Episode Transcript
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Speaker 1 (00:00):
Let's dive into Polygon today and some of the ecosystem
that is surrounding that. Part of that will be some
interesting stuff on a project called Katana. My name is
Paul Barren. Welcome back into the show. Let's get started.
I do want to thank our sponsor and that is Tangentum.
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custody journey. One thing we have been watching on Polygon,
(00:41):
and as you guys know, one of our picks right
now for our all coin portfolio is the fact that
we are starting to see a new potential challenge to
its market cap all time high for stable coins, and
I think this is something that is showcasing on some
of the projects around it, including a project called Katana.
Speaker 2 (01:02):
Now Katana you've seen and.
Speaker 1 (01:03):
We've talked a little bit about this in previous shows,
but up into the right there, guys in terms of TVL,
so it's continuing to grow, getting.
Speaker 2 (01:11):
A little bit more popular.
Speaker 1 (01:12):
So we thought, hey, let's reach out to the project,
get them in on the show to talk a little
bit more about it and really kind of learn what
is going on.
Speaker 2 (01:20):
One of the things though, that you.
Speaker 1 (01:22):
Guys will notice is the yields over on Katana, and
this is something that we are starting to see on
these yield vaults that are starting to open up, and
if you look at some of these, you're going to
see some pretty big projects here obviously eth right there,
but of course right there USDC. And one thing to
be aware of just when you are doing this is
not forty one percent on USCC. That's actually a variety
(01:45):
of different yields that play into that. Part of that
is the eight yield, the Katana yield, and then also
some of the unlock rewards on the kat token. This
kat token, which we wanted to learn a little bit
more about. So I wanted to bring in the business
development lead over at Katana. Welcome into the show, justin
how are you hello?
Speaker 3 (02:04):
Hello? GM glad to be here.
Speaker 1 (02:06):
Yeah, So we're gonna learn a little bit more about
Katana in general. First of all, explain Katana in general
and why Polygon needs.
Speaker 3 (02:16):
It when you're looking at Polygon there there's been this
initiative over at at Polygon Labs called the AG layer,
which is an infrastructure type product that connects various different
layer twos, and Katana has been incubated by two parties,
that being Polygon Labs and GSR and is connected to
(02:40):
the AG layer. So that's kind of the connection there, okay.
And what Katana aims to be is, you know, a
DeFi first, a DeFi focused layer two that's connected to
the AG layer. So there's benefits there for all other
types of like AG layer connected chains. But the way
(03:01):
it really came about was there's there's quite a few
people over at Polygon and some some partners on DeFi
projects that we are working with, where we were starting
to see this trend of this almost like verticalization or
sector specific type of layer two blockchain that was being
being built. Right, You've got gaming chains, payments, change r
(03:24):
w A chains, and you started to see some DeFi
focused change spin up, and so you know that that
group of individuals I talked about, we all kind of
got together as like heavy DeFi users and we said,
what what do we really want in a DeFi chain
as users and developers of DeFi And it really came
(03:44):
down to two main things, and that is a real
sustainable yield and deep liquidity. Those are those are the
main two things, and what we wanted to do was
try to reverse engineer the architecture of this blockchain to
really maximize for those two things. And throughout that we
(04:05):
notice some sort of inefficiencies that we are seeing in
the layer two space in general and DeFi in general,
and we started to develop some mechanisms within the architecture
of Katana to really focus on, you know, how do
we minimize the value extraction that we're seeing from these
DeFi ecosystems and redirect that value extraction to benefit the
(04:30):
users and developers who are building and using Katana. And
then that's where we developed the Katana DeFi flywheel. There's
some really interesting mechanisms to go into that, which we
can talk about a little bit more, but when it
really comes down to it. I think we're we're starting
to see a trend where projects are looking for ways
(04:50):
to give value back to their users, and we feel
like we've developed a very unique way in doing so.
Speaker 1 (04:58):
Well, you know, part of it is in the reward
architecture that you guys have built. Additionally, the Katana ecosystem,
there are some companies in here you guys will recognize.
One of course is Morpho. They've been in the lending
borrowing space. You've got Sushi Swap in there. You're in
Finance also tied into this, even Kensey, and then of
course you've got a lot more coming into the ecosystem.
(05:22):
Explain first of all the benefits that that kind of
brings to Katana in general. And do you think that
this is going to get to the point where we
just see hundreds or multi hundreds of project partnerships. What
are the benefits here versus just having a few.
Speaker 3 (05:40):
Well, that's a good question, and it kind of touches
on one of our philosophies, which is our core app
philosophy or a core app thesis. So you mentioned Morpho
and Sushi there. Those are a part of a group
of apps and canse a group of apps that we
call our core apps, and you know, we are up
the opinion on Katana that DeFi has matured to a
(06:04):
point where it can be considered as core architecture in
the designing of a blockchain. And so when it comes
to lending and borrowing protocols, for us, it's it's just morpho, right,
and for decentralized exchanges it's just sushi. Now, Katana is
still open source and permissionless, and anyone can deploy anything
(06:25):
that they want on the chain and we encourage that.
But when it comes to business development, engineering, marketing, and
even like Flywheel incentive support, those are going to be
channeled into Morpho in sushi. And what that does the
benefits there is it takes away a lot of the
(06:47):
guesswork for users on where can I get the best
trade for my assets? Well, Katana, it's sushi, That's what
it is. Where can I find the deepest liquidity for
a loan that I want to take out on Morpho? Well,
there's no question, it's it's Morpho or a lining bar protocols,
(07:07):
it's Morpho. So it eliminates a guesswork and it also
concentrates that liquidity into those apps, which provides a better
user experience from an execution environment, and you know, like
I said, they don't have to guess on where those
those rewards are coming to. We also have this concept
called chain owned liquidity where Katana, through like sequencer fees
(07:32):
that are generated in other revenue generating mechanisms, we actually
manage some liquidity that is put into Morpho and Sushi directly.
And the reason we do that is to provide some
sort of like bear market resilience within the ecosystem in
those protocols where you just you know that if there's
(07:52):
chain on liquidity in these pools, it's not going to
go away when the bear market hits, So it gives
some reassurances there as well.
Speaker 2 (08:00):
Well.
Speaker 1 (08:01):
I think the thing we're starting to see is the
explosion that we've seen in just a lot of these
vault kind of oriented projects that are out there, and
most of them, to your point is there are very
chains is specific to a certain extent. Speaking about that,
a USD on Katana, why are you guys boosting this
right now? Explain a little bit more about a us D,
(08:21):
what what it means to the AG layer, et cetera.
Speaker 3 (08:25):
Yeah, that's a that's a really good, really good question there.
And you know I was talking about bear market resilience
that we have with chain owned liquidity. We also have
this with AGRA in a us D as well. There's
other benefits as well, but I'll talk about that first.
So a U s D is similar to circles USDC
(08:46):
in Tether's us D T. It's backed by off chain
US treasuries and those US treasuries earned yield. The question
is the difference there is where does that yield go
once it's generated. So with with Tether and Circle, that
goes to teather In circle, right with in a U
(09:06):
s D in coin base, Yeah, they're very very close
relationship with circle. With a goredon a USD, that yield
gets routed to the Katana Foundation, and the Katana Foundation
then uses that yield that's generated from the T bills
to boost the yield in a USD pools. So whether
that's sushi pools or morpho lining and borrowing markets morpho vaults,
(09:33):
you will get a greater yield than you would have
otherwise just because that that yield generated from T bills
is being redirected to those markets. And for the bear
market resilience point of view. Historically, when when recession where
bear markets hit, the rate on T bills typically tends
(09:55):
to increase.
Speaker 2 (09:57):
And so.
Speaker 3 (09:59):
That that, paired with the chain on liquidity that we have,
really helps to provide that level of bear market resistance
that we're looking for. It gives us more levers to
pull on to make sure that the ecosystem is still
spinning and churning like a healthy DeFi ecosystem during it.
Speaker 2 (10:16):
Yeah, and that is something I think you're right.
Speaker 1 (10:18):
In the bear market, we are going to see people
exercising dropping into projects like this because this is where
some of the better yield factors are going to play out.
And I think this will maybe be a huge onboarding
from money markets if you think about because money markets
right now are winning in traditional finance, maybe this gets
opened up into others. Of course, part of that my
(10:39):
argument will be is you got to make it easier.
I'll talk about that in a second. I was looking
at a tweet you put out here is did you
get some VB tokens some FIBE tokens sent to your wallet?
And this is explaining or kind of talking about this
flywheel that you're mentioning explain to me how this works
and what is the benefit to a user.
Speaker 3 (11:00):
Yeah, this is a great question. I'm glad you pulled
up this tweet. Actually, so I talked about channel liquidity
and how ausd you know, shares that that TPO revenue.
That's all part of the flywheel. But one of the
biggest parts of the flywheel that we have is this
concept called the vault bridge, which is a product that
(11:20):
was created by the agg Layer team, and Katana just
happens to be the first chain that's integrated with this.
And essentially how it works is, you know, when a
user bridge is from Ethereum to a layer two, those
assets just stay in a smart contract on ethereum doing
nothing right every then you're like minted a receipt token
(11:41):
on the layer two that is your claim on the
assets on ethereum when you want to bridge back. We
saw that as a little inefficient right there. There are bridges,
there are layer twos that have bridge smart contracts that
have a billion dollars just sitting there on ethereum. So
we thought, you know what if we could use that
(12:02):
in morpho lending markets on Actherium, Yeah, to generate yield
and similar to how the aus D flow works. The
yield that's generated on vault Bridge on ethereum is periodically
harvested goes to the Katana Foundation, and the Katana Foundation
will then boost the yield on core app pools like
(12:27):
Morpho and Sushi to further encourage activity and to encourage
this concept called productive TVL, which we can talk about
in a little bit and that. So in what we
did there in the tweet that you mentioned was, you know,
first we wanted to to basically shore up some some
(12:47):
of the yield that people were getting in the vaults,
and we decided, you know, let's let's send it to
the wallets directly, you know, retroactively of people that were
in these vaults, because some people have withdrawn from the
vaults and we want to make sure that we didn't
miss them. So we just sent it to the wallets directly,
and you know, that's yield that was generated from the
(13:08):
assets that they put in the bridge, and gotcha should
be the beneficiaries of that. But in the future, instead
of just putting it directly in wallets or directly into
the vaults that you see on the Katana app that
you showed, we'll be using that yield to boost the
incentives for those defive pools, and you can think of
it as like a perpetually funded liquidity mining campaign that
(13:33):
uses real yield like in kind assets as opposed to
just the CAT token.
Speaker 1 (13:39):
Right right, Well, and speaking of the cat token, because
that's something as we start to see yield generation, I think,
what is it ninety days if you hold on an asset,
you're rewarded the cat tokens. Which is interesting because right
now you have the tracking of those yield rewards in
a separate or I guess it's in a separate website
under Turtle, is that right?
Speaker 3 (14:00):
Yeah, Turtle is a really close partner with us while you.
Speaker 2 (14:04):
Were that there, versus just on Katana itself, So.
Speaker 3 (14:07):
It is on both. Uh, it's so basically the Turtle
The vaults that you see on Turtle Club and the
vaults that you see on Katana are actually the same
vaults Underling, and the incentive structure is also the same.
I think like from time to time there can be
some like sort of miscommunication from the APIs on on Yeah,
but in general, the same program, same vaults. You know,
(14:30):
it's just a it's just a way for us to
tap into a different user base and kind of uh,
you know, use different distribution channels to make people more
aware of our of our apps. And they've got a
great b d arm on the Turtle club side as well,
and they've they've been helpful in driving more liquidity and
assets onto the chain as well. Great team, love working.
Speaker 1 (14:49):
Yeah, I'm looking at the ag layer right now. You
can kind of see main that you guys there, but
there's a lot of other integrations. I mean there's okay
X's there's quite a bit of growth here. What other
change should we be excited about.
Speaker 3 (15:06):
Let's see, you got tornoah on there, and there's there's
another place. Uh. Ag layer dot dev is a website
where you can kind of see all of the other
projects that are like in test net or will be
live on ag layer soon. And you know, the way
that we use the ag layer or the way that
aglayer works is actually a big part of our fly
will as well. And you know, we feel like it,
(15:28):
you know, if you're if you're calling the ag layer
ecosystem the polygon ecosystem, we feel like it benefits that
ecosystem at large, because, like I said previously, we're seeing
this trend of you know, not so much general purpose
chains being being launched, but more like vertical or sector
specific chains. If you if you have a gaming chain
and you launched just by yourself, uh, you still need
(15:51):
a decentralized exchange on your gaming chain so users can
swap assets, and so that that takes time away from
that that blockchain that should be focused on gaming, where
they're having to go out and like source the centralized
exchanges to launch. They might have to provide a grant there,
They've got to help them with bootstrapping liquidity, and it
really takes them away from like their core mission yea.
(16:13):
But if they are connected to the AG layer, what
they can do is they can tap into the dex
liquidity on Katana. Their users can and it's not even
going to look or feel like that they are bridging.
You know, a user on this gaming chain just wants
to swap an asset and it just happens, and in
the background, it's actually going through the AGG layer swapping
(16:35):
on sushi and coming back to the gaming chain. So
we see a lot of opportunities in DeFi composability there
where these these ag chains as we call them, can
tap into the yield and liquidity of the Katana ecosystem
that we're building.
Speaker 1 (16:52):
I'm looking at this was a tweet put out by
Oka x X Layer. They're talking about the issue of
gas feed right now, high gas fees still ranking number one,
low returns also and then of course security of terms.
All that played into this, I mean, because this is
the complexity that we are dealing with.
Speaker 2 (17:11):
When you look at that, I mean in terms of
bridging gas.
Speaker 1 (17:16):
Fees, are they do you feel like they're too high
right now for this to be able to really create
mass adoption.
Speaker 3 (17:23):
No, I don't think so. And I think the way
that a lot of Layer two's work is, you know,
the more activity, right, I mean, you're essentially batching transactions
down to maynet ethereum, and so like, the more activity
you have on the chain and the more transactions you
have to go in a specific batch, that gas cost
is spread out throughout all the users. And you know,
(17:43):
just looking back to DeFi summer in twenty twenty one,
where I remember paying hundreds of dollars for gas fees
sometimes on ethereum maynet and we had all this adoption
coming in, but we didn't quite have the infrastructure in
place to handle all of that adoption that we were
hoping for, and now we're in this place where there
are so many layer twos. It's really exciting because you
(18:07):
can you can onboard users into the ethereum ecosystem where
they are going to pay much lower fees on on
the L two side and even on the ethereum side,
because it kind of takes away some of the gas
fees that that would happen on ethereum and putting them
on the L two. So I think, in general, I
think I don't think gas fees are too high right
(18:29):
now on layer twos necessarily. I think as activity grows
over time, we'll start to see an increase on ethereum.
But I think we've never been as an industry better
positioned for for the masses than we are right now.
Speaker 2 (18:42):
Yeah.
Speaker 1 (18:43):
Well, I mean, I think my my complaint, it's not
really a complaint. My suggestion to a lot of these
type of platforms is, you know, one making them very easy.
You know, for instance, the you know, just the bridge
capacity right now where you have express and native this
something that can be Oh it's not complicated to most
people who are in this industry. But I'm looking at
(19:05):
if you're going to start to get others involved in
this new people in crypto in general, they're gonna want
to start doing things like this. I think DeFi and
just in general, yield farming is going to be a
big factor of growth and making it just easy, you know,
to do that so interesting that your rewards are tracked
in there.
Speaker 2 (19:25):
I did not know that.
Speaker 1 (19:26):
So that's you taught me something today on Katana that
I think.
Speaker 3 (19:29):
That's something we pushed out. That's something we pushed out
last week making that a little bit okay, sod and transparent.
So yeah, you probably didn't miss it. It was just a
new update that we that we got out. And we're
constantly pushing out new updates on the Katana web app, right,
I mean we're we're blotching with our own app, right,
and we do surface like like those vaults that you
see there, those are just yield opportunities. Is it that
(19:50):
we have surfaced to the top to make things a
little bit easier for users? But yeah, you know, that's
that's what it's all about. Like, if we want to
hit you know, this mass adoption that everyone's looking for
the DeFi space, we've got to make it easy for users.
Speaker 2 (20:03):
No doubt.
Speaker 3 (20:03):
Yeah, and that's what we're trying to do there, and
so we try to tack, you know, with the vaults
that have surfaced. We try to make that a little
bit easier for like maybe non DeFi or non crypto
natives to kind of navigate towards that, but then also
people who are really deep into the space, the DeFi
dijons as you call it. We also have our Ecosystem
Explore page which you showed earlier, that lines out a
bunch of the apps that are lives so people can
(20:25):
use and kind of explore new yield opportunities, maybe a
little bit more complex than what we're going to show
within the app.
Speaker 1 (20:32):
Yeah, speaking of yield, when would the cat token launch,
because that's obviously going to be a big part of
the yield generation that you're doing to be able to
get those kinds of yields over on the platform.
Speaker 2 (20:43):
When will that happen?
Speaker 3 (20:44):
Yeah, it's a good question. So no later than February
twenty twenty six. Okay, but why that we're hoping that's
just a date that we put out there just to
you know, we didn't want to keep it open ended
necessarily so we wanted to put a hard date on
that it's very likely to go live sooner, and then
(21:05):
what we'll have there is we'll have the cat staking Hub,
which I don't think we're calling it the cat staking Hub.
We might be calling it the cat Armory. But what
we did, you know, we're so focused on DeFi that
we wanted our chains token to be a DeFi token essentially.
So what you can do is you can steak cat
for what we call vcat, and then you can vote
(21:25):
on where future cat incentives and emissions will go to,
whether that's Sushi or mor Fo or another protocol in
the ecosystem. And we've seen similar things like this in
Curve and Aerodrome and Solidly, but we're doing it chain
wide instead of just for a specific app. And so
you vote on where those emissions go, and then after
(21:48):
you vote, you actually receive a portion of the fees
that were generated from that pool as well. So you know,
it gives vcat holders and voters an opportunity to get
a piece of the revenue that's generated by the chain,
and we're seeing a trend in that in the crypto
space as well, trying to reward users as well as
(22:11):
token holders with real tangible incentives. And I think we're
just we're just in the perfect spot where we wanted
to push this out at a time where we're just
a little bit ahead of other players in the industry
from a chain level standpoint.
Speaker 1 (22:24):
Yeah, I would agree with that for sure. Last couple
of questions I want to hit on you. This is
why wou blockchain people saying, hey, they're familiar with coindsk
talking about Polymarket considering issuing its own stable coin to
capture yield from reserves backing like USDC, which is held
on its platform right now, do you think they'll come,
(22:45):
you know, into the idea of its own, you know,
its own stable coin, or do you think they'll maybe
end up in a partnership or something with Circle.
Speaker 3 (22:53):
That's it. That's you know, only speculating here. And it's
really hard to say because stable coins are so hot
right now. I think, you know. And I worked at
Polygon for three years prior to coming over to the
Katana side, and prior to that, I was in traditional
banking for like thirteen years. But I think that you know,
some sort of setup for poly market that's similar to
(23:16):
the Agora AUSD setup that we have could be really
really interesting to do a lot of very novel concepts
with that. If Circle is willing to share some revenue
with polymarket from the yield that's generated off of us.
Speaker 2 (23:29):
Get it with coinbase why not.
Speaker 3 (23:32):
Well, yeah, that's true, that's true. So yeah, I think
there's a lot of unique opportunities out there. People love
stable coins. Right now, I think we're going to see
a lot of really cool innovative stuff happening on that side,
not just on the institutional side, but a little bit
more like on the the developer composability side of things
as well. But I think right I think we're seeing
(23:53):
a big trend in the space in general of just
revenue share, whether you're sharing revenue with users or other
projects or other block chains. So I wouldn't be surprised
to see something like that in the future. I don't
know if it's going to work with Circle, but I
think it would be. It would be very cool to
see that.
Speaker 2 (24:07):
Yeah.
Speaker 1 (24:08):
Uh, ethereum x stocks are coming now to the main net.
This is a big deal because this has been kind
of Solana's edge for a while. This of course, will
change things up pretty quickly. If that occurs. Would we
see maybe ag lair supported stocks in the future, do
you think.
Speaker 3 (24:27):
You know, I think if the if the right partner
comes along and the ag Layer team finds the right
people to work with on that, for sure. We've we've
talked to some people on the Katana side about potentially
bringing this this new type of asset class over to Katana.
I think it's a unique opportunity for people in you know,
(24:49):
in jurisdictions who can't get access to this type of exposure,
the ability for them to get that access. However, I'm
not really sure on my side where like certain shareholder
rights come into play there.
Speaker 2 (25:03):
Yeah, that might be interesting.
Speaker 3 (25:04):
Well, dividends though.
Speaker 2 (25:08):
So it'd be it'd be quite a bit. Yeah, it'd
be quite a bit different. But I'm just kind of curious.
Speaker 1 (25:13):
Do you think you could ever see that as an
asset that you could earn yield on, you know inside,
Oh for sure.
Speaker 3 (25:18):
Yeah, I think I think that's a I think that's
a great opportunity. Yeah, like if you could if you
could supply your X stock in a morpho market and
let users borrow against it and kind of exactly yield
on that, I think that's an incredible opportunity, and I
bet we see that the next in the next twelve months.
Speaker 2 (25:35):
Yeah for sure.
Speaker 3 (25:36):
I'm not saying next twelve months on Aton or Aggler, Yes, okay,
I get.
Speaker 2 (25:39):
Yeah, industry, the trends are leading into that for sure. Well,
which we'll see a lot, a lot more of that.
Speaker 1 (25:46):
Last question is do you think Polygon right now the
Paul token is undervalue because it's setting it what is
it number thirty seven right now, even though it's up
almost twenty percent on the week and on the seven.
Speaker 2 (25:57):
Day, just crossing three bills. So what do you thoughts undervalued?
Speaker 3 (26:02):
I can't really I can't really speak to or give
financial advice on anything related to tokens necessarily, so I can't.
I can't really help you too much there. And if
it's overvalued or undervalued, I did. I did receive a
lot of I can only say what I have been
doing personally, So you know, I did receive poll in
(26:26):
matic compensation during my time at Polygon, and I just
staked it. So there. I haven't sold. I haven't sold
any poll I don't really plan to ever, but I'm
you know, it's kind of based on my own risk tolerances. Yeah,
time references and things like that.
Speaker 1 (26:44):
Well, it's one of our picks to really be it's
an under I think it's an underperformer right now. We've
we've picked it to be one of the potential superstars
out of this market.
Speaker 2 (26:54):
Again.
Speaker 1 (26:54):
Well, we'll see how that plays out for sure. Listen,
it's been great having you on the show.
Speaker 2 (26:59):
Show. Thank you, Thank you so much for coming in today.
We appreciate it.
Speaker 3 (27:02):
Yeah, absolutely, thanks for having me great.
Speaker 2 (27:04):
You bet, you bet.
Speaker 1 (27:06):
Thanks listen, all right, let's get into it today. Of course,
if you guys are not in the Diamond Circle and
want you to take some time right now and join
on the link down below. It's an absolutely free program
where you guys can be part of our ecosystem. We
do a lot of additional research that we share with
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It's just an email address boom you're in and of
(27:28):
course follow me out there on X at Paul Baron.
Speaker 2 (27:30):
We'll catch you next time right here on the Paul
Baron Show.
Speaker 3 (27:34):
Thank you.