LiquidStake - Andrew Keys & James Slazas | Meet the Nation

Transcript

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of the most safe environments to hold your assets in which is why people have put millions and millions of dollars into the argent wallet that they use on their device in order to see the argent wall in action go to argent dot link bank lists and download the argent wallet on ios or android today we're also brought to you by monolith monolith is your cool new defy account your defy savings account your d5 checking account except the cool thing about the monolith defy account is that it gets software updates right you actually get to increase the usefulness of this over time so here are some of the features monolith is a smart contract wallet with a lot of the features that you would expect if you've come to know defy and what it is you can

you can add money to it you can put that money to work in compound and accessing yield but you can and you can also swap through uniswap what was cool with monolith is that they will send you a very sexy monolith visa card that connects to your smart monolith smart contract wallet on ethereum so it's a really awesome tool to live a bankless life with a a savings account that gets software updates so this is something that you're never going to find out in the real world but you can still do real world things with you know real money and like buy your groceries so that's just fantastic coming soon to monolith actually already here to monolith is now you can buy die and get it sent to your wallet directly right so it's also being an on-ramp so you don't have to go

through your centralized exchange like coinbase or gemini or wherever you can just go straight from your bank account right into your monolith checking account smart contract wallet so check them out at monolith.xyz welcome bankless nation we have andrew keyes and james slaws who is the andrew is the president and co-founder of dharma capital and liquid steak and james is the ceo and co-founder of liquid steak and we have them on to talk about exactly what liquid steak is why this product is getting built what it is useful for and who should be using it so uh james and andrew welcome to the bankless nation pleasure to be here

having us thank you david and ryan so yeah as the the deposit contract is here the conversation has inevitably turned to staking ether and you guys have just put out your guys's introduction your announcement about liquid steak so if you guys want to just kind of give us the the quick elevator pitch of liquid steak so we could have some foundation about what this is then we'll move forward and get into some more nitty-gritty details great um yeah i would love to and and and basically just uh there's two different uh two two different offerings we we wanted to obviously support ethereum's movement from uh proof of work to proof-of-stake and and so we saw that need of well if

all these assets are gonna be locked up how do we get liquidity and so we created liquid stake to help individuals to be able to provide to to do that and dharma capital is helping institutions to to do essentially the same thing and the i would say the form is is a little bit different between the two but uh it essentially um gets you to the same spot so for an individual they can stake any amount of ether that they want um the uh and it looks just like any other type of um collateralized loan they send in their ether they get a loan against the collateral value of that ether

uh the big difference is that instead of if they had already staked it somewhere else well then we can't access those private keys right so so they need to come through liquid stake we then um ask them of our you know three preferred uh uh you know validating service providers um bison trails codify and figment which do you like and then we stake that through there right so we have those those keys and they can like i said they can put any amount that they want to uh so it doesn't have to be a full 32 lot uh pool uh additionally all of the stakers that choose the same uh validating service

provider they can they basically have an aggregated pool so they don't have one specific pool risk where one one pool might get slashed or or not instead it gets aggregated across the you know everybody that's a in each of those and in addition to that a little bit more technical but we we basically commit our own capital to ensure that all of those pools are always topped up to 32 so if there were to be any type of slashing we just want to maximize the amount of reward rate that that each of the stakers are going to to receive um all of this is done in a traditional collateralized loan format and and so is

the you know our website will have a dashboard tracking all of your collateral and things like that for the institutional side institutions deal with our dharma capital which is a cftc registered um investment fund and and there we are a a swap firm and so we enter into a swap with the with our institutional client and the reason that we we do this is essentially non-security swaps have been around for several years and so there is a lot more regulatory and tax clarity on how to treat a swap and so you know there's a lot of different issue issues that are going

around um uh post uh proof of uh steak association has done some phenomenal work on being able to you know do we we don't actually know today that if we move from eth1 to e2 is there a step up in basis um are the reward grades taxable in the current year or when you dispose of those those rewards by james just uh to clarify step up on the basis you mean a taxable event of some kind basically in the u.s yep yeah and and so for institutions where they can they obviously know how to treat a swap um they're they're just receiving the the swap you know returns and so um it really alleviates a lot of those kinds

of of questions so james this seems to be a product that you know we in the the defy universe we can really resonate with because in d5 if you have an asset you can generally put that into an application and then receive a loan based off of that asset like this is what maker dow does this is what compound does this is what ave does and so i i guess i in the grand scheme of finance we're kind of spoiled here because any asset that we have we can generally get a loan out of and this is uh what you guys seem to be doing with liquid stake except it's for a very specific instance which is staked ether which is very much unlike any other asset in the the defy and ethereum ecosystem

and so uh the the goal of this is just to be able to you know provide i feel like a similar comparable level of service as all the other d5 applications but specifically with staked ether is that right right and and in the uh big difference right is that all of those assets are able to be moved right so so typically what happens is somebody goes and takes their their crypto asset sends it in as collateral receives their loan on the other end of it you know that that group is then lending it out to someone else right so that they can borrow that asset and you know an additional let's say uh interest rate is earned here the asset

is locked up all right so we can't there there isn't any type of rehypothecation that goes on or anything like that it's just it's held in the deposit contract and then there is this this loan or you know leverage effect from from the swap um the the unique part of why we're able to offer this out is is essentially because dharma is such a large player within the uh ethereum ecosystem even though that this these assets are locked up in the deposit contract dharma it's itself can help when there's a liquidity event so so let's say that someone has to be you know that they're they didn't meet

their collateral calls there's a liquidity uh liquidation event um dharma has enough capital that it's willing to basically step up and say we will buy that staked ether that's locked up and it really just becomes almost a journal entry to to our account and so this is how we were able to solve the solution for being able to provide liquidity um it's a lot you know we it it's kind of funny we i i laugh about saying it this way we're using a uh centralized approach to really push decentralization and and i i would say that we really feel strongly that given that this is a short

time frame right we only have a year and a half three years until we reach you know phase 1.5 um this solution basically helps bridge that gap so that we can continue to innovate because as people have more liquidity from their staked uh ether now they're going to be able to do additional things with their assets right super cool all right so a bunch of uh questions pop up in my mind about this first is uh just a quick detailed question um so when when somebody deposits their staked eth right you mentioned james uh collateral calls right so how are those calls made um people in d5 are used to collateral calls in maker for instance and that's all sort of you know bot arbitrage

the workload feeds the price and you you just get liquidated if you're in too long people familiar with something like a block five for instance um they will email you they will call if they've lent on otc desks it's it's sort of similar how do collateral calls work in uh the liquid stake system yeah it's it's literally the same thing um right we're we're looking at this as different trigger levels and and so then we you know whatever forms that we can get a hold of uh of the borrowers at uh obviously it'd be uh email notifications of saying you're x percent away from a a margin called you're you know and then

each each level getting closer and closer until a liquidation event um the top part for us obviously because this is uh an asset that is locked down um once we do have a liquidation event right we do have to then liquidate the the loan so so in our documentation it's you know send us in um stablecoin bitcoin ether any of those to be able to obviously satisfy the margin call interesting okay so so that's how that side works and if i'm understanding maybe breaking up kind of the retail

piece and the more institutional piece right so the problem you're solving with liquid stake on the retail side is i guess a few fold one with liquid steak you could stake with less than 32 eth right of course folks that have been listening to bank list know that if you're spinning up your own validator you must at least have 32 eth which is the equivalent of i don't know 15k in capital so with liquid steak one problem solved is you can stake with less eth than 32 is that correct right okay so and another problem that you're solving is in this uh first phase that we talked about all the way to phase 1.5 which could be a month oh could be a year could be up to three years maybe it will will be optimistic maybe it's two

years um there's no liquidity on the ether that you deposit as as collateral which means it is essentially locked inside of eth2 until the rest of the ethereum network is is bridged over so you guys are providing liquidity there and that will come in the form of a collateralized loan i imagine it's it's got to be over collateralized so what percentage over collateralization are you guys doing it's like it works out to be um a little bit more than 50 percent okay so 50 over collateralized loan but in return you get usdc which is essentially a very liquid stable coin almost as good as as having a

is you have the optionality of a collateralized alone uh you don't have to so you don't have to take it on day zero you can take it in increments on let's say day 30 day 60 day 90 day 180 uh you can take it on day 180 so so i think an important consideration to make is that if you do not stake with liquid steak at inception your staked ether is ineligible for liquidity right because we don't have a perfected interest in the collateral if you do stake with liquid steak you are able to

have liquidity in the form of a loan at any point between phase 0 and phase 1.5 which andrew is kind of nice because look all of us here we're eth bulls are we not i mean not your head if you're an eighth bull okay so so i i may not uh want that liquidity when price is at 400 when i deposited it right but i may want that liquidity when heath shoots up to 2000 because wow that's a lot of locked capital and now i want to start taking out my loan so it solves that problem and i think the third problem is solved again i'm just sticking on the retail side because i know dharma is solving some other things but on the retail side the third problem

it solves is basically like oh boy i have to run a validator right okay like i have to buy some hardware run it um it's easy guys we have a guide for it you could do it but if you don't want to get into that um you are essentially connecting them with uh sas based uh validator providers so and and i want folks to know who are thinking about like um like staking on something like cosmos or eos or something those models are all a form of deleted proof-of-stake which is different than what these sas providers are providing you're not delegating your private keys to these sas providers they're just providing you the infrastructure essentially they're providing you the the hardware only it's

it's cloud-based and they manage it in exchange for i don't know some sort of fee but it it solves that problem for retail as well so it's kind of those three problems that um liquid steak is solving is that around about right i i think that's very accurate i i'd actually like to add another problem that i think well maybe it's not a problem but it's definitely a perk uh and so you guys at liquid state are enabling uh non-um non-multiples of 32 as deposits right and so not only can you deposit less than 32 but you can deposit something in between 32 and 64 and still get the roi on that whatever is above 32 which you know if somebody is staking 32

eth on their own they're going to be receiving each dividends and so maybe by the end of one year their 32 each grows into 36 eth or something but that extra four ether isn't actually isn't compounding it's just that first 32 eth right and so i and from what i'm i'm gathering because you guys enable um partial deposits of 32 you guys are actually enabling perhaps an increased roi by enabling people to have just more capital efficiency by that extra deposit is that correct yes and in addition to that your collateral grows so in real time your collateral uh will grow

and you could in effect take more fiat out uh or usdc out against that and and we do journal that accordingly now i want to zone in on this right to make sure i understand this because i i said it but i just want to make sure it's true um if i am a retail staking in liquid state am i giving my private key to anybody here so i've got eth do i have to give custody to a figment or codify or anybody else so you're actually sending your eth to us oh we are okay right so so it is that you know you're you're giving us your private keys or you're really just

giving us that that ether you'd have to have that i suppose because you've got to be able to liquidate oh yeah we have to have a perfect fit in the collateral yeah the perfectly interesting title is the big partner there right they got it it's obviously if you gave us your private keys and you held them right there there would be a cancellation yeah yeah you can't you can't come to my house and get them of course that's right an important difference because we were talking about um how like a liquidation event might occur if somebody borrows a bunch of usdc but then the price of ether drops and so therefore the loan becomes underwater you guys said that it's very similar to how you know maker dower ave does and does this with their

liquidation events but on on something like on chain on ethereum there's a transaction that actually happens that occurs that liquidates the ether from those applications is that also true for liquid stake or is this something that you guys have your own internal uh ledger for that kind of operates not on ethereum yeah so this would be so essentially what would happen is at a liquidation event right there is this price trigger and and that's what i was referencing is that ether is already locked up it's already under our like we were saying private keys so it essentially becomes a journal entry of moving the assets under um the borrower's

you know account to dharma capital and and so dharma capital becomes the then buyer of those of those assets um i'll just say late in a later state um after you know depending on how much this grows that's something that we absolutely want to reach out to the community and say if others want to be a part of this being a you know saying here i'll i'll be a buyer of those staked assets that and but that's going to be a future state too okay so and i do want to get back to what you said james was uh centralization by decent with like um centralized to decentralize because i think here's what you're saying here is um you you know you guys would custody the private keys

of course because you have to in this in this model in order to provide the liquidity but you are not doing the validating yourselves you are essentially i guess decentralizing that to some um staking as a service provider companies like codify and figment and bison trails and i imagine you could add and maybe we'll add others to that list is that what you mean by decentralization that like you're not all you know staking it yourselves and validating you're just distributing it to this network of sas staking providers well i meant more of helping push

proof of stake in general foreign in the community uh and yes you can uh you know we absolutely are you know the way that we look at it is you know we vetted those three um validating service providers and they're awesome we know that yeah um and and so we use them and and as you said give over to them just that the the the tech stack to be able to manage the the staking side of things um you know we so there becomes this you could say decentralization for all the different staking providers that that we then uh connect to

uh but more so just this has been a project where okay ethereum has an issue we we've come up with an innovative product to be able to solve this um and something else that i'd just love to to be able to share about that is we've really worked with a lot of different partners in the ecosystem to bring this to market you know so um i mean just our loan and swap documentation that's all been codified through open law yep and then open law ends up you know uh encrypting the hash onto filecoin oh cool right we're getting to use all the different parts of the system you know we have you know obviously the

validators and then we also use luca for basically making sure that all of that that regulatory data and compliance is all met right so it's it's basically saying here is blockchain in action delivering it you know in a a what i would say a simple you know innovative financial product very cool all right so those are the wins for retail on the liquid stake side on the dharma side you are also providing staking through a similar mechanism but it has a different kind of regulatory interface right and here's the problem i think you're solving there is that institutions are leery of staking this early because in the same way retail is the liquidity

issue that's one reason but other reasons are the ambiguity the possible ambiguity of the um tax situation right maybe retails willing to to accept that sort of risk but large institutions with stockpiles of youth may not be so with dharma you guys are providing essentially a bridge a way to unlock all of that institutional capital like all of the ethert a maybe a poly chain owns or something um you can essentially unlock that to be available for staking is that correct right so all of these um these swaps you know um they're they're driven off of an uh is a

master so uh international swaps dealers association agreement so it's a standardized agreement and uh there's 30 plus years of history of how do you treat a non-security swap so it's very i i look at it as a very cookie cutter um and and so for an institution who says you know we don't even need to uh borrow against this but we want to know what is that we want to have that clarity yeah right so um it's it really is much more just the institution gets to go okay great i don't want to have to have this kind of vagueness on how do i treat these

things there's already enough uh you know almost hair in how do i deal with these type of assets and so having the swap is a very standardized format we actually have a facility where we um it's called an sdr uh swap data repository so we work with the cme and we submit all of our swaps into them which goes to the cftc and so the regulator is able to see all the different swaps that exist do you guys have a sense of the proportion of uh if it's held by institutions versus say like quote unquote retail no you know saying that we have 50 million dollars worth of interest today

based on this uh based on this news that's the on the institution side just in today's uh you know notwithstanding what we've committed uh we've got uh institutions with with with with that on let's call it day zero hour three that have reached out uh very quick and and and and i think that you know this may not be the coolest decentralized finance data today but what we are doing by employing best practices in things like aml kyc and using a swap dealer repositories we are bridging that gap

for the institutions to be able to really enter this market confidently tax clarity regulatory clarity proper procedures nlkyc and there that there's there's a time and a place for both the radical experimentation and uh the regulatory compliance and we're really sitting on that regulatory compliance side to pave the way for institutions to participate andrew did you say 50 million dollars as in 50 50 million dollars of uh potential eath deposits into liquid stake so it wouldn't be into a liquid steak it would be into the dharma swap facility but just since this is this news

uh it's it's been over 50 million dollars you know aside from the 50 million dollars that's been committed already by us uh that that has reached out to to have a conversation um basically the institutions that have that amount of ether in the in the first three hours wow well that's that's a fantastic fantastic news do you know how much demand or how much demand are you guys expecting to have for ether deposits in liquid state have you guys done any research or information on that we we haven't modeled per se but just in the first four hours uh since we've launched this news

uh the the interest has been overwhelming that's good to hear so tell us about the sign up process what's that like like say say i want to come and and give you guys some of my east to you guys if you want to live a bankless life you need to get a hardware wallet there is no alternative for storing your crypto in a self-sovereign fashion that's why i have four ledgers that i use to manage my different crypto assets using the ledger live account as well ledger live is like your home base for managing your ethereum defy and crypto accounts it does a really good job of aggregating all of your different ethereum wallets if you are the type of person that uses more than one but you can also add other

cryptocurrencies like bitcoin or cosmos or whatever your preferred blockchain is and then it will display an aggregate portfolio of all your accounts at the main page one thing that ledger is doing a really good job of is enabling all the money verbs that me and ryan talk about with the bankless skill cube enabled in the ledger live app so right now in the ledger live app you can buy sell lend swap and stake your crypto assets which is doing a really good job of fulfilling all of the money verbs in the bankless skill cube something that's new to ledger live is ledger swap where you can swap assets one for another directly inside the ledger live application ensuring trustlessness in your financial activity on ethereum and on bitcoin if

you want to learn more about what you can do with a ledger go to the blog post the power of ledger live on the ledger website where they share some of the more advanced things that you can do with your ledger that you might not have known about there's a link in the show notes that will take you to the ledger shop where you can get your preferred ledger hardware wallets i personally like the ledger nano x but i also have both they're both great options when you own a ledger you own your own assets in the way that they have been designed to be held by the user and the user alone so go get your ledger today to make sure that you are as self sovereign as possible the bankless state in the nations are brought to you by wiring wiring is defy's first self-building community run

project which i just get really really excited about wiring is a system that seeks out yield in d5 and it does that in a number of different ways but a very aggressive way is with the vaults where you can deposit your preferred asset of choice and different defy experts will come in and generate a strategy for what to do with your deposited token right and so it'll go find ways to get yield in that deposited token in d5 for those who want to just earn yield on their stable coins the urn system is for you where you can deposit your preferred stable coin and wiring will go and figure out which money market on defy and defy is producing the best interest rate whether it's dydx it's compound or ave it looks around d5 to see where the

yield is coming from and it directs stable coins automatically so you don't have to check them out at why earn dot finance to get started and also check out the stats page to see what other people are doing it's good to hear so tell us about the sign up process what's that like like say say i want to come and give you guys some of my east so you guys can stake my eat for me so i can perhaps later pull out a uscc loan how do i sign up for this so as of today you can register uh and onboard through an aml kyc service provider named shifty pro it's almost completely keyless meaning that you will have a picture taken of your face

through your through your laptop and you can upload your uh driver's license and and and passport and once that happens uh you're able to choose your preferred validating service provider and when when that is done you have a seamless dashboard that shows your uh collateralized ether it will show your updated um ether rewards that you're earning and basically the increase in your collateral as you continue to earn staking rewards and then you'll be able to draw us dollars coin uh against that in the uh because we know that this is

the biggest use case of something like uh ave or maker dow at least historically has been to deposit ether pull out dollars buy ether and deposit more ether is that something that is impossible with liquid state here yeah of course one is able to do what they want with those us dollar coins so the answer is uh yeah sure if that's if that interests you but the real and really and really what i would say is that prior to this liquidity product suite for ethereum 2.0 uh you really had people had basically bifurcated their ether stack if you will and there was

basically uh two hands and one hand would say i am comfortable with taking the risk of uh phase 1.5 coming in either 18 months or 12 months or 36 months and i want to earn those rewards and then i don't really want to sell my ether but i need liquidity to pay my rent or to pay my phone bill and and basically it was a tale of two cities now we introduce the ability to earn staking rewards on all of it and if you need that monthly payment for rent and the phone bills or if you want to uh

withdraw us dollars and buy more ether or buy file coin or buy bitcoin or buy a house you're able to do so in this regard so basically what i believe that this is solving is that one-way street problem uh and it's solving it both at a retail uh level and an institutional level it's interesting that you guys are first out of the gate with this like i don't think i've seen any exchanges offering this this kind of thing right i i guess that was pretty intentional to be first here it well we don't care about being first we believe in the vision of proof of stake and we believe that a strong ethereum is foundational

to a strong society and we are here to encourage that evolution so say someone has deposited ether pulled out a loan bought more ether deposited more ether and maybe they got a little bit too excited and they did too much and then and then ether price drops do they have an ability to unwind or is it kind of a one-way street with their ether deposits so their their ether is it is deposited into the contract right so it is it is locked up um it would really just be more of saying do they have enough collateral to substantiate it reduce down obviously the the

exposure um i was also going to say though on the part alluding to of like you know being first out of gate it it really isn't yeah it isn't that it's just that um dharma kind of sits in a very unique spot right that it's it's actually willing its investors want to be long ether they you know so this time horizon of holding for a year and a half three you guys don't care you're you're long-term holders you don't care you're bullish permeables the weak permeables to be able to journal journal over that staked ether right really becomes you know becomes a much easier thing if a an exchange were to say here we can

we're going to go and do this and then we're going to commit our own capital to being staked in in ether yeah exchange are a little bit more neutral right they are not necessarily permabulls any asset over another they're about the transaction fee yeah so oh but by the way we're a date thematic we are thematic investors in the web 3 stack yes and and we believe ethereum to be the connective tissue to to that entirely by the way i i the the thing that david was talking about hypothetically about like margining your eth guys i i just want to say i know that was hypothetical dave but like don't do that yeah don't do that yeah don't do that don't do that too volatile i've seen many get liquidated prematurely on assets they

didn't want to sell by doing that so be very careful i do have a question about uh design choice that that you guys seem to have made with with liquid steak um some staking as a service providers or at least it's theorized that some staking as a service providers will if you deposit your ether with them they will return you a token that resembles a credit on that deposit which would be like a state east token where the token itself uh has the interest baked into the token in the same way that compound has their c die or their you know their c tokens uh have you guys thought about issuing a token like that so so at this stage we we we looked at that in and you think of the world in

here's how big the liquidity is of ethereum just freely traded ether right and then when you start to tokenize subsets so now let's just take the new bison trails uh pool okay now that that world has gotten a little bit smaller then you've tokenized that and now the people that want to participate in the the credit worthiness or the volatility of just that token right that becomes creating a token doesn't create liquidity right it's that can be just more of a uh you know you you have this representation but there is no then bid ass market so now if i'm a lender and i have to go and sell that token

well what's the bid right the bid will be by appointment and and there really won't be enough there to substantiate lending against that asset so so that's why we avoided uh going through the tokenize these like we obviously what we could do is tokenize all the things that we bring in now that's a subset we then have that as a way that people in the marketplace could you know lend against it um what i would say is call it future state it will be more of as ether opens up and is now has reached 1.5 now we would be able to provide that right so that that's where i kind of alluded to that that today it's almost

like we have to sort of shepherd that part of the of the risk along once the development catches up now we're in a great spot for everybody to participate in this so i know you guys are permeables on ether and on ethereum and i know that the decentralization of ethereum is very important to you what would you say to somebody who looks at the solution and says yeah but guys you're you're doing aml kyc you're requiring custody of our private keys wasn't the original design of eth2 so that i can run my own validator in my own home and maximize decentralization is this a centralization vector what do you say to that person they're still welcome to they're still

welcome to absolutely do that we want to solve the one-way street problem of liquidity and and we believe that that will further enhance uh ethereum 2.0 and we think that we'll be a small part of the ethereum 2.0 proof of stake evolution james yeah i i i exactly that i mean this is really just supporting so that decentralization can occur right so let's do certain stepping stones for the next year and a half three years

and we can really set uh set up and position uh ethereum to be this complete decentralization uh but you know there are there's different parts where you can help you know basically be a pillar hope you know holding this up here and now great now we can build from there and you know both andrew and i did that you know at consensus they've done a phenomenal job of of really almost peppering the ecosystem with a ton of different types of products and projects that enable you just hold it up right and then it can take it to the next spot yeah i mean i spent a tremendous amount of time with central banks regulators banks and all

all we were doing is to say i want to just move you from here one step over i don't want to get you all the way into decentralized world i just want you to understand this technology let your regulations catch up let your understanding of this technology catch up so that we can do a lot more right today we're working off of you know uh ancient uh type of regulations um we think about oh i have a tokenized asset that's earning a reward that is on a new blockchain but that that doesn't really compute for a regulator and so this is really you know we just look at it as here we're taking these stepping stones the way that i see this is that

with adding liquid steak into the staking ecosystem you're not pulling away uh people from staking at home you're actually just adding more total options available for people who want to stake right and so there are people who are going to stake steak at home stake their 32 64 128 ether they're going to do that at home and just because liquid steak exists doesn't mean that they're going to stop doing that liquid steak existing means that it's going to be easier for a wider subset of people to stake their ether and while it might be in a centralized fashion there's going to as a result of liquid steak there's just going to be straight up more total ether staked to ethereum 2.0 which at the end of the day is how we provide security to ethereum

agreed and and and again this is a temporary solution uh for a temporary moment of time from phase 0 to 1.5 and this is our best attempt at financial engineering uh intersecting with blockchain leading edge technology to help solve what we believe to be a major issue in the ethereum 2.0 ecosystem liquidity yeah i i think that's the thing to zone in on this is maybe sort of a solution for the next 18 24 months or so because of that bridge problem because

depositing eth to each 2.0 is um just unidirectional at the moment um so it's good and and and if i may this is liquid stake 1.0 uh just like you know everything has to start from a centralized manner i'd be remiss if i didn't say we've already been researching ways to decentralize multiple aspects of this concept very very cool that's exciting so we actually haven't talked about this yet and uh i would also be remiss if we skipped over it how does liquid stake make money we're doing this for free this is a charity

exactly the same way as as a collateralized lending facility right so um you know our model is that we'll charge an interest rate uh we'll charge a percent of the rewards rate uh what we're um what we're doing with the rewards rate side of things is basically saying we're gonna charge a uh five percent of the rewards rate uh on top of whatever the validator service provider is charging uh we're not um it we're not basically call it saying here we're going to change it a little bit from for this validator versus that validator or

anything like that it's just to make it across the board that is an evil even uh playing field for for people to understand here's here's the cost of let's say optionality of being able to get a loan right and then um and then from the the lending side of the things it'll just be an interest rate which uh we're gonna uh we'll come out with uh just as um as the market goes live are you guys absorbing any of the uh risks like the slashing risks for instance right so there is um in inactivity kind of risk when validators are down there's also of course double sign risk which i'm i'm hopeful all of these sas providers

would never do that but there's always the possibility who takes who incurs that risk so you say we were saying before that we're aggregating all those pools right so for whatever um you know validator that you choose um but whatever those that slashing or whatever those pools aggregate right that's going to be passed on to uh to the individual so it's essentially you staked your ether you got another thousand other people into that same you know validator service provider and if some was slashed you know here or there then you know part of your returns would be lower um we are uh you know adding

to make sure that every pool has 32 ether if ner slashed so that it is maximized at least for the reward rate that it would earn but but it is a pass-through of basically whatever happens there happens there very cool all right so uh guys i want to ask you another question this is sort of tangential but also i think related and definitely within your within your wheelhouse i would say you guys talk to institutions a lot on the dharma capital side of course um you know even even with sort of staking do institutions with with eth jurado going live with ether as an asset turning into a productive yield bearing instrument

uh consensus put out a white paper we've talked about on a bank list this is like a new internet bond basically that's what ether is and i love that analogy it's right it's it's kind of like you know it's like the d bill right so it is a bond um that provides yields um institutions seem to understand bitcoin that like over the last three years they've started to miraculously enough when i got into space originally they had they thought it was for criminals and drug lords right now they get it like oh bitcoin is new gold okay i get that are they any closer to understanding ether as an asset as an internet bond and will this help they're getting there they're not there yet you are you are light years ahead of them oh good it's just a good time to

buy okay yeah and and and the bottom line is that bitcoin is now 11 years old uh and and i would say a much simpler concept and and has potentially a tam of gold and ethereum has a tam of a multiple of the global economy right now as we digitize all assets and that becomes a substrate and settlement layer for the clearing settlement and automation of assets and agreements and and that's a lot to process and uh we will get them there uh and and that's what we're here to do and that's how we

hope to serve the ecosystem yeah it's hard not to sound crazy when you say like yeah everything is going to become digital and it's all going to be on ethereum and then we have like this internet native bond market it was like that was already like three bytes to that we're huge and too and to this day like it's like you said it's like we're 11 to 12 years into bitcoin and people are now just dipping their toes in the possibility of bitcoin as money like the the average average legacy world is you know still still kind of like not really sure what the hell is going on in this ethereum thing we we like to say that we like to live ahead of the curve and in the gray area

you know but i would also add with with bitcoin and not just that it's been around for 11 years but just think about what happened this summer right so the occ has now said that u.s banks could custody crypto currencies right that's an enormous step forward in in the marketplace then they also then came out after that to say um you can hold the reserves for these stable coins to be issued right those are huge statements for our marketplace right it's not just ethereum but but to look at you've had over you know i i i keep always looking at the institutional

infrastructure what's being built right i'm excited about what fidelity has done i i love the investment that the cme and and ice have done those are really important for institutions to be able to access these assets right they don't have the systems in place to hold these kinds of assets and then when you have the regulators backing them up the new york dfs you have the confederative state bank supervisors coming out with expediting different ways for money servicing these are all huge steps that lay the that infrastructure right so an institution can buy it

so after their regulatory clarity occurs then they start to look at liquidity obviously it's the same thing as what we're we're doing with this kind of product is that how liquid is this and so ether bitcoin those two are have market caps and liquidity that enable an institution to be able to make that type of investment right and and they don't want to buy something where they're like well i'm twenty percent of the issuance uh that's really doesn't really help me um so i i would say that you know um there are you know a lot of that infrastructure is now it's maturing there's more parts

being added on to it um you know i think we'll probably be speaking to you guys in less than a month about something else that's going to be a really amazing institutional product and again it's basically pushing people to here is opening the doors and hand holding those legacy institutions to understand it absolutely guys um good these guys aren't saying it but but i am i mean you want to buy ether bonds before paul tudor jones buys them right and that might be in a three to five year uh time horizon he's just now wrapped his head around bitcoin so give him some time give him some time we're early guys thanks so much andrew james it's been a pleasure

we appreciate what you guys are doing in this space always a pleasure to have dharma capital on and this liquid steak thing is pretty cool we will include uh notes in the show notes as usual uh david anything else we should say before we uh conclude this this meet the nation my friend yeah ryan i can't remember what video it was but you we talked about the likelihood that enough eth gets deposited by december first in order for ethereum phase zero to get launched i gave my my uh guess i think i think i said 85 percent chance that it would meet it you said 95 chance uh i'd like to bump my numbers up a little bit if i if i can change mine yeah it's okay

david and ryan the community thanks you for the high quality content and education you put on we really from the bottom of our hearts appreciate all that you guys do day in day out every tuesday i love listening i love watching thank you cheers yeah we appreciate it we do it we love it it's fun we work for the protocol in the bankless nation that's who we work for guys risks and disclaimers as usual eth is risky of course so is uh defy and bitcoin but we are glad you are on the journey with us this is the frontier it's not for everyone but thanks for joining us on the bankless journey