Recording

Transcript

All right. I think we have people trickling in. But while they're doing that, maybe I could just lay the agenda for the call today. We're having a pretty casual conversation about Stablecoins and Defi, more specifically decentralized stablecoins and defi. It's great to be joined by Publius, who's the creator of Beanstalk Farms. I've also got Maude here, who's speaking on behalf of Beanstalk Farms as well, and myself, Sam, who I lead the growth at Liquidy and it's just going to be a casual conversation about the need for Stablecoins and Defi, why decentralization is very important, and also to give an insight into some of the stuff that the Beanstalk team is working on or has been

working on for the past couple of months.

Thank you so much for having us. We look forward to this conversation and just to clarify, being Farms is the organization that's working on the development of steel stock being the protocol is, you know, the protocol itself, and that's founded by Publius.

Perfect. Thanks for clarifying. Cool. I guess we have a couple of people who have already joined in, so I guess we can begin. Thanks both for joining. I guess what we can start off with and I think considering in light of recent events with tornado cash and everything that's happening is, you know, what's the need for stablecoins in defi now?

And I could go ahead and provide my insights. I think, you know, stablecoins provide preservation of buying power in the near term. And, you know, it's for me, the most important thing that really provides is a bridge between traditional finance and crypto markets because, you know, activities like borrowing, lending funds and all that, it's it's not it's for us who have been involved in crypto for a while, it's it's a normal thing.

But then if you want to get new users to join the crypto revolution, then there is a need for some sort of stability. In addition to that, what you're seeing in kind of the developing world now is, you know, foreign currencies against the dollar has lost so much value in the last year or so. And then you're seeing it as a it's a store of value in a lot of cases as well for people.

So I definitely see, you know, the importance of stablecoins of defi like, you know, Defi definitely needs stablecoins just for those two reasons alone. But on top of that, you also have a lot of these payment merchants and just general payment and crypto itself where, you know, merchants won't accept volatile currency that fluctuate wildly on a day to day basis.

So that's the importance of stablecoins and that's what I guess both our protocols are working towards, I think would be great as Publius if we could hear your thoughts as to why you feel stablecoins are so vital to Defi and also perhaps provide some thoughts of your own as well. Certainly. And thank you for having us, Sam. So we tend to come at things from an economics first perspective.

And if you look at the structure of Defi, what is defi decentralized finance? Decentralized finance is a it's a a system where it's really a question of the least common denominator. So using decentralized primitives is only really as practical as your least decentralized primitive. That you're relying on, if that makes sense. So at the end of the day, what all of us are working on, as you alluded to, is the the construction of a decentralized, permissionless, global Internet based economy.

But the there is a a fundamental problem with the current structure of stablecoins today. It's really two separate problems as we see it. And the first problem, which both liquidity and bienstock address directly, is the current centralization of the major stablecoins. And we can talk about the other economic related issue, but if you think about the the centralization of USD CE tether and Binance USD, which are the three largest stablecoins by market cap, they're all centralized.

If we go back to the concept of using decentralized finance, it is only as practical as the weakest link in that. In that system, as you said, it's impractical for businesses, whether they're merchants or other businesses, to use Bitcoin or Etherium because of their excess volatility as their main currency to denominate their business in. And therefore there's a need for if businesses want to use decentralized financial primitives, there's a need for a decentralized unit of account at a minimum, and a medium of exchange at a minimum.

Whether you get to store value is another question. But at a minimum you need a unit of account in a medium of exchange with low volatility in order to facilitate the overall adoption of decentralized finance. And so both liquidity and bienstock are protocols that are built from first principles on to be as permissionless as possible and the original being stock being pool was of being ETH pool.

Similarly, liquidity is only allowed even as the collateral. That's because EVE is the most decentralized and permissionless asset on the Ethereum network, which makes it very attractive to build on top of and currently being stock has been three or four, but the goal is to relaunch of Bini Pool in the next couple of weeks or maybe a month or month or two.

So that's maybe the starting place. And then there's a second area which is the switch from collateral to credit based, which is maybe the main difference between liquidity and being stock that we can talk about as well, if that's interesting. But just to answer your question about why decentralized stablecoins are so important, I think I think that that that does it for now.

Well, that's a very good point. And I think it also it's up to us as kind of leaders in the space to to talk about this stuff, too, for new users who come to the space. You know, I think there is this trilemma that everyone mentions about scalability, stability and decentralization. And it's often times, I guess, the nature of crypto bull markets and whatnot, that people just forget about the decentralized aspect of things just because they see the crazy papers.

AP wise. You know, it's it's kind of events like tornado or what happened, tornado. And that remind you, I guess, of like the importance of decentralization and the fact that, you know, if you have a stablecoin that cannot be seized or frozen, if you have collateral that can't be seized or frozen, that's that's components that are quite essential and important.

And in Web3 and in this in the decentralized finance. So I guess, you know, one thing that I've had a thought about on a personal level as well as you know, do you think it makes sense to have centralized issuance of stablecoins on decentralized primitives and platforms? Now, my opinion is I think at this point there is still risk with what what I mentioned earlier about the trilemma of scalability, excellence and decentralization.

Obviously with the decentralized stables, there is, you know, the scalability aspect of things is something that we need to work on and there's still some there's no magic bullet once stable that fits all in that in that scenario. But it also something that another side of me thinks, should we try to kind of innovate on that front more and more and let other daos and protocols know about decentralized stablecoins and you know, make that an educational piece for everyone and move away from centralization as much as possible.

So be clear, I'd be curious to hear your thoughts on that as well. Like this does make sense. Just centralized stablecoins and like decentralized platforms and primitives or what's your take on that? Which would be interesting to hear that. So one thing we would say is that the market tends to know best. And so the fact that there is at the moment the vast majority of stablecoins are centralized stablecoins that is meaningful to us.

And, you know, to answer your question as to whether they should exist or whether they should continue to exist, the short answer is they will almost certainly continue to exist because what they serve is they serve a stronger role as a bridge between the physical world and the digital world or the the network that that they're issuing stablecoins on.

And so even though the Stablecoins aren't great to use for decentralized business activity, they are really good for bridging the value of dollars on chain and so the way Bienstock works is in its most basic form, the Oracle compares, for example, that's not how it currently works, but the most basic example would be comparing the bean eve pool, which doesn't currently exist with the Usdc IT pool ratio over time.

And the concept is that because Usdc is a very strong and stable dollar, even if it's not really permissionless in doing so. Being Stockton without any direct exposure to U.S. DC because it's Usdc trading against Uniswap for example, or even a permissioned decentralized exchange, Bienstock could still determine the price of a dollar on chain. So there is some value there.

Now, to answer your second point about scalability and what we're all doing here, we do believe that Beanstalk, because it uses credit instead of collateral, can issue enough stablecoins to meet infinite demand because the credit of the protocol can expand infinitely. And so when we think about where where Defi is going, there is sort of a nuanced take here, which is that if the beans supply grows infinitely and let's call it not just to the to the tens of billions where usdc currently is, but to the hundreds of billions or trillions of beans at some scale.

The Oracle derived from the value of usdc, even at some point becomes manipulable. And so at that point there is a question of the scalability of a decentralized permissionless oracle. And at that point maybe you need a different Oracle system to, to scale with, with a protocol like Beanstalk, but certainly see there being a symbiotic relationship between Beanstalk and protocols like Usdc.

Even if Usdc wants to permissioned who is using the Stablecoin on chain, it may be very few people are using the stablecoin on chain, but just the fact that it is on chain, it serves the value to a protocol like beanstalk or a protocol like liquidity. That is trying to derive the value of a dollar or more in particular derive the value of a being or a USD compared to a dollar or E compared to a dollar.

Absolutely. And I think, you know, what be good is I guess the approach that Bean start takes. It's it's quite different from other decentralized tables in the sense that you guys use credit instead of collateral to create this price stability relative to its peg. And also what how would you explain, like let's say Beanstalk two if you were to do a TLDR for people who want a quick intro into being like, what would be your take for that?

Because I think it's quite different to, let's say asset liquidity where we're fully collateralized by ether and that's how we work. It's pretty straightforward, but since it's credit I guess is a very new concept to many. If you could do a quick tldr of how being works, how it maintains its peg, I think that would that'd be very helpful.

Sure. So fundamentally, instead of having collateral backing the value of the stablecoin of being stock, which is being being stock instead uses its credit to create price stability. So to juxtaposing against liquidity, which is like an optimal, it's an optimal implementation of a CDP style Stablecoin where you have the ether locked up. That's collateral, that's totally decentralized. And the value of the LAUSD issued against the CDP is always going to remain in excess of the value of the outstanding.

The value of the IT in the CDP is always going to be in excess of the value of the outstanding LAUSD and therefore you have price stability now instead of having collateral, which creates the price stability being stopped, uses credit. So any time the price of a being is too low, Bienstock tries to borrow beans from the market and by borrowing beans from the market, beans can remove beans from the market and decrease the supply.

And over time, assuming it decreases the supply, enough beans can eventually return the bean price to its peg. So in short, instead of having collateral, the main thing that creates price stability is the credit of the protocol. The ability of the protocol to borrow beans from the market whenever there's excess supply on the market, Does that make sense?

And then obviously, because it doesn't have any any collateral, it can mint new beans when there's excess demand. So when the price is too high, being stock can mint beans in order to return the price back to a dollar. And when the price is too low, Bienstock tries to borrow enough beans to return the price back to a dollar.

No, it definitely does. I think I think it's a it's a novel concept. I think it's I don't know of any other decentralized ables out there who have a similar credit system in place in terms of keeping the peg intact. And it's, you know, it's at least for me as a decentralization. Maxy, I guess it's at least a novel concept that's trying something new that's not going for the centralized wrapper or centralized kind of way of going about having Stablecoins One thing that we know we are liquid liquidity get asked often.

And also it would be interesting to hear your take on it is also the value of immutability in a protocol. As many probably know, liquidity is immutable as a protocol. What that means is that there are no changes to the protocol that can be made. Whatever you see on Liquid's protocol, right on the protocol right now, that is how it's going to be.

And that's, you know, it's we have algorithmic governance that's there instead of human governance. We have created the system from the ground up so that it's completely decentralized in terms of front ends and whatnot. And we also have a liquidation process in place where it's it's all instant in that sense. And that's how we've made the system from the first place so that it's immutable.

Now, I would like to hear your thought on the immutable aspect of liquidity and also what your take is in regards to immutability. And I do feel that's a key component of decentralization. Or do you feel like there should still be There are layers of decentralized nation. It depends on what you, I guess, want to value more in terms of control and Upgradeability It'd be good to hear that.

Well, I think as a starting point, it's worth noting that Bienstock is not immutable, Bienstock is upgradable and the on chain governance that Bienstock had in place from the time it was deployed in August of 2021 until when it was exploited in April of 2022, is a testament to the risks of not having immutable contracts. Now. Similarly, there are risks associated with having immutable contracts, but in the case of Bienstock, the fact that it was immutable was part of the issue.

Now, I think one thing that's really commendable about liquidity is that you guys have continued to innovate on top of the protocol despite the immutability of the base layer. And so you look at something like trigon bonds, and that's a real testament to how having certain things that cannot be changed and are fixed creates long term stability and security and a Lynndie effect.

And also can can lead to some cool thoughts and innovation. So there's nothing there's nothing bad to be said about immutability other than the frictions around upgrading things that are not perfect. And in the case of Liquidy, as we were saying before, it's an optimal implementer version of a CDP, perhaps with the exception of the fact that there's a fee to multiple USD.

But the concept is that there wasn't really at that point CDP is had been something that had been created for a while and Liquidy was a major step up in terms of the the decentralization and collateral ratio of a and Etherium native CDP. And is the fact that it was done in an immutable fashion speaks to the fact that the CDP market was pretty developed at that point in the case of something like Bienstock, where as you said Bienstock, it's very new in many regards and, and we expect there to be a need to continue to upgrade Bienstock for the foreseeable future.

It's much harder to work around immutable contracts. And so while immutability is, I think the ideal or something to work towards, it's not something that is super possible. If, if there's a lot of innovation happening in a short period of time. So there's a tradeoff there. I think in general, we think immutability is is the goal. But speaking factually or practically, bienstock is implemented using the IP to five, three, five, which doesn't really support immutability.

So the reality is that Bienstock will remain upgradeable for the foreseeable future. So that's fine. And I think that's that's one thing about what I mean by the trilemma. It's it's scalability, decentralization and also kind of retaining the peg. I guess it's it depends on I guess there are levels of decentralization as well. And ultimately the end goal is immutability.

But as I said, as an industry, the thing that I want to reiterate is that maybe we should not forget that, I guess and it's great that at least that that's still something that you guys are on top of mine at some point, even if it is not in the near future. Probably down the line. Yeah, I think there's something to be said about the difference between permissionless ness and decentralization, right?

Yeah. In particular, you can have decentralization and you can have permissionless this. But I think that the goal and one of the things that immutability helps create is systems that are permissionless and decentralized by nature that are hard to move away from that, right? Whereas you look at something like the merge right now and there's a lot of open questions around the future centralization of the network, right?

So you have something that's highly decentralized right now and highly permissionless right now, but over time, it's unclear how that will be retained. Whereas if you have a protocol that is unlikely to be changed, it's it's it's a it's at the end of the day, the real thing to optimize around is what are we collectively trying to create and whether whether you've created enough at a base layer to say, okay, this is done and lock it in relative to upgrading it to facilitate whatever is necessary.

And if you're going to keep upgrading your network or your protocol in a decentralized fashion, there's always going to be some core questions around whether the principles that led to the original permissionless flows and decentralization are going to remain intact. And that's something that is constantly kept in mind as we continue to develop Beanstalk as a DAO. And while we're not actively engaged in the development of Etherium, we we recognize that it's something that remains a priority for a lot of those that are involved in the development of Etherium.

And that's very important. So I think that immutability is like the perfect implementation. But again, because a lot of this tech is still being developed in real time, it's hard to have immutability. Absolutely. One thing I was curious about is obviously liquidity. We use liquidations. You know, ether for price stability. How about for beach stocks since it's on collateralized, how do you maintain the price stability?

And with the credit system, be good. If you could shed a little bit of light on that, I think for the audience as well, that'd be good. So there's a couple different layers at this point in time to the Bienstock tag maintenance and the let's talk about first where the price is derived from. The price of a being is derived from the liquidity pools that it trades.

And so what's the being worth? Well, it's worth whatever you can get for it. Now, why is there any liquidity for for beings or a liquidity being provided to trade against beans? That's because Bienstock offers interest in the form of new being mints to depositors of liquidity pool tokens. And so you can provide liquidity and liquidity pools that being traded in that are whitelisted for deposit.

You can deposit them in stock and by depositing them you receive stock, which is the governance token. And stock entitles you to a portion of future being mints. You also receive seeds. Seeds entitle you to more stock over time. That's related to some of the stock native incentives, which we won't get into at the moment. So there is some liquidity trading against beings and the baseline mechanism, the credit of the system is that if there's too many beans, let's use a base example, even though there's no being USD fee pool, let's just say the goal is for the ratio of beans and the ratio of USD in the pool to be equivalent.

Right now there's a bean three curve pool. So it's beans to the ratio of three curve times the three curve virtual price. But the concept is if there's too many beans in the pool over the previous hour being stock will try to borrow beans from the market in order to remove the beans from the supply and return the price to its peg.

And the point is, if you assume that the market is at some sort of equilibrium, if people are going to lend beans to the protocol, they need to buy the beans in order to lend them to the protocol. So if the protocol is creditworthy and people are willing to lend to the protocol, the protocol should over time be able to borrow enough beans to return the price to its peg.

So that's the core base peg maintenance mechanism that gives beans their value. There's liquidity incentivized to be provided because of the senior edge. If the price is too high and then when the price is too low, the protocol tries to borrow beans to remove them from the supply and beans. If you want beans to be in stock, you receive debt from the protocol.

The debt of the protocol are called pods, which are first in, first out zero coupon bonds without a fixed maturity. So whenever the the ratio of beans to USD C again, in theory there's not let's say now there's not enough beans in the pool, the price is too high. Bean stock can mint new beans in order to try to return the bean price to its peg.

And when Nubians are minted, the distribution of beans. Our beans are divided between creditors, people that hold debt from the protocol and depositors, people that have deposited liquidity pool tokens or beans in the protocol. And so that's the primary. That's the primary set up. Now, there's a second layer, which at this point has become another major layer of peg maintenance called convert.

So the concept is and going back to immutability convert was something that was introduced in December, five months after the protocol was initially deployed, after there was a lot of data around peg maintenance. And the way convert works is that you have all these depositors that have liquidity pull tokens and they have beans. And in short, when the price of a bean is too high, when when there's not enough beans in the pool, anyone that has deposited beans in the protocol, they can convert their deposited beans into deposited liquidity pool tokens, which has the effect of adding beans to the liquidity pool and lowering the price back to its peg and vice versa when the

price is too low, meaning there are too many beans in the pool, depositors can remove beans from the liquidity pool and in effect return the price back to its peg. So convert functions of the secondary mechanism from an economics perspective, but perhaps a primary mechanism from a a practical market behavior where if you look at the on chain activity, a lot of peg maintenance actually happens from converts at the moment as opposed to from debt issuance, which speaks to the improved efficiency of the PEG maintenance model as a result of the ability to upgrade the protocol.

So that's really the nuts and bolts of how peg maintenance works at a high level. I know nuts and bolts at a high level is sort of oxymoronic, but there's a lot of layers to the tag maintenance system, so we can go a lot deeper into how an anything works. But that's, that's like the macro picture of what's going on.

Thanks for that. I think I mean, it seems like the three functions that you would expect from a decentralized stable are kind of hit with that. I guess when you think about censorship, resistance, liquidity, instability, it seems like with with all those different facets that you guys use seems to seems to provide all three of those things, which is, which is good.

One thing I think for both liquidity, the liquidity community and also for the arts community, which would be exciting and I guess you know something that both our communities would look forward to, is this being LAUSD pool that we've heard about. So from my understanding, there's a you know, there's a proposal or I'm not sure if you've already done it.

There's a white list for LAUSD in the silo. Could you give some information as to when we can expect it and know what's the what the expectation is regarding that? Sure. So the there's a couple of things to be said. One is that prior to being is being exploited in April, I think it might have been in March, the being in LAUSD pool was originally deployed and whitelisted in the silo.

And what that meant is that people could provide liquidity to the pool and deposit the LP tokens in the protocol. Now the liquidity pool had started to grow and had a little over $1,000,000 in liquidity, I think, at the time of the exploit. But looking back, the the whitelisting of LAUSD, the LAUSD pool was something that we we thought was a great decision in hindsight, and that's because of the immutability, the decentralization and the strong peg maintenance of USD, even though it's paid between a dollar and a dollar $0.10.

The reality is that doesn't matter to stock at all, because being stock wasn't driving the price of a bean from LAUSD. It had it done. As we've been talking about, a separate way to measure the price. And so it was just a question of decentralized liquidity. And we felt that the LAUSD pool was a really nice complement to the being e pool because to some extent you have it if you have a significant portion of the liquidity trading against beans that are volatile oil assets like Etherium, then you need a significant, more significantly more amount of conversions happening in order to maintain the peg tightly.

Whereas if you have beans trading against LAUSD, there's a lot less active peg maintenance necessary and a lot less implied volatility in the bean price. So to some extent that's a good thing. On an on the other hand, it's nice to have the protocol deal with natural volatility. So I think from that perspective right now, the the goal is to roll out a B e pool in the coming month or so.

I don't have an exact timeline for that. And then hopefully LAUSD will be shortly thereafter. And then one of the one of the things that has always excited us is, is that Beanstalk is able to support a really high level of composability on top of that area. And so through the creation of a liquidity pipeline to Beanstalk, at some point, hopefully soon people will be able to take their Etherium and deposited into a liquidy trove mint LAUSD against it, provide LAUSD into a being LAUSD pool, and then deposit those LP tokens in be in stock in a single transaction.

And so it's unclear on exactly when all of that will be possible, but that's some of the really cool composability that Beanstalk is able to support. And it's certainly a priority given given how much we like liquidity now that I think that's music to the liquidity community's ears and U.S. fans as well. Yes. If you have one single transaction which allows you to do all that gas efficiency, obviously this time the demand is a bit low and they do remain that.

But obviously on that front is going to be that. That's very cool. Is that something you see sometime in Q4 or would you say it's still you have no really set date so far? No set date, but, you know, hopefully sometime before the end of the year, that's not that's not unreasonable, but not for admittedly cool one. One other thing that, you know, that's we'd like to know more on, I guess, is the zero fee amp that you guys have 0:04 p.m. and that is when you just hear the term zero fee kind of the past year or so.

Could you shed a little bit of light on as to what that is and how we can offer no fees? Sure. So one of the really interesting things about Beanstalk is that Beanstalk is able to attract liquidity through seigniorage, right? We go back to the original reason why people are depositing assets in the protocol is to participate in the senior edge when new beans are minted.

Some of those beans are distributed to the depositors. And so the starting point is that bean stock can attract liquidity prior to the exploit being stock kind attracted like $80 million in non being stock native assets. And at the time it had issued like 120 million beans. So when you talk about a significant amount of liquidity being stock, it was certainly attracting it.

And the point is it was attracting it through seigniorage, not through a trading fees in the amounts the beans were trading in. In fact, the trading fees that are in the arms that beans trade in are really the primary obstacle to peg maintenance. Because if you think about it, when when when market makers are buying beans below peg and selling them above peg, the profit is significantly and then to buy any sort of trading fee.

So on Uniswap, the 30 basis point trading fee makes it such that buying beans above 99.7 is not. It's like you're paying every every bean you buy above 99.7, you're paying above a dollar and vice versa. Any bean you sell above a dollar and put a dollar and $0.30. You're you're, you're selling it below a dollar. That makes peg maintenance really tricky.

Or high friction perhaps is a better way to say it. And even on a curve that four basis point fee is pretty, pretty expensive when it comes to peg maintenance. So the concept is given that bean stock is attracting liquidity through seigniorage and it really to bean stock, the trading fee is a cost. It makes a lot of sense to deploy a dex without any sort of trading fee.

And in doing so it should support PEG maintenance significantly. Thanks for that. One other question. I guess this is more I don't think this is specifically beanstalk, but also I guess it's related. Beanstalk is this generalized marketplace that you built on top of Beanstalk. I believe it's called Root. What is Roots, I guess is is my first question.

I think I saw an announcement about it a couple of weeks ago, but if you could give an explanation as to what root is, how it will help facilitate a relationship between Beanstalk farms and Root as well, it'd be good for us to know. Sure. So Root is something that's exciting to us. Root is the first private company to raise money to build stuff on top of Beanstalk.

And so they announced a couple of weeks ago that they raised something like $9 million in the seed round to develop prediction markets and certain derivatives on top of being stock. And to be to be frank, that is in and of itself sort of very exciting that there are other entrepreneurs that have started to notice beanstalk and recognize the potential to build cool things on top of it.

And oh, we're pretty excited about it. So what exactly is root or root? Is a company a protocol? I don't know exactly what it is, but they're building they're building some cool prediction markets on top of Beanstalk. So what does that actually mean? So why is that? Why is this important? So right now there's lots of different prediction markets on a theory and they all suffer from really low liquidity.

The reason for that is a similar problem to the problem that's plaguing a lot of Defi, which is that the opportunity costs associated with using the protocol are really high because you have to lock up collateral. There's a an opportunity cost associated with locking up that capital. And in particular, if you look at the borrowing costs on Stablecoin loans, that makes it really expensive.

So if you're going to borrow stablecoins to make markets or you could just lend out your stablecoins instead of making markets that put sort of a floor of the required profitability necessary to provide liquidity on these prediction markets and that flaw of profitability created by the opportunity cost makes it such that these markets can't compete with Vegas and therefore there's nothing there's no real economic activity happening in Defi in general and prediction markets in particular.

And so if you look at Beanstalk, if you have assets deposited in the silo in the protocol, you are receiving interest payments as the protocol grows. And so in practice you don't want to withdraw your assets from the protocol and stop receiving interest. You want to start to be able to use your assets that are deposited within the protocol and do lots of different things with that.

So a very basic but very obvious use case for what to do with your deposits that are earning interest is to start betting your deposits on different things. So different types of prediction markets, that route will hopefully develop and incubate to facilitate the use of deposits that are earning interest. That is something that we think will create a lot more liquidity around prediction markets and hopefully serve as a proof of concept that markets built on top of being stock fundamentally solve the opportunity cost associated with current Defi protocols.

That's very interesting. So I guess it could be a prediction market. I would assume that you could. I remember reading and correct me if I'm wrong, but there's also a potential for buying or selling NFT represented goods and correct me if I'm wrong here, but I also read that is there is that something that route will eventually kind of support on a tour?

I read that too. I'm less familiar with the inner workings of those plans, but I think that there's a lot of good stuff happening. So called, You know, one of the cool things is that the Beanstalk ecosystem in economy is growing so much so that there's lots of questions that at this point we we don't really have good answers for.

And we got to defer to a lot of the different people build the different things within the beanstalk ecosystem. So perhaps these are questions better geared towards people working route directly. Absolutely. Regardless, it's a it's a it's a nice appreciation of the of the beanstalk ecosystem for them to be building on top of it. Right. I think those those were the main questions and topics that we to discuss.

I guess what we'd be doing now is have a quick Q&A session. So if and if you have a question, please raise your hand and then I'll invite you to speak. You can ask myself or Publius or even the Beanstalk marketing team any questions. So seems like we have a pretty quiet crowd today, but a pretty clear position.

Yeah, I'm leaning towards that as well. Well, I guess there are no questions from many of the audience and check to see if anything there is one. So from J, let me just give you approval to speak and you can unmute your email, Mike, and ask a question. Sure. To C Oh, I have a question. Go ahead. Unmute yourself and ask.

Great. Thank you so much. So I'm pretty new to being stock and I've just been reading through the documentation and I was learning about the parts system and on the website it seems like there's quite a few parts in line. Are there any concerns about like maybe being stuck taking on too much debt?

That's a fabulous question. And to some extent it's the ultimate question, right? Because if the protocol issues too much debt and people view it as no longer creditworthy because it's too indebted, that would basically be the undoing of the PEG maintenance model. So to some extent, and this is something we hadn't previously spoken about the way the protocol works is that it optimizes not just around the price of a bean, but also the debt level of the protocol.

And if you look at the history of bean stock, there's a couple of things to note about this exact point, the most important of which is that from the inception of the protocol, until I don't actually remember what month hold on, going to the to the Bienstock website to check out the analytics to try to get the exact the exact rate.

But if you look at the pod rate, which is the bean starter debt level from the time being stock launched until January of 2021. So for like six months the pod rate just went up straight up and the protocol continued to take on debt despite the fact that it was maintaining peg, it was not efficient at issuing debt and paying off debt in an effective manner.

So it was unsustainable. Now, the Padres grew in order significantly to like 1300 percent, and then it sort of flattened out and grew up to like 600% in March. When in March, it started to decline for the first time and it declined for a couple of different reasons. It stopped increasing as the result of a couple of different bean stock improvement proposals that were implemented.

But the concept is that it wasn't until March that the protocol really demonstrated an ability to de-leverage and pay off debt. And once that started to happen in March, that coincided with a major growth cycle that being stopped, went through and was in the midst of until it was exploited. And so since the exploit, there's two things that have happened.

One being stock issued a lot of debt in order to recapitalize itself and two, the being supply was cut down significantly. So the result is that the amount of outstanding debt increased and the beans supply decreased, which made the protocol more indebted. And to some extent, Jay, this really speaks to, well, how much debt and what what debt level is too high.

No one really knows. It really is the ultimate question. But there's something very comforting in our opinion about the fact that the protocol had after replant as high as like a 3,000% pad rate and now it's stabilized around 20 500% pad rate, that is encouraging to us. And the concept as well is a 5,000% par rate sustainable? Is the 10,000% rate sustainable?

No one notes, but the higher the pod rate the beanstalk is able to sustain itself at, the more comfort people should be able to feel. Whenever Beanstalk ultimately does get leverage and get back down to a much healthier, more more obviously sustainable pod rate. So 25 is pretty egregious, but nonetheless, it speaks to the potential of the protocol and people viewing it as credit worthy despite its many issues and problems and the exploit.

And that's very encouraging.

Gotcha. Thank you so much for that detailed response. And yeah, I'm a big fan of decentralized stablecoins, so I think you know both what y'all are doing at Beanstalk and Liquidity is really great. So thank you all so much.

Thanks for your question, Jay, and thanks for that response. Probably a cool I don't see any other questions from anyone else, so I guess we can wrap it up. Thank you to the Beanstalk team and all of you guys for joining the spaces today. I hope you learned a lot from from the explanation that the Beanstalk team provided and also from ourselves on the importance of decentralized Stablecoins And if that's all.

Have a lovely weekend.