Recordings

Meeting Notes

How did Beanstalk University start?

• Publius is unsure exactly how it started but thinks it started because of a productive AMA

How does it feel to be Publius in Beanstalk University?

• Publius thinks it is a great treat and a luxury that people want to discuss Beanstalk with them. To say it is a dream come true for Publius is an understatement
• The content of Beanstalk University has shifted so much over time. It started just talking about how Beanstalk worked and now things have shifted to the future and macro questions about Beanstalk

What does trustlessness mean and why is it important for a currency?

• The amount of utility is highly correlated with the amount of censorship resistance. Meaning in any given instance how much control do you have over your money
• For example, some people have been hypothesizing the recent downturn of the Pound is there has been a major change in how people view investing in the UK as a result of the censorship of Russian oligarchs

What does low volatility mean and how does it affect the currency?

• Most real economic activity happens through credit or debt. The question of what to denominate that credit or debt in is perhaps the biggest question in what currency to use. If you are a business that is taking out loans, the number one thing that matters to you is whether or not the denomination of that debt is stable.
• For example, if you are a business and you borrowed Bitcoin, and you now have some type of expense in Dollars. You would be spending money in Dollars, but you borrowed Bitcoin. If the value of Bitcoin increases a lot, independent of how well your business is doing, the denomination of your obligation increased might mean that you are unable to cover that obligation. You would have to hedge that exposure.

What does carrying costs mean and how does it affect the currency?

• Carrying costs is the cost to a business to get to a stable value of borrowing assets. In practice having low carrying cost is secondary to low volatility. For example, USDC has low volatility and high carrying cost. Low volatility is not a Defi thing it is a general economics thing. The whole structure of the FED is to create low volatility for the Dollar.
• Carrying costs is also the cost of holding a position, they can be negative or positive. You can get paid to hold a position or pay to hold a position.
• Beanstalk has a positive carrying cost, you get paid just for holding Beans in the Silo
• In the case of USDC, there is an opportunity cost for just holding it because you could be lending it out for a certain yield

What is liquidity and why is it important for a currency?

• For any business that is transacting at scale, the business wants the slippage to be as little as possible. The slippage is the loss of value per transaction, and the more liquidity the less slippage

What is endogenous and exogenous value when it comes to stablecoins and what are some examples?

• A stablecoin is a currency that optimizes around low volatility
• Exogenous value with regard to the issuer of the currency is not the source of the value of the currency. In practice, there is a wrapper, there is some value coming from another party ie USDC
• Endogenous value with regard to the issuer of the currency is the source of value. In practice, this is anything that is not backed by another asset

What is convertibility? Why is it important? And why isn't everything convertible?

• Convertibility is the ability to convert. There is some value that backs a stablecoin, this could be endogenous or exogenous. Can the stablecoin be converted to the asset that is backing it?
• As long as the convertibility is in place, you should have low volatility, but that comes at the cost of accepting the obligation of the backing
• Convertibility is a tradeoff between short-term and long volatility in the case of endogenous stablecoins

What is network nativity and why is it important?

• Network nativity refers to the source of the stablecoins value with respect to where it is issued. For stablecoins that are issued on the Ethereum network, is the value of the stablecoin on the network? If it is not then this creates a lot of friction, especially with trustlessness. This is because you need to bridge the value

What is Beanstalk across these axes?

• Beanstalk is an endogenous value, non-convertible, network-native stablecoin
• The endogenous value of Beans does not come from future growth it comes from Beanstalk credit

Transcript

How's it going? Doing good. How are you? All is well here today. Today is a big day for the university. It's been a year since, you know, classes started.

Yeah, well, it's a it's fun stuff. Fun stuff and a bit of a journey. So one year. 48 classes, 48 weeks. Begs the question, how did all of this start for this?

How did it start so big in the memories? Now? Yeah. How did it start? The quest to educate people about Bienstock is is is kind of an infinite, continuous one. But class was. They. Honestly, I don't even remember. Maybe there was an M.A. that was done and then the thought was to do it more regularly. That might have been how it got started to just do them weekly, because the first AMA was pretty productive.

It wasn't there wasn't any sort of. It just kind of happened. And then we started doing them every week. And yeah, it's a great question. How did we get here? Well, I guess it doesn't matter. How did we start? As long as, you know, we're going towards the direction or the one of the destination. So probably has 48 classes again, 48 weeks a year long.

How does it feel every week to come in and, you know, get all these questions and go through them and answer them? You're asking how it feels like, you know, to to be to be, you know, to be us in class. It's a great it's a total luxury to have people that want to come and discuss being stuck with us every week is to call it a dream come true, I think, would be an understatement.

I mean, it doesn't even do it justice, because how could you even dream of something like this? Like, it's totally surreal. So we this is probably one of our favorite times of the week and always, always enjoy answering or trying to answer as best as possible. Any and all questions from from anyone and everyone. And frankly, the content of class has shifted so much throughout time, from in the beginning about how Beanstalk works to then more topical things.

And now things have shifted more generally towards looking towards the future and macro questions about Beanstalk. And obviously there's still a healthy mix of all different types of question. But the the transition through time of class. To be perfectly candid, is like a very clean representation or honest representation of our own thoughts or understanding or trying to think through Beanstalk and things, because this is a relatively efficient market and the farmers are smart and asking the same questions we're asking ourselves.

And sometimes it's kind of a maze in how much. So the things that just and obviously there's a reason that we're thinking about whatever we're thinking about. But then the exact thing that we've been thinking about all week will come up and be the main focus of class. And that is, it feels very organic. This whole process of discovering, trying to discover some some answers to some pretty big questions together.

And yeah, it's a total thrill and a luxury. And we hope to be able to continue doing class for for for for a decent amount of time until it doesn't seem like we're needed to participate in the discussion. Now, one thing that we really like about classes, though, even though we still do most of the talking very frequently, when there are questions that can be addressed by other people they have up here and people can raise their opinions and voices.

And so it's a yeah, it's a wonderful thing to be a part of. Right. And to those who are joining us, whether this is your first time or, you know, regularly or have attended class before, but doing this time on Twitter, but the format remains the same, which is, you know, you can talk on a question any time as a comment.

Deanna, to me is your hand. You know, we'll bring you up on stage. Okay. So this I wanted to start maybe this class with a bit of a discussion on our on a blog post. But the terms published today and this is a bit of summary maybe to some of the writings that that's in the White Paper and it starts or the topic mainly would be, as you know, the classification of Stablecoins and you know, the framework in general of what Stablecoins are.

And I would maybe divide this article into two segments or two sections. Let's say the first one starts with what's a utility of a currency? And then the second one is what are the futures of a stablecoin? So I would start off first of all with, you know, what utility of a currency is, and that was summarized, is there a link mob that you can draw for people, maybe talk about?

So we Twitter, which we have that on our blog, but we can also drop that. Let's see if it can do that. All right. So I started as a comment. I hope folks can see it and looking, you know, now, if you if you don't, it's also on our on our blog. So if you go to be in both money, you'll find us on the first the first blog post.

And it's also on on our Twitter profile. So we tweet about it and a spend on our Twitter profile. Okay, so we run it starts what I wanted to start with the utility of a of a currency, publius and that has been, you know, maybe summarized into four main points and that's trust, trust, business carrying costs, low volatility and liquidity.

I wanted to discuss a little bit what each of these or those terms mean. You know what? Why is the utility for a currency or, you know, what difference does it make for the currency starting with trust business? What does this mean and why is it important for a currency so ensure all of these factors are complementary? I'm not sure that we would necessarily subscribe to these as the only factors or the best way to describe these factors.

But but it's it's a pretty good start. So to start with trustworthiness, you can think of the utility of a currency as being somewhat highly correlated to its level of censorship, resistance, meaning in any given situation, how in control of your money are you? Or what is your ability to actually spend your money? And in particular, if you look at at a really large scale, for example, some of the reasons why people have been pontificating or hypothesizing whatever you want to call it, about the the recent downturn in the pound is that there has been a major change in how people view investing in London and and Great Britain in general as a result of

the censorship of Russian oligarchs. And that doesn't just affect Russians per se. It affects lots of people all around the world and how they perceive Great Britain as as an environment to England. Honestly, not not super familiar with with which would be, I guess the right classification here. But, but in practice it's in practice. It's clear that whenever there's a change in the censorship resistance or the trust looseness, which is another way of talking about whether you need to I think censorship, resistance is probably a subset of trust business.

But but if you have a sensible currency, it's only so useful or only so valuable and trust looseness certainly captures that. Okay. So is it accurate maybe to say it that, you know, as long as there is a possibility for the currency to be censored that say that adds some friction and confidence for the people to hold it or, you know, use that currency.

So, you know, today today it may be possible for us to use that, but hey, there is a risk for it to be censored and we don't know when will that happen. So as long as that risk exists, this adds, you know, some sort of friction and dilutes maybe the confidence of of the currency. Cash is king for a reason made a great all right to the to the second point then and that's carrying costs of just can you maybe describe it explain to us what carrying costs mean.

And again, why does the currency so to be honest, I think it might be more beneficial to start with low volatility because it's easier to understand how carrying costs play into things in the context of low volatility, and that's the next bullet. So if you'll humor me, maybe I'll start with low volatility and its importance to to to the utility of a currency and let's let's do that.

So it starts with low volatility. So most of real economic activity happens through credit of some form or debt. And in short, the question of what to denominate that debt or that credit in is is perhaps the the foremost question when choosing what what currency to use. And the volatility of a currency seems to be if you're a business perhaps the most particularly a business that isn't concerned about censorship, let's put censorship and trust sets aside.

If you're a business that you're you're taking out loans and you've got future expected cash flows, you've got bills that are being discounted, you're borrowing money. The the number one thing that matters to you is, is whether or not the denomination of that that debt is stable. And the the problem with denominate in your obligations in something that is highly volatile is that even if everything that you can control is controlled and your business is doing pretty well due to the volatility in your in the denomination of your obligations, you can have a total you can basically go bankrupt very easily because you're not able to match or your assets and liabilities as the business

easily. If the if the the underlying denomination of of your obligations is constantly changing. And so and so just to maybe give a practical example, if you're a business and you borrowed you borrowed Bitcoin and you now have some sort of expenses in dollars where you're not spending money in Bitcoin, but in dollars that you've borrowed Bitcoin. If the value of the Bitcoin skyrockets in the meantime, independent of how well you're running your business, you may be making a profit and whatever you're doing, the fact that the the the denomination of your obligation went up significantly could very well mean that you're unable to cover your obligation.

And so then you have as a business, you have to hedge that obligation and you have to try to hedge your exposure and in practice hedging that exposure can start to get very expensive if the volatility of the underlying denomination is high. And so that is the Segway into carrying costs, which is what you actually asked about, which is what is the the actual cost to a business to get to a stable value of borrowing, borrowing assets or discounting bills.

And that's where having having having a low volatility currency certainly contributes to having lower carrying costs, but it's not the whole thing. And in practice, having low carrying costs is is probably second secondary to low volatility in the sense that a lower volatility currency with higher carrying costs is probably more useful than a higher volatility currency with low carrying costs.

And the the example of that is the popularity of usdc and tether, which are low volatility currencies with high carrying costs. But there's a lot of compromise is on trust business with each of those currencies and think that that goes to to speak to how a low volatility currency is is is perhaps the most important thing that businesses and people are willing to compromise on trust losses and carrying costs, although to some extent carrying cost to become a limiting factor in order to to achieve low volatility.

And low volatility, I guess is not a defi thing because how economies in general in general is one. And the reason the most popular stablecoin as they all started is because people perceive the eurozone in general to be to be a stable currency. So low volatility is, as you said, you know, one of, let's say, the most important or important aspects of a currency.

Well, I would go further and say it's not just a question of whether it's perceived to be stable. It's the whole structure of the Fed is is designed to create low volatility in the value of dollars, according to the CPI, which is in the Consumer Price Index. So the concept is that the Fed has, although you can make arguments that the CPI is manipulated and yadda yadda, but the Fed does have an explicit mandate to create low volatility for consumers that use dollars so that it this is directly related to what we were talking about in terms of creating a low, low volatility asset.

That's that's the main focus around currently the most popular fiat currencies is low volatility. Yeah. Okay. So Trustless, there's low volatility and we touched a little bit upon carrying costs maybe. Can you explain a little bit more what are carrying costs? Why, why, what difference does it make for the currency? Let's say so carrying costs are the the cost to hold a position and carrying cost can be negative or positive.

You mean that you sometimes have to pay to hold the position or you can get paid to hold a position when when you've got a market with longs and shorts per market, for example, there's the longs are paying the shorts or vice versa, and therefore some countries are holding the position there may be volatility in the position, but you get paid for holding the position that's carry.

And so in short, if, if all else being equal, if volatility is equal and perhaps trust losses as well, but perhaps not if if the carrying costs are excuse me, the carrying costs quickly become the main differentiating factor between different currencies. So at the same level of volatility, the question again, if you go back to real economic activity, if you're a business that is trying to borrow assets that are discounting bills you want to borrow the asset that has the lowest carrying costs.

And in short, having low carrying costs is a is a is a function of the structure of the assets themselves. So in the case of being stock, it has a positive of carrying cost, meaning you get paid just for holding beans, which is fundamentally different than any any currency that that otherwise has existed thus far. And so when you think about an economy that could exist on top of a positive carry currency, where unlike us DC for example, where you have the similar volatility of the US dollar, but there's borrowing costs where if you're holding us DC, you're effectively you've either borrowed the USD or there's opportunity cost associated with holding the US DC because

you could be lending it out. The concept is that just for holding the US, DC, you now have some cost in the case of beans, just for holding the beans you collect yields from feedstock and so there's a positive carry on top of beans as opposed to a a negative carry associated with other other stablecoins for example. Now this does introduce some complexity in practice because the only way for the beans to receive positive carry is to be deposited in the silo or wrapped in LP tokens that are deposited in the silo.

But the, the, the concept is that once, once you're holding the beans in the silo, you're receiving the carry, and therefore the complexity is how to facilitate the use of assets within the silo to do real things so that you don't have exposure to any of the, the opportunity cost in theory because you get all of the positive carry without, without necessarily having to deal with being stock directly and deal with all the complexity of the silo.

So a lot of work being done by a lot of different people and protocols on that front to make make the the competitive positive care and cost of bids usable, but perhaps it's more meaningful to just stay on the macro conversation or not talk about beans in particular. Okay. And of course, the floor is open for anyone. You can drop in your question, raise your hand and we'll bring you to you, not just as a speaker on you can ask ask your question directly.

And to those out in discord, you can also drop in your questions on on the town hall chat and we'll read them here. All right. The last let's say your tuition for current events is liquidity. What is liquidity? And was liquidity important? So any any business that is transacting at scale wants to be able to buy and sell goods with as little slippage on the value of of the goods that they're buying and selling between each transaction.

And this basically relates to the medium of exchange function of a currency, which is when you're when you're exchanging the currency, how much loss of value is there for each exchange? And the higher the liquidity, the lower the loss of value. So maybe just kind of talking out loud here, but from a if if we're trying to classify if we're trying to classify these four axes along the traditional ways that people talk about the use of money, which is a store of value, a medium of exchange and a unit of account, you can sort of think of the trustless this aspect of the store of value or the optimization for store of value along with

low volatility. Although obviously if if the value is going to increase people, it does make sense to accept higher volatility and that that's really the yeah. The at this point as we understand it, the value proposition for Bitcoin when it comes to a medium of exchange, that's where liquidity seems to be the most important, where people want to have a low loss of value when they're using the currency as a medium of exchange.

And then where you have low volatility and carrying costs come in is really on the unit of account where it's a question of what are the denominations that businesses want to use a real economic activity wants to use in order to deny use the people that are performing real economic activity want to use to denominate their economic activity so that that might be a helpful way to think about this in more of a traditional context.

But due to this is certainly an interesting framework to think about currency. All right. Let's move now to the to the other section, which, as you know, features of a stablecoin. So we've discussed that of, you know, what are the utility of a currency. And now we want to talk about, you know, the differences of stablecoins and the document again on this is summarizing maybe bits and pieces of the of the white paper.

And we look we look at three different futures that define, let's say, a stablecoin and the first one being the value source. So where does the stablecoin, you know, where does it get this value from? The second one is convertibility and the last one is network connectivity or you know, where does this coin need to, to or to what network is operated?

Let's start off first with the with the value of or the value source of a STABLECOIN. And when it comes to the value of the stablecoin, we also define or say that it has to be one or the other. It has to either be exogenous or endogenous. This can be maybe explained to us what what does this mean and what are some examples of that?

Sure. So first, maybe just in a sentence that might be helpful to say what is a stablecoin under under this framework? It may be may make sense to think of a stablecoin as a a currency that is optimizing around low volatility. So of the the four things that create utility for a currency, the the thing that stablecoins are primarily optimizing around is low volatility or stability.

So with that in mind, the question is how do you create that low volatility or how do you try to create that low volatility, which is always easier said than done. And the first kind of axes or axis excuse me on which to think about stablecoins or if you're trying to classify or understand different stablecoin models and how they work, the the the the first question perhaps to ask is what is the source of the value of the stablecoin?

So what that means is, and as you said, the two options are exogenous value or endogenous value and exogenous value meaning with regards to the issuer of the currency, they are not the source. The issue of the currency is not the source of of the of the value of the currency. So in practice, what that means is there's a wrapper, some wrapping going on, there's some value that the value comes from elsewhere and that value is being wrapped by some protocols, some entity, something, and there's some asset that has a stable value that is effectively a wrapped version of the value and things that fall into that are tether us DC Dai liquidy they're all

wrappers that issue stablecoins using exaggerate as value and endogenous as you said brings us value from from within. Yeah. So there's, there's a lot of different models or attempted models on how to create, how to create endogenous value. But perhaps we'll talk about that a little bit later. As we as we continue our discussion, I'll let you you guys, that's your money.

Sure thing. I think we can summarize it by saying anything that is not backed by another asset, as is one that has endogenous value. So as long as you know that that asset stands of itself and not because you know, it's backed and can be converted to something else and maybe conversion was the right word that it's not backed by another asset than derives its value from within or or is endogenous okay.

Convertibility problems. So here again, we have two options. It's either convertible or NON-CONVERTIBLE. Can you maybe explain to us what is convertibility and why is it important? Why can't everything always be convertible? Let's say? Well, convertibility, it's not a question of why can't they always be convertible? Although tell that to a bank during a bank run. Oh the the concept is that the stablecoin itself, whether it's, it's, it's backed by exogenous or endogenous value, there's a question of whether or not you can convert that stablecoin to some, some other value that is in theory worth.

Well, that's the first condition of having the coin is the activity converge. In the case of loop. And so and I'm sorry, equivalence. I think we might have lost you or we're losing a bit. Can you hear me so we can hear my. Yes, it's Kate. Can can you hear us? All right, let's give it a minute and see if we can join again.

Type of discontinuous. I'm not sure. Not sure exactly what happened. Can you hear me now? But we can hear there's. It's clear. Where did I pop out? And we spoke a little bit. After all, we're talking about convertibility. And, you know, we talked a bit about, you know, what what about convertibility to bank on maybe. But then we started losing.

Got it. So there are eggs there. The there exact what is convertibility? Convertibility is the ability to convert. I hate to say that convertibility is the ability to convert. What a bad definition. In short, there's some value that is is backing the STABLECOIN or is creating the low volatility of the STABLECOIN and whether that's an exogenous value like Usdc has treasuries and dollars in a bank account or whether that's in stocks credit or which is endogenous, is a question of whether or not the STABLECOINS can be converted directly to by the issuer of the protocol.

The value that that is being used to back that protocol and convertibility functions as a real, an incredible dampener to volatility because it creates an arbitrage opportunity where as long as the the convertibility is in place, as long as the the stablecoin can be converted to the asset that it's it's pegged to or something worth the asset that it's pegged to, then the arbitrage opportunity should make it that if the price goes too high, people mint the currency.

And if the price is too low, people, people convert the currency back for whatever it's backed by. Now, despite the fact that it's a dampener to volatility, there's a question of at what cost. So in the case of Terra, which was an indigenously collateralized stablecoin and had convertibility, the concept was that even if the price of USD deviated from the peg, you could redeem, you could convert USD for Luna for the the the endogenous value token, the equity token of the system, let's call it at par at a dollar.

And in short, what is what does that mean? What is what is converted to convertibility? Do impact of convertibility means that the protocol that facilitates the convertibility effectively honors each stablecoin as an obligation at the pegged value and so if if you've got a protocol saying that they will facilitate convertibility, whether it's autonomous or a company like Circle, the concept is, is as long as that convertibility is in place, you should have low volatility.

But the convertibility comes at the cost of accepting the obligation. So if circle, it seems, didn't have value backing the stablecoin or if tether didn't have value, there's there's always thought about tether not having value. The question is, at some point, if that seemed likely, you'd expect the currency to start to trade at a discount. Now, in the case of Terra, the the the fact that there was such a high obligation of the protocol in the form of outstanding USD that it was willing to allow to be converted to Luna meant that there was effectively a huge supply coming for the Luna and that led to people front running the dot and selling all their

Luna. And there was a collapse in endogenous value. So there is there does seem to be a friction point around having convertibility and endogenous value because it's hard to have a scalable obligation that that the protocol is going to honor at par in all circumstances. If people are, for whatever reason, willing to accept system at a discount. If the clearing price in the market is under par, it's hard unless the system is totally collateralized by by the value that it's pegged to.

It's very hard for the system to sustain itself in perpetuity. There's always going to be a bankrupt so you juxtapose that with non-convertible systems. That's effectively where the protocol says it. The the, the thing that creates stability in, in the currency, whether it's exogenous or endogenous value, you don't have access to. If you're a holder of the currency.

And therefore, there's likely going to be some increase in volatility. There's a trade off here that there's an increase in volatility, particularly short term volatility, because if there's there's a need for liquidity and there's an increase in price or vice versa, there's there isn't is this arbitrage in place that facilitates a risk free ARB to return the price to whatever it's pegged to?

So now you do have the ability for arbitrage to come in and create price stability, but there is risk that they need to take because there's no convertibility. So convertibility creates this like risk. It does create this risk free arbitrage. And therefore having no convertibility removes the risk free arbitrage and introduces additional volatility. But it seems to be if we if we take Tara as a case study, that the convertibility really created short term low volatility at the at the cost of long term high volatility.

And if you juxtaposed that with a system like Beanstalk, that doesn't make any sort of guarantees about the value of its obligations or the value of its being being stablecoin. And there is no there is no convertibility in the system whatsoever from a if you have a being, you can redeem it for a dollar. In all cases, you have much more short term volatility in the price, but but if you look over the long term, it seems at least thus far, that the the volatility in aggregate of the system is continuing to come down.

And so that that will be something that will be continue will be interesting to continue to watch as the system grows. Obviously, if Bienstock blows up, then this doesn't apply. But given that the price has gone as high as $4 and as low as $0.24, and now rarely trades at more or less than a dollar and certainly excuse me, more or less than a cent away from a dollar and since we kind of think it's only gone, it's only gone maybe plus or -$0.15 from a dollar in total.

Again, considering that it went up to $4.24, it does seem that the overall volatility in the system is coming down over time. So convertibility from from our perspective is a trade off between short term and long term volatility, at least in the case of endogenous, the indigenously valued stablecoins. Yeah, agreed. Agreed there that non convertibility aims for long term stability.

And this is a topic that has been discussed and also traditional let's say or historical bank runs and so on and it has there are there are a few topics on the diamond of that model and maybe they touched upon that on how to deal with bank loans and convertibility is is one of the points there. So you mentioned a few examples there here.

So endogenous Non-Convertible you say USD is an example of exogenous convertible, that would be you as the to you as the C and so on or the or their likes. Then the last bit here is network connectivity and that is, you know, if the Bitcoin is native to the network that and or not, can you maybe give us an example to that again?

Why why is it important or what's the differentiator here? So it maybe to clarify network negativity refers to the source of the of the stablecoins value with with respect to the where the stablecoin is issued. So in the case of Etherium native Stablecoins, where the Stablecoins are issued on Etherium, the question is, is the value of of the stablecoin on the Etherium network or not?

And if it's not, that creates an immense friction, particularly when it comes to trust business around, around, around stablecoin because you need some in some way to bridge the value of the Stablecoin onto the chain, if that makes sense. Yes. So if it's native to to the network, then it's as you know, of course, or origin it's or derives its value from the network that it's an.

All right. So for this what has been struck then across these two axes or maybe what is being. All right, can you hear me now? Sorry. Yes, Bienstock Is a endogenous value non convertible network native stablecoin. Is that what fiat is then. Would what would being be, let's say to the network what the US do or the US.

Not it as you know and and life or not and traditional finance. So I think question is what is the network if you're if you're saying that the the network is the physical world. Sure I guess in the case of of tokens or that's really where like the the the notion of a network makes sense in the physical world, not for it.

It maps as well. So I don't know if you could really slot the dollar in in the exact same you could make the argument that with respect to the Ethereum network, the dollars are are indigenously valued non-convertible non network made of stablecoins. So the non network native counterpart to beings. All right. And then we would compare if we were to compare use tier to being the main difference here would be convertibility.

So USD was indigenous convertible and then it was, you know, native but native to a to the blockchain let's say. Well, I think that you can you can definitely get into a lot more specifics than just that. But the the the other angle is what was the source of endogenous value? So in the case of USD, it was Luna a token.

And in particular what was the the source of value for Luna? In theory it was demand for the token for transact fees and to state the token to earn transaction fees. And in short, that that was both highly speculative and something that was highly reflexive. So when you had an increase in supply by of USD at at the margin, meaning you had a sell pressure in in USD, a decrease in demand is another way to to to to phrase the same situation.

When you have a decrease in demand, the the value of Luna would decrease because the future if there's a decrease now in the in the demand for for USD maybe or an increase in supply. So there is a decrease in price one way or another. Speculators that are speculating on the value of Luna, which is highly related, what are the sources of value of the transaction fees on network wallets to use U.S. mostly.

So if there's a decrease in demand for USD, there's there's probably going to be a decrease in demand for Luna corresponding. And the fact that USD was was convertible to Luna meant that when you had a decrease in demand for USD that correspond ended with a decrease in demand for Luna, which was the exact thing that needed to have an increase in value at the time or an increase in demand.

And so that is the most closely to like an equity and where the source of endogenous value is sort of an equity token, the equity of the network itself, it's not exactly equity, but you could think of it similarly of what if Microsoft or Google issued a stablecoin and that Stablecoin was always convertible to Microsoft stock? Or what's the value of Microsoft stock from?

It's from the future expected revenue of Microsoft. So that's similar to how Tara worked. And in hindsight, it's not so hard to see that if Microsoft issued $1,000,000,000,000 of stablecoins, at some point you could see a run on Microsoft stock and a collapse of the system, which is what happened in tariffs case. Now bienstock the endogenous value for beings is derived not from the equity of being stock, meaning the future expected revenue of being stock.

That's a protocol, but instead it's derived from the credit of being stock, meaning the ability for being stock to borrow beans from the market. And in particular the thing that is anti reflexive about credit as opposed to equity, particularly when combined with the lack of convertibility, is that when there's a decrease in demand for being or an increase in supply, however you want to think about it, where the price comes down the beanstalk as a borrower is only borrowing being on.

So the the the reward for lending to being stock increases without increasing the obligation to being stock the price that the stock is paying to a lender in being is the same. But for as a as a lender, the value or the return that you get for lending to being stock increases as the price decreases. And so during that first dead cycle where the price went as low as $0.24, there was actually a multiplier on the temperature whereby the temperature was honestly, don't remember exactly what it was.

It was a couple thousand at least two or three, 4000. And there was a multiplier on on that temperature. So at 24, since it was a4x. So in short, that's where the primary anti reflex of nature of a credit based model comes from when paired with convertibility. So the idea is unlike Tara, which when the when the price of USD would come down would honor that USD at a dollar at its its peg value at at at the cost of Luna.

In the case of Bienstock, Bienstock doesn't make any promises about the value of being. It lets it trade below a dollar below its peg and it tries to borrow beans from the market and very slowly increases the rate of interest that you want to pay on the beans. And so the marginal cost to the system to borrow beans is increasing very slowly.

And so you're going to have volatility. There's, there's this trade off, you're going to have volatility in the price. But when the price trends downward, you have this anti-reflective future where the rate of return for lending to the protocol increases quickly without the, the, the temperature, the interest that the protocol needs to pay increasing. So instead of having equity, which is highly reflexive, you have credit and in particular credit denominated in your all your obligations.

And, and that's where the Antero flexibility comes from. And again, the the tradeoff with non convertibility, as you said, it's, you know, the short term volatility about long term stability. And to our listeners, again on the on the blog post, you can, you know for more details on what we discussed on then it gives out examples, you know, to each to each of these or those coins, let's say what with almost at the hours.

So maybe we can give us some time a little bit and see if if any of our audience now have questions again feel free to drop us a comment. You can Vienna to me, if I'm just called up to the town hall chat or just raise your hand and come come on stage. Okay. POULOS Thank you very much for kicking off this year's class.

This is class number one on your two. And thank you, everyone, for joining us once again for just for taking taking the time to begin on and explain the blog posts or the discussion between out today total. Totally our pleasure. Thank you. And see you next week. Next week with a Zoom class on Discord. And again, it's every week on Tuesdays, 430 Pacific Time, 730.

Sir, thank you again for joining us.