Panel | Building the Best Stablecoin Liquidity in Fragmented Markets

Hello everyone. Yes, Ian. I'm doing DeFi at Ethereum Foundation now. Previously was a co-ounder of Yearbox Protocol which is still alive. Honestly, haven't moderated in a while.

So, I hope you're all not sober at this point. Uh so that any uh hiccups you will totally ignore. Uh please meet the panelists today. uh Phil from Core Protocol, Ben from Superset, Lorenza from USDT0, and Jackie from Bridge. Um should we do you want to start with a round of intros about what you do?

Sure. Hi, I'm Phil Fogle. I'm building Cork Protocol. We're building a new primitive for DeFi, which is risk token so that you can take apart any risk in any in any different asset and price, trade, and then hedge your risk. Hey, I'm Ben Hlam, CTO and co-founder of Superset Finance, and we're building this brand new multi-chain architecture for unifying liquidity of multi-chain assets into one single market to give the best execution.

Uh, I'm Lorenzo. I'm one of the foers of USDT0. We are the largest onchain movers of uh, USDT between all of our 25 supported ecosystems.

Hi, I'm Jackie. Um, I lead Asia Stata at Bridge. Uh, bridge is an infrastructure company for stable coin where we do on offramping. We do issuance as well as uh stable backed cards. Okay.

So, what should we start with? Um, when you get to the well, the topic of today is building the best stable coin liquidity in fragmented markets. At least I can read still. Um, when you get to that topic, there are a few things you could consider. One is effects.

One is just liquidity and efficiency. Another one is um questions related to centralization, decentralization when it comes to swaps, liquidity on chain solvers and whatnot. So we'll try to touch all of them at least partly. Uh let's start with maybe some everybody loves to reminiscent about the old DeFi days, right? Lorenzo was just crying behind the stage yesterday about it.

So let's start off with that. Um, previously when you would get a stable coin on chain to bootstrap its liquidity and usage, you would go like the route of pretty much vars right you would have curve balancer incentify some votes that gets the initial liquidity then you get some oracles then you get it listed on lending markets and then if you are successful you might get to centralized exchanges. Most of the stable coins stop before that last step. But what do you guys think? Is the past still the same today or is the ask for new stable coins totally different when you want to get that initial liquidity at least?

What do you think?

I think it depends on what you mean by stable coin, right? If you have a yield bearing stable coin that's really something that's closer to a synthetic dollar and is actually a credit product wrapped in in a stable coin wrapper, it's very different. If you're trying to create a payment token that is genius compliant, you know, it really is about that a lot of that same activity. But on the credit side, if you're talking about synthetic dollars, it's a very different game today because actually what you want is distribution. It's not necessarily so much about how do I have instant liquidity for lots of people in very small amounts or now is much more about how do I find big institutional type buyers for these tokens.

Yeah, I like really agree with that because I feel like the market has really shifted from um more liquidity first to more demand first. So like today when you issue a stable coin it's not really just like how do I mint this token. It's a lot more about the holistic stack of like okay after minting or like during the minting I need to think about the reserves and I need to think about the onchain and um on ramping off ramping so it's connected with the real world I need to think about the utility like why do people hold my token? How do I get the distribution channel like have a lot more? So, um, so yeah, I think today's like kind of on the surface, sure, you work with market makers, you get these stacks liquidity going, you get listed on on centralized exchange, but today I think the starting point it's it's much more different.

I also just think there's more to consider than there wasn't before, such as which chains are you even going to launch on now? Like back in the day it was like pretty simple be Ethereum and maybe a couple of others but now there's like a dozen different chains you might want to launch on all at the same time and then what is the liquidity provision? What are the markets you even going to create on all of those? Are you going to have markets in all of those?

Yeah, I guess so. I mean on our side we're pretty lucky I have to say because we can tap into both sides. We have the centralized liquidity of USDT which is the best stable liquidity in the world and then what we do is just we take that and then we allow for frictionless movement between all the supported chains uh which basically allow us to basically pick up few chains with very deep liquidity and then all the others can just tap into that directly. Uh I really wouldn't want to be in the shoes of someone trying to kickstart this whole process all from the get-go because it's extremely hard and it takes a year to get it right even if you just want to do it on the onchain finance side and not on on centralized.

Yeah. And I think what ends up happening is it really depends who your users are, right? If you're USD0, right, you actually care about I need instant liquidity to other stable coins so people can go and take my stable coin, convert it to another stable coin to then go do what they want with it. And that has to always be on and always available. When you've created a yield product, what actually matters about who your user is is how do they want to redeem this?

What do they care about? Do they care about being able to exit this instantaneously or is there only a subset of users who want to care about this inst instantaneous redemption ability and will they pay for that and do you now have to you know so you don't necessarily have to create liquidity the way you did before

um nice segue in we are kind of feeding off the quotes of one another right first the question was set up for Lorenzo to perfectly [laughter] talk about that and Phil piled up so I can pile up on this one now uh speaking of conversion and the liquidity in fragmented markets really since a few years ago we kind of moved away from the EMM model right where every liquidity was on DEX and you would just have everything there. I remember like back in 2020 when when was USD around 2020 right still there

USD yeah

USD was big in 2020 2021 I guess was big

back in the days like we would even watch the recurve pool on curve finance right and if you see the discrepancy there even for something like USDT you would think oh something is wrong there even though comparatively it was a really tiny percentage of the entire supply uh then we moved away to the solver model right so a lot of these things you don't even see on chain as much anymore so would you say it became Of course, you could say it became more centralized, right? But do you think it's going to continue that way or do you think we're going to pull back a bit and just make onchain liquidity a bit more efficient?

I think you need both, right? Like you you have on one side the cow of this world and all the solver infrastructures, but you also still need that bedrock level of liquidity that is there that is regulated by AMMs and so on and so forth and especially for lending and risk assessment on lending protocols, you always want something like that because you always need your atomic executions and etc etc. So I think I'm very happy that we're moving into a world where solvers are more into play because there's way less need for capital sitting not exactly idol I guess but uh not also in the same level of APIs that I would like to have my capital sitting on on on AMMs uh and still gives pretty good experiences for users especially the average trader or retailer unless he's trying to go from a USDT into a in that case it's a big problem I guess [laughter]

I think it's it's interesting that you know in 2020 2021 the best way to monitor risk between stable coins was to look at a three curve pool, which was wonderful, but it's also totally absurd. That that is and today in 2026, that is still probably the best way to monitor stable coin health and the risk of stable coins is to actually look at something like a three- curve pool instead of there being an actual way to look at risk. And I think it's gotten a little bit better. You know, you do have stable coin ratings from places like S&P and a couple other people are are actually starting to do more on the rating side, but those ratings are static, right? they were done at a point in time.

They don't actually monitor something on a real-time basis. You know, if you look at Tradfy markets, credit markets actually exist to really give you real-time pricing and information about the risks in different products. And that's what we need in crypto markets. We need a way to actually have credit spreads um and products like that in order to actually see this actually in real time.

Yeah. And I guess just a comment since I feel like these days when we talk in DeFi, it's like three months is three years. So, it's very interesting that we're like looking back into like 2020 2021 period. Um, we I think we've moved a really like come a really long way. Like back then there's only like Uni V2 where like curve three pools and this is old news.

I know we all know this but with Unisoft V3 right the concentrated liquidity model um the capital onchain is much much more um efficient and last year we've seen a bunch of prop amm uh popping up as well. So I think even in the onchain world, sure I just looked at this the other day, we have like on average less than 1% of liquidity sitting on chain. I think we are approaching that world where it's like um pretty efficient for the onchain especially the top tokens but um where I think about is like still like nowadays I I do data so at unis swap even back then when I was doing data like I would still go look at the central exchange fee and look at the the the price ratio there. So like is there a a world where we can just like rely on the onchain world for some of these like oracle like I'm not sure we're there yet.

I should also mention that it was extremely easy to try to the peg USDT via the curve pool. It requires way less capital to do that via the the three pool compared to actually attacking the peg of USDT via centralized exchanges. It's something that requires way more capital, way more money because the market are objectively more efficient when it comes to uh centralized order books. I guess um I I still remember the days where we were all waiting on Twitter on trying to understand why there was 90% of the three pool being USDT and the rest was was being withdrawn.

Yeah. Uh on that topic actually one ways I see now protocols are trying to do things is to look back and okay how can we use capital on chain more efficiently for example if you look into AM's majority of the liquidity there right is spread out so much that at a certain point in time only a small percentage of that gets used right for example lending protocol started looking into things like okay what if you have your depth which is in the same time in an AMM right so that's one way to look at it yes we reciprocate collateral in a way and you kind of expose it to close risks but maybe that's the way to do it right another way I think uh without naming names right other protocols who are not lending but more so on the aggregator side they're trying to make it as such the liquidity that's for example in your wallet at the time can be used for swaps and things like that do you have like do you think this is the right way to go or do you think it's too risky because you somewhat use the same asset for multiple purposes at the same time or yeah what are your thoughts

it depends on the goal and it depends on what you ultimately need If you as a user are relying on their, for example, if you're a lending protocol that's relying on capital to absolutely be there, you need that capital to be there. You can't have it be that, oh, it was sitting in someone's wallet when I last looked and now it's not there anymore, but I built my underwriting strategy based on the fact that that capital was there at the time. So sometimes you need committed capital that you know is locked and going to be there for a long period of time. Other times it's perfectly fine to say it doesn't need to be there and we can be more capital efficient, but you need to be able to pay and price that efficiency.

Yeah, I agree. I think when it's basically in a protocol that's built with that in mind to be as efficient as possible, you can definitely do it right. Like basically in superset what we do is we have this virtualization layer which allows one deposit of a pair on one chain to basically be used to do trades on multiple chains at once. So it gets a lot more fees. But then all the liquidity on a given chain can then be used for multiple different pools at once.

and we basically have these abstraction layers. So that does work in a fair way and I don't think it can be exploited or like you couldn't find yourself in a situation like the one that you describe because it's all custom made for this one protocol but then it does make it much more efficient. I agree with both of you [laughter]

since we kind of started talking our own shop at this point which again natural right if you are building you're working on the team you have your own certain sets of opinions right that you want to push forward so let's just do one by one uh because also interesting I think to learn about specifically what is your vision for the product that you were building and why you made some choices like that for example Lorenzo start with you with USD0 I think at some point when bridges and like the intro of bridging started popping off a lot it was just custodial bridges then it was like solverbased model right and so on and at some point the asset issuers came out with their own direct redemption vehicles right that you can just deploy something so for us it has happened a couple of times that they would deploy their own like native way on the chain to redeem an issue directly and then I heard some questions okay why do we need this like replica essentially uh what's you heard this thing a lot right so what

a lot for the last 15 months straight so yeah you're totally right like it all starts with this idea that you do need to have some kind of interpolability layer between chain because in 2026 it's actually holding back a certain product or a certain stable coin not having this feature, right? And it also makes a lot of sense on why it takes a lot of time for the largest stable coin in the world to kind of innovate on that. It's because if you are the largest in the world, you also have a responsibility to go slow and make sure that everything that you do is battle tested and shows actually real demand. Um for the last 15 months or so, I don't remember the exact date, the native USD deployments have basically been scaled down to zero and all of the new ecosystems, uh plasma tempo, etc., etc.

all been consolidated underneath the USDT your standard. I think just because it's something that is a little bit gives a little bit better user experience for the end user that actually holds the stable cocoon itself right it's been an uphill battle I have to say because for the first few months it was extremely complex to try to explain people why the need was there um but like 15 months later and 8182 billion in volume between chains later it actually becomes very clear that if you take what is already in my opinion the best stable cocoin in the world which is tether itself and you just try to make it as I usually say I sound like a broken record at this point 1% % better. You actually get to a point where you get a lot of usage and we can do it with a in a very frictionless manner and we want to keep doing it and 2026 for us will be uh 2025 was basically the the year of first initial expansion. We launched like 25 chains. We were very aggressive.

Uh 2026 for hours will be still partially um consolidated on on the on the expansion side of things. But it was also going to be trying to make the experience for all of those deployments that had the native USDT deployments back in the days a little bit better. uh we do have a product that that serves that. It's called the legacy measure, but it's something that uh we think we can do better and I think in the next few months we'll be able to actually uh bring to market way better solutions for the actual end user. So we are pretty excited to to get to that.

It looked like for a second Jackie disagreed with you there. Maybe just halfway through to give you a chance to argue on that. Maybe perhaps but I'll throw a different question not to turn it too much into a fight is when doing research on what bridge offers right u the ability to for every issue essentially to decide to issue their own stable coin right and decide how reserves are being used where the yield is coming from and so on while being atomically enough right swapable between another to unify liquidity again I could be wrong and this is what I'm trying to set up so you could walk us through properly uh how to ensure that swapability is there and atomicity is there While the approach of one issue would be to go more risky versus the other one would be less risky, right? Because end of the day, one could decide, okay, there are just reserves in something absolutely lowrisk DeFi and something a bit more experimental. Do you just not allow experimental in the first place or what are the Yeah.

What are the security essentially?

Yeah. Yeah. Also, just to respond, I I was nodding because [laughter] I was actually chuckling. It's like it's a very uh it's very objective to see the supply but it's also very subjective to say the best uh stables in the world. I was kind of

I was just going with empirical numbers under [laughter] uh but with regards to uh bridge issued to stable coin uh yes with atomic swap it does mean one to one um and I think when when you ask the question on like the risk um it's probably helpful to like walk through like how exactly does bridge issue the token to ensure this like peg into one USD right um so all bridge issued uh stables are fully collateralized uh with either the treasury reserves or like a mixture of treasury reserves or liquid reserves. So treasuries are like short-term T bills um and liquid are like basically US dollar you park at a bank. Um so because it's always one to one reserved and each of the token is contained in its own um there won't be a situation where it's like under collateralized um and all the reserves are actually um OCC and genius compliant so it's like very short term um so when you think about it um the uh duration mismatch kind of risk wouldn't happen like it did with SVB um and then because you know each of the token is fully collateralized. Um the choices that each of the stable coin like kind of makes to go you know like where it deploys to the defi um it's kind of like contained on its own. Um so compared to other models like um like Luna for example like it just wouldn't happen like that because of how the stable we issue are designed.

Are each one of those managed by the issuer or is it managed by a centralized entity so to speak?

Uh like you mean the reserves?

Yeah,

it's it's by us.

Yeah. So it's like kind of a trade-off there,

right? So the individual stable coins building don't necessarily have a choice in what kind of risk?

Oh, um actually they do though. So they can all like have their um we call it like developer allocation preference. So they can choose the uh percentage they allocate to each of the uh whether it's like liquid versus treasury. Um and I think we're still making the decision on like would they be able to choose the counterparty basically like you know can they choose like a black rockck or like a fidelity whatnot.

Do you guys also allow the ability to um back part of the reserves with more volatile assets like gold or bitcoin or obviously because

yeah makes sense.

Is it those tables then? Yeah, it it's just yeah, it's one to one fully backed by all these reserves.

Okay, on the same topic but more on a primitive level rather than a product, right? Feel what you're working on. Um, if you make that kind of thing as a primitive and you don't have full control over reserves and things like that, right? But you still allow for different assets, different maturity. For instance, let me start it differently.

uh the questions of liquidity versus m liquidity available versus maturity started back in the days with ST for example where you know that LIO ST is properly pegged and everything is fine but liquidity on chain would be an issue then it also got into the topic okay what is the oracle then being used for lending because so much was looped you kind of just look at the market price right and so on but instead of going there let's stop at maturity right there are many assets especially today that are a bit more tokenized real world dependent there are more maturities and so on as we get into fixed rates and things like that. It's more so that the assets will have the back end. They will be safe enough but then they simply won't be liquidity when it's needed at a given time and that's very important for anything that relates to underwriting it as collateral or credit right for any kind of instruments like that. So what's your way of you're building in that direction? What's your way of ensuring that people can essentially have the liquidity for maturity but not be the sucker essentially while buying something that's already like you know deep right but you're still providing the liquidity and to add to that right there have been some especially vault protocols who understand they need it right they wanted some of them wanted to come up with something like a liquidity layer that would meet the redemption and essentially preund it if a lot of users exit at the same time but the issue is again How do you control for it?

Right? If you make it permissionless anyway, I think the context is set up. You can take off from there. Yeah.

Yeah. So, I mean, if you think about it, there's in Trad 5, there's something called a liquidity premium, which is basically that you're getting paid more for being locked up for a longer period of time. Something that is instant. The reason why treasuries and repos and things like that have the lowest rate is because they're essentially fully liquid and you can trade them and get in and out of them pretty much, you know, anytime. as you move up the scale and you have things that are locked and start having different kinds of risks built into them, you want to get paid more for holding them.

And so what we haven't built in DeFi is a way to disambiguate that. And so what you see is lending protocols that charge more for illquid assets because they're they have to take on the illquidity, which means they have to go and find someone who's willing to buy the asset at a discount and then they're potentially the sucker who's now stuck buying it, especially if an oracle has been misconfigured or hard pegged or something like that. What we're building at Cork is a way for you to actually tokenize both sides of that trade. And so you can take an illquid asset, say that's my reference asset that I want to be able to trade out of, and I want to be able to I'm going to pay a little bit of something up front and I know the exact terms that I'm going to be able to get out of it at. And then you have someone sitting on the other side who says that's fine.

I'm willing to get paid that little bit extra in order to be the facilitator of buying that and be able to basically create that. and they know that they're going to be locked in that trade for x amount of time because they know the redemption capacity, the lockup of the token as well as the redemption capacity after the after they get their hands on the token. Is it going to take them one day? Is it going to take them 30 days? Is it going to take them 90 days to get out of the token?

And so you create a market for that where the market is actually able to price that risk.

And in terms of the user base, who do you expect it to be? because uh unrelated topic back remember Renzo days when restaking was there when I layer Renzo and everybody allowed the uh announced their points the issue was that if you didn't have uh restaking withdrawals right away a dack happened and it was a thing that even though let's say it was relatively known that everything is fine and restaking didn't even get real rest in security back then right it was all just st normally there wasn't like anything like SL

it was also a huge problem if you wanted to accept the scan token as as collateral because then you have to be able to process liquidations, right?

Exactly.

And if if you cannot withdraw or you can only withdraw up to a certain time, then you have to meet your risk risk parameters to actually meet that. And that basically stops quite a lot the the growth.

It's an interesting thing for a liquid staking token or liquid restaking token, which is it sometimes there's no there's no risk, right, being able to get out of a trade. There's a liquid market for it and there's, you know, there's just the unstaking queue is very short and then all of a sudden it can become very long and that can turn on a dime. And so right now the way that that's priced is in liquid markets and that liquid markets provides no guarantee. And so the lending protocols end up having trouble with this because they need to find someone to buy it, but they've set their lending parameters at such a high rate that even if they find someone to buy it at a discount, it's still going to potentially lead to bad debt. And so for something like that, you want to create something that's a guaranteed buyer where you say, I'm willing to lend against this because I know I have somebody who's going to buy this.

They're then going to hold the risk. They were paid for that and it's now their problem that the staking queue all of a sudden went went up. They looked at it and said for the next 30 days this is the price that I need to get paid in order to put that trade on and then the next 30 days they can repric it but 30 days after that they can repric it and it can even get shorter and shorter as time goes on and you have more automation and more agentic workflows around this where you can actually start pricing these markets on a daily basis right but as you know as a starting point you probably want something a little bit longer. So from an actual from an architecture perspective, do you design that you have essentially different pools and each one of them are segregated and there is some abstraction layer on top or like what's the I'm just curious like from the

Yeah, so from the protocol perspective you can b the protocol is designed to be an incredibly flexible primitive that you can pretty much do anything you want with right where you can create different markets and as long as you have a buyer and a seller that's willing to accept a price that market can get created. What we then will have sitting on top of that is vaults where you have people who actually know how to underwrite the risk and deploy capital who are actually saying here are the pools that I want to actually work on. Where this goes in the future though is much more of an agentic system where you have agentic underwriting. And if you think about just at a very high level how that works if you go today to take out auto insurance right you go to a geico.com or you go to a website and there's a whole bunch of different sliders.

You give them a bunch of information and then you can choose how big your deductible is, how much coverage you want, do you want an umbrella policy, and a bunch of different things. And then 30 seconds later, you get a price, right? It's not quite an agentic workflow, but it's an algorithm that's doing underwriting on behalf of you. And so you can think about what risk underwriting in DeFi is going to look like in the future to be something very similar where where you come in and say, "Here's my need." And underwriter is sitting on the other side and says, "Here's how I'm going to price your need."

And then you can meet in the middle.

Cool. Thank you. Then I'll start with a simple question and it's a bit of a lazy one but when it comes to effects we all heard about effects resurrection rate for the past seven years. It's kind of a thing like we fixing permanent loss also for the past seven years and you look at it and it's being solved slowly but not as much. So what would you say now is now is the time to do that at least like in my inexperienced view of like a user in that effect who doesn't build a fix protocol himself.

The issue feels like if I cannot let's say I can even trade forex from one currency to another. If I want to redeem that currency later I can't do it. So is your reply that when you have it you don't need to redeem it. You know like the bitcoin meme right once it already happens you will never need to c cash out right type of stuff. or did you fix the way that redemptions can happen in different jurisdictions easier enough?

I think for true adoption, you definitely need to integrate the redemptions in as well. I think um in order to get like crypto people on board who don't mind just holding stable coins and like a lot of the net wealth just being in stable coins and not having that is fine, but like for it to really take off and actually get you know the ride of the wider world into it like non-crypto people where they'll just be doing a trading app on their phone and they don't even know that it's crypto under the hood. I think you need to have the uh the whole pipeline in one go. So you need to have a process where they can on board like on ramp on one end and then it goes straight into an FX engine which is running on a blockchain on multiple blockchains and then get the amount out and then that could potentially be sent to a different bank account in a different currency and that all needs to just work in one go and then I think only then will it be able to completely take on at the world and be the new standard.

What's the fee structure right now for that? because forex around the world let's say I think in US and Europe it functions relatively well some parts of Asia it's also pretty good uh in many areas is just the the spread you get is absolutely terrific right so when you come to that question in crypto is the fee structure right now better than in real world is it much worse or is it somewhere in between like what are the uh what are the real world essential institution asking you for there

I think yeah the the biggest hurdle is the spreads for now like the spreads in the real world because it's literally trillions is like the biggest market in the world. Um, and then the crypto is like tiny compared to that. And so in terms of like big markets like Euro, USD, there's like literally trillions every single day. And so the spreads are pretty much impossible. I think it's more about the access and also the time it actually takes to make a trade.

Um, like if you're going to go through a bank and get it done as just a normal consumer to get like the bank rate, it could take you like multiple days. But what if you like needed the result immediately then you could get a much worse rate. Whereas ideally we want to put the whole thing on crypto where as it scales and gets enough like enough liquidity you'll be the best of both worlds like instant open execution anyone can just see it but it also gives you the best rate

and just quickly plus one on the whole like the world today if we want to bring above retail um effects on chain I think the infrastructure is like super immature there um to to Yeah. So like there's trillions a day that's being settled in terms of FX but billion like 1 point something billion a day that's actually moved that means like more than 95% is just netted but in order to have this netting we need a standard and we need credit and like I think today I maybe like I'm not really focused on the FX market. I don't think there exists one today yet. Um, so that's one thing, but also on the flip side of that is like solving for for the retail demand, right? Because if we talk about the trillions and the billions, that's more for institution adoption.

And for the for the retail, I I do feel like as a a ecosystem, we're getting there because as more stable, different stable that's non USD getting get on chain. Um, we we basically will have the demand to do it. And where there's a demand, there will be a solve.

Yeah.

You also need swaps.

You also need swaps. [laughter] Yeah.

Yes.

I think it's it's it's happening now though. Like I think the like non-USD stable coins are like really actually starting to proliferate and grow in volume pretty much like this year and last year. I think like Euro C which was the biggest one had a big boost last year um due to like various political reasons basically. But like I mean that kind of thing is always what drives FX as well as like all sorts of geopolitical things and like when you start seeing that actually happening in crypto as well then you know that it is going in the right direction.

It's also very complex to solve. It's uh especially growing non US dollarated stable coin is one of the hardest things that we have actually seen. We we're focusing a lot on a bunch of Tether assets that are not only uh US dollar denominated. We have CNT0 live that is currently live on Conflux right now. Uh we have TA Gold Zero which is not exactly an FX.

It's a little bit different but we we kind of use the same the same mentality and T has been one of the very first to actually go with the with the old products like AOT Mexican Pesty and all of them has been growing at a way lower pace than the main US dollar one because obviously the demand is there. Um I I personally think that onchain finance and onchain zops are one of the best possible way to actually solve this problem. So I'm very eager to see whoever is going to build it this way and if they can build it against USDT I'm even happier I guess. watch this space. [laughter]

Since when did we choose the ph change the phrase from DeFi to onchain finance? How fast did you sell out? That's was quick.

Since DeFi is no longer decentralized, I guess that's probably when uh I mean we were talking about it yesterday, right? Like we we went into this industry in late 2020, early 2021. It was a bunch of people thinking that we were revolutionizing the whole the whole money and that was where the the the main thing that everybody was focusing on. And then we changed that. And I think it's also part of the natural process of a of a of an industry, right?

Like you start in a pretty cyberpunk mode and then you slowly slowly uh get to something that is a little bit more institutionalized. Um that's why I like to when I I speak a lot with people that don't like DeFi as you can imagine. A lot of institutions, a lot of people that have very much been into crypto, but they have no longer been uh following since you know all the meme coins and all the when we were doing swaps that were called with food name and so on and so forth. That that's where they drew the line. So I always try to make the distinction that yeah DeFi can be a little bit crazy sometimes but onchain finance is the real technology behind it right like I I hope that it's going to be decentralized but if it's not decentralized and it's just onchain transparent and all this kind of stuff it's something that is [snorts] good enough for me

before we start crying about 2020 again which I would join you in that right [laughter] well but um let's speak about today are there because you guys know so much about the issues of redemptions credit right that you don't own your assets and whatn not talking about own your key not like that we don't go that are right now. Um are there stable coins or assets you hold on chain that would be more pure without any kind of like um I don't know centralized components like there have been some experiments right some of them are alive like mentioned main liquidity right there was reflexer right that I think is relaunch and a few others do you of course there are questions of scale how can you scale this fast enough and big enough that is a different topic and we all know the obstacles with that but in terms of like you yourself do you use something like that or are you like not anymore Not anymore.

I used to but uh I that's it for me.

You trust enough basically at this point.

Yeah. I mean, you know, I I

when you can call the issue yourself on the phone, this becomes a bit easier. Yeah.

Yeah. Yeah. I agree with you. It's it's just that, you know, it's it I think there is a demand for that and I think whoever is going to be able to crack a truly decentralized permissionless stable coin that can grow at scale is going to not only make a lot of money but make something very good for a lot of people. I think we sooner or later we will need that.

Um, but it will take time and so past so so far all of the more um exotic iterations of this all ended up very badly as as we know. So yeah, I'm a little bit more conservative lately.

Yeah, the centralized stable coins are always going to be bigger and always going to have bigger um network effects and so most people are going to end up using them. I think for a decentralized stable dollar back stable coin to come onto the market and be as prevalent as USDC or USDT, I think that's really hard. What I what I actually care way more about is decentralized protocols, decentralized base layers, and permissionless protocols. And so you can see things where you can use them and not get censored out of using them. Whereas the stable coins ultimately at the end of the day, if you're using a dollar, the dollar is created by the US government and the US government is going to want to retain control of that.

They're going to do a lot of things to make sure that they do maintain control of that. And it's going to be really hard for you to not be somehow if you do something, you know, adverse in the system to be pushed out of that system. Or you could use tether gold. Just saying. Trust Heather.

[laughter]

And then I think it goes back to uh which use case, right? So we average build compliance stable coin. So the whole point it's a feature not a bug that it's centralized.

A quick exercise. I don't know if you can do it quick enough, but which of one one part of your product or protocol that you think can't really be open source or onchain whatever you do versus the other part of the protocol that you think you want to put on chain and open source that you can do but maybe you haven't gotten to yet like you know there is always this like with governance for example building fully on chain or not there is always this one thing that you're like h could be but like let's do it tomorrow. So if you could tell about like self-criticism essentially right which one of these two that you can't and that you can

I think we it's not really a self-criticism because we are already thinking a lot about it. Um and I guess like personally I got into the space um a while ago because of the open nature of the space. So for me like open sourcing and like building interoperable things is very important. Um so yeah so obviously for bridge issued stable coins right the the the reserve part um because the reserves are are are essentially T bills government issued or the US dollar so that part has to be kind of like centralized in the in this case but there's a lot of other part about uh stable coin that's like whether it's like moving the stable coin or ramping uh whether it's just um spending the stable coin utility like all those things were swapping between different like USDC USDT the open issuance at bridge All those things I think can totally one be open sourced. Two actually people um should try to have a standards.

I'm always reminded of the the comic where you have like already a bunch of standards. You're like okay let's have a new standard and then you have like yet another standard. But it's uh it's really important I think like coming from a data background especially when you have different standards of data it's just such a mess right um with USDTC's CCTP and USD uh DTS like layer zero it really fixed the fragmentation of various bridges so the same thing on the interoperable between different tokens I I I think that part um we at bridge are like thinking about how do we do that and we like very much so want to open source that part

yeah uh on our side our whole infra is basically on chain uh the the supply backing every single USD in the world is fully auditable on Ethereum mainet. Uh our smart contract that holds every single USD backing USD0 is the third largest holder globally of USDT at like 4.2 billion. Um most of our infrastructure is on chain. The only part and very easy to to audit and transparent.

Uh the only part that we do not advertise publicly and that it's it's our thing and we don't want people to look into it for security implication is the DVN which is the actual verifier that checks if a transaction lands on chain A and needs to be executed on chain B and things like that because we have a lot of security measures on top of that. So every single time somebody moves USDT0 around chains it looks like something very sweet very very easy and very efficient but it's actually there's a lot of checks behind the scenes to make sure that non nefarious actors can can actually do something shady. So that part we'd love to be able to open source it but at the same time there's a security implication and when we when we have so much responsibility as we do we we we always want to make sure that whatever we do is secure enough and meet the security standard. So the DVN is the only part that we don't have of chain uh and only sorry our compliance processes meaning that we freeze we blacklist we do everything regarding when when a law enforcement agency request us something we we freeze USDT0 we freeze x0 uh we're actually pretty fast in doing so because we believe that users should be shielded if something bad happens to them um and uh and that part obviously leaves completely off chain until a multi transaction is processed and sometimes hackers look at our multisigs and try to swap out ofd0 as soon as we post them. So it's not fun.

Let me try to quickly intervene there. What's the difference between quickly helping users and doing the same thing that happened with USDC this week? You saw that

competence. Uh you need to have a very good compliance team uh or you have to be able to outsource your compliance department from someone that has a very good compliance team that can identify situations like that and make sure that that doesn't happen. And I think Zach was really spot on when he when he called out what happened last week. And I'm very happy to to see that at least on our side on the USD0 side, nothing like that has happened so far. Knock on wood.

Uh and I to my knowledge, nothing like that happened on the on the USDT side of thing either. So it's it's very very good to see that the compliance people know what they're doing.

Yeah, I would say on our side it's very similar to yours where like all of the protocol is on chain. Uh like the whole market's on chain. All of the communications even are on chain. Uh but it's very similar in that we're building on top of like interoperability infrastructure like layer zero and we are doing off-chain stuff to make that as fast and just efficient as possible. So you said you're running your own DVM.

We're running our own layer zero like executor to relay the transactions between chains. Uh just to get it to be as fast and like efficient as possible. But the point is that's completely permissionless. Like actually anyone can call that function. We just want to do it ourselves because it's faster than the official layer 01.

So we can get the fastest interrupt but uh yeah all the business logic all the market all the liquidity everything completely on chain open for people to see. So our protocol also is completely onchain and visible. Um I think one thing that's not is the underwriting process and it would be actually very cool to one day have an underwriting process that was onchain where you actually could know sort of what the parameters were that someone was willing to to think against so that you don't have to actually go back and forth and sort of try and guess. you actually say, "Hey, here is actually your underwriting criteria."

Cool. Do we have one more minute? As a research exercise, name on top of your head three, not most, but like the ones you remember most competent teams that are a bit more of your competitors rather than friends in the field that you're working on. Let's say whose practices, products, thinking, vision, whatever you respect. Then you would say, "Okay, these are like these are also cool."

just so because we spoke about our own book right for like an hour. So just to get the karma points back whoever wants to start. Yeah.

Uh cap morpho and steakhouse

competitors.

Cap money.

Yeah. But competitors are the mobile friends.

Uh so so cap is doing something that's similar inside of a very specific market. They're doing you know credit basically something that looks like a credit default swap for private credit on top of their platform. And so the fact that they've been able to do that and scale that is, you know, somewhat competitive in terms of, you know, we could have been the the underlying infrastructure that did that. But it's also really nice to see someone doing that and it being successful inside of a limited scope and hopefully that means that the broader scope is there. Um, Moro is just doing things that are permissionless.

We're very envious of their vault structures and how that's sort of we we look to that as sort of an example for how to build things. And then steakhouse on the underwriting side.

Cool. Thank you. Uh yeah, I would say like just the teams I appreciate most for sure are layer zero, chain link, and circle basically all for their interoperability protocols. And this is because we're building on top of all of those. And in order to do this kind of thing that we want to do, it literally would have been completely impossible a few years ago until they all built these kind of similar interrupt standards.

And then also they're just awesome. They always reply on like a Sunday, so can't really complain. Ben stole my answer. I'm gonna sue him. Uh layer zero CCTP which has been definitely good.

Uh I guess not definitely not a competitor but a team that we very much respect is the whole a ecosystem. We think they are pushing the industry forward in a in a very profound manner.

I will clip you saying CCTP and send it to Paulo. That's going to be funny.

I know you got to give du when when duds are done. We I have to say that we moved six times what we in our first year than CCTP moved in their first year. So I will say that clip that also but [laughter]

the disadvantage of going last I was going to say CCTV and layer zero as well it's just the simplicity right like the elegance where you you have a very clean like with CCTV you have a clean uh burn and that's it and it's very easy for everybody to understand um also I um personally admire the Athena go to market strategy um I think previous today there's other panels who who had negative to say about them but but but really like I I think Athena for me is just like great example how they thought first about demand first um and all these like campaigns they launched and ultimately it has sustained them usage and utility and users um and they they just did it in a very creative way so

cool thank you for being honest sounds good I think that's