Guy Young on How to Build a 10 Times Better Product on Blockchain Rails

Transcript

Yeah, I mean uh there is definitely a risk. You can lose money on USD. I would uh kind of just point towards the last sort of two to three years is uh kind of one of the most um testing periods you could have ever imagined for a product like USD to have got through and never lost even the basis point of users money. So uh just for some figures for your listeners uh there's been around like $30 billion of mint and redemption flows within USD peaked at around $15 billion and then we went through the Binance uh 1010 you know deleveraging event that we saw um at the back end of last year and then the Ave kelp incident that was uh you know uh in in Q2 of this year. In many ways, this is like some of the most testing periods you could have

ever gone through with a product like this where people would have expected something to go wrong and nothing did go wrong with like 30 bill of flows coming in and out. >> Hi everyone, welcome to Unchained, your no hype resource for all things crypto. [music] I'm your host Laura Shen. First, we'll take a quick word from the sponsors who make the show possible. This episode is brought to you by 1 in Aqua, the shared liquidity layer from 1 in. Back multiple liquidity positions with one wallet balance and keep your tokens in your wallet until a swap fills. See how it works at 1in.com/aqua. Today's guest is Guy Young, founder and CEO of Athena Labs. Welcome, Guy.

>> Thanks for having me. >> It's nice to see you and congratulations on the recent launch of Athena Pay, your new Neo Bank. Um it's a really interesting launch because Athena for a long time has been seen as very crypto product and um it even you know had both centralized and decentralized aspects. It kind of uh just was its own unique animal and it very quickly became one of the most successful non-reserved back stable coins. So I'm curious to hear why you decided to also launch a NEO bank.

>> Yeah, for sure. I think um it's part of a broader theme I think uh just from the lessons that I think we've gathered through the last cycle which is uh I don't have as much confidence that like all the money that we thought would turn up into DeFi and operate on chain is eventually going to come here and uh you know operate in the same way that we have in the last uh 5 years. I think I've increas increasingly become the uh you know formed the view that uh defi probably just plays a role in the back end for a lot of uh you know userfacing front ends that actually control the user in the distribution. So I think you've seen that kind of trend in the last uh year or so with some of the bolt products for example like you've seen um

you know integrations into Morpho uh with Morpho into Coinbase and Robin Hood and I think that those are just very good examples of kind of the role that DeFi plays as providing better infrastructure better products in the background to you know a centralized front end where tens of millions of users actually sit and I think that this is a bit of a learning for us which is just looking at the data from this last cycle uh versus uh 2021 one D5 TVL actually didn't even break the peak of where we were in 2021 and it was actually you know 30 to 40% below the peaks uh that we saw even four or five years ago and to us that was just a very important data point which kind of told us that we needed to go out and meet users where they are in a form factor

that they're used to which we think is you know a mobile app that anyone can access uh to be able to to interact with these products so yeah I think it's kind of combination of a few different things one is just a recognize uh you know recognizing that uh you can't just operate on chain and expect that the whole world is going to turn up and get used to interacting with MetaMask wallet and uh you know finding your your DeFi DAP and you got you need to go meet users where they are uh to try and control the destiny of your own distribution in a more meaningful way and I think that that kind of segus into the second piece which is um I think Athena has done a decent job of integrating into important distribution platforms you know in the last two to three years. So integrations across some

of the names that I mentioned earlier with Robin Hood and Coinbase, Binance, Bybit, etc., etc. And uh while that's you know extremely helpful to try bootstrap your growth in the beginning, I think in an end state if you're going to control uh the end user relationship that's a much more valuable place uh to be in terms of being able to extract a margin and actually you know grow revenues for the business. And so while that is you know still maintains uh one of the most important sort of like growth vectors that we have in terms of uh integrating in the back end of other people's you know products and platforms uh we thought that the opportunity here was so big for us to go and try do that ourselves direct uh with this type of product and uh and you know thought we couldn't ignore the opportunity to go

and try it at least. >> So when you were considering a neo bank there must have been some other options that you looked at. Why did you um you know what were those other options and why did you end up settling on Neoank? >> Yes, I think we've taken different product directions which have been mistakes in the past kind of spending time on things which uh were basically just distractions and I think we're too distant from the core DNA of things that we uh you know think that we're good at which is basically money, Satan's products and uh pieces related to that. Uh and for us, yeah, I think it was just uh the emergence of this category when it came out. It just felt like the first kind of nonspeculative application that you could just genuinely um imagine more than 100

million people actually using um outside of crypto. Uh and so yeah, when I saw the product category come out, I think a key question that you need to ask yourself with these type of things when you're trying to take, you know, new direction or try to build out a new piece of the business um alongside what you're doing is a does it produce like a 10 times better product for the user on the on the end? And then if you're successful in doing that, does it create like a 10 times better business rebuilding the stuff on crypto rails? And I think for us, like the answer to both those questions were like a resounding yes. Uh and then it basically just came down to like do you have a reason to win that market which is kind of the piece that we ran through I think

in the beginning around uh you know why why does any uh reason at all to try and compete within this market and uh for us the answer there was around the savings yield and actually owning kind of like the yield infrastructure in the background. So, um, yeah, I do continue to believe, uh, the addressable market for this is huge. And we're actually, you know, as cringe as cringe as it sounds, like extremely early in this like product category here in some senses, right, people, uh, it's very obvious that like stable coins and exchanges could be 50 to$100 billion outcomes as you've seen with like the Binances, the Coinbases, and then the tethers and circles uh, between the exchange and stable coin categories. Uh this to me just feels like a very similar one where you look at a revolute in a new bank at a very similar sort of

valuation range of hundred billion dollars and then you look at the actual product itself and just say you can do this better with rebuilding it on stable coin and blockchain rails. Uh and then the interesting piece of that is that you don't really have an incumbent within crypto who's had the scale and size of a tether and a Binance to sort of crush you if you're if you're trying to compete with them. And so I think it's the very first time since I've been in this space for the last four to five years where you feel like the size of the outcome can be that sort of like hundred billion dollar um sort of ceiling that I was describing, but you don't actually have an incumbent within crypto uh who's there to sort of stop you getting there. So yeah.

>> And how do you um plan to so like in in that space um there is still a neo bank attached to tether and I know that they also just launched but obviously tether has so many inroads. So, how do you think about competing with plasma? >> Yeah, I I don't really um view it as competition at all. We're quite friendly with the teams. I'm an investor in plasma as well. Uh I think the as I said, the bigger picture here is how do you find the 100 million users who aren't operating on chain right now. I think plasma have done an amazing job of a making a product that just looks and feels like really great. I don't know if you played around with the app, but the actual sort of design and just attention to detail to the whole thing is actually uh incredibly impressive, I think, from

uh from our perspective. Uh but yeah, I think like trying to compete over the 50 to 100,000 uh people who who are using the app right now kind of misses the bigger picture of like where this thing can go in an end state with new users uh uh coming into the space. So um yeah, we're not too focused on uh yeah, trying to fight for scraps. I think uh uh with the existing users who are here, it's really like a race to see who can who can get to the to the millions and hundreds of millions of users. Yeah. >> So this is obviously a really different product and um you know you had already spent years building Athena and uh that you know was kind of more um well it it wasn't userfacing directly, right? And

so you probably had to either make a lot of changes or learn a lot of new things to try to own this customer relationship. So what are some of the changes that you've been making? >> Yeah. Um I would very likely challenge I think maybe the premise that we've never kind of gone direct to users where I'd say in the beginning we were kind of direct to direct to consumers and direct to users where we had no integrations whatsoever and when we first launched it was kind of just in DeFi to the DeFi native user base. that got us to I think the first sort of two to3 billion dollars before uh we ever sort of integrated into any meaningful distribution platform and then yeah the second leg of growth definitely came through those integrations that I was describing and now we've kind of come

full circle again to where we started in the beginning which is uh trying to go back directly to the user uh so there definitely is like a different DNA in terms of doing that and I think even just the product and the look and feel of these apps is actually just completely different to you know normal applications that you see uh operating on chain just from even like a basic design and a product perspective. Uh so that did require kind of hiring in and bringing in a new team entirely focused on building out this product with a lot more experience from building these kind of apps you know in fintech and having had that experience doing it before. So yeah, I think it's really like a team composition piece where uh this has really been the only piece of Athena alongside the security team that's

actually grown in the last year where we've added sort of like 25% of the total headcount of Athena to just focus on this product and they've all come in new to to build this. So uh it definitely is a different type of DNA for building these products and uh yeah I think you uh you need to recognize that to do that well >> and since it is something that will sort of mimic fintech apps that already exist and already have many users. How do you think about competing in that space? Yeah, I think that there is like a a sequencing to this entire thing where uh you you kind of need to a recognize that the crypto user base is not large just from like a numbers perspective of users who are actually operating on chain and trying these products. So even the most

successful examples of these applications that exist there now are sort of in the 100 to 150,000 users in total. Uh but the interesting data point there is that they're kind of 10 times more valuable than a normal fintech user just because everyone is so much more uh you know so much more wealthy and has such a higher propensity to sort of spend and consume and save. Um so even if you just look at the average revenue per users for some of the existing crypto banks versus normal fintex it's quite literally one order of magnitude larger. And so I think the view that we have is that you know the ultimate end goal of this is not to just have 100,000 users within crypto. But it's also a mistake I think to ignore that user base in the beginning just because a that's where we have existing users who trust

us and trust the products that we bring to market. Um you know having interacted with us over the last three years. Uh b because the users are that much more valuable from a revenue perspective. You should definitely focus on uh you know trying to capture them in the beginning if you can. But then at some point when you feel like you've sort of saturated that market and grown into you know the majority of existing users who are trying these products on chain there's just an entirely different I think sequence to that which is then trying to expand to normal users who are using these products in place of normal fintech apps outside of the normal crypto bubble. So I definitely don't think we're at that stage yet. I think we still have a six to nine month period to sort of fill out that first piece of

the sequence that I was describing. Uh but the end goal for us is definitely not to just try uh better serve the existing 100 to 150,000 people who are trying these apps now uh but but sort of view it as more of a stepping stone to to going to much larger user numbers. >> And so because you know there are apps already out there that do this you know do what you're doing and have you know probably very loyal user bases. How do you plan to try to acquire those customers? Yeah, I think um one thing we've learned is actually the crypto user is not that loyal at all. And I think uh you know when you have a better rate or slightly different functionality, it's very easy

for people to switch over which is quite literally sending one you know sending a stable coin from one wallet address to another. Uh so that's one thing that's kind of great but then also uh very difficult when you're building within you know uh onchain which is you can accumulate capital and accumulate users very quickly if your product stands out but you can lose them uh equally quickly when you know something new and shiny is out there that can attract them out. Uh I think the the core sort of like structural reason for why you know we as Athena founders interesting to do and you know can try to answer that question of like why do you even deserve to compete or try and win within this market is um a huge piece of this product I think is like why is this actually a better product than what you

can do within a revolute or something similar uh you know within web two and I think a core piece here is actually the savings uh you know rewards that you're actually generating on the balances that are sitting within the app versus the 50 basis points that you're getting within a normal bank. And uh you know really what we've done here is actually just build a consumerf facing front end to our existing product set that's that's already been in the market for three years which is a dollar with a structurally higher you know savings yield versus everything else that's in the market. And so it's core to the DNA of what we've done already which is trying to produce the best savings yield on dollars at multi-billion dollar scale. And if you're able to do that, I think you have a structural advantage versus everyone in the market because

everyone else is bleeding cash to try and pay up for these incentives on the savings yield that sits within the app. And if you can just, you know, produce the best yield outright because of the product that you sort of own and you own the yield engine that actually produces that, we think that that's like a structural advantage going forward, which allows you to actually just produce better pieces of the product um outside of that. So it allows you to sort of afford to do free on-ramps for example, which is something that Athena Pay offers on the side. It allows you to sort of afford the cashback piece of of the card spend. And a lot of these piece pieces are basically downstream of actually owning and vertically integrating uh the yield engine and the dollar issuance with the app itself. Uh so I think that that's just like one

piece that we looked at you know from the outside in which was the growth of you know the pretty insane growth that we've seen in the segment of the market in terms of how many neo banks and also just the growth in terms of user numbers and spend. uh in some senses like the biggest beneficiaries of that weren't actually the NEO banks themselves. It was kind of circle and tether because all built on someone else's stable coin basically and they were able to monetize the NIM and uh the float you know at circle and tether and for us like in an end state we think that that's a pretty unsustainable sort of revenue structure if you're losing what should be one of the largest revenue drivers within the business uh to someone else. So yeah, there was just a few ideas there around, you know, why we thought having the

experience that we did building USD was actually a pretty important like prerequisite to uh you know, potentially competing within this market. >> Yeah, it definitely makes sense from a back-end perspective that um you know, you would have more efficiencies um that would allow you to compete better. But yeah, just in in the existing market, it's sort of a like a a question of how you get over the hurdle. One other hurdle that I thought of was, you know, there is a portion of this that's self-custodial and you're going after a market that is not crypto people. So, how do you plan to educate those users about like, you know, that aspect that's a little bit different and what that means for you know the behaviors that

they should apply when using the app. >> Yeah, I think the self-custodial piece is a very interesting one because people have taken different approaches here uh to actually bring this product to market. Uh for us I think it was actually a key competitive advantage which is actually creating every balance on the app being self-custodial but the user not being aware or not aware in the sense it's sort of being hidden from them but not aware in the way that they're interacting with the app that they're actually just holding stable coins in a wallet rather than you know fear sitting within a bank account. Uh the reason for that is that if you think about like the roll out of normal fintex um historically it's been like a pretty slow process which is every single country that you open up to you need to get a new bank account you know new fear

rails regulators need to sign off etc etc etc and that's like a 12 to 24 month process for most of these large fintex to just open up a new region um uh to be able to offer their products I think one of the interesting things about this is that when you have user balances sitting within a self-custodial stablecoin wallet uh you kind of unlock the whole world just by default on day one because you know that doesn't require regulation and licensing to be able to offer a self-custodial stable coin wallet to users. And so it's a very like strong accelerant I think to be able to be global by default on day one which is kind of what that unlocks. And then I think the other piece is actually just the nature and type of financial products that are available within a self-custodial stable coin wallet

essentially just plugging into DeFi uh which which you obviously just have less restrictions versus uh you know the regulation that sits around like a banking balance sheet. Um, and you're kind of seeing this trend, I think, even across some of the largest exchanges and brokerages in the world, which is the move of like even a Robin Hood to be able to offer what is a very similar product within their own uh Robin Hood earn. They're essentially doing the same thing, which is plugging into a Morco bolt uh with USD that's sitting within the collateral. Um, and so yeah, I think this is like a broader trend that you're seeing with even some of the largest and most established players in the world kind of recognizing the fact that being able to provide these products in a self-custodial nature um can actually just provide an outright better product

for their users on on the other end. Yeah. >> But I think um like is there an education piece around how if they send the money to the wrong place then you can't get it back for them you know that kind of thing? >> Yeah, I think that's uh always a challenge. I think it's uh we try to keep a lot of that away from the user in the app. I'm not sure if you've had a chance to actually give it a go, but it's all kind of name tag based rather than wallet. So, you're just sending to names and your contact address that that you've uh saved down. I think the other piece that we built from the ground up, uh which is quite interesting is it's basically no seed phrases or anything when you're getting into the app. It's actually pass key based with an email

backup that sits behind it. So, it essentially just follows you around with your iCloud uh iCloud account. uh even if you lose your phone, you just need to set up your iCloud and you have the entire balance sort of sitting there. Um so it does feel quite like uh you know normally friendly in the sense that uh it's just using the same infrastructure that they're used to operating an iPhone or an Android with pass keys and email backup that sits behind the whole thing. Uh but yeah, I think there's still definitely like some areas around uh the edges that you can do better there. But um uh yeah, we've tried to make it feel as little as possible around uh you know, normally sending money to a pretty scary looking you know, wallet address like uh like you do on chain. Yeah.

>> And um I think you're launching with about 20 countries like how do you plan to go to market, you know, in so many different regions? >> Yeah. So it's actually it's closer to 50 now on day one and this is kind of the top priority that we have right now. So it's kind of still in beta phase at the moment with very much like gated access in terms of the number of users that we're letting onto the app just because we want to do things in a slow and controlled way uh as we bring it out. Uh yeah, I think this is literally number one top priority for us is opening up uh US, Europe, UK and then some bits of Asia including Taiwan um and others. And uh yeah, a big piece of this is just the card infrastructure layer that sits beneath um you know the front end that

users are actually interacting with. So think of like a rain or a reap or a a stripe that's sitting under underneath and actually helping with the card is insurance. Uh we're sometimes just controlled by you know all constraints sorry by the timelines that they're able to bring our product to those markets and so uh yeah it'll be be a matter of weeks of sort of like three to four weeks until a lot of these new geographies are coming online. Uh but that's also part of the intention of doing this slightly slower roll out uh to controlled group of users. Yeah. But like so any one market would would be a challenge. So how would you um you know think about so so obviously like the US is a huge one but you know I'm sure it's super different from like Asia or you know some country in Asia. So do

you have strategies for each one? Are you going to try to focus like on remittance? Do you you know how do you think about getting adoption in in all these different markets given that there's probably different demographics in each that you want to target? >> Yeah for sure. I'm sorry I'm slightly misunderstood your question. Um yeah, I kind of think about it as uh a we already have quite a bit of data around which users are actually finding the savings products that Athena has actually brought to market. Um historically we kind of have a very good sense of South America and Asia is kind of where the largest user bases for us uh sit and so we don't really want to reinvent the y uh the wheel. We kind of know that these products are in demand in those countries and that's where we want to lean into. I think this kind of

goes back to the sequencing point that I was making uh slightly earlier on which is uh in the very beginning we don't have a country specific strategy for everywhere that we're going because we're actually just trying to sequence this with our cryptonative user base that we already know and then you get some data and understand where is the product popular where do you want to lean into harder and then you pick 10 to 15 countries that you really want to go and dominate um after you learn that and I think a lot of this stuff you don't know until you see how users respond and uh where this actually picks up so anecdotally We we've kind of seen with a couple of the other large NEO banks now who are in the market and you know speaking to one of the founders there who's actually a close friend of mine uh

his two largest markets weren't even in the top 10 before he actually launched his in terms of what he was expecting. It's like uh Brazil and Taiwan were basically the two uh that came out and he said when he was starting this that definitely was in the top of the list of what he was expecting. So uh for us as I said I think there's a 6 to9 month you know learning period and sequencing where you're actually just interacting with the same crypto native user base that we've uh you know uh um served already and then once you have the data you'll be able to work out where you want to localize and and really lean into. >> Okay. Yeah. I'm excited to try it. I'm on the wait list. Um all right. So in a moment we'll dig into the back end a little bit, but first we'll take a quick

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Remember that providing liquidity carries risk and fees aren't guaranteed. Back to my conversation with Guy. So, something that is interesting is obviously the name Athena is based on ETH or Ethereum. Uh but Athena Pay uses Avalanche for the back end for USDE transfers. Why Avalanche? >> Yeah, I think we uh for a couple of years have been trying to find uh something more meaningful to work on with the Avalanche team uh uh together. So historically we' sort of left some of the stable coin balances. We had like launches on Ave with USD collateral.

Some of the uh RWA backing that we had within USD was actually held on uh on Avalanche through periods of time. and it's been like a pretty long uh kind of what what else we're going to do that's a bit more meaningful with the team. Uh I think we aligned a lot with them in terms of the things that they spend time on and the things they focus on are pretty aligned with what we're trying to do here with the app. So you know I think different chains now started to build characters or build uh pieces around their brand that actually align with what is the purpose of what they're trying to serve here rather than just being generalized to everything. So some chains are focused on trading, some are focused on derivatives, some are focused on um you know other pieces around like DeFi etc etc. And Avalanche I think is

always come out with the um you know pretty consistent line of this is backend infrastructure for just real businesses uh that are operating and serving users outside of uh the space. And so yeah, when we came with the idea to them, I think there was just a very strong alignment with what they're trying to do with the chain and what we're trying to do with Athena Pay, which is we're not trying to build another trading app. We're not trying to build another app for speculation. It's just really a, you know, banking business that's that's settling on blockchain rails in the background almost invisibly. Uh so yeah, uh got along with the team very well and I think along with the vision of what they're trying to do with the chain uh in terms of what we're trying to do with the app as well.

>> And the cashback is currently paid in Avac. Um I was curious for that reason. Like I'm sure it's part of the deal. Is that you know exclusive for some period? Will that be the reward forever? Um is Avalanche funding the reward? Like tell me a little bit about why why that is. >> Yeah. Uh so we it is exclusive on Avalanche uh in terms of Athena Pay and um yeah I'd say base expectations is the next couple of years at least um we're expecting that the the rewards will be paid in in AEX but I can't sort of guarantee that forever. I think you've seen a lot of these programs sort of uh change around a bit as these sort of uh pieces evolve through time. So, uh

different car programs you've seen sort of swap between native token of the chain to ETH to USDC etc etc back and forward. Uh I don't want to lock us in to say we're definitely going to be doing one thing you know indefinitely uh uh around the cashback piece uh forever. Uh but yeah, at the moment it's basically AVAX rewards that are coming through uh to users and uh that is funded by Avac themselves. Yeah. Okay. And so I also saw that um so Athena Pay is offering a 6% savings rate, 5% cash back on card purchases. Um but I was kind of curious like where that yield comes from. I think SUSDE uh pays less than that. So um you know what are what are all the components of of that yield?

>> Yeah, for sure. So uh in the beginning as we're trying to bootstrap this uh there is an additional kind of boost to the yield which Athena is funding on top of the natural SCSD rate. So historically like lifetime to date since the product's been out uh USD has averaged around a 7ish% uh yield. So that's actually kind of below the long-term averages of where the product is actually um uh produced in terms of the savings yield. Uh but yeah, at the moment you're right, it's around 475 basis points for the natural SEO yield and uh in the app itself it's around six and this is just a natural we're trying to scale the product in the beginning entice people to come on and that won't last indefinitely. But I think the interesting piece about this is that when the extra incentive that's sitting

on top of it falls away, you still have a product that's under, you know, at the underlying level still producing one of the highest uh savings yields in the market. Where a lot of these other programs where you're just putting additional incentives on top of a T bill, it's always going to end up at T bill yields afterwards in the end. And so you're kind of like, you know, what are we actually doing here? Um and then yeah the cashback incentive again I think as we discovered that's the piece that's sort of funded within ABX in partnership uh with the avalanche team. So uh yeah the delta that you see on the savings yield right now is uh basically Athena just bootstrapping the product in the beginning.

>> Okay. And then something else that I want to understand is um so as far as as as far as I understand this is not structured as a typical debit card. um it's more like a secured credit line against uh USDE. So there is some aspect that like some of this could be liquidated. Is that correct? >> Uh I that's not correct now. I'm not sure where you read that. I can check that out. Um >> I can explain what's happening in the background which is a little bit more simple. Um so essentially like uh USDC, USDT and I think PYUSD are kind of the only settlement currencies that are actually taken by Visa in the

background. And so uh the interesting piece is that uh USD itself kind of has uh backing portions sitting in all of those stable coins that I've just described there. So during different periods of Athena's life cycle, I think we've been the largest holders of uh Tether Circle, MPYUSD at different proportions in different points of time. And essentially what's happening in the back end is when a user is spending, you're essentially redeeming USDC from the backing within USD uh to then be able to send uh to the card network uh to be able to settle on the other side.

So Visa isn't actually touching uh USD. There's an intermediary step that actually draws USDC out of the backing from USD to then settle with Visa on the other side. So mechanically it's basically just a one-step kind of redemption process before it hits Visa but there's no kind of uh lending or leverage against USD in the process. [snorts] >> Okay. So now um let's also talk about the how the backing of USD has changed. Um so obviously the original uh you know structure of it was a basis trade. Um but now PERBs are about a tenth of the backing and then the rest is um institutional lending, collateralized loan ob obligations etc. So um this feels like the um you know the the the

back end just has um sort of different risks hidden in it. So how would you um you know think about that for um for users of this product? Yeah, I think um you're right. The risk profile has changed quite a bit through time and the composition of what we do within USD I would actually argue has become like safer through time rather than more risky which is kind of more slanted to world uh towards real world assets lending in a secured way you know within qualified custodians etc etc. Uh and so yeah, I think if you compare some of the stuff that's sitting within USD now to where it started, um many would make the argument that like holding you know, a bunch of AAA rated uh pieces of collateral is actually much safer than a

basis trade on like offshore um exchanges. Um the way I would like in very simple terms sort of explain it to user on the other side is that uh the end user who's using a bank account doesn't really see the complexity of like a bank balance sheet that sits behind the whole thing. they kind of just see I'm depositing my money and I'm getting a safe, reliable, dependable uh savings yield for having my money within a deposit account. And for us, I think it's it's obviously not the same in terms of like the risk profile of a bank. But the complication of everything that goes on within a bank is almost abstracted away from the user who just sees this very simple interface of uh a simple deposit with uh with a reliable savings yield. And so from our perspective, it's kind of like uh almost

a new form of that which is a tokenized form of different exposures that are sitting within USD uh but simplified for the user is like a oneclick experience for depositing dollars and getting a yield. Yeah. >> Okay. And is there any risk um in terms of like a situation similar to a Genesis or BlockFi where um you know some of the assets might be um it just might not end up being there when you know for that you for what users need. >> Yeah. I mean uh there is definitely a risk that like uh you can lose money on USD. I would uh kind of just point towards the last sort of two to three years as uh kind of one of the most um testing periods you could have ever

imagined for a product like USD to have got through and never lost even the basis point of users money. So uh just for some figures here just I guess for your listeners uh there's been around like $30 billion of mint and redemption flows within USD uh peaked at around $15 billion and then we went through uh the Binance uh 1010 uh you know deleveraging event that we saw um at the back end of last year and then the Ave kelp incident that was uh you know uh in in Q2 of this year. In many ways, this is like some of the most testing periods you could have ever gone through with a product like this where people would have expected something to go wrong and nothing did go wrong with like 30 bill of flows coming in and out. Um, so that's you can never

say never sort of going forward. But I think that the risk profile and general perception of what we're doing in Athena now versus where we even were, you know, two years ago is just fundamentally so different. Um and so yeah, I'll just point towards I guess the last uh bare market of the last sort of 18 months is a pretty testing period where you would have seen something go wrong if if there was sort of fragility within the system. >> So we are talking uh shortly after Revolute announced that they had someone reach out to them um via government agency email requesting customer data and they did give that to what is essentially a hacker. So it was like passports selfies transaction histories. Um, and obviously, you know,

your company uh does not have as much need for compliance as a Revolute. Um, but I was thinking like, couldn't a similar attack at Athena Pay reveal additional information such as an onchain address, you know, on top of all the other things that were, you know, part of this Revolute hack? And if so, you know, given that you probably have a smaller compliance structure, like how do you think about that type of security issue? >> Yeah. So, I think um a lot of thoughts on the whole kind of like KYC regime and kind of what happened with Revolute. Uh I think I was actually affected by that as well as a as a user and customer of Revolute. Um, I think as like before we

actually just jump into Athena Pay specific pieces, I do think we just kind of need a broad rethink around like KYC more broadly, which is like do does the benefits of, you know, uh, forcing this into every financial interaction everyone has in their lives actually make sense relative to like the mounting cost that we're seeing with like almost a weekly incident like this happening. Um, you know, I think even basic elements around this, which is like, do you actually need to know the address of where someone lives or do you just need to verify that they're in the country, for example, where they're operating, uh, it just seems to be opening up like an insane risk vector where if one of the 20 different people that you shared your KYC with um, has some sort of breach, then your physical safety is basically at risk uh, going forward. So,

I think that this entire kind of like KYC regime does need a rethink and it's pretty insane the way it's operating right now. Um, having said that, the way that it's uh designed within Athena Pay is that we kind of recognize we're not a KYC and compliance company. We need to outsource that to people who do that for a living and do that as as best as they can. Uh, we work with Samub on the side and then also Rain who do some of the compli uh KYC and compliance for uh actually signing up on the cards itself. And so a big piece of this is actually working with reputable providers who kind of do this and do this securely for businesses that are much larger than Athena as well and relying on you know obviously doing your DD but relying that they're doing a better job than you

would be able to do trying to stand up your own small compliance team to do the same thing. So uh yes it could happen but I think the decision we've taken here is to outsource it to professionals who kind of this is their core business rather than what we're doing. Yeah. And [laughter] um but then I'm sure you're aware of what happened with Treasor recently with their thirdparty providers. So um you know do you have conversations with those third party providers about like a a different kind of threat level against crypto users or how do you think about that risk?

Yeah, this is the painful piece which is I think you've heard my opinion just there on like what what like level of KYC I think you should be doing that's like appropriate given the risk of KYC information being leaked. Uh the issue is that you know our requirements are downstream of uh a lot of the service providers and platforms that were being built on. So a lot of this is actually down to like uh the card issuance and visa requirements around uh KYC which we have to adhere to be able to be able to issue a card on our products on the other side. And so this isn't necessarily like a decision that's sitting with us to say this is what we need to see from a KYC um on on the onboarding sort of flow that comes in.

uh it's really just us providing a level that's required of uh our users before they're actually able to use the products that uh rely on on uh Visa payments basically. Uh but yeah, I think my point is more I just disagree from a fundamental level as to the way it's designed at the moment. But uh Visa doesn't care what I think about KYC and compliance. They have their own sort of levels that they they're going to stipulate we need to to stand up to. Yeah. And um so one other question that I had about the um go to market issue is you know as as you mentioned you have US UK um Europe and like we've seen that tether has done very well in sort of

more developing countries that uh you know have a natural demand for exposure to the US dollar and I was wondering why you are um you know targeting the US market. >> Yeah, I wouldn't say uh I wouldn't say the US is our biggest target market um at all. I think the countries that I was me me me me me me me me me me me me me me me me me me me me me me me me me me me me me me me me me me me me me me me me mentioning in terms of where the largest user bases for Athena's product actually map out very similar to the way or you know the growth and success that you've seen with tether uh basically offshore where you know in the beginning we didn't even have access to US users uh directly from Athena and uh it was

really South America and Asia which drove a lot of the growth uh for us um you know the last couple years uh so for us that's actually the highest priority markets which are outside of the developed markets where I think the lesson that Tesla taught everyone as kind of the best businesses within the space of kind of dollar is insurance or providing dollar rails to people are built um outside of the developed markets because they all have access to very good financial infrastructure in the US and in Europe to some extent. Um but I I also think it would be a mistake to just entirely shut off those markets because you don't think that they're going to be uh you know the most in demand. it's relatively easy for us to open up to a new country and it's obviously the largest consumer market in

the world uh with you know like one of the richest uh consumers per capita uh anywhere um in the space as well. Uh so yeah I think the the view from our point is like of course you need to have some presence there to be able to serve users who want to use your product and they could be very high value users as well but I wouldn't say it's like even a top five sort of priority market for us just in terms of where we think the end state of this product can go. [snorts] >> Oh interesting. Okay. For some reason, I would have thought that it would be more challenging to open up here, but it sort of sounds like any country just it it doesn't matter which country. Um, but just adding on an extra one is not a big enough a big hurdle.

>> Yeah. Again, this is uh downstream again of where Visa and Rain and Card issuers basically have comfort being able to offer this type of service. So that's an evolving landscape uh the whole time where even us coming to market now it looks quite different to the way the market looked even 18 months ago where pretty much the whole world was accessible with these products until uh you know different markets start to put a lot more pressure on these products not being available and I think that this is a bit of a broader theme where you know local banks local payment companies are actually quite threatened by the growth that they're seeing within these products uh around the world and it wouldn't be you know surprising to me to see continued sort of pressure uh on blocking and the growth of these products going forward. Yeah.

>> So, here you are. You've kind of just set a new goal for yourself or, you know, you've just uh started this launch and so now you're going to have this race for adoption and you're going to also aim for non-crypto users. What are the metrics that you'll be tracking to measure your success? >> Yeah, it's relatively simple in terms of the business model. So it's kind of uh spend on the card and then the uh NIM that you can generate on the balances within the app itself which is basically USD business model uh just sitting within an app. Yeah, for us it's pretty simple the all the numbers you'd expect around uh users uh average revenue per user um and just the volume of spend per user. Uh I think the sort of like TVL or

balances piece is slightly less important to us here where I think part of what was attractive about Athena Pay to us was actually a diversified revenue stream that wasn't just based on USD NIM or you know interest generation on USD itself. And so for us like the USD that sits in uh Athena Pay is more of like a user acquisition and tool for us to be able to fund other pieces within the business as a cost as cost effectively as possible. Uh and for us it's really just like the card spend that comes through and volume on that side through you know FX fees and uh interchange which I think is the most interesting like revenue stream that falls out of this which is actually quite uncorrelated and different to like USD uh NIM generation >> and talk about that more like why why is

that the most interesting piece? Yeah, I think it's just because uh you know one of the big lessons that I think we've had in the last cycle uh is you just don't want to be entirely reliant on just the crypto cycle as a business and I think the very best businesses now in the space have tried to you know untether themselves from just the cyclicality of just is bitcoin price going up or down. Uh so I think you know hyper liquid here was a great example of you know kind of repositioning the businesses in some sense in the last year where RWA per the per on equities and commodities actually grew to like more than 50% of their volumes I think like a month or two ago and that didn't even exist like nine months ago as like a category uh within the space. Uh so I

think the the learning and lesson I think tether's another example here which is they don't care so much about which direction Bitcoin's going for like the earnings of USDT itself. it's just printing money from like T bills and real world assets that are sitting outside of the space. And so for us it was like the product did extremely well obviously in the in the bull market and it was quite reflexive on the way up. Uh but we didn't really have like another tool in our arsenal uh when the crypto cycle was down to have you know differentiated and uncorrelated sources of revenue that weren't just connected to speculation within crypto. And so it was just a big piece and focus area for us which was making sure that we weren't in that position again whenever we do go through you know the next sort of four

year cycle. Yeah. >> [snorts] >> And so, um, you know, you're going to have now multiple kind of arms of the business. Um, where where do you feel like the balance will eventually, uh, land? Like, will do you think that the NEO bank will be bigger or I guess they'll sort of naturally grow together? like it sort of feels like the user for Athena Pay will have smaller balances, the users for USD might have bigger or like just talk a little bit about how you see that mix.

>> Yeah, so we have like three core business lines now. You have USD so like the second largest like onchain um savings product. You have the white label business which is basically anyone being able to launch their own branded stable coins on our infrastructure and that's actually the largest in the space at the moment. and then Athena Pay which is obviously what we've just run through now. Um they're quite like uh synergistic in the sense that like uh Athena Pay is just a great distribution avenue if we're successful there for the first core product with USD and so as you said the growth of one is kind of uh inherently linked to the growth of the other. Um I do it's an interesting question because in some senses the tan for both of these products I think is actually pretty large which is like a

dollar with uh you know a savings yield is one of the few products that I think actually um appeals to almost every single individual on earth who has some sort of dollar savings balance and then equally everyone pretty much has a mobile banking application as well uh when you think about the number of people that are using those type of apps in the real world. So I think the town for both uh is actually like most people on earth if you can do it well. Um so yeah, I really don't have a view of which one's going to end up sort of like bigger in an end state, but I think they're both bets that we want to take just given of uh just given how wide the reach is I think for both of those products. Yeah.

So, one other um aspect that I've heard you talk about is how your goal is that a user will use this app without being aware that it necessarily has a crypto component. So, how did you think about while building the app and you know what other kind of changes in the business did you need to make to um you know try to achieve that? Yes. So I think um it was even like very small pieces around uh some of these applications right I think lean very hard into the uh kind of like old crypto approach to to building these products which is almost ignoring the idea that like banks and fear rails exist at all.

Um, I think we kind of try to start from the position of saying, how would a normal user want to bring money into this app? Uh, and then be able to interact with these products afterwards without feeling at all like they're actually, you know, on ramping or bringing money into into crypto like they would normally. Uh, so like even the deposit flow into the app itself is you just wiring money from your bank account to another bank account essentially and then it turns up as USD within your wallet with no other interaction on your side necessary. And so I think it's like very small pieces like that which is what does the user flow actually look like on a normal fintech application when you're doing uh the things that you want to do every day on these apps and make it almost identical to that uh while all you're

doing is instead of sending like fear between different bank accounts it's just stable coins moving between addresses on a on a blockchain. So uh even the look and feel once you do get off the weight list and into the app I'll be interested in your um uh your feedback there. Uh to us it was just kind of basically modeled off of the revolute design of like user flows coming in and out rather than starting from the position of saying this is a crypto app. Uh how do we bring it to normal people? Yeah, >> since we are in a crypto winter or perhaps um a crypto spring right now. I was wondering how you think about trying to launch a product at this time.

>> Yeah, I've never kind of um tried to drive like product related uh decision- making around like the cycle and that kind of stuff. I think uh the only lesson I had in terms of tackling last cycle is you just get the product out like uh as soon as you can to start like getting user feedback and iterating on the product as as quickly as you possibly can. Uh for us, yeah, we've never tried to time product launches, all those type of things around like uh our view of where the cycle is because I'm like wrong 99% of the time when it comes to trying to second guess those things anyway. Uh so for us I think this is actually kind of the absolute best time to build things which is the market is less distracting you know even employees are less distracted by what's

going on in the market and you can actually just focus on the only thing that actually matters which is building a good product and uh I think we it kind of mirrors what we had last cycle when we were just building Athena in the beginning which was we started in 2023 when it felt actually even more boring than I think the last sort of like six to nine months has felt uh uh in this bare market and it's actually just an amazing time to just have like quiet like uh focus on what you're actually doing uh before like the distraction of like the market going up uh comes around later. So uh yeah, I think in many senses this is the perfect time to lay the foundations uh to build a product like this. And regardless, we've never really tried to drive uh decisions around timing and like product releases

around anything to do with the market. It's just uh trying to get it out there in the hands of people to get feedback and grow it as soon as possible. >> So I know you've only had this out for two weeks. Um but are there certain uh you know uh behaviors or metrics that you've seen so far that have surprised you? >> Um uh yeah the the spending like volume has been pretty insane relative to the number of users who are sitting on there. So we as I said controlled how many users are actually using the app uh which has felt quite painful actually being like you know telling uh turning people away and saying you're not not actually able to use the app now as we're trying to do it in a controlled way. So I think the weight list now is like 10 to 15,000 people and we've only

got like 400 who are sitting on there now uh within you know the last sort of like 14 days I think since we launched it. Uh I think the one piece which surprised me slightly was a few guys throwing in like one or two million dollars on like the first day of the launch into this like new mobile app that they've never used before and it was like within 5 minutes. uh it felt uh like a bit of a compliment I guess to their trust in like our security sort of setup and processes and stuff but I hadn't even had the confidence to uh do the same on my side yet and I'd been playing around with it for a month. So that was probably the bit that surprised me the most was just the speed with which people are throwing in seven figure sums into this uh mobile app.

Yeah. >> Okay. And um when you say there's only 400, which uh geographies are did you um are they mostly in? Uh mostly South America and Asia at the moment. Yeah. >> Okay. Okay. And um are so they're just using it as a regular credit card. >> Exactly. Yeah. And then savings account and then uh uh Yeah, it's basically like a savings and spending account right now in its current form. Yeah. >> And could you tell whether or not they um you know were previous USD users?

>> Uh yeah, a few of them. just because we you know tried to bring on bring on like our power users from Athena as like the early beta sort of test uh uh group that was coming on uh a lot of the guys who who I mentioned we're putting in the uh size and balances that I was describing were existing users that we did know already. Yeah. >> Okay. Well, so as I mentioned um you know this has been an interesting year in crypto. Obviously uh you know there was 1010 and then we've seen a draw down in the market. Um, but I'm curious for your thoughts on where you think the market is headed and um, you know, when you think we'll uh, come out of this bare market.

>> Yeah, I might just preface it that every time I try do one of these, I'm completely wrong, but uh, I feel like the sentiment is at least better than was two or three months ago and we might have kind of uh, put the worst piece behind us. Um I was trying to put my finger on why it felt like uh you know a lot of people within the space were almost more depressed during this uh last sort of down cycle versus uh 2022 when we had scams like you know Luna FDX etc etc. Um, and I think the real pain was probably just caused by the fact that we didn't actually have an example of something to point towards and say like this was the reason for why the market collapsed in the way that it did, right? You didn't have some scandalous fraud or, you know, huge leverage blow

up with a Luna type of uh, incident. And I think the disconnect between crypto and other, you know, risk on financial assets was probably the most painful piece where you're just watching like AI go up 10x, gold go up 10x, and then um, you know, crypto down 80% over the same time period. Uh, so I think we've just got to that point now where people are just looking at this and saying on a relative value basis, this is all like quite cheap just uh, you know, uh, just based on where it's trading historically versus other assets, not even in dollar terms. Um and so yeah, I think my uh low confidence view is that we've probably seen the worst behind us now. And I we've started to see green sheets, I think, pop up in the last few months uh in terms of uh yeah, optimism within the

market. >> All [snorts] right. Well, thank you so much for coming on Unchained and congratulations on your launch. >> No, I appreciate it. Thanks. Thanks for having me. >> That's it for this episode of Unchained. Nothing you hear on Unchained is investment advice. This show is forformational and entertainment purposes only. And my guest and I may hold assets discussed on the show. For more disclosures, [music] visit unchanged crypto.com.