October 2, 2025 • 58 mins
In this episode, Sebastien Couture is joined by Benjamin, the founder of CAP, a stablecoin protocol designed to provide insured yield. The protocol features two main products: CUSD, a digital dollar, and stCUSD, its staked, yield-bearing version. Yield is generated through an "allocation engine" where third-party operators borrow from the protocol's reserve to execute yield strategies. To ensure user deposits, these operators must be vouched for by restakers on protocols like Symbiotic. If an operator defaults, the restakers who vouched for them are slashed, protecting the stablecoin holders' funds. This model shifts risk from the end-user to the restakers, who have a bilateral relationship with the operators they underwrite, often backed by legal agreements.
Topics covered in this episode:
- Benjamin's background and perspective on China
- Journey into crypto and stablecoins
- Hot Take: Stablecoins are not as safe as you think
- The evolution of stablecoin models
- Has DeFi forgotten about decentralization?
- CAP's design: CUSD and stCUSD
- How CAP generates yield with operators and restakers
- The role of restakers and legal agreements
- Integrating with Symbiotic and views on EigenLayer
- The best use cases for shared security
- Navigating the Genius Act and global regulations
- Rebuilding trust in the DeFi ecosystem
- Why the stablecoin space is not too crowded
Episode links:
Sponsors:
- Gnosis: Gnosis builds decentralized infrastructure for the Ethereum ecosystem, since 2015. This year marks the launch of Gnosis Pay— the world's first Decentralized Payment Network. Get started today at - gnosis.io
This episode is hosted by Sebastien Couture. Show notes and listening options: epicenter.tv/618
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
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Welcome to the epicenter. The show is talks about the
technologies, projects and people driving decentralization
and the blockchain revolution. I'm Sebastian Cuchio and I'm
here today with Ben Benjamin, who's the founder of CAP.
(01:05):
And CAP is a stable coin protocol that has insured yield.
Now, I know insurance can trigger some people, but we'll
get into all of that and how thepro quo actually insures its
deposits and how it generates yields.
We'll talk about the restaking component here, how you use a
symbiotic to secure the depositsand a whole bunch of other
(01:31):
stuff. Hey, Benjamin.
Thanks for joining. Thanks for having me man, super
excited about this. So you're, you're currently in
in China like I'm, I'm curious, just what's your impression of?
Yeah, what's your, what's your high level impression in China?
(01:51):
Is it the first time you've beenthere or and like?
No, I, I've been to China many times.
I speak Chinese, so I go, I comeevery year to practice Chinese
actually. And so this year I kind of
combined my language practice with meeting some crypto people.
(02:11):
But yeah, I love China. It's a wonderful place.
Did you live there for a while? I studied here for a year in
Beijing during college. Yeah.
And like what, what's your senseof 'cause I think they feel like
a lot of people in the West, it's kind of hard to put a
finger on like what Chinese lifeis like.
(02:32):
And I, I recently listened to this Lex readme episode that
this, this woman who is like Chinese and sort of like a
Chinese economic and policy expert.
And and she gave, she gave like AI think like a really sort of
like she gave me sort of an eye open look, eye opening look on
like what life in China is like,what people's aspirations are
(02:55):
like, Like how, how people sort of deal with the things that,
you know, sort of in the West wesee as like state control and
sort of bad, right? Like that, that people actually
thrive in these, in these conditions.
Like what? What's your sense of like, what
life is like in China and what are the biggest kind of
misconceptions that people have about China?
Yeah, I mean, I think there's like the people that have been
(03:19):
to China and the people that haven't, and I love you that
haven't, have a very macro view of China.
So like politics, economics, world power, like struggles,
right. But I'm from a small country,
I'm from Chile. From my point of view, China is
the same as the US, right? They, they remind me very much
of the US, like big country typeof culture with a lot of
(03:42):
diversity, obviously a big economy.
You know, I was just in the rural China last week or like
early this week, which is, you know, very different from
Shanghai where I am right now. But they're miles ahead of
everywhere else, man. Like all the cars are electric,
(04:02):
super clean. It's very safe.
You know, the absorption of technology or the adoption of
technology in everyday life, I think it's higher at least
consumer technology compared to the West, especially Europe,
right? Like it's not even close.
They don't use cash, they didn'tuse cards.
(04:23):
It's all like you, WeChat or Alipay.
Since the digitalization of the countries, it's already there.
It's been there for many years. Yeah, it's super impressive.
I think like that's probably oneof the things that I've, I've
not been to mainland China like I've been to Hong Kong, but like
adoption of technology, I think like in Asia.
Oh, it's very different. I think Hong Kong is like, it's
(04:44):
amazing. I love Hong Kong.
My first startup was in Hong Kong.
But mainland China is it's a different thing.
It's a different, completely different place in my opinion,
from from from a living standard, obviously not from a
political what have you. Yeah.
It's, it's crazy how like, you know, being in Europe and I
(05:05):
don't want to make this all about this, but it's just
interesting to kind of get your perspective on this, how like in
recent years there's been kind of a reversal in it, like
rejection of technology almost in Europe.
And I wonder if that has to do with the fact that like a lot of
technology in Europe is owned and operated by by U.S.
companies, if it's more of a kind of geopolitical rejection
(05:27):
than an actual technology rejection.
But it is worrying to see like European people and European
kind of political discourse be like super anti technology.
It's like it's just so weird. Europe is at least 40 years
behind China at least. Like if you go, if you compare
Berlin, Oh my God, like they used to use cash.
(05:50):
You don't know what elevators are, you know what I mean?
Like electricity, like it was like all the ACS not in most
places. And then you come to like
Shanghai, you know, I just shared a elevator ride with a
robot, you know, that was delivering something to the
hotel. So it's just like, you really
can't compare the I mean, love Germany, right?
(06:11):
I actually came up with the ideaof CAP in Berlin, but no, man,
it's just like crazy how how different and people really
don't think about that because again, people's idea of China is
very like a macro about politics, about economics.
Cool. Well, let's set that topic
aside. You're going to put a clip on
me? Like fighting, Fighting Germany
(06:34):
is fine. Yeah, yeah, we'll, we'll use
that as a hot take clip. But yeah, like what tell like,
you know, we know you studied inGermany or sorry, you studied in
China and, and and you, you cameup with the idea for cap in in
Germany. But what like what, what's your
journey and how did you end up here?
Like how did you end up in a podon a podcast talking about your
talking about your your your trying to dirty and your your
(06:58):
founding of this company? You know, life is crazy, right?
Who, who knew we would be here together talking about
cryptocurrencies in a, in a podcast?
No, So, I mean, I've been encrypted for, for quite some
time. I, I, I started, you know, in
the head there hash craft space,doing some infrastructure there.
Oh, yeah. OK.
(07:18):
I, I started a stable coin 4-5 years ago on Polygon.
So been in the stable coin spacefor a while.
And then obviously most recently, I started CAP about a
year ago, a little over a year ago.
Yeah, that's kind of my, my little, my little short spiel
about crypto. What was the stable coin project
(07:39):
you were doing before? Chidao QIDAO, yeah, it's like
very very different right. It's like at the height of defy
summer type of project. No, no fundraising, you know Max
Alo to the community air dropping strangers.
I don't I don't even know who owns the token.
(08:00):
Like the largest whales is like random people.
But yeah, it was a wonderful project.
It was the first cross chain stable coin.
OK, and this was on Polygon. Yeah, well, Polygon started then
Phantom Avalanche. Before you had OFT or your XRC,
we invented this idea that the token, when you bridge it from
(08:22):
different chains should remain the same.
It should be fungible. Before us that wasn't the case,
right? You would have wormhole
avalanche USDC or you know, layer 0 wormhole avalanche USDC
theory, like some long string like that.
And so you had some crazy pools on Solana for example with all
the different versions. So before the show we were, I
(08:45):
was asking you about your hot take and and you, you said that
you think the stable coins are less safe than what people think
they are. Can you expand on that?
Why should people be worried about their stable coins?
I mean, I don't, I want to say you should be worried, but I, I
do think you should be cautious about, you know, where you put
(09:08):
your money. Because what happens every cycle
is that, you know, we learn certain lessons about, you know,
what, it's safe and it's not safe, But it's usually the
people that get burned that actually retain the lessons
'cause if you lose money, you really remember, you know, these
kind of lessons. If you don't lose money or if
you weren't there, then you don't know what to look for.
(09:29):
And so there are a few things that, you know, are kind of
being done again in this cycle that I'm worried about that have
been done in the past, For example, over trusting third
party bridges, right? Even though we have these token
standards that's supposed to have ninting limits, the ninting
limits are the size of the market cap of the tokens, right?
So there's like not really any like, you know, protections
(09:51):
there when it comes to D5. We're, we're rebuilding Celsius
and, and all these different like what's it called like CD5
lending platforms that we're building in on chain and they
didn't suddenly become safe, right?
It's the same issue of unsecuredlending to teams, but now we're
(10:13):
doing it on chain and I think that's very unsafe and I'm
worried about how that's going to end up.
So yeah, in general, I just think we should be very cautious
about money because it's money in the end of the day.
It's not a game and people can, you know, get hurt.
So, you know, we used to talk about stable coins in three
(10:33):
buckets or at least, you know, Ithink like around 2021 people
would talk about Sablecoins as like there was the algorithmic,
you know, the likes of over collateralize over, you know,
and then you had like sort of CDP, you know, over
collateralized and then and thencentralized like USDC or
(10:54):
something like that. Do you think those categories
still stand today and or or do you think that we're sort of
finding new types of stable coins?
Yeah, I think that definitely one of those kind of died or
it's like not very big anymore. CDPS are not big anymore.
(11:14):
I, I, I think in general, synthetic stable coins, at least
in number, they're not that big,right?
Like there's one big synthetic stable cone right now that's
extremely successful and it's Athena, right?
Synthetic meaning is not fully backed by dollars.
It's partially backed by other things that are not dollars.
But by and large, more stable, most stable coins today are
(11:35):
eventually redeemable for the dollar, whether it be T-bills,
etcetera. So yeah, CDPS have definitely
gone down in size. Obviously algorithmic ones are
gone. So really now we find ourselves
in in a world where there's two main buckets, I think where you
have yield bearing stable coins and there's many different kinds
(11:55):
of yield bearing stable coins. And you have these like non
yield bearing stable coins that are, you know, backed by bank
deposits and they're, you know, genius act compliant like PYUSD,
like USDC, etcetera. Why do you think the the over
collateralized model didn't workso well?
Right? Because I mean, like, I think
(12:16):
the, the, the starting principleof say something like maker DAO
was to have a highly decentralized stablecoin and
with, with no, kind of like no USD collateral or at least no
reliance on centralized stable coins as collateral.
(12:36):
And I think for people, a lot ofpeople in crypto that got into
crypto as a rejection of the Fiat system, that's like a very
powerful idea, you know, today, like size, maybe, you know, in
the top five, but certainly a lot in the top 2, which is
dominated by USDC and UST. And then we have projects like
FX, right, that claim to be super decentralized by, you
(12:59):
know, I talked to them on last episode and it turns out that,
you know, the dollar peg is actually based on, it sort of
relies on USDC. Yeah.
Why do you think those like haven't really taken off and
would would do you think they should?
Like do you think there's a space for highly decentralized
stable coins that are over collateralized?
And we have to acknowledge what the discourse is today in D5,
(13:23):
right? In the last cycle, it was
decentralization, right? How can we stay away from the
traditional banking system? And this is largely due to how
regulators viewed crypto. They did not want to engage with
us. You know, they they were going
after teams. And so you saw the rights of
projects like liquidity, which is arguably the only
(13:43):
decentralized stablecoin right in, in crypto.
Now it's different. What, what is what everybody
cares about now? Institutions, institutions,
institutions, right? How can we partner with banks?
How can we connect to the traditional finance system?
And these traffic guys, they don't want to play any games,
right? They don't want a stable coin
(14:05):
that's not backed by dollars because that is risky
objectively is very risky, right?
Because we're not the US government, we can't print
dollars. And so this kind of push to be
compliant or at least adjacent to Tratify has pushed our whole
industry to forget about decentralization and and focus
(14:27):
more on scalability. You you think the industry is
really forgetting about decentralization?
Yeah, yeah. I mean, yeah.
I mean, I don't, I not sound like a Debbie Downer, but like,
for real, I think like people just don't they don't value it
as much as they care about scalability, right?
If you're looking at, you know, centralized L twos, if you're
(14:49):
looking at every single stable gun that's coming out, right, is
is centralized in nature, eitherbecause of their collateral or
because of the team's administrative power over, you
know, the protocols. You know, we're no longer
counting how many multi 6 signers there are on these multi
6. We're no longer worrying about
(15:09):
time locks, right? The idea of fully open sourcing
your code base is no longer the standard.
So just as like a review of where we are as an industry,
it's just factual to say that decentralization for for D5
protocols in general is not at all at the top of mind do.
(15:31):
You think that's a positive development?
And and if that's the case, thenwhy do we still, why would we
still call it D5? Like what is the distinction of
like, I mean, is it just like, is it just fintech with better
tech? Is that like the direction we're
going in or like is there still some viability in the D part of
(15:53):
Phi? Well, I think blockchain is not
just decentralization, right? There are many things about the
blockchain that are good for finance.
Composability is one that reallycomes to mind, right?
Like a lot of people talk about rebuilding SWIFT, we already
have it. You know, literally any chain in
the world with tokens can just, can be Swift, right?
(16:17):
It's just send and receive between wallets and there you
go, it's done. And so, you know, that's very
powerful. That's that's that's
interesting. I've I've never.
I, I don't think it's negative. I I just think it's like it's
part of any industry, right? You know, like right now, AI
probably is in a like a moment of high romanticization of what
(16:40):
you can do with with AI, whereascrypto, we've definitely gone
through this solution then and now we're looking at mass
adoption. And when you look at mass
adoption, you have to get rid ofthe things that most people
don't care about. You have to focus on the things
that most people care about. And for us, you know, boomers in
crypto that, you know, maybe we cared a lot about Max
(17:01):
decentralization in the past, You know, if we want the world
to use crypto, maybe we need to think about what everybody else
cares about too. What do you think is like if
there's one thing that the industry needs to kind of
maintain as a core principle when interacting with the
(17:25):
Triadfi world or like traditional finance, kind of
regulated world? Like what is, what is the one
property or the one thing that like, we can't deviate from in
order to remain successful and like, have a future where you
know, this whole project has notbeen in vain.
Well, part of us maturing as a military mean that means that
(17:46):
we're no longer sort of unified in values.
We're definitely in a multi polar world within crypto where
different groups have different values, right?
Things that they think we shouldkeep.
Personally, the group that I find myself in is that of
(18:06):
safety. I really think that the
transparency of smart contracts,the immutability of smart
contracts can provide a lot of safety.
And if we can maintain that, then we can make finance better
than it is today. I want to kind of come back to
what you said earlier where decentralization is less of a
(18:30):
is, is a value that is like sortof not, not as coveted as it was
perhaps previously, right that we're moving more towards or
moving away from from the decentralized aspect of crypto.
Do you think that like is it isn't, isn't it true that the
(18:50):
infrastructure layers need to remain decentralized?
Otherwise they just kind of likethey're just databases, right?
And I like this entire project has been kind of useless.
We could have just built new data.
We could just like done this on databases.
Is, is there some amount of value, right?
Like is it? Is it like that maybe the higher
layers of the stack are less decentralized, but the lower
(19:11):
ends of the stack are still I'm?Talking about, I'm talking about
like D5, I'm talking about stable coins, right?
Stable coins. D5 people don't care about
decentralization as much as theyused to for base layers.
They do and, and and the writingsaw on the wall who has the most
stable coins in crypto? It's Ethereum and nobody comes
close, right? We've seen so many people try to
(19:32):
make their own stable coin chains for many years.
There have been many and they really haven't kicked off,
right? The L twos don't have a lot of
stable coins at all. And, and it's because at scale,
money's not dumb, right? At scale, people care about
principal protection. And, and so that's why they're
on Ethereum, using the applications on Ethereum.
And some of those obligations might be, you know, less central
(19:55):
decentralized that we would wantthem to be.
But at least as you said, peoplecare about the base
infrastructure. Being decentralized.
Well, I think we'll come back tothis maybe a little bit later,
but let's talk about CAPS design.
And so you know broadly speakingthere's different participants
(20:15):
within the protocol. We have also sort of like
different technical modules, different smart contract modules
and and CAP utilizes restaking to ensure its deposits.
So give us a high level and maybe we can kind of drill down
into the different parts. Yeah.
So CAP is a stable coin protocolto generate yield for users in a
(20:40):
way that we can, one, ensure thepeg at all times and two, we can
protect users from the activities that must be done to
generate yield, right? And the way that we do that is
by two products. One is CUSD, which is a digital
dollar. And this digital dollar, you can
mint it with other stable coins like USDC or money market funds
(21:01):
like Benji and Biddle. What's great about that is 1,
you don't need liquidity, right?Because at any point you can
just redeem 100% of the market cap, no slippage and and then
and you're good. So you don't need to spend money
on Curve or or any sort of Amms,which is quite nice for us.
And it is also means for users they can leave whenever they
(21:22):
want, right? They don't need to be worried
about about the peg. The other product that we build
is, you know, the staked versionof it, which generates yield.
And this yield comes from two sources, primarily at the
beginning from the base yield ofeach asset.
So for example, all the money market funds are in the US
Treasuries yield and then the stable coins which are not
(21:44):
allowed to share the yield because of Genius Act.
We use some different strategy for each of them depending on
their circumstance. For example, USDC, we put it on
Ave. because it's an over collateralized lending market.
But that's that's not the exciting part.
The exciting part is the other kind of source of yield and
(22:05):
we've built this sort of allocation engine where third
parties like regulated financialinstitutions or D5 protocols can
compete with each other to generate yield for our protocol.
And the way they do that is thatthey provision loans from our
reserve and pay some sort of feeright in exchange for the loan
(22:25):
and they go off and they all execute their own strategy.
So there could be 1010 thousand of these kind of yield
generators competing at one timeto generate yield on the stable
coin. But we don't trust any of them.
And so before they can come to our protocol and generate yield,
they need to convince a restakeron symbiotic or eigen layer to
(22:45):
vouch for them with their cryptocurrencies.
And if the yield generator were to default and not pay back, we
can slash whoever vouched for them.
Yeah, I'll stop there. There's a lot you can go into,
but that's the high level. Yeah, that's that's great.
Thanks. So, so there's two products.
There's the CUSD which is the non yield yield bearing stable
(23:07):
coin and then you have STCUSD which which generates yield like
why would someone hold CUSD overUSDC?
What's what's finally the difference?
What's all about integrations right in, in a lot of
integrations in D5 like perp Texas or you know, pools
etcetera, you can't use yield bearing assets, you need a
(23:29):
pegged asset. And so if you look at some of
the larger yield bearing stable coins today that have a staking
kind of module, they all have lower than 70% staking rates and
that's because of these integrations.
Yeah. OK.
That makes sense. And so like so if, if we just
(23:51):
kind of recap here, the, the user deposits some, some
collateral and in this case it'sit's a stable point.
So USDC or USDT that goes into the protocol and then you have
the operators that are hedge funds, primarily institutions
(24:16):
that will use those those coins to go and generate yield.
So they're implementing their own strategy.
And some of those, some of thosemight be implementing like super
high risk strategies, others maybe implementing like lower risk
strategies, but there's like a basket of strategies there.
And then we have RE stakers thatare acting essentially as the
backstop as the insurance fund for against those USD CS well.
(24:41):
I would say insurance fund is a very passive term.
I would say they're sort of the decision makers.
So instead of having a Dow say, you know, we're going to put our
money here, we're going to put our money there.
Reese takers say, you know, Susquehanna, you get to generate
yield for cap on $10 million or Amber Group, you get to
delegate, you get to borrow 20 million to generate yield.
(25:04):
And so they decide who gets to make yield.
But in order to do that, they need to vouch for them.
And so it's a bilateral relationship.
It's not like ISRE Staker. I vouch for Wintermute and now
with Amber group defaults, I'm getting slashed.
I I'm only exposed to whoever I vouch for.
And why is that important? Because these yield generators,
(25:25):
what do they want to do? It's not their money.
So they want to generate as muchyield as possible so that their
spread is very high. Restakers, what do they want?
Well, they want yield, right? Because Bitcoin and ES don't
make yield compared to the dollar.
It's not even close. You know, the the
cryptocurrencies are not productive assets like the
dollar. And so they come to restaking
land to get some sort of yield. They don't want to get slashed
(25:48):
above all else. And so they're never going to
underwrite extremely risky strategies or extremely risky
third parties. And so that kind of balances out
the system. I don't know if you're familiar
with this protocol. I mean, it's it's still like in
the early phases of developments.
It's not released yet. They have like a website but
(26:09):
mezzanine where they have like kind of risk trenching.
Yeah, the trenching stuff, yeah,I mean there's.
Yeah. So would it make sense to have
like risk trenching here so where you know, you might have
like low risk, right, where you're getting kind of like the
Treasury yield and then maybe some higher risk and then like
some very high risk. And then that all those
different sort of yield sources are are being combined to
(26:33):
provide the yield to the end user.
But there is some amount of likekind of backstop where the
higher tranches are protecting the lower tranches.
Yeah. So here's the thing.
I don't think retail has the mind to be making these
decisions. And so we abstracted away,
right? You're right to say, you know,
we have all these strategies, but the dollar holders don't get
(26:56):
any exposure to the risk, right?If you're holding stakes to USD,
you are not exposed to the risk of the strategies.
Who is exposed is the risk takers, right?
And so it doesn't really matter.You don't have to tranche it
because what would you tranche? There's no risk to tranche.
The tranching is on the other side where risk takers can
choose like, hey, I am super risk averse.
(27:17):
I'm ether Phi, so I'm only goingto delegate to Bank of America,
just to give you a random example or maybe restaker XYZ
and I want to get as much yield as possible.
Let me delegate to a crypto native market maker, right?
And so you'll you'll have these different tranching on the other
side, and it's important to keepit on the, you know, protocol or
(27:37):
B to B side, all this tranching because there's a lot of
complexities, right? When ether fi delegates to
institution, they're not just trusting them, right?
They're signing some legal paperwork on the side to arrange
what will happen if they get slash etcetera, etcetera.
Who is in a good position to sueBank of America, right?
(27:57):
It's not some, you know, small farmer at all, right?
It's these big projects that have raised millions of dollars.
They're in a good position to sue.
And so we're kind of shifting a lot of the burden of these
decisions and management to the restakers.
Obviously not for nothing, right?
They get more yield than Ethan Bacon have ever seen.
(28:20):
OK, right. So the so the restakers have
legal agreements with the operators, the market makers,
the crypto, the crypto private equity funds, etcetera.
And those agreements layout the types of strategies will have
kind of like risk management provisions etcetera.
(28:41):
And the restakers are on the hook for those operators doing
their job right. Exactly.
And the operators are on the hook to the restakers.
So you could put it like this. The stable coin holders are
protected by smart contracts. They don't need to trust
anybody. The restakers are protected by
the law and so then they should only delegate to good
(29:05):
counterparties, right? Susquehanna may lose money
sometimes, like everybody can lose money, but they are are a
good counterparty, right? If they owe you money, they'll
pay you back, right? And so that reduces the risk for
the risk takers. So what what constitutes a
slashing event then? And how are like, what's the
(29:26):
flow of capital for end users tobe made whole if like one of the
operators, you know, loses all the money, you know, like.
Yeah. So we are a completely on chain
platform, everything smart contracts.
And so we don't really know if the borrower lost the money or
not, right. What do we know?
We know how much money they borrowed and we know how much
(29:48):
money they've been delegated. And so we track the collateral
to debt ratio. So how much delegated value is
compared to the amount of loans and if that ratio falls below a
certain threshold, then that's when we liquidate sort of how
over collateralized lending markets track loads like avian
morpho. Right.
(30:09):
OK. So I guess one way to look at it
would be that it's under collateralized lending where the
trenching happens between the operator and the restaker and
(30:29):
it's kind of like abstracted away from the end user.
Sort of, yeah. I mean it's like it's a three
set of marketplace which allows for, you know, three different
interpretations of the model, right, depending on where you're
looking at it from. From the point of view of the
Stablecon holder, it's a miracle, right?
You're having an over collateralized lending market
(30:49):
that's giving you three times the rate of love it, right.
And you're like, what's what's going on, right?
And it's because you have this coincidence of wants and needs
of these three different partiescoming together.
Yeah, I love a good cow. Yeah.
Coincidence of wants. Yeah, cool.
OK. So and so who are the operators?
(31:11):
Like practically speaking, who are you working with and like
what kind of strategies are theyimplementing?
I mean, if you, if you, I guess,I guess like you don't know
unless you're talking to them, which I suspect you are.
We know. We know because they tell us
things, which is nice. So we launched a month ago and
for the first two weeks we focuspurely on setting up the
reserve, right, bootstrapping itwith USDC.
(31:33):
We got just over 100 million in organic user deposits from in
USDC and recently we started onboarding the restakers and the
operators. Now in terms of the operators,
there's ample demand for liquidity right now.
There is, there's a lot of market volatility.
There are a lot of opportunitiesto make yield.
(31:54):
And so demand for for loans is pretty high.
We have operators like Amber Group or like GSR who are, you
know, blue chip market makers incrypto.
We also have Susquehanna, IMC and Flow traders, which are
their counterparties in the Trackfi world.
You know, these are huge enterprises, over 200 billion in
(32:17):
AUM. So it's not just some random,
you know, companies that we've put together.
And then finally, we also have some define native names, right,
like Gauntlet soon to have RE-7 as well.
So there's definitely a mix and that's the that's the goal,
right? Because right now you have all
these stable coins that are justmaking yields from Treasuries or
(32:40):
maybe basis trade. I can come to you and say, well,
we're going to make yields from anything that the dollar can
touch because we can have a theoretically unlimited amount
of operators to the extent that restakers are willing to on the
right, a theoretically unlimitedamount of operators.
OK. So this is kind of like where
that the kind of like insured orcovered loan component comes in.
(33:08):
We're like the restakers are covering the.
Loan we we look at it as guarantees.
Right, right. OK.
Has there been a slashing event?I mean, I guess you like you
launched a month ago, but so I suspect not.
No. And you know, we're we're going
through great pains to make surethat there's no slashing events
within at least the first year because that that would be bad,
(33:28):
right? You don't want people get
spooked for all sorts of reasonsin crypto.
And so at the beginning we are whitelisting who gets to borrow.
So even though the final say is actually at the restaker level,
cap as a team is can can block certain people from borrowing
even if they have delegations. And this is because the last
(33:48):
thing we want is for somebody tostart up a risk taking protocol
and delegate to a meme coin trader and lose all their money
and get slashed. Because then all the other risk
takers are going to look really bad and their users are going to
start getting scared like, oh, are we next?
Even though, you know, meme cointrader has nothing to do with
Susquehanna. It's completely different risk
profile. So which restaking protocols are
(34:12):
you integrated with? Right now every single major
restaking protocol is either delegating or is in the process
of delegating to CAP. Some of them are faster than
others. We're very happy with you know
Renzo as our first delegator on symbiotic and concrete.
(34:32):
The next one, but then sticks toa hyper rhythm.
I've already delegated this weekas well, so very happy with them
and obviously excited to work with all the other ones that are
on the way. Yeah, I, I know you guys are
working with symbiotic, but likewhat's what's unique about
symbiotic that kind of like makes this all work as opposed
to say like other protocols likeEigenleier?
(34:55):
You have to be political here. You know, they're both great
projects with great teams and weare integrating both eventually.
Right now we're in audit for forEigen layer, but we started with
symbiotic. We actually finished the code in
Feb and we've audited five timeswith like trailer bits, spear
bit Recon, Sherlock, a bunch of top tier auditors.
(35:19):
What do I like about Symbiotic? Well, it works right?
All the all the kind of featuresthat we needed are were live
when we needed them. And so we were able to launch
there. The team is very, you know, high
quality, they know how to ship. And so everything kind of worked
the way we wanted it to work. And then finally, obviously the
(35:41):
modularity is actually pretty interesting because obviously
CAP is not the original intendeduse of restaking right?
It's not the original intended use case of of share security as
a whole, one could argue is one of the best in my opinion.
But we can go into what I think about shared security later.
(36:02):
But yeah, that's that's why I like Symbiotic.
Yeah. What, what do you think about
shared security? Like what are the really valid
use cases for shared security other than like this guarantee
this, this loan guarantee, whichI, I agree.
I think it's like a really cool implementation and like use case
for. Yeah.
I mean, I, I think it's, it's interesting that, you know, when
(36:23):
I read Eigen layers white paper,I saw Universal marketplace of
Trust, which I interpreted as, you know, you have people with
money, which is ETH, right? And they have nothing to do with
it because it doesn't have as many skills as the dollar.
And then you have people with skills, right?
And there's some sort of trust economy where the people with
(36:46):
money can guarantee the actions of the people with skills.
But then in practice, everybody was starting to build these POS
like networks where they were just validating off chain data.
And I thought to myself, why arewe limiting this technology to
(37:06):
just validating off chain data? If you think about it,
validating data is not a very high margin business, right?
So can you really pay the high cost of shared security just to
validate data? And the answer is no, right?
Right now these validation systems are generating $0.00 in
(37:28):
fee, not a cent, not ten cents, they're generating 0.
And that's because you know you have to constantly validate a
state, but you don't constantly generate fees.
And the only way to make up for that imbalance in the accounting
is to issue incentives. And that's why Ethereum has
inflation sometimes. That's why, you know, Bitcoin
(37:49):
gives the token right at the whole point of Eigen layer and
symbiotic is that you don't needto have another token and you
just reuse the value of these tokens to have real value.
But if you if you don't generateyield, then how do you pay
right? Anyways, so I, I was not very
happy with most folks focusing on validating data and I thought
(38:11):
that we should really expand theuse case of these guarantees to
any sort of activity. It's just so happened that I'm
using it to allocate funds of the stable coins collateral to
generate yield, but it really can be anything.
You know earlier when we were talking about kind of like
decentralization and whether or not you like it, you know it
(38:33):
continues to be relevant. Do you think that this
particular use case for restaking that is using a
decentralized validator set and the, the assets that gain value
due to that decentralization to secure or act as kind of like on
chain insurance? Do you think that that's a use
(38:55):
case that can grow and can kind of scale and become, you know,
the, the reasonable debts for, for restaking 'cause like I, I
agree this whole like data validation like doesn't seem
like a really good business longterm.
Yeah, I I think guarantees in general are definitely the way
that restaking will survive and will thrive.
(39:18):
If you look at a lot of you know, asset managers, Butch
bracket banks, one thing that they really like about crypto is
obviously the composability the other party smart contracts,
right, because a big problem in Tri Fi is having to trust other
people. Trust is the biggest issue with
finance. And so smart contracts can
(39:39):
alleviate that and organization systems like symbiotic can
alleviate that. And so I think there's ample PMF
for it. And that's one like the, the
demand side, on the supply side in terms of like Ethan and and
Bitcoin, these assets have a lotof value.
And I don't think we're paying taxes in Bitcoin anytime soon.
(40:00):
And so there's not going to be alot of use cases for Bitcoin
compared to the dollar. So this use case of re staking
or using your assets to delegateto other people I I think it
will have a lot of PMF for a long time.
So we touched on this a little bit, but you mentioned the
Genius act and you know that some Stable Point projects were
(40:22):
kind of like Genius I compliant and others probably won't be.
What do you think will be the dividing line there?
And you know, for those projectsthat are Genius I compliant, is
it mostly than just kind of likehaving access to the US
traditional financial system andmaybe that's the dividing line
between what we consider to be kind of like the D Gen. projects
(40:45):
and those that are not D Gen. Yeah.
What's your what's your kind of like long term take on that?
Yeah, I mean, I think we definitely live in a multi polar
world outside of crypto as well.So there's is not the case that,
you know, the US says this is what we need to do.
When everybody does it, there will be folks that are not
compliant and they're just, maybe, you know, putting their
(41:07):
foundations in the caveman and living in another country and
and kind of like just not payingattention to American loss at
all, you know, changing their UIS to block Americans so they
can say, you know, we don't haveto follow the laws.
Cap is our first round was with Susquehanna and our last round
was with Franklin Templeton to Great American institutions.
(41:27):
There's no hiding from US regulations, right?
And we're also American. And so the way we're going is
the way of compliance, right? And if regulators have a problem
with us, we're we're prepared toto change things, right?
And I think if you want to get big, if, if you want to be a, a
large financial institution in the future from the landscape
(41:49):
of, of crypto, complying with American regulations is key
because that's where all of the world's money lives.
Yeah, I agree. I think like this change, this
change in administration really has opened up the gates for a
lot of capital to come into the space.
(42:09):
And I, I, I think like a lot of people see it as like, oh, like
this legitimizes crypto in the US, etcetera.
But the offshoot of that is thatthere's just like potentially
hundreds of billions of dollars that can flow into the
ecosystem. And, and that's not going to
happen in probably not in placeslike Europe where the political
(42:30):
discourse is very different. Although I think there has been
some, there has been some departure a little bit like at
the E level from the CBDC's now that they've seen kind of like
what the Genius Act includes andwhat it can mean for U.S.
companies. There is a little bit, at least
I've, I've, I've kind of seen onTwitter some backtracking to, to
(42:54):
something that looks more like the US system.
Yeah. What, what are your thoughts on
the kind of like, yeah, you mentioned multipolarity.
Where are you think things go from here?
If we look at like, you know, the big polls, right?
So like US, Europe, bricks and China.
Well, I'm, I'm not worried aboutEurope too much from a capital
(43:16):
markets perspective. Most of these large institutions
that are involved in crypto within Europe are invested in
US. So IMC flow traders, edge
capital flow desk, they're all not only investors in cap, but
they're also operators, meaning they are prepared to borrow and
generate yield for a stable con protocol.
(43:37):
And, and so that's, that's all you need to see, right?
The, the people that need to be involved are involved.
And we'll have to see what regulators do about that.
Obviously there's nothing to sayabout South America, right?
Because they're having fun. They use crypto.
They don't care about, you know,the tokens, they, they've been
using stable coins for a while and they'll continue to use
stable coins in the future because there are wonderful use
(44:00):
case down there. Our, our job is going to be to
try to tap into as many of theseregions as possible.
And the way that we're doing that is by accepting collateral
assets that are integrated in each area.
So, you know, America will have the stable coins that are
popular in America. Europe will have, you know, the
money market funds and the stable coins are, are popular
(44:22):
there. Our job for CSV set all of that
as collateral. So if you want to enter our
yield system from Singapore, youcan do that maybe through UOB or
if you want to enter our system from Germany, maybe you can do
it via Deutsche Bank's, you know, money market fund.
And so no matter where you are, CAP will be able to connect via
(44:44):
these kind of integrations with the money market funds and with
the stable coins. Yeah, I think my, my kind of
high level view on the Europe USsituation set the US very early.
I mean, like I think US institutions maybe maybe the
government, like the previous administration didn't see it
this way. But at least like institutions
(45:05):
saw crypto and stable coins as a, as like a, a technology that
could improve composability, improve reliability and, and,
and security of the system as like something that needed to be
adopted by the industry with theadministration kind of giving
(45:28):
that a green light. And it feels like it's, you
know, full steam ahead. I think European banks and
European financial institutions,at least like the most more
traditional ones, are more risk averse.
And I think there's there's likeregulators and policy makers are
kind of sitting in this really uncomfortable position where
(45:53):
pushing stable coins or the advancements of stable coins in
Europe kind of undermines the power of traditional banks.
And probably it will take a really long time for stable
coins to be kind of fully adopted in Europe in the same
way that it, you know, Europe was kind of behind the US in
(46:14):
terms of its adoption of e-commerce.
Any technology in Europe just takes a long time because
institutions have so much political power.
And at the same time, I mean, not that they don't have
political power in the US, but they're very risk averse.
They're very adverse to change. They're very comfortable in
their position. They're not pro innovation.
I mean all all traditional industries are.
True. But I think I, I think in Europe
(46:35):
there's an even stronger sense of wanting to sort of like sit
on your laurels and sit on your established rule like position
as an incumbent, which kind of informs policy.
Yeah, I don't want to. I don't want to say too much
about politics. I might.
(46:55):
Our marketing person is going tobe looking at at this interview
and, you know, pulling their hair out.
So I, I wanted to maybe like, let's, let's just kind of do a
thought experiment here and, youknow, let's kind of overlap
stable coins on the traditional finance system.
So, you know, if, if we look at,if we look at kind of tried
(47:19):
fire, right? Like let's, let's take a country
like France, you know, the central bank, or at least the
European Central Bank like issues EUR flows down to the
French central bank. The the French central bank then
lends those those EUR out to lends out those EUR out to, to
to banks, right regulated banks and and then those banks and
(47:41):
then like issue their own kind of stable coin, right, their own
version of the euro to to depositors, right to like their,
their to their customers. And you know, we have like you
don't, you don't see it as a, asa user of the system, but in
reality, you, you have like a association that had Euro coin
(48:05):
and you have like an LCL stablecoin.
And like, you know, for Americans, these bank names are
not going to mean anything. But like you have the banks,
right, like that are issuing their own version of the euro.
And that's kind of abstracted away, but it works because you
have this really good interoperability between all of
these systems because we have like kind of nationwide payment
systems. And then and there's the
(48:26):
backstop and it's underwritten by the central bank, which
itself is underwritten by like trusted institutions and their
ability to lock people up, right.
In crypto, it's a little bit more complicated because we
don't have this kind of like institutional backstop.
And the interoperability is, is also there's, there's sort of
(48:48):
complexity in the interoperability aspect as well.
We're like, you know, your CUSD is not as fluently interoperable
with any other stable coin because the risks are kind of
like different. Do you, do you kind of like see
this parallel as kind of being relevant?
And where, how do we get to a point where anybody can just be
(49:09):
using any stable coin and they're they're not kind of
encumbered by this, this problemthat like the different risk
profiles of the protocol introduces where these different
coins are not incorporable? Yeah, I think it's a matter of
like the design of the mechanism, right.
Cap works with every single on ramp or off ramp or every single
(49:33):
payment provider, you know, every single bridge.
Why? Because we're instantly
redeemable for USDC, right. And you can within a reserve,
you can stop within all the the tokens right between the money
market funds, between the different stable coins.
So, you know, you, you tell me there's an issue of
interoperability, certainly not a cap, right?
(49:54):
Because that's how we've designed the system.
And you'll see that happen with larger companies like Coinbase,
for example, you know, they takePYUSD deposits as USD just like
they take USDC. And so it's just a matter of who
trusts who. Cap trust Franklin Templeton and
also they trust Black Rock. And so now we can act as like a
(50:15):
bridge between them. Coinbase trusts Circle and they
trust PayPal. So now they can act as they can
act as a bridge between them. And so as long as you kind of
grow this pie of trust, you can start seeing this these
connections. And it's very similar to the
banking system where overseas banks can connect to each other
via, you know, this wire system that we have in try five with
(50:38):
the added benefit of, of how elegant crypto is right for
organizing token transfers. But it's not a very difficult
problem solve. I I just, I just think we need
is. If you have a good design, then
interpretability is pretty easy.I want to like kind of zoom into
this trust aspect and this kind of circles back to what we were
(51:00):
talking about earlier. Like, you know, a lot of people
in crypto got into crypto because of kind of this
rejection of the Fiat monetary system.
So if you talk to early Bitcoiners and like early
Ethereum folks like this, this, this, this idea that Fiat, which
actually the etymology of that word kind of comes from the word
trust, right? You it's a monetary system where
(51:21):
you where you trust others. Crypto kind of felt like it was
a a rejection of that. I mean, it didn't feel like it
was a rejection of that, of that, of that idea.
And you know, hearing you speak now you're, it sounds like
you're talking like we're going back into kind of a trust based
system, but with one kind of 1 distinction.
(51:46):
Is that because risk is now kindof spread across different RE
stakers, different kind of fundsetcetera?
In the case of CAP, it creates amore opaque central kind of like
authority to who is responsible,right.
So it actually makes things morecomplicated for the end user who
(52:12):
has like suffered some damages because of misconduct.
Right. Well, it depends on how you do
it. Like, for example, like with us,
you know, we take Benji, we takeUCC as collateral and you can
track and see, you know, these are the collaterals we take.
It gets more complicated if you know, you're backed by Eve, but
then you also put money in Ave. and then who knows where have is
(52:33):
putting that money and, and, andyou have like these more
complicated systems. And there are such stable coins
where you don't really know where the money is being put.
And so I agree with you that thethe question of, OK, I lost
money, who whose fault was it will become more complicated
when you have these stable coinsthat are kind of acting like
hedge funds and putting their money in all sorts of places.
(52:53):
But it's certainly not the case of cap because we're all defied
PTSD, you know, survivors. And we've built CAP in a way
that you're able to track what you've just described, right?
Who? Who is responsible for
maintaining the quality of the collateral?
I guess it's, it's, it's not a reflection on cap, but just kind
(53:15):
of like as the for the industry as a whole.
So where the risk is more spread, perhaps it means that.
The chances of something happening.
The yeah, the chance of something happening is is
reduced, but you know. It's increased, but it's like
the the the penalty of it happening is lower.
(53:36):
The sorry the the the penalty, the penalty may be less right,
but what but also like the crypto world operates in the
space where you know, there is alot of opacity around like where
operators are situated. And certainly like I think
regulation kind of kind of kind of like help with that where you
know, there may be like clear paths to litigation when that
(53:57):
happens, but. Yeah, I mean, look at what
happened to multi chain the bridge.
They got hacked by the Chinese government or like a local
government and all the money gotstolen.
So Binance froze it, Circle froze it, Tether froze it.
They haven't returned the penny to users.
And the Phantom Foundation has been suing Binance and all these
(54:17):
teams to give the money back andthey've refused to do it.
And and they haven't been able to get the money back because,
you know, that's just how regulations are.
And so you're right, I see, and that's kind of why we built cap
the way we built it, because I really just don't think that
users are in a place to get any sort of recourse.
If your favorite yield bearing stable coin that the pegs,
(54:39):
you're going to be suing some random K man entity right with
you know, a director who is the same director for every other K
man entity in crypto and you're going to find yourself without a
nickel of recourse. Yeah.
I think, I think this is where like regulation will play a huge
role is where these entities need to be kind of like local in
(55:03):
their jurisdictions, where they're situated and where they
become highly sort of entangled with the traditional finance
system, central banks, etcetera.But I think we're like really
long way until that happens. Yeah, that's.
Fine. You have to choose, like do you
want to trust the government or do you want to start trust smart
(55:23):
contracts? And I think any project that's
in the middle where you're not trusting smart contracts, you're
not trusting the government, you're actually trusting some
random developer team. I am very scared of those
projects because I know I can trust the government somehow a
little bit, and I know I can definitely trust smart
contracts. I know darn well I can't trust
random developer teams. Yeah, well, some, some, some
(55:46):
people would definitely not agree with you that you can
trust the government a little bit, but that's a conversation
for another. I trust like regulators more
than I trust a random, you know,startup in general.
Yeah, yeah, yeah. I I think some people might not
agree with that. But yeah, obviously, yeah.
I guess like where the kind of proliferation of stable coins
(56:11):
does Excel is offering these different trust assumptions.
So you have like stable coins that are fully centralized where
you don't have to trust anyone. And then you have stable coins
that are fully centralized and you have like sort of things in
between where you're relying on centralized stable coin
deposits, but those deposits arebacked by a decentralized asset
(56:32):
in the case of cap, right? So like you're, you're backing
the, you're backing the centralized stable coin deposit
in the form of USDCUSDT with secured by decentralized asset.
And that might be like the the middle ground that we need to
scale but then also remain decentralized.
How could I disagree with such abeautiful explanation?
(56:52):
Well. Benjamin, thanks for coming on.
Anything you want to share before we wrap up?
Nothing. I, I, I actually, I would say
that, you know. A lot of people have said
recently that the stable coin space is extremely crowded and
there are too many stable coins,but I think they're wrong.
I, I think they're not that manystable coins that are
(57:14):
differentiated in crypto. And so if you are, you know, a
founder that's trying to make a new stable coin, make it, you
know, I, I want there to be 100 new stable coins, 1000 new
stable coins, because the more innovation that happens, the
more liquidity we're going to get on chain.
And that will benefit everybody because it's much easier to
convince somebody that's using another stable coins to use
(57:36):
yours than it is for you to convince somebody that's has
money in like Bank of America touse your stable coin.
And so, yeah, I, I just I will have a call to, you know, not be
discouraged by, you know, how many stable coins there are in
crypto. Cool.
Well, thanks for coming on. Enjoy the rest of your.
Time in China and good luck withthis.
Thank you.
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Welcome to the epicenter. The show is talks about the
technologies, projects and people driving decentralization
and the blockchain revolution. I'm Sebastian Cuchio and I'm
here today with Ben Benjamin, who's the founder of CAP.
(01:05):
And CAP is a stable coin protocol that has insured yield.
Now, I know insurance can trigger some people, but we'll
get into all of that and how thepro quo actually insures its
deposits and how it generates yields.
We'll talk about the restaking component here, how you use a
symbiotic to secure the depositsand a whole bunch of other
(01:31):
stuff. Hey, Benjamin.
Thanks for joining. Thanks for having me man, super
excited about this. So you're, you're currently in
in China like I'm, I'm curious, just what's your impression of?
Yeah, what's your, what's your high level impression in China?
(01:51):
Is it the first time you've beenthere or and like?
No, I, I've been to China many times.
I speak Chinese, so I go, I comeevery year to practice Chinese
actually. And so this year I kind of
combined my language practice with meeting some crypto people.
(02:11):
But yeah, I love China. It's a wonderful place.
Did you live there for a while? I studied here for a year in
Beijing during college. Yeah.
And like what, what's your senseof 'cause I think they feel like
a lot of people in the West, it's kind of hard to put a
finger on like what Chinese lifeis like.
(02:32):
And I, I recently listened to this Lex readme episode that
this, this woman who is like Chinese and sort of like a
Chinese economic and policy expert.
And and she gave, she gave like AI think like a really sort of
like she gave me sort of an eye open look, eye opening look on
like what life in China is like,what people's aspirations are
(02:55):
like, Like how, how people sort of deal with the things that,
you know, sort of in the West wesee as like state control and
sort of bad, right? Like that, that people actually
thrive in these, in these conditions.
Like what? What's your sense of like, what
life is like in China and what are the biggest kind of
misconceptions that people have about China?
Yeah, I mean, I think there's like the people that have been
(03:19):
to China and the people that haven't, and I love you that
haven't, have a very macro view of China.
So like politics, economics, world power, like struggles,
right. But I'm from a small country,
I'm from Chile. From my point of view, China is
the same as the US, right? They, they remind me very much
of the US, like big country typeof culture with a lot of
(03:42):
diversity, obviously a big economy.
You know, I was just in the rural China last week or like
early this week, which is, you know, very different from
Shanghai where I am right now. But they're miles ahead of
everywhere else, man. Like all the cars are electric,
(04:02):
super clean. It's very safe.
You know, the absorption of technology or the adoption of
technology in everyday life, I think it's higher at least
consumer technology compared to the West, especially Europe,
right? Like it's not even close.
They don't use cash, they didn'tuse cards.
(04:23):
It's all like you, WeChat or Alipay.
Since the digitalization of the countries, it's already there.
It's been there for many years. Yeah, it's super impressive.
I think like that's probably oneof the things that I've, I've
not been to mainland China like I've been to Hong Kong, but like
adoption of technology, I think like in Asia.
Oh, it's very different. I think Hong Kong is like, it's
(04:44):
amazing. I love Hong Kong.
My first startup was in Hong Kong.
But mainland China is it's a different thing.
It's a different, completely different place in my opinion,
from from from a living standard, obviously not from a
political what have you. Yeah.
It's, it's crazy how like, you know, being in Europe and I
(05:05):
don't want to make this all about this, but it's just
interesting to kind of get your perspective on this, how like in
recent years there's been kind of a reversal in it, like
rejection of technology almost in Europe.
And I wonder if that has to do with the fact that like a lot of
technology in Europe is owned and operated by by U.S.
companies, if it's more of a kind of geopolitical rejection
(05:27):
than an actual technology rejection.
But it is worrying to see like European people and European
kind of political discourse be like super anti technology.
It's like it's just so weird. Europe is at least 40 years
behind China at least. Like if you go, if you compare
Berlin, Oh my God, like they used to use cash.
(05:50):
You don't know what elevators are, you know what I mean?
Like electricity, like it was like all the ACS not in most
places. And then you come to like
Shanghai, you know, I just shared a elevator ride with a
robot, you know, that was delivering something to the
hotel. So it's just like, you really
can't compare the I mean, love Germany, right?
(06:11):
I actually came up with the ideaof CAP in Berlin, but no, man,
it's just like crazy how how different and people really
don't think about that because again, people's idea of China is
very like a macro about politics, about economics.
Cool. Well, let's set that topic
aside. You're going to put a clip on
me? Like fighting, Fighting Germany
(06:34):
is fine. Yeah, yeah, we'll, we'll use
that as a hot take clip. But yeah, like what tell like,
you know, we know you studied inGermany or sorry, you studied in
China and, and and you, you cameup with the idea for cap in in
Germany. But what like what, what's your
journey and how did you end up here?
Like how did you end up in a podon a podcast talking about your
talking about your your your trying to dirty and your your
(06:58):
founding of this company? You know, life is crazy, right?
Who, who knew we would be here together talking about
cryptocurrencies in a, in a podcast?
No, So, I mean, I've been encrypted for, for quite some
time. I, I, I started, you know, in
the head there hash craft space,doing some infrastructure there.
Oh, yeah. OK.
(07:18):
I, I started a stable coin 4-5 years ago on Polygon.
So been in the stable coin spacefor a while.
And then obviously most recently, I started CAP about a
year ago, a little over a year ago.
Yeah, that's kind of my, my little, my little short spiel
about crypto. What was the stable coin project
(07:39):
you were doing before? Chidao QIDAO, yeah, it's like
very very different right. It's like at the height of defy
summer type of project. No, no fundraising, you know Max
Alo to the community air dropping strangers.
I don't I don't even know who owns the token.
(08:00):
Like the largest whales is like random people.
But yeah, it was a wonderful project.
It was the first cross chain stable coin.
OK, and this was on Polygon. Yeah, well, Polygon started then
Phantom Avalanche. Before you had OFT or your XRC,
we invented this idea that the token, when you bridge it from
(08:22):
different chains should remain the same.
It should be fungible. Before us that wasn't the case,
right? You would have wormhole
avalanche USDC or you know, layer 0 wormhole avalanche USDC
theory, like some long string like that.
And so you had some crazy pools on Solana for example with all
the different versions. So before the show we were, I
(08:45):
was asking you about your hot take and and you, you said that
you think the stable coins are less safe than what people think
they are. Can you expand on that?
Why should people be worried about their stable coins?
I mean, I don't, I want to say you should be worried, but I, I
do think you should be cautious about, you know, where you put
(09:08):
your money. Because what happens every cycle
is that, you know, we learn certain lessons about, you know,
what, it's safe and it's not safe, But it's usually the
people that get burned that actually retain the lessons
'cause if you lose money, you really remember, you know, these
kind of lessons. If you don't lose money or if
you weren't there, then you don't know what to look for.
(09:29):
And so there are a few things that, you know, are kind of
being done again in this cycle that I'm worried about that have
been done in the past, For example, over trusting third
party bridges, right? Even though we have these token
standards that's supposed to have ninting limits, the ninting
limits are the size of the market cap of the tokens, right?
So there's like not really any like, you know, protections
(09:51):
there when it comes to D5. We're, we're rebuilding Celsius
and, and all these different like what's it called like CD5
lending platforms that we're building in on chain and they
didn't suddenly become safe, right?
It's the same issue of unsecuredlending to teams, but now we're
(10:13):
doing it on chain and I think that's very unsafe and I'm
worried about how that's going to end up.
So yeah, in general, I just think we should be very cautious
about money because it's money in the end of the day.
It's not a game and people can, you know, get hurt.
So, you know, we used to talk about stable coins in three
(10:33):
buckets or at least, you know, Ithink like around 2021 people
would talk about Sablecoins as like there was the algorithmic,
you know, the likes of over collateralize over, you know,
and then you had like sort of CDP, you know, over
collateralized and then and thencentralized like USDC or
(10:54):
something like that. Do you think those categories
still stand today and or or do you think that we're sort of
finding new types of stable coins?
Yeah, I think that definitely one of those kind of died or
it's like not very big anymore. CDPS are not big anymore.
(11:14):
I, I, I think in general, synthetic stable coins, at least
in number, they're not that big,right?
Like there's one big synthetic stable cone right now that's
extremely successful and it's Athena, right?
Synthetic meaning is not fully backed by dollars.
It's partially backed by other things that are not dollars.
But by and large, more stable, most stable coins today are
(11:35):
eventually redeemable for the dollar, whether it be T-bills,
etcetera. So yeah, CDPS have definitely
gone down in size. Obviously algorithmic ones are
gone. So really now we find ourselves
in in a world where there's two main buckets, I think where you
have yield bearing stable coins and there's many different kinds
(11:55):
of yield bearing stable coins. And you have these like non
yield bearing stable coins that are, you know, backed by bank
deposits and they're, you know, genius act compliant like PYUSD,
like USDC, etcetera. Why do you think the the over
collateralized model didn't workso well?
Right? Because I mean, like, I think
(12:16):
the, the, the starting principleof say something like maker DAO
was to have a highly decentralized stablecoin and
with, with no, kind of like no USD collateral or at least no
reliance on centralized stable coins as collateral.
(12:36):
And I think for people, a lot ofpeople in crypto that got into
crypto as a rejection of the Fiat system, that's like a very
powerful idea, you know, today, like size, maybe, you know, in
the top five, but certainly a lot in the top 2, which is
dominated by USDC and UST. And then we have projects like
FX, right, that claim to be super decentralized by, you
(12:59):
know, I talked to them on last episode and it turns out that,
you know, the dollar peg is actually based on, it sort of
relies on USDC. Yeah.
Why do you think those like haven't really taken off and
would would do you think they should?
Like do you think there's a space for highly decentralized
stable coins that are over collateralized?
And we have to acknowledge what the discourse is today in D5,
(13:23):
right? In the last cycle, it was
decentralization, right? How can we stay away from the
traditional banking system? And this is largely due to how
regulators viewed crypto. They did not want to engage with
us. You know, they they were going
after teams. And so you saw the rights of
projects like liquidity, which is arguably the only
(13:43):
decentralized stablecoin right in, in crypto.
Now it's different. What, what is what everybody
cares about now? Institutions, institutions,
institutions, right? How can we partner with banks?
How can we connect to the traditional finance system?
And these traffic guys, they don't want to play any games,
right? They don't want a stable coin
(14:05):
that's not backed by dollars because that is risky
objectively is very risky, right?
Because we're not the US government, we can't print
dollars. And so this kind of push to be
compliant or at least adjacent to Tratify has pushed our whole
industry to forget about decentralization and and focus
(14:27):
more on scalability. You you think the industry is
really forgetting about decentralization?
Yeah, yeah. I mean, yeah.
I mean, I don't, I not sound like a Debbie Downer, but like,
for real, I think like people just don't they don't value it
as much as they care about scalability, right?
If you're looking at, you know, centralized L twos, if you're
(14:49):
looking at every single stable gun that's coming out, right, is
is centralized in nature, eitherbecause of their collateral or
because of the team's administrative power over, you
know, the protocols. You know, we're no longer
counting how many multi 6 signers there are on these multi
6. We're no longer worrying about
(15:09):
time locks, right? The idea of fully open sourcing
your code base is no longer the standard.
So just as like a review of where we are as an industry,
it's just factual to say that decentralization for for D5
protocols in general is not at all at the top of mind do.
(15:31):
You think that's a positive development?
And and if that's the case, thenwhy do we still, why would we
still call it D5? Like what is the distinction of
like, I mean, is it just like, is it just fintech with better
tech? Is that like the direction we're
going in or like is there still some viability in the D part of
(15:53):
Phi? Well, I think blockchain is not
just decentralization, right? There are many things about the
blockchain that are good for finance.
Composability is one that reallycomes to mind, right?
Like a lot of people talk about rebuilding SWIFT, we already
have it. You know, literally any chain in
the world with tokens can just, can be Swift, right?
(16:17):
It's just send and receive between wallets and there you
go, it's done. And so, you know, that's very
powerful. That's that's that's
interesting. I've I've never.
I, I don't think it's negative. I I just think it's like it's
part of any industry, right? You know, like right now, AI
probably is in a like a moment of high romanticization of what
(16:40):
you can do with with AI, whereascrypto, we've definitely gone
through this solution then and now we're looking at mass
adoption. And when you look at mass
adoption, you have to get rid ofthe things that most people
don't care about. You have to focus on the things
that most people care about. And for us, you know, boomers in
crypto that, you know, maybe we cared a lot about Max
(17:01):
decentralization in the past, You know, if we want the world
to use crypto, maybe we need to think about what everybody else
cares about too. What do you think is like if
there's one thing that the industry needs to kind of
maintain as a core principle when interacting with the
(17:25):
Triadfi world or like traditional finance, kind of
regulated world? Like what is, what is the one
property or the one thing that like, we can't deviate from in
order to remain successful and like, have a future where you
know, this whole project has notbeen in vain.
Well, part of us maturing as a military mean that means that
(17:46):
we're no longer sort of unified in values.
We're definitely in a multi polar world within crypto where
different groups have different values, right?
Things that they think we shouldkeep.
Personally, the group that I find myself in is that of
(18:06):
safety. I really think that the
transparency of smart contracts,the immutability of smart
contracts can provide a lot of safety.
And if we can maintain that, then we can make finance better
than it is today. I want to kind of come back to
what you said earlier where decentralization is less of a
(18:30):
is, is a value that is like sortof not, not as coveted as it was
perhaps previously, right that we're moving more towards or
moving away from from the decentralized aspect of crypto.
Do you think that like is it isn't, isn't it true that the
(18:50):
infrastructure layers need to remain decentralized?
Otherwise they just kind of likethey're just databases, right?
And I like this entire project has been kind of useless.
We could have just built new data.
We could just like done this on databases.
Is, is there some amount of value, right?
Like is it? Is it like that maybe the higher
layers of the stack are less decentralized, but the lower
(19:11):
ends of the stack are still I'm?Talking about, I'm talking about
like D5, I'm talking about stable coins, right?
Stable coins. D5 people don't care about
decentralization as much as theyused to for base layers.
They do and, and and the writingsaw on the wall who has the most
stable coins in crypto? It's Ethereum and nobody comes
close, right? We've seen so many people try to
(19:32):
make their own stable coin chains for many years.
There have been many and they really haven't kicked off,
right? The L twos don't have a lot of
stable coins at all. And, and it's because at scale,
money's not dumb, right? At scale, people care about
principal protection. And, and so that's why they're
on Ethereum, using the applications on Ethereum.
And some of those obligations might be, you know, less central
(19:55):
decentralized that we would wantthem to be.
But at least as you said, peoplecare about the base
infrastructure. Being decentralized.
Well, I think we'll come back tothis maybe a little bit later,
but let's talk about CAPS design.
And so you know broadly speakingthere's different participants
(20:15):
within the protocol. We have also sort of like
different technical modules, different smart contract modules
and and CAP utilizes restaking to ensure its deposits.
So give us a high level and maybe we can kind of drill down
into the different parts. Yeah.
So CAP is a stable coin protocolto generate yield for users in a
(20:40):
way that we can, one, ensure thepeg at all times and two, we can
protect users from the activities that must be done to
generate yield, right? And the way that we do that is
by two products. One is CUSD, which is a digital
dollar. And this digital dollar, you can
mint it with other stable coins like USDC or money market funds
(21:01):
like Benji and Biddle. What's great about that is 1,
you don't need liquidity, right?Because at any point you can
just redeem 100% of the market cap, no slippage and and then
and you're good. So you don't need to spend money
on Curve or or any sort of Amms,which is quite nice for us.
And it is also means for users they can leave whenever they
(21:22):
want, right? They don't need to be worried
about about the peg. The other product that we build
is, you know, the staked versionof it, which generates yield.
And this yield comes from two sources, primarily at the
beginning from the base yield ofeach asset.
So for example, all the money market funds are in the US
Treasuries yield and then the stable coins which are not
(21:44):
allowed to share the yield because of Genius Act.
We use some different strategy for each of them depending on
their circumstance. For example, USDC, we put it on
Ave. because it's an over collateralized lending market.
But that's that's not the exciting part.
The exciting part is the other kind of source of yield and
(22:05):
we've built this sort of allocation engine where third
parties like regulated financialinstitutions or D5 protocols can
compete with each other to generate yield for our protocol.
And the way they do that is thatthey provision loans from our
reserve and pay some sort of feeright in exchange for the loan
(22:25):
and they go off and they all execute their own strategy.
So there could be 1010 thousand of these kind of yield
generators competing at one timeto generate yield on the stable
coin. But we don't trust any of them.
And so before they can come to our protocol and generate yield,
they need to convince a restakeron symbiotic or eigen layer to
(22:45):
vouch for them with their cryptocurrencies.
And if the yield generator were to default and not pay back, we
can slash whoever vouched for them.
Yeah, I'll stop there. There's a lot you can go into,
but that's the high level. Yeah, that's that's great.
Thanks. So, so there's two products.
There's the CUSD which is the non yield yield bearing stable
(23:07):
coin and then you have STCUSD which which generates yield like
why would someone hold CUSD overUSDC?
What's what's finally the difference?
What's all about integrations right in, in a lot of
integrations in D5 like perp Texas or you know, pools
etcetera, you can't use yield bearing assets, you need a
(23:29):
pegged asset. And so if you look at some of
the larger yield bearing stable coins today that have a staking
kind of module, they all have lower than 70% staking rates and
that's because of these integrations.
Yeah. OK.
That makes sense. And so like so if, if we just
(23:51):
kind of recap here, the, the user deposits some, some
collateral and in this case it'sit's a stable point.
So USDC or USDT that goes into the protocol and then you have
the operators that are hedge funds, primarily institutions
(24:16):
that will use those those coins to go and generate yield.
So they're implementing their own strategy.
And some of those, some of thosemight be implementing like super
high risk strategies, others maybe implementing like lower risk
strategies, but there's like a basket of strategies there.
And then we have RE stakers thatare acting essentially as the
backstop as the insurance fund for against those USD CS well.
(24:41):
I would say insurance fund is a very passive term.
I would say they're sort of the decision makers.
So instead of having a Dow say, you know, we're going to put our
money here, we're going to put our money there.
Reese takers say, you know, Susquehanna, you get to generate
yield for cap on $10 million or Amber Group, you get to
delegate, you get to borrow 20 million to generate yield.
(25:04):
And so they decide who gets to make yield.
But in order to do that, they need to vouch for them.
And so it's a bilateral relationship.
It's not like ISRE Staker. I vouch for Wintermute and now
with Amber group defaults, I'm getting slashed.
I I'm only exposed to whoever I vouch for.
And why is that important? Because these yield generators,
(25:25):
what do they want to do? It's not their money.
So they want to generate as muchyield as possible so that their
spread is very high. Restakers, what do they want?
Well, they want yield, right? Because Bitcoin and ES don't
make yield compared to the dollar.
It's not even close. You know, the the
cryptocurrencies are not productive assets like the
dollar. And so they come to restaking
land to get some sort of yield. They don't want to get slashed
(25:48):
above all else. And so they're never going to
underwrite extremely risky strategies or extremely risky
third parties. And so that kind of balances out
the system. I don't know if you're familiar
with this protocol. I mean, it's it's still like in
the early phases of developments.
It's not released yet. They have like a website but
(26:09):
mezzanine where they have like kind of risk trenching.
Yeah, the trenching stuff, yeah,I mean there's.
Yeah. So would it make sense to have
like risk trenching here so where you know, you might have
like low risk, right, where you're getting kind of like the
Treasury yield and then maybe some higher risk and then like
some very high risk. And then that all those
different sort of yield sources are are being combined to
(26:33):
provide the yield to the end user.
But there is some amount of likekind of backstop where the
higher tranches are protecting the lower tranches.
Yeah. So here's the thing.
I don't think retail has the mind to be making these
decisions. And so we abstracted away,
right? You're right to say, you know,
we have all these strategies, but the dollar holders don't get
(26:56):
any exposure to the risk, right?If you're holding stakes to USD,
you are not exposed to the risk of the strategies.
Who is exposed is the risk takers, right?
And so it doesn't really matter.You don't have to tranche it
because what would you tranche? There's no risk to tranche.
The tranching is on the other side where risk takers can
choose like, hey, I am super risk averse.
(27:17):
I'm ether Phi, so I'm only goingto delegate to Bank of America,
just to give you a random example or maybe restaker XYZ
and I want to get as much yield as possible.
Let me delegate to a crypto native market maker, right?
And so you'll you'll have these different tranching on the other
side, and it's important to keepit on the, you know, protocol or
(27:37):
B to B side, all this tranching because there's a lot of
complexities, right? When ether fi delegates to
institution, they're not just trusting them, right?
They're signing some legal paperwork on the side to arrange
what will happen if they get slash etcetera, etcetera.
Who is in a good position to sueBank of America, right?
(27:57):
It's not some, you know, small farmer at all, right?
It's these big projects that have raised millions of dollars.
They're in a good position to sue.
And so we're kind of shifting a lot of the burden of these
decisions and management to the restakers.
Obviously not for nothing, right?
They get more yield than Ethan Bacon have ever seen.
(28:20):
OK, right. So the so the restakers have
legal agreements with the operators, the market makers,
the crypto, the crypto private equity funds, etcetera.
And those agreements layout the types of strategies will have
kind of like risk management provisions etcetera.
(28:41):
And the restakers are on the hook for those operators doing
their job right. Exactly.
And the operators are on the hook to the restakers.
So you could put it like this. The stable coin holders are
protected by smart contracts. They don't need to trust
anybody. The restakers are protected by
the law and so then they should only delegate to good
(29:05):
counterparties, right? Susquehanna may lose money
sometimes, like everybody can lose money, but they are are a
good counterparty, right? If they owe you money, they'll
pay you back, right? And so that reduces the risk for
the risk takers. So what what constitutes a
slashing event then? And how are like, what's the
(29:26):
flow of capital for end users tobe made whole if like one of the
operators, you know, loses all the money, you know, like.
Yeah. So we are a completely on chain
platform, everything smart contracts.
And so we don't really know if the borrower lost the money or
not, right. What do we know?
We know how much money they borrowed and we know how much
(29:48):
money they've been delegated. And so we track the collateral
to debt ratio. So how much delegated value is
compared to the amount of loans and if that ratio falls below a
certain threshold, then that's when we liquidate sort of how
over collateralized lending markets track loads like avian
morpho. Right.
(30:09):
OK. So I guess one way to look at it
would be that it's under collateralized lending where the
trenching happens between the operator and the restaker and
(30:29):
it's kind of like abstracted away from the end user.
Sort of, yeah. I mean it's like it's a three
set of marketplace which allows for, you know, three different
interpretations of the model, right, depending on where you're
looking at it from. From the point of view of the
Stablecon holder, it's a miracle, right?
You're having an over collateralized lending market
(30:49):
that's giving you three times the rate of love it, right.
And you're like, what's what's going on, right?
And it's because you have this coincidence of wants and needs
of these three different partiescoming together.
Yeah, I love a good cow. Yeah.
Coincidence of wants. Yeah, cool.
OK. So and so who are the operators?
(31:11):
Like practically speaking, who are you working with and like
what kind of strategies are theyimplementing?
I mean, if you, if you, I guess,I guess like you don't know
unless you're talking to them, which I suspect you are.
We know. We know because they tell us
things, which is nice. So we launched a month ago and
for the first two weeks we focuspurely on setting up the
reserve, right, bootstrapping itwith USDC.
(31:33):
We got just over 100 million in organic user deposits from in
USDC and recently we started onboarding the restakers and the
operators. Now in terms of the operators,
there's ample demand for liquidity right now.
There is, there's a lot of market volatility.
There are a lot of opportunitiesto make yield.
(31:54):
And so demand for for loans is pretty high.
We have operators like Amber Group or like GSR who are, you
know, blue chip market makers incrypto.
We also have Susquehanna, IMC and Flow traders, which are
their counterparties in the Trackfi world.
You know, these are huge enterprises, over 200 billion in
(32:17):
AUM. So it's not just some random,
you know, companies that we've put together.
And then finally, we also have some define native names, right,
like Gauntlet soon to have RE-7 as well.
So there's definitely a mix and that's the that's the goal,
right? Because right now you have all
these stable coins that are justmaking yields from Treasuries or
(32:40):
maybe basis trade. I can come to you and say, well,
we're going to make yields from anything that the dollar can
touch because we can have a theoretically unlimited amount
of operators to the extent that restakers are willing to on the
right, a theoretically unlimitedamount of operators.
OK. So this is kind of like where
that the kind of like insured orcovered loan component comes in.
(33:08):
We're like the restakers are covering the.
Loan we we look at it as guarantees.
Right, right. OK.
Has there been a slashing event?I mean, I guess you like you
launched a month ago, but so I suspect not.
No. And you know, we're we're going
through great pains to make surethat there's no slashing events
within at least the first year because that that would be bad,
(33:28):
right? You don't want people get
spooked for all sorts of reasonsin crypto.
And so at the beginning we are whitelisting who gets to borrow.
So even though the final say is actually at the restaker level,
cap as a team is can can block certain people from borrowing
even if they have delegations. And this is because the last
(33:48):
thing we want is for somebody tostart up a risk taking protocol
and delegate to a meme coin trader and lose all their money
and get slashed. Because then all the other risk
takers are going to look really bad and their users are going to
start getting scared like, oh, are we next?
Even though, you know, meme cointrader has nothing to do with
Susquehanna. It's completely different risk
profile. So which restaking protocols are
(34:12):
you integrated with? Right now every single major
restaking protocol is either delegating or is in the process
of delegating to CAP. Some of them are faster than
others. We're very happy with you know
Renzo as our first delegator on symbiotic and concrete.
(34:32):
The next one, but then sticks toa hyper rhythm.
I've already delegated this weekas well, so very happy with them
and obviously excited to work with all the other ones that are
on the way. Yeah, I, I know you guys are
working with symbiotic, but likewhat's what's unique about
symbiotic that kind of like makes this all work as opposed
to say like other protocols likeEigenleier?
(34:55):
You have to be political here. You know, they're both great
projects with great teams and weare integrating both eventually.
Right now we're in audit for forEigen layer, but we started with
symbiotic. We actually finished the code in
Feb and we've audited five timeswith like trailer bits, spear
bit Recon, Sherlock, a bunch of top tier auditors.
(35:19):
What do I like about Symbiotic? Well, it works right?
All the all the kind of featuresthat we needed are were live
when we needed them. And so we were able to launch
there. The team is very, you know, high
quality, they know how to ship. And so everything kind of worked
the way we wanted it to work. And then finally, obviously the
(35:41):
modularity is actually pretty interesting because obviously
CAP is not the original intendeduse of restaking right?
It's not the original intended use case of of share security as
a whole, one could argue is one of the best in my opinion.
But we can go into what I think about shared security later.
(36:02):
But yeah, that's that's why I like Symbiotic.
Yeah. What, what do you think about
shared security? Like what are the really valid
use cases for shared security other than like this guarantee
this, this loan guarantee, whichI, I agree.
I think it's like a really cool implementation and like use case
for. Yeah.
I mean, I, I think it's, it's interesting that, you know, when
(36:23):
I read Eigen layers white paper,I saw Universal marketplace of
Trust, which I interpreted as, you know, you have people with
money, which is ETH, right? And they have nothing to do with
it because it doesn't have as many skills as the dollar.
And then you have people with skills, right?
And there's some sort of trust economy where the people with
(36:46):
money can guarantee the actions of the people with skills.
But then in practice, everybody was starting to build these POS
like networks where they were just validating off chain data.
And I thought to myself, why arewe limiting this technology to
(37:06):
just validating off chain data? If you think about it,
validating data is not a very high margin business, right?
So can you really pay the high cost of shared security just to
validate data? And the answer is no, right?
Right now these validation systems are generating $0.00 in
(37:28):
fee, not a cent, not ten cents, they're generating 0.
And that's because you know you have to constantly validate a
state, but you don't constantly generate fees.
And the only way to make up for that imbalance in the accounting
is to issue incentives. And that's why Ethereum has
inflation sometimes. That's why, you know, Bitcoin
(37:49):
gives the token right at the whole point of Eigen layer and
symbiotic is that you don't needto have another token and you
just reuse the value of these tokens to have real value.
But if you if you don't generateyield, then how do you pay
right? Anyways, so I, I was not very
happy with most folks focusing on validating data and I thought
(38:11):
that we should really expand theuse case of these guarantees to
any sort of activity. It's just so happened that I'm
using it to allocate funds of the stable coins collateral to
generate yield, but it really can be anything.
You know earlier when we were talking about kind of like
decentralization and whether or not you like it, you know it
(38:33):
continues to be relevant. Do you think that this
particular use case for restaking that is using a
decentralized validator set and the, the assets that gain value
due to that decentralization to secure or act as kind of like on
chain insurance? Do you think that that's a use
(38:55):
case that can grow and can kind of scale and become, you know,
the, the reasonable debts for, for restaking 'cause like I, I
agree this whole like data validation like doesn't seem
like a really good business longterm.
Yeah, I I think guarantees in general are definitely the way
that restaking will survive and will thrive.
(39:18):
If you look at a lot of you know, asset managers, Butch
bracket banks, one thing that they really like about crypto is
obviously the composability the other party smart contracts,
right, because a big problem in Tri Fi is having to trust other
people. Trust is the biggest issue with
finance. And so smart contracts can
(39:39):
alleviate that and organization systems like symbiotic can
alleviate that. And so I think there's ample PMF
for it. And that's one like the, the
demand side, on the supply side in terms of like Ethan and and
Bitcoin, these assets have a lotof value.
And I don't think we're paying taxes in Bitcoin anytime soon.
(40:00):
And so there's not going to be alot of use cases for Bitcoin
compared to the dollar. So this use case of re staking
or using your assets to delegateto other people I I think it
will have a lot of PMF for a long time.
So we touched on this a little bit, but you mentioned the
Genius act and you know that some Stable Point projects were
(40:22):
kind of like Genius I compliant and others probably won't be.
What do you think will be the dividing line there?
And you know, for those projectsthat are Genius I compliant, is
it mostly than just kind of likehaving access to the US
traditional financial system andmaybe that's the dividing line
between what we consider to be kind of like the D Gen. projects
(40:45):
and those that are not D Gen. Yeah.
What's your what's your kind of like long term take on that?
Yeah, I mean, I think we definitely live in a multi polar
world outside of crypto as well.So there's is not the case that,
you know, the US says this is what we need to do.
When everybody does it, there will be folks that are not
compliant and they're just, maybe, you know, putting their
(41:07):
foundations in the caveman and living in another country and
and kind of like just not payingattention to American loss at
all, you know, changing their UIS to block Americans so they
can say, you know, we don't haveto follow the laws.
Cap is our first round was with Susquehanna and our last round
was with Franklin Templeton to Great American institutions.
(41:27):
There's no hiding from US regulations, right?
And we're also American. And so the way we're going is
the way of compliance, right? And if regulators have a problem
with us, we're we're prepared toto change things, right?
And I think if you want to get big, if, if you want to be a, a
large financial institution in the future from the landscape
(41:49):
of, of crypto, complying with American regulations is key
because that's where all of the world's money lives.
Yeah, I agree. I think like this change, this
change in administration really has opened up the gates for a
lot of capital to come into the space.
(42:09):
And I, I, I think like a lot of people see it as like, oh, like
this legitimizes crypto in the US, etcetera.
But the offshoot of that is thatthere's just like potentially
hundreds of billions of dollars that can flow into the
ecosystem. And, and that's not going to
happen in probably not in placeslike Europe where the political
(42:30):
discourse is very different. Although I think there has been
some, there has been some departure a little bit like at
the E level from the CBDC's now that they've seen kind of like
what the Genius Act includes andwhat it can mean for U.S.
companies. There is a little bit, at least
I've, I've, I've kind of seen onTwitter some backtracking to, to
(42:54):
something that looks more like the US system.
Yeah. What, what are your thoughts on
the kind of like, yeah, you mentioned multipolarity.
Where are you think things go from here?
If we look at like, you know, the big polls, right?
So like US, Europe, bricks and China.
Well, I'm, I'm not worried aboutEurope too much from a capital
(43:16):
markets perspective. Most of these large institutions
that are involved in crypto within Europe are invested in
US. So IMC flow traders, edge
capital flow desk, they're all not only investors in cap, but
they're also operators, meaning they are prepared to borrow and
generate yield for a stable con protocol.
(43:37):
And, and so that's, that's all you need to see, right?
The, the people that need to be involved are involved.
And we'll have to see what regulators do about that.
Obviously there's nothing to sayabout South America, right?
Because they're having fun. They use crypto.
They don't care about, you know,the tokens, they, they've been
using stable coins for a while and they'll continue to use
stable coins in the future because there are wonderful use
(44:00):
case down there. Our, our job is going to be to
try to tap into as many of theseregions as possible.
And the way that we're doing that is by accepting collateral
assets that are integrated in each area.
So, you know, America will have the stable coins that are
popular in America. Europe will have, you know, the
money market funds and the stable coins are, are popular
(44:22):
there. Our job for CSV set all of that
as collateral. So if you want to enter our
yield system from Singapore, youcan do that maybe through UOB or
if you want to enter our system from Germany, maybe you can do
it via Deutsche Bank's, you know, money market fund.
And so no matter where you are, CAP will be able to connect via
(44:44):
these kind of integrations with the money market funds and with
the stable coins. Yeah, I think my, my kind of
high level view on the Europe USsituation set the US very early.
I mean, like I think US institutions maybe maybe the
government, like the previous administration didn't see it
this way. But at least like institutions
(45:05):
saw crypto and stable coins as a, as like a, a technology that
could improve composability, improve reliability and, and,
and security of the system as like something that needed to be
adopted by the industry with theadministration kind of giving
(45:28):
that a green light. And it feels like it's, you
know, full steam ahead. I think European banks and
European financial institutions,at least like the most more
traditional ones, are more risk averse.
And I think there's there's likeregulators and policy makers are
kind of sitting in this really uncomfortable position where
(45:53):
pushing stable coins or the advancements of stable coins in
Europe kind of undermines the power of traditional banks.
And probably it will take a really long time for stable
coins to be kind of fully adopted in Europe in the same
way that it, you know, Europe was kind of behind the US in
(46:14):
terms of its adoption of e-commerce.
Any technology in Europe just takes a long time because
institutions have so much political power.
And at the same time, I mean, not that they don't have
political power in the US, but they're very risk averse.
They're very adverse to change. They're very comfortable in
their position. They're not pro innovation.
I mean all all traditional industries are.
True. But I think I, I think in Europe
(46:35):
there's an even stronger sense of wanting to sort of like sit
on your laurels and sit on your established rule like position
as an incumbent, which kind of informs policy.
Yeah, I don't want to. I don't want to say too much
about politics. I might.
(46:55):
Our marketing person is going tobe looking at at this interview
and, you know, pulling their hair out.
So I, I wanted to maybe like, let's, let's just kind of do a
thought experiment here and, youknow, let's kind of overlap
stable coins on the traditional finance system.
So, you know, if, if we look at,if we look at kind of tried
(47:19):
fire, right? Like let's, let's take a country
like France, you know, the central bank, or at least the
European Central Bank like issues EUR flows down to the
French central bank. The the French central bank then
lends those those EUR out to lends out those EUR out to, to
to banks, right regulated banks and and then those banks and
(47:41):
then like issue their own kind of stable coin, right, their own
version of the euro to to depositors, right to like their,
their to their customers. And you know, we have like you
don't, you don't see it as a, asa user of the system, but in
reality, you, you have like a association that had Euro coin
(48:05):
and you have like an LCL stablecoin.
And like, you know, for Americans, these bank names are
not going to mean anything. But like you have the banks,
right, like that are issuing their own version of the euro.
And that's kind of abstracted away, but it works because you
have this really good interoperability between all of
these systems because we have like kind of nationwide payment
systems. And then and there's the
(48:26):
backstop and it's underwritten by the central bank, which
itself is underwritten by like trusted institutions and their
ability to lock people up, right.
In crypto, it's a little bit more complicated because we
don't have this kind of like institutional backstop.
And the interoperability is, is also there's, there's sort of
(48:48):
complexity in the interoperability aspect as well.
We're like, you know, your CUSD is not as fluently interoperable
with any other stable coin because the risks are kind of
like different. Do you, do you kind of like see
this parallel as kind of being relevant?
And where, how do we get to a point where anybody can just be
(49:09):
using any stable coin and they're they're not kind of
encumbered by this, this problemthat like the different risk
profiles of the protocol introduces where these different
coins are not incorporable? Yeah, I think it's a matter of
like the design of the mechanism, right.
Cap works with every single on ramp or off ramp or every single
(49:33):
payment provider, you know, every single bridge.
Why? Because we're instantly
redeemable for USDC, right. And you can within a reserve,
you can stop within all the the tokens right between the money
market funds, between the different stable coins.
So, you know, you, you tell me there's an issue of
interoperability, certainly not a cap, right?
(49:54):
Because that's how we've designed the system.
And you'll see that happen with larger companies like Coinbase,
for example, you know, they takePYUSD deposits as USD just like
they take USDC. And so it's just a matter of who
trusts who. Cap trust Franklin Templeton and
also they trust Black Rock. And so now we can act as like a
(50:15):
bridge between them. Coinbase trusts Circle and they
trust PayPal. So now they can act as they can
act as a bridge between them. And so as long as you kind of
grow this pie of trust, you can start seeing this these
connections. And it's very similar to the
banking system where overseas banks can connect to each other
via, you know, this wire system that we have in try five with
(50:38):
the added benefit of, of how elegant crypto is right for
organizing token transfers. But it's not a very difficult
problem solve. I I just, I just think we need
is. If you have a good design, then
interpretability is pretty easy.I want to like kind of zoom into
this trust aspect and this kind of circles back to what we were
(51:00):
talking about earlier. Like, you know, a lot of people
in crypto got into crypto because of kind of this
rejection of the Fiat monetary system.
So if you talk to early Bitcoiners and like early
Ethereum folks like this, this, this, this idea that Fiat, which
actually the etymology of that word kind of comes from the word
trust, right? You it's a monetary system where
(51:21):
you where you trust others. Crypto kind of felt like it was
a a rejection of that. I mean, it didn't feel like it
was a rejection of that, of that, of that idea.
And you know, hearing you speak now you're, it sounds like
you're talking like we're going back into kind of a trust based
system, but with one kind of 1 distinction.
(51:46):
Is that because risk is now kindof spread across different RE
stakers, different kind of fundsetcetera?
In the case of CAP, it creates amore opaque central kind of like
authority to who is responsible,right.
So it actually makes things morecomplicated for the end user who
(52:12):
has like suffered some damages because of misconduct.
Right. Well, it depends on how you do
it. Like, for example, like with us,
you know, we take Benji, we takeUCC as collateral and you can
track and see, you know, these are the collaterals we take.
It gets more complicated if you know, you're backed by Eve, but
then you also put money in Ave. and then who knows where have is
(52:33):
putting that money and, and, andyou have like these more
complicated systems. And there are such stable coins
where you don't really know where the money is being put.
And so I agree with you that thethe question of, OK, I lost
money, who whose fault was it will become more complicated
when you have these stable coinsthat are kind of acting like
hedge funds and putting their money in all sorts of places.
(52:53):
But it's certainly not the case of cap because we're all defied
PTSD, you know, survivors. And we've built CAP in a way
that you're able to track what you've just described, right?
Who? Who is responsible for
maintaining the quality of the collateral?
I guess it's, it's, it's not a reflection on cap, but just kind
(53:15):
of like as the for the industry as a whole.
So where the risk is more spread, perhaps it means that.
The chances of something happening.
The yeah, the chance of something happening is is
reduced, but you know. It's increased, but it's like
the the the penalty of it happening is lower.
(53:36):
The sorry the the the penalty, the penalty may be less right,
but what but also like the crypto world operates in the
space where you know, there is alot of opacity around like where
operators are situated. And certainly like I think
regulation kind of kind of kind of like help with that where you
know, there may be like clear paths to litigation when that
(53:57):
happens, but. Yeah, I mean, look at what
happened to multi chain the bridge.
They got hacked by the Chinese government or like a local
government and all the money gotstolen.
So Binance froze it, Circle froze it, Tether froze it.
They haven't returned the penny to users.
And the Phantom Foundation has been suing Binance and all these
(54:17):
teams to give the money back andthey've refused to do it.
And and they haven't been able to get the money back because,
you know, that's just how regulations are.
And so you're right, I see, and that's kind of why we built cap
the way we built it, because I really just don't think that
users are in a place to get any sort of recourse.
If your favorite yield bearing stable coin that the pegs,
(54:39):
you're going to be suing some random K man entity right with
you know, a director who is the same director for every other K
man entity in crypto and you're going to find yourself without a
nickel of recourse. Yeah.
I think, I think this is where like regulation will play a huge
role is where these entities need to be kind of like local in
(55:03):
their jurisdictions, where they're situated and where they
become highly sort of entangled with the traditional finance
system, central banks, etcetera.But I think we're like really
long way until that happens. Yeah, that's.
Fine. You have to choose, like do you
want to trust the government or do you want to start trust smart
(55:23):
contracts? And I think any project that's
in the middle where you're not trusting smart contracts, you're
not trusting the government, you're actually trusting some
random developer team. I am very scared of those
projects because I know I can trust the government somehow a
little bit, and I know I can definitely trust smart
contracts. I know darn well I can't trust
random developer teams. Yeah, well, some, some, some
(55:46):
people would definitely not agree with you that you can
trust the government a little bit, but that's a conversation
for another. I trust like regulators more
than I trust a random, you know,startup in general.
Yeah, yeah, yeah. I I think some people might not
agree with that. But yeah, obviously, yeah.
I guess like where the kind of proliferation of stable coins
(56:11):
does Excel is offering these different trust assumptions.
So you have like stable coins that are fully centralized where
you don't have to trust anyone. And then you have stable coins
that are fully centralized and you have like sort of things in
between where you're relying on centralized stable coin
deposits, but those deposits arebacked by a decentralized asset
(56:32):
in the case of cap, right? So like you're, you're backing
the, you're backing the centralized stable coin deposit
in the form of USDCUSDT with secured by decentralized asset.
And that might be like the the middle ground that we need to
scale but then also remain decentralized.
How could I disagree with such abeautiful explanation?
(56:52):
Well. Benjamin, thanks for coming on.
Anything you want to share before we wrap up?
Nothing. I, I, I actually, I would say
that, you know. A lot of people have said
recently that the stable coin space is extremely crowded and
there are too many stable coins,but I think they're wrong.
I, I think they're not that manystable coins that are
(57:14):
differentiated in crypto. And so if you are, you know, a
founder that's trying to make a new stable coin, make it, you
know, I, I want there to be 100 new stable coins, 1000 new
stable coins, because the more innovation that happens, the
more liquidity we're going to get on chain.
And that will benefit everybody because it's much easier to
convince somebody that's using another stable coins to use
(57:36):
yours than it is for you to convince somebody that's has
money in like Bank of America touse your stable coin.
And so, yeah, I, I just I will have a call to, you know, not be
discouraged by, you know, how many stable coins there are in
crypto. Cool.
Well, thanks for coming on. Enjoy the rest of your.
Time in China and good luck withthis.
Thank you.
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