Aave Labs - Stablecoins in a Multichain World

all right Sonny how's it going good good hello all Deans hello Deens who's who's getting yield today who's getting yield who's getting more than 5% who's getting more than 5% who's getting more than 10 no you're getting who's getting more than 20 who's getting more than 30 no one no oh what leak the alpha all right and uh today's wait what 25 that's carpet key so they do um treasury management so they they know what they know what they're doing they know what they're doing uh today's topic is stable coins in a multi-chain world uh and stonnie can you give us your initial vision of go and how it has evolved since Inception yeah I think um go is um very typical um defi um initiative um that we see it starts from one idea um and then evolves and keeps evolving and uh then you have a um a dow that contributes to that uh process and and keeps just um iterating to to something uh more bigger um originally we've approached go from more of a prot perspective so we purely wanted to figure out um the same thing that we always do at a like how to build a better uh product for the users you know how to build it in a way that it uh is also better financed which means bringing more transparency um auditability um certainty with smart contracts um Community governance um and and obviously um best execution and with go the the idea was to bring um reliability and predictability actually for interest rates for the a users now one interesting thing about AA is that uh it's a uh protocol that has been around for quite a while um I'm actually feeling quite um uh old being here and talking to you all because um it's been so many years since um I participated first time Toc I think it was uh 2017 or 18 and um back in the Ean days um and and and think the the whole defi as a as a kind of a sector has evolved quite a lot but a has seen uh nevertheless multiple uh Market cycles and it's a really a product where when you build something like a um you need to keep in mind all the um the whole kind of like a end to end of a cycle so how do you ensure that the the product functions um on a market that is going U upwards and how it keeps resiliency when the market is going downwards as well and over the years we've seen a lot of situations where you know um in DFI and also in a where you know we've we were in a in a very close uh place where kind of um uh in I would say like black Wednesday Thursday and all these uh scenarios but but effectively we know that liquidity has more de demand in some cases and and in some Market cycle less and with go our idea was that um because we have these liquidity crunches we can actually provide predictability for the yield for the users and and Beyond the predictability one of the use cases also was that you can earn on your collateral which was a unique thing that you have a low um uh a meaning or a borrower rate for go because you're earning at the same time on on a and then like one uh more of like um um economical perspective um for a was that um it provides more um revenue for the avow and and just to give you an example um 100 million worth of go um equals the same amount of Revenue to the avow than one uh billion uh usdc so when you put these two things um aside and compare uh it makes a lot of sense for the avidal to to uh Embrace and go grow um to grow it uh further so those are those were the things initially but obviously now things are evolving and and the vision is evolving what go actually is today and can be in the future yeah and how does go differentiate itself from other stable coins that are out there especially in a multi-chain context yeah it's an interesting question because um I think in in some ways go has also a lot of similarities than than many of these stable coins and um I see it as actually a benefit so being having this kind of like a little bit of a schema morphic approach to to go so we didn't create go as being something like very unique experimental bizarre uh stable coin experiment that you know could go well or could could end up like going very badly um the way we approach is that like any technology we build is that you know how we can make um something that maybe exist to some extent make it maybe five uh 10% better um and attract more users and Virgil ablo used to say that if you make something 3% better or new that's essentially a definition of of novelty so aiming beyond that is is really good and I think um um having that familiar approach was important building a decent stable coin and then on top of that having the ability to actually earn on your collateral um has been one key benefits for the users because they have predictability on on on the rates and borrowing directly from the a down can you go over how go works and how it integrates into a the protocol yeah and uh also the integration perspective is is one of the things that is unique so uh the way go is structured is that um some of you might know very well and some of you might be new to the uh whole landscape of how a works and uh go is that there's this concept of facilitators and facilitators are essentially buckets uh a credit line that you can Min go um and today the main credit line is to M go against your deposits in the a protocol um and we have so-called stability module uh at GSM which has another bucket um and now even more recently as go went cross chain uh so today you can actually um use go and earn um uh with go actually in in the arbitr market um it it it essentially created a new facilitator so the idea of these facilitators is is that they they are buckets of credit uh that can be minted depending on how the a um Dow sees uh benefit for for the treasury so my kind of perspective is that um this could be used for institutional use cases use cases of giving credit across different um Dow organizations protocols meaning directly uh to other protocols uh go as well but down the line uh various different kinds of um uh payment use cases and and even Beyond it's just a flexible structure of uh supplying and distributing go across um everywhere and what are the technical and security considerations you have when implementing go especially across chains yeah I mean there's a lot of technology today uh I mean once we first um announced and we're talking about go going cross chain you know there was probably every single um I would say like um I don't know how do you call this U bridging protocols teams reaching out and you know trying to get you to use their technology which is great that we have a lot of choices today um and I think um one of the challenges is that especially like an ail VP of engineering is in in the um audience today and something we've been brainstorming quite a lot of uh when we try to choose the technology is to think about like what is the most simple way uh fastest way um and also the secure way of having these types of uh deployments um and and expansion so one of the options that we had is that we we we built something from scratch um and that will maybe take much more time or we use a specific messaging Bridge um and essentially we chose to use uh chain links uh ccip um and there's reasons for that um and one of the reasons is that as a technology it's relatively simple to actually distribute uh messaging across multiple networks uh in a reliable way and second thing is that um a has been utilizing chain link price feds for um as long as a has existed and in the early days of actually uh itan we tried to build our own Oracle and we realized like how much actually uh time and dedication uh it takes to upkeeping it um so basically that previous experience um uh having high quality data feeds we we transitioned to actually utilizing uh ccip and there some kind of like um uh little bit like a technal challenges in terms of like being new technology but after that um go is essentially today live in in arbit room uh which is nice to see now yeah and uh when it comes to go to market uh what strategies are you employing to encourage the adoption of go across blockchain networks well first I was thinking of like hiring like a kind of like um um you know like a very um um volatile in turn to manage our social media accounts but I think everyone is doing that at the moment so so then I was thinking that maybe like the the the best thing is that actually um once the Go is is there and and obviously um you know what like it's not really sufficient that technically you can actually um utilize go and um do whatever you want to do in arbitrum which is like a lower price point than for example in the and that brings inclusion and that essentially brings more users and also appetite for people to try things in defi no one will try anything if you have to pay 20 bucks of of transaction fees like you know it's it's it's just uh uh the transaction fees has to be as as slow as possible but I think something that helped uh quite a lot on the goto Market perspective is that the way the a uh ecosystem works is that avbs is one of the uh contributors and we focus quite a lot on the technology uh we do some other things like you know events we host Raves um but we try to have that technical contributor uh perspective to to things that we create and then you have these other uh service providers uh within the uh ecosystem that are actually putting a lot of effort in in in growing um go and um from various things like liquidity pools and other initiatives and surprisingly a lot of uh uh defi uh protocols and partners has been uh very active on actually um helping to grow go and that has been like really amazing to see how this like a human compatibility aspect has been working yeah there's a lot of different parties involved when it comes to stable coin it's not just the issuer you have oracles you have liquidity providers there's all these different Partnerships that come into making a stable coin successful in that scale so what Partnerships and collaborations are crucial for the success of not just go but for stable coins in general in your opinion I think um It's relatively fair to say that um stable Co like growing a stable coin is is hard it's really hard yeah so if you are planning to like you're thinking about stable coins um it's it's a really tough field and especially like U without incentives so incentives play a big role of accelerating uh a lot of the growth um and you know if you look at some of the older stable coins decent stable coins in our space you know they still relying on incentives but um the whole kind of like a um key ingredient of of any stable coin is the liquidity so you can Min as as much as you actually have uh ongoing liquidity um and that's an interesting uh thing because like if you me uh tons of um let's say go um and you know the liquidity decreases and you have to unwrap these some sort of positions that might affect go market price so you have to have liquid uh both ways and I think especially in this type of a market situation liquidity um has shortage uh at the same time so I think that's one of the the hardest uh things to to uh approach when we think about uh go and also the perspective is that um a has been known for building a um kind of um blending protocol so essentially like we don't have an infrastructure of of uh like a d cized exchange where we can combine with incentives we could actually um um have like a lot of Tailwind uh to grow go but on the other side we have the ability to collateralize which is like the the bread and butter of the a protocol and that colorization is something we haven't uh yet uh turned on um but it will happen at some point and that shows the power of of the growth of of of go and now go is um 80 85 million in in mints um total and that's basically gives the amount of Revenue that's 850 million usdc will give to the um aval yeah and as more l2s and chains come online where do you see the role of stable coins evolving especially as blockchains become more and more interconnected both in our lives and also in just in general um what I've seen a lot is that a lot of these l2s are are creating like these ecosystems and I think that has been the case for for a while right so um I I I was thinking that maybe we'll see like dedicated trollops more um and this is something that the a um uh da is also thinking and and part of our uh proposal we submitted from the avaps on on the um basically AA 2030 type of a vision where uh we're essentially building a new iteration of a a V4 uh we're proposing also a a network which could be a liquidity Hub with cross chain uh liquidity movements across other networks as well um so I was thinking that um we've seen like this ecosystem play uh happening and now more of like dedicated rollups uh for different teams and different use cases I'm personally hoping to see more uh rollups that have a specific use case and caters uh some sort of uh value added uh behavior and is optimized to that uh can you give an example of the rollups You' like to see these like use case rollups yeah so one thing could be really really cool is seeing like a um validium rollup for go um and and the reason for that is that um a validum can actually bring a price point that is uh a fraction of L2 let's say optimistic or ck based uh rollup um and that means that you can have a really low price point for payments and this is really nice for you know day-to-day payments for example settling online payments but also you can activate some interesting new use cases and and payment events so for example if you scroll your social feed um and every scroll triggers some sort of a payment that's an example or you know you're reading a blog post um changing a chapter or like an online book or something and that can initiate a a payment transaction so you could actually um have more utility for payments like for like like something that's really um uh kind of like um um like like if you think about internet payments the design space now is very limited so we're used to subscriptions we're used to basically going to a uh a website and and um pay I don't know 10 bucks a month and and you have to subscribe for a year and that's the that's the design space at the moment and that's really isn't like applicable to everything and that's why that experience really is annoying to people but maybe you want to access to news and information and and pay whatever the the information is worth without actually subscribing to a a a product so there's a lot of design space and taking a step back we hear a lot about l2s but we haven't heard too much about validium yet for people unfamiliar in the audience or at home watching this can you go into like what validium are and how they work yeah I mean valids are um they they work kind of like a rollup so you you basically post straight State transitions into ethereum so you take security from uh ethereum but uh you're not storing the state on ethereum itself so you are actually storing in another location and that um third party location can be for example a data availability provider um there's multiple there's Celestia aale um uh I da as an example uh or you can use the the validium um node itself as a as a location and what it does it it significantly reduces the the price point of uh transacting uh on that validum chain and you still take proofs of of all the uh so validium are ZK based so you still take the the the proofs and you store those proofs on ethereum but not the state on ethereum and that's the kind of like a key ingredient so what you're doing here is that you're trading a little bit off um kind of like a the security side uh but not to the extent that it's uh you don't have any security and you're opening up to new use cases and this is really interesting for like social gaming and and payments uh in my opinion yeah and going back to stable coins now and there's always regulation on people's minds so in your view I was thinking we would skip that topic yeah yeah we'll skip we we can talk about regulation we can talk about we'll keep it light um how would you navigate the regulatory landscape right now especially for go I think it's really uh uh I mean it's pretty fair to say that you know in some extent defi is under attack at the moment um and it's really sad to see because um obviously like we in the room we we know the benefits of of defi like once once you start actually using defi especially on l2s where you have uh low uh transaction cost you and you can see the transactions yourself you can audit them you can see the recipients getting the funds that you are sending um and you eliminate this kind of um custody risk from one um perspect like the traditional custody risk uh completely um and you also are you as a user you can also participate in these communities and actually um direct where where the produ or the protocol um initiative should go towards like that's like a huge empowerment and on top of that you have like a global market like you actually can transact with anyone and you can also Trail back all the way where you know where the people are coming and onboarding and so you have that auditability so it is like a really um um um isn't really like um nice moment at the moment from that perspective but I think it's a place where we are now where we kind of uh we have to fight for D5 and we have to fight for crypto and this has been happening and and I think um I give a lot of credit for for example for UNIS fob for actually um fighting some of these battles uh consensus is fighting some of these battles and um and I'm pretty sure that there's more um similar Batts coming but at the same time there is such a strong Demand on the institutional side um I think there's more excitement from institutions to actually use this technology and and plug into uh defi so there's kind of like a two different waves going at the same time and what is the institutional appetite right now are they curious are they deploying into Defi and stable coins what have you seen honestly um I think the institutions institutions are quite involved already so I I mean we saw with the bidle fund um Black Rock deploying um was it total 400 million into um into on chain um backing the redeemability as well that's just one initiative and I think we'll see and there's plenty of more obviously and we will see more and more coming I think there is there's definitely appetite it's a question of also how to structure it right and how to participate and how to manage these new types of risks so when previously we had a custody risk uh we might not have that in defi but we have the custody risk comes from for example you know smart contract smart contract risk that's the new custody risk for example in other types of risk governance is a risk like there's a risk for example um you know if you do Supply assets what if the governance makes decisions you know what's the governance alignment uh there the underlying uh Network risk so there's a new type of uh things to actually explore but um I've seen a lot of excitement about um and I I think it's partly also because of the uh ETFs but that's only the investment side I think the the the institutions that are here to use the technology itself that's there's a there's a high appetite at the moment yeah absolutely and the institutions are here and they're playing by our roles like with buildo they're on ethereum they're not on some permission blockchain chain like they're playing the game yeah I partially yes because uh they want to plug into you know where where things are done right at the same time but you know that can change very quickly if C cbdcs become popular and the narrative goes towards that way uh there's a big risk actually uh ending up in a similar control we are with the existing Financial system and remember that the the first place we are in defi um and excited about the blockchain is that it really removes the idea of like someone being able to control the whole monitary system and print uh loads of funds for example and um you know control the economy we're now moving essentially into an economy where um you know we have high interest rates so people were paying essentially you know couple hundred dollars for the mortgage paying now maybe uh $2,000 uh on the mortgage so those kind of things affect people uh very quickly and that's just a you know centralized uh Federal Bank decis that changes the rates based on the how the economy um changes and and that's basically just the the one part of the whole pie because that's the Western World and then you have also the uh East and and kind of like the spread of between East and West at the moment with bricks um as well so things are becoming like a really um I I think we're here a lot because of that we also don't like this type of uh progress in in and centralized um governance over uh Financial infrastructure but I do think that it can go very wrong way uh as well and that's why it's important that we kind of like guard these values and and the the very core what what defi is and what would you tell people that want to stand on the side of Defi and fight for defi what would you say to all the enthusiasts out there in the stable coin space to drive and look forward to I would say that um you know the very big thing obvious is um is getting more people into the space so it's not really um it's fun you know to use the amongst us and um you know events like this where we all meet and talk about interesting cool projects out there but like that really kind of like a longterm game really is to get more people um and get in the right way that they they know and learn about what actually defi is and there's also this idea that kind of like the the mainstream doesn't really care about um you know what what DFI is they want to just earn and if defi is better like it gets a lot of tailwind and people will come and partially it's true but partially also like if we can educate uh along the way and get actually people to understand what what they're doing and why the underlying technology is better um and I do I do think like people who you know went to internet went to online realized you know what are the good things about internet that makes it interesting or social media makes it interesting and and and also like a better let's say like a media format because you can you know you can comment on things and you can um you can have distribution the same way as with with defi um the more people understand the benefits um and in a simple way I think that's going to be the the the key component and then building towards that building better ux as well and a lot of the things that uh we see today in defi are very mat so we see a lot of mature protocols a has existed for uh I think like we' we've been working for past 8 years on on solving the one of the problems in in in the space but a lot of the kind of like a more important things is on the on the front end side like how do you build something in between that actually is appealing to to the to the to the nor normal users and mainstream and get adoption uh that way and then obviously the institutional aspect is is really important like how we can pitch what we do in in a very um way that institutions can participate yeah it's all about education guys yeah you need to build stuff as well so build build it and build it securely um in a in a and and and have a pro professional um touch in what you're doing I I think one thing I what I love about defi is that it's um it's not as serious as traditional finance and there's like um you know there's a lot of like meme energy but at the same time like the stuff we build we're building it has to work like it has to work it has to be secure um you know and and that's really core to succeed and I feel like right now we're kind of in the beta we're in the early stages everything's being tested out and then eventually this stuff will scale into the trillions and we're just at the beginning of it yeah I think defi is still small right and I do think that if you start building today and you you're working in the space today um it's going to take one decade to get to even like a decent adoption you know and not even like full you know that defi is everywhere it's a really really long game and and that's just because just because of the nature of Finance you know it's uh people want maturity they want to see that these protocols work and they also want to see that the people who are governing these protocols they are um they also have a touch of professionalism uh there as well and there's enough data to back whatever we're doing I think those are things that are very important the more professional the space is uh without actually losing the connection with uh users and and people who care about the the space and ecosystem that's the most uh important s thank you so much thank