Beanstalk University Class #28

May 31, 2022
0:00 Intro • 0:20 Opportunity costs to Convert • 4:40 How would you remove the potential of losing Stalk when Converting? • 6:28 Why not give 4 Seeds to Bean deposits? • 9:25 Has the 20% of committed capital changed? • 10:25 Thoughts on permanent Silo Deposits? • 17:52 What would the $ROOT token do in the Root Finance ecosystem? • 19:40 Any updates on the audits? • 21:30 Root fundraise • 21:45 What are the benefits of buying Fertilizer vs. depositing in the Silo? • 25:32 Ideas for what could be built on top of Beanstalk • 27:50 The Idols Guardian of Beanstalk NFT • 29:27 More on protocols on top of Beanstalk • 34:30 Would Beanstalk use the same Pod Line if it issues additional assets? • 35:57 What does Beanstalk look like at scale? • 49:55 Thoughts on FRAX • 52:18 Thoughts on using Aztec L2 • 53:17 Thoughts on reducing the length of the Pod Line during growth phases
Beanstalk University


Notes and Questions

Right now with Convert, you lose Seeds if you Convert from LP to Bean. You also might lose Stalk if the BDV is below the initial deposit amount. Can you shed some light on why it was designed this way?

  • When it comes to Seeds, the question is which Beanstalk wants to incentivize more. Deposited Beans don’t really do much for Beanstalk, whereas LP provides liquidity and thus utility for Beans. So it makes sense to have the number of Seeds offered be different, and it’s ok for there to be a cost to Convert in this case.
  • When it comes to Stalk, it is possible when Converting LP to Bean to have a lower BDV than the initial deposit due to impermanent loss. How should the system treat this change in BDV? It does make sense to change this whereby there shouldn’t be a loss in Stalk if there’s a decrease in the BDV.
  • This is a no brainer to change sooner rather than later.

Has the 20% committed capital changed?

  • Generally in the same place, interest might be a bit higher than that.
  • We’ll probably get to 20% or close to it prior to the restart, on Day 1 of the Barn Raise
  • Still at 10%-ish as far as having money in wallets/bank accounts

Thoughts on permanent Silo Deposits?

  • There’s nothing wrong with it inherently, but with regard to Beanstalk, it doesn’t seem to be advantageous. It seems like a marginal benefit. Beanstalk would have to pay a premium to get people to do that and it doesn’t seem beneficial in the first place
  • Beanstalk is designed to minimize the ease at which it can’t be front run, as it doesn’t do any open market operations outside of a Season of Plenty (in which case it wants to be front run)
  • Gameability of Convert—with withdrawable deposits, there’s no guarantees that Convert actually happens. With permanent deposits, everyone can operate under the assumption that at some point that deposit will Convert
  • A permanently deposited Bean doesn’t help anyone, there’s no point of having supply that’s locked forever
  • The existing Stalk system already works such that the longer it is deposited, the larger the cost is to Withdraw

What would the $ROOT token do in the Root ecosystem?

  • Unsure. In general we’ll push for rent-free protocols to be built on top of Beanstalk
  • If you look at $UNI where the value is governance and/or the potential fee share in the future, those tokens are kind of useless.
  • As far as we know Root is still working on the rate swap and then will focus on the $ROOT tokenomics.

Any updates on the audits?

  • Halborn audit is underway, nothing too substantive that they’ve found
  • Trail of Bits starts next week, will be wrap up the code changes for them by then

What are the benefits of buying Fertilizer vs. Depositing in the Silo?

  • Difficult to compare before knowing how much Stalk/Seeds have vested. If there’s minimal participation in the Barn Raise, then the Silo would be attractive because there wouldn’t be much Stalk/Seeds. There’s a lot of factors that would need to be considered to determine the benefit of Fertilizer in that case given the amount of Active Fertilizer and the Humidity.
  • In an efficient market you would expect the return on both to be similar at a given time.
  • Fertilizer will become attractive as more of it is paid off

Any ideas for protocols to build on Beanstalk?

  • Depends on what your skill set is! The use cases to build on top of a positive carry stablecoin could be infinite.
  • In the early days, basic derivatives like Root make a lot of sense
  • Other UX issues that could be addressed via protocols that automate things on top of Beanstalk
    • auto-farming Stalk
    • during Soil wars, smaller farmers find it difficult to Sow. A bot could pool funds from them
    • Deposits are non-fungible and don’t follow any standard. There could be a Silo interface
    • Pooled Convert

What’s going to happen to the Idols Guardian of Beanstalk NFT?

  • No idea at this point

Would Beanstalk use the same Pod Line to issue other assets?

  • If there’s a different Pod Line, then it’s really a different Beanstalk.
  • There are some friction points from an economics perspective that would need more thought here

What does Beanstalk look like at scale? In a steady state situation where there’s minimal growth in the Bean supply and the market already has a lot of Beans.

  • Scale would look like Beans being used as the main currency in the world.
  • In a situation where there’s minimal growth, the reasonableness of lending to Beanstalk may come into question.
  • Even if there is net new Bean growth, we think there’s still a steady state where lending to Beanstalk is attractive.
  • The Convert functionality decreases the amount of debt the protocol needs to take on.
  • Additionally we would make the argument that if Beanstalk is creating a stable asset, there will be increases in demand for that asset
  • The skepticism is welcome!
  • [lots more nuance that Publius covered that you can listen to in the recording]

Thoughts on FRAX

  • We saw that after Terra collapsed they indicated they were inclined to change to a credit based model, because it became clear that partial collateralization doesn’t work on-chain. The only way to do so is to use credit (outstanding obligations from other protocols) rather than endogenous collateral.
  • It’s hard to ignore that they use USDC for collateral. There’s sort of a gun to their head at all times. It’s hard to get passed that.

Thoughts on using Aztec L2

  • Aztec is really cool, we are big believers in the potential of ZK proofs. And we like that Aztec is ZK first. Sort of a question of when Aztec is ready for Beanstalk

Thoughts on shrinking the Pod Line during growth phases

  • If the Pod Rate is below the minimum Pod Rate, in theory it makes sense for Beanstalk to offer debt up to that minimum.
  • When the price is above 1, under the current parameters the Pod Rate will stay the same when demand for Soil is high
  • The suggestion is that the Pod Line decreases as well. That seems more sustainable


um just just before we start uh reminding everyone that you know um june 6 at no one eastern or 9 a.m pacific time that's six days from now is when the boundaries uh begins and we can start our class for the first question that was from austin actually almost a week ago and the question publius is right now the way that convert works is that you lose seeds if you go from lp to beans and also there's a chance for you to lose uh bdv if if the bdv of the lp is you know below uh uh the deposit amount uh can you can you shed some you know um understanding on why why is it designed this way and is there a possibility for it to be changed in the future definitely so the the question on seeds is a little bit easier to answer uh if beanstalk allowed you to keep your seeds when you convert deposited lp to deposited beans uh the question then becomes well how do you handle things uh when you convert back to deposited lp again do you get more seeds so to some extent the nature of the stock system is that there's a maximum seed per bdv and that creates a linear growth in stock which is essential to the long-term distribution of stock over time and so the the concept of letting people farm infinite seeds is pretty unattractive however the concept of when we talk about your stock so your stock is a function of your grown stock and the stock from your bdv and when convert was originally introduced there's two directions for convert you can convert your deposited beans into deposited lp tokens in which case there's no change in bdv uh at all and so this isn't a problem but in the case where you convert deposited lp tokens to deposited beans the bdv is unlikely to be the same as the bdb under your deposit and so the question is and that's because the impermanent loss under the lp token uh denominated in beans in that time and so the question is how should the system treat this uh change in bdv and when convert was originally introduced the thought was to be conservative in the reward for converting whereby if there was impermanent loss in being denominated value uh there the thought was to have a haircut in your stock on your bdv reflect that and that that in practice did introduce some friction on the converts uh when beanstalk was back up and running uh there were some people in the discord that highlighted that they were losing stock when they were converting lp to beans and so that's a friction point and when you consider the protocol level beanstalk wants to incentivize an efficient conversion uh it does make sense to uh rem or change i would say the policy that the protocol implements when you convert lp to beans whereby the there shouldn't be a loss in stock if there is a decrease in the bean denominated value and so it's a less extreme uh incentive than allowing people to compound their seeds if you will but then that is a much more frictionless experience when it comes to converting in both directions and so that in theory should encourage tighter peg maintenance on both sides of the peg in this case particularly on the downside so this is a pretty simple change to implement uh and would be among the uh parameters that we would probably encourage uh being implemented upon restart uh and so there's no reason why not to implement this you know sooner rather than later and so uh the concept is yeah this this is a no-brainer to change sooner rather than later okay uh and just to help me uh make sure that i understood this how are you going to stop the uh the potential of accumulating stock uh sorry seeds if you keep doing that so you keep going back and forth so there's no extra seeds you still forfeit your seeds when you go from deposited lp to deposited beans so you'll be accruing less grown stock per season uh but you'll the the change that we're suggesting is is purely with regards to the not even the grown stock just the stock for your bdv which is one to one and so the question now here is how do you handle the change in bdv got it i'm guessing the reason we can't do that where we basically stop someone from going back and forth is otherwise that has because otherwise all c's are fungible and you'll have to differentiate between them to know which ones you know went one side and coming back well there's there's there's a couple different reasons why not to do it but uh you know the the main reason is to minimize the the accumulation of excess seeds per bdv when you think about the structure of the stock system there's a maximum seeds per bdv so there's a maximum grown stock per bdv and you don't want to compromise that maximum by allowing people to farm their stock farm their seeds excuse me if you farm your stock that doesn't compromise the seed per bdv uh ratio for the grown c grown stock per season per bdv ratio got it okay and awesome then follows up um what what this advantage be then if we just give four seeds to everyone you know lpa deposits being deposits everyone gets four so that's an interesting question now in reality holding beans and holding lp tokens uh have a different risk return will have a different risk profile first off and from beanstalk's perspective have different benefits to the protocol so beanstalk would much prefer for people to hold deposited lp tokens now i think where austin's ques and the reason is because it wants there to be high levels of liquidity now where austin's question seems to be coming from is the friction around people forfeiting their seeds when they convert deposited lp to deposited beans that's okay in the sense that beanstalk doesn't necessarily want everyone to convert at 99.999 sets uh instead the the goal is for there to be some range over which people want to convert and so having some friction where there is a a cost benefit analysis that needs to be made on uh whether or not it's worth converting uh and forfeiting the seeds relative to the benefit from the extra beans that you get or the stock that you get from buying beans below peg that's uh that's a friction point that at the moment uh i think beanstalk is comfortable with as the model continues to play out that may present itself as a sore spot but at the moment uh it doesn't appear to be one and therefore you know hard to hard to speculate as to you know you don't want to change things before they present themselves as issues per se but that is at the margin you could make an argument that you want to minimize the cost as much as possible while still having some marginal benefits you could do three seeds and four seeds you could do three and a half seeds and four seeds how does this relate to the bean stock gauge system uh it's all unclear so these are very good questions and i think this the yeah uh unclear on whether or not it makes sense to change the seed per bean deposit ratio uh but at the moment would think that uh i think that's not necessary or advantageous to the system uh but but perhaps we'll see how this plays out uh you know over the next couple months and and that may change yeah and i guess especially with the gas system i guess these questions are going to be more discussed once you switch harry smith asks the 20 indication of interest and 10 on the wallet has any of that changed uh the short answer is i think those are generally the same place we're at i think the the actual interest is probably probably a little higher than that uh such that i think we will get to i think we'll probably get to 20 prior to the restart that may be like actually in day one that may be a little ambitious it's like a you know but when the thing restarts we'll be at basically 20 but i think we'll be close to that and you know if that's the case we'll be quite excited in terms of money in the wallets or in bank accounts i think we're still at 10 10 ish percent maybe a little bit more uh you know memorial day weekend not too much has happened all right um neurovirus asks asks two questions we're going to uh the first one is what do you think about the permanent deposit idea that syncs idea and then the second one is do you think an idea like that is to be implemented natively on beanstalk or on a protocol on top of being stock well the two questions go hand in hand ultimately there's nothing wrong with a protocol that locks in deposits however at the beanstalk level there's not there's not as far as i can tell an obvious advantage to having locked deposits now i mean maybe when you think about the the liquidity that would want to leave the system in a wind down like a true one like a a collapse that if you have lock deposits that sort of minimizes the overhang above the system but it's like a what does that even mean it's a marginal benefit and at the end of the day that doesn't substantively change the economics of the protocol at all then the question becomes well why would anyone lock something in permanently being stock would have to pay them to do that and so given that again as far as i can tell or we can tell there's no there's no benefit to beanstalk to having people permanently lock their deposits or obvious benefit it's hard to justify beanstalk paying a premium for people to lock their deposits now there's lots of different protocols that we hope will exist on top of beanstalk we assume many of which will have uh treasuries that are permanent to some extent and therefore they may never withdraw from the silo or they may commit to never withdrawing from the silo but but it doesn't make sense to to implement that directly at the beanstalk level as far as we can tell okay during the discussion uh publius and um i had a few comments on it and i i described an idea of having a permanent deposit to defend peg again or similar to collateral it will behave the same way a collateral behaves and and thinks uh a reply was that that that was a mischaracterization i wanted to hear your your opinion on that or your thoughts on that if we have a permanent deposit that's locked in the protocol and is there to defend peg does this not behave the same way connected would well it's actually worse than collateral because you have this reserve now of locked deposits that are either going to be beans or lp tokens and they'll be distribute this this reserve will be distributed as some percentage of deposited beans and deposited lp tokens when the price is too high it'll convert and the ratio will increase to more deposited lp tokens and when the price is too low the ratio will increase to deposited beans the problem is how do you when do you when do you do that when do you implement that and so you would need some random uh certainly pseudo-random at a minimum but hopefully more random than that uh truly such that the protocol can't be easily front run on on the converts in either direction and that's really the the problem that we see there now being stock from a first principles perspective has been designed to minimize the ease at which people can be front run because the protocol doesn't take any open make any open market operations itself other than selling beans on the open market during a season of plenty and it's comfortable doing that because it wants people to front run it meaning it will only sell beans on the open market if no one whatsoever is willing to sell beans and the fact that it is going to sell beans means that you'd expect people to front run it and sell and so the fact that it is selling beans means there's no cell pressure whatsoever but other than that beanstalk takes no market action in any case and the the concept of having permanent deposits that are now making open market operations to to keep the peg at the protocol level that's highly highly unattractive at at the level on top of beanstalk where you have uh independent dows or market participants all competing to do that against one another that's very attractive and aligned with a competitive marketplace that would create a strong but randomly maintained peg based on supply and demand that is a little bit harder to game then then per se if it was all done at the protocol level so we would be we you know it's not to say that you can't do it but to do it in a way that isn't easily gameable is very difficult so just to add on a few things there you know number one talking about the game ability of convert you know with kind of withdrawable deposits there's no guarantee that the convert will even happen you know everyone who has deposited lp could withdraw at any time and sell if we move into a world of permanent deposits that's no longer the case if we have permanently deposited liquidity there's nothing it can do but convert and therefore it's like you know everyone can operate with the assumption that all permanent lp will eventually convert and yeah we can try to make it random kind of at what point that convert happens but the point is it's still guaranteed to convert and you know it's kind of hard to kind of think about whether that's gameable or not and if that kind of you know goes along with the assumptions that we've made with the current convert structure um in addition to that you know having a permanently deposited bean doesn't necessarily help anyone right it's like if we have a permanently deposited bean why does that even exist like we might as well just burn it like what's the point of creating supply just to lock that supply forever and then kind of the third thing is you know we already have this stock and seed system to incentivize people to deposit things for longer and it's already intended to work such that the longer you leave something deposited the more it costs to withdraw so when we talk about whether we should add a permanent deposit system or not you know obviously the question is the first question is okay what's the additional incentive to lock up a deposit forever and the question is you know given we already have this stock and seed system with increasing opportunity cost of withdrawing is the system willing to sacrifice any additional rewards at all in order to get someone to permanently lock their deposit forever if they're already kind of going to be incentivized to never withdraw in the long run um so just a couple of additional thoughts there completely agree with the with the stock system that the stock system is designed to do the same or achieve the same objective as what the permanent deposit is you know trying to do um i guess lastly as well is the scalability of it if we come to agree that a certain percent of uh pyramid deposits as you know the equilibrium point or being stock is happy with it then how does bin stock scale scale with it and if it doesn't scale with it then you know that's an additional change that you know you want to keep looking at and try to find out some meaning of it of what that means all right a question from austin about the root talking what what what will the root token fit in in the root ecosystem what does it mean to hold that token i guess uh i have no idea uh have spoken with the manifold and the root team a little bit about this uh at this point in time it's unclear exactly how the root token will function you know the the thing that we're pushing for and anyone that wants to build on top of beanstalk and wants our help the thing that we'll push for in general is for there to be rent-free protocols built on top of beanstalk and so the question is the concept of having a uniswap token that the value is through governance and uh in theory like some future fee you could impose on the system is kind of ridiculous uh you could make an argument that there's iterations of that that are better but at the end of the day those tokens are all really worthless and so the question is how do you build a token to support or or create or facilitate a decentralized frictionless protocol built on top of beanstalk uh i don't necessarily have a good answer for it uh at the moment but uh know that the root token or the root team i should say uh they're all working pretty hard on that at the moment and uh we'll be very excited to see what they all come up with so i think it's still a little bit early on the token side uh as far as i understand it they're still implementing the rate swap uh stuff in solidity and then from there we'll uh focus on the token token economics all right a question from tearboy asking uh any substant substantive updates uh from from the audits uh any findings and like you know changes in in the timeline i guess from from the audits uh not to my knowledge uh published you want to comment [Music] yeah um you know the hal born audits underway um you know nothing too subsident so far that they found you know they're chugging along well and you know trailer bits obviously starts uh a week from yesterday so looking forward to that you know uh we'll probably you know we'll pretty much you know we'll be able to wrap up the rest of the code changes by then and you know hopefully we can you know tie up the code in a nice box give it to them and get it back you know as soon as possible um it's just you know hard to you know there's a lot of new code and a lot of very complicated code being added alongside the new proposal um you know so fingers crossed that doesn't cause any hiccups and sort of in terms of timelines and such but you know the the goal is to be able to get this protocol up running safely uh you know not swiftly thank you for that a question from bean i guess follow-up uh to the permanent deposit idea but maybe it's a general one is asking would something like this be built uh you know added as a facet to reduce gas cost or it should be kept separate i think this question is applicable to anything built on on beanstalk i think it's likely to be a separate separate protocol instead of a facet of beanstalk right a question um about uh the routines um and the question is you know who are the investors and is this happening or not i believe the right person to answer this would be mr manifold so you know reach out to him and ask and ask that question to a boy the guilfoyle asks what are the key benefits of investing in fertilizer now versus the silo when beanstalk resumes well the apples to apples analysis is difficult to do before you know how much of the stock and seeds have vested and so the it's a it's a little bit hard to model now if you have no participation in the barn raise whatsoever close to zero which again we don't think is is likely at this point but if you have you know sing low single digit percentage participation that is likely to you know that's likely to to basically make the silo very attractive because there won't be a lot of stock and seeds at the moment so each dollar of capital you add to the silo will get a significant amount of future bean mints so how that relates to the return on fertilizer is based on a lot of different factors uh including what the fir the humidity is including the amount of fertilizer that's sold out including the the percentage of the fertilizer that's been paid out including the amount of stock that's been issued uh from vesting and from people adding to the silo there's infinite variables but the concept is you'd expect in an efficient market for the return in the silo and fertilizer to trend towards a similar rate of return now whether or not the bean stock market is sufficiently efficient for that to happen you know i think that we might be a little early for that but in theory because of their nature you'd expect them to be somewhat similar now because the silo does have liquidity you can withdraw whereas fertilizer once you once you purchase the fertilizer you can't un-purchase it you can only sell it on the open market in theory it is a it is a different slightly different liquidity profile so there may be some difference in the return reflected in the market because of that but otherwise you'd expect them to to trend towards to to be somewhat similar now i think what's more likely to happen than not is unless the barn race fills very early on the silo will become uh more attractive than fertilizer for a period of time until the existing fertilizer has been largely paid back and then at that point the fertilizer will become very attractive because you can receive a low return but a high percentage of future beam in so you'll get a high return very low return very quickly which on an annualized basis would be still very attractive so the the thought would be that the silo would would be more attractive than fertilizer in most cases and that's that's by design in part the goal would not be to have fertilizer crowd out the attractiveness of the silo so to summarize this would you say if let's say equal amount of money not having the ability to withdraw is not like you know of concern it would basically be the percentage of your uh your ownership uh um in the silo versus the percent of fertilizer that you have versus outstanding fertilizer to be paid is that right generally yes okay um question from neurovirus uh asking if do you guys have any ideas on protocols to be built on top of bean stock and you know he's happy uh to build and wondering if the team is up for that i guess neurovirus can help build bean stock itself so reach out to the team and you know we will be happy with your help on the protocol itself and then on any ideas that comes to be built on top of it as well well we would also just add though it depends what your skill set is uh one of the cool things about a positive carry stable coin is that what what it facilitates is potentially infinite so the concept is it depends what what your what your background and expertise and interest is and then that would be the starting point for a discussion on what to build but think that there's a wide variety of different things in terms of early days you know something like root where it's a rate swap that is a basic derivative on top of beanstalk that will facilitate more adoption of beanstalk because people need fixed yields to facilitate other stuff uh that's a very clear obvious first use protocol to build on top of being stock there's lots of other derivatives and financial products that also make sense to build on top of being stuck in a decentralized fashion but beyond that the goal would be to to start to build an entire economy of products uh on top of a positive carry stable coin so what what what does that consist of there's there's i mean there's infinite things that need to be filled in in terms of on-ramps wallets uh credit cards debit cards there's infinite parts of the beanstalk economy that can hopefully get built so we would highly encourage you if you're serious about that to to reach out maybe we should hop on a call and just uh shoot some [ __ ] and brainstorm and that applies to anyone else that also wants to build on top of beanstalk we love and it guess you can also add a positive caddy currency or even just a decentralized uh uh um currency as well okay if i see a few typing sync asks the custom guarding of beanstalk nft by by the idols team will that be rewarded to an early participant in the boundaries or you know any idea what what uh qualifies that i have no idea on that one sync yeah undecided sync we the team hasn't come to a conclusion how to use that nft but you know welcome to ideas as well on how we think is best to make use of it okay this is the end of the questions maybe we can give it a minute see if we got more see dumpling typing seems like a long question so dumping is following up on the um what can be built on top of beanstalk you know what what ideas uh can you elaborate a bit on you know you've mentioned a few things like financial derivatives maybe publius can you elaborate a bit on what could be built on top of beanstalk so the first things that come to mind that are kind of basic are things to improve the user experience around bean stock so the variable or uh constantly changing rate of being in the silo that's a potentially a user experience issue which root solves another user experience issue is the need to constantly farm your your grown assets uh that is another functionality that can be built on top of beanstalk to be automated in some fashion now there's complexity associated with that and to some extent root a protocol like root may may offer those functionalities because it it facilitates uh more participation in the root protocol but in general uh some sort of auto farming feature when you think about what are the other ux issues with beanstalk right now uh when you have the soil wars uh there's smaller farmers find it on impossible to participate in lending to the protocol you could in theory have uh you could in theory have a protocol that facilitates people to load up a load up a bot with soil and then group group things together and collectively try to buy soil uh there's those are just like very basic things to improve use or experience then when it comes to i mean one of the things that we're trying to work on to facilitate cool stuff is like an a silo interface so one of the most difficult things about beanstalk is that deposits are non-fungible and totally don't follow any sort of standard and therefore facilitating the easy interaction between protocols like root and beanstalk can be can the friction around that can be significantly lessened if there's a silo interface being implemented so uh i know uh publish has been working with the root team on that interface uh because root would hopefully be the proof of concept of something like that uh you know the the concept of a a pooled convert i'll i see bernoulli being shouting that out uh a la what we were just talking about it's not a permanent deposit or something like that or a reserve but a protocol built on top of beanstalk to just convert the only issue with that is again doing that in an autonomous fashion there you do need some sort of like management so that wouldn't necessarily be autonomous but that's another thing uh there's i mean one of the difficult things is timing so ethereum is at the very beginning of its scaling journey if you will and at the moment uh it's a little bit more difficult to implement certain certain protocols on ethereum itself uh particularly order book based protocols and so when you think about all the derivatives that you want to be supported within the silo such that people can basically buy and sell calls and puts on silo yield for example uh that that may be a little bit further into the future because of the desire for order books to facilitate that stuff but i mean the the there's so many different things that you can build on top of beanstalk uh you know we've talked about a zero feed dex uh because of beanstalk's ability to attract liquidity uh a i mean there's there's so many [ __ ] cool things you can build so uh just if if anything the the really big ones you know you don't even wanna like like like mirror protocol that's been been in the news over the past 24 hours uh all sorts of cool stuff you can build on top of beanstalk uh you wouldn't want to implement mirror until it's back to being fully decentralized but uh in the future everything is possible i'd like to follow up with the mirror uh commentary and i guess this is this is a different question um do you see a world where bean stock issues different uh uh like right now we have been you know packed to the usda so it will have other assets back to other things would that utilize the same field or line or what would those be different since you know each asset has its own creditors i guess so the assets would be i mean there's different ways you can do it if there's a different pod line then it's really a different bean stock so at the end of the day you'd expect there to be one pod line but multiple assets that you can lend to beanstalk and then the soil would be priced in one of the assets per se and then there'd be a ratio based on the asset that you you lend to beanstalk but in theory when you have beanstalk issuing other assets there are some technical friction points from an economics perspective haven't really worked through so well i'm sure it is possible to implement uh haven't haven't necessarily gotten to the end of that one there um so that one that'll be a a problem to work on in a couple months hopefully yeah [Music] all right a question from austin um and he's following up on a thread um that i think was by mood or moog i'm not quite familiar with it so let me remember the question from austin and he's asking what does beanstalk look at scale you know in a situation where there's minimal demand for beans uh so we with plateaued basically uh and with we've approached you know the total addressable market uh what happens then is it difficult to reason about what happens in the type of situation in theory and in many ways you know we can only learn in practice by doing it well there's a lot of different questions that were asked in the that thread uh frankly it's hard to address all of them because they're it's a little bit all over the place we tried to do some of it in writing within the thread itself uh but to answer austin's question on a steady state where beanstalk is at scale there's no expectation of future growth from being stuck growing to fill its market and it's now the the main stable coin issuer uh or or uh money issuer perhaps in the world that's really what scale would look like where beans with some some denomination are the main the main currency used in the world that would be what scale looks like and the the question is in a situation where there's minimal demand for beans i think it's probably better worded as minimal growth and demand for beans expected uh such that the the the reasonableness of lending to beanstalk may come into question well that is there's a couple things to be said there one the the protocol has at any given time a current supply and a an outstanding amount of pods and whereas at the moment there's a third a third a third distribution to stockholders pot holders and fertilizer holders normally it's 50 50. but regardless at any time that you're lending to beanstalk you can calculate the the bean supply at which your pods will harvest and in reality though this and so it's presented as you can always uh assuming that beanstalk grows to that size uh you can always you know what your return is you're locking in your return and then the question is well will the beanstalk the plot will the bean supply grow to that size now the question is you're at a steady state where the bean supply is not expected to grow what does lending to beanstalk look like so the the starting point is what is the the pod rate so if beanstalk has a pod rate that is high whatever that means beanstalk defines uh the excessively high pod rate as uh 35 so let's say the pod rate is high uh there may be no nobody that's willing to lend to beanstalk because at a 50 50 split uh in order to get paid back there's too much growth factored in and this is one of the reasons why beanstalk optimizes around the pod rate in addition to the price so instead however if we if we assume beanstalk is at an optimal pod rate call it 15 percent uh which is what is currently defined as the optimal pod rate then the question is well the the bean supply needs to grow 30 in order for your pods to get paid back up or and this is where where things it is a little bit of a technicality but when we're talking about the steady state how things how things work so this is a detail we haven't typically gotten into the calculus on what bean supply you'll get paid back at is actually a maximum so it's what is the maximum bean supply at which you will get paid back at but it could be less than that because beans are constantly being lent to beanstalk and so there's actually a a a constant decrease in supply and then an increase in supply if you're in this steady state in theory the bean supply is remaining constant but the pod line should actually be churning and so then the question is just how quickly would i expect 30 of the bean supply to be churned through entirely now the nature of bean mints and i'm thinking out loud here where only half of bean mints go to paying off debt uh makes it such that it's unclear if you have oscillations above and below the peg how the pod rate will grow if that makes sense so if you're at the steady state the question is how do you make sure that the padre doesn't grow and this is where the communities had some great feedback on even under the current uh soil parameters after bip9 there's probably an additional efficiency that can be introduced such that the pod line doesn't just stay fixed in length it actually decreases when the price is above a dollar uh so that would uh exacerbate the rate at which the pod line is being cycled through if you will and minimize the percentage of the bean supply that needs to be cycled through in order to get paid back but the concept is at a steady state assuming that there's an economy uh on top of beanstalk where there's capital flowing in and out you would actually expect over time for your loan to still be paid back by being stuck and even if and again this is all presuming that there's no growth in being demand which is an assumption i'm not necessarily willing to grant but it's this is arguing uh against a steel man argument where there is no bean growth i think you could still there is still a steady state where lending to the protocol is attractive uh and the system can can continue in perpetuity now there's there's a separate question as to how would beanstalk uh respond when you have a significant decrease in demand for beans but in reality all that would be is an increase in the pod rate if you assume being stuck it's functioning such that now you're you have a decrease in demand and now you're in a steady state the same questions we were just asking uh before apply but at a slightly higher pod rate so there's the same question of sustainability obviously if there's too much of a decrease in demand uh such that the pod rate increases dramatically at some point you may have an inability to attract lenders but we would comment that the convert functionality is it is in practice likely to greatly minimize the amount of debt the protocol actually needs to issue even if you have a decrease in demand for beans now the the interesting thing to say though is when we say decrease in demand for beans it's kind of funky because if someone's converting they're actually buying the beans back and so net net there isn't a decrease in demand for beats uh whereas what we're saying colloquially is people are selling their beats so in the con in the context that there are some silo members that continue to believe in the future growth of beanstalk they can uh stack their beans in stock which in theory is is negating the cell pressure in beans and reducing the amount of total decrease in demand when you have actual decreases in demand that's where you would expect it to be reflected in the increase in the pod rate so substantively again it's very clear how this this gets out of hand and beanstalk potentially is unable to attract lenders where you have too much of a decrease in supply excuse me real demand uh independent of convert such that the protocol needs to issue too much demand and it goes from having a healthy debt level to a very unhealthy debt level and in doing so makes it unattractive to lend to the protocol at a steady state now i do just want to make the argument and this is now having having gone through the whole premise of there is no increase in demand for beings and this does speak to vitalik's point in his in his article that there is it's an it's an unreasonable assumption that a stability or any protocol is built on perpetual growth and so to that point it is very important that beanstalk is able to function in perpetuity in a lot of cases uh without increased demand for beans uh i would make the argument we would make the argument that if beanstalk is is creating a stable asset that apples to apples there will be increases in demand for that asset now whether that's true or not remains to be seen it's hopefully non-substantive as to whether beanstalk can work in reality it probably is substantive as to whether beanstalk can work and so the question is once you face once the protocol faces long-run decreases in demand assuming the protocol is able to return the bean price to a stable level even if the pod rate has increased it will there be new demand to enter the system uh given that it has the beanstalk has demonstrated its stability and unclear if anything that's a behavioral question so we're very i mean i just want to shout out moog for for raising their their their points uh their tone uh was perhaps not the most appropriate uh but it's funny you click on their bio they go to uchicago and it's like yeah exactly like all the other people we went to school with so we're used to the tone we don't mind it per se but would appreciate everyone to to perhaps engage with a little bit more uh friendly discourse in mind as we're all trying our best here but nonetheless the skepticism is very healthy and uh we think it's fabulous that people are pointing out uh any and all potential issues with being stuck and uh you know we invited them to class they said they had a conflict but hopefully they'll be here uh next week and we can talk about this further publish i wanted to touch a bit about the the steady state scenario that that you've described so we're talking that bean stock isn't growing anymore and and growth in general can come from two uh two ways either by you're capturing more market share or the market size itself is growing uh and in your example we said we said that bean stock now is like the number one issuer or you know the major issue where so you know you're not taking market share anymore and now we're questioning if the market itself is growing uh or not is it reasonable to think that the market won't grow anymore this is equal to saying that d5 is not growing anymore or like you know the economy is not growing anymore and while that might happen and it might stagnate but it won't happen forever right so is it unreasonable to to start from the very beginning and say that there's not going to be demand anymore well that is kind of the substantive point right at scale if beanstalk continues to be able to maintain its issued stable coins at their pegs there's no it's hard to imagine that there won't be increased demand for stable assets when the rest of the market is collapsing right so in practice and this is where convert is so powerful if if you are risk off in this environment where the whole market is shrinking the stable asset is going to be whatever beanstalk issues and so in practice the conservative play will be to convert your lp to beans when the prices are too low and the prices being too low will be in practice manifested by the decrease in value in these other assets right so if you have a general selloff in the market de facto beans will be below peg and people will need to convert their beans or convert their lp tokens to beats that behavior is exactly aligned with what what you'd want to take place in the case where people are using beanstalk as a as a reserve or beans as a reserve asset perhaps or a store of value in that instance so and in particular accruing stock during that period of time is also something that's attractive if you think uh beanstalk as a protocol will will continue to function so yeah again this is all kind of presuming that the protocol works uh and then people are comfortable with the volatility in the bean price uh because they generally have confidence that it will continue to oscillate above and below its peg but assuming that's the case it isn't unreasonable to expect beanstalk to actually perform quite well if the if the rest of the economy shrunk yeah and i guess the point is even if economies shrink eventually you'd expect them to grow in in the long in the long run or in the long term a question from alex says frax has been making waves lately with interesting developments i guess maybe it's talking about the base pool that brain mentioned earlier which was uh frank's flex usdc i think and and they said you know participants there are going to get some rewards so what are your thoughts on that and on flex in general so i haven't spent too much time on frax over the past couple of weeks uh we did see that after tara collapsed they they indicated they were inclined to change to a credit-based model which to us is very exciting uh it's a recognition that partial collateralization doesn't work on chain and the only way to to do partial collateralization is in fact uh not to have protocol native collateral serve as the remaining piece but to have credit uh outstanding obligations from other protocols and so to that end we've actually approached them to try to participate in the barn rays uh at the protocol level as sort of a proof of concept that fracs can start backing some of their non-collateralized usdc collateralized portion with debt and bean stock dad and debt in that case there was a draft of a frax governance proposal dropped a couple days ago in their forum hopefully there will be a snapshot actually for them to vote on in the not too distant future to maybe participate but the concept is you know the only the only real issue that we see with fracs and it's hard to ignore is to use usdc and so there is this kind of gun to their head at all times that makes it very difficult if decentralization is a priority to to to to rely on fracks because they rely on usdc and you can't rely on ustc so they're moved to a credit to using debt uh or or exogenous debt to to back fracks that's very cool and we hope they start to lend to beanstalk at the protocol level but beyond that you know don't find it with the usdc the usdc gun to the head is it's very hard to get past that question from sync about using aztec as a network tool uh or an l2 uh solution uh so asic i think um that was john woo's uh uh project or uh he mentioned that and and the advantage of it is batching transactions basically so yeah we had a great twitter spaces with john woo uh aztec is really cool we are big believers in the potential of zero knowledge proofs and in particular the application on ethereum we also really like that aztec is zero knowledge first and it's kind of focused on uh building things out slowly but all zero knowledge and so the question would be more uh when when are they ready for beanstalk if you will uh but but in theory uh yeah aztecs very cool austin uh followed up on the idea of reducing uh the pod line um and you know i wanted to touch a bit on that wouldn't that be the same as austerity where we're sacrificing growth you know uh for for reducing that as as long as we must maintain a certain pod rate or why would we want to reduce our debt well the short answer is being stock there's a couple different cases right and you make a good point which is that beanstalk really cares about its pod rate so if if the pod rate is below the minimum pod rate the wherever debt is considered excessively low in theory it would make sense for beanstalk to offer debt up to up to that minimum because beanstalk always wants to to be at that minimum now above that there's a question of when the price is above one and beanstalk is minting beans under the current parameters the pod line doesn't change length and so the pod rate can decrease but the pod line stays fixed now the the maybe i wasn't sufficiently articulate but the the suggestion is to have the pod line decrease in addition to the pod rate decreasing such that the pod rate decreases faster in certain instances but where we think it's more substantive is where you have a steady state where when the price is above one the pod line decreases and then when the price is below on the pod rate increases again and that's where you can have a more sustainable outstanding debt level uh with a sustainable or a stable supply of beans okay thank you thank you and and i like this idea so we're basically saying maintain the pod line at a specific pod rate and when it's above that reduce the pod line to accelerate the pod rate reduction basically okay austin has dreams about convert i think i think we reach to the end of the questions unless i miss someone's question this was a fun class i i enjoyed it i mean every class is okay i think i think this is the this is the end of the questions or the last of them at least for this week uh publius you know thank you uh for for making class for taking all the questions i guess and see you next week awesome thank you for that thank you and once again six days to go june 6 the barn raises at noon eastern or 9 a.m pacific time thank you everyone