don't forget everybody to make sure you
scan the QR code and uh and uh get your
questions ready for the panel
[Music]
afterwards hey everyone um Welcome to
our panel So today we're going to be
talking about the fixed rate flywheel um
which is a concept that we've developed
about how fixed rate markets can fuel
variable rate markets
and this creates kind of a virtuous
cycle um so I'm joined today by my
fellow panelists uh Lucas manwell uh the
co-founder of Phoenix Labs Violet venage
um Twitter personality and just
allaround defi expert uh and Merlin
eagley uh the co-found morphol labs um
so yeah let's get started um so first
up okay great um I just uh I want to
give people a quick primer on the fixed
weight on the fix straight flywheel and
just to get started I want to give a
primer on fixed rate markets so for
those who are not familiar um fixed rate
markets on ethereum have already been
deployed they're already scaling there's
a good amount of liquidity on some of
the markets um but just to understand
the basic mechanism um we'll talk about
how we actually get fixed rates from
variable rates on ethereum so the basic
idea is that that uh right now you can
deposit you know let's say one usdc into
a lending market and you'll earn
variable rate interest over time so you
know this is great we have variable
rates but how do we turn this into fixed
rates so the way that we do that is we
create a separate smart contract um
which will basically lock up this one
usdc for a period of time so let's say
that you know we deploy the one usdc
into a lending market like a
and this is going to ACR variable
interest over the course of the term so
the first thing that we do is we create
two tokens a PT and a YT so the
principal token will own uh basically it
can be redeemed at maturity for the
principle that was deposited into the
position so that's just one usdc in this
case um the YT the yield token will
receive all the interest that occured
over the term so how does this create a
fixed rate well because the PT only can
be redeemed for one usdc at maturity
you're not going to buy it for one usdc
because you can't do anything with the
funds that are locked up so you can't
Supply them to a lending Market you
can't use them in a yield Farm it's just
sitting there so because of this you're
going to buy it at a discount and so
this could look like buying one usdc six
months from now for say 95 cents of usdc
so if you do that you'll pay 95 cents of
usdc today 6 months from now you'll
redeem it for one usdc and you'll get
what amounts to a 10% fixed rate of
return so it's a zero coupon Bond and
then on the YT side you're just going to
be earning the interest that acrs over
the term so the idea is pretty simple um
but this drives some interesting market
dynamics and has some interesting
applications so um the first thing
that's worth noting is that all of these
fixed rate markets are built on top of
variable rate markets so you know we
have a couple panelists that work at
companies that are such variable rate
markets like you know Phoenix spark and
you know
Moro um these markets power the variable
rate that ultimately leads to having a
healthy fixed rate Market um so every
dollar that's put into the fixed rate
Market either invested through the PT or
the YT is immediately going into the
lending market so as we get usage on the
fixed rate Market Market it's actually
supplying liquidity to The Lending
Market as well so even though the fixed
rate Market might have very different
users from The Lending Market it's
actually still Pro you know it's
actually still helping to grow that that
variable rate lending market and then
the interesting thing is that activity
on the variable variable rate markets
can actually drive growth on the fixed
rate market so recently um at Deltech we
built a product called Fix rate borrow
which basically allows you to convert uh
a position on Moro into a fixed rate
position the way that this works is that
you'll open a borrow position on Moro
and then you'll buy another yts so that
you'll earn interest over the over the
course of your of your loan that will
actually offset the variable rate debt
cost that you're recuring on Moro so you
know as more people are using Moro some
of them might choose to open a fixed
rate loan this will in turn Drive
activity to the fixed rate protocol and
every
that's put into the fix rate protocol
goes back into Moro so this is like this
fix rate flywheel that we're talking
about so now that we've kind of
established what the fix rate F wheel is
and talked a little bit about fixed rate
markets um we're going to get into our
panel discussion so just just to start
off we're going to talk about the
current um fixed tra
Market okay yeah so I'll start with
Lucas um so spark was built in the bare
market and has achieved massive growth
like going into the bull market how is
spark you know uh how has spark achieve
this adoption and what are some of the
main takeaways that you have from the
user side from going to the bar Market
to the bull market yeah so just to give
everyone some context on what spark is
um maker has recently rebranded to
Sky um and Sky will allocate liquidity
to us spark as a dow to um to manage
that liquidity and allocate it to to
different uh things one of those things
uh has been sparland uh which is a fork
of av3 that allows users to borrow um
die or usds at I I'm not going to call
it a fixed rate because it's not it's
more of a a stable rate um it's a rate
that's set by Sky governance um so the
value proposition of this is as a user
you can get the benefits of A's you know
rehypothecation of collateral and cross
collateral ization across borrow
positions without the uh the algorithmic
variable interest rate
model um so you can you can borrow with
that so basically what I'm saying here
is that there there definitely is a
demand for more stable borrow rates uh
which is part of this broader discussion
this was one approach to it which was
having a more sort of predictable uh
rate where you could see that the rate
would be changing uh ahead of time so
you can adjust your rates or adjust your
position um and so that that was proven
out during this uh last year and a bit
um where we've got a lot of
adoption um and another big um thing
that we've noticed is there's been a lot
of demand for leveraging on um Pendle
principal tokens of Sude through Athena
uh through Moro um so spark has been
allocating D into Moro markets to allow
people to borrow against their um their
principal token uh yield positions
inthena um these users are able to lock
in these you know quite high yields that
we're getting from Athena that we're
seeing uh without the sort of
variability in these apys that could
affect the safety of their position it's
just it's overall a lot more uh
predictable um of a way to to borrow
against the position so both of those
have been quite successful and they're
both based off of this principle of
having like predictable interest rates
for
users awesome um yeah I mean going to
you Merlin so moro's also grown like a
tremendous amount going into this bull
market um like what have been some big
takeaways from you like you know on the
user demand side right um so as you say
like Moro is um like a a prim Landing
primitive uh on which like some
solutions for fixed rate Market are
being built so on Moro you have like
only interest rate model that are
providing like V variable rates for now
um and uh but we have more and more
Demand on like uh funds or arbitragers
or like strategist uh they want
predictability on their rates because
they want like to to form use their
funds like they borrow usdc they want to
use them on over protocols if you don't
have like produc ability on like the
borrow rate like you you'll need at some
point maybe to unwind your position and
like uh face like some Sage Etc so to
protect you against that like you need
to um to find like some fixed rate
Solutions and like Solutions like Del
like are um like ideal Solutions and
more and more we have that um that
demand mostly from like a more um Mator
and um uh I would say like um um like
more educated players in the space uh
for those kind of things that are
entering the space now that uh that like
D5 is being integrated at the um like
institutional
level yeah I guess just a brief followup
on that I mean can you compare and
contrast like who's using variable rates
and who's using fixed rates like which
users want each one right um I think
like we've been used uh uh we've been
used with um valuable rate since the
beginning of D5 because it has been like
so we had like e uh the beginning of a
where you had like a fixed rate but it
was like hard to manage on chain it was
difficult um so everyone like turned to
like more algorithmic uh interest rate
model because it's much more scalable um
so like everyone in defi is like uh okay
with uh variable rate and it's like uh
it's like in their zone of comfort but
like from people uh coming from trfi
where like a fixed rate is a norm like
you have Z zero coupon Bond everywhere
uh it does not really make sense to have
like variable rates I think it will
change like uh in the coming year coming
years like uh I really think that the
the the fixed rate will be like the base
uh of like lending and everything on
chain but it's just like uh we it
requires like a more much more like
complexity of managing those rates like
order books uh managing order books uh
it's like we are closer to Market making
um uh Quant Quant trading if you really
want to have like an efficient market of
like uh of fixed rates and we are not
there yet uh but uh but having both like
both Solutions right now is like a good
way to Ard like those that are asking
for uh fixed rat that are more coming to
uh from the tra EOS
system yeah that makes sense I guess
just to talk a little bit more more
about the uh more the D sort of things
like the kind of crypto native defi
users so one of the biggest um use cases
for fixed rate Protocols of late is
points trading so we've seen Pendle
achieve massive success trading points
um and the reason for this is that it's
really the only venue where you can do
that I guess a question for you Violet
is do you see this as a form of product
Market fit or do you think it's more of
a a passing fat in the
industry
uh yes this is very obviously product
Market fit because buying cryptocurrency
and then gambling on the price of the
cryptocurrency has incredible product
Market fit and has like sustained a huge
amount of usage for the past 20 for the
past years and even if you look further
back through history gambling has always
had like a fairly huge amount of product
Market fit the real question to me isn't
if this Behavior where you are seeing
people effectively trading the
underlying uh future token rights is
product Market fit the real question I
think is is this fixed rates like if you
ask somebody from sort of like any other
Financial spere oh purchasing the sort
of like future stock
issuance of a company is that fixed rate
trading I I would say they would
probably say that that is not fixed rate
trading so I think this has incredible
product Market fit because it lets you
do something that many of the most defi
native people want to do which is
speculate on these sort of upcoming
token launches however this like class
of users is entirely separate from the
sort of like people who are interested
in maintaining like uh predictable loan
positions or financing uh various
projects or even going even getting sort
of predictable rates for their leverage
so I think that while it has been highly
successful and it is like undoubtedly a
form of product Market fit to be able to
trade these cryptocurrency tokens before
they exist um I don't really consider
this Behavior as fixed rates instead I
think this is sort of like the most
convenient lead way to trade future
issuance of cryptocurrencies with the
sort of wink wink nod nod of like a B
Team telling you oh the tokens will be
there in the
future I guess just to push back
slightly on that um the there are still
fixed rates going on in these markets
because people that are buying the
future issuance are buying the yts
typically so and this is pushing the
rates up which is like creating
opportunities for really high yield pts
so I guess maybe uh maybe if you want to
elaborate a little bit more on that
dichotomy that would be
good yeah obviously this also creates a
good deal for the sort of capital
providers and it makes it sort of
explicit the deal that has been sort of
implicit through the history of many of
the launches of defi protocols which is
that we will pay you a high percentage
interest rate like a very high
percentage interest rate in tokens in
sort of future expected value of the
cryptocurrency tokens and normally no
protocol can ever say that to you
because uh the lawyer would like tackle
the CEO and just force them to SP stop
speaking because this is sort of like a
comically legal thing to say to people
uh unless the regulatory regime changes
in a dramatic way for some reason
the but it does produce it like the
product here adds legibility to the sort
of market and I don't think that people
are buying High interest rate bonds
because the rate is fixed but rather but
because the interest rate is high and
this has sort of always been the reason
that they put money into sort of Novel
def products which they expected to have
sort of future issuance of tokens to
give them high interest
so yes it does create a really
interesting fix rate product and it does
drisk
the sort of like allocation of capital
into sort of Novel defi products and
this is useful for the
protocols um but I don't think it
displays a product Market fit for
bonds uh that are sort of fixed rate
instead it just displays the appetite
for uh Capital to get high interest
rates from deploying to sort of
high-risk uh new def5
protocols yeah I think that's fair and
uh yeah I guess going to the next
section um we're going to talk a little
bit more about integration and market
dynamics for like more of the
traditional side of things which to
Violet Point has lower rates and is used
in pretty different ways um so starting
with you Violet you know you've been
involved in fixed rate markets since the
beginning like what are some things that
people should be mindful of when they're
managing risks in these
markets um I think that there are two
things that are kind of under explored
the first is that as you have more real
world assets um many of these real world
assets even if they pay variable or
fixed rates may not have like the
expected um risk profiles in fact uh
there have been a recent string of
defaults occurring in the maker system
in their sort of real world asset vaults
because provisioning credit is like a
very challenging behavior um and I think
sort of like the default Assumption of
the defi industry is that they will be
able to sort of copy this behavior from
the sort of trafi the traditional
financial institutions but that is like
the the sort of like pricing of this
risk is like not actually a tremendously
easy process and many people who have
tried in the def5 space um have like run
into major problems and we're seeing
some defaults now in addition to this I
think you add in like another layer of
risk um which is the Smart contract risk
whenever you're shipping like two
Integrations a week for months at a time
the the chances of a large issue go up
um and I think that this is like a type
of risk that is important to quantify
because like when you're bringing these
products to more institutional investors
I think this is the thing that they're
the least familiar with actually is how
to quantify the sort of smart contract
risk of having many Integrations and
having many like of these problems and
so I think those are the the
risks yeah that makes sense um so Lucas
you know SAR has started to integrate
with more of these fixed rate protocols
so you've been kind of trying to wrap
your head around a lot of these issues
um what have been some surprises for you
as you're doing those
Integrations um yeah so the main
integration that we've done so far is uh
the Morpho integration with the Pendle
Athena uh PTS
um and so an interesting problem for us
to solve and to iterate on has been uh
pricing these tokens on chain uh so we
started with a fixed price Oracle at $1
and then we would um adjust the uh the
maximum loan to value parameters to
basically uh account for that risk um
we've updated those oracles recently to
basically dynamically price the PTS
uh based on how long they've existed and
basically the point on the line of that
of that discount um what is an
interesting thing to think about is if
the fixed rate Market changes and uh the
fixed rate increases um and for some
reason a user's position goes underwater
um liquidating those uh pts on the open
market will actually yield like a lower
price because people don't want to buy
that um that token at that price if they
can get a better opportunity uh with
another principal token um so what's
been interesting to think about is in
that situation uh maker would have to
purchase um those pts and essentially
hold them to their duration and so what
happens there is um instead of
liquidating them on the open market and
having that immediate liquidity instead
what's happening is uh maker is holding
them to maturity still getting that
yield this value is still there um but
the the underlying liquidity has to be
um redeemed at a later date so there is
duration risk that needs to be
considered when onboarding these
different uh collateral types these
novel collateral types um so we're
conservatively adjusting the risk
parameters to account for these
situations uh making sure that we're not
getting into uh any sort of real trouble
um by onboarding these um but it's it's
definitely an interesting new uh
primitive and it's it's exciting and I
think there's a lot of uh additional
work to be
done yeah that makes sense so I mean
Merlin I think you're in kind of a
similar position you guys have started
integrating with fixed rates like you
know these Pendle positions but you're
also looking at things like fixed rate
borrow which is kind of attacking this
from the opposite direction um I mean
what have been some big learnings for
you and you know how do you deal with
things liquidations right um so coming
back to uh what Lucas was was saying is
like uh liquidating a pte token uh is
much more complex first on like just
like selling the token but if you can't
sell it like you need to keep it so that
requires capital and like no not all
Liquidators can do that so uh the the
pull of potential Liquidators is
obviously like um uh has a constraint
and uh that can be like end up with bad
debt if it's like if you have too uh too
high like LL TVs that do do that do not
account for those kind of issues so it's
definitely something that um um that
needs to be uh taken into account by
risk creators uh or like any people
building and creating markets on top of
Moro that are using like PT tokens as
collateral um on the Bor side it's quite
recent uh with the the hyperdrive I mean
Del uh integration um we we have like uh
some requests uh to to you that it's
quite interesting to to see how will he
will uh will it go into uh during the
next uh few months um for now I I don't
think we have enough data to like say
anything on that use case uh but uh
we're definitely Keen to to see what
will happen what what has been um what
has surprised me is like so Del is like
fully onchain uh systems and there are
over system that are like kind of like
doing fixed rate but offchain and
onchain settlement like I'm I'm thinking
about pwn for instance and they're
looking into integrating uh integrating
Moro and uh the the interesting uh
interesting thing is like they could use
the same exact same Market with variable
rate but end up like sharing like
liquidity and um uh to together like
with Moro with pwn with uh Del and that
will nourish like the the moros network
effect but also like uh the the markets
liquidity so I'm curious to to see how
it uh what will happen in the the next
few
month yeah me too I guess um Lucas just
to double down on that point on oracles
um you know looking looking a little bit
ahead into the future maybe over the
course of the next like six months to
one year you know what would you like to
see on the Oracle side from fixed rate
protocols yeah it's an interesting
question because there's yeah there's
like the the theoretical price of the
token based off of the discount and the
time that's passed but then there's also
the reality of the secondary markets and
for something you know as deep as like
us treasuries uh you can really base the
value of these bonds uh based on
secondary Market but the reality of the
situation is in defi we have like
nowhere close to that uh level of
liquidity yet um down the road if we do
um maybe we can consider starting to
base these oracles more on secondary
markets um and maybe there's some kind
of hybrid solution that we could
investigate uh this is definitely a new
new area to focus on so we're definitely
open to a lot of different approaches um
right now but it seems like the way that
we're thinking about this now we're
we're pretty comfortable with this you
know theoretical pricing Oracle with we
are querying the um the underlying
assets price um and then yeah like using
this theoretical value um and then you
know adjusting the lltv to make sure
that we're still conservative so that if
we're ever liquidating a user we can
hold this token to maturity and it won't
uh hurt the protocol and any significant
way yeah that makes sense um do you see
that in a similar way Merlin um or do
you have any other kind of takes on that
issue I definitely agree that like uh
taking the market price like is not is
clearly not ideal because it's like you
could like manipulate it very easily uh
and like um yeah I I deeply think that
uh you you need to just like use um
maybe uh like I I think the the the last
latest version of the Oracle that is
like um trying to uh approximate like uh
the the price depending on like the time
to matur it is like a good good first
step and to have like a more visil arle
I I'm I'm sure there's better way to do
it but it's more it's better than like
having like a fixed price and it's uh
it's it's clearly better than like a
market
price yeah that makes sense so I mean
now that we've kind of discussed some of
the challenges in the current market um
let's shift our attention to the Future
Market um so starting with you Violet I
mean you're you know an expert in the
space of privacy and zero knowledge
proofs um it sounds to me like a lot of
these issues involving oracles
liquidation Etc could be perhaps
benefited by scaling Solutions um I
guess I'd like to hear you talk about
that but also are there any other areas
of overlap that you see with like the
future of privacy and scaling Solutions
in these
markets yeah I think um the impact of
sort of scaling Solutions on the
liquidation of these
markets uh will be primarily driven by
the sort of increase in the sort of
depth and like breadth of the sort of
financial
institutions who are able to use these
well because I think if you have like
very longtail assets like um call it
like Pendle on corn farm dated to July
of
2025 and not Pendle on corn farm dated
to July uh 15th of
2025 you you're always going to I think
have difficulty um pricing this well
until you get really good uh and like
competent financial institutions trading
on train and these people will have to
be much more like um will have to be
much more like Savvy and regular Traders
than sort of your normal like
Liquidators in the cryptocurrency market
who are looking to dump these things
into the liquid space as quickly as
possible or you need to start uh having
yield sources which are more like um
legible uh and so I do think that
scaling Solutions will help with this
because they will drive sort of more
institutional adoption and sort of more
traditional Financial systems uh and so
I do think that's a connection but I
think that what is like much more
important potentially is actually the
Privacy component of ZK which is um like
if you look at the sort of traditional
Financial system fixed rate loans kind
of didn't happen in this direction right
like you started with the fixed rate
loan because these were easy contracts
to make between various
parties um and I think still there lack
like there's still a huge gap in the
sort of like fixed rate lending
ecosystem of ethereum and defi in
general where you don't generally have
people just sort of making lending deals
to each other on chain in a legible way
and I think what you might start to see
as sort of the next wave is uh ZK
enabled private lending contracts that
are sort of automatically executed by
ethereum which use fixed rates and which
use ZK to prove various properties about
their like Originators their lenders
their interest rates the
collateralization ratios if you can
prove compliance of the sort of like
institutional Investors Auto by
automatically executing their loans on
chain and by proving various details
about them without leaking this
information to the public you might
start to see like uh better quality and
larger lending desks making sort of the
actual fixed rate loans that you see in
trafi that sort of are backbone of the
trafi lending ecosystem and you could
start to see real bonds and these could
be assembled into like real products
using the proofs of validity that ensure
that you have like like bonds that meet
certain criteria and so I think the
privacy and validity components of ZK in
this use case are very important and I
think that they will help bring the sort
of like missing component of like actual
fix rate agreements out of traight into
Defi and this may not look like defi as
it exists now because these sort of
automatically executing Agreements are
not really like over collateralized
necessarily but I think this is the
future if for fixed rates is like that
the difference between trafi and defi
will start to evaporate as we get good
tools to bring offchain and semi onchain
financial instruments to sort of like
production grade on
ethereum yeah I just want to Echo that I
I completely agree I think uh that's the
sort of Next Step that I see
is is totally necessary to get big
institutional traditional Financial
involvement uh is having these uh things
like privacy and zero knowledge uh
privacy pools uh to allow for these
institutions to be provably compliant
without doxing themselves I think is
also going to be like a massive
necessary step that we have to take as
an industry uh to get more of these you
know hedge funds and and big you know
trafi institutions on chain and doing
regular Financial transactions um
that'll just be a necessary step for us
to
take yeah totally agree too um I guess
in that vein you know Merlin you guys
have started to work recently with uh
Swiss board so I think we're really
starting to see institutions come on
chain yeah um so swissborg was a first
step in that direction and like we are
talking to other uh fintex um one cool
thing about m is like um you have like
Market that are isolated and like per
permission like the creation of Market
is
permissionless what that that mean what
that means for institutions is like you
can create like whatever Market you want
and gate uh the market if you if you
want to be compliant you can gate the
the market and require a kyc for users
uh what you can do is also uh maybe you
don't care about K but you want to get
gate The Vault uh that is managing your
uh your funds and like uh but and you
want to um have an exposure to a given
um basket of assets uh this is and and
like institutions like because it's
fully IM mutable and UNC consal they own
the whole stack and I think this is very
important to have this and it's like one
of the
um one of the most important uh argument
when they want to integrate a landing
protocal is like do we own everything
from like uh of the stack or who are we
trusting are we trusting a governance uh
body a third party um uh with who we are
dealing with and I think like having
immutable non upgradable governance
minimized protocol like so the the issue
of like are we owning the stack but
everything that is related to how we
compliant uh are we gating Etc is you
using attestations and hopefully like uh
in the future um Z proof as much as
possible uh so that like any users could
like prove that they they've done a kyc
without revealing their um uh their
identity um this is already the case for
KC but you can still track asset uh
sorry addresses Etc it's clearly not
ideal and it's uh the the right now the
experience is like uh it's cumbersome so
like not not everyone is doing it so we
are talking with a lot of um of inex and
uh this problematic is like one of the
top one that we need we need to solve
like as like a global ecosystem but
we're not there yet I think yeah totally
agree um we're seeing the same thing on
the fixed Market side of things where
you know institutions want to own the
whole stack and make sure their funds
aren't mixed I guess Lucas I feel like
at spark you guys have taken a slightly
different approach where you know
instead of a huge institution backing
you um you're working very closely with
maker I guess um what are what are some
differences in you know working with
large protocols instead of uh
institutions and how's that going to
change the onboarding
process yeah so it's a pretty
interesting situation to be partnered
with uh with Sky maker um because uh
with that we have a really large
liquidity provider that's completely
defi native um and so with that it's a
pretty unique opportunity to be able to
evaluate all these different defi
protocols basically just purely on their
Merit and their economical opportunities
uh we're not as held up by um you know
uh regulatory red tape at this point in
terms of allocating funds into def5
protocols specifically um so it it is a
cool um opportunity
are experiencing you know similar things
with uh allocating funds into like into
institutions um like more of our real
world assets side of things but that's
sort of the the other side of it it's
it's taking funds offchain rather than
bringing them um onchain um but it is it
is a different sort of Paradigm to be
working with a with a defi native uh
large
LP yeah that makes sense um I guess I
think we can transition a bit so um
we're going to be taking some audience
Q&A but just before we get started kind
of wanted to uh summarize some of the
panel discussion and see if anyone had
any hot takes so um Violet I think you
had one if you want to go ahead and
share
it uh yeah I would say my hot take is
that defi is going to not be become
Finance isn't going to become defi defi
is going to become
finance and I think in that way you will
see like many more like products that
kind of do not align with the most um
cyber Punk definitions of like what a
lending protocol should be you'll
probably see more just like legal
agreements that are executed
automatically on chain you'll see more
trusted parties like and this will
probably be the way that defi will scale
that it will be accessed by millions of
people
and uh the sort of defi protocols that
we love that we're passionate about will
grow much more slowly
because it will be much easier for
normal people to access institutional
grade defi than to be sort of defi
pilled on the like most cyberpunk ride
like automated controllers automated
Market make makers or with like
completely decentralized systems then it
will be for like someone to be using
like maker to get a car loan like we
will
see like defi become Finance not because
finance will become decentralized but be
instead because these tools will be used
in new ways that many us will not like
very
much yeah I actually want to follow up
on that cuz like I I agree I think there
will definitely be a faction of defi
that will be you know for the cyppher
punks and it will be available but I
think I think it is exciting that we are
actually moving in a direction where
we're bringing Real World Finance um on
chain and using ethereum I think that's
like kind of the dream that a lot of us
have is to is to move the economy out
chain and like one of the things that
really excites me personally about uh
spark and sky is the idea that with
these new instruments and with this
increased institutional
adoption um we're able to bring back
these yield opportunities to um the end
user really easily through savings usds
through this the sky savings rate uh all
the revenue that sky is generating by
allocating into these different yield
bearing strategies that are increasingly
going to get more into traditional
Finance uh we can actually bring that
back to the end user uh with the sky
savings rate so it's basically like if
you go to a traditional financial bank
and you deposit into their savings
account you're going to get a pretty low
yield uh that is you know not even close
to anything that you would see in defi
but what's really nice about maker is
you can just deposit your usds into the
savings rate and right now it's it's
going up from 6.5 to 88.5% and you can
just park your funds there and let them
sit and that's available to anyone that
has an internet connection and is
completely
permissionless all right uh come coming
back to fix rate um I think one hot take
is like right now lending uh lending
Primitives are based on like variable
rates I think long term it will be the
the opposite uh like every primitive
will use like um like fixed rates and
you'll have variable rates because
you'll be like there will be like
onchain matching of like you'll have
like a market for bonds uh and and like
as a user you want a passive experience
and like someone will like manage your
fund and like much of those orders and
you'll basically have like um Market
making on chain uh that will abstract
the complexity of like dealing with like
various bonds of with different rates I
think this is where we are going and
just like this requires the the um uh
the the ecosystem to mat and to uh to
have like more expert um uh like a
financial expert to to enter the the
space and this will occur um thanks to
like spark for for instance uh like
bringing more institutions on
chain yeah that makes sense um I think
kind of piggybacking on that one of the
hot takes that I would have is that I
think that the fixed rate markets um are
making the lending markets look a lot
more like what happened in decentralized
exchange a few years ago so you know
dex's kind of started off with there
being a bunch of different Silo dexes so
we had zerx we had Unis Swap and then we
saw this layer of aggregators emerge so
that was like you know matcha 1 in Paras
swap etc etc then we had aggregators of
aggregators with metamask Swap and it's
just become increasingly clear that like
the base level exchange is not actually
what users are going to interact with
and I think we're we're not quite there
in fixed rates because I think it's it's
a bit more complicated kind of like
we've talked about I think that there
there are some issues integrating fixed
rate protocols with variable rate
protocols um you know it's a collateral
type that we haven't completely solved
the issue of integrating with but I
think that's where it's going and I I
think I agree with you like we're going
to start to see a lot more you know
aggregated approaches where you're not
necessarily buying a fixed rate from a
single protocol you're buying a basket
of fixed rate from a bunch of different
protocols potentially like the ones that
Violet's talking about you know where
they're not even originating from a
variable rate protocol and that's going
to become more of what users are
interacting with because that's like
your money market you know your high
yield savings account Etc and that's
ultimately what I think institutions and
even large you know D5 protocols like
maker want but um yeah I mean if anyone
else wants to uh share any other
thoughts I think we have a couple
minutes otherwise we can move to uh
Q&A cool
[Music]
Q&A um
okay there we
go um okay okay so starting off um is
there a role for auction priced fixed
rate lending I.E term Finance or is the
way forward YTP for fixed lending um
does anyone want to take
that yeah uh yeah definitely I think
yeah almost certainly you will have
institutions who are willing to price
their sort of like loans in this way or
you'll have aggregated Market
information coming from many sort of
fixed rate loans that are met made ad
hoc and then getting like publicized
into the sort of normal market and like
you might get something like a defi
liore which is setting like the
mid-market price and then you could have
batch auctions around it I think in
general I don't believe that YT PT is
going to be the sort of core Paradigm of
fix rate in the future instead this is
just a very convenient um abstraction
for the smart contracts to be able to
integrate with the variable rate markets
and yeah I think the auction-based
priced lending with many different
actors all following the same rules is
almost certainly going to be very
relevant yeah I I think um I I totally
agree with that I guess another thing I
would say is you can do auction PR uh
auction price fixed rate lending with
the YT PT model
um we're already starting to see this
where people are trading yts and PTs off
amm and doing like OTC deals you can
also do that with auctions so basically
instead of having a an LP in the middle
you can just directly match these funds
because fundamentally a YT plus a PT is
just equal to one base token so as long
as you have people on either side of
that trade they can put the one PT or
sorry the one base token into the fix
rate protocol and mint the YT and the
um but yeah so I think the next question
is people say rwa and trafi on chain
will make it more accessible but so far
that's not been the case uh only
approved users are allowed to do so um
why are we why are we bullish on
it um so only approved users uh so there
are still like a um per permissionless
Market on mofo with hward as at as
collateral um so that's still possible
to access uh even like it's not g
markets um but um but
uh that's true why bullish it's because
like um for instance um there's um rate
like in Bur Market that is like uh the
the one of the financial system so you
still have like a a lower Bond on the
rate that you can earn so it can like
drive more liquidity into more flow of
liquidity uh onto like Landing protocols
and one cool thing with more for
instance is like if the liquidity is not
used on like this real world asset um
market and there's like another um good
opportunity that is more definative they
those Market can share liquidity and
like the the liquidity can be
reallocated like in time uh when it's
needed so I think like why bullish is
like you have that lower bound of rates
that is driving more liquidity on chain
and that will be useful for uh def
native
markets yeah I think just also in
general it there is going to be a sort
of spectrum of how restricted um certain
Protocols are and I think the general
idea of bringing more liquidity on chain
is just always a good thing uh markets
will get more efficient uh more products
will get used wider usage and there will
be these sort of uh Hybrid models like a
good example of this is actually um
Maple Finance uh with syrup usdc uh they
are allowing for users to uh deposit
into a lending pool that's lent out to
institutional borrowers um but it's done
in such a way um where they're you know
not allowing certain jurisdictions like
the US to to remain regulatory compliant
U but it is this sort of hybrid solution
where you're seeing retail users get
access to uh yield that's generated by
institutional bar
borrowers yep I think it makes sense I
mean I think the only other thing I
would say here is the question says only
approved users US citizens only or such
conditions I'd say that um you know
right now most eii products can actually
be used more easily outside of the US um
and I think that generally speaking you
know there's you know trafi in other
countries as well so I think trafi and
rwa is coming on chain May right now now
look pretty us-centric that doesn't
necessarily mean that's the case long
term so I think just like we're seeing
things that can only be used by US ecps
and stuff like that uh we're going to
see the same thing in other countries
and we're also going to see these defi
native Solutions Ju Just wanted to to
add something on on that lower Bond
rates is like okay maybe the real world
asset is permission but like on the loan
side uh you can have like usdc or usds
that is totally like um permissionless
and you can come uh deposit liquidity to
earn an interest on this and like kind
of get exposure to that realwood asset
rates without like have but still
keeping like a um like a without
requiring any kyc I just wanted to say
that yeah that makes sense um so the
next question is who is the customer for
fixed rate loans um Merlin I think you
already kind of answered this but yeah
so um you say it I I think like uh
there's two types like the D forming
points and like band PT tokens as
collateral and looping like crazy and um
they also like a more um like a try in
institutional uh players that are used
uh to fix rate and they they want to
enter the device and like do some
complex strategies or things like that
or retrieve just like what they are
familiar with and they are asking for
those kind of
product all right Violet looks like you
have a question um due to the terms and
conditions of my advisor ship to Wild
cap
Finance I uh I'm obligated to shill them
instead thank
you no
comment all right uh how to deal with
privacy versus efficiency uh a good
example in Trad Iceberg order that hides
the Quant being traded but has less
priority um what about double bid sealed
auctions
um uh very good question I
think you will actually see ZK making um
privacy more accessible in trafi as well
because uh currently it's more difficult
in trafi to sort of guarantee that the
parties who are doing these types of
behaviors where they're hiding some
proportions of their like order or or
doing other types of things are actually
being fully honest about it or that
they're following certain rules um and
of course you can enforce this via
regulation but um this maybe come to as
a shock to people sometimes people don't
follow regulations and sometimes they
commit fraud um and so I think it will
actually be easier in trafi you might
have trafi applications of ZK which is
which are completely independent of
blockchain which bring more privacy to
more types of
transactions okay cool um we can go to
the next question why traditional can't
offer High fixed rate uh High fixed rate
yields like
defi uh because when the
cryptocurrencies go up and they pay you
in cryptocurrencies the interest rates
are
high pretty much I just want to add like
I I I deeply think you can still like
get like very high rate in the TR F
ecosystem it's just like you as a retail
you can't access it and this goes back
to what Lucas was saying is like uh
spark is like um and like any D5
Protocols are just about like providing
the the the good rates to end users
which is like something that is uh
completely gated into the tri ecosystem
um so it's just like I think it's just
hidden uh and you can't see it and um
but and and yeah after like you can also
have like very very crazy defy rates
that might not appear in the Trad V
ecosystem but because like you don't
have like smart contract risk and uh you
have there perhaps less mem coins or
those kind of things because it's a bit
holder yeah I just want to Echo what
Merlin was saying I think the biggest
thing is that you don't you don't hear
about these large yields um as you know
retail users uh in in trafi but they are
available uh to you know big
institutional players accredited
investors there's there's gatekeeping
that happens in the traditional
Financial system and uh through defi you
can you can pass these yields back to
the user um more easily but another
thing on top of that is the vast uh
efficiencies of using something like
defi uh again to bring it back to Maple
Finance it's like you know getting
theoretically hundreds or thousands of
liquidity providers in different
countries to lend into one pool and that
pool lending out to many institutions
and then collecting the interest and R
Distributing that to all the LPS if that
was done in the traditional Financial
system with wire transfers and manual
reconciliation all of the administrative
costs and the settlement time to do with
that is just like an absolute
inconceivable nightmare you know what I
mean especially for like low amounts
like if people are depositing $100
$1,000 doll um but with smart contracts
as soon as one borrower makes a payment
that interest is you know automatically
distributed to all the LPS uh
immediately so the amount of efficiency
that you gain with that you really can
pass on these yields back to the users
uh in a in a much better way well listen
sorry uh thanks for million guys that
was a a really insightful panel uh I'd
like to give a shout out to inventive
for providing 95% of the questions
there that was really thanks a lot
thanks again to Our panelist Round of
Applause