Panel | Is the Yield Safe?

Hey everyone. Uh I see a lot of you tuned in for risk panel. [laughter] Um yeah, I guess uh let me start with a quick introduction. So, we're at the moment in DeFi where um the DeFi yields are competing with truffle yields. There is more and more RWA assets uh being available on chain.

More and more institutions entering with their uh own products. Um and I guess the choice has never been uh um like the user has never had more choices in DeFi and they can basically pick whatever they want from, but at the same time um there have never been so much complexity um in terms of what to do with your money. Uh and as institutions are entering, we're still seeing multiple depegs weekly of plenty of delta neutral stablecoins and protocols getting hacked uh and a couple other unfortunate things. So, the question for today's panel is is the yield safe? Uh and I guess we can uh start off with um introductions of our speakers.

Guys, if you could like tell us a couple of sentences about yourself, about your company, and what you do. Uh and we can start with uh with you, Andrew. Sure. Thank you. Um hey everyone, my name is Andrew.

I'm one of the co-founders of Herd. Uh got into the DeFi space back in 2020 uh because of composability. Contracts have gotten a lot more complex since 2020. Uh I spent 3 years at Dune analyzing protocols across Ethereum, Solana, and Bitcoin and studying how every protocol was becoming more composable, getting you more yield, but also getting more complex. Finally started Herd uh uh a little over a year ago cuz I thought that a lot of the work that we do when researching and due diligence saying and building on top of contracts should be done with the help of agents safely.

So, that's that's what Herd does. Everyone, my name is Nicola. Some of you may know me as a DeFi Nicola on socials. I'm a risk manager at Block Analytica. We're a team behind Sky Protocol, risk team behind Sky Protocol, formerly known as Maker.

And we also do risk management for protocols like Hyperlend, Summerfi. We have worked with Aave and I've been on a risk committee there as well. So, yeah, that'll be a short story. Everybody, my name is Chris Walker, founder CEO of Credit Coop. For those of you who didn't see my solo talk, we finance payment companies and for lenders we allow them to allocate to these opportunities and earned a nice yield.

My background's in securitized products, investment banking, and I've been in crypto since 2020. Hello everyone, my name is Phil. I'm a security researcher at Certora. Uh At Certora uh my work is a little bit different from from the rest of the guys here. Uh I spend all of my time looking at smart contracts uh to see whether or not they're safe.

Uh and this is what the main thing that we do at Certora. Thank you so much, guys. As for me, I'm Philip from Redstone. We do oracles, but we also have Credora product under the hood, which is the risk rating protocol. Um well, I guess let's kick things off with a first theme.

Um how yield is being generated and what risks it introduces. And um you guys work with risk on a daily basis. So, I have a first question to you. Walk us through the main yield sources, or like yield-bearing assets you work with. Um, and what risks do you see they actually carry from the that might be like unvisible, um, from the headline number?

Uh, anyone wants to start, or Yeah, I can uh I guess I can uh name a few uh to start with. So, what we're today mostly working with when it comes to um, different yield sources. So, let's first start on chain. Um, let's say uh those are like first the basic ones, LP into both DEXes and perp DEXes, then uh some native lending, uh all the way to tokenized like more complex tokenized strategies, whether those are delta neutral, market neutral. And then, we also uh cover, of course, now the increasing number of off-chain yields to show you know to disrupt a little bit the cyclical nature of the on-chain yields.

Uh they're kind of more dependent on the crypto market itself. And those being um tokenized private credit, uh even tokenized uh delta neutral strategies that are uh being managed like completely off-chain. Uh of course, wrapped T-bills. Uh so, yeah. This is just the to name a few.

I would I would let others if if they have uh Sure, yeah. Um, for Credit Coop, our yield is is generated from namely two sources. Um, the first source, and 90% of our yield is generated from the repayments that borrowers make, or rather the repayments that we automate on their behalf. Uh and then, the second source would be we take that interest, and then we compound it and we'll allocate to you know select Morpho markets. So for example, maybe Gauntlet USDC Prime.

Um or some of the lower risk ones that will compound uh the interest and so allow the principal to be paid by the borrower. I would say from a a risk standpoint what is not obvious to you know depositors or what you can't necessarily see as easily on chain is some of the behind-the-scenes risks. So, you know, concentration risk of of those payments. And well, what happens if you have 80% of your volume from one borrower or one client and then they have something that happens. Uh so, I think that's probably one of the bigger ones and then I would say another one would be, you know, redemption risk and and really thinking through the duration of of your deposit and should you want to redeem, is there actually liquidity to meet that redemption?

And uh the third one I would I would say that I think everybody probably agrees is, you know, Oracle risk, um the hot topic is resolve. And uh you know, maybe we'll get into that on the panel, but I think historically in DeFi, this has been a known uh attack vector and sadly we we still have, you know, instance like the resolve instance. Uh so, that's really important is to think through what the source of the data is and what the Oracle is actually pushing on chain. Yeah. Um for us, we we don't directly invest in any of these products, but most of our biggest users are curators like Steak house and Gauntlet.

Um so, the asset class we focused on historically has been like stable coins. And the you know, the the risk that we we look at is a a lot more on the operational risk side, right? Cuz for any stable coin, there can be, you know, up to 15, 20, or 30 contracts involved in terms of like yes, there's basic minting or basic Oracles, but there's going to be some master minter, some controller. Um it's pretty complex to untangle that across like if you take some token like uh S S N U S D, um, like how does that perform? How does it perform the market?

How is it operated? And then how is the How is it tied to the underlying collateral? Um, now that we have like async deposit and redeem um patterns in place like Centrifuge as well. Um, there's just many, many layers of like trying to understand how does this token actually work and like how does that reflect the actual underlying collateral? Cuz you could say like, oh yeah, it's a it's a U S T bill or something that's collateralizing it, but by the time it gets into a Morpho market, it can have very different kind of operational or liquidity or, you know, redemption in and out queue um levers that fundamentally change its like how we would think about its risk profile, right?

Right.

Well, um, my my my perspective on yield is more from a an infrastructure uh point of view. So, uh in my view, there is one layer which is where's the yield generated? So, we have staking, restaking, LP-ing, lending. And then, as Andrew mentioned in in his intro, uh this got really complex. So, it's it's not trivial at all uh to manage LP.

So, we got another layer which is uh the protocols and players who manage these things to to generate yield and manage the risk of how to to generate that yield. Uh and as you add each specific layer, each specific thing that you do carries its own risk. And when you compose these things together, you you add the additional yield. So, when if one protocol is exploited, uh often that's not the only victims because if anyone has a any exposure to that, they will be a victim of that, too, if they expect for their token to to carry any value. I think we've seen it with um was it uh D USD, Deepak, right, where we had whole morpho vaults liquidity crunch?

Yeah. Uh I remember our deaths didn't slip a long time at that time. Um but yeah, I guess uh that could be at the same time the next question. So, where do you see the biggest gap between how the risk is being perceived or like presented by asset issuers or protocols, whatsoever, and between what is the actual risk that the asset comes with itself? I'll just jump in on that.

I think one of the bigger things that stands out to me is a a lack of standardization in in how yields are presented, right? So, if you want to LP into a protocol, like to your point about risk, typically in traditional finance, you know, you get higher risk, higher reward. And you know, that sounds like simple, but on chain, it's a little more complicated. Some front-end UIs will show a forward-looking, you know, yield projection. Some will show a trailing 7-day average of realized yield.

Some will do 30 days. So, it's a little trickier on chain to know if you're comparing an apple to an apple or an apple to an orange. And I think that's what makes it a little challenging, and I think to to Andrew's point, like it is complicated. You do need to dig deeper and have a sense of what they're actually showing. And then to my earlier point uh on the underlying liquidity in those markets and thinking through redemption.

So, I think they they kind of one in the same, right? It's If we can standardize how yield is is shown on chain, we can then have a better sense of the risks, right, that are being taken. Yeah, I would I would absolutely agree on to like the presentation of the and the disclosures of the risk. I think by default, it there is definitely a lack of uh of the metrics that like the average LP uh is, you know, um exposed to. So, I think um the there is a con- concentration on the single like metric, which is an APY, and this is, you know, common to regardless of the underlying yield source.

This is probably something that most of the users are relying to, and as you said, I think um things like, for example, the max drawdowns, the average time between uh some significant drawdown uh till the till the break-even uh or things like that should be, you know, should be there by default. Uh not just uh not just uh the price you you get for underwriting that specific yield source, but rather uh who's your counterparty. Uh I think uh this can definitely be uh presented in a in a better way, and I think uh we should, you know, uh en- enforce that somehow to to make it as a default. Just just quickly uh just double-click on that. Like, I think a a tangible example for the audience is um I won't name the the protocol, but I know there was an optimizing an optimizer, and for example, to the point about APY and liquidity, it saw this, you know, from its API return some value as the yield source, and it was, you know, marginally higher than their current position.

They swapped into this position like 3 and 1/2 million bucks, but then there was no liquidity. So, when their little AI agent saw higher yield, two basis points higher than another protocol, it went to swap and rebalance, but then it actually ended up losing 90% of its value because it didn't have liquidity to actually meet its its trade and its logic. So, I think like that to me is is where things can go really poorly on chain is is not thinking through why the yield is what it is, and is there even liquidity. Sorry, Andrew. Nah, you're good.

You're good. Uh yeah, I think over time like in the past a lot of our our research analysis, even like two two and a half years ago, was more focused at the protocol level cuz like you know, the the tokens are more or less the same in terms of there's not really an intrinsic value. It's some crypto token that's been approved by you know, Ave or someone else to be in a pool. Um and so like the the the complexity and the risk was really at the protocol level and like you know, as as Phil mentioned of like oh, how how does a a pool in Ave maybe affect a market in Morpho? Um but over time we found more and more of our our our customers and even ourselves diving just deeper into like the token fundamentals of literally like how does minting work?

If there's collateral, how does deposit and redemption work? And then what are all the oracles and the consideration and like the time lags of these oracles cuz you know, for the same US Treasury like like T-bills, I probably I know a bunch of protocols like have very different ways of updating the NAV on chain and like you know, what if the that time lag represents how that actually reflects like the the duration um that might be underneath in those assets. Um you know, so there's a lot more focus now for us there in terms of like just peeling those onions. It kind of looks like this is a engineering view but it's like it looks like a like a folder on a computer and there's just more and more folders as you go down and we're actually building a product that literally takes a token, makes it look like a folder so you can kind of click through and be like okay, this part's capped, this part's not capped, this part of the yield like the oracle kind of it comes from there versus this yield's actually on chain. Um and so we're actually focused less on like oh, what is the the Morpho Vault V2 adapter risk and more just on like okay, can we just understand like all these different tokens that everyone says like oh, these are RWAs or these are stable coins and make it sound like they're very homogeneous when in reality they're like not homogeneous at all and it's like a very dangerous generalization which is classic to crypto Twitter of like oh yeah you can just wrap all R D V A s and whenever one says R D V A s it's such a loaded word I'm like okay this doesn't this doesn't feel right so I would I think we are I love the coverage that we have here what I would add is there are levels to it so we have very sophisticated people here that go deep and actually understand on the very deep level how these things work but if we if we if my grandma is wants to invest in crypto and she first thing she would do probably would be to open an account on an exchange and then she buys I don't know Bitcoin and then the exchange will will tell her hey if you pair Bitcoin with this random unknown token you can get 40% APY and for me this is the most misleading part of how you dispresented from the not very technical user standpoint this is super dangerous to me because the person might get possibly 40% APY but then lose 90% because to to get that she would have to get this other token and if there is 40% APY there's a lot of volatility so there's a higher likelihood that someone that doesn't really know the details of of the specifics of how that thing works they might end up losing most of their money instead of getting any APY any any yield You know what's worse than that?

If someone deposits into like 5% or 6% stable coin and still loses all their money. That's what I hate. So, that's why I just like Yeah, whenever anyone asks me about the stable coin, I am still trying to say be careful or like

[laughter]

make sure it actually makes sense compared to like treasury yields or anything else out there. Uh but yeah, I guess um as you guys see protocols expand to the new kind of assets out there like RWAs, new yield-bearing tokens. I guess we already kind of touched up on this, but what is like your checklist? So, what does the asset need to like what kind of requirements it needs to fulfill in order, in your opinion, to be added to like the protocols and um other parts of DeFi? And also, do you see any kind of um yield that is in your opinion maybe being added to fast and like being perceived as too safe already while it maybe shouldn't be so broadly used uh as of now?

Yeah, let me let me jump into the last question. I think uh I think it's now even a maybe a popular opinion that um the the the upcoming and the one the yield source that we are probably going to see a lot more with as tokenized and in DeFi is probably a tokenized private credit. And just wanted to uh mention, you know, don't be exit liquidity to a private to tokenization of the private uh credits. Uh the we're as we are seeing like the global trend of the unwinding in private credit. Um so, whether that's um uh you know, consequent or not, at the same time we are seeing like a huge uh trend in tokenization.

So, it is coming to DeFi, but I think uh we should be very careful when underwriting this since it's not trivial to price it accordingly and to evaluate like the operational and counterparty risk when it comes to it so yeah I would say this would be the the sector that it's probably going to be to become a big when it comes like to the model of loans we're going to see even on chain but yet again not like the the most secure one at least not according to like current global trends. Go for it. So I was just going to double click on like the private credit and I think it's it's a really fascinating topic to talk about and 100% agree with what you said Nicola about I think in private credit there's there's kind of two buckets. There's what's happened calls since COVID to now with a lot of private equity sponsored deals where there's private credit fund and he is going to lend direct to this company direct lending right within private credit to a private equity sponsored company and that right now is where you're seeing a lot of a lot of hits and a lot of funds doing very poorly a blue owl being probably one of the worst with with some of their deals. I just wanted to shine light on like part of the earlier question that Philip made which was like well you know how do you actually verify yield how do you look at adding new assets to your protocol and I'll speak about our protocol specifically within private credit there's also another sub segment called private asset backed finance and private asset backed finance is growing rapidly while direct lending is is starting to have some some really big strains and some redemption halts and asset backed finance is growing because as the lender you can have granular controls and really know exactly what you're exposed to and who is going to pay you from from that exposure?

So, I think as we at our company think about expanding into different markets, one of the big things we look at is, well, is this does this fit into that asset-backed finance role? And what I mean is, are we aggregating, you know, thousands of individual cash flows and collapsing that into one payment, or is this kind of to my earlier point, is this concentrated as a direct loan to one data center and has projections about what the cash flow will be, but the reality is those projections won't be met because they aren't even done with the construction yet. So, I think there's a a lot of things that you need to look at when you when you think about private credit and liquidity and projections versus realized is is very important in this space. Yeah, I mean, also on the private credit line, like my my previous life before crypto was an investment banking. And it's like we've brought credit kind of on chain, but all the tools of like protecting yourself from like ultimately when defaults happen, none of that is really on chain, right?

Like all we have is NAV, right? All the tools that like investment banks typically have around like, you know, the the restructuring team or like credit default swaps and all the tools there. Like, you know, no no one's itching to to to bring those on yet, right? But if you don't have that like or like just more transparent covenants. And like without like if NAV is the only thing being reported on chain and then it's like, oh yeah, in liquidation like, yeah, just push it to some other holding company that's probably also managed by the private equity company cuz like I doubt there's clear separation of concerns there.

And like then the users on chain, it's like, okay, cool. Your USDC is just going to be locked there for 12 months and like hope you forget about it, right? And you have no way of really like there's no forced deallocate button on chain right now, right? So, I'm I'm I'm I'm I'm very much I like to ask like, you know, asset-backed securitization um and I think like some of the stuff Centrifuge is doing. I'm like, okay, when I'm looking through the contracts and like the redemption cycles and everything, I'm like, okay, this makes sense.

But like specifically, like direct lines of credit, whenever I see that, I do get kind of concerned even if it's like corporate loans or corporate corporate lent bonds, I'm like, okay, this is kind of uh worrisome. So. Yeah. Um My my perspective on this is is what concerns me the most is lack of transparency. Because if you know what you're buying, and if you know what's the product, and these specific details that matter a lot about what's the expected value uh of the investment or of of the asset that you're buying, then you won't you have to make a decision about if the risk return is um is is appropriate.

But what concerns me is lack of transparency. If there's anything that I do not know exactly how it works, if it's shady, if if it doesn't share the details, then that concerns me. Otherwise, it's like even if it even if it looks shady, but if if it presents you uh an opportunity for an outsize return, like, yeah, you can lose 100% of your money, but if it goes right, you you you can make a uh uh an outsize return. Then that might make sense for some people. But if you do not know how that works, then for me, it's it's I would say it's uninvestable.

I guess we got uh private credit on chain around the same time we got the biggest private credit crisis potential in a decade. So, lucky us in crypto. Um okay, uh guys, how you um, differentiate um, types of yield-bearing assets that have like structurally sound yield sources from the ones that are just like incentivized? And from your experience, how do those differentiate when something is defined, right? I mean, we So, I'll say sustainable yield if you have uh, a borrower that pays a lender because they need access to capital, that feels organic and sustainable.

Uh, when I look at protocols or look at different borrow-lend platforms, when you know, 50% or more or even, you know, anywhere, 10% of that yield, whatever it is, whatever the number is, is incentivized, right? I think you know, at least I'll speak individually, like I always just sell the rewards as soon as I get them, right? It's just to me it's incremental. Um, so I think that the the truth is, like, you know, if you have to incentivize people to use your product, then I I I don't view that as sustainable. There's some caveats and some nuance to that statement, right?

Like, in traditional finance, some private credit funds will demand like preferred equity or warrants, right? To gain ownership in like the company that they're lending to, and on chain, sometimes you see that, right? In token emissions. But just from experience, at least historically on chain to date, usually those are down only and and don't really add much real yield unless you immediately dump them on the market at spot. Um, but I don't I don't know if anybody has different thoughts.

I think it is it's a challenge, right? To have a sustainable yield if you have to incentivize it. No, yeah. I I agree. I think it's a pretty straightforward answer.

I think incentives could be um, like a booster of initial adoption, but yeah, uh, in the long run, um, uh, Uh, it doesn't work, basically. But yeah, just uh, if I may, um, to to continue a little bit on the topic of the transparency, uh, just wanted to add so the audience is aware. I think like the users generally in DeFi, so it's a a little bit backing, uh, going back to the topic. Users are it's safe to say the users in DeFi used to um uh, easy easily verifiable uh, yield sources because, you know, coming from like overcollateralized lending and uh, the xLPing, uh, we didn't even need to ask a question of the okay, if uh, is this really backed or uh, is this really delta neutral or market neutral as a yield source? And I think it's not going to be trivial to replicate that same same setup with the like the increasing number of um, tokens that are kind of powered by the off-chain yield sources.

But, there are definitely some uh, let's say let's call them back best practices and something that we can do. Uh, so I'll I'll just name a few, so let's say the first one is frequent uh, attestations by independent third-party attesters. Uh, but then better yet if you were able to um, offer to your your potential suppliers uh, and investors a way to prove at any point via ZK proofs or similar that you were actually uh uh, having like a full reserve and you're actually backed or whatever the investors require, they're actually uh, running delta neutral and uh, running market neutral or uh being something that they are kind of assuming. Um, I think that would be good enough approach at least for the time being uh, and that is comparable to something we are definitely uh used to in DeFi which is, you know, uh like complete uh disclosures. So, yeah.

Sorry for getting back on the transparency.

All good. Right. For me, incentives are like ad spend. So, it's it's like spending on ads. You you wouldn't it's it's I see it as a marketing effort.

So, if the product if the success of the product relies on it, then for me it doesn't work. Because once it runs out and as it we see it every time almost every time that uh there are incentives, there's TVL. The incentives are gone, the TVL is gone. Um if I don't know, if you launch a new protocol and with incentives, uh and then after the incentives end, you lose 70% of your TVL because users withdraw because of lack of incentives. That might be that might uh be a good strategy too because it it allows you to launch a product and now everyone at least knows its name.

Some people have deployed capital to it. So, it's an ad spend. It it has its use, but not for uh if it's if it's required forever, I don't see it as something sustainable. I would say on the other side like if you can structure the incentives in a good way, it's very hard to do so. Uh yeah, you can achieve incredible things with that like uh I'm not sure if on a stable coins we got good example, but it in a partially that, right?

Because uh they grew it like crazy level. Everyone knows them and it's been all like at the beginning it was all incentives, right? Uh or like on perp taxes, it's very visible there. Like if you attract enough liquidity with incentives and it stays with you, then you can you can get a lot of success. Yeah, and and and sometimes you can uh decrease the spend of the incentives.

It it becomes cheaper as uh once once you reach enough volume, uh enough organic volume, uh it's it to get incremental volume and to get incremental people to know you you don't need as much money as you need to get the thing started. Exactly. The issue is there are like nine out of 10 incentive programs that just like right when the incentives ends, the protocol just like dries out of the all liquidity and like one out of 10 or like maybe one out of 50 actually works out and becomes like a leader or something. I think you made like a really interesting point, Phil, about Athena and like there are really good examples of incentives working out well and I think really to judge that, it it takes uh you need to like talk to people and participants in that market and get a sense of well, you know, for Athena, for example, well, people wanted to own that, right? They wanted to own more of the network.

And I think in those scenarios, right? It it's a no-brainer and and um you mentioned like um limiting emissions and changing the emission schedule and I think uh a great project that did that would be Maple Finance. Um you know, they now have some rewards and they come down and the people that that get those rewards, they they want to own them, right? They want to own more of the network. So, if that's like the lens that that participants are taking, it's a really I mean, it's the most powerful tool, right?

To scale your network as Athena, you know, represents. But if it's kind of what I said earlier and it's really more um marginal, like it's just viewed as, "Hey, we're increasing our yield, our effective yield." then they're just going to dump the token, right? And and if you can look into the data and see, well, okay, how much of our emissions are actually retained and held for, you know, longer than call it a month or maybe, ideally, right, 6 months, 1 year, it it's probably a really really effective liquidity bootstrapping uh method. Actually, uh about the Athena, uh I have a one more spicy questions in there for you guys.

So, Athena right now is uh I checked the, you know, I checked the numbers before the uh uh the panel, and right now. You can get the treasury yield at like around 4% at this point. Um and my question to you is, are delta neutral stablecoins just like pure bull market product? Like, uh do you see any reason why people would just like keep holding those in the bear markets? The treasury bills are not available for everyone.

Actually, most of the people in the world cannot It's It's very difficult in many regions to hold USD or anything that's denominated in in USD. So, there is this this this use. Um it it doesn't From a um if the market was more efficient, more open, more accessible, it wouldn't make sense to at all, because you are you are running a lot of risks by holding any token at all, any. Uh software risk, it it it several types of risks. Uh but if your option is to not have any exposure to an asset that you that is important for your financial protection, uh then it might be worth it.

That said, it's a big roadblock for me that stablecoin issuers real-world asset uh state real-world asset-backed stablecoin issuers they cannot share yield. Uh so, this for me is one of the main like the main source of of of this discussion that we're having right now. I think it's a really interesting point because Athena um I mean, Phil, you kind of described them as a stablecoin. I would never call Athena a stablecoin. I would say you know, synthetic dollar.

Like to your points, it's you make really valid points about access to T-bill yield. Um it it reminds me of traditional finance where you had like Eurodollars offshore, but I guess in this case the backing is more akin to like a hedge fund, right? That swings bullish or bearish depending on where we're at in the market. And if you look at Athena's underlying reserves, I mean, they're now changing, right? I haven't looked recently, but I imagine given where their their yield you said it's under T-bills, majority of their their reserves are probably in T-bills at this point.

So, you know, it's not the same product it launched as. And I think they did that to make their product better um and make it more stable. But I I still don't really view it you know, I think synthetic dollar is maybe a a better phrase, but the way I I mentally modeled it is similar like a tokenized hedge fund, right? Where in in a a bullish price action, they can allocate those reserves into the basis trade, whether that's Bitcoin, Ethereum, and generate right outsized returns, and then allocate that into higher quality, lower risk products whenever the basis trade goes negative. So, um it's it's it's interesting play between the T-bills and like the hedge fund because most people in the world can't access a hedge fund either.

So, um it's a definitely interesting product, but it has some risk. Go ahead. And like the last question to you guys, it's a bit more personal. Um let's say I give you $1 million each for participation in this panel. And uh there is one uh twist to it.

You have to keep this 1 million in like stable coin yield sources or like any on-chain yield sources for a year before you cash it out. Where would you put your money into? Can we Can we diversify or it needs to go only one

You can do whatever. Okay, I'll go first. Uh I'm biased, but I put 70% in my company, Credit Coop. After fees we'll make 11 to 12% and the remaining 30% I would split between sniping Pendle PT markets that just launched and LPing on Uniswap in a very concentrated range between USDC and USDT. Um yeah.

Is there alpha in sniping early PT? There's a lot of alpha in sniping early PTs. Um Athena and EtherFi, yeah. I mean, back in the day you could make 50% on your ETH if you snipe the right EtherFi markets on Pendle. You see some alpha.

[laughter]

Phil, do you want to Oh, I'm I'm conflicted for this one. Sorry.

Okay, no worries. [laughter] I mean, I I think for me the hard part here is like, oh, if it's a if this is like a a herd coin or something and I'm not allowed to It's like, all right, I have a million of it, quote unquote, but like how am I How am I swapping that into other other markets? Like I have to If I want to borrow against it, if I want to sell against it, like that liquidity has to come from somewhere. All right, and I feel like this is, you know, probably not not in the the heart of your question, but I think this is something a lot of stablecoin issuers like run into of like, okay, you have You have the reserves, you have the token. I ultimately end up having to work with USDC anyways on chain and the USDC yield sources.

So, it's like, you know, ultimately somehow find a way to swap into USCC and then do whatever the the popular yield strategy is of the of the day, but um if I go in between the stable coins when you maybe don't have enough liquidity or don't have all the markets set up yet. Um You mean there would be no enough liquidity for like $1 million or what's the Who who knows? Yeah, I mean if it's our if it's our own stable coin, uh but if we assume there's more than enough um then then yeah, then it becomes okay, how do I leverage up on on on our own token, I guess. So. It brings its own risks.

For sure. Yeah, I'm going to be probably old fashioned. I'm going to say sUSDs and that's it. I know I think uh it's a sig- amount that is significant enough to, you know, don't go way too much down the risk curve. So, I think uh something and I think sUSDs is actually diversified enough by itself by the design.

Now with the Yola, the prime agents, aka the the stars of the Sky Protocol that are kind of uh essentially acting as a capital allocators. So, there's a lot of different and various yield sources already that is powering like sUSDs. So, that'll be a simple answer for me. Reasonable. Yeah, I like it.

All right. Uh well, it's bear market. So, I won't give you $1 million.

[laughter]

But I have some Redstone socks for you guys. Nice. Thanks. Thank you very much.

Yay.