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BTCFi: Expanding the Bitcoin Economy Through Multichain DeFi
Recorded: July 30, 2025 Duration: 1:07:36Space Recording
Short Summary
In a dynamic discussion, the Neutron team unveiled their innovative strategies for enhancing DeFi on the Cosmos blockchain, emphasizing the launch of Tapcoin and the introduction of organic yield-bearing Bitcoin derivatives. With a focus on partnerships and growth, they aim to capitalize on the rising demand for Bitcoin yield products, positioning themselves as leaders in the evolving crypto landscape.
Full Transcription
Thank you. Thank you. Thank you. Thank you. Hello everybody. We're waiting, I think, Avril and Elijah, if I'm not mistaken.
So we'll just wait a little bit longer until the show. Hey, Harold, can you hear me? I've got to invite you guys to speak. Hold on, I'm moving this. I'm moving this.
Are you going to request?
Just invited Abraal just now.
Okay, super.
And Clyde, you should have a invite as well. I see Clyde accepted.
Here we go, yes.
Hey, Meg.
Hey, how's it going?
It's going well.
How are you, man?
Good.
Doing all right.
I think we've got the full...
I think Spade's looking like a co-host now, too.
Do we have someone joining from the Cosmos account itself as well?
We've got a listener on the Cosmos account,
but I'll be co-hosting it um
from my side so i'll be asking all the type questions nice yeah um maybe wait like one more
minute uh is elijah gonna join that'd be cool, we should get Elijah in here. I don't think he's
expecting to join. Oh, yeah. By the way, Mag,
before we get started, I don't know if you're using the right mic.
I swear I've heard you talk in spaces before with a better mic than what you're using.
Hold on. Let me try to switch to my other phone.
Talking about mics, can you guys hear me clearly?
You sound crispy.
Yeah, you sound good.
Noise. I've abandoned the AirPods.
Thank God.
The team was giving me shit before.
My ears were bleeding, dude, dude last 30 minutes anyway
meanwhile happy tap coin day happy tap coin day guys um i would recommend anyone listening to stop drinking water um you should
be using the water to cool your tap coin miners instead it's my official recommendation i got
deployed on in here the dawn of deployment he deployed tap coin yesterday gotta love it
guy has he has a deployment. I'm gonna have an intervention.
For those that are unfamiliar,
could you quickly explain what Tapcoin is?
Go ahead.
I mean, no, context is useful.
So TLDR, if you missed out on Bitcoin mining back in the days,
you can run it back today with Tabcoin using one of your tabs in your browser
and basically just mine this new crypto.
You don't have to pay for it or anything.
You can just mine it in your browser.
mine it in your browser, you can get to it by typing tabco.in, tabcoin, into your browser
and then you'll see it basically.
And it has this nice Windows XP old school vibe.
You can even go on paint on it.
So yeah, just like if you missed out on Bitcoin, there's only ever going to be 21 million tab
coins.
So that's your chance to fix past failures, you know?
So what you're saying is like, this is like getting in Bitcoin at $10 or something?
Is that what you're saying?
Yeah, except this time it's at like one cent or something.
I don't actually know.
Probably a fraction of a cent.
by the way mag i did uh i did ping elijah maybe he'll pull up at some point if we're
Jeez, sounds like quite an opportunity.
if we're lucky enough otherwise we can probably take it from here mag we still can't hear you i think mag got demoted to listener
just pirate took over his spaces for the captain now yeah it's really strange because I do see a request,
but when I look at the menu,
Mag is already a co-host,
so I can't actually bring him up on stage.
That's fine.
I can already imagine what he would say.
Okay, he's going to rejoin.
He's still there.
He's in the...
Fuck yes.
And everyone's talking about me and I want to say things, but like, yeah, X is so buggy.
Well, thank you guys for hopping on.
Excited about Tapcoin.
I was just going to say, you know, it said welcome the $21 million supplies and welcome rest from the ever-inflating supply of the majority of Cosmos tokens, which as we know has been a tough thing to stomach, even though I think a lot of other tokens have unlimited,
like doesn't Solana have unlimited supply? Anyway.
we're not here to chat about Tapcoin, I assume,
We're not here to chat about Tapcoin, I assume,
but instead chat about a lot of your guys' upcoming
and I would say pretty now consistent
and coordinated efforts around Bitcoin,
which is a tough market to break into.
It's definitely a market that a lot of folks
have been going after recently.
And you guys have taken a number of different approaches to it.
And in addition to that, we're also
going to chat about some of the things going on with Cosmosm
and how you guys have been involved.
But maybe before that, just in case there are people here
who don't know about Neutron, would somebody
mind giving me a high level, what is Neutron?
Why should people care? What is the story? Yeah, for sure. And I'll charge you this as
concisely as possible. The TLDR is like, if you're really ambitious about building effective and efficient DeFi mechanisms. Doing that on a chain like Solana or Ethereum has a
ton of constraints that prevent you from shipping the best mechanism, basically. And so Neutron is
built from the ground up so that the blockchain itself is customized to allow you to build much
more effective DeFi, right? And what that allows you to do is like, you know,
you can have more liquidity for cheaper, have better execution, right?
Like, you know, you can have better prices on assets.
You can have more leverage.
You can lose less when you get liquidated, all these kinds of stuff, right?
So it's like a lot of innovation on the technical front
that makes for better products,
which makes for like better end user experiences and, and, and, you know,
more wealth, hopefully.
Better, better, better prices, more money, purpose built for DeFi and for
a cause of wellness.
Like that, uh, so that Papa John said, better prices, better money,
better pizza.
Incredible.
Excellent.
So, I mean, as part of that, you know, I think one of the things that has stood out about Neutron is it has,
I would say it's been the biggest adopter of a specific VM, Cosmosm,
that I think has enabled some of those things and would love to hear your guys take on,
you know, you were really pioneers of Cosmos at the time alongside folks like Juno, who, you know,
now I think are less pioneering.
And how has that bet turned out for you guys?
Do you feel confident in that decision?
Do you feel like that has led to a lot of the properties that you just mentioned, the
growth, the real ecosystem?
Are you proud of that choice? Are you continuing to invest in that choice?
Yeah, absolutely. I think that's a great question.
I think there's a number of angles to this question.
The first one is technical. Obviously, we can talk about the properties of Cosmosm.
Another one is network effects and business considerations and such.
We maybe talk about that like in a second point.
I think just like technically speaking,
Cosmosm is by far the most aligned virtual machine
with Neutron's vision, right?
The whole point is like, we're, you know,
we're very ambitious about the products
that we want to ship
and we are willing to change the chain itself
in order to make them possible to build.
And the only virtual machine that's closely integrated enough
into the blockchain to actually benefit from these things
very directly is Cosmos.
All of the Solana virtual machine or the EVM
are way more insulated from the rest of the blockchain,
which means that even if you had this really really advanced like integrated infrastructure, it would be
way more complicated to be able to like, you know, have the small contract layer basically
benefit from them in such a like nice and convenient way as like Cosmosm allows.
So there's this, there's like just performance, security, like most of the attack vectors
that, you know that DeFi protocols
on Ethereum suffer from are just not possible in Cosmosm.
Re-entrancy, for example, is not a problem, which while it's not sufficient on its own,
does make Cosmosm and Cosmosm-based applications way, way, way safer for you to put your funds
They're also easier to audit. They're more optimized and clean.
Like, for example, as a developer,
you don't have to whip out assembly code
to optimize your contracts for gas.
You can just build contracts, you know.
And so, you know, all of that
and the ability to build in Rust,
which is, you know, like a broadly optimized
and used language in Web2,
which has like very robust compilers
that are used by, you know by millions of developers across the world.
All of these are really, really strong features, basically.
So on the technical side, I guess, so my two cents.
Clyde, maybe you have some thoughts on that as well.
Yeah, I mean, technically speaking, you're right.
Rust is like everything about Neutron that enables us to be purpose-built for
defy things like modularity composability security um this all goes hand in hand with rust uh
yeah performance and efficiency we can go down all those characteristics i think the part of
mag's question that i wanted to touch on was you know how is this decision working out for us really
and i think it's really fitting um that we've become
the stewards of cosmos and that announcement that we shared in the last couple weeks uh i think did
a nice job of kind of rallying lighting lighting a torch and otherwise maybe sometimes bleak dev
community in cosmos and i was really happy as dev rel to get a bunch of devs uh reaching out that
are even even new devs that want to understand, hey, where are the Cosmos learning resources at?
Where can I get started?
And I think in that sense, it's been pretty affirming to get that kind of response in terms of us assuming stewardship of the VM.
Yeah, and on that front, I wanted to shout out to you, Mag,
and the ICL, generally speaking.
I think it's been,
there definitely has been challenges
for Cosmos and Maintain over the years,
but at least on our side,
at last we feel comfortable
with the knowledge.
The technology is going to be
well-maintained, secure, up-to-date
and such for everyone to use.
And I think that's a huge advantage.
And that's something that was made possible by you guys' involvement as well to some extent.
So thank you for that.
Thank you, guys.
I mean, I think it was something that was very emotionally charged.
I didn't realize the depth of love that so many people had for Cosmosm. It was something that was very emotionally charged.
I didn't realize the depth of love
that so many people had for Cosmosm,
even if they'd never built on it or coded on it,
or even use an app on it,
they had such a deep attachment to its existence
and that it had a good end story.
And I think that period of time
between when we made the decision not to do the
EDM and when we announced that actually we did have a story for Cosmosm, which you guys know
we've been working on for months prior, working with you guys to make sure that you were set up
to maintain it, that medium part was very tough. And I saw a lot of devs, you know, crashing out and saying like, that's it. You know, it's all I ever lived for.
It's all I ever wanted to code on.
Um, uh, but it, the truth is it does have a story.
Right.
And I think from our perspective on that, on, on why, you know, you guys are such a
great fit, you can't really maintain something and give it the kind of love and
attention that you need without using it.
That would be like, I don't know,
it would be like Apple trying to maintain Windows.
You guys are positive awesome.
You know the ins and outs of that technology.
You've pushed it to its limits.
You've built applications on top of it.
All of your customers use it.
It makes total sense to us that you guys,
you know, would be able to like take what you're learning from Neutron and put it into Cosmosm
to grow it and to make it more powerful. And I think it lends you guys an additional air of,
not that you needed it, but an additional air of credibility around being Cosmosm,
a Cosmosm ecosystem by saying, you know, we maintain the stack as well.
So I thought it was a great fit.
Happy to be funding it on our side
for you guys to maintain it.
And yeah, I mean, I'm personally excited.
I am curious though, you know,
what are the big things that you guys plan to do with it?
Now that you're sort of in the driver's seat, you know,
are there big features that you've been wanting to add for a while do you plan to try to um like uh create
some kind of um ambassador program to push it out into other places in addition to neutron how are
you guys thinking about that yeah i think you know we and i think we've been consistently in
investing in you into creating resources
and helping people on board that desire it.
But I think what's most important and most critical at the current stage
is actually our firm belief is that virtual machines live and die
by the network effects of their ecosystems.
And so the reason why, for example, Cosmosm was flourishing a couple of years ago was because there was this massive,
you know, ecosystem throughout Cosmos and also Terra that had, you know, billions of dollars
sloshing around like hundreds of thousands of years and such. And so the best thing that one
can do for Cosmosm going forward is bring back that kind of adoption and success
and such, right? And once you have a market, developers will flock to the ecosystem. They
will find sustainable opportunities to build businesses, to build products and companies,
to find funding and such, right? And so that is really the key root cause of a lot of the
challenges that some of the current teams are having, which is that the key root cause of a lot of the challenges
that some of the current teams are having,
which is that the market so far is too small.
And so that's really what we're focused on solving.
And I think the Bitcoin summer campaign that we're working on
that is very soon launching, I think, is directly tackling,
if that makes sense.
Tackling this question of how do you onboard new developers?
How do you excite them enough to learn the framework?
Those kinds of questions.
Well, no, more so like how do you make,
like how do you create a market that is large enough
that all of these guys, you know, like people are smart, right?
When they look at like, okay, where should I build, right?
They have an idea.
They could build in a number of chains, in a number of ecosystems.
The way that most people think about this is like,
where is it that I have the best chances for this thing to take off, right?
And to a large extent, the default answer for a lot of people have become,
or like the default advice that a lot of people have been giving
is like, oh, you should go on Bayes or you should go on Solana
or something. The point that I'm making is
we need to get to the point where that default
answer is like, go on Neutron, go on
Cosmosm, go like, you know, that kind of stuff,
right? And the way that we do this is by
using the fact that there already
is a large, strong,
talented developer pool in Cosmosm
and convert this into really groundbreaking applications
and use cases that are actually valuable, right?
Like two things that people actually care about,
which today is Bitcoin and Bitcoin yield.
And how do we leverage this in order to establish
a really strong position for our ecosystem,
which over the coming years, once we're successful in doing this,
will basically continuously attract people
into learning about Cosmosm
and building new things and new applications and such.
And so feed this light wheel, right?
So I think it's like a lot of ecosystems
can take this approach of,
we'll first build tools and whatever,
and then people will come to use them.
I think that's useful and valuable
to have good tooling and such.
Obviously, it's valuable and it makes your life as a developer way easier.
But if you look at the trajectory of Ethereum, the value came first and tooling came second.
It's like when it started, it was absolute ours to build on. But there was something really unique
and powerful about this ecosystem.
People started creating value in there,
and this is what enabled the compounding
of developers into building toolings,
which get better, which allow more people to build,
which allow more tooling to be developed and stuff, right?
So rather than the cart before the horses,
the focus right now is like,
okay, let's build the biggest DFA ecosystem possible.
And how do we do so?
Well, we have to think strategically about this.
And so our first question is like, where do we play?
And today there's this huge movement around the desire for yield on Bitcoin that is completely unmet because most of the opportunities that exist for Bitcoin are fairly unsustainable,
right? It's like, you know, X, Y, Z projects just like sharing their inflation or their incentives,
hoping to figure out a business model before the incentives run out, right? Well, you know,
if you apply some innovation to that problem, there are solutions, basically. And so like,
you know, Bitcoin Summary is basically about, about you know how do we tackle this market bring actual yield to bitcoin and like use this in order to create a
very very large ecosystem that will like create compelling reasons and opportunities for people
to onboard to Cosmosm if that makes sense yeah that makes sense and i appreciate that you use the word to describe Ethereum as arse, which I'm translating to ass in American.
So I appreciate the politeness there.
Yeah, so that's really interesting.
I mean, I would say there's many different ways that you guys could have approached this, right?
In terms of this question of how do we create a really exciting, valuable ecosystem on Cosmosm
and then use that to attract developers in, right?
The way that Terra did it was via a giant Ponzi scheme.
I'm glad you guys are not doing this,
at least from my understanding.
But like, how did you pick Bitcoin, right?
Like there's so much going on right now around trading and high frequency trading.
And I've seen some of your guys' updates regarding speeding up your block time.
So it just sounds like you've made a lot of progress on.
There's also a lot of stuff going on around prediction markets with Polymarket.
And I forget the names of the other ones, the ones that Greg from Twitter is showing.
There's a lot going on around like asset issuance.
How would you guys decide, okay, Bitcoin is the place to begin here
and the place where we can win?
Yeah, that's a really good question.
I think generally speaking, you want to find a really strong need
that is felt by a very broad market
and that you can uniquely solve, right?
If we only have the same solution
as everybody else to bring to the table,
then, you know, regardless of the size of that market,
that's not going to be very, very, very appealing.
But in the, you know,
so we were looking at all of these trends
and all of these, you know, for example, like the whole AI trend happened.
And we did not like ride that wagon because we have nothing to add to that conversation.
But on the financial side, right, like our team has, you know, a lot of our people are from like Lido background, right?
So we've seen the financialization of a large asset before right
we've sort of like applied this playbook to ether to ether before you know doing it to to to bitcoin
right and so like we have a lot of context on like what that looks like and so you know we were looking
at this market and i think there were a few things that were really exciting like the first one is um if you look at the bitcoin fi market right now it's been
one consistently growing um it used to be like just a few billions a couple of years ago now
it's like you know double digit billions and it's consistently continuing to grow bitcoin has been
like on on a massive tear for like the last year and more um institutions are onboarding and such
there's like a bunch of catalysts, right?
So the market is growing.
Two, a lot of the current solutions
to the problem of like,
I want yield on Bitcoin
are, let's say, very limited, right?
The competition is pretty young,
immature, not very sophisticated,
let's say, right?
Who is this competition?
Like who are your, who is like the biggest guy right now in Bitcoin fields?
That's a good question.
I think there's a number of different types of verticals and categories.
I think there's projects that are basically offering
kind of like, you know, stake Bitcoin to my chain
and then you'll get some like inflation of like
this other token and whatever I think
there's like lending and borrowing that's like
under collateralized and such that's
like also trying to go after this market like there's
a lot of like early attempts and I don't think
that there's like a
massive established guy so far
right this is what I mean by like
it's kind of like there's a huge market but it's very
immature still like there's not like there's no big players you're saying right now like it's really
that emission no no i mean there's plenty of big players right like lombard and babylon and all of
these um are fairly established they've done a really good job at attracting a lot of a lot of
tvl and such but i would say like you know their ability to generate yield at scale on bitcoin
is i think something that they're still working on and that they're looking to improve because staking yields on Bitcoin have not yet manifested the vision that people had for them, if that makes sense.
It's a good start, but it's not sufficient so far. And I think this is where we have an opportunity because there's, as I mentioned, a lot of talented people in our ecosystem.
And one of these is the structured team, which is a team that is working on introducing a product called MaxPTC.
organic yield-bearing Bitcoin derivative
that actually has organic yield
and that is way higher than what is generally available
on Bitcoin across the industry.
If you look at like RAPTC lending, for example,
on most networks, that's going to be like 0.5% APR,
which is nothing to write home about.
Most of the other opportunities are overing
like 2% to 3% max based on the pendule and stuff like estimations when you're looking at the points.
And the other positions are basically just incentivized.
And so when the incentives run out, a lot of these collapse back into fairly unappealing rates. And so there's this constant shurn of TVL from one opportunity to the next because just
the campaigns run out.
But with this product, because it's exciting yield, there's like 5 plus percent on Bitcoin
and that is organic and therefore sustainable, there's an opportunity to basically create
a financial system around that basically. Does that make sense? there's an opportunity to basically create an ecosystem, like a
financial system around that basically
does that make sense?
Yeah, that does make sense
I mean, I think I've been in a similar
place or in a similar
battle
because even when it comes to
the adoption of the Cosmos stack
one of the big things that
confuses people is like
why didn't Robinson choose Cosmos? Right? of the big things that confuses people is like, why didn't
Robinson choose Cosmos, right?
Especially when they wanted to have an L1.
And the reality is because they got paid a hundred million dollars to not
choose Cosmos, right?
And to go with Arbitrum.
And I think it's easy to confuse that because obviously these deals aren't
shared and sometimes a lot of the incentives are obfuscated.
It's easy to confuse that with market traction.
Right.
And like at the end of the day, you know, at some point the money has to run out.
Right.
And like you can't just keep doing an infinite number of a hundred million
dollar shots on goal, or, you know, there can't just be an infinite number of
$200 million incentive campaigns to attract Bitcoin and something, there's going to be some equilibrium that's going to favor organic.
So I totally get that from your guys' perspective.
I guess the structure of the Bitcoin market is really interesting to me
because it seems to have shifted substantially quite recently.
It used to be, from my understanding, it used to be basically you would hold your Bitcoin
on your Bitcoin wallet and you don't need yield because the price is supposed to always go up.
That's the number one feature of Bitcoin is it goes up over time.
You didn't have that, people wouldn't be so excited about it, I assume.
That's about it and everything else was kind of a scam. But recently I've seen a lot of things that have shifted my perspective on this.
Not that it's a scam, but that the rest of the market doesn't believe so itself,
which is, like you said, these liquid-staked Bitcoin providers, right? Lombard, Solve, Lorenzo, Hump, all of these
different guys have attracted, you know, billions in Bitcoin collectively. And it's interesting
because they don't actually provide yields themselves, right? Like they don't actually
have the yield, but yet they're collecting all the Bitcoin.
Their job is to go out and find the yield on behalf of the people who gave them Bitcoin.
So they're kind of like, at least my understanding is like, they're kind of like an intermediary
between all these Bitcoin folders and the yield generating protocol to like match them up.
Is that the right understanding of how these big liquid-staked Bitcoin providers work?
I think there's some truth to that.
I would say it's like,
probably there's a few more pieces to the puzzle.
As in, I think a lot of the LSTs themselves
are kind of trying to financialize their own assets.
And so like, you know, they're sort of like using whatever capacity they have to incentivize to, you know,
bootstrap liquidity and like long lasting use cases and such,
while also kind of like sometimes playing this game of mediating, you know,
large conservative LPs with like yield opportunities in the industry.
large conservative LPs with like yield opportunities in the industry.
There's also like a sort of like cohort of projects today that are,
you know, a bit flabbergasting to me because like the business model is basically,
you know, some LPs want, and maybe it would make sense to take a step back
and talk about like the changes to the
general market but like some lps basically don't even want to take any risk to their bitcoin right
like they're like they would love to get some apr on top but they do not risk-free at all yes they
want risk-free yield and the the surprising thing to me is that there are people willing to pay for
this it seems like tvl numbers and optics optics are valuable enough to a number of projects.
You can actually play this game of, let me deposit real Bitcoin into, let's say, a multi-sig with the developers of a project who will go out and mint some receipt for that Bitcoin, which can take the form of a stable coin,
can take the form of a Bitcoin derivative.
It depends, like the formulas are like depends.
And then these guys will go on and negotiate integrations
and incentives package with a number of protocols in the industry
and pass on some of that yield to the Bitcoin providers.
But if something actually happens, and pass on some of that yield to the Bitcoin providers, right?
But if something actually happened, the deal is that either one,
the project would just basically pay for the losses based on the cut that they took of the rewards,
or if it's worst case scenario,
the Bitcoin would still not move from the multisig basically.
And so like the asset would become unbacked, if that makes sense.
And so like, I think that's a riskier,
less interesting part of the Bitcoin financialization cycle
in the sense that like, this is, you know, like,
this kind of shenanigan, in my opinion,
is kind of like fake TVL, if that makes sense, right?
And so like, I think that that's something to watch out for.
And I think it goes into the same sort of direction
of what you were saying about some people
just use really aggressive marketing tactics,
like, for example, paying $100 million
to attract one project in order to give the appearance
of product market fit and hype and stuff.
And some of these games are,
most of these games actually are fairly short term.
At some point, the music stops.
Yeah.
Yeah.
I mean, I don't want to name names, but there are, I think, very big examples of that music stopping recently for a couple projects that attract a lot of Bitcoin liquidity.
And it does seem that it's that,
because it works is the sad thing.
You see an ecosystem attract 200, 300, 500,
$1 billion of TBL in Bitcoin.
And everyone's saying,
oh, it's like X chain is the Bitcoin chain.
You believe it, you buy the token, and then you realize that what you're getting is participating in a system that is used to just incentivize this Bitcoin to sit there with no actual utility, just sit there.
And then as soon as those incentives run out, all the Bitcoin guys who are getting the incentives are just selling it, right? Because they don't want to hold anything except Bitcoin.
Then they go to the next one, right?
And they give that team the moment in the sun.
And that is like, you know, that is tough.
And the sad thing is, I think it's not very well understood and it can be tough to spot it when it exists.
But I know that's not what you guys are creating. So let's transition into why is what you're doing different?
Let's talk about this organic yield.
Let's talk about how this is going to outlast all those other kinds of things.
Yeah, I mean, great point.
And to be fair, like, I think one of the reasons why this is happening is because people can
see that there's a lot of demand for yield on Bitcoin, but don't actually have a compelling
solution for it, right?
And so they come up with a bunch of shenanigans
to make ends meet and be able to tackle this market.
But that's where I think stuff comes in, right?
If you look at the financialization of Ethereum,
I think there's a number of lessons there.
And some of the primary pieces of insight are
that there aren't that many trades happening in defi actually right trades that like matter at
size right um i would say the two primary ones are one leverage looping leverage looping is you know
billions of dollars on ave on morfo on basically all of the lending and borrowing venues, particularly the isolated one, on Mueller, extra, extra.
And, you know, by size and by importance, it's kind of like one of the primary trades in DeFi.
And the way that it works is basically just I have a yield-bearing asset that I can mint with an underlying, right?
I will use the yield-bearing asset as collateral, borrow more of the underlying, and I will use it to make more of the yield-bearing asset as collateral borrow more of the underlying and i
will use it to make more of the yield-bearing asset and so you know when you do this you're
capturing a delta that allows you to basically take on leverage on the yield and if you are
somewhat sophisticated or risk-taking like that can be really profitable and it's decently low
risk because you're dealing with assets that are correlated
with one another and therefore you're very unlikely to be liquidated right so that's that's
strategy number one and the strategy number two and this one is a bit newer slash less seen in
defi specifically because it was structurally constrained in like on chain until recently
but i would say that's the basis trade and the
best like representation of the basis trade is like athena right it's like let me do the basis
trade of chain actually and then tokenize it and make it available on chain right um and those two
account for like the majority of like of defi actually um can you explain the basis trade
because i think a lot of people hear that and they're like, wait, what actually is that?
Yeah, that's of course. So the basis trade is the idea that you can, I'm simplifying, obviously, but like for the sake of the conversation, let's say you have RepState ETH, which is making a few percent APR in ETH per year.
percent APR in ETH per year you can hold that so like the actual token that is
spot you're holding spot and earning that yield and you can use this as
collateral to short on purpose eg like speculate on the fact that ETH price is
going to go down on perpetual exchanges which is generally an unpopular trade
like most people are betting that the price of
crypto assets are going long. And as a result of this, the people who are making the consensus bet,
who are betting that like the prices go up, will pay you an additional yield all of the time,
right? Like most of the time, rather. And since you're holding the actual asset,
and therefore, you know, if its price go up,
your actual asset goes up in value,
but also betting that it's going to go down
and collecting the yield in doing so,
you're like, whatever the price does,
your P&L shouldn't actually change.
So you're just sitting here collecting the yield
from both of these sides.
And you have kind of like a stable coin-ish exposure in the sense that like
your P&L is not like subject to the price movement of the asset that you're
that you're doing the trade on. Does that make sense? Would you explain it like any different?
Yeah, I think at a high level it makes sense. Obviously it's a somewhat complicated financial topic but it's basically
most of crypto is like super bullish in a kind of like deranged way and like on some places you can
actually arbitrage like that deranged bullishism with like places where you can borrow for like
less um and there's like a difference in there's a difference in how much you're
getting paid to go against that bullishism and like how much you pay to borrow the
asset.
Um, and like what, what I've found a little bit is like that exists in so
many different places, right?
Like that exists between lending markets and perpetuals markets.
So like hyper liquid
versus, um, let's say like, I don't know, something like, uh, you know, Mars vertical.
Um, it also exists between perpetuals markets. So for example, like right now on Ellis, which
has perpetuals market, you, you have to, uh, like you have to pay 80% to go long because everyone there is so goddamn bullish on Adam.
And then on Hyperliquid, you get paid 16% to go short.
So there's a huge arbitrage opportunity just because of, I don't know, I guess people on Hyperliquid are less excited than people on Ellis.
And you can arbitrage that.
And that shows up in many
different places. And it is almost like, unlike a lot of arbitrage, it's structural, which is kind
of unexplained, I would say. But for example, the ETH Bitcoin basis trade goes back as long as ETH
and Bitcoin have been alive and has been studied extensively because it shouldn't exist, but yet it does.
And it always has existed and it's now being exploited,
or not exploited, but leveraged by a bunch of different firms
and it hasn't gone away.
So it's a very interesting concept.
Yeah, exactly.
Like the whole family of cash and carry trades, I guess you're right.
And I think another point where you're right is this trade is actually already massive off-chain.
There are funds that are running these sorts of trades, not on-chain exchanges, but off-chain, in very, very large size, like billions of dollars, right? And I think Athena and new projects like Resolve and others now are sort of like bringing some of these by tokenizing them, making them available on-chain, right?
Like, to my knowledge, there's no protocol today that does it fully on-chain, but I think that this is like the next like logical step, if that makes sense.
And that's what you guys are doing?
Yeah, yeah, pretty much. That's correct. That's one of the things that we're doing.
The TLDR is that, okay, so there are these two trades.
Those account for the vast majority of DeFi activity and
TVL. And today, both of them are unaccessible to Bitcoin.
Number one...
Just to repeat, it's the leverage looping trade right and the uh basis
trade you're saying yes exactly okay both of them are inaccessible to bitcoin right now because
one there is a lack whoops um there is a lack of um a yield bearing asset that is yielding sufficiently higher than other versions of Bitcoin, basically,
for the arbitrage to be profitable to do in a long-term way, if that makes sense.
There's instances of this happening at a smaller scale between different assets and such
due to incentives programs or just the expected value of TGE tokens and such.
But generally speaking, structurally, it doesn't happen like it does for rap state eth and eth for example um so that's that's number one right like the leverage looping just isn't happening because
of the lack of a yield bearing version of bitcoin at scale and then second basis trading doesn't
happen because of that reason plus the fact that um you can't use yield growing bitcoin as collateral on-chain right
and so that is like you know those are two things that like are being solved on the neutral ecosystem
right now which means that like it creates an opportunity to basically rally all of the players
around creating an ecosystem where you know all of the primitives that neutral has built can be
used in order to unlock the primary use cases and like trades of the primitives that Neutron has built can be used in order to unlock the
primary use cases and trades of the industry for Bitcoin, which itself is a huge opportunity
in my opinion.
Wow.
Yeah, no, that sounds really interesting.
I mean, yeah, it's like a lot of studies have happened recently that I think enable this.
of things have happened recently that I think enable this. One thing that, not to shill
IBC, but I do want to shill IBC, I think in addition to the restructuring of the Bitcoin
market around these LST providers, around the accessibility of off-chain strategies,
like the basis trade, which you can now leverage on chain with things like Athena. We've seen it other places too.
I think the last thing is we now have, at least for Cosmos chains,
a way to get Bitcoin or at least Bitcoin derivatives or Bitcoin derivatives on Ethereum into Cosmos very easily over IDC Eureka.
And I'm curious, are you guys leveraging that power
to power this Bitcoin future and this aggregated Bitcoin DeFi market?
Yeah, absolutely.
And very smooth segue into that in the sense that as part of the campaign that we're preparing that's about to launch,
As part of the campaign that we're preparing that's about to launch,
one of the ideas was that we wanted to solve this isolation
that sometimes exists when you have a dedicated blockchain or such
by enabling users to participate directly from Ethereum,
for where most of the capital is held today.
And we worked with Valence, which is this great cross-chain protocol, from Ethereum, right? Like for where most of the capital is held today. And, you know, we built, like,
we worked with like Valence,
which is like this, like great cross-chain protocol
to build these vaults that basically allow you
to like deposit on Ethereum,
but actually have all of your assets
to like do things on Neutron
and like get the,
so like the benefits of that basically
without any friction.
And all of that, all of these vaults
use IBC or EK in the back end, right?
So just like you were saying,
that facilitated the flow of assets
between those two ecosystems tremendously.
And especially since it feels faster
and it feels much more cost-effective
as well as a solution.
And it's natively integrated
within all of the IBC rails
that have been laid out over the years
and all the way to SkipGo and all of these,
which means that you get a pretty well-integrated package.
Yeah, no, that's really cool.
I mean, I'm excited to collaborate with you guys on that
because I assume there's going to be a lot of product learning
on the Eureka side, which is still very, you know, in its infancy
and you guys are going to be an early adopter
for all intents and purposes.
But also it is the protocol that's being used
to bridge everything to Babylon,
like all the different LVDC derivatives
and, you know, liquid state things.
So I think that will help you guys
in terms of just like having all those integrations
set up with Lombard and Solve and Lorenzo, et cetera.
Yeah, absolutely.
Actually, it's interesting.
We were discussing like before the space,
wondering whether or not, like,
because, you know, as you mentioned,
we're definitely going to be early adopters
and we already are.
We already, like some of the assets on Neutron
that are, you know, in Supervolts being market made and and status and uh so like
servicing skip go uh volume today are eureka bridge basically already right but so we're
definitely early adopters but uh some of us thought like we're wondering basically are we some of the
largest adopters already um what what kind of like traction are you seeing for IDC Eureka so far
among these different ecosystems and such?
What would you say are the largest users and such so far?
Yeah, not to, I mean, I want to keep this about you guys,
but I will go into a little bit
of what's been going on at the ICL.
I mean, for everyone who's been watching,
I think folks are familiar
with the most recent strategic change,
which initially we were,
and we still are building the Cosmos EVM,
but we were going to deploy it on the Cosmos hub directly.
We switched course after realizing,
going back to some of the conversation we had,
Admiral earlier on this space,
that's not a very differentiated VM.
It's very expensive to power the incentives to get builders on that.
It just looks like a money play.
And we weren't very excited about that, especially since we didn't have the kind of
super deep pockets that Solana and Ethereum have, like Base and Arbitrum and Optimism, et cetera.
And we've transitioned much more to focusing on building the stack into something that serves
outside institutions, real businesses that we can onboard into crypto via the Cosmos stack and via
our tooling like IBC Aureka. And so that's kind of where we've been thinking about IBC Aureka recently,
because one of the things that we anticipate is, you know,
there are going to be a lot more chains in the future, right?
Like I truly believe that the vision of having, you know,
every business have a blockchain in like 15 to 20 years is actually not crazy.
That is seemingly where things are going.
And to make that work, you need IBC Eureka.
You need something like it.
And so we've been adding the work that we're doing right now
is creating a generalized system to onboard new chains very easily
and do it much faster. doing right now is creating a generalized system to onboard new chains very easily
and do it much faster. So we've been creating an attestation system so that we can connect to Solana,
that we can connect to Base, we can even connect to things like XRP and Cardano and all of these
chains that are traditionally forgotten. And I think the things that we've seen so far are, one, if we deploy, like a bridge in
itself, just having the protocol out there doesn't do much, right? I guess there's like many
corollaries to this, but like, you know, creating the Cosmos stack doesn't do much. What you need
to do is you need to attach it to real world instances of adoption. You need to create
or work with partners who can create incentives and reasons to bridge. And we started that with
Babylon. But to be frank, the Babylon incentives did not start and still haven't really started.
And so we didn't see a lot of reason for people to move their Bitcoin from Ethereum to
Babylon. And then another sort of organic adopters in Ellis, which has now created, I think, some of
the deepest liquidity for some of the Eureka assets like Eureka Bridge Bitcoin, Eureka Bridge ETH.
And we're now talking to Osmosis about adding liquidity for that.
And then of course, this is a big focus for us too, like the Neutron adoption, the usage
of it for its Bitcoin properties.
We're seeing a lot of that already with Babylon and we think you guys can bridge the divide
that was missing, which was actually offering a reason to bridge, right?
Because now there's a reason to go from Ethereum to Neutron.
And there's a reason to transfer it from, you know,
wherever Lombard has their BTC into Neutron.
And that, I think, formula was missed, right?
Because with Babylon, you could keep your Bitcoin on Ethereum
and you could still get the airdrop.
You did not have to bridge it to Babylon.
That, I think, is a critical piece, right?
Outside of that, we're generally talking to companies
about how we can use IBC or RECA to bridge their asset.
So especially for like RWA issuance,
a lot of those conversations are early.
And I think that's kind of expected because we saw IBC itself
take about a year before it was really even usable, let alone well adopted. And slowly,
as you said, the very incentivized bridges like layer zero and Axelor, et cetera, we
think are eventually going to run out and the best technology will win. And we still truly believe that is IBC or Eureka at this time.
So that's sort of where things are right now.
But as I said, we're very excited about working with you guys on this.
And I think it's going to be a big test of how Eureka can transfer a lot of
capital and be a good bridging partner for you guys and actually creating this
ecosystem.
I think we're equally as excited for your success.
I think IBC was among, if not the first aspect
of the Cosmos tech stack that it got properly shilled on.
So very happy to see where you guys are taking it today.
I'm personally, I'm really pumped with the XRPL EVM sidechain.
And I'm glad you guys are seeing a lot of some traction there.
I know that team pretty well.
It's looking like a promising one to be sure.
Yeah, thank you.
Cool.
One quick note on this, which is that I think all of that makes a lot of sense.
I think tough decisions are being made,
which I think is exactly why people were excited to see you guys like step up.
So I think that's all very positive.
But bro, 64 pages.
Oh my God, you read that?
Yes.
Why did you read that?
Why did you post 65 pages?
I didn't post it
bro i put it in the adam community chat well chad gpt read it for me we're good we're good
that's good um so just for context for anyone listening if you haven't joined the adam community
chat it's not just about adam a lot of people are in there from Cosmos. It's fun. It's a good vibe. People post very horrendous doctored images of Zeki in various different situations.
But one of the things I posted, there was a 64-page research document that outlined the
strategic paths that Cosmos could go with the conclusion that basically working with
institutions, because what we're doing is one of the best options.
But what I will say about all of that, and I think just to tie it back to Neutron for
a second is, you know, Neutron just made, you guys just made a very big chain, right?
And I don't want to forget it.
You became a fully sovereign chain, right? And I don't want to forget it. You became a fully sovereign chain, right? You
switched off of ICS, having been, you know, the biggest and first real ICS experiment,
and you've, you know, forged it on your own. And, you know, you're making big moves, and you're
you're making a lot of changes that for a long time, I think you were,
making a lot of changes that for a long time, I think you were, you were hampered from doing.
you were hampered from doing. And, you know,
we have now made a big change to our roadmap at the, you know,
as the quote unquote hub team to,
to not build our own EVM on the hub directly.
That I think has led to a lot more collaboration between the two teams that,
you know, neither of us expected because, you know, now we have a bridging product
that you guys can actively use.
You guys are working with an asset that institutions actively want,
which are the customers that we're now talking to.
And we're not competing for developers in terms of, you know,
we're not trying to grab teams and convince them to join EVM and vice versa.
And we're working with you guys to
actually maintain Cosmos to begin with. So I think it's a very exciting time in Cosmos because
there's a lot of protocols. Cosmos is going through a lot of changes right now, but I think
there's a couple of protocols that are really shining through and being very collaborative
and really starting to work with us and work with other
Cosmos protocols to actually break out and build these products that do meaningfully change the
DeFi landscape and do meaningfully attract liquidity. And I feel like you guys are,
you haven't made it, of course, in terms of getting there, but I think you're aiming for
a pretty big target here, right? You're aiming for Bitcoin.
And the truth is, if you hit it out of the park there,
it's an unlimited opportunity.
It's way bigger than whatever Ethereum is going after.
And so I think that's really exciting.
And honestly, I have a lot of respect for you guys for thinking you can do it and giving it a real shot.
Yeah, I appreciate it tremendously.
And to be fair, to give back to who is owed,
I would say Elijah, who joined the space,
is also a big, big reason for us going into this direction,
building conviction and building the capabilities
of taking a really exciting shot there.
So Elijah, if you want to come on stage like just uh request it i think everybody will be
happy to have you on yeah elijah if you do want to hop up i'd love for you to speak a little bit
about duality um i don't know if everybody knows this yet but we did recently i think you guys did
it but you integrated duality into skip go for the first time i was as i do buying adam
with usc and all of my trades are routing through duality and i knew because there was some little
trade in the middle that was buying neutron i think to pay for the duality transaction and i
was like let's go guys that's it you have the best execution for like relatively large
that you have the best execution for like relatively large size um so i'd love to yeah
uh aliza if you can speak to that um it seems like things are working out i would love to hear more
about that yeah i i would have joined earlier but i i had my lunch break um yeah uh i guess i was
called up um i don't know like what was so far, but I guess just sharing some thoughts.
Shield duality.
That's all you need to know.
Shield duality.
Yeah.
I think one of the things that always stood out to me about the Neutron team and community
and ecosystem of projects was we always had this North Star of like, you know, bringing like really great,
like yield products to market, you know, and the team's background, right, comes from like P2P
and Lido, right, where it's like, you know, the things that, you know, were instilled in us and
the experiences that we had were very much around like, how do you just bring these things to market? Like, you know,
liquid staking tokens, you know, like strategies on top of them, things like that,
and understanding like the market structure and dynamics around those systems.
You know, I love like the notion of like, knowing what your edge is, and like trying to pick a path
and a strategy that aligns with your edge. And I think the edge that, you know, we've always had is, is, you know,
understanding like how those markets actually shape up.
Um, and I think the thing that we started to see were basically headwinds that
there was this, you know, large inflow of demand into BTC yield products, you
know, both like, you know, BTC LSTsSTs, but also like how they're actually used and all
the other parts and pieces that need to happen around that to make it useful on the liquidity
end, on the leverage end, et cetera, et cetera.
What actually is a good BTC yield product?
And I think the combination of the team having a good BTC yield product? And I think like the combination of, you know, the team having, you know, a good amount of experience and expert, you know, genuine domain expertise in how to bring those types of things to market.
And then like actually, you know, realizing, hey, there's this, you know, market that's starting to bloom with all this demand.
But, you know, nobody's actually doing the right work around that asset to try to make it possible. So I think like one of the coolest
parts about duality, just to like tie it into Max question is like the way that we approach.
So like, you know, most AMMs are kind of built or like even order books or whatever,
they're built very much as like one size fits all solutions.
It's kind of like, here's your thing and everyone, you know, has the same needs. But the reality is like, you know, different assets have different needs, different liquidity providers have different
preferences. And you want to like build, you know, systems and tools that like can, you know,
accommodate, you know, the different preferences of different liquidity providers and, you know, the different needs of different assets. So a lot of what we do on like
the duality side and the exchange side, but also like across the entire ecosystem is just thinking
about like, you know, what do assets need, right? And what makes different assets different? And
then how do you build systems that like get the most out of those assets. And, you know, you know, my belief,
and I guess we'll see this and, you know, how successful or not successful the, you know,
Bitcoin summer campaign is. But my belief is that like, there's a lot of efficiency and gains
and, you know, other good stuff, you know, being left on the table, because people are just not
being super thoughtful about the assets they're supporting and the users they're supporting.
And if you can build DeFi systems that cater to those things, they'll just be a lot better.
Yeah.
At a minimum, we'll learn a lot about all those people, which is like half the battle,
I think.
It's just really getting those contacts, talking to the people who hold Bitcoin, who deploy
Bitcoin and realizing what it is they need.
Because I think a lot of people just throw incentives at the problem and then they'd
send them for now as we were chatting about earlier.
But it sounds like you guys are thinking about a lot more from the ground up fundamentals
perspective.
What is the risk profile?
What are the trades
people are comfortable taking? What is the kind of experience they want, which I think is going
to be fruitful? Yeah, exactly. Like, you know, one of the things that's, you know, kind of silly
to me is like, one of the first things people teach you to think critically, you know, to help,
you know, your critical thinking is like the thinking systems, right? You know, know, know
where the sinks and flows are. But like, you know, you don't really find that in a lot of, you know, like the way people are
approaching problems right now in DeFi. And so like, you know, to your point about kind of
identifying those different trades, right? Like if you, you know, if you know, there's, there's
kind of, you know, the pieces, I guess that, you know, we're trying to put together is like,
let's see what's actually working in existing yield bearing assets. And, you guess, that we're trying to put together is like, let's see what's actually working in
existing yield bearing assets. And if you actually look at DeFi, the wide majority of DeFi is being
driven by either liquid staking tokens or yield bearing assets that resemble liquid staking tokens.
And not just is that TVL, Lido is the largest protocol by TVL, but also like, you know, LSTs in general contribute to a lot of demand for TVL outside of just that.
Right. So like a lot of the ETH volume, right, that goes into like sustainably supporting liquidity on Uniswap comes from people like liquidating Steeth to USDC.
Or a lot of the ETH lending supply right now is just being lent out to people who are borrowing it so they can deposit it into staking yields and like earn the difference between borrow costs and the staking rate.
And, you know, if this is happening for ETH and Sol and all these other assets, you know, it's going to happen to Bitcoin as well, right? Like it's Bitcoin is the largest crypto asset. It has, you know, there's no one, you know, no other asset in the world can, or no other asset in crypto at least
can kind of claim, you know, the throne in the sense that like, you know, anyone in crypto is
willing and excited to have exposure to Bitcoin and no other asset can say that, you know,
there's people who have like a bone to pick with ETH and people have a bone to pick with soul.
But, you know, Bitcoin is kind of this thing that everyone in crypto is okay
with holding, but there's been no way for the people who have funds.
It's too big to fail. That's my conclusion.
At this point, any haters have just been proven wrong.
And so it's like, you can't credibly hate on it.
Like anyone who's ever called Bitcoin top has just been humiliated to oblivion.
So it's like like it's a
reputational suicide to go to this viewpoint yeah it's like a beautiful era we're entering too like
a lot of the ogs who i've spoken to um you know i've like told me stories about like you know
like uh actually someone we work with i don't want to dox them but someone we work with
dropped out of um uh college um you know in their senior year to like go full time
in Ethereum in like 2015, 2016. And like, you know, like, you know, one of the conversations
I've had with them a bunch of times is about how like, you know, back in the day, you know,
it felt like at any moment, like the industry could just like disappear. And like, you know, more than ever now, like that's just like, you know, feels, you know,
it doesn't feel like there's any risk of that anymore.
It's like less about, you know, whether this thing will like, you know, disappear or not.
And it's much more about, you know, what will this thing look like?
And you know, I think like with all of the institutional options, stuff like that, it's
very clear that like all this stuff is here to stay, especially Bitcoin to your point.
So yeah.
Yeah.
I want to be mindful of time.
I'm forcing now three minutes like to connect us all.
And I want to say thank you guys for hopping on.
Amazing that you guys are doing this.
I really hope Bitcoin summer turns into a wonderful fall.
And you guys have the adoption of the show
for all the hard work that you've been doing.
Thank you for using Eureka.
Let us know if there's any problems with it.
And yeah, guys, thank you.
Thank you, Neutron team.
Keep killing it.
Thanks, Meg.
Thanks a lot, Meg.
And keep it going with Eureka and everything else.
Really excited to see all of this joint work blossom.
Bullish.
Okay.
Thanks, folks.
Catch you soon.
See ya. Thank you.
