Ebisu Finance - Applications for Restaking in Decentralized Stablecoins

hi everybody um yeah I'm Ethan from IBU and today talking about reaking in decentralized stable coins so firstly I want to start with one of crypto's North Stars which is enabling untethered banking imagine how much human development could be unlocked if everyone had equal shot at Financial Freedom given Humanity uses Fiat denominations to store uh account for an exchange value stable coins are playing a integral role in the financial Revolution we're all contributing to they create outsized value relative to Fiat banking by offering 24/7 permissionless low fee system for storing and transacting value and today I'm going to talk about decentralized stable coins and IU's approach in driving their adoption so as we all know a good stable coin has a strong Peg and deep liquidity centralized stable coins like usdc and usdt are issued by regulated companies and are rough roughly backed oneto one with reserves of US Dollars and T bills they have great Peg and liquidity and subsequently their Network effect is tremendous of the $160 billion worth of stable coins issued to date 145 are usdc and usdt uh decentralized stable coins on the other hand are issued by trust minimized protocols and are typically over collateralized by crypto assets or algorithmically pegged um they're great for permissionless transactions without the risk of sensorship but often run into issues regarding the price volatility of their collateral and um issues around bootstrapping liquidity so to understand the value of decentralized stables let's quickly take a look about how easy it is for authoritative entities to censor stable coins first we have centralized single points of failure like Banks which we saw caused the usdc dpeg when sbv collapsed or centralized intermediaries like paxos which halted the issuance of binance stable coin when the New York Department of Financial Services asked them to uh secondly stable coin issuers can themselves like um censor transactions directly like when Circle froze usdc held in tornado Cash Link addresses or when tether froze to transfer of funds relating to like terrorism and warfare in Ukraine and Israel and there's also collateral risk anytime the US government flirts with uh defaulting on their debt which they often flirt with uh there's the risk of dpeg or insolvency for all of these t- Bill backed um Fiat stables and and the list goes on so it's a great thing like L positive uh positive public sentiment on crypto as a way to hedge Fiat and inflation is is growing but um what we believe is the majority of users don't care about architectural trade-offs between different coins or the ethos of decentralization they want convenient reliable cheap ways to store and exchange value and centralized Stables are winning because they're just that uh issued by trustworthy entities better integrated into trafi um and issued one for one against collateral versus decentralized Stables which are often over collateralized and I would like to like double click on this last Point um here we see the collateral composition of usdc versus Dy relative to their respective circulating Supply and I would like to point out the over collateralization buffer of Dy which is needed um just to account for the volatility of the crypto that they use as collateral um we believe that decentralized stable coin adoption is being bottlenecked at the issuance stage due to the high cost of capital associated with bootstrapping them versus centralized Alternatives um as indicated by the overcollateralization buffer um to bootstrap a well pegged liquid stable capital is required as a collateral posted by users because more collateral means more value backing the stable and B liquidity allocated to venues that the stable coin can be used in for example dex's money markets Etc because um more liquidity means smoother transacting swapping and borrowing so this is where reaking and liquid come in uh liqu is an elegant CDP system optimized for minting over collateralized Stables against eth I think um we learned about them a little bit earlier today and their stable LUSD has proved its ability to maintain Peg throughout periods of crypto volatility as seen here um yeah Ben earlier noted like there has been problems with redemptions and I think their V2 is doing a great job at solving those um the second point is reaking so reaking via igen layer or symbiotic lets crypto assets earn incremental yield on top of their base staking rate what this enables is a fully decentralized yield bearing collateral that can be used to offset the opportunity costs incurred by issuing over collateralized stables and this is where IBU comes in IBU is a liquidy inspired CDP stable coin powered by restak collateral our thesis is that in the long run IBU will harness reaking as the greatest permissionless source of onchain yield to issue decentralized stable coins at lower cost uh Abu lets users borrow stable coins against eth and liquid reaking tokens and our stable EB USD gives users dollar liquidity against their restake assets while enabling them to remain exposed to that reaking yield we can take a look at it from a user perspective so if you're a holder of lrts or restake collateral EB is a borrowing venue that can offer you Capital efficient leverage against your restate assets unconstrained by lenders uh for those seeking a stable secure um decentralized stable coin EB USD is issued against collat that always grows in value and takes advantage of liquidy V2s protocol incentivized liquidity to ensure real sustainable yield for EB USD stakers and there's a whole uh list of other things that make liquid ev2 um what we think the best at issuing over collateralized decentralized Stables but I won't go into it now uh definitely check out their white paper if you want to learn more um so while we're really optimistic about the applications of restake collateral and defi there's a few risks that need to be accounted for um primarily the principal agent risk um associated with lrts so LRT is basically a risk manager their job is to allocate their deposits across operators and choose which avss to secure uh if done incorrectly LRT deposits can be slashed um by the avss second there's the risk of the LRT price volatility caused by these AVS slashings or market conditions like um low liquidity or cascading liquidations and of course the more protocols involved in a defi in the defi stack the more smart contract Oracle and governance risk there is overall reaking is a novel primitive and how much real yield it can generate um is still up in the air it's going to be really interesting to see how avss um think of innovative ways to use IG lay and symbiotic to create new products that will create profit and subsequently drive real yield for uh resters um zooming out there's a place for centralized and decentralized coins Circle tether maker fra and liquidy have all and my have all played paved the way for um stable coin adoption today I just wanted to highlight that the market is Overexposed to centralized stable coins that bear the same principal agent risk that plague the TR trafi fractional Reserve banking system uh the last that I want to pull up is the $183 trillion of deposits held in Banks worldwide of the 8 billion people in the world only 7 million have transacted with stable coins today and I think myself along with everyone here agrees that the opportunity for stable coins in the real world far exceeds that of our crypto microcosm so look forward to collaborating with everyone to grow the stable coin p and um yeah super grateful to be working with all you stable coin inures um towards this goal thank you