Darren Camas, IPOR Labs: Fusion and the Future of Asset Management

[Music] uh hello everyone uh it's a pleasure to be here and first I want to thank the eth sopia organizers in general but of course uh V especially Vlad because he's the marketing director at ipor lab so really happy to be here to tell you about iore in general the protocol uh it really consists of two different protocols and they're all focused around yield around fundamentals uh and so we want to talk today a little bit about ipor Fusion but I'll give you a quick background of the protocol so iore in defi terms a lot of meme coin people look at it and say you're poor I we all pour until bull market uh but iore is comes from a very trafi term uh it's like a hat tip to the liore which is or was the most important Benchmark rate in finance um uh interest rate derivatives are the second largest market in all of Finance at $650 trillion uh and we think that this is going to be the biggest Market in defi in terms of derivatives so we started our our core as an interest rate derivative uh protocol with benchmarks and interest rate trading uh so in a interest rate swap you can actually get up to 1,000x leverage and then I know this seems very degenerate but in an interest rate swap it's much more of a hedging Tool uh for interest rate Traders for people that are have participation in the money markets and the longterm goal is that if you ever are going to be able to get a home loan from a di5 protocol you will need an interest rate Benchmark you will need a yield curve you'll need liquid interest rate derivatives for that to happen so we have a very long goal in the future for the ipor interest rate derivative side iore Fusion I'll tell you a little bit more about it but if we dig into the derivatives iore uh interest rate derivatives were launched two years ago on ethereum mainnet over that time they've traded over 4.5 U sorry 4.5 billion in cumulative notional uh interest so this is a very Capital efficient Tool uh it's a PE Topol mechanism where one side is a depositor so you can deposit stable coins you can deposit ethereum that's underwriting the interest rate derivative in that asset so for example if you're looking for yield you can be a passive deposit inside of iore uh you can see the profitability uh for the LPS which is up and to the right uh while it's underwriting a very high notional derivative balance uh and we launched an arbitrum at the at the beginning of this year with Rising notional value and trading volume and we were looking at this and like every derivative protocol your worry is about Capital efficiency so if you're underwriting instruments you also have this kind of passive Capital pool that can also go earn in other ways so this is also the way for example traditional Insurance funds work uh they're some of the biggest money market players so if you're a derivative protocol you put your assets in uh and let's say let's take usdc usdc comes in it becomes the balance sheet of this decentralized Investment Bank and it's underwriting a portfolio of derivatives meanwhile it's sitting act uh it's sitting passive so it can be deployed to the D5 money markets which is let's say the uh the closest prox a risk-free that we have in defi so we'd always have this concept inside of iore so your assets go in the the balance sheet and they also go to the money market to yield and we'd always wanted to actually upgrade this part of the protocol and we were also looking at the idea that a lot of these things will be packaged into Structured Products and so we wanted to create something uh that was able to for example scan all of defi credit markets and get the best loan terms or get the best debt terms uh and also wanted to do that in one click and that really gave birth to the infrastructure that is ipor Fusion so iore Fusion it really Embraces the idea of anything that can be done on chain should be done on chain so it's an asset management protocol at its core we call it the unified liquidity layer of Defi and if we go back we can say in def5 summer you had something like year which is the V1 uh Asset Management Vault it means that you can have a vault and you can connect it via Smart contract integration into a yield protocol and effectively you have someone who's behind the computer clicking and moving that position you get this kind of socialized uh exposure and also socialized gas fees so it becomes easier to manage a large group of assets than a small group and then we went into the V2 which is I think a big departure uh uh away from what defi should be which is building calls offchain that have potentially arbitrary logic you send them to the contract Builder and execute them and you use a side chain construction that has some sort of verification but it's a very high trust structure it's not transparent for the people that are building the strategies for the people that are depositing uh and it's potentially sending malicious code so we thought okay so what can we do to create an asset management infrastructure that's transparent that's secure that's automatable and that's fully on chain even up to the accounting layer and so this is ipor Fusion so ipor Fusion it starts with the Vault it's an ERC 4626 Vault up top that means you have a single asset that goes in and all the accounting is done in that asset so it might be a usdc denominated vault it might be a wrapped eth denominated Vault and that Vault share will change in relation to the base asset the whole idea idea is that these fuse constructions can actually be connectors they're simple smart contract con connectors they're non- upgradable and they're two-way functions they hold uh they hold no State they hold no balances there's no accounting done you're going to think of it a as a pipe that money flows through and because of that structure you can actually add and remove fuses over time to basically construct your investment universe or to decide which protocols that you want to interact with and this is at the Smart contract level so what that gives us is a modular infrastructure it gives us reusable pieces so for example if some esoteric lending platform comes up and there's a fuse that's built for it anyone who's using Fusion can actually plug into that fuse or hook that fuse into their vault you can also remove it in case there's some malicious transaction uh and this is how we wanted to balance like what can be done on chain where's the accounting how can you restrict the actions and then how can you make everything transparent an atomist is like the asset man or the strategy they can set the strategy and they can also set fees at the Vault level because obviously there can be some kind of uh business model around this so the strategist can choose the different fuses they can connect them as easily as uh interacting with the front end or they can do it at the Smart contract level uh and they can also give the essentially the trading keys or the rebalance to an alpha an alpha is like an asset uh an active manager but that Alpha cannot do uh arbitrary transactions like move money to their own pocket why because all of the logic and the connections and the restrictions are written at the Vault level what's the accounting asset which asset can this Vault interact with which uh protocols can it interact with and that's transparent on chain for everyone to see so that allows you to do a lot of more sophisticated defi strategies it allows you to do everything on chain if you want to basically send signal from offchain the alpha can interact with those and execute on behalf of the Vault so you get this really very nice kind of trade-offs in terms of Engineering in terms of transparency and functionality and that's why we created Fusion so Fusion it kind of solves this uh this TR limit in in defi if you're talking about assets strategy and and and uh the protocols right Protocols are always looking for depositors that's what they want they want assets to come uh and through Fusion if there's a fuse that's built then they can be included in the strategy the strategists they need actually the simple plug and play we have a lot of people that are coming into defi that know strategy they know risk management but they've never touched a smart contract in their life and they maybe shouldn't have to so they can be able to adapt their strategy through the fuse ecosystem and they can also use it for a distribution change Channel and attract depositors and depositors also want to know what's happening with their money right if we look at the centralized exchange failures it's it's really that where's my money so the depositors want to know what's going on who can access the funds what are they being used for and also how much am I earning so this is the kind of liquidity trimma that that Fusion is achieving and it's an extremely flexible modular architecture that you can do a lot of really cool things on so if you want to go very low down the risk curve let's say that you just want over collateralized money market yield but you want to optimized and this is actually the strategy that's powering the uh the liquidity pools on on iore uh the iore amm today so it's basically plugged in if we take the arbitrum instance it's plugged into gearbox V3 a V3 compound V3 and fluid and then the offchain the AL is sitting offchain and understanding all of the actions that are happening there in those money markets it's looking at the interest rate curves it's looking at the deposits it's looking at the gas and it's optimizing for essentially slippage and gas fees to make sure that the pool is always earning the highest lowrisk money market yield possible and sometimes that's depositing all into one uh into uh um a single protocol sometimes it's actually deploying those uh deposits over a number of protocols and then if you're on ethereum mainnet that same usdc pool is plugged in not only to those same markets but also three different Morpho pools so you can actually change your strategy you know very quickly on this uh using the fusion infrastructure and the the liquidity pools and the ipor fusion will actually be deployed to base and what's really cool is actually we can take the uh the everything that's built on arbitrum Port it to base but there's no gearbox on base but there is Morpho so we effectively unplug the gearbox fuse and plug in the Morpho fuse you can also do something like something uh you know more sophisticated or even higher up the risk curve you can copy ethena right you can go uh long spot short Futures and you can coordinate this and automate it with the alpha or you can do something like the leverage eth fund where you're leverage looping eth for Stak teth or even eth for some lrts and this last one is really where Fusion shines and also Fusion is kind of a trojan horse for the iore interest rate and stake rate derivatives because let's say if you're taking a a million dollars worth of eth position and you want to leverage Loop it 10 times in the same uh transaction you can do the leverage looping you can do the flash loan you can take an interest rate swap you can take a stake rate Swap and you have this very nice structured product that's transparent and easy to build on chain also what happens if that basis inverts well through the through use of fusion the alpha can understand and contextualize what's happening in the market unwind that position and roll to the most profitable Loop so the whole idea of asset optimization infusion is the idea really around automation it makes automation possible while breaking uh while keeping the trust barrier very low so it's really good and I shouldn't point this out but it says appendex I stole it from another slide uh but any construction that you want to have you can build let's say that you're an individual D5 power user you can be your own atomist Alpha you can use the fuse mechanisms to build your own strategies let's say you're a traditional asset manager that has no smart contract experience and you actually want to hire a thirdparty data team to run the strategies or even something like uh uh like a hyper native to ensure risk management in case of the connected protocols is hacked and you want to put the control mechanisms at the Vault level to remove all funds in case your funds are at risk well you can you can actually have all of these different functions go to different parties and that's transparent at the Vault level so you can really construct any kind of strategy and any kind of configuration you want where you can be uh in control you know top to bottom you can be someone who's depositing into a protocol because you believe that this asset or risk manager it has the best strategies or you can do everything um you can even use it just manually so one of the big things that is now very prevalent is that you need a lot of Intelligence on the financial side on the data side to understand what's happening in defi uh if we look at the defi credit markets when we started building uh I uh the core iport protocol there was only a and compound and all of the other forks and no one was able to get uh any any more liquidity now we're at a time where you have some of the best defi Builders and some of the best teams are all building credit markets right so you have the rise of Moro you have the relaunch of Oiler you have uh you have fluid coming out of uh instap and this is a great time to be around because you have a lot of experimentation you have a lot of competition but you also have a lot of liquidity fragmentation which makes it a really bad place to be if you want to take loans in size if you want to deploy capital it means that you have to do a lot of either button clicking on your own interacting with front ends which could be malicious or you need some engine like Fusion to orchestrate and actually deploy capital or take the take the loans and use the offchain intelligence to be able to understand what's happening and optimize your portfolio and actually the iport labs team is very good at data because we've been building and curating and understanding like what's happening at the defi credit credit Market level now for the past 3 years so for example if you look up at the very top that's the uh stake rate swap so you can exchange the Lio Stak eth rate on an interest rate derivative at 1,000x uh Lido prints the rate onchain once a day uh the IPO Labs team gets that data we know at the epoch level what the lighter Stak rate is and so this is interesting to build a market but it's also interesting if you want to be a ble to manage your risk so if you're an Institutional staking service you may want to offer a stake rate derivative because someone might want to hedge their downside risk maybe you believe that we're going into a bull market and there will be a lot more uh ethereum gas usage on chain and you want to go long uh well if you have this kind of data you can also drisk let's say there's a massive slashing event to clost Lio clusters you want to be not only the first out of the queue but this is also a situation that cause deegs and all of these kind of data is what drives the investment decisions both on the optimization and also on the uh on the risk management side so Fusion enables composable rates Arbitrage and everything in defi is rates if we talk about leverage looping if we talk about credit markets everything is rates so it uh this is uh coming from one of our white papers our Quant team has uh our Quant team just released a framework called dope where where you can back test using uh just plugging into the defi llama data and back testing complex strategies uh and so these are some of the things that drive ior Fusion these are our go to market so we have a number of atomists uh you can't see their names right now but you will be able to see them very soon a number of very high level and upand cominging different asset managers and defi Risk Managers who are already building Fusion strategies behind the scenes we just wrapped up a couple of projects that are now being tested and we have other uh strategy that will be coming on chain uh very soon across multiple chains Fusion from a from a perspective it it has about the same amount of Revenue generation at the core protocol level as something like a and actually the iore derivatives is a key generator because it can get anywhere from like uh three to four times the average uh kind of D5 Blue Chip yield and the team obviously I I mentioned Vlad who is our marketing director my co-founder is here deitar he is also a Bulgarian so we uh one in8 I4 Labs members is in Bulgarian uh one in six is a PhD uh we're very strong maths background so uh you know this is uh this is the kind of team that you kind of want building this kind of infrastructure so uh thank you guys for having me uh if you want to check out more about ipor Fusion uh you can go to ip. uh there's Fusion uh information in the docks there's a lot of different yields opportunities now and there's much more coming uh in the next uh weeks and months so thank you very much [Music]