Navigating Stablecoin Yields and Risks | Devcon SEA

[Music] hi everyone thank you very much for joining our session today is Wednesday and it's a perfect day for discussing some ston use and risk um so this is going to be a 55 minute session 45 minutes for panel discussion and then the last 10 minutes is going to be for Q&A uh the Q&A is only open to audience at the venue and I believe you need to scan the QR code here to submit your question um so let's get started I am Tammy um I'm specialized in on chain research and then I'm passionate about stable coin and stable coin risk so I have spent some time on developing um a St coin risk assessment framework that Leverage uh data driven metrics and today I am the moderator of the session really excited about our panel with the representatives coming from stable coin project and onchain liquidity provider how about we start a session from you guys introduce a little bit about yourself um yeah hi everyone um alesandro I'm the CD at dialectic um we are a non-chain liquidity provider um you can think about us as like institutional grade yield forming so we provide liquidity to anything that is on chain and and is paying incentives so it's kind of liquidity as a service as well um and redeploy into stable coins and E and Bitcoin yield opportunities mainly on evm chains and uh I'll probably be talking mainly about risk uh today um my name is Colin I'm the head of product for uh liquidy uh we are a the most uh decentralized immutable stable coin that exists uh with LUSD uh and I'm in charge of an upcoming product called liquidy V2 and we'll have a stable coin called bold um so we'll help you with the yield uh part of this question and I'm Ariah I a co-founder of gyroscope I also did one of the uh probably first phds uh looking at uh at defi uh back in in about like 2018 2019 and gyroscope is a uh a combination of a decentralized stable coin and a deck so it's a little uh unique in that regard it's focused it's a protocol that's focused on uh risk and liquidity management uh as well as uh kind of generating new yield opportunities around uh specifically decentralized stable coins um well for the last 12 months we have seen the number of new stable coin project rise exponentially but however I think around 199 4% of their stable coin market share are dominated by four top stable coin project on ethereum so 58% by usdt 27% by usdc around 5.6% by D and the rebranded version usds and then around 3% by USD which is just launched last year so at this point it seems like the main way for new cicon project to compete is on yield opportunities so my first question will be at this point in the market uh sorry what yield what yield strategy do new stable coin use to compete and how do you see this evolve over time yeah so um I think that's it's a really good point um so yield is a big big aspect so our current LUSD um we don't compete on yield our yield right now is is not great it's 2 or 3% where most other places are paying much more we're building a new product should be no surprise there um it's not the whole story I mean there there are different risks that come in the other half of the the yield um so Athena is is kind of uh mentioned with USD as being one of the higher yielding stable coins um but a lot of people are concerned about the risk U one of the highest yielding stable coins in the last cycle of course was us um which no longer exists um so you can kind of see and I'm not proposing that Athena is going to go down that route at any stretch of the imagination but there are people that worry about why am I getting paid more um because you in finance uh risk and and reward kind of go hand in hand and if you find a way outside of that you're either losing or you're winning um but most people kind of get it in the middle um but I think you hit on a really interesting point which is how do you prod product segment uh using yield and using your risk profile um and I think what's really interesting is if you look in the trafi sector we're just kind of across other defi things um everything we label is a stable coin I mean it's a transferable unit of account that's generally measured in dollars I mean it could be another currency um but your savings account at a bank is as well as is your investment in a treasuries um these are all based on dollars or in bot where in Thailand or Euros or whatever um but they do different things and some of them may require you to lock money up for a certain time and for different parts of your portfolio that makes sense and I think with stable coins we're going to see nich sh cases usdc usdt work really well because they're in centralized exchanges uh they're very good at on- ramping and off- ramping they don't provide yields Athena is the polar opposite so I think that we're going to see lots of segmentation around that focusing on yield as well as liquidity and other aspects and yeah I would add a little bit on top of that uh in particular for like new entrance to the stable coin space um there is kind of like a spectrum of course between like uh uh how much risk are you taking on with this stable coin design and also like how how much you have to be compensated for that risk but at the same time you also have to compete with the uh the like existing incumbents mainly like usdc and usdt who have very entrenched uh liquidity and the the usefulness of your stable coin really depends a fair amount on how easy it is to get in and out of your stable coin to to actually use it for what you're intending to use uh and that depends on like how liquid your your stable coin can actually be and kind of like a chicken or the egg problem even if you're not like intending to only be focused on yield you somehow have to like establish your uh your liquidity and usually you have to have to pay for it and like compete with the cost of capital of uh of other stable coins which actually is like an advantage of usdc and usdt for them like they don't have to pay for it yeah and that maybe also just like the the fact that like most of the stable coin liquidity is actually not in defi I think like all of us here on the panel at least are like very much focused on the def use case but most of the supply of stable coins is outside of Defi and it's used in centralized exchanges it's used for payments um and there that the existing Network effects I think are very difficult for especially like def focused stable coins to compete with on those use cases so where the defi stable coins are really competing at is in the defi um ecosystem where it's more about using the stable coins as collateral it's using the stable coins as pair with other stable coins and there the yield component becomes a lot more important being it's it's the one of the big ways in in which the different coins try to try to um get their own share of the market now as calling very correctly said it's it's really much about risk adjusted yield um and for us as like large scale liquidity providers that's ultimately what we care about if we can get very high a in a position that's very risky um then that's not something that we may do or we may only do with a very small part of the portfolio and then most of the liquidity goes to like lower yield but also much lower risk stable coins um so what is the use strategy um at G scope and liquidy then can you give us some details on that I know you mentioned that but like traditionally a stable coin user can earn use from providing liquidity and now you have a Yi bearing uh stable coin which is liquidity V2 and dry scope has their uh uh s idea as well can you give us some more details on that yeah I can fill in a bit about uh gyroscope there um so realistically a lot of the kind of early go to market for new stable coin does end up focusing around yield just for this like chicken or the egg problem of you have to establish uh enough liquidity that you're your product is actually uh useful um and then also like realistically so a lot of just stable coins get used in Defi and then like become ingrained in various yield strategies and so the actual usage of stuff at least on chain ends up revolving quite a lot around uh yield for gyroscope in particular we have uh I mentioned we have kind of like the a unique combination of a a stable coin that's decentralized and a decentralized exchange uh we have two main kind of like yield products that are part of the the go to market I suppose one is a yield bearing version of the stable coin SG for compared to the stable coin that's non-yielding G and uh the what SG does is uh kind of similar to some other yield bearing stable coins it takes the uh uh the revenues that come in from uh kind of various aspects of how the protocol works and forwards them back to uh to to users who opt to hold sgid instead of using G somewhere else um and currently that yield kind of averages kind of between like 12 and 16% right now in the the current environment uh and then we also have uh our decentralized exchange we have uh what we consider a more efficient liquidity pool type that's also more easy for uh kind of like LPS to use uh it's focused on what's called asymmetric concentrated liquidity you can think of it it's kind of a big word but you you can think of it as just a way to squeeze more liquidity out of the same assets that you're putting into the pool by kind of strategically choosing which parts of the pricing region you actually need uh and tying that in also with like how this stable coin is actually designed so why it's why we built it actually for gy is that uh G has like a minting and Redemption function and we use that to basically say hey uh minting and redeeming uh kind of takes care of most of the pricing range and you can then make uh kind of secondary markets focused on very particular areas and so that's like a high level idea of why uh our decentralized exchange is kind of more more efficient uh but it it's made specifically for for GD like that that was one of the reasons why we built it and so one of the most efficient places to actually put GID to use is using it uh in our decentralized exchange which uh also like ends up grouting quite a lot of volume these days too yeah so um I think you made some really good points in there um kind of one of the things like when we designed our product realization and kind of taking a step back where with our first um version is there's actually unlimited demand to create stable coins I mean I think if I did a survey here and I said if you could mint a token that was worth a dollar um would you do it and I think everybody would say I'll do that in unlimited size the issue is there's not unlimited demand to hold your token that you just Meed um we realized that actually with V1 um because when you would mint it you'd pay a half% fee and that was it it for the rest of your life um we had some mechanisms in there which ultimately kind of created an issue with our V2 um we kind of understood that everybody would mint uh on an unlimited amount um but you have to pay this borrowing rate so we've been talking about yield um our kind of USP is that you set the rate you want to pay uh you decide what interest rate you want to pay for that stable coin you've minted now this guy might choose 3% a year you might choose eight why would you choose three and you eight um we have a mechanism called Redemption and essentially we are a CDP which means you put in eth or lsts um you paying three if that somebody can acquire that for less than a dollar they can turn around take that stable coin and take your eth obviously you you probably like eth I imagine most people at Devcon probably are constructive on the price um depends on the talks you went to go see before this um but if you believe it's going to go up over time you don't want to lose that uh and have somebody pay back your debt so you might say okay well I'm getting 3% that's a great deal now but if I see that I'm likely to be redeemed I'm going to move that up and pay closer to 8% like this person over here um over time what that should yield is kind of a very good rate that is a decentralized reference rate is what we referred to it as in trafi we have these reference rates it's how much does it cost to borrow a dollar if defi we ask that same question we'll get like 18 different answers people might reference trafi they might reference a they might reference maker um but there's no one number uh our goal is to hopefully get enough liquidity to be part of that answer uh and in time we hope to be that answer uh overall medium to longterm time frame oh well since you both we mentioned the you bearing stable coin which is um it does not only it does not offer only offer the stable value but also um it gain Ed based on uh return on underlying Catal and then it seems like for the last 12 months real well asset become a really popular choices what's your view on this what's your view on this Mass adoption of real world asset the pros and con maybe Colin will be the last one to answer that I know you have a lot of opinion I mean um I work in defi um so real world assets don't exist in my world um because they're not defi um it's great if people want to play with them um go to Goldman Sachs and do that that's it um what's your opinion then Alexandro um I mean like it's for us it's a very different set of risks where we are very specialized in understanding and measuring and mitigating risks of onchain things that are transparent that we can audit that we can go deep and understand like fundamentally how this mechanisms work we have full onchain auditability of what the reserves are so for us that's what we focus on and it's very not not easy but it's very intuitive for us to to think about risk that way as soon as the assets leave the chains that the set of risks that you take on are very different you need to look at counterparties and jurisdictions and understand what the rights are in case of bankruptcy of the custodian and it's it just adds like another dimension to to the stable coin game and I feel like over time the decentralized options should mirror the yields that the rwa take if not more and and also like the rwa yield on on T builds which I guess is the most common asset to back stable coin Swift these days is is going down um and and depending on on how the economy goes in in the next year or so it's expected to go down even further so I I think that the rwa push was really due because the yields were very high and then it makes sense for defi to tap into these yields but as they go down I believe the the decentralized options that are Crypton native that are built on Def Primitives will out compete not just on on the yields but also in terms of transparency and auditability and therefore in in in terms of risk as well so I would put uh real world Assets in kind of a similar boat to uh to like usdc so you can do a lot of defi stuff with usdc and rwas but that doesn't mean that like a centralized stable coin or like a an rwa is like itself defi you can use it and you can do interesting stuff on top of it um but yeah I mean I'm pretty sympathetic to uh to what you what you were saying Colin about like uh uh I I think something that's like vastly underappreciated is the just how much risk there actually is in in rwas even to the point where like if your goal is to hold like an rwa uh it doesn't really make sense for you to hold it like directly in defi you're choosing like an inherently riskier way of holding this this asset um so it really only makes sense if like it's useful for something else you want to do in defi kind of like building on top of it and and also what I feel like is for um when sometime when people talk about tokenized real world assets right they always mention about the transparency but it's not necessarily always true and then for tokenized credit pool if they went bust the process to recover the asset underlying it's actually quite difficult to understand especially for General user um we but we know the market is driven by youth um and most of the you are motivated by you not all of us want to talk about the risk um I once ask a friends about how he choose a stable coin and then he told me that he feel pretty comfortable if if the yield is high and if the market cap is above uh100 million that sounds like someone is going to lose their money during the uh Terra crash so I think what we need to know is a stable coin user face different type of risk depending on how they engage with stable coin uh whether it's direct holder whether it's a leverage user lender or uh whether it's liquidity provider so one of the most discussed risk is the uh St coin deping risk where the stab price is significantly lower than the pet value or the value they Tred to stabilize so in your view what factor may cause the stable coin to become insolvent or permanently lost part of uh its value um I mean there's like many reasons why stable coins deeg um in theory if a token is redeemable one to one against an asset that has a fixed value and has a lot of liquidity and and you can like exit a position in some way it shouldn't now there's there's many things that go back and it it goes from like smart contracts getting exploited and people minting more stable coins than what the collateral is and and then it defects for that reason or it is because cicom Valley Bank is going bankrupt and then usdc D pegs because their reserves are not on chain and people can't verify how much money is actually exposed um and then in the past we' have seen like algorithmic stable coins and people have been trying a lot of different mechan Mech isms to keep uh pegs in a way that is under collateralized and most of those didn't work um so so I think it really comes down to like the mechanisms of the stable coin and and ultimately at least from from what we've seen in the market a stable coin that is not fully collateralized and can be redeemed against some underlying assets is at very high risk of of dep pegging and it's more a matter of how many people do you need to withdraw in one moment for there to not be enough liquidity to to suain the price and then Bank runs start the the same way that bank runs have started for hundreds of years um so so it's it's multifaceted but if if like the design is solid and and if there is actual value backing the stable coins and the mechanism to get the stable coins um and exchange it for the underlying value then at least in in general it it should be pretty begged I I think that was a pretty complete yeah there are we've seen lots of lots of different reasons and I think you you highlighted a lot of them I mean the one I'd add is poor mechanism design um is a common thing um people building stable coins that they need to can have humans that are throwing money in to to keep interest in it that wasn't designed inside the mechanism um you know that runs for a while um eventually people realize that they're throwing a lot of money in to pay to keep it token stable uh and you can only do that for so long like we hear in trfi about a lender of Last Resort essentially in a lot of these tokens we have you know uh a bag holder of Last Resort uh and that's when we dpeg um you know we need to find an equilibrium and that needs to be designed in the mechanism um obviously when you know we have backings uh they should be redeemable for something whether it's a decentralized asset or a non- decentralized asset um and those are pretty good ways but I guess uh when those break uh that becomes a problem um but just functionally um designing your token a way that can be sustainable I think is a prerequisite regardless of all the other questions so I know arah actually predicted the crash of Tera even when Tera is at is a pick so I think one fun fact about him is like a Doan K you what a cockroach yeah so do you think we have learned from the teror crush like the market I hope that uh that there are some lessons that uh are learned uh by most people uh and I hope that one of them is like kind of being cautious of what's what we've called like endogenous collateral something where uh the value of where a stable coin is backed by some other token but where the value of that token is like circular with the with with the stable coin itself so like terara uh was backed by Luna well sort of backed uh but like Luna really only has value because people think terara has value and so like there's just like a spiral to zero that's that's possible there um and if you kind of disentangle the how all of that works I mean it's basically equivalent to a Ponzi scheme and so it shouldn't be too surprising that it just uh blows up will we have another one this cycle well that's what I hope we don't well as a general stable coin user I found it I sometime do find it very difficult to understand because stable coin normally rep especially the decentralized one rep underneath like very complex design so I come up with a one if statement to help people to to try to identify whether that's a Ponzi scheme like if if the St con is back significant amount of the significant part of the St con is back by a asset create from nothing create from with no economic value and no other use cases that is a Ponzi scheme am I is it fair to say that I mean the US dollar would be a Ponzi by that definition it has other usage um so apart from the deping RIS there'll be what are the other risk that are often overlooked and stable coin user may not realize that they two will incur loss um yeah so like we break down risk into different categories um the big one for us and also I guess historically where most money was lost in defi is smart contract exploits um so that is all about like is it possible for someone to use the smart contracts in a way that the developer didn't intend and through this unintended use take out a lot of the value that is backing the stable coins that would then lead the stable coins to to dpeg um dead risk is kind of always there like even protocols who have done many many security audits who have some of the smartest people behind they still get exploited it's it's just the trade-off that that you need to do if you want to be in Defi and if you want to use protocols that are built on Smart contracts and give you all of the um trust minimization guarantees and security guarantees um so so so that's I I think the biggest one in in our view there's many others there's things like governance risk so like who can update the smart contracts that the stable coin is is running on there is some like considerations around centralization around there and and even if it's not um necessarily malicious upgrades of the contracts you're still relying on the operational security of a small group of people who have access to the smart contract and we've just seen a couple of weeks ago with with the exploit on radiant that um that that can happen like it's very sophisticated players doing these attacks but it can happen that the group of people who has right to upgrade the smart contracts get compromised and then that leads to to the smart contracts being changed in a malicious way and a lot of money being lost so and and then I guess the the the other thing is mainly around like economic mechanisms so many of the stable coins all have different ways to to manage the peg um and these mechanisms need to be solid and should have been simulated in different environments and in different market conditions with volatility and other assets being liquidation Cascades and and things like this so I I I think it's really like a multi-dimensional um risk assessment that one needs to do and the the the nice thing is that all of the information is there it's more a question of going through all of the documentation going through the smart contracts if needed um getting in touch with the team getting a very deep understanding of what the trust assumptions are what the security assumptions are and then coming to a conclusion whether or not that makes sense for the yield that that is being offered by the protocols or if the the the unique selling points of the stable coin in terms of network effects and liquidity are worth taking the risks that that come with that well um since you just like to mention the government risk I would like to um go deeper into into the government risk so what are the common types maybe for Colin what are the common types of uh governance mechanism that have been adopted by most of the stable coin project nowadays yeah I mean I I'll kick that off by saying I agree governance is bad and stable coins should have minimal governance whenever possible um I mean the big risk is things can be changed parameters can be changed um a lot of people buy into stable coins because they fit into a product and and something they like and they may find that you know they do this and somewhere down the line somebody puts rwas in the back or or puts other things and it functionally becomes a very different thing than what they expected um effectively just become sometimes a rapper for a stable coin another stable coin like usdc um you know that is useful for a lot of people they like to have whatever but uh if you're a long-term holder and some of these need to be kept longterm because maybe they're backing another immutable smart contract it's very hard to build your business uh focused on decentralization if somebody's able to change this Downstream and and we find with our users um because we have no governance and we don't have proxies um that's not the main concern people have it's smart contract risk based or liquidity based in case these guys don't show up um but if if you're trying to build something that should be able to stand the test of time you need to build it on top of components that will remain in a predictable Manner and some of the biggest uh entities out there that's what they're concerned with it's not just eth Maxis that say we love decentralization it's some of the biggest balance sheets in defi do not like governance behind stable coins and I think that that's something that's not fully appreciated um because governance is a risk not just for the average user who goes oh yeah my money might get censored that is a huge risk um you know usdc can white Blacklist your address some of these stable coins have that as governance but that's not only thing that can happen they can also decide um we're going to completely knock out some of these positions we're going to add weird things into it we're going to change it and make it unrecognizable in some cases they can through governance parameters shut it down and withdraw collateral they tell us it's for safety but what happens if they're asked to do that by a government is that still defi what's your view on that arah I find it kind of ironic that most people don't care about governance risk when we have a space that has so much like a uh rug poles in it which is governance risk or like one major form of it um and uh I think we most of us probably on the stage here agree that like governance minimization is probably a good thing if not just because it like helps to minimize governance risk but also like anytime you have like something like a dow running something it's like incredibly inefficient and uh a bit scary uh so the is where you can minimize that and make it less scary I think that makes a lot of sense and that's kind of the approach we also took with h with with gyroscope uh although I would I would say we took a more pragmatic approach we don't think you can actually like remove governance entirely at least for what we want to build which is a bit different than what liquidy is building too so fair enough um but for what we want to build that you you can't there are some things you can't really predict how it should change in the future in particular how like the defi space will evolve and how the asset space in defi will evolve and we see that like you basically have to have something that does some sort of governance at least for what we're building to to be able to adapt to that but in our view that is a very uh that that's very good to be a ve a particularly slow process and we don't need like Fast governance to to do that nor do we want fast governance to do that because fast governance is a lot riskier than than slow governance if you have slow governance uh and you're a user of the protocol you have time to see is something risky coming up and am I still happy using this or do I want to move to to something else that uh that isn't uh is isn't doing something this risky and to the extent that like fast things need to happen in the protocol that that we built we automated it so that that should happen automatically by the protocol we don't have to wait for governance to come in and do a quick action and instead governance can specialize in what it should be doing which is just slow things about how the space uh should evolve do you think you guys can come up with a example that laws has incurred because because the governance process is not optimal in the past um I mean yes the as as I just mentioned there was a there was an exploit on on a protocol called radiant um where the full protocol was upgradable by a multisig wallet with three out of 11 signers required to to approve any transactions and those three signers got compromis on their computers um and and someone was able to trick them into approving a transaction that they didn't intend and this malicious transaction ended up introducing a back door into the protocol and around $50 million of of liquidity was stolen so um I think this is just like the type of exploits that that can happen um and that that's the things that we need to protect against even though we may trust that the the the team and if it's publicly known people there's some level of reputation in that but I I think what the Rya says is is really really important where it's about how quickly can bad decisions be implemented so any changes to a protocol should go through a time lock they should be publicly visible for some period of time before they go into into effect so that first of all users can make their own decision whether they are still fine in holding the exposure to the asset um after the things change or um even if it is some malicious upgrade these these changes can be blocked before they affect everyone's uh everyone's assets awesome um after the terror crash many entities have published their own risk assessment framework like you have your risk ass framework within dialectic um some of them even go further to public the final risk rating for stable coin like SNP or uh other agency what is the best practice to assess stable coin risk and do you like the idea of having a final risk rating uh yeah I think it's a really hard question to answer um people need to spend time in kind of understanding the risk they're taking unfortunately um that's kind of one of the downsides of being decentralized um I think a lot of people will look at things like usdc as being kind of a flag bear of what's good because they trust that there's a big company behind it that has lots of rules with coinbase and circle notably um but that is you know brings inherent risks inside of it so if you're looking beyond that the one we hear a lot when we talk to our users is a lindin of how long a token's been around and and proven itself how big it is um but that's kind of just an effect because Tera was very big and and was around for a while so it would wouldn't pass on that understanding some of the economics and and having people that can evaluate that is important you mentioned kind of the modeling um there are companies out there that are trying to do some of these risk weightings and I'm I'm a big fan of it personally um because I don't know that everybody has uh the time or uh the interest to go through and dig through that they just say I want something that that's a dollar and I want it to be a dollar today and a dollar in the future um so giving them tools I think is is a great thing and I would challenge the community uh to come up with more Frameworks that we can look at uh and hopefully one of those itself will become Lindy so people can look at it uh and say you know these are some of the Frameworks that we like best and hopefully those don't become corrupted um as we've seen with other ratings agencies I thought AR want to add on something I definitely think risk Frameworks are like a net positive the one beef I would have is that uh in terms of like giving One summary stat uh it is usually just like a big oversimplification because there's so many different risks and it really depends on who you are and what you're using the asset for in terms of uh what the risks mean to you and what the like best uh solution is actually actually for you um and depending on uh on what your preferences are you might prefer usdc it's a it's extremely liquid it has a a relatively trusted company behind it uh I mean it had ran into issues of course so that's probably shouldn't have happened but it did uh uh but they they got past it uh it works fairly well uh but for other people uh they may like liquidy for instance uh but liquidy also has its own risks one of them being it's much more price volatile uh and inherently not as liquid too because you have to uh you have to over such a wider wider region um but it like is better when it comes to to other risk factors like like using purely decentralized collateral um and there there's more than just this too there's like many many different reasons you might even prefer other stable coins than than these two um this was part of also the motivation for why we built gyroscope because we wanted to make something that was easier for for most people to use or what we think like most users of stable coins are that can just handle the risks for you and kind of like uh balance the the various different risks but still you might prefer kind of like taking on more of one risk than a gyroscope would take on for you and less of of another you might not want the balanced approach but it sounds like you don't like giving users the information of why they should trust you they should just do their own research and figure that out you're against the simplification um I would I I think having the information out there definitely net good or all good um but it feels like there should be maybe something more connected with like uh what your use case is I guess in terms of like helping you figure out what the grade is for for different stable coins I think I can add on to that as a user and then I'm coming from a credit R background to me a b c and d has its own meaning probability of default but what does AB C and D represent in stable coin's term so that's the confusing part quality Trend how safe it is it's just unclear so to me the my best practice will be like the user has to do its homework right and then you look at risk in different category and based on their own risk appetite they look into the risk rating or risk score for each category but not have a final risk rating been given too handy for everyone and as I say it's kind of confusing I think we have do you want to add yeah just also just like um like for some users the biggest risk is still self- custody um and and so like even if the stable coin and everything is is very safe um there's like a whole giant group of users for which just the fact that to hold a stable coin you need to have your own Keys is already like a bis big risk factor so I I think it really depends on on the user as as as you said as well um well like different users are fine with taking different security assumptions and different users are fine with um exposing themselves to different risks and and in the end everything is risky to some extent and it's just different types of risks and and it's up to the user to kind of understand them and decide what they feel comfortable with and what not well we'll have five minutes left in the panel so um to wrap up what's next with you or with your project and then do you have any advice for any potential state Co users here uh yeah so we're launching V2 soon um we know what that means it will be soon though um uh would welcome all of you checking it out uh liquid. org uh we'll be releasing a lot more information here extremely soon including test Nets uh very very soon I'm using soon a lot so just to reinforce this um without giving any numbers but uh would love if you could check it out um on the yield front uh borrow pay money in 100% of that's passed back out it looks closer to a public good than some other things um so we're very excited about it um it is true Innovation and and it's truly defi uh and we feel very strongly on it and would love to hear from you um so hit us up on Twitter uh hit us up in our Discord and everywhere else um hopefully everybody in this room will be a user plus the people listening online for gyroscope uh we've had our main product this the stable coin out for coming up on almost a year now about about 11 months uh the it this will be followed pretty soon now by the like actual like governance token launch so that's something exciting to to look forward to um we're also uh I'll be talking actually on Friday about what we think will be the next like actual innovation in uh in in gyroscope what we think will be the next like basically 70% Improvement on how you can get uh liquidity cheaper for in particular decentralized stable coins why I think it's pretty exciting is that like uh we have uh usdc and USD it has very entrenched liquidity it's very hard to compete with that but there are some ways which I'll be talking about on Friday that decentralized stable coins in particular have a unique advantage that just hasn't really been exploited yet and well we want to build the thing that uh that will exploit it so uh come check that out if you're around cool yeah and I mean on my side we are mainly like liquidity providers so we get excited whenever these guys build some New Primitives um that that we can play with um and generally like I think that defi is is ready for like a another summer moment um so much has been built and in the last two three years so many of The Primitives has taken so many steps forward and so it's just like very exciting time for for us to be in the market and be working with all of these people and and helping them along the way to to bootstrap their liquidity and to to get a product to to more users um on the dialectic side we also starting to think about how we can offer some of our yield strategies to more of a public audience um because right now we're just a a private fund and um yep stay tuned for that well I think we have two minutes I think we're on time you're going to tell us what you're excited about oh mine um I as I I saw one question actually from the audience talk about the what is the best way to measure risk as I mentioned I'm working on a risk assessment framework for stable coin and then my goal is to identify metrics that can be deriv from publicly available data so it will be like a a method that combine uh fundamental analysis and quantitative analysis to try to be as biased as Fair as POS unbiased as fair and fair as possible so maybe follow my Twitter account and then I'll have my research paper published uh become available soon and and can I ask one more question as we still have a minute and 36 seconds do you this is a question back to the moderator because you don't get to talk it off um as you represent a centralized exchange do you think that we'll see much more stable coin listing on centralized exchanges and if if so why if not why not um yes or no yes for custodial stable cor I think I not representing anyone here but this is what I understand we've seen more custodia stable coin become available in the space and then they can become regulated or even been used in uh for payment especially in Europe but for decentralized stable coin I think it's quite difficult though if you look at the latest uh regulatory framework by Mika I think they will restrict centralized exchange to list decentralized St con so which means that it will be quite difficult for you to be listed but at the same time your regulator risk should be lower though because um they don't really have a lot of requirement on checking your reserve for example or monitoring your issurance or Redemption so it really depends on what you value the most and do you really need to be listed on centralized exchange though we don't necessarily but some people want that um and one way is like they use decentralized St coin on chain and then if they want to cash out on centralized exchange right they can do the swap on tax and then from there you get something else and then you send the the crypto asset to centralized exchange for fat Q&A time I don't know if you can see this but they have little Billboards that they hold up the say Q&A time for the Q&A either you do the or I up to you oh okay this here the first one what's the stable coin decide you are most bullish about right now and why liquidy V2 uh gyroscope um liquid TV2 and gyroscope yes um why do protocols with Y bearing stable coin also have a governance token um because they can raise money with uh governance tokens and attract people uh it's a great bootstrapping mechanism or it has been um because there is a cost of capital starting a stable coin um people will buy volatile tokens because they think the price is going to go up uh with a stable coin generally people don't expect the price to go up um so you got to give them something and if you don't have a lot of money raised from a VC um a governance token solves that well the second one four part Tessa gets shut down by us now after after last week very low very low I mean it's not even based in us it's packed to US dollar right is it like the common is in Cayman Island or nobody knows Bahama Switzerland Switzerland oh what's the next one I mean there are ways that they go government could try to shut it down I wouldn't say there's no risk but it does seem like less next one what do you think of EA is it sustainable um I mean I think it's I think it's a really interesting idea um I'd say assuming they do what they claim to do it is sustainable because they're essentially doing a strategy that is a trading strategy and they're making that tokenized um so assuming that's all they're doing and I have no reason to believe that they're doing anything else um yeah that's sustainable as long as people are trading perss yeah I think it's uh it makes like economic sense uh there's probably two things to think about about like sustainable though I guess uh it it has positive rates in some environments and probably negative rates in other environments and if you have a sustained negative rate environment in particular when people don't want to take a lot of Leverage uh which happens during like deep bare markets you may just have a natural unwinding of the system at least how how it's set up right now and maybe even disappear anything um no I mean like as all trading strategy there is some limitations on capacity so you you can't run the same strategy with 10 or 100 times the the the capital so like it can scale forever but at the size it's now and and as the Market is is is right now it's it it should be good well the LA the next one will be why don't protocols use vaults ERC 4626 instead of a stable coin don't they serve the same purpose without the RIS of maintaining a stable coin uh I think most people like tokens that's my my short answer Humanity I mean if you get a token something that's just like oh yeah I'll be able to put this in and get a dollar is worth out of let's say eth a dollar in today a dollar out later uh sure why not um but I think most people like to do stuff with that dollar value like yield Farm or whatever um so that's I think generally why users have not been overly interested but maybe I'm missing something yeah I mean I guess to some extent 4626 is also tokenized um but uh I guess there just like some composability that comes with just having a token that you can use as collateral that you can pair with the tokens to provide liquidity and pools and it's just like the mental model that people have is still very much token focused and not like Vault account obstruction focused well the next question will be is there decentralized stable coin that can take over the usdc in defi ours yeah I I mean it's uh I think it's like we were saying like tokens will address different things and a big use case of of stable coins is on R and off ramp um as long as coinbase is is a big way to get in and out I think usdc and tether uh as well will be very important um basically both of those coins extend US dollar banking to unbankable uh offshore exchanges as well um so you see some of the the biggest exchanges you're not able to trade in dollars but you can trade against a usdt pair um as long as that is still exist uh it's hard to say if we just restricted to defi I personally would love to see decentralized stable coins become the main things to do it in uh there are tax incentives at least within Europe of why that might be better maybe that will drive some things but again we're Europeans we're we're poor so maybe not another thing is that uh historically at least decentralized stable coins have suffered like liquidity challenges compared to centralized stable coins um but I mean there are actually some ways to turn this around which is what I'm planning to talk about on on Friday and some advantages that uh I mean decentralized stable coins have some flexibilities that centralized stable coins don't that you can actually potentially make them actually much more efficient when it comes to uh to to liquidity yeah I agree I mean there's some advantages in having like instant anatomic redemptions in stable coin for example for for people doing like Arbitrage and and doing those sorts of strategies um it I I think to some extent it comes down to network if effects and and usdc especially and defi has just huge Network effects it's the most it's the most liquid asset to swap against eth and Bitcoin and against many of the other assets it's the cheapest one to bridge it's the um quickest one to bridge to a centralized exchange and I feel those Network effects are very strong and and there needs to be something that is given by the decentralized versions like yield bearing um that that usdc doesn't have that really like a strong use case to to win the users over I think we we should have a healthier competition in the sector I like 94% dominated by four stable coin is just way too high and doesn't sound very healthy so as user that we should just actively explore what are the options there as like you guys have mentioned centralized stable coin and decentralized B they offer different sets of benefits um the next one will be do you think will ever get a world where there are no stable coin back by the USD instead there is single Global inflationary currency I do hope that we get to see that I do hope that we get to see stable coins that are backed by all sorts of assets um because that's just diversification and it reduces the risk on the space and on defi in general um I'd love to see more stable coins be backed by by assets that are not USD about a single Global inflation ER Rec currency I I think that's what we got with the USD um and yeah and we should use eth as collateral more yeah I I agree eth is a pretty good like non USD back stable coin it's one eth Bitcoin as well Bitcoin is one Bitcoin yeah uh I think the reality is today everybody wants to use like dollars for most things but that may not always be the case and uh uh defi should be ready and prepared to do other things than just dollars at some point too oh this question is to Colin will bold be you bearing also immutable like liquid liquid liquid V1 uh yes so we have room for one more question ultimately are stable coin use in the crypto Market simply a game of musical chair um there's kind of two types of yields that that you can get on stable coins one is what we would call organic yields so that's anything that's interested you're on Ling markets because people are actually borrowing your stable coins um there's things like trading fees if you're deploying stable coins into a stable coin pair on Deck so those I think will always be there that's just like the cost of the protocols and the cost of liquidity um but well what like most of the yield in defi is is is protocol incentives and and I don't know if that is something that will be going on forever but the same way that web 2 companies have huge us acquisition costs I think um liquidity incentives are like a very similar parallel for defi where any new protocol needs to solve the chicken and neck problem um and and just paying yield and and governance token is a great mechanism to do that to add a little more to that there we have some liquidity pools that uh from organic yields earn like 10 to 15% so they do exist uh but yeah a lot of defi yields end up also coming from like token incentives there's many different flavors I guess you guys said everything so I'm going to skip to the last question that's what we build is immutable contracts uh it's Frontier but everybody should do it that way well the music is up so I think we've got to go thank you very much for joining the panel yeah thank you so much Alexandro Aria colen and Tommy for this very insightful panel um I learned a lot