PANEL: Breaking the Stablecoin Trilemma; Scalability vs Stability vs Decentralisation

baby [Music] hello and thank you all for being here we have some great panelists here so there will be no slides nothing so and let's also change up the dynamic a little bit so we have some questions that we have prepared for this panel but if you want to ask a question don't wait until the end ask a question right away if you want to contribute to the conversation you are free to discuss with each other as well interact with each other so just to start with could you please present yourselves and your project your stubble coin whatever initiative we are the Ave dalmen delegates and also service provider to the avedo and in a few hours we do something so stable control go and uh yeah one of the the youngest stablecoin in the pattern I guess one day old not even one day not a in yeah two two and a half hours yeah we will be witnessing a birth of a new stablecoin then yeah I guess so okay Robert hey I'm Robert lauco I'm founder and head of research at liquidity liquidy has maybe some of you are familiar with it's a stable coin and borrowing system which has been live for more than two years now but just recently we started like working on a new project which would be some kind of successor yeah or new version on everything related to financial work so we work for her make a dial DNS Lido and plenty of others but yeah with mainly mainly known to have been working for make it up for the last three years and implementing the hill what I said strategies hey my name is co-founder of angle so we started with a stable Euro the last largest one um in volume sorry um and uh so we intend like to do all those stable coins um with the new models that we're gonna talk after that and um and yes that's pretty much it hey my name is Mayor I'm co-founder of fluid protocol uh fluid is a stable coin on fuel Network so we're building ourselves as the native stable coin for fuel heavily inspired by liquidy protocol but Rewritten in scratch in sway which is a rust-based programming language and with a few different differences from liquidy so multi-collateral partial liquidations no recovery mode if you're familiar with liquidity you might understand some of that thank you to all of you so this panel is about a trilemma because for some reasons we can have everything good we always have to choose we have had the blockchain through them or we have the stubble coin Trail ammo and before going through each of the points of the Trillium of the three choices let's say um let's start with the design of a stablecoin um do you consider this trilemma before you start your project or basically you start with the idea and then you try to respond to each of the of the underlying factors do you want us to explain the trailer maybe yes please okay so uh the stable code triam you talk about this this morning and you solve it this morning I guess everything we should see okay bye nothing to discuss was great but you too you solve it everybody solve it it's like an impermanent floods for decks you know everybody solved it but we will see in six months uh so The World trailer is that your stable coin can be decentralized uh scalable uh and uh what's what will be the third for you for me uh resilient or robust yeah pack Brazilian for us yeah it's the same thing so very close to one dollar if you're tracking the the USD for example or one Euro yeah in the case of Android EGU and it's hard to have all all three at the same time usually the more decentralized you are with like uh for example only eat ascolate all the less big resilient and scalable you are and so on and so forth yeah maybe I just to add to it I mean there are multiple I think definitions so I mean one is looking at the capital efficiency that's more like an inside view I mean that's like how much the protocol how like how much value it needs from the underlying like asset or or network like how well it can cope with like the economic bandwidth but I used to prefer like a slightly different like trilemma which is more about like the outside view um yeah that's more the peg uh at least like Peck stability and then also resilience which is kind of the more the long-term resiliency against like shocks against like the the black swans in decentralization I think that said that everybody agrees that that's part of the trilemma yeah but I guess like Capital efficiency and skull and scalability is not really the same thing like for me like we started with this trailer which is decentralization capillary efficiency and stability and I think we're going more to one like Capital efficiency is great you can like have like 100 30 percent over collateralization or something like that but like earning like this few percentage more is not as important as scalability and so I would say like right now the trailer is more about scalability decentralization and and surprise stability and that's the most important part for me because some people like to especially on crypto Twitter like to to have like some kind of TV PVP mindset that at the end of the day every single actual decentralized project a guo LUSD maybe go uh even now is so small compared to the actually centralized I said like usdc and usdt so the room to grow and the path for scrability allows to have multiple implementation and I think there's more pathway for Synergy at the current state of decentralized stablecoin than actually being PVP on this and I guess like gesture and serial your first question so our angle I guess we have more like an ideology so because they're like this is three puns and so we like one most important thing for us is the stability because if your stable coin is not stable to what you're trying to replicate then you cannot fail so for for for me at least it's gonna be stability before before anything else and and then it would be more scalability and try like after that like to be as as much as decentralized as possible so that's kind of a way of thinking and so it's just about where you put the cursor because even like there are multiple way like to really Define decentralization it could be like on the collateral you accept it could be like on the process the process processes of the governance so even that you have like multiple definitions so really um answering to this question of uh the tree dilemma is not easy because you're gonna have the previous form of decentralization that won't fit your stable coin and I would say the best advice if you want to launch a stable coin is to be so understanding of what you are doing and the choice you are doing that to not use the stable conditioner because if you are really staying in the stablecon 3dma that you are not understanding everything because we speak about Capital efficiency and over characterization you can see here make it out is over characterized by 150 maybe I don't know that's a lie it's not true it's not Capital efficient it's Capital efficient because for each day there is 1.05 assets that is collateral but that's a secure loan and if you go look on the tri-fi market well there is a lot of overcoateralized loans and there is a lot of money creation so it's not because you are over collateralized that you cannot scale just the fact that we started with only two assets when one assets let's say crypto currencies like if and is super volatile and not a lot of people want to take loans sometimes when you want to scale so that's limitation but that's just because we don't have good assets on trade for my view yeah I mean I agree that like yeah this collateralization rate is not like the main I think limitation of scalability it's more that loans itself like margin loans or lumbar loans or just have like a certain market and if that market is kind of fully used up then but at the same time you know maybe people want to buy the stable coin so then there can be a mismatch between like those who would like to borrow against some asset no matter what I said but just some asset and and those who want to own like Buy and Hold the stable coin so I think that's like the main scalability issue that we are facing with like the cdb based systems and you're quite right because we always speak about scalability on the asset side how we if we don't can if if we are just CDP based on ease when we can go we cannot go higher than the market cap of ease come on wait I'm not as a market cap office anyway the problem is not on the asset side I mean we have an issue of having good assets that if we agree but the problem is that no one wants to hold your stable coin and they are using usdt and UST so that's a real problem to find users that want to use your stablecoin not so much about how you do on the asset side there is a lot funnels it's better to focus on the asset side but if you want to launch a stable coin it's more about why should someone hold your stablecoin and that's actually a very important thing because when you look at the actual market like the actual people uh you all you have the speculations side of these centralized finance that you stablecoin as the Aging tool so they want to stay Unchained and they will also die they will go out some LUSD and they they will have some kind of protection from variety on that but if you look at stablecoin hours payment system 99 of that is centralized stable coins like if you go to Istanbul for devconnect there's a good chance you can pay your taxi with usdt but that's usdt and throw most of the time and they don't [ __ ] care about decentralization because the ux is great it's cheap it happens and they did a lot of work on the troll Network to to accept stablecoin in the real life and that's an important thing to do when you launch a stablecoin is that what you optimize for which kind of use case what is your audience that's why there's there's room for every everybody and for example go on the first day you can buy socks with it of course you can use e tascon to buy your loan and buy more eat if you want to if you believe the price of it will increase or do exactly the opposite use another stable coin and short anything you want with it but if you want you can buy socks and or you can support your favorite content creator on lens which is cool why not and I think that's the the part that all of us should develop more and more but don't you think that we have like a slight disadvantage compared to the centralized stable coins because those are the ones that are integrated in the Texas like the c e centralized exchanges and they also used for on and off ramp so they have this kind of built-in advantage and for for really decentralized Define native stable coins I mean there is this lack of demand coming from you know this exchange facility which allows you to on-ramp and off frame yeah I think you you talk about a really interesting point where um you have to make a difference between the usage of the stablecoin how you use it where you can use it um and the technology behind it because the trilemma it only concerns the technology doesn't care about adoption it only concerns the design of your stable coin and we have seen many stable coins um being created so we have angle we have we have liquidy we have go uh we have stable coins from the past like usdc usdt and so with all the developments do you think that the trilemma is still up to date today or can we find something which suits more the current landscape of stable coins yeah in my view you are just when you launch a stable coin you're trying to optimize for two constraints with one which is liquidity the ability to to move from your stable coin to dollar and should be close to one to one if otherwise not a good sabercoin but you can decide well we have more soft pack than it works as well but it should be up front and the other one is solvency do you have the backing so if everyone wants to exit your system you are still surviving and that was the point of terrain it was obvious since the start but you just need to grow a balance sheet and see what happens and you can also see what happens if there is fluctuation in if you have a CDP or a kind of assets you can see what are the risk and so on and you can just see yeah see what happens and then you see with those two constraints which you can decide up front what do you want to optimize you can you might want to optimize a return for the stable code holders return for the governance token orders and other goals being some Starship resistance and plenty of other Goods but you cannot you need to be sure that you are trying to do what you want to do anyone want to add something well yeah I agree fully with the fact that I mean it's a multi-dimensional um set-off criteria that you want to fulfill it's not just the three of the trilemma of it if you kind of include other elements I think it could be a pantemma or maybe even a whatever how many um yeah but would you agree that you have two one is liquidity there's one Solen C and we have decentralization I mean decentralization which we can discuss if it's a stable coin they all all the other are centralized in a way that they are using at least a bit of usdc or other stuff do you think it's that binary sorry do you think it's that binary I don't think so no no binary I mean you can be a ever shared or an even desensitization if the government want to shut you down and you are now no exchange and you barely exist on the ethereum for East Maxis well are you succeeding you will not get scale so we are focusing a lot on that front Capital efficiency and not so much about wealth people that want to rule the stable car and just want to be sure that there is backing they cannot redeem if everyone wants to redeem and when they redeem it's one dollar actually just like I actually agree about like trying to solve solvency if you have sovereignty and the price is always at one and you can scale like you can really scale you can like absorb any demands then why do you need to like to answer another question but like because you're definitely doing your job like your job which is like trying to be stable around something and whenever you want to exit you can exit at the right value so you just solve everything yeah I mean ultimately I agree that I mean you could make the point that decentralization is subordinate to stability because you could say like if there was like a world government that everybody trusts and we know that it will work perfectly and everybody would like it and you would could have a cbdc kind of issued by this agency and do not need decentralization because everybody knows that it's a word but we are not in a perfect world and that's why decentralization matters because we can't have those you know perfect issuers of stable coins no I agree that's why you need to tend towards that but I agree it's not that easy to have full full um for um solvency thank you it's hard to go towards that but like if you solve it like if you complete these two tasks like then you can add decentralization because if you are not pegged and you are not solvent I mean you don't have a business to start with that's just adding a utility value on top of it well yeah I think like you were saying earlier though you know everybody usually puts Peg at the top and then the trade-off is more in between scalability and decentralization so I don't think anybody's suggesting you would trade decentralization for Peg stability because then you know if you if you're totally decentralized with no Peg it doesn't really make any sense so yeah but on the other hand also to worry about what you were saying right before um the peg sometimes doesn't depend on the solvency so the pack basically depends on the secondary market so it's basically about the trust that people put into your stubble coin and for example if even if you're solvent and all the people start selling your stubble coin then your stubble coin loses its Peg no because they were just going to exit your protocol and as it is solvent it's just they're just going to exit add to value at the right value because otherwise you're not solvent like if everybody tries to go out of your of your protocol at the same time and the price drop then you're not solvent so you can say and there was a free bankings could learn 300 years ago there wasn't a backdrop and there was the thing the banks were investing the money and it was one to one until well it's not and then there was a One bank they created what's it called the option close is to say well we don't have the money yet but we will pay you in 90 days and we will give you an interest in the meantime and that's we are breaking the liquidity but the fact is if you are one to one in the primary market and I would separate the primary Market which is a protocol of the secondary Market which is something else I mean Circle has five day to redeem no one was never redeemed at anything else at one dollars so it was different on the secondary Market but that's that's another story uh at maker for instance it's always a one-to-one and we don't have a quality of service but we you can see what are the level of reserves and you know that 99.99 of the time it will be one dollar and I think that's a very important distinction you just mentioned I mean the primary market and the secondary Market because currently for like as far as I know there is no decentralized stable coin that would offer like a liquid primary Market that would always mint a stable coin and also redeem it because all the ones that offer this kind of minting and Redemption they they are using like usdc or some centralized asset in the background so I think that that's kind of what motivated me to kind of think more about like how we could solve this challenge um to yeah have something that power is a primary market like an asset that is decentralized but don't you think that on the secondary Market there is this element of trust which is important because for example today many people use stable coins as collateral for loans Etc so if the stablecoin loses its Peg because people are exiting on the secondary markets so not talking on the protocol level on the secondary Market it can affect the pack dumps you think that there is this element of trust that is still important for stable coins because at the end of the day we got like so many like in the past two years and uh of D5 we have so many examples of historical Market data of usdc going below pack like a few weeks ago usdt you're going be opaque for a few a few months ago died going over pack so many times like a few years ago and when it's actually settlement the the equilibrium in the market is back to back and that's what you you end up with eventually and also um like it's more like about angle I guess but PSM could be something used by arbitration so like more pro pro like Pro users and IMM will be more targeted to to one like casual users I would say and so if you're fully fully solvent it's just going to be this Arbitrage like this kind of Arbitrage and it's just going to be taken right right away because like it's a blockchain so if there is an average where you're making 10 cents you cannot do it and so if you're like confident of on your primary Market on like price diability module or something like that or whatever it is then like users can panic and like can sell it for like 80 cents even if like the reserves are at one dollar it would be fine because like Arbitrage you need to have enough arbitrages like to re-establish and if they don't lose face in your in your in your protocol so I guess that's what happened with circle which was a depend on the secondary Market but um like pro pro users just like disconnect their Bots because they were not sure about what were the reserves and that's where come decentralized stable coins it's just because you know what are in the reserves uh even if you take real water sets um there could be some some issues with that but you kind of lose this trust on the auditor that that use that Circle used or something like that it also depends on how you decide or you define as a protocol your risk models like a good example of that if for example a lot of stable coins will use uh sticky task collateral and when you look at the history of sde from NATO you you got like a few uh events of DPAC so the protocol was working perfectly like people's take Dairy there and uh it's one to one but before Shanghai the actual merge it was a one-way street so it was impossible to convert your st8 into it no it's a possibility but you got a few events of DPAC for the sde but the actual interesting value of sde it was actually one eat and and the thing is that all your protocol Define this risk model should you as a protocol only look at the primary market and say well if the nerd operator are still working and the Lido protocol is solvent and everything is working correctly should I care that right now on curve they tell me you can buy one SD for 0.98 should I care as a protocol should I liquidate my users or actor or activate or should I adapt to it and say maybe my price feed the way I price the asset will be different yeah maybe it's fine if if you have like a long-term guarantee or at least a very strong expectation that it will return so yeah I think there is this kind of trade-off that sometimes maybe it's better to relax like some short-term goal to make sure that in the long term you can hold it so that you have like fewer trade-offs in other areas and that's why we design we chain link to have like uh asochronous Oracle price feed updates on those specific assets that will look at the single dairy market but in a very specific Market event if there's like a hike of utlayer volatility on on the asset maybe the protocol can consider the primary market and say okay secondary is one thing but maybe the right answer is on the private but it's all you design your risk model that makes your protocol more resilient or not but I definitely get it and so I'm like I'm kind of in the same spirit I guess but I um for stake for stake is for for instance I guess we Enterprise like the risk of stake is so you get like your five percent but we maybe dot doesn't have like the like the the backlog like to really assess the risk of it and so maybe doing like this hypothesis like you could be like could be at risk for for the protocol it's super hard to design because we talked about STD but for example usdc usdc can be used as Colorado should I care as a protocol if you sdca on curve is at 92 cents or should I consider that my uh that I have some position that are underwater on paper like the protocol should consider that the air Factor are up to liquidation but should the protocol allow those liquidation or just win for one day because that excess debt probably not gonna turn itself into bad debt and user that loses actually money and it's extremely hard to design and there's no good answer and we all have to learn from each other to make the the full model and the full decentralized Finance more resident of this and I actually really like that so because during the US so at angle we were pricing it from from chain link so when it dropped it was at like zero zero eighty five dollar or something like that zero nine I don't remember and so we were like uh selling uh this assets uh because basically people were redeeming their zero for usdc and so like in overhead we were like okay so we may be selling it at a loss because uh I guess it's not at this price but it was an hypothesis and so like I guess as a protocol you don't need to make you shouldn't make any hypothesis whether it's going to go up or down so that's why like I was pretty happy that we sold it at 0.85 and that we just clear the position it happened like it all it go it went up after that and so we made a loss but in my opinion the protocol should be like agnostic about this kind of yeah usdc is going to go up after that or it's going to go to zero and so that's funny because it's so for maker so maker it was priced at one dollar and so there was like kind of another hypothesis which was okay so it's going to be back to one one dollar and so in the end it was a good trade for maker because you just like price it up one dollar and so you just like um got a lot of usdc in the PSM and so it was all good but I guess in the end you don't want to make this hypothesis so yeah I think the I mean we knew it's not perfect but uh people now clearly understands our true price for stablecoin and you could already understand that uh two years ago when there was an issue on the local price of compound where Dai was 1.

4 I mean you cannot get 1.4 dollars per die is it for sure so there is a phase value if you buy die above one dollar well you are not you are doing your mistake so you know that the max price of any stable coin except maybe liquidity liquidity it's one dollar and then you have a signal price which is the market price so you shouldn't let people to deposit one usdc and say oh that's one dollar you should take the lower price and anger does it I think sometimes you have two workers and other protocols as well and you take all always the the best one for the protocol so you're always winning and that's the kind of stuff I think we should do because if you use the market price and we always discuss again because we are CDP base in this economy using ES has collateral to take alone we recreate I mean everyone is speaking about liquidation let's liquidate usdc let's criticulate Clearwater set I mean like no we cannot create command uh and people want to liquidate whatever the price and if we already create usdc I mean the price will go to zero and then we are not good because we will just set all collateral to zero because programmatically that will happen and that was already the case with if at some point there was a big liquidation of 600 million and pick it up at one point I mean it was saved a few minutes before the the deadline what would have happened if we the we would Market sold 600 million of ease in a short period of time so but market price in a bad event is not a good price neither but I think that's also a consequence of maybe in not the most efficient liquidation mechanism design because I mean that's what we try to improve upon at liquidity that you would basically already have the assets available like the stable collect the debt asset so that when you need to liquidate a collateral you don't need to sell it because you already have the buyer kind of uh pre-selected like for um this case so it means that yes I agree like if you want to like force fire sale something you have to be very careful because you will like impact the market price potentially a lot even with ether and intro advisor did the same thing in 2008 there was a lot of selling on Triple A your abs or imbs there were 20 I don't know how far down It Go did it go but at the end they were kind of all the redeemed power or very close to it it was worse well there is no buyer oh the CDP for AAA RBS are not working oh I need to suggest that to buy something else I have no other choice so fire sale liquidation kind of work those days but if we go 10 times bigger than what you are today it will not work it's actually a very interesting set of remarks because I think there's a lot of room of improvement in liquidation models so everybody got inspired by Mikado and we we should give credit to that of the CDP model and the liquidation auction but then we went with compound and Navi to a partial liquidation so you have a health factor and then you have a close factor or uh of a way that someone anybody in the world can pay debt on behalf of the user in exchange of a liquidation bonus but there's more and more innovation in this space and I think there's room for improvement in this space like they are not independent but they are part of the organizer like curva curve USD have like a very elegant model of a liquidation range bounds that are that does it gradually and I think one years from now we will all improve our models I I think there's uh like an improvement to like liquidations done as component Ave which was introduced by uh Euler which was basically liquidating just enough to go back to uh Health factors that is correct and we implemented that at angle like just lightly modified it but like we inspired from from that so I think it's already a a good like a good Improvement on the CDP model I think it's an interesting point because well when you design your protocol you have to stick to the code you don't get to make decisions you for example if you have to create a loan which is a bad loan where the collateral goes down then as per your design you have to liquidate it otherwise if you decide like yeah it might go up again you're a fund manager you're not a protocol anymore so I think this is where uh it's interesting to see like the design or in the code for each protocol about the liquidations about everything and I think that we still have to emphasize the education about protocols about liquidations about like the price the prices the risks uh the collateral which collateral should be used which can be used which is the cap for the for the collateral that can be deposited into your protocol et cetera Etc so I think these are really interesting points that we have talked about and let's get back to the trilemma into the to the stability Point um so I think Robert you can get a great input on this so um as we said we are aiming for stability so the peg around one dollar and you have chosen a soft Peg which is not exactly one dollar it's I think it's 1.1 and 0.9 something like this one in one ten okay yeah yeah and so why did you choose it and do you think that it's more efficient than to maintain a heart Peg well I mean just going back I mean that's the design of our current liquidity system which has been now out for more than two years I mean of course it was uh partially influenced by makers design and maker like single collateral die um initially I mean they I mean they only had a soft Peg which means that I mean they could manage the interest rate like the stability fee but they could not they couldn't really do anything to keep it really close to one I mean just changing an interest rate may not have a very direct or immediate effect on on your stable coin or the price so what we did with liquidity is that we introduce like an asymmetric um heart Peg like a hard price floor which only acts on the downside so to say so we have this direct Redemption so people can basically come and redeem their LUSD for basically at face value so they get like The Ether from other borrowers there is a fee which is dynamic but if we abstract it away you can say that more or less there is this uh hard price floor downward but there's nothing similar um on the upwards like on the other side except for when the token like when the LUSD gets above 110 because then you can do an Arbitrage by just taking out the maximum amount the mxml LTV which is like a bit more than 90 percent and sell it on the market so you can just do an Arbitrage trade by getting up to the maximum with your debt so that kind of confines the LUSD price between those two boundaries but it was I mean it was already cons like it decision to make it so that now people have a kind of belief that it shouldn't be completely off but of course it's a soft pack because even though there are mechanisms that would make it so that it should be closer to one we cannot guarantee that like and and we have seen in the past that it's sometimes traded like two or three cents above or even four I mean it was a decision to kind of improve upon die but without introducing like the pack stability module which would then kind of go against decentralization okay and now going to you um yeah Sebastian sorry I was confused um so Sebastian I went to your website did my homework uh so that you have a lot of people focusing on real world assets and that you are working with many dials and maker is part of the of the daos and we have seen that maker are integrating more and more real world assets into their treasury do you think it's something good for this stability over stubble coin and have you seen any projects doing it's really in an efficient way it's still early days so I came up to do really what I said by accident three years ago because no one wanted and I thought it would take three weeks three years I have later we are still almost nowhere but McDowell has invested close to or will be close to 2 billion in many treasuries but also really real estate loans with the Community Bank in the US and plenty of other product uh it's quite challenging but actually it's the part of the key solution and again if you look we are all most of us are so you you just say that well make a doubt me it's the decision to use the PSM and usdc as a way to Value deposit one usdc you get one die and the opposite that was not an easy decision there was a lot of people hating us operating those people that made a decision I did I was for it but I wasn't obviously voting a lot and no those days everyone is using usdc and it's not a real water set it's well is it still centralized I mean we are all using it a lot so it's less an issue and I think the same we're seeing will happen with real water set they are super centralized or you have there is always well usdc is fine but if you go in here what I said then you are no longer sensorship resistant I mean same thing and you can say well you can deposit the liquidity in a balanced big balancer pool of usdc so you cannot be blacklisted but they can just Blacklist otherwise that is on the other side of the depositor in the Bronson pool so there are a lot of limitations and if I think to to go a bit beyond having just us this year or other stable current as an asset doesn't make much sense because you already have the stable coin so why do you you have it on the asset side and on the rapid side it's a balcony issue so there is no value really so you need to find a ways to to scale to go back to the 3D map to scale and that I mean except if there are a lot of people want to borrow against the East which is not the case at scale and might never be the case at scale uh well we need to find something else and if you look the world banking system in the real world is based on functional Reserve banking so making loans you have interest on the asset side and you issue a bank deposit or let's call it tokenized bank deposit on for to be a bit more crypto but the stable current is quite similar in the sense that well you can you just need to be able when you deposit something you get the stable coin and it could be almost anything yeah ideally something that should be issued is the unit of account of the currency so US Dollars and usually you loan a bond or whatever you want that is increasing in value over time could be a bit of a volatility but something that increase in value over time and it and that is not too risky and so that's what we call Asset which is not that complex and if you look at cdps they are just loans issued in US dollars in US dollars and are creating interest every 12 seconds so there are all the same kind of assets and to your point if you cannot if you wait on someone to take a loan you cannot you cannot scale by keeping the pack because you need someone to act and it might not act so you need to be able to buy assets and you can have arbitrager as you say that will uh fix it so what I said especially tbils I think that's the movement we are in make it always invested a lot of chain which is not great and not so much for decentralization because if you invest in tokens the fact that we have tokens instead of a trust in BVI buying tbils through a bank Signum in Switzerland doesn't change much the problem it's just that remove from Google announce the burden of doing those very complex legal details so I think that's how we will scale we need to hear what I said because most of the stuff is in the real world and uh to scale yeah we we need those but we shouldn't make them tokenized and so we could still have stablecoin protocols that are fully on chain except one of the assets is kind of us this year I have two things to say to that first thing real world I said is a shitty name because what happened on the blockchain is real like buy it here is really more real than most things that happen in traditional Finance so I prefer like off-chain assets that's my personal preference and I try to Shield that that naming but the second thing is like more serious obviously is don't you think this all these option I said attractiveness is that temporary because in the sense that right now usdc is printing money so Cash Call and the same thing with usdt I think they make three million dollar three billion dollars profit last quarter because uh the central banks there's some kind of inflation the central banks increase the rates so you have risk-free ish product or at least high quality bounds that uh print money right now but what was pre-pandemic the yield on this kind of product and I don't know if like personally and I would like to know your vision I don't know if it's something super interesting for the next 18 months but three years from now when inflation will go back to normal rate and you will be happy if you make the ordered five percent on treasury bills real water SEC will be so sexy at this point yeah just a quick one so yeah I guess like you you should not like close those and this would be closing a door and just staying on the blockchain so obviously like in general you consume real assets and so I would not like to close this door of consuming yeah for sure like okay every option is open but I I'm I I have the feeling we find this option super sexy but that's uh historical outlier in terms of you and and I'm also like just wondering I mean if you imagine like let's say a very simple die whatever like stable coin which is just collateralized by t-bills and even if you are kind of um let's say giving the yield of the t-bill to your stablecoin stakers or holders I mean what you ended up creating is just a wrapper around tables like why wouldn't them people just hold on or just like invest in tokenized tables in the first place so that's kind of the question I mean by just adding I mean it has to offer a value on top otherwise it's a bit yeah yeah you know uh I can't take this one you are completely right and this is my thesis that no stable coin so it's a stable coin the interest you should pay to the fees you should pay to the person holding your stable coin is uh the should be a risk-free rate plus the credit risk of your protocol minus the utility value you provide because well you have a cool server and plenty of integration because and and so the risk-free rate will not go away let's say it's zero you see level the credit risk you can say well make a no it's not risky so it's not it's fine don't give me anything or you can say oh make your love is risky it's my contract who knows what will happen with a smart contract and so on so you can make really risk and utility value I mean honestly we are in uh in the trial it's difficult to make a competitor to a bank I mean in defy you just copy paste the code so the utility various value will be close to zero so that means that every stable coin will have to pay the risk rate plus something more and so you can will not be because the money will create a stable coin on top of table set for sure so you will have to give a bit more so you will have to to take more risk so we will you will have to get some Equity buffer or whatever you want to call it as a protection for your stable coin holders and give a bit more of than the risk rate and that's different well you don't get the table rate you get 0.5 percent instead of five percent because well no one can move you cannot buy something with a t bill you need a bank account but in crypto I mean if I want to buy something with a tbil an es or Bitcoin I can I don't need to go to a stable coin first no I mean I see the added value of liquidity like if you can build a stable coin on top of something else uh which makes it then much more usable for transactions or exchanges then of course you you can maybe even justify a lower yield or Justify the added risk like just contract risk but that kind of implies that you have already built out like your liquidity or like accepted like in many places right but but then there is an answer before that so you said what is the trade-off between just holding these tables and having a protocol owning it for you it's the same thing as you have an amm that you can just deposit liquidity and okay let's come back like six months later and you will see what happened and it's because it's handled for you and so as it's called on chain you can like check the record and see how it works and see if it fits to your vision and so that's what you you are buying kind of it's just like the ease of mind to not have to look at your position every three four five hours days I don't know you name it and so that's really what you're looking for it's just because if you want to have not even Mass adoption but just like people in general like people over here even me I don't want to look at my position every day I just want to look them one sometimes and just forget about it and so that's what you're looking for when you have like a stable current protocol and so just a little thing so we all also like um we're gonna release a V2 of of the AG Euro and so with a new price stability module and so what we offer and so it's they're going to be real water set and tables and so what we offer is that you're going to be 100 sure that's your exposition to one of the assets so like for the case of of usdc for instance it never will go a person X percent and so you will you will know for every time that you cannot lose more than this x percent even if the asset goes through with zero and so that's Automation and so that's what I'm looking for on the blockchain just like to and it entered it for me I look at the code I'm like confident on what it's going to do and just like do it and I will keep my my ago or your stable currency or whatsoever okay yes we we have 10 minutes left a little bit less so there is one question I wanted to ask you all because it's something interesting interesting because we talk about the capital efficiency basically the amount of money that you have to spend to get loan to get a stubble coin um when vitalik last year presented southbound tokens he said that this could be a path to um a loan without any collateral do you think that it's something that we can achieve there therefore achieve Capital efficiency makes basically Max it out or do you think that we still have a lot of time before it comes in and there will be some factors that we will need to consider in order to have it I think that this is a really interesting idea I mean there are now a few like uncollateralized Landing platforms like say Goldfinch or or Maple but they are all just using I guess usdc or some existing stable coin so they have lenders which they need to match with the borrowers but why hasn't anybody built a stable coin that is given out through uncollaterized loans like where the low the loan itself is given out in this new stablecon of course you need to have some on-ramp and off-ramp which makes it more difficult than if TX was about to do it so yeah but I think that that could be an interesting like um novel approach because then you are the one like your stable coin will be the one benefiting from the senior Raj you are not giving it away to usdc I mean the problem with with like those Landing markets is that I mean the lenders need to get like paid of course and I think it could be a better deal overall if you can mint your own stable coin to give it out as an uncollaterized loan which is then basically backed of course by reputation maybe also by legal agreements of course it's not fully decentralized but it's uh it's another then it's okay what I said yeah it's a legal agreement yeah it's yeah what you optimize for it's always the same thing is that if you optimize for Pure decentralization that's not the base case and also we have a lot of historic Market data on on the characterized loans and all they end up I think Celsius was the biggest one but unknowingly uh it's always the same thing what you optimize for and I have the feeling that in the panel you have like a good like representation on the Spectrum that's for example liquidity will be more on the decentralized side of the spectrum and the other ones are somewhere else on that spectrum and that I think it's good you have several options in an ecosystem anyway and do you think in the long term we could see self-repaying loans for example you put if there's collateral and basically the stick is collateral and basically your the interest that you earn on that ethereum basically repays your loan automatically um same thing with other basically proof of stake occurrences do you think that's something that can be done in something that would be efficient alchemics probably gonna do a V2 or V3 I don't follow like the versioning numbers but that's uh that's what they do is that they they will probably the thing is that it's self-reping but uh the money has to come from somewhere so you are basically giving out your uh if you are like using SD eats you are giving away your yield in it in order to repay your uh your loan that is based in USD but me for example I think that it will over perform USD and the the why I use stablecoin as an individual and it's not a financial advice is that I believe that my it has more value than dollars so I'm shorting the dollars each time I use D5 that's the main use case of D5 for me and the thing is that I don't want to sell my it yield for dollars because I think it is more valuable so it depends many options in the ecosystem and just like self-repaying tabs is like great but it's like ux it's not gonna change the world of stable kind it's just yeah it's easy for you for User it's automation so as we were talking about before you don't have to look more to your position but this is really not like a groundbreaking thing thank you oh yeah well we're more on the Spectrum with liquidy so um yeah we don't do any under cloudwise lending and then yeah for the so we will support stake ethereum as a collateral but yeah we're not going to use part of the stake yield to repay the loan basically so and maybe just to to close or not close we will see on the uncharacterized lending I mean that's we agree that you need a legal agreement or most likely because otherwise well I just have to lose my repetition so good luck I mean that will be exploited quite easily so we're talking about assets but if you cannot do a secure secured on the person or business which is not unsecured but it's not secured by something specific uh well whatever what are we doing I mean except us that we have some ease and we can borrow and it will self-repay because ease is going up because we were earlier than the rest of the world I mean what good are we doing if you cannot create if you cannot replace the bank why are we trying to create a new Financial system if we are worse than the bank then oh would you do that as a Dao like we decide what's the good credit rating and where you should mean money out of dinner I mean I'm not in D5 for this I think that will be always outside there could be some communities that will be managing and a stable coin protocol will just try to have a diversifier location and it will be kind of a real asset and we are talking about Dao so let's finish it up with decentralization I think it would be great for you mark because you work for other companies then for other then you're created your own initiative now which allows people to submit their proposals for a way to improve the protocol and so on this spectrum of decentralization what do you think the aim for stable coins and protocols should where should it lie no um in favor of diversity I'm not uh like uh I don't have the ego to say we have like the the best option and it will be this option for the next 200 years and that's why maybe we have like some uh disagreement or not really like a argument matter with the the fact that protocol should be mutable and governance less because for me there's a there's a very thick wall you will hurt yourself is that is my protocol future proof and absolutely perfect and it doesn't need to change for the next 200 years and as a human being making mistake as every human beings I like to let the door open to say maybe we should change things up in the future and all we do that in a decentralized way is to have a decentralized governance and a decentralized autonomous organization so that's more Vision on these things well just a quick point on on that I mean I agree that of course you cannot do something that will work in 100 years but being immutable doesn't necessarily imply that you cannot gracefully unwind your existing system and build a novel one where people can migrate I mean even that isn't easy so I mean but maker has done it to some extent I mean with amid signal collateral die and multicolateral die we don't do it with av1 then V2 then V3 MCD we all done it but it's a pain in the ass for liquidity fragmentation it's a pedina is for migration and things like that so I have the feeling that's my personal point of view I'm not saying I'm like smarter than everybody in the world and that's the truth but I have the feeling that it's good to open doors for some kind of wiggle room that you can involve with governance and immutability is more fit for protocols and less fit for application at least in my eyes I think I would say it's the opposite and let's agree to disagree that's a great pattern I think we need both kind of protocols I mean I think centralized one have some benefits decentralized governance on top of mutable protocols I mean if you have a stable current but you have locked down on seven days before making any change and everything is on chain with some safeties that no stable can protocol offer now uh maybe not to this one but and even there I mean you get a lot of slack on using training which has a multi-seig and so on I mean we can always debate on we are not at the end game for sure currently but we are going but there is still room for I mean you can still try we can always improve and I think we will improve in many directions and then the market will decide I think there is place from stable coins that are completely censorship resistant I don't think that will be used uh use case for the rest of the world but for maybe for the people who this room most likely and but centralized we companies will also do stablecoin and decentralized will do as well as long as it remains on train I mean I'm working on her water set for Makita which are off chain so first step would be to migrate them on chain so just like quickly for me like decentralization should just like at least like deal like rights on the protocol should be long-term Vision so I guess like a bit like mark and [Music] um and uh so yeah it should be like long-term Vision uh in in general and you should not like having like some plugs that you can like put uh like in short-term period and so it should be autonomous in the sense that it's fair like for everybody like you can always interact you know how you will interact with it and you know that nobody can like screw you like by just passing one transaction and that's and for me that's good that's good enough actually in this setup actually yeah so I think a lot of what we've been talking about today has been about maybe the biggest decision developers can make which is collateral types basically so I think that's where the main use of governance comes in for a stable coin I think it's the main challenge for like an immutable one with liquidity as well is like you know if you choose stake teeth then what if there's a different liquid stake derivative which comes out so if you could have a protocol that was multi-collateral and could add more collateral types about governance that would be great but that's kind of the main downside I think for not having governance um but yeah I mean obviously it's a trade-off so um yeah we're opting not to have governance but we're going to be multi-collateral so we're going to try to put in a few different collateral types at the beginning to try to increase the scalability there well thank you very much and as Garrett said in the beginning of the day we have Giga brains in the in the house and so talking to each other I think that all of you are smarter guys and I think you we can all learn from each other see what's what other people are doing so please give it up for the speakers and maybe we have some questions if someone wants to ask a question oh thank you for the panel very very interesting I enjoy it too much I think all of us and so much content to dig in and but I still um I have the view that in the industry we kind of debugging from the initial idea of what's the end goal of stable coins per se right Sebastian I think pointed out in that direction I mean we are very much focused on the direction of this is a financial asset that Traders we can Mark can make and get some profit on it and but we are losing the part of this is in the end and a payment instrument right and what's a payment it's not a financial transfer so payment implies in the involvement of real good and services transactions behind right so if we want to replace that as an industry with something better we need to replace the system as it is and what drives the singleness of money in the system in the current system that we have is something that we need as an industry come together and design it better than we have and the singleness of money in the current system is determined by having the settlement a common settlement asset basically that is the Central Bank liability they call it outside money they call it ultimate it's not really outside money because it's already in the inside the banking system but it's what they is the common asset that no one has access to so I think we cannot compete with that unless we agree as an industry on a common outside asset as a digital commodity to settle and I see a big threat as the tokenized deposits on this because tokenized deposits are in a closer distance to the hierarchy of money to access to the central bank money than stable coins so I think these are real topics that we should discuss I don't know what's their view on this topic understanding the hierarchy of money I think yeah I know but you are right that single learning stuff money is something that might kill us because as an industry we are not moving in this Direction I mean I'm an art bag Maxi because of the singleness of money and otherwise you will read the bis and all the regular testing audifa is not good stablecoin are not good no singleness of money and we can come back to the second reactions between primary elections that we discussed previously and tokenized bank deposit is exactly the same thing as a stable coin if you remove access to the to the to the FED it's just that people don't understand that a token is actually a ledger on the smart contractual level so they don't see the link and if you if you read my last blog I'll explain why we can achieve simulation of money quite easily without Central Bank currency because tbrs are kind of uh I mean it will work the same actually if you regard closely and alone against ease in this industry if you have a collateral ratio of 200 percent it's considered risk-free so you just need the unit of account and it's fine you know the price of ease and you you can create a arbitrary money that is good for this industry probably not for the regulator but for this industry but you are right that if we cannot show a Unity of having stable coins that are one dollars and it's not to say that we should but if we don't then the regulator will say no that's that's not synchronous of money blah blah blah no one we understand what they are saying about and they will shut us down and put tokenized bank deposit which are way less safer than just a stable coin issued on top of a tibial all the shutdown at a USD like it's immutable it's on the blockchain like they cannot do that yes no no they cannot but how can liquidity be used by a billion of people if they are not allowed to use it to for payments well I mean currently no no stable Quantum aware of issues for payments but I mean I think that's kind of um an overall like regulatory challenge So currently all the stable coins are in this bubble like in this D5 world and liquid is not an exception there so so yes I mean in that sense I mean but that's a challenge I agree I mean we need to kind of tackle together because only together we have a chance to kind of convince the regulator that may like hopefully in the future there will be something which is better than the current system like the current like Fiat payment system not that yeah probably needs some some collaborative effort or maybe we just need to convince like most of conception that is made of chain to go on chain without like trying to convince um like regular regulatory uh regular regulatory just like convince this like companies to for instance just an example issue T bills directly on chain or like uh by your your socks directly on chain and then it will go like forward but so that's why I think that we have it's a centralized stable gun first it's just because most of the conception is of chain and so I don't know like how many years it would take I don't have even like a gross like number of years but if we if we can move this conception on chain then we we don't even need actually easy centralized Stapleton that can be centured so I think that's more the point of view that I'm I am having on that yeah I think it's all about education still and the fact that people don't understand uh what we are doing for example if you show liquidity to a person who has never touched crypto in their life they wouldn't be under able to understand anything about it while you tell them well we tokenized the dollar now the dollar lives almost blockchain you can buy stocks with that that's great um so I think there is there is no Duality it's not binary like you can have some centralized elements still in the blockchain industry will still will have the need for this centralized pieces and elements to for the adoption for the to bring in more people but the end goal is for these people to move from the centralized elements to something more decentralized and basically it would be like a journey from coming in and then decentralizing your Solutions whatever you do on the blockchain and what I've heard like from from policy makers is that they are concerned about defy essay name only or Dino as somebody called it like from the oecd so they they are explicitly kind of afraid of like D5 just being like uh like a nice name for something that is inherently centralized so if you want to convince the regulator we need to be become more decentralized and less decentralized I think we're lucky enough to be in Europe or in the US where the government doesn't just kidnap your sister and keeps your keys so so I think we're well over time so one more one more question oh okay perfect Bruce uh yeah I guess I'm not sure it's the proper discussion but regarding the question that was asked before of having one assets for the settlement uh for me the way I see it at least is um if you like decentralization and trustlessness um a bit like what Mark was saying earlier actually you become a many stable coin maximalists you know so like if you're align with liquid is ideal for instance you you're not a LUSD Maxi you actually want to see more coins like LUSD and while Robert was decidating is a problem is there is none it's been two years and we're still waiting for our project to ship something as resilient as a USD because it will actually you know pave the path towards more infrastructure so we'll allow us for instance USD no we have another stable coin that is as resilient as awsd we can pair with for liquidity and things like that so essentially this approach naturally pushes towards tons of stable coins like right now I'm talking about the resilience side but even on the scalable decide probably there are other traders that makes it so that you need one stable gun for this one stable gun for that so at the end of the day for me I don't see how we avoid hundreds of relevant stable coming mother and I think the question is more about than the aggregation of State working back into something uh easy to use and and understand for the user so I don't know if you guys have some view on this maybe well obviously I completely agree with you Bruce and the thing is that it's what you there's different actors out there that have different needs and it's completely normal that you have different options for them and uh I think one a good tale of that of all position and other is that Ave we are launching gold but you still have LUSD or Navi and it's a more than welcome and we added LUSD recently on layer twos as well and you also have usdc usdt you also have die because we believe we have the strong belief at Avi that it's not a zero-sum game at least not right now maybe in 20 years when uh the stable Unchained stablecon Market is 20 trillion dollars maybe we will stop fighting each other for market share but right now we have to grow the buy and increase decentralization and resilience of the ecosystem as a world so and at the end of the day we are lucky we have great tools we have curve we have balancer we have Maverick we have V3 V4 so it's just a ux problem if I can freely go from LUSD then swap in a pool to go then move that into us this year and and that's what is credited on my early Health debit card and I paid that uh uh I paid my sandwich with this it's good enough ux and the user does he has to know that this tree is stable oops if it works it works well it's big red letter saying time out so thank you very much and give it up for the speakers once again