Fireside Chat With Joao Reginatto and Kartik Talwar

All right, we are ready for our next fireside discussion. For this one, I'm going to bring out Cha from M0. Please give him a big round of applause. [applause]

Welcome. Thank you. Thanks for having me. Um this is a challenge for user because you were a extremely critical part and uh effectively helped build USDC uh from uh zero to kind of where it is now. And uh the thing I want to start off with is by asking you sort of back when everything started, what were kind of the the hardest things that you were trying to accomplish uh and the biggest kind of challenge you ran into when launching USDC that we kind of take for granted?

Yeah, thanks for asking me that question. When you sent that question, I was reading and I was like, "Wow, I don't think I've ever been asked that." Um yeah, for folks who don't know, just giving you some context, I I I joined MZO in 2023, but before uh M0, I spent 8 years at Circle um as a product lead um led all the stable coin product teams and led the build out of USC between 2017 and 18 uh until launching and then obviously everything that followed and the go to market and and all of that. Um it was uh many many good stories. Hopefully we can touch on some of those.

It was the most complicated thing I think I've ever had to build. I'm a product person by background. Um have built a lot of hardcore infrastructure things, a lot of finance infrastructure, but um but a stable coin and of that nature was really the most complicated part. I think a lot of it because what you said it was um it was kind of uncharted waters, right? We had uh tether at the time.

Um but tether was always a bit obscure in terms of how it was built. Obviously, we tried to understand a little bit of how it was built when we were doing our own investigation and there wasn't a lot of information or people you could talk to. The ones that would speak, we spoke to them. Um, and so we had to figure a lot of things out and there were so many really really hard challenges and trade-offs that we had to do when building a product like that. But the one but to to be specific to your question, the one that I think people take for granted is um is this kind of synchronization that you have to do for you know these what's called what are deemed fiat collateralized stable coins.

The the synchronization you have to do between two very different ledgers right the the old very bad kind of world of ledgers of banks and um bank accounts and balances and you know updates on balances and things like that. and the blockchain world which is you know very sophisticated much easier uh to implement and maintain uh we spent a lot of time on that synchronization a lot and I think a lot of people takes that for granted and I'll I'll give a few examples of how people take that for granted um I I I love history so I'll do a bit of a journey here um Tether back in I think 2019 um uh made a mistake with a mint transaction um I think they supposed to have minted 5 million tether and they minted um 50 or 500 million I suppose. If you go back on Twitter you will find these things and these

I remember I think it was 50.

Yeah. Yeah. It was it was either Yeah. 10x or 100x mistake. It was an honest mistake you know and they undid it.

was actually due to a transaction that was the counterparty was Circle uh because of Poloni and Circle was swapping some um uh you know Bitcoin version of Tether at the time which was the original one the omni version of Tether for Ethereum version of Tether and they misprinted the destination amount. Um, and that that tells you clearly that, you know, there was something broken in that synchronization of the two ledgers, right? They obviously had the cash. Uh, which I don't think there was a lot of like FUD on that, but I don't think there was ever a problem. They they had the cash, but somebody at some point had to type in an amount for, you know, how to synchronize that with the blockchain.

That's that's a very bad design. Like, you should never do it like that. Uh most people I I suppose most people here don't remember that one. So I'll mention another one that's more recent than that. Maybe you remember.

This was even worse from an order of magnitude point of view. Couple of weeks ago I thought you were going to say

yeah. Paxus printed 300 trillion worth of PYUSD on chain. Um obviously

solving world debt of course.

Yeah. Exactly. I hope I hope we had that like coming into this the ecosystem but that was obviously a mistake. But again, it tells you that how is it possible that somebody can type an amount and it gets to the blockchain, right? That's again a very an indication to me of a very very poor design.

Um we we never did that at Circle. We you know there was never um a chance that a human could type in an amount of USC to be printed. And the reason for that is because we we wanted um the flow of dollars to USC and back and the synchronization between these two ledgers to be super secure, super robust, but also super fast. Every time you have a human in the process, right? You know, unfortunately, humans go on vacation, they get sick, you know, all that kind of stuff.

We wanted this stuff to work 24 by7. We wanted it to be as best as it could be. Um but but that's really hard. like it involves a lot of checks and balances. You know, effectively we built a system that had the private keys for minting USC in a super super secure way.

You know, no human had access, not even DevOps, that kind of stuff. Um, and the system would use the bank accounts as an oracle essentially and, you know, read information um from from the bank accounts and automatically mic and credit it to to customers. Um a lot of these other companies over time that have built similar situations, they have opted not to do that because it's hard. Um and uh you know they have opted for different solutions like tether u most most famously opted to have the solution of preminting right so they mint tether tokens that they keep in a treasury and you know they attest that those tokens are issued but not in circulation. Uh so they have tokens at hand and that's how they you know have like quick response to market demands.

We opted for a different design at Circle and we incorporated some of those lessons in the design of M0 as well. But I think that's one of the things that people take for granted that it was very very hard to build. If you use a fiat collateralized stable coin and somebody's typing in a number to mint that you know I would advise I would advise using something else.

So what led you to join M0? And for those of people in the audience don't know about it, what is the the M0? Yeah, I'll start with with the pitch. Uh, M0 is a universal stable coin uh platform. And the reason why we use this term universal is because we think first of all part of the thesis of M0 that stable coins are going to migrate from being understood as products.

Uh, you know, they're not products, they are actual infrastructure. I think the era of, you know, knowing USC, knowing US, knowing some of these brands, um, it it's in the past. I don't think there will be like more successful um approaches following that path. Um now we're going to enter a phase where stable coins are infrastructure. What we mean by that is when you build a financial product or service um in the past you usually had only one way.

You would have to go to a banking partner and build on top of their infrastructure, right? ability to hold dollar balances to transact in dollar terms and then you built a user experience on top of that and you go and you also need like payment processors to connect to different rails etc. stable coins can play all that role on chain for people, right? So you have like dollar denomination, you have dollar virtual accounts, you have a ledger, you have the ability to send money in and out. So uh it's basically all there in a much more permissionless way on a global ledger that is actually fast and actually low cost and and you can actually program.

So the thesis is that this is a way better way of building fintech into the future. However, uh people have been trying to build these uh financial services and products on top of the existing incarnation of stable coins and they are not fit for purpose. They were not designed for that. They were designed to be a product. So that's the thesis of M0 that the world now needs a stable coin infrastructure, right?

So that you can build fintex, you can build great products for co customers uh by instantiating stable coin technology for your own use case. So M0 delivers that. It's essentially a two-sided platform. On the one side of the platform, we serve developers who can come in and customize stable coin technology for their own use case.

And just to be specific, this means like they can launch their stable coins that are

the the best way to understand it is that they create a custom stable coin for their own use case. But in many of these use cases that we're developers,

the the users actually don't know that they're touching the custom stable coin of the developer. But they can, you know, they can customize the behavior. They can customize the monetization aspect of of it. They can make a closed loop, open loop, uh, you know, they can build something like a Starbucks, which to me is like a dollar that has different behaviors, a dollar that you can only spend on coffee, for example. Um, on the other side of the M0 platform, then it's a multi-issue model.

So, we actually allow that. That's why we use the term universal. We we have the mindset that these platforms need to be open because money infrastructure is so so important. You don't want to be attached to a particular provider forever. So we allow multiple issuers to plug in in the back end.

So a good example of this how it works is MetaMask has built the MetaMask dollar on on M0. So they as a developer team they utilize the M0 technology to build MUSD. On the other side they opted to use uh bridge as a stable coin issuer. So bridge is one of these stable coin issuers that connects to the M0 infrastructure and mints stable coins for developers via our infrastructure. We have u the the first issue on the network was something that we bootstrapped and now we have recently announced last week the third issuer which was moon

amazing

and um and we will have two more being announced soon and the platform is beginning to grow which is very hard a hard thing to do but it's beginning to grow on the two sides right we are about a billion dollars in aggregate circulating supply uh across all these developers that are building stable coins we have already three issuers and we'll have probably five in the next 6 months as I said and um and we think this is What the world need the world needs like an open money platform, dollar digital dollar platform in this case that developers can easily build products on top of but it's open for anyone to participate. I would love to see in the future circle plugging in tether plugging in and alternative alternatively to the products they already have issue stable coins for other people too. I mean

I mean the thing about our ecosystem is that we kind of put developers in the center of all these things and you effectively and in designing a lot of these things that become composable of each other and if you think in code it makes it a lot simpler to have things talk to each other and you kind of know what the opportunities to build on top um and can actually own the product and the experience. Um, one kind of common criticism about stable coins get is that um, they actually typically earn yield on the cash that's issuing us points. Uh, but those things really won't get passed on to the user. Uh, but a lot of their models where you end up contributing to increase the supply and uh, the question kind of I have for you is like how do you think about that as a platform? Um, is this something that you believe is like a strong value that you need to propose uh to anybody who's contributing to a stable coin and give them the ability to sort of share that or do you feel like the the core part of this problem is making um allowing anybody to make stable coins for their own user base and in their community or their product and just facilitating that infrastructure but not having a strong opinion on what else they can and cannot do.

Yeah, that's a great question that I think it's fairly misunderstood in the uh in the space right now. We have some somewhat in the last um it's very recent, right? But let's say in the last year, I would guess um this concept of yield bearing stable coins has emerged, right? Again, I think I think u we we as humans were way less smart than we think, right? We there's always the the joke about if Henry Ford had asked u you know his customers back in the day what they needed, they would have set a faster horse.

I think yield bearing stable coins are kind of a faster horse. We don't really need them. Uh

that's an interesting statement.

Yeah, we don't need them. What we need is stable coin infrastructure because if you zoom out of the tech a yield bearing stable coin again is a product. It's a piece of technology. I always zoom out and like okay but what is the job to be done? What do people want to do with these things?

And as you said maybe it's because they want to park some money on some use case and earn yield from um you know from um kind of money at rest. that that's the need that's the use case you know and yes you can build yield bearing stable coins as a way to deliver that but but I don't think they are a general purpose product that you can then try to sell to everyone so I'll I'll make I'll make a so to your point yes we try to educate our developers on that um I would say most of them actually understand and I'll I'll tell you how they come interested actually on the platform some of them do have a little bit of confusion and we do um educate them but my take and our take I I think is a little bit controversial. Uh our take is that users most of the time actually do not ask for yield. Um or to put it in a more sophisticated way. I think users are very smart in trading off yield for utility, right?

I I'll give you like an example like cash especially here in Argentina, right? Cash is [clears throat] very important. You don't get yield on cash as a form factor. Why? because it's the most uh like incredible and liquid uh piece of peer-to-peer money technology, right?

So, there's a lot of utility like it can literally, you know, finalize a transaction. It has immediate finality, right? It has no fees. I give it to you. You have it now.

Uh it's very liquid. And so, for those good attributes, I forgo yield. So, I'm willing to not take yield on that portion of cash in my pocket because it has like other benefits. Same thing for a checking account. Same thing for most payment instruments, right?

And also, I guess to your point, like that number starts to only matter if it's large enough, right? I can go 2% yield on on $10, but maybe in a $20 million, I may start to care about it.

Exactly. It's all about the use case, right? What what people are willing to trade off. If they're willing to trade off then liquidity for a little bit of return, then they are willing to park some money, especially if it's a higher amount, right? for example, on a savings account, they know they're not going to touch for 30 days, then they're willing to take some.

I think the missing point though, and this is this goes back to your previous point about, and we really believe in that. We put developers on a pedestal, right? To me, we need to help developers. They are they're the missing piece in this puzzle. And I mean, developers of applications um you know, we have fantastic infrastructure in crypto.

We haven't we haven't had fantastic applications yet. And part of the reason is monetization, right? It's it's way easier today in crypto to build infrastructure because it's easy easy to monetize. It's not very easy to monetize applications and part of it I would I would say again it's a bold claim. Part of it is because of the types of stable coin products that we have because if I build a wallet um how do I monetize a wallet?

Most wallets have been monetized by swap fees right so they each created their own swap engine because you know

it's on top not on

it's on top. Yeah. So we got we got to make money. How can we pay for like milk and and bread and good things, right? So, we need money.

Where are we going to get money? Let's build a swap facility so that people trade and that's how we're going to get fees. But that that's, you know, that feels like a shim. The the the way you typically have monetized these products in more traditional ways is if you have acquired customers, if you have acquired customer deposits, monetize those deposits, right? Make money on those deposits.

That's the main that's the main thing that we advocate for these developers who built on M0 is that you you need to live. You need to be able to have a sustainable company. Otherwise, it might be the best product ever. It's going to go to die. So, take the yield and take it as revenue for you, right?

If you're building something where you're

a really good way to hedge. Yeah.

Yeah.

Yeah. Exactly. If your end users the use case your end users are going to expect the yield, then fine, share it. You know, if you're building a savings account, well, you better have something to give them as savings. Um, but don't think that, you know, I I think it's an idealistic way to think about like, oh, all the yield I'm going to take now, I'm going to give it to my users.

Maybe they might not be asking for it. So, and that's that's an okay thing to say, right? It's not like an evil

I I actually am on your side now. I totally agree. Um, the opportunity cost could be much higher for the potential 5%

and the products built might end up being worse, right? Like we have to developers have to be able to have a revenue. That's an okay thing.

Exactly. You want to give them a more stability. Uh given the time I want to ask you one last question. Um we're clearly kind of seeing a moment for stable coins and and payments kind of becoming chain and just getting hyped up everybody whether it's crypto institutions outside of crypto. Um where do you think all this thing is headed?

Yeah, we've been in just 6 months from now being old where there's 10,000 stable coins and I'll have to figure out which one I own and it's going to back to effectively everybody having their own token but they

amount to a dollar

or do we think there's going to be consolidation or better ways to kind of interface with them

kind of project a couple years from now the stable coin industry?

Yeah, I get asked that a lot. Um but but it's it's hard I think it's really hard to make a prediction. I think the the one thing that I think is happening already and will continue to happen is uh is experimentation. I think I think we're going through a phase that if you like to study like the evolution of technology in other areas right pick your favorite technology maybe uh you know mobile apps or cloud computing like all those things actually went through similar phases right of uh first of all like oh it's really scary like who would want to you know store their data in a cloud then you go through a phase of you [clears throat] know like there's a few use cases that actually work and and you start getting like traction uh but still most of the time these things start as like very horizontal quite honestly naive pieces of infrastructure and then and then you start having things like oh but in the healthcare industry you can't store like patients data in the cloud except if you actually do these additional things and then you see customization of technology right I think we're going through that phase like we have gone through a phase where we have commoditized the base tech so building a stable coin it's really really easy like you don't need to be worried about the things that you asked in the beginning that I was worried when we built you SECS circle um you just you just do it right like the the a lot of the onchain tech is like very commoditized a lot of the offchain check is tech is commoditized you have many providers that can do that for you today um when you lower the barrier for entry what happens is a lot of people experiment and I think that's the thing that I would certainly bet that it will continue to happen we are going to see a lot of these products being launched that doesn't mean a lot of them will be successful I think very few of them will be successful But it gener you know action generates information right generates learning. People will learn and they will iterate.

I think uh I think we will live in a world with many instances of digital dollar money. That's more the way that I think about it. Um but uh and I think it will not be a winner take all or a winner take most. I think in the same way that cloud ended up it will be like many providers with many you know many ecosystems or big ecosystems you know the Microsoft solution and kind of what we're seeing in AI right

AI is going the same route so I think we'll end up with like four or five of these big platforms and but I I don't think that will happen until like maybe 5 years into the future I think for the next 5 years the certain thing is experimentation a lot of failure a lot of good things and bad things but we just need to go through that as an industry Thanks. Thanks. Perfect. None. Please give a massive round of applause.

None zero.