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PACT: Transforming Credit Around the Corner & Across the World!🎙️
Recorded: Sept. 11, 2025 Duration: 1:13:19Space Recording
Short Summary
PACT is revolutionizing the credit market by bringing $1.8 billion of loans on-chain, leveraging partnerships with Aptos for enhanced efficiency, and preparing for a Token Generation Event to engage the community. This innovative approach is set to transform traditional finance by integrating blockchain technology, reducing costs, and improving access to credit.
Full Transcription
Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. All right.
Welcome, everybody.
Well, almost ready to get started.
I think the PACT account actually dropped down.
If you want to request, I can bring you back up.
Xander, how are you in today, sir?
Oh, I'm doing well, thanks. How are you?
Not too shabby. I made a trip over to the West Coast yesterday, and my whole sleep schedule is messed up already.
But I'm otherwise doing great in sunny California.
I'm excited to hear about what you guys are building.
I was looking through the docs and looks quite unique.
I want to get quick intros.
I don't know who we have on the Pact account and the Pact Labs accounts, but just before
we get started, Xander, background into you guys, who you are, how you got into crypto,
and then we can dive into Pact.
Wonderful. Well, first, thank you so much for having us. Really excited to be here and to chat
with all of you. I'm Xander. Maybe we do. I'm one of the co-founders of Pact. I'll give
like a really quick background on me and answer your question of how I got into crypto. But
before that, maybe just Eric and Brady, you can just say hello and introduce yourselves so everyone
knows who you are.
Yeah. Hi, everyone. Super happy to be here. My name is Eric. Helped co-found PACT alongside
Xander, and I lead product here at PACT Labs, the tech and engineering arm within the PACT
ecosystem.
Brady there?
Well, while Brady is figuring out the speaker system, Brady runs marketing and is here with us as well.
So let me give you a little bit
about us and PACT. So I come from a traditional finance background. I went to Harvard, I worked
at Bridgewater, worked at the Global Macro Fund, Boston Consulting Group, I started to lending businesses.
I helped start a mortgage business in the States and a education finance business.
We finance vocational training.
And so I was just in it.
And this was over the last 15, 20 years and was issuing loans, hundreds of thousands of
loans.
And as I was doing that, you know, it's just the way we were doing it the way it was done.
I total, you know, no blockchain anything.
And we, you know, at the student loan business, as a good example, we'd issue our loans to people who needed money to pay for vocational training,
for education that led to jobs. And when we issued the loans, we'd sell them to Blackstone and
Goldman. And that was just how it was done. And it was great. They financed it and off we went.
And in that process, I just witnessed something
happening every day or every time we sold a loan, which
is that once you issued this loan to the student,
we had to send a bunch of documentation
to the buyers of the loan, the financers of the loans,
to make sure and validate that the loans that I was selling them were the actual loans that
we had made. And there were a team of accountants and lawyers who came in to
manually check each piece of paper, each document that we were planning to sell them.
And that process took a few days, sometimes a week. And after all that validation was done,
they would buy the paper, as we called it, and we'd send the paper over to them.
And that happened each and every time. And that was a really simple transaction. It was one
financer and one lender. And it worked, you know, it worked, but there was a lot of friction in it
and a lot of costs in it. And those costs are directly
borne by the borrowers. These are the actual individuals who need the money for some productive
use. And there was just this friction in the system that existed. And it always, it sort of,
I was always scratching my head while I was doing this, but I didn't know of any other way.
this, but I didn't know of any other way. And then I met Eric and our other co-founder Fabian and
you know started talking to them about how blockchain could solve this. And all of a sudden
I realized that the sys, you know, that what we were building at PACT could effectively stop that whole process. It could just fix it. Instead of having these teams
of lawyers and accountants manually validating all of the paperwork and all of the data associated
with these loans, you could just originate the loan on chain and suddenly that data was there and immediately verifiable and that whole process
was suddenly gone and that i mean i have goosebumps right now telling you this that
represents billions and billions and billions of dollars spent on validating that data in the system that just doesn't have to
be spent anymore. And weeks and weeks on every trend, you know, days and days on every transaction
of friction time. And all of that is borne by the borrower, the actual individual, the person who
needs the money for something productive, ultimately is paying for that in the form of an interest rate.
And so there was this sort of eureka moment where I just realized how huge an opportunity there was to make that system significantly better.
And so that's what we're doing at PACT.
We're building a protocol and software that enables the credit markets to
function more effectively. And I can say a lot more about this, but this is an enormous problem.
There's a joke on Wall Street that the credit market, pardon me, the equity markets,
the stock markets are a pimple on the butt of the credit markets. The credit markets are just so much bigger.
And in these credit markets, this validation process just is a huge problem.
So I can keep going, but that's like the high level of what we're doing.
There's a lot more that I'm really excited to share, but I want to pause for a moment.
Yeah, certainly.
So my first question is, it sounds like you found a solution to a problem, and I'm not surprised that blockchain tech solves this.
for solutions like yours to come on chain.
Are you doing this on a private blockchain?
Is it going to be on an L2, on ETH?
I'm curious to know more about where you guys are building.
Yeah, so we're building on Aptos,
who's been a great partner for us
and have been working with them now
since near the beginning.
Eric, are you speaking?
Yeah, sorry.
Sorry, I muted a little bit later.
So yeah, as Xander was saying, we're building on Aptos,
or Aptos as you pronounce it.
We've been operating on Aptos for quite a bit of time now.
We've built the entire tech stack there.
So just a couple of reasons, you know, why we're working with a public network like Aptos for quite a bit of time now. We've built the entire tech stack there. So
just a couple of reasons, you know, why we're comfortable with a public network like Aptos.
First off, we definitely believe that the future of on-chain finance belongs on public networks.
That's how we leverage the full benefit of what we're building within this space and make these
systems ideally composable and
with the ability to interact with other sorts of protocols within the space.
For us in particular, there were two sort of metrics that were top of mind.
Low latency, low cost. And Aptos fits both of those requirements quite well. I'll give an example. When we onboard big originators, they'll have
tens of millions of transactions that we need to bring on chain within a short amount of time.
And then even going forward, they'll have tens of thousands of transactions, in some cases,
millions of transactions a day, because they're oftentimes issuing very short duration loans that
have high turnover within a very large customer base.
And so if you actually go back, I forget what month it was, but we had onboarded quite a large
customer and we sustained well above 1000 transactions per second on Aptos for over,
I think it was like two or three hours. That would not have been possible on any other public network
that we're aware of. And even if it was possible, we probably would have been possible on any other public network that we're aware of.
And even if it was possible, we probably would have been out of business due to the gas costs
of posting all those transactions. So in short, yes, we are building on public networks.
We do recognize that for some use cases, privacy is a requirement. And we are building in the
direction of bringing privacy primitives to these public networks.
So again, we preserve the value of not going the direction of some private blockchain, which in a lot of cases does remove some of the value adds of building on blockchain in the first place.
And I'd imagine a lot of the most of the people that you're serving are folks that aren't crypto native.
So is that required building a front end UI that's indistinguishable from Web2 UIs?
I'm just curious to know more about how, yeah, how you're going to bring those users on chain or if it's even necessary.
Or if it's even necessary, if this is more of a back end thing where it saves you and saves the clients a lot of costs, but they're not really seeing what's going on behind the curtains?
This is a fantastic question. And I think this is a big debate in general within crypto right now.
We have taken the approach of being an embedded protocol to where we primarily interact with stakeholders at the capital markets layer to where you wouldn't see like an end consumer per se going to a website to interact with PACT.
But little do they know that that loan that they just received was entirely enabled by a debt facility that was dispersed to their lender on our platform. And so what makes
us somewhat unique is that even though we to date have primarily operated at the capital markets
layer, our technology extends all the way through to end borrowers just within an embedded setup.
So for the fintechs and asset managers that do deals on Pact, they do interact
with our platform through a traditional web dashboard. This is a web three enabled dashboard.
So you do connect a wallet that you sign transactions with. But since we're on Aptos,
there's a lot of primitives we can leverage like keyless accounts to make that very user friendly.
And we're partnered with BitGo and all of that because we have people that manage lots of money so they can hold it in qualified custody as well. But it's important
to emphasize that our technology is actually embedded inside these fintechs. And if we want,
you know, if we want end borrowers transacting on PACT, anytime they get a loan that actually
gets recorded on chain. If we want these end borrowers actually to receive stable coins into
their account, we all know that in order to do that, you need to have a crypto wallet. And so what
we've done is actually laid the groundwork, giving every single borrower on the PAC system an
embedded wallet with their fintech provider. And over time, as we're working with these fintechs
within markets where we're allowed to, we're slowly starting to expose some of these Web3
features to the end customers. Some of the obvious use cases will be a non-bank lender
offering a stablecoin account to their customers, in addition to the loans that they are receiving
now being dispersed to the stablecoin account as opposed to directly to their bank account.
to this stable point account as opposed to directly to their bank account.
Other examples would be, you know, exploring some kind of new credit card sort of rewards
points type system and a couple other ideas.
But I would say just to summarize right now, we are embedded.
I think that's what has allowed us to accelerate to scale just by focusing on providing value
to the fintechs that we interact with.
And now we're shifting into a new phase of the company where we're actually we're essentially
acting as outside Web3 consultants for these TradFi companies, helping them triage the entire
Web3 stack to upgrade their business to these new rails. Yeah, thank you, Eric. Oh, go ahead.
Yeah, thank you, Eric.
Oh, go ahead.
Yeah, Eric, that's bang on, obviously.
I think something important to mention, and I think in my intro I didn't quite hit it, so I just want to get it out there.
traditional finance. And one thing that traditional finance has is a lot of capital and a lot of
distribution to a lot of customers, users. The money moves. Could blockchain make it much better?
Absolutely. For those end borrowers? Absolutely. What we've done here is that, as I was saying at
the beginning in my example of where I used to sell my loans to Blackstone and the team of lawyers and accountants would come in to verify them all, we've brought all that data on chain.
That means that validation process is instantaneous.
The other thing that we've done, and I think this is really important to note, is that we've built the transaction layer on top of it as well.
And this is getting at the integrations that Eric was referencing here.
So once you have all that data on chain, once a borrower makes a repayment into their wallet built on Pact, that repayment of that dollar, or because we do a lot of work in emerging
markets and whatever the local currency is, that automatically flows to the ultimate owner of that
loan. That's a crazy thing in credit markets. If you remember 2008 and all the mortgage-backed
securities and how complicated they were,
and these loans get repackaged and tranched and cut up and there are complicated waterfalls.
And those lawyers and accountants, part of what they have to do is track all of those
stacked waterfalls so that to see where when $1 is repaid into an individual's loan,
to their mortgage, to their student loan,
to their credit card. Where does that dollar go? Who owns that loan? And who owns that complicated,
tranche, restructured loan on the other side of it? And so the beauty of what PACT is doing and
what got me so excited was that by combining all of the data about the
loans and the transaction layer using stable coins, you can, I mean, in traditional finance
language magically, have the dollar repaid and 15 seconds later be in the account of the ultimate
owner. That is transformative. That reduces the cost to borrow to the consumer
by like really significantly. In some cases, you could see like 20, 25% reductions in the
cost of borrowing. It's crazy. That radically changes the financial markets. Not only does
it reduce the cost for traditional loans,
but entirely new segments of financial products can be created when that operating cost is lower.
And so whole new markets emerge that just weren't feasible to serve before because the
costs of all that process were too high. And now we've been doing this and we buried the lead here,
but we've been doing this now. And in the last year, we brought $1.8 billion of loans on chain.
We're very proud of that. We're growing rapidly. We expect to grow that significantly over the
coming time with more and more partnerships and
more and more distribution um we're very proud of the work we're doing and that's that
so i was with a friend last he's one of my best friends from childhood he He worked at Blackstone for several years before they went
to their tech startup. But anyway, I was showing him Aave and I was showing him the different types
of DeFi platforms, Aave specifically, because I was essentially telling him I haven't paid taxes
on my Bitcoin and Ethereum.
I'm just borrowing against them. And he didn't really understand what I meant by that.
And I showed him Aave and the interface.
And it was kind of a light bulb moment for him because he goes, wow, this can really
shift the way that TradFi and Wall Street operates.
And it sounds like you guys are on the forefront of that.
It does, to me, though, sound a bit more complex than Aave.
That's my favorite lending platform.
I think that it's – I previously didn't have access to any of these sorts of financial tools,
and now they've been democratized.
But, again, I know that what you guys are doing is – it sounds a bit more complex. to any of these sorts of financial tools. And now they've been democratized.
But again, I know that what you guys are doing is,
it sounds a bit more complex.
So I do, for people that are just joining,
want to, I would love for you to describe the tech stack.
And then we can kind of dive into, you know, how the types of collateral that people are able to use with PACT and how that's verifiable on chain.
I just, again, it sounds a lot more complex than the average crypto lending borrowing protocol.
Yeah, absolutely. Great observation by making the comparison to Aave. At the highest of levels, we do operate within the same space of asset-based lending. In Aave's case, they're lending against crypto assets like Ethereum. And in your case, I think you had said you borrow against your Bitcoin, if I heard you correctly.
Yeah, absolutely.
Great observation by making the comparison to Aave.
Whereas on PACT, we're borrowing against, or not we, but the partners that we work with
are borrowing against receivables, in this case loans.
And so they'll issue a loan, like a $50 microloan in Kenya, and they'll issue thousands of loans,
of those loans in a given day.
And then periodically, they will look to get financing against those assets effectively. Because as a lender, you know, if you lend all your money
and you now can no longer issue any more loans,
you're out of business.
And so what they'll do is they'll issue the loans
and then finance them on our platform.
And so a little bit different from the use case
that, you know, Aave's typically used for,
which is like getting leverage on crypto assets.
In our case, it's getting leverage on the loans on your balance sheet so you can continue
to issue new loans to new customers.
And that's taking the simplistic view.
So when I'm talking to my crypto friends about what we do, I typically will give that Aave
example and just say we're slightly different.
When we peel back the layers of the onion, though, you're absolutely correct in saying
that it is quite a bit more complex. So at the high,
like still keeping it relatively high level, I would say there's three primary layers to our
system. There's the loans and the loan book layer. There's the debt facility layer. And then there's
the credit fund slash securitization layer. So at the loans slash loan book layer, this is,
you can almost view it as like a loan
origination and loan management system. It is quite literally a full-blown end-to-end protocol
by itself for a lender to migrate their lending activities from fiat to on-chain and stable coins.
Anytime a loan gets issued through this layer of the protocol, it creates an NFT or an NFT equivalent on Aptos
that holds all the metadata for that individual loan.
So think what's the principle balance,
what's the payment schedule.
From the payment schedule,
you can derive things like due date, interest rate,
stuff like that.
It also keeps track of, for example,
is this loan delinquent?
And what is so powerful and the base building block to what Xander was talking about earlier
is that whoever holds that loan will receive the cash flows of that loan when a borrower repays.
So when a borrower repays, they repay the loan book.
And the loan book routes that money to the owner of that loan.
Now, the owner of that loan can be an individual or a business through like a true sale transaction.
But what's most common, as I mentioned earlier, is that an originator will finance those loans.
They will pledge them into a lending market and borrow money against it.
And in that case, the owner of the loan is not an individual or a company, but another smart contract with its
own logic. And so that smart contract in this case is our debt facilities layer. This is by far the
most complex layer within the pact stack and what I would describe as one of our biggest modes.
So the debt facility layer is effectively where Aave sort of operates to where they have simple parameters.
Like, for example, we'll lend up to 85% of the collateral value.
We use these systems for valuing the collateral.
And if it falls below that threshold, then it can be liquidated.
In our case, just imagine basically different criteria being applied
and significantly more complex rules.
So I'll give another hypothetical example.
We may structure a debt facility to where we will lend up to 80% against the value of the assets,
but we will only lend against eligible assets. And the eligible assets may be those that are
less than a certain dollar value to individuals with a risk score above a certain threshold,
below a certain duration.
And what we can do to make it even more complex is we can add things like concentration limits
where we say, okay, we'll lend to first-time borrowers, but we only want at most 20% exposure
to that customer segment.
And then you can take it even further and you can say, hey, that advance rate or that
loan-to-value threshold I mentioned earlier, we're actually going to do variable loan-to-value thresholds based on individual criteria of the loan itself.
And so long story short, basically, we're analyzing bespoke attributes across millions
of loans at a time and at the end spitting out a credit limit that that fintech originator
can draw down from.
So that's our debt facilities layer.
And then the last layer, which I'll end here, is our credit fund slash securitizations layer,
which is essentially the capital, the broad capital raise arm of the protocol,
where money flows in there.
It functions very similar to a debt facility, just without the asset pledging logic.
And it's what allows us to
basically take a bunch of these unique loans, structured through these debt facilities,
so we have that added protection, and then create these standardized financial products
for institutions, funds, and potentially one day individuals to invest in.
That's protocol. I'll just briefly mention that
protocol is actually quite, even though it's very complex, it's the lightest part of our entire
stack. As part of working with these fintechs, they don't have blockchain experience, so we
need to make it as easy for them as possible. We have a massive off-chain footprint of developer
tooling and middleware to actually facilitate the integration of our protocol into these fintech lenders, mobile apps and back office operations.
And as we had mentioned earlier, we actually operate some of our own consumer-facing applications like our dashboard, which fund managers and fintech originators use to, for example, manage their debt facilities, do capital calls, and draw
money from the system? Yeah, certainly a lot more complex than the lending markets.
Most of our crypto friends, crypto native friends, including myself, are used to interfacing with.
myself are used to interfacing with. I mean, I think this is the future. And like I said before,
I've been waiting to see. You mentioned how some of that metadata for a specific loan is
coded in NFT. And I remember, I didn't want to interrupt you, but I remember thinking to myself, finally, real legitimate use case for NFTs apart from just our JPEGs. So yeah, that's actually
one of the coolest things about this project is that we're taking all of these tools that have
been used in sort of, you know, total crypto native use cases where they just like they exist for this community
and this community alone. And some of them then have been moved from the NFTs of yore to
things like Aave where we did a real financial tools, but still financial tools basically only used by crypto native people.
And we're taking these tools and we're bringing them into actual real world economic situations.
At the end of the day, the borrower we're talking about is like, these are, I'm going to give you some examples. Someone needs a tuk-tuk,
a little motorized vehicle in Colombia.
They need to borrow money to get that so that they can have that for their delivery business
or so that they can run a mini-taxi.
That transaction was very expensive
using traditional finance. Expensive in the form of an interest rate
that paid in part for the operating costs of moving that money and tracking that money.
By bringing the tools that were pioneered by this community
into that real world, suddenly that individual gets that tuk-tuk cheaper.
Now, they have to onboard into the crypto ecosystem to do that. Now, we make that very
easy for them and all the rest, but they're not necessarily thinking, oh boy, I can't wait
to buy some tokens.
They're thinking, I want a tuk-tuk.
This tuk-tuk is cheaper than the other tuk-tuk.
And that is real economic value being unlocked by the blockchain.
Now we are doing that with millions of people all around the world, or hundreds of thousands, millions of people,
and are going to continue to expand that.
We're going to start working in the United States.
And this will be global.
And I am very confident that a decade from now,
people won't even talk about tokenized assets.
They'll just talk about assets.
Something I share a lot, and then Eric, I'll shut up after this, but Eric, you know, something I
share a lot in a joke with the team that if you go back to the, like go way, way back, put on your
historian hat for a minute, and you go back to some of the earliest Sumerian writing,
like literally some of the first writing
that we have as a society in human history.
There are these cuneiform tablets.
There are these clay tablets that people use straw to mark.
You'd change the angle of the straw.
And there was this alphabet based on like this triangular straw
that you'd stick in the clay. And so we find these clay tablets. These clay tablets, the first recorded words we
have are records of IOUs of bushels of wheat. They're recordings of loans.
Now, I sometimes joke with our team, we are building a modern equivalent of that clay tablet.
We are recording the data of loans and we're making it easier and cheaper to send. This is
something that human beings have needed in the real world forever. Now, obviously, a clay tablet
and the protocol that we build are, from a technical perspective, wildly different.
But they serve the same human need that is independent of blockchain.
It's a core human need to lend assets to each other so that we can thrive together.
It's a beautiful thing in economics.
And by bringing these tools, it makes it better for everyone who needs to do so.
Go ahead, Eric.
I distract from that last point, but just want to, you know, what, what, Xander, what
you were saying about the tuk-tuk or bota-bota financer in, as the example in Columbia.
So that wasn't actually, I just want to emphasize, that was not a hypothetical. You know, we do work with this exact customer segment on PACT. And in fact,
you know, I'm looking at one of their dashboards right now, and I'm looking at their average loan
APR historically as a lender. And you can actually see as soon as a debt facility was raised on the PACT platform, a noticeable and significant decrease in the average loan APR charged to their end customers.
And that is showing the quantitative impact of what Xander was talking about.
Like, this is not theoretical. We're seeing this already with the fintechs that we're working with.
already with the fintechs that we're working with.
Okay, so I have a question about this specific example, or let's say another example.
Let's say that I want to start a food truck business and I want to get a loan for a food
truck.
Can you, from just a non-technical perspective, explain.
This gentleman wants a tuk-tuk.
He's crypto-native at this point.
He has a wallet, and he goes to the PACT protocol.
Go ahead.
What does it look like?
How are you verifying that this person meets the criteria to get a loan and how much they're allowed to borrow, what their collateral is?
I'm just curious from a high level.
Yeah. So what we're doing is we're bringing traditional finance on chain.
What does that mean?
That means that we are working with financial technology companies who already have built
expertise in local markets at underwriting the loans, at assessing the risk of the loans,
at finding customers, at onboarding those customers.
But we're bringing all of their technical infrastructure of that lender on chain,
and then facilitating everything in the background for them.
And the beauty of that is that it allows us to scale so much faster
than if we had to go out and individually find each borrower who needed something,
develop our own in-house expertise of underwriting that
specific type of borrower for that specific use case. Instead, the way that we've brought
almost just under $2 billion worth of loans on chain in a year is that we're working with partners
who already have that expertise and already have that underwriting.
And, you know, it's important to think about what we do.
We are experts.
We believe the best at recording the data of loans and facilitating the money movement, the payment flow around those loans.
the payment flow around those loans. That's what we do. And we embed that into people who are
That's what we do.
excellent at finding customers or underwriting customers. But we get to be the financial rails
that all of those people operate on, all of those other companies operate on.
We already have partners, I think on how many continents? Four continents at this point. And we're going to continue growing that by bringing more on and rapidly scaling.
What this is doing is bringing millions of new individuals into the crypto ecosystem.
Because the only way they do this is that they end up interacting with stablecoins and building and having a wallet themselves.
And it's bringing the tools that this community has developed to the rest of the world.
to the rest of the world.
It's massively expanding it.
It's massively expanding it.
Okay, so another, I mean,
I have a full grasp at this point, I think,
of what you guys are bringing on chain.
It's what already exists,
but it's going to be more efficient.
It's going to be cheaper, more transparent,
all that good stuff.
I'm still trying to wrap my head around what the process looks like for me.
Okay, I'll give another example, me.
I want to buy a home.
Can I come to PACT and get a loan for a home?
And if so, what information of myself do I need to share?
Is it basically the same thing as me walking into a bank?
Yeah, so to maybe take Xander's answer a slightly different direction.
So in this specific example, in the current state, I would say, of the ecosystem, we would refer you to one of our partners that we work with that offer mortgages.
So in the case of the Boda Boda financing, right, we would refer you to that partner within the
market because at this stage right now, PAC does not operate, neither PAC Labs nor the protocol
operates as a lender. The lender of record, as we say, the legal term. You know, in order for us to
do that, we would need to be a
licensed lender in all the markets that we operate. And as Andrew mentioned, we touch four continents,
and that would have slowed us down quite a bit if we went. And we did contemplate it.
I will say that we actually contemplated it so much that we ended up building exactly,
going back to your original question, if I have a crypto wallet, I know how to use stable coins.
Can I get a loan to my crypto wallet in stable coins?
We've taken the embedded approach so far, but we actually have built and we never released this.
But we are still contemplating a potential go to market for it.
We've built a loan aggregator on top of our platform.
The idea being, you know, we're already plugged into all of these fintechs.
We are involved in their
disbursement of loans, the collection of the repayments. You know, why not take that one
step further and bring them customers through an aggregator app that we build similar to like
Credit Karma, but built on our rails. And we could be even better than Credit Karma because Credit
Karma can't disperse funds on behalf of the lenders they work with.
They just refer you to their website.
But we can build, and we have built, that's the point I wanted to make, we have built a
dApp, effectively, that can be slotted into any Web3 wallet.
It feels exactly like a normal microfinance app, right?
You go through it, the crypto OGs will be upset about this, but we do have to do KYC
on you.
We do need to know our customers if we're getting in the lending business.
And, you know, it asks you general questions about, you know, how much money do you need for what duration?
And then that sends off the application to all the lenders that we work with.
And then there's a time period to where they can respond with offers effectively.
And then you as a customer will see a list of offers and you can filter them
or sort them based on what matters most to you. It may be most amount of money. It may be cheapest
cost of capital. It may be longest duration. And then you can select the loan that works best for
you and then receive that loan directly on the DAP, which will just send the money to the wallet
that you're signing the transactions on this DAP with. And this isn't like an idea or like a Figma design.
This is a legit dApp that we have fully built that works end to end.
And we're, we honestly just, like our normal business,
the embedded business has been going so well
that we've just stayed laser focused on that.
But when the timing or when the opportunity presents itself
with like the
right wallet provider, for example, or the right lending use case, we're ready to jump right on it.
I think that when we talk to our fintech partners about lending to customers within a non-custodial
crypto wallet, they're still trying to wrap their heads around, right, what's their own
non-custodial crypto wallet play? As I mentioned, that's sort of like the new phase we're shifting into within the ecosystem
is helping them triage the entire crypto stack,
which gets packed sort of further locked in to these partners.
But once we get there, I think that will be a great opportunity for us to revisit this idea of
how can we plug this into the broader ecosystem?
Instead of this just being an embedded solution that customers interact with without even
necessarily knowing that they're touching PACT, how can we let individuals like yourself
that now know about PACT, that now understand the benefits of it, also leverage the benefits
within the market that you're in directly on the PACT platform?
So I hope that sort of helps give some color as to what direction we may go to support that type of use case
within the medium to longer term future.
No, it certainly answers my question.
And it's exciting.
It's exciting to see this happen after so long hearing about the power of blockchain tech
and what it's going to do for financial markets,
what it's going to do for games, what it's going to do for supply chains. I mean, it's really cool
to finally see this after longer than I thought coming to fruition. I want to touch on the role of stablecoins in making the system work because to me it's quite obvious for this to all come together.
You need stablecoins.
They, in my opinion, are the only product in crypto that I don't even consider my beloved DeFi to be one.
I think stablecoins are the only product in crypto that have found product market fit.
And they're being used across the globe.
And I think they, at this current point in time, solve even more problems than Bitcoin does.
And we have the Genius Act that's gone through.
This legislation is going to allow for an influx of stablecoins to come on chain. Tell me about how stablecoins are making your ecosystem work and any other
thoughts you have on them. Yeah, this is a really core part of how we operate. And as I was saying
before, there are two components of what we do.
The first is that we bring the data of the loans on chain.
Part of that data is who owns each component.
And you've heard a lot about tokenized equities.
A bunch of real world asset platforms are talking about equities.
And equities are pretty simple.
There's real benefit to tokenizing them.
More people can buy them, international access, cheaper entry point. That's great. But operationally, equities are pretty
simple. In credit, it's really complicated. There are those waterfalls I was talking about,
where like, you need to do a lot of work to figure out who gets the dollar that someone repays.
you need to do a lot of work to figure out who gets the dollar that someone repays.
By bringing that data on chain, suddenly you know who's supposed to get the dollar. So that's a hard
part in and of itself. But then second, if the loan is repaid using stablecoins, you can instantly transfer that money to the appropriate person. And instantly transferring
it is a huge benefit. The efficiency is greater, the costs are lower, the capital costs are lower.
It is a revolution. There are huge swaths of Wall Street that are just going to fall away.
There are huge swaths of Wall Street that are just going to fall away.
Thousands of people, hundreds, tens of thousands of employees that just won't be required anymore to do this.
And means that consumers, the borrowers, individuals will have cheaper access to borrowing.
And that's that's empowered by stable coins.. It doesn't work without the stablecoin.
Yeah, and I would say, just adding to that, going back to one of the earlier examples,
Xander, you're giving about the daisy chain of intermediaries. Just a very practical example,
when an end borrower repays their $50 microloan in Kenya, using stablecoins, it's a difference
between just being able to tell
someone, okay, these people are owed this much money and having to coordinate with off-chain
payment service providers to route that money across borders and all that stuff, which has a
bunch of fees and long time delays, versus now everything can just settle in real time. When
that embarrower repays their loan, it goes through all the same layers of the system,
right? We still have the structure, right? There's still a debt facility that has all these rules and
covenants to make sure that stuff doesn't blow up. We still have the fund or securitization layer
that has additional safeguards in place, ultimately to protect investors. And by doing stable coins,
though, the routing of that payment is it no longer gets stuck at each level for an additional 30 days until they run their next payment waterfall.
And by having that cash not be stuck at each level, you're reducing counterparty risk because the longer my cash is sitting with some random trust in Nairobi or Mexico City or wherever it may be, that's time when I can lose all my money
because it's not in my possession.
And by leveraging stablecoins,
that's how we really disintermediate
the entire value chain.
And there's several levels to it.
So the shift when we bring the full chain
over to stablecoins,
and that's another,
I really want to echo this point.
We're not just focused on the top of the stack
syndication layer,
like most RWA projects. We're end to end. So we're going after every single layer of the system
because we recognize if one layer of that daisy chain breaks, everything breaks. And that's where
we really realize a ton of value. And I would just say, you know, what we're doing with stable coins
is so interesting
that we're actually getting quite a bit of inbound from stable coin issuers that are
taking significant interest in looking at PACT, you know, ultimately as a way for them
to achieve critical mass in these hard to reach emerging markets with these hard to
reach customer segments on both the business side, the regulated fintechs, as well as the
customer side, the largely unbanked or underbanked individuals.
I will say this is hands down the most sophisticated RWA project that I have interviewed.
And I mean, I think the proof is in the pudding.
You guys are a lot more complex on the back end.
There's a lot happening.
It's more than just, as end. There's a lot happening.
It's more than just, as you mentioned earlier, borrowing lending protocol. You guys are essentially bringing an ecosystem that's off-chain, on-chain, and as a result, lowering
costs, system costs. And you're also expanding credit access for borrowers across the globe.
So, you know, hands off, kudos to you all.
Is there anything,
there's a couple audience questions here
that I want to get to.
Is there anything that I haven't asked so far
that you all feel important to highlight?
I actually think your summary there at the end
really captures what we're trying to do here.
You know, the U.S. credit market alone, just in the United States, is over $100 trillion.
It's enormous.
You know, we all believe that the tools that have been developed by the blockchain community are going to be used there.
And we're trying to bring that whole segment into this world faster to bring the benefits of this technology, you know, to the general population that up till now have not
benefited from it. Brilliant. Absolutely brilliant. And I hope to see more RWA. I've been hearing RWAs,
RWAs for the last two years. And again, I haven't seen anything that looks
this legitimate. We had Aisha and Rahmat on stage, but they did drop down for a sec.
Is there any reason, if anyone wants to ask questions, please request.
Gentlemen, is there any reason, I'm not finding one, but is there any reason, any situation where you would expand to another chain, to an EVML2, for example, just to get access to that liquidity?
Or is most liquidity that you guys are accessing just completely, I mean, it sounds like most of it's off chain anyway.
Yeah, I would. Oh, go ahead, Eric. It's a great question and also a great observation. Yes,
we are for the most part, you know, looking to introduce new capital into blockchain world,
but we recognize that there is this massive pot of money, you know, in EVM land and all these
other places. And, you know, we are, we want to do this very thoughtfully money, you know, in EVM land and all these other places.
And, you know, we are we want to do this very thoughtfully because, you know, I've been in the space for a long time.
I recognize that bridges are one of the most sensitive pieces of infrastructure within the space. effectively keep our core operations on Aptos,
but leverage capital raise functions
across multiple networks, right?
So keep the highly sensitive core operations
on a single network, but allow investors
to access those operations that live on Aptos
from any network that they operate from.
And that's certainly something that is within the roadmap.
Brilliant.
We have Rahmat up on stage.
Rahmat, go for it, sir.
I think you'll have to unmute.
Yeah, I think he knows.
I think he's having...
Can you hear me, Gav?
Yeah, now we can hear you, yes.
Okay, okay, I've been listening.
Okay, I want to ask what specific personal information is required during the pre-wetting
process for borrowers and how do you ensure compliance with the data privacy regulations such as GDPR and CCPA in future?
Yeah, it's a great question. Just to echo it for folks that maybe didn't hear it, he was wondering
basically what information is required to apply for a loan and how do we ensure full compliance
with local laws around data privacy protection?
So to echo Xander's earlier point, to date, we've largely taken approach of partnering
with local existing fintech lenders that are licensed and regulated by the local government
bodies. These are companies that oftentimes have issued billions of dollars of loans already.
And so these are big operations that are under tight watch and observation of local regulatory bodies.
And they're the ones that ultimately bring the compliance for that end consumer lending.
Now, we do retain certain information when it comes to the debt deals that contain certain sensitive,
you know, in some cases, user information. And for that, we don't have the time to go into it
on this call. But we've built quite a unique system that effectively allows permissioned
access to private data based on on-chain ownership and different identity and access controls that leverage both on-chain
ownership and off-chain data. So I'll give an example. Let's say I did a true sale transaction
where I bought a portfolio of loans. I need to be able to see or identify who those customers are
in the event that they don't pay. But I don't need, for example, to get instant access to all
of it. I just need in the event of default where I need to send it to a backup servicer, for example.
In that case, all the documents are encrypted and stored locally, like within a local AWS instance, for example, like within the country.
And access to those files are programmatically shared, again, based on the on-chain ownership.
So we haven't seen a huge use case of this now, given the deals that we've been focused on haven't required it. But if anyone's interested, we basically rebuilt the concept of
eOriginal, which is a UEDA compliant loan vault, but leveraging blockchain native rails for
identifying who should have access to what information.
Got it. I have another quick question. I was wondering what is the governance structure of PACT and how the decision-making
members such as PACT Labs, Aptos, and other fintech partners?
I had a hard time hearing that.
I don't know if you guys caught that.
I unfortunately wasn't able to hear it.
Yeah, Rahmat, your connection is really bad.
I am not able to hear.
And I don't think the speakers can either.
So here, while you figure that out, Rahmat,
I want to move to Aisha because we are closing in on the top of the hour.
Hey, guys.
Can you hear me?
Yes.
Yes.
That's good.
Okay.
I want to ask that according to the white paper,
PACT employs smart contracts for dynamic pricing
and have been assessed to be valued in real time.
Can you explain the underlying process
by which Pax smart contracts determine
and update the valuation of real world assets?
Yeah, this is actually a fantastic question
and one that's becoming more and more top of mind
as we're exploring potential integrations
with other DeFi protocols.
A common example here is like, you know,
Aave's rolling out their Horizon lending markets against RWA assets, Morpho's starting to roll out some stuff. The basic idea being in order
for, back to the Aave example, right? Aave lends against your Bitcoin or Ethereum. They value your
Ethereum by looking at the prices on DEXs. And then they take like the volume weighted average
price across the DEXs to kind of smooth out the volatility. And then that's how they value your asset.
With RWAs, it's a little bit more just qualitative, I guess, for lack of better words.
You know, typically you will have a valuation company that comes in and strikes a net asset
value on a certain cadence.
And what we've actually seen, so I don't know if
anyone's familiar with Aave's recent Horizon development, but I was reading through their
docs the other day and they recognize this issue that they're basically relying on issuers to
self-report the value of these assets. And they're like, this is clearly a risk within the system.
And so what Aave did to protect against it is just set min and max bounds on what that nav price could be, which seems to be very much like an afterthought.
And long story short, there is no perfect answer for how we value these relatively illiquid assets.
But one solution that we came up with is taking a more formulaic or quantitative
approach to asset valuation by basically predefining formulas that anyone can see.
And this gets back to the conversation about the debt facility layer of our system. Our system has
a bunch of complex rules where you can say, for example, if a loan becomes more than seven days past due,
we're going to discount the value of it by 20%. If it becomes 30 days past due, we're going to
discount the value of it by 50%, so on and so forth. You could have other rules where it's like,
if it's a first time borrower, based on historical loss rates, you know, the probability of default
is this. So we're going to instantly discount this loan
below par value. But for a third time borrower, you know, they've we have a good track record on
them. The probability of repayment is quite high. And so we're actually going to mark that up
above the face value of the loan. And so in short, to answer your question, we've devised
a formulaic approach that allows us to value a corpus of millions of loans at a time in real time.
But again, the key difference there being that we're using formulas that analyzes loan level
criteria across all of the individual assets and sums that to get a credit limit effectively
compared to other RWA projects, which primarily for the most part, solely
rely on those net asset value strikes done on a periodic basis.
I will note that we also get those net asset value strikes on a periodic basis, but we
fill in the gaps in the meantime with our formulaic approach.
I understood.
I understood.
I also want to understand what support mechanisms such as educational tools or customer support.
We got Ayesha rug in this time.
Can you hear me?
Yep. Try it again.
What support mechanisms such as educational tools or customer support do you or your lending partner provide to help underbanked borrowers navigate the loan application and repayment process?
Yeah.
Yes.
Go for it, Sam.
Yeah.
So when we partner with a lender in…
with a lender in yeah i don't know if you guys caught that i i don't know if the space is having
Yeah, I don't know if you guys caught that.
issues because i'm seeing the connection notification the connection error notification
on the top of my screen um i was able to hear the question i can't hear xander any longer either
you can't hear me but hey we all we made it through almost an hour without any spaces bugs
so that's that's better than i can say for 99% of spaces over the last year.
I cannot hear Xander anymore.
I don't know if I can even hear Eric.
And we had the Pact account dropdown as well.
We just got back on.
If you guys can hear each other, go for it.
I just, give me a thumbs up if you can hear each other
and then I'll just sit here until you're finished.
Awesome, awesome.
Cool. Xander, do you wanna take that question?
Yes.
So thank you for the question.
When, it's very astute that these are,
people are sort of onboarding into this for the first time.
By working with our partners who have local expertise,
not only language language but cultural, and have worked with
thousands, in some cases, tens of millions of borrowers over decades. You know, we leverage
our partners' expertise in communicating, you know, information about how the loans work and how to get the loans. We, here at PACT, work with those
people to add a layer explaining how the cryptographic wallet works or if they even need to
know or how the stablecoins work if they need to know. And so we'll add that to it. But the real
cultural work of bringing people on board is handled by the local partners we work with and that's partly how
we can get to scale so quickly how we can bring 1.8 billion on chain already is by leveraging
that local knowledge and that expertise i'm not sure if our host can hear us so i'm not sure if our host can hear us, so I'm not sure if our host will be able to ask the
next person to speak.
I think we may have time for one last quick question.
Venice, if you want to unmute and go for it.
Yeah, I can hear you guys.
Thank you so much for allowing me.
I think Noah is having some issues.
Okay, I'll just move to my question.
I noticed that you guys stated PII will be encrypted off-chain with only hashes stored on-chain.
I was thinking that if you guys can tell me who will date that the off-chain data is correct before it's hashed.
I mean, isn't there a massive risk of garbage in, garbage out
where the chain cannot detect fraud in underlying borrower identities?
Yeah, it's a good question. And I would say we're largely
focused on ensuring that the financial data
reported is accurate.
You know, fraud prevention at the identity layer is at this stage out of scope.
But what's top of mind for people
within the finance world is,
you said that this loan got issued.
Does this loan actually even exist?
Can you point me to a line item in your bank account
that shows this loan being dispersed to this customer?
By doing it on pact with stable coins, people can validate that a loan is real, that it
was issued, and the historical performance of that loan without having to go through
any intermediaries or trust an off-chain data source.
The PII, the only reason that we even support custody, off-chain custody of the PII, is really for those specific types of transactions, like I mentioned, to where the buyer may need to take custody of that data and forward it to a backup servicer.
It is really just to support that sort of use case.
It doesn't necessarily have a direct use case within our protocol, though, at this stage.
So I hope that helps answer your question.
But I would just note that, you know,
we work with regulated fintechs in each of these markets,
again, issuing billions of dollars a year.
And we recognize that as a problem,
and we would much rather delegate that task to those experts versus trying to take on all of these potential problems at this stage of the company and the project.
I'd say one last thing as I see we're on the hour.
Thanks all for staying.
And thank you for your question.
You know, we've got a lot more coming in the last year.
We've, you know, we've achieved all this in the last year of going to market. We intend to
do a lot more. We're finding more and more ways for the community, all of you, to get involved.
At some point, we will have a TGE. We are going to find more ways for the community like you to financially get involved in the loans.
We, in the lending that we're doing, we're bringing on new partners all the time and new geographies. We're bringing more and more of traditional finance on chain, traditional credit
markets. And so we posted a bunch of links in the comment section where you
can subscribe, follow up. We'll be posting more and more about what we're building there. Please
click through and just follow. You're going to have a great time with us. We think we're really
excited about the work we're doing. And also your questions have been great and really get to the
core of some of what we're doing. So, you know, follow us, reach out to us individually, directly,
if you wanna talk to us about it.
We're very excited about what we're building
and look forward to connecting with all of you more.
Hey guys, it is .
Just wanted to say this was,
for me, the coolest AMA that we've done
in terms of projects,
we do AMAs, interviews, other stuff,
but in terms of just strictly a protocol that's being built,
this is, and I don't say that lightly,
you can ask anyone in the audience in my community.
A lot of what we've had up here
over the last two years is copy paste and it almost feels like innovation
has not stopped but really slowed down and if you go to other crypto spaces and you talk to people
the general consensus is that these conversations you're getting quite repetitive and people are
and that's why we launched an ai show on so that we have something different to talk about on
tuesdays but i just want to say that this has been really refreshing and i think that this is what
the real use case for blockchain technology is or one one of them. And I wouldn't be surprised to see
these solutions pop up over time.
So hats off to you all, well done,
and we will be doing more coverage on PACT
in the near future, so keep an eye out.
As they mentioned, please follow the accounts up here.
Please follow the MOPI account.
Remember that everything you hear on this broadcast
is meant for educational,
this is only nothing, It's financial advice.
So be safe out there, and we will see you all on the next one soon.
Take care.
