PANEL: Stablecoins; The Future of DeFi Lending and Borrowing

oh hey everyone I actually just landed the airport right now so i' I've had like no sleep so I'm kind of just winging it right now um but hey everyone uh this should be a pretty exciting panel like stable coins are like literally the most one of the most important things in defi lending um so I'm really excited to have all the panelists introduce themselves the projects as for me uh my name is Walter uh I'm a data science lead at gondet we're a crypto IC research firm um hoping to use offchain intelligence to drive onchain efficiency um we'll start with Michael hiy everyone uh my name is Michael lellan uh even though I've got a compound shirt I actually work at open Zeppelin uh but open ze's been doing a lot of work with compound over the last couple years as security Partners there's kind of like I'm basically kind of in a primary security advisory position but also end up playing a lot of uh roles in the protocol where security has some relation which is nearly everywhere uh so yeah excited to talk more about like what compounds been up to in open Zeppelin and everything else from and now yes okay uh hi everyone so I'm Paul from Mar Labs uh Co founded the Maro protocol two and a half years ago and uh today we're building landing and baring primitive on eum and on base yeah hi everyone my name is amilio I I work at avara I am VP of engineering I handle everything that is defi related with avara and aabs hello everybody I'm Sam uh CEO of uh Phoenix labs and um we work on spark protocol um which is um essentially liquidity provisioning for maker da so d uh is the largest decentralized stable coin um we work to um issue loans cool okay um so I guess for the first question we're going to start with Sam uh there's a lot of new different collateral types coming up in defi which ones do you see are the most conducive for stable coin borrowing what are the mechanisms that can support it how do you think this will go how do you think this will look going forward yeah sure um so historically the biggest use case we've had for uh lending stable coins is been speculative leverage on specifically uh at scale the assets of eth and uh Bitcoin so this is been it still is the most dominant use Case by far so really um once you get beyond that um I think we're kind of maxing that out uh with uh with access to centralized exchanges products like Athena tokenizing this um with the cash and carry trade we kind of have this capacity of you know on the order of you know 10 to1 billion worth of uh leverage there or worth of uh loans available for stable coins within uh crypto so where do you go from there like I mean there's only one place it's real world assets it's trafi you need to to get up to this next couple orders of magnitude of scale we need to keep onboarding rwa so the first um big example of this we've seen over the past uh year or so due to the interest rate uh environment changing is the tokenization of uh treasury bill products so this is kind of the lwh hanging fruit and so maker um has been the biggest buyer in defi of this um like sort of spearheading this this uh this project where um I think at the beginning of 20203 it really started to ramp up and makeer peaked at about uh two billion um in exposure to uh treasury treasury bills now it wasn't tokenized so you see the market for the tokenized T bills uh growing at about the same right so that's about 1 billion right now maker is about uh you know 1 billion of this as well um and so this has been a big uh growth sector and what I want to see in the future um is more and more of these uh real world assets uh tokenized um on chain such that we can start issuing uh loans for other use cases other than crypto speculation because you know as much as uh it's you know people love this use case right now speculation is not going to fuel the industry forever we need to mature eventually and so we need to find more regular real world use cases uh for issuing loans well let's go left or right yeah personally I think it depends on what degree of I mean there are different degrees of Liberty we want to we want to call like that in stable coin design so rwa brings something that is certainly uh uh from um futuristic perspective like very important because it's probably the next Frontier in terms of uh bringing a new capital new value to defy but also there is the aspect of decentralization so if we are talking specifically about collaterals I would say that the purest collateral from a decentralization perspective that we can use is probably on the ethereum network is e in the sense that like is the lowest risk uh I guess most decentralized assets that you can probably use as collateral and then from there it's like a kind of a uh you know a curve where we have risk and uh centralization different risk and uh centralization setups and so lsts have a different uh risk profile risk different decentralization and centralization profile but they also bring uh different uh characteristics ICS so there is native yel brought by the usage of the network uh then we have assets like R Bitcoins which we can probably say is kind of an rwa right in the sense that in the sense that it's a tokenized asset uh still coming from still a dig digital asset but coming from another Network so there is kind of uh um intermediate step there that brings another degree of centralization and towards the centralization scale there are rwas because inevitably when you start moving uh towards the real world you need to uh have some compromises in terms of uh degrees of decentralization but that that is right I do believe that probably I'm more and more convinced that probably a fully decentralized table coin is probably impossible to scale I'm not completely sure but I kind of think that that's we are heading towards that way but even introducing some degrees of of centralization that is uh differentiated enough those in my view are also ways to decentralized when we talk about decentral decentralization we talk about uh custody risk uh we talk about liquidity risk and many other aspects so having different ways of integrating more uh assets that are more centralized on the decentralization scale is also a way to decentralize risk right so I I agree with um I agree with him that probably rwas are the the future in terms of bringing the next wave or large Capital inflows into defi into blockchain and I also think that um decentralized assets with the different degrees of decentralization will still have a very strong strong uh presence yeah I I mean I agree I think this is inevitable that we'll come back to like more and more like centralized uh assets but at the same time those centralized assets will have more and more like decentralized token issuances Etc I think the the decentralization of stable coins will mostly being the uh the governance processes of the Dow that is issuing the loans right like how are how the backing of the the stable coin in itself who who's choosing that backing and I think uh inherently like the decentralization will come from those processes so there is like Innovative like mechanisms and Designs around that like maker end game is one of them uh yeah I I very much agree that we're kind of not seeing the limit but approaching the limits of what like the speculative use case can bring is in terms of adoption uh yeah um I just want to comment on the decentralized stable coin so so like this is something that's been um ongoing for a while now this uh thinking you can make a decentralized stable coin now I mean what does that mean in practice it means you're backing it by only eth because like really there's multi sigs like everywhere else once you get outside of that so this has been tried and like uh you can you can definitely make it at a small scale but uh it's like a a scalable decentralized stable coin is that specifically pegged to the US dollar is completely a myth so seb's presentation at the beginning was very good um if you missed it talking about the hierarchy of money and so the only way you can scale up something lower in that hierarchy is if you back it directly by something that's higher up in the hierarchy of money so for die this is the backing with usdc and any stable coin project that launches and starts scaling up to uh billions there is there is a limit there and so like I I think if you really tap out as I said before if you tap out like the defi lending against eth um you can't even really tap into centralized exchange markets because then you know you've got all kinds of custodians and stuff like that so really the market for leverage against eth will not scale to Beyond a couple billion at most so right then and there you've hit a fundamental blocker so a truly decentralized stable coin uh that's scalable is is a myth frankly so you have to back it by um things that are higher up in the in the hierarchy of money yeah I mean I agree with everything that everyone said here I think I just add that the the biggest risk going forward is going to be if decentralization is going to be a key part of the use case for using a stable coin like are you segregating that from the stable coins that are going to have to scale more with r assets is kind of like the things you see with Ryan and others that are kind of experimenting with keeping it pure which takes a big tradeoff on like the stable part of the stable coin but um I think at the end of the day are the people that are making big use of these stable coins aware of that uh aware of how it's being mixed uh and that's one thing that with compound there's a lot of segregated markets now in the new version of the protocol so it's something that you think about a lot how much can we segregate liquidity before it becomes uh less valuable but you're is worth the risk management trade-off these are like very hard questions to answer but it's something we constantly think about cool the natural next question then is given all these new types of collaterals whether it's Ras whether it's the next generation of e derivatives the current bar borrowing mechanisms in lending are you know they're fairly like Dynamic based right like the borrowing rates are pretty Dynamic based on utilization are there other types of borrowing mechanisms that might work for instance we can consider like you know fixed time loans for instance what does the equilibrium look like this down the road for these different types of mechanisms for borrowing um we can start with Paul yeah so I think fixed train Ling uh as we Des describe it in like def has been particularly challenging because of like the terms and you have to essentially what's challenging in lending is like bringing together the lenders and the borrowers at the right time and decentralized monotic Ling and borrowing uh posts are exceptional at this like they're going to bring together lenders and borrowers at all time at the same place when you introduce terms well you fragment a lot right because you know you have you need to find people that agree on this specific term and currently like the user person of defi um you know is probably more and more inclined to that uh and more and more active but uh you know is is you know passive L you know lenders are fairly passive like large lenders Etc so uh it's hasn't been such a success so far however um it is you could you know like if you look at traditional finance a lot of of things are based on like short-term uh loans and and variable uh interest rates are more rebuilt on top of like the fixed rate primitive so in in defi like the Primitive is more like the interest rate model that was like uh you know continuous interest rates well in traditional Finance you have like fixed term and the market is pricing like the the zero coupon and and and rates get defined by the markets not by like governance right and um overall uh I think there is a a reason why we ended up like doing interest rate models and and and continuous like and variable interest rates it's really like liquidity and and being able to meet like supply and demand at the same time but as users complexify and this is the case more and more in defi as you have like uh you know proxies that are between the the base protocol and the users that are able to bring like cleverness and not like some some kind of proxy for activity on behalf of the user uh you can imagine that those kinds of interest rate models will come back like uh in the coming years and I think we have a presentation by liqu uh on borrow Bor far as defining their right right after I'm not sure but I can go um yeah so I mean you guys have been in the market uh like right now there's just no demand for long long dated uh fixed rate stuff it's because like the market is nuts like it's it's up three months ago we were in like a bull market and now it's like everything's over right so like who's who's taking loans at a six-month duration so this is just there's just no demand for it right now but I think obviously the demand will come in once the market matures so I think it's just a matter of time until fix rate stuff becomes more popular I mean we look at this stuff uh quite frequently at maker for um like as a a new a new market for loans but yeah I mean once you even like even three months is like you're really kind of pushing uh the demand there um so yeah I think this is something just going to come in over the long run but right now there's just the demand isn't there in in defi yeah it's also to reconnect to the previous question I think it's also a matter of the collaterals that people are using and and the the volatility connected to those collaterals so what some was mentioning that like the volatility of the market that we have at the moment is just is insane and but once we start bringing assets that are more stable so for example we start tokenizing houses that's that's that's a different different Behavior right so people collateralizing a house usually have long-term plans right so they are looking for a different kind in fact we have mortgages that are structured in a fixed rway and a variable rway there are a variety of uh instruments there and it's also related to what kind of collaterals people are going to use with crypto in inherently I mean we did we tried to do fixed rate uh borrowing a few a couple of times we tried with itan in 2017 and uh that thought us important lessons on on on that uh because uh back in the days in 2017 ethland was like generating like 50 million volume uh in in uh in loans which was crazy by the time because there was no no there were no stable coins um I don't know icon and us and all of those were were ear c20s on ethereum so we are talking like really uh long time ago in crypto terms and yet one behavior that we observed is that once compound came out back in the days compound one itand was basically obsolete from from day one and the reason was that um kind of what Paul was mentioned before that uh lenders are kind of lazy from a certain from a certain perspective but also Borrowers that are I think the most important part of the of the um economics of landing and borrowing because are those are those who generate demand usually what we observed when we had L it when compound was there that even if in on nland there were uh possibilities of borrowing at better rates than compound but you had to match lender and borrowers people was actually still going to compound you know because users wanted borrowers especially maybe they want to capture the occasion to go along instantaneously they don't want to wait three days until a lender comes to Pro provision liquidity and maybe the market went up 50% in the in the meantime you know so I think I do think that fixed rate uh borrowing a lending probably if it's going to take any traction in crypto is going to be some time uh along the line and probably will be more easier will be easier with different types of of collaterals as well I think the only thing i' add is I'm it's a naive question but I'm just curious to know like how many people in the traditional Finance world if they had the functions that we have today with like these variable interest rates would prefer that over fixed rate whereas right now they would prefer fixed rate because that's what they're familiar with that's what they built their whole financial processes over I think there's definitely still a lot of use cases for fixed rate like mortgages being a perfect example you don't you know want to deal with a mortgage rate that's going to change over the years but I would I would be very curious to see we obviously saw a lot of issues with banks that were locked into long-term fixed rates and treasuries that created an issue uh for the banking sector um that just happened to get sucked into crypto because of the choke point narrative but uh I I would just that's my naive question as someone who doesn't understand entirely what that mentality might be cool um obviously we talked about a lot of different collaterals different types of borrowing mechanisms one of the hot things in crypto these days is the idea of interoperability and the cosmos ecos system and many many in the many chain thesis what does the future of cross chain lending look like what are some of the technical considerations some of the economic considerations how does the space continue to grow let's start with Michael uh yeah this is something we've gotten a lot of experience with because uh open Zepp one's been working with compound laun a lot of deployment we've obviously been very much like scrutinizing like new markets evm equivalents but like looking at it I guess from a financial perspective uh it's going to be interesting because you obviously have a lot more potential Demand on other chains but then you're also segregating your liquidity now compounds kind of a specific example where they kind of decided that segregated markets are fine like that's basically the idea you're going to have one base asset for each market and then certain number of collaterals and you could have multiple of those on the same chain so you're already potentially segregating liquidity on one chain and you're taking that uh uh you're you're eating that might be like less features available but like more optimized for the specific feature that you've kind of decided on which is like borrowing a stable or eth uh so when you're going across different chains I think you're going to just you're going to see more segregated liquidity and then you're probably going to see uh we've already seen several people building this on compound people try to build aggregators on top that will you know you're not going to get the same level of Base security might get with just using the vanilla protocol uh but you could have more of the functionality of like moving liquidity between multiple chains but you're going to have Bridge providers you're going to have to trust you're going to have to trust the people implementing the smart contracts on top uh and like I think that's going to be an interesting role to see play out because I think it's going to be necessary if we don't want to like segregate liquidity too much but we're also going to obviously be very careful about the risks there yeah I I don't really view uh liquidity fragmentation as as big of an issue in practice as it's being made out to right now right now we're in this like infrastructure structure phase where just like in the abstract things are being built out on all these different chains um but when you're talking about like what the applications that people are actually using on top of this specifically like lending and Dees um really well for Lending at least the the main or actually is for dexas as well the main thing that you care about is US dollar stable coin liquidity that's that's what liquidity is so like what what an issue so as an issuer um maker is able to um you know unlike a full Reserve uh stable coin like usdc maker can do just in time issuance um on all of these chains at at the time so die can be um you know you call it premitted whatever you want to call it um capacity can be allocated to basically uh every dii protocol um in on all the chains at once and then the actual liquidity to facilitate the uh backing of this uh um of die on on these chains can be Consolidated into a backend infrastructure so for D we use usdc as uh for Peg liquidity because it's higher up on the hierarchy of money so as maker has uh keeps 25% uh cash reserves um at all times to back the die stable coin to ensure that you have high liquidity with usdc maker can then uh move usdc to all these different chains as a sort of a backing uh instrument for the peg on these chains uh issue die on all these different protocols all at once and so then uh liquidity is no longer a concern the users can just use their mint die you know they have the usdc uh liquidity there um and circle has fairly good uh Redemption uh process on all the all these big chains now so really in practice this whole thing is is going to be very very uh seamless process for the end user and so like we don't have to worry about market makers um facilitating this um for um the US dollar side you have uh you know I guess you call them stable coins there's all these terms but whatever uh decentralized stable coin I'll go with the classic one uh where it's not a full Reserve stable coin uh and specifically yield bearing versions of this like SDI um they'll facilitate the backend infrastructure of this and you have the same thing with uh eth with lsts issuers can do uh this all around on all the chains so really I think this is more of a theoretical problem for the assets that we care about uh eth and US Dollars uh it's not going to be a problem in practice and in the next little while yeah and I I would add to this that I think there is the general concern about liquidity fragmentation whether it's about you know like cross chain or or risk management Etc but in practice aggregation and just in time liquidity is extremely powerful from a user standpoint because at the end of the day liquidity is about like getting the tokens you want at the the moment you want them and if you have someone one that abstracts away like the bridging at at the moment like you're taking your loan for example that's perfectly fine and maybe we we'll disagree on this I don't know but I I feel like in lending at least there is like two views one is that uh cross chain should be enshrined in the protocol and and that cross chain should be you know externalized and brought like you know just in time when the user needs it our perspective on this is that so at Mor for we have a primitive Ling and boring protocol that externalizes completely like Risk Management considerations right and so users have to do their own risk management and we believe that's the same thing for Bridges like selecting a bridge in itself is extremely like it's it's non- trival uh and you know there are trade-offs like pretty much all the time and and we believe it should remain you know the decision of the user to choose you know how how they get this liquidity and then is there a choice you know to have like abstraction layers and decide to you know use a solution that is going to reaggregate and that's going to do all the hard work them but I think at the Primitive level for the sake of resiliency uh you should not inshine like a cross chain in in the landing protocols in reality at a we have been exploring we I mean what we have noticing is that of course a for example is deployed like on I think on 13 chains so is probably the the largest uh protocol in terms of number of chains in which it has been deployed and the behavior of the users from a market from the etherum Market to the arbital market to the base Market whatever doesn't really change much in terms of the way they use the protocol but of course the proportions in which the the the liquidity is being used in the protocol are different so uh I do agree that the justing time liquidity primitive is quite strong in terms of narrative because it allows you we are exploring something like this with go which is our native stable coin we just went multi-chain we deployed we we developed and deployed an infrastructure for canonical go across for now it's on ethereum and arbitrum but in in the future it's going to be extended to all the networks where a supported and of course the next step is going to be develop a an infrastructure for Justus in time liquidity there as well where you can use the infrastructure that we just built to move move liquidity across the different networks by just generating it but this use case is very powerful but it's also uh related to how much uh traction the stable coin that you're using has so for example D has a lot of traction and for them is much easier to apply this kind of strategy because uh you can go and capture use cases everywhere with die because it's pretty much used uh across the board on all the networks I think it's list a for example list die pretty much all the networks where it's deployed I think something like that so uh with a stable coin like d that has already kind of reached uh critical mass at least in in crypto proportions so I mean the crypto Market is relatively small so uh D is quite big in terms of the proportions of the of the crypto Market it's much easier to apply a strategy like this uh compared to go that is in a growth phase so it's still relatively small uh and at the on the other end of the spectrum there are stable coins that are don't actually use this kind of strategy for example usdc which is generated uh whenever a user goes to Circle and you know asks to receive usdc in exchange for dollars um and because of that like user then are individually deciding where these dollars will be crypto dollars will be used so they might be using them on base they might be using them on ethereum they might be using them on arbitrum and I do see value we do see value in being able to move this kind of liquidity uh Whenever there is an excess on an I mean what we have noticed is that there is not necessarily Arbitrage if we to call uh this way between the networks so some Network might sit on a lot of liquidity another Network might have been a kind of a demand uh in a liquidity crunch so there is a demand we have noticed that in multiple case would have been useful to be able to move uh liquidity from one network where there is access to another Network where there is demand uh transparently for the users but is also has an implication in terms of uh risk because it change kind of change changes the risk assumptions of every market so um if you for example move I don't know 50 million out of the ethereum market to base uh then you are exposing the ethereum market and the usdc suppliers in the ethereum market to 50 million uh I mean you bringing 50 million of exposure to the base network uh to ethereum suppliers which of course has risk implications for the bridge for the technology everything so it's it's something that we certainly want to explore and we are kind of moving on both directions on a so I do think that with before especially there will be ways to to experiment on that on that front cool um obviously lending market performance in general is very dependent on overall Market downturns Market upturns so naturally Market downturns do present a lot of risk in terms of like borrowing Health etc etc for users in our requests to scale decentralized lending naturally there and improve the capital efficiency naturally at times lending protocols might incur bad debt um whether we like it or not is it necessary to enshrine an insurance layer in lending protocols if so what's the best way to do it um we can start with AO um that's not necessary I would say um it kind of depends on what kind of uh spin you want to give to like to the to the protocol that you're building uh so for example Moro relies on the idea that the user is completely responsible for any action it takes so if metamorpho Vault or morphol blue Market goes underwater because there was risk and the risk was not properly managed that's user responsibility right for for moral blue not metamorph like uh so like the way Morpho blue is design is like bad depth is uh realized to users so um cor correct me if I'm wrong on a like essentially bad debt is not directly counted it's here but users don't take the loss it's only the last user to withdraw that will not be able to withdraw because there is a loss in the protocol and so a has put a lot of like mechanisms in place to avoid like bankr scenarios like on top of like all the risk management that that is done there is like this Insurance Fund of uh a tokens that if something bad happens to the protocol while a token orders can vote to sell a tokens in order to repay the bad dep in Moro if the bad depth happens it gets realized so users of a given Market are going to take the loss uh immediately proportionally to their share of the market at the Morpho blue level then at the metamorpho level you know metamor metamorpho vot so the risk creation layer well risk creators can decide to put in place their insurance like they they free like they they collect some fees if they want to put an insurance in place they are free to do we don't have an opinion on the way they do it or the way they design it etc etc so so yeah that was just to to elaborate but if a Mor blue Market incurs in losses and a metamorph is using is Supply liquidity to that Mor blue Market the metamorph is incurring your losses as well yes but then they can put in place like Insurance funds and they can treat it differently okay yeah for sure yeah I can talk about a specific like so we're using metamorph we have metamorph vaults as spark as an extension of uh maker Dow and there is an insurance buffer in place so maker has uh 50 million um in cash that it holds as an insurance buffer and on top of that it holds 150 million in protocol owned liquidity in Unis Swap and maker uh die poool so these are um I would say like Moro is just kind of like a tool you can construct whatever you want with it so we've uh in the same way that the maker corals have this insurance buffer for uh die holders die holders are designed uh to sit uh very very senior to a lot of this lending that happens and so you can construct pretty arbitrary constructions here so yeah okay but like my point was it's not built in into the so you guys decide to put an insurance fund but by default there is no Insurance Fund this is what I meant yes there is no Global Insurance funds it's kind of a a different uh approach there so the Insurance Fund in in case of a where the risk management is uh Dow controlled um uh the decision was to uh integrate an automated Insurance mechanism over there it kind of partially uh it's it's kind of embedded partially because like any fee that the have a market earns is uh retained within the a uh protocol so if there is a loss for example uh the other protocol is automatically absorbing it for the amount of liquidity that is supplied from the treasury there because if there is a loss us users are allowed to to withdraw while the treasure is Dow controlled and also there is a safety module uh that is built with a variety of currencies that will be used that are used in general to they have never been used until now uh but potentially are can be used for uh ensuring that user suppliers I mean suppliers are not uh incurring in uh in losses for the maximum capability of the of the safety module so I would not say it needs to be it's kind of uh depends on on the spin that you want to give in terms of narrative that you want to give uh to the protocol I kind of uh agree with the idea that probably a fully trustless and permissionless primitive like morphol blue uh would not embed such a mechanism in the first place uh I do also uh think that the the nature of more I mean the what I have been seeing is that this kind of approach is uh trying to emulate what dexus do with uh with Landing right basically so I mean the design behind Moro is kind of has kind of a similar approach to a dexo where the users provide liquidity and it's completely mutable there is no risk management and so on and so forth I do think think um that the uh use case for Lending and borrowing is massively different from a uh from swapping or liquidity provisioning in a in a DEX so I do uh personally I would prefer using a protocol that has um uh you know built in Insurance Fund uh but again uh I I do think it depends on a variety of aspects is not certainly not mandatory yeah I'd like to add two things on this so so first I agree with you like as a passive user I would never use like Morpho blue directly like I would definitely use like those abstractions layers that are built on top and build like you know that have a specific R profile for me or specific insurance funds that suit my needs I would also add wanted to add on the uh the badb question that I think we've lived with the idea that defi lending should be risk-free in some sense and that's not really the case like uh eventually we'll have like losses and you can you know that there is some part of the risk profile where yes if you decide to take a lot of a lot more risk you'll have a much higher apy and yes from time to time you'll have bad depth which will lower your apy but maybe it's a good trade uh at the end of the day and uh I think a great example of this is actually uh the gaunlet volts that are built on Moro where you have different categories of risk you have like the the prime volts on on on from gaunlet on Moro which are like incredibly like secure collateral with like just BTC and SS I think and then you have like the core volts which accept more longtail collateral Etc and and so you have different VTS with different risk profiles and different risk appetites and obviously the ones with the highest you know risk will have the highest rate and some time to times will incur some bad depth but will often be compensated by just the high yielding uh interest rates and I think it's important uh as an industry that we sort of like stop thinking about investment opportunities are as completely risk- free because when we talk to users this is really how they they tend to think and uh and you know everything everything has a trade-off so you know I anticipate that as the ecosystem mature like those risk reward like uh profiles will be more easily expressed and and and U and you'll have like products that should all of them in in defi essentially I mean a compound has protocol reserves which I assume would essentially function the way we're talking about insurance here uh and yeah the idea is if there is any bad debt that can be absorbed by the protocol and it yeah it comes down to like what you as a protocol are trying to tell users that you're achieving if you're trying to say that you're we're going to provide you as risk-free and experience as possible there is still risk but we're going to try to cover for like Black Swan events for sudden price movements for sudden Oracle failures for anything that might come up that just wasn't considered even if the risk parameters are set perfectly like other things can always happen uh so I think it's useful to have that to step in and I you know with compound I definitely have a preference for it but like I would also say like if you're if you're trying to strip out less if you want to give more of the risk management to the user to choose what they want to be a part of then it does make sense to then say okay well maybe the insurance function there is not uh a critical piece so yeah it comes down to kind of like how you're putting that stack together I'm more comfortable with compound having that feature and knowing that it doesn't it's not up to governance to figure out how to maybe deal with a bad debt scenario it just happens automatically but I could I could definitely see other protocols wanting to to put it together differently cool um one last big question for the group um a lot of few lending protocols these days have you know created their own stable coin or are deeply intertwined with a particular stable coin what are some of the you know challenges associated with this what are some of the Dynamics associated with this in the end well every single money Marketplace have their own stable coin what do you guys think so just just we don't uh at more fun and and we don't plan to uh we see decentralized lending you know as like the so I I know it's like you know the stable coin industry has been like pretty attractive and like its you know potential and also a financial potential for projects We Believe lending is a smaller opportunity than stable coins but we're fine with that and I think like building The decentralized Lending infrastructure that will allow stable coins to operate there you know the the best possible way is our mission and uh and we don't plan on launching ing stable coins just providing like the tools for stable coin operators which I believe fundamentally are about you know issuing loans the correct way not about like building the landing infrastructure those are two different in my opinion again uh two different like uh like businesses yeah so um let's let's break stable coins into two different uh types like um so there's like the full Reserve which are like the circle tether Mountain uh these types of stable coins which are very very strict collateral set which basically they're just doing uh one to one with uh treasury bills once you get into the um uh you know fractional Reserve stable coins within defi I think uh this and lending is just going to be the same thing in the long run so like uh we're already seeing this uh converge um you know uh die sorry s die specifically the yield bearing version of D and uh a usdc are pretty much the same thing and so as uh newer new stable coins we see a lot of experimentation but once you hit that uh scaling uh you really want to just uh you follow the same path you don't have really a lot of options you can explore and uh lending and stable coins these are kind of two different names we've given for what is essentially the same thing which is um you know the uh era of having zero yielding stable coins is over so tether has won that um at least unless something fundamentally changes uh any stable coin that launches now uh if you want to compete you have to be a yield bearing stable coin and this looks more and more like just general lending within defi so yeah I think a lot of these terms we come up with is all just kind of uh it's all just the same thing dressed up uh differently I think it's just it's just a matter of who the lender is in this case because like uh uh I mean we have issuers we have uh lenders in the case of maker like the we have an entity that is also is both issuer and lender at the same time because they issue the stable coin uh and they also have mechanism to automatically uh perform liquidity provisioning in a variety of protocols and uh once you have that then at that point it AG with sum is basically the same thing um but uh the the profile in terms of for example uh revenue for the issuer are massively different so uh for for the other protocol for example to to give an idea of what I'm talking about um go is at the moment like has like a total Supply I think of 85 million or more or less and it's already uh generating a revenue which is basically equal to the uh total reserve on of usdc on the ethereum market which I'm talking about Revenue I'm talking not talking about profit because I I saw you were already Rising the microphone let me anticipate the guy I know that like uh the stable coin business is really hard business especially when we talk about decentralized stable coin um so the revenue for stable coins is very high but reaching critical mass is tricky it's not trivial and it takes consider considerable investment in terms of go we are pretty much on par in terms of investment that the Dow is doing at the moment uh so there is um relatively small Delta that the da is paying to propel uh the growth of go uh but it's negative so of course Al although the revenue numbers are very nice the the the profit at the moment is negative in terms of go the the interesting thing is that uh we can leverage a variety of ways to reinvest the Dow The Profit the da makes in in go to make gr go grow I do think that it's more uh takes it will take some time it's not it's not a simple Journey but I do think that I consider that not expenses but in in Investments so like the da is currently invest Investing For The go for the growth of go and uh we hopefully manage to reach like a similar level of critical mass at at some point and then uh we will have interesting ways of integrating what we have in a what originally was the a protocol with a stable coin like go so in a before for example we will have a variety of features that will integrate the other protocol at deeper level with uh the uh with go so there will be soft liquidations there will be uh the possibility of earning interest in uh in uh in go rather than the the native stable coin that was SL so there are interesting things that we can do also to provide uh more uh fulfilling um opportunities for for both lenders and like traditional lenders and borrowers in a yeah um so I I think the thing that everybody's looking for with stable coins is this magical thing that is uh monetary premium this is people who are willing to use uh your stable coin and accept uh zero or close to zero yield on it and uh this is where you know tether is making an absolute killing in terms of the money that they make um I would posit that this ship has sailed I think you know you have tether Circle has it to a certain degree and D kind of got it a little bit there's about three billion D that is accepting uh zero yield for whatever reason um I think in the in the increasingly competitive uh uh Market uh the that monetary premium like that that ship is completely sailed and so the focus right now is on who can get the best uh risk adjusted yield and to be honest I think this is great I mean uh for users uh this means that uh they can get uh access to the yields that in traditional Finance um I think Martin's presentation was very awesome where like he's talking about um all these users who are uh these low quality or sorry unsophisticated users you said who are using Banks and the banks are Bas basically just extracting money out of them um because they don't they don't are putting their money in the money market fund or whatever so this is something that I think defy enables so this uh race to provide users with the best risk adjusted yield should take into the trafi risk-free rate by default and there should be a hyper competitive um space where we're just going to completely uh troun trafy here uh I'll I'll be the security guy in the room and complain a little bit about just when you have a an ec20 that's just slightly different than the rest um and the challenges you sometimes get with listing with compound we had a comet that was basically built with a like very tight on the contract size limit and then usdt comes along it's like okay there's a slight change we have to make to the contract to make it accommodate oh no the size limit's been hit uh and it became a this was going to be a plug-and-play system to your C20 compatibility making a bit difficult I'm I am nitpicking for sure right now um but I do bring that up because sometimes you see these issues are not noticed until they actually get launched I I think most of the people here would not make those mistakes but uh you do have like smaller protocols that are listing stable coins and are very very naive even they won't even sometimes read the documentation so that's just the one thing I worry about especially if there's an also an upgrade in the future to a stable coin like usdc upgraded I think it was like maybe in February or March and we had monitoring that detected it as it happened and we look at it and say okay great it didn't break anything if it did break anything we were we're already in trouble and then they put out a nice article after the fact saying this is how we upgraded which is nice but I feel like my my one nitpick is if a stable Queen provider is making an upgrade uh is to forecast it ahead of time as opposed to after the fact so that people can potentially get ahead of it but I am absolutely nitpicking around blacks want events here well I'll end with one fun question for the panelists we're all trying to make defi Landing better what's a very cool thing that you find about another panelists protocol that you personally like I mean uh so as a user of both av3 and Moro I I like uh different things about um them so like originally um when we were uh so just so people all know so spark lend is an av3 fork and so what when we were originally uh looking at this project we had uh makeer core vaults which are the Legacy cdps um and we noticed there was some features that the market enjoyed that uh were not being served by maker which the most the the feature that was most uh in demand that we weren't serving was uh rehypothecation of eth people really like getting this extra yield on their on their collateral so we looked at the market and we were evaluating what was available at the time um you guys had just put I think ob3 into production this was like a summer 22 I think and so we looked we there was like compound V2 there was a V3 um and uh Oiler was we were looking at Oiler as well and so av3 the feature that we really really like that you guys included was uh emote so that and it's proven to be the killer feature of av3 where um you can get high leverage um so you can use eth as collateral and then take out USD loans you know the regular leverage but then that eth can then be um used as uh to bore borrow um and lever up on uh lsts so normally in av2 you could only do this at the uh leverage that so the LTV numbers that were also available for USD but these same LTV numbers don't really make sense for um you know eth looping so emote allows you to uh uh do high leverage and I think a is at like 95% LTV for that uh spark runs a little bit more conservative at 93% but it allows you get a lot more capital efficiency for Levering up on LS so that is a feature I I think you guys did a good job on y i' second that uh we like opens up was able to do the audit of V3 so we saw a lot of really interesting new features being added I mean this was around the same time that compound V3 was going in a very different direction and and OB V3 was the doubling down on no no we are going to keep the pools together and we're going to add a lot more no features and so uh I think that's really cool to see as well as the fact that uh like I see both Moro and maker guys sometimes in the compound forums and having discussions with about how different assets can be listed uh so I would say generally there's I always see positive interactions from all three teams uh I'm going to talk about a before uh I think uh boring uh premiums or like what's the it's the name boring premiums liquidity premiums that essentially bring a different rates for depending on the collateral assets uh you have I think is going to unlock a lot of uh long assets on on iv4 or at least it's my interpretation and that was really a missing piece in i3 and I'm excited by by by this feature talk about both these guys so no I mean I do appreciate uh the capability of Morpho blue of covering some aspects that we cannot cover uh or we can do but in a way more convoluted way on av3 at the moment so for example what What spark does with uh Morpho blue and the Tina it's doable on iv3 but it's in a convoluted way that is really not elegant so this is something that we are planning to address with before certainly uh there will be we recently started creating we will start with a Lio market so there will be a Lio Market specifically to to cover specific needs of the uh Li Alliance uh but I think like we will be covering in a more elegant way this particular use cases with have before but that's something that is really really interesting because I can see the value for an issuer like uh maker to be able to allocate liquidity in such a granular way and a controlled way and uh from on the maker side what I like is the ability to segregate the collateral because while they want to but in a in a very isolated way in individual walls so per user uh while in their case some users want wanted what a was able to do uh so provide liquidity aggregation on eth and and yel on the that additional yel on the repo deated e we also have users especially uh institutional that at the moment they don't use a and rather use maker specifically because they don't want to mix their collateral their assets together in a pool with assets of An unproven Origin right so um that that's a very important feature we will have also before we will have something like this uh called vaults and smart accounts that will allow users to borrow um from the a pool Imaging like you can borrow them today from av3 but using your safe bullet and keeping your your collateral in your safe wallet rather than supplying to to the pool and still having the capability of borrowing from a this is something that's going to be supported in in a before so um we like to see what others do take the best things and rework them in a way that make most the most sense for us awesome thanks for your time guys [Applause]