Colin Platt, Liquity: Liquity V2: The endgame for CDPs

hello okay next up we have Colin Platt from liqu who will be talking about liquid V2 the end game for cdps welcome Colin everyone thank you par and thank you everybody for staying here I know it's it's late it's nearly 7 o'cl uh so I won't keep you too long um today I'm going to chat about uh liquidity V2 uh some of you may have heard about us uh we had V1 as you can guess from the name uh from 2001 um I I joined about a year ago to to lead product on V2 um what I really want to kind of get into talk about today is reference rates first of all what is a reference rate when we talk about uh rates so if I start to ask people a question about how much does it cost to borrow in defi um some people might start talking about fed rates or things like that um a lot of people say well how much does it cost on a in this very minute that's a problem and that's what I want to talk about so the first question is do we actually need a defina native reference rate do we need a rate that we can all rely on we all go yeah that's the number um I think we do yes thank you uh right now everybody's looking at a usage rates uh there's a lot of problems with a a is a great product there's a lot of problem with using that rate as a reference rate a it goes up and down a lot B it's based on usage even a between op arbitrum and mainnet aren't all the same it might be backed by eth on one usdc on the other it moves around also because we're looking at things with stable coins that rely on the traditional Finance system we have a lot of friction uh we heard in the last panel people talking about wires that take a long time fortunately that reminded me to send money that only took 30 seconds because I Bank in Europe um reference rates are where we need to go uh reference rates means we can make our own rates and we can do it efficiently because we're borrowing and lending inside the same market and of course we have blockchains with our beach from op that take sub seconds or maybe 12 seconds if we need to wait for main net let's talk a little bit more about what some of the the rates uh tend to be so as I mentioned a up and down it can be unpredictable even things like uh maker or sorry was it sky or was it maker I don't remember um we don't really know what the rates are going to be from when to the next it's very hard to speculate it's very hard to hedge if we look at these things historically a up here at the top moving up and down uh we've seen some of these things go from single digits to low triple digits over short periods even very liquid markets um if East starts pumping hopefully that keeps happening um it it puts a lot of stress in the system and until they can start to equal out people are paying a lot of money now imagine you go to sleep you're super happy because eth is pumping and then you get liquidated because your interest rates have just gone through the roof you couldn't get in in time that's very frustrating people don't like that in maker we we still have the same problems somebody comes on they turn in Athena Athena's got huge rates that's great but at the same time that means our rates inside of maker whatever um go up overnight from 2 3% to 15% I don't decide what that is somebody else decides for me we're in defi because we're here because we want something that is decentralized hell we even want control let's talk about what we're doing with V2 the idea here is user set interest rates that means you the users of V2 because everybody in this room will be a user of V2 on day one you heard it here can set your own rates that means you decide how much you're going to pay to borrow sounds like magic huh there is a catch we have as some people have heard with V1 something called redemptions what redemptions mean is when there is not sufficient demand for the stable coin there's an order of people who get redeemed what that means is they swap collateral to repay their debt so they have collateral backing their loans that is swapped if you're at the lowest end in this it is the lowest rate makes a lot of sense you're paying the lowest rate what happens somebody says you got to either up your rate or you got to swap you got to close out your loan you got to pay it back somebody can pay it back on your behalf you can pay it back on your half we also let you move your rate up what we arrive at is a market equilibrium this market equilibrium becomes that reference rate this becomes how much it is to borrow dollars in Def with no governance no proxies anything on top of this this is autonomous this is driven by the market it's driven by you the users that hold stable coins and that borrow this is defi as you said stable coin up and down this is what really drives the mechanic of it when we're paying too much as an aggregate of all the borrowers of course this is great people are getting paid more money than they should be more money than they get paid elsewhere more money than it's worth so you're willing to pay more more than a dollar for the stable coin that means everybody looks at it and they go I'm going to bring my rate down I I don't have to worry about this Redemption problem that's weird I'm going to go right down to the minimum and that starts to make the token less attractive and brings it back to a dollar on the flip side when redemptions are a concern as I said people are bringing it right back up and that makes the token more attractive this means that we can look inside the economics we heard a lot about emerging economies hell defi is an emerging economy our emerging economy can have its own rate that's huge and that's what we're all here for I got Sam's animated slide there so tldr we need a reference rate in dii we need a rate that is our rate we are a huge growing economy just like any other economy Thailand has their own reference rates if we go to Malaysia they have their own reference rates of course United States Europe have their own reference rates we need one too what we really need is we need users who are decentralized to be in control of their money to be in control of what they pay to be in control of what they lend at this is what liquid is looking to offer we want to build markets that fix this we want markets to become the drivers of What markets for money should be we don't want Wall Street we don't want governance to decide what your rates should be we don't want users that decide I need to park some money here for a day or two to decide we want users that are actively lending and borrowing to decide the rates that they receive and the rates they pay this is the promise of liquidy V2 a promise of bold one last thing I have to say I was supposed to say at the top uh Sam and I are going to be here all week uh would love to chat with all you guys about liquidy V2 chat about bold uh thank you very much it's been a pleasure to be here [Applause]