Keynote by Marc Boiron - CEO, Polygon

Hello everybody. Uh, excited to be here. Um, I'm Mark Boron. I'm the CEO at Polygon Labs. I'm also a contributor to Katana.

For those of you who don't know Katana, Katana is a relatively new um, L2 that is focused entirely on DeFi with about $500 million of TVL built up over the last 4 months or so. Um I'm not explicitly here to talk about Katana, but I am going to talk about um some underlying things that Katana does that are important. Um you know at the key core kind of like what we're talking about here is the idea of like uh unlocking like stable coins um for institutions. And when we think about like what that actually means um we have to like look at what the problem is today. And the problem is today is that you can't actually do anything in size in stable coins.

And you know, as they say, like your size is not your size, right? Like the the size that institutions are going to transact in in stable coins is not the same size as we've seen in DeFi historically. And when you actually think about how chains are built today, none of them are actually optimal for DeFi. Um, we can really talk about this in the context of like why it is that kind of stable coin liquidity sucks. Um, and really like the the biggest one is that chains are not actually built for this.

And people often talk about this in the context of like crosschain fragmentation of liquidity. Um the thing is like cross-chain liquidity fragmentation is an issue but the bigger issue is actually liquidity within chains and when you think about this and you think about like how your typical chain is constructed um what you basically have is the equivalent of like 30 different order books each being a different deck. Um you have the same thing when it comes to lending and that's not how traditional markets are built. Um, it's not how centralized crypto markets are built. And the reason they're built like that is not because they're centralized and centralized is bad.

Is because that's actually how you get the greatest efficiency. And that is 100% something we should be trying to replicate in DeFi. And so let's take like an example of like what DeFi looks like today is you've got like DEX one, DEX 2, you're talking about USDC, USDT, liquidity. You've got like $26 million in one, $21 million in another. Uh, right.

Right. And so you're talking about like a total liquidity of like $47 million. Um the thing with that is that when you're actually transacting in one of those pools, you basically have half the liquidity that you would have if all of this was actually concentrated. Now this can be solved like decently well in dexes. Um but like in lending this is really no way to actually solve this well.

Um the same is true when you start start talking about like launchpads where you need like again a concentration of liquidity and and you can't replicate it. Um you know orderbook dex is definitely something that that can't actually be fixed in this way. Um and so there's a solution to this. It's a very obvious solution which is just concentrate the liquidity. The question is how do you concentrate the liquidity on a blockchain in a permissionless way?

Uh and it all comes down to being opinionated. This is one of the kind of like unlocks of katana. A lot of people like look at like the way katana is built from a me mechanism perspective. Uh I actually think that that tons of interesting things there. That's actually not the interesting thing about katana.

The interesting thing is how opinionated it actually is so that we can solve this problem and actually bring defi into the mainstream. Um what do we do? We basically have one protocol per category and that is it. Now the way that we do this in a permissionless way is basically through incentives which is exactly how crypto works for everything is we don't need to permission anyone out. We just need to give such incentives to those who we actually want as the core protocols that none others choose to build.

Um and so we've got Morpho on the lending side. All lending liquidity gets concentrated into Morpho. It doesn't get split between Morpho and A and Oiler and so on and so forth. Um same thing on like the spot deck side. We've got sushi and we don't have unis swap and aerod drrome and you know continue down the list of like 90 other decks most of all being just forks.

So all the concentration of liquidity comes into to sushi. Um we have not historically had a per deck uh given the launch was 4 months ago. Um but good news being that uh we have identified one that we will be bringing to katana in the new year. Uh it's going to be be very exciting. Uh, and so, uh, I'm excited for Katana team to to announce that when it comes.

Uh, and then we have a launchpad, uh, that is called Kenzie. Uh, and this is a memecoin type launchpad. I think the thing that's really important to recognize that like I don't know how many in the audience hate memecoins and how many of the audience love memecoins, but it doesn't actually matter. The only thing that matters is to understand that like the information uh, the content of web 2 was information and the content of web 3 is tokens. And you need a way for people to create tokens easily.

And you also need a way for those tokens to actually grow in size. And therefore you need to concentrate liquidity in new tokens so that they can actually grow in size. Um which is why that's the case. Now the same is true by the way for assets, right? You you want to look at assets and you want to focus on assets that are differentiated in some way, not only ones that are the same.

Um USDT has a completely different user profile than USDC. Uh Agora's AUSD has a very different user profile than any of those. Those are like different stable coins. But let's take like Bitcoin as an example. Um there's like one or two different versions of Bitcoin that make sense because you've got one that like miners trust and then one that like DeFi users trust.

But ultimately you've got like 20 different versions of wrap Bitcoin that exist and like you don't need 20 versions of them. You only need a few and you concentrate liquidity in them. That allows people to come in actual size. Now the other thing to remember is that institutions don't want your shitcoin, right? So like when you think about this like what is all of the yields above you know the the baseline yield it's just tokens coming in and nothing else.

Uh one of the things that's been a big focus for Katana is is really passing back like maximum revenue to users that is turned into yield. So one of the things that's unique about Katana uh is that you've got you know things like AUSD yield. So this is yield on on a USD that is passed on to Katana. Uh you've got sequencer fees, you've got a mechanism called vault bridge. All of that yield goes back to the users and that is all native yield.

That is not your shitcoin. Now you want to kickstart things and so Katana does have a shitcoin called cat. Um the nice thing about this shitcoin is it's not really that much of a shitcoin. It's going to be a pretty awesome coin uh when it's actually transferable. Um and uh it'll be very unique to see like a chain with like a V33 type model built into it.

Um but for now you've got that coin that is being distributed and incentivizing others. Uh and then you've got uh c uh tokens from like these core apps that that are doing the same. Ultimately we want to move to a day where you don't actually need those tokens anymore because the revenue being generated from these other sources and being passed on as yield is is so high. Um, and that's really where you get kind of like institutions saying, "Oh, wow. I can offer instead of 5% yields, I can actually offer 8% yields."

And those 8% yields are actually like real dollars or real ETH that is actually being earned on ETH assets. Um, this is a little more on on how we actually do it, right? So, deposits into Katana are actually deposited into Morpho vaults on Ethereum uh for any USDC, USDT, ETH, and BTC. Those assets get lent out, take that yield, pass it right into the core apps through to the users. Take a USD yield, pass it to the core apps through the users.

Take the sequencer fees, pass it through. Basically, you're giving yield to the users which they deserve to receive in like the maximal way possible. There's really no other sources of yield here that you could like passively possibly pass on. The nice thing is this is actually sustainable because as you know, bridge yields grow, users come, as more users come, those grow. Same thing with activity on the sequencer side of things.

Um, now you also need to think for institutions about like bare markets. In a bare market, you're going to want to uh actually have something that's resilient. We build up chain liquidity. This is liquidity that stays in the chain at all times. So when all the market makers and other traders pull out, you still have liquidity to trade against.

As this grows in size, creates more stability. We also uh want to focus on what we consider to be productive TVL. Uh so really when we look at this like what we're talking about is you know how do you actually with productive TVL like maximize liquidity fees. The general idea here is when you have a typical chain that just incentivizes tokens and people to do nothing you don't have productivity. But when you actually incentivize people to use a chain then you actually get productivity through these assets.

So that's a little bit about Katana and how we bring institutions to uh uh use stable coins on a chain in size and uh yeah very excited to talk to anyone about Katana who has who has questions. Thank you very much.