Hey, Chief. Sound check. Is it okay? Yep. All clear.
Yep. I'll send him a invite. We are we already have requested
speaker. So, we'll we'll add him on later on, I guess. Yeah.
Yeah. Four questions to me, right? Yeah.
So, how's your debut? Oh, good. Great. Great. Waiting for, you
know, I've been waiting for this space. Yeah, I was wondering,
put some music on, but I don't know what kind of music you
guys like. Thinking maybe jazz or something like that.
Yeah. Yeah. Or maybe the arsenal team song or something like
Alright, I'll let me quickly send the notes. Just go. Yeah,
sure. I'm here waiting for it.
Hope everyone's keeping well who joined in.
Let me just add Scott Scott's Scott's here.
We already have a speaker who wants to have a chat.
Oh, Scott just messes in his small technical difficulty on
So, no problem. We can wait. We can wait. We can wait.
But yeah, this is a really good time for our discussion.
RWA's seems like Larry Fink really timed his Ethereum
move with our space, I guess, with the recent
partnership with that program. Yeah, I was going to talk
Pretty, pretty bullish for RWA's.
How's it going? Chief and I were just saying BlackRock and
Larry Fink really timed the Ethereum move with our space.
But yeah, hope you're keeping well.
You guys hear me alright? I need to delete the lags or
anything. Yeah, everything's good. Okay, cool.
Yeah, I guess we can begin to the space. Yeah, sure.
Hey, everyone. Welcome to the seventh episode of with
Icon Space Series. I'm your host, Chief, and I'm excited
to be moderating today's conversation with our special
guest. Today we have Scott, who is an early contributor
to Balance DAO and the founder of HighYield on
Avalanche. We'll be discussing asset tokenization,
balanced high yield and cross chain infrastructure
between these two. If any of our listeners want to
ask a question, please raise a hand so we can
invite you to ask your question in person.
So, hey Scott, how are you today?
Good. Yeah, it's a little cold day here in New York.
But besides that, things are going well. Can't complain.
Great, great, great. We have been seeing a lot of
news recently, and I've personally seen a lot of
excitement from the community on what you have been
up to, so there are a lot of things to talk about.
Before we get into the details of the topic of
today, let's quickly touch on real world assets for
our listeners, who might be unfamiliar with the
term. Can you give us a short explanation of RWAs?
Sure, yeah. I think, honestly, a term that I don't like.
It's a classic kind of crypto industry, trying to
make some acronym or some new term or something.
But I think back in 2018, we called them security
tokens. Now they're RWAs and people are still trying
to think of a better acronym, honestly, even
within the space. But RWA stands for real world
assets, and with that name, encompasses quite a bit
of things. It could be anything from tokenized
shares of Apple stock, tokenized exposure to
treasury bonds and yield-bearing debt products
from traditional finance. That's what high yield is.
And then there's also tokenized Rolexes and
tokenized corn, tokenized this and that. So it
really encompasses anything that's not natively
issued on-chain that needs to be like custody
somewhere, perhaps, or is issued off-chain, is how
Yeah, thanks. So my first question is what inspired
you to create balance and then went into high
yield? And what specifically sparked your
interest in real world assets?
Sure. Yeah, I think that kind of all has a lot
to do with just my background in general, which I
can go into. So, you know, I got before I got
into crypto, I was working in traditional finance.
I worked at Deutsche Bank. I worked on asset
backed securities, which are debt products and
bond products backed by, you know, cash flows
from, you know, let's say like yourself, your
monthly payment on your cell phone bill, like
they'll wrap up like, you know, a million of
those, put them into a bond, and then issue
it to investors. So I learned a lot of different
stuff working with asset backed securities.
And actually, you know, I liked that industry,
ton of different use cases, like airplane
leases, you know, solar panel leases, car
payments, everything with the cash flow in the
world is like wrapped up and put into a bond
and sold off to investors, like hedge funds
and pension funds and things to that effect.
So that was my job before I got into crypto.
And then in 2017, 2018, I started paying
attention, like right before the ICO boom.
And I started, you know, I was like, all right,
I got to understand the difference between Bitcoin,
Ethereum, and Litecoin. Those are the only
three available coins on Coinbase at the time.
Started researching Ethereum and, you know,
teaching myself all this stuff, and really
started to get fascinated with smart contracts.
And I was like, okay, asset backed securities,
like I could see how all of this could fit
into a smart contract, you know, and like
everyone else at the time, I thought smart
contracts were going to eat the world in
a matter of months. So I started like, you
know, going to conferences and, you know,
trying to meet, you know, network within
the space and potentially make the jump
from banking into crypto. And I actually
met Min Kim, one of the ICON founders,
at a conference. Started networking with
him a bit. He was ex Deutsche Bank.
I was current Deutsche Bank. And, you know,
after a series of calls, he eventually
convinced me to leave banking and join
the ICON team in April 2018. So that's
when that's when I joined crypto.
Did a lot of different stuff for Min,
as I'm sure you guys are aware of, for a
lot of different hats, business development,
you know, working with the community,
token economics governance, and then fast
forward a bit, if you guys remember, when
everyone was kind of forking Uniswap and
other DeFi protocols, like, I feel like
at the time, the ICON community was
very focused on staking and like
decentralizing ICON, and no one's really
paying attention to what was going on
in other ecosystems. So part of my role
and what I wanted to do with my time
was help the ICON community like
bootstrap these DeFi primitives that I
saw like gaining a lot of traction in
other ecosystems. So that's kind of how I
came up with balance. I had been
researching MakerDAO and Uniswap, and
you know, I thought they were really
innovative and knew that those types of
primitives are important for any
ecosystem. So I reached out to a
couple of community developers within
the ICON ecosystem, and you know, that's
kind of how similar story for like
balanced Ohm and Kraft. Those are just
like key primitives that are needed in
any blockchain ecosystem that were
happening elsewhere, but you know, the
needed to push in the right direction. So
that's how I got it to balanced. And
then, you know, after building at the
focusing on that, focusing on smart
contracts, focusing on building products,
and less so on a core blockchain. So
that's when, you know, I decided
I want to think about like how to
leverage my background in traditional
and my experience building balanced, and
like what can I do there? And that's
kind of how I came up with high yield,
because it's kind of a confluence
between my background and
tradFi and asset-backed securities, and
and what I did with balanced.
Great, great. You were talking about a lot
of research over there. So
I also heard you always do your own
homework for your decision-making
I'm curious about why high yields opted
to launch on Avalanche instead of
let's say another layer one like
Solana or a layer two like base.
What factors influenced that choice?
Yeah, good question. I think Avalanche,
like narrative-wise, is like very much
They had like the Avalanche Vista Fund,
which was like clearly supporting RWA
building in the Avalanche ecosystem, and
you know, their team. This
Morgan Krupeski specifically has like a
strong network in the traditional finance
space. She also came from
investment banking, so you know kind
good to have someone on the team that
understands the product well,
and they were just really supportive in
making introductions within the ecosystem
and introducing us to investors. So
you know it seemed like a good natural
Yeah, yeah, fair enough. You know,
you said in the beginning that you can
tokenize everything. So I want to ask
you about the high-yield product. Why did
the team choose to venture to space of
treasury bills first? Sure, yeah. I think
at the time, it made a lot of sense,
and other people were doing it where
you know yields on Aave, like on-chain
yields that had significantly higher
risk in terms of like smart contract
versus the risk of the U.S. government
Like you were earning 2% yield for
where you have 100% of your capital at
If there's a smart contract exploit,
versus earning 4 or 5% lending to the
who's never defaulted to the history of
So the risk profile just seemed way off
and you know we had to help wanted to
You know, if you're earning 5% off
with treasuries, there's no reason to be
we should bring those yields on-chain
and try and close the yield gap. So
unfortunately, right when we launched
you know the crypto bull market, well not
necessarily unfortunately,
but unfortunate for high yield I guess,
when the crypto bull market launched,
or when we launched like right as the
bull market kind of started picking up.
yields on Aave and compound started
you know, it's still a different risk
than it was like when we came up with
the product. So we're exploring like
other things to tokenize and
you know kind of poking around for
I will say though that the demand for
treasury-based yields and a diversified
is definitely still there. So it's just
target market than I initially imagined.
I imagined that high yield would be
targeting people using Aave and
at this point like the target market
It's still still some demand there though.
Yep, yep, fully agree and I've been
doing my own research as well. I've been
high yields since the beginning and
recently I've seen you made some
improvements to the product by offering
no expiration. Can you speak more on
Sure, yeah, that was kind of from just
our target market more and understanding
where the demand would come from for
And I would say we kind of service
with the way I think about high yield
these days is enabling access to
traditional capital markets for Web3
So Web3 Natives could be like you know
raised money by selling NFTs and it
doesn't feel like you know wasting
three to six months of their one of
their team members time like
onboarding to investment banks and you
just to try and extend their runway
through buying treasury bills or
something like really deep DeFi Native
like something like balanced
that's certainly not going to be going
so the product like the perpetual
perpetually yielding product makes a lot
for those types of use cases. I think
made more sense for trying to bring
traditional finance on chain
in terms of like that was kind of the
initial thesis behind high yield is
you know traditional credit funds like
traditional money managers and say like
you shouldn't buy from you know JP
Morgan or Morgan Stanley or these
regular investment banks you should buy
them on chain and here's why
as opposed to you know targeting Web3
Natives. So that's kind of like where
the different design came from.
so what are the future plans in terms of
for high yield products? Yeah I think for
we're doing just a lot of business
find more of these Web3 Natives that are
you know interested in leveraging
our on and off chain infrastructure and
banking relationships that we have um
and you know we'll bring we'll go
um right now treasuries and like low
are still what's most like mostly
um so that's what we're sticking with but
if somebody wants access to Apple stock
or you know risk like higher yielding
private credit opportunities like
we're more than happy to uh do that I
one of the issues in the RWA space more
is like you said you could tokenize
everything and founders and BCs
often get excited uh like oh let's
bottles of wine or tokenize whiskey or
you know this or that and no one thinks
about like okay like who's going to buy
like who actually wants this and that
we even you know fell into that
mistake as well where we were
you know went through all this effort
to tokenize like individual bonds that
and you know we really needed to think
more about the demand for something
like that not like oh this would be
and and that's what we're doing
great great you know I have I have
I worked in a project like three years
we were trying to tokenize the
apartments like you know selling an
since none of them are able to you know
things work so I'm happy to have you
talking to you thanks for that and
now let's go to the icon side
I want to talk about real world assets
in the context of balanced with
balanced utilizing US treasury bonds
through high yields could you
elaborate on what balance is doing with
and how icons GMP comes into play
in this context sure yeah so
yeah I think like another kind of
yielding collateral is for stablecoin
like balanced so you know high yield
doesn't directly interface with
like balanced isn't a client of high
but you know some users of high yield
are also users of balanced
are the you know backing BNUSD
with yield bearing collateral enables
revenue between like the you know the
holders and the five percent that it
the balanced savings rate but based on
you know the yield on balanced savings
rate right now like the number of
people actually utilizing it
balanced can capture the entire spread
between the five percent yield of
the high yield assets and the
you know zero percent that it has to
on the issued BNUSD so it allows it to
generate revenue in a fairly low risk
and I think that's like a good high
and in terms of like icons in terms of
general message passing like cross
that's used when transferring high yield
balanced and adding it to the stability
avalanche is like a spoke balanced
balanced has a spoke on avalanche
that's how I like to think of it
balanced has like the hub and spoke
model where the hub is on icon and it's
actively deploying spokes
on different chains and expanding you
know its addressable market
avalanche being one of them and uh
you know balance you know the the
amount of high yield assets in balance
has been steadily growing which is
400k 350k last time I checked
yeah so this is a synergy between
balance and high yield can we expect
more in the future some similar use
yeah I mean I guess I think that the
use case that's happening right now
the like stick with that I don't think
that balance to get into like backing
BNUSD with like private credit
and like other riskier assets I think
you know it could get maybe more out
of investment grade bonds like
you know slightly extra yield that's
something I think we could see
if balance wanted to start diversifying
and getting higher yielding products
investment grade bonds by the way is
you know you have is like a bond
issued by amazon for example you know
well-funded company they pay their debts
uh so that's called investment grade
it's uh it's AAA rated there's like a
rating scale for publicly traded bonds
so you know uh something like amazon
AAA rated you know some company you
struggling with cash flows you know could
double b rated or something something you
guys can google there's a huge there's
a number of different ratings but that's
place that I would see balanced expanding
it's uh it's RWA purchasing would be
into investment grade bonds
great understood um so we are talking
if other developers who is listening
you know um who also want to utilize GMP
for their future RWA products
they may want to learn about
you know this part so how can icons GMP
be leveraged to push more real world
yeah I think it's about distribution so
you know high yield was able to increase
assets under management by uh opening up
just like one network on uh avalanche to
you know using a GMP protocol to uh to
expand its distribution capabilities to
to other networks without having to
anything extra on its own so really
expand your distribution I think is a
nice uh you know short sweet
yeah cool cool um it is also great to
see DeFi projects are testing
real world asset use cases like maker
DAO being adopted by balance with the
are there any other RWA use cases
adopted by DeFi protocols which you are
that you think would be a good fit for
uh yeah actually I think um one that I
a perps protocol like a decentralized
like those types of uh protocols like a
lot of them use stablecoins as
the collateral for uh traders to get
that's like the LP is just only
stablecoins you just supply stablecoins
and then people trade uh futures
and you know when you anywhere that
of stablecoins that you know tend to
or at least like the withdrawal
profile is like you're not going to
see like an 80 withdrawal request in a
uh like those types of use cases make
we're seeing uh some demand from perps
taxes and then another one that I
was interesting was uh some like
smaller bridge teams so if you
are operating just like a token bridge
from like one chain to another
you know let's say you're operating
bridge from like ethereum to a new
um and you need access to usdc and you
don't have native usdc usually
people would lock usdc on ethereum
like a wrapped version on their new
uh you know icon has this with arch
uh and then the usdc that's locked in
uh we have a client interested in using
you know 50 percent of the uh locked
to purchase uh you know rwa to purchase
treasury bills and earn yield on it as
like a business model for the bridge
because bridges you know instead of
charging fees to their users on every
which is like not really a sustainable
super profitable business model um
but earning five percent yield on half
you know if like there's 20 million
to a network you're making five percent
yield on 10 million that's like pretty
meaningful revenue for uh
for a startup so um you know that's an
interesting use case that i didn't
really expect when i was building when
i was building high yield
yeah um we um i've been collecting some
questions from the community
one of our community members asked this
the real world asset tokenization hasn't
so what are the biggest barriers for
adaptation and what factors could be
when we're talking about adoption i
don't know the question is about you
having off chain uh like people who buy
and sell watches off chain like bringing
them on chain i do think like user
in terms of adoption um especially when
it comes to traditional finance
it feels good for us in terms of how
we purchase uh rwa's on chain but
you know like my old job at docha bank
you know a fund manager literally just
picks up his phone calls me places in
order and hangs up and it's done in two
you know while he's sitting next to a
pool like drinking you know martini or
there's no uh it's just really easy
uh in traditional finance to do this
they don't deal with like the back
office middle office stuff of like the
process so i think the user experience
um generally speaking of like just
using blockchain and wallets and
uh that type of thing and and then
yeah really just bringing the demand on
right now existing on chain users i just
super high demand for a wide range of
so until that changes where more people
are transacting on chain like there's
uh not people who are like super into
crypto and buying meme coins and stuff
you know i think uh that's when we'll
and more activity which which people are
building you know i've been to some
rwa events it's kind of like a
bubble within the crypto space like you
it's people more interested in the user
experience thing like i said and
problems uh in the real world like i
want like i saw a presentation on like
uh you know tokenized whiskey and
being able to trade bottles of wine and
actually like deliver the wine um and
you know with like a qualified you
that that does solve like a real problem
for the wine industry and
alcohol trading and collecting and
um so i think it's just about finding the
and hitting the right market and there
is investment happening in the industry
you know we'll see uh we'll see which
yeah and you said uh you know the
popularity of the products so
um i just want your uh i i'm curious
about your opinion what type of
tokenized product do you think will
popularity in the next few years
depends how you rate most popularity like
in terms of dollar values exchanged
that traditional financial products
like our original product like tokenizing
individual bonds and trading them on
um that will be something that uh
has a lot of dollars behind it it's
not going to be something that like
you know crypto retail is going to be
like paying attention to or interested in
enables like you know some borrowing
against treasuries it's called like
repo financing on chain and does it for
like a trillion dollars like
crypto retail it's not going to impact
them it's not going to make any coins
moon or anything like that
like that's not uh the um
it's just a totally separate market so
in that sense i think um you know if
we're talking about dollars transacted i
think like traditional finance will
ultimately come on chain in some respect
um and have like a lot of the larger
financial institutions that are operating
Citibank like those types of folks
um this is my own personal question um
do you think it is safer to you know
launch this RWAs on chain you know
traditional finance tools
um it really depends who you're
transacting with um i think like
like like treasuries for example like if
you're a fund manager and you have like
you're managing a pension fund and
you have like you know thousands of
you know like billions of dollars of AUM
and you were to stick that all in
into like uh you know one of these
RWA projects like there's a lot of
other risks besides just like buying
direct from the US government when you
buy them direct there's no like other
custodian there's no other person
these are edge case risks but are
extremely important to somebody who's
less important to like a web free native
who's just trying to manage their
so um you know i do think uh what is
sorry forget exactly where i was going
with that i know it addressed your
question what was your question again
i was i was talking about the security
security concerns yeah yeah there is the
concern of like who is the third party
how much does this pension fund manager
me and the high yield team like why
would he choose to trust me instead of
just interacting directly with the US
um so i think if you're talking to
that guy he's gonna be like there's
no way there's better security
but if you're doing it with um you know
yeah so web free native then then they
would feel comfortable doing it and
yeah so that's kind of my thoughts on
yep understood understood so
um we covered all of my questions today
but once i check the time this
is going to be the shortest
space we ever done uh you
directly answered all of my questions so
do you want to add anything upon all
you know talking to the community
yeah i just yeah maybe just add that
RWAs is like a really broad
term that applies to a lot of different
uh there will be some use cases that
make a ton of sense on chain
and you know finding demand for that
and uh you know that that's kind of
the most important factor for any
startup in the rwa space who's going to
who has you know usdc on chain that
they want access to these assets and
so um that's where my head's at these
days and i'll just leave it with that
yeah thanks man i think it was a
um and i guess there is no question
i am going to close this um thank you
turned it to the space and see you
in the next one bye bye yeah thanks for
having me take it easy guys