Hi everyone, my name is Alio. Uh I work in A Labs. A Labs is the the company who who started the whole A thing. We started in uh in 2017. I was there almost since the beginning essentially after uh uh Stani had the idea of Ital was called Ital.
time basically almost since the beginning. Those were fun times for stable coins because actually there was no D, there was no USDC. Uh ETH uh USDT was on omni chain. So it was not on Ethereum. And I remember it was pretty interesting to see how people was using ETH uh to actually borrow uh back in the days like we had this peer-to-peer platform.
Um there were no stable coins to borrow. So people were were using ETH to borrow against all the tokens back then were on uh Ethereum. So it was pretty cool. After that we moved to uh we renamed to a we after compound was released we decide to build uh something that would build on on that foundation of the pool design of the pool model. Um and but we added some very interesting features that actually made a what is today.
So we had eight tokens, we had flesh loans, we had different ways of um uh borrowing with different rates. We had stable rate, we had variable rate and so on so forth. Then we had a v2 a v3 which have been basically improvements uh on top of the foundation of a v1 like that that was actually a very um uh very strong design decision in the sense that the a model was working and we knew what was what we needed to improve to actually made it even more scalable and more efficient plus we didn't want to disrupt the work of the integrators. Uh but today we are going to actually talk about what's going to change because a v4 is uh around the next like in the it's coming uh live in the next uh months. Uh so I heard before someone saying in the in the panel uh before that the science space is a bit stale uh lately in D5 which I kind of agree.
So let's see what do we have uh coming up. I think I'm very excited about that V4 because I think there is going to be uh a lot to talk about in the next months. So, uh the focus of course is on stable coins. So, stable coins like are basically the strongest DeFi primitive. They are growing uh uh an insane pace and they are by far the most liquid asset uh available on uh on all the various networks.
uh a big chunk of these stable coins are actually in a we're talking about like I don't remember now maybe more than 10 billion and um uh so why are they getting traction and uh how things are changing compared to uh compared to the last uh few years right so they are gaining traction because of ease of uh ease of uh transacting with stable coins because of the stability that they bring on chain. They allowed to go from uh volatility to stability very easily. Plus lately we have this uh growth of RWA mostly in the form of money market onchain money market funds that allow very interesting thing that we have been seeing in the last uh months which is arbitrageing rates between uh DeFi and TRDFI. Right? So what we have been noticing is that when rates are uh low in DeFi, people actually move uh to RWAS to like be for example uh to gain the advantage of higher thread fire rates and the opposite happens whenever uh rates in DeFi are are higher.
So borrowing demand increases. So one of the things that we are going to focus with a v4 is to make this pro process efficient and we'll see how uh so what we can actually do to improve stable coin yield on chain like we can work in integrating more seamlessly uh traditional finance products but we can there is still a lot to do on uh in the defy uh design space as well. So uh one thing that we have been noticing uh especially as as the uh market is growing is that whenever there is um uh decreased demand for borrowing what happens is that uh there is a lot a huge amount of huge capital available for borrowing in a uh which is idle essentially because nobody's borrowing it which on average decreases the efficiency of the of the protocol and of the y generated right So one for one thing that we can do for sure is uh unlocking capital uh and in unexplored areas. So one of these unexplored areas uh which I'm very excited about is uh liquidity that is in decentralized exchanges. Right?
So we in a we have tried many times to actually try to unlock this liquidity to let people borrow against this liquidity. It failed for a variety of reasons like uh it's it was really hard back in the days like the DEX design space was moving very fast. It was hard to keep up uh building on top of that. Uh it was also very hard. There was ch ch ch ch ch ch ch ch ch ch ch ch ch ch ch ch ch ch ch ch ch ch ch ch ch ch ch ch ch ch ch ch ch ch ch ch ch ch ch ch challenging around pricing and so on and so forth.
Damn 18 minutes are very short. I am already five minutes left but okay. So uh um yeah I mean so what we also want to do is make this RWA define transition very seamless and uh simplify access also to new stable coins. There's going to be a wave of new stable coins coming many entities want their own stable coins. So how do we facilitate the adoption of those?
So uh I mentioned before a v4 uh a v4 is going to be a completely new product has nothing to do with v3 in terms of design and uh architecture. Uh it still retains the same pool model but what we wanted to achieve was like being able to uh unlock uh different areas of demand. So compared to other v3 where the borrowing happens in a very uh standardized and uh unified uh way in v4 we will have pluggable uh borrowing strategies. So you can have the same borrowing strategies just as a v3 today but you can have uh the capability to borrow for example from uh safe vaults which today is not possible. Today the collateral needs to be in a to be able to borrow right but thanks to before we will be able to borrow modules that actually uh interface like uh safe vaults and uh a so even if the collateral is in a safe you will be able to borrow uh liquidity from a and the collateral is going to stay locked into your safe if you for example you don't want this was one of the features that stratify asked us to be able to keep the collateral separated from the pools and at the same time to be able to borrow, right?
Uh there is another feature that is coming up which is like we did a proposal to the unis swap dow to unlock liquidity that is in the um uh unis swap LP positions but about this we'll talk uh shortly. Uh so we will have this a new architecture uh the liquidity provisioning part called liquidity hub is completely separated by the borrowing part. This allows us to plug different borrowing engines on top of the of the um uh liquidity provisioning. Uh so as I mentioned one of the things I am excited about is like unlocking capital that is uh in places where currently users experience certain cost opportunity cost. One of these is uh um DEX uh LP position.
So users that are providing liquidity to dexes are uh usually um experiencing not only volatility risk but also opportunity costs because your stable coins that are in the DEX for example they could be somewhere else uh earning more yield right so by allowing borrowing against this against this liquidity uh we will be able to unlock this capital and to increase the borrow demand even when the uh relative demand in the market is lower Right. Uh another feature that AV4 will have is uh a reinvestment feature. So as I mentioned before, one of the things that we have uh noticed uh uh in the last especially in the last year and a half or so is that uh as soon as demand goes down, we end up with a lot of unused capital, right? And it to make the transition between stratify and and DeFi easier like the most convenient way is to actually take this capital or invest it somewhere else to optimize the yield right because we of course want to facilitate users in providing liquidity into a and not having to leave A and enter a Tradify product and trying to remove that friction. So to remove that friction of before, we'll have a native reinvestment feature kind of similar to what balancer does today for those who are um familiar with the balancer uh protocol.
And uh this will allow uh liquidity to enter and exit uh rein other investment uh products more easily. I'm thinking of for example our SD or SUSDS or even Bidle for USDC, right? Erh another thing that we are planning to do is to facilitate uh the collateraliz collateralization or LWA products. Uh because another friction that today users who use bele have for example is that uh they lose like instant possibility of going from uh bele to east for example. So if I want to be long ETH but I'm bele is not that easy to actually go from bele to ETH because you have a like um redemption fund but if the redemption fund is not big enough you might not be able to redeem then you need to wait like the I don't remember it's I think a couple weeks to be able to redeem there is a fee and so on and so forth.
So sometimes coll being able to actually collateralize to pick go back to defy rather than to have to redeem makes things a bit uh easier and more capital efficient. Uh another thing that is going to be very interesting is like native yield redistribution. So what I mean by that is that uh today's stable coins either centralized or decentralized they have native uh yield uh generation feature which comes from either reinvesting the the uh collateral backing the stable coins in the case of USDC or SD for example or from the borrowing demand that is actually uh generating the stable coin in the case of go or USDS. So uh one thing that we will facilitate in a v4 is going to be redistributing this interest. Uh we have esgo and uh we recent rec recently released s go uh uh which essentially allows to stake uh go for a return in uh in yield coming from the borrowing demand of go itself.
So on Nav4 is going to be very easily very easy to actually redistribute Y if uh stable coins issuer plan to do so. So conclusion I had to rush a lot. uh uh yeah so we are trying to bridge to make uh the bridge between uh DIY and trady more seamless uh more easy uh to also further optimize D5 y to make it as much competitive as possible even in a situation of low market demand and uh facilitate and embrace uh native uh y distribution. So yes that's pretty much it. Thank you guys.
Automatic transcript — names and jargon may be misspelled.