Uh, Rito, uh, I think most people's first exposure to Figure is your token, which is the ninth largest token in cryptocurrency by market cap. Uh, how did Figure get into the top 10 crypto assets? Of course. So Figure started out, uh started out, uh , a little bit in the dark, uh , a little bit in the dark, uh , in the sense that they created a tokenization platform for HELOCs, a kind of esoteric asset in consumer lending. Well, the numbers are real.
So today we have approximately one and a half billion new natively tokenized Helocs per month on the Provenance network. Uh, and then we started to get interested in how we could embrace other chains and other ecosystems, permissionless liquidity . And that was kind of a key indicator that nobody realized was the confidence that Bidd was a the confidence that Bidd was a great product. It has huge TVL, but no one really sees the real volume because not many people necessarily use Provenance every day. So we worked with Coin Gecko to display, uh, the TVL number on Provence.
So the number can be checked. Um, maybe there's some truth to that. Um, but yeah, I think that's asset number nine. Now, can you just do a quick 101 of this business to set the stage for all the questions we're going to ask you next we're going to ask you next ? So, our founder Mike Cagney is also the founder of SoFi.
Um, and SoFi actually developed the direct consumer lending business, um, in the US. And he had an idea that we could run this business much more efficiently, cheaper, and faster if it was built on blockchain. So, um, you can think of Figure as a lender, and when we started the business, we were a lender. So when we created Helox, they were our off-balance sheet capital. Today, we work with approximately 380 different partners who plug into our technology stack technology stack , powered by Provence, for HELOC origination, credit decisioning, tokenization, HELOC trading, HELOC storage, and HELOC securitization.
And if we look at HELOC as one asset on the platform, we do auto lending, home equity, small and medium business, inventory financing. So, a whole range of credit assets. You can imagine Figure built on traditional components needed to work on a blockchain, and we have the full stack. Yes. So I think the first, um, first generation of tokenized real assets are companies like Tether that issue US dollars, um, usually issue US dollars, but they also issue gold.
Uh, and that's all. Uh gold. Uh, and that's all. Uh , Tether is like dollars, this is gold, and it was the first generation of real, um, tokenized assets on the blockchain. Uh, you all do the whole supporting set of services other than that, and you move everything to the blockchain because it's just incomplete.
It's not just tokenizing Helocks–it's just one piece of the puzzle, and you guys are doing everything. Maybe we could talk about what kind of bottleneck opens up for Figure when you put things on the blockchain, because you guys have already had a successful business before. So, strategically, what kind of aperture opens up when you guys tokenize things on- chain? Yes. So I think there are two ways to look at this.
First: why did Figur choose the HELOC as an asset? A strange, seemingly esoteric asset. Well esoteric asset. Well , the reality is that if you bought a house in the US, the mortgage process is quite complicated. This is expensive and takes a lot of time.
So maybe two months, a lot of paperwork back and forth, but ultimately for the bank to issue that loan, it costs somewhere around $11 or $12,000. So, if you think about it, what should the loan size and interest rate be for the bank to make this profitable? They are quite tall. So, historically, if you want to, say, own a house worth half a million dollars, you own it outright, and you want to take out, you know, a $20,000 loan against that equity. Um, the bank wouldn't give you that because I can't make money on this loan.
So, the kind of basic, um, holy grail of blockchain technology was cheaper, faster was cheaper, faster , faster. And that unlocked something like the gelilok that we provide because banks couldn't provide it, um, economically, banks couldn't provide it, um, profitably before. And then, I think the second thing is, think the second thing is, um, once you tokenize that asset, yeah, you have to have a reason for tokenizing it. So utility or some better economic outcome. And so we had to create all these other objects that would function as a holistic platform to serve the utility and the economics of that asset.
So if you look at Democratized Prime, which is our flagship product, um, you can think of it as can think of it as , um, kind of like a loan market against these AAA-rated helocs. Um, so it pays about 6.5% with hourly liquidity. Um, and when we combine this with DeFi, it unlocks a whole range of options, right? So, last month we launched morpho and you can finance this helicopter loan for almost a sofour.
This is again an example of a new product that was not available through Tradfy Rails, and the utility and economics of what you can do with this product in DeFi that you couldn't do in Tradfy. When you list your tokens on public blockchains public blockchains , you open them up to new buyers. That's the point. And so, in your traditional business, there was a group of people who were providing capital to access HELOCs as just an investment, just getting income. But now when you put this on a public, permissionless blockchain like Ethereum, there are potentially new buyers and new capital to access this opportunity that they didn't have before.
Who are these buyers? Who is this new group of capitalists who are now interested in these investment opportunities? Yes. So, I think if you look at a lot of RWA tokens, almost all of them have liquidity issues, meaning you have to wait for the redemption window to open. There is no buyer of last resort, so you are just stuck with it, right?
So, since we created a Tradfi asset that is natively on- chain, we have Tradfi buyers every month. We are conducting securitization. These are pension funds, insurance companies, asset management companies that want to buy these mortgages. They buy them tokenized, and they live forever on the blockchain. So it's kind of a pent-up demand for liquidity.
But in terms of financing these loans before they are sold, we would use banks. And this is a business that has always been available only to the largest banks. This is a great business for them. They can charge over 300 basis points above sofur for essentially risk-free credit. So we created, essentially, a democratization of access through democratized prime.
And now anyone can borrow against these assets, which historically only banks could do. Um, and that's the main institution that you guys are cutting out, because all blockchains are essentially focused on eliminating intermediaries. Is the main intermediary that you guys are cutting out the banks? 100%. I like it 100%.
And, you know, we think that a narrow banking thesis is going to happen . This has been proven. We saw it happen. Um, essentially, banks today provide transactional services. Um, you know, now they have a competitor in the warehouse financing space, and that's everyone in this room.
Um, and that's their goal. We also work with banks, right? Um, they help with the structuring and marketing of our securitizations, but in terms of, um, monopolistic access, that's what we're democratizing. So when you place these HELOC assets on the Morpho blockchain, 160 billion stablecoins appear on Ethereum . Suddenly this market is available to you guys.
And that's half of your answer to the question I'm about to ask. But there are also potentially new people who originally wanted a HELOC. Maybe they're not on the blockchain. They had never touched blockchain before, but now there is this HELOC capability on this blockchain called Ethereum, and they can just get stablecoins there, and they can also tap into the blockchain for the first time. So, there are two options.
There is the existing stablecoin economy that you are accessing, and then there are new people who can now access it by connecting to the blockchain for the first time. Which one is bigger, and where do you think the distribution of capital coming from these two parties is? Yes, I think that's a good question. Um, I think, you know, we've had really great success with the curators and their willingness to dig deep and understand not just what the liquidity is on the screen, but also, for example, let's actually look at the historical record of loans. Let's evaluate 20 billion HELOCs and their effectiveness.
Um, and we've been really successful with this cohort on blockchain. Um, it's probably a combination of individual retail lenders, some larger LPSs. Hmm, it's a bit difficult to analyze, but I think the blockchain numbers will demonstrate it. I think the token is about 95% used in DeFi markets compared to the D5 lama market. Um, that's one segment.
But to another point, you asked what new capital is coming into blockchain, because the opportunity is there. Um, we've had a lot of conversations with Asian family offices, and high net worth and access to American consumer credit is almost impossible for them . Um, and so a lot of this conversation revolved around you being a legitimate American loan originator company , a public company , a public company . Um, you've been in this space for eight years space for eight years , 23 billion assets tokenized. Okay, let's discuss how I can raise capital in blockchain to access this opportunity.
So, um, I'm optimistic about both. I want to learn a little more about the business of numbers and how this opportunity impacted margins . Perhaps one answer is that there is a larger TAM on Ethereum. We would like to access it. Your margin, your income and profit depending on the amount of capital.
Maybe that's one answer, but another potential answer is that increasing efficiency makes your life easier. Can you talk a little bit about that side of the equation? Yes. We are a platform business. We are a Capital Light operator, so we don't provide loans, right?
We are trading platforms. Therefore, volume is important for us. Cheaper financing and wider access to appropriate collateral are the driving force behind our business. The example I gave earlier was this: If we used Goldman Sachs to finance our warehouse. The interest rate they charge us there they charge us there is around 6.
5-6.7%. So, if we can fund on Morpho at today's 4.4%4%, which is below sofur, it's a significant boost for our business to attract new initiators to come and initiate on the blockchain. Because now we are providing them with a purely economic product that is better than what we were talking about before, the cost of initiating heliloc.
So these 23 billion, uh, loans that we initiated, it was a product that was previously inaccessible. So this is important; this is not just a margin improvement for the product, this is a completely new product for primary borrowers in the US that could not be serviced through legacy institutions. I want to know a little more about the Morpho integration you guys have. Why was Morpho the right platform for you? How does it meet your needs and what do you do with it?
Yes, you know we launched a kind of MVP with the primary token and hashing protocol on Salana in December, and it was a fantastic launch. Um, it grew to a market that was bigger than Salana as a loanable asset on Camino. Um, the problem is that Salana is that Salana is a different community, and it's not as liquid it's not as liquid . So there are 10 times more stablecoins on Ethereum, and I think that market has more profitability issues, especially even at this scale, than Salon. So we knew we wanted to be in the EVM chain as well.
Ethereum made sense. Um, and I think the Morpho team was very flexible. These are isolated markets. Um, and it was an obvious decision in terms of scale and layout. So, you can make money at Morpho as a repository curator.
This could be a profit center for you guys. Is this a profit center for you, or is it more of a distribution engine because that's where people come and access these, um, helocs? Yes, so we take 50 basis points. Um, so we're making some money. This is, you know, we're a very profitable company, for example, in core trading, um, we believe, well, I have to say we believe deeply in native development in DeFi native development in DeFi , and I think that's borne out throughout our course, but it's not a profit center for us.
Our flywheel accelerates and our profitability increases when we have the opportunity to have cheaper and broader access to financing that Trapfi does not provide. Um, and that accelerates the profitability flywheel for us. What other companies, potentially your competitors, are looking over your shoulder at what you're doing and learning from you, learning from me? Hmm, oh, what they're doing is interesting. It works.
Yes. I think the challenge is making challenge is making it work. I don't know if they are learning. Well, okay, maybe I'll put it this way. Um, it's complicated, and you need to have a very strong North Star to have this vision of building from nothing and saying I'm just going to have to build the whole ecosystem.
Um, and yeah, you know, that was Mike's north star. I think competitors are realizing that if they can't take on the entire value chain on their own, then they can form partnerships across that value chain and get incremental unlocks into something like a network of RWA partners. Um, and yeah RWA partners. Um, and yeah , you saw it with, um, with Securitize and, um, shared computers with Unis Swap. They seem to be building partnerships for the different functions they need.
Superstate did, you know, something similar. Um, so I think that's how, um, the industry is learning to compete a little bit more: it's, um, more strategic full-fledged partnerships, rather than something like "here's my token, the platforms are just built to support it." When you guys think about, um, growth and next steps, um, what additional assets will come on chchain, or are you guys mainly focused on scaling the assets that already exist, um, what's next for you guys when it comes to blockchain? Yeah, so, um, a few things. So Heliloc was again an amazing asset that we picked and that had just a fantastic market fit.
We announced a deal, um, about two months ago with a company called Gora, which is kind of an AI-based auto loan originator , similar to how we originate HELOCs. So we partner with them to connect to our platform to originate, distribute, and fund auto loans. We just announced a deal this morning with a company called Kyave that we acquired to provide residential bridging loans. We have several other deals in place for SME lending , inventory financing, and trade. So it's really a whole range of credit assets of various scales, tokenized natively.
Do you see what you're creating, what you've built, and the success you're seeing as unique to you, or do you see it as a scalable model, perhaps with customization to the needs of a specific business that you're just first or early adopter in just first or early adopter in ? I think the key, I think there are two key points–it’s an asset originator who truly believes in building for DeFi, because there are a lot of great asset originators out there. There are a lot of great cash brands, but if they don't really believe it, it could significantly change their margins or there's a mandate from above. It takes a lot of work to create target tokens that run on the blockchain, i.e.
ADI assets. So, I think ADI assets. So, I think one element is dedication to the cause, and the other is usefulness for opening up the economy around it. So if people can find these co- find these co- founders and build these partnerships for the utility of the platform utility of the platform , then I think you know you can compete, but I think those are two things that have served us well in our efforts so far. What numbers can you give regarding the current size of assets you have on Ethereum and Morpho, and what do you think it will be at the end of the year?
Of course. So, you know, right now, I think you know, right now, I think on Morpho it's about 200 million, uh, TVL. On Salana, it's about 400 million TVL. On HELOCs alone, we do about a billion and a half new HELOCs per month. So we have a lot of opportunities just for this one product.
Uh, and I named many others, uh, many others. Uh, so I would say we would be happy, and we think it's reasonable, for that number to be in the billions. Uh, definitely billions on Ethereum in Morpho by the end of the year. Yes. I'll hold you to your word.
Well , let's check again. Reed, thank you so much for joining me on this.
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