Piotr Saczuk, stablewatch | A Year of Yield Tokens in 10 Minutes

So, uh I'm Piotr from StableWatch, uh founder, and in 10 minutes I'll try to tell you a little bit what's happened this year in the yield-bearing stablecoins market. And we all know, probably, especially after this panel, that it's a wrong name as a lot of those products are actually um some tokenized strategies, uh tokenized hedge funds, and so on. Very quickly on StableWatch, what we do and why we have a, I think, great overview of what's going on in the market. We're a research venue. We spent a lot of time on advising on the risk side.

We've built two models um to help clients manage risk. One is FRTB, which is coming from Basel 3 threat 5 regulation, and other stable thing, which is uh our implementation of Monte Carlo modeling. We work with pretty big partners like Plasma, and recently we officially uh announced our partnership on the risk side with a Sky ecosystem. So, last year was incredible, and especially because of the genius act, which pushed all of the issuers of payment stablecoins um in a direction where they can't uh give us yield. We've seen big influx of money into this new category of a yield products.

So, the growth is remarkable, um more than 200% in the last year. And when we look at the supply, the the biggest winner is Sky with sUSDs. In 2K24, we've seen Ethina as a main coin in this category, but this really changed in the in the last year. So, what we see now is uh Sky leading the way with a very diversified portfolio and on their balance sheet we can see some direct crypto exposure but as well a lot of the RWAs from T-bills but also to CLOs. So, Elon Musk or Burger King is actually proxy taking money from the Sky protocol.

Beside that, Maple with their products where part is still crypto lending but big part is as well lending to some off-chain counterparties as a big success and the third category influx of the trade five side of a market participants coming and building big products like USDB or build by BlackRock and securitize. We've also seen Aave coming to the space with AS GO and they also have GO umbrella as some other product. So, this whole category started really with the one big party which is Ethena but the delta neutral strategy is not anymore an edge. So, we see a lot of new teams trying to productize the delta neutral trade. Some of them do relatively well.

We've seen that on the hyperliquid ecosystem for example but definitely there's too much of a parties trying to extract alpha in the same place and that's why Ethena as well is not competitive to some other market participants and have lost the first place in the category in the last year. Especially when we've seen like big wipe of of the long positions few months ago, then the tax markets and the perps from that time are not that used anymore and eating a really have lost a lost its edge. So, what else happened during the year? We see a hall of fame here. Let's start on the good side.

Two protocols been acquired. So, USDM and S-level USD has by a level team been acquired in a good way. So, congrats to those teams, but we've seen a lot of fuck-ups really and most of that are not really related to any smart contract issues. So, I think we already crossed this barrier where the biggest problem being smart contract security. Actually, here in only one example, the smart contracts didn't work out well for the Yield Five, so the YUSD guys, but they haven't been hacked directly.

They've been using, I think, the Sega protocol and allocated some money there and this counterparty risk been a killer for them. Beside that, as always, we've seen a lot of crime, but as well the concentration risk and a lot of strategies which are not anymore crypto native. So, the SMS USD guys been trading the Trade Five options and probably because of the lack of a skilled people in there or maybe just because a bad luck, they lost big part of the of the users' money. For the USD, that's been concentration risk and for the Stream Finance, once again, giving money to unauthorized in some sense parties. So, what we learned at Stable Watch out of this is that people are not really interested in looking into collateral composition and what is happening with your money all the time and the market incentives at the moment are not aligned to change it really as nobody wants to pay for this kind of ratings.

Some of the curators the ratings on their own, but I think the incentives are misaligned and we don't really have a king maker in the space like an S&P or Moody's or Fitch and and TradFi where you need to pay them 25K whenever they going to do an audit with you. So the biggest event last year was this one week in November. We could even say like one day the 10th and three major YBS's de-pegged. We've seen 2.5 billion of an outflow from the market and that'd been the single biggest wipeout since Luna UST.

So very bad event for for our market and a lot of people started to asking themselves how we can avoid this type of situations and can we redeem when it when it matters and once again the learning is that we really lack a tooling to help us monitor this kind of a situations because if we do assessment of some product only once and we would do it for a stream at the beginning we would learn that the product is actually relatively safe with a lot of allocations into T-bills and so on, but over a quick time the collateral composition really changed with only 30% being on chain. Big part being totally untracked on the off-chain side which turned out to be loans to a friend, and one of them have lost 93 million of those user deposits. Some other situation we as industry are not really monitoring is what's happening in the lending markets because the people affected by stream not being only the direct holders of the xUSD, but also people involved in the lending markets like Morpheus, um and so on. As there have been a lot of curators, which allowed xUSD as a collateral and set up the LTVs, and as well the whole vaults in a way where stream could not repay the loans, and that was really free money for them, and instead of repaying the money to the lenders, they've been all the time topping up with the xUSD. And when people realize that stream is actually not willing to repay all of those loans, then we've seen like a bank run, but they've been actually like two or three million of liquidity to take out of those, and people been stucked in those lending markets.

So, once again, we really lack monitoring not only directly when it comes to real bearing products, but the same for the lending infrastructure. Um And the other big thing is yeah, the counterpart risk because we've seen that with the Elixir dUSD, which been big part of what happened also to stream, the recursive minting and that those two parties been like exchanging the yield and they're rubbing out their users from it. And once again, there've been no platform and no place to see what's happening on Plume and how big is the volume on the bridge to Plume to support all of that. So, if I would have or like if we would have a stable watch, one advice to everyone here is to yeah, stay paranoid as you need to really do research on your own if you don't want to get wrecked at some point. And we've seen that no matter what kind of protocol there is like balancer on even Ave, they experience some bad events during the during the last year or Q1 of this year.

So, you really need to put your own time and effort if you want to stay safe. And very quickly, like we've seen that there is one protocol you've seen at the beginning Sky who has a remarkable growth with a new plan for the scaling where the Sky agents, so few white-listed parties to manage the balance sheet and invest on behalf of the Sky to grow the supply, which seems to really be working as we saw the growth of Sky on the first slide. And I'm very happy to announce that we at Stablewatch became the next Sky agent, which should be live in a few months. So, if you would love to talk about it, yeah, I'll be here around in the venue for the rest of the day. Thank you.