Spark Protocol: MakerDAO's Gateway to Vertical Expansion | Sam MacPherson

Transcript

this is why everybody's launching a stable coin because they've realized that uh with all the other products dexes and lending you're at the mercy of LPS and you have to pay them the vast majority of the revenue the stable coins the only one uh where the protocol uh can direct the revenue to different things so uh this is what everybody's coming to the realization for this is why they're all launching a stable coin and I think yeah everything's just going to be vertically integrated in the end you know everything's open source code uh and I think this is ultimately a good thing for the users because they're just going to get the best products at the cheapest rates welcome back to another episode of zero X research brought to you by the atom

accelerator if you're a developer looking for a new home in this industry the atom economic zone welcomes you you'll hear more about the atom accelerator later in the show today is June 12th and we have a great interview coming at you with Sam McPherson the founder and CEO of Phoenix Labs which is a Contracting development team that is building spark protocol spark is currently operated by makerdale and is this interesting lending arm that they're kind of pushing the uh the innovation of the lending operation for maker Dow so we'll get to them later in the show and as always we are joined by two of the blockworks research analysts to discuss what's happening in the markets which right now is not great this week we're joined by effort and Matt

um you know looking at asset prices here Bitcoin and ether actually hanging in pretty nicely over the last seven days bitcoin's down about our Bitcoin is actually up one percent each down about four percent but some of the alts uh that we've come to know and love are absolutely nuked Solana down 25 polygon down 23.5 percent Aptos I don't know if they qualify into my know and loved category but down 23 it's uh it's been a rough one um so honestly for this episode we might have to put almost everything in the hot seat and and start with I'll go first and put crypto in the hot seat um but I know we can we can kind of do like a power round of uh some of the madness that's been happening over the last few days so effort I'll kind of

throw things over to you yeah so I have Gary Gensler on Hot Seat today um obviously we've been talking I think a lot about the fccs mostly a crypto regulatory podcast now uh over the past couple quarters is because everything that's happened uh but today um again Monday June 12th house rep Warren Davidson proposed a new bill uh that I guess proposed in the house floor called the SEC stabilization Act and pretty much it plan it outlines a plan to remove Gensler as the SEC chair and not even just that but restructured the SEC to no longer have a chair and currently it has four Commissioners that roll up to Gary Gensler as the chair uh but in this future uh structure of the SEC that's in outlining this bill

um it actually expands a commissioner set to six and instead of the SEC chair really deciding the rule making and enforcement investigations under the sec's purview the six Commissioners uh would actually have uh say over like again everything I kind of outlined the rule making enforce investigations or what have you and then there would also be an additional um uh chair or I'm sorry an additional person called the executive director that really wouldn't have as much power and Rule with an iron fist like gensler's today with the SEC uh this executive director more so just really be there for like day-to-day operations and more like a figurehead for uh the SEC and less so of uh um I don't know a monarch which is what I feel like again

there's kind of running the SEC like today so I don't really think that there's I saw on crypto Twitter today a lot of people were like yes this is exactly what we need um but at the same time like this is very early on in the house floor uh or stages of becoming an actual law I doubt this actually gets any traction um it's really I guess it's good to see that uh Congress is kind of seeing I guess much of the same that we're seeing in crypto like obviously we're gonna be biased we see things with our own view because we're bullish crypto we want to see crypto here to stay in in the United States but I think it's nice to see that at least some people in the in uh on the house floor are um feeling the same pain points um it's

not just crypto but I think there's been other concerns that Gensler as a whole has really threatened Capital formation in America and capital formation and the rules that the SEC has laid out over the past 100 years has really made the United States like the uh Financial epicenter of the world um and obviously it starts with crypto but there's a bunch of other things I think that Congress is overall overall like not happy with how Kepler has run the SEC so um again I doubt it actually gets any attraction I doubt we lose him as chair but it's very interesting to see that he is on the hot seat uh with respect to the Congress I've seen a lot of hatred towards Gensler even outside of crypto like obviously pretty much everyone in crypto is you know not happy with him I started boxing a couple weeks ago and

I'm not gonna lie like maybe picturing his face on those myths has been a little a bit helpful for me picking up the skill quicker but uh overall like I think traditional Finance like I think a lot of people think the cftc is who should be regulating crypto and the gunsters overextending his reach and doing things he shouldn't be and I think the you know it's getting to the point where it's like an inflection point for the general Public's perception again of Gary Gensler and hopefully you know it continues to Trend the way it's going and everyone uh kind of I don't want to say picks up pitchforks or anything like that but you know just uh voices their concerns and problems with the current administration at the end of the day like he's not protecting anyone you can go you could walk into a Vegas casino

take out a credit advance and go gamble all your money away but yeah like you know allowing people to actually invest in cryptocurrencies that are decentralized protocols that a lot of them like actually remove middlemen and you know rent Seekers and allow a more fair industry is oh so horrible obviously there's a lot of bad stuff in our industry too I'm not anti-regulation but you know calling every cryptocurrency a security is just a ridiculous statement in my opinion yeah and like just the way he's gone up about it you know especially for like every time I see some ridiculous clip of him saying some obscene thing about crypto you know proof of stake for example that video was just painful to watch we can link that one in the description but uh for every video like that there's a video of him saying something

intelligent about crypto from his time at MIT so it's just like very strange to see these Dynamics play out and I think this uh this reaction by rep Warren Davidson kind of just highlights that actions have consequences and you know this country was kind of founded on checks and balances and that's kind of what we're pushing for this this specific position seemingly dodged the uh the majority of checks and balances to this point but if you start start acting like an people are going to come barking up your tree that's just kind of the way the world works so it's unfortunate for him but you know maybe this is a step forward that we need to take yeah just to add to that so Matt you said you can take out a credit line and go gamble all your money away I mean in the same sense like spax flourished

under gensler's watch right and like majority overwhelming majority of specs that launch in 2020 are down like their crypto tokens that are unregistered Securities in his purview it's like these facts there's no investor protections with how those facts got listed and pretty much failed precipitously um obviously like Nikola like the EV maker that ultimately ended up becoming a fraud like that happened on his watch um it's really easy to say that the SEC allowing company to publicly listed like coinbase argument is they approved our listing they know what our business is like so they allowed us to become a publicly traded entity and the FCC is like well no not actually like we're just saying that you showcased the proper disclosures we're not actually proving your business and I'm not saying I want the SEC to kind of be more

stringent with how they allow publicly traded companies to list but at the same time it's like I feel like the SEC has done absolutely nothing the profess prevent investor uh investors from getting fleeced over the past three plus years that he's been chair and I know he's been chair prior prior to that but um I just feel like there is no investor protections the way SEC stood up today I'd rather have zero regulation than what we've seen over the past few years because again crypto a completely unregulated industry in in certain cases compared to securities and spax like literally give me crypto because I feel like that at least has a true promise of the future um and again it just it feels completely uncalled for with how he's handled this entire industry it's unfortunate yeah

yeah I agree and like you and for you and I have talked about this quite a bit but like we keep trying to shove tokens and crypto crypto assets into this like square like this just this rule book that doesn't make sense right like I don't know the exact year that Security's law was written but what I do know is blockchains weren't even an idea at that point in time and like the idea of the internet was hardly an idea and a realization like we're trying to use these ancient rules and I use I guess ancient quite Loosely there but we're trying to like shove this very new and emergent technology into the rulebook of the past and that is just not going to work like it's like the debate has always been oh is it a security or is it a commodity like no maybe it's something

different maybe it's a token so let's carve out its owns class of rules that you know kind of benefit everybody and like yes create a fair in a more reasonable environment or protect investors to you know as that's the Mandate we're supposed to be working towards it's just like trying to take the existing rule book and and apply it to this very new and emergent technology that has many new properties we've never seen before it it just doesn't it doesn't make sense and it's super super frustrating to me I don't want to believe a point too much but if you actually think about it like I was one of the earth I wouldn't say the earliest part I was a very earlier user of Facebook when it was around back then uh or before I've changed the meta when it was like just initially a social media

platform I was an early adopter of a lot of like web 2 Tech Giants and their products like Google in like the late 90s early 2000s I got a computer when I was like six years old in my house and I remember Googling things like the promise of web 3 is like if you're an early adopter of this technology you should also be an owner of this because you were one of the major reasons why I was able to get to as big as it was back then being an early adopter should like give you certain benefits that today investor accredited investor laws like don't allow it if I as long as you uh have less than a million dollar net worth like and there's I think some additional rules they have like prove that you're educated enough to invest in certain uh you know

um early Tech VC rounds and stuff like you are pretty much blocked out you're blacklisted from being able to invest and potentially create like generational wealth so I feel like they're missing the point about like decentralized ownership being an emerging an early adopter of this Tech like there is value add here and they're completely like missing the point like yes there's a lot of scams and fraud in this entry so is there in every other industry in the world and there will be for the test of time and like having a centralized regulatory body is not going to fix that but what they can do is at least create a good sandbox that have some type of investor protections but also allow innovation in America and it's like it's just so sad to see um that they're just missing the point here and also trying to bucket every

crypto into one category is pretty ridiculous on its own if you look at Dogecoin you know Dogecoin had no initial fundraise anyone could go mine it it was basically being given given away for free on Reddit if you were to say in that period of time that there was an expectation of profit you're just lying there wasn't like no one thought that um you know the people who actually developed the currency sold it all quickly and were out completely there was no you know third-party promoter like Central entity that was you're relying on for expectation of profit so it's like Dogecoin looks very different than maybe like a GMX or I don't know whatever like oh there's there's multiple different types of cryptocurrencies that should fit into different categories as well which is something that uh I think a lot of people don't realize like maybe some

people realize oh Bitcoin and ether different but everything else is the same and it's like that's not true either there's at least a few different kinds there's utility tokens there's you know Meme coins there's whatever there's multiple kinds of cryptocurrencies um and then like back to your point effort I remember last year I'm gonna I'm in a class with one of my finance professors really good guys smart dude and he goes why why does the you know why are there these accredited investor requirements to invest in certain types of vehicles and I'll raise my hand like 100 percent class or whatever and I'm like to keep rich people rich and he's like no it's to protect to protect them and I'm like you know then we get into the same art that same conversation we just had and I'm like ah but what about all these other things you could go buy

lottery tickets um and yeah just in an interesting an interesting conversation yep yep Fair points but that's enough regulation for the next six months so so Matt what's what's the next one we got on the list I got arbitrum in the hot seat today um Arboretum unfortunately had a little issue last week where basically it was unable to post transactions to mainnet so reference the way arbitrine works at a really high level is you send a bunch of transactions into this centralized thing called the sequencer it's basically just a server the server collects all the transactions takes the important data from each puts it together and sends it into ethereum as one transaction that includes all the data from all these different transactions um and that sequencer was not able to actually post those transactions to

mainnet so arbitrim was technically potentially depending on your definition down meaning it couldn't reach finality similar to ethereum I'm not sure that we had a conversation about this probably a couple weeks back but ethereum wasn't able to reach finality I mean you had no way of knowing that your transaction was never going to be rolled back it was never gonna you know that it was something that was going to be forever immutable going to be forever ingrained in this blockchain which is one of the promises but everything was functioning completely fine from the user perspective so if you're if you're transacting on arbitrum you know you're still if you do a trade on unit swap you still end up from the user experience perspective you still end up exactly how you would imagine there was nothing different that was going on so whether or not it was actually down could be uh

up in the air and this half this was a couple hours so it only lasts a couple hours and the sequencer it was you know fixed there was a little bug it was fixed and gas was added back into the sequencer so I was able to post more transactions to mainnet but it was uh definitely a interesting time that deserves a comment for probably a hot seat as well yeah for sure I personally would call this like degraded performance rather than down down to me feels like a very on off thing like a yeah it's like a it's either honor and it's off and uh users were still unaffected they could still post transactions and still process like if you weren't like a tech savvy user you would have had no idea the chain was you know in this state of degraded performance um and ultimately that's kind of why I

lean that direction so you're already getting soft confirmations from the sequencer it's in where it says hey I'm gonna go post this transaction for you to the L1 but in the meantime we'll pretend as if it's happened um and you don't actually get the hard confirmation until that happens so if your hard confirmation is just delayed by a few hours that's just an unfortunate scenario like again this I would just consider that degraded performance and I think the same thing for ethereum when uh it was struggling to reach finality due to a client it client bug that was the same thing like you could still get your transactions processed you just didn't have the guarantee of finality um which kind of gives you a little more Security in the you know irreversibility of your transaction but uh while you're still

executing transactions to you know 90 of users they're completely unaware I'm I'm just not willing to call that uh down but I'm curious effort what's your take just sub-optimal performance um what I will say though and and I've seen other people talk about this too obviously it's just like how serious is it or how much of a how big of a deal is it that arbitrum has a centralized sequencer and I've seen um a buddy of mine fault proof Ben he works at bankless him and I have like dm'd about this a couple times he's very much like you know in the ethereum community in the l2s um and he doesn't think centralized sequencers are that big of a deal and I feel like that's like the narrative that's kind of coming around and if you're ecosystem is like it's okay you

could just force include the transaction it's no big deal and it's like that might be all well and good as a solution for somebody that's like a crypto power user and I feel I think I would coin myself a crypto power user been in this space for six years at this point I have no idea if the sequencer went down how the hell they include my own Force include my own transaction to the L1 it's like first of all that's not easy that's not an acceptable answer and like we we can't uh I think it just kind of lends itself to even though this is like some Optimal Performance obviously the arbitrim team was able to get the sequencer back up and running to your point you had uh users had soft commitment and had no I no idea this is even happening for the most part unless

you are just staring at RV scan like day in and day out but it doesn't change the fact that this should not be considered the end state of Roll-Ups we have to get Beyond this it's not okay that one seat one node on a chain can go down it's pretty much running AWS on top of ethereum like we got to get Beyond this um and him you know him and I and I think a lot of other people in the community uh on crypto at least on crypto Twitter have like really gone back and forth about whether this is okay and I think it's okay in the interim but I think from a regulatory and a technical perspective and the overall ethos of decentralization it's not okay so like we gotta do whatever we can to make these systems resilient um but again go back to answer the

question like it wasn't down it was really just some awesome performance um and yeah they kind of Iran how it should have it was it did exactly what it was supposed to do so so I know this is kind of a meme but I think it does come down to social consensus and I hate saying those words because because of the way they've been used recently but at the end of the day like if you have an expectation of finality quickly and it's not you know you don't get that I think that it can be considered down but with arbitrum actually like you don't really have an expectation besides that within 24 hours your transaction WE Post demand that so I agree with you and I'm kind of asking to be roasted on Twitter for saying this but with ethereum I think that maybe social consensus is you

do have that expectation of finality which means maybe you could consider it down but you know semantics whatever um I don't actually care at the end of the day to the centralized sequencer Point like well I agree with you it'd be amazing to have you know decentralized sequencer Network which would help with censorship resistance and liveness guarantees of these l2s I I've really thought long and hard about it and I don't see a design space that makes sense um maybe you could have a you know a few sequencers but each One's Gonna still be centralized like when it comes down to it and it's it's turned to order and propose a block which is how it works today I think that it's uh you know there's there's not really a better design space um at least not one that's been proposed yet additionally if we

create better UI for doing things like forced inclusion um and you know other different different l2s have different guarantees but to make those guarantees reality of getting your assets back on mainnet of kind of unwinding positions and getting assets back on mainnet I think that that's actually a pretty pretty close to Optimal solution and not optimal I think we have more room to grow but I don't think uh we're we're getting decentralized sequencer sets honestly I hope I'm wrong but I don't don't think so just to add to this quickly like it also becomes an issue as more native assets are issued on l2s so like I want to force include to an L1 that's great if I have ethereum that's operated by The Grail like a random like Camelot decks like their Grail token I think is native to rbl2

and if arbitrum went down forever my token is completely worthless so like it doesn't it doesn't matter that I could force include a transaction from the L1 it's like I agree though I it does go back to social consensus even though it feels like it's becoming a cop-out answer like it very much does because these blockchains are really just Technical Solutions to get a community of of uh of people to agree on like what the state is of of the world whatever that world is uh for each individual chain um so I I agree uh Matt I think it does come down social consensus and I do think that like you can argue very much so that ethereum was more down than arbitrum in this case

but I'm not giving it to you it wasn't down but it could be more down maybe oh I don't know that kind of sounded like a capitulation right there effort but uh on and keeping the uh the social consensus wave riding we have the Solana Community discussing a potential hard Fork to be fair I don't really think this is getting any meaningful traction but nonetheless we're bored on Twitter and and this is what's floating around so I'm curious to kind of get everyone's take on if that what are the trade-offs here so it sounds like the largely the reason why the community has just even brought this up in the first place is the fact that Alameda um the sister company of FTX has around eight 8.2 percent of the total token allocation right now

um and you know that's I guess that's technically owned by the creditors at this point definitely not Alameda or FTX but nonetheless the community still kind of sees it as this like burden um that's kind of hanging over it and you know we just saw the SEC name Soul Security in some of its recent lawsuits so is this kind of like a acceptable way to migrate away from this you know Dark Cloud that's been hanging over them I have mixed feelings about it uh to some extent I actually like the idea of removing alameda's position of maybe like being able to even say that this new this is you know this is far-fetched but saying this new version of Solana like maybe isn't a security or isn't what the SEC just deemed a security very recently

um I know that's you know probably lawyers would say that that's just not true but anyways like uh so I kind of like the idea overall but I think it does provide some issues like for instance I think a lot about like if Lido got hacked Lido smart contracts got hacked and ethereum had to do a roll back or would they do a rollback would that be the end of ethereum would people just want to go to a chain that never did something like that so I think something like I think that similar concept is true with Solana I don't want to see any chains do hard Forks that aren't complete like you know that have any controversy around them I was around for the Bitcoin hard forks and bch and bsv and even though they end up not being too big a deal just like the

amount of fear and widespread you know controversy going on in crypto at those times was just absolutely ridiculous and um I'd probably prefer to to not have that happen again there's no way that this happens right like going back to social consensus who is Solana foundation and who or Solana Labs Solana Foundation usdc who which Fork would they support there's no way they're going to support a fork that puts like legal liability on them to like to pretty much deprecate the chain that Alameda and its predators are have ownership in um and if you don't have Solano Labs support if you don't have the foundation support circles and a bunch of other people that are supporting Solana today like there's no way this Fork will will

have any success um but it does seem like a highly profitable legal strategy of every single time you get deemed to security you just keep forking it be like that's not us fam we're we're so classic we're so classic too oh my God no I I tend to agree it feels like a massive foot gun like you can't yeah I don't know if there's ever be any recovering for Solana to be honest like you need that rallying point you can't divide the community in any way shape or form especially when it's shrunk to the size it is now for for all of crypto and it just completely deletes your ability to to remain credible as this neutral base layer um which is really what a general purpose blockchain needs to be

so I would be pretty upset to see that I'm rooting for Solana it's it's kind of the you know the modular thesis has really taken over right now and they're the ones putting their foot in the ground being like no we're going to take a different approach um so really excited that they're kind of leading the charge of that different set of Innovations um so yeah I would personally be pretty upset to see them kind of make this decision it just doesn't seem like the best move but uh over the last couple of minutes you know you guys have both mentioned your tenure in crypto and how you look at it things now versus then so I'm curious to get your take 2019 or 2023 which one is worse uh maybe Matt I'll kick it over to you first definitely 2019 in my opinion um you know if you look at actual like

you know percentage price drawdowns we're in a better position if you look at institution involvement like we have Brevin Howard we have jump we have countless other you know Dragon Miller we have tons of support Ray dalio like these aren't names of small entities like in 2019 that were involved in crypto they're not people that are unimportant to the rest of the world in 2019 we had very few entities that were really you know ingrained in the global economy and Global Financial system especially in the U.S financial system as well um and now we just do have that so I would say overall like don't get me wrong like I feel the horrible sentiment like it feels like the industry is dying which by the way is something that I've been waiting for for a long time as accumulation signal but overall like I

do agree like you know it feels terrible it feels like we're in the depths of the bear Market as far as sediment but uh yeah 2019 was worse and 2014 made both of those look like absolute uh walks in the park having bull market whatever you want to call it so I'm not too sad overall yeah this is this is my second bear market so um was in the 2019 bear Market in the depths of it I took a break I wasn't in crypto um outside of just like personal hobby was obviously like really charismatic about it but it was really difficult I did take like a three to four month break uh from crypto like literally at the bottom unfortunately I probably should have accumulated back then I'd be a much richer man today um but

I I honestly think now is worse I'm not sure if it's because I have more of my personal wealth in it I'm obviously working full-time in this space is obviously like a lot of higher risk at stake but I also think in the 2019 deaths of the bear Market you had this promise of defy starting to show it's like you're starting to glimmer and like show itself like you saw a maker really start ramping up you saw Ave lend or or eth line back then and compound like slowly starting to emerge and like this promise of decentralized science open Financial rails uh and it it was like it was like a company pre-revenue it's like the possibilities are endless like yes we're down here but like there was something

to look forward to and even though there's like a lot of large institutions coming to the space you're seeing regulation in other parts of the country other parts of the world and it sounds great I sit here today and as someone is very extremely bullish on the space as a whole what I will say is this past cycle we're here today and like we created products I think are really cool and novel but I'm not sure if there's any actual real world demand for any of this and that's scary um and even though I do think there will be demand I still see the promise of future of of uh decentralized Finance uh potentially on chain gaming and whatnot uh and really democratizing ownership and access to uh an open Financial system

um it doesn't change the fact that like the right now it's very scary especially being in the United States from a regulation perspective um and sometimes all these products that we're building it's still there's definitely still a question back in my Minds like is any of this worth it and I'd be lying if I said that wasn't like a real question it's like I think again it's a combination like Stakes are higher uh is the things that are being built today actually have real world demand in the future even though I do think it will there will be I think there is light at the end of the tunnel uh personally I do think right now is worse than 2019. that same idea that you were getting at with like this budding sprout in defy at the end of the last bull market um I feel like I'm seeing similar and

you mentioned it but I feel like I'm seeing similar with gaming at the end of this bull market and also on-chain derivatives so like you know the idea of trading with leverage on chain um in a censorship resistant manner maybe a higher leverage more assets whatever I think those two things are what gave me like a little bit of of a reminder of kind of what you're talking about but I do I do uh I do get what you're saying for sure it's you know tough times well that was depressing so thanks heifer uh let's uh let's try to end things on a on a better note uh no I'm kidding I always like hearing those perspectives because it's not like for this industry especially you can't just like pick up a textbook and read about the times like you gotta scroll through old tweets or find old medium posts or

like you know dig through old Kobe tweets like it's it's hard to really get that type of perspective so I always appreciate that um but I got a I got a cool throne for us to end it here and there is someone winning from all this and it's foreign jurisdictions so you know London is kind of leading the charge here most recently with a16z announcing their first International office um going to be opened in London and that's pretty interesting so they they cited the Hostile us crypto regulation basically as the reason why they are considering elsewhere and London was very very open to them and I think Rishi shanak is I believe is his name is the UK prime minister he was saying how he wants to be the home of web 3 and kind of just you know make a playground or a

Sandbox for this this Innovation and that is like as an American that is super disheartening because that is that's what we should be doing that is that is the no-brainer move here being the country that takes the anti-new tech stance that has never played well for anybody in the history of time and so why do we want to try to change that like that's just that's been a losing card to play and it's really painful to see us play it um I guess like the positive Spin Zone here is that the lar one of the largest and most you know well-respected VC firms thinks that crypto is worthwhile enough to open its first International office that's a pretty exciting thought so that's kind

of that's what I'm telling myself at least but um you know Matt I think you mentioned that there was some other regulation or jurisdictions that you felt were kind of like also in this this category as well yeah for sure I mean if you look at Dubai it's gaining such a narrative I don't know if I actually you know I haven't seen a16z's move there like or any entities of that stature so you know it's it's reality I'm not sure about uh it might for all I know it could just be the uh it could it could be a lot of posturing I haven't seen the actual regulations to enable crypto companies to move there super easily yet I think it's still pretty hard to get a bank account if I'm not mistaken but I would say also in like the optimistic front glass half full

there's a reason the United States is where crypto still has such you know strong roots and Tech in general it's the homes of you know all the biggest tech companies in the world for the most part um and that's because we handled it so well with Web 2.0 and just because Gensler and like I don't even mean the SEC I mean Gary Gensler is going so anti-crypto and being so critical towards it doesn't mean that that's like going to be what stands I'm I'm hoping we change course and I'm thinking that there's a good chance we do uh obviously we're so deep into it that it's hard to not be nervous and upset and whatnot but I think taking a bird's eye view that this isn't like something that's set in stone it's not like the US is anti-crypto so I'm uh I'm hopeful for

the future probably a good time to jump over to the interview with Sam McPherson but before we do want to give a quick shout out to the atom accelerator for sponsoring our show again we're looking for all developers that need a new home or looking for an exciting place to build because the atom economic zone is looking more ripe than ever to to be that location so you know we talked talk about the importance of interchange Security on almost every other episode it feels like and we recently talked to stride and they're a prime example of what you can do leveraging that type of technology in culmination with IBC strides actually specifically has taken quite a few uh strides no pun intended on improving the ux of IBC and along with icas interchange accounts so super exciting further to that Neutron

launching gives you the permissionless smart Contracting platform that kind of the you know defy ecosystem has really come to know and love so that powered by native usdc coming through Noble would really be a huge game changer for the cosmos D5 ecosystem so the atom accelerator is rolling out grants on a monthly basis ranging from 10 000 to 1 million dollars looking for people that are willing to make an effort to change the status of Adam within the economic zone so if that's you feel free to click the link in the description to check out a little bit more about the admin accelerator now on to the interview with Sam McPherson from spark protocol awesome everyone thanks for joining us today we have a special

guest Sam McPherson who is the co-founder and CEO of Phoenix Labs which is a Contracting development team building spark protocol so Sam thanks a ton for joining us today we're super excited about this conversation I know I think we kind of need to start this off before getting into spark protocol and kind of how everything's being built there and why those design decisions were made I was always talking about the the relationship that spark has with maker now and even before that I feel like I'd love to get your take on on the at the end game you know it's been runes disgusted at length on a number of podcasts and a number of forums but what's how do you view this like how do you kind of put this in the context of of where Maker Now goes from here and how would you kind of Briefly summarize

Maker's end game yeah so um make our end game I guess uh one of the main points of it is that roon is looking to lock down the core of maker um such that there's no major decisions there and it more turns into um like routine more like bureaucratic just making sure the rules are followed that kind of thing very boring and move all the exciting Innovation out to what are called sub-dials which you can think of as kind of like uh subsidiaries of maker but they're more um they are competitive as well so spark protocol was formed as a way to uh dog food this whole process basically so

um the the protocol itself is a lending engine that is um connected to maker through a d3m so you get all the advanced features of a modern lending engine so for example like in maker uh core vaults you can only post collateral and then borrow die that's really the only thing so lending engines have evolved a lot since then so you can do things like uh re-hypothecate the collateral to get better yield as a lender you you can do cross-collateralization um yeah so various features like this so spark provides this all at the same time providing the Best in Class liquidity that only maker can provide so by dog

food in this process as before the sub-dials are launched we're able to get um like pave the way to see what it looks like for future protocols that want to integrate into the end game and um you know get access to Maker's liquidity with their awesome products awesome I I love that uh definition there you provided so spark basically is one of these growth focused arms of maker Dao and so my understanding is it will it will eventually kind of be Amalgamated into a sub-dial so what's this merger process look like and how do you kind of expect that to play out like how does the acquisition actually occur by transitioning spark from makerdale to a sub-dial yeah sure uh so us as Phoenix

Labs we are smart contract Dev shop so we're just one of the contributors to building uh spark protocol I would say one where the primary contributor right now but it's it's not just us spark protocol is open to everybody and so the ownership right now is under maker Dao as a temporary holder of the uh product um all the admin functions for example are under maker governance for security reasons and stuff like that there's no new Dow or anything like that now when the sub-dials launch the farming will uh kick off and then there is no pre-allocation whatsoever everybody has equal opportunity to post die and I believe posts later eth and maker to get

the sub-dow tokens and once they reach a critical threshold then they can start um doing whatever they want I mean within certain limitations so part of that will be purchasing products that um various ecosystem actors will be able to offer so us as one such ecosystem actor um building spark protocol we can then sell the product if if the subdials want it they can bid on it so they can exchange sub-dial tokens for the product but keep in mind this is not compelled so this is a completely voluntary purchase of a product in this case spark protocol and uh yeah so that that's basically how it works in a nutshell

gotcha if we can take a step out a little bit a little bit of a higher level Dan did a little bit more homework uh on spark than I did admittedly so I asked the dumb questions here but can you kind of just explain what exactly spark is and like what problem it's aiming to solve and what services it wants to provide yeah sure so spark is a modern lending engine that is connected to maker through what is called a die direct deposit module so maker will deposit uh into uh The Lending engine into the die Market at a below market rate um the rate is actually as low as possible it's set to the die savings rate in no uh borrowing um sent out by maker can go below that rate for a number of reasons which I can

get into if you want um so the lowest rate possible is the die savings rate and Spark is able to offer uh users die borrowing at that lowest rate so um this is going to be basically it's it's the cheapest rate in D fight so that's the value prop you get to have all the features of a modern lending engine cross collateralization um you know you're able to take each shorts and stuff like that as as well as connected to Makers cheapest borrowing rates and and this is at scale too so this is not just like some uh small amount that can be uh done through like yield farming or something like that this is like we're talking hundreds of millions

yeah yeah and absolutely and you know we've seen it an early success for spark but the initial cap of 5 million die being smashed in just three weeks uh the vote to increase to 20 million I believe has passed so that just needs to be executed at this point um I think we're marching on towards 200 million so can you talk a little bit about why the DSR enables this lowest rate in D5 like why is borrowing die at the DSR always going to be the lowest rate it's because of uh if if you were to set um a borrow rate that was lower and maker is the provider of this loan then it opens up this fairly useless carry trade where users I have some eth sitting around I stick it in maker I borrow it

um well the DSR is about to go up to 3.5 so let's say you can borrow at two percent after after it goes up um then I can just take my eighth uh Min some die and then stick it in the DSR and this doesn't really benefit maker at all right so it's like it will increase the market cap of die but uh makers kind of paying for it and it's like these these users will just go away as soon as the rates go up so at in a nutshell that's kind of why yeah and just to elaborate on that with an example for the listeners basically like imagine all they had was allowing the borrowing of of die which it does of course and let's say the market rate was currently two percent users could borrow at two percent and then stake to die for S die

and earn that three and a half percent so you'd basically just be milking the spread between those two uh those two numbers and yeah I agree that it kind of is a useless carriage trade there so and also I agree it's at the expensive maker so you kind of expect the rates to across all of die lending markets to jump uh to the dsr8 and because of that like how do you think that affects other stable coin boring like usdc or usdt yeah I think what's going to happen uh next week and I don't know if people are entirely prepared for this but the rates across the board and this would include usdc that we have less uh maker has less of an effect on uh tether I would say but usdc due to the one-to-one swap and the PSM will be uh raised as well

there's a lot of users who uh take if they'll mint uh die swap it to usdc and stick it into the um and Supply it on Ave for example so that Supply rate is currently about you know two two and a half percent or so um so these users once they have a better opportunity uh with dye um they will um switch to the DSR and this involves pulling liquidity out of secondary lending markets such as avian compound which will increase the borrow rates so we should see the supply rates be at least uh 3.5 which depending on the um interest rate curve that uh oven

compound or setting uh should put the borrower rates um yeah more into the five percent uh type uh range yeah okay so that's pretty interesting as well and that's kind of when you kind of look at different lending models you know maker Dow as a whole uses like that more peer-to-protocol method where users come to the protocol to borrow die of course spark is kind of sitting in between that so it's a little bit different there I would say whereas something like Ave which is truly a peer-to-pool model where suppliers deposit assets into a protocol that kind of in turn funds the the borrowers loans um and so being in this peer-to-pool model I see that you're kind of like beholden to these Market forces and you don't really have any pricing power whereas maker for example can come out

and say we're good you know we are doing some operations with rwas I think we're going to earn our game plan is to earn five and a half percent so we're going to offer DSR of three and a half percent and kind of capture that spread as as uh as income for the protocol so other peer to protocol models like let's say Ave post go launch kind of kind of have the same pricing power there in my head so like I uh the game plan for uh Ave is to initially have a bore rate of one and a half percent and I know a curve just launched its own stable coin um it's a more of like a it's a pretty complex interest rate mechanism but the rate zero on that which is kind of like your equilibrium rate if you will is closer around the low three percent

range so I'm curious like how do you think this puts makerdale in a competitive position with other peer-to-protocol lending models uh yeah so for stable coins um the name of the game is demand demand demand so like the supply side although I'm I'm really liking the Innovation like coming out of like curve USD for example they've got a really uh Innovative liquidation model it looks like um but for the demand side uh that's been the hardest nut to crack and like I I really there's only three stable coins um that have done it at a large scale and that'd be usdc tether and die where um you look at um organic spot demand for the um

stablecoin this is users who are not just using it to get a yield they don't have to be paid to hold the stable coin these are users who are like using it as cash they're holding it in their wallets um store value they're using it to pay people that kind of stuff this is the ultimate uh goal of a stable coin right so die has massive numbers here we uh we use uh uh eoa addresses multi-cigs look at this people are just holding die and they're not like depositing it for yield as a proxy for organic demand and we see numbers of like three and a half billion in this demand whereas um like some of these others like it's more in like the 100 million range so like die is like in

terms of organic demand is is far and above uh the competition here um the Fiat uh the feedback stable coins are of course much bigger but um yeah it's in terms of decentralized stable coins that is by far ahead now I think I'm interested to see what happens with go and curve and all these kind of things how they build demand um you know liquidity incentive seems to be the way to go to bootstrap that but it's hard uh I I don't know best of luck to them yeah interesting and so raising the DSR like uh also pushes up the borrow rate for some of these uh you know on-chain like assets like rhaps take to Ethan eth for example and isn't

that sort of like this that sensor or that create demand creation you're looking for is to take you know on-chain assets mint collab and mint die against the collateral or do you is maker really trying to push deeper into the rwas and kind of go in on go all in on that um I wouldn't say makers going all in on anything um maker has a multi-pronged strategy uh of course we are sorry the maker is very interested in um uh decentralized collateral because it provides all sorts of resilience so I I really don't think maker has this like we need to just switch everything to rwa sort of mentality um but the name of the game is is demand demand demand Demand on this on the on

the demand on like the stable coin holder side uh that's how you build a product that scales so the DSR is um a way to bolster that uh demand and uh really uh pay users for the yield that um some of the other providers are just keeping for themselves like to me this is just uh user yield like the users should be paid for um holding holding the stable coin instead of just all going to the uh intermediary so I want to talk a bit about like the plumbing of how the DSR actually gets paid so the protocol generates um yield on its its assets that and that

kind of flows through to the buffer Surplus is my understanding and then the the DSR rate is actually like I'm talking strictly like you know on a smart contract level like how do the assets flow and if I if I stake die for S die I'm being paid by the buffer Surplus is that correct uh yes that's correct okay so you know I this is obviously like some extreme Edge case that is just simply unrealistic but like what would happen if like the entire outstanding circulating die Supply just all was like aped into the S die uh contract would that like could theoretically the could the S die yield like drain the buffer Surplus to a point where it would like

create this bad debt scenario uh theoretically but that won't happen in practice because the um on the revenue earning side uh we have a very scalable um like return there so as demand builds um we just scale the revenue with it it's pretty one to one okay okay that's interesting and then so The Benchmark value I think that was in the latest proposal was five and a half percent and that kind of led to a three and a half percent DSR roughly um do you see a world where the DSR Rises to be higher than like the UST Bill risk-free rate and kind of where do you imagine this you know equilibrium value resting for a DSR yeah it's an interesting uh thought experiment so uh

yes so right now uh it's tracking um the traditional Finance rate but um we did have a there's a maker had a positive uh DSR in the past when there was um and the oversupply of uh um crypto leverage so it was the inverse of what dye's been since March 2020 which is the demand side has outpaced the supply side so this is why usdc was onboarded because you need something uh cash-like to fill that Gap basically that um so yeah on the um in the case where it was before the um crypto leverage was uh in demand more

than the holding die side so the peg was uh breaking down in that case this is a long time ago this is like when uh multi-collateral die just launched so for the first more months this was the case and the die savings rate was increased then I believe it got up to about five percent um to incentivize and the stability fee went up as well so this was being paid by the uh crypto leverage users so they were paying five percent and this was going to the holders in in order to bring this number back in line return the peg back to one dollar so I could see a scenario where we returned to this potentially um it it's it it's hard to say though because I mean uh crypto collateral as as a

the soul um provider is the sole collateral is hard to scale up to these numbers so returning back to that kind of scenario uh I mean it could be but I would think it would there would still be real with real world assets on the balance sheet to a certain degree so strictly I would say no but yeah for the foreseeable future it will probably be falling around this uh Trad fire rate that's interesting because you keep saying demand demand demand and you also say like just crypto back collateral is really hard to scale so real world assets are like a key component of that scaling strategy do you ever see a world where there's any under

collateralization at all for a decentralized stable coin like more on the macro picture obviously we saw that go terribly with UST Luna um but I'm just curious if you've thought about that at all in terms of the long-term game plan yeah I mean that's up to maker holders uh ultimately but personally I I don't think we should be pursuing that dies uh big strength is it's it's over collateralization if we start uh going down this like under collateralized route uh like I I think this is kind of a slippery slope towards what has like the Fiat currencies that exist now so um I'm a big supporter of over collateralization as a fundamental rule of die now maybe there could be

something at the margins but uh for the for the vast majority I think we should be striving for over collateralization there are so many assets out there like we're far from tapping out the capacity okay yeah I kind of like that that thought process of like let's focus on getting all the assets onboarded and then cross that bridge if we need it when you think about like pegs to Peg stability mechanisms obviously uh maker and die use the PSM which I believe you actually created um and then you look at something like frax who uses Amos curve is using these their Peg Keepers which are quite similar to Amos how do you think about the the trade-off between the two like the the one to one PSM or kind of this

more like smart contractual a little bit of like under collateralization going on it's hard to kind of Define it like how do you think about the trade-offs between the both both options yeah I like the ammo model and maker is actually switching to more of that where it will be depositing on amm's directly rather than the PSM so the psms are actually going to be retired in somewhat near future and maker will directly inject liquidity Amo style uh to dexes wow awesome no that's that's super interesting to hear actually I had no idea that was the case uh what was the the design decision there like what inspired that was it mostly just to kind of help shed some of that uh you know there's obviously a lot of discourse

around being too backed by usdc and during that last usdc d-peg we saw um die deepeg in a one-to-one fashion with uh excuse me usdc but you know not thinking about that out loud we also saw frax do the same thing uh yeah so that uh DPAC event was uh certainly it was a nice test case to see where the faults were and one of the faults was definitely that the debt ceilings um and uh no kill switch basically on the uh any uh on the stable coins basically primarily usdc I would say so we've uh or makers since taken action to add a kill switch in that if that happens again uh the PSM will just be shut off in that scenario because we do

not make it doesn't want to be like this uh lender of Last Resort for a true gpeg now I I was never worried about the usdc d-peg being permanent but um you know if and when something like it's it's always prudent to have protection against uh any individual collateral um failing so yeah design decision um there is a number of reasons behind this uh dies um has had this one-to-one Peg um but makers um shifting strategies as part of the end game to have uh die now uh trade at a a range as opposed to um just this hard pay so as part of that

depositing into Dex is is a much better strategy you also get uh better uh rates as you are no longer the psms are actually primarily just used as an Arbitrage mechanism with the dexes so instead of having this intermediary Arbitrage or it makes more sense to just directly deposit and then you know maker is the taker um in these Market making side uh thing right on yeah and we see frax do something similar obviously and they kind of use curve as that home base with some activity onto mother dexes uh do you think it makes sense to kind of have that main source of liquidity on one given deck and if so like which dexes do you think provide the best options for for die not just one decks it should be really wherever the users are the users

decide what they want to use and makers should just adapt and Supply liquidity to wherever the users are on that same vein so I guess a competitive Advantage I see of spark is potentially being able to launch on different l2s and using the direct deposit module to kind of export some of that activity to l2s have you thought at all about that strategy like which l2s do you want to roll out to what does the actual architecture look like like how does it work underneath the hood yeah sure this is exactly what we're working on now at spark is um we've got the mainnet instance but branching out to other chains is very important again this is uh all the the same strategy go where the users are so

the users are increasingly using l2s and other chains so we want a spark instance to be present and we do the same thing where with this direct deposit module something similar to that where it will prevent the die and move it across the native bridge in the case of the L2 and then deposit in the spark instance and then the rates are set at this uh same DSR rate so no matter what chain you're using you don't have to worry about uh the rate differences and like you know liquidity providers having to Arbitrage this and all this kind of stuff you know it goes away it's very simple use the chain you want and borrow at the same rate is this pretty similar just for

additional context to ave's go facilitators uh yeah actually the model is kind of similar so um Maker's original design bundled the Vault engine um it is fairly tightly integrated um you know I am not faulting the developers I think it's it's really hard to build this stuff like for the future I think they did an amazing job but uh in retrospect I think it's better to just have the stable coin and then it can attach the um asset side of the balance sheet to whatever so lending engine is is just one of the things and I think this is what uh Ave is doing they have uh are they um their lending Market as one of the

facilitators and then they have um uh what is it just a flash mint I think is the other one and presumably they'll add like real world asset um but yeah this this is very similar to uh the restructuring of maker in the end game where uh the balance sheet allocation will be delegated entirely to the sub davs so there's going to be four uh sub-dials that are specifically for allocation of the balance sheet so they will be given they'll have access to Mint uh die and then they can um use that die and just stick it into whatever investment opportunity uh gives the best return you know there's lots of caveats they have to deal with like

um keeping things uh keeping the peg liquid all those kind of stuff it's a lot of nuance but generally speaking Yeah the the best return um wins and the the allocator dials will compete uh to allocate the balance sheet because they get a cut of the profit okay that's pretty interesting and well as well and Sparks doing some more cool things around fixed rate lending why do you think that this is kind of like a missing piece from D5 and how is spark really working to enable this I believe you're working with protocols like element and sense yeah I mean uh fixed rate lending is like a huge Market in Trad Phi and um I think I think it's just because we're early it just doesn't exist yet it may be like uh the rates are so volatile and defy like you know

getting a fixed rate for like six months it's like an eternity like who's taking the duration risk on the other side of that um you know it's it's tough so but I think this is as the ecosystem matures you know introducing fixed rate Primitives is like a next logical step so yes we're working with um element sense um they're building their products such as element hyperdrive um to which we can uh integrate with uh as Phoenix Labs we can help facilitate the integration with makers so they can get these um the allocator Dows can then allocate to this as a a potential investment opportunity yeah that's that's almost like the world of tradify

runs on fixed rendering fixed rate lending so it'll be fun to see that come on Shane and you know I've seen you talk about how this kind of defines a yield curve for die and why is that important for dye and how is that going to impact the broader D5 space yeah it's really interesting um I think because D5 has actually chosen to denominate itself in the US dollar uh I think it's actually going to eventually just import the yield curve from Trad Phi and then you can just trade it in D5 rails and this isn't like any enforcement I think this is just going to naturally happen and it's not because like there's any special thing about the US is because everybody has chosen to denominate in the US dollar so just kind of naturally

gravitates to that decision so there is really no yield curve in D5 right now but having fixed rate lending will bootstrap this mechanism and I think it's only going to grow and converge on the traditional Finance space as we import uh more Primitives so I've noticed personally just over the last few months a lot of protocols popping up specifically focused on either on-chain treasury yield or on LST back Stables so like they're really focusing on these two different niches whereas makered out kind of feels like they're trying to tackle you know both of those things in the same vein um would you say there's pros and cons to either strategy like why is maker Dow

kind of making the decision to go for both and and maybe what advantages does it bring um I would say Maker's not really pursuing an LST strategy those previously uh kind of put out there but um that was pulled I think you're talking about ether die is that what you're referring to yeah yeah uh that was uh canceled in the makers plan so maker is uh just focused on um these uh treasure yield uh strategies um so yeah I mean just because the rates have been so high there's like a huge um economic uh Force um you can think of it like so let's go back a year ago or maybe even half a year ago um there was like this huge gap between

uh traditional Finance rates and D5 rates defy rates had cratered um because we were you know in the middle of a bear Market um track fire rates skyrocketing but this this difference and again because we're denominating in uh US dollars in D5 um this is a massive economic incentive for somebody to tokenize uh this treasury yield and put it on chain and this is why you're seeing an explosion of these protocols um you know ondo Finance back Finance um Maple now has a pool I believe so like there's all kinds of uh different solutions coming online and this is uh precisely just because uh this economic

um it's like a discontinuity in economics and so it needs to be bridged and so these protocols will reap the benefits by being the first to bring these uh tokenized treasuries on chain and then all of D5 benefits um as we get more access to more Primitives in D5 and it almost seems like there's kind of like a convergence with the ideology of every protocol not every but you know we've seen we've talked at length about how you know frax is doing some some similar things in Ave is now launching a stable coin they have their lending market and curves kind of in the same boat and Fracture spoken at length about the Trinity between the stable coin a lending market and on-chain liquidity even like a decks of some capacity so do you think that these

protocols will just continue to vertically integrate until you've kind of like reached that Max Capacity or like you know we kind of saw it was like the original state of defy was everybody that specializes and does one thing but the landscape seems to have changed what's your views on that yeah absolutely everything's going to be vertically integrated I think it all comes down to um this this is a really good thing about defy I think is that it uh there's very little moats actually so the users are going to get all the benefit of this um things are highly competitive and uh they'll the margins are just going to drop to zero in the long run on basically everything where there are moats I think uh turns out to be branding to a large degree

um that and I would say um demand for stable coins and this is why everybody's launching a stable coin because they've realized that uh with all the other products dexes and lending you're at the mercy of LPS and you have to pay them the vast majority of the revenue the stable coins the only one uh where the protocol uh can direct the revenue to different things so uh this is what everybody's coming to the realization for this is why they're all launching a stable coin and I think yeah everything's just going to be vertically integrated in the end you know everything's open source code uh and I think this is ultimately a good thing for the users because they're just going to get the best products at the cheapest rates yeah no I mean that makes a ton of sense owning the whole stack kind of

gives you that more the you know the flywheel term that always gets uh tossed around but it's true you can kind of feed your your other arms um and speaking of like you know on that defy Lego narrative uh spark was actually built off of a fork of Ave V3 what was the kind of reasoning for not building a custom solution and kind of saying hey like let's just leverage what's already exists it's in I know there's like a profit share agreement with Abe if you can speak to like what were the terms of the final agreement yeah sure um so the decision um I mean I guess I would ask why would you build your own when there's existing open source software that's really great like the Ave team has done an exceptional job building of av3 code base

um it's one of the best code bases I've seen in the space it's battle hardened um it's yeah it's been it has huge lengthy effect so there's lots of Integrations with it uh so like by using the same code base we get lots of Integrations just out of the bat because people just uh take their integration with office E3 and then just point it to new contract addresses um yeah so we're a big believer in uh open source and you know everybody's sharing and we open source all of our code anybody's free to use it um and you know I also don't it doesn't uh it's not up to us but yeah we felt as uh we want to um encourage a positive uh feedback with this kind of stuff so we did not have to

pay avedao there's no requirement to do that but we want developers to be paid uh for the work that they do so um well there's um very interested in things like retroactive public goods funding stuff like that I'd like to see more experimentation in that regard so that the open source developers that are doing all the hard work get compensated for that work and incentivizes more of this work but in the meantime we felt the most prudent thing to do was just to you know pay avedao for the work that they've done and so we have an arrangement with them to pay them uh 10 of the profit uh that goes to the spark subdial when it's merged um for two years and are they we sent

that to avidao and they've accepted with overwhelming support so we feel it's just a very positive some way to go about this I love that that mindset is really kind of you know leveraging what already exists and uh doing it in an appropriate way that's like kind of positive sum the The Narrative of you know Rising tide lifts all boats is is commonly touted throughout difa and this is a great example of kind of how you guys are participating in that I wanted to take a step back though to one of our earlier conversations about how kind of exactly how this like acquisition or merger whatever you want to call it goes from the from spark with as it pertains to spark protocol from maker now to the sub dial like basically how the

transition occurs um and so you'd be using these sub-dow tokens to acquire the protocol um and both of those things kind of have like an up in the air fair value in my mind like how do you truly Define how many tokens should be given to Maker Now for spark protocol yeah it's a good question so it's uh like a normal uh bidding process so there's four uh sub-dials that can bid on acquiring products and um we would just throw out a price um like if one of the sub-dials wants it if none of them want it you know it's up to them and this is just sort of classic

negotiation so uh presumably we'll go back and forth a few times um what exactly that looks like because if the Dow um I'm not sure yet but we're we're gonna find out I guess let's say each of the four sub-dials are interested there'd be like this bidding process effectively um definitely excited to watch this play out now and like would make her dial be more interested like just objectively speaking like from between one sub-dos token versus another like are they all this equal and onset and then of course as the subdials Evolve and do different things maybe the tokens are have different uh meanings of value but from the original onset like why would

maker Dow favor one sub dial over the other uh yeah they don't they're born equal and this is a very interesting design that came from roon uh where he calls it foreign decentralized where it's it's there's no pre-allocations whatsoever so it's literally emergent from those users that uh have the capital and want to they just pick them like I want to go into this one and in their mind maybe they have an idea of what it should look like uh after the initial farming period is done and then the sub-dials they'll all have a bit of a personality after this you know maybe whale Aid will be a certain number of uh smaller users are in one particular or another there are active on the Forum

because they're uh farming that token so they're actively trying to uh persuade people to go in some direction um and then once the voting kicks off uh these personalities kind of form and they can adopt branding prod products whatever they're completely autonomous to do uh it's not whatever they want but like within certain uh constraints that maker sets they're free to adopt their own Brands and uh products and whatnot and there could be multiple products so it's not just spark protocol like uh anybody's free to build uh what they want and Pitch it to these sub-dos I was just curious so like I view maker as kind of like the Unchained Circle if you will so like

when treasury bills or yields are going up that's obviously really good for circles business and then when they're down um maybe it's less so good so I guess how does Maker's strategy uh both benefit from rising interest rate environments by increasing revenue for the protocol but then also on the other side of things when maybe we get a bond bull market and and uh rates are going down how does maker continue to make profit uh yeah so this is the strength of multi-collateral dye in that there's uh we have or maker has like every kind of asset basically on Earth in the long run so um as the interest rates go down it will kind of drive more probably bullish

behavior um eventually at least and then uh maker was making a fairly good returns when the bull market was on because people were just leveraging with no no limit and um to when the market gets too hot you have to uh raise rates a bit to kind of cool down the insanity so there's uh returns there um yeah it's really like an all-weather type of situation um we haven't gone through like a low interest rate recession yet so that might be interesting I'm not sure what that will look like um I feel like that's just bad for everybody so you know nobody wants a recession right yeah I stronger agree there that would be a really interesting

scenario though one that I actually hadn't considered so I'll I'll be watching closely over the next if that could take five ten years who knows we might be waiting a while but uh anyways I this was a fantastic conversation Sam I know you got a hard stop here coming up in the next 10 10 10 minutes so I just wanted to hand it over to you to share with people where they can learn more about spark learn more about you and any other closing thoughts that you wanted to share uh yeah sure um so if you want to get involved in um I would say the sub Dow is the important place to go um there is a Forum open up on the maker forums called sub Dow 2. it's a bit weird I know um so there's like six sub Downs we just kind of are posting in in the one under

uh spark and Friends kind of uh setup so you can go to the Forum uh post your protocol or if you're interested in helping you know it's wide open um just get involved I really I really think um makers had this past where it's kind of been a little closed off uh from the outside view um people find we're finding it hard to onboard what's the process for onboarding my collateral and whatnot um and I think a large part of this is because it was so um big and like everything's all together a lot of the arguments just turned very political in the Dow so um it just became very bureaucratic and

like messy and not that great now the end game um I think really flips this on its head so uh these are going to be smaller teams many of them and you just you you pick the uh sub-dow that you want that Vibes with you right you know you don't like real world assets going to a decentralized collateral uh sub down and that's what we're more focused on um you like um meme coins I don't know like it could be anything and because there's so many um sub-dials you can kind of just pick and choose and go into the uh memes that you like um for lack of a better term I guess uh so yeah my message would be there's really a new ground floor that

you can get in on with maker it's it's no longer the old school conservative uh boring place that it used to be it's you can get in on the ground floor and really uh shape the future of maker so that would be my takeaway message yeah with all the infrastructure and and battle tested uh resume I guess that maker has developed to date too I feel like that's an absolutely incredible opportunity so I would urge people to get involved as well if they're interested but again Sam thanks so much let's do this again in six months or so to get an update on spark and and where maker Dallas at because I'm sure this stuff is going to change really quick but again thanks for coming on [Music]