DEBATE: Ethena Labs, CAP Labs/Qidao - Future of Stablecoin Fragmentation

yo can we wrap like w yeah yeah maybe we can sit I I think everybody's like jet like by now yeah a little bit yeah oh man it's been one of those one of those days um so yeah we are here to debate whether the future of stable coin Market structure is going to be win or take most or whether we're going to see hundreds or even a thousand stable coins coexisting um so yeah just to kick it off I guess uh do you guys want to introduce uh yourself yeah uh may I can go uh my name is Benjamin uh I've been doing stable GS for a bit before this I did uh Chow Kow quow people call it very different things uh and now I'm doing cap yeah I'm sarim from Athena before I used to to Lio before I used to the crack I'm just kidding I used to do the traf which is worse um and yeah um I used to do like Emerging Market effect swaps like that I was in m&a so I guess we're all Tred five people here yeah um awesome yeah I think uh sort of the the Crux of this debate is uh kind of like thinking about stablecoin Moes um and you know how how the industry uh is going to look in the next 5 10 15 years um we've seen for like tech companies they tend to be sort of like winter tast take most markets but then if you look at Financial Service and banking um there's you know hundreds or thousands of banks in the US even now so there's there's some precedent for you know either of these sides of the debate um prevailing I guess um but I guess the first thing that I'd like to drill down on is um economies of scale so like if you think about a stable Point like tether uh it's quoted that they have like the highest revenue and profit per employee of uh of any company just you know not even crypto but any company in the world so do you think that stable coins have like an important factor of like economy of scale does that Advantage big stable coins versus small yeah definitely uh but I think that's just life like uh winner usually takes most if not everything and tea have simply been around for so long they have the ultimate um liquidity profile and Integrations and I think the biggest integration that's ever has done so well is just being integrated into centralized exchanges as per collateral and then eventually there's a way to transact uh between retail and Emerging Markets that's just obviously we're thinking about these things a lot of Athena and even though I think we're at the Forefront of that we just see how much of an advantage te have because they've been around for a long time and I just don't see that it would be so easy to um to come in and just say okay we're going to take over with this now I I think it depends what game you're playing because the way we look at it there's only two reasons you would have a stable coin it's either yield or it's either storage of value uh and if you're storing value yeah there's huge economies of scale particularly because people don't see you as money until you have billions of dollars with you right the only one that really got that is tether Circle maybe but tether really won that game uh for interest bearing stable cenc is very different because there are some games that can't get big for example like the V toen fly wheels like fra got big because they were basically distracting value from the CRV emissions but they if they got like another I don't know 40 billion they wouldn't have been very good because that's not the game they're playing um same with like any Standalone stable coin that has like one or two strategies like you also don't want to get too big because then the yield is going to be very bad um so maybe there's like the opposite effect of of economy of scale interesting yeah Network effects and anti- network effects um I guess so like tether you guys you know kind of both acknowledged that like they've like almost crossed a Chasm of like reaching some level of lindin kind of because they're so early um do you think that there's a way for smaller stable coins uh Ben do you think there's a way for smaller stable coins to like kind of break in and have that uh like brand value that has and I think this is part of like why I think there's going to be a th stable coins and that's because I mean let's look at this storage of value in the future every single centralized exchange is going to have their own stable coin every single region is going to have a prevailing stable coin the only reason that tether is doing well now is because there's no regulations like we don't really know what's going on but like just in the in the same way that you know VMO doesn't work in China themo doesn't work in France uh it's like all about uh regulatory advantages and Regional connections because it's like a people game right uh and so um when we have good regulations I think it's over for tether I think every everybody uh in their own regions is going to have a stable coin and I hope for tether's sake that they move to uh stable coin as a service thing kind of like a paos because um it's going to be great for the smaller ones now uh not to talk ramble for too long but then if you're doing the other side which is the yield bearing stable coins then uh your mode is um can you do something that others cannot do and if you can then yeah for sure there can be entrance for example a teller can't do a funding rate Arbitrage so uh yeah if you can do something like this then you can you know enter I saw you making faces there no yeah I mean I think there have been attempts by centralized exchanges to replicate certain products like the l space obviously binance Eve is a thing MEF is a thing yet they don't seem to have the success that they probably envisioned initially similar to Lio and I I think it's just a structural way centralized exchanges work they're just big bureaucratic corporate it's very hard to push actual growth Within These uh uh these structures just on the ground level that's what I've seen and if you leave it to leave it to somebody like ler a couple years back they were just this is the only focus we've got and we're going to get it done whereas centralized exchange teams just have constraints that we in defi don't secondly exchanges did try to create their own uh stable coins but they mostly failed and even if you look at binance with BD you can argue that's a one-off because of regulatory kind of capture that happens but even FD USD which is a great team um they just don't seem to have that Traction in spite of all that support that they got from binance so my theory is just there's a structural kind of uh break that these internal projects encounter and when you leave it to third parties like Athena to do it and our strategy was is just to get all the centralized exchange on the cap table get all them to hopefully integrate us um kind of that's when we can really push the execution that they can't do internally so I think the execution in the space is so hard that um just because somebody has regulatory or like Moe like a centralized exchange doesn't mean they're going to succeed and so far that's not what happened right I guess that's like a very product heavy like uh argument because you say you know we can move fast but then the exchanges will say well the banks are large bureaucratic institutions but we can move faster and then the banks will look at the governments and say you know the governments move slow but it's all about like size if you're very very small you can move faster but if you at the size of tether you will become slower uh and so I I don't think it's a matter of product I actually I think it's a matter of relationships like I don't know look at most countries like Vietnam Thailand you're not going to come into Thailand with a cool product and like become big you're going to be friends with people or like same way Vietnam same with like most countries in the world it's like a people business interesting and I I recall you were mentioning like uh regulation as like a maybe a factor driving uh less consolidation like more different stable stable coins and like loal ization um do you think there's like a risk of like big dominant stable coins like tether or Circle doing like a regulatory capture Playbook and trying to sort of win the market through regulation rather than having it be like localizing actually I think it's going to be very interesting right now we have the biggest stable coins being store value stable coins I think the feuture is going to be backwards so right now like tether usdc are 10 times bigger than all of the other uh literally 10 times bigger than the interest in stable coins I think that's going to flip my thesis is that um you know there is going to be some sort of regulatory capture and it's going to be Regional and then the big stable coins are the ones that are going to be able to take these Regional centralized table coins and do something with it that users won't be able to do and in this uh case is a yield I think if you can uh provide yield for all these stable coins then you're going to have these layers on top that uh transcend the regional boundaries and because of that they're going to be much bigger and that's what we're doing at cap nice so one thing that I think uh we've seen drive like a lot of scale in certain stable coins is Integrations so like if you can get on a and be used as collateral you know suddenly you can tap into the billions and billions of dollars that are there um how how do you think like as either a large or a smaller project do you think you have like a unique value prop that you're bringing to potential Partners maybe s you can take yeah I think within the dollar asset space what we do very well is uh apy scale it's very hard to replicate what we do just because you it requires operational legal structures rather than simply a smart contract so uh I think we're the only ones that can scale in terms of high apis to tens of billions of dollars as a if you take the mix of rwa and what we do now um so um yeah I think from that perspective we would bring a unique value and also I think the fact that there's lots of track for institutions that kind of use Athena taking these guys into markets like are they even though tvl wise isn't that big it's probably good for the industry and makes it very appealing to work with us um because obviously guys like BR Howard we're big investors they Ops there's a bunch of like pretty big traf hch funds that interact with us because of the way we structure the product so yeah yeah I mean the way I look at it I think interest in stable cones have not scaled like the biggest one we have right now is sddi right and it's significantly smaller I think there's only a billion dollars in the sddi contract right now uh compared to $155 billion with usdc and circle and that's because we're not tapping into a field so when you say Integrations I actually don't think about it like outside of the protocol I think behind the protocol how much Integrations can you do um so like the way we work is like uh cap allows many different agents be it ethena be it centrifuge be it other sources of yield that are like uh you know good at generating yield maybe for a certain amount of TV lets them contribute to the overall stack of generation of yield I think until we are able to um have more Integrations on the back end we won't be able to scale yield um I I wouldn't be so worried about like the other side like the Avis and stuff like this because I think these are like small games um like teer doesn't play these games right um I think you need to think fundamentally around how are we generating this yield and what kind of Integrations we're doing in the back end and yeah I think tether you know we've mentioned them a lot they're kind of in a unique position of in their room they're in illegal their own for sure um they I mean they have been able to uh run this huge stable coin Project without really paying out any of the yield hardly at all um and circle to a lesser extent is had some success uh make her to a much much lesser extent a little bit of success of like getting people to just hold the stable coin um like and kind of use it as a medium of exchange rather than just holding it for the yield um do you think that there's any Prospect for either a bigger stable coin or maybe a smaller stable coin um or like you know an ecosystem of many stable coins achieving that in the future or is the book closed on you know getting users to hold your stable without paying them for it yeah the dream is to keep all that Revenue we had like 130 million in Revenue year to date I'd love to keep all that obviously uh I'm expensive I like to spend so uh but I think the problem is yeah at the moment we're in the stage where we have to pay out the apy so that people actually use it but I do foresee a future where uh subject to certain Integrations there comes a point where we could start charging a bit more in terms of take rate we can go from zero or 10% to 20% 30% and as we keep growing hopefully eventually we just pay zero um and I think that will be done at least in our mind through uh uh deals with distribution centers in the fintech space in the banking space um and as we gradually capture that market we'll just start to probably and I'm just assuming we'll be increasing the take rate to the point where maybe we don't have to pay anything basically or pay out to only certain counterparties uh and that means we can just have more Revenue just like a classic business cycle off spending a lot giving a lot back and then eventually keeping a lot of the revenue so um yeah defin definely on the cards for us I think yeah I think it depends again what game you're playing because I don't think you can be a good interest bearing stable coin and also be a good store value stable coin I think they're completely different things um and you know there's a lot of space for uh new entrance in the storage uh like store of value stable coins look at Brazil uh very soon all of the people that transact in Brazil with their money will have a stable Co whether they like it or not and so automatically it's going to be bigger than uh tether because the Brazilian econom is huge um so that's how I see those going it's like users don't really have a choice about what they're going to use it's basically going to be what the government or the large companies decide it's going to be the storage of value stable coins uh because they have this mode um and then I think for us the interest buing stable coins our MoDOT will be you know can we do enough can we do things that can't be done outside and that's why I think it will never work out if you just have a team executing things like you need to have um a distributed system of of people contributing to your stack um in order for you to do things that other stable coins won't be able to do I feel like like obviously the biggest interest for people outside of Western markets is just preserve value obviously if you live in turkey and even if you have dollars if that's parked for banks the banks could take it away so just having the dollar is amazing even without the yield but there's a yield at the point where no one's going to care anymore about like the government based dollars U if the government was barely able to uh force people to not use dollars but to use the local currency How likely it is that in this open defi world where you can transact whatever you like that these guys are going to keep holding their Brazilian dollars I feel like they're just going to look at ethena and say hey 20% I'd rather swap into that and just start doing defi things basically I think well there's two things there one is like yeah probably not Brazil is a good example for this because Brazil has an amazing economy and they're like uh like their banking system works argena Venezuela Nigeria maybe I think those will be more of a Battleground uh but uh yeah I mean like these people don't save money it's not like most countries people don't save money like people just hold and they just pay or like they use remittances uh but people don't say like you know there's yield let me let me go because they're not saving money well maybe for Sarah I'm I'll ask you this so like we've we've seen tether and to lesser extend Circle um have a pretty pretty dominant position among stable coins in a sense you could say that the you know winner take most um outcome is already playing out a little bit um does that leave any space for a newer stable coin like Athena or like um you know anything else like usual or something like that is there room for you all to succeed uh if it does be like a win or take most Market structure yeah I mean this whole Space is based in optimism and defying the current worldview so I think we wouldn't be doing this if we didn't think we' actually have a shot uh the question is how to execute I feel like execution is getting harder and high harder with every year where last cycle you just Fork something throw more tokens you grow this cycle is getting to the point where you can do anything if you really want to you just need very strong Partners very aligned incenters with the really big guys it's just anything is possible as long as you have the right backers and the right execution so um I just don't see why we couldn't do it we just need to uh very often like the you know the competitor makes a mistake and then you just happen to be suddenly not the third but the first like this happens all the time uh so I don't see why we couldn't do that too right well we're coming up close to time but I'd say let's um just wrap up with uh if you guys could each give like a kind of like what's your vision for 10 years out what does the market structure of stable coins look like uh maybe I could start I think there's going to be obviously a th000 2,000 10,000 stable coins because where while they all share the same name stable coin they're used for very different things um I think like like if you want yield specifically from funding rate Arbitrage or you only want exposure to centralized exchanges you might go to ethena if you want uh just T bills you might do Ono um if you want uh leverage yield you would do uh SD I think most people will want to have some sort of like abstracted way way uh yield bearing stable coin that can adapt to yield depending on how the markets change I think that's obviously I'm I'm bias because of cap but I think that structure will win long term um but I think there there's not going to be one guy or one protocol that wins it's just going to be because there's so many use cases for stable coins and let's not even talk about like alternative currencies um there there can't be one stable coin yeah I think there may be a th000 stable coins but the distribution would definitely not be linear it would be as usually in life if you guys get everything or most of it and this would be probably similar to if you look at the tech industry we have the same guys of the last 20 years like there's an open AI even every now and then but realistically what'ss the churn compared to 20 years ago or the banking in terms of assets oning managements yes there's thousands of banks but how many how concentrated is the balance sheet amongst the top 10 it's pretty much the same so I feel like like we thought about this right we added rwa to the balance sheet so now we just we at some point we had $900 million of rwa we were bigger than the whole rwa combined you know just because we added that and we're very Nimble so um I feel like we can keep adding different exposures as long as there's interest for that and but that's probably why uh we're going to see a th000 stable coins but top 10 will probably account for 80% of all the TBL that's just how life goes I feel like all right well thank you guys so much uh thanks for having us table Summit thank you