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Tuesday | TezDay w Kevin Mehrabi!
Recorded: Aug. 26, 2025 Duration: 1:08:57Space Recording
Full Transcription
All right. Welcome back to Tuesday Tez Day, episode 114. I'm Blangs, here with Kryptonio.
Each week, we bring the Tezos community together to cover what's happening, what's next, and
the people driving it forward.
Tonight, we've got Kevin Morabi joining us.
Kevin is the founder of StableTech, the team behind USDTZ,
and one of the earliest stablecoin projects on Tezos.
We'll be talking about the future of USDTZ,
what it means to move stablecoins onto L2, and also get into the Genius Act and what it could mean for builders in the US stablecoin space.
Before we get into the interview, let's take a look at some of the latest headlines from
around Tezos.
Is Tezos heading into another PFP art revival?
Is Tezos heading into another PFP art revival?
That's the question at the heart of this new piece from Yoshi
tracing the cultural history of Tezos PFPs
like Tezards and Autes
and exploring why they matter beyond the hype.
The article looks at how profile picture art has shaped past cycles,
brought new collectors into the space, and fueled a lot more than just floor talk.
With the Mythfits launching soon and old projects showing signs of life,
this might be the early flicker of something bigger.
Read the full story at news.tezoscommons.org. The July Tezos Community
Rewards results are live. Every month, up to 5,000 Tez is distributed to recognize standout
contributors across categories like development, community support, education, and more.
If you've been active in July or know someone who has,
it's worth checking the list.
Nominations for August are now open,
tag a post with hashtag TezosCRP,
or head to tezoscomments.org slash rewards to make sure the right people get noticed.
If you want to stay on top of the Tezos News Cycle
without chasing updates all week,
the Baking Sheet has you covered.
It's a weekly email with the biggest project news
and community updates all in one place.
No noise, just the highlights that matter.
You can find it at bakingsheet.tezoscommons.org
Quick reminder about the Tezos Community Rewards Program
and how to make sure your nominations count.
There are two ways to nominate. First, head to
tezoscommons.org slash rewards and fill out the short form.
Second, nominate right on social media.
Always use hashtag Tezos CRP.
That's the only tag we track.
If you use just hashtag CRP, it goes somewhere completely different,
and usually it doesn't count.
If you're tagging someone's post, that's enough,
since the post itself shows what they did that month. But if you're making your own post, like a
list of names, you need to add a quick note about what each person did. That way the nomination is
clear and people get recognized for the right reasons. So again, use the form on the website or use hashtag Tezos CRP with a category
and a reason. That's how we can make sure to highlight real contributions. All right, let's
bring in our guest, Kevin. Thanks for joining us. StableTech has been at the center of tezos stable coin development since the early days
and now you're looking ahead to usdtz's future on l2 so let's start there how are you my buddy
good how are you super fantastic thank you for having me oh it's a pleasure. Finally got you up here for the right reasons. Yep, yep.
It's a very...
It's a time when I think
a lot of the stuff that we did over the last five years
and the choices that I made in how to go about this,
it was always with the idea of
okay, but this only works if
and when the US decides to invite stablecoins to become part of the party, legally regulated.
And the calculus was that that will ultimately be a thing. the fears would be seen as like not something that they could be uh like
they shouldn't be applying that as a blanket um you know judgment of all crypto but that no u.s
stable coins are good they're good for the u.s they're good for the dollar standard they're good
for everything um so a lot of what we did and um and i think most of this, I mean, you mentioned the L2, like that's part of it,
the L2 journey. But I think the big thing in the room is what just happened just a few weeks ago,
an event where when it was signed into law, Arthur Breitman himself, co-founder of Dezos,
was there at the signing because it's so momentous for the entire ecosystem and really all of
blockchain is that the genius act was signed into law and that is basically the first framework that
says okay u.s stable coins uh can be are a legal thing we want to actually encourage that
and here's the guidance on how to do it.
Now, it's the beginning.
It's a first step.
Obviously, I mean, we don't want, like, so much regulation.
But, I mean, obviously, we also know it's not going to be the last thing
that comes up regarding stablecoins.
So, Kevin, now that this act has been signed into law,
what do you see as the immediate next steps for stablecoin builders?
And where does this change things most clearly for you and StableTech?
Well, so this is, and let's be specific, this is for certain kinds of stablecoins.
But we are talking about the majority of stablecoins out there.
I mean, the majority of the money that's out there in stablecoins.
So this is for U.S. dollar-backed stablecoins that are representing their token one-to-one.
So not algorithmic coins, not collateralized debt positions.
So things like DAI or Calibri or UVES, that's not what this affects. In fact, I think part of the concern
that regulators rightly were worried about is that if you outlaw stablecoins, as it effectively
had been for many years, then those kinds of things would rise up. And then you just,
those are things you can't even regulate. Like they just live forever on chain. Um, and I even considered going down that route of like total censorship resistance,
but, um, and I published this in the article, like why I realized that was not like, basically
there's always some kind of a trade-off and you can't accomplish all the things you want to
accomplish if you do it that way. So really the best, most practical way to go about things is to have a reserve back stable
and then to try and work through those parameters to make it as decentralized as possible.
So for stable tech, to your question, I mean, there's always been three considerations.
One, have something that really absolutely serves the Tezos community as best as possible.
Financial resources that work the best for users.
And then the other concern is, of course, the people who have support and build with you.
And that includes backers and builders and partners through all this time,
make sure that they're all happy and satisfied and can do the things that they need to do.
And then also there's the state and that regulatory guidance.
So it balances ethos of Tezos and of what we want, of decentralization, with the practical
concerns of running an entity, which now I can freely say before I would have to dance
around that and be like, well, no, I mean, it's a
technology that exists in Neverland and, you know, we're
not a thing, even though we are. So, and then also there's, of
course, the government and what they do. So it's in terms of
like the structure, it's, we are going to have to do a couple
things different. But the great, the best part of this is it validates all the decisions we've been making through now.
So for one thing, even though it was tempting to not do that, it was very tempting to lend collateral reserves, especially when there were millions of dollars. That could have done a lot to, I mean, if nothing else, just to sustain. So we wouldn't have to necessarily use investor dollars to bootstrap.
We could just do that, let alone profit or some kind of yield mechanism. We didn't do any of that.
And that's good because that's not legal by the Genius Act. And so it you'll see, we did that even before you told us to.
It's about having monthly audits.
And that was something we did thanks to Tezos Foundation grant.
That was the one grant we did have with Tezos Foundation back ran from 2021 through 2023.
And it was a monthly audit.
And at that time, that was a lot. I mean,
even like USDC and Tether, they weren't doing, definitely not Tether. It was like quarterly for
those guys or just whenever people really complained, but we were doing it monthly.
Now it's required to do monthly. And so there's been that. And then making sure that it's one-to-one
backed, you know, like having a fully solid backed reserve.
But now what we can do, which lets us have some breathing room in that regard, is we can put collateral in treasury securities.
So that means like T-bills.
So the Genius Act says, okay, you can have the collateral money in cash.
You can put that in a bank and then do stuff with that,
just like all cash,
or you can have it put into T-bills and short-term T-bills.
So 30-day, 90-day kind of thing.
But with those returns, we can pay off operations,
but then the surplus from that, we can do stuff with.
We can donate that to say an on-chain fund that's
maybe controlled by a DAO. And then that can do a lot of different decentralized activities that's
supportive of not just StableTez or DeFi, those things too, but also Tezos at large.
So things like even donating to the blockchain ecosystem DAO, which is something I'd encourage
a lot of entities who can to do that, because that's the long term future of the ecosystem.
And ultimately, it helps the individualized entities as well.
So, you know, and grant programs, direct grant programs, we could have a permanent art collection.
There are all kinds of ideas, but, you know, it finally lets us have that valve of return coming in so that we can do stuff,
and it's not just doing the stuff at cost to demonstrate a concept without even looking
towards scale. Now we can scale and we can get the return to do stuff. So yeah.
Will StableTech need to adjust its roadmap to stay aligned with the new framework at all?
tech need to adjust its roadmap to stay aligned with the new framework at all uh in good ways so
for one thing we can so there would be like we will need to create uh new entities i mean we
could add on to the existing ones but i think it's cleaner to just make something holy for the new
laws and the entities that they would call for so we'll have an issuance entity and that would be what,
like that's what's in charge of doing whatever kind of enrollment,
minting, redemption, KYC, that would be registered with FinCEN.
I mean, we already are registered with FinCEN,
but we'll have a new entity that just does this.
And it would bring the collateral into T-bills
and be responsible for taking it collateral into T-bills and be responsible
for taking it out of T-bills.
It's mostly overhead.
It's a very unsexy kind of thing.
But most of the issue with, and this is something I had to stress really early on when we were
the first USD stablecoin to launch on Tezos, and actually one of the first tokens, period,
to launch on Tezos and actually one of the first tokens period to launch on Tezos.
So early that not even like wallets would display and explorers wouldn't even display
tokens because it was that early.
But it like the, the challenge is like, why can't you just make a token contract?
Why can't you just do it?
It's like the contract is the easiest part of the whole thing.
It's everything else, the, all of the overhead and making sure you're compliant and all that. It's something that, yeah, it's a lot of work. It's very time demanding.
You're always having to learn about the laws, make sure that you're staying compliant, staying
on your toes with that. And then we'd probably have a different entity which would be managing those returns that come from the Treasury bills,
and also be responsible for moving that on-chain,
where ultimately more and more functions should be run.
Once we establish the DAO especially,
we should be revolving those functions over from
whatever would be done off-chain to on-chain and decentralized
as much as possible. I think that's definitely the route that's in line with Tesla's ethos,
but it's also just the better route for everybody and everything.
You've got me over here just nodding my head like yeah he's right on yeah so do you see this
as a turning point for stable coins in the u.s or more of a first step that still leaves questions
oh definitely i think it's actually better for like this is not necessarily i mean the only
people who i think might be not so happy with that would actually be Circle and Tether. Because, I mean, they were able to do more things before this came to be.
I'm going by whatever kind of, like they were operating in the US, but, and it's not, there was no specific path for stable coins, but they were operating in a way that like, okay, we'll get all the money transmitter licenses.
We'll get everything that anyone would say you would have to require to do this.
They had the money to go and do that.
But likewise, then they were able to kind of operate in a way with their collateral in a manner of knowing that there wasn't anything saying they couldn't do certain types of collateral lending activities.
But now there is.
So it's actually better for entities like ours.
It's better for startup stablecoins. So, yeah, this is going to be a turning point in that regard. And I think if there was anything to fear by regulators that I was like about reserve backed stablecoins, the only thing they should have been fearing is a monopoly or duopoly.
Nobody wants that. You don't want your dollar, country's dollar standard to be effectively controlled by a couple or massive groups or a cartel or anything like that.
No, you want it to be so diversified, so decentralized that, you know, like that would never even enter like your mindset of concern.
And that could be like they might lose market share, but I think it'll be better for users.
I think it's not,
it'll be less complicated.
You can use all,
any kind of stable coin you want.
But it'll be just as easy to spend
or save or move into other areas.
I think the surface level use for users
will be flattening.
And that's great for builders
where you don't have to onboard for builders where you don't have to
onboard every issue or you don't have to onboard.
It'll be more like take a square,
I guess called BlockNow or Clover or those POS systems.
I don't know. I think they've been trying to go through
the stablecoin. It's not like you have to
onboard them to get them to use your stablecoin.
It'll be more like, I think we'll get to the area where like these kinds of providers will add a line of code
and then suddenly an index of like a thousand stablecoins will now be usable for their thing
for financial like the list of cards on a gas pump like for all those debit and credit cards
yeah yeah and um yeah they're the ones who would probably
have to be worried because that you know and hats off to visa for really at least trying to um to
try to get into the stable coin game or try to accommodate stable coins early starting a couple
years ago um you know when and the first sign of uh something great was in i think beginning of 2022
when the comptroller of the currencies office said okay banks can now start to consider like
you can start using stable coins as settlements so that's when like two weeks later you saw some
announcement between visa and usdc that they were gonna um pursue stablecoin. And I remember, this is Tali,
I remember someone who was trying to argue with me
about how, no, Ethereum has won everything.
I'm like, why do you think that?
It's like, well, did you see that Visa USDC?
And at that time, there was,
USDC was only on Ethereum L1 at that time.
It's like, well, okay.
So Visa has chosen Ethereum by virtue1 at that time. It's like, well, like, okay, so Visa has chosen Ethereum by virtue
of choosing USDC. Like, yeah, like there, he, it wasn't really seeing this idea of like, no,
that those things are so like, you got to change like what, how things are right now versus where
all these things are going. And then they just added a whole bunch of other chains. And it's
like, oh, well that tie has nothing to do with each other. It's US Circle doesn't necessarily care about
Ethereum. They care about being Circle and being an entity. And Visa doesn't care either.
You know, they're trying to, you know, diversify what they're on. But I think for financial
institutions, especially like there will there in terms of of stable asset funds and indexes and all that kind of junk that they look at,
I think the kinds of instruments that I will start to see formed are indexes of stablecoins.
And you'll see baskets of different stablecoins brought together precisely because they have maybe different origin points.
And that diversifies risk,
so it's not concentrated all in one thing
or in one settlement layer even.
And that bodes well for Etherlink, actually.
It's like, well, you know,
because all the other EVM layer twos,
they're resolving to Ethereum layer one.
Well, that's not really diversification of risk
because they're all resolving to the same L1.
But it's like, no, this one resolves to a different L1.
That is diversification of risk.
That is much better.
More should look into stuff like that.
So I think that's a highlight point
that might become stronger over time
for those EVM fans out there.
But yeah, so it's a whole new world coming and we're just at the infancy of it this is the first thing that's invited us to the table finally
finally not kevin you've been working on tezos stable coins for years yeah through different
market cycles and shifting regulatory landscapes what's been
the toughest part of building in that kind of environment um the uncertainty i'd say the
uncertainty and because you don't know when the light will come at the end of the tunnel
or when the end of the tunnel will be and like i didn't think it would go necessarily this fast um i didn't even
know like trump said i mean yeah politics aside um you know i for the last three elections i did
not vote for trump but i will give credit where credit is due he came good on this promise and
i i cannot complain about the crypto um you crypto actions and it came very fast.
It's what we needed.
It put aside those that were just dragging it along for no reason.
We were losing ground, I think,
to other countries that had the freedom to innovate on stables.
I have an entity in Panama for a US dollar stablecoin.
That's what we had to do,
because that's where you could do a true non-shareholder foundation without the exorbitant costs of doing it in Switzerland.
And then that has a subsidiary in british
virgin islands which coordinates with entities we have here in the u.s like that's that was kind of
the model when we started all this like the regulatory model that was preferred the panama
papers i mean that was yeah that when my lawyer who was you know top lawyer in stable, in DeFi and crypto at the time and everything, still, still one of
the top, uh, from one of the top, uh, like big law firms that no, no, no student Panama, like Panama.
My first thought is Panama papers. Like, what are you talking about? It's like, no, no, no. We have
a lot of entities that do it. It works quite well. And, and, and you put it on perspective, like,
yeah, after the
panama papers panama really had to kind of recover which is why they uh worked really you know like
to compete in in getting businesses right uh so that's one of the reasons why they lent themselves
to this kind of an entity um which and not many jurisdictions allow you to do a true non-shareholder foundation, which is the closest thing to a DAO framework for what's off-chain, or at least before Wyoming said, okay, now we can take DAOs.
But even that, I think there's, you know, like they all, most of them, they want you to have at least one person say, okay, but if shit hits the fan, who do we lock up?
Or who gets the blame? Or what
that kind of thing where it's like, no, no, no, there has to be a way where like an entity can
be created for public good. And it's not like someone can hold the keys and ultimately do
something which I mean, that's the problem like that it wouldn't be you want to avoid nefarious
activity, you want to avoid concentration and control of a single individual um like you want it to really have that that
public uh composition and so that was the way we had to go like all right panama it is and then i
played that van halen song and then that's how we incorporated but uh sounds like a great way to get started now have you ever had
a changer approach as both the tech stack and the policy picture evolved yeah i did at one point
and like we wanted to pursue like an on-chain like an like because there was so much
like time waiting it's like well let's also maybe split it and have like some kind of a cash
reserve so we can like work with off chain entities.
We can get the kind of regulatory partnerships we might want to get.
Um, and which is something I didn't really want to do, but it seemed to
be the name of the game.
And that's what we started building for prime trust as a custodian, which had a
license under Nevada law to do it.
They were actually a fine entity,
but based on stuff like their previous regime had done,
they went belly up and they were under
a suspended license or whatever.
Thankfully, we did not enter any collateral there.
uh uh like any collateral there um and uh yeah yeah uh when that happened though some entities
did really suffer like uh stably remember those guys they yeah their collateral was suspended
effectively for a very long time and their peg suffered because of it and um yeah that that's
what happens so it's like after after I was like, all right,
no more of this. Either this has to be formal, federal, and like none of these kind of ad hoc
ways of doing, right? This is exactly why we didn't want to do it.
Didn't want to fly by your shorts.
So yeah, we've been able to stay good. We have years of monthly audit reports. And the other
great thing is because, I mean, there was some pushback at the time when we made this kind of reserve.
And to make it like an assortment of different U.S. domiciled stablecoins like USDC, GUSD, USDP.
And they were based on Ethereum, which at the time was the only place that was having stablecoins.
And some people were like, well, that's kind of blasphemous to Tezos.
How could you have the collateral there?
It's like, well, because that's where there's the stablecoins.
Now we've changed it completely, haven't we, on our thoughts on that and how we integrate.
But it was the practical thing to do at the time. haven't we on our thoughts on that and like how we integrate, but the,
but like it was the practical thing to do at the time.
It was realistic.
And it's like, well,
I didn't feel like it was the best.
I had that same feeling, but it's like,
but what are you going to do?
It was a different time.
Yeah.
I mean,
the whole space,
like what was accepted,
what was not accepted was totally different back then.
Totally.
I have a question for you, Kevin.
No Kryptonio questions.
Okay, go ahead.
By the way, 25 minutes in, and now I'm saying hi.
Hi, Kevin.
Hi, Kryptonio.
Okay, so while you were answering Blanc's questions,
I tried to go through the article you linked briefly.
And you have a side note there, you know, touching about why USDTZ when USDT and USDC exist.
Yeah.
So I don't want you to go exactly over that note, but I would like to ask you, like, how do you grow with such big competitors?
When you're a founder of a stablecoin company, how do you expect it to grow?
And what's the strategy you have in mind?
I mean, it really depends on what the market is and what the strategy is.
So for one thing, yeah, and people would ask that.
Or the question I get a lot, which I think people ask this question, but they really mean a different question.
They say, what's the utility of USDTES?
And it's like the answer is that it's the same utility as any stablecoin.
What they mean to ask is, but I can go to Coinbase and easily buy and sell the USDC.
How can I do that here? It's the same utility. You can spend it in places and you can mostly
trade it on chain. And we've been able to demonstrate all of that. So why use this when
you can use the other? And that comes down to the part of the design for USDTES,
which I talked about very early on in the origins. There's three different parts. One is to make
sure it's trusted, another one that's scalable and all that. But the other is the Tezos alignment
part. And how can we be something that's Tezos aligned? The goal needs to be to be
the paragon of stable coins on Tezos. And that comes in a couple different ways. For one thing,
when it comes to the technologies, we can employ technologies at a faster pace. We can innovate
them faster. We can not only that, but contribute in a feedback loop to development and token standards development and core development in a way that's best suited for the Tezos ecosystem and economy.
So some things on that front. uh mickelson tickets as the base store value that's on chain because that would enable a lot
of dynamic activities that we can do you know cross-chain and um and also just in terms of
having okay i'm gonna pause you right there you said a lot of technical jargon that a lot of us
may not identify with yeah you'll have to google mickelson tickets just can you can you give us like a five word summary in general what what
you mean by that so the the quick answer is this thing in every part of it is like the intention
is to benefit tezos and tezonians better than usdc and usdt because this is where we're focused
and we'll do that in terms of programs of like returns on the yield,
the ones, the stuff that I mentioned,
we'll do that in terms of even rewards programs that we can institute,
not direct, obviously, from, because that's against the Genius Act,
but like what we can do, like what the Dow could issue and all of that,
so that, oh, I'm actually benefiting more financially than I would with this other thing, which maybe spreads it across all the chains.
And it's in terms of like how we can use the technology.
We want it to be the like the reference point, not that like, oh, USDC and USDT would never, you know, issue on, issue on, they would never employ this new technology
that Tesla's protocol added
to make their stable coins better,
or they'll probably just take longer.
But we want them to do that by doing it first
and showing them how good it is
and how it's better for them.
I mean, we already kind of did that.
I mean, the first step in doing that
was actually just minting a stable coin on Tesla's
because we were the first to do it, and then they did it. So that was actually just minting a stablecoin on Tezos because we were the first to do it.
And then they did it.
So that was very validating when USDC announced it, that they were going to, even though they
didn't, when Tether came on.
Because it's like, people are like, oh, are you worried?
It's like, this is the most validating thing to ever happen.
If they did it, it's like, well, maybe this was a big mistake.
Why are they avoiding this?
You know?
Kevin.
By the way, Kevin, sorry, just follow by the way are you um are you still focused on the other stables because you know
early on you had used it is you had the f easy and they were huge they were like maybe at that
point maybe they were the only tokens on Tezos, right? Back in 2020.
I was wondering, are you still putting focus on those as well,
or just USDTES? Good question.
I was thinking about in the article
to include stuff about that,
but it's like, no, I don't want to derail focus.
Because I think, because this is
more of the flagship, you know?
And also, it's much easier to do
the stuff you want to do with ETHT uh btc tes because they're not like a fiat backed thing um or is that a
required thing but yeah it's the same uh it's the same pattern of what we'd be doing um and but it
could be a lot more programmatic uh like obviously there's not going to be a requirement of, well, you've got to take that ETH,
and you've got to put it in treasury securities that take ETH. No, that doesn't make any sense.
It doesn't exist. But we can do that, the same kind of pattern with on-chain mechanisms.
Yeah, USDC is the hardest one to do. But the reason why we didn't add,
because there are other things we want to do.
There's GoldTES, there's Eurotez.
If you look at the StableTES.com site,
there are several other specific stablecoin,
fiat stablecoins that I want to get to.
And they're not random.
They're very targeted because those are the top those stable coins comprise 85 of forex
trading alone and uh like i mean those fiat assets so we want to get to platforms where people can
trade these assets i mean that's that's the biggest market that's the most traded market
there's like six trillion dollars of uh per day of uh fiat currency trading, a forex trading. Is that all?
Oh, sorry to disappoint you. That's all.
We'll get there.
Well, Kevin, normally I open up questions at the end of talks, but I know that we can
totally just end up spinning off on a tangent and losing where we're at.
And I believe Fendel has a question for you.
Fendel, welcome to the stage.
Fendel, Fendel.
Oh, maybe he just wanted to come hang out that's fine too i'm sure he'll get to
his question but yes keep going keep going so uh so yeah there's all like to me like everything
always starts with the stable coin because to do anything in defy you need it you need stable coins
you need that counter asset to the cryptocurrency uh Then you need an exchange, because that's how things swap each other. And then you need lending. And lending is where everything starts and ends. I mean, that is the most important part before you get to the next things, which are derivatives.
like you don't have to know too much about them just know that in trad fi it's the vast majority
of trad fi uh in traditional finance like it is the biggest stuff by far it is the that's where
things get crazy that's the standing behind the blackjack scene and the big short yeah yeah i mean
that i mean that one was uh they were talking about a specific kind but yeah that's that's
kind of how it works i mean like in general i'm not talking about it multiplies many many times over but they're based
on like because that blackjack table like what was going on there that was the lending market
um and and to let you know just how important uh the lending markets are so the equivalent to that
in traditional finance is the bonds market.
And do you remember that time a couple months ago when Trump started the whole
tariff thing and everyone was like pushing against him? He's like, no, no, I don't care.
They tweet out like, don't be weak, be strong. And nothing was getting to him. He wasn't going
to budge until the bond market started to shake. And then he pissed his pants and was like, okay,
no, nevermind. We're going to, rightly so, by the way, like it's smart to fear this. You don't want it to,
so he did the right thing. He's like, okay, we can, we'll give an extension here and we'll figure
this out. Because if the bond market starts to get shaky, then like the whole house starts to
fall down. Like it'll just destroy the entire financial global ecosystem, which is why
I've been stressing for the longest time, the most important thing we need to do in DeFi right now
is to scale up the USD coins that are in the lending markets on the layer one. That is the
single most targeted thing we can do. There's other stuff that has to come, but those things
are the effect of doing it.
The causal factor,
the independent factor we need to target,
is scaling up the USD lending
pools on the L1.
So, UPANA and Tezfin.
Those are the keys.
We got to see those things.
If they get large enough, by the way,
given the way these things are structured,
it becomes attractive enough for people to get in
for the scale and scope that they desire to start supplying it,
and for people to borrow,
which brings the naturally incentivizing rates up,
so on and so forth.
So it doesn't necessarily require a
continuous scaling or constantly feeding the beast. No, you just need a seed amount of US dollars,
let's say a million dollars or so in those. And then that'll make it like the rates,
like it'll be of such depth and of such low rates that it will attract a lot of borrowing, which
will bring up the supply rates, the natural reward for people to keep adding supply of
U.S. dollar, which will bring the rates down once they do that, which then makes borrowing
more attractive again.
And then people borrow, and then the rates go up again, which makes it attractive to
keep supplying.
On and on it goes.
And then you can have this compounding growth.
The problem of what we've had, like you notice the price of Tez would go down or the relevance of the price went down as we started to grow in commerce.
Excuse me.
As we started to grow the art markets, which is the opposite of what you'd think.
It's like, why was the price higher when we didn't have any activity really at all? But now we have all this organic
activity of people pursuing not something that they expect a return on, but just something that
they like, which is the best thing you could ever have in a commerce market, something they like to
just have in their collection because they like it. And they keep buying this stuff. That's the
best thing. But why isn't that translating into growth of the price? The reason is because we don't have credit markets. We don't have those skilled lending markets. If we did, then there would be a lot of incentive people would see, not even necessarily artists or collectors per se, but just like there would be a reason to not take the TES that you've collected for whatever reason and cashing it out.
You would want to not miss out on that price rise, but you'd also want some US dollar.
So you'd put it in a lending market, you take out US dollar, the value of your overall position, your collateral starts to grow and continues to grow
as the price of Tez goes up,
and you still get to live your life with US dollar spending.
I mean, that's the way it works
on other ecosystems that do have this.
We just haven't had it.
We just haven't had that missing component,
that keystone component.
We haven't had it on Tezos.
So I've been clamoring for it. If we get that that you will see things start to change very very quickly now are you rethinking
tesfin as an l2 native protocol or do you see it keeping a foothold on the l1 i mean it you don't
need i mean so debt so lending platforms create the other kind of primitive. Primitives should be on the L1, or start on the L1 with provenance. You can bridge them over, but they get their actually recommended mint on the L1 and then bridge over to the L2
because you have these benefits. And there are many benefits to doing that. But the other kind
of primitive besides the main token is the interest bearing token. So the token that's
produced by supplying to a lending platform. And so they have these naming conventions like on upana you know you
add tes it's called like yxtz or if you add tether it's y usdt on tesfin we have f so it's fxtz f
usdt stuff like that and those are interest bearing tokens so they're not tokens that have
like indivisible value within themselves i mean within themselves, it grows with interest over time
based on the dynamics of the market,
which they're a part of.
And those are composable.
That's the real Lego brick you need to build other stuff.
So you can bridge those over and you can do stuff.
You can make all kinds of derivative platforms on that basis.
So you can do it on the L2,
but the only things where it would really be an advantage to do it also on the L2,
would be if you're employing those stables for something that requires rapid kind of a use, like creation and destruction
like the creation and destruction of them
for like flash loans
or something like that. So that
would be something to explore. Flash
loans, however, are not easy.
Really the only ones who do it
right now are Aave and they have an
exploit like every few months.
It's a crazy thing.
It's very, very hard. It's a target for
people trying to exploit. Compound does not do flash loans. So we can get there. It's a lot.
By the way, everything we do, it would be a gajillion times easier on a technical level to do
it, let's say on Etherlink, particularly because you could just fork stuff from this massive library of EVM.
But also, I mean, really what's needed
is to build a native economic identity on Tezos first,
on Tezos, the core of Tezos, Tezos L1,
and by extension, Tezlink.
I believe the best applications are going to be on Tezlink,
and that will be the heart of Tezos DeFi, not Etherlink.
Etherlink will be an export layer.
That's what it will be for.
It just happens to be that that came out first.
It'll also be, you know, we can figure out how to attract outside liquidity.
And I think that will come to be once we do have something very natively attractive.
Once we have something to export, then people from the outside will be like, hey, I want a piece
of that.
That's really valuable.
And then they'd want to come in, and that's how we step them into Tezos.
Otherwise, if we do it from an L2 first approach, and this is why I didn't do it and why I went
to the DCA accelerator as an organizer, not as a participant in the cohort, is because
it becomes something that's in a vacuum
that's completely divorced from where the Tesla's commerce sector actually lives. And you need to
have this recursive compounding loop. You need to have this interaction between commerce, like the
fine art market, an object, and the credit market. You need to have that, you need to streamline that, building that out as closely as possible, not on a whole different thing. It doesn't make any sense. And now I think we're
starting to see movement in the proper direction. I did make some suggestions internally, and I
think that's, from what I've been told, that's what's going to happen, which
is not one thing for Tether, right? Tether, you know, like they minted on the L1 and then
like nothing happened really. It was $140 million authorized, but not issued. $40 million was
issued. And then of that, like less than $10 million was ever actually utilized. Like only a
few million is in TVL.
So the rest of it is sitting there.
And if you're Tether, you're kind of like, okay, maybe this was not a good idea.
And Tether, by the way, on the dozen chains that they've been operating, they axed five
of them in the last two years.
So EOS, Kusama, Algorand, Omni, BCH, they're gone. They're not operating on them.
They've ended support for them. They're taking the redemptions, but it's a no-go. I mean,
that sucks for those ecosystems, right? So we are next on the chopping block if you look at the low
utilization rates compared to the other chains, and I looked at them. So we should try to make sure Tether is utilized.
So one very, very easy way of doing that is to stop bridging Tether from other chains
to get that on Etherlink.
Why are we doing that?
We have all this Tether on the layer one.
We have this bridge.
Bridge it over.
That should be the thing.
And there's, I think, a larger conversation with that, too,
which is a lot of entities that maybe came in.
Sorry, Kevin.
Sorry.
Just to jump in there.
It is a little bit confusing for users.
What I mean is when you're attracting liquidity,
somebody bridges over from Ethereum or Arbitrum
or another chain to Etherlink, and they have USDT on those chains.
Wouldn't it be more complicated, you know, if you tried to get the bridged assets, those USDT
being made from the Tezos L1, you know, like, or you would have to add them an extra strip to go through Tezos cell one and then bridge it to Ethrolink.
Like, I get the point you're trying to make that it would be better to have those USDT
that are native on Tezos cell one bridge to Ethrolink.
But with the way they tried to attract liquidity from other ecosystems, I don't know how that
could work out.
Yeah. So there are, I mean, essentially it's the same process. It's not like they're bringing it
over from the other place. They're having to do some kind of a swap or a bridge.
Yeah, they're wrapped.
And also it allows for new kinds of markets which actually multiply. So there's a market for,
and this is when we get more in the habit of bridging, there will be the markets get theirs, because they're fulfilling arbitrage
that happens when you have
slippage in the dex pools
for that coin.
And then there's people,
they're going to be people
who are like,
they're going directly to
whatever the minting source is
or from Binance
or whatever's facilitating
like the movement of the money
from where it's minted to,
and I think whatever has has like even that 40 million might be able to get utilized pretty quickly that we'd actually have to
you know if we're lucky or if we're doing it if it happens well they'll be able to mint more
of that 140 million that's been issued that authorized but not issued and then there will
be money to be made there so it it actually also creates money-making opportunities at all these different levels, but it provides the
same convenience that they would, probably even more convenient than if they had to source it
from the outside. And likewise, I would say for those entities that maybe they came from the
outside, maybe they're multi-chain,
and then they put their provenance of these assets or they bridge their assets from
outside places to Etherlink. And there were incentives for that. I'd say to fulfill on
the stepping stone to Tezos thesis, you know, especially if we're providing the, you know, the incentive programs for it, it's like, okay,
well, that's great. You got a lot of liquidity out of this. It's been a great relationship.
Hey, can you do this thing? Can you mint on the L1 and bridge it over? I think, of course,
they would do that. Of course, they would. It's like, yeah, you're putting incentives for the
growth of liquidity and doing all this stuff. Yeah, of course we will. That's not a big deal.
So we can get that.
And that's how we can get people in the door.
And likewise, if we can even incentivize people,
and this is when I wrote that good friction,
bad friction article,
we can put the incentives on actually bringing over,
like bridging over from,
like to read in someone's wallet
that they had completed bridging over from like to read in someone's wallet that they had completed bridging over
from the L1. And therefore it is implicit in their etherlink block record that they use the Tezos
bridge. And therefore it is implicit that they were on the L1. So it would show that like, okay,
like these, like if we're attracting people from outside chains we got them to come through the whole tezzo stack you know you got to work for the money because otherwise we're we're greasing
the wheels like way too much because it's like okay we'll meet you where you are and we'll pay
you it's like well what's the point of any of this you know like well i don't know i get what
you're saying i get what you're saying but i But I assume there has to be a balance, you know, in what is too much complexity.
Because after a point, I'm sure that people, even with incentives, they would be like, no, I'm not going through all of that.
Well, that's fine.
They don't have to get the incentive.
That's kind of the point of what we're doing.
I think we get too much.
We're too much like we presume, I think, a lot of these structures, like the structures that we end up having, like, I think there's this over presumption of like, this was all kinds of approaches to the people who maybe went off to execute them.
Because they don't know that this thing is a placeholder.
They think maybe, oh, well, this was a calculated idea.
And that's where we get the inertia of stuff that maybe could change and improve rapidly.
So I've always been a big proponent of set up, what are the actual goals here?
And what are the best ways to achieve them um because i i
you know i do think the strategy implementation strategy had been inverted but now we are i think
getting to a better sense i think um the movement to things like vesting was very good uh you know
i mean like why wouldn't we have that of course we should have you know otherwise it's just you
know spill off um and the movement towards like things like the STXTZ bridging, that's very good. That is a direct support of the staking economy and its direct support of the L1 where we need higher liquidity.
That could be done, I believe, for incentives.
I haven't.
But like, so it would be to take those interest-bearing tokens of the L1 for the ones I said, the USD stablecoins.
The bridged versions of those interest-bearing tokens.
So like say, YUSDT and FUSDT.
And then incentivize those on Etherlink, because that
would grow the very key market we're trying to get.
This is another point where I think people might, it's like, well, what if people don't
want to do with stablecoin because stablecoins don't grow?
That's why they're getting the incentive.
The incentive overrides the friction, so we've got to use it to the benefit otherwise it's like you know
you know like it was i mean i remember um back in the day there was initially a consequence
uh for you know if your baker double baked and you delegated like you wouldn't get
like that like you would be effectively punished for
that. And people were like, that happened to people. And I was like, hey, what the hell?
And then something was changed. And then now people didn't get any penalty. But then that
took away any risk at all for delegating to the point where it was like, wait a minute,
this whole thing is supposed to be proof of stake. What's at stake? I think now we're finally at a point where it's like with staking as an actual role and the movement from delegating to staking, I think we've become more realigned.
instant. It's like, well, what the hell is the point of staking? It's very easy to go down that
road, I think, to make it easier for people. But we forget also why some things need to be
deliberately hard. And that's not bad UX. No. UX is something totally different. This is the actual
steps of why you get money for nothing. That's why you get a value advantage in whatever way,
whether it's something native to the protocol or whether it's an incentive program.
Something has to be done.
And actually, if you look at a lot of the most successful...
You look at Curve, right?
You know how many people complained about the user experience
and just how hideous their initial site was?
They were doing an 8-bit resolution before it was cool and it was
just like people like what the hell is this i'm not moving my money here and like and then the
way just even the whole it was so counterintuitive but it blew up like crazy because it's one of
those things where if you're talking about something that's so sensitive and important
like money people get over that very quickly. And in fact,
they actually start to see it as an advantage. Like, other people can't figure this out,
but I can. That's why I'm going to get rich doing this. And those other people are just going to be
like, I don't understand it. I'm going to put all my money in this. That's actually how it works
for things like that. And Steve Crud, the godfather of ux and everything he's
like not everything requires good ux and he you know think about that jacket you really wanted
to buy from that e-commerce site and it's the only place that sold it and the ux was just like
uh poison and it made you jump through hoops and it didn't make any sense yeah yeah but like it would you went
through it anyway because you wanted the thing and you went through stuff you're like never again
but you know you wanted the thing yeah we always people fly spirit airlines it's the same dude
nobody's flying spirit anymore anyway uh that's a whole nother conversation frontier looks like they look because it was cheap and there's other ones safe anymore um
kevin we are seven minutes before the hour i'm gonna open it up for questions in case anyone
has any but keep on going brother preach on um yeah so anyway uh so the thing is rounding this
out um primitives on the l1 derivatives on the L2, bridge start by,
so the path is the same throughout this whole thing.
It's build out the stable coins on the L1
and the interest bearing tokens on the lending platform,
create that credit to commerce feedback loop,
and then bridge that stuff over to the L2s
where all these high performing derivatives can come to be.
And so Tezfin will...
So yeah, we'll get back to minting more stables.
TezX is...
Right now, it's liquidity baking.
I do want to bring back that atomic swap exchange
that we had before from Ethereum to Tezos.
And you know what?
The thing I was writing this,
I was remembering history and all that.
And it's like there was a time
when everything I did
had some Ethereum component.
Because the first three things we did,
it was USDTES,
which has the Ethereum collateral.
The next thing was ETHTES,
which was wrapped Ethereum.
And then the thing after that was TezX.
Even before we had BTC-TES,
we had the TezX inner chain atomic swap from Ethereum to Tezos.
You'd think like, oh, this is some EVM maxi or whatever.
For me to go from that to being like,
we need to really stand on building out
the Tezos native economy before we start
entertaining all this EVM stuff.
No, I'm not.
We're actually we're bridging over to,
we're testing the bridge contracts right now.
So we'll have USDTES and BF tokens on Ether.
We'll do that. That should be out in a few days.
But in terms of building, it's like.
Wait, wait, wait, wait, wait.
Let me.
Yeah.
You are going to bridge because I don't think I heard that before. It's like, wait, wait, wait, wait, wait, wait. Let me. Yeah, yeah.
You are going to bridge because I don't think I heard that before.
Like, you're going to bridge and you will have the USDTest
and all the other tokens on Etherlink in a few days?
Yeah, that's how it's supposed to be.
Supposed to be.
OK, OK.
I didn't know that was going to happen so soon.
Like, I thought you were still contemplating
Oh, no.
Tesslink, Etherlink, whatever.
No, I mean, it takes time to
make and deploy
those contracts. I mean, the reason why
it's the testing, because you have to wait that two-week period
for the withdrawal for the testnet.
But that's why
otherwise it would have been out by now.
But yeah, so that'll be out there.
And the idea is like well why do
we do the incentives on um etherlink and not on l1 and the response to that is well because the
middleware of these incentive programs are on the l2 it's like well i think for one thing um
you know we do have some incentive program stuff on the l1. Kukai built a model for that.
There's a quests.teslos.com.
There's something there.
Plus, we should encourage it.
I'm sure there's stuff we can do with a lot of it.
That stuff is just ready-made over there.
It's like, well, if that's the case,
but we can use that still to build up liquidity on the L1, all you have to do is bridge it and then reward people, invest people would want to withdraw from there, that they'd want to bridge back outward.
I mean, they obviously will, and they can.
But the more layers of separation you create, the more you can build these sort of intermediary markets in those additional layers of abstraction.
And you can build out new markets in those places.
So, you know, I mean, the most basic thing is to incentivize people just having those tokens there.
But I think a better step even is also to try composability
with those interest bearing tokens on the L2.
Try composability, take the bridge USDTES and XTZ and put that in a market on the L2.
Even with ETHTES. and xtz and put that in a market on the l2 um and even when even with ethos how come
how how come do you do you have to use the the test brief for your tokens i mean couldn't you
just deploy your contracts on etherlink and like you used to do between ethereum and tezos oh so
an actual swap between two things?
Well, for one thing...
Yeah, yeah.
Let's say I have 100 USD Tezos on Tezos
and I want to move them to Etherlink.
You burn, not burn, or burn actually,
on the layer one and you mint them on layer two
with your contracts, you know?
Like you have control over it.
Like Tether does between chains, for example.
Because that interrupts the flow of
provenance to the present and you want to have continuity between those two things um i think
something and you know there are different ways of doing this but once we have like um and i mean
this requires more development on this front but like with mickelson tickets that we can maybe do
a little bit more dynamic stuff using the information that that informs the l2 as opposed to uh the token
bridging and whatnot and that so we can maybe have more direct paths of communication between
the l2s and the l1s but um you know that's that's very early design ideas. But, and also you don't have to, yeah, and also you don't have to create like, I mean, that would require more new liquidity being made.
It could lead to, if there's an error on that front, you know, it might lead to a double spend problem where something isn't collateral back, but another representation of it exists because the other instance of it wasn't burned.
So bridging it over is always the best way to do it.
You know, like, yeah, yeah.
And it creates that semblance of continuity.
It removes a set of risks from what I understand.
Yeah.
Mint L1 bridge to the L2.
That's the way it should be.
And then with justice, I think that's something that's so
early that when I ask, what's going on with what's the plan for that? And the answer I get,
I mean, it's in a good way, is that it's still exploring, which I think is cool.
We're not trying to direct it towards a very specific thing. And I wish that
actually was done with Etherlink as opposed to very directly trying stuff out.
Because I think by now, or maybe we're seeing like, oh, with gaming, I think that's really the best, coolest thing with Etherlink and what it's capable of and what we'll be able to reach out to that we otherwise can't or shouldn't make such a concerted effort towards.
Gaming will be so huge. But for Justice, I mean, my imagination
goes towards these sort of Web2 built platform,
like things like what Stripe is doing,
because they're very heavy into JavaScript
and the integrations we can have with them
that we wouldn't otherwise be able to have
and how we can attract them.
Many other platforms that, like anything you can think of
that's building on, I mean,
I'm thinking of course of fintech, but that like they're building on JavaScript, they
want to do something in blockchain, or maybe they resisted it before, or now it's like
here's an invitation to come in and try stuff out.
I think we'll have really interesting commerce relationships and really interesting fintech
relationships.
But I think that might become the most interesting outcome
of these three canonical layers in ways that we can't even
foresee right now.
But for me, I think when it comes to what we need to build
natively, it is that sovereign identity and that sovereign native structure of Tezos
built in Mickelson, built in our native language from the L1 to Tezlink and seeing it as an
extension of the L1. That's really going to be the heart of it. And Etherlink will be a very wealthy port city for the exports because we're going to be so attractive to that EVM world and then they're going to want in. And it's going to be Etherlink that's going to be that ambassador for us for EVM. And that's going to be very interesting and exciting.
us for EVM. And that's going to be very interesting and exciting. And it doesn't mean one is necessarily
going to be larger than the other. I don't know. You can make arguments actually in both ways.
It has nothing to do with that. It has to do with just how you structure these instruments in a
manner that's so coherent and creates consistent value and credit for the places where it can
recursively compound and expand the commerce layer for all Tezonians, including and especially those
in the art community. And I want to say this because some people say, like, okay, I get the
credit commerce feedback loop thing, but it's just art. It's just fine art. And to that I say, if you look back historically at economies that they didn't have credit in their ecosystems before, in cities, like real-world cities, and they were poor cities in Europe and in South America as well, but they did have one thing that was great,
and that was fine art.
And then once you started to add a credit system,
that's when they started to really get rich.
And it started with art,
but then that diversified into other economic sectors.
And that led to them becoming first-class global economies
that led the world.
And there's something about fine art.
It's not like coincidence.
That's a weird way of saying coincidence.
It's not a coincidence.
There's a specific reason for that.
For one thing, art is something that has insatiable demand.
You keep buying it. and it has intrinsic value.
You want it because you want it in your collection. That's the thing that makes you feel good.
Whatever that is, smart or not, good or bad, maybe it's unique to you. Maybe it's unique to
it's interested to others, but you want it. So you keep buying it and the value is not something where you're
particularly necessarily concerned about resale. You want the art because you want the art.
And it also spans large numbers of people. Anybody can create art. It might not necessarily be good,
but anybody can participate and do it. So it spans large numbers of people. It doesn't require
monoliths. You could say, oh, well, the insatiable demand, you could say
that about Soylent Green. Everybody wanted that. Yeah, but it was one company that made it. That's
not a really diversified economy. With art, like the value is because you're always exploring new
different artists and it's so diversified and it's this large and ever-growing community.
It's the most perfect commerce sector you could ever design for a blockchain economy
that needs a commerce sector for which it can grow and compound with credit.
It's logically the best on presence.
We have this community.
It's endured despite lacking a credit market on Tesla's, which has just even amazed me.
As optimistic as I've been,
it's just like, wow, hats off to the Tesla's art community.
And it's also substantiated by not just how we've seen
like that difference with that and other chains
that have had credit systems,
but by real world economies
since the dawn of modern finance like 300 years ago
and what's come of them.
You know, we're so close.
We are at the last mile of scaling the Tesla's economy.
And I will pin it down on one very specific thing.
Scale up the USD lending pools on Upana and on tesfin do that and that will hit that'll be the trigger of the rube goldberg
device that chain of events and that chain reaction that will lead to everything else
um you don't need to scale the other things people use people are fine just collateralizing
btc xtz whatever so they could borrow the usd um and at every lending platform that's
the case as well like they get very little borrowing of those growth assets people borrow
the usd coins they collateralize the other stuff those are low utilization the usd ones are high
so we need to focus on that and um yeah well ke Well, Kevin, I just want to say, man, we could probably go on for hours.
You and I, we could probably push.
I've said my piece.
Three, five hours.
You want to go for five?
No, I'm kidding.
I just want to say thanks, man.
I'm content.
For joining us tonight.
And thank you for walking us through everything, man, as well as what the Genius Act means.
Of course.
I enjoy it. So that's going to wrap up episode 144 of Tuesday,
Tez Day.
We're here every Tuesday,
8 p.m.
UTC,
bringing in the people building on Tezos and the conversations shaping
what's next.
Until next time,
stay curious,
stay connected,
and we'll catch you next week.
Thanks for joining.
Bye. Thank you.
