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Open Money: The Decentralized Stablecoin Multiplier for Ethereum
Recorded: Sept. 25, 2025 Duration: 1:07:18Space Recording
Short Summary
In a recent discussion, key players in the DeFi space, including representatives from Open Money, FX Protocol, and Alchemix, explored the future of decentralized finance, highlighting innovative projects, significant growth metrics, and strategic partnerships that are shaping the Ethereum ecosystem.
Full Transcription
Thank you. Thank you. Mic check. Can you hear me?
Yes, we can.
Good morning, everybody. We'll get started in a couple minutes.
everybody we'll get started in a couple minutes
do a quick mic check here can you hear me okay james yeah you sound great excellent Thank you. Good morning, CurveCap. Good morning, everybody.
We'll be getting started here in a couple minutes.
Just wait on a few more people that arrive.
Add a view curve cap as a co-host, just in case my phone connection severs.
I don't want to end this space prematurely. Thank you. All right, GM, GM, everyone.
Thank you for joining today.
Let's see.
Today we're doing Open Money, the decentralized stablecoin multiplier for Ethereum.
And we've got some really exciting people to join us on stage.
I'm 0xJMG and one of the contributors to the Open Stablecoin Index.
If you don't know already, Open Stablecoin Index,
it's a decentralized token portfolio deployed on the reserve protocol.
It's built on Ethereum, tracks leading stablecoin
networks, advancing transparency, composability, and user-led governance. You can learn more about
the methodology in the basket at openstablecoinindex.com. Of course, not surprisingly, FX
protocol is in the basket, and so is Alchemix in the basket. Really thrilled to have you guys here
today. Let me put Leviathan News on the stage as well. All right. Let's see, quick introductions
for a few people that are going to be on stage with us today, and they'll probably share a lot
more later on in the conversation. First up, we have Scoopy. He's a co-founder of Alchemix, a DeFi platform
that gives users free interest,
I'm sorry, interest-free lines of credit
using their stable coin, AlUSD,
and enables self-repaying loans
through yield-bearing collaterals.
I've used Alchemix twice in the last four years
for some self-repaying loans, and I'm a big fan.
Second up, we've got Kmetz from FX Protocol. He's a core contributor at Aladdin DAO, stewarding
concentrator, cleaver, and FX Protocol. They've got about $500 million of TVL,
anchored by the stablecoin FXUSD, And they have some really cool leverage products as well.
And then last up is CurveCap, also known as Garrett.
He leads developer relations at Curve Finance,
the largest stablecoin DEX.
Curve enables high yield on-chain savings,
secure borrowing, low slippage swaps.
He also is one of the key builders at Leviathan News.
So thank you to Scoopy, KMets, and CurveCap for joining us today.
Happy to be here.
Cool.
Well, guys, this conversation was born out of a few different things.
Well, guys, this conversation was born out of a few different things.
One of them was a post a few weeks ago that some contributors from FX Protocol, Liquidy, Aave, and Curve put together.
And I'm going to just take that post right now and I'll put it in the comments of the spaces.
Hopefully, people will be able to see that.
So I'll just drop that in right there.
You can kind of check that out like after the spaces.
And it also kind of follows an article
that's actually a couple of years old
where Vitalik was at, I think, Biddle Asia,
the Korea conference,
talking about how centralized stablecoins might be the significant deciders in future hard forks.
So I'll go ahead and put that in the comments, too.
You'll have that nice context.
And we'll get started here in the conversation.
Maybe what we could do is start off with is the post that you worked
on, Kmetz.
It's Ethereum security model and the strategic importance of decentralized stablecoins.
Could you kind of summarize, and for everyone who's listening, I've linked that under the
comments of the spaces so you can bookmark that and read that later on.
Kmetz commit could you summarize
at a high level the main questions or takeaways of this post yeah happy to uh so the the the gist
of the article is that um you know since proof of stake ethereum switched to proof of stake
uh the the main security model is is built around staking ETH, right?
And people that stake ETH earn validator rewards.
And, you know, there's the EIP-1559 burn
and a few other methods for value accrual to the network for staked ETH.
And any sort of tokens that are on the network are secured, any value is secured
by that staked ETH. And so these centralized stable coins, for the most part, do not contribute
to the security model of Ethereum. They are essentially sort of taking advantage of people who have staked ETH
so that they can continue their operations
at the cost of Ethereum stakers.
And so this kind of creates an interesting
kind of weird dynamic,
especially when you consider sort of some of the
side effects from it.
And as you mentioned earlier, even Vitalik Buterin was concerned about it when Ethereum
had its merge in 2022 because these ultra-large centralized stablecoins basically have to choose
when Ethereum does a hard fork, which fork their value is going to rely upon and where redemptions will come from.
So in an indirect way, they have that exposure to Ethereum's security model.
And then directly speaking, the stake itself, there's really two security milestones that Ethereum has to meet.
And one of them is if one third of the staked ETH is basically if a singular holder or group of holders hold a third of ETH and decide that they want to do a delay finality with the Ethereum blockchain, they can certainly do that.
And there's a value leak.
That's sort of the penalty for doing this, for preventing finality, is sort of this value leak.
And so it sort of basically drains your one-third of your staked Ethereum until it basically is less than that.
And then if you're able to overcome that and you're're able to build up two thirds of stake DEATH, then you can essentially corrupt the blockchain. And so
Ethereum has slashing mechanisms for that as well. But these ultra large stable coins,
if they so chose, they could affect those based on the amount of value that they have currently on the network.
And there's different varying mechanisms, and I won't get into a whole lot of them of how they could do that.
But the point of it being is that there's such a large amount of value that's on the network that isn't contributing to Ethereum security that it poses some threats to
to how Ethereum operates its security and basically the future of transfer of value
in a decentralized space. So these are like the main overarching issues and then in order to
combat that the article talks about how decentralized stablecoins that are basically backed by ETH or staked ETH are basically the way to sort of combat that.
And the growth of those is exceptionally important to the network.
I mean, Metallic even released a blog post, I think, this past week about how basically Ethereum's killer app is this low-risk DeFi,
and low-risk DeFi is driven by stablecoins. And so these decentralized stablecoins basically
have to be the pillar of Ethereum in order to help secure the network and ensure that people can
move value permissionlessly, censorship-free, and at any time they want.
Thanks for that, K-Mats. Scoopy, what's your take when you think
about Ethereum security model and the importance of decentralized
stable coins? And also, if you'd like to talk a little bit about
low risk DeFi, I'd love to kind of hear your perspective on that.
If you can hear a scoopy
oh sorry i was on mute um so let me take the security question first um so i think like
the idea that that some new entrant could come in to the ethereum ecosystem and then um
get one third of the staked eth supply um and then use it as as as an attack vector on uh ethereum
is kind of like a really hard thing to do imagine if someone tries to buy that much ETH,
that would very much push the price of ETH up a lot.
There would also be this very, very, very large entry queue
going into ETH2.
So in that regard, the security of ETH would go up.
And we also, game theoretically, kind of modeled this with ETH2,
with the staking
model and it has slashing. So if somebody is going to start, you know, messing with the network,
they're going to get wrecked and they potentially lose it all. So as far as like the network
security goes, like, I don't think at least at these levels, it's really a huge factor.
Maybe if the market cap of real-world assets like 10Xs and ETH stagnates,
maybe that becomes more of a concern.
But right now, it's not on my radar really as something
because I think the game theory is pretty good for ETH.
And what do you think about this idea that the large central issuer stable coins could choose fork choice?
So it's like kind of a different argument.
So this is one of those things where it's like when people say hard fork when it comes to Ethereum,
that's essentially, in the context of Ethereum, a network upgrade.
You have all the different client teams and they all, you know, post, you know, like upgrade it.
And the network basically upgrades, like it just happens.
It's not like there's a fork.
It's like, you know, the, you know,
when we go to the next hard fork,
it's not like the network splits
and there's now two Ethereum's
and then people have to choose which one to go on to.
The chain just keeps on going.
You know, I think, you know, if like there's a Pulse chain or an ETHW
or something like that,
those are chain splits or hard forks,
like I think how the article is talking about it.
And I guess they could theoretically force a chain split and then decide which one to go.
But now there's so many different stablecoin issuers and real-world asset issuers,
it's going to be hard to get them all to coordinate against Ethereum all at the same time.
And then another point I heard was saying how the stable coins in real world assets don't necessarily contribute to ETH security.
And that's one of those things that's like kind of like unknowable.
It's a little bit vague because how much of ETH value accrual is because of these assets on chain and all the DeFi activity that they promote.
So it's one of those unquantifiable things.
No model really exists yet to correlate
how those two things track.
Curvecap, which parts of this line up for you
and anything you want to push back on?
Nothing I want to push back on in particular.
I just think it's kind of funny comparing this conversation with the conversation about Bitcoin security budget.
Because Bitcoin, people liken the very kind of like small amount of revenues generated by Bitcoin miners to be a security budget.
generated by Bitcoin miners to be its security budget.
And by that model, Ethereum looks like it's super safe
and protected compared to Bitcoin.
It's just really funny to also wargame out
these various scenarios playing out
because as a long suffering ETH holder,
I would be very eager for someone to try some sort of attack
where they actually did buy up enough ETH to control things.
You know, shooting, skyrocketing the price in the process.
We haven't seen it yet.
My banks can testify to that.
It would just be kind of interesting to see.
It's also kind of funny to think about the idea of, like, trying to attack, like, such an attack to, like, get all the USDC or something.
an attack to like get all the USDC or something as if like, um, all the like
large.
Stable coins on Ethereum aren't actually backed by deposits in a bank account.
So if there was some sort of massive attack, uh, trying to, um, trying to
like get all the USDC, USDC would just not honor those, uh, those withdrawals
from the attacker in most circumstances because they effectively control.
Ethereum, uh, you know, USDC, USDT, the major stable coin. withdrawals from the attacker in most circumstances because they effectively control Ethereum.
You know, USDC, USDT, the major stable coin,
control Ethereum, effectively control the direction it could go in any kind of hard fork.
I think one of the things I'm hearing is the security threat is maybe less so than stated and certainly very difficult to quantify.
Maybe back to you here, Scoopy, on the role of decentralized stablecoins in that security,
even though it's difficult for us to quantify what the tradeoffs are. I mean, do you have a sense of the role of decentralized stablecoins on Ethereum and whether it's going to be, you know, at size, would it be a contributor to ETH security or is this a non-issue?
I totally think that decentralized stablecoins can contribute to Ethereum security, especially ones that are collateralized by ETH.
It drives demand for ETH.
It relieves cell pressure for ETH, gives more utility for it and everything like that.
And so in those respects, I think there are clear value accrual mechanisms going towards
ETH when there are decentralized stablecoins powered by it.
And I also think that like just for, you know, the sake of, you know, user sovereignty,
decentralized stablecoins, you know, for your own personal, you know, usage, I think are more secure than just relying on Circle or Tether not to blacklist you
arbitrarily in case your address gets mixed up in something or whatever. I think it's
definitely safer to have a strong decentralized stablecoin than to over-rely on these centralized
issuers. Because I doubt that Tether or Circle would rug users or anything like that, but
the government theoretically could nationalize these companies and then do nefarious government things
potentially with it.
So I see that as some of the advantages
of using decentralized stablecoins
and the fact that they're not blacklistable,
at least maybe, I guess, USDS is,
but all the rest of them aren't.
Yeah, thank you for that.
Hey, Matt, I believe you guys published this post about a month ago.
I'm curious what the feedback has been and if any part of your thinking has changed since then
on kind of looking at this relationship between Ethereum security model and decentralized stablecoins.
this relationship between Ethereum security model
and decentralized stable points?
Yeah, so I think the big thing that I took away from it is
I did not realize how siloed various areas
of the Ethereum community are.
And I think the main takeaway that I got from it
is that the DeFi folks are operating in a completely different world than the folks that are very interested in Ethereum's technical development itself or just the base layer.
and don't really have a very good understanding of the effects of DeFi
and how it affects the operations of Ethereum or possible effects
and then in terms of consensus and execution.
And then also a lot of Ethereum folks don't understand the concepts of,
the effects of having stablecoins with large liquidity and sort of these assets
that have the ability to almost arbitrage their value off-chain and on-chain.
And there's just this real lack of sort of understanding of how these systems can be abused and taken advantage of.
And it's interesting because in order for me to go and kind of find DeFi folks to talk
about this, it's real easy.
You just get on X and just start talking to whoever or in the discords.
But for Ethereum, it's much more scattered itself. I wound up having the best conversation on the Ethereum subreddit, and there were some folks who vehemently denied that this could be even a possibility.
And then there were other folks that we conceded as well. And so it just – it didn't really change my mind other than the fact that unless Vitalik comes out and writes an article, then we're all kind of operating with a lot of different opinions.
And so it's interesting to sort of keep these things in the back of your mind and think about them.
To Scoopy's point, I don't think Tether or Circle pose, you know, immediate threats or have any, any designs
on taking over Ethereum. I mean, after all, they just released their own L1s. But at the same time,
it's just sort of one of those things to sort of think about in terms of like, you know, with,
when you have liquidity that, that, that is that large on the chain and you're having assets that are off the chain, you can do some
kind of weird and screwy things to affect one and the other. And we're never really quite sure of
what the side effects are going to be. But with decentralized stablecoins, it's, you know,
you know, every 12 seconds what the accounting is going to be because everything is on chain.
And so there's that certainty there.
So ultimately, it just comes down to there's a lot of different communities and they have a lot of different thoughts on Ethereum and stable coins.
it's important to continue to keep having these conversations with not just one group or the other,
but hopefully everybody can get involved and at least get some exposure to both sides of the equation.
Yeah, thank you for that, K-Metz.
Curvecap and Scoopy kind of talked about this, like the unlikely scale that would be required to corrupt the chain. I am curious,
and so kind of just putting that aside for a minute and recognizing the unlikeliness of it,
if we were defining the value at risk, and this may be a moot point, but do you define it as just
the value of the state deeth, or do you define it as
all the assets that it secures, you know, all the stable coins, all the RWAs? And is there
another way to think about this and, you know, where this information might actually be useful?
Or are we just answering a question that has kind of no application in reality. Maybe I'll kind of start with you,
CurveCap, on this one. Well, it's a fun thought experiment because it's entirely a theoretical
at this point. But you might imagine that in such an attack, like it might come in multiple waves
of sort of death spiral, where first you saw some sort of attack. And let's say USDC somehow got threatened and undermined.
So USDC just announced that it was kind of freezing all the USDC on the chain and making
all of its depositors directly whole.
This leads to, like, let's say an undermining confidence.
People panic sell ETH.
So you see ETH crater to a few hundred dollars in the process. Anything in DeFi that was counting on some level of TVL starts to massively shrink.
You see all the CDPs see their TVL completely crater.
It could play out in a matter of, let's say, 24 hours because things happen very fast on chain where what looked like everything was resilient, robust and going well, just quickly death spirals and turns into absolutely nothing in this sort of like massive pseudo liquidation cascade, black hole death spiral event for Ethereum.
spiral event for Ethereum. So let's hope we don't live through that, right?
So let's hope we don't live through that, right?
You're really gloomy, man.
You're really gloomy, man.
It was your question. I'm an optimist, but that's the worst case scenario for what could happen.
Because we've seen it happen. We saw Luna, everyone who was using the Luna Terra chain
thought that it's just a fairly blue chip chain. And within a matter of days or hours even,
anyone in net worth on the chain
it's not going to zero yeah that's a great contrast and we're all kind of you know once
your bags are set you it's a little bit like being at the craps table and thinking maybe
one more spin and i'll win it all back um but oftentimes in crypto it doesn't work that way.
Scoopy, would you have anything to add to that?
You know, we were kind of talking about this idea of value at risk,
defining it.
Is it, you know, should it be based on state, you know,
benchmarked against ETH only, or is it all the assets secured on the chain,
the stable coins and the RWAs?
And does answering that question even have an application in reality?
What are your thoughts?
It's really tough to think about it because on one hand,
these RWAs and stablecoins, they're kept in off-chain custodians,
and they have reputational risk and
you know and you know legal risk for you know not doing the right thing um and stuff um but like
i think that there is an element of truth that they choose ethereum because it is um secure like
because it is secure.
Like you're never gonna worry about
like a double spend on Ethereum.
I mean, if it did happen, Ethereum would be,
you know, many, many multiples higher
because somebody would have to buy up
so much Ethereum to do so.
And so I think, you know,
the fact that the network is extremely secure, attack, from double spins, gives issuers a lot of confidence that nothing's going to go wrong on this chain for them.
I'm losing my train of thought. It's really late for me.
But, like, yeah, I'm losing my train of thought. It's really late for me. But, like, yeah, I'm sorry.
That's a really nice framing, nice pivot in the conversation, Scoopy,
to kind of maybe go sort of away from sort of the, you know, the wolf is coming.
from sort of the, you know, the wolf is coming, you know, there's concerns about the chain,
which might be quite unrealistic as we're discussing here on the call to the more important
topic of the ledger of choice for securing these assets, which, you know, when we're seeing that
play out quite a bit with lots of institutions and, you know,
potentially the U.S. government using the chain, actually,
I think they've already confirmed that they're going to be doing that for publishing certain data types.
Oh, yeah, they did do a, like, GDP report and different, like, I think CPI index,
different, like, economic reports were published to the chain.
And I remember I was gonna say like I think that Ethereum is also appealing to lots of different you know real world asset issuers because it is you know incredibly neutral chain like.
I don't think we're gonna see anybody other than circle issuing stable coins on the circle chain right and it's a and same thing with
like plasma and stable chain I don't think there's going to be much stable coins outside of tether on
those ones so you know the fact that it is a credibly neutral platform I think does and secure
makes it the ideal place and the fact that they can make their own l2 that can leverage
ethereum security uh and properties um while giving them you know different attributes that
they might desire in a chain i think all that is like just like really strong arguments in favor
for ethereum um or you know securing you know, real world assets on chain.
That makes sense.
Yeah.
Yeah.
I was reading this morning, the Vitalik published something a couple days ago on openness and verifiability.
And it got me thinking about a principle that I like a lot, which is transparency.
But, you know, when you talk about transparency, sometimes that almost sounds like a lot, which is transparency. But when you talk about transparency,
sometimes that almost sounds like a virtue. And to some degree it is. And people may agree or
disagree with that virtue, depending on the topic at hand, a particular politician or a government
or whatever, or a chain. But this idea of openness and verifiability, it strikes me as something that's like a higher order version of transparency.
I think a lot of us want things that are more open and more verifiable.
And this is against kind of a backdrop.
Some other reading that's been popping up a lot lately is some questions about in some questions about, you know, in the Solana ecosystem,
who holds all the tokens? There's a little bit of a black box there. And I think that's even the
same with like the Ripple ecosystem, the first 30,000 blocks of their chain are unaccounted for.
Well, well, another thing against Solana is like, you know, like if you've tried using their block explorers it's really
hard to make sense of anything even when you're just checking out your transactions and you know
where they're going it's still it is like it's like reading greek man um it's really um like
i've actually heard of people using the strategy where they bridge tokens over to Solana,
send them around to a few addresses, then bridge them back.
And it's essentially like a mixer because it's so hard to follow what's going on on that chain with their block explorers.
Whereas you contrast that with Ethereum, EtherScan is the gold standard.
But then we have tons of other tooling that's out there that can help you analyze the chain and audit it in real time and user friendly formats and very powerful tools at that.
So I think like, you know, just the ecosystem is, you know, light years ahead of other other like players in the space.
Yeah, Solana.
But thank you for that. of other players in the space. Yeah. Solana.
Thank you for that.
Yeah, we're just past the half point of the hour.
I want to bring this back down.
We've kind of been in sort of the theoretical realm a little bit in the conversation
and come back to how Alchemist and Curve
and FX protocol specifically are thinking about
contributions to this ecosystem, specifically in this area of verifiability and openness,
and especially novel applications that are either not possible or going to take a lot longer to pull off in TradFi.
I think this would be a good part of the conversation for people to sort of take the concept of what we set out to do here
and kind of look at it specifically as it relates to each of the three protocols represented here.
Maybe, Komets, we could start with you and what you're doing at FX Protocol,
and then we'll go to Garrett for Curve and then Scoopy for Alchemix.
Sure. So at FX, the main killer thing that we do is we offer basically leverage at a very inexpensive rate. There's almost no funding fees usually.
And then there's also liquidation protection as well. And folks can take leverage on ETH or BTC
positions, long or short, on mainnet. And it works really well i've had a what we call the we call these x positions
and they're basically supported by the fx usd stable coin and uh so uh every position is
collateralized by either lido's wrap staked eth or uh wbtc uh depending on uh what what leverage position you have. And then they basically operate in such a way
that it's kind of like a traditional sort of,
if you're familiar with sort of like a GMX or hyperliquid
or whatever, as it goes up in value, everything's great.
But as it goes, as we saw last night,
as things go down in price, FX does this really cool thing where it rebalances your position such that it's always kind of removing FXUSD from your position that's basically serving as leverage and basically just kind of like protecting your principal so that you never are totally out of the game.
your principal so that you never are totally out of the game. And it's really sort of a DeFi
primitive in terms of how it operates. And obviously, we've gone from just a few dozen
million TVL to 400 million TVL in really the span of about five months here in 2025.
So it's definitely had some product market fit.
And it's definitely not something that you see in TradFi,
especially not for retail users.
So we're really proud of the offering.
We'll be having a release of the protocol as well on base in the near future.
And so if folks want that version as well,
it'll be available, which obviously we'll be able to offer more leverage and, you know,
all the lower gas fees and what have you. But yeah, that's what FX protocol really does and
really does well. Hey, Matt, FXUSD is your stablecoin. Can you say just a little more about its role
in the ecosystem, how it's being used
and how it's being used in this specific application
you described?
Sure, so FXUSD is sort of our stablecoin
that's minted against the value that people deposit. And as it's minted against that
collateral, it basically serves as a debt against it. And so, obviously, if you put in $100 and you
do 7x leverage, it uses a series of flash loans to basically build a position up such that you have 7x leverage support on your original deposit,
backed by RAPStake Deeth, but the debt itself is denominated in FXUSD.
And so FXUSD, its PEG is supported by a stability pool, which basically does PEG stability operations in the Curve LP, FXUSD and USDC.
And so it basically swaps those out in order to maintain the PEG.
And we also have a yield bearing version of it as well that That's based on the yields from the stability pool
and that's our FX save as well.
And that one's also probably at about,
I think last I checked 109 million in TVL.
So really good in terms of composability
for things like yield trading
or collateral on lending platforms and so forth.
Thank you for that, KMets.
CurveCap, can you talk a little bit about how Curve Finance and Curve USD
are contributing to Ethereum security
and what mechanisms or features might be coming in the future to further grow that?
Yeah, absolutely.
From my perspective, it's been really fascinating to watch.
The introduction of permissionless ledgers meant that essentially in order to conduct
the equivalent of what happens all the time in TradFi, meant that in the past five years,
DeFi has had to basically reinvent everything
that happened, but without permission to middlemen.
And seeing it unfold, and really, five years is kind of the blink of an eye.
It's been speedrunning this entire history and really enabling new applications that
never could have been imagined in traditional finance. For example, Curve Finance
got onto the scene by pioneering highly efficient stablecoin transactions. And if you think about
this, this is not really a problem that existed in TradFi. The idea of trading a dollar for a dollar
wasn't really a massive problem that I'm aware of. Maybe someone who's listening can point to me examples
of where this actually was a problem that needed to be solved. But there was a full business that
could be built for Curve to kind of get its foot into the door by finding more efficient ways of
trading a dollar for a dollar. Since then, we've seen tremendous innovation from Alchemix in terms
of self-repaying loans.
Like, could this have existed in TradFi?
I guess it's possible, but like the system really wasn't conducive to it.
Could we have seen, you know, expositions that came out within FX protocol?
Maybe there's a way you could like squint and imagine a way it could have come about in TradFi.
But really, like the birth of like a permissionless
ledger has enabled all these use cases. So I do tend to think that as far as like, you know,
we're seeing a lot of traction for centralized stable coins, but really one of those killer use
cases remains just taking your centralized stable coin and using it to access DeFi and using it to continue to do things in DeFi and get, basically get it allows this concept of being able to top up
or add some pay externally to rebalance
and push liquidity towards more optimal ranges,
which can make the pool more efficient for LPs.
So there'll be a lot more about that coming out in future weeks,
but stay tuned.
Very, very good for foreign exchange currency trading, which might be the next thing that we
see DeFi trying to attack. Thank you, CurveCap. And I'm going to come back to you in a second,
CurveCap and KMAT. So I want to ask you what you think might be borrowed from your protocols and migrated over to TradFi first.
You know, capitalism has its way.
Before we do that, though, I want to get to Scoopy on the same question,
which is novel use cases, applications, you know,
you know, how Alchemix is contributing to Ethereum security.
how Alchemix is contributing to Ethereum security.
And then maybe, you know, I'm actually curious from Scoopy's perspective,
because I think you invented self-repaying loans.
I don't think they existed before that.
But if there were examples that existed or inspirations, you know,
how did you come to that?
And then also just kind of tell us what's coming next in the next version of Alchemix.
Yeah.
So the way Alchemix works, let me talk about that first, is that you deposit yield bearing stable coins or yield bearing like ETH.
And then you can borrow like kind of assets.
So if you put in stable coins, you can borrow Al-ESD.
If you put in ETH, you can borrow AlieSD. If you put in ETH, you can borrow Alie.
And then that yield that your collateral is earning
pays off your debt automatically over time.
And since we don't charge interest on the loan,
that it's guaranteed to be a self-repentant loan.
And because it's stable to stable and ETH,
we don't have liquidations in the system either.
So going back to the safe DeFi thing,
it's one of the safest protocols itself.
We've had some security incidents,
but not with our core protocol,
one with a bridge and one with the
infamous uh re-entrancy uh hack from the viper compiler um on curve um but other than that
apologies for that but yeah it's all water under the bridge it's all good now um
It's all good now.
And the idea came from like, it was like in like mid 2020,
like a lot of like, you know, beginning of DeFi summer.
And me and some of my friends, my co-founders,
we were seeing that there was like these really crazy yields
available in the burgeoning DeFi ecosystem.
You know, seeing things even as high as like 70% like
with the year and die when that first launched.
And then it kind of settled around like 20 to 10% by the time Alchemix launched.
But we thought like, what could we do with this yield as a primitive?
And the original idea was that you would like lock up some tokens for an X amount of
days, and then you would get this other token. And then the yield from locking it up would
buy back this token. And this was originally what we called a cheese pie. But then
as we got more serious and we made more progress, we realized that we could turn this into a stablecoin.
That'd be a better way to abstract it than a different token.
And so that's kind of how we got to Alchemix.
I would say Alchemix, the Al-Eath product, does help secure the network.
does help secure the network.
It drives demand for ETH.
and it uses LSTs as collateral.
So in that sense,
it does incentivize people to stake
or put their assets into staked Ethereum,
which contributes to the health of the network.
I am very, very, very, very much looking forward
to our next version, version three of Alchemix,
which is slated to enter audit in about 10 days,
or the last audit in about 10 days.
And what it's going to do is have a really cool new redemption system
that hasn't really existed in DeFi yet.
And basically what happens is that if you look at Liquidy or Resupply
or some of the other decentralized stable coins,
they have a redemption pool.
And basically whenever the price of the decentralized stable coin goes down,
people can redeem it for the collateral that's backing it
in order to burn some of the supply and bring the price back up to one-to-one or near to it.
Whereas Alchemix v3, we also have a redemption system.
But this one is going to be fixed duration.
And the redemptions themselves will
be communal in the system.
But there's some really, really, really cool data structure
and math stuff that our team came up with that
allows the system to essentially earmark your debt for redemptions.
And this happens block by block.
And so the purpose of this is that,
imagine you just got in and you levered up a position.
And then, boom, a few hours later,
there's a major redemption.
And you end up taking a loss because when you're looping,
doing this, there's a little bit of losses
because of the slippage in the peg.
And that's something that happened to me recently
with Resupply.
And as I'm experimenting with it, and it's like, OK,
well, Alchemix v3 is better because these
are fixed duration redemptions.
It could be one, two, three months, et cetera.
But the whole time while your debt
is being reserved for this future redemption,
you can earn on the entire stack of it.
So it gives you this kind of temporal advantage.
And because of this new pegging mechanism that we have,
we're going to be increasing the loan to value ratio up
to 90% v3, which is going to enable a lot of, you know, basically levered looping up to
10x.
So you can basically get 10x leverage on your yield or close to it.
And in order to make the UX better, instead of having like a selection of different yield
tokens that users will select, we're going to be aggregating everything
into our own meta yield token that our DAO will be risk
curating.
So that should get really good competitive yields
that are risk adjusted.
And then you 10x those.
And so you could be making you know theoretically you know 40 50 60 percent and we
could be taking the fx usd save uh you know uh token as one of the strategies that makes up a
you know our collateral so that's also exciting because we can compose with lots of different
d5 protocols we're not direct competitors with anybody, really. We're enhancers. We can be
partners. And I think that shift in thinking from like, oh, no, there's another new stablecoin
protocol coming out. Oh, and more competition. Now it's like, oh, another new stablecoin
protocols coming out that we could use this. And so it kind of reframes everything. And I'm very excited for it.
Hopefully we can get it out this year.
Thank you for that, Scoopy.
KMets, at the earlier part of the conversation today,
you talked about kind of a gap
between the different teams in the Ethereum ecosystem,
the base layer teams versus other teams.
And then, of course, you know, we just saw Vitalik's post here just a few days ago on
low-risk DeFi.
It's nice that he's sort of bringing that to center stage.
What are your thoughts on, you know, how, and so I think if I was reading you correctly,
what you're sort of suggesting is, you know, there hasn't been a big emphasis on DeFi in the Ethereum ecosystem, at least not from an Ethereum foundation standpoint for some time.
But that might be changing.
you know, kind of bridge, built bridges into the different groups in the Ethereum ecosystem
and to see that decentralized stable coins, you know, it's not just from Vitalik's conversation
in 2022, but that remains an ongoing conversation for folks to be thinking about
decentralized stable coins in the Ethereum ecosystem.
decentralized stable points in the Ethereum ecosystem?
Boy, that's a great question. And I don't really have an answer exactly. If I knew that answer,
I'd be quite the organizational consultant. But as it is, yeah, there's just a lot of siloing. And
I think it's going to be more prevalent than in other sort of centralized organizations
when it's decentralized like this. And it's kind of a good thing as well in some respects because
it means that there's not a lot of group think going on. And so for Vitalik to single out low
risk DeFi means that it's had a large enough impact that it has sort of expanded the range to reach people's sort
of sphere of knowledge.
And so this is really good.
And I think low-risk DeFi is the thing that we all want to see get adopted.
And so other than sort of like just continuing to do what we're doing in terms of building things,
I think it's also sort of like branching out from, you know, our comfort zone of just crypto Twitter and going into other areas of communication,
be it blog posts or YouTube or, you know, Reddit or wherever. And that's sort of like the biggest thing is like, it's the centralized communication devices are kind of our,
our own worst enemy in terms of spreading the news.
But, you know, I think for the most part, you know,
the ecosystem needs a chance to sort of mature in order for people to take it
seriously, you know, instead of it just being meme coins chasing after each
other, you know, when,
when Aave is the 35th largest bank relative size in the United States,
debt goes with some weight behind it and people take debt seriously.
And so hopefully these protocols that are on here today,
like Curve and Alchemex and FX, as they grow in size,
their influence will grow as well.
And hopefully everybody can start to see sort of like
how they do contribute to Ethereum and its security budget and the strength of the network and DeFi
and crypto in general. Thank you for that, KMets. Well, we have about nine minutes left in the
spaces. If anyone has questions, please raise your hands. We're going to go around the table. I think
I'm going to start with CurveCap, then to Scoopy, then to KMets on this last question. I think some of my
learnings today or clarifications, we set off on this direction of examining the security value gap
on Ethereum. But I think one of the takeaways that kind of came through the conversation was, yes, that gap exists, but the likelihood of exploiting it, it would be so difficult.
for a time, that it probably doesn't make a lot of sense to sort of dwell on decentralized stablecoins
as a mechanism to grow Ethereum security.
And then on the other side of this is what we learned from the conversations with Curve and FX Protocol and Alchemix is this continual drive towards innovation,
innovative features that are just not possible in TradFi.
So I guess my question to you, starting with CurveCap,
is what did you take away from today,
and what would you suggest we all be thinking more about going forward?
Well, I just wanted to basically state,
you know, we should have stated it up top,
but we were too busy getting into the hardcore alpha.
Risk DeFi, but it's still worth really highlighting
that all of DeFi is inherently risky.
And, you know, as much as we like to say that,
like we can have such a concept as low risk DeFi, you know, I feel this very closely having worked at Curve, where Curve worked incredibly diligently at trying to avoid potential exploits and still suffered from the Viper compiler exploit. testify to this. It can suck that even if you are doing everything absolutely right and building on
the safest, most battle-tested protocol, there is still heavy elements of risk.
And in fact, this is one of the things that TradFi does very well in terms of alleviating
the risk. There is inherent risks to TradFi that maybe the US is going to default on its
debt obligations, which it has never done in its history.
And the entire global financial order might collapse.
Or maybe the U.S. will collapse because of overprinting it, which it probably will at some point.
And it's kind of, again, musical chairs.
But until that happens, you can have FBIC insurance and you know that if your dollars deposits under 250K in a bank are there, it is very safe.
The U.S. Genius Act actually makes stable coins inordinately safe in that you actually have very strong legal guarantees if you purchase stable coins that you would actually be protected in the event of a bankruptcy.
So TradFi is probably for the foreseeable future going to beat out DeFi in terms of safety.
for the foreseeable future going to beat out DeFi in terms of safety.
Now, until such time as the entire financial system collapses, at which point maybe it will
be pretty good having some JPEGs to hedge your portfolios with.
But all that being said, the inherent riskiness of DeFi can actually be a feature that works
in DeFi's advantage because
where very safe systems like bank account deposit can't really earn excessive yield,
excessive yield is something DeFi does great at because when there's excessive yield,
there's probably excessive risk and vice versa. So as long as we are kind of like a riskier place,
we can also get access to better yields, which can maybe work to DeFi's advantage if we do see continuing rate cuts and we end up in a very low interest rate environment and people are looking for new ways to gamble.
Thank you for that curve cap.
Let's go to you, KMets.
Takeaways and suggestions for fellow low risk DeFi enjoyers.
What should people take away from today's conversation,
K-Mets? Yeah, one of the things I did want to clarify is basically in terms of attacking
Ethereum, we talk about it being a low-risk threat from these stablecoins. But with the amount of value that we're talking
about and sort of like the decentralized nature of this, they're low risk, but also things that
we do have to consider and think of all the possibilities and how to combat that. Tether
can print money out of thin air if they want,
and they only have to be accountable four times a year
in terms of their real-world assets.
So if Tether wanted to, say,
create their own liquid staking derivative,
Tether ETH, I like to call it,
they could just print money out of thin air
to triple the staking yield
and start accumulating stake teeth or whatever.
There's all these sorts of weird ways that you could imagine it.
But the main takeaway is that I kind of want people to realize that there are risks.
They might be low, but we need to just take those into consideration in terms of how we
continue to strengthen this ecosystem, DeFi, crypto in general. And there's always somebody
out there that's looking for a way to get creative and disrupt the system, as we've seen many times.
And we just need to be working as best we can to make sure that we're strengthening
things with our low-risk DeFi protocols, or so they're called. But yeah, I definitely want
people to kind of like have an understanding that the unknown unknowns are what get you.
So yeah, thank you for that, KMets. I'm going to give one last plug
and then give Scooby the last word today.
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Scoopy, yeah, takeaways and suggestions for the community before we end the conversation today.
Yeah, echoing what the others were saying is that, like, you know, DeFi is, you know,
low-risk DeFi, you know,y is you know low risk defy you know
quote unquote low risk defy right um it's it's always like you know like a little bit of risk involved with it no matter what just because of smart contract tax and stuff like that um
you know because i mean curve what it was i would have put all my money in Curve in 2023, you know.
In fact, I had a lot of my money in those pools.
Because I thought, hey, this has been out for three years now, and it's so battle-tested.
Like, you know, of course, nothing could go wrong.
But then some really deep issue in the compiler surface that
wasn't Curve's fault at all. So it's like those unknown unknowns could get you. And as Ethereum
is talking about moving to a risk V, like a VM that's EVM compatible and stuff like that,
that's EVM compatible and stuff like that.
What risks does that introduce to the system,
especially now that we have that risk via EVM or VM,
we could do Rust and other programming languages.
How, like what new, you know,
security bugs are going to pop up because of that
or deeper compiler bugs are going to pop up because of that, or deeper compiler bugs are gonna pop up because of that.
You're just never sure that everything's going to
always be okay on Ethereum.
But that said, most of the hacks that has happened
in the past year have been just like OPSEC hacks,
like where the teams get their keys compromised, like with
Bybit, for example, the vast majority of the value is being lost because of just poor OPSEC
by the teams.
And there's fewer and fewer DeFi hacks.
And the ones that do get hacked are the ones that, like, you know, they're not really innovators.
They're like they're forking, you know, somebody else
and they don't really know what they're doing.
Like the reason why Aave hasn't gotten hacked versus Aave,
you know, forks getting hacked is because, you know,
like there's a lot more than just the code
that goes into securing Aave's markets.
There's a lot of risk curation and liquidity
and different things like that, Oracle Choice and whatnot
that all go into it.
And I've known that they've had a couple of close calls
where if they didn't have such a competent team responding
so quickly, it could have ended badly.
So even low risk Aave has had dodged a couple bullets.
But I do want to say about the EF and organizationally,
because CurveCap had that question earlier.
And I've recently had the opportunity
to talk with them and get to know them a bit, at least not
everybody in the EF, but a handful of people now.
And it's definitely siloed, but there's teams out there now
that are reaching out to developers,
reaching out to DAP developers and DAP teams.
And it seems more like at this stage,
it's more of like a kumbaya, hey, we're listening to you.
But they're not really wanting to do product plugging and shills and stuff like that.
Like I'm going to be writing a guest thread on the Ethereum account soon.
But like the guidelines are saying like it can't be a shill.
It's got to be like a personal story, you know, or examples of how the protocol has helped people in real life,
things like that are, you know, within their guidelines.
Like I don't think I could get them to buy ALCX token, for example,
maybe use Alchemix platform in the future. That might be on the cards,
but as far as like you know the
ef and doing business development uh i don't see that really happening or being on the horizon
um so yeah that makes sense i'm not sure if they're they're even if they they do align with
you know this you know open stable coin like uh you know you know, this, you know, open stable coin, like, you know, you know, protocol
and things like that, the basket.
I don't know if they actually would invest in it per se.
And I think like they've had their heads in the sand or like for such a long time, as
far as like what's actually going on at chain, that they're taking this moment now to kind
of re-educate themselves or just maybe just educate themselves organizationally about what is going on in DeFi and in the larger like that development, like, you know, space.
And, you know, who knows, like after they've done their findings and they've established relationships, maybe it'll inform some different policies from them going forward.
inform some different policies from them going forward.
I appreciate you sharing that.
I love that you ended us on a high note of reflecting on kind of the hardening and noticeable
success of smart contract developers, DeFi developers, over, you know, contrasting that
to where a lot of the bigger hacks are happening in OPSEC.
And then to your last point, Scoopy,
I think I just saw a few weeks ago
or maybe a few months ago
that Ethereum Foundation started using Aave,
which was pretty exciting.
So I think we're making progress.
As you said, they are listening.
It might kind of sometimes be kumbaya,
but I think there's a serious interest
in engaging with the community.
I definitely see that with folks like Benji and Nico, Tom Oz. So, you know, I would just say
onward and upward. Thank you guys so much for coming out today. I know it's real late where
you are, Scoopy. Thank you, CurveCap. Thank you, KMets. Thanks, Scoopy. Everybody, be sure you're following FX Protocol, Alchemix, and Curve Finance.
And, of course, be sure you're following Leviathan News.
Open Stable Coin Index is doing a lot of coordination with Leviathan News, so stay tuned.
Thanks, everybody.
Thanks.
Thank you, sir. Thank you.
