and on the earn side it has only been like shipped like one or two month ago one month and there's already 300 millions so you see that there's a lot of retail users that actually were just on the surface exchange that are actually performing on chain. So there's real demand from from users. Um and and so this playbook can be repeated on any chain or or the same chain to benefit from the liquidity that is already there. Um and it is quite simple. It's now now it's super simple to integrate moro. Um the var are following like a well-known standard. Um

and there's also abstraction if you're using like I don't know wallet providers like privy uh gelato those kind of things as a fintech or centralized exchange which many do now you can have like native integration so it's actually having like maybe toggling a button sometimes uh to enable those kind of uh experience for their for their users. Nice. Um Merlin, you mentioned, you know, timing the release of products with the maturity of the industry and we we you know, we've seen more go from like modular lending integrations in the front ends, vault creation, um and then having with with these fixed rates. Something else to mirror the TRFI

analogy is un or under collolateralized lending. Um do we you know do we see that in the future um as a mor product and if so maybe when? >> So actually with MO for V2 you can you can do underaterized zones. Um we have a few teams that were considering using their own stack to do this and now are considering building on MO for V2 because because they will have the whole infrastructure and they can focus on actually okay I have some specific CL type of clients so it could be entities businesses uh in this case it's quite easy uh but it could be individuals individuals so they must have maybe a

credit score or maybe it's like for mortgage loans etc. And in we in every cases you need some very specific knowledge about that which is something that I don't think mofo will work on it. So because we are more here to provide the the the infrastructure the credible neutral infra that will empower everyone to build their own use cases but will happily help them like build on top of Mofo and and um I think this is more the way we'll we'll envision that those kind of partnerships but this is definitely in the pipe when it will be released I think maybe just

soon after MOF launch. I I I I I can't commit and and say it really depends on those teams, but I know there's a bunch of them that are working on mofo and and thinking about using V2 to and leveraging V2 uh for for that. And it would be super nice because I mean we haven't seen PMF on that sector. Why? It's it's a very large um uh part of the financial system right now. Um but um so of course it will come on chain. When is is more the question.

>> Okay. Love to hear it. Thanks. >> Yeah, maybe uh getting out of the product a little bit and to the Morpho token a little. I'd be curious on your thoughts. I I think it's pretty clear you guys are optimizing for growth today. Uh I know Morpho has a fee switch but it's I believe not active or you know not turned on yet. But I guess how are you guys thinking about maybe some eventual transition from you know pure growth to like a value acrruel to the Morpho token. Um I know that there was uh you guys made an announcement maybe a month or two ago about changes to how you know the foundation and ownership of the token is is handled. Yeah. Sort of like set path for that. But any thoughts you have?

>> Yeah, I think you mentioned that the d the dissolution of uh the the labs entity is is that cor Okay. Um yeah, so it's because we I think most pe most teams are advised to do that that kind of setup. U there's a lot of uh it's quite recurrent in the industry where you have the foundation on some uh on one side and the labs on the other side. I think we're going to see that a merge of um everything just because from like an efficiency point of view, you don't want to like split I mean you don't want to split the engineering part of the business part for instance. uh even though they're

kind of doing different things, they still need to coordinate and and to coordinate having one single entity is is way more efficient and you can go way faster and be more much more successful which is better for for everyone. Um so I think we'll we'll see like a uh like some entities to merge merge again and this is something that um on our side we were we we had the labs um and we decided just to remove that labs and to uh only have one incentive which is the token value and that is the incentive that should drive everything um uh for

everyone in within the the the mobile apps but also has a token holder. Um you you you're sure that everything everyone is in line. Um so that that's why we uh decided to do that. So and the second question was when are we going to come from like a growth mode to a more like a uh revenue generation mode? it was it the the question? Well, the DAO could decide to to activate the the fee switch. I I personally don't think this is the right time. Um because even DeFi is in growth mode. Uh the the whole blockchain

ecosystem is in growth mode. And if you check like the major the the biggest companies, most of them like for a long time did not really generate revenue and they focused on growth and once they had the whole market then turn turn on the fee uh or like whatever was the business their business model and at that moment I think we were quite pretty early. I mean, waffle labs is is only four years. Um, and I think we won't see the the the whole financial system fully on chain before like maybe in 10 years, 15 years.

It can take a lot of time. So, of course, there will be maybe trillion trillion dollars before, but the the financial system is very very large. We're just like a drop in the ocean. and and so I would focus on growth um for I still still like a few years maybe but any anything changed as well so maybe in two years I I would have like uh another another and and yeah and yeah I think that it's the right moment to turn on the the fee switch.

>> Yeah I I think that makes a lot of sense. Um I think your point about you know the it's a common theme to see the sort of split between labs entity and the sort of token organization um that's that's kind of a sticking point I think for a lot of a lot of protocols in the space. So uh great to see you guys take that step. Um I get the comment around revenue is really just you know I think we see a lot of teams trending in that direction of you know wanting to get to buybacks right away. So just curious how you guys are thinking about that and you know if you feel any pressure from the market basically.

>> So from the beginning you know that there were there was a a lot of um uh discussions around oh how how should you set up a the governance framework? Should you use v uh tokconomics uh should you use another another system etc. And at at some point we realized that we were spending a lot of time researching those design and and trying to say whether that we should create a staking module etc. Why? In fact, if you think really think about it, the most important thing is the product. Um, and it's the protocol itself. And we were okay, we just need to build the best

protocol of the whole ecosystem on our u spec specific sector and be the very best at what we're doing and then liquidity will come and and and user will come. of course with like business um doing business etc and and not just like releasing the protocol like this there's um but but really focusing on trying to create the best experience and the best product and and and that for retail users to very large asset managers in the space will I think bring a lot of people to to mul and that will drive value to the token and we thought that it's the best way we

can we can uh we can um yeah provide value to to to the token instead of trying to have like the best governance system that is yeah we'd rather focus the the resources on what where where it matters most. >> Awesome. I I think that makes a lot of sense. Um we got a couple minutes left so I guess I'll leave it open to you. I'm curious like what are your thoughts um just going into the future you know next 6 12 months with Morpho what are you excited about um looking forward to expansions products what do you think right now >> so yeah Moro V2 you we already talk about that I think we are

I I can't talk about it but I I think we're going to see actors that haven't been do doing much on chain to do stuff on mofo and I think it will be another zero to one the same way that coinbase was a zero to one for the defamlet I think we'll see defulled from institutional like coming on chain and and and also very large financial infrastructure that coming on chain and and do stuff um this is why I'm super excited because it will just bring defy propuls defy to another um totally new space and I think this is super exciting to see.

I maybe one more thing for you. Um I have seen some lending teams I guess maybe Camino is an example where they've they've leaned into sort of additional verticals like they have a swap product now um and are maybe kind of eking their way into into some different you know not quite lending specific products or markets. Um, is that something you guys are thinking about or are you still very focused on what are all the lending opportunities available? >> One, one of our value is um laser focused. So, and I I I said it earlier, we want to do one thing but do it perfectly and we want to be the best at this. At the moment where we you try and you start building on another protocol that means you need you have to dedicate

other resources uh which cuts resources from the the major pro protocol and product that you were working on. Um so this is not something that we we want to do. Uh we'd rather partner with like great protocols that are doing this uh already. So you mentioned like swap. So for for instance Dex is um you we could work with iod for instance or or unis swap and and I think we'd rather do that because they are the best one in their own category and if you take the best then you can do like ma magical stuff and I think it's much

more exciting and also like less time consuming so that we can focus on really what we we know um and and And also it avoids having like multiple competitors. Um so no swap, no stable coin, uh no perh just landing and and be the best one. >> Gotcha. Okay. So no purpose farming campaign makes sense. Um I guess I'll leave it up to you uh to close out. Where uh where can people hear more learn more about from you what you guys are doing?

>> So website mofo.org. Uh the Twitter is Mul Labs. Um and uh my Twitter is Merit Merlin. I don't know how to to say that in in English. Um but uh but yeah, you can uh you can follow us on Twitter and you you you'll see us at some point. Anyway, >> awesome. Thanks for coming on today, Merlin. It was pleasure having >> Thanks. Thanks, Denny. Thanks, Mark. It was a pleasure. Bye. Bye. >> Cheers. >> Bye. >> All right. Uh before we jump in, I know we've got Luke joining us from Moonwell.

I'm going to do one last shout out to our sponsors for today's stream. Uh quick shout out to Katana. Katana is an L2 built for DeFi and is pioneering the ecosystem category of productive TVL. In just two months, Katana has surpassed 500 million in TVL with over 90% of that TVL being productive in ecosystem apps like Sushi and Morpho. It's kind of funny. Uh, from now until the end of November, users that bridge to Katana can earn boosted yield from CAT incentive campaigns, added vault bridge yield, and other chain revenue. Follow the link in today's show notes to get started. As well as Allora, AI is fragmented. Every team is scrambling to pick, swap, and manage LLM models that can't keep up. Allora changes that. Instead of choosing models, you set your goal. And Allora unites AIS into one smarter system. The result, a new AI standard. Predictive

intelligence that adapts in real time, outperforms any single model, and gets better as more people contribute. From powering DeFi strategies to nextgen AI agents, Allora is the intelligence layer of the future. Learn more at XA Allora Network. All righty. Thanks so much to our sponsors. Uh let's jump back into it. I know we've got Luke here just joined us in the lobby. Thanks for coming on, Luke. Uh founder of Moonwell. Um and Mammo as well, which we'll get into. Uh glad we could have you on as part of uh we're doing a little bit of a base day today. Um just spoke with Aerodrome and Morpho team members. Um, I to kick things off, I guess if you can give us some background on yourself and Moonwell. Um, you know, where you came from, what you guys are building, uh, and then we'll go from there.

>> Sounds good. Thanks for having me today, Danny. Uh, Mark, it's good to be here. Um, by the way, I hope that, uh, my connection holds up. I am, uh, currently commuting into the office. Uh, and I'm on like a Wi-Fi hotspot. I'm in the back seat. Don't worry, I'm not driving. So, um, anyways, I just wanted to, um, thank you for having me and, um, yeah, so my background, um, I worked at Coinbase for a few years, helped launch Ethereum staking rewards, as well as a bunch of other staking products. Um, and that was my first foray into crypto professionally. Um, since then, I I founded Moonwell in early 2022, and we've grown to be uh, one of the largest native lending apps on the base network.

We currently have two different types of money markets. One is a multi-colateral that is very similar to a or compound where you can supply any collateral and borrow any asset. Um and we're really proud to support some of the best based native assets like Morpho, like Arrow, like virtual uh as collateral. And then uh the other protocol, sorry, the other type of markets we have is our isolated markets built on top of Morpho and we curate vaults um on the Morpho ecosystem. Um, you just had a chance to talk to the Morpho team and uh, you know, we couldn't be more excited about curing curating some of the top vaults on base, including the Moonwell flagship USDC vault that supplies borrowable liquidity into Coinbase's uh, Bitcoin

borrow product uh, that's built on top of that. Um and then you know more recently we launched the MAMO agent which is a personal finance agent that helps you you know uh learn about crypto and uh earn a higher than average uh savings rate by supplying borrowable liquidity to those those uh USDC borrowers on Coinbase. Um you know really excited to kind of talk about how the MAMO agent makes um using crypto easy for onboarding and also helps you autocompound your your gains. Um but thanks for having me and glad glad to be here.

>> Yeah, glad to have you on. I guess um I'll ask first since I'm curious maybe the um I believe if I'm not mistaken you guys originally launched within the Moon Beam and sort of like Polka Dot ecosystem and I guess I'm curious you know transitioning or like you know expanding into bass um maybe a year two years ago or so now um what sort of you know spurred that decision and um you know leaning into the bass ecosystem and you know obviously that's been successful for you but just curious how that transition played played out and what what you guys were thinking and um you know how you're thinking about that change now.

>> Sure. Yeah. When we first launched in early 22, we were launching on the Polka Dot ecosystem as you mentioned and our thesis for Polka Dot was that at the time DOT was a $30 billion collateral asset. So we saw the opportunity to basically be um you know the primary primary lending protocol in the Polka Dot ecosystem. Um now that opportunity didn't really pan out as we expected. uh DOT is not no longer a $30 billion market cap collateral asset. And so when we learned about um Jesse launching the base network in early 23, we decided to pivot to the base ecosystem. Um so what we did is we made the well token uh multi- chain and uh we upgraded our governance system so that we could

govern the uh base protocol as well as launch on you know OP mainet uh optimism and uh that's been a pretty good success for us. you know, it took us a bit of work to kind of launch what we call Moonwell V2, which is, you know, the current app that you see today. We still support Moon Beam. Um, but, uh, our primary most of our liquidity, over 90% of it is on the base ecosystem and then most of the rest of it is on OP mainet. So, it's been a pretty successful pivot for us. Um, you know, being uh, early to base really helped us. I think uh we were there a few weeks before the aerodyorm team launched and uh you know it's been really excited exciting to grow alongside um you know the entire base ecosystem and you know kind of be the first to to launch a lot of these

native base assets on our lending protocol. I guess I've kind of been asking everyone this today, but uh curious your thoughts here as well, but we see this with with Arrow with Morpho the and the the base and Coinbase is kind of leaning into this DeFi mullet playbook with various products. Um curious if that is something that you guys are thinking about with any of the products that you're building and rolling out. Um and maybe how you know integrations into base or Coinbase products uh kind of might come your way in the future or be like positive catalysts.

Yes, absolutely. We already participate in one of the DeFi wallet products, which is the Coinbase Bitcoin borrow product. You know, if you open the Coinbase app on your phone and you scroll to the bottom of the main page, you'll see borrow against your Bitcoin. Um, our Mortho vault, uh, the Moonwolf flagship USDC vault supplies some of the USDC liquidity into that DeFi mullet product. And the way it works basically is that, um, you know, you can take out a loan against your Bitcoin um, on Coinbase. Coinbase actually wraps it as CBBTC uh creates a smart account wallet for you and supplies it on the base network into a morpho isolated market and then allows you to borrow USDC against it. Um you can borrow up to 86% loan to value and you repay it on your

own terms. Now the thing that makes that possible obviously is the um the Morpho primitives. Um but we're really proud to kind of be one of you know half a dozen or so vaults that supply liquidity into that market. And then Coinbase just launched a new product called Earn uh which allows you to kind of supply um USDC liquidity um through a vault. Now that vault is currently being curated by stakehouse financial uh but we are uh keen on getting our own vaults into that earn product as well uh because that kind of allows Coinbase uh users to provide both sides of that uh you know that lending opportunity. You can either borrow against your Bitcoin or you can supply the borrowable USDC coin liquidity. And I think that for those of us that have been early to Bitcoin and

Ethereum, um we understand that, you know, the most durable use case in crypto really is borrowing against your coins. Most people that are holding Bitcoin for years, um since it was, you know, below $100,000 don't really want to sell it right now, want to keep holding it. Uh but they also want to get liquidity so they can, you know, buy things in the real world, maybe get leverage to uh go long uh or run advanced trading strategies. And these DeFi mullet products allow people the opportunity to do that. And then uh the third thing we're participating in is really the onchain swaps that are coming to the uh retail app. So you may have heard of this. Um it was announced at the uh state of crypto summit in New

York a couple months ago. Um Coinbase announced that they're launching onchain swaps using dexes like unis swap and aerodrome. Uh and that allows 100 million plus monthly active users in the Coinbase retail app to actually trade or swap any token on base. Um now uh you might ask how do we participate in that ecosystem? Well, the Mamo agent actually is marketmaking on a lot of these um high volume high liquidity pairs on the Aerodrome decks. Um, if you look at the Airdome Dex and go to liquidity section and just type in Momo into the token search, you'll see that Momo agent is actually providing liquidity in about 19 pairs. And uh the mama agent actually has a custom smart contract system we call the um burn and earn or transfer

and earn system that allows us to kind of take that liquidity uh position that LP token and put it into that custom contract then redirect all the fees generated by uh trading activity on that liquidity provider position to the MAMO um depositors. So, um, that's kind of a unique way that, you know, Mama Agent can kind of earn marketmaking fees on the base network and we're really excited to kind of lean into that as Coinbase expands that capacity that the onchain swaps and rolls it out to more and more of their users and uh, starts to market it. We have a really strong thesis that uh, you know, there will be a lot of trading activity on base and you know, we want the MO agent to capture a percentage of that as a market maker.

I I kind of wanted to I we're going to dive into the Mamo agent a little bit more, but I kind of wanted to rewind a little bit and ask, you know, you're having such great success on base relative to to Polka Dot. Um, but and with the especially with the DeFi Mullet integrations, but I kind of wanted to ask, were there any other tradeoffs to moving to base that you saw and like how did the community take it? Because I know a lot of other teams are thinking about making this move as well. >> Yeah. Um I would say that it's been a really nice uh jump to the base ecosystem because there are so many infrastructure pieces that are available to you. Um you know for example um all of the uh things you might need to launch a product on base whether it's

DeFi product or more in the creator space are there. For example we needed chain link price feeds. Uh they're available and almost any pair you can think of has a chain link price feed. Um also just infrastructure like uh you know ether scan or base scan if you will um tenderly for doing simulations all that infrastructure exists um and it's quite robust um where where I would say there are challenges is really around liquidity and I think it's because um you know in general Coinbase tends to have really good CFI liquidity but they're still learning how to get you know D5 liquidity and it's challenging sometimes to compete against ecosystems like mainet um where there is you know

over hundred billion dollars of tbl on Ethereum mainet and so you know you have to kind of take a longer term thesis like we do that um you know over time there will be you know trillions of dollars of stablecoin liquidity on the base network mainly due to circle and coinbas's partnership and the the passage of the genius act but in the short term you know there is more stable coin liquidity on uh ethereum mainet and the the reality is some of the biggest projects like you know uh lido and um you know Athena are on mainet today. Um so that is something that you know Coinbase could probably improve on is you know kind of attracting the the largest DeFi projects to the base ecosystem and you know in a really um first class way and making sure that they're incentivized to you know have

deep liquidity there. >> Okay, that's really interesting. I haven't heard that one before about base re liquidity. I normally hear positive things but it's it's good to know and I guess that kind of ties into to the Mammo agent there with the market making right so maybe can kind of walk us through why the creation of it and the user flow and what problem you were trying to solve. Yeah, absolutely. So, the marketing is really a more advanced more advanced feature of Momo, but the problem we're really trying to solve is kind of two problems. One is crypto is hard to use and DeFi apps especially are hard to use. Most normal people uh if you ask them to use a DeFi app like

Moonwell, they would struggle with uh okay, which wallet do I download and how do I back up my seed phrase? You know, they would ask you all these questions. So the MMO agent is really designed to onboard normies to crypto and make it super easy for you, your friend or a loved one, family member to go from uh having you know maybe money in a Bank of America checking account into um earning you know 6 7% in DeFi uh by lending out your coins in a safe way um without having to you know download a wallet without having to think about what apps to download. Um, you know, it's just very easy onboarding experience. And then the momo agent is your personal finance tutor and can kind of help help guide you and help you learn about how to save um how to build healthy habits

like how to dollar cost average, how to um, you know, set aside a little bit from each paycheck to kind of grow your uh your portfolio. Um, it doesn't give financial advice, but it's more like uh, you know, financial hygiene, if you will, like you know, how to how to build healthy habits. Um, and then, uh, the other nice thing about the Momo agent is that it makes sure you're always earning the best rate at all times. And the Momo agent, we designed a fully audited smart contract system where the agent never takes custody or control of your user funds. So, you may you remain in control and your funding wallet is the only thing that can withdraw from your dedicated smart contract. But the MAMO agent can make sure that as the rates change on chain, you're always earning the best rate, whether it's in the

Moonwell core market for USDC or in the vault. uh the Morpho vault and sometimes the rates do fluctuate pretty wildly. For example, when people are going leverage long bitcoin, the core market rates can spike to double digits and the mamo agent makes sure you capture that higher interest rate even if it's just for a few hours. Um and it autoco compounds your gains back into the underlying position USDcoin or we also support uh Coinbase wrapped bitcoin. So, I found it to be, you know, really compelling, not just for new pe people that are new to DeFi or people that are new to crypto, but also for um DeFi whales like me where I can actually keep my funds in a cold wallet um and I can the mama agent can compound them for me,

which is something I used to not be able to do in DeFi. So, um it can be kind quite useful for people that are DeFi veterans. And then you know like I mentioned earlier the marketmaking fees are really the way we think about the MAMO platform itself evolving over time. The Momo token is more of a utility token um where it confers um 100% of the fees generated on the Momo platform. And the Momo platform is really designed to just it's a designed to be a platform for personal finance agents more than just uh you know lending agents in the future. We'll have trading agents uh as we figure out how to make those safe so they can't lose funds. And um the key there is that uh the Momo agent platform fees come from two different areas. One is from compounding fees which are 0%

right now but will be turned on in the future maybe next year. And then um also the marketmaking fees that the agent makes by uh building liquidity on on the aerodrome and unisoft dexes. And so, um, those marketmaking and compounding fees all flow through 100% to Momo depositors or Mo holders if you just hold Momo and deposit into your Momo account. Um, every week there's a Momo drop. Uh, and you'll see us announce that on the Momo X handle. Um, and that basically uh takes all of the trading fees in both form of Bitcoin and Momo itself and passes them back to to Momo depositors.

Those are actually real yield and not token emissions. Um, so that's important to uh to to note that there's no, you know, liquidity mining incentives or anything like that. Those are all actual fees generated by the Momo agent on a weekly basis. We hope to see those increase over time as the onchain swap volume increases on the base network. I guess Luke, I'm curious um since you just went through the whole um breakdown of the Momo token, what was the reasoning or thought process behind, you know, breaking that out from Moonwell um and creating a separate token alongside kind of the launch of the Momo product rather than having it sort of all wrapped up into Moonwell. Curious just what the thought process was there and why you chose to

go that route. >> Yeah. Um I think in general we wanted the um the Momo agent is very different than Moonwell itself. So Mo kind of sits on top of Moonwell and it leverages the Moonwell markets and vaults to kind of provide um that base layer of like that lending primitive that allows us to earn you know higher than you know high yield savings account um yield. Um and basically uh the MAMO token itself is not a governance token you know like the Minwall token is. Um the moonwalk protocol is governed by over 100,000 token holders and it needs to remain incredibly neutral and you know kind of provide that base layer of you know money markets um and vaults but at the mamo layer mamo can be more opinionated

and momo can you know try to find the best investment opportunities for you. So um I think it makes sense to have momo be you know a separate project that sort of sits on top of moonwell. In the future, Momo may expand to other networks. We're considering, you know, things like World Chain where there is a high volume of, you know, retail users. Um, because Momo kind of hits that sweet spot of, you know, being really easy to use and being able to onboard normies to crypto. Um, and so we want to kind of meet users where they are, whether it's, you know, on the base network, on world chain, um, or maybe even on other networks like BNB chain in the future.

Um, and so I think that gives us, you know, and it also gives us the the Mama platform the opportunity to evolve in ways that are different than just Moonwell being a core lending primitive, you know, for example, evolving into trading strategies and other types of strategies. >> Gotcha. Makes sense. So, you know, potentially some different vision between what the Moonwell product is versus what the Mamo product might become. Um, makes sense to kind of split them out. >> Yeah. Okay. Um, I guess another thing we've been talking a little bit about vault products. Um, we had Morpho, we had Merlin from Morpho on previously to talk about uh, Morpho in general, but I guess Morpho Vaults, you guys have

integrated a few of those um, and have your own sort of like um, Moonwell Morpho Vaults listed on on the platform. Um curious if you can walk us through like your decision to build those out and like you know thoughts about either how you're expanding those vaults going in the future or what that really brings to Moonwell as like a you know broad product offering versus just you know you have the the base lending markets what you know bringing vaults into the picture did for you guys. Yeah, it actually provided a really nice new revenue stream where we could actually earn vault curator performance fees um by kind of curating some of the safest and highest quality vaults on the base network. And you know what differentiates our vaults from some of

the others um is that we have a really strong risk management team block analytica um and back stop protocol they provide risk curation for Spark Dow on mainet. Um it's a multi-billion dollar TVL um part of the it's a subdow and the maker Dow ecosystem, the Sky Money ecosystem. And so they have really deep um expertise on uh you know kind of how to manage risk on our flagship vaults. Um and there are two main vaults that uh well actually four I should say but you know there's uh the USDC and Bitcoin vaults. Bitcoin the Bitcoin vault actually generates uh yield using a Pendle strategy. Um, and so it's able to generate, you know, just under 1% um, which isn't, you know, as much as

USDcoin, but it's nice to be able to kind of stack more Bitcoin, if you will, um, by simply depositing that vault. And then we also have, um, ETH and Eurocoin vaults that are quite popular as well. that those vaults have allowed the DAO to generate a new revenue stream that actually flows back through to um to well stakers um you know through by people that stake well in the safety module and provide shortfall insurance and participate in governance uh get rewarded through um access protocol revenue and so that has created a nice new revenue stream that allowed us to kind of expand the minwell ecosystem and the other benefit to you know vault depositors is that I believe they're the only vaults that are actually um owned by a DAO with over 100,000 token

holders. Most of the vaults out there are just basically owned by a few um people on a multi-IG. And so there is you know some uh risk there in terms of governance surface area um you know when you have a smaller set of of um you know multi-IG signers uh you know the vaults could uh theoretically have some governance takeover risk. Um and so we think that having a DAO actually own those vaults um gives us an advantage in terms of you know decentralization. Um and then the other thing I would say is that uh we just recently launched some new vault a new vault called the minwell ecosystem USDC vault in partnership with Antheus Labs who is the risk curator on our core protocol. Um and that that new vault um will supply

directly into uh Moonwell and staked well um uh mark isolated markets as well as a MAMO USDC market um and that allows people to actually borrow against their well or staked well on Morpho in an isolated way and um we're working on a way that you can actually retain your governance rights um so you'll be able to in the near future stake your well you know retain have full governance rights as well as you know capture fees generated by the Moonwell protocol and borrow against your staked well. Um and the Moonwell ecosystem USDC vault will provide that borrowable liquidity side of the equation. This is actually pretty key for us as well as for you know well holders because it not only lets you get

leverage against your your staked well um but it'll also allow us to kind of expand the minwell ecosystem without selling tokens. um you know as we want to grow and build you know more AI agents and more personal finance agents we really think you know we have a a moat here in the in the space where we have the the only personal finance agents that can't lose funds because it's a you know the agent doesn't take custody of funds and so we want to kind of lean into that and hire and grow the the team u and the momo team and the way to do that I think is to kind of finance that growth not by selling tokens um but by borrowing against our tokens um since we have these these onchain money primitives like Morpho um like the Midwell core markets

we can actually borrow against our um our treasury our foundation treasury and you know just uh that way it allows to kind of finance ecosystem growth without selling tokens um in the crypto space many um teams do have to sell tokens to kind of finance operations but we realized like hey we have these money markets why not leverage them for this purpose it's kind of interesting I Yeah, it's an interesting way to approach um sort of like debt financing for growth purposes, I suppose. Um but in in you know in the sort of DeFi way I guess. Are you concerned at all about um obviously you know Moonwall maybe is not as systemically entangled as Curve was um when uh large curve positions became

kind of an issue in DeFi back in 2022. I want to say during the bare market. Um I guess are you concerned at all about you know borrowing against those positions to fund that growth? Um you know the the potential downside risks that might have in a kind of you know maybe a flash crash or other sort of scenario that might you know warrant um needing to address like a potential liquidation or something along those lines. Yeah, definitely. We want to make sure that we're pretty safe and so um we're keeping that loan at a really high health factor like you know 2 to1 or higher and also um you know uh the 1010 crash actually recently um we were uh you know even at that crash we were sold at 1.5 to one but we we plan on adding more collateral. So um the way to kind

of work around that is just keep super healthy levels of collateral um you know three or 4x more capitalized than it needs to be on the loan to value. So that way you can kind of weather any um flash crash and and also it's it's really important to kind of be responsible and not you know draw down that credit facility too much um and just kind of have sustainable growth. Um but over time you know as the market cap of the Minwall token grows hopefully we'll be able to kind of expand um the credit we draw from that from that um facility. And also um I think it's important to sort of pay back those loans with protocol revenue over time as well. So um but yeah, it's definitely something to keep in uh in mind. I

remember um you know that uh weekend when Curve was uh you know losing a lot of its value and that loan was at risk of you know defaulting and potentially like causing um bad debt on a um luckily that didn't happen but um you know it is top of mind. I think that was a a cautionary tale. Uh especially with like the volatility we've seen recently and just since 1010. Um it is quite a scary time to be, you know, borrowing or using leverage of any type in the crypto markets. Now, um I will say like there was, you know, it it's really fascinating that those of you that you guys probably research this pretty heavily, but a lot of the altcoins that were traded on Binance um did have um really low prices uh that were printed

on the price feeds. um you know, Morpho, Arrow, Virtual, all three were kind of impacted in the base ecosystem. Um and it's more of a Binance like liquidator issue as I understand it. Um the liquidator might have gone run a muck, but that doesn't um help, you know, the fact that, you know, DeFi just relies on these price feeds to kind of, you know, liquidate underwater loans. So we do have to be careful and you know make sure that um we're not susceptible to those sort of flash crash um type events because crypto is definitely not as mature as traditional finance where these things have been you know kind of properly um fixed in previous years.

>> By fix you mean shut down the exchange for 15 minutes to let everybody cool. >> Circuit breaker. >> Yeah. Yeah. You know, to be fair, circuit breakers probably don't work in DeFi when you you shut down one exchange and people can just trade on another, right? So, um it's a hard problem to solve, but also I think um you know, we need more maturity. Uh we need like probably a market structure bill, right, to help um guide some of these exchanges on what the proper way to liquidate positions is. >> Yeah, that makes a lot of sense. Uh I think that was a very pretty thoughtful answer um on kind of the risk balancing there. Um maybe one more thing that we haven't talked about but um I see Moonwell does also have um a card

product and this has been I think that cards like DeFi cards have become something of a theme here in the past year. Uh I feel like this is one of the things that everyone's talking about lately. Uh a ton of teams are launching kind of their own card products. So, I I'm curious um how that kind of wraps into the Moonwell experience and what you guys were thinking in in rolling out um the Moonwell card. >> Yeah, it's been a really great um last year or so. I think we launched the Moonwell card in uh December of 2024. So, it's it's um almost uh our one-y year anniversary in a couple months. Um and you know, we thought pretty deeply about how do we design a card that could be used alongside a lending protocol? We kind of have two different ways to use

it. One is to borrow against your crypto and load the card. Uh and then another way is to autoload the card. And um both have been um pretty interesting. You know, borrow and load is is a feature that you know, Bitcoin or Ethereum staked Ethereum holders find really popular. Um, autoload is more for a neo bankank type user that just wants to hold stable coins in their wallet or in the morpho vault earning, you know, seven 8% and then, you know, have the card autoloaded whenever the balance falls below a certain threshold. And um that feature is actually quite a fun feature. I I use it personally because um you know, we developed a custom smart contract that has a rate limit. So, you can decide, hey, my card can uh get

loaded, you know, $500 per day. Um, and that sort of protects you in case you lose your card or uh, you know, get stolen online um, from someone draining your vault. Um, but, uh, we think that that feature is, you know, pretty compelling for people that live outside the US. You know, if you live in Latin America or parts of Asia where you don't have good banking services, you can keep most of your funds in stable coins in you know, in a vault earning a good yield and then, you know, shop with a Visa debit card um anywhere Visa is accepted and u you know automatically reload your card without having to load the app and manually load or anything.

Um, now we can't actually pay you yield on the funds loaded on the card, which is why, you know, you want to autoload with, you know, a small percentage of your of your total holdings, but um hopefully in the future we'll be able to offer something more compelling like that. And then as we evolve the card product, I think our next um big milestone we hope to launch in before the end of the year is to be able to offer uh customers cash back on their debit card purchases, some type of developer revshare. And um you'll be able to choose if you want that in stable coins or if you want it in, you know, some other token like Ethereum or well um I think that'll be pretty compelling.

>> Very cool. Um that makes a lot of sense. I I do think we see this more and more um in your comments about for people outside the US, you know, making use of, you know, US stable coin holdings basically, um avoiding, you know, inflation in a lot of countries where that's a systemic issue. Um it seems pretty compelling and clearly, uh I I mean, I've seen a lot of teams have been leaning into card products as of late. So, um interesting that you guys jumped on that, you know, a while before this kind of more recent trend has has popped up all over the place.

Yeah, thanks. Um, yeah, it could be nice to continue to expand that. Um, we also have a pretty cool feature you might want to try out if you haven't seen it is the uh virtual checking account. Um, we partner with Bridge on this and that allows you to get a US checking account. No matter where you live, um, pretty much anywhere in the world, you can get a US checking account. When you receive money in that account, it converts into stable coins in your wallet on base or OP mainet. Um, so it's, you know, quite a nice feature, especially for digital nomads or people outside the US. >> Yeah, that's really cool. I will have to take a look. Um, otherwise though, Luke, we are out of time. Um, it was great having you on today to talk all things Moonwell. Um,

and to round out sort of our episode on on base builders today. Uh, I guess I'll give you the floor here for one last shout out. Um, you know, where can people find you, Moonwell? Um, and and what should they look forward to? Thanks. Uh, it's been great to be here. Um, you can find us, um, at minwell.fi. Um, and also try out the Mamo agent at mammo.bot mmo.bot. Um, follow us on X. Um, uh, you can follow my handle x.comlukeyou youngblood or uh x.comwwelldefi or x.commamo.

And uh, yeah, thanks for having us and it's great to be here. Um, have a great morning. >> Awesome. Thanks so much for coming on, Luke. It was a pleasure. >> Thanks, Luke. >> Thank you. Bye. >> See you. Here we go. All righty. Well, Mark, that rounded out the episode for today. Um, I don't know. I don't really have any last comments to give other than um a lot of strong teams building on base. Um, and I think the biggest theme that we see, um, and I think we're seeing this now from other, you know, Binance is doing this as well, but the integrations with, you know, from base to Coinbase, the exchange, um, is pretty meaningful. We

kind of see that across all the teams today. Um, and it's a big part of like product roll out and expansion. So >> yeah, >> um, it is interesting to see how like meaningful that has been for growth broadly. Yeah, the the DeFi mullet thesis is strong and it's kind of blurring the lines of what is a corporate chain. >> Yeah, definitely. And I think um maybe somewhat tangential, but I saw that um Jesse and CZ both tweeted this morning about tokens. Well, I think first of all, Coinbase listed BNB and then also um some like BSC assets are tradable on base or the Coinbase app now. Um which

was kind of like an interesting cross collab um that I don't think we've really seen historically from, you know, I think for a long time you don't you don't really find like B&B or Tron or some of these assets on like US exchanges. So that's an interesting change in the tides, I guess. >> Yeah, for sure. When I when I saw Coinbase tweet out BNB is now tradable, I was like, is that regulatory reasons? Are they trying to be more neutral? And then I saw Binance do the same and I was like, okay, this is just like Kumbaya mode. So yeah, I like it.

>> It's definitely interesting. Um, but we can call it there. Uh, no more ad shout outs. Um, thanks so much for you guys for tuning in. Thanks so much to our founders and friends at uh Drumos Labs, Aerod Drrome, uh Morpho, and Moonwell for joining us today. I hope you guys like this one. We will see you again later this week. Um but until then uh until next time and hopefully Bach will be back and not sick for our next episode. But uh you know, everyone tell Boach to feel better in the uh Xerx Research Telegram chat. If you're not in the chat, join the Zerx Research Telegram chat. Check out the newsletter.

Mark and our other research analysts write exciting interesting stuff stuff about the market every day of the week. Um so check out that. Uh otherwise we will see you later this week. [Music]