Who Are the Borrowers? | Ben Forman

Transcript

the average company in the Russell 2000 has roughly 30 percent of its capital structure in debt and uh the other like two-thirds or seventy percent in inequity so for a bit effectively they finance their business with one dollar of debt for every two dollars of equity and so I think you know in crypto we effectively have a market cap of a little less than a trillion that's completely unlevered it's it's it's a one-dimensional capital structure if you think about you know governance tokens as equity and so it's almost as if crypto markets have not used every tool in their toolkit to

optimize their their cost of capital today [Music] what are we talking to today dude I mean we should be talking the pump with that intro I haven't heard anyone say bang bang um anyways yeah uh today we were talking to also a long time friend of blockworks uh Ben Foreman Ben is uh great like extra advice came from tpg was that tpg on the credit desk I think then was it KKR on KKR then I think tpg then KKR on the credit desk and then left KKR in 20 maybe 18 or 2019 founded parify uh the founder of KKR kind of seeded the fund

Henry crevice and he's just had an incredibly impressive run um and they built like one of the best firms in crypto and this episode was great I think it like tied home tied together everything that we've been talking about like the permission D5 like that the potential there um fixed rate London borrow under collateralized loans like we talked about it all so I thought this was this was one of my favorite episodes of this season I thought it was cool too maybe to even just be if you're Tuning In For the First Time listening to this episode like this is you know where we are kind of in the season right is we we mapped out the death of C5 you know New Renaissance into charging uh over at multi-coin he kind of we connected this thesis of okay A Renewed interest in defy maybe debt detonative markets on

defy with a boom instead of uh Innovations and token distribution so this this you know not only do we get the A Renewed interest in D5 but that could actually lead to a big boom then we talked about specifically the fixed rate unlock right now we only have variable yields in crypto and we talked about what and what the unlock might be in terms of actually getting fixed rates we just did an episode on options right options and how they lock in those fixed rates and then we also talked about Structured Products and uncollateralized lending so where we are in this this current season here is basically like or the next question that we have to ask with Ben and we got so much more that we even bargained for was basically who are going to be the issuers of this fixed rate debt so we got into that question

with him and then he we kind of LED in this very interesting direction of kyc fi and permission D5 on this episode as well so that's kind of where we are in the season and yeah this was we got even more uh more bang for our buck than we bargained for wow do you like that alliteration bang in this episode nice work nice work yeah yeah let's jump in stay on the other side let's jump in see you on the other side folks all right everyone welcome back to another episode of bell curve we have long time friend of block Works Ben Forman I'm joined by Mike ippolito per usual Ben welcome to bell curve thanks excited to have your uh Ben I wanted to actually start we're going to dive really deep

into like who are the borrowers we've been talking all season of bell curve about like under collateralized lending fixed rate lend and borrow and like kind of what the next area of D5 could look like I actually want to start in traditional Capital markets though because you have this credit background coming from KKR and from tpg what do like what are some of the learnings that you've learned from the traditional credit markets that maybe you're that you see in defy you're like oh this clearly is going to exist but it doesn't exist yet I'm just curious to see it to get your take on how you see Credit in capital markets first credit and D5 right now so I think there are a few big things that are missing uh one is term debt and longer maturity debt so most uh most borrowing and Defy is Perpetual

borrowing so rates change block by block and uh you have that doesn't allow you to really like lock in a liability for a long period of time which is a big issue like most most companies in the world if they're investing in a project like they're building a bridge they're building a factory they're building a school that may take years to build and years to generate cash flow to pay them back and so you need long-term liabilities to plan and that just as contacts like Global fixed income markets are roughly 125 trillion dollars and about 80 percent of that have maturities of longer than a year so

certainly like we need longer durations in D5 than we have today and then we also need uh term debt so that's one one major uh one major area among among many others so why why walk us through exactly why that is right because again something that we've touched on in previous episodes is this need to be able to lock certain things and we've got all variable debt encrypted right now options and kind of uh the market for interest rate swaps is how you lock in fixed trades why is the term structure really important to that longer term well I I think that fundamentally people want certainty right like locking in a rate for three months is three months is a long time in crypto land but to the

extent we want to actually connect to the real world we need um we need a longer we need to be able to not have to rely on refinancing our debt after three months because if you borrow for three months when things are good um and that debt comes to maturity you may not be able to refinance and that could ultimately cause you to be insolvent and we actually I mean just recently a few months ago this was top of mind when uh you had kind of three arrows causing contagion across crypto credit markets uh you know if you had an open Term Loan with a desk like genesis or Galaxy or

any of the other big uh lenders they were saying hey please return our capital um but if you had a fixed term debt where they couldn't call call it back you know you could you know rest assured that you know you could buy time to effectively repay your debt and so really that's why that's why it's so important that's why you know the U.S government issues 10-year bonds 30-year bonds it's why most high-yield issuers are issuing five to ten year bonds most municipalities are issuing 10-year plus notes um same with same in the mortgage Market I mean most you know the most common duration on a mortgage is 30 years and uh

most of the fixed rate attempts in D5 are still too short they're still you know okay let's lock in a rate for one month three months six months but that's still far too disconnected from the duration that you see in in traditional credit markets so why is that why do we have such short durations in crypto as opposed to if like there is an equivalent of the Toyota Camry right in financial it's the 30-year fixed rate mortgage in the in the US right Mo that's a super popular Financial product everything encrypt has such short duration why is why is that partly a function of uh just this Market being uh very immature right I mean if you think about it uh

the demand to borrow at long rates maybe hasn't really become relevant until recently I mean part of the reason for that is uh there was really no demand to borrow a long term previously because why issue debt when you could just sell Equity or sell tokens right like any company every company is trying to optimize its capital structure and uh keep its cost of capital as low as possible and it's no different for uh a dow and so when Equity prices are high sell Equity because it's it's you know it's it's it's cheap um but in today's market uh you know with token prices depressed

uh you know if to the extent a company or a dow believes in the equity value or the value of their governance token they wouldn't want to sell it at today's prices and now they'll kind of turn to to to credit as as an alternative I think the other the other issue were rates in defy so you go back a year ago and the risk-free rate on compounds or Ave was high single digits low double digits uh today it's significantly lower but when rates were high single digits low double digits to get someone to lock up capital for five years or ten years the slope of that interest rate curve

uh was going to be was was going to be very Steep and so it it didn't really make sense until this Market environment and that's why I think we we really haven't had a need for it or there wasn't demand for it until until this recent sell-off occurred yeah I I really like that framework of just there there wasn't a demand to to borrow right like you basically had the main use case right for taking out for borrowing and crypto thus far has been really short term is a very Degen type product Market fit right where you're basically leveraging uh either you want to earn like some short-term yield or you wanted to like go long something while maintaining price exposure to the underlying asset but you didn't have the way like a company might think about you

were kind of just getting into this this idea of capital structure right which is I want to borrow at the cheapest cost of capital possible and that's how sovereigns tend to think that's how corporates tend to think so maybe we could kind of get into that use case but I actually love you uh to maybe pull on your KKR background and just give us a little bit of a lesson of capital structure right when people use this phrase like capital structure walk us through what that means and then kind of talk us through the two different forms of financing which are debt and Equity financing yeah so everything in the world requires Capital to build whether it's a company a piece of infrastructure or a protocol or a dow they all require money and the game of Finance is optimizing your cost of capital uh at

the lowest level where you're not over levered uh but you're paying uh the lowest amount possible because why pay more for financial Capital than you need to um it's it sounds obvious so as it relates to companies companies will raise some combination of equity uh convertible notes preferred equity and debt to do whatever they need to do to grow their business and within within debt there's there are a number of different types of debt there's secure debt there's unsecured debt there's senior debt there's mezzanine debt and all of these

different uh stakeholders in a business have a different priority in that company's capital structure and have claims on different parts of the business uh and so this is like really how how the uh the traditional Financial Market works and just as context there's roughly the same amount of publicly issued debt in the world as publicly issued equity uh and I uh the average company in the Russell 2000 has roughly 30 percent of its capital structure in debt and uh the other like two-thirds or seventy percent in in

equity so for effectively they finance their business with one dollar of debt for every two dollars of equity and so I think you know in crypto we effectively have a market cap of a little less than a trillion that's completely unlevered it's it's it's a one-dimensional capital structure if you think about you know governance tokens as equity and so it's almost as if crypto markets have not used every tool in their toolkit to optimize their their cost of capital to date then what like when you look at um I feel like a lot of folks think of debt as like something that maybe a big

Fortune 500 would it uh what what issue and that like startups maybe don't use debt as much but I feel like I actually feel like startups like non-dilutive debt financing is becoming more and more popular even in the startup markets these days why has that not hit crypto yet like why is it why do we have that relationship like basically what is what is missing I guess yeah I think they're you know most defy you know D5 was is two years old most Dows have started in the last year and there's really no reason to issue debt because token prices were expensive so sell tokens um and debt debt would have been expensive uh because defy yields were high but now defy yields are very low so I think that was one one concept I think

the second is uh they're there really haven't been that many teams Building Products in this category so there may be a small handful of teams that are are just now coming to Market with products uh that allowed Dows to to issue uh or debt like instruments uh but you know I I count you know 65 to 70 teams building decentralized perps or decentralized options and you know 50 plus teams building um you know money market style competitors to avian compound and assume similar amount building amms but very few have focused on on this particular category to date

so so I think it's it's a bit of a late mover and then I think the final point is you know we can get into this more but I I think that the what debt looks like in to a dow may be different than what debt looks like to a company and I think to some extent lenders may want to look at look to protocol earnings uh as a source of repayment almost like a royalty right as opposed to just a direct loan that's repaid at maturity so I think there are some design characteristics that need to be sussed out before we really get to product Market fit can we go a little

bit deeper explain what exactly you mean by that yeah so I I just think about you know a typical high-yield bond that let's say you know you have or an investment grade bond that Tesla issues they may issue you know five-year Bond at three percent coupon and every years every year they make an interest payment two lenders and then at the very end of that five-year period in 2027 they repay the principal and those bondholders basically have a generic lean or claim on the assets of the business

and there's you know the CFO of Tesla is stroking the checks every every year assuming it's an annual coupon I think in the D5 space what we may end up seeing is something that looks more like a royalty right where if you think about a dow that's cash flow generative like you know uniswap generating 500 000 of daily earnings or actually maybe uniswap's a bad example because the fee switch is off but let's say sushi uh you know I imagine an instrument where I like let's say sushi sushi is uh X Sushi is generating you know fifty thousand dollars a day of earnings

uh if I were to lend say you know a million dollars to Sushi Dao and be guaranteed block by block that I'm getting repayment along with an interest rate as cash is coming into the Dow uh that would be more palatable for me because I wouldn't have to take risk that a dow has to go through a governance vote to make an interest payment or to refinance debt at maturity and so I think I think for that reason things may look a little bit different um then you know just trusting that a dow will make you you know will make interest payments does that give it a different that's really interesting that you say this because we on one of the previous

interviews in the season we talked to um uh the guys from Maple finance and uh notional finance and Teddy from notional brought up this idea of you know one thing that's very possible in crypto this is straight up not possible in you know tradify is this idea of you know money going towards certain things right you can lock in on a block by block basis for words so I mean that I mean we were actually even talking about about it within the context of okay let's say you issue a loan to a company like block works is gonna take on a loan we'd say hey we're going to use it for like additional Personnel we're going to use it to like fund this conference and maybe we need uh out of some marketing or something like that basically you're when you give give us that money

you're trusting Jason and I to do that uh whereas right now you can actually remove a dimension of that risk and say hey these dollars can only go towards thing X Y and Z and then this is another way to feel even safer as a borrower right where at the end of the loan I don't need to worry about repaying the principal even if things are going well in the business I can actually see those payments start to flow in at a more regular basis which is just really interesting I think yeah absolutely I mean I I also think you could you can structure products that resemble Revenue shares so when block when block works is selling tickets to its next conference you could structure some sort of note where 30 cents of every dollar goes to repay

my Revenue share until I make you know 1.5 times my money so I think the design space for what you can do uh you know with crypto Structured Products is obviously much much wider much broader than what you could do easily in Trad fi and um I I think that's actually like pretty exciting yeah which gets into the second part of the programmable loan which is like not only can you program into the smart contract that you would basically be using protocol revenues to spit off and pay back the loan but you can program it on the other side so that hey I'm taking out a loan and I'm only using it to to spend on these things right so it's like

both sides of the loan are programmable right it's really interesting yeah absolutely I mean the other the other interesting feature set that I don't think has been talked about a lot are loan Covenants so most loans have a reporting covenants by a company so if their revenue or their ebitda drops below a certain level the loan is in default and so there could be you know we could see features where these loans reference on-chain data whether it's tvl or um you know volume or protocol earnings and to the extent that certain metrics aren't hit

um you know the loan would be in default and would accelerate in some way so I think there are other you know the programmability kind of comes in comes into top of is top of Mind here relative to traditional Finance like everything is reported via paper and financial statements on a 45-day lag to quarter end whereas here you know you basically get real-time monitoring and Loan covenants which should reduce risk at the end of the day um I'm actually Imagining the playground that that opens up to like just the Arbitrage and the crazy strategies that are gonna get run if if this becomes widely adopted right like

one of my favorite you know Matt Levine breaks this down like very normal language right but there was a whole Trend a little while ago basically of hedge funds using credit default swaps right basically to say hey uh wink wink nudge nudge we want you to actually go into breach on this Covenant because we have the other side of a credit default swap right it will basically kick back to you whatever we get from the insurance or the credit default Swap and actually you could make sort of an argument that worked out well for everyone because the financing was actually cheaper for the company that got like they would get more from their Kickback from the hedge fund than they would have from uh you know whatever you know sort of debt agreement they had in place before but it just the the level I

I'm just interested to see if we do open up this design space in D5 just how creative this stuff really can get because it'll be nuts I think um Let me let me ask so so Ben do you think that there will be like a protocol that is built that does not exist yet that basically is like a lone Covenant protocol and you can put in place like it helps you facilitate these loans and like some covenants that might exist would be like the debt yield Ratio or like the dscr rate like dscr or like LTV or like the LTC like just different covenants and it's all just programmable and it goes through this protocol I I yeah exactly I I think that you know we'll have some Covenant light debt and we'll have some debt that has covenants uh but I imagine you know and I imagine

you know we're going to be we may be living in a world where you know we're talking about the relative value between you know the 2032 uniswap 10 bonds or the you know compound 2028 converts and one may have covenants and one may not and so I I think that uh they'll be they'll be traditional credit and analysis as we see like different types of products come with different types of covenants and different types of structural protections yeah Ben can we just storytell for a second because you guys actually underwrote one of the first like Dao Dow issued debt things with uh with uh who was it rivendow via Porter finance

and I think it was your credit fund that underwrote that on-chain convertible note can you just like tell us some I don't know if that was the first one that ever happened but can you just tell us some like learnings and maybe the story definitely so it's to our knowledge it's the first one that's that's ever happened and I think it is somewhat of a window into the future so as context uh rivet ribbon Dow decentralized options protocol uh had uh you know had a desire to borrow money and in their treasury they only had the rbn tokens which were not eligible collateral on Ave or compound and so they used uh Porter Finance which this decentralized Bond issuance protocol

uh to do that and so effectively what the deal was is they put 15 million dollars of rbn tokens into a contract as collateral and they borrowed three million dollars of stable coins against it and the uh the rate uh that the stable coins uh got paid via this Bond was set via an auction so there were a number of participants bidding and it was structured as a Dutch auction ultimately the way this Bond was structured is it was a six-month Bond and it was issued at 97 cents it was a zero coupon Bond so you effectively make

three points over six months so six roughly six to seven percent as you include compounding and you had a claim on this rbn collateral and now one of the interesting things here and actually this touches on an issue for Dows when it comes to borrowing is they don't want to wake up overnight you know overnight and find out that they got liquidated uh so what was interesting about this ribbondow bond is there were no liquidation so let's say the 15 million of collateral ends up becoming two million dollars like it goes down you know 85 percent well you have a three million dollar Bond and you have 2

million of collateral that Bond may start to trade at 60 70 cents on the dollar at an implied recovery value but there was no there were no liquidations associated with that Bond so I think that's actually quite quite a good user experience for Dows to not have to worry about getting getting liquidated and be able to use you know this you know a bespoke collateral type that's not available on compound and Ave so anyway this this Bond was fully subscribed we did participate um and uh you know what was interesting is or is ultimately the quarter Finance ended up shutting down and ribbon repaid its debt a bit earlier than

um than planned but the mechanics around the bond issuance was was fascinating they actually worked really well and I think it was quite practical for for all parties you said it might be a glimpse into the future why do you why do you think that I I think that other Dows are in similar position to to ribbon um they have governance tokens in their Treasury uh that you know they can't easily borrow against they can't sign a contract with an OTC desk because they have no manifestation in like in the real world that was entering into contracts is is not straightforward and so they're really forced on chain to borrow

and uh a product similar to importer used I think is was was quite effective I mean they were happy with it I think the participants in the round were happy with it so uh I I imagine other kind of small and mid-capped owls will will have the same same desire and need down down the line the I remember thinking one because one of the you know I think the risks that we're exploring in this thesis that we're talking about this season is just like when this actually is going to like a lot of these ideas like make a lot of sense but just when are they gonna happen basically and when we talk about you know debt financing for Dao's the it's basically been a unanimous like yes we think that this is going to happen at some point but the question is when is

it going to happen and I think in addition to like I want to get into regulation in a minute here because I think there's a different regulatory implication when we're talking about debt versus like selling tokens um which I think is important to get into but also the reason why it didn't necessarily make sense for Dows to issue debt is because what you want if you're issuing debt is like steady predictable cash flows right so that's still a decent headwind for issuing debt but one of the reasons why maybe it could happen sooner than we all think is because I think like a lot of the founders that I've spoken to and I assume probably you have a similar experience is that like the yield farming method of growth worked really well on the way up but it really sucks on the way down because

then you're basically relying on deluding yourself to generate growth and as the token fault like when tokens are falling people just sell the tokens which means you need to give more and more of your tokens away it's just really negative enforcing feedback loop and when I looked at the ribbon thing I thought it was a really elegant solution because you basically looked at your Treasury and it was a really easy way to get liquidity on you know what you had in your treasury as opposed to like this Doom Loop of just giving rewards away so that that's how I kind of saw I don't know was that like basically the motivation or what do you think yeah I think I think exactly that I mean their their token you know had traded down significantly they didn't want to use the RB they didn't want to sell more

of the rbn token right if they didn't need to yeah exactly um can you um walk us through like I know regulation is a big part of this right debt uh like a lot of what there's a lot of gray area still to be fleshed out in what really constitutes a security right on the token side that's kind of being deliberated and that's using the Howie test I think maybe for tokens versus uh for debt like traditional debt instruments like we're talking about it might be a little bit more kind of black and white walk us through like what are some of the regulatory implications of credit or debt being issued on blockchains I mean I I think that's spot on I think I think if a Dao is issuing a bond or convert uh that's a security on it almost

unambiguously and uh you know I happen to be a a kind of permissioned D5 Bull and I think permissioned pools are really the way of the future so I you know I ultimately think that as you know there will be kind of permissionless debt issuance by Dao some Dows will geofence you know non you know us users Etc but I think the majority of debt issuance on chain will take the form of permissioned pools Ben is that why um like Porter Finance I think Jordan ended up shutting did he shut down Porter Finance or at least they shut down their bond issuance platform like how much of that was because the regulatory side of things

versus the competitive nature of like rates offered in tradpy right now uh versus like just the lack of institutional fixed income it was it was mostly a regulatory uh consideration given you know if you're if you're running a platform to you know allow debt issuance on chain you're effectively acting as a broker-dealer and there are a number of other like regulatory implications around that I think the other the other kind of thought at least from from Jordan was that the market size at least today is is not enormous uh in that you know if you look at uh who would be issuing these bonds

today you know it's not like we're gonna have Bitcoin bonds or ethereum bonds or or layer one Bond it's going to be mostly at the application layer it's going to be mostly bonds issued by Dows and the total market for governance tokens today is 50 to 100 billion so you assume that let's say it's 100 billion and you assume that for every two dollars of evacu of you know governance token there's one dollar of debt that's 50 billion of debt and if they're taking a small cut of issuance and even if they're capturing 100 of the market you have to kind of squint to really see that being a home run outcome uh so that I think was the other was the

other was the other factor in kind of the decision what do you what do you think if you had to guess the size of let's say it's 10 to 15 years from now what do you think the market size of or like activity in provision defy versus permissionless D5 like how do you see that shaking out I I think permissioned D5 is going to be much bigger like orders of magnitude bigger um I Ben Ben can you define permission D5 versus like permissionless and then and then I'd cut you off there no definitely I mean look I I think that I I Define permissioned defy as uh you know everyone interacting with a pool or

contract uh has been has gone through kyc AML and effectively has a compliance you know uh credentials in their wallet that you know proves that their uh credited investor qualified purchaser um and has other metadata associated with where they live um and and their activity on chain so I you know I I kind of Imagine a state of the world where you know JP Morgan is going to Fork compound and say hey only people that have you know certain nft in their wallet can interact with with our money market with the JPMorgan money market and uh that that's kind of how I Define permissioned defy uh and there's some

stuff that's like quasi-permancialist quasi-permissioned but that's you know what I just mentioned is probably the most the most extreme view of it huh so do you think that there will be like almost the user flow here is uh there'll be a an on-chain kyc AML provider and you'll go through that they'll basically drop a kyc AML like token in your wallet if you have the token in your wallet you'll be able to access the kyc AML division exactly there are maybe five to ten teams today building that you know compliance passport so to speak and the way I see it is you know maybe there's one pool that says only only people only qualified purchasers from the US and the

EU can interact with this uniswap pool and maybe there's another one that's you know only for accredited investors or eligible contract participants or you have to have a certain net worth on chain and so I think ultimately you know you'll you'll have your credentials in your wallet and then you'll be able to interact openly with these with contracts and in the permissioned uh D5 space hmm okay ask a secondary question there which is um will D5 platforms have the relationships with the users or will C5 and like fintech and like the jpmorgans of the world have the real estate I think C5 will will and the fintechs will have relationships directly with

the users and uh I think about it almost as like a d to B to C distribution model so doubt a business to consumer uh because the way I look at it is and maybe you know uh curious if you guys how you guys see it as well but there have really only been like four to five million people unique wallets that have interacted with defy to date and I think it's a relatively self-selecting group that wants to go through the rigmarole of storing private keys and understanding gas prices and um you know understanding bonding curves and so on and so forth I I think that the vast I think C5 will effectively be user capture for all of D5 uh and um ultimately like will be sophisticated

enough to make the risk management decisions so someone at you know uh revolut will decide which yearn Vault to deposit Capital into uh and the user themselves will be somewhat um shielded from a lot of the risk management decision making now individual users that want to go through the process of interacting directly with Dows you know are more than you know are more than welcome to or more than able to I don't think that's going to change but I just think that that uh you know extra user capture step is going to ultimately be where the majority of uh users come into defy hmm what do you think um maybe if we can return to the subject

of like debt just for a second like the analog and try advise you that kind of gets broken up into three different groups right there's that at the consumer level there's debt at the corporate level and then there's debt at kind of The Sovereign level um so maybe we could like I don't know how useful that analog relay is going to be because maybe maybe at the at the consumer level right that's still gonna just be get done through although honestly I do think that's an opportunity for defects it's so hard to get debt from like your bank like to get a loan from your bank it just sucks and mostly that's really credit card debt when people are measuring Consumer Debt but um but uh one thing I'd love to get your your perspective on is where yield is generated in the form maybe of

actually on on the L1 level like around eth kind of staking as a as just a big source of yield like in in traditional Capital markets like the the Perma the the the enormous generative yield really is government's desire to borrow right and really it's like the US government is like the biggest uh borrower out there so so like there's a really interesting opportunity for like yield generation around like e-staking um I'd be curious to see like what kind of opportunity like I don't know how much you are looking into that but how much is that an area of opportunity in terms of generating yield yeah look I I think it's a huge opportunity I mean at a as a 200 billion dollar asset is going to be spitting off or is spitting off now 10 to 20 billion dollars a year of staking rewards that

is a massive amount of wealth being distributed every year uh so uh I I think the ability to lock in a fixed rate uh and swap from you know floating to fixed on each staking is going to ultimately be one of the biggest you know I think one of the biggest Financial products in D5 I think you're gonna be able to do it you know through C5 and also through D5 uh so if you have you know let's say you have steth or CBE you'll ultimately be able to sell off your future staking yield or lock-in rate I mean one one actually example of this is you know let's say you have a hundred dollars worth of of

ethereum to keep the math simple so you know you you would be expecting to earn let's say like five dollars in year one four dollars in year two this future cash flow stream um you know imagine being able to uh sell off that cash flow stream and Pull It Forward to today or locking it or locking in a fixed rate I think there's going to be a ton of demand for that uh you know over the next couple of years you're essentially securitizing the eats taking yields derivatives markets on the securitization of the sticky note crazy derivative marketing because once you have that cash flow stream you know someone may be okay taking risk on like

the first three dollars a year but anything above that you know maybe you sell that to a more Junior tranche and so I think you're going to see basically this yield gets securitized and bundled and and it's not only the staking yield but it'll also be you know you can bifurcate and sell off just Mev or or just fees or just uh just the core um uh just the core uh yield itself so you can even get more great more granular is what I imagine this world is going to ultimately look like are we just talking about building a yield curve is this what we're describing here like a yield curve in crypto I think to I think to to some extent

yeah I think there's I think this will be ultimately like The Benchmark rate for ethereum uh but I think this is very separate from the dollar borrowing Market yeah because I I don't know that many Dows will ultimately want to borrow eth uh because ultimately if you're borrowing an asset you're shorted and most Dallas Building or ostensibly bullish on eth and so I think like the liabilities will still ultimately be denominated in in dollars and this like interest rate swap Market on ethereum will come down to institutions and holders of eth ultimately just wanting to lock in raids is my sense that's a really interesting point

um do you do you you were kind of talking about some of the different ways that you could lock in you could separate like fees versus like Mev do you have do you have an opinion on what the opportunity is uh and what would almost be because the way that I would almost think about it is not even like okay if I have a hundred dollars worth of East like this is the yield that I could get like let's say you run a certain number of validators basically I would almost price it on like the yield that you could get on base basically the amount of Mev that could be extracted from basically the block space that you have access to or the theoretical block space that you would be you know taking like does that I mean how do you kind of suss out different opportunities of like

the different categories of maybe you could just focus on Meb because that's it seems like that's a super important category yeah I mean it's it's kind of like a little bit it's a little bit esoteric in the sense that um you know you may want to the way I think about it is like you may just not want to make if you're a validator you may not want to make a bet on on what you'll earn from Mev you know over the next 10 years like you may just not want to play that game so you may want to basically sell that future Revenue stream to someone who does want to play that game um you may just want certainty around that so you can pull effectively pull forward those cash flows and uh you know and and kind of like bifurcate and and

disaggregate these cash flows and send Mev to someone else so I think that a lot of these products are probably going to get built like on top of Lido or on top of other synthetic staking derivatives maybe by the Lido team Maybe by Maybe by others in the space and then to a certain extent in in C5 hmm what if if you had to guess um at the like we've covered kind of two big categories then like yield that gets pulled from from basically from the ethereum protocol or like let's say other layer ones right uh we've talked about kind of dows you know Dao's issuing that as another major source of debt do you see are there any other like big buckets of uh debt or potential borrowers or sources of yield that maybe we haven't covered

so I back on like the debt borrowing concept and the concept of kind of you know back to the port of Finance example there's no reason that you know people or companies couldn't you know issue debt on chain in the same way that Porter did so if you have a basket of nfts or or governance tokens that don't necessarily like have or aren't marginal on chain on the major money markets you know you could pledge them to a contract on that looks similar to Porter and set your max rate and your desired maturity and borrow against them so I mean it is possible that there will be some consumer borrowing on chain uh you know

outside of compound and Ave again because some people don't have the right collateral or may just want to borrow for five-year term so I I think that that will actually be a big bucket and then you know in the in the permissioned world you may see you know you may see companies or crypto with crypto related companies or companies outside of the crypto space Also also use architecture like that um do you think in terms of like what might hit first like just use the example of let's say coinbase right coinbase issued you know a billion and a half dollars worth of debt I forget when exactly sometime in the last year I think it's probably in 2021 um you know they chose to just tap

Capital markets right like regular debt Capital markets basically to get that I know there wasn't the counter factual right there wasn't a way that they could have done that on chain or whatever but one way that I kind of think about like if you if you're set up as a company like you're a C Corp and you're domiciled in the US capital markets are like pretty efficient for you basically um whereas for a Dao I don't even think you have the option right like just look at the way that the maker has structured deals with like Huntington Valley Bank or you know there's a deal out there with coinbase institutional it's a whole part of that proposal that's just dedicated to how maker The Entity as a Dao is going to interact with coinbase institutional like let alone you know like JP Morgan or something right so I it just kind of

seems to me that in the in the immediate term doused I mean maybe just from the the mere fact that they have a weird organizational structure like they would tap a crypto native source of debt rather than regular Capital markets I I think yeah I think the first the first you know cohort of debt issuers or Dallas exactly exactly for the reason you you just mentioned Ben can I get your can I get your take on the Huntington Valley Bank thing actually and just like make her and I'm just curious to this is now uh kind of getting away from the uh thesis of the show per se but I just really want to get your take on maker and like the end game and there because they're talking a lot about real world assets which obviously increase the Tam of maker but like I just want to get your take on the

whole thing yeah definitely and congrats by the way on becoming a delegate I think we we voted for you so um uh the okay so my overall view is like the end game proposed by roon is way too complex and complexity is like the death of most things um particularly in crypto I I think you know of the two paths that maker down could go on you know one being uh Phoenix stance like the most decentralized like all all kind of permissionless collateral uh no no you know the max censorship resistance from any state actor getting rid of usdc as quickly as possible like if that's path one and then path two is you know like kind of giving a bear hug to Trad fine

in the real world and doing stuff like Huntington Valley Bank and this this coinbase uh MIP um my view is they're actually both interesting but doing a combination of the two is is the worst possible path forward um it's one of those scenarios where if I could own a token in in those two versions of maker Dow I think they both have a reasonable chance to build value and create something interesting but we can't right because you can't Fork die easily you can't Fork those Network effects and so my sense is if I had to pick one I'm of the mind that uh I would pick the the route of uh going full bore

into real world assets and just managing risk around it so managing counterparty risk managing default risk but um I think that that is ultimately you know a much bigger Tam to to Chase does the does the biggest risk to that in your mind like in bear hugging the real world assets basically uh does the biggest risk there seem like to use because that uh census resistance because I feel like that's like what everyone on the forums are talking about or does the or is the bigger risk really like the inability to basically assess the risk of uh you know like a hundred million dollar pool from a traditional

lender yeah I think that there is you know when you start interacting with the real world I think when things don't go well and you have to enforce your rights and remedies as a lender as a creditor it's not clear like exactly what that looks like or how a bankruptcy judge would treat your claim uh and most of these structural setups around real world assets are incredibly complex so I I think that that is a risk uh and I also you know I I think the the the the risk that was you know triggered this whole shift in the community the tornado cash sanctions in my mind

uh are less of like that doesn't feel like as likely of a risk that all of a sudden you know the uh all the usdc in Maker Now is going to be Frozen and dye's going to be impaired um ultimately my sense is that Regulators like I mean that would be a big you know consumers would get hurt consumers will die I think there would be more of an orderly unwind or um you know some other scenario but I I ultimately think it's more about hey how do we as lenders because that's ultimately what maker dad is It's A lender to the to d3m and other real world assets how do how does maker now actually like enforce its its rights and

remedies because that's it's it's like my view is maker Dao's kind of secret weapon is it has the lowest cost of capital of any lender you know out there because it's just software it costs nothing to Mint more die um so it should have a structural advantage over over other Capital sources and so I think like actually you know capitalizing on that requires being able to go after borrowers that don't repay and that's that's the disconnect in my mind what do you think uh on that on that maker that that let's talk about the coinbase and coin shares issued their own proposal as well for basically how to you know leverage assets that are sitting in the PSM so one you know how much of a headwind do you see it being

that because like if you rewind to one year ago everyone was talking about yields and crypto these really high yields in crypto that's going to be a trojan horse that's going to bring assets into our space now assets in or yields and Trad fire creeping up and are actually you know above where they are in crypto and it looks like they're going to stay that way as long as inflation keeps doing what it's doing it's doing do you view that as a headwind or are other companies basically like maker are going to be like hey we actually have a decent amount on our balance sheet here we actually want to import some of those yields over from tradfine they'll view it as an opportunity yeah I I think that it's um I think that could be an opportunity because I mean the way I look at like

makers business model is they can mint at zero percent and lend it lend out that Capital something greater than zero percent and that's ultimately that spread is there is their earnings um it has it's been very interesting this year to see defy yields go from having a massive premium to Trad five to now trading at a discount uh so I I think that that's been one of the drivers like in maker like for maker Dow to actually like reach to to higher sources of yield because putting capital on Ave and earning 50 bips I think is is less appealing um and so that's I think ultimately I I view it as an opportunity if we can you

know I think makers should be able to thrive in an environment where you know 10-year yields are approaching four percent two-year yields are at four percent I mean that is like a great environment to be a bank what what do you think I mean maybe just to like you know uh sort of wind down with just asking you some of the central questions of this season which is you know how big of an unlock is the ability to borrow lend at a fixed rate in crypto right we've got you know probably V1 of a of a you know an interest rate Market which is you've got pretty good access like variable rate type lending which is good in some situations but I think we outlined even earlier in this episode about what the logical limits of that are let's say we got widespread the

widespread ability to borrow lend at a fixed rate how big of an unlock is that from a credit perspective for crypto I I think it's I think it's um and I think it's enormous uh I my sense is you know it's uh it's the next it could be the next big unlock in the space I think you know kind of drawing an analogy to tradify um to public companies they tend to operate with you know 20 to 30 percent of their capital structure and debt uh where so if we kind of draw that analogy to crypto I mean we're talking about tens of billions of dollars of debt issuance on chain and that doesn't really speak to

um the growth that we expect to see in the space going forward and uh non-cryptonative debt issuance so C5 players or traffic players or or consumers uh you know borrowing using um using debt on chain so I I think it's you know I I think it's it's a huge opportunity and that just makes more sense on chain in a lot of ways because you avoid you know these Mass 300 Page credit agreements and bond indentures the cost of issuance is a lot lower um versus kind of going through investment Banks and uh and clearing houses and also I mean one of the big in finance the only real departments

that have grown at banks are uh compliance and operations uh head counts are generally moved lower in all other parts of financial institutions and within operations a lot of it's just settling you know calculating accrued interest settling um settling trades and uh you know bank loans can take 20 days to settle if you're buying a loan from someone so there's just this huge unlock with putting credit you know with tokenizing credit interest can accrue you know natively in the assets similar to C tokens uh and uh you you see there's no calculation required for interest and you have instant settlement and you you know eliminate all the legal docs and

all the issuance costs it can all move on chain and you know you have reduced bookkeeping you have better transparency so as I think about real world assets and as I think about uh you know I think a debt is the most obvious place to start uh it makes it just makes a heck of a lot of sense it's almost like leap frogging what we have in uh you know in in Trad five today do you think um we you know a lot of the the Booms that we've seen in crypto are either directly catalyzed by or coincide with some sort of innovation in token distribution so that in 2017 that was icos right you basically instead of

having to go out around and bootstrap this network of miners right to validate your network they were like oh we're just going to sell pre-mined coins that was a big innovation and we kind of saw this enormous uh you know boom back then then there was like the binance there was like the launch pad phase which was hey you can actually just launch this you know in a you know regulatory compliant way like directly on our exchanges until you'll have access to distribution that was another big thing then there was yield farming which is hey just come Park your liquidity here you'll get you know token X in return so these like Innovations in uh in distribution um and that you know to your point if you consider governance token Equity these are Innovations in equity financing so but in in our Trad fog our

Trad fi analog a lot of the times like these booms like 2008 which is way too big of a boom that was catalyzed by an innovation in debt financing which was taking a bunch of mortgages you know chopping them all up and then serving them you know to different you know you're diversifying the packet of mortgages and then you could sell them to a whole bunch of different investors you could magic away risk um and then it goes back all the way like Milken kind of did it with junk Bonds in the 19 but you can go back in history and see these like debt sort of booms so I guess my question to you is do you ever see like let's say we do get this uh you know fixed income unlock uh and Dows or whoever it is are able to issue debt Capital markets in a crypto native

way way more easily all these benefits get get realized you ever see that catalyzing you know a potential Bull Run in in crypto or being a part of that story yeah wow I mean that's that's a really interesting like framework uh I I think it's I think it's um you know in some ways I don't know if this catalyzes the next unlock in crypto but it will come at some point uh because it's only natural for uh Dows which are effectively you know uh companies on the blockchain to want to you know pay the least amount they need for for financial Capital so it doesn't make like from first principles I think being in having an all Equity or all governance token

capital structure and not issuing any debt uh is is not optimized and from a technical standpoint there there's really no reason that uh debt issuance can exist I mean it draws on mechanics that already you know are out there in defy so I I you know it's a really interesting thought that could this catalyze the next bull market um I think it's possible uh I think the product will exist and it's just a matter of um it's just a matter of like when when will this when will this come into play you know one thing I'm not sure how necessary you view this to maybe uh realize that that Vision but you know a lot of the

there have been at various different times of financial markets people that were very comfortable taking an enormous amount of risk in crypto our version of that is like what you'd call like Degen right people just aped into these Farms no understanding you know they would like kind of talk to a buddy like hey is this like legit and then you go put a bunch of capital work and try to like Farm the yields before it rugged uh and that is and honestly like some some pretty institutional players have made a lot of money doing that um you know you know a lot of these names but if you go back in time right there was another form of risk that seemed really crazy at the time which was basically what like soroson druckenbilly used to do I mean people didn't understand that at one point like

leveraging up and then taking bets against entities as big as the bank of England right or whatever when they broke the bank of England and there were it was a different type of like Savage out there in the market who was willing to lever up take huge positions in really liquid markets that's just a different type of risk taker I wonder do you do you think we need kind of a different to your your idea of product Market fit I feel like in crypto you're never gonna get it right unless you allow for like how are speculators gonna make money off this and what it seems to me is we need a different type of Speculator one that almost Harkens back to those like big levered up speculators and debt markets do you know what I'm saying yeah absolutely I mean look like I I

think that you know there's a hot ball of capital and stable coins that's hunting every day for the highest yield and it's that's it's an incredibly competitive zero-sum uh Endeavor and so if there is uh if there is a dow issue debt that uh from a risk-adjusted standpoint uh is attractive and it has has a attractive interest rate and attractive structure like Capital will buy that like I think that the world loves yield and like we learned that in the past cycle in crypto that a lot of the yield was just denominated in governance tokens but the World Loves Us dollar denominated yield and I think a

lot of the existing a lot of the existing stable coin holders are who have stable coins on chain and are hunting for that would love to buy you know uh you know a uniswap bond or a compound Bond or or maker Dow bond which was also something that was you know recently thrown out in the Forum so I think it's going to come from existing Capital but then you know on top of that I I do sense that institutions are not going to be able to resist uh uh you know um like some of these like great risk-adjusted returns you know the porter Finance uh Bond was 500 collateralized for six months you can kind of you can

effectively price uh the probability of default based on the implied volatility of the rbn token and you know my sense is it was pretty attractive at least that was a conclusion that we came to I imagine many others in traffic are going to come to that conclusion because it's actually a different bet you know investing in the uni governance token and building a thesis that token price go up is is is like a very different orthogonal idea to like will uniswap generate enough cash flow in the next 30 days to repay me so I can earn an eight percent return like it's it's much it's you don't have to believe in the growth

of crypto markets to believe that you know a a properly structured uh product like that can make you money and so that's where I think you know you maybe start to see these crossover funds or credit funds Ben do you think that that is the um I mean we're always looking for the institutional unlock right but like one thing that you haven't seen as quickly as people maybe like every year there's always like oh the institutions are coming right and like obviously some institutions have come in but like maybe not that quickly one of the reasons might be because like they're just kind of taking potshot bets or they don't feel good about taking potshot bets on like whether or not the uni tokens going up but if really this just comes down to a model unlike Uni's cash flow and

everything's entirely transparent you could see the credit institutions uh actually come in faster than the like the equity focused institutions I'm curious if you think that that is how things could play out yeah it's funny you ask because I a couple recent conversations I've had with institutions uh credit funds in the space that are you know looking to I mean they they started these initiatives internally last year when yields were higher but they were saying hey can we lend to a dow how do we lend to a dollar how do we lend to a Proto protocol I'm like look it's it's not possible because you're going to want to sign a credit agreement there's no one working for the Dow that can necessarily be a signatory or it's

complex and you're not going to really be able to easily do kyc AML so I know there is there is capital that's you know looking to access fixed income like returns in crypto uh because I've seen them floating around the space now is a question of uh uh how big that I mean I think there's you know there's a ton of capital in private credit funds that are hunting for yield and there I think it will be kind of proving out uh like default rates and what you can earn on these products initially but then I think and I think with most things in crypto retail like the first movers are retail investors so

I think it's going to be stable coin holders first and then maybe once you see a little bit more of a proven track record you see default rates you see some Dows start to repay their loans unless you new debt then I think you start to attract attract the institutions it's almost like in the same way that some of the earliest adopters of crypto on an Institutional standpoint were FX Traders because their account is like I don't really care what the underlying is like I just care about you know extracting spreads or whatever I feel like this this is maybe the next step of that right which is like I don't need to believe that you know XYZ is the protocol the future like I just need to be able to underwrite that I'm gonna get my principal back and I that could be interesting you know right yeah that's a

good point and you know like what else is I mean stable coins are bonds like if you own usdc you're loaning money to Circle at zero percent right and you know you're taking you know you're taking their counterparty risk and same with tether and same with the USD and so yeah and a lot of Institutions hold stable coins today and so if you're willing to hold the Fiat back stable coin at zero percent uh why wouldn't you be willing to buy a Fiat denominated Bond at something greater than that now there's like liquidity and implied default risk but it's less of a jump than maybe it's not as big of a jump as as uh you know we may think it is yeah well yeah it's I I wonder even at the current time like

even even the maker proposal for between coinbase uh the coinbase like really made me think because I it took me a little while to dig into like how are they able to not unwrap usdc for that to work and then it was like okay well there's a there's Center the Consortium and they have this Revenue share agreement and then it depends on where the usdc is custody and there's some sort of rev split so basically this is more of like coinbase sharing rewards that they were already getting with maker and that's why they could keep it on the but it just made me think you know it kind of it's like what circles really generating a staggering amount of money um on this and I have to imagine like people are looking at that and being like wait a second dude like I want to

get in on this you know I wonder how many competitors there are either realizing this or or cropping up their own Solutions at the current time because yeah I don't think I don't think um it's they're going to be allowed to just own this use case as the Blue Chip stable definitely but we'll see yeah like if if we used like cusdc or some rebasing stablecoin as as our stable coin like and everyone's settled in that I think that would probably make more sense because uh like it would allow users to recapture more of that yield but I think there's such like a shelling point and so much inertia around just using usdc zero percent usdc you know unwrapped usdc as as like kind of the medium of

exchange and D5 that maybe that never changes and like in the meantime circles making or an absolute Center the center JV is making an absolute absolute killing yeah it's uh it's still the the biggest business is in crypto are the ones that move assets from The Real World into crypto and it like was exchanges and then in a way that's really what Circle does they import assets which are dollars from The Real World into crypto so I mean it's undefeated uh Ben this has been just a ton of fun my man uh seriously given us a lot to think about um I gotta plug you at purified like if folks want to figure out more about like you and what you do purify or follow you or anything like what's the best way to

do it so I'm unique in the space and that I'm read only on Twitter uh so you can find me I'll give you my email address uh ben.foreman at purify.com you can follow us on Twitter why don't you have a Twitter or I know you do have a Twitter but like you're read only you know the KKR way just says I don't know it's a good life I you know I just like I've just kept on putting off signing up for it and you know I uh I don't know I I don't know maybe

well yeah well yeah this was a blast I got what Mike said thanks thanks again for coming on Ben yeah thanks a lot for for having me on really appreciate it it's just fun cheers [Music] all right big interview that was a really good one with Ben that was that was that's a that's just one of my favorite people he's like very articulate and very uh very thoughtful thinker on where d5's headed and I feel like I like thoughtful thinkers I like thoughtful thinkers you know the thoughtful thinkers we like them yeah a lot of unthawful thinkers I'll tell you like that like yourself I'm stuck with you every day so somehow I've been able to deal with it so you know what

Ben Ben deserves an extra shout out because I ran you know this thesis by a bunch of people and he was really helpful in the beginning uh you know just like helping sound all of this out and I think it came through one I think one of the reasons I like this interview is that it just brought together in a supernatural way a whole bunch of different themes you know that we that we've been talking about um here's what I thought was cool from this episode is uh is the aspect of programmability on a loan from from before uh the programmability on both sides of the loan so the programmability in terms of having a smart smart contract basically be able to be alone using a smart contract against the protocol's revenue that's like before

the loan happens basically um and like that's a really interesting way to structure it and then after a loan or like on the other side of the loan I guess I would call it uh the ability to basically program into the loan um like you can only use it for like these three things which we talked about on two episodes ago right with Teddy and with Sid um so I think like I don't know sometimes it's easy to lose track of like what what really like how crazy it is how crazy these smart contracts are and how how cool it is like what what we're building here and um just this idea of like being able to program all the stuff into the smart contract uh and into the loan makes it quite interesting I think it it brings it back to also Teddy's kind of idea that a lot of this is about

Capital efficiency because what you're basically doing is removing layers of risk and it's much better from the standpoint of a borrower like try to try to think of yourself in a new it when the Overton window has shifted towards where bar once you lend someone Capital you're used to just getting a programmatic stream of income based on Top Line Sales instead of oh yeah you get like paid back in increments of like you know every month or every quarter and then you have no transparency into the process other than whether or not your income comes and then at the end you get your principal back it just yeah I mean to me it feels very obvious it will feel very obvious as well once that Overton window shifts

the the pure transparency that that de5 gives you and what that should lead to is a your underwriting less risk so you it should be more Capital efficient in general yeah what did you think of that idea near the end talking about maybe it maybe it's not the Institutional Investor of equities who comes in and basically buys up our bags and prices go up that's why everyone's excited about the institutions coming in but really it might be the credit folks the the institutional credit side of things who just looks at this and says I can underwrite this what did you think of that I really I really like that idea because then you need P you need p i I like the idea of you get onboarded to crypto yeah some people are like these Believers and

missionaries but oftentimes I think it's a much better incentive structure if you can find someone you know a group of people who find a way to make money in this space especially in the beginning before you have time to get bought in and like really integrate yourself in the community so I think there was a reason like we kind of talked about why FX Traders adopted crypto very early because they didn't get all these they get all ranged up on yeah this looks so different and weird they were just like I understand this looks like a market that I'm familiar with and I know that I can make money here and I think in the same way that you know debt investors are just like I know how to underwrite risk so underwriting risk in Market X is not that different from underwriting risk and Market Y at least once I have

my framework so yeah I thought that was extremely interesting I've been thinking about this idea recently of um people only come into crypto once they see something that's very recognizable to to them and they're like they already have a mental model for it and they're like oh like oh this looks like that thing that I know okay now I can come in right and so it's uh you know you saw it with the FX Traders like you mentioned like I'll use you as an example I would remember look we're gonna talk about crypto and then you're like I mean this is the you know you fell for the wrong thing I will say but like you were like oh like oh like Enterprises putting nurse their supply chains oh I get this okay like oh okay I'm coming in and then and then you get

pulled in and um I just think that that is like how everyone gets pulled in and like you just you need the thing like artists and like crypto stuff and then they saw nfts they're like oh I like I see this okay and um I think the credit folks will get pulled in when this stuff the institutional credit folks will get pulled in when they can see this be like oh like that model and like underwriting looks like something that I understand okay I'm coming in yeah someone I think it was probably Raul Paul who said this on something he's like there's no Silver Bullet for what works with everyone I mean we learned this right with the thesis of block Works in general like it's not really a language problem it's just you got to get the ideas out there there have to be enough good ideas and someone

I I agree exactly with what you just described they will say oh this thing is kind of like this other thing that I know like let me dig in a little bit and oftentimes you can be wrong about what that first surface level similarity is but then you're already kind of bought in and interested so yeah and total agreement with you there um one thing I'm you know we didn't actually call this out on the interview but it's funny that we ended the interview with Sid and Teddy and Teddy predicted it's like I think the thing that might bring us down on the next Bull cycle is debt that's collateralized with protocol like basically governance tokens and Ben's like yeah very bullish on that so I don't know I um I I do think one thing people might not give I

don't mean to say Bend is Ben's a very sophisticated investor but you know I I wonder if there are logical limits on what just makes good collateral in general and I do think it would be worth looking throughout history of like you could find times when you collateralized debt with um with equity and that that hasn't typically ended very well but I think Alan from yield protocol basically said it correctly is that that's kind of just like unsecured lending and there's no such thing as a bad loan there's just a bad rate so I think there probably has to be at least one one cycle of uh maybe not pricing risk correctly before we figure that out but it's probably some weird yeah like pseudo un under collateralized loan or like

uncollateralized someone with a call option attached to it what is the market what is the market like for like weird collateral have you ever looked into the market for weird collateral like let's say um I have not so I'm talking to someone earlier today they've got a bunch of horses like if you can and like horses are valuable right like let's say a horse is like 50 bucks I don't know this person dude who who he's chatting with that has a bunch of you can tell me how fun off the Record off the Record conversation is this part of the Dowry that uh you're getting with Dana the horses so this one's got like you know like let's say 10 horses each horse is like 500k for the horses can you use 500k can

the horses be 500k of collateral probably I guess I mean I guess yeah I suppose I mean I guess if it was me and someone was posting 500k in collateral for horses you'd have to give some big discount because it was like okay if worse comes to worst I'd love to not receive physical delivery on 500 000 worth of horses because I would then have to figure out how to like sell those horses to a Rancher so yeah I would probably but this is where their Capital efficiency comes into play right where I guess if there was an Ultra Liquid horse Market of you know people that would just come over to my apartment and or if like there was you know big Stables local to New York where

I could like oh yeah like I'll accept my horses here I'm just gonna put them over here and then I know there's a service where he can connect but I you know it's not how it works so what I wouldn't accept it at face value to have to take a super big discount you know probably like 200k or 150k yeah worth of value because I don't know what the hell I would do with the horses and by the way the Dowry is not 10 horses it's just one horse for the diary just one horse hey buddy don't sell yourself short um okay the last thing the last thing that I thought was interesting too was I mean talking about I'm glad I was glad to hear that you know from someone who was actually involved with the porter Finance ribbon Dow uh convert debt issuance that the express one of the the

whole Express point of it was to get liquidity on their treasury without necessarily selling any more ribbon tokens right because that was something that we theorized that was probably the reason behind it so it's interesting to hear that that actually was the driver and again Constantine throughout this season Ben seemed very interested in it like was like yeah debt Dallas will add that financing to the mix question is just when and I do think it's right to also question how that's going to work from a regulatory perspective as well yeah good yeah cool get up we got one more huh one more baby um should we keep it a surprise or should we announce who's gonna be on the episode surprise you gotta hit that

subscribe button this one's gonna be a banger though this one I'm hyped for this one yeah um this one's gonna be a blast so it's the season finale so tune in um it's gonna be a good one worth your time I promise if you guys have ideas on season two Mike and I have started thinking about season two and what that looks like so you guys should tweet at us and let us know what you think some themes or a thesis should be for season two we have some ideas we want to hear from you so tweeted us you should also rate and review this uh the show if you haven't already uh and also we got a couple requests to sponsor season two so if you are a company and you are looking to sponsor season two uh just shoot me a DM on Twitter we got you so Mike

enjoy the rest of your day partner and uh see on the other side peace buddy [Music]