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DEFI SEASON IS BACK?? 💥 The Aggregated Ep. 106
Recorded: March 28, 2025 Duration: 2:58:54Space Recording
Short Summary
The DeFi landscape is witnessing a resurgence with strategic partnerships, innovative yield strategies, and the integration of real-world assets, signaling a positive growth trajectory despite concerns over sustainability and market risks.
Full Transcription
Thank you. Thank you. You gotta pump it, pump it, pump it. You gotta pump it. okay
you gotta You gotta hunt it, hunt it, hunt it. You gotta hunt it. Nice.
Bummed out we didn't get to play the nerd song, Darren.
Another time, maybe.
Yeah, I don't know what's going on with that.
The audio is really weird.
Yeah. Well, thanks for making it anyway i'll keep it from me all right cool hey guys it's uh nerd girl here sorry this is nicole this is going to be a little
bit different uh rock has a couple of meetings booked today and Aztec is still taking some time
off so I guess it'll be me
and Darren this week right
yeah any complaints
we'll send them right to
Richard
yeah right to
writer yeah yeah nice
okay cool cool well
okay so this episode Darren
if it's you and me it it's going to be trouble.
That is the plan.
Cool, cool.
Or should we get started with introductions?
Yeah, go for it.
I think we're still waiting on a few people jumping in.
So I'll deal with that if you want to deal with the introductions.
Yeah, so I'll just call on people
um like in the order that i see people uh no need to raise your hands of course as always this is
like a yeah a show so all right um let's do two cent timmy first gm how are you everyone
i i feel like uh this this one is either going to be the best show or the one
that goes most off the rails without uh one of those well well the mouse is or while the cats
away the mice will play sort of thing without a rock or aztec here so it's going to be a very fun
space but uh yes i am two cent timmy i on the Polygon social marketing team and very happy because I love DeFi and I love talking to DeFi, so it should be a good space.
Awesome. Sounds good. Hey, TwoCentTimmy, I don't know if you know this, but it used to be back in the day that Darren would get a really bad idea and then I would implement the idea for QuickSwap when Rock and Aztec weren't paying attention.
So yeah, you're exactly right there.
Okay, next intro, Gamma.
Hey, how's it going?
This is Brian from Gamma Strategies, and we're a liquidity manager on Polygon and on QuickSwap.
Yeah, great to be here, guys.
Thanks for coming.
All right. Thank you.
All right. Next up,
should we do Kevin
Yunai, CEO and founder
of RWA?
Yeah. Hi, everyone.
Great to be here.
I'm Kevin Yunai from RWA,
Inc. We are real-world asset
tokenization and investment ecosystem.
One of the largest ones I've heard in the world.
We have around approximately 200 partners.
And we are also trading our token on various central and decentralized exchanges.
And yeah, I'm super happy to be here for this great team of speakers and community.
Well, thank you for being here, Kevin.
Looking forward to getting your insights on some things.
Okay, next we have shauno.eth.
Hey, Jim.
I'm Sean from Orbs.
We are an L3 for on-chain trading,
some of which are our integrations are live on our good friends QuickSwap.
Yeah, thanks for having me up here. It's good to be back. It's been a while since I've been
last time I've been on one of these. So yeah.
Thank you for being here. Okay, so that's everyone who is on stage right now
has intro'd. I do see Koovy
has requested. Is Koovy on the list on the call sheet today, Darren?
No response. We'll find out. I'll just write him up.
Okay, okay. Koovy, you're a speaker now. Would you like to introduce yourself?
I would love to introduce myself. Thank you so much.
My name is not Koovy.
I'm actually, well, I can be Koovy for the call if you like,
but I also have like a normal name,
which is Dylindu and Yaboo.
Yeah, geez, normal names.
We don't like those.
We have to go buy our avatars.
But yeah, and we are, we're building an AI driven crypto interface, which helps, you know, noobs come hopefully into crypto and dgens have superpowers. And that's what we're up to.
here. I also see
another request from SmartM
Hello. I don't know who that
is, but Darren, you can make
the call if we want to
let them up or if we want to just start
with the questions.
Just let James
up. James.
Ah, okay. Alright.
What's up, friend? How's it
going?
Living the Dream is nearly Monday again, the best day of the week.
No, no, no. You can't talk about Monday on Friday.
That's like against the rules.
It's good to be here with you all.
I'm super stoked to talk about the return of DeFi season with you all.
Yeah.
So let's do it.
So let's do it.
Okay.
So I kind of want to jump in with a question.
Darren wrote the questions this week, by the way.
But I want to jump in with a question that's related to, you know, DeFi and current drama.
So I want to ask everyone what you think of the
recent hyperliquid drama. And if someone can explain what happened, that would be great. If
not, I have a little write up. Darren and I can talk about it. But yeah, if someone wants to like
share their personal insights, does anybody have any personal insights or
just knowledge about the hyperliquid exploit?
I could give it a shot.
I think it stems from their liquidation.
There was a vulnerability in their liquidation mechanism that got exploited a couple other times with larger market cap assets like ETH,
exploited a couple other times with larger market cap assets like ETH, where essentially people
forcefully liquidate their own positions. And whenever a position gets liquidated, their HLP
vault, which is the backstop for all liquidations, that vault takes over the position. And sometimes for when there's not enough liquidity,
there's a way to extract value there where,
or not extract value at least,
but for the ETH position,
they purposely liquidate themselves
because there's not enough liquidity
to sell to liquidate their own ETH position.
So they liquidated through the HLP vault.
But the situation with Jelly Jelly,
which was the most recent incident, was a very low
liquidity token that didn't have the guardrails for liquidations.
And a user placed a massive short of Jelly Jelly on their perps exchange and simultaneously
placed a long and started pumping the price. And then they removed
all their margin from the short, which liquidated them and forced the HLP vault to acquire their
short position. And then they kept pumping Jelly Jelly, which forced the HLP vault to lose more
money over time. I think it was minus 10 million at one point.
And then what happened was, I guess, what was a bit controversial is I think they did
some sort of a centralized action where they said, OK, let's just forget that all happened.
That all happened. And then they rewrote the Oracle price back down.
And then they rewrote the Oracle price back down.
So it's acting as if they didn't get liquidated or,
or it's pretty much a pump, the price of jelly jelly,
all the way up to like three cents.
And they rewrote the Oracle price using a set of validators that they control
to just say, okay, the price never pumped. The vault never lost money.
And yeah, that's essentially
what happened. So I think the controversy here is HLP vault didn't lose money, but the way in
which they did it was a bit of a centralized action. A lot of people are saying centralized
actors like Binance and OKX tried to attack Hyperliquid because they're a decentralized perpetual exchange,
which has a lot of advantages over a centralized perpetual exchange,
namely that they don't have to KYC any users.
So their user acquisition costs are very, very low.
So I think Binance, OKX, BitGet,
and all the big centralized exchange players,
I think they're all going to try to attack Hyperliquid somewhat.
And yeah, they expose a pretty big vulnerability in their liquidation mechanism.
And yeah, that's kind of what I know about it at the moment.
Okay, so, all right.
So what you're saying is you're advancing a little bit of a conspiracy theory, saying that big centralized perpetuals actors have acted to
attack hyperliquid because it is decentralized but i haven't this other question and feel free
to answer or anybody feel free to answer the actions that hyperliquid took in the like absence
or in in the advent of the attack kind of do they or do they not show that hyperliquid is actually centralized
yeah it probably is to overwrite an oracle price um i mean the way in which they did it was they
got i think like their own valid like i think they control all their validator sets so in essence
they are i think they can make some argument that they're more decentralized,
but it was a pretty centralized action.
Yeah, I think most would probably agree that it was very centralized,
but I guess it's centralization is just a sliding scale.
I mean, they did have a set of validators that all voted for it.
So that would be their main argument against.
But yeah, yeah yeah they probably
just need more guardrails around it and it it definitely was a somewhat centralized action
in my opinion yeah i mean i feel like decentralization is this spectrum right like
where on one end decentralization in its complete purest form pretty much doesn't work in the same way that like centralization in its exact form is, you know, just absolute totalitarian control.
So anybody else want to weigh in on this topic, you know, on the gamma or sorry, not gamma, gamma answered on the hyper liquid drama on the on what happened.
So I know you said that there was a short, but I know that there have been there have been conflicting reports in media over whether the attackers opened a short or a long.
I think part of it too really points out the need for good code and good auditing and really coming from a pessimistic standpoint of this protocol will be attacked and people will try to exploit it.
And how do we cover that? And I think basically what happened was you can remain decentralized and do everything right if you write the code properly.
And kind of like what Gamma was saying, you need the proper guardrails in place.
So, I mean, most protocols in DeFi that have been around for a while, like lending and borrowing protocols specifically, they have different thresholds and they kind of whitelist and allow you to
use only certain assets as collateral as a way of basically making sure that you don't lose
$10 million because you don't have the proper guardrails in place. And I think that's really
what it boils down to is the code needs to be better to protect users. I also think there's, I know Hyperliquid was saying that they were protecting
users. But I think when we talk about what you can't protect users and advocate for permissionless
infrastructures, because if you can do anything you want then you give up all of
the protections and i think that's really in my mind the beauty of defi is being permissionless
but you also absorb all the risk and i think users are okay with that and then you can kind of
alienate your decentralization maxes when you step in and do things that you probably, at least
on the optics, look like you are more centralized than people would have expected.
So do you think that Hyperliquid will see a lot of users who were decentralized in favor
of decentralization kind of falling off after this?
I don't know.
It's hard to say.
I think it just, looking at it from the outside,
I, as a user, I would treat Hyperliquid more like a centralized entity
after this point, where before I definitely thought they were more DeFi.
And I know there's a continuum between like completely decentralized versus
completely centralized. And for me,
Hyperliquid moved closer to the centralized spot on the spectrum,
especially after coordinating all these validators.
We see it kind of across the space where there's a thing.
Projects say they're fully decentralized,
but then things happen where it turns out
that now they're probably a little bit more centralized
than we thought.
Yeah, so I want to get into something else
that you said in relation to this, Timmy.
So you mentioned that we really need better code
and better audits.
And, you know, audits were a huge issue in the last season, right? Like every DeFi protocol out there got multiple audits,
security and economics audits. And then it seemed like just about every protocol that was out there
got exploited, even though auditing firms had verified them as low risk of vulnerability.
So I guess the question is, what happened there and how do we improve the audits process
or how can developers improve the audits process?
I think what happened is, so I think the smart contract was functioning the way it should,
but there are certain guardrails that you have on this smart contract to prevent economic
attacks.
Like economic attacks have become more prevalent.
I think you've heard, there's this one guy named Avi who exploited Solana because of there was like what we also have to analyze other
than you know smart contract like holes in the smart contract is just a liquidity situation is
there enough liquidity to absorb this liquidation and I think that is not necessarily smart contract
that's that's an economic question okay how big should we allow this market to get? How much
leverage do we allow this market to have? And those are just more like controls over,
it is a smart contract control, but they have to implement those more aggressively,
and they have to do more economic testing to see, okay, we should not have let this market,
more economic testing to see, okay, we should not have let this market, we should not have
let this person open a position that was like $20 million for a market that has like $2
million of liquidity or $3 million of liquidity.
And I think they're getting, I think they're, you know, it's fast tracking their education
on it.
I think they probably have to, like Aave uses Chaos Labs to do all their economic testing. Others use different service providers that specifically do economics
testing. And I think they need to start doing that. In terms of centralization, I think,
you know, I think it's too early to say. I think a lot of, they're still relatively new. They've
had massive success. They make a ton of money.
I think they make five, six million of revenue a day.
So they had a lot of early success,
but I think they're starting to see, you know,
they're starting to see holes in their product.
And I think they just need to spend a lot more money
just patching up these little issues.
And I think they'll be good at the end
of the day, as long as they have the right safety plan with regards to certain markets and how to
prevent certain things. I mean, people are extremely, extremely smart. They're going to
exploit everything out there. So they have to kind of just learn by fire. And maybe during this
learning phase, it's okay to be a little bit centralized. So you don't, you don't like extract all the money.
They have what, hundreds of millions in their HLP vault.
So, I mean, they technically had to do that to prevent that vault from spiraling down to zero.
So maybe some amount of centralization is good until they get all their guardrails in place.
all their guardrails in place.
But who knows?
But who knows?
That's just my opinion, at least.
I feel like the incentives are misaligned with auditing in general.
It just has nothing to do with the fundaments of the smart contracts involved and things
like that.
Just auditing as a general category is kind of like a tough one because when you're seeking
your audit, you obviously want it to go well. And then you're paying people to tell you, ultimately, like you're paying people to kind
of like tell you that it's fine and you don't want to pay them to tell you it's not fine.
So that's like this, that's this very, very like base level, like primitive, like problem
just with auditing in general.
That's the only way I can really opine on the subject probably usefully other than that.
So I think...
Yeah, I mean, in 2021, obviously, like, as a DEX, we, like, to get on the Quicksilp token list, you need to have, like, an audited smart contract.
And then we would,
we wouldn't ever suggest who to go to because it's a free market.
If you go there,
it's fine.
And most people always went to the same place.
I'm not going to name them.
Everyone knows who it is,
but yeah,
I think,
I think some of the times when they were getting quoted,
like 10,
50 grand for an audit,
people would come back to us and be like,
yeah,
you guys are trying to scam us because these guys are going to charge us
15 grand for 12 lines of code.
I think there was a sort of just preconceived notion for a little while
that outside of like DEXs and massive smart contracts,
that token audits were a scam.
Like we genuinely had people like say to us,
like we're better coders than
the guys that are going to audit this. We don't need an audit. And I'm like, yeah, but someone
still needs to look over it. Like even an experienced auditor should know that someone
else should look at the code. And yeah, I mean, this is, yeah, Darren, totally. I was going to
jump in and say something similar. right? And I don't know that
this is necessarily true, but I remember thinking this during 2021 was that, you know, the people
who were doing the audits were potentially also involved in the exploits because they knew exactly
where the vulnerabilities were. Yeah, that's also the same name that I avoided as well.
But I actually had a friend have an audit there,
exactly as Koovy said.
I forgot his name, apologies.
They got an audit.
Everything was okay.
They paid, I think it was like 30K for this audit.
And then it was fine.
Nothing came back.
ChatGPT sort of moved into the mix became more prevalent
and then he just ran all the code through that and was like hey like do you want to take a second
look at this and it found like three exploits found the ways to fix them and then gaitly told
them what to do um can we can we not recommend chat gpt for audits though because that's really dangerous that's so dangerous everyone listening
do not do that please do not do it yeah exactly but um I mean it's a good sort of just look at it
before you send it to someone professional but in this case he'd send it to someone professional
they said it was okay and then GPT was like it's not. I wonder how long it will be before AI agents
completely replace auditors, right? Like auditing, like you said, right, was a complete scam last
time. Everybody needed audits. Everybody needed them quickly. So people were paying between 10
and $50,000. And in some cases more, for audits that took months to complete.
And then, you know, with the advent of AI, you know, and it's getting better and better every
day. I wonder how long it will be before that entire profession or entire sector
is replaced or at least reduced significantly.
I also think there's a big difference,
and I know it was already mentioned, but differentiating, are you auditing for code
or are you auditing for exploits?
Because yeah, maybe there's a bug in the code
that someone can get into the code
and manipulate the code and mess with it and that's
one type of audit and we see that sometimes um but there's also the like oh everything's working
as it should you can't change this code um and the code itself isn't exploitable but like you just
have a really bad financial economic policy um and way that it's structured that can be exploited that you really hurt people.
So I think those that is a very important difference with like, what are you auditing for and who are you using code hackers to break the system?
Or are you using call it like people who are more traitors looking to exploit?
And those are, that's a very different skill set, I think.
And maybe worth saying shout out to all the white hats out there who help find these vulnerabilities
and bring them to the teams and avoid the math issues that come out.
I think about audits a lot of times in ways like it's an opportunity to have a very like
high level view of if your code is good, but if you go, if you rely on that to be the end all be all,
it's probably too much trust placed there.
And just, I wanted to go back, I forget who said this,
but there are a lot of teams who think
their engineering prowess is much better
than any auditor out there.
I would argue that that's probably true
and still a really dangerous and like bold stance to take as a team.
Those kind of teams make me nervous. They just make me nervous.
I also want to say that I think there is a missing element in DeFi in regards to hacking,
and that's the insurance part, right? Because in traditional finance, you will have the auditors audit your financials
and they are under insurance
and you're covered under their insurance
if they basically miss something, the same with lawyers.
But in crypto, we don't have that insurance package on top.
When we pay for an audit, we're not insured if anything happens.
So there's definitely room for improvement, I believe.
What do you think?
I think that that's interesting.
And I think that we should come back to it.
I know that we've got Paul here from Gauntlet.
And we want to
intro Paul and then also intro Justin Crypto Texan. And then I've got a question that's
specifically for Paul, but everybody, of course, should always weigh in.
Hey, guys. Great to be here. Can you all hear me?
We hear you.
Sweet.
Yeah, I'll provide a quick background then.
My name is Paul A.
I run the protocol strategy team at Gauntlet.
For those of you who may not know, Gauntlet is a risk manager and asset curator. So since 2018, we've been working with protocols across DeFi, lending, DEXs, perpetual staking,
restaking, and ecosystems.
We are also the largest risk curator on Morfa with over 500 million in assets deposited in the gauntlet managed vaults.
And the protocol strategy team specifically, we help clients develop and execute strategies that enable sustainable risk-aware growth.
So you'll see us across many communities, both DAOs as well as more centralized parties
for risk management, mechanism design, ongoing optimizations, and asset curation.
So yeah, looking forward to speaking with you all and happy to chat about anything. I love Gauntlet and I've been,
I know some of your team,
I have been DMing with like George Beal
for a while now.
So I haven't met you yet,
but great to meet you.
Nice, yeah, great to meet you.
Justin, do you want to intro
and then I'll ask the next question.
Yeah, howdy everyone. Thanks for having me once again. Paul, great to be on another Spaces with
you. We've been doing these quite a bit lately. And yeah, I mean, yeah, I think, you know,
looking at the title of this, DeFi Season is Back? It absolutely is.
And I know you're going to get into some questions and we can talk about this a little bit deeper,
but it starts on Polygon
and it starts with Compound Blue,
which is a collaboration between Compound, Gauntlet,
Polygon, and Morpho.
And I know Paul's probably going to talk about this
quite a bit later.
But yeah,
very excited for, for DeFi season 3.0, I guess. All right, cool. I agree with you. DeFi is where
it's at. So, and I know Timmy specifically came out today because he, you know, DeFi is really
what gets his engine going too. So I think it's going to be a fruitful conversation.
But let's ask this question.
What makes a vault strategy sustainable versus just yield chasing?
Yeah, so when it comes to a sustainable yield,
sustainable yield, really what Gauntlet is optimizing for our managed vaults is risk-adjusted
really what Gauntlet is optimizing for managed vaults is risk-adjusted yield.
yield. Now, there are different phases when a new market launches. If there's already supply,
then it's time to bootstrap borrow. But in the case of Compound Morpho, we really launched
these vaults around two weeks ago, and those vaults launched from zero. So at the beginning of any vault launch, typically
it's a two-sided problem, right? There is the problem of obtaining supply and without the
supply, obviously borrows don't have any capital to borrow. So in the initial stages, it's about bootstrapping supply, mainly through incentives or through arranged partnerships.
That is why we started off our incentive campaigns incentivizing the supply side of the vault.
So users who deposit USDC or wrapped ETH or USDT earn a pretty substantial yield coming from both comp tokens and POL tokens.
From there, it's building organic borrowed demand, right? So, you know, borrowers who are looking
across different ecosystems, looking across Polygon and analyzing their options are looking for
a few things. So the first is, you know, stable and competitive
yields. What is the borrow yield and how does that change over time? And the second is LLTVs,
which is kind of when they are able to get liquidated. So, you know, generally borrowers
are looking for higher LLTVs for greater capital efficiency, whether they are going leveraged
long on an asset or trying to get liquidity out of a more volatile asset. And there are other soft
factors as well, but generally stable and competitive rates and competitive capital
efficiency is what borrowers are looking at. So yeah, right now on these compound morpho vaults,
there's around 35 million supplied and around 6 million borrowed um we're just starting to see a lot more borrowed demand pick up this week
after uh supply is under the market um for state for in terms of sustainable yields now it comes to
um uh the utilization of the market um being maintained around optimal utilization levels, which is
usually around 85, 90%, depending on the lending market. So that depends on a bunch of factors,
what is kind of the yield that suppliers expect, what are the rates that borrowers are comfortable with, and that obviously depends on
whatever use case they have, whether it's leveraged looping, then obviously the floor is the bar rate
and the staking rate is, and the bar rate has to be below the staking rate or whatever looping
strategy they're undergoing. And when it comes to more exit liquidity strategies,
then it just depends on what are the prevailing market rates. So really what we're looking for
to maintain sustainable yields is sticky users that are bootstrapped with incentives, but stay
for the native yield, a minute market equilibrium, the interest rates adjust to ensure that utilization maintains
around the optimal rate. Yeah, happy to dive into that further, but that's an overview.
Okay. Anyone else? Okay. By the way, everyone, just a reminder for anybody who might be new or
might not have been on the show very often. We don't
really wait and raise hands. People are encouraged to just jump in or call on people. So if you've
got something to say, please feel free to just unmute yourself and talk, obviously respectfully,
and trying not to interrupt anyone too much. But yeah, if you've got something that you really
want to say on the topic, please do. right anyone else on the vault on the vault strategy anybody else have insights
i'm just curious the perspective i'm sorry no go go please i'm curious on the perspective of like
defy season is back kind of assumes that it left like
does everyone think that like DeFi went away I felt like DeFi has been there since more or less
like and growing or some level of like stable linear growth or well not stable but some level
of growth like since its inception.
And I guess like when we're saying like DeFi season is back,
maybe it's more of a nod to like altcoins or DeFi,
like, or the macros, you know, playing, playing nice.
But I actually think that like DeFi, like DeFi never left,
like I never left, baby.
Like DeFi has always been here here like that's kind of how
i feel a little bit too yeah i think um so yeah i think yeah i see what you're saying but i think
like defi never left there's always been builders who are very passionate about decentralized finance
who have been building regardless of the market bear or bull but i think you know if you just
look at the numbers,
like if you look at the TVL numbers, like it's obviously been down significantly
from like the 2021 highs.
And I think just like from a regulatory perspective,
there's kind of been this, you know,
we've been dealing with a government
who has been very adversarial to DeFi projects
specifically in our industry,
you know, suing projects like Uniswap
and several others. And now, I think there's just a, I've worked in the DeFi space in Polygon for
over three years. And then I worked with the IndexCoup prior to that. And you're starting to see, in my mind ways i think like the the structure and
architecture of how compound blue works where it is like compound on the lending side you got
morpho vaults on like the supply side and then you've got gauntlet curating the vaults like this
is the way this is set up is it's a pretty primitive, and I bet we start to see more things like this in the future.
And yeah, I just think it's just a, it's not that DeFi was gone or that it left, but I just think we're starting to see a renewed excitement for builders in this space that I haven't seen in the past like two, three, two years probably.
Super well said. Yeah, I agree with all that. that I haven't seen in the past two years probably.
Super well said. Yeah, I agree with all that.
I guess I'm speaking more just to its pure functionality
and emoticom of users being there day in, day out.
But you're absolutely right.
I mean, it's the macros.
I think the macros also played a role too.
It's just, and everybody started aiding crypto, you
know, in 2021, like crypto was supposed to be like, like in 2021, that was like the big debut
for crypto. And then we had this like really black swan type of situation with FTX. And it was like,
everyone's like, oh my God, no, this is not what we wanted. And I think we now have, you know,
but maybe it all led to this point where we have a, you know, whether you like them or not, a sitting U.S. president that's clearly advancing the case for crypto.
I think a lot of it is that DeFi probably moved more into MIMFI for like the last couple of years.
Totally, Darren.
I was thinking exactly the same thing.
I think that's what the title is a reference to.
Yeah, I think I've got some thoughts on that too.
And I think that's also just the symptom
or an effect of like the regulatory environment
that we were in, right?
Because there was a time when, you know,
DeFi was new and people were creating new,
creative, unique tokenomic structures. And then basically
the SEC came in and said, oh, if your token has utility, then you're a security, right?
And so, you know, there was, and you know, the ICOs played a big part in that as well.
But then you just kind of were in this, we're in this zone where, okay, if you have a
token that has utility, then it's a security. So what can people invest in? And it was, you know,
memes. The loophole was, if you create something with no utility, then it's okay. But if you create something that has a little utility, that's bad. And it's just,
you know, it's opposite of what should be intuitive, right? And what helps to like spur
innovation in the space. And now, like I said earlier, like, you know, that's why meme points
like rose to fame, right? It's like people were looking for something to invest in that risk,
that appetite for risk didn't go away you couldn't invest anything with utility because
you couldn't really create utility focused tokens anymore so you create memes and that's what people
can you know scratch that risk appetite itch uh use those to do that and but now i think we're
getting to a point too where and i've been talking to projects where we're going to see like new, unique tokenomic structures that we have not seen before,
because that, that threat of being sued is, is being alleviated a little bit. Right. And you,
it's almost like, I know it's a permissionless place, but, you know, we're like getting permission to experiment a lot more now.
And I think that's another exciting part.
So in my mind, not only are we seeing innovation just, you know, on DeFi architecture and protocols in general, but I think on the tokenomics structure, we're going to see some really exciting stuff in the coming years, too.
too. To add to that, CryptoTexan, I also think, I mean, you are absolutely right in the innovation
and the builders, but I also think that we have, like, there's this new air on the social side
with retail where people are actually excited to get back to DeFi and using it. I wonder,
like, I can't help but think we, in a slightly different way, the consumer crypto apps really, really exploded last year.
I mean, we all know about Polymarket and a whole bunch of consumer crypto.
And I think that really brought a lot of people that were around in 2021, 2022 who left the consumer crypto applications.
They came back to use those.
And then they just kind of fell in love with crypto again as a whole.
And it's kind of like this perfect marriage
where we have these two worlds colliding
where the developers and fun, innovative DeFi solutions exist.
And you have this rise in people that want to play around with DeFi again.
And I think both of those are going to really create this really, really fun and exciting time coming up very soon.
And I would also say that in terms of the DeFi arc, it's kind of beautiful to witness right over the last year or so, because as you mentioned to me, like, you know, when
the regulatory environment was strict over the last year or so, that's when people got
excited about DeFi through meme coins and all the toys out there, right?
It kind of was a good toy to many people who were just getting into the space.
It kind of was a good toy to many people who were just getting into the space.
But now it's just so very well timed with the Trump administration such that now a lot of crypto and even DeFi is going to move towards clear regulatory frameworks.
So the users that were captured and who became interested through meme coins and whatnot can now transition to more real use cases.
And that kind of user flow is just kind of really interesting to see.
So it kind of like the arc of DeFi has been pretty interesting
over the last year or so.
It was kind of the tech developments
and then the regulatory landscape changed to become worse
and then meme coins and now the regulatory landscape is becoming better again. And now it's,
yeah, back to building and integrating and broadening the distribution channels.
Well, we recently, and sorry guys, I'm late. I saw that call with BitGo.
um sometimes i rock yeah um so i think it's interesting that we got like a check mark from
Thumbs down for rock.
the u.s government on meme coins we got a check mark uh or a semi check mark yesterday on
uh stable coins my i do have a concern with that i mean it's I'd say it's probably generally positive overall as a way to Trojan
horse the whole world into crypto as the world moves to using stable coins for cross-border
payments, trade settlement, etc. My one concern with the stable coin thing is that it might,
they're not done with it, right? It's, they're making some adjustments
to it still, but it generally looks kind of good. But the, one of the issues with it is that it,
it seems to approve, uh, specifically only certain types of stable coins. So my, my concern is that
it could quench innovation a bit. So some of the parameters they mentioned were, it has to be backed by
dollars, bonds, things like that. That is, I mean, that'll be good for some of these big
stablecoin providers. But if you want to make an innovative stablecoin like, you know, let's,
Terra Luna obviously didn't work well, but I think it was an interesting experiment in an innovation. Now you have things like Athena, you have other kind of synthetic stable coins, you have algorithmic stable coins, you have gold backed stable coins, you have commodity other commodities back coins, like what bricks is actually building um uh the you
know brazil russia india china south america or south africa um so they're doing a a token that's
backed by a basket of commodities so oil wheat gold these, gold, these kinds of things. So I think it's just,
I hope we don't, you know, while we're sitting here asking for the government to be,
to regulate us, and we're hoping for positive regulation, and then we get some positive
regulation, but it does potentially stifle innovation. That's a concern of mine, because
I think the current stable coins we have are still like early version stable coins and that we can probably innovate and find much
better ways to do these things yeah and i i meant to look this up but i i didn't get a chance to
this week when it talks about algorithmic stable coins I know that some politicians or lawmakers kind of rope in like CDP stablecoins like, well, old die and like, you know or if they mean more of like the under collateralized Terra Lunas of the world, which makes perfect sense.
But I mean, does it make perfect sense for the government to tell people you can't experiment and try under collateralized stable coins?
Oh, yeah, I'm totally with you on that rock. I can see where they're coming from a little bit more on a Terra Luna situation than for a truly over collateralized stablecoin.
But yeah, no, my philosophy.
I mean, think about all the experiments in history.
Hey, I'm with you.
Go ahead.
My philosophy is let the market decide, let people experiment.
let the market decide, let people experiment.
And that's the most efficient and creative way to get to the,
I don't know, just to find new products.
So, yeah, I mean, I'm not necessarily supporting it.
I'm just trying to, you know, try to put my politician glasses on
and see, like, why are they writing things this way?
Yeah, I mean, imagine, you know, all the times in history
where the first experiment of something didn't work, but then later we got it down and it worked great.
I mean, imagine, you know, the first electric car makers and they started trying to make electric cars a long time ago, 40 years ago, and they weren't ready.
They didn't work. Imagine the government saying, oh, we're going to ban electric cars because they just
don't work. Look how bad this company went bankrupt or something and lost investors'
money. We're going to ban this. I think Terra Luna became insolvent, but that doesn't mean that
we should completely close the world off to trying stuff. If someone wants to try stuff and investors
are willing to invest in it and they can get the funding to do it uh either through you know investors or like retail or crowd sale or uh their own personal
funds then let them let them try it as is my opinion um we're on the same page yeah yeah it
looks like paul's positive yeah go ahead paul oh yeah here's a clarifying question like are they
are they banning collateralized stablecoins and algo stablecoins?
Or are those just regulated and treated differently?
Because my understanding was that basically this legislature defines the terms and conditions upon which a stablecoin is to be treated as a US dollar, more or less.
My understanding was that you can still build like
collateralized stable coins yield bearing stable coins there's going to be put under high regulatory
scrutiny and not treated like the us dollar i i may be mistaken there but i think that i think
the suggestion was a mortatorium on algorithmic stable coins like a two-year mortatorium on those,
I think is what was in the bill.
Which is interesting, yeah.
But what exactly all does that mean?
What are the devils in the details?
Is it that you have two years to wind down operations or is it you have two years to experiment
and we'll see if we do something with these and allow these in two years.
Is it a two-year innovation sandbox where you can continue trying these experiments, but if we don't support them after two years, then they are now illegal or something?
That's worrisome.
It's a two-year moratorium on creating new algorithmic stable coins.
So, yeah, so this is like really interesting. We discussed this yesterday on, on the bid angels,
uh, spaces. So apparently if you have a stable coin out now, it's okay. If, but you can't create new ones, uh, new
algorithmic ones, it sounds like. So it's interesting, like the free market always finds
a way. And so I imagine what you could do there is something like, like the concept of a SPAC.
So you take like, uh, a vehicle that is already live, that's grandfathered in.
So SPACs, they're basically, you take a publicly traded company,
you inject, you buy the company, you inject a new company
into that like regulatory framework.
And this makes it easier to launch a company.
And there's a bunch of other, it's more complicated.
So you could think okay if we
i want to launch a new algorithmic type or whatever type of innovative stablecoin i could just go buy
a company or get on the cap table of a company that is already out and now i could just use that
because there's thousands of stablecoins out there and many of them have low market caps and could
easily be bought up and then just you repurposed for a new and you could change it innovate it update it except we don't know that's
what another thing we don't know will they allow you to update stable coins or do they have to stay
as they are when the moratorium starts there's a lot of questions there's certainly um a ton of open questions. I think one thing that is clear from this bill is that the target audience are the banks,
institutions, and fintechs that are planning on launching their own stablecoins, whether
that's PayPal USD or the Fidelity stablecoin, if they are actually planning on going live
with that um and whatnot
it just seems like yeah this regulation is aimed to provide clarity for those players that already
have a very specific use case in mind uh who have an existing distribution channels to their
own customer base and where the digital dollar is sort of a,
I guess, utility token behind the scenes,
behind the scenes to improve operations or whatnot.
So it does seem like, yeah, this regulation is tailored, not for, you know, the next, yeah,
the next big innovators,
but rather like people who are trying to leverage existing technology
for their traditional use cases. Yeah, I think it's definitely going to help adoption. And,
you know, I kind of have this theory that, you know, launching a stable coin in 2025 is going
to be launching and it's going to be like launching an NFT project in 2021. Right? It's just like,
we're going to flood the market with stable coins. And then over time, only the really,
really strong will survive. I mean, Wyoming has launched or is planning to launch their own
stablecoin. And it's going to be on Polygon, which is really cool. But how many stablecoins
do we need? And I guess it's just up to the market to decide.
But I'm excited about it.
Very, very pro stable coin innovation.
And I think, you know, this bill going through, it just helps institutions get comfortable with it.
And so it's going to streamline and help adoption significantly, especially of the Ethereum blockchain, I think.
It'll be interesting. I wonder how the banks and PayPal, they already have a stable coin, but they also have their own payment rails.
You have MoneyGram, I believe. Was it MoneyGram that Ripple bought?
I believe, was it MoneyGram that Ripple bought?
I wonder, will banks, like for banks that use Swift in these things,
that are, by the way, transacting trillions a day, it's insane,
but will they, to alleviate costs, encourage people to transfer in stable coins
instead of through the normal system, which uses all the,
like goes hops through four banks every time it goes from one place to another. And there's all,
every, everybody takes a little piece of it and they're taking an interest on the float. So I
wonder, um, will, will banks encourage people to use stable coins because it's more efficient for
their bottom line. And then in addition, banks want to get in on this. So on the stable coin thing themselves. So it might
become a time where all of the major banks have their own stable coin and they're encouraging
people to use their stable coin because they are getting treasury bond yields. This is a huge hack
for banks. I mean, this is the hack that USDC and Tether figured out. And the banks are kind of pissed off because they're like,
wait a second, why can't we do this? We want to do this. And so now they're getting greenlit to do
this. And so you might see these banks do things like Coinbase. If you take USDC, send it to
Coinbase, you can sell it and put it to your, send it, transfer to your bank for free,
zero fees, zero slippage, exactly one-to-one. And you might have Bank of America say, hey,
if you use our stable coin and you bring it to Bank of America, we'll convert it for you for free.
And the reason they will do that is to get more adoption of their stablecoin so that they can get these huge, you know,
treasury bond and other yields. I mean, Tether is making more money than Goldman Sachs right now.
And Tether only has like 100 and something employees. And I don't know how many Goldman Sachs has, but I imagine it's many, many orders of magnitude of that.
has, but I imagine it's many, many
orders of magnitude of that.
Yeah, I know we've said it a few times
too, but I do think with this regulation
that we have coming up, it really is a Trojan
horse where my mind
is like, I do think that
in the end, permissionless,
decentralized infrastructure will
win, but at the
same time, most people are only willing to
try something that is what I call one degree of different away from what they use. So like,
people aren't going to adopt a new, if you don't know Tether or Circle, you're not going to start
using them as a bank to send payments and use Web3. But people would be willing to use crypto if it's with their Bank of America or Wells Fargo
or whoever they do banking with because they already have that semi-trust with the bank.
And then they'll start using it, realize how much better it is,
and then they'll be willing to go that next step and like,
okay, I tried permissioned stablecoins. Now let me try permissionless stable coins. And they'll
again see that it's better. So it's really this hidden Trojan horse where we're
able to onboard a lot of people who fall more on the careful side than the people in the space
right now who I would say one thing that characterizes everyone working in crypto today,
they're probably a risk taker and not everyone is comfortable with that degree of risk. But once
people see the benefits of it, they will eventually migrate, which is really why I think
like the title said, DeFi season is back and it's coming back very fast because more and more people will actually see the power.
And we're not going to have these rent-seeking middlemen, which so many people probably hate, but they don't know a way around it.
And they feel like it's too risky to just jump in where now these rent-seeking middlemen are almost training people to get comfortable on how to off-board and use a different infrastructure entirely.
I agree with you completely.
I think that the moment they will be in the rabbit hole due to traditional finance, it will be much, much easier to onboard them.
But regarding the regulation of stablecoin, I actually don't think that's the main issue of having a lack of innovation.
I think the moment the very, very big thing going south in crypto, like what happened
with Terra Luna, it's just like, I don't really see any innovation.
Like when you talk about stablecoins, like right now when everybody's launching their
own stable coin or talking about it and the same with like uh blockchains now like remember in back
in the next cycle like you would hear them on a huge innovative layer one that would do things
so different and so innovative with like completely different concerns mechanism and
completely different consensus mechanism and you don't really hear that anymore.
So it's more feels like very big players trying to take bites on profitable mechanics or
sectors in the industry because they already have the existing user base rather than
actually like innovation and then we need to watch out that the government won't kill it.
like innovation and then we need to watch out that the government won't kill it
i think uh robert leshner said it best and i forgot which talk it was but yeah leshner
basically made this claim that um the traditional institutions are going to steal defi technology
so it does seem like from the d side defi things, yeah, there are new primitives being built. I think recently we saw a lot of innovation with restaking and other sectors as well. But in the traditional side of things, yeah, it's not even about innovation, it's about adoption. And they do have the user base. So we just take the technology that DeFi has built over the years.
Lending markets, for example, are great for leverage looping.
Lending markets are great for repo transactions.
Like if we just get these assets on chain and use the technology that we've built
and we can configure how permissionless or not it is to minimize trust
assumptions where institutions are going to reach a threshold of
comfort that institutions need, then that really broadens the user base. And I don't even think
users are going to necessarily even know that they are using stable coins. They'll just be
clicking the button and they'll just be converting their dollars to a u.s treasury backed stablecoin that is running under the hood so um yeah i think
when it comes to this bill it's more about just distribution and getting institutions comfortable
rather than any um underlying innovation i think it would i think it would always be the case
that regulation is going to lag the innovation that is going on in DeFi.
It's always going to lag.
There's always going to be regulatory ambiguity for the newest things out there.
Stablecoins, yeah, like with Maker, that was, I guess, one of the first stablecoins, you know, 2016, I believe or so.
And yeah, I mean, it took all these years to get us here so i just think regulation
is always going to lag innovation hey paul do you have any uh thing you want to talk about
on the gauntlet morpho compound vault, maybe let people know of the opportunity there
and what's going down.
Yeah, for sure.
The TLDR is if you want to earn yield,
particularly if you're already on Polygon,
and by the way, none of this is financial advice,
but if you want to earn yield on stable coins, USDC, USDT, or wrapped ETH, there are these vaults that Compound hasC is earning 12.8%. USDT is earning 11%.
So really high yields right now for users who want to earn yield on any supplied assets.
These are also extremely low yields on borrowing.
So if you want to go leverage an asset or whatnot, you can also borrow assets with the collaterals of RAPDETH, RAPSTAKEDETH,
Bitcoin, RAPPOL, and MATICX. Borrow APY is negative for many of these assets. What that
means is you're actually getting paid to borrow. So this is a great opportune time to earn some
very risk-adjusted yield, I would say,
given the low level of insolvency risk in these markets.
The website is compound.blue.
So compound.blue will show you a dashboard of assets
you can supply and borrow.
And Polygon is providing incentives.
Compound is providing incentives compound is providing incentives gauntlet is
leveraging our risk management expertise real-time simulations to fine-tune the parameters and
reallocate liquidity as needed if you're supplying in these gauntlet managed vaults
so yeah this is just a very exciting collaboration overall. It brings together two of the biggest lending protocols, one of the biggest chains to provide a superior experience to lenders and borrowers.
Yeah, so I'm on the Polygon Grants board, so I was part of the vote to support this.
So yeah, exciting stuff. Glad to see it's been growing.
I did have a question though,
a critique and question. Is there a reason that it's not on the, the normal compound site? It's
only on this compound blue. Yeah. So compound, uh, labs is building, uh, the, the site or
integrating a compound blue into, uh, the, the website is actually listed already on the main
page. But in terms of like spinning up the supply and borrow functionality and getting all that in
place, it's still in progress. This front end was developed by a Compound DAO contributor who has
also contributed across other protocols as well. It's called Paperclip Labs. So they're able
to spin this up really quickly while Compound Labs is spinning up their own front end. So yeah,
I think there's a lot of apps that list Compound Blue already. I think Valsa FYI,
Beefy as well, Superform. So yeah, I think there's a lot of other venues
that list these.
And Compound Blue is probably the one
that people use the most.
It is also being developed on the Compound.finest website.
Cool.
Good to know.
Sounds like I'll do it as fast as can,
get an MVP, and then scale up,
which I think is brilliant. I have been using it. And I will say, even just the UI, I love the LTV and like the percentage where you get liquidated. I know that, like, I think that is a huge thing where even like on little things, DeFi, four years ago was really complicated and hard for people to who didn't have an understanding to see everything.
And then, I mean, you look at this Web page and it's very clear everything that needs to happen.
I will say, like, even just it's accessible to people who aren't crypto native and they can try out to like high five there.
aren't crypto native and they can try out to like high five there.
If you guys haven't checked it out, it's absolutely beautiful to even just easy to navigate as
a webpage.
Appreciate the feedback.
And yeah, if anyone has any thoughts or questions, my DMs are also open.
You know, if you have any questions around how the vaults are managed
or the assets, the incentive campaigns or whatnot,
we do think this is kind of the first of its kind
at this scale.
It's happened before with Seamless and Moonwell
as protocols that launched these Morpho vaults.
Really good to see Compound launching these wallets as well
to provide a great experience for users.
So yeah, my DMs are open
for anyone who wants to chat more about it.
Good luck to speak with you, Paul.
Sounds great.
All right, Nicole, do we have a next topic?
Yeah, totally.
Actually, just led right into it.
So what is a long-term yield percent that makes you want to move your assets is my next question.
Yeah, like give me the APRs.
What, you know, what, I don't know, what excites you?
Like what would make you move from one chain to another chain to chase yield?
That's a good question.
I've been really conservative throughout my crypto career.
I don't actually do a lot of staking.
Most of my assets are not staked.
I only stake in things that I really, really, really, really trust.
So my poll has been staked for like, I don't even know, five, six years.
That's something I trust.
My quick has been staked in Dragon's Lair forever,
which now doesn't matter as much since we are not doing staking yields.
We switched everything to a burn.
Are we with the new
vote darren are we uh side note are we deflationary yet i know we were really close to being deflationary
yeah i mean we burned some yesterday i think uh i got stats that are sent to tristan. Hold on. I think current emissions are around about 180,000 quick a day.
Over the last, since October 1st, which is roughly six months, we've actually burned
I think 120,000 a day. So we're maybe 66% of the emissions.
But with the burn, that could move up to 175,000,
just extrapolating the data from October 1st.
That isn't the new numbers.
So yeah, I mean, it's going to be much higher than the actual emissions.
That's incredible.
So if it plays out like we're extrapolating
then quick will be the first decks in the world to be a deflationary token
so for everyone to understand what's happening there um we did a experiment vote uh i don't even
know six nine months ago um to it started october first the first vote okay no yeah it went live like the burn
okay so the concept was instead of giving staking um yields to people who stake their quick
to because some people who stake and earn those yields sell them them, uh, instead to just burn the quick. Um, and doing that,
uh, got us to like 80% of the amount of quick that is issued, um, for liquidity mining is now
being, uh, was being burnt. And then we also did another vote recently which supercharges it by another 50
percent of burning which is uh upping the or something like that approximately um but
increasing the amount of fees that go to to burn uh go to um what else?
Foundation.
And I think it's, what else is it, Darren?
My brain's blank right now.
Because we're not staking anymore.
No, so, yeah, I mean, it's just Foundation and Burn.
I mean, some go to algebra because of the license.
But, yeah, basically the old V3 protocol fee was 10%. We've shifted that to 15% through our governance vote
just to bring it more in line with the rest of the market.
And then, yeah, so 10%, so 66% of that
is just used to buy back and burn quick.
And I'm not really supposed to talk about quick price,
but someone put,
who was it that put out the analysis recently,
like comparing quick to all the,
like,
like 50 other tokens or something.
And it was like,
I guess I probably shouldn't talk about it.
Stupid rule,
but look from medieval empires. Yeah. He posted yesterday. I guess I probably shouldn't talk about it. That was a stupid rule, but...
Luke from Medieval Empires.
Yeah, he posted yesterday.
We can talk about it because it's subjective.
But yeah, he basically bought a bunch of tokens in December.
He said December 26th,
so he must have just used all his Christmas money.
And yeah, he bought, I think, very different gaming tokens.
Because his game was on Quickswap, he chuckeded some quick in there and obviously the market hasn't been performing tremendously in the
Quarter but um, yeah, the very tokens quick has been the best performer in his portfolio
Yeah, I think
I think, again, not supposed to opine on this, but I don't give a shit.
Again not supposed to opine on this, but I don't give a shit
Because it's a silly rule and the regulators are aggressively attacking us now.
And plus, I've never sold a damn single quick anyway, so I don't even know what they could be mad at me for.
But anyways, I think this burn is, I think it's a big tailwind.
I think this burn is, I think it's a big tailwind.
I think being deflationary, I think one of the reasons that DEX tokens in general across the industry
haven't performed so well historically is because they're all emitting inflation to compete with each other.
And so competing for liquidity and volume and things is contradictory in a way to the token
holders because you're emitting tokens uh it does help the token holders too because then there's
more volume which gives them fees but uh i'm surprised no one else has done this i think it
it makes a lot of sense we we were hesitant to do this we talked about it for at least a year before trying it.
And even then we just said to the public, let's do it.
Let's try an experiment, a three-month experiment and see what happens.
And we let the public, the community vote on it.
And it was going well and the community voted to extend it.
Um, so yeah, I think it's a, it's pretty cool.
So, yeah, I think it's pretty cool.
First decks in the world.
First decks in the world.
Uh, it's not, maybe I'm counting eggs too soon, but it sounds like, uh, it's good.
We're going to be the first decks in the world to be deflationary.
I mean, I'm sure on a short term, like a few days or week we are, but, uh, it's better
to watch it over a longer period of time.
I, to answer Nicole's question, um, earlier about like what would get me to switch and like
rock i think you kind of touched on it is like there is i would say a band of api i would go
with because if i were to say part of it is i would not go to any protocol that says oh you can
get i don't know 100 apy right because i know that like
that is just unsustainable on its games that really what i personally look for is make it
simple and easy to understand um like and that is important and then even just like the user
experience where i want to use platforms that are easy to use and that I don't have to
constantly monitor from minute to minute and check on everything. I think it's really important that
these platforms like in DeFi make it simple and easy for users to understand. And then you don't
over promise because there is red flags that go up. And I know everyone has a different threshold.
I think for me, it's probably in that anything over 20% is definitely like a hesitate, see what happens.
And now there are some things that I see, like, I know when Compound Blue first came out, the supply APY was very high because it was incentives.
And I could see that. and you know that over time
those will adjust but if anything has above a what you would expect to see everyone else doing
over a long term it's a platform that I really like to stay away from like I am not going to go
to anything that has huge inflation because that is basically going to end in catastrophe for 99 of the users
except for the people that you want to pull out i suppose it depends on like what you're looking at
there's a little nuance there so like if it's like the titan stable coin we some of us remember
they i was literally just thinking about that yeah then the inflation
is going to affect you as holding their stable coin um so that's that's a problem but if it's
like if you go to a platform there are good opportunities in indy fi where you go into
a platform and they are subsidizing some yield or someone else is subsidizing a yield um through like some kind of
new incentive program um there's i guess there's it's more complicated aspects to this so there
can be times where it's like morfo for example you know they're putting incentives uh polygon grants is putting incentives and it's not inflation
to your assets that you're putting on the platform you're putting you know eth on the platform we're
not inflating eth uh so yeah there's like some nuance there but generally you're i totally agree
with you yeah no and i think that's what i meant like it make it easy to understand where or where
that yield is coming from i think where it's like it's very straightforward on compound to go okay
it's compound and being incentivized by polygon and then even on quick swap like if i want to
use a stable coin like usdc usdc eth um lp, I think it's probably right around 10%, 12% is usually where it
fluctuates.
But it's not that the USDC or the stable coins are inflating in value.
I get that APY through quick rewards.
And that's also very important to know where when I think about Luna and UST last cycle,
we're like, oh no, you just get 19% or 20% or whatever ridiculous thing
on a stable coin just through our lending stuff.
It's like that to me doesn't make sense how it's sustainable long-term
when the M1 money supply in general is not going there
and you don't have anything that special or unique to
arbitrage and outperform the market. So like, it's really important to know where the yield
comes from. And to Nicole's question of like, what would cause me to switch? It's protocols
that are upfront where the yield comes from. And what causes me to stay away or leave is when I
don't know where the yield is coming from, in that case i'm the yield but what if it's like a tomb fork where you know where the yield is
coming from but you're just aware that it's a ponzi scheme but if you get an early at the ponzi
scheme things go well that's how ponzies go but like you said it might be you may be able to profit
right short term from a Ponzi scheme.
But when you're thinking about things from a sustainability lens, you don't want to be in a Ponzi even if you can get in in the beginning.
Because what you're talking about is leaving your money there, parking your money there, and having it last for a long time.
Not monitoring every day whether you're on the, you know, on the end of winning
or losing. That's a good point. I guess, yeah, there are some people who like to just park their
money and there are other people who like to be very active in reallocating their liquidity.
And yeah, I think those users prefer different types of protocols and vaults. I think going into a protocol that
may be a Ponzi, and I would never, ever recommend that, but if there is liquidity,
and if you understand how liquidity works there, and if you understand what are the cascades that can happen to um uh to suck out
liquidity then you're probably in a better position than most to farm that farm for some amount of
time and you know when you see the uh the situation unravel then you can withdraw and i know people who
shorted UST
and generated a ton of profit off that.
So yeah, I think there's different types of risk, right?
There's like the risk of liquidity, so you can't withdraw.
There's also the risk of volatility, like if the rate is volatile
and there's a risk of capital or insolvency risk,
like if there is a drawdown in the balance sheet value, per se, of the asset.
So I think depending on the risk profile, there are also different products out there that are tailored towards it.
Right. So like Morpho is an example of a protocol where as a supplier, you don't need to necessarily be on top of your position all the time because vault curators are on top of the position.
So there are lower risk tier vaults and higher risk tier vaults, frontier vaults, where if you deposit a stable coin, you can select the risk tier.
And the curator is behind the scenes allocating and reallocating your liquidity across different collateral assets depending on the risk tier. And the curator is behind the scenes allocating and reallocating your liquidity
across different collateral assets, depending on the risk profile. And some yields are higher than
others. So yeah, I think it just kind of depends. Like for me personally, like I want someone to
be on top of it. I don't want to do it myself because I have other things to do, but I'd rather
want someone to be on top of it 24 seven. And Trust is involved, for sure. There's a trust component of it,
but I don't really see that going away if we can't make everything algorithmic on chain.
I guess the conclusion is that everything falls back into understanding what you are
doing, right?
Whether you are staking in big protocols, understanding where the yield is coming from,
or if you are kind of interacting with this Ponzi scheme and you want to just enter and
exit fast, everything goes, or summarizing, you need to just enter and exit fast everything goes or summarizing you need
to understand what you are doing what are the risks and how long do you want to stay there
and how much attention you can or you want to pay to your investment or your stake
has anyone here ever participated in a ponzi either knowingly or unknowingly
anyone have any fun juicy stories i've got one
and like depends who you ask because there are certain people that will say we are all
participating in a ponzi right now just by holding cryptos.
Well, I thought you were going a different direction.
I thought you were going U.S. dollar.
That's what I was going to say, right?
Yeah.
The greatest Ponzi scheme of all time.
No, I will say I heard a very funny joke where social security can't be a Ponzi scheme because Ponzi schemes promise
above average returns. And social security gives below average returns. Yeah, it's kind of
ridiculous. I've looked into it and you basically, the amount you put into social security, that's
what you get out. You don't get any interest essentially at the end of the day. It's totally ridiculous. I don't know how that's possible.
Like who is mismanaging this? Like, even if it was just put in only treasuries, shouldn't you get,
well, treasuries are kind of, they kind of reflect the real rate because of inflation.
They kind of just generally counter inflation and that's the government calculated inflation. They kind of just generally counter inflation.
And that's the government calculated inflation.
Anyways.
It's not invested.
Like that's not how social security works really.
It's not like that.
It's actually spent as it comes in.
So there's not like a drawer that's like
you put the money in and then it's saved for you that comes back to you.
Your money is spent immediately on the current retirees.
So what you get is the right to assuming that, you know, there's income.
assuming that there's income, you get the right to earn from current earners when you retire.
This is a common misconception of Social Security. Social Security, you don't have the right to earn
dollars you put in. Your dollars are long gone by the time you are retired. Your money is actually, that's why
Social Security was in a much less precarious position before boomers retired, right? Because
we had 10 earners for every retiree and retirees would retire for less than 10 years, right? So you had one earner carrying one-tenth of the weight
for a short period of time. So basically, workers had, there wasn't much weight that every worker
had to support the retired population. But now we have fewer workers supporting a large population of retired
and retiring people that are going to be retired for, you know, maybe 30 years, right? So that's
a huge problem because now it's basically three workers for one retired person for 30 years. That's why they're saying there's no more money,
there's no more money. That's why, because the balance is completely off. We haven't changed
the ratios. We haven't actually adjusted things. And we've allowed, there's the same pool of money,
essentially, supports also people who draw from social security disability or things
like that and the people who are um who are approved for disability is broader than it used
to be right so and people who are on disability live longer than they used to i'm not saying any
of that is bad what i'm saying saying is the way that it works now,
people live longer with health conditions and things like that, and we don't have the money
to support people who are living longer with, you know, either they need like a lot more financial
support in order to survive, right? We don't have, you know, Social Security is supposed
to provide for their, you know, food and shelter, et cetera, right? But the cost of living has gone
up, but the allowance, the COLA, right, the cost of living allowance for people hasn't been adjusted for basically for people to live for 30 years, right? Basically,
they say at the time, they say, here's your allotment when you retire, but it's not adjusted
over 30 years, right? So you're essentially making the same amount the entire time that you're
retired, even though it goes much less, it doesn't go nearly as far the entire time that you're retired, even though it goes much less, it doesn't go nearly as far the entire
time that you're retired. So you have basically 90 year olds needing to come up with a shortfall
in their rent or whatever, when they can't come up with it because they're still making what they
made at 65, right? They're still pulling what they made at 65. So Alex, this is a really good point. So I think, what is the reason for this? So it,
like, as an example, Singapore, they have a social security type system and it works quite well and
people are happy with it. What they do is you pay into an account. You don't, it's not a commingled
account with everyone else. You just pay into an account out of't it's not a commingled account with everyone else you just pay into an
account out of your paycheck every month and then the money your it's your money uh and the but the
government invests it on your behalf but you know your balance and you get your interest and so i
the difference is when we created social security and i'm not sure on this i'm curious if you know is the reason that
it works the way you say is because when social security started it wasn't hey everybody will
start paying in and then we'll start giving benefits out you know when you retire later
uh based on how long you were paying in because some people would at that time be retiring in a
couple years some would be retiring in 30 years. But instead, what they did was they said, we are going to start paying people out right now who never paid in.
Is that where the discrepancy comes? Yeah. So the idea was originally to be able to pay for
widows and orphans, right? And so the idea was, look, if you pay now, we'll be able to support the widows and
orphans, the current widows and orphans, and you will be supported when you retire. This will be
money that you'll have available when you retire. And the idea is, I mean, when you were talking
about Ponzi schemes, the idea is future people, there will always be people working, and those future people will be paying for your retirement.
That's essentially what the idea was to be able to pay for, how are we going to pay for current widows and orphans?
This was post-World War II, Trying to figure out exactly how do you pay
for these people. And this was, you know, like, how are we paying for people when there's not
enough welfare? How do we do this without raising taxes overall? And trying to, you know, like,
there's this constant idea of how are we able to pay for the welfare of people
who can't pay for themselves? What do we do? Right. And we've done so many things over time,
including like the post-Civil War marriages, where we had essentially like one of the ways that
we had widows and orphans supporting themselves was basically like people who were like 13 years old were marrying Civil War veterans who were in their like 70s because they were getting veterans benefits.
So during the Depression, you had basically young teens that were getting married to these very old men because they at least had these veterans benefits that were coming in.
So people have had to resort to a bunch of different things to essentially support themselves when there was no other way to support themselves. So the idea is, what is a way that we
could be able to take care of people who couldn't support themselves? They wouldn't be on the street.
They wouldn't be homeless. They wanted to get rid of the idea of poor houses. So what is the
way that we can actually support people so that they can be in homes and they can provide for their children without having them marry off very old men?
And, you know, how can we do this?
And the idea is, if we do this, then there is going to be future money for other people.
But, of course, they didn't see then this idea that, well, there will be dwindling
jobs in the future, and there will be this problem of how to... And potentially dwindling
population or population growth decline. What if there's a bumper population and then a narrow
population? How does a small population support a huge population, they didn't see, you know, progress in health care.
And what if because people, you know, didn't really retire.
And if they didn't work, they died within five years.
Right. So you were talking about usually supporting someone who stopped working within five years.
And that was it. Remember, they also had their family to help support them.
We had multigenerational housing back then.
So this is a very different environment and lifestyle that people were supporting that we just never updated.
Now, if you remember, and I see you, Matan, I'm sorry, I'll wrap this super quickly.
The very, the different thing that we had, what you're talking about in Singapore, in the 90s, there was this push that under Bush Sr. to privatize the assets that were held under Social Security, like take all of them, give people the right to be able to invest them
or have the Social Security Administration take all those assets and put them in the stock market.
And the problem there was then the government would be too entwined with the stock market
and would have a vested interest in the stock market. And they didn't want the government to
have a vested interest in the stock market because then the fear would be that they would then have policies that would unnaturally force
the market up just to make sure that the social security funds were kept up, right? There would
then have policies that would no longer have it be a free market. So that's actually what killed
that. Which is a really important point, but I don't even understand how they could. So first, that's a really important point. This is why I'm concerned
about sovereign wealth funds. I'm not saying I think we shouldn't do it, but I have concerns
about government king making, look at them choosing Solana XRPp and ripple and and i don't think the government should be picking
any winners or losers um but anyways the other question is how would they even privatize if
there isn't a massive treasury because most of the money so they do have a treasury and they do earn
interest to kind of counter your original point that they there that it's there's not like all this your money's not sitting there earning interest there is some it's not a lot i guess from what
you're saying it's not like all the money you paid in your whole life it's like a small kind
of operational kiddie bank or something that grows or shrinks based on populations yeah but it's not
for you like it's a just it's a big it's a chunk of money but it's not like, but it's not for you. Like, it's a big, it's a chunk of money,
but it's not like for you.
It's not in your name.
It's not like your account.
But additionally, it's not that large, you're saying,
because right when the system started,
the money going in was already going out.
It wasn't being saved.
Right, right.
Like, it was, it's,
it's a,
it's a,
it's basically like a,
you know,
it's like when you,
when you,
when you win like the lottery
and you're like,
shit,
where'd it go?
Like you pay all your bills,
you pay your taxes,
you know,
you buy something and you're like,
what the hell?
By the way,
how did we get to social security guys? I love By the way, how did we get to Social Security, guys?
I love the topic, but how did we get to that?
I made my stupid Ponzi scheme joke.
Oh, that Social Security is a Ponzi, that's right.
You did ask the question if anyone has been involved in a Ponzi.
Oh, right.
So I got one.
I've actually never said this publicly out of embarrassment for almost a decade, but I'm going to say it now.
It's a funny one.
So was anyone around for BitConnect?
I was.
I was.
Nice.
BitConnect!
Good times. I met the bit connect guy dude like i i like hung out with him i have a picture with him he's he's like a legend to me like it was i had more i had more
like shock value meeting him than like like almost as much as like meeting ed snowden um nice like like i was
what's that
uh did someone cut out or is it me i think it was was him. Oh, sorry. I have a story for Ponzi as well.
It wasn't crypto.
I was actually, I was like, I just got kicked out of university and I needed work.
So I responded to an ad in a newspaper for like marketing, like being a marketing professional.
like being a marketing professional and it was literally like it was like a culty like multi-level
like marketing thing called ds max and then i like later looked it up and i was like literally going
from door to door um trying to sell like coupons and it was it was crazy man it was crazy and i got i got um i straight up got culted like at the time um and i got culted
into like being like yeah like this is a big opportunity and like i'm gonna i'm gonna start
my own like um my own you know like ds max office you know in another territory one day selling you
know with a with a cadre of people selling coupons um so yeah i do my story
i do also have an anecdote when i was like 10 years old and i'm 50 now so it's it's a long
it's a long time ago but that was this game called harlequin i don't know if you guys remember it
but uh basically you would have a list of seven people and you would then send like $40, $50
to the three names on top.
And then at some point it would be your turn.
And I remember I did it and back then it was snail mail.
So you would send by traditional mail.
And I remember nobody believed money would ever come back, but suddenly
my mailbox was just full of these people sending me $50. So that was my first encounter with
a Ponzi scheme.
How did it end?
No, I mean, it was stopped by the authorities. It's not
legal. I didn't know back then, but
it's a pyramid scheme,
so it's not legal, so it was stopped by
the mail houses.
But it was all over the world.
It was a German company called
Harlequin.
It's crazy. As a
libertarian, a small part of me
is like, maybe we should just allow that kind of stuff because it's like if it happened enough, people would start to know about it.
The problem with letting it happen is people get tricked and they don't understand. They're stupid.
But I don't like when we make rules that protect people from being stupid.
I would rather that people learn and don't become stupid.
For me, it was BitConnect. I've never participated in a a ponzi again i've never participated in any kind of mlm again
you know that was a long time ago and it was a good learning experience um but you know i learned
from it uh i i think having these like chain mail it sounds like your thing was like a chain mail
type thing um yeah and like guess what people are doing this stuff on meme coins on on solana right
now it's literally the same thing as you know it's gonna dump uh but you hope you can get in and get
out i don't participate in that kind of stuff but some people like to and it's fun it's like that
eth crash game if anyone ever played that you know that you put in money and then you can and then so
you start out with the money you put in then it then you can, and then, so you start out with
the money you put in, then it goes, there's a little chart and it goes like up, up, up, up,
up. And then you have to pull out before it crashes. If it crashes, you get nothing. If you
pull out at any time, you get your money plus some, so you could pull out in one second and
get like, you know, from one ETH, 1.1 ETH or whatever. And, uh, you know, it's kind of fun,
stupid game. Um, and, uh, but I think things like
this should be allowed to exist, but okay. So my BitConnect story, so it's not, it's not a much of
a story, but, uh, had some friends in crypto telling me about this. Oh my God, it's crazy.
I'm making all this money. And I was like, dude, this is, I think this is a Ponzi scheme guys.
Like, I don't, I don't think this is a good idea. Uh, and then they were like,
they were, they kept telling me about it. So I won't name names. Some people here might know
some of the people, but, uh, they, I'll let them tell their own story, but they were like, look,
it doesn't matter if we just like hold for like two months, if you, if you stake or whatever for
like two months, it's been, it had already been going for like two years. And they were like, if you stake for just like two months, you get your, you make your money
back and then you're making money. Uh, and so I was like, you know what? Okay. I'll, I'll try it
with you guys. And I didn't put a lot in, I think I put a couple grand in or something. And, uh,
like, sure enough, after like two months, uh, or whatever, three months, whatever it was had made
our money back. And now it was like
growing super fast. And we're like, okay, we're just going to wait. Let's wait like two months
and, uh, like two, three months more, you know, triple our money or something. And then we'll,
we'll pull out. It can't go down. Like it's been up for years. What are the odds it's going to go
down in a couple months with us, you know, when we're doing it. And then the Texas state issued a cease and desist order to BitConnect.
And I think another state did too and said they have to give all the money back. And then it
collapsed. So kind of like yours, the system didn't actually collapse naturally. It collapsed
because the government said, hey, don't keep doing this which is you know there's an argument for that's a good thing because if you let it go too much it'll
get too big and then it when it collapses it can hurt a lot of people is the argument right
yeah no for sure i think we we like had a system i had like um i'd figured out that better than
staking was just holding the token so i just had the token like on some exchanges and had some limit order set that if it starts dumping, it should auto sell.
So we recouped a good amount, I think close to our whole amount of money by just having these limit orders set.
So these scaling limit orders that if it starts crashing, we would just sell.
So we actually didn't lose much on it. But it was a fun experience looking back.
The worst thing that can happen to a gambler is to earn money.
Yeah.
I'm very curious, Alex, by the way,
you mentioned before regarding the social security
and I think that the fact that the age limit uh is increasing
is actually not really an issue uh oh sorry not the age limit the fact that people like
like live for uh to be older like of course that's good but i don't think it's not an issue
because you can just keep on raising that's what they do keep on raising the age of retirement but what actually
scares me is when the when the population gets uh smaller and it's like an upside pyramid like
what's happening with china that they forced everyone to have only one kid for so long and
then now all the education system all the the culture, even the houses are built
to have one child, people don't even want
to have more kids than one.
And then what's gonna happen in 20, 30, 40 years
when all of those guys gonna retire
and there's gonna be such a small working market
to support that.
Just curious, what do you think will happen?
I mean, you know, the population changes.
So here's what should have happened, right?
They should have taken the initial amount and invested it and said, you know, in five, ten years, you know, this will be ready, you know, for the first group,
the oldest group, like, you know, it'll be a small amount, but it'll be a small subsidy. And then
they, you know, they didn't have mutual funds and things like that, etc. And then the size of any
given population wouldn't matter, right? So right now, if they said, we're going to have, say, a separate
fund, and anybody who wants to invest, and this is essentially what you do when you have a mutual
fund retirement fund, you put money aside separately, and it ages at a rate that is
determined by the fund. Like, let's say you plan on retiring at a particular year
or in a set amount of time or whatever,
and then that money is invested
and the investment risk ratio adjusts
according to the maturity date,
and then you get it parsed out
according to actuarial tables at the time,
saying, okay, we're assuming that you're
going to live X amount of time following that. And so we're going to parse it out, or, you know,
you can get it all at once, or you can get it over time, you know, depending on what your taxable
rate is, etc. And so there's that, that method should have been done by the government. And I'll
tell you why, because can you imagine if you had a government worth of people that they said, okay, we're going to tax
this, but we're going to say, we're going to tax it, and we're going to give it back to you tax
free. And we're going to take this massive population worth of money, and we're going to invest it in this country, right?
Let's say we take part of it and we do it in infrastructure
and part of it we do it in enterprise.
Can you imagine over like any period of time
how much money that would have put back into the country
and that would have literally been our own money, right?
That would have been this amazing powerhouse that we could have used as this incredible
engine.
That's not what happened because they wanted to pay out right away.
If they'd been able to say, you know, here's what we're going to do.
We're going to take your money.
We're going to hold it for you.
We're going to invest it and you get it back, right?
And we're going to, you know, we'll tax it at a rate right now, but it's a small
portion and we're going to give it back to you tax-free, which is essentially the Roth IRA,
but we're just taking it out of your paychecks. This could have been like this amazing powerhouse
that they'd created, but they didn't do it now. So, and then it would have been irrelevant.
You think it's too late?
You have a lot of kids who have kids.
You think it's too late? A lot of kids have kids. You think it's too late?
I think it's well, it's too late, mostly because people don't have that.
They'd have to stop doing Social Security as it currently stands in order to do that,
because most people don't have the extra money to supply a secondary Social Security fund.
If you have money to do a secondary social security fund,
you're already putting it into another retirement fund. You're already investing it separately.
What we need is a giant mass. We need people to collectively make this giant investment fund.
It would have been a great idea, but already, they're already taking out Social Security, and we can't afford to stop doing
that, right?
Because the people who are currently collecting Social Security are so reliant that they can't
afford for people to stop paying into Social Security right now.
So it's kind of too late.
Yeah.
I mean, the people who are paying can't stop.
The people who are, because there's just not enough of them. There's no extra.
And the people of any extra money are already putting it into something else where they're investing their funds. Right.
The people who could afford to pay for five, six, 10, 20, 100 million additional Social Security funds are already doing a bunch of other stuff with their money.
So, you know, it's a shame, you know,
could I do it over again?
I do it differently, but I think it's, you know,
it was such a, you know, the way this was designed,
it's like, I look at it and I'm like,
why did we do this, right?
What do you think?
So who, it's such a short-term solution.
When they looked at it,
they just thought in such a short-term solution. When they looked at it, they just thought in such a short-term solution of like, you know, that's what happens when you think it'll always be this way.
As soon as anybody thinks this will always be this way, this is exactly what happens.
You put your problem off for like two or three generations.
This is exactly what happens every single time.
Anybody designing any problem, this is exactly what's going to happen to you.
Like, don't put your thinking off for a future generations.
Don't start thinking this is the way it's always going to be because it's not.
Even the way things exist right now, all of this is going to change.
In two or three generations, we're not going to recognize the problems that we have now.
So, you know, everything changes.
You have to kind of make it flexible.
What do you think will happen if right now, let's say, the Chinese government would say, like, hey, guys, we're very similar to how, like, Federal Reserve is, the government is trying to raise Federal reserve, etc. like from the Treasury bills.
So, hey guys, we're going to do a huge raise right now to a national fund
that is going to invest only in the country.
And everybody who invests in that will give you like a very small,
like a very small interest compared to the market.
But we're going to give you like tax benefits, for example. like a very small interest compared to the market,
but we're going to give you like tax benefits,
for example.
Like a sovereign wealth fund?
Yeah, basically.
Actually, it would be more interesting if they did like an equity fund.
Like, wouldn't that be cool?
You could invest in an infrastructure fund in a government infrastructure fund. How't that be cool? You could invest in an infrastructure fund,
in a government infrastructure fund. How cool would this be? Let's say the government says,
we're going to invest in some growth fund in the country. We're going to invest in
country we're gonna we're gonna invest in um you know a bunch of uh you know buildings and
companies and whatever it is and we're going to issue not bonds we're going to issue equity
in these things anybody who wants to buy in uh could or maybe what you do is uh you'll um maybe
you can you can pay an additional tax and that will equal an equity investment
in this particular fund.
But then you raise the taxes.
And if you can raise taxes,
you can just raise them
and have more in the Social Security Fund.
But let's say, I mean, you're raising a tax,
but the tax equals X percentage into this fund
and it's kind of an equity plus follow on raise. But in exchange,
you're getting like it's a tax for a limited period of time. And in exchange, you get a
percentage. And then in Y number of years, you get a payout, right? You have ownership. And what's going to end up
happening is, let's say they're going to do whatever companies there are an IPO or whatever,
when there's, let's say they're investing in utilities, then revenue from those utilities
circle back in payments to the holders of that fund, right? So it could either be voluntary of
you have to buy into it, or it could be involuntary of we have to do this funding,
but we're going to do a tax, but everybody is going to own it, right? So it's going to be like
a citizen-owned fund that we're going to do.
And that way everybody owns it.
And then the revenue basically gets redistributed back into everybody. So it's not like, well, we're raising taxes forever.
And then we're keeping all the gain or benefit of this particular thing.
It's we're going to raise tax temporarily as investment.
Yeah.
So what you're saying basically is we have the Social Security Fund,
which is not enough, and very soon it windows in comparison
to the increase of the population.
And we need to find a way to create a new fund that will have
or generate value for the long term and then on based on that we're
gonna finally close this circle that we need to close in the beginning where we started paying
right away and not from now onwards like from who's actually paying it so and and basically
the way we will create the second fund, it will take like government or country,
like natural resources or companies
or utilities that are owned by the government or the country.
And we're going to sell equity from those
in order to fund or to finance this huge new fund.
For sure.
Or you can even say, like, look,
if there's not enough of a population
to fund Social Security,
then they take pieces like they're,
they get 20% of their GDP
comes from exports.
That's twice what we get, right?
They are excellent at selling shit, right? They are excellent at selling shit,
right? They're great at selling. So they take 3% of that and use it to fund Social Security or whatever it is that they call the, you know, funding the elderly, right? That's a huge amount
of money. So they have a bunch of different resources that I mean,
better than we have in order to pay for that. They don't have to necessarily take it from taxes.
They can take it from any revenue source. It doesn't have to be their citizenry. Right.
Like that's us, too. We don't have to necessarily take money from our citizenry.
We could sell more goods and then we could actually have more money.
Like if we need more money to close a deficit, we could take more money from our citizenry or we could sell more.
But our citizenry are the ones selling more.
So you would be taking money from them?
Well, it's not necessarily.
I mean, it's also, you know, we could actually produce more.
We're not producing a lot of stuff, right?
We're producing things like culture.
Culture doesn't come back in cash, right?
Producing things like, you know, like producing culture, selling culture.
Right.
We need to sell more goods.
We only export...
It sounds like you're in alignment with a lot of Trump policies then on this export and this kind of stuff, maybe. Well, the difference that I have is that I don't think that punishing somebody to sell them something is actually as productive.
to sell them something is actually as productive. So usually what really works is saying, I want to
make something that you really, really want, and I'm going to withhold it unless you do what I want.
What we're doing is saying, you have to buy more of what I'm selling or I'm going to punish you.
But the problem is we're not selling them what they want. We have to sell more of what people
want at the price that they want.
That's the problem. And we gave that up because of the dollar. And that's a whole other story.
But we have to sell more of what people want at the price that they want.
That's where we've also we've made it too expensive to produce in the US. So we export
a lot of things. Yeah, big part yeah, big part of it, but,
but even with that sacrifice, I don't see why we still couldn't maintain decent, you know,
trade kind of balances. If you like, part of the problem is we put these crazy and complicated
regulations, protections on environment. You can argue, are we too far or not? But what happens is we,
so let's say there's some good that you want to produce here in the US, but we add a, call it a
30, 40% tax or like a regulatory burden kind of tax also, combine those. And then now we can't
produce the good for very cheap anymore. And so now
China says, we don't care about the same regulation stuff that the US is doing. So
we'll produce it for very cheap and we'll sell it to the US. And they're still releasing carbon
into the air that gets to us within a couple of days, the global air flows. So it doesn't matter.
It's not like we're like reducing carbon. We're
actually increasing because they emit more carbon because they have way worse standards than us.
So we're actually just compounding the environmental problem and we're losing all our
money to them because we're exporting the pollution, the feel goodness of the pollution
to them. And don't forget, they do have slave labor and child labor as well.
Just wanted to throw that in there.
Hey, here's a great time for us to segue
into another one of our questions for today,
which is about what everyone thinks about CDFI apps
like Coinbase and Binance allowing deck swaps
from within their native centralized
applications. I think it's awesome. Yeah. It would be great to see Bank of America and others allow
this too. You know what? That's actually interesting because some big financial institutions
like Venmo and PayPal do allow it now, although I believe
that they use centralized exchanges for those swaps because they only allow really high
market cap assets to be swapped and held.
Weren't we just talking about this yesterday at the Bid Angels about Bank of America and
starting to take custody of crypto assets?
Yeah, there was some news recently.
We didn't pin it down, but about Bank of America and others being approved to hold crypto assets now.
So, I mean, I think all this stable, this goes, and I got to run for a really important call.
I'm sorry, guys, but I'll try to come back.
But this goes to the whole stable coins and the Trojan horse we keep talking about, which is now if banks can get involved in stable coins, if they can custody stable coins, if they can give you like build into the Bank of america online banking app you know a crypto
wallet that just trojan horses all the next steps which is having bitcoin and eth and pull and
and everything else there uh so we're making great progress
so i mean like in an ideal world you could you could open up your bank app and then just swap like the US dollar into fart coin
Exactly
The future of finance we can replace Social Security with fart coin. It's a sound it's a sound strategy
Actually don't think
Sorry, but go ahead Yeah, I just don't think it has... Sorry. Go ahead.
Yeah, I just don't think it has so much value for the user
because it already has all the decentralized tools and infrastructure.
I think it's more of a way for Binance or OKRX or whatever,
centralized exchange to...
Because right now they have a very
high listing standard,
seemingly high,
and then
you don't really, like, people there
don't really have exposure to
a lot of tokens, or the vast majority.
And then you
get to a point where
if you don't allow these decks,
like, oh, oh, oh, by allow these decks, like by allowing these decks,
you actually give the users,
it's like you list all the tokens on your platform
and then you just white label or like a,
or white list like some of them
and highlight them in your actually like centralized exchange.
I mean, the centralized exchange
just can become like a front end for DeFi, I think.
And so like at first it'll start with more rigorous blue chip, you know, protocols.
And then over time, they'll allow more.
Actually, Morpho was recently did a partnership with Coinbase that they can borrow and lend, I think,
on, what was it, Bitcoin,
on Coinbase, which is super incredible.
$100,000. I think a bird once time told me that
they're going to increase that to higher numbers as it scales up.
So you're saying the maximum you can borrow or lend on Morpho on Coinbase of Bitcoin is 100k?
Yeah, and then someone I talked to who will not be named was like,
yeah, it's 100k, but we're looking to expand it higher.
What's the interest rate on that?
Oh, that's a great question.
I think it'd be whatever Morpho is doing. I think it's the interest rate on that? Oh, that's a great question. I think it'd be whatever Morpho's doing.
I think it's the dynamic rate.
I wouldn't mind getting a little interest on my Bitcoin.
But it stays in your custodial...
It stays in a smart contract
that is only accessible by your custodial wallet,
or does Coinbase carry some multi...
It goes to Morpho. It goes to Morpho. that is only accessible by your custodial wallet or does Coinbase carry some multi-sigging?
It goes to Morpho.
It goes to Morpho.
The lenders are permissionless.
So the lenders on the Morpho side are,
yeah, just suppliers there.
Yeah, really interesting.
I mean, this goes back to the whole theme of... Hey, I'm sorry to interrupt.
interrupt i gotta run i'll try to be back quickly guys thanks see ya
I got to run.
I'll try to be back quickly, guys.
Thanks. See ya.
okay yeah go ahead paul oh yeah i was saying like this all goes back to the concept of defy mullet
with centralized exchanges in the front end defy in the back end um when it comes to coinbase
gauntlet is actually working with coinbase on these verified pools in collaboration with Uniswap.
And it's similar, right? It's about expanding liquidity as well as an alternative source of
yield for users. So yeah, on the institutional side of things, like if you are an institution
using Coinbase and you want an alternative source of yield, then you can provide liquidity to these pools. Over time, I think
what can happen is it can expand access to traders for alternative assets, but I don't think that's
necessarily the biggest use case, right? It's not about if Coinbase or these centralized exchanges,
if they don't want an asset listed, is usually for a relatively good reason.
If they are owning the user experience, the customer experience, they care a lot
about kind of protecting that user experience and making sure they don't interact with coins that
are illegitimate. So I don't think it necessarily increases the number of tokens available for
trading in that way, but rather it expands liquidity for
assets where market makers on centralized exchanges may have been providing less liquidity too. So I
think it just broadens the liquidity profile, which expands more tokens, but it's not like
Coinbase wouldn't list them otherwise. I think there's always going to be a high standard for
listing tokens, especially if things are going on chain and Coinbase and these guys are leveraging DeFi infra
to support their brand.
So I think it's, yeah, an incredible opportunity
to like, yeah, expand usage.
And yeah, I mean, it's obviously just beginning.
My only concern around it
is whether or not people are able to transfer those assets
that they've bought through the centralized on-ramp, you know, like through an application
that uses a decentralized exchange. Are they able to get those assets into self-custody?
I think there are trade-offs, deliberate trade-offs in the design there.
If you are using a centralized exchange,
generally speaking, custody is handled by the centralized exchange. There are, of course, exceptions,
but this is a sacrifice that I think users are willing to make.
The target user is not the DeFi native user
who is doing a bunch of stuff on chain on their own
because they're already doing that.
The target user are people
who have maybe traded a little bit
on a centralized exchange
are not comfortable with self-custody,
don't want to deal with all the overhead management
and they're happy to outsource that
to a centralized party like Coinbase.
But what they want is better yield.
What they want is better trading execution.
And by plugging into Uniswap and Morpho
and with DeFi under the hood,
they get the best of both worlds there.
So yeah, I think there are certain trust assumptions at play,
but there are also deliberate trade-offs as well.
So I think your biggest question
whenever you're dealing with yield,
this is literally what I wrote a book on, is DeFi. Your first question is always,
how is the lender getting yield, right? And if you are new to this stuff, you always want to know
what lenders are doing. You have to know this stuff, but you have to ask, ask, ask, ask, ask.
Don't feel embarrassed asking.
Don't feel like, well, you should know if it's not clear to you after they explain.
Say, I didn't understand.
Can you explain it in simpler terms?
E-L-I-5 it.
Don't worry about what it makes it sound like to you.
If they can't explain it in simpler terms, that means they don't understand it.
Everyone who understands, truly understands their own financial transactions can explain it
to a five-year-old, right? People who don't understand, can't explain things to a five-year-old
are parroting things that they either heard or read, and they don't understand the complex terms.
Finance is not really that complicated. It uses a lot of jargon. And I feel like, honestly,
that's just to scare off a lot of people so that it sounds like it's something for elite people.
But most of the concepts are completely easy to understand once they're broken down.
There is nobody in here, and I don't know most of you,
there's nobody in here who cannot understand finance.
There's no one in here who can't understand finance.
Zero people in here.
You can all understand this.
You have to be able to follow what's going on.
So when you're looking at an
aggregator or you're looking at something that offers yield or you're looking at any protocol
that is saying they're offering you a percentage, especially when it's a crazy-ass percentage,
you have to figure out how are they getting that yield. If it's sitting in a box under a bed, some black box, especially if it's off chain,
then you have to think about that. How exactly is putting money in a box somewhere going to
make additional yield, right? That is not how money works. Money sitting in a piggy bank does
not grow more money, right? There's no money sex. God, I wish there were, right? Because man,
my money can just go to town. But that's not what sex. God, I wish there were, right? Because man, my money can just
go to town. But that's not what happens. Your money has to work. Your money has to do stuff
to make more money. What is it doing to earn more money? Is it voting? Is it securing a chain?
Is it being lent out to something that's actually creating additional value?
Is it working in a real financial tool?
We don't have enough financial tools in DeFi, right?
We don't have a lot of those, if I would say really any, right?
That's why most of DeFi, I say most of DeFi is garbage because we don't use actual financial
tools.
What do banks do?
Banks take your money and loan it out to other people, right?
Like a truck.
They take your money.
They loan it out to other people.
Other people say, hey, thanks for the truck.
And of course, if someone's using your truck, they pay you a rental fee, right?
Because you don't get to use your truck while someone else is using the truck, they pay you a rental fee, right? Because you don't get to use your
truck while someone else is using the truck, right? That rental fee is interest, right? That's
the interest rate you're getting. That's the rental fee. So they have to pay you for it.
So, you know, the longer you have it, then the longer that person has it, the more rental fee,
right? Or if they're doing something that is,
you know, really like difficult with it, they might have to pay more of a rental fee because
there's more risk involved, right? But there has to be a reason why they're paying you a higher
than average rental fee. Otherwise, it's like, well, wait a second. Why are you paying me a
higher than average rental fee? If you get my book, honestly, I break down average rental fees or interest rates with
various different activities.
But you have to understand what the average rental fee risk rate, interest rate risk rate
is, and then ask questions.
Why are you above average?
Why are you above average?
Is there additional risk here that you're not talking about?
So then you have to figure out exactly what they're doing. Like what was Celsius doing?
Right. They were doing crazy risk with people they didn't know.
Kefi was just three guys from Twitter, you know, that were doing crazy bets that were unhedged. Well, of course, they had to pay really high rates, but they were unhedged bets. You need to know that your money is coming from crazy
unhedged bets like a casino, right? You may win a lot, but you're also going to lose a lot. You
have to know that kind of stuff, right? Are you okay with the potential of winning a lot if you're
also likely to lose a lot? You have to know
that kind of stuff in those terms if you're not familiar with it, right? You have to ask what is
happening with this stuff. That is how you understand whether or not that return is a good
return for you. Remember that not all investments are good investments for everyone. There is no universally great investment, right?
Not even Bitcoin.
Some people can take a certain amount of risk and some people can't, right?
Some people are not positioned to take the same risk, right?
Not everybody can take the same amount of risk.
Something that may be a great investment for me may be a terrible investment for you and
the alternative, right?
It depends on your risk profile.
So you have to understand how much risk is acceptable to you, how many resources are
available to you, what is your time horizon.
All of these things matter when you're looking at this kind of stuff.
So just because something has a great return doesn't mean it's a great investment.
It might mean that it's a huge scam, right?
So ask a lot of questions when you're looking at these things like, oh, this is a great return or that is a great return.
You have to know why.
Don't go in blindly.
You have to look at these things and ask questions.
If there's no information, there's probably a reason for that, right? If you're running a particular protocol that has a very high or below average
rate because it has below average risk, explain that, right? This is not about, you know, SEC
stuff. This is about making your investors aware and comfortable with what you're giving them for
their money, right? You want people to give you money, you have to explain to them what's happening
with their money. So just make people aware of what the investment opportunity is and what the
risk is. This is how we make this a safe environment for retail investors.
Okay.
I think that that is a good place for us to segue into a topic that I think a lot of people are going to have something to say.
Let's talk about what is a DeFi narrative
that no one is talking about, but they should be.
That's a good question i i would like to learn if quick swap and others are thinking about futures on on the decks and how you handle that i'm gonna let you take that one
yeah so quick swap actually has two different versions of futures depending on the chain. There's an orderly powered DEX,
purpose exchange on Ethereum and Polygon because they both support native USDC deposits.
And then on the more sort of DGEN chains that don't have the circle sort of support yet,
the more sort of degen chains that don't have the circle sort of support yet.
We've got a CapEx model that allows, I think, 50x leverage.
Okay, that's cool.
That's cool.
Anybody else?
Yeah, the one on, yeah, sorry.
The orderly powered one is really cool though
because you basically deposit into a vault
that gives you the same assets on L3.
And then you can use the front end
like a centralized exchange.
The UX is really good.
We actually had to add buttons in to be like,
are you sure you want to do this?
Because people were just clicking buttons
expecting MetaMask to pop up.
So yeah, I mean, the UX was so good
that they were opening orders twice and stuff
because they were just like, why hasn't MetaMask showed up?
Yeah.
No, I was actually reading your documentation
and it's quite impressive what you guys have built.
It's a very big system you actually have built.
I really think one narrative has to do,
and Paul can speak more to this because I also have questions,
but the Yield Aggregators is a huge one that like,
like gauntlet,
like what Morpho does kind of putting everything together for the,
I would say like a lot of people,
a lot of,
especially Americans,
most of their net worth is tied up in their house and retirement accounts,
let's say.
And those are primarily just set and forget accounts.
People aren't actively managing their investments. And I think once people realize that there are the, I mean, you could look at a gauntlet
vault and curators the same way you can look at a target date fund in my mind.
I mean, it's not a perfect analogy, but it's very similar in the,
but here's what I'm comfortable doing.
Here's what my goals are. And here's what it aligns with.
But one, I would say,
I know it's early days
and this aggregation and curation
is still being worked out.
But one thing as a user,
I would have concern with is,
I would say the risk and like the reputation of these curators
and how they work, because yes, there's a, here's the strategy here. Like if you look at gauntlet,
it's like this is more lending, it's prime lending, it's trading, it's whatever. And
of course those have different risks, but there's also the like, how do you,
Of course, those have different risks, but there's also the like, how do you verify like and match the risk versus reward and look at what I would say like the long term performance of these different types of vaults or curators?
Because I think there's obviously this, there's a level of trust required, and I don't think there are the tools in place where that
level of trust can be minimized. So like, I'm also interested in hearing from you, Paul, like how,
what's the future look like for like the, how do you, it will require some level of trust,
but how do you minimize the level of trust required right now? All good questions. I think
to answer, I can compare and contrast with traditional solutions
in traditional asset management. So let's say you're trying to enter a fund, a mutual fund,
or otherwise with a traditional asset manager. Well, the first thing is that depending on the
strategy, you don't really know what's going on behind the scenes. They will report progress to
you on the monthly or quarterly basis, depending on what the reporting requirements are, but otherwise you don't have much visibility in
what they're doing. For Gauntlet, everything we're doing is on-chain. You can verify any time where
your assets are allocated to, and you can also verify how that yield aggregates over time.
And you can do this, you know, any time of the day, right? So there's a lot more visibility and transparency into the performance of our vaults.
The second thing is that the traditional asset managers are custodial products.
All these vaults on chain are non-custodial.
So yes, you can, you know, ask for a withdrawal for your traditional fund that you invested in, but
there are, first of all, conditions upon withdrawal.
You're depending on the issuer to actually honor that request, and depending on the redemption
period it could take some time as well.
For Gauntlet, our vaults are non-custodial, which
means that at no point in time can Gauntlet say no to your withdrawal request because you actually
fully own custody of the funds. So, you know, there are some strategies that have a one to two
day withdrawal period, but that is all baked in on chain. That's immutable um most of our strategies are full you can fully withdraw
at any point in time and that that includes um that includes uh more more full um as well so
um i i would say the the two main things are like a ton of visibility transparency and the
non-custodial nature of it um i think what we're seeing with this whole DeFi trend around vaults
is that protocol strategy has evolved over the last year.
It has evolved such that the competitive advantages
that propelled protocols like Compound and Aave previously
are shifting towards,
I would say more intangible aspects.
And that is because a lot of infrastructure
is becoming shared.
Essentially like, yeah, the Morpho tech stack,
when they launched on Ethereum and Base,
that was his own protocol instance.
But we have seen since that Morpho has evolved mainly into a backend
infrastructure provider for DeFi protocols like Seamless, Compound, and Ionic that are leveraging
Morpho vaults and centralized exchanges like Coinbase. So rather than owning the front end
and the user experience, one way they can really supercharge growth is by just
being an infrastructure provider that other people build on top of. How does this change the lending
meta? I think it changes the lending meta in several ways. I think when infrastructure becomes
shared and it becomes more of a commodity, now what matters more are things like partnerships,
right? So what partnerships can a protocol like Compound secure?
What matters more is customer and user loyalty to those protocols.
What matters is the active management of liquidity
and making sure risk creation is running smoothly.
These service providers and developments on top of the underlying infrastructure make for more sustainable competitive advantages.
If you actually look at how Aave grew over the last year or so, it wasn't necessarily due to any of the technological improvements they made, but rather they landed some huge deals, right?
Like EtherFi, for example, stands out and Athena.
ETHRFI, for example, stands out and ETHRFI.
These really drew TVL to Aave because they already had the supply.
So the supply side is already bootstrapped for a lot of leverage looping strategies
that people can do with ETHRFI and ETHRFI.
So it wasn't necessarily the technology, it was more so the brand and the partnerships
they drove.
And that's kind of how protocols are going to be
competing moving forward, not just across lending, but for decentralized exchanges. We see,
you know, something before with hooks. So again, becoming the infrastructure layer.
And with staking and restaking as well, you see providers like Symbiotic that are able to provide
vault infrastructure to people to restake their capital, whether it's Ethereum
denominated or stable coins or otherwise. So I think the overall meta is changing because we
realize that monolithic structures don't work. You can't have a one size fit all. There's a ton
of issues that arise with it. So if things cannot be done algorithmically automatically on chain
in a monolithic structure then you have different parties plugging in in different areas like like
you see with the vault play um yeah i'll pause there no that's great i wonder it like makes my
it all makes sense one thing i think of from the users of like yes it's all verifiable and on
chain but if you're thinking of like a um your average user who would want to transact in that
defy protocol i don't think they have the ability to actually read everything on chain so it makes
me think there could also be an opportunity and not necessarily you guys, but like a, almost a trusted, like, Hey, we are experts
and we, in a weird way, audit the vault on chain. Um, and then give it almost like a trust score
or a, like, uh, I mean, you have in traditional finance, you have a sharp ratio, which of like
volatility and returns and all of that. And you could have something like that.
I'm thinking for the vaults where people can choose their level of risk.
And that's,
that would be a good way to,
but you have a,
almost like these companies that have projects that just give their own rating.
Like,
I know we see it.
I know it's not the topic,
but like for social five right now,
you see ethos network giving reputation scores to
certain, uh, Twitter accounts. And you could do something like that similar to vault. And I think
that's a really unique opportunity. I wouldn't be the person to build it at all. It's just
thinking out loud, but that would be something I feel like that would excite me and get the
thinking about like the average web two user to web three.
Like, how do you build this to keep them safe while also allowing this great innovation?
Because typically when you add in safety measures, you restrict innovation.
But if there's a marriage where you can go, okay, you're more aware,
but almost like more informed consent to interacting with the protocols,
I think is what's needed in DeFi as a whole.
For sure.
I have a couple things to say here.
One thing around quick swap, right?
And this is so my name's Derek.
I'm CEO founder of Steer Protocol.
We do on-chain liquidity management for spot, perps, options, on-chain incentive program
distribution, a bunch of different things,
staking. The big thing for us, though, is that we're listed on quick swap. So whenever people
go to deposit liquidity on quick swap to get yield, for instance, in DeFi, they can choose
us as an option. And in regards to risk, one of the first things that we found out as we started
as a protocol is that users
are pretty simple, right?
They go for the highest APR that they see, right?
So when you list out the APRs for users without really telling them, hey, here's a different
strategy and here's how it might be better over the long term, most of the time the deposits
will just flow to the higher APR.
And one of the things that's always been interesting to me is that if you're a liquidity provider on a DEX
and you actually are getting the high APR,
that actually means that you're cranking up the risk
versus the opposite, right?
And so that's just one of those things
where it's like human behavior is, I guess, maybe opposite.
And to what you were saying, like, yeah,
maybe there should be tools and stuff like that. One thing that's a little bit different about us is that all the
strategies that, so we have this strategy SDK, and we have a data connector library. You can connect
to 150 different data sources. You can build these different strategies, launch them. We do
rev share with you, all these cool things. But the idea though, is that we have this open network of
strategies for liquidity provision. And we have about 20. We're the though, is that we have this open network of strategies for,
for liquidity provision. And we have about 20, we're the best, I think, in the space around that.
And anyone can run these locally within their browser. And on top of that, we have a back
tester that we had to build to find out like, are we going to be competitive against our competitors
or are these actually going to lose people money, stuff like that. That's a public resource where
anyone can download that and even run it within a browser as well.
And then go back to us like, you know, what does it look like?
And that forks the network, replays all the transactions and basically rebuilds, you know, the history while you're in the middle of it.
And I think those are like maybe the baby steps of getting there.
But yeah, agreed on risk.
And I think, you know, the more and more we can start putting profiles
to risk, I think the better.
I think there are two parts.
I think there's the aspect of data and visibility.
And then there's the aspect of analysis.
Whenever we provide a risk rating, right?
It's the analysis part, the interpretation.
And that's dependent on the results of economic simulations.
I think I agree with all of these aspects around.
How do we provide users context on the risk tranche?
This is something we did for protocols like combat and Aave back in 2021.
We had a collateral safety score for different collateral assets that were listed.
So I think on the creator side of things, one thing which we are doing is providing visibility on what's happening, right? So it's like very clear what the yields are, both current
and historic. It is clear what the current allocations are, like where we're lending out
the assets. Is it Bitcoin? Is it Ethereum? Is it a PT token, et cetera? So all of these yield sources
are being transparently laid out. And internally, we have risk methodologies and scores that are
fine-tuned with market conditions. And as market conditions change, the risk levels of these
change, and then we make reallocation decisions, right? When it comes to kind of a broader,
you know, DeFi risk score, I think, yeah, that could be helpful. But I think it's also important
to recognize that that is also an interpretation. Like risk levels are an interpretation and they're
only as good as the underlying analysis. And that is why on the gauntlet side, what we really focus on is
performance. Are we actually minimizing insolumency risk? How does an on-chain track record look like?
We really value what actually goes on-chain and what the gains and losses are, because that's the
only real way to build trust over time rather than a kind of pointed risk score
that can be developed by anybody.
Okay, sorry about the lull there.
Maybe we should move on to another discussion topic.
Let's talk about how does DeFi risk management evolve beyond just like dashboards and ratings? So that ties into what
we were just saying, right? Like what additional tools can be built for risk management or what
can people do to understand their risk management better?
Yeah, I can take this one.
I think there are a couple of aspects.
On the user side of things, I think tools have been built in the past that either auto-leverages or auto-deleverages based on a user's health factor.
So, yeah, I mean, I think there are apps out there
where if you like deposit in compound or otherwise,
you know, they can automatically top up collateral
or repay borrow depending on how your health,
the position of your borrow changes.
I think that's how things are done in the traditional sense.
In the traditional monolithic protocols, parameters are optimized by governance.
So, you know, ask listings are approved by the governance procedures.
The listings happen the same way.
If parameters are to be changed, they're usually recommended by a risk manager and then approved
by governance. So for example, if liquidity improves for XYZ token and the risk profile has
decreased for that token, it may be prudent to increase capital efficiency, increase LTVs there
to enable more leverage, to drive more growth without adding any outsized market risk. So those are some changes that go through governance.
But that process is also really tedious.
It requires review from risk managers.
It requires an audit of the on-chain proposal from a smart contract auditor.
It adds risk, right?
Because you have to ensure that the parameter change
you're making is correct on chain
and that doesn't affect other parts of the protocol.
It requires community attention and voting.
So there's a ton of overhead
in how risk management is done there.
And with the newer vote style approaches
like symbiotic and Morpho and others, really all that risk management is abstracted away from governance towards curators.
So curators are like the are the entities who are managing the risk levels of certain vaults.
of certain vaults and rather than go through parameter changes they push through parameter
changes via the on-chain vault smart contracts to allocate liquidity to markets or deallocate
accordingly so if a market is seen as too risky and the creator has allocated five million dollars
to it the creator can just deallocate liquidity assuming that there is enough liquidity to deallocate and not all of it is borrowed in that market so that is kind of how
it changes over time i think the benefits are pretty clear it's more real-time risk management
rather than taking a week or two for on-chain proposals to change parameters it allows
yield to actually get more aggressive without adding risk. If you're
able to deallocate liquidity quicker, you're able to go more aggressive in risk on. So over time,
it actually can improve yields for users if people can be more aggressive without adding risk.
It also enables not only really fast asset listings, an asset listing can be spun up in
under a day on Morpho. It takes
months on a protocol like Aave. Now, all you can add more assets, it adds new types of assets,
right? For example, for PT tokens that have a certain maturity date, it's really hard to list
that on a monolithic protocol where it will take months to list it and then delisting it is a major
hassle just because of how it's set up and how the
yield works. But on a protocol like Morpho, you can spin up that market in a day and when it reaches
maturity, it's just like a natural point for allocation decisions or allocation changes to
be made by a creator. So that process is a lot easier for these types of
kind of bond-like tokens with a certain maturity that it's just structurally very difficult to list
on a monolithic protocol. So to kind of like, yeah, summarize it, risk management is becoming
closer to the metal rather than, you know, arm's length parameter changes, smart contract vaults directly are pushed
to make allocation decisions in real time.
Okay.
I was like, I wanted to add something,
but Paul, you basically covered all of it,
every point that I had to say and want to add.
So that was a great answer
don't mean to rug you it's all good I would say you were more eloquent and probably way more
accurate when speaking than I could be so thank you for that I'll just like say I support what
you say and and plagiarize it later appreciate the support support. Yeah. I mean, also we just have a,
we have resources online, like a ton of content if anyone's interested in understanding how
a risk management is done. We kind of just nerd out on it all the time.
So, you know what, and I think that that's an important point that we can talk about.
That's not, it's related, but it's not directly related to DeFi. It's about assessing your own risk management, which I know a lot of people struggle with.
So I guess the question, you know, open question to anybody who wants to answer,
multiple people are welcome to answer. It's like, how do you determine your own risk tolerance?
determine your own risk tolerance?
I have like a, what I would say is not a, an exact number test, but for me, when I start
staying up later than I normally would checking charts,, waking up earlier wanting to check charts, and waking
up in the middle of the night and have trouble sleeping, I know that I have taken on too
much risk for me personally.
And this happens sometimes, but when I first got into crypto and wanted to trade meme coins,
it was happening to me.
And then I'm like, you know what?
This is too much risk i can't do it where if the majority of my holdings are in like the blue chips bitcoin
ethereum stable coins earning interest like i sleep well and that tells me that i am at a good
personal risk tolerance um and then the other one, I think,
for me too, is like having lost money sometimes when it gives me like a huge pit in the stomach
or I'm afraid and have that pit in the stomach where like I can't. What I would say is I almost
feel embarrassed to share it with people close to me. If I can't tell my wife
or my family, like, hey, here's how I'm invested and here's my strategy and can't, and I don't
feel proud of it or can explain it, then I've taken on too much risk. So it's not for me,
it's not really a like number thing or volatility thing. It's a like how knowing myself and recognizing my emotions
and psychological state is a good barometer for risk for me personally. I feel like that's such
a funny answer because it's so similar to my own. Historically, I've always been like,
if I open my portfolio tracker and think like, oh my God, that's a lot of money, then I take profits.
So, Timmy, what you're saying is that you can't tell your wife that you went 100x on Farcoin.
Exactly. I could never, never, ever do that.
So, no, if I can't justify the trade or the position rationally, then it's too risky.
And I would say also along the lines of risk is like there's risk and there's greed.
And I think they're very similar because as you get greedier, you start making riskier and riskier moves.
start making riskier and riskier moves.
And when you feel that like,
Ooh,
I'm going to do this because I could change my,
I could like,
you see on Twitter,
retire your entire bloodline.
Like I'm not,
I'm not interested in that.
my grandfather always used to say,
don't try to get rich quick,
get rich for sure.
And like,
you have to keep that in mind.
And I think that's a really good way to,
to stop yourself from getting too risky. You don't have to get rich for sure. And like, you have to keep that in mind. And I think that's a really good way to, um,
to stop yourself from getting too risky.
You don't have to get rich overnight.
You just,
you have to build your assets,
over a long period of time and make it,
make sure that it happens inevitably,
not that you're going to do it within the next 24 hours.
So what you're saying is don't buy Mutant Apes.
You can do whatever you want, but I actually talked about it.
My wife supported the decision and I told her, so, you know.
Then you asked her nicely.
Yeah, I mean, personally, I've always been a little more a little more risk adverse um
so i mean i actually made one of my best trades one uh when my partner was pregnant
and she's like six months pregnant and i'm like aping into meme coins um
but yeah i mean um it's it's it's really funny seeing other people's risk
appetites because most of the people that i know in web 2 like none of them hold bitcoin none of
them hold ethereum like most of them don't know what ethereum is couldn't spell it um
and the minute i mentioned like a meme coin like a little Pepe, a green frog,
or something along the lines of fart coin
with a stupid name,
they're like, yeah, yeah, I love that idea,
and I'm going to buy some of that.
Even retail just have an incredible risk appetite.
But yeah, Jason, you've got your hand up
if you want to jump in.
Yeah, this is a reminder.
We're a panel show too.
So everybody, you know, should just feel free to unmute and talk when they're ready.
You know, I was wondering.
Hi, guys. I was wondering if someone, so what I do in my case is that I just decide how much I'm willing to lose without it affecting me.
And so, for example, in this case, I go to the casino and then I say, OK, I'm going to spend, I don't know, 50, 100 bucks.
And I know that at the end of the day, if I lose that money, that's the money that I want to lose.
And that's basically the same mentality I have towards Web3 and crypto.
I just go and I'm going to put this in this mink coin.
And if I lose it, it's fine.
But that's just how I see it.
I don't know if anybody else does that.
Yeah, just understanding the possibility that it could be a loss. I think that that is a lot,
like that's a lot of people's mitigating factor is, you know, people say it all the time, right?
Not putting in more than you're willing to lose. So like you said, if you're going to the casino,
maybe you play with 50 bucks and you're like, if I walk away with more than 50, that's
great. And if I walk away with nothing, I understand that that's the risk that I'm taking.
So yeah, I think that that is, I mean, obviously like the saying is, is what it is, like, you know,
is a cliche for a reason. That's because that is a lot of people's barometer. But you know,
what's funny is I have so many friends and family who were not crypto people
at the beginning who got into crypto, you know, of course saying, oh, I can afford to lose this.
But when people actually lose their money, it feels like more than they could have afforded
to lose. So I wonder at what point, I think it probably is when greed really sets in, when people
really start to see those returns,
that they start thinking, oh, I could put a little bit more in because then I'll gain more without realizing that they're also risking a lot more.
Yeah, I completely agree here. And really what I think is important is that you
define a strategy first and foremost when you invest. You have to have that in place before you invest.
And another advice I will give is always to protect the principal.
So when you go in with an amount and you are in plus,
in most instances, take out the principal and then play with the rest.
That way you can never really lose.
And that has worked for me so far.
Totally. cannot never really lose. And that has worked for me so far. So, uh, totally. And you know, what else is like a really, I don't know, poignant thing to point out here is a lot of times when
people say, I'm going to buy X amount because this is what, you know, this is the money that
I want to earn from it. Like I'm going to put in, you know, X dollars and I'm going to bring,
you know, because I want it to turn into y dollars then
often what will help them is actually doubling their investment amount because then when they
pull out the principal they still have the opportunity to earn what they wanted from it
yeah no 100 agree and also if you have returns of like 13%, 20%, 40%, you should be happy, right?
And sometimes people just play and then they lose 100%.
So, yeah, it's also a matter of being realistic about what yield can money generate and then, you know, take out the profit when you can.
you know
take out the profit when you can
alright anyone else
so we're about 15 minutes
away from wrapping up the
episode maybe I can
ask one more question and we can let
everyone answer
as they outro does that work
everyone
yes okay I'm to just do it since nobody's
saying yes or no. All right. So the question is, is DeFi really ready to service real world
assets or are we still too early?
Well, maybe I should answer here.
So, yeah, we're definitely ready. We see Ondo having a huge success with their DeFi play,
and we see a lot of regulation also easing up
easing up and a lot of deregulation happening.
and a lot of deregulation happening.
And DeFi is, by default, you can say the most promising roadmap
to handling all the regulation issues there are currently.
So I would definitely say that we see a lot of traction in the DEX space.
And that's also why we are scaling up and speaking to QuickSwap right now in terms of producing our own DEX.
That's in the roadmap.
And I personally love the DEX transparency.
You can see everything on chain.
There is no black boxes.
You can see what goes on.
So I'm a big fan of decentralized solutions.
And I think we'll see a transformation actually from central exchange listings to decentralized exchange listings in the real world asset space.
Yeah, I agree.
Adding on to that, I'm very, very bullish on real world assets.
I think RWAs can offer a lot to crypto as well, not just RWAs leveraging crypto infrastructure.
crypto as well, not just RWA's leveraging crypto infrastructure. So I guess just to like,
yeah, provide my general thoughts on it. The most kind of immediate use case we've seen,
as Kevin just alluded to around ongoing US Treasuries is, you know, levered looping, right?
So if you have like a US Treasury that's yielding like, I don't know,
5%, 6% and you can borrow at 3%, you're just going to post that up as collateral,
borrow as much as you can, pour that stable coin into US treasuries and loop that trade
for leveraged yield. That is a pretty killer use case and something that is kind of hard to do
with traditional financial systems, but you just kind of hard to do with traditional financial
systems but you just kind of embed that asset into a lending protocol and you can run that trade all
day so i think we see that use case there but what i'm actually more bullish on is higher yield
strategies like credit funds or mutual funds or otherwise where now there's a lot more opportunity for leverage because those
yields are higher and the spread between the bar rate and the earn rate is greater.
What we find difficult, right, is like when on-chain stablecoin yields flip U.S. Treasury yields because that can be pretty volatile.
The profitability of that trade is pretty uncertain and the size of that trade, the attractiveness of
that trade can be very volatile. But with a higher and hopefully more stable yield that you see
in credit funds, that trade can be a lot more
lucrative. So number one, I think the size of DeFi as it expands to these various asset classes
can rapidly expand, not just on the borrow side, but concurrently the supply side.
not just on the borrow side, but concurrently the supply side.
This may even open up a new set of users, right?
Like maybe users are okay with a lower yield if they're lending to like the BlackRock Biddle Fund.
Maybe they're okay with a lower set of yield.
But either way, like as U.S. Treasuries fluctuate and as the Fed cut rates or otherwise, you can see different parts of the market grow in different areas.
So when, you know, the Fed like cuts rates, for example or not levered Bitcoin looping, but just people going leverage long of Bitcoin, that increases size.
But when yields are greater, when the Fed hikes yields during those market regimes, the interest rate on these credit funds and traditional funds are not higher.
on these credit funds and traditional funds are not higher. So when the Fed, when we're in a
regime where there's less demand for leverage on crypto native assets, there's more demand
for leverage on these higher yielding credit products. So it kind of balances out the market
overall. And I think the introduction of RWAs smooths out growth of DeFi. So yeah, I just think
it's, I think, you know know the technology is mainly there uh there's
some kinks to be worked out but it not only grows the market it also makes it a more steady growth
over time yeah i think rwas it'll get really interesting because once you have a representation on chain, you can definitely do really fun things with DeFi, with the RWA.
So like you can use and like I know depends on you need these guardrails and like there's stuff that obviously needs to happen.
But assuming things like that get taken care of, you can all of a sudden take out loans using like I think of an RWA project as simple as Courtyard that is basically just Pokemon cards and sport cards.
Those have a value.
And then once you put them on chain, you can use them as collateral and take out lending positions. It really, there's a lot of things in the real world that actually trade at a discount or are sold at a discount because they don't have the financial potency that they otherwise could. use them as collateral or you can fractionalize them and use them with different tools.
All of a sudden, their, I hate this phrase, but inherent value or what the market perceives the
value of them increases and then all of a sudden things become worth a lot more. And it's this,
it's not reallocating these, like if you think about a pie chart, it's not like different ton of financial part of the world because I have
something that I think is trash. It has no financial value, but someone else has money
that they are willing to trade where I get money for something I thought was trash and they get
something that they deem worth at or more than the money that i got for it so all
of a sudden you have this value creation and i think that's what rwas can do uh when you pair
them with defi protocol you unlock this value that is exists in potential but didn't have a way to actualize itself. And now through DeFi,
you actualize this value in these objects that otherwise wouldn't exist.
Yeah, I'm a huge fan of RWAs. I'm also a huge fan of Polygon's latest policy to focus on payments, right? Like, I feel like that is the right mindset, the right, like, look, and, you know, a huge thing that I've been paying attention to this cycle has been breakthrough applications. So applications that people can use without being
crypto native, right? Like Polymarket appeals to people who are not already in crypto. I can name
several of the things that are built on Polygon that I think have the potential to be breakthrough
applications, you know, one of them being Faith Tribe, another one very
controversially being Mint Stars. So I think that that is a huge part of what we'll see in this next
wave of adoption. Applications that are built on crypto payment reels that people don't even have
to know that they're using cryptocurrency for. All right, so we've got like seven minutes left until we hit the hour.
It'll be somewhat of a record wrapping up right on time. But if anybody has any...
Totally recognized I could have the issue.
Yeah. You know what? It's funny. Every time that I'm the host of the show,
it ends right on time. It's so weird.
Anyway,
Timmy actually DMed me about this earlier.
Rock was like,
yeah,
I've got to go for this important thing.
And then like five minutes later,
he's like,
yeah,
so what's the yield on that?
I know.
I know.
That was funny.
I saw that in the chat.
Okay.
So if anybody,
like,
I don't know,
anybody have any closing thoughts, anything that they want to wrap up with, they want people to know, I want to say really quick before I pass the mic, that everybody in the audience, everyone, you know, listening, everyone participating, please do, you know, follow each other, follow the speakers there's a lot of people with a lot of DeFi knowledge a lot of crypto knowledge
in the state on the stage and in the audience and then additionally please follow the LDA and
Tesseract account which is in the audience as well I would like I would like to share some thoughts
that I have regarding like DeFi and crypto in general. And I think like most people would agree with me. And he's that as long as we deliver things that are useful to people,
there is a space for it.
So RWAs and deepening,
anything that is useful and people can actually improve their lives with
will be used and there's going to be space in the
Web3 ecosystem for it.
So, yeah, just basically that's my thought.
So, RW's and whatever it is, they're going to have a space and we are ready for it and
people are ready for it.
They just need things that are truly useful.
Yeah, so that's what I think about the question, the last question that you make.
Okay, anybody else? Closing thoughts?
My closing thoughts are I definitely agree that DeFi is coming back and it is super exciting to see. I mean, seeing the innovation that's happening, I feel like for a long time, and this isn't meant as a slight to projects that exist out there, but it felt like DeFi was basically just like, oh, we are a Uniswap fork and here is how we do things slightly different.
And we are a Uniswap fork and here's how we do things slightly different. And we are a Uniswalt fork and here's how we do things slightly different.
And it was just really boring and bland.
And now we see things like new,
we have these gauntlet vaults and Morpho vaults.
We have companies, I mean, Polygon,
it's putting a whole bunch into DeFi incentives
and growing DeFi.
And you have all these other chains
that are really investing in DeFi incentives and growing DeFi. And you have all these other chains that are really investing in DeFi.
And you can see that it's going to come
like a huge tidal wave
and really be a great opportunity
for people who took the time,
learned about the different protocols,
learned how to use them.
And I also see things like uh even on
the more traditional decks as you see i mean quick swaps an example where like yeah it was
like if you use quick swap in 2023 and then you went in a time machine and then you started using
it today it would be you'd go oh my god like how did they accomplish all of this on a simple
decks?
Like it is a much better user experience, much better, much better infrastructure and
everything that goes into it.
So I just think that when you have time and money being spent and you match that up with a regulatory environment that is favorable to all
of these like it's inevitable that um defy is going to really showcase its strength and potential
in and i mean nobody knows the time frame but it's one of those it is definitely coming whether
it's within a month or over the next year year and a half or five years but like
to me i just see defy as inevitable and i do think defy season's coming and you can tell that it's
coming because you can see where the major players are putting their money and a lot of capital is
being allocated to defy awesome well i will love to see some of the meme coin profits turn into defi
uh you know it was like i feel like what you said earlier regarding your risks you know your risk
strategy if you can't justify why the token will go up how much you want it to go up um then you
then you can't buy it um but there are a lot of people who can and did and do.
And hopefully we see some of that, you know, some of that capital rotate into real utility.
All right. I guess, you know, if nobody else has anything that they want to wrap up with,
we can close it out here. Thanks everyone for coming. Come back
next week. We're going to have an episode all about trading. We've got some
professional traders coming on and some people who oppose trading.
So yeah, come back next week and learn about
trading strategies and all that. Thanks everyone.
I don't know. Stay classy, San Diego.
Thank you. Bye, everyone. Bye.
Speaker
NOTAI
from
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