Hi, Kevin. How's it going? Great. How are you? No complaints all good on my side
Awesome sharing the link now
February 1st, that's where we're at. Wow. I can't believe the year the year is flying by already cannot believe it
Lots of activities. This is going to be a really packed year
if you're like me and a believer in
what's happening with the
Overall blockchain world and markets and how that affects
developments in other areas as well
It's going to be one of those years
Yeah, I think I think such in I think 2024 is the year of lots of sort of exciting activity
Not saying that the bear market wasn't but that's always a bit more exciting when
You know things are heating up in the market
Yeah, of course, yeah, I've always like it when it's good
I mean there is pride in being able to weather the storm and I think a lot of
Ecosystems are would-be ecosystems daps projects things that people are really
adamant about their growth and proliferation
In in the height of a bull market or even towards the end and as the bear market begins
And then they just they just don't like you they're gone. They're gone from conversation and they're gone from
From everything and the people move on
But like then there are those that build in the bear market those of us who are just like, okay
We knew this was coming. Let's use this time. Let's use the time and then we'll have a beautiful table ready for you
So and that and that and this is also one of the exciting aspects of defi overall, right? It's super innovative
There's always something happening. Like if you take the aisle off the mark for just a month
You've already seen new projects launching or new activity happening new sort of infrastructure being either launched or connected
It's there's always something new to to learn and that that's a kind of a speed into our conversation on the lending side lending and borrowing
But there's so much innovation
There's so much things happening
but you still need the actual primitives of d5 to then make things successful and then to generate the likes of
Derivative side, so that's probably the most exciting thing like just being able to just sit for you know
Just be able to learn it's like I don't know actually everything
And you know the more that you kind of learn and take in from this the cycle the better
It's for me that that's the most exciting thing
Yeah, and on the derivative side in when you look at the traditional finance
Economy when you look at at that world of you know, what are the Wall Street people doing and everything it's
Financial products and and value of them are derivatives. So it's not stocks not bonds
It's not like debts debt securities or or equities in that regard. It's derivatives
like kind of the the off-track betting or
I'd say like a they're far more creative instruments
And I mean that that's I guess the the bigger reason why there's so many of them and why the value is so much
But it lets you really pick apart
Events of the world and of these markets and industries and be able to create
financial instruments from them
That you can benefit from but ultimately I mean it goes to to better and improve and advance
The the financial ecosystem overall we historically we haven't had much of that on in the DeFi world
But now it's starting to creep up
Because I mean just it's implied in the name derivatives like it's derived from something and yeah
That's exactly what it is. It's derived from the basics from the stocks and bonds and equities and debts and all that
But but overall the traditional finance, that's a very tiny part of the economy
But but ultimately we get there and yeah, they're very exciting
But but yeah, we needed to complete that those primitives before we could get to the derivatives really and scale those
I feel in the DeFi world and that's that's true in Tezos
Yeah, we haven't that's the big thing. We hadn't had a complete primitives cycle until until now really
Maybe that's touch on that. So, of course with the launch of
Tisphen was the launch of your partner. That's been some time back as well. I suppose we're starting to see more of these
Primitives come online if we're going to call them that maybe let's touch on how that impacts or scales out
DeFi economy. So do you want to maybe touch on how lending and borrowing is kind of servicing? No DeFi at large?
Yeah, yeah, so DeFi or just any like finance, I mean, it's
It's made up of things that are very obvious for one thing just the the the equity type stuff
So like the this is the spot trading. So, you know you trade Tez and stable coin, you know, because you're betting on the price
That that's like a that's a equities kind of trade that that's on that side of things
But really it presumes that well, let's put it this way
Like it's it's a very basic and very kind of old to just have that it's a very old way finance was like that's what
Finance in the world was before the 1700s. So it's a very primitive way. It's not a very expansionary way of looking at things
but the thing is what's and what's better for it is is the fact that
We can have it when you add a system of debt where people can actually
Borrow and have had this like this has been true in every economy for for hundreds of years now
And and it's been true in DeFi when you add a system of credit in which people can put down a cult some collateral
Borrow money, you know and and yeah, they're they're owing debt over time, but that as they do that
Like they can take out capital. They don't have
You introduce this new factor to an economic to an ecosystem
And that interacts with all the other elements that have been built
much more usable sustainable
Enables liquidity the the sheer amount of capital that's in the system to retain for one thing not go somewhere else
But stay there and and compound because people keep using that money that's being lent out
to go and and commit financial activities and then those
Activities lead to more funds going into a lending system and into into lending and which leads to more capital
It it seems like it's a product in a vacuum and and that's not
Lost on me as I've tried to explain this over the years and how important it is
But it's the farthest thing from lending is the single most important factor in scaling
Defy ecosystem without it. It's just not even complete. I mean you could say that with a lot of components
It's not complete, but it's really the engine the true engine that drives
The growth of liquidity and the growth which ultimately of course leads to the growth of users because you know
If you don't have enough liquidity, I mean there are only so many people who could use it
And the growth of activities and and the economies of it the amount of liquidity within a deck
Soars after as we saw that in aetherium once their lending system scaled
We saw the the amount of liquidity in the decentralized exchanges to start to soar
Same thing with the algo coins in those systems
And and also the the areas outside of finance proper outside of D5 proper
I think the really key thing that we'll see on a very illustrated way is
The fact that we've had this thriving art ecosystem on Tesla's for all these years without a complete defy ecosystem is amazing
And we've been able to thrive this long without having scalable liquidity and people said it couldn't be done
I mean, we showed them but just imagine what happened once we do have that scale defy ecosystem once we have lending
it so there's a practical element to it for for something like
For like an art ecosystem like to be able to use it on object
Like that's a very practical element
But I think more importantly even if that's not used by the art ecosystem directly
It's still very much affects it
In that like you don't like you don't have to use like you might not be part of Wall Street
But your your bottom line your your income and everything is very much dependent
On what happens there and the money that's moving around because it trickles to you in many ways
that that scaling is going to be something fantastic and
I mean, there's so many ways you can look at this
I mean people are like what about the price of test and all that it's like well
You could say all those things will affect it but also on a very linear way
It's like well more money locked, you know taken out of the liquid
circulating supply and put into like pools that are a larger and larger a bigger proportion of test well that puts more strain on the
Supply that's in the available markets, which of course puts tension on
Demand relative to supply goes up and then you can draw whatever conclusions from that not financial advice
Just for education example purposes only
Etc, etc. But yeah, that's basically how it how it all feeds together
Yeah, but I suppose if you must take a step back. So let's talk about what lending and borrowing is in the deep in the
Centralized wage because I suppose in the track highway, we know very similar
Typically there's some type of collateral involved. You also get un-collectalized loans
Or under-collectalized loans if we want to say that do you want to maybe just talk us through?
What it means in a in a DeFi way as we know it now
We know that the market is evolving this this play is trying to have things under collateralized
But maybe talk us through what the currents how we define
Decentralized line sending and borrowing
Maybe that's a good starting point as well for us
Sure, exactly and and there's there's very interesting differences between it and what we know of letting and borrowing in the traditional world
In the traditional world, we know that okay, I can let my deposit my money in a bank
That bank holds on to it. Maybe I get paid a rate of interest. Maybe I don't
and but the money that's in the bank the
Bank can lend it out to other people charge a rate of interest those people have to pay it
Not everybody has the same terms
there are so there's a lot of biases and prejudices in that system too and also so it's it's not equitable to all people and
Also, there's there's no guarantee that the bank would get paid back
And and if they don't well, maybe they can go and see some collateral because maybe that was put down
They'll take your house or something and then they'll they'll auction that off to get the money back
That kind of thing that's
And you have this thing called a credit score and then that affects that so you don't have any of that and and altogether
There's a central intermediate in their intermediary there
There's there's people who are making choices and bad choices and and ultimately with this kind of a system on an institutional scale
It does lead to very bad outcomes like the financial collapse and crisis we had back in
And still you can argue the effects are still enduring
Basically, everybody starts as a lender
So so no matter what you're trying to do trying to borrow money you are starting out as a lender you put collateral down you put
you're earning some rate of interest because
That that pool that you put money into that lending pool earns a rate of interest
and you could just stop there and collect interest and then call it a day come back and
Cash out if you you want to whenever you want to the rate of interest changes over time and I'll get back to that
But then if you want to you can choose to borrow money
Using what you have lent in the system as collateral effectively
So you will opt to use that as collateral like you'll press an actual button to do that
And then you have a rate of borrowing capacity and right now it's 50%
So the the equivalent US dollar value of whatever you put down and say it's has you can borrow
so USD stablecoin like tether USD Tez and
Once you borrow you are then owing a rate of interest over time
the rate the interest that that pool
Gets like the earning interest is smaller than the borrowing interest, of course
Naturally, that would make sense
It's implicit within it is the way of saying it
The more that people borrow and the more that is being borrowed
Relative to the amount of funds that are in that pool that are available to be borrowed that puts more tension
On the algorithm and it causes the rate to borrow to go up
So more demand means the rate for borrowing goes up
And then if and then what that does also is it brings up the the lending rate
So the the lenders who are putting the money down that people are borrowing that's in in such demand
That rate goes up with it
And if people if there's not as much activity the rate goes down for borrowing as would the the rate for supplying it
And but likewise, let's say the demand is through the roof and then oh, yeah
People are still paying are paying this higher rate of interest and that brings up the lending borrowing rate the lending rate that people get
For supplying that token. Well, that rate is becomes increasingly
incentivizing to people because
Like well, that's a higher and higher rate
I want to get money and supply it here because I can get a better and better return on this
This is really in demand and then so more money gets added more capital gets added to that pool
And then what that does is it effectively brings the rates down because now there's more supply relative to demand
Which makes borrowing more attractive and effectively and then so people will come and borrow so on and so forth
So the idea is that there is this natural
resource that's not incentivized by a subsidy or a
farm or anything like that
Or anything that's a byproduct of one of those things
But just a natural rate of interest based on bought lending but some demand and supply
That'll keep perpetuating and going in that way
and it leads to compounded growth of the amount of capital in that system and
The more capital that's in that system enables more activities
More borrowing activities to be had and more borrowers to come in and to do such things
Which leads to more transactions larger transactions more frequent transactions
So that's how it works a little a little bit on the technical side and and the concepts behind how it how it operates
Andrew it's almost as a summary. You would put up some type of S test collateral could be TzBTC in this instance
It could be X Tz and ultimately borrowing against it
And then you could use that borrowed those borrowed funds do XYZ doesn't have to be only from a trading aspect
could be for purchasing an NFT, but
Not selling your X Tz or one of these other assets and you just borrowing some type of stablecoin. I think that's been the
Traditional approach more form for myself. Of course, I think others prefer to lend out to stablecoin and borrow against some type of assets
But I think that gives us an overall
Summary there and then Kevin. How does that then ultimately scale?
So now we've got the lending and borrowing services, of course coming online
I think we've touched on a key point being real yield
So therefore not being incentivized by some type of token. Although there are some projects that do grow that roots
which is also a separate model and
Has been quite successful in the past
But let's say in this model
Completely lending and borrowing everything's implicit by the lenders and borrowers and that interest rates are then determined from there
How does that then ultimately impact the flow into the rest of the DeFi? You've got the DEXs
Let's touch on the DEXs because that to me we mentioned lending and borrowing the engine. To me the DEX is the engine of liquidity
like it's you want liquidity, you want more pairs, you want how much of
TVL I know with the likes of the uni v3 implementation less
Not to get too much into the technicalities, but you know, it's let's say a lot more efficient
But let's assume from the standpoint of this conversation more TVL is better
How does lending and borrowing then kind of fit into the DEXs itself?
Like to actually feed into what I think is like the engine of the political moving tokens
You know, that's that's what I would see more as an asset. Like what are your thoughts on that?
Yeah, and I can put it in terms of
Just even like the decisions people face today
Like what are the things that is very very valuable and you look historically and this is very consistent
Something that is always earning money
are pools between like say Tez and USD Tez
And that's because people are very willing to run bots
Or just spot trade based on the moving price of of XTZ in or tether as well
XTZ and tether or XTZ and another stable coin
And that's because like XTZ USD is the most traded XTZ and something asset in in the world today
You see that on centralized exchanges. It's always at least tens of millions in volume a day
In you know in bull markets. We've seen it go anywhere from hundreds of millions of dollars a day to literally billions of dollars a day
So it's always happened every day doesn't matter doesn't doesn't matter what's going on
But the thing is so it's like you think like okay. Well, well, there's if that's the case
There's a lot of money in collecting those fees, right? So why isn't everybody just adding?
Lending pools why aren't they adding liquidity to that? Why aren't there?
10 times as much there and I'm not gonna encourage it
well, the thing is if you really believe in Tez you probably don't want to have all this fiat exposure to
You know like put more Fiat down and
Or liquidate something so you can do that you want to make money off the price of Tez
Which is very understandable. So one thing you can do is with the lending system is well put the Tez down and
Already you're gaining with
Interest you're gaining with the the interest rate that that emerges for that
And you're also not losing out on the price of Tez price of Tez goes up
so does your position there and you can borrow against it in terms of USD stable coin and
Like and you have a borrowing capacity, but as the price of Tez goes up, so does your borrowing capacity your borrowing limit
USD stable coin back with interest and if you believe there's money to be had with this principle
Then yeah, you can pay it back with pay back the interest and have profit. That's the idea
So it that that's one very specific example, but I think it's a very prime example
Another thing is you might want to be on well. Yeah, that's like a DEX example another example with the DEX would be
Say the ability to to participate as an arbitrageur like you need funds to
Make up for the arbitrage of a price change within DEX's
But you don't want to convert over your funds
But you do want to have cash at the ready you want to have capital at the ready
So you would borrow against that and just have something on hand. I remember back when
Those early days of Dexter the first
Decentralized exchange on Tezos so fall of 2020 and there were just two pools out there
One was X TZ TZ BTC the other was X TZ USD Tez and then I would go on
Twitter and I would see arbitrage because people weren't used to using DEX's on Tezos at that time
So I would say hey there's arbitrage on Dexter
And I wouldn't take the opportunity myself. I would just post about it
I would spell it out for people put it in you know
imagery and all of that and say what people have to do or explain what it would have to be done to
to take advantage of that to balance out the exchange and
Some of those were for tens of thousands of dollars at a time or otherwise thousands of dollars at a time to be made
and and that acclimated people to start using these DEX's because
Like oh they realize how they can make money off of arbitrage
But the thing is you have to
To get that you have to be faster than the next person which means you have to have that capital at the ready
So you have to have USD Tez at the ready to do it or whatever other stable coin
You're trying to make arbitrage or whatever clean you're trying to do arbitrage with
So to have that that you don't want to sacrifice
Maybe your Tez which is that growth aspect?
I mean, that's the point you you're like the price of Tezos just went up now
You got to put in the USD Tez to make up to balance the arbitrage to balance the rate up
So instead you can borrow against it using a lending system. You didn't miss out on the price rise of
Tez and you made money off the arbitrage maybe use that to buy more Tez if you like
And everybody's happy. So those are examples from DEX's that enable that kind of growth
But I feel like I'm still doing a disservice because there's just so many ways
That are like not as direct as that but it affects the growth of these liquidity pools because once you start bringing in these third-party
Applications and all of the programs they have that are incentivizing in their own, right?
Lending and borrowing funds starts to become much more incentivized
Implicitly at that point and that leads to to ultimate growth of those
Ecosystems to of those of those liquidity pools trading activity within them the balance of them and all of that
And and the success in any one of those factors also is good validation that
Promotes the growth of those of other factors of within a DEX
And maybe just so this is a as you were talking. I was just thinking about the flashlines as well. Is that possible?
So the only so Aave does so of the two biggest
I'd say the two biggest and most principal
Lending systems out there for the rest of the egos for all of DeFi are Aave and Compound
I always go back to those two examples trailblazers
They're very similar but also different in certain ways
Their strategy risk-taking capabilities compound does not enable flash loans
Aave does and it's been very problematic for them. They're every few monthly you hear of an exploits
Related to that flash loan system and for people most people don't know what flash loans are
Basically as I just described a second ago the idea that you could take money for this is one example of using it for arbitrage
That it's like whoa, I can go and I can balance out this exchange here
Instantly pocket the difference. They're like the money I'm making from it and then be able to
Pay back my debt immediately. We should be virtually nothing because I just took it out like we're not
like whatever the divisible AP
For the like it should be like virtually zero
And then plus I make my money back and I can even do pay a fee to do that and still make profit
So but I don't want to put but like I'd have to put collateral down to borrow and I don't want to do that
Because you know, my collateral is all locked up or whatever. I'm doing other stuff with it or something
But the idea is like people who are into flash loans are like well
should people necessarily have to put down collateral to borrow money if
All of that's gonna be if they're gonna take it and return it all within the same block
I mean clearly we can see that. Yes, we can see the arbitrage play they're trying to make. Okay. Yup. That makes sense
Yup, they can make the profit. Yup. They can pay the fee up. They can do that and if they can just take this and and
make that play and then bring the money back pay the insignificant zero amount of interest and and then
Whatever other fees and then and then it doesn't hurt anybody who lent that money out in that pool
Because it's all you know, it happened and and ended and completed before even a block finished
So basically that whole event not like the borrowing of it the use of it the returning of it all happens within the same block
Programmatically, that's the idea there and you can you hear that you can always think like well
What if it gets screwed up for whatever reason?
Wouldn't that person have just borrowed all this money that's like gone and then the pool that lent that money out can't get paid back
And everyone's screwed. Yeah, that's the problem
So that's why flash loans are a really dangerous proposition
They're really cool if you can get it, right and I'll be for whatever reason feels that that's a good strategy for them
to keep plugging at it and keep
You know, we're always watching words reading every time there's an exploit. We're reading about it, but it's a
But yeah, it's a scary thing and it can get very screwy
So it's not a very easy thing to implement and no one's really perfected it yet
But it but the concept does make sense in theory. It's just we're not we're not in that place yet. Not even close
Yeah, and of course ultimately I think larger useful
For arbitrage opportunity to give it to the same actual transaction and for those interested, of course
I know it's more touching on the other side
But there are some very interesting documents between either and chain nick actually and discussing flash loans. So I know slightly off
Topic but you know keep this as a great way of also learning
Um and educating so yeah, have a look have a look out there. I just wanted to touch on another point as well Kevin
Um, i'll spend a bit of time, of course in argentina
Um, and there's you know given that there's a lot more let's say and i'm not i'm not saying unbanked
But maybe underbanked is the right word. I know that's always been a hot
A hot angle, right? There's always underbanked or unbanked, you know always targeting this
Segment of the market, but I actually have an interesting story as well there
With someone actually lended their btc borrowed against it a stable coin off-ramp and purchased
It was a bike. So this was actually a real story a real person that actually facilitated it
Um, you know given that the the btc
Volatility overall is let's say the most stable of of what is out there
Of course, we know that there's a lot of risks associated
Um, do you have any other sort of real world cases?
That could also maybe be shared because um, I always actually take a lot of
Uh, I don't know if the word is faith, but I take a lot of benefits
Um, oh, yeah, I suppose faith hearing that there's a lot of real world examples being utilized not just for you know
arbitrage or not just for trading
Actually solving some real world problems as well. Have you got anything maybe there to share or something you want to maybe?
Yeah, I mean any uh, I think
Even if that's just like you're an artist trying to pay your bills
but you don't want to miss out on the price rise of tez or you want to use that tez to buy more in a tease and
Um, like I think that'll be a very major use case the ability to just okay
You you made all this revenue in tez put it in a lending pool. You'll earn on interest
uh whilst providing uh borrow borrowable capital that will feed back into
Economy, but then if you need if you need us dollar if you need that to go and pay your bills art supplies
Uh feed your family all that uh, but you don't want to miss on the price rise of tez you can just borrow against it
uh in in u.s dollar form and in u.s dollar stablecoin and and that's that's a better way to
To move particularly for a lot of people given their choice in a bull market
Uh, so and I think that's a like I imagine what would have happened if we had this in place back in 2021
For a lot of reasons, but but that one too
Uh, so that that's one thing uh for any flipper
And these things keep the the economy going so a flipper
Uh someone who buys nft's editions on object
Uh when they just drop before anyone notices
Uh at the initial market price and then as people realize oh this thing dropped and they're willing to pay more
Some of those editions that at a higher price takes a profit and a lot of people do this systematically
And they're they're looking they're sharking for for good opportunities to do that the come-ups. They know the landscape well enough
To be able to make those determinations
But you know, it doesn't it's not always a perfect science and people take risks in that regard
Especially as their comp there's competition for flipping
And things might not sell back right away
Maybe it takes a week or a month to flip or uh, so on and so forth
But in doing that I mean you're putting tes down your bot you're spending tes to buy that stuff in the hope that
You know, you can sell it for uh, you know
What you want it to be and and that's not
You know in the meantime, it's like well, I could have done so many other things in that tes effectively
I have it in this sort of locked position in the form of this asset
Um, so and maybe I have to adjust the prices to flip maybe I you know, I might miss out in that regard
Um, so but instead if it's like well, you know, you can just borrow
That you can borrow like put down your usd and then borrow tes to do it or the other way around
You know put down tes and borrow usd to do it. Um, you know, you're you're minimizing your risk relative to the straightforward way
Because you're you're saying I believe this is going to happen. I believe i'll be successful in this so i'm taking on some debt
Yes, it's a level of debt, but it's not it's a very manageable level
And even if it takes longer
If you put down tes you borrow usd
It's like well i'm not missing on the price rise of tes you put down usd you borrow tes
It's like well, you know if the price isn't unstable and it this would have been a bad time for me to buy tes
So I could go buy nfts. Well, it was a good thing
I only borrowed it because the price went down and and I still have my us dollar in my us dollar firm and that's
That's earning interest and as soon as I close this thing, that's better
So yeah, it's better in times when you think that the price of tes will I don't know it might go down
Uh, that's when it but you need to spend tes on stuff. You need to have open positions in tes. Well, then you would probably
A lot of people would be of the mind to to lend tes out or lend us dollar
And then borrow tes when it's the other way when you think the price test is going to go up
But you don't want to miss out on that. So you probably put down
So that'll probably be the ebb and the flow and everyone has different ideas of where the market's going
Um, and yeah that that so that that that creates a strategy that's more optimal and more and better for risk management
which sounds very boring and corporate or and and
Financy or whatever but that ability alone any any it's in degrees
There's a whole spectrum of risk management there and availability and and the more you can avail
That type of opportunity for people the more uh people can leverage themselves and manage their risk
the more things they can do and
That has a a compounding effect
That's where the sort of monster effect of how this will affect the economy
Comes in because it just it goes in a cycle
There's the primary effects of what you can practically do with it if you're someone who would use this system
There's the secondary effects of how that would affect all the other
DeFi and the other ecosystems that it that it touches that of the people who use it
Uh, and then there's this tertiary effect, which is how that cycle and the continued cycle of that affects the overall tesos economy
Um and tes as an asset too
so so all of these things factor together to
To uh perpetuate growth and then we've seen that in other
Uh, it's a very consistent occurrence
Uh very consistent with having these pieces in place
The only reason why we haven't soared to that level in defy as well as within
In terms of liquidity for for nft art ecosystem, despite it being so large
Is the fact that we haven't had that engine that keystone which is lending?
Um, and and it took a time to get to this point
And so I mean you touched on on the nft side as well
I think that's uh very valuable given the amount of activity that is occurring on the nft side. Um,
Let's say more from arts culture perspective, but also now from gaming. So that's a
A big vertical within the ecosystem that's picking up a lot of traction. So are we seeing?
Do you think that with a lot with the rise of lending and borrowing?
Um, do you think that these sort of industries will then also?
Essentially pick up momentum from a liquidity perspective and what would that look like? Would that be?
Individuals then are maybe putting a usd t down. Um as uh as a loan and borrowing
You know xtz to utilize it in a game like yeah
Maybe talk to them a bit more given that there's such a big market
Uh for both nfts and gaming that's overall if I if I combine
Each aspect, yeah, how do you see that kind of then evolving that's movement of liquidity?
Um, you know from the lending and borrowing platform into these sort of services and and thereon
Yeah, I think uh, it's very simple yeah, uh, it's market of education
It's just people's awareness of this kind of thing. Um, so I mean for one thing on my end
I'm going to be doing a lot more spaces and
Creating i've been writing a lot more material
but uh, I believe it'll grow to the
Just the community getting familiarized with it probably starting with
A few select individuals figuring it out like oh I can I can do this I can
I can leverage myself and advance my position
Um within gaming say, uh assets. I need to have an advantage if it's an incentivized game
It's like well, that's a profitable activity for them. Um, if the if the profit is just the pure enjoyment of the thing
Yeah, I can I can make this a managed system
And then it comes back to like the collateral you put down and what you think is going to happen to that
The price of that and the value of that relative to what you're borrowing
Um, it's like I can manage risk. I don't feel
So bad about spending money on this game or in within this game
Um, which you know, I I'm always like that myself like i'll get some game for my phone and it's like i'm not gonna pay this
Additional no i'm i'm good with the freemium. I'll watch an ad it's okay. And then eventually you're like, uh
It's only 199 and it'll just free up my
You know, I won't have to watch this stupid stuff anymore
Okay, i'll just pay it's it's about two dollars is worth my time. Whatever
But then I feel like oh I paid for that thing. I said I wasn't gonna pay for
Same thing with other elements of stuff you buy within it
Uh, but yeah, but as we get more and more into esports and stuff like it and and when there's money on the line
definitely these games become
like like business ventures
Or or just mini project type ventures that you would you would we would see within the nrt ecosystem
I mean these are these are nfts that that are being traded around for the most part on in games
Like that's what enables it
um, but uh, yeah, so you can manage your
Like what you would do in that regard. So so the scale and growth of it I feel will
Yeah, and I think uh another thing I wanted to mention another
Use kit like this is something i'm
I think people could i'm surprised it's not being taken up yet
But I think people will the price of borrowing tez for right now is very very low
Compared to lending uh, uh usd tez or or or borrowing usd tez or borrowing tether
Um and the amount because the just the sheer amount of tez there relative to the usd stablecoins is just far more
Like between 10 to 100 times more, uh, which means
Like it's really good for someone borrowing tez like you're basically borrowing tez at a cost of borrowing. That's
All close to zero. I think it was 0.11 percent the last time I saw
Uh, so, you know if you have that friend who's like, oh i'm not going to do a tezos baker
I want to get the full amount to delegate the 6 000 tez but
I don't know if I want to buy tez to do that or you know
It's like well, you can tell them just put down your us dollar form. That's your principle
To which is at almost like a close to a zero
Uh closer to zero than it is to 1 percent a borrowing rate right now, uh, start your baker like that
Um, if you're if that's how you feel and you'll make money off of the interest
You'll like you'll you'll grow from the interest
Like the rate of return right now is it like seven?
Over seven percent for usd tez it's like four and a half percent
Uh, this is the rate of lending like how much you earn by lending for for tether
4.5. Yeah, you can see that on and by the way the site here is you keep talking about tes
The direct link to the app is app.tesos.finance
And the big difference by the way, I should have also mentioned this too between now
And when we launched the beta a year and a half ago is that this is the audited version
So this is the inference audited version. We spent 2023
Improving and all of that. So, uh, this is the production version
Yeah, scalable production version of of tesvin. So
Yeah, thanks for for sharing. That's uh, of course as well on the spaces. Um
And you know just in terms of then broader broader growth like, you know, every it's called a chains ecosystem has lending and borrowing markets
Uh, we think of course another come live on tesos
What do you think needs to then occur to really?
You know pick up the game from um, you know
Everyone talks about the next billion coming on board like what you step on a lending borrowing side
Is it a ui ux thing? Do we need to see under collateralization?
Start actually taking shape and start becoming more standardized or formed. Of course, it comes with its own risks
You know, you probably then need someone to be an intermediary in between as soon as there's some some type of under collateralization
But maybe talk us through
You know where what would we need to see to then really on board this next amount of users?
Because lending and borrowing on one chain, of course, there's there's multiple options now
Um, what we need to see to really on board this next amount of users ui ux. Is it something to do with under collateralization?
Some other top effect. Uh, you know something we've said many thoughts about it all year
Yeah, I think uh in general we need to see this the defi cycle have a
closed loop, um, the idea that lending and borrowing and how that factors into
Dex liquidity and trading um for that to be
Perpetuating so like it's not
A single action someone yeah borrows and and uses for a particular case
But but that that's those funds ultimately lead back to a deposit within a lending pool
And such so so that's that's part of it. That's that's the first element
It's not just you build this thing and put it out there or that even people start using it or that even that there's liquidity
There's too much focus on just like oh the the the amount of liquidity is higher today than it was tomorrow
It's not it's the volume and it's the usage. So it's more like the
The ratio between liquidity and activity in so many ways that you can you can measure that so that that's one
That's one part. Um, and then awareness is the other thing
We need to get people to know like there is so much more activity of tez trading that they could totally be doing
And they probably be better off for so many ways of doing it on a tezos dex as opposed to doing it on a centralized exchange
They just don't know that exists. I I always encounter so many people
Who are like, oh there's defi
On tesos. There's oh, there's a dex on tesos. I didn't know and then they've been training tes like daily for years. It's just um
Yeah, so so that connect I think uh is something that had been missing. So those two things need to to change
Um, but yeah, otherwise people commonly use it. Of course people would prefer a dex over a centralized exchange for so many
Like the d gen crowd would that's the whole thing
Um, but at ui ux, it's important. It's important to
Get for a user to be able to get through the activity funnel
They need to be doing or need to experience or what they're trying to do
They need to be from start to finish of like getting into an app
Uh and everything that they see and and confirm to them
Um in every step of that process they need to be able to to finish and come out with a good experience
You know and and like ui doesn't mean
And so like I think the the over emphasis on ui ux comes to when it's just
Like it comes to a level of taste
There are a lot of really bad
Looking and even bad functioning a user experience is out there of products, but they're just phenomenally successful
We all use them and as we use them we're like, oh, I wish they'd improve the ux on this
Yeah, but you're using it constantly every day if you want the thing enough you're going to use the thing
I think um steve krug talks about this and
Uh, don't make me think and it's just like there
I think of that like that thing you want to buy
Like that jacket or whatever and it's like, oh, that's so cool
But then it's only available on this one website, which has a terrible checkout experience
And they make you have to register an account first to just do it and then you have to unsubscribe from notifications
Because you know that's going to come soon. Um, so use your spam account
Uh, so but then like but you go through and it's just so terrible
Like it feels like a website from the 90s
But you go through it and you pay the money because you want that thing if it matters that much you'll do it. So, um
And but I to me when it comes to user experience and also product just generalized product development
And I I am a big believer in design being the element that informs the rest
I like to start with design and then go towards the engineering. I don't like design design design afterthought
It brings everything together design is the is a very the most important thing for mapping out where you're going with the product development
For one thing limit the amount of features that you're engineering and adding in
I think that's so important because too many times we see
and we've seen this on tesos too seen it in in in blockchain and and just generalize different products on my phone where like the
There are things that need to could be improved about the experience of the basic functionality of what i'm trying to do
But then the team tends to just move on to another feature as opposed to perfecting those features, which are the base structure of the thing
And that is just the worst thing you could do
Because then you're not attending to the things that need to be fixed and you're not improving on that and getting better
You're spreading yourself out more and then you have to manage and debug those things
And it's like where are all the users? How come they're not using it? It's like well, you haven't fixed the fundamentals yet
Why have like why do you think people would come in because you added this new feature of a terrible experience?
So i'm a big believer in getting the fundamentals, right?
Um on a very limited set of features making sure that that's right mastering those and then based on informed validated learning and demand
Moving on to adding more things. So, um, those things could be exciting, but it's not
I actually couldn't uh couldn't agree more. I think that's and but you see that
Why maybe it's it's actually a very good point and i'm gonna definitely use this for future any future spaces as well because
Uh i'd like to call it as like bloat, you know, um, and especially within defi
Because everything is so focused on innovation innovation almost at breakneck speed. Uh, I mean
The the market is I mean, uh defi overall like look at all the various different services are evolving so fast
That before you even perfect something else you onto the next thing and I think there's this mindset
I'm always try of course innovation is a part of what we do. I mean a heart of
Uh, it's called a crypto land
very very fast and oftentimes we forget some of the most basic principles and I think that
Is exactly what you're saying. Heck yeah, man. It's a it's a very much aligned with that and but we see it across other
Industries as well like I was uh previously within fintech a company called iris
And the more features that you kind of put in, you know, you're thinking people will use it, but they just don't you know
So I think from the key takeaways, you know asking more questions to your audience
You know, is this asset something that you'll utilize in the lending in the lending side or the borrowing side?
Um, you know what sort of frustrations are these users feeling? What do they want to actually see in future?
And there's no audience for it. So we'll develop a product without an actual use case
We know that on the lending and borrowing side that's not the case
And maybe that's also one of the reasons why it hasn't been as much innovation, you know
Like if you look on the deck side, there's been a whole bunch of stuff happening
Uh on the perpetuals, there's always something new a new model whether it's a an order book model or liquidity based
Um an lp model. There's so much things occurring there. So sorry. I just wanted to reiterate your point
It's uh, you know, sometimes going back to the basics is the right news
But for me the big not the big concern but one of the biggest effects at the moment is
I find that we've got all these various chains
What tells us ethereum you name probably about 89 gm. It feels like there's a new chain every every couple of weeks
Um, it feels like we're competing for the same audience and that's probably is is the is the challenging piece
It's you know, someone can learn another chain and then deploy the liquidity there. They can name they can borrow against it
Um, but we haven't yet found a way to tap into these this new this new user base
Um, you know, I like to say like my mom and dad would never be able to utilize a d fire
and I think that's where we need to get it to so that it really can truly truly scale like
We can't really scale by just only competing with the same audience and every of course, that's that audience grows
So the pool of let's call it crypto users or defy users is growing
Infinitely slower than if we actually try and tap onto real world use cases, you know
Actually, that's solving a much broader purpose. So i've always wondered like for me. That's always been the biggest
The biggest fact that we just haven't really tapped on to we try to compete with each other
But we're not trying to be on board
You know the next generation of users that are infinite infinitely bigger than what our current market is. So do you think that?
Would have to start getting back into how tradfire is looking and working from a web2 perspective and you think like
The gold standard that will probably work towards an innovative way of just making sure that you know, there's no entity in between
There's no sort of credit check
Do you think that is a fair statement or do you think that we will sort of find another way of going about it?
fundamental difference between defy lending and tradify lending and tradify lending you can
You can borrow even if you don't have the collateral or have like a a minority of the capital
Like you're actually borrowing more than you have even if everything goes a bust and and for that it's like well, how does that happen?
This person's credit score is so amazing and their track record is so great that the bank is confident that this person will pay it back
Like they're confident. It'll pay it back
Well, what happens if they just don't or something happens or they get hit by a car?
It's like oh, well the bank has insurance for that and just in case and
Like law of averages for the most the things that are less reliable. They'll get paid back where the collateral is taken and for the people who are
Over under collateralized for the amount that they're borrowing if they default then then the insurance will pay it back
I think what we will lead to a level. I think we will get to the point where people can start borrowing
But it'll be more like digital I borrowing for more that
More than they have collateral for but for one thing and this is something I outlined in the original
Closest thing to a position paper, I guess the initial article for for Ted's been a few years ago
How long ago was it 2019 maybe?
The idea that you can delegate
Like a guarantor position. So you can delegate your collateral for the sake of someone else because
Just because you want to or you have some other kind of a dealing or something like that
Like I believe that that will be a factor
Insurance and being able to ensure pools or something will probably have a DeFi name for that kind of thing
But uh, yeah, but we don't really have insurance to that effect in in the DeFi markets
I think we will eventually the only kind of a decentralized insurance type thing is nexus mutual that I know of maybe there are some others
Now but um, yeah, like I think that would be a big step
it's it's hard to get people to add liquidity to those types of products because likewise for
Like people don't like them kind of like low interest return type things institutional finance loves it
Oh like, you know these stable asset funds all over traditional finance
Uh, yeah, they love those low interest kind of things. I mean people are buying t-bills
There's trillions of dollars in t-bills out there
Someone's buying it institutions are buying it pension plans. Uh
like uh other kinds of like charities that things that
Things that have a lot of uh incentive to to have slow growth and they don't need to take very big risks
But in the in the DeFi world in the blockchain world
Uh, the people who are putting money and liquidity into these assets and into these these different instruments
These are not people who want that kind of thing. These are people who want to go big
They want 10 times a return a hundred times a return a thousand times a return. That's what they want
um, so it's a very interesting
I guess you could call it a paradox there where like the people who are coming in and where the money is coming in are things like
Perpetuals, um and uh power perpetuals those derivatives things where it's like higher return higher risk
Um, it's so much more exciting it gets people in the door, but in order to really scale those things reliably
Uh and even participation out you need to also have a basis of capital instruments that is valued
By those that are adding liquidity for a very slow
Growth expectation it's that that conservative crowd and their money that powers the high risk
Uh kind of activity. Um, so so that
That's a really big factor and that that's also a way in which primitives inform derivatives, uh, but it's also
Just the nature of our ecosystem
Uh, like our struggle to get there is that's the nature of the blockchain ecosystem and DeFi ecosystems
Whichever one you're into it's that high risk high return
Yeah, and in terms of like anything like a credit scourge you ask I think about this a lot
It will increasingly have forms of digital identity
Um, I think trust networks are important for security
But like that that's of course harder to implement because it involves groups of people working together
And to test it out to make sure it's working properly. I think it's
It gets more complicated. But in the beginning, I think it's digital identity
We already have systems like that kind of like I I see certain people
You know like kryptonio.tes
If I see kryptonio.tes do an act and this is just anecdotal like doing something
It's like oh, he's a trusted member of the community he's reliable. I know his character. I've seen the activity of stuff that that
there there is this implicit record of
This person not a credit score, but there's something I can derive from that that puts esteem and value in my mind
Above someone who's maybe completely anonymous that I haven't seen before and there's value there. That is a form of value
Now, how do we quantify that value?
How do we determine that value to a reliable way in which you could put it on chain and make that composable?
Like that that's the stuff that requires more imagination and over time we'll see different iterations and people trying stuff
So yeah, yeah, I think the terminology you're referring to is attestations
It's like you will have various attestation providers could be
Um, so you get the trust score
So I I agree. I think maybe that's one way of looking at but it that's the thing
We've had at we've had attestation reports audits, you know for uh, say usd tez
Um, you know that like the monthly kind of but it's like it's very expensive for one thing
Uh, and it's off chain ultimately like it and we trust that more for for whatever
For you know today because it's like yeah
We can see stuff on chain
but we also want off-chain professionals that are licensed and reputable to be able to
To confirm this kind of a thing. It's like well to systematize this to get it streamlined to get it automated and quantified and composable
Decentralized attestations and that's the question to do that reliably like there's yeah, there's no real answer. Yeah
I think I just wanted to mention it's a list. Sorry about um, you know a traditional attestation of like, um,
you know the funds in an account more of
Attestation of because we're thinking of like the the under con hand. How would you solve for the under?
Under connect realization?
It's a problem and it's to do with like trust right if you default what would happen
Right. I think that's a very important point and I think in time just more my views that
You know these various attestation providers that could be
A six that is um has ky seed a particular individual
So even though you don't know that individual is you know that there's some sort of trust involved in it and maybe it's going to be this
network of attestation providers then authorizing that hey michael mein is
Is actually a um is a person he can end up to x around under collateral
Um and under collateralized you can take an under collateralized loan and these are the sort of requirements around it
But I still think why something occurs is I don't think we've really solved for that like if there's a default
Of course if I default on the road
You know, what is the sort of service we know in the track file world?
There's um bad debts and there's debt collectors and all these sort of things then then actually take into account
I'm, so interested to see how that evolves and i'll maybe leave that as a
As a final point before before
Uh, sorry, I just wanted to mention sorry because I do I do have to leave in the next
The next bits I wanted to ask you more around security and security. How does that really impact on lending and borrowing?
Um, maybe you can just talk through
You know you mentioned value inference is security just around auditing or do you think there's there's a lot to uh security as a broader topic
Also within that context as well and and in the previous statement you made I want to mention they the
Like how does a the question comes up?
Like what if a person doesn't pay back their debt like what happens then?
Or what if the amount of debt that they plan to put it back, but the amount of debt that's accumulated
Um, or just maybe grown because the value of what they borrowed grew like the coin that they borrowed its own value grew beyond
The the borrowing limit that person has set based on what they've collateralized on tesvin. What happens then then there's liquidation
Liquidation can occur and a liquidation call and that means part of the collateral
Uh gets liquidates taken by the person who liquidates
And and it's not us doing it as these people who deploy the contract
The it's not some central party
Anybody can run a liquidation bot and make money off of that kind of thing and you make a fee
you earn a fee based on uh the amount that you
The percentage of the of the amount that was liquidated
So what happens then once that that function is called once that operation is called and when any individual in the community can do that
um, and and they also they pay back whatever's so they pay back whatever the
the over uh, uh borrowing is and then they seize the
The f token which is that collateral representation of the amount that was put down by the borrower who who?
Sort of overexposed in that regard
Uh, so that's how it works. And then so even the the liquidation aspects are are decentralized in that regard
So that and that's how it's kept tidy and secure
Security in general, uh, yes, so that's why we were we were not we were hesitant to put out
Activity usage of tesfin a year and a half ago when we came out with our beta
Because we wanted to go through the security
Audit first that that inference provided. Um, and you can read the full audit report if you go to
Uh docs.tesla.finance you can go to the inference site and see it there
Um, if you go to app.tesla.finance if there's a link to the audit report at the and the footer you can see that
Um, so but yeah, we're we're always
And we're constantly, um, you know getting feedback from the community and making sure that
Anything is discovered. It's discovered right away that we can
um, so yeah, it's always so but even the most um
Longest running lending systems out there the most scaled the most well-known the compounds and the aveys of the world
Like they'll they'll maybe find something
And yeah every few months we hear about something that is
Detected and corrected by the ave crowd and all of that. So, you know, there is smart contract risk. That is a
But uh, yeah, so so it's something that you iterate like anything else
But we're very proud of it and we're we're glad that we were we took that long haul security audit approach
Um, which was basically when I think security, but I think 2023
That's just the immediate first thought that goes through my mind
Like security audit and iteration from inference for tesvin because that was the whole year
And then when I think of that, I think of 2023. That's where the 20. That's where my 2023 went
So, um, but yeah and more on
Gonna keep doing it. Yeah
Given the amount of activity and hacks that are good more more broader probably um, well definitely the right way to go, right?
Security security over all others. I think that's the um, yeah, that's the most important. Uh, I think for sure
Yep, yep, and uh, and yeah and and of course more formal audit reports, I mean it doesn't stop
Just like iterating the the platform doesn't stop and um
Yeah, I think regular audits
Attestations everything is called an attestation in the whole industry. Everything that's once called audits is not called attestation
I guess it's a nicer term in general also because when you think about it, I think the word association that comes up is tax audit
Um, at least in the u.s. It's a very negative thing
Yeah, yeah, so we're very security focused for him and I I think the the culture of that
Definitely. I I think of the people we have who have built this thing that um,
You know, it's stable tech stable tech is the consortium
But it's a consortium of multiple companies in the tesla's ecosystem including kryptonomic
Um, and I have this long relationship with kryptonomic between my company wealth chain and kryptonomically built all these things for stable tech together
uh, like one thing I really just loved about them from the very beginning is just how
Uh security focus they are how obsessive they are
They're for personally and for the products they make
Um, like they they go so far with security where it's like no one's asking for this. No one's gonna care
It's like nope gotta do it. Gotta do it. Uh, so there's this consummate
Obsession with the with kryptonomic and the products they make and that I love
Um, so yeah, they've been the right partners for this. I feel that's important
Um, I also want to mention and people because this comes up a lot
People say why did it take so long to get to here or why did it even take so long for lending in general?
like even when the beta came out and when yupana came out and uh, a couple days later in, uh, august, uh, 2020
Uh, like why did why did that happen?
Especially if we had d5 for like we had the first dex was a year prior and all those things over
Um, or two years prior to that
It's because the way tesos was designed initially the protocol itself
It was designed in a manner that was very security focused to prevent specifically to prevent
Re-entrancy attacks, which was a very big concern
uh at that time and through today and
In the blockchain ecosystem and and in the design for these choices
uh, but and so the way in which it was designed in order to
Mitigate the risk of that
and to make tesos more secure it also had the effect of
efficiently create certain types of applications that required uh, a lot of callbacks things like tesvin essentially things like uh,
These sort of these types of applications lending applications and and let alone anything
With you know, perpetuals trading and all that kind of stuff anything. We want to do in the future with d5 applications
So we tried to work around it and we built a model that worked around even the very strong limitations that tesla's protocol had
Uh, we were building that out 2020 but really 2021 so we had had a model going but then
Towards the very end of that year beginning of 2022
Uh, the upgrades that came out
enabled the ability to create these types of applications
so it took time for the protocol to evolve to that point to have to be able to reconcile both sides of the equation there to
Be able to have the security but also the uh capability to to build these types of applications
Uh, and then it's like, okay. Well, we already built this thing
This is a much better if we rebuild now, it's a much better system based on the new protocol
So it was like well, we can re we can integrate these new parts at least in part
And then you know, we can rebuild the whole optimized app later, but then after like
A few weeks of that we were like, okay, we just have to rebuild all together
So we had to rebuild started again in 2002 in 2022
uh, and then uh, that's why the beta came out, um in august 2022 and then
Security audited up that and that's why it took so long to get here. So it was um
Yeah, yeah quite the experience. We built many versions of this app
Yeah, okay. I'm loving uh, uh all our conversation but um
Have you got any any final thoughts? Um, of course apologies. I do have to yeah, of course. Sure
Yeah, check out the tesos finance application the ten spin application if you haven't already
And uh, make sure join the conversation on the discord
Yeah, tell your friends especially the friend that like wanted to start baking but was apprehensive about it. It's like just borrow the tes
Tell them that that's what I that's what that's one kind of a call to action
I want to encourage because i'm curious to see how that'll affect people starting up bakers as well
It's a really great way to start a baker
Um, and and yeah, I think this will be the year of tesos d-fi
But I said that also in the context in which I thought that we'd have tests been launched
Uh around that time that I was saying it. Uh, but so now I really really mean it and i'll also be holding
Frequently at least once a week, um going forward
So do you want to maybe just touch on those as well? So when uh, when are we expecting to hear uh more from you?
Um in that on the uh d-fi spaces will we see more activity occurring on?
X spaces probably through my own account. Um
And then I think if we do certain educational events, it'll be through the tesfin account, but uh, we'll be fridays
Uh, because I used to do this all the time. I used to do this every week back in
Um in 2021 first part 2021 I did on clubhouse
I did it some here fridays were
A good time for people and I think it's a good way to to wrap up the week d-fi friday
Sounds nice, right? Something melodic to it. Yeah
Yeah, under the suit. I'll get to that fantastic idea
Thanks for having me on of course as well. I appreciate appreciate taking the time and uh, actually find this very educational
I mean even though i've been around for quite a while
Um, you know, I like your the way you put things it's um
You know, it just kind of makes uh, it makes a lot of sense, you know
Well, thanks for doing it. Let's do more of these
Some more of these and by the way, uh, we we had we had invited other d-fi
Uh founders to come there were I guess
scheduling conflicts and not just that but also object scheduling conflicts and
Yeah, which is it's a good thing because people are working people are working very hard. Um, yeah
And then uh, dimitri wanted to join but he got sick. Unfortunately, so uh, we shouldn't wish him the best to him
All the builders be building, right?
Amazing. All right. Thank you. Kevin. Thanks everyone for the time. Thank you. Thanks for jumping on. All right, take care