Joseph Schiarizzi - Tradable CDPs 1

hi everyone um so the next talk is going to be by Joseph founder of open dollar he'll be talking about tradable cdps tying stable coin debt to tokens instead of accounts give it up for Joseph everyone Hi everybody thank you for coming to the unstable Summit I'm very excited to to close it out with uh our keynote uh I'm Joseph the founder of open dollar and we're here today to talk about tradable stable coin cdps um a revolutionary new defi primitive that uh we're planning to launch in the next few weeks on arbitrum with our new uh stable coin open dollar uh so just a little bit about me I'm Joseph um I have been a solidity developer for the last seven years or so um slightly more than 1% of all ethereum transactions use Smart contracts that I've written and uh I've contributed to openc getcoin consensus uh and and several others you can follow me at Cupa Joseph on Twitter foraster lens or what have you so uh this talk is really about stable coin safety and stable coin flexibility uh and if we get into uh uh all the different types of stable coins that are out there um this is a screenshot from Blue chip. org which is a new stablecoin rating agency and they've actually rated uh all of the most popular stable coins in crypto and given them you know an alphabet an alphabet rating just like a bond rating agency uh and the really interesting thing about it is that liquidy is rated a and liquidy is the absolute safest 100% safest by every single metric stable coin that exists um and no one else is really even close because of liquid redemptions mechanism even usdc uh is way down here with a B+ rating while liquidy has an a right so what's what's up with that what's what's actually happening uh on liquidy whatever Vault whatever CDP uh collateralized debt position has the lowest ratio is the least safe Vault on the system that can be liquidated at any time by anyone holding the stable coin so even if the stable coin price in the market is going really far down uh you can get out of it whenever you want into that high quality underly collateral which in the case of liquidy is always uh eth right and so when usdc deegs uh or you know the the yield for some yield bearing stable coin goes down and it causes the stable coin to death spiral or uh you know dpeg uh you don't have the option to redeem that stable coin for the underlying collateral right if you remember last spring with usdc d pegging you don't get to call Circle at 2 a.m. on a Saturday and say hey guys uh give me two t- bills to to cover this right they don't do that uh and it's it makes it less safe right so liquidy number one because of its redemptions and that just really makes it the safest best stable coin in the market right now uh but there's there's this other problem because um liquidity loans and uh uh vaults their cdps are tied to accounts just like a compound and every other lending protocol that exists in defi the loans are always tied to accounts so um raise your hand if you own a house or you have a mortgage or a car payment yeah so would you ever buy a house with a 30-year mortgage if you couldn't sell the house until your debt was paid back who would do who would take that deal one person says he would take that deal you're very brave very brave so that's a terrible deal right no one no one would take out uh almost no one would take out a 30-year loan if you couldn't sell the assets behind it until the loan is paid back but that is exactly how lending positions work in defi right now right you lock you lock your collateral into a CDP or other lending protocol you borrow against it and you can never access that collateral until the debt is paid back uh and that's just not how loans work in traditional Finance which is why traditional financial loans are more ed useful and safer uh so in in defi lending uh you know it it's this difference right loan conditions can be more flexible than traditional Finance right um if you take out a mortgage there's a fixed rate and that's like what the mortgage rate is that day but on liquidy version two for example you get to decide what your interest rate is you get to just pick whatever interest rate and so there's a lot more flexibility about the terms of loans right when you deposit on a or borrow on a there's no end day there's no end day it just exists so there's more flexibility in defi lending but you can't sell your collateral until your loan is paid back and so it it lacks the flexibility um in the structure and in the collateral and the capital efficiency of it uh even if it has more flexibility in the conditions so introducing nonf funable a new D5 primitive this is what actual nfv looks like there's like a picture it's very cool it's rendered onchain we'll get into that uh so nfv stands for non-f fungible Vault right and this is something that open dollar uh is going to be the first to bring to Market I expect other stable coins to add it shortly um but this idea of you have this Vault that you've created you have this debt position that you've created and it has some certain amount of collateral inside of it and it has some certain amount of debt minted against it and that entire position is stored as a non-fungible token right it's stored as a as a 721 which means that it can be traded in a secondary loan Marketplace the same the first secondary loan Marketplace in Defi and it also means that you can sell that entire asset and you can get out of a leverage position or out of a lending position in defi without having to pay back the debt because you can sell the entire position to someone else uh so this unlocks a lot of uh really cool experiences well let's go back um it unlocks a lot of really cool experiences it means that people can take more leverage because they are never going to get a margin call they can always sell their entire position to someone else who is willing to pay back that debt before it gets uh liquidated uh so it increases Capital efficiency really greatly in the market uh and and means people can take on more uh more leverage safer so there's a few considerations that I think are related to kind of security um we want to when we're when we're designing nfvs we want to design it in such a way that these can be traded safely which means that there's no front running uh if you buy it on a Marketplace you want to make sure that no one else can front run your buying offer and remove all the collateral or mint extra debt against that position right and so there's there's some extra security considerations that we need to take into account when we're trading these types of uh these new types of nfvs um I think one of the benefits of of making it uh a 721 and and making the nfvs uh kind of use existing infrastructure means a lot of the trading marketplaces the analytics on nfts and all this kind of existing info infra that has been built in the last 2 or three years around nfts um the market can can take advantage of that I think there's been a lot of Promise over the last several years about uh nftf and and being able to use nfts in Defi and personally I don't think that comes from or I don't think the the end game of that is uh borrowing money against monkey pictures I think it's saving data and using nfts which is a really great way to store data and create uh uh non-f fundable marketplaces for loans uh with them and and other other types of assets so back to stable coin safety we know LUSD is so much safer than everything uh else on the market because of the redemptions and nfvs can also facilitate redemptions the same way where you can sell an entire position to someone instead of against their uh against their consent um but have it be opt in so we can provide more yield bearing opportunities to active Vault managers so if you're willing to let someone redeem against your Vault maybe you uh get a slight fee for that you get a small fee uh you get more yield and the stablecoin uh itself is safer and um better to hold because you can get out of it easier uh so we've been when we designed this we were hugely inspired by liquidy uh but we want to make lending in defi even more flexible even more safe and even more useful than it's ever been before so that's that's it pretty simple um things tradable loans tradable cdps and being able to uh get out of positions without having to pay back your debt so bringing um bringing the feature sets of traditional Financial lending up to def5 for the first time uh with non-f fungible vaults so as you're working on your stable coins or or uh deciding what to get involved with you know consider how flexible your cdps are and how useful they become because of that thanks for listening thanks for being here I really appreciate everybody's time uh I'm Joseph from open dollar and yeah enjoy the rest of the unstable Summit