Joey Santoro: Fei Protocol – Introducing Fei V2 #422

Transcript

welcome to epicenter the podcast where we interview crypto founders builders and thought leaders i'm sonny agarwal and i'm here today with state lair state lair is a guest host today he is a if uh for anyone who doesn't know him uh kind of ngmi i guess but you know for anyone who does it he is a prolific twitter anon who it you know just has awesome thoughts on crypto and wanted to come on today and uh guests host an episode and so uh here he is today today we're speaking with jody santero he's the founder of fade protocol uh which is a stable coin being built on ethereum and takes a lot of ideas in the you know long lineage of stable coins

and applies them uh which we'll learn about today but uh so before we talk about story about faye we'd like to tell you a little bit about our sponsors for this week uh so the first up is tally tally is a new wallet for web3 and d5 that sees the wallet as a public good think of it like a community owned alternative to metamask it has all the same features as metamask but the difference is that it's a 100 open source under a gpl v3 license and it's also 100 user owned with all the profits flowing to the community not a corporation the launch totality is coming in the new year but there's an early version available right now called the tally community

edition uh which is before the long before the dow launches on december 15th you know and because it's this community wallet they're ready for feedback and want to know how they can improve so you know if you have any features that you're looking for in your ideal wallet or something that annoys you about your current wallet you should uh you know post on the discord and let them know and so that way it can be a really community oriented run project uh the community calls feature a new partner each week and have about 500 uh people attending and so all the info you need is at tally.cash uh also sponsoring today is gnosis safe uh digital assets today on web3 are usually controlled by a single private key i hope that try multisig or something is not

but uh and this is a challenge because single private keys are often lost or compromised and all the funds are gone um and they often have to trust the individuals holding these private keys to like you know govern them um gnosis safe solves this problem by being a smart wallet that enables users to control digital assets with much more granular permissions involving multiple private keys a subset of which is required for executing transactions these keys can then be stored on a different wallet or software wallet and even shared across multiple people gnosis safe's extra layer of security and personalization make it the most trusted web3 asset management solution for individuals teams and dows and it's already being used to store over a

hundred billion us dollars worth of digital assets today on top of that nosy save also provides opportunities for developers to plug into the platform and build their own dapps and permission list modules visit gnosis-safe.io to learn more and get started with setting up your own save today cool so uh joey welcome to the podcast um i'd like to you know start off just with a disclaimer that i was an investor in faye so you uh you know that that should tell everyone that i love faye a lot and this is why i'm so excited for this episode but just want to give a fair disclaimer before uh jumping in so jerry welcome on to the show hey thanks honey um it's good to be here and yeah it's been a it's been a ride been you know awesome

like having you around in state too he he hopped in later when it wasn't cool and and so for for that i think he brings a very good context as well so yeah very excited to be here you want to maybe uh start off with just telling us a little bit about your background and you know what got you into crypto in the first place what were you doing before i think we first met at the sf blockchain week hackathon a few years ago uh back in like 2019 and you were like uh you were building something there was that your first foray into crypto or was there stuff you were doing before that too um yeah that was my that was my first time building something sort of in public but i've been into crypto

ethereum since like 2017 i definitely hopped in that last you know cycle and i was trading [ __ ] coins i was you know buying a bunch of stuff and losing money making money all over the place after everything went down um i maintained a very strong you know intellectual love for ethereum and for all the apps that were being built back then it was basically just compound and makered out um and you know unit swap but then like slowly like more apps came out um read every white paper to get my hands on i even taught a class on solidity at duke where i went to school and um and then when i graduated i came out to the bay they had the sf blockchain week

we built a really cool like it was kind of like furu combo or like uh i don't know like like insadap or whatever where you could like chain actions and it was built on ave using their flash loans which i thought were the coolest thing ever like when i when i first heard of flash loans i was like this is gonna be sick and it feels like people like now flashlights are just like oh you got rugged because there was some bug that a flashlight exploited and that's like why flashlights are still relevant but anyway um very very technical i'm a developer i wrote all the code for favi1 um and a lot of the code for v2 but now we have some some sweet devs on the team that aren't just me um and yeah like always trying to innovate

i care a lot about d5 and where we're going and that's kind of how i got here and i built fit so i'm happy to jam more on that as we um you know as we as we chat cool and so then how did you you know in this process how did you choose to you know i remember you were working on the some things around flash loans and stuff uh how do you decide to like you know stable coins that's what i want to go fix stable coins as opposed to the many other things you could be doing yeah so i think though like when you're a builder um like at heart the way that you want to go about like starting a project is you have to see a need that you feel like you're the right person to solve and so it wasn't that i'm like obsessed

with stable coins or anything like i just care about defy and crypto and i saw that like our options were tether ew usdc like cool but you know not long term and die which was like slowly becoming not cool like i still love maker now i think it's like you know foundational infrastructure but at least you know especially in like the 2020 time maker was not like the coolest thing in d5 at all and i think that they've really like you know made some strong moves kind of they're setting themselves up to do you know real world assets and a lot of like esg stuff i think that's a really cool niche that i think they'll continue to fill um and they'll continue to continue to

be dominant but anyway like those were the options and i was like not very inspired and i saw all these cool lending markets and derivatives and things popping up but stable coins were going nowhere um and then there was all these algo coins that were like really shaking it up those were not gonna make it like i was involved in empty said dollar um you know i did a little bit of development work there um and i i tried to make it like less of a ponzi and more of an actual stable coin but you know we saw how that turned out um and it was really cool because it was super decentralized project it really got my like my brain kind of thinking about stable coins and i realized that like where we want to go with stable coins we want to have like asset-backed stable

coins that have more algorithmic management um redeemability we want to have like protocol controlled liquidity that was a big theme and one of the reasons why empty set dollar failed versus things like olympus or kicking ass right now is because of protocol and liquidity that was a big idea behind fey and i was like why is no one doing this i'm gonna quit my job as an enterprise software engineer and just like go build it and that that's how that's how we got here so it wasn't like i was obsessed with stable coins but i was very much like trying to follow the pocket defy and fey is just kind of you know it was so in the zeitgeist that we had the crazy launch that we're gonna talk about and that's because it was like we hit we hit it on the nose with

the idea but then the execution was you know a little bit behind the idea at least in an initial stages but baby 2 is going to be really sick and so i'm super excited to just like tell the whole story and and where we are now cool yeah maybe you won't want to let's jump into that story so like you know okay so let's say what is it november 2020 esd just fell over and you're like okay i want i'm going to take these learnings and start to do something with it what was the story what was what were the steps did you just start working on it by yourself and you start to put together a team did you come up with the idea first or did you start just like

yeah or what was the steps from there until yeah and you launched relatively pretty fast right because you went up from like you know almost i idea to you know raising and launching within what three to four months yeah so the the i was involved in empty set dollar in call it october 2020 um and i had the idea for faye like right around the end of october so um it was literally like i was in empty set dollar i was like guys we need protocol owned liquidity and they were like uh whatever let's just keep incentivizing people they were like having a lot of fun and empty set dollar continued to blow up through december like in a good way like i mean not in a good way but in

like a tvl kind of way like it went up to like 600 million um supply and that's while i was building fake because i i realized like empty set dollars is probably not going to make it they actually wanted me to build their v2 or be at least be one of the devs on v2 and um i told him like oh i'm busy with work but i was building faye [Laughter] and so um so yeah like i had the idea for like protocol liquidity i was i was jamming on a bunch of mechanisms in my head um if you want to like hear more about like fave one i've done like several podcasts about it the delphi one was really good um as like historical context but um the tl dr was the market was like crazy it

was east with 600 when i went in october by the time we launched it was 2 000. so we were like really trying to just like get the idea out there like it was like a ship or die kind of mentality in retrospect that was a mistake and that was probably the biggest one um which was like we just wanted to get faye out there because we felt like stable coins there were so many competitors you know frax was coming out olympus i guess was like kind of a stable coin but now it's clearly like not a stable coin but it's still pretty similar to fey um and then you know empty said dollar v2 you know they finally shipped that didn't really go very well but there was all these other algo coins so much competition so it was really like we raised the

round with you know some investors that i like knew and friends and then andreessen wanted to invest and i was like no i'm building and then we did another round like within like a month and a half and we we probably didn't need to do that round and it definitely attracted a lot of attention and all those backers are are awesome they're cool to work with um but it really elevated the stakes a lot but yeah i would sunny sunny us sunny with in there it elevated the stakes a lot because now like all eyes were on us and um you know we were moving so fast already that um yeah and the market was going crazy it was it was honestly like a surreal experience to be a part of that um you know very small team very

ambitious idea and that so i would say like one of the mistakes was like just trying to get to market as fast as possible like just because it was like that's what everyone was doing there was so much pressure from like the bull market and all the competition um i would say like do things right like take your time take like blinders on that would be like the big lesson there is like um don't just do things because you feel like pressure from anyone else like do things the way that you want to do them because that's the way that you want to do it that's the one that's like one of the i'd call it like two biggest lessons and then the other one was like keep things super super simple um the launch like so the v1 itself was very ambitious

the launch was also an ambitious type of launch i think it was actually super close to being really good but the there was a couple things we did wrong one was it was uncapped and two was there was this like weird airdrop that was kind of mixed in with the launch plans um where people would get like more dollar value than what they put in in terms of like so everyone thought everyone who came into genesis thought they were going to make 20 immediately and if you've been around for long enough you know that that's when you should be very worried um and like we tried to tell people like hey here's how genesis works we put out all these articles we gave spreadsheets we wanted to like educate people but it's

so hard the market just like really ran away with it um and then we got so much demand like way more than we possibly could have expected it was the biggest defy launch i think in history still to this date um 1.3 billion in eth absolutely nuts and uh yeah there's like uh those are the two big lessons i'd say like don't rush and keep it as simple as possible so that like you know people who only look at your thing for 10 seconds before aping can like know what's gonna happen and i yeah there's a lot more in there to unpack but that's kind of the very broad strokes of um of what happened and uh and then obviously there was like that's up until genesis right then there's a whole like what happened

after we can go there um but yeah what like it looks like you you unmuted i'm curious like what was it like from your perspective or uh on the outside like what you know what are your thoughts on like the the launch or whatever i i'm i'm curious i think i'm gonna i'm gonna take this one actually yeah because um i was watching it uh more from from afar and i like i i one thing that i've realized is that probably even if there was like a lot of like extra like too much like fake creation like you couldn't like like you create like too much fat first and like probably that that wasn't sustainable at first because there was

like so many people that that like tried to participate in the launch but like even then i think with your current design uh without like the penalties and the incentives like the current design and especially like the the v2 design i'm i'm i'm thinking that it's possible that i think it would still still still have worked right because if there was like certainly less demand than people would just have like uh redeemed their faith for eth like in your current v2 design and like things would have went uh smoothly possibly i think which is kind of interesting like even in those like kind of like adversarial like conditions like probably would have still worked if like i'm thinking about this correctly

yeah i i agree completely and the the old like your v2 is your v1 oh my god that's never been more true than with faye like fabia one was basically broken and fei v2 is really the goal it's the protocol controlled value back to reserve um you know one-to-one redeemability algorithmic risk management it's like everything that fabi1 should have been and if we had launched with fev2 um it would have really really like we would be in a much different position now and we're already in like an objectively really good position just from a protocol perspective um like all the numbers are fantastic the protocol is making like eight figures a year on

yield um you know like we have a ton of dow partnerships like that's really our product market fit is like working with other dows um and yeah like it took time to get here but not that much time that was six months ago or seven months ago you know so um it's pretty crazy how fast the space moves and you know we're just trying to learn and stay relevant and really like be on the edge with all these other like d5 2.0 dows or whatever like that's that's where we're most comfortable and and i think that we're hitting our stride right now you don't want to belabor too much on the lodge but i i in general you know i think that i actually think the size of the launch was not the issue i think the size of the launch was a good thing i

think that the getting that billion dollar in protocol control value is what gives sort of this flexibility to like sort of really you know take this thing to and like have scale and like start to you know that size of that pcb is what enabled sort of doing some of the down to down interactions that are going on which we'll get into uh i i think that yeah personally i think the only thing that could have that would have been solved would have been like you know like you mentioned that like instant 20 increase when instead maybe there should have been a little bit of a delay between the sale and the distribution of tokens and that would have allowed for uh sort of a you know

i think that could have fixed it but you know i wanna talk sort of maybe let's go a little bit into uh some of the technicals of like how fav1 worked and so that way we can use that to like learn how how fae v2 uh differs so you want to just give us a brief overview for listeners on what the mechanism of a v1 was and what was sort of the like the main insight that you you sort of brought in yeah so fev1 was just complicated like uh it had two peg mechanisms and one like sort of core engine which is protocol controlled value that we're absolutely keeping for favi too like that was the big idea that i think

is the the real staying power um in terms of maintaining the peg favi one had direct incentives and um relates where direct incentives were basically a penalty applied on trades um if you're hurting the peg and a reward if you're going back to the peg um sounded really nice and like you know some simple models basically showed that it was like fine but the problem was that it was like super volatile and that it's a very soft touch kind of mechanism um and when you throw a billion dollars at it it just totally breaks can you talk about how does it break like what what what specifically breaks yeah i mean i mean i mean look if you're if you're selling a stable coin and you're facing a 25 penalty um that's not a

stable coin it's worth 75 cents if you can't sell it for a dollar it's worth 75 cents and that was the big problem is that the protocol effectively rugs liquidity when people want to sell and that is like um you know it from a game theory perspective like you would just hold it because you'd be like well someone else is gonna take the penalty and i'm just gonna hold it but the problem is that um game theory is like not a good way to design a d5 mechanism and like i'm gonna i'm gonna stick to that like you wanna have much like more more savage mechanisms like game theory works until it doesn't we saw that with empty set dollar um maybe someone will do it like you know whatever but you want to have like hard

mechanisms uh 3-3 question mark i i would love to talk about olympus for a second i i like the project they have an awesome community um in order to like we could talk about them if it comes up again but but basically yeah like game theory is tough man and so you need memes you need hardcore community they have it we'll we'll see how it goes i'm uh i'm definitely cheering them on that being said so so like there's this game theory aspect of direct incentives it didn't really work um especially when you throw like hard adversarial conditions at it um because that's when you're it's like if you have any kind of unstable equilibrium that is going to get snapped in half if you if you throw a lot of of chaos at it

so and then the re-weights were like very innovative and and actually they worked the the the thing about re-weights you just bring the secondary market price back up to a dollar and that's basically like redeemability you know but it's redeemability with this time component that you like re-weight every you know so many hours so what we realized was that it was just complexity for no real reason it kind of gives advantages to bots and arbitragers like um so we just said you know what screw direct incentives we scrap those really early and then re-weights we transitioned to redeemability model in in in june in early june or end of may and since then the fade peg has been like airtight um

so really like i completely disregard those first two months of phase history as like you know learning in public and iterating on a very high risk mechanism um you know and we we made very safe moves we moved slowly carefully since the launch we got it all sorted and then um and since then we were just like put our heads down planned v2 like phase been in this very like transitionary period since june where we've been like scrapping old code adding like putting diversifying at like buying stable coins doing all this stuff and now everything is like ready for fav2 which is like gonna go live basically tomorrow um with an asterisk but

yeah like uh really really really pumped about like the path and where we're going i remember one of the things that was like sort of interesting about v1 uh what and that or just the fey idea was you were one of the first to sort of really try to tackle how do you do an under collateralized stablecoin uh you know before that everything was either over collateralized or like no collateralized uh and you you one of the one of the theses of fae was that like hey is there something somewhere in the middle that gets some of the best of both worlds is that still the goal or is is that something that has also transitioned away

i'm glad you asked so basically what i have learned the hard way is that the only way to make a stable coin is to have redeemability um obviously like i don't i don't really believe in like absolutes so i'm sure that somehow somewhere someone's gonna make a stable coin that doesn't involve redeemability but if you point to any stable coin that's working at scale it's redeemable for one dollar worth of something on both sides um tara's like this fraxes like this usdc is like this guy is like this with the psm um you know like any stable coin that works at scale is redeemable period um or you have the rye-like stable going where it's volatile um

but only like a little bit and that's the only way because otherwise that volatility has to go somewhere so um redeemability is like absolutely essential and so it actually doesn't matter whether you're over under collateralized if you're redeemable at scale then it's the other properties of your stable coin that are interesting whether you're over under collateralized it's just a symptom of your goals right um so undoes under collateralization in a vacuum is a negative property it's like you all things all things equal if you have redeemability you want more collateral you want collateral that's not your own token because like that's a you know systemic risk if you're collateralizing with your own governance

token um when things go bad they go very bad and like it can work i i am very very like you know curious and optimistic about like tara and fracks and um you know those teams are executing phenomenally they have great ecosystems uh the the spirit of fav2 is minimize dependence on internal assets so tribe is like qualitatively different than frax and terra even though it uses some similar mechanisms and i would love to get into that and the idea is like let's have as much pcb as possible because that's where we went you know like pcb is the moat so we don't want to be under collateralized we can be but like in the long term the

mechanism should converge on either 100 or monotonically and not monotonically increasing but like increasing collateralization in reserves and it all depends on like how much demand there is for fae versus how fast we can grow pcv and like the v2 is designed to absorb under collateralization but not stay there that's pretty much the that's pretty much the the unlock it's like you just need to have redeemability and then all collateral is good collateral you've mentioned this term redeemability a couple of times can you explain what what does that mean and what does that look like yeah so if you have an asset that you can sell for a dollar and buy for a dollar at all

times it's worth a dollar that's the whole idea of like a stable coin so when i say redeemability i say you can mint faye for a dollar worth of something right now it's eath v2 is going to be eath and die and we're going to add like other assets as well if you could buy it for a dollar and sell it for a dollar it's a dollar that's the idea so you redeem it for protocol reserves same way you redeem usdc for a dollar from coinbase basically the the learning is that it's the that's the only way to have something at exactly one dollar right like that tried to make this like uh and eventually realize like yeah i need something where the someone can come in and like literally exchange it for a dollar otherwise it won't be like otherwise it might be at 1.1 uh 1.01

once was 1.02 like you can't really make something stick at exactly one dollar just with uh game theory like joey was saying yeah at least not not at this scale of d5 where everything is like you know 30 volatile a day uh maybe if we have like you know if you talk about like very very sophisticated financial markets like if the if the fed if the fed lowers interest rates by 25 basis points everyone loses their [ __ ] it's like that that is not the world that defies in right now um and maybe like you could have more game theoretic like soft touch institutional mechanisms but i do have this suspicion that like the traditional finance industry is

basically just run on like human algorithms like oh the fed lowered interest rates i'm gonna go sell all these assets like i don't think there's like it's just like all this like coordination at like a big scale i don't think there's anything like objective about like interest rates directly affecting the economy on such a fine grain scale if that makes sense yeah okay so joy like for the v2 um is uh does the redempt redeemability mean that you're like completely gonna like um like ditch the the re-weights and like uh directly balancing the unit swap pool yeah so re-weights are gone um and like same thing with direct

incentives like both of these features in a vacuum are interesting mechanisms that were not gone forever necessarily but like v2 is going to be fine without them so like what we're going to do is we're going to build on bouncer we're really like we have a great relationship with that team we did a treasury swap like a couple of weeks ago and um bouncer's kind of perfect for like a pcv system you could have a ton of liquidity you can re-hypothecate assets so if we do any kind of rebalancing it's going to happen like using bouncers mechanisms and not using like crazy custom code that we wrote um so that that's the idea but v2 doesn't need it it's probably not going to have it um at least not in the

same way it'll look different if we if we add free weights back in and i'm just curious like do you think that means because right now it's like the the liquidity on faye and ethan's like hundreds of millions right like are you do you think you're gonna and that that accrues like a lot of impermanent loss right like over time do you think like you you could like reduce that uh that liquidity a lot since you yeah absolutely we're gonna move it all into uh probably a balancer pool um and we might like weight it more towards eve like maybe 70 30 or something um so that way we're like maintaining some upside exposure to eth um

and yeah like i think we're going to focus a lot more on what asset allocation do we want and like kind of putting using balancer as a tool to have that asset allocation and algorithmically rebalance it versus like oh let's just have liquidity everywhere that was a very like v1 mentality and i don't think that's scalable because like in permanent loss and these things like um we'd rather leverage solutions like bouncer and tokamak and whatever to have the right liquidity in the right places and make the pcv composition what we want because um that's like far more important i think than just like liquidity in a vacuum yeah you mentioned that earlier uh about like you know the pcv composition and like how like you know

the goal should be like increasing the pcb would it be like fair almost to like in one way think of like tribe as this um or like the pcb as this like fund that's being invested in and fit and like the fae that's outstanding are bom are like bonds and then the tribe is like shares in this like fund and so basically like tribe is this fund is like borrowing money from the bondholders will pay them back and then like the excess is captured by the shareholders that is certainly a mental model that

you could use for at least some of the mechanisms obviously tribe is you know a governance token but um given what it what it controls it's a lot more than that and so like tribe is kind of a direct um they are responsible for the future of the pcb like tribe holders vote on these assets there's a buyback in fav2 that's algorithmically managed by the mechanisms tribe holders are heavily incentivized to protect pcv grow pcv maintain um you know and grow the phase supply because um fey is like you said like like debt against pcv so really it's leverage for tribe holders tribe holders can earn yield on the whole pcv and it can send fey into

circulation earn yield on that and it can like have a productive useful stable coin that like makes d5 better so really it's like an awesome awesome mechanism that's really healthy if done right you know and it's it's very flexible which means there's a lot of booby traps and dangers which is why like you know fate labs is higher in quantitative traders we're like we're really trying to like go deep on how to make sure that we can keep pcb safe and make the protocol safe because it's powerful and with great power comes responsibility and like i think that these pcv backed mega dials like fei and olympus and fracks are gonna just absolutely take over in the you know in the next wave of d5

so that that's pretty much the thesis there and uh i'm curious if you can talk about like my favorite like potential use case for phase like um to solve the problem where like all these uh cdp um uh collateral collateralized debt uh positions stable coins like diet like they need uh they need a psm which is like this this thing where you like can redeem uh you can redeem die for like one dollar of something and right now is usdc but i think my favorite potential use case is um um instead of using usdc you could use like uh you could use fey instead because phase directly redeemable for a dollar

of something so that i think yeah that's my my favorite use case potential maybe if you can talk about that yeah absolutely so faye really like the vision for faye is to be decentralized usdc that's what it is it's like only decentralized assets in reserves which are obviously volatile so that means that we have to have very sophisticated portfolio management and the problem is that there's not a lot of liquidity for hedging opportunities like assets that can be stable relative to um you know relative to the dollar like you can't pull like write a bunch of put options on each you know

on chain right now you can but there's no liquidity for that so um we have to resort to other mechanisms right now fey is like semi-dependent on other stable coins and that's on purpose um we have lusd dye and rye in the pcb right now we're looking at other options as well um so if we can get to a point where the market is mature enough that we can basically hedge portfolio volatility and continue to like earn reliable yield then fey becomes an extraordinarily compelling um psm asset it's basically the on-chain usdc that's been the vision it's like if you can buy it for a dollar sell it for

a dollar at all times it's a dollar and then we can truly break away from our dependence on usdc as an ecosystem and i want fay to play a huge part in that um and so that's that's really like i would say we have like two north stars one is like being the decentralized usdc and two is being a home for daos like a place for dows to have a ton of financial services you know the merge has a lot to do with that we're building some really sick products for next year once v2 is shipped it's going to be like heavily focused on on taos um and yeah those are like the two big use cases so i think you hit it on the nose we actually talked to daniele and mim is considering fey for its psm for um you know for mim which i think

would be really sick and kind of just validates this narrative which i'm all about and is like one of our main goals so it's pretty exciting to see the project get to that stage it's basically like two sides so is that a right way to think about it is that you do you need like the um you need like the customer right the the the person that like wants face so because of that there's assets in the in the pcv because without people holding fay you you won't have assets right so it's like someone like uh mim would be like a holder a fan and like a kind of like a depositor in the in the fade out yeah exactly you have like the the people on the other side the other side of the metal is the people that

like want to like that can benefit from the the pcv which is like dials right like people that that need like lping people that need uh like uh just services in general that require capital but without the depositors you can't have anything because you don't want to have money in there right yeah so basically we're building a two-sided marketplace right where you want people to hold fey because it's the most decentralized and scalable stable coin or at least one of them right and so mim is exactly like a perfect for you know spell i guess so that protocol is like a perfect candidate for this and that's what i said by going hard on daos we want to make use cases for daos to hold fae that's our like that's how we build

the demand side and then this uh the you know the supply side is easy or or rather like the demand to hold fay right the like to make more supply we just mint it you know we mix they into fuse pools we mint they into ave we meant fae like all over the place um that's easy as long as you're careful about your collateralization ratio and making sure that like all the mechanisms are are sound um so yeah it's really like building that demand side through daos and through the narrative that like fey is on chain usdc that's the real like vision and um i think fey is very well positioned for like you know you know the next the next phase we're trying to stay on the edge of d5 we want

to keep innovating we're we're partnering with very innovative teams staying on edge staying innovative staying competitive that's always been the vision it's like a very like execution innovation focused down okay and uh another one um what's the what's the like a breakdown because you didn't you didn't need to think eventually like what do i actually want to hold in the in the treasury right in the pcv right what's the what do you think like i imagine like it's not you it's the dow right but what do you think like which should be like a right uh breakdown for uh like what you're holding in general yeah absolutely so um this is entirely dependent on the

collateralization ratio i actually think the current asset allocation is approximately perfect which is you know it is good right like we have 220 50 million in stable coins um and that's a mix of die ryan lusd and i consider those to be like the three most liquid and decentralized candidates um you know like dye is extremely liquid and it's censorship resistant but there's some questions about its collateral composition l usd and ryer there's no questions it's like totally backed by eth using cdp style mechanisms um enough lindy to feel comfortable holding them in size but definitely not to be 100 dependent on them so it's this

like as much of kind of those type of stable assets as we can get comfortably how did it acquire this stable coin pcb because i remember it started off with the pcb yeah yeah so the like i guess to wrap up that last thread like and then the rest we want to hold like a ton of each and then good amounts of other like fully decentralized baskets um we love like kind of the index co-op product suite like we have some dpi uh maybe some data maybe some metaverse index those are not in the pcb at the moment because we're kind of waiting for v2 what's the percentage right now between between stable coin versus yeah so there's two different numbers that are important here one is the raw

like asset allocation it's about 25 stables but then if you talk about it in terms of collateralization we're over 70 percent backed by stables so eat would have to really really eat [ __ ] for the protocol to be in in danger so it's awesome because we're free rolling a ton of eath right now um and that's a really good place to be in so we're pretty much like shored up for a bear we're like like phase going nowhere basically and that's the goal um so so to answer your question how we got these stables um we got the die and rye through bonding curves where we would like buy them at a small discount um and we just let arbitragers kind of fill up our buffer

and then what we realized was that that's kind of like a a little bit uh of like it's not like a totally sound mechanism you know because you're just giving away like one or two percent spread just to acquire the assets so what we started doing is we started using liquidity bootstrapping pools to basically auction fee for um assets and that's how we got 100 million dollars worth of lusd with only like like about one percent slippage which is awesome given that there wasn't even that much lusd in circulation like the you know i mean there is but it's all in the stability pool so like the market just kind of took care of it for us this huge buy order that we placed over two weeks um so we started

we're going to use more like automated tools like bouncer to to do these like asset um rebalancing and acquisition and stuff like that that's really cool that's a cool use of the lvps um yeah whatever if you weren't just uh sending a transaction on unisoft and getting front run or something like that so that's cool no we're dude if you're you got to move slowly and carefully when you have that many assets in in public so we're always thinking about how can we get front run how can we avoid that how can we like you know make these these asset allocations in the open and it's something that we're building a strong competency for who makes these decisions is it

governance votes or is it or does governments delegate to a more sophisticated treasury manager governance is totally controlled by tribe holders with the exception of the optimistic approval multisig which is currently responsible for our liquidity mining and um it can allocate say um to some extent it can like do like say um liquidity as a service kind of stuff like infused pools or with our ondo partnership but uh asset allocations are totally controlled by the dao um that may not always be the case um in fav2 we're going to have risk curves which are like an automated mechanism for rebalancing using balancer so it's

kind of uh it's kind of like compound has an interest rate curve that tells you programmatically what the borrower interest rate is and what the supplier interest rate is but instead of controlling interest rates you control asset allocations and the input parameter is the collateralization ratio so it's just a really cool like automated function we're still doing a ton of analysis on how to like optimize that before launching it that'll come in like probably march or april next year we're also blocked on balancers timelines for releasing that feature on their manage pools but um but yeah i wrote a really i i like i've thought so much about governance that i wrote an article about it that i published last week maybe you could put it in the show notes or something but

it's about um it's about governance and like where i see d5 governance going and i think that there's like three really critical aspects to any sufficiently complicated protocol you want to have token governance but you want it to be pretty light like token governance should only control really important decisions like um you know do we inflate the token supply do we change access control do we update contracts like that should be like you know very big decisions should be managed by token holders and i think you can delegate a lot of decisions to like a committee or like a group of like your specialized stakeholders most decisions in governance are just on party lines it's like everyone votes yes

and to me that's a sign that we're over utilizing token governance like token governance is an extremely heavy-handed process and if everyone's just gonna vote yes on most things then that's sub-optimal use of of resources of gas of all these things of people's time and energy so where i think we should go is more towards optimistic approval i first heard of this idea through the gyroscope um i think they're in testnet or something right now but um it's basically negative consent governance it's not anything totally new but it's that like you appoint a committee that committee can make decisions but there's a time lock and during the time lock the dow can veto and that's so much easier because i think people when people want

decentralization they just want to say no when something's messed up they don't want to be involved in every decision and that's what i think like for example um you know if people are getting censored on twitter and stuff like because twitter centralized like the people should be able to vote and say no you can't censor that person but they don't really care like what the algorithm does day to day um and so that that's my model for decentralized governance is that the people want to just know what's happening they want transparency and they want to say no when they don't like something and i think we're going to start leaning more and more on those type of mechanisms um especially after the merge because tribe is going to very quickly become governing like a ton of stuff so we can't do token governance for everything

yeah it's almost like future key for governance where like if everyone can predict how governance would vote you probably don't need to actually run the governance system itself yeah dude she turkey is futarki is crazy i'm i've been i've been obsessed with futarki since i first read that merkel paper but um it just seems like so hard to to program an objective function and like d5 is moving so fast that we can't have decades worth of data but yeah that like i can't wait to see smarter people than me solve governance like i don't know state layer state layer might do it you know whatever whatever he does next but state are you working on solving governance not right now but i did like that article i think optimistic governance yeah that's that's

pretty good like uh you delegate to uh people and uh if like the governance holders still remain in control they can still dissolve the the consoles or whatever whatever is in place i think that's the right model yeah i i plan on posting something on the sushi forum trying to get them to use this model because i think like if they had optimistic governance all this controversy would have just been like oh okay no the people voted no you know instead of giving absolute control to the treasury multisig um and i think the sushi team is like pretty on board for this um it would be a big win for everyone so uh one other question about the pcb you mentioned so you've mentioned balancer a bunch of times now um so

you're not holding the piece you're not holding the pcb in like a balance or amp right it's like you're holding it how how are you how do you what do you mean by using balancer for this so right now faye is basically a patchwork of pcv deposits which are just literally like wrappers around like yield generating assets like compound ave um fuse pools whatever this is not a sustainable architecture and i'm wrapping up the thread on the initial v2 launch and the merge and then i'm going to spend a lot of time re-architecting from the ground up like a full stack kind of pcv system that's like more elegant um and more streamlined and that's going to involve balancer very

heavily so what i'm imagining is basically balancer is kind of the top layer where everything is in a bouncer pool that decides the macro asset allocation of the portfolio how much do we have how much dpi do we have how much rye do we have how much lusd do we have and this is controlled by the risk curves at the very top level and it should be pretty light it shouldn't move that much because if you move too fast you're moving the whole market and if you move the whole market algorithmically you're going to get destroyed by hedge funds and traders and so um we're doing a lot of analysis to make sure like what's a safe mechanism for that but that's where i imagine the top layer

being and bouncer has a cool feature where the way that they solve the capital efficiency problem is not by concentrating liquidity but by actually giving you access to all the liquidity outside of the the price band that you're in so you could take assets out of bouncer and put it into like some other deposit so what we're thinking is using the fuse yield aggregators or rari yield aggregators that are aggregating on top of fuse as like a big component of pcb so it'd be bouncer on top and then yield generation sort of abstractly using these aggregators and then at the base layer we'd be using to use pools um that would control kind of where pcb's going so it's kind of this like full stack integration where you get

length you get swapping liquidity lending liquidity and yield aggregation um kind of all all in in a hierarchy and that is a really nice architecture i'm gonna like do a whole write up on it come up with a transition plan um from our current system and that's gonna be like a big theme like early next year probably so um that's kind of the the alpha leak i guess for for where we're going after fave 2. but when you're keeping your pcv in the balancer pool does that mean that like it's suffering the il because i've always heard like balancer try to pitch it as like hey this is you can build etfs using balance by also isn't having

it in a pool like a terrible etf because you're like just you know whenever an asset goes up you're like selling that asset basically and like so here's the thing like when you're market making like the goal is or like whether it's a goal or not the idea of market making is like you're always selling the asset that is in demand like if someone wants it you're selling it to them and you're taking fees for that um that is like market making is a is a trade it's a trade that's long volume and short volatility so impermanent loss is like it's a stupid name like it should just be called market making like that's that's the whole game i guess the question is why are you market making with your entire pcb so so and then there's another question which is that

market making in an amm is two things it's it's actually a portfolio management tool like if you're an lp you're making a specific trade on your portfolio you want to be fifty percent exposed to each and fifty percent exposed to usd if you're a market making ether um and maybe that's not what we want but if we know what we want we just plug it into balancer balancer decides the asset allocation and you know instead of thinking of it as selling on the way up think of it as rebalancing like you're you're rebalancing to have the asset allocation that you want at all times and you're actually getting paid for that because people are swapping on your liquidity giving you swap fees to have the asset allocation that you want does that make sense

yes but i'm going to claim that the balancer amm is the opposite of what you want because like you mentioned you know 25 percent of your poll for for folios in stable coins right now but it's 70 backed with uh with stablecoin but the problem is as eth starts to crash you guys are going to end up owning more and more eth which is crashing and less and less is going to be backed by stable coins i would argue that you almost want the opposite which by the way this is something we're working on at osmosis is you want a leverage amm which actually lets you sell eth on the way down rather than buy eth on the way down yeah that that's literally what we're

building for fe v2 we're building risk curves on top of bouncer that change the weights of the portfolio as the collateralization ratio changes so we can actually we're making an abstract generalization layer on top of balancer that lets us do exactly what you're saying where we can sell on the way down or buy on the way down or do nothing on the way down and that's totally dependent on the the inputs like we're providing the function and so like yeah like the answer is whatever we want we can do and we're doing a ton of upfront analysis we have data scientists quantitative traders on the team who are doing this analysis so that when we put it in it we have like a pretty good understanding of what's going to happen and then you know it's a very chaotic

system so if if something happens we didn't expect then we change the mechanism and we change the curve weren't you saying joy that like uh you were thinking like you might not not necessarily like put the whole thing in the in the balancer pool right you might just hold like a hold some outside of it right yeah so the the roll out and the architecture are still totally up in the air um i think that it's very wise to start out like we're gonna start moving pools over to bouncer pretty soon like the east faye pull on unit swap v2 there's no reason it should stay there we're not getting any incentives and you know it's like it's a dumb pool so we're going to probably move that over to balancer

um we're going to make a tri-pool and balancer probably so we're just going to keep like moving assets over to bouncer and then eventually i do imagine that near 100 of pcb will be in balancer and maybe it's not 100 maybe it's like 50 but we want to build an ecosystem we want to build a stack that we're like i i believe in like concentrating your resources both from an architecture perspective and from like an alignment perspective like we want to own a ton of valve we want to be a part of the balancer ecosystem you want to pump tvl there pump volume there um same thing with the merge like the rari merge is like we want to put as much pcb and a fuse as possible and into rarity vaults as possible because like we're going to

become one protocol so that's the that's the idea there it's like maybe not at once maybe for technical reasons and security reasons we'll roll it out but eventually we're going to put as much as we can there um assuming that we have the properties that we want of pcv like the end goal is to just have the asset allocation we want in pcv at all times and we're gonna use balancer as a tool to get there can you still have like uh some of it in like in balancer but uh like just like static like just like not actively being like market market mate width or that's possible at that point we might as well just keep it outside of balancer so it's it's really like that's that's what i mean like maybe we don't want to

put our index in bouncer because we want to make sure we're not ever selling it because we want to maintain one percent of the fully diluted supply of index we'll just keep that outside of balancer and we could do that with any amount of pcb like maybe we just like always want to have a hundred thousand each no matter what and we're just gonna keep that outside of balancer forever and put it in state teeth and just leave it there like you know we could do stuff like that um definitely like i don't i don't believe in doing anything arbitrarily like we should have put it on bouncer just because we should do it because we have a very specific goal so having a lot of smart people in the community like you and you know all the the various stakeholders kind of pitching in and deciding like what we

want to make this thing that is what i'm going to support and provide technical resources for we so we so okay we talked a lot about uh what happens in like the over overclocalized regime like you know ideally everything is one for one redeemable for something in the pcb what happens when the pcb gets if the pcb gets completely drained and you know because we offer this one-to-one redeemability now that that means that there's outstanding faith what happens next you're saying we're under collateralized in this scenario or what yes i yeah yeah what happens if what happens if we're undercollateralized but you know you still keep and you keep

offering one-to-one redeemability but then we're all out of and we get and all the uh pcb gets wiped out yeah i mean that's a textbook bank run so that's the v2 is designed to avoid that we have two mechanisms to avoid that one is if we go under the target collateralization ratio we backstop with tribe and that's the only scenario where tribe is used to absorb volatility on the downside is if we go under the collateralization ratio the target's going to be 100 um there's technical reasons why it shouldn't be over 100 um and we can actually lower it we can lower it to like 90 or maybe even 80.

but um you want to keep that number pretty high because like you don't want anyone to be scared like if people are like oh fey is 90 back that's gonna be fine in pretty much all market conditions um so as long as there's this like guarantee from the protocol to backstop with its own equity when [ __ ] hits the fan that's like a really good way for people to kind of like feel comfortable we also have a rate limit on how much tribe can be inflated at a given time so that tribe holders are not freaking out and like dumping to front run any inflation um and then like i said the risk curves are going to be selling into stables basically as pcb goes down so um there's all these mechanisms to kind of stop us from getting under

collateralized but if we do like tribe is there as a backstop um and if we get so under collateralized like black thursday like you know i i guess in an extreme scenario phase zero is out that's like you know we're doing everything in our power to make that not happen and i'm extremely confident in the mechanisms but like if things had gone much worse on black thursday maker wouldn't be here right now so that's kind of the yeah i think it was black black thursday or monday i don't know whatever whatever happened in march of 2020 if it had gone much worse makered out would be toast and so like that's the risk and that's what we're building to protect against but yeah like you know it's defy you can't have an airtight mechanism when

you're doing something this complicated so it's all about like on-chain incentives asset reallocation mechanisms to protect against the backstop event that makes sense um one funny thing i was thinking about before right while prepping for the show was uh if you actually allowed redeemability or mint ability of tribe first right before it it's at the collateralization ratio it kind of becomes like terra but with a bat with like an e backstop so you know the whole thing with like terra is like how does it work well the tfl balance sheet is backstopping it but here it's like hey there's this on chain balance sheet which it you you create terra but this on chain balance sheet is what's

backstopping the protocol which is kind of cool here is the difference between fey and tara um and i love this analogy i think like i think it makes a lot of sense to me so like let me know if it doesn't make sense but basically um luna is absorbing volatility in ust demand directly when luna when ust goes over a dollar luna gets bought and burned when usd goes under a dollar luna gets minted and inflated um fey backs the peg with hard assets if other stable coins like pcv so the peg is completely managed by pcv and tribe is absorbing volatility in the pcv so it's kind of like luna with an extra step where it's managing volatility in

the assets not in demand for the stablecoin yeah i i i think like for me i i remember like i was always very skeptical of tara and i guess i just never understood it um until i saw understood faye and i think faye to me was like this like stepping stone where i like at least i understood the game theory of terror i'm not it's still something that's a little bit you know will it blow up in a good way or a bad way i don't know we'll see but uh i think that that definitely helped me understand tara much better yeah and uh then the reason why we're obsessed with being fully collateralized is because we're nervous about

mechanisms like terra like we've seen titan zero out after a two billion dollar supply and like there's a bunch of things that went wrong there but the market has been in our favor for a year and a half now um that's not gonna it's not gonna be like that forever so um you know we don't wanna have a mechanism that can weather the storm in like a really gnarly storm because i think you know i remember march 2020 i remember you know 2018 like [ __ ] is not always very pretty it's like it's brutal sometimes you know i was like a hyper hypothetical like scenario like the only way i could see like faye become like close to uh luna would be like if faye would swallow up like so

much eath that like heath would be like really like uh like ingrained like with uh with faye itself right like then that would be closer to luna right because basically there's a point where face selling could affect the market right yeah i mean we are at that point it's just like not it's not like if ether would like get destroyed if we unloaded everything but the east price went up 10 during faye genesis and the gas price went up like 200 percent i'm pretty sure that like us sucking up you know almost a full percent of the east supply was like definitely moved the price and we still

have like you know a quarter of a percent of the each supply so we're we're a huge actor we're probably one of the largest eath holders as an entity in the entire ecosystem this is a i'm just having this crazy idea now like right now while we're talking so this might make zero sense but what i mean so what one thing i was mentioning was this state earlier was like hey what if like that the v1 idea what like but you had like the redeem ability let's say you had something more like terra where like you meant and burned tribe for uh usd uh sorry for faye but then you used your pcb to instead of market making on

ethe like v1 was doing you instead use the to market make on each tribe instead and you basically have like hey here's this like exit liquidity for uh for uh tribe out and it's like that feels very interesting but then what i just thought about just now was like i wonder if there's like this a way of like using this with like an olympus style mechanism to keep like increasing the um pcb and then like i wonder if olympus could issue a stable coin with like their actual so you know you know actually earlier on the thing you were you were offering up your views on olympus maybe maybe we can do that

and we can talk about that a little bit because i remember back when like fae was when it was first like launching and stuff i remember at the time like uh everyone was talking like the two things everyone's like oh two big stable coins coming out right now feyen oh man clearly ohm does not seem like a stable coin right now so what do you think it's like about what are your thoughts on olympus yeah so um the the spiritual core of both protocols are identical it's a pcv backed asset period like fey is a pcv back to usd stable coin ohm is a pcv backed futuristic reserve currency that has a floor price um and so in that in that regard i think

olympus is one of the coolest things ever because i think faye is one of the coolest things ever and they're very similar um the way that olympus is different is that they use snaking and bonding to kind of growth hack this like pcv or protocol own liquidity um it's super sick like i don't i have no idea what's gonna happen i um like i don't i don't have any own bags but i really like the team i like um you know i like the community a lot i i'm always i always hedge when i talk about it like it's a dangerous mechanism i think even the leadership kind of knows that it's like not to be trifled with so all the memes and [ __ ] are fun but um you know it's trading you know 8 or 10x over its reserve value at any given time and that

could zero not zero but that could you know that could do a 5x dip at any point um and everyone's kind of aware of that and but like they have such a strong community and the market's been in their favor like they're acquiring so many assets like olympus is not going anywhere and i think that's the long-term play is like even when [ __ ] hits the fan they just pivot to being more like a stable coin and less like a like a growth machine you know um i uh yeah i i like a very nuanced like i'm i'm i'm following olympus right closely i'm i'm you know like i think that they're really executing pretty well and that's my that's my like broad take on on olympus

it's it's funny because like uh one of the uh because i have like a lot of like uh omi's friends right and like one of the ways i like kind of like explain them fair like peel them on faye was like imagine if olympus was to like issue like a an asset like a like a stable coin that's like fully backed by their their pcb right because they have like hundreds of millions like they could do that like tomorrow they could issue like a well maybe not tomorrow but you know uh like uh issue a stable coin it's just essentially like faye and just sell when it's over one dollar and and uh buy back when it's under one dollar right uh so like that's kind of how like sometimes i explained the fade because like tribe would and home would become essentially like trap right because it

would be just like the the governance token and like uh they get like the upside on the pcb growing and everything so that's kind of like one way dude that would be a crazy timeline if olympus just like launches a stable coin and turns home into a governance token that would be absolutely that's a crazy timeline yeah so that's exactly what i was just thinking it seems that the mechanisms are very similar but what ohm did was it packaged tribe and what what in in faye is two separate tokens one which is stable and one which is this like accruing value asset because it's like proportional to the pcb it packages them into one asset but it would be but i feel like oh maybe could separate these out where

like you know they have this like floor value that's backing the ohm when it's clearly under collateralized there they could issue a stable coin based off the floor value and then have this other thing become this like pcb tracking asset it seems like that's a little bit what's going on here oh my god that that's so sick i don't think they want to do that i i've talked to like i've suggested like oh could you do this like to some friend like og omes and they were like yeah that's not that's not like the vision right because they want the asset itself to become the the reserve currency but i think it's a cool it would be cool right and they could they could make it so that it's not it's not like feel like exactly one daughter it could be

more of a like a floating one right like uh let's say it's like they don't let it go past 1.05 but they might you know that that type of thing yeah i mean i think uh like they should keep it as just home right like they should stick to what they're good at that's been the narrative that's been the vision and like if they can execute it it's [ __ ] huge and like you know i i definitely think you know it's worth it's worth giving that it's full shot right um so but if they want to launch a stable point call me i could i could give you some tips what is the pcb right now the the dollar value

approximately uh yeah eastman tanking so my guess is it's around a billion it was like 1.2 uh a week or two ago um yeah it's almost exactly a billion as of right now okay so there's a so there's about 1.2 billion dollars of pcb and about 750 million dollars of outstanding fee right yeah but half of that say it's 700 and half of it belongs to the protocol so in terms of debt there's like 350 million okay so then maybe let's talk a little bit about uh this uh rari merger um so you know what maybe before we go into the merger like you know what was this like

relationship and like what was the interaction between the fey protocol and the rari protocol before any talks of merger even popped up yeah i mean it's it's really a perfect fit like fey is a you know phase a stable coin looking for a product and rari is a product looking for a stable coin like they have a leverage market but you need liquidity particularly in stable points to you know satisfy the demands of people who want capital efficiency against their tokens and so we basically put fey into every fuse pool we could we have fey in like you know like nine of the top ten fuse pools or something like that maybe eight or nine

of the top ten and um you know a ton of pools like all the top pools have faded because we put liquidity in them and then that attracts capital so um very strong relationship on the mechanism level also the teams just like really gel very very similar vision execution style very aggressive innovative um like wanting to be on the fringe and like you know be the ones kind of leading the charge like that's always been like jay's vision their team is is phenomenal and great to work with so um when when jay first like floated the idea by me it's funny because i had actually been thinking about it for a while i thought like man what if we like merge with rory that'd be so cool and then jay was like dude what if we merged

protocols to me and it just felt right when he said it but we spent a lot of time kind of syncing up with the teams getting everyone on board um you know it's a big big decision it's like getting married and um so that's kind of how we like got here and then once the teams were all totally on board we took it to the community no one else knew about it we didn't tell any of our investors or anything it was literally just like from the core teams and then we took it to the community got a ton of attention um had some really great conversations it's honestly been the coolest example of decentralized governance i've ever been a part of um because you have two different communities trying to negotiate all these different narratives all these different stakeholders really really like people showing up to

like contribute value and like you know fight for their you know their protocol very awesome kind of process and cool too you know cool to be a part of was there a vocal minority or that was like very against the merger yeah i mean i i think calling it a vocal minority might even be like um you know belittling like the sentiment like there were people who were very upset on both sides i had no idea what like on the tribe side it wasn't even a minority it was like all the biggest tribe holders were like dude what are you doing and um you know there was a lot of like

negotiation and and we changed the proposal a ton to really make it work for like all the key stakeholders and as much of the community as we could and jay and i have been like really emphasizing the vision of what we can do together and oh my god is it going to be sick like get ready um and so yeah like there's a ton of detractors when we first proposed most of that was because people just it was out of nowhere like no one was expecting this because it only makes sense after you spend like some time like thinking about it and looking at where defi is going and um so we think that this is like a very forward move that you know already we're seeing like the spell ecosystem like they're consolidating a ton i think they're trying to merge with sushi right

now like we're going to see consolidation all across the defy stack and so it's like choose your friends and i know who my friends are and i want to merge with these guys and like um you know i'm trying to sell this vision to people who aren't into it but ultimately we're we're letting people who aren't into it kind of exit like tribe holders get the rage quit rgt holders are gonna swap into an asset that's 10 times more liquid so everyone's going to have the ability to leave if they don't see this new vision and it still needs to go into unchained votes so it's ultimately still a decision by token holders and uh i'm pretty confident that it'll go through and we'll like we'll be able to execute something really awesome the it looks like the snapshot vote is currently uh at 99.99

yes so it looks like it's probably gonna go through as at the moment yeah it was the most voted on snapshot ever in faye protocol by a long shot ten percent of the supply showed up fully diluted supply so it was like of all of the tribe that could even possibly vote over half of it showed up and fey labs participated very minimally like i didn't vote seb didn't vote most of our investors didn't vote it was very just like totally community like i'm so i'm actually floored at how positive it was received by the community after we after we added the rage quit and changed the proposal like everyone was on board even the people who like aren't down for this new vision are down because of the rage quit

they're like yeah like you guys do your thing i just want to take my fae and get out of here and um i think that's going to be a really positive kind of healthy moment for d5 as a whole but particularly you know the fey community and the rari community it's going to be it's going to be really you know a powerful event yeah i mean i i that's very interesting about this whole ecosystem thing because that's something i find i i see happening as well where it's like you know you know you you take a stable coin you take a lending protocol you take a decks and you're you got to pack them all up and so you know like you mentioned you know i think you know this is happening in terra i think that's happening in like as you mentioned in like the

spell commune ecosystem with that daniel esta is like uh putting together so and you you is that really where you see like sort of tribe going as well where it's like okay uh you know you have this like stable coin you have a lending protocol eventually you guys are obviously gonna acquire balancer alpha leak right here blah blah uh is that where you see where this is all going absolutely i think like tribe is uh tribe like new narrative basically like i want tribe to be synonymous with d5 in like two years you know um and that's the that's the real vision is it's like full stack a bunch of very values aligned teams all independently contributing value like i'll continue to

lead the stable coin side for as long as i can and i'll try and help with this like broader vision but everyone i want to bring in leaders i want to bring in people who can like build a product and help us integrate and create a really full stack experience for dfi and we're going to use pcv to make that really really kick-ass and like that's the trick is that everyone who integrates with us gets hundreds of millions of tvl immediately and if you and if you're a builder and you're like thinking about like what's gonna happen to d5 when everyone consolidates like and you're and you're like excited about what we're doing with like faye and rari and you know we're already in talks with other teams and like it's gonna happen and we wanna talk to you if you want to build on us like

dm me it's a really powerful value proposition when you have this tightly knit community that's sharing resources um and like fostering leadership you know like i want teams that are i want to see like people fighting for like what they believe in like in governance and like really sharpening the sword and not just like one team kind of saying what's happening and that's what's happening a lot with faye right now and i think we're doing a good job as kind of stewards with the community and we're elevating the community more and more but when you add in more development teams and more products so you really get something magical where it's it's like true decentralization and that's what we're going for so you remember there was this one line in i think the governance proposal or

somewhere but it said like different comp separate communities in one token what exactly does that mean so i do think that in particular the communities i really want to like mesh together because like rari is maintaining its own brand and fey is maintaining its own brand but tribe is like the umbrella and um i think that there's like you know it's kind of like everyone who's on the terra ecosystem you have like anchor protocol and like i don't even know what what other stuff is over there but like that's all over on tara and everyone still like identifies very strongly with like luna and the whole it's like ethereum almost like

communities within communities i want to strive to become like an asset that represents a lot of different communities that all come together and like i care a ton about tribe and i care a ton about ether like i'm buying as much ether as i can get my hands on right now and like i want people to like also feel that way about like tribe and have multiple teams all like building on tribe that's really the vision um so the development teams will stay independent but they'll be much more resource sharing i'm actually on calls with the roaring team almost more than the fey team these days because like we're planning so many integrations and so much about the merge so um yeah it's going to be very fluid and kind of like you know authentic decentralization that kind of the dow

level scale one thing that i guess makes this merger interest different is like so like this is probably the large is this the largest like token merge in like crypt ever in crypto or do you know if there's any larger ones i don't know of any larger ones and it's definitely the coolest if it's not the largest because it's too it's it's so here's the thing it's two teams with product market fit that's that's what's so cool about this is that like other mergers it's like you take one dying thing and one thing that's not dying and you like put them together um this is like two teams that would have continued to kick ass if we stayed separate forever but we just saw that like one plus one equals three

that's like the meme that we're going for right now like you take two things that are already good and you put them together you get something like that's greater than the sum of the two parts and that's really the that's really the vision and why it's so cool in my opinion what i remember last year there was this whole thing about like sushi and year are emerging and that they're going to share a depth but then i never heard there was like a blog post about this but i never heard about it again what was like the deal with that look i mean here's the thing like the urine ecosystem tried to do this they realized that consolidation is power and to be fair the the urine ecosystem is powerful but because they have all these separate tokens there's not really a ton of incentive alignment so people are

kind of just doing their own [ __ ] and it was honestly pretty lackluster in execution um and then the sushi sushi tried to verticalize d5 by building every single product possible with one development team and that didn't go well either so what jay and i realized that even though it's painful to smash two tokens together it's the right way to do it and um like we are gonna continue on our product roadmaps we have specialized expertise in what we're doing but we have dramatic incentive alignment because we have one token instead of two and we think that that's the model that consolidation will like will win and um so it's really a bet on like a certain type of consolidation that's at the token level and that's that's what

that's the bet that we're making yeah because even if you make a large token swap like when you think about it like yeah maybe you'll be happy if the other protocol does well because you're like yeah we own some of the token but it's really not the same in the sense that like in the at the end of the day you're still rooting for your token and you want like your token to do well and like that's not probably the only way to like actually be on the same on the same side the same team is like you need to have the same token right like otherwise you're gonna wanna you're gonna want the best for yourself uh that's just natural yeah exactly so that was the key intuition and this was a common criticism from a lot of community members like why don't we just do a

token swap it's like well we've done token swaps with other teams and we still do them i think they're they're very useful and important but it's a totally categorically different type of incentive alignment like we love index coupe but we would not like give them pcv for any reason right like we would we would buy dpi and we would use it and like do stuff like that but with rari it's like we are going to put assets into their protocol we're gonna pay off their hack we're gonna do development with them like that is true incentive alignment and that's what a token merge gets you that a token swap doesn't so what are some of the plans for the future for for i guess faye and rory now and

the tribe ecosystem as a whole how do you what what's yeah so you know you mentioned fev2 is launching tomorrow um what what one of the things what are the um assumptions that you're looking to validate from this launch tomorrow yeah so the fedv2 launch it's it's really like fey is kind of the ship of theseus like it's it's one system that has a bunch of changing components all times like even today before the fed2 launch the only contracts that are the same from fave one are the fake token the tribe token and our one access control core module every single other contract has been completely replaced since fev1

so it's already like the v3 if you think about it in like a pure like software perspective but the thing is that we're going to keep like adding new components and replacing old components fey is like a very fluid system and it uses a different architecture than most ethereum projects like it's immutable but with like very modular so we don't have any upgrade ability except for two contracts in this system everything else is just plug and play like legos you get rid of something old put in something new um so the fev2 launch tomorrow includes two really important features it includes the tribe backstop as well as a rate limiting module on drive inflation which is useful for tribe holders to kind of game out like there's no infinite minting attacks there's no like

craziness like there's a hard rate limit on how much tribe can be inflated and two is the die redeemability contract it's really a psm just like maker dao and that is the most important mechanism because right now we have redeemability against eth which is great but it on its own it's a little bit leaky because the chain link oracle is not perfect it's the best that we have but it's not good enough to um not leak value to arbitragers and predictive like you know predictive bots and stuff um so we're adding a die redeemability contract what's awesome about this is that it's categorically different from the makerdale psm maker now does not control how much usdc they have they

only have a cap it's not pcv they can't unload that usdc anywhere um we can decide how much die exposure we want it's currently 10 um it's going to go up to i think 12 or 15 after this next download passes but um that is a number that we control as a dow so like maker dial doesn't control how much usdc backing there is it's totally market determined but we can say we're going to sell all this die or we're going to buy more and that's totally up to us so um we can we can decide the the level of dependency that we have which is really powerful um and so we just want to see that like that redeemability tightens the peg spares us from like buying and selling

eath all the time um and then we can focus on kind of the the fun part which is what happens after the merge we're going to build a ton of products that focus on um you know like dows i have one product in particular that i'm really excited about and and then like some future plans that i'm super excited about so what is the what's your you know i think every every protocol is you know kind of mandated at this point to have a plan for multi-chain or interchange uh what it what what is those guys is looking like i'll admit i've made one ethereum transaction in the last month because a little part of me dies every time i pay a transaction fee that's over a hundred dollars

yeah so our multi-change strategy is like not right now pretty much um and and that's changing rapidly but basically fey is a protocol for daos and daos operate at a scale that is still comfortable on ethereum layer one um so we're going to stay where the dows are we're not fey is not a stable coin for consumers we're not competing with diet in usdc we will eventually but our um our like foot in the door is doused like i i'm not concerned with how many retail users are holding fey because it's such a hard sell it's like fey is a stable coin that's not doesn't have as much of lindy um it's not as useful as dye yet but it's quickly becoming integrated everywhere um so why would we try to compete there when faye is literally the

best stable coin to integrate with a dow and all the dows are on main net um so we're staying on mainnet with the daos basically um until l2 is more certain right now it's kind of a [ __ ] show it's like you go to arbitrary do you go to optimism oh zk sync is coming like you know we're we're gonna just wait and see you go build tribe change that's the answer dude low key that's gonna happen but don't like like that's the mega alpha leak is like i don't know when but that will happen low key on this podcast with 10 000 listeners don't tell anyone there's one cool multi-chain thing uh that that you probably could do or probably will do if i'm guessing like um uh so transmissions and rarity like they've

been working on this nova thing where it was like a protocol for like uh you can use for fast breaching uh like between roll ups or chains and like the the the hard problem with these uh protocols for for like uh inter chain and like fast bridging is like you need capital like so phase like a perfect fit because they can literally just print into these these fast bridges and like use their use their uh their their protocol nova for for and do that so that's kind of like a multi-chain type thing yeah absolutely so basically like fey core is staying on l1 for a long time probably until it's very clear that we need to move

um but launching products and certain amounts of pcb onto other chains is in the works at the moment um like transmissions is working on it david's working on it one of our developers caleb is working on it uh basically we want to joint launch fuse and fey on a bunch of chains and i think fuse is getting a little bit of a head start because their devs are more focused on that than ours are at the moment but we will get there um so well imagine like fuses on all these other chains phase seating pools there but it's not like core pcv is on these other chains yet if that makes sense you could get it on us on osmosis too uh well charlie thanks for coming on and uh you know sharing all this fun stuff

about bay and tribe and everything going on um where can people sort of like find you and learn more and what's the best way for people to get involved yeah absolutely so um follow the fey protocol twitter account it's just at fae protocol no spaces um or me i'm joey underscore underscore santoro i tried to buy a better twitter handle if anyone knows how to do that i will i will get one but um and then join our discord i think the discord link's in our twitter bio so um you know we want to hear from you dm me especially if you're a builder looking to join a sick megadoubt ecosystem um and yeah like thanks again for having me

this was this was awesome thank you