Where Frax Fits In The Modular Thesis

Transcript

welcome to the rollup today's episode is with Sam the founder of fra and today we talk about everything in the fra ecosystem from the Frack stable coin and why it is built as the best M2 money on the market today all the way through to fraxel the new modular L2 home to the billions of dollars in the frax ecosystem we talk about Sam's broader vision of fractal scalability and the app chain life cycle of how applications graduate from Smart contracts to their own app chains this is the rollup enjoy today's episode with Sam the founder of fra before we get to today's video please enjoy a word from our sponsors that help make the rollup possible cartei is your home for app

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course here with Rob I know Rob's pretty excited about some of the fractal scaling that you're doing Sam and yeah you guys have had quite the journey in defi now all the way to launching fractal your own l too amongst other really cool stuff that we'll dive into so welcome in Sam it's a pleasure to have you back on man awesome to be back guys it's it's been a while really excited to talk about all the stuff we're we're building in fra uh like you guys said there's a lot of stuff since the last time we talked uh fra has grown a ton and recently we shoed our our modular rollup main net and uh a lot of stuff going on with that as well there's so many different places where we could dive in I think let's just let's start from the beginning like tell us you know

kind of like the prehistory of FRA the chronological going all the way through when you guys launched just you know just kind of getting us caught up on like what what the last um I don't know the the recent history has been for fra yeah for sure so fra launched at the end of 2020 as you guys said uh end of defi summer we launched as a decentralized stable coin uh frax you know the uh dollar PEC stable coin and as we grew over 2021 2022 basically became like the the second most like Lindy you know liquid stable coin after die in terms of like the decentralized space and we expanded our vision to issuing uh currency we call them M2 assets so for

people that don't uh know economics speak M1 assets are basically like cash or like if you think of crypto they're like just BTC raw BTC or eth and then M2 assets they're the first hypothecated layer of the M1 so like for cash or be money market funds right so like everyone tries to get the the treasury yield but but keep the the money market funds liquid right for for ethereum it's lsds and re recently lrts right you you try to keep it liquid and then get that additional layer of yield in terms of one layer of uh rehypothecation uh you know aspect and so you know for BTC there's no native yield in BTC but you might say like wbtc is an M2 asset because it's an issued

note of of BTC so fra expanded to having frax ether a a uh top five LSD and soon in the V2 version uh LRT support so much higher yields uh keeping it at the the top of the kind of M2 the the yielding uh stable coin kind of LSD game and recently to complete our vision entirely we launched fraxel so it's a modular rollup which is the probably the most uh exciting thing to talk about on a podcast named the rollup so uh the the idea behind that is if you think of fra as kind of a decentralized central bank the monetary policy levers the balance sheet the protocol own liquidity the stability mechanisms the the credit

facility like the frax L system that we've built the cdps they'll eventually all live on fraxel so as the currencies are issued on multiple chains right as more places need lsds like frax ether or as they need uh dollar PEC decentralized stable coins and and yielding uh dollar stable coins like Esra right as those grow the assets that back them and the over collateralized loans that need to happen to Mint these or the avss and and LRT reaking systems that need to be deployed we're going to consolidate those onto fraxel the smart contracts the assets the balance sheet the transparency uh will live on fraxel so this kind of Central Bank chain uh with

its unique technology with its unique incentives to build on top of will grow as as a function of the currency issued that grows on all these different chains so that's the vision the the decentralized Central Bank um and we're growing every day so it's been it's been really fun very cool and and like kind of in that leadup you mentioned that uh M1 is inherently cash now when I think of stable coins I kind of think of them as like the the cash of decentralized Finance why why do you consider FRA the stable coin an M2 asset yeah so that's a that's a great question so like basically uh there's there's basically

if you divide economically stuff into uh the base money right and then the one layer hypothecated uh money you'll you'll basically see like the M2 assets are usually yielding not this is not like a hardcoded rule like like I was saying wbtc there's no Bitcoin yield it's one layer hypothecated though um but it allows new utility right program programability and so uh the main thing is basically like we think that on chain there will have to be good risk adjusted yield for for dollar pegged assets right there will be you know rwa uh like basically tokenized T bills money market funds right that distribute

this yield there will be stuff like s fra which is the yielding system for for fra and there's s die people are familiar with it uh if we go really deep into it and there's Athena as well can't forget about them they're very new um hot place of the carry trade yield if if we think about the design that we've built with with SRA and fra um we're pretty confident it'll be the uh best risk adjusted yield over the long term the way that SRA works is that it has like a utilization curve so the more fra gets staked in the SRA Vault the uh lower and lower the the yield goes but it bottoms out at the risk-free rate of the fed the money market fund rate right

that the T Bill rate because that's pretty much infinitely scalable as much as the the FED can scale which is the issuer of the dollar right so if you hold SRA uh essentially um you you can think of it as you get the IB rate the interest on reserve balances of the Federal Reserve but you can also get a much higher rate like right now there's 25% apy on srax and that's higher than sdy and uh Athena it's dependent on how much of the supply of fra is doing other things right like in liquidity pools versus how much of it is uh getting yield but the system that we've designed I think is the best for like essentially bringing really good risk adjusted deal

to defi layers whether it's on ethereum mainnet which it's already been a big success on fractal soon but also on these other chains right and so the the way that we've designed it is how can we get M2 yield uh to other chains uh the best is possible how can we get ethereum M2 yields which was lsds now it's a little bit more lsds plus LRT yield uh which is why the the V2 version of our frax ether will include that and the idea is expanding the M2 yield everywhere right getting it in as many places the the ubiquitous Vision here should be any chain you are in and you guys probably know this better than

anyone but there will be thousands of them right in in in terms of rollups l2s l3s out l1s any chain you're in you should have a very high chance of interacting with some fra asset uh whether it's like the biggest one or like the the one that powers yield or the LSD of the the chain fra as like a a a brand or a protocol should be ubiquitous whether you build on fraxel the the rollup or you're on any other chain that's the vision anywhere you go you you should see it you should be able to rely on it you should be able to see the the Lindy that uh fra is already you know it about three close to four years old and it's uh thankfully you know

knock on wood never has had a uh security incident no one's like lost money uh depositing in directly in fra smart contracts and that all of that will just add up when you can see that Lindy with the the risk adjusted yield yeah and you mentioned a couple pretty interesting points there and and I think this kind of is why you're getting to this fractal uh end game here for fra because you've kind of got all these different pockets of fra assets um and effectively utility for users in terms of defi yields and um Capital efficient uh opportunities for people to to operate in then I remember in in in 2020

I was thinking like man I wonder when we're going to be settling consistently in yield bearing assets and I think that we're getting closer and closer there we have you know uh Native yield chains you've got these yield routes and bridges and um uh stable coins that are natively generating yield lrts this ethereum staking yield is now kind of become this base yield and so you a at FX Finance have all these different moving Parts kind of happening and you guys have decided look we need to kind of get into our own block space we need to basically own our our execution environment and kind of operate in this Sovereign way we we can't we don't just want to have to be doing this on other chains although that we want to be on

all these chains we kind of want like a central like Hub if you will for for fracks I'm curious uh on kind of some of the of the technical stuff and we can dive into fraxel um as well and kind of the scaling design but what what were some of the reasons why you thought that hey look I think we need to build our own chain and this is going to be advantageous to us from a a revenue perspective a business perspective or just a general like um you know running up protocol perspective definitely and it's a really good question because a lot of people when they you know think of fra as like a decentralized central bank they're like oh okay well you issue assets everywhere why do you need uh a chain you can just you know deploy the smart contracts on other chains that

have Smart contracts right it's a it's actually I think probably the most common question so the the answer here is actually our vision and our view is like in a in like a world five years from now when there's thousands maybe tens of thousands of of rollups uh any basically large distribution uh protocol will want to have basically their their central location to actually have uh their collateral their their balance sheet their monetary policy um that like for example we do expect to see stuff like maker chain which is is already announced right and so like even though it hasn't been deployed I I think it we

we'll see something like that even though for example uh a hasn't announced that there's going to be an a chain I would not be surprised that in the future if that the central place to do those kinds of monetary policy activities is uh is is announced there and so um fraxel just to go over the super quick the unique Tech but also how it works is a modular rollup so the execution environment is op stack so it's actually super chain compatible we're one of the inaugural super chain uh participants along with Bas uh mode um Linea op main net um then more and more getting added every day um the execution environment being off stack

has some modifications so the gas is fra ether our uh LSD um token and basically the da is is modified so it can actually fan da out to different multiple places so that even if blob costs are like High um you know you could push it to Celestia uh nice shirt by the way and big fan of Celestia and all the guys there and so or you can move it to near one thing we're exploring with the near team is is near da compatibility so fraxel can actually be uh the cheapest location uh roll up no matter what the actual demand for for da is um so like right now swaps are like one cent or under but even if blob costs and L1 costs go extremely high that's the

modular framework we've modified it so that you can actually uh in real time the the sequencer node can actually push da to different locations and we also have an L 3 heavy uh road map which we call fractal scaling which is where the the fractal name comes from uh and and the idea behind that is as I was saying I think a lot of daps will actually uh start out Life as a uh dap that's deployed to a close relationship rollup and as the DAP becomes big and and hopefully you know a lot of the daps that we see deploying on fraxel will become very very big they will think about

uh either having their own L2 or L3 right and we actually want to encourage that the way we've set up our fractal points incentives the way that we've set up our our community grants and Investments and these kind of things we actually embrace that rather than try to keep all of the you know DBS from launching their own chain so one thing with fraxel is that we have an L3 uh heavy road map meaning that no matter how you want to launch an L3 whether you want to use arbitrum framework op or ZK evm or all these other uh ones that are coming out you can be an L3 uh under fractal and get rewarded fractal points based on the amount of Da Block space and and tvl in your L3 Bridge uh the

system that we've designed called flocks basically rewards any smart contract based on both tvl and gas usage and popularity um so it's a holistic picture of of a a vision for building a chain that embrace is people building on the Chain as an ecosystem and rewarding them and actually encourages and helps if people want to launch nl3 and take their their dap and actually do what fra did right fra originally was on ethereum mainnet it now has its own uh Network in fraxel and it's hopefully going to be one of the largest l2s that are systematically important and we want to actually help everyone that wants to

build on fractal do that kind of uh dap an an app cycle uh to app chain timeline I actually talked about it recently on on a bank list a few weeks back with with David where he actually brought up the this tweet by John charbono that was like the the life cycle of like a a big uh dap and I think it I think it was made as a joke but it's like astutely uh good which is like you start off with a with an app on like a general compute chain you're like wow I'm really huge uh modular expansion is awesome so let me just launch my own chain right my modular uh rollup and then you want to open up the rollup for everyone else to

build on right so it becomes a general purpose chain because that's smart contracts anyone can build anything right and then so a bunch of apps uh Deploy on it and they're like some of them are super successful right so some of the daps stting they're like um I'm a really big dap I should I should think about launching my my own chain so you come and up back up here app launches app chain and then they're like hey everyone build on top and you know the cycle goes on and on and so um I think that embracing that and encouraging people to build stuff like that in in that way is good um so like for example there's certain other chains that I think you know they might be thinking about it in terms of like negative suers

like build on our our chain don't don't go and and build your own chain right like build on it to to like so you keep uh paying us like like block space fees or whatever or or how they want to you know measure their kpi tvl on on the chain or something but the positive some way is to encourage the the actual life cycle uh that that everything is going towards like this Natural Evolution of uh blockchain and and daps and so frax is uniquely positioned to do that because we can do you know protocol and liquidity as as a big uh stable coin issuer so like let's say you're like a per uh project you want to deploy on uh fraxel because it's close to the Cent Bank where the assets are and where the

liquidity is and and the uh levers on on monetary policy is and you become a huge per uh you know um thing because you have liquidity we can give you incentives there's fraxel points you can distribute those to your users and then let's say you want to be uh an L3 or or something right you want to have your own chain even like Avo or dydx or something well the cool thing is that's great we would we would encourage you to do that we would make sure that fra assets are native on that chain in in day one if it's an L3 right as as like a fractal a fractal then it it happens immediately right we can bring the same protocol on liquidity same incentives natively right without any Bridge risk right down to your L3 immediately um and

then you can basically do exactly what you do best developing per and and all this stuff so you could do that with any other types of things so like if you have a game and then eventually you want a gamey chain for example but you want uh your your assets and your items to be like really good yielding stable coins natively uh safe stable coins we can we can do that and so it's a it's a good positive some vision for like how the crypto space will evolve in the next couple years and we're already seeing a lot of people build uh and then uh the few first few l3s are uh actually expressed interest in in working with us so maybe in the next couple weeks we'll we'll have some cool announcements there

as well sweet very good overview kind of uh of the modular stack that you guys are building so let's kind of dive into each part of these let's start with uh okay so we have this fractal scaling inspired by this kind of mandal BR I know Rob wants to talk about that um let's talk about this this idea of the incentivization for each of these l3s as well as kind of how they how they interact with the base layer of frax L2 um and kind of what the what the um what the incentives are to build uh within fra and earn these uh fractal points with your block space incentives and

kind how that works from a a user and a and a builder's perspective yeah for sure so uh first thing is our points distribution system fraxel points are pretty unique we call it um block space incentives or flocks for short and the idea behind it is actually it's inspired by Google's page rank algorithm so so like if you guys remember way back when people were trying to figure out which websites are reputable they saw which other websites linked into a specific website and then later you could recursively look at you know how reputable is that website that's linking into this because other websites hopefully link into that right so we developed this algorithm that's actually run uh with the chain software it's

always running block by block and the idea is it's like EIP 1559 which decides how much eth is burned but instead of deciding how much things are burned it decides how much uh fractal points to give out every single block and the algorithm is based on how popular a contract is based on the total amount of users that they use it the total amount of gas historically throughout the the chain and and it becomes really really expensive and difficult to game uh unlike a lot of the other chains that have like aird Drop farmers and stuff because what you get actually uh incentivized and and rewarded for is by having a popular contract that the sum

total of other users uh have used the vast majority of gas on the actual chain so it's like this recursive system of like if everyone's using your contract or like you know large some of users are using your contract and the the vast majority of gas is used on your contracts right like a high proportion of of the total Network your contract is reputable like it's kind of like backlinking to a cont contract right it's like the the activity uh across everything is kind of like a ton of backlink so to speak and you actually get a lot of fraxel points based on that and the cool thing is that's not a gas rebate right you can get thousands of x times more rewards this way because it's

so hard to game than you know a gas rebate right like so gas rebate systems in my opinion especially on rollups that are super cheap they don't really move the needle right like if if you're as popular as Unis swap right um uh like if you look at Unis swaps router might make like $5,000 of gas like $10,000 of gas like a day that you could like I guess refund um but Unis swap on its own layer for fees make can make millions of dollars a day right so it doesn't the economics don't make sense but if you're the most popular uh smart contractor set of smart contracts on fractel you could get hundreds of thousands of dollars of of worth of you know future fraxel points uh delegated and and sent to your

contract a day now that is a pretty big deal right and then you can start earning these over time and as your contracts get more and more reputable it's like memory uh in the chain right like those are the that's the reputation of each contract it's almost like uh I was talking to teron from Gauntlet about this because he really liked this system and he was like it's kind of like a social graph for smart contracts no one's really kind of built a chain where as more and more of it is used you get a better and better uh social graph of like popular protocols and and smart contracts right so it actually over time it even gets more and more accurate and and more and more difficult to gain so that's the incentive system that's novel

that we've built and then if you think about it it just is so General whether you're like an L3 right and and your L3 is like uh the inbox contract is on fraxel if it's the most popular you know L3 contract and it's like the 10th fifth or whatever third most used contract you get tons of fractal points for having one of the most popular r3s and you could decide whether to use that as revenue or you know incentivize your you know your own users um if you deploy a Dap right then that's great too if you're you know if you're like the Unis swap of fraxel or like the per uh of fraxel you also get uh these fraxel points and the motivation for us was basically to make it as general transparent and and uh well uh well

designed so that it's possible for any kind of Builder whether you're doing an L3 adap a nft set or whatever like a highly used token to get the rightful amount of rewards that they that they deserve so that's the that's the incentive system um super unique I think a lot of people will probably be motivated to take parts of it for their own airdrops or snapshots or something but the cool thing with this is for us it's always running it'll always run years uh over time block by block just like how EIP 1559 is running literally every block is part of the the chain Zone rules um this should make fraxel more profitable or just more useful to deploy on uh when you're considering

like 10 different like you know super chains rollups alel ones and and these kinds of things right because you'll always get this proportional to how popular your dap is right so if you're thinking should I be a popular dap on this L2 or fraxel you'll know like just by existing on fraxel like just every every block that people use your thing you're just get getting more and more points um those will be worth something and then that'll go that tail emission will go for for years right it won't stop it's not like a um it's not like a campaign or like an airdrop and then it ends and stuff that's part of the distribution of all of the fractal points so we designed this general purpose system and um that's why we think it it'll have a really cool

fractal scaling uh system so people can build for example l3s that are privacy Centric Payment Solutions right maybe you have a very specific like ZK L3 that you know you bridge fra stable coins or usdc right anything right from fraxel and then you can privately send it to to anyone right and and have payment settlement privately and then the more people use it uh the more you'll you'll earn pral points because like that's where your uh L3 contract resides right and you could do kind of anything you could do gamey you can launch something like you know um lens or um warp cast like the the new um you know social F stuff and forecaster and

all these things right so that's the the general idea is to build this chain that's uh the the central the decentralized central bank but that has a generalized incentive layer so for people to explore building uh on top and around it navigating multiple blockchains can be complex and Comforts some let's say you want to deposit in to a lending Market on polygon because they have the best rates but you only have funds on optimism so you bridge your funds to polygon only to realize that you need madic to pay for gas maybe you use a centralized exchange or you ask your friend to pay for the gas but only then can you finish your transaction in a chain abstracted future powered by connects this is not the situation you can connect your wallet to any dap from

any chain with all the complexities of swapping bridging and depositing all completely abstracted behind head over to connect. network that's connect. Network to learn more about connect chain abstraction toolkit pretty specific question if I first start off with a with a Dap uh just a smart contract application on fraxel um and I generate some some user base and I generate some flocky flock points and then I go and I launch an app chain and kind of like continue this prophecy of uh of the app chain life

cycle would I lose the continuity of of the user base and the points that I generated as an app when I when I go launch that L3 no actually because uh first of all your daps smart contracts will continue to carry their rank right so the the cool thing about that is the the rank is like memory right it's like onchain and and that score will be there in the graph um and it kind of I guess depends on probably you'll leave the DAP running I assume but even if you don't you can then bring over the the rank and and the actual um the actual demand to the L3 contract right you can actually delegate that uh to the L3 contract so you can actually there is continuity and also just memory it's a it's a rank that

stays with the contracts awesome yeah that that makes a lot of sense um I I think it is a good time to like get into like the whole fractal scaling Vision like I can just kind of introduce the mandal BR set a little bit because this was something that I found on like my mathematical Journey that I found fascinating which is basically this idea of like infinite scale and if you dive in infinitely or you zoom out infinitely you're still gonna end up at this mandal BR set type of visualization and so I think it is a really really again fascinating uh visual to think about an L3 that could potentially outgrow it's its L2 in in one sense but then still kind of contribut back to the L2 in a in

a means of distribution and so I I kind of want to let you uh make that bridge to the to the blockchain scalability side of it but I just I encourage like anyone who's who's curious about this stuff to go look at like anything on the mandal broad set any uh there's a great uh like mathematical you YouTuber uh three blue one brown who does a great video on this and basically describes like how this this set is constructed um and how you can kind of zoom into the decimal places you'll end up revisiting the same visual set of points and graph that you found on like on like the integer uh number line um and so this is just a perfect analogy for like an L1

zooming all the way into L2 3 four five um as far as like how do the like when you're thinking about fractal scalability how do you how do you picture that in general and then I'm also curious like just how incentives work when they start flowing back back between like inner layers and outer layers generally like what what is this Vision how did you think about how did you come up with this fractal scalability Vision yeah that uh and I I love the mental broads set stuff because like that's the actual visual that we uh definitely want to give out if you go to like fra.com the whole the whole vibe is basically this exact fractal scaling uh situation and one thing I wanted to say like that you said really well it's

quite possible that you know an L2 will be could be bigger in terms of both tvl uh and and usage than and an L1 or like ethereum or something although people you know people really don't like or sometimes get confused when they think that or an L3 could be bigger than than fraxel uh just because there's like numerical like one two three four whatever doesn't mean that's the order of like the the capped growth of like like you said there's in fractals there's other parts can expand and and you end up on the same place on the graph so and and this has actually been a just a time immemorial thing everyone's discussed I remember Way Way Back in 2018 people were like is it

possible for an erc20 token to ever become larger market cap than ethereum and like that like broke some people's brains right it's like well now I think everyone thinks well yeah of course usdc could issue like 500 billion usdc that doesn't mean ethereum will break that doesn't mean like the validator have less at stake or something it might have some you know interesting things at at the margin but like before that used to break people's brain right they they thought like oh an erc20 token must mean that it can't ever get bigger than than the L1 token but you're totally right and this is actually why we Tred to make like the incentive system so like General so it can just work no matter like how popular an L3 is like there could be a like an L3 like if it's a

payments L3 that's with privacy and stuff it could have a million times more transactions than fraxel you know right like and and so the the main thing that's important is just does it have the da and the enshrine bridge and and where does that work right and I think now in the the modular landscape those things can like move around right like the da can be on Celestia the enshrine bridge and Fork Choice rule can be to eth or you know to fraxel if it's an L3 but all of those things mean uh different things different features different functionality which is kind of why we also have the da module that can move around where the the da is posted so basically I invite anyone that's

interested in building to know like there's no like uh cap or limit to how big something can get um on on like fraxel or under fraxel or above fraxel or like you know as a L2 that has a direct feature Set uh or something like that one cool thing though is the currency isure right is like a centralized Central Bank is like if fr's currencies on different chains get uh used so much like let's say in like three four years FRA the dollar PEC stable coin has like 200 billion you know uh Supply so like a 200 billion balance sheet that does actually translate to at

minimum uh somewhere around 200 billion uh value of tvl and liquidity on frac because again like our goal is eventually to have the balance sheet the the loans the over collateralized cdps uh the the credit facility the redemptions on fraxel so one cool relationship that does stay intact is the the minimum amount of uh utility and tvl and everything on fraxel is proportional to the sum total of like fra asset usage across all these other chains so that that's always a cool equation that I I try to um you know follow keep track of let's definitely dig deeper into that uh because there there is a lot to unpack uh when it

comes to the value acrel to fra assets and the asset layer in general um and then as well like these programmable monetary mechanisms that you can pull these levers that you can pull sort of across not just fra but like multiple other blockchains and rollups because you have fra assets on there before we get into that just I want to tell you a quick meme uh and just curiously think about it uh okay it goes like this all blockchains including l1s are rollups on Circle cctp I didn't know you were a stable coin maximalist so that that's a it's a great meme because uh I I like to Brand myself as the world's first stable coin

maximalist which is you know Frack start as a stable coin and and the and the reason for that is like I was just thinking what's the biggest you know Market opportunity and interesting area in crypto and I was like well stable coins are a trillion dollar industry right the only other two trillion dollar Industries in my opinion is Bitcoin like the asset the digital gold and ethereum like the the first you know fully tur complete you know L1 and then um stable coins I think are the the third uh trillion dollar category so it's interesting you you say that because I've thought about it a lot um I think issuing your own currency your own liability that people use as money gives

you uh disproportionately powerful say in uh Fork Choice rules just overall and and everything I don't know if it like you know a lot of people think oh like Circle can signal you know the you know if there's a hard fork or if like certain EI will will pass or not I I think that the incentives aren't there and if like even if they s you know signal the wrong one people can just redeem right and and like you know so I I think that might be a little bit exaggerated but I I am a stable coin maximalist and what I mean by that is that I think stable coin issuers have a disproportionate say more than what

people actually think uh about in terms of how people uh behave on a certain chain um some some signal on on Fork Choice rule but also just overall everyone's like debt is denominated in in stable coins right like you know you either owe tether die fra you know uh these things if you have a or usdc or something if you take a loan on like a frax lens spark or something um so it's it's really important to actually think about those things right like I I would say I'm a I'm a stable coin maximalist and and that by the way that doesn't mean so Bitcoin maximalist is where the term

comes from which means like they think everything is a scam right and so that's not at all the connotation of that uh and you know there's also ethereum Maxis and stuff although I think they're a little bit more respectful because they're at least bought into the idea there will be a ton of other tokens right BTC Maxis are the absolute worst because they're like every other token if it exists is like a scam and you know the Beyond saving but stablecoin maximalist actually is like the most positive sum because it it actually considers all of the tokens that should exist and do exist considers Bitcoin and ethereum as as trillion dollar opportunities and everything and their right place however it says that stable coins particularly just tokens that are

pegged to a certain thing mostly dollars obviously because everyone's accounting these days is in dollars but it doesn't even have to be it's just things that have a stable Peg to some expectation are the largest opportunity on chain for uh protocol um monetization Revenue as well as having a disproportionate say in in like the financial layer of of like a syst we did a podcast with Chia Wang and uh he kind of described like these two use cases that have gotten product Market fit um and they're kind of like on either end of a of a of a barbell one of them is uh payments and you can see this on Tron stable coin payments are the number one use case and like their own its own kind of uh

uh like just frenzy if you will Mania like there's a lot of activity a lot of usage there uh and then the second was speculation but I I want to just kind of like tweak that a little bit and say rehypothecation because I think on one end you have these stable coin payments there's really nothing like too like exotic going on there on the on the speculation and the rehypothecation side again stable coins are sort of just a rehypothecation but then you can do all these programmable and very like flavorful things with them and so I think stable coin Maxis are both at both ends of the spectrum like have gotten product Market fit on both the very

exotic side as well as the very vanilla side and and there's a lot of adoption and demand for for both of those and uh that's just a a shout out to the stable coin Maxis out there yeah and like uh yeah you said it really well and I think another rule that you know that kind of Drew me to stable coin maximalism is that I think everything kind of converges at at large enough size into either trying to issue their their own stable coin uh doesn't mean they'll succeed obviously but but basically saying like Okay currency issuance right Central Banking essentially is is like the most lucrative trillion dollar opportunity again right and so like you

could see a right they launched go uh curve launched CRV USD um you have this fork in the road uh you know no pun intended and stuff so to choose between whether your protocol is like a service right you you take fees and and like bips and and a small amount of fees across like you know if you're a like you know other lenders or something like that or if you're an amm you know like some admin fee or something like like curve um or like if you're a per uh you know system you know like like just some fees on trading or something or you're actually a stable coin issuer and then your stability mechanism is the thing that you you built like your amm or your

your like lending protocol like it's your credit facility or like in curve it's your very novel way of liquidating uh stuff in in deep liquidity right and so kind of stable coin maximalism says like if you get big enough the only like final frontier to capture from like you know billions of dollars up to like the trillion dollar Mark is if you issue a stable coin and then you try to get for example as as big as like tether and and like keep growing and and stuff like that um like you could kind of see this Evolution right a was like Hey we're we're not making a lot of money lenders are like just depositing usdc and all this stuff but we are the lending like Market on chain we have the most

distribution for where debt gets created uh if only we could just mint our own money that people could could take out of of a then use as cash um you know that would be that would be 100 times x more more profitable right because all the interest would go go back to the a DA and and everything um obviously it's really hard to launch a stable coin that's the other thing it's like uh you have to know how to do proper stability mechanisms transparency and balance sheet uh risk assessment and people barely know how to do Oracle uh proper Oracle settings and stuff in lending markets so it's extremely lucrative and important area but it's a very very hard uh area to get right

that's why think Lindy and reputation and and brand of a protocol is pretty much the most valuable right like I I would say frax is probably the second after die D is older than than fra a little bit so um they have the most in terms of decentralized uh yield and and like people know like this thing does not get hacked or if it does it's just it's such an old protocol with a good treasury good team behind it um and then same thing with fra now is like the the second most you know reputable decentralized stable coin uh protocol LSD system and all this stuff uh people know we're not going anywhere we're very long-term oriented and so like you know if you see some yield on srax or like

fra ether or something you're the the risk assessment is not like is this is this yield worth potentially getting rugged or like getting hacked to zero and then never seeing my value again or something right it's more like oh is it is it worth the opportunity cost of like somewhere else right and so that's how you build the value that you can actually continue building out your currency Assurance uh protocol they left this part out of the app chain life cycle uh diagram it it it doesn't have the part where it has a fork in the road and it's either turn on a fee or it's launch your own stable coin they just left that out of the to talk to John I need to talk to John Sho who made that

that tweet to be like hey like the the last part is like after you launch the chain you be like I we need to launch stable coin or like LSD or something let's go into these these stability mechanisms and some of these mechanisms that you can pull on fra but actually have far-reaching implications on on on blockchains uh around inside all over uh Beyond fra so like you know fra is in flight on multiple several blocks chains and and all of the uh stability mechanisms all of these algorithmic controls you host on fractal um so talk us through like what happens when you pull a lever on fractal whether it's the Lend or it's it's you know when you pull

one of those levers what is what happens to Frack assets on on these different chains yeah like that's a good question so right now actually since we just launched fraxel a decent amount of them is still on Main but you know things are moving to fraxel uh every week um the way that it works is like you know the the big the big stability mechanisms are you know the credit facility CDP as some people call it on on fraxin which is our endogenous basically system for over collateralized lending uh protocol own liquidity through OS that we actually uh invented kind of in the last uh bull market which is you have assets and you deploy them to like curve RS like Blue

Chip amm places and so people can swap fracks against like you know usdc if that's on the balance sheet or usdp or py USD like we have a good relationship with paxos and PayPal they actually we have an rwa uh system where they they distribute some of the yield back to to the fra protocol um those things living on frax still means that as there's more demand for example on on like for fra on another chain people will want to bridge it you know over there right like people if the people want s fracks or normal fracks they'll have to get it from somewhere right and the most likely Place once everything is on fractal is they have to either mint it or they'll have to buy it on amm like curve is already deployed on fraxel you know

balancers think of deploying other places like raw is a is a new amm on on a fraxel as well so people will actually go to to fraxel to to actually pull these decentralized levers like we don't obviously pull them like I don't have the the keys to actually pull them the whole thing is that there there stability mechanisms and people uh will will pull them themselves because the economics of it uh actually make sense for them to do so and the reverse is true as well if there's not a lot of fra demand or it's shrinking you know people will want to bring it back to fra they get a dollar worth of uh you know collateral that and and orbit and make sure that the fra uh stable coin is at Peg that's why I was saying that the

unique relationship between you know fracks assets and fraxel is that as those currencies grow everywhere so will activity on fraxel so will like liquidity on fraxel so will the the um the basically the desirability to actually build on fraxel because there's all these liquid places and so soon for example we can say as fra grows a lot hey if you're like an rwa system like we're talking to Ando we're talking to Agora um few other you know protocols if you want to be uh backing of fra um because we're a huge stable coin issue natively on frax still we will intake your your asset well actually deploy

protocol and liquidity which is good for them right and so the redemptions and stuff can happen on fra you'll get a lot of usage uh people can build on top of it and so this equation of you know how much fra M2 assets are everywhere else and how much utility tvl liquidity and transactions and and building happens on fra is really cool that it always proportionally kind of follows cool and so kind of as we as we come to a close here we've got this broader vision of what you're calling the singularity and you know we've got some some weeks ahead there's tons of development happening in the majra space in the weeks ahead you guys have some uh l3s launching some

interesting uh applications coming on board what is the The Singularity from here on out um and kind of how do you get there in this new kind of modular road map that you have yeah so I I wrote The Singularity road map and the name is like kind of to to unify all aspects of that we're we were building at FRX into one kind of global Mission uh there's a lot of cool parts of it like one like you said we have this program for the first 23 l3s we will not only uh invest bring protocol and liquidity but also uh additional fractal points grants and and everything but but basically there's a lot of uh unique things that we want to do um as part of this road map another

thing that wasn't actually on the road map that I'll announce here is uh in the next week we're announcing a really huge uh fraxel hackathon um with like probably yeah we we'll see exactly how much but like eight figures of of like prizes and Investments H and everything especially with support from our uh fracks investors and and backers and VCS and so the we want call for l3s for uh daps on fraxel um all of these things and we'll support them with a ton of uh both Investments grants prizes and everything and the idea with that is basically to Kickstart The Singularity road map which is getting frax still to be a a huge L2 um getting the tvl to to

increase as fra assets are are growing on on different chains and then also fostering uh 23 l3s that sounds like a interesting number some like so like the Michael Jordan of of uh l3s but the reason we landed on that number was because um we want to make sure that we support uh the right number and we don't say oh there's going to be thousands of l3s uh on on fra or something because that's not only impersonal but uh you know it doesn't seem like you know people will be like okay I'll consider it later but we want to make sure to work closely with every Builder that's in this uh kind of inaugural cohort and eventually obviously there will hopefully be hundreds and and thousands

in the coming years but uh if you want to work directly with the fra team if you want to build some really cool defi Primitives or like a payments L3 or your own type of experimental L3 and you want to talk incentives investment and and being in one of those uh 23 spots um I think the first two uh is probably taken after they announce it and stuff but um you know there's there's obviously a bunch of spots left but I think by the end of this year in the next couple months uh hopefully most of those will be uh taken so there's a lot of cool stuff coming in in the road map as well as the hackathon that's going to be announced next week love it Sam it's been awesome to see your um progression throughout crypto I mean it's been uh

from from kind of defi to uh different iterations as the ecosystem matured now kind of chain and then now empowering Builders it's like it's almost like your own full circle man um and so excited to to continue to see the growth and appreciate you coming on today and sharing your thoughts on fractal scaling it's always a pleasure thank you guys thanks for having me and uh hopefully be on soon always always fun to chat already looking forward to the next one thanks Sam