Type III Stablecoins by Benjamin.lens

stable coins let's go oh it's over there right oh nice okay cool cool cool hey everybody so today we're going to talk about type three stable coins um you're probably wondering wait there's like three types well there's actually four and yeah we'll get to it uh first of all whoa first of all uh we're not going to be talking about the Giants like usdc usdt those guys are doing great they have a lot of pmf um they are used for settlement right on ramping off- ramping they're backed by Fiat in a bank account we're not talking about them today we're talking about interest bearing stable coins uh things like my things like ethena things like D um LUSD Etc so to not keep you in suspense we're going to start by showing you all of the types of stable coins according to us um this talk will mostly focus on type one to type three because that's where the Innovation is happening today uh inable coins but briefly about type zero um yeah you can imagine like there's like a line here between and dogenous yield and exogenous yield endogenous yield type zero is like your cdps your OS um vitalic calls them the borus of crypto because they are completely tied to usage of their platforms so like os are tied to somebody buying a token on CRV or Aerodrome cdps are tied to people leveraging their e leveraging their Bitcoin and so naturally they can never grow Beyond crypto because they get all of their yield from crypto as an industry as a stablein industry we've largely gone away from these types of stable coins because we've realized they don't scale and today no major stable coins I'm talking about over $500 million are endogenous stable coins so we're going to focus on the others and the way we break them up is how do they fulfill the promises that they are um giving to users so all of them promise exogenous yield y that comes from outside of their platform outside of the blockchain but the way they deliver these promises really matters uh like if a team is delivering the yield a DA is delivering the yield or maybe a blockchain is delivering the yield um now I didn't come up with this this this uh this framework for thinking about promises and guarantees actually comes from shiram the founder of Igan and he talks about how we can as an industry um offer more robust guarantees to users if we um change up a little bit how we um organize the decision making with protocols so why does it matter right why does it matter how a protocol guarantees their promises well if you don't know how these Protocols are delivering their promises you can't assess the downside you can't assess the risk related to their operations and so I I I didn't show made off here because we're supposed to be better than trfi we're supposed to to be able to give guarantees that trii cannot give but as you can see I mean banks are not my friends not your friends turns out Alex is not her friend either right uh all of these teams that are in crypto haven't been any better than uh trifi uh products so let's start with authoritarian so it sounds like a bad word uh but it's purely descriptive I promise um the first type of stable coins interest uh yield bearing stable coins that are EX have three main characteristics uh the most important one is that teams are the ones in charge of fulfilling promises right if you put money into Athena who is the one that ensures that you're going to earn yield is the Athena team if you put money into and and us to resol who is in charge of making sure that they fulfill their promise of making yield is the team uh now because these teams are the ones ensuring the yield um they can't do more than like one or two strategies because there's no way one of these teams can do 40 strategies it doesn't really scale operationally and then lastly uh a key characteristic of this type of stable coin is that they're unsecured custody so you're essentially lending money to these protocols and if they lose it via their strategies you're out of luck right like you lost your money there's there's no recourse but there's trade-offs it's not all bad not all good the best part about these type of stable coins is that they're simple right you're just putting money in um and some hft background developer is uh doing some strategy for you so super simple there's also a user agency so let's say ethena yield is not that great well you can move to Ono and you can move to resolve and you can like you know pick your own adventure that's pretty um user Centric they get to make the decision now the key concern is that you have these teams uh playing with your money right and if they lose the money well you're out of luck and they're fine right because it's not their money um and the other thing is obsolescence right there's no one strategy that will last forever at one point your strategy will become obsolete we saw this with all these teams making t-u protocols at the end of last cycle and as soon as all of them went live the crypto yields went up and suddenly nobody wants to use the T stable coins um and so this will happen to every single other stable coin that relies on one or two strategies in my opinion so how do we evolve from here so there's some cool projects that have decided that focusing on a team um to guarantee this kind of yield is is not scalable so you have things like Sky things like angle Maple now they uh Focus the enforcement of these guarantees on Dows or committees so you have these groups of people that decide where the money will be allocated and they give it to other parties to generate yield so this is way more scalable right because now you can have uh like trafi institutions market makers folks that are really good at generating yield uh to do it for you um you still have the characteristic obviously of unsecured custody right if these folks that you're giving money to lose it you're out of luck you lost the money um so let's look at some of the pros and cons so obviously way more scalable than type one stable coins uh the latency between strategies is much lower because let's say the strategy you're running now is no longer good well you can just take out the money and put it somewhere else um and so this is what you know sky does right like if they have money in ethena and ethena yield is no longer good they can take it out and put it in spark they can put it into coinbase it's like very flexible um and the enforcement is better right because if you have 100 people making a decision it's going to be uh a more robust enforcement and you have two people um it doesn't come without its cons right downsides so for example you still don't have recourse if the Dow makes a bad decision you lost all your money right um and also there's a lot of corruption in dowas in general right like we all know there are some uh big defi Blue Chip protocols that if you want them to launch in their chain you make all delegates your advisors and suddenly uh certain protocol launches some mettis so like these things happen some people know about this stuff anyways uh these things happen you can corrupt doubts like if you have a delegate that's making $100,000 a year to vote on a billion dollars of liquidity well people can just bribe them a million dollars to put their money in your protocol and so that that's bad for users so this is what I'm trying to introduce to you guys today is a type three stable coins how can we still harness the power of effic markets of external parties generating yield for us while still having robust guarantees for user safety and so the key characteristic here is that instead of having a team or a dow deciding whether the money goes you have an immutable set of rules um tracked by a smart contract that decides where do we allocate funds and this is very similar to bitcoin to ethereum if you're processing a transaction on um ethereum you're not going to wait for a vitalic to uh Val validated for you he has no uh part in the decision- making process there's just Rules by which you get slashed Rules by which you make money in ethereum and that's why it's way more robust than the daps that we have today but nobody has built daps that function like ethereum we're we're just recreating like these like Web Two platforms um and another big part of type three stable coins because they're self- enforcing you cannot trust anybody at all and so if a custodian has to take um hold of the money in order to generate yield you need to make sure that they're fully secured because at any time we have to expect that they will be malicious and so these kind of uh trust by um what it's like trust by check I don't know what it's called Uh by verify trust by verify I think it's these kind of like values that we need to get back to us uh industry so PR are similar to the type two scalable because there's many strategies low latency because you're not the one running the strategies um and then way more robust enforcement right you're not waiting for for people to make decision you're not waiting for like a team to make a decision there's a smart contract with rules a predictable rules that decide which actors are benefiting the system and which actors are harming the system um now the cons is a user agency is a big one right we don't think the users should be deciding whether they're putting their money on like Susana or Franklin Templeton or or wintermute they don't have this kind of skill right and year after year users lose money uh by making these sort of decisions um it's way higher complexity right we're not building um just like a a rapper of a hedge fund this is almost like a blockchain right like you're having these immutable rules that dictate um the penalties or the rewards of various actors so that's self- enforcing stable coins um just as a high level the outcomes of this this is the current um priorities for projects right let me deliver the value that I promise to use is uh Yi then let me compete with other people so higher yield than other projects and then lastly let me protect and and you see this you have projects that you know uh put everything in a multi-sig or have a lot of admin privileges they clearly put protect users at the end what we're saying is let's let's oh I can't go to the next one I guess there's nothing else guys there we go so so what we're saying is the number one thing we should do is protect users right um if people are going to use us over trafi we need to give them something that they don't already have right in trfi they rely on uh Regulators to protect them we don't have Regulators we don't have robust regulation so it's up to us to protect users and that should be number one then we can worry about yield then we can worry about competing with other sources and and if we do that you know the users that believe in us we won't lose their principle and they won't leave our industry so that's all I have to say thank you guys