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BITS | New BTC yield on Core 🔶
Recorded: Aug. 8, 2025 Duration: 0:58:31Space Recording
Short Summary
The recent launch of BITS, a Bitcoin yield protocol, marks a significant milestone in the crypto space, aiming to provide scalable and secure yield opportunities. With partnerships with major players like Hidden Road and Ripple, BITS is set to attract institutional interest, signaling a growing trend of Bitcoin adoption and utilization in DeFi.
Full Transcription
Thank you. Thank you. hello everybody we'll be starting the space in just a minute
waiting for our friend diamond rock and we're gonna let some more people trickle in before
we get it started oh i see him in the audience now but don't worry get ready we're about to have a
great conversation talk about bitcoin bitcoin yield Bitcoin yield, the new BITS protocol.
So just sit tight and we'll get it started in just a minute.
GMGM.
Oh yeah, we got the Rich Rines here with us as well.
It's going to be a good one. All right, all right. We got all speakers on stage. We got a decent amount of people
in the space already. Let's get it started. Diamond Rock, Rich, you guys ready?
I'm as ready as we're going to be, my friend. Good morning.
All right, all right. GM, everybody. GM. So yeah, everybody here. Today, we are gathered
to talk about BITS, the brand new Bitcoin yield protocol that just launched on Core.
And we got DiamondRock, the founder, with us as well. We got Rich Rinds, initial contributor to Core, to talk more broadly about what this means for Core.
We're going to talk about Bitcoin DeFi 2, Bitcoin in general, institutions. We're going to get into all of it.
to bitcoin in general institutions we're gonna get into all of it um but the main topic of
conversation is bits so diamond rock let's just go straight for that in the beginning give the
explanation what is bits you know how is it different from these other bitcoin yield protocols
on core what audience are you targeting give us the full rundown just to get started
beauty yeah thanks uh thanks again for having me, guys.
It's truly an honor to be up here speaking with everybody.
But yeah, as far as Bits goes, I mean, it's a Bitcoin yield platform, I suppose, as the
space title suggests.
But the really kind of key differentiator about Bits, in my opinion, is that it's absolutely real yield.
It's kind of where CeFi and DeFi intersect. So we do what capitalism has been doing for the last
hundred years and the banking system and all of these other things to generate yield with
counterparties to pay to depositors. But we do that in a way where we still live on chain and can facilitate
everything on chain and transparently and securely. And so to answer your quick question about kind of
who's it for and why is it different? The thing about BITS is we are absolutely scalable. So it's
real, it's transparent. The counterparties are some of the biggest companies in the space.
Hidden Road and Ripple is our first strategy provider.
So we're really excited about that.
It also gives us an opportunity to deal with institutional depositors.
But that being said, the idea is to have scalable yields.
So we can get into the many multiple billions of TVL without any dilution of yield, without any, well, multiple billions, low multiple billions without any caps on most things.
And so we can really scale fairly quickly if given the TVL to do so.
And that's pretty exciting.
In many ways, it's, again, the yield is paid directly from strategy providers in Bitcoin.
So there's no market risk of some inflationary token or guesstimation of what points may be
worth or something down the road. So the idea is, you know, just predictable, simple, safe,
real yield. All right. Yeah. No better way to start the space than to drop the B word. Billions
like that. Now I'm already excited. Okay. Perfect. And, uh, DiamondRock, let's talk a
little about you. So have you been in the crypto space for a while? What's your story?
Oh man. I don't know if everybody wants to hear the whole, uh, laundry list of things,
but yeah, I've been around for a minute. We've been building here since about 2016,
built a couple of other protocols, scaled them into the multi-billions of TVL,
exited both of those. They're both operating now. We're not going to talk deeply about them today
because there's no point. But yeah, building for quite a while, investing for quite a while,
advising in projects for even longer. And yeah, I just really wanted to be a
part of kind of the new paradigm for financial products. I came from TradFi with the intention
of kind of, again, being a part of the new generation of finance and making things better
and more accessible and available to everybody. And so here we are finally starting to see, you know,
some of the real world applications of the things we,
at least I thought we were starting to build back in 2015, 16.
Yeah, I love to hear that.
That's a common pattern I tend to hear.
People coming from TradFi over to DeFi and just get to building.
So that's great.
And I've been hearing about bits for a while.
I know this has been in the pipeline for a little bit so i want to know rich and diamond how did you guys
meet how did the idea for bits even come about what's like the origin story of bits how did it
get even built on core chain what's the whole story i mean i'm happy to i'm happy to kick it off um
I mean, I'm happy to kick it off.
I think we got introduced by Brendan, I think, back in 2023.
It's been kind of a long build as we've been trying to figure out the best way to collaborate.
I was really impressed when I met JD back then of how pedigreed of a builder he was already.
And then his background kind of approached it to building protocols was really something that is unique for the space. When it comes to core ecosystem
projects, particularly groups that really want to be like torchbearers or flagships for the protocol,
we look for folks that we can partner with deeply for the long term. And it was really immediate in
the first conversation I had with JD that he was trying to build a real revenue generating business that he wanted to be live on core for many years in the future. And that's rare. It's hard to find
people that are so aligned with the ethos of core and also the ethos of Bitcoin. And as bits became
more of a thing, the foundation was super excited to help bring it to life in any way that we could.
it to help bring it to life in any way that we could. And I think he gave you kind of the undersell
of the century, as he described it. I think having a scalable real Bitcoin on Bitcoin yield platform
is something this space has been desperately missing for the last several years. It's been
one of the biggest impediments to growth, really hard to pull off a quarter of what JD and the team
have done. And I think it's going to be one of the biggest protocols in core,
one of the largest protocols in BTC five for,
for many years to come.
So super excited to,
to partner with these guys and to watch them grow.
It's quite the,
quite the vote of confidence,
dude.
Yeah.
I think the timeline's about right.
Early,
early 23,
late 22,
I think that we met at a restaurant actually, but anyways, I think the, the at a restaurant, actually. But anyways, I think the decision to
build on Core was an easy one in terms of just working with Rich and Brendan and many of the
other people on the team, just understanding kind of what the future roadmap looked like for Core,
what was being built towards, and kind of the vision and mission that was kind of underpinning
everything. And I think that's where I got so much alignment. Core has always been, let's build
something insanely meaningful, something that we plan to last, something that works and really is
different and plugs into an incredible target market. And that's kind of how we were approaching bits. So where did the idea
come from? I think was your original question. For a long time, I've been saying since building
in DeFi, since, you know, before DeFi summer, well, DeFi summer, really, I've been saying,
you know, this, the unfortunate truth about most DeFi is that the yield is fictitious.
most DeFi is that the yield is fictitious. And I understand it's fun to chase liquidity mining
campaigns, which used to work at massive scale for every little protocol that used their protocol
token. Now you have to be more surgical with how you do that, of course. And points and all of
these other things. Unfortunately, most of the yield from most
quote unquote DeFi protocols is somehow inflationary and comes from some other token
emission than any actual yield being generated. Now there's exceptions, of course. So that's not
a blanket statement. But that was something that I was really interested in building i felt that there was a world in the future where we
could not have d5 versus trad fi but rather where you take the good things from trad fi that work
that are scalable that create yield and you match those with the incredible technologies that we've
built in blockchain um and you get kind of a one and one is three.
Why Bitcoin? I mean, again, we've been thinking about this for probably three years,
at least in a meaningful way, how to create scalable Bitcoin yield. And I mean, as Rich
said, it's not an easy circumstance to put together.
You have to really find incredible counterparties, lenders.
You have to find kind of the, you have to thread the needle through the regulatory gauntlet to make sure you're, you know, trying to stay out of trouble, et cetera.
And yeah, we finally got it together with some really incredible partners.
And then the next part was figuring out how to make the tech work, um, so that
we can accept assets on different blockchains and, um, you know, different programming languages
and, you know, have bits be canonical across all of the chains, um, and the yields also
be canonical.
And, uh, so we, we took we took some stuff that we had built before.
We built one of the first liquid staking platforms
back in the day.
So we took some of that, kind of the conceptualization of that
anyways, and blended it together with some more modern stuff.
And we have a really what we believe
to be really elegant architecture and infrastructure now, which allows for a heck of a lot of horizontal scaling.
I think you hit on one other great point that's just, you know, like a why now type question for bits.
And there's just been so much bad behavior, I would say, throughout all of crypto, but particularly in the Bitcoin DeFi space with these yields that were
point-based. I've been up on a soapbox for the last year and a half about this, where you can't
take points to the bank. And there's just been so many protocols that have done these points
campaigns that have translated into extremely low yields, one one hundredth of what they're
promising LPs. And it's actually really nice to
see that getting eliminated from the space. I think most people aren't falling for those tricks
as much anymore. And I think that's just the healthy wave of maturity now that we're starting
to see in the Bitcoin DeFi space. So I think with a lot of that washing out, you've seen this
just change of expectations in terms of what real meaningful Bitcoin yield is. And I think being
able to offer Bitcoin on Bitcoin yield, whether it's through course dual staking, whether it's
through bits, you now have these opportunities here to really go put large amounts of Bitcoin
to work in a way that you, quote unquote, can take to the bank. And that is just this really
healthy evolution of the space. Yeah, for sure. And wow, since 2023, I didn't realize it's been in the
pipeline for that long. Huge congratulations, Diamond Rock on the launch. I mean, damn,
getting that already. I know that's no easy task. Big congrats there. So quick question to Rich,
since you guys talked about the meeting in 2023 and all that, what do you look for
for these different ecosystem projects?
Are you more focused on the builder or the idea?
What really do you look for when you meet with someone looking to build a DAP on Core?
So Core is open and permissionless.
Anyone can build anything at any time.
You're also definitely willing and able
to get in touch with myself or anyone from the team.
We're always game to jam on ideas.
We want to build the biggest, baddest Bitcoin ecosystem, and that means partnering with amazing builders.
So definitely feel free to reach out at any point in time.
And you can see with folks like JD, we've been working on cooking stuff up for multiple years now, right?
for multiple years now, right?
And if I was to kind of give a framework
for how we think about it,
a lot of it is really trying to underwrite
the builders that you want to partner with, right?
Good folks that have long-term intentions,
that want to build real revenue-generating businesses,
and that ultimately want to call core their home.
Those are the folks that are the easiest for us to back
and to help leverage our BD, go-to-market,
marketing, et cetera, muscle to help support.
Ultimately, at the end of the day, Cora is a platform business and we want to have as
many strong applications built on top of Cora as we can.
But ultimately, that means really long-term deep partnerships with builders.
I think part of it is solving the idea maze.
You meet amazing builders. And I think part of it is solving the idea maze, right? So you meet amazing builders,
maybe it's not immediately clear how you guys will work together. But there's a nice path and
kind of ethos alignment in building something real and meaningful. And then I'm a strong believer that
if you kind of work around the edges, jam on ideas for a while, you will come up with interesting
stuff that can be done. Of course, the core team always has a wish list of things to get built,
but it's always just kind of this, you know,
going through the maze and figuring out what works together.
But you know pretty quickly with most builders, you know,
if you have an ability to form a long-term partnership and, you know,
kind of the culture of, of course,
BD team and partnerships generally has been people that we want to work with
for 10 years.
I think one of the biggest issues in crypto generally, aside from all the points pieces
that I just proselytized about, is that people are just way too short term, right?
They think in terms of weeks or months.
They don't think in terms of years or decades.
And I think ultimately, if you're trying to reinvent the traditional financial system,
which Bitcoin's been trying to do now the last 16, 17 years, it takes a long time, right?
And you need to have long time horizons.
You need to be playing infinite games
with people that you want to partner with
and be within the trenches long-term.
And I think that, you know,
it's been a unique differentiator for our ecosystem
and one of the reasons it's been so healthy for so long.
And we'll continue to have this long-term lens
and be fortunate, hopefully,
to continue to partner with amazing folks like JD.
Yeah, 100%. And I think that's a good transition into talking about this long-term vision,
talking about the endgame of Bitcoin DeFi. Both of you, what are your thoughts on where Bitcoin
DeFi is currently, where it's set to go, where different protocols like BITS will come in handy,
different neobanks, things like that? I don't know. What's the bigger picture? Let's talk
long-term Bitcoin DeFi compared to what we have now. I'll jump in and take a stab here because
Rich probably has a whole bunch of good points and I wouldn't have anything to say after he went.
But I mean, I think we're at a pretty incredible point, honestly, for BTCFi in a lot of ways.
I mean, there's obviously been the signals from regulators in the United States, or at least the president and regulators already that, you know, Bitcoin's here to stay.
We're treating it as a serious asset now.
You can hold it on banks' balance sheets.
You can, you know, transact in a whole bunch of ways that you couldn't even six months ago. So I think there's been the ETFs and everything. There's been a lot of regulatory acknowledgement, I think, of Bitcoin, which has been really important from the institutional aspect.
if they're regulated until regulation allows them to. And I think we've really seen that
now yesterday with the EO allowing Bitcoin in 401ks is another huge unlock that I don't think
we're talking enough about. And now we're seeing all of these treasury platforms that are really
saying, holy crap, Bitcoin is really becoming a global phenomenon. And there's a lot of major nation states
and major companies stockpiling Bitcoin.
I think India, I read the other day,
has a million Bitcoin now.
So there's a lot of global competition.
Everybody's interested.
We've all kind of agreed that Bitcoin's here to stay
and it's worth looking at.
And it's been idle.
And so now we're saying, okay, there's multiple trillions
of dollars
worth of value here.
And if it's here to stay and it's a global asset, that's, you know, going
to be appreciated by most everyone.
Uh, how can we turn, you know, financial infrastructure towards it?
How can we allow it to be a productive asset?
And so I think we're at that point now where the market's like, heck yeah,
let's go. The prices are good. People are feeling happy. There's crazy waves of adoption and
incredibly positive news coming out all the time. And we couple that with technologies like Core,
protocols or blockchains that allow us to facilitate BTC Phi with a close relationship to Bitcoin mainnet while maintaining a lot of the security components and a lot of the things that people got into Bitcoin for in the first place.
stuff. And then I think there's incredible ecosystems, of course, core being the major one
that has really turned this on, I think, in terms of getting builders in and there's a real pathway
to building strong, healthy revenue generating business, which I think is key. We don't talk
enough about that in crypto. These businesses have to stand on their own two feet. You have to be able to scale and
grow like a business anywhere else. And you can't do that by selling your token indefinitely. So
you have to start to create revenue. And so that's what we're focused on. And we think now
is a great time, better than ever, of course, to be doing this. It's funny how you led that off with I was going to have so many amazing,
great points. That's like an impossible answer to follow. That's so well articulated and such
a complete viewpoint, in my opinion. I think I'd add a few kind of more like high level framing
pieces for the audience that are probably pretty useful here. I think we've seen like waves of
interest in Bitcoin DeFi and I'll like focus kind of more of interest in Bitcoin DeFi.
And I'll focus more specifically on the Bitcoin DeFi piece versus just the Bitcoin piece.
I think JD did a great overview of the macro.
But in terms of Bitcoin DeFi, we've had these runs where people get really excited in early 2024.
Expectations get above where reality is.
And then you come back down and you're always in this ebb and flow to like kind of figure it out. But I think we're now firmly below kind of where the
expectations should be, right? Like we're actually well ahead in terms of the progress versus kind
of how people are viewing the space. I think that's the most exciting piece is when you're
becoming underdog again. And I think we're on the first pitch of the first inning of Bitcoin DeFi.
Like it is still so early. And I think that's what's first pitch of the first inning of Bitcoin DeFi. It is still so early.
And I think that's what's so exciting about it is Bitcoin is now a multi-trillion dollar
asset that is only air above for the most part to the market cap of gold.
We're talking decatrillions, not far, let's call it within five years.
You're just talking about this amazing untapped market that is just so ripe for opportunity.
There's just so few spaces in the world that
you're in the trillions that have, let's call it like 1% or less penetration. And it's so early,
but that's why it's so exciting to be partnering with these builders like Bits, because now is the
perfect opportunity to start to plant your flag, land and expand, and start to bring in as much
Bitcoin as you can to have these protocols grow.
And I think we're going to see inordinate growth over the next year, two years,
as we start to see more and more of this Bitcoin get put to active use.
There'll be some technological innovations that will help enable that.
There'll be a bunch of regulatory things that allow people to go do that.
And you'll have these other external factors that will also make Bitcoin more and more appealing.
But I think you're going to see this trend towards productivity, because that's just
the arc of history, right? Like you go into more and more productive assets over time.
And Bitcoin now with core can be a productive asset, you can use it in DeFi, you can stake it,
you can put it in any number of DeFi protocols. But it's the most exciting opportunity in all of
crypto. And we're past kind of the the hype and unrealistic expectations it's now time to build it's now time to build real businesses
and you mentioned another another great one um dylan which is the bitcoin neobank and we get
some exciting exciting news to come there but i think you're going to start to see that trend
really emerge here as well where people throughout the world are viewing bitcoin as their savings
account and you're going to see just this proliferation where it's one click to deploy from different
neobanks and protocols like BITS and just have this passive yield, passive accumulation
of Bitcoin.
And I wouldn't be shocked if within the next two to five years, we actually crossed like
the one billion Bitcoin holder mark using solutions like Core versus native Bitcoin
itself.
So I've been bullish on
this for a long time that's you know one of the reasons that core exists but i uh you know almost
can't contain the excitement at this point it's perfectly primed yeah yeah 100 i'm always telling
people you know it's great what's going on right now but this is this is a trillion dollar opportunity
this is going to take decades um this is really just the beginning this is what we'll be telling
our kids about so yeah people got to realize is really just the beginning. This is what we'll be telling our kids about.
So, yeah, people got to realize this is just the beginning of a huge mission.
And now with core season, we're starting to see, you know, the core ecosystem really, really get built out. We got, obviously, CoLend, the biggest borrow line in all of Bitcoin DeFi.
Volta just went live, native perp decks of core.
We got HoudiniSwap to make it easier to onboard.
We got Bits.
We got Molten, the liquidity layer of Bitcoin DeFi,
different AI things like Volair, native stable coins.
So DiamondRock, where does Bits fit in this whole large core ecosystem
that's getting built out?
And then Rich, what do you think it's going to look like
in a couple of years from now compared to where it is now? Because it's already's getting built out and then rich what do you think it's going to look like in a couple years from now compared to where it is now because it's already getting very built
out but i can only imagine what it's going to be like in the future yeah that's a really good
question man i think but where bits fits in is you know we're we're one of the more deposit passive layers of yield for Bitcoin.
Again, it's kind of a parallel to if you think of how finance starts,
maybe from the lower level of kind of user deposits or
or corporate deposits, things like that, you know, the yield on those things are
kind of the base for what allows further what we call composability
on chain.
But sorry, my other phone turned on and started yelling at me.
What we call composability on chain is kind of what we're seeing, what we were seeing
in the banking system.
Things kind of go ladder up, more complexity, more yield, so on and so forth.
And BITS really is just a foundational piece. We see ourselves kind of as one of the initial
building blocks. There's a lot of subsequent protocols and subsequent structures that are
really going to supercharge the yield potential and the yield makeup of how BITS functions over time. But at first, the idea is to be a very steady base yield
from which other protocols, other treasuries can count on
and then start to build on top of and build with.
And so we're excited for LST BTC to come out.
We have some really cool ideas on how to take one and one is three there also,
which is really exciting. But yeah, I think we're not chasing the hype cycle with 50 or 80% yield
or anything like that. We're saying, hey, this yield is the yield. It scales into the billions.
It's super safe, super secure. you know who the counterparties are and
what's happening everything is completely above board all the time um and that's kind of where
we start we have a lot of ideas going forward in the future but yeah hopefully that hopefully
that answered you a little bit awesome i think that's a great answer. And then I think just to kind of quickly touch on, you know, kind of the overall core season in the landscape. I think as with any sector, you're going to have a variety of different, you know, applications and tools that meet whatever goals that you're trying to achieve as a user, right?
Right. And there's going to be a lot of Bitcoiners that just want to do leverage.
They just want to borrow against their Bitcoin and get stable coins, just super low risk.
And that's all they want to do with their Bitcoin.
There's going to be other folks that want to, you know, 10x borrow and then lever up against their ordinals positions.
You know, like you're going to have people that are on both ends of that spectrum.
both ends of that spectrum. And as the platform that core is, we're here to home as many great
builders to build different products and services for anybody that's on that spectrum.
Whatever yields people are targeting, whatever trust assumptions or risk assumptions that they're
willing to accept, it's our job to try to create as many of these opportunities as possible for
folks to go do that. And I think that's where BITS is a really
special opportunity in that landscape is it kind of gives you a best of all worlds where you can
get this passive accumulation, low risk on your Bitcoin, you get institutional grade counterparties,
custody, it really operates almost in the CDFI landscape, which is essentially one step beyond
Core's dual staking is kind of the way to think about it, right? Because you get this really nice receipt token with that receipt token, you'll be able to
compose it into other protocols. But it's again, it's kind of just if you think about it on a
spectrum of these different opportunities, it's it's kind of squarely one peg over. And I think
that also gives you kind of an idea of how composable JD and team are thinking about it,
right? The more close to the metal you are in, you know, to use that analogy, the more composable JD and team are thinking about it. The more close to the metal you are, to use that analogy,
the more composable opportunities that you can create.
I think it's going to become one of these pillars of the core ecosystem
that we will see plug into a variety of other protocols,
whether they're neobanks or whether they're other DeFi projects
that want to use base yield for bits, LSTs, you name it.
But it's really exciting when you can see how all of these different products and services feed off each other.
Yeah, yeah. Super exciting future.
Earning your yield from things like bits and LSTBTC.
You know, having these Bitcoin-backed stable coins so you could make these real-life purchases and expenses.
And then having these neobanks where you can keep everything together that's that's gonna be awesome then of course the dgen stuff on the other side which i
see nev and spring in the audience i know they're excited about that um so let's let's go away from
dgen and talk a little about institutions because i know everyone in the audience is interested
about the institutions they've been looking into core heavily. These Bitcoin treasury companies now have
over $100 billion of Bitcoin. Like Diamond Rock was saying before, these institutions, even
countries, are clearly adopting Bitcoin, clearly okay with holding it. The question is how long
will it be until they start putting it to work? Rich, I know you've had countless conversations
with major institutional players
about bitcoin yield over the past year so i guess where are institutions at right now with their
bitcoin i know they're comfortable holding bitcoin but are they ready to start putting it to work
i don't know what have you been hearing in these different conversations and jdu as well since i
know that bits is a very institutionally focused platform. Also for retail, but I know you guys also cater to institutions.
So you guys are no more than anyone.
So let's hear.
Yeah, I'm happy to kick it off there.
I mean, I think it's first and foremost, it's important to not just like bucket institutions as one broad group.
There's very different types of institutions out there.
Example, pension fund is going to be totally different
than like an alpha fund, right?
Like they just have very, very different goals
what they're trying to achieve,
very different yield assumptions that they want,
risk thresholds,
like all that needs to be also viewed as a spectrum.
And what I'd say is the appetite is growing,
it's growing rather rapidly to go put the Bitcoin to work,
but there's not a ton of available opportunities today with which that they can go do that.
And that's where, you know, core's dual staking, low risk protocols like BITS are a great answer
for these folks, but it's still very early on. There's been a litany of issues with yield seeking in crypto since crypto began,
right? If you think about last cycle, BlockFi, Genesis, Celsius, whole number of other, you know,
more centralized lenders, but historically, yield has been a dirty word in crypto, because it's
always involved giving up your keys or having kind of unknown counterparties. There's always
been pieces there that you haven't been able to fully sort through. And it's led to a lot of Bitcoin loss and altcoin
loss as well, but quite a bit of Bitcoin just for the focus of this conversation. And that's a lot
of battle scars that have to get shaken off. But I think we're now past the point of people
understanding that Bitcoin will be the most valuable asset in the world
over some period of time,
and you can never have enough Bitcoin.
So with that as kind of the general premise,
now it comes down to how do you go get more Bitcoin?
And the way you do this,
hopefully in like a non-dilutive way,
is that much more appealing, right?
And that's where things like course dual staking,
low-risk protocols like BITs very appealing, because that gives you a way to passively increase your Bitcoin holdings
in a way that you hopefully will just maintain forever using kind of that savings account
analogy, whether it's for an institution, a nation state, etc. But I think that trend is
going to grow rather rapidly. And I think we'll see some major news on that within the next few months.
Yeah, I'm going to have to echo most of what Rich said. I know you speak to a lot of
institutions as well. I think important to make that distinction, you know, what type of
institution are we talking about? Are we talking, you know, JP Morgan, Citibank, Deutsche, or are we
talking, you know, a hedge fund that, you know, manages a book of $100 million or something,
a liquid fund. So I think the institution type and size matter. I think something that's been
interesting with kind of larger and especially publicly traded companies, you know, they really
have to think about their governance structures, what they're allowed and not allowed to do. It takes a long
time for them to get new things, new opportunities through their boards, what they can hold on the
balance sheet. I think we're probably seeing, at least from the people I'm talking to, some pretty
good progress in those types of environments. But that's going to be, you know, one of those
things that happens over kind of an extended period of time, I think. We are seeing already kind of the family office
networks, again, smaller hedge funds, investment funds, private books that have quite a few
dollars really starting to take an interest in first owning Bitcoin. And now, as Rich said,
trying to put it to work a little bit. How do
we do that in a risk-adjusted way, dip our toe in a little bit in a way that we already understand,
which is one of the keys of BITS. Any institution will immediately understand what BITS is doing
and why and how to price the risk, so to speak. And so, yeah, I think, you know, everybody's kind of hoping for
this one single explosion where all of a sudden we wake up and everybody, every institution is
using BTC and further BTC-Fi. I think we're seeing a lot of adoption, you know, kind of at the smaller
end of institutions. And now it's starting to kind of creep up the hierarchy. And we're seeing a lot of larger participants
really starting to claim their stake here,
pun not intended, to Bitcoin and BTC Phi.
Yeah, so just getting the battle scars taken care of
and offering these low risk, different yield solutions.
Yeah, I totally see the vision.
And then, but JD, what are institutions specifically looking for?
I feel like BITS has a lot of those properties where it's, you know, on chain, you can see
exactly what's going on.
You know, the custodians, like you were saying, can scale.
So the liquidity has to be there.
Compliance, you know, what are they specifically looking for? I feel like you know exactly with BITS protocol. Yeah, the answer to all of that is yes.
I mean, there is some unique aspects of compliance that we have to cater to. When you use
or work with institutional counterparties, they have compliance requirements that you must adhere to.
So we have no choice but to do so, hence why we have KYC and other things. But I think what BITS,
BITS was really built for kind of everybody. It's built to be that foundational asset from which,
like Rich said, a lot of people are going to be building their savings accounts, their life savings in Bitcoin, denominating that and by holding Bitcoin.
And so, you know, if you can, if you can find some very transparent, lower risk type environments to put your savings, then things like LST, BTC and BITS are going to be incredible options.
If you want to take that one step further, you can get more exotic on top of both of
those structures.
And we can talk more about that later.
But from an institutional perspective, I mean, compliance was a big one.
Transparency was another.
They're obviously, you know, they want to make sure that there's some contracts in place,
that they're comfortable with how the legalities work in TradFi.
And a lot of that is done, you know, litigiously.
When things go sideways, they sue each other and do weird things.
So having proper contracts and proper control agreements between parties and so on is something
that takes a very long time to iron out and to get right.
So those are some of the things that they're looking for.
The depositors want to know that we have that stuff.
What happens if something goes sideways?
How do we remedy that?
And Bits is a US-based company.
The contracts with our counterparties are all written in the state of New York.
So yeah, there's appropriate financial recourse and that was a big piece in building BITS
is so that we can A, work with these neobanks and start to work with financial institutions
globally, but also allow institutional depositors the desired comfort to participate.
Yeah, that is exactly what I was looking for.
The things that you don't necessarily see in the marketing copy or that happen behind
the scenes, that's great.
And also, I want to break down, we're talking about lower risk Bitcoin yield protocols.
There's a couple of Bitcoin tokens already out there that earn yields, these liquid staking
or liquid yield bearing Bitcoin tokens that earn yield through either basis trades or liquidity
provision. But with bits, it's simply just encumbering the BTC, right? So can you talk a
little about that, how there's less things you need to trust, less things you need to worry about
within permanent loss and things like that? Really explain to people why this is a lower risk bitcoin yield products compared to these other ones yeah 100 so i mean
i want to preface what i'm about to say by saying that um this isn't a blanket comment about every
single operator and every single product that's out there that does that um there's some some
great people out there doing and experimenting with really great things.
The limitations, and we've done a lot of research actually on basis trades
and funding rates and all of these kind of exotic sounding things.
And the challenge, first and foremost, is volatility.
Sometimes, or at least how they're quoted in the first place,
is based on some time horizon where things look really good. And so you're saying, holy crap,
I can get, you know, 20% yield on Bitcoin if I borrow against it and, you know, do all of these
things. But there's a fairly extensive market risk in some of those cases where, I mean,
you have to manage that actively, essentially as a fund manager.
And that then makes me ask the question, who is the fund manager? Who is the person or people or group thereof that are managing these funds in a way that, you know, they're protecting your
capital and making the right decisions, you know, which basis to try to arbitrage or which funding
rate to try to take advantage of based
on what you think is going to happen in the market in the next little while. I mean, I think we all
know that predicting the markets and playing with those types of instruments is not fool's play.
It really, it's an expert level endeavor. And I'm just afraid that I can't say that I trust
that that's happening behind the scenes at a lot of these places.
Now, could it be? Sure. I just don't necessarily trust it.
The other challenge with the funding rates and the basis trades and all, let's assume that everything I've said is not relevant to one particular platform.
The other challenge with these things is scalability.
So the challenge with basis is as you scale,
your movements themselves move the market.
And you start to move the market further than the basis.
So you need a wider and wider basis spread to arbitrage.
And that becomes harder and harder with size,
especially once all the market makers and algo
traders in the space, of which there are many, start to pay attention to what you're doing and
try to front run you. And it becomes a big game. It's very difficult to scale that beyond a certain
point. We actually looked at building some of that into the bit structure and decided against it,
because the modeling just said it was way too hard to be predictable and
super secure. So those are a couple of the things. I think you want to make sure
you understand what the heck they're doing. You mentioned impermanent loss. Sometimes they're
selling the Bitcoin because it's cheaper than borrowing against it, which isn't simple. Borrowing against Bitcoin at scale
is actually much more difficult than you think
and trying to get interest rates that are viable.
And so often what these protocols will do
is sell the Bitcoin, use the resulting USDC.
Let's say Bitcoin rockets or moves up significantly,
their users are now down or missing out on that
growth to chase a couple percent yield. So it's a very active participation from the protocol
manager's perspective. And I think there's a lot of risk in that, especially in such a novel,
nuanced space. We all know how hard it is to predict what's happening next of course
um so yeah but again not to poo-poo on all of them i'm sure there's great products out there
um but yeah they're very difficult to scale there's a lot of unseen kind of behind the
risks that i don't think you know people talk about um and yeah right yeah the scale piece is one that i honestly didn't think about much before
this talk i mean but you laid it out perfectly with just you know the more layers of risk or
the more layers of trust that you have in these different people in these different platforms the
more risk there is so with with bits it's a lot simpler um and yeah and it could scale which which
i didn't even think about.
So talking Bits, what is, I don't know, what's the future of Bits? Is there a roadmap?
Is there anything coming up soon that you could maybe give us the alpha on?
You know, we got 230 people in the space right now listening.
You got to give us something to get excited about.
Yeah, I think the next immediate thing on the roadmap is to to open up the btc mainnet
deposits so we currently accept cbbtc wrapped bitcoin on eth and wrapped bitcoin on core
it all funnels into core to mint bits so core is the home base and kind of the hub
of where bits operations will be but we will be accepting Bitcoin mainnet here pretty quick,
probably within the next week or two,
which is really exciting.
A little bit more complex than the other two,
but really exciting to be doing that.
I think we have some pretty exciting UI things
that are coming up and polishing,
putting a little bit more
lipstick on the pig so to speak uh which is exciting but we're also working on a pretty
cool supplemental yield product for stable coins um i'm not going to get too deep into it but it
would be essentially uh near zero risk uh fixed interest on stable coins um and so we'll we'll come back to that um in a little bit but
that's you know definitely something that we're working on in the next uh couple of months
expecting to to be able to uh to start talking a lot more about in the next little bit um we've
already got most of it built um just need to make sure we're uh we're rolling it out at the right
time in the right way so anyways uh short-term stuff that's kind of the road map for now um the next kind of large things
is how do we expand the strategy optionality so right now you come to bits you deposit your uh
either your bitcoin on mainnet soon or your wrapped products that we accept and you receive a BITS token, the BITS token
very soon will have a vibrant and exciting market on Molten with which you can go and add liquidity
and it should have near zero impermanent loss because it's pooled with wrapped Bitcoin.
And if you look at kind of how LST pools, so STETH and ETH pools go, there's a lot of volume.
You know, there's pretty good fees in there.
It's a pretty cozy spot if you're looking for some supplemental yield.
We're working towards having lending integrations, obviously, so we can get very low risk, low cost looping infrastructure in there to really, you know, for some of us,
DGENs that kind of like that a little bit, you can loop, you'll be able to loop your yield in
the coming months. A lot of exciting things there, but we need to expand beyond the initial deposit.
You deposit, you're earning 3% gross net fees, you're getting about 2.6-ish net of fees. And if you want to lock it up with a
little bit of time commitment, we can get you up to 5% before fees of yield. And so that's really
exciting. As Rich said, risk adjusted, the counterparties that are paying for the opportunity
to encumber the Bitcoin are very large companies. As I said before,
Hidden Road, Ripple, very, very large balance sheets that have a very well-established business
model. But we do need to expand. We want to create the option for people when they come.
Everybody gets the base yield and the bits, but we want people to be able to take their risk and return profile and be able to put that to work in different ways.
So there's a few things that need to happen before we get there.
Obviously some scale, but yeah, definitely expect once we get to the billion and billion plus TVL,
we'll really start moving to roll out additional strategies.
All right. The stable coin option. I did not know
about that until this. I'm glad I asked that question. Yeah. I don't know. I've been telling
people. I don't think anybody knows about it. So yeah. That's the big alpha drop. Let's go.
I want to see some reactions in the chat for that one. But yeah, this is something we've
been preaching a lot about cordis being the
chain for the two pillars of crypto so far which has been bitcoin and stable coins obviously we
got the bitcoin defi as well but another stable coin option that'd be massive um and then when
you talked a little about the pool on molten so yeah we should talk about that too because to
actually mint the bits token you must be kyc you must be an institution or an accredited investor, right? So I want to mention that too, that people that aren't accredited investors can just swap into the BITS token on Molten once that pool is live, which I saw, they already had the infrastructure for it, I saw it on Molten.
But yeah, you want to talk a little bit about why you require people to be KYC'd in order to deposit this Bitcoin?
Yeah, absolutely.
I definitely didn't say that you could go to Molten and get it without KYC.
That was Dylan for sure that said that.
I apologize if you guys can hear this background noise.
I apologize if you guys can hear this background noise.
It sounds like there's construction outside of my office.
But I don't even remember the question now.
I got distracted.
What was your question, Dylan?
Just about the KYC.
Like, why is that important?
Why it need to be?
Yeah.
So that's one of the big things that institutional and regulated counterparties must have is you have to have very strong AML, money laundering, fraud protection,
consumer protection policies. You have to adhere, of course, to OFAC and EU sanctions and all of
these other things. And the only way to truly know that is to truly understand who, in fact,
are your depositors.
And so to the best of our ability,
we're not managing or a part of the molten pools or anything like that.
That's just what the community has decided to do,
is to start that up.
But to the best of our ability,
we are to collect user data
in case there's ever questions about, again, AML.
The big one is money laundering,
honestly. Money laundering is huge. Sanctioned countries, sanctioned people. We just can't
participate in that and neither can the institutional counterparties. I think whether
we love it or hate it, we're probably going to see more of this, more required KYC when protocols
are integrating with, you know, traditional businesses as regulation picks up.
I know there's some friction there.
We don't keep the data.
We have a partner.
They're SOC 2 compliant.
They deal with all the appropriate data storage and so on.
And so, yeah, it's just one of those things we see a pass or fail, whether someone got through it or not.
And then we move forward. But I guess that's the origin.
I would prefer that no one ever had to KYC, but I just don't think that's the world we're going to live in for at least the next little while.
Right. I mean, it makes sense. You got to do it to get these these big players involved.
And, yeah, everyone listening who's not an accredited investor, you know, we could just hit up Molten and we'll check out the pools there.
But a good point on that, actually, Dylan, that's why those pools are exciting places to provide
liquidity. Because a lot of people, so there's a 32 day cool down when you want to withdraw
your Bitcoin out of bits. So you have to come back to bits and say, it's like liquid staking. You come back to bits and you say, hey, I want to withdraw
my money. And the clock starts ticking for 32 days. Then in 32 days, you have to come back.
You have 48 hours to withdraw it. Otherwise, it gets swept back in and you have to do it over
again. The alternative is you can go to the exchange or an exchange if one exists, which it does, wink, wink. And once that gets to a certain scale, people will move in and out quickly on demand via that exchange.
You know, because the spread will eventually widen on the exchange as people are selling into it.
And it creates a good opportunity for people to buy it simply at a discount if they want to just wait 32 days to withdraw it.
My point here is that there's a lot of volume there.
It creates volume and it's a really efficient way, which is why we've done it this way with building the yield into the exchange rate of the BITS token to Bitcoin.
with building the yield into the exchange rate of the BITS token to Bitcoin is so that, you know,
you can really participate in a much more fluid way using exchanges. And eventually,
you'll be able to use it on, you know, perp stacks and many other things where you can
use these assets, BITS in particular, the equity in your Bitcoin while you're earning,
you can go out and use the equity elsewhere. So definitely exciting.
Yeah, I didn't even think about that.
So it's basically pegged to Bitcoin, so there won't be much in permanent loss.
And it'll be earning yield.
Plus, there's the lockup period for BITS.
So providing liquidity in Molten with the BITS token could be a play.
I'm definitely excited to make some videos about that.
Diamond Rock dropping all sorts of alpha this phase.
I'm loving it.
I didn't even think about that coming in.
But yeah, with the launch of Bits,
it's another protocol on Core as part of Core Season.
So Rich, I know Core Season, it's really just begun.
I know that people are eager to learn what's coming next.
We can't give away too much.
I know people want an update on LSTBTC.
So share as much as you can about what's about to come up this month and next
month as well. So I'll try to tap dance around what I can share and I can't share. LSTBTC is in
its final round of audits. So we don't expect that to be too far delayed from here. We're super excited to get that out.
It's been a long time coming.
It really is a institutional grade product.
There's amazing partners like Maple Finance behind it.
And it's been a labor of love to get it to this point.
And we're super excited to bring it to the world.
We really do think it can be the dominant LST for Bitcoin
in a pretty near time horizon.
So we're super fired up about that.
We'd have a number of core season launches already that have been really exciting.
Of course, BIS, Molta, Molten, Volta.
There's going to be several more to come.
The idea here is core is already the best place to go put your Bitcoin to work.
We need to have more and more products and protocols that people can go use.
We need to have more and more products and protocols that people can go use.
So I'd expect throughout the next couple of months to see several TGEs and another whole
wave to come in the September, October timeframe.
But the idea here is now you can go and really participate in Core's ecosystem in a more
material way versus just kind of generic DeFi activity.
There's more stuff going on, more novel native protocols.
And I think it's never
been a better time to get involved. We're going to do some cool, interesting new kind of mission
oriented campaigns. So expect to hear news on this relatively soon, but you're going to hear
some new kind of incentive mechanisms that will be much more directed and kind of more competition
based. And I think that will be great to help bootstrap a number of these different
protocols.
There's also quite a few interesting liquidity providers that are getting more
involved in the core ecosystem that I think will help make these markets more
efficient, like, you know, JD was talking about.
So you're going to see more and more of this activity picking up as core
becomes a more mature ecosystem, but definitely stay tuned.
Lots more to come very soon.
Let's go. Let's keep building. And yeah, the missions too. It's going to be a big upgrade
over ignition. I'm definitely excited to grind that. And everyone here I'm sure is as well.
And if there's one thing I've learned from this talk, it's that things are just going well. We
seem so ahead of the game with the Bitcoin DeFi. It took bits years to really be in the making, which makes sense now after hearing all the
different things you have to do from compliance to the actual product itself.
Yeah, it's just a huge moat where if someone wants to make another bit, it's like, good
luck.
It's going to take years.
So I'm feeling great about Bitcoin DeFi, feeling great about where Core is at.
I think we covered everything already in this space.
Sorry, sorry. I don't mean to interrupt you don't but you got this also that it's also
just super helpful the other thing that we can't replicate is the strength of the core community
right like that that is the huge competitive differentiation of what of what core has on top
of the amazing tech and amazing builder community that we have but it's really the core community
the cortoshis are one of those rabid fan bases of any group and any part of crypto. They've been with us for years.
We're so excited to watch this platform continue to develop and to deliver more and more
opportunities for the millions of folks around the world that use the different protocols on
core. So again, with all the amazing parts that we can kind of pat ourselves on the back for,
JD can pat himself on the back for, it's really the strength of the community that has always been and will always be the biggest differentiator for core.
100%.
I mean, look, 266 people in this space right now.
Everyone getting excited about the same thing.
Yeah, couldn't be a better time.
This is great.
But yeah, thank you for Rich.
Thank you for Diamond Rock, JD for joining us.
Everyone follow Bits. Everyone follow Bits.
Everyone follow Bits.
It's up on stage right now.
Follow Diamond Rock as well.
And also, which I didn't even mention,
he's been doing live streams with other core builders,
which I just love to see the different builders working together,
doing this promotion, talking about the future of core.
So make sure to check those out.
Clearly, Diamond Rock is not shy to give some alpha.
So I'm sure when you get him on those individual individual live streams he does you can you can get some good news out of him so make sure to follow him the only difference is i have a face
per radio so maybe i'm built for spaces but i guess we'll leave that up to you guys but we are
doing the bits the vault we're trying to do it once a week when schedules allow.
So we're gonna try to get through
as many amazing protocols,
whether we are partners or integrators
or just fans of them,
helping to highlight and have conversations about BTC-Fi,
where things are going
and how we can impact kind of the future as a group,
because it takes a village.
And as Rich said, the community here is absolutely amazing.
You guys have been so welcoming and so positive, generally speaking,
with respect to Bits and myself coming into the spotlight a little bit.
But the builder ecosystem and core, the teams themselves,
it's like a giant collaboration all the time.
Everybody's working together, helping each other out.
It's absolutely amazing.
And so if you want to check out a little bit about some of those other protocols,
shameless plug here for Bits the Vault, usually on Thursdays is when we drop them.
So keep your eye out.
Thanks, Dil, for the plug.
Of course, of course.
Any last words, anybody, before we end it off?
It's core season. season baby simple as that core season let's go excited for this next month everyone get ready big big
announcement coming next week i'll say i'll just say that but um yeah thank you everybody for
listening and you know like diamond rock was saying yeah it's like a whole it's a whole community
it's a whole internet world internet economy that we're building out.
So awesome to see it go down.
But, yeah, we'll see you guys all in the next space.
You know, follow everybody on stage, of course.
Make sure you're keeping up with bits.
Join those Diamond Rock live streams.
And, yeah, thank you, everybody.
Have a great Friday.
See you guys all on the next space.
Thanks, all.
See ya.
Thanks, guys. Take care.
Host
Core DAO 🔶
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