[Music]
all right can you guys hear me okay
great um okay so um they asked me to
talk about stable coins I've been
talking to friends about stable coins uh
a lot over the last little while and so
I'm very excited to kind of share my my
thoughts and where I think they're going
and why I think it's important for
ethereum so um I'm giving them a second
to put the slide on because this is
different
slide you guys almost got it
by the way I'm probably going to skip
through some parts of it because I think
we have 20 minutes and I put to go like
a 30 minute presentation uh but I'll but
I'll do my best to make sure I kind of
like share what's what's interesting to
me
for
[Music]
all right I think we have a little
technical issues on the most uh Tech
conference uh but it's happen sometimes
yeah so sorry about that I think we
probably need a few minutes so Liam not
sure if you're comfortable to share
something about what's like about the
talk today um yeah okay so I can I can
share a little bit about it so some
context why why am I even interested in
stable coins at all like my background
in this industry has been uh as an
engineer like I've been predominantly
focused on like Building scalability
Solutions and on like doing hackathons
and all the tech stuff but stable coins
have always been sort of like outside of
the realm of the technology they've been
a lot more like around exchanges
uh they've been sort of opaque and
confusing and even when I talk to Folks
at like dinners in this industry like
there's not a kind of a coherent
understanding of why are they relevant
what is it about them that's special um
and you know you can use phrases like
people you know build stable coins on
ethereum or is it is it the case that
stable coins are enabled by ethereum or
is it the case that um stable coins are
just like a customer of ethereum it's
unclear why they're so uh impactful and
so what I wanted to do in this whole
presentation in just the past several
months of thinking about stable coins is
kind of demystify it understand how they
came to be and what is it about them
that might be the thing that makes uh
ultimately might be the biggest impact
of cryptog into the future so so that's
where I'm coming from with
this all right let's do it so I already
just jumped into a bit of it why do we
want to make sense of stable coins um
last year I took a bit of a step back U
from being really hardcore in the tech
of the space and I wanted to see where
are are their Real World Adoption of
crypto and one of the most like jarring
things when you kind of talk to people
and you look at the data is that the
biggest use case of like payments in
crypto shockingly is not even on
ethereum at all it's on Tether on Tron
and that led to like writing this blog
post um earlier this year which kind of
Dove deep into how that happened which
I'm going to talk a little bit about in
this presentation uh and I wanted to see
well if we're building all of this
decentralization infrastructure is it
the case that the lasting impact might
actually not even be on ethereum at all
and and how does the industry maybe
evolve in a way that we we we don't end
up in that scenario where you know
ethereum is just kind of this Niche
Cipher Punk movement and doesn't
actually end up mattering a lot in in
the rest of the world so I wanted to
kind of figure that out so uh I'm going
to dive through what is it about stable
coins that how product Market fit and
then the history of how we got there and
then I'm going to speculate a little bit
about where I think we're going to go
next so why is it that stable CS have
product Market fit uh I want to start
with just some mind-boggling stats uh
nearly $180 billion now are in
circulation of stable coins and this is
a 400x in the past 5 years so you know
and this is not even that long ago like
this is still like after the Ico Mania
area era we've still had a 400x in
stable coin Supply uh and it's not just
like resting there people are using it
for um U moving money around and and
they're using it not only just uh for
speculation purposes but they're
consistently using it month over month
uh for uh all kinds of purposes and you
can see volumes this is from visas
onchain dashboard uh and transaction
couns are just up and to the right and
the cool thing about it is that it's not
just Tethered to speculation you can see
even as you know nft craziness happened
Ico Mania the recent meme coin Mania um
stable coin transacting addresses and
also the transaction counts just keep
going up and to the right month over
month and if you're in crypto and you
see something like this that's not a
crazy you know bubble up and down this
is like beautiful because it means
there's like something here that you
know is sustainable long lasting so so
what what what exactly is going on um
one of the best uh indications of why
this is valuable I've seen is uh the
simple use case of accessing the dollar
and here's like a really clear chart of
how you can understand why it's so
valuable in Argentina as the purchasing
power of the Argentinian peso has gone
down uh I think like 82% in the past
couple of years there's been a 10,000%
increase in stable coin trading volumes
in that area it's in in essence and you
can go there and talk to the people
their currency isn't working for them
but stable coins are giving them a
really easy way to kind of get access to
us stable currency for their everyday
basic financial needs it's not about
crypto token trading it's about
genuinely improving their lives and the
financial access that they can get um
and there's this really great survey
that came out I think about a month ago
month and a half by Castle Island
Ventures uh brevan Howard digital they
went around to these countries where you
know there's charts just like the one I
showed you and they asked people what
are you doing with these stable coins
and you know the biggest answer actually
was not on this slide 50% was you know
crypto trading nfts but it was just 50
and 47% is still saving in in dollars as
well as pretty high percentages are just
getting currency conversion benefits
they're earning yield on their savings
they want to move money internationally
and so it's indicative that people are
using stable coins not just for trading
but also for real um important elements
of their financial lives and there are
businesses being built now that
facilitate this bridge for example this
is a screenshot from their documentation
it's effectively giving uh all the uh
movement of money um products that you
might need to kind of benefit those use
cases or to enact those use cases as an
API and that's one of the reasons why
they were so valuable um and those API
are being used for products like uh
remittances loyalty point conversion uh
you know aish Board of financial use
cases in Argentina with lemon stripe now
supports payments and stable coins as
well as payouts to people after you've
accured that that capital and PayPal is
entering the game with both like a
payments product and a branded stable
coin product and I showed the the bridge
docks and if you don't know just uh I
think a week and a half ago like not too
long ago stripe acquired that company
for $ 1.1 billion which is the largest
acquisition in the history of the
industry um so this is not just
something that's kind of happening it's
kind of rising this is already
enormously valuable and big players are
taking note um and if you don't know
this fact hopefully you know at this
point uh The Business of Being a stable
is insane tether is I think the largest
it's the the most profitable company by
headcount in the world so far this year
they've already earned nearly 8 billion
doar in pure profit on the the yields
from the treasury bills they buy with
the stable coins that they uh they the
cash they get from the stable coins they
issue and this is on the level of nation
states like Germany and Mexico are kind
of in the same uh order of magnitude in
terms of treasury bill purchases as as
kind of combination of tether and circle
so it just it's just wild I just kind of
want to employ to you how how big this
has gotten and it's not like this is
some other things in crypto where it's
very regulatorily challenging and
confusing uh there's a huge uh group of
people Lobby lobbying for regulation
across the world and and Regulators
especially Forward Thinking um
governments um like the Singapore money
Authority um and the Central Bank of the
UAE they're already adapting to stable
coins and writing policies to regulate
issuance and make sure that it's done
correctly so the world is adapting to
this in a way that it's not has not as
much done with say uh
tokenization so you know what is about
the product Market fit it's the fact
that stable coins are programmable
they're highly traceable they're
fungible they're interoperable uh they
settle instantly 247 they're Global it's
a basically it's programmable money it's
a better form of money uh that make them
so useful so that's what's going on uh
it's a pretty big deal uh I wanted to
understand why is this happening though
how like how did we actually end up in
this world where there's this new form
of money and how is it that it's all
been kind of accepted uh and this is now
the new norm and so I looked at the
history and just it's it's very
interesting how it all occurred it
started uh in 2014 during a time when
there was a lot of Bitcoin trading and
new altcoins popping up and uh a new
coin uh was created by Brock Pierce who
actually was the guy from The Mighty
Ducks movie um which is really cool uh
and they announced real coin and real
coin the pitch was basically today what
you'd recognize as what's called a
stable coin today it was get the
advantage of the Bitcoin protocol to the
dollar meaning uh anyone can access it
without a trust to third party but it's
backed one to one by a company's Reserve
this was the first time this product was
introduced um you know later they
renamed that to to tether uh and and I
want to show what is it about that
product that ended up being so useful
with a kind of a a very simple diagram
here uh at the time there were a lot of
these exchanges and the the supposed to
be emojis in the bottom that were
opening up around the world to
facilitate Bitcoin trading people wanted
to buy and and and sell digital assets
uh altcoins Bitcoin and so on and they
were trying to get banked uh with you
know for example you know different
banks around the world but a big problem
in this era because of things like the
Silk Road was that they would regularly
get debanked you would have trouble
making your exchange work uh because you
couldn't get access to a US dollar bank
account uh what tether realized is that
that is a solvable problem by bundling
the relationship to the banks and sort
of going directly to the exchanges that
wanted to facilitate that uh those
exchange of digital assets and
effectively use blockchains as The
Ledger so tether could go to the banks
the exchanges could leverage tether for
on an off- ramping of of assets and
there'd be a much more sort of
decentralized way in which people got
money in and out of exchanges so this
helped exchanges all over the world
start trading digital assets but the
other really important thing that it did
is it enabled because blockchains are
open protocols they're not closed silos
uh siloed Banks it enabled inter
exchange Arbitrage uh which is really
interesting and you can see how you know
this is a bit later on as the trading
volumes of crypto assets went up um so
too did the supply of stable coins and
the reason why is that when people
wanted to trade digital assets that led
to huge uh price differences in
different markets which led to massive
Arbitrage opportunities which means if
you want to make money in an Arbitrage
opportunity you want to flood liquidity
into those exchanges uh and do the
market Mak you have to do to kind of uh
get the prices all in line and earn your
profits from arbitraging and who is
doing this um it's kind of interesting
to see the history the biggest one by
far was Alam research SPF um you know
there's also Cumberland other market
makers what they were doing effectively
is going to tether giving dollars
getting tether back going to exchanges
and then putting liquidity across
multiple exchanges to Arbitrage across
them and that is what caused a huge
spike in the supply of
um and and ultimately drove huge numbers
of transactions through the blockchains
that were the things that tethered them
together um and you know really
interesting kind of uh Quirk of history
is that it started out on the Omni
Network which was back in the day when
they launched tether pre ethereum was
was mastercoin uh which is actually the
product that falic almost uh joined
before they kind of rejected him and he
went and started ethereum um but then
ethereum took over as the rc20 is became
very popular um but because ethereum
didn't scale Tron was able to kind of
take a bit more of the market over time
and now we're in this kind of
equilibrium where it's kind of ethereum
and Tron are the main places where uh
stable coins end up living for this sort
of inter exchange Arbitrage opportunity
um another cool part of this was that
binance played a really big role as more
and more people were buying digital
assets in all these different countries
binance was really effective at getting
huge numbers of users um on their
platforms and when it came time to kind
of move Assets in and out of binance
they would end up using tether they'd
end up using Tron because of what
actually ended up becoming the default
way to move tether in and out of binance
uh was via Tron um I don't know exactly
how that deal ended up being arranged
but it kind of cemented Tron as kind of
the place that you ended up using tether
for a lot of places where people had
binance accounts and that ended up now
into the situation that we find
ourselves in where there's huge amounts
of supply concentrated than tether um
binance is still the largest holder of
tether uh and other exchanges uh you
know just just you know pretty far
beneath it actually and Supplies on uh
ethereum and Tron so that's how we got
here and so I looked at that and I was
thinking okay what are the network
effects that maybe we can observe
occurred between those those companies
and maybe are potentially uh going to be
important going into the future and uh
what I want to kind of pause it to
everyone today is that there's three
really interesting players in in here
which are stable coin issuers
blockchains and uh ramps and you can
look at this diagram it's I'm not going
to go through all the labels but you can
see there's a lot of very naturally
occurring Network effects between these
three sort of entities um stable coins
obviously earn huge amounts of yield
that's reinvest for all kinds of
purposes apps Drive transactions those
are the things going and getting
customers to put money into the system
for whatever use case trading or
whatever might be and chains ultimately
are place places where transactions
settle fees can ACR and it's also where
liquidity Aggregates um and I want to
say historically I think these three
players were really U successful at kind
of uh leveraging some of those Network
effects uh and it's one of the reasons
where they've kind of gotten themselves
into that's a very dominant position in
the market and similarly today if you
look at what's going on with coinbase
base and circle I think that they're
replicating a lot of these benefits um
but uh something interesting has
happened in the past few years which uh
I think is very exciting and it's worth
everyone kind of being aware of which is
that uh this is sort of changed and so
I'm going to explain what's changed and
why it's gotten easier um historically
it's really hard to do any of these
three things every time there's a new
chain it's a new algorithm it's a new
token it's a New Foundation it's a new
you know new brand it's a new community
it's it's a really complicated Endeavor
um every time there was a new stable
coin it's again very complicated you
have to get all these banking
Partnerships you have to build a brand
for your stable coin uh it's a very big
business you know these are these are
companies that are getting started um
and similarly with ramps or or exchanges
whichever kind of term you want to use
um these are very big businesses too
you're going to Time Square Billboards
driving people to want to buy and sell
crypto assets um and so this has been
very hard but in the past few years this
has radically changed we've solved
scaling for the most part we've made it
very low fee and and very easy to launch
a new blockchain uh similarly stable
coin issuance has gotten a lot more
normalized and you can can launch a
stable coin through something like a
paxos or a braille um and Sexes are
being unbundled into apis what I showed
with Bridge earlier their documentation
is effectively something that people are
leveraging exchanges for historically
now as an API so it's kind of this like
unbundling uh of of the of the things
that those businesses did and being made
available for people to build on their
own so examples you can now launch a new
blockchain like you launch a new server
using conduit Alchemy uh or any Ras
platform you can now launch a stable
coin like you would work with any other
vendor there are plenty of vendors that
will help with the regulatory components
and figure out how to pass the yield to
you or your customers um and ramps are
you know there's a huge industry of
ramps and I've have a slide showing some
of them uh later on that now are
possible for you to integrate with uh
for your business so the question I kind
of pose is like okay in a world where we
don't need different companies for each
of these kind of three um kind of
pillars of the industry what what things
can get built what what fills in these
circles um and what I'll pause it is
that uh it's all about distribution uh
this is what I've been really occupied
with in the past a little while is how
do we get more and more companies that
have huge amounts of distribution like
you know the top apps on the finance
page in the App Store the revolutes uh
this is this is America no revolute but
the cash apps the robin hoods you know
the venos PayPal how do we get them who
have huge customer bases to want to
integrate with ethereum because if we
can bring hundreds of millions or more
users effectively through their
distribution that might be the fastest
path for us as as the ethereum community
to get uh this technology to the masses
um and I I think there's three major
kind of ways you can look at this in
terms of how it'll evolve I think the
apps are going to be a lot less
speculative in this world where
distribution is the most important part
it'll be a lot less about how do you buy
and sell crypto assets and more about
how do you do payments cross border
Commerce settlement uh how do you how do
you kind of provide consumer fintech uh
products the chains will be a lot less
narratively driven personally I think
it's a lot less exciting what the next
ethereum color is they're very
incremental it's going to be a lot more
interoperability driven how do you make
it so that your chain connects with sort
of the city of ethereum um and you know
how do you make it so that your chain is
also going to benefit your customers
I'll give an example about what world is
doing with with World chain but if you
have a world ID you're kind of
privileged on world chain in a way which
attracts you to that chain I think
that's the kind of thing that'll
differentiate chains into the future um
and then Stables it'll be a lot less
about sort of the Branded stable coin
how do we get maximum liquidity and a
lot more about this these short-term
Journeys where money goes into a stable
temporarily for the benefit of moving it
and then uh comes back out later so
that's kind of my thesis um and I'm
hoping that we'll see a world that looks
a bit more like this where PayPal
through the combination of stable coin
issuance and the combination of
leveraging blockchain platforms will be
able to kind of effectively take a lot
of the values that we've kind of
embedded into the technology of ethereum
and bring it to uh to their
customers so um that's where I think
things might be going I think for
ethereum to win there's three major
areas that it needs to focus on like if
I was CEO of ethereum is the kind of
things I would like make sure like are
really being nailed um one is access two
is liquidity and thre is in our
operability um pretty straightforward
access basically means if you are
someone that has a business in any one
of these countries or anywhere else in
the world where this huge you know very
disperate Patchwork of banks how do we
make it so that no matter where you are
no matter where your money is you can
get it into ethereum through some ramp
providers some API some some through
some means uh and this is you know
ethereum has a huge Head Start it's been
around for um nearly a decade we have
tons of Integrations already and I think
we can leverage also all of these
companies that have been built in our
ecosystem to get all of that um all
those Integrations done um and if we do
that it's going to make it incrementally
easier for companies like a Dao which
has building sort of uh an app on the
App Store you download it if it's
possible no matter where you are in the
world to just get your money into this
app all of a sudden we have sort of a
universal venmo that just works for
everyone um so it's the access is really
really important the second one is
liquidity ethereum is way ahead on this
we're already by far the largest um
aggregator of capital in this industry I
think it's really important that we
continue to double down in that and we
don't lose sight of that and it's been
great to see in the past you know year
the ethereum foundation and etherum
researchers have really focused on defi
as a use case uh I think the fact that
ethereum is kind of the New York of the
you know the city on Mars which is what
what Paradigm calls it is really really
important and we have to continue to
aggregate that liquidity because it's
that liquidity aggregation which enables
this kind of use case where because
ethereum has it all in one place we can
enable um really low fee FX conversions
for example on chain in a way that
competes with wise you can almost think
of wise as like a blockchain in a sense
that has a ton of integration Partners
um that they've manually had to build up
over the past decade but compared to the
aggregate Manpower of the entire
ethereum industry I don't think it can
compete um similarly you can see more
apps like stable which effectively is
going out and saying hey the crypto
economy has really good yields and so if
you want to get access to the best
highest dollar denominated yield that's
you know obviously there's risk and so
on but relatively risk-free
comparatively um you know just one you
know Jal app face idea and get and get
and get that value so that's the
liquidity and then the final piece is
interoperability which is I want to
describe in kind of two two different
ways um one is super apps so if you're
not familiar with super app is an
application like this one which has tons
of different um use cases all in one m
one single app this is very popular
especially throughout Asia um WeChat
grab here and so on uh I think that
super apps might be a type of
application that ethereum can really
accelerate the developments of um and
I'll kind of give like a really fast
pitch as to to how that is um if you
think of a super app you start with some
concept of identity so like WeChat you
know has all WeChat users in China for
example some integration with a payment
system uh Integrations with other
companies and products and then
engagement uh with the application um I
think the cool thing about ethereum is
that it makes this step permissionless
meaning instead of having you know if
you want to build a super app going out
and building hundreds of Partnerships to
get them into your application ethereum
mean uh ethereum lets you have
permissionless Partnerships uh and I
give the example of worldcoin which has
about 15 million people now that sign
that are signed up for an orb uh they
are all effectively able to uh be uh uh
using the world app they're able to kind
of uh access different applications
permissionless through something called
minikit uh which is going to end up
showing up on the world app using mini
apps uh and the reason why it's possible
is because of this kind of
permissionless integration anyone can uh
create a mini app um I'm going to skip
over the Partnerships example but the
tldr is maybe through ethereum we can
enable Partnerships between brand BS in
a way that they already kind of want to
do but with ethereum it's a lot easier
so those are the three things um in
short I kind of went over them access
liquidity and interoperability those are
the three most important things I think
that ethereum really needs to nail if we
get these down then I don't think really
any other ecosystem can compete all
right Liam I think I need to cut you off
because uh it has to be on time I'm so
sorry do you want to say I got one more
I got one more slide um Let me let me do
one more side really fast if I
can okay screw it I can I can do it okay
I just want to share this one meme um I
think that not this one I think that
stable coins are basically the gateway
drug to ethereum if we can get this use
case really nailed uh I hope is that in
the future we get kind of the technology
of ethereum in the door into the hands
of consumer fintech and it's by
espousing our values and coding it into
the into the technology uh and then
selling it via stable coins that will'll
get ethereum into the world so yeah
thank you very much all right let's give
him a big round of applause wow thank
you and I think St cor is really taking
the right now as you can see it's full
house okay let's do Q&A uh do you think
we should have spent more time thinking
about transaction privacy for stable
before the space grow to yeah this is a
really fantastic question I think one
way of thinking about ethereum is is
kind of somewhat a bit torant in the
sense that it's the alternative thing
that you could use if uh if you didn't
want to use whatever else aside gives
you and I think that this is the kind of
a feature that ethereum we we believe in
right it's kind of part of the cyer punk
e ethos we should embed it right there's
there's a counterfactual version of the
world where we don't have privacy you
know this technology goes mainstream and
privacy just wasn't implemented in time
and we've almost normalized this so it's
actually a good thing for ethereum to
think about is how do we make sure that
we codify into the protocol the things
that really must be there such that in a
world where you know technology just
just lifts off in a way that can't
control the key things we really need to
be there are actually in the protocol so
yeah I think privacy really needs to be
emphasized very highly at the evm layer
for sure okay and what's your opinion
about why wouldn't government just Crush
third party stable and enforce cbdc in
yeah I think the bull case for this is
that ethereum is credible NE incredibly
neutral block space right it's kind of
like is it is it really possible to get
a bunch of different government entities
all to collaborate on launching some
sort of a chain that has this level of
liquidity um and this level of
interoperability across the world
banking systems like it might not be
actually be possible um so I think the
fact that ethereum is credibly neutral
means that people want to integrate with
that uh and and it becomes the thing
that governments themselves integrate
with even if they do a cbdc okay next
one uh do you think there's demand for
non USD stable coin what do you think
what about it yeah what do you think
yeah I think my take on non-usd stable
coins is that um it's probably going to
be the case that uh government entities
are going to want to prioritize their
local currency in a world where stable
coins do take off anyway but it's kind
of like I said with a bit torned example
it's it's the alternative you could go
to so if it's always possible to just go
to your laptop and effectively get
access to the US dollar then you're not
in in your government's currency sucks
you're probably just going to go get the
US dollar but if it's the case that your
government's currency actually is
reasonably well-run like in the case of
maybe in Euro people prefer the Euro
over the dollar then maybe people will
use Euro stable coins there in a world
where this stuff takes off so the good
thing about this technology is it raises
the bar of the credible alternative you
could use uh if your if your local kind
of more centralized version isn't that
great okay I think we got 40 seconds
left um what are the most promising
decentralized stable coin in your
opinion crypto wasn't mean to be secured
by a company's bang account yeah this is
I mean this is a good question um I
don't know I've been a fan of D since
the beginning um I think that I think
sky is a great protocol I I use Sky a
lot um but I I I know where this is
going to go honestly the hard part about
the centralized stable coins is that
they're fundamentally it's way harder to
build one of those than it is to build a
centrally issued one um I think that
this industry would have to kind of
espouse like its values on stable coins
and we'd have to all agree that the the
the denomination on like dex's instead
of it being usdc or usdt it should be
die um but that's going to take a lot of
political willpower I think all right
ladies and gentlemen Liam horn thank you
thank you for your inspiration and side
talk about stoc C