Beanstalk University Class #6
📖

Beanstalk University Class #6

Date
December 14, 2021
Timestamps
0:00 Intro • 5:55 What would a reverse Season of Plenty mechanism look like? • 16:55 Why are credit based stablecoins so important and positive carry • 20:28 Why is there soil when the price is above peg? • 29:45 When Stalk/Seeds/Pods are tradeable will they be denominated in Beans? • 31:23 What kind of growth should we expect? • 42:48 How are negative carry costs prevalent in other stables? • 49:32 How does a central bank compare to Beanstalk? • 57:33 Plans to host the site on IPFS/Arweave? • 59:13 How many other BIPs do you have in mind? • 1:04:15 What is the Curve integration for? • 1:06:20 Closing remarks
Type
Beanstalk University

Recordings

Notes

From Publius: main things in the near future:

  • liquid seed and stalk
  • Curve pool
  • growing the dev team, scaling the DAO
  • cross chain integrations

What happens to bean in a "bank run" scenario?

  • Pump and dump in September is a great data point. If you look at the all time price chart, when SOP picked up when the price was >$4 and lasted for a couple hours
  • eventually after a few days where there was aggressive demand for beans, the apes realized they didn't make enough money (or didn't understand bean) and left. What was reflected over the next couple weeks was a dip to $0.40, back up to a dollar and the apes left. This caused a major decrease in the bean price
  • If you go to all time liquidity chart, there was a major increase and then decrease in the amount of liquidity. More beans were sold into less liquidity which resulted in a lower price. If you go to sown beans chart, this went up—this was the main driver for the price going back up. The ability to attract lenders.
  • It definitely has short term tradeoffs in that it may not be exactly a dollar. That is the drawback of a credit-based stablecoin rather than collateral-baesd. That's ok, because you get all sort of incredible benefits and the fluctuation will go down significantly down over time.

How would a reverse Season of Plenty work?

  • It wouldn’t—Beanstalk only does SOP this in a "must sell" scenario. Apes that buy at $1.50 don't understand how the system works. Beanstalk is designed not for those apes to make money, but to disincentivize that from happening.
  • Major problem with algo stablecoins: if the rules say that if the price is too high, increase supply, that creates inorganic demand anytime the price is too high.
  • Beanstalk says, if no one else is willing to sell bean on the market (which they should when the price is high), the protocol mint beans and put them on the market, and it will distribute that ETH to holders of stalk before it started to rain
  • this disincentivizes buying beans and depositing them when it is raining, to rate-limit inorganic demand
  • There's no way for Beanstalk to buy the price of beans back to a dollar, you need ETH to do that
  • We don't want to have in its rules that it will spend ETH on anything—people would game Beanstalk to make it pay them ETH. Beanstalk is happy to do that with beans because it doesn't want bean to be above a dollar.
  • Beanstalk is going to sell at a certain point (SOP), so that further incentivizes people to sell first if you want to. That dynamic creates an efficient system above a dollar
  • Can't really do that on the flip side. BIP 7 alleviates this concern to some extent
  • the main mechanism underlying bean's stability is the ability to attract debt
  • Answer: there can't a be a rule in Beanstalk to spend ETH. Someone would take advantage of that

We get a lot of questions about why credit-based is important vs. collateral. What are negative carry costs?

  • There are billions of DAI, why aren't there 100s of billions? Because there's not enough collateral to create enough DAI to meet demand. When you have a shortage of something, it'll be reflected in a high price. You can see this in borrowing costs.
  • When you flip from collateral to credit, you go to having no borrowing costs and positive carry. Like a normal checking account, when you are spending money you take it out, when you aren't you can deposit in the silo

The protocol only prints bean when the price is above the peg. For the credit facility in the field, is there always available soil to be sown?

  • There is not necessarily always soil (it was regularly zero a few weeks ago)
  • In a very short term perspective, Beanstalk would have been better off if it did not issue so much soil while demand was so high at the end of November (BIP-6 fixed this issue). Beanstalk issued 200M+ pods that it didn't necessarily need to. Why is there soil every season? In order to price the weather. Every season, it looks at Time Weighted Average Price, the debt level, and the change in demand for soil from season to season.
  • Accurately pricing the weather is what allows Beanstalk to return to equilibrium over time.

Beanstalk fails if it is no longer able to attract creditors. Is there a need for creditors when the price is above $1? Or should the field be shut off during those times?

  • Basis had this mechanism where there wasn't any bond issuance when it was above a dollar. In our opinion, the benefit of issuing a small amount of debt when the price is above a dollar is that it informs the protocol whether to raise or lower the weather. Beanstalk just tries to figure out whether to raise / lower the weather (when in theory there could be a million other inputs to what the demand for bean currently is, but Beanstalk at the end of the day has to compute that and only has access to data on-chain).
  • Recently added bernouilliBean to the team who will be doing more data analysis like the implied market cap on the pod line, stuff like that.

When stalk and seed and pods become tradeable, will they be exchanged for beans?

  • Pods can be transferred OTC, but they aren't tradeable yet as there isn't a market
  • Silo beans, stalk, seeds will all have Uniswap v2 pools against BEAN. You'll be able to deposit those LP tokens into the silo as well
  • In general yes the goal is to have everything be tradeable against beans

The difference between collateral vs credit-based is that there isn't enough collateral. With this credit-based model, what does supply expansion look like?

  • We think the growth rate will decrease dramatically over time. Some people have been scared away because getting burned by ESD/Basis, which was worth 200M at its peak. Beanstalk has grown much slower than those coins by design. It's difficult to project how quickly Beanstalk can grow over the next few months.
  • NFA: there are 380M pods and 45M bean supply. If you lend you are assuming that Beanstalk grows to 805M beans. Once the pod line does not grow any longer, the protocol is deleveraging. We expect it to deleverage pretty aggressively, that would be our guess. Probably on the order of a couple months, or Q2 2022 at the latest. Deleveraging means the weather would come down significantly.
  • You would expect the system to stabilize over time. Probably start to see strong stabilization around a couple billions. Working to make sure the DAO and the development is able to meet that demand over the next 6 months!
  • As people start to speculate on the stalk price upward, the arbitrage opportunity to sell stalk in order to re-silo will put a ceiling on the stalk price relative to bean which is when things get even more interesting.

What do you mean by high borrowing costs (negative carry) to hold other stablecoins? What do you see the impact of bean on the wider defi ecosystem?

  • If you look at the cost of borrowing other stablecoins on protocols like Aave, Compound, etc, the interest rates are 10%+ (this is a manifestation of the supply not meeting the demand—people are willing to pay a premium for USDC)
  • Carrying USD in the physical world is basically 0% in comparison (like a USD loan on an asset)
  • when you have a stablecoin that has a negative carry, you always have to think about the opportunity cost of not lending it out
  • with bean, you don't need to give up your stablecoin to earn yield (the silo).
  • Isn't there the same opportunity cost of exiting the silo? Yes, but you keep your beans native to the beanstalk protocol

Beanstalk doesn't have a monetary policy: could you explain that? If there is a Bean country that uses dollar-pegged beans, what's the similar and different between that and Beanstalk?

  • The impossible trinity: ability for a central bank to be in control of its own monetary policy and maintain the price of the currency that they issue at some sort of target, and have the free flow of exchange. You can't have all 3 at once
  • How is it that Beanstalk is able to maintain the price at a dollar when countries like UK and Russia had their currencies depegged due to the impossibility trinity? The answer is that Beanstalk doesn't set its own interest rates.
  • A country might set its own interest rates because the cost of capital is fundamental to a country's economy. If you have a borrowing-based economy (like most of the world), most investment is made on borrowed capital where the assumption is that in the future you'll make more money on that capital. In order for economy to grow healthily, there needs to be sufficient ROI in order to pay back the debt. The problem that happens is that when economies slow down, you aren't able to pay down debt. In those scenarios, being able to toggle your own interest rate (the cost of capital) is fundamental. This allows an economy to pull forward future gains and lever up. Decreases the amount of returns you need by decreasing the interest rate. Right now those rates are basically zero across the world — this means that investments made over the last couple decades have not returned enough to pay down the debt. The only way to keep the system solvent is to rollover debt at zero interest rate.
  • Beanstalk isn't the same because it doesn't say "we'll raise/lower weather because we want to." That would be much closer to what central bank operators do.
  • Beanstalk is super levered right now — high debt rate and high weather. If you unilaterally lower the interest rate (weather, or cost of capital), others might look at that and say "we are no longer interested in buying your debt anymore". Countries do this to their detriment. Beanstalk doesn't do this, it continues to, on a slow basis, adjust weather to price it (based on demand for soil among other variables) independent of what it would like to happen.

DNS is centralized, had you thought about hosting on IPFS/Arweave?

  • We want to eventually host the website on Arweave, but want to get the website in a better place given the permanence of Arweave.
  • This is certainly on our mind
  • People could run the website locally (once it is open-sourced), other people could run their own versions, etc

How many other BIPs do you have in mind at the moment?

  • The hope is to get Beanstalk to a place where it no longer needs tweaks to the model, but we are a long way away from that. There's a long list of these things that we want to improve. We are hiring more devs to implement said things!
  • Examples of future BIPs:
    • lower withdrawal time from the silo
    • withdrawing ETH from beanstalk so you don't have to withdraw bean and sell for ETH
    • beasly working on BIP to partially claim harvests and withdrawals to better leverage BIP 2
    • simultaneous voting
    • make all the assets fungible
    • etc

Could you explain the purpose of the Curve integration?

  • Uniswap v2: the x*y=k curve was really innovative and enabled a lot of autonomous DEXs, but it's inefficient. We have millions in liquidity in the BEAN/ETH pool, but a 100k bean trade still moves the price significantly. Curve stable swap is better at handling those trades at smaller volume, which will result in tighter oscillations around the peg. This will also provide arb opportunities between the Uniswap and Curve pools

Transcript

this is class not a dow meeting so we're going to try to keep it you know more substantive on protocol and generally people's questions about anything at all um and just for reference there is a down meeting in an hour specifically a structuring also uh those of you that have been part of the conversation on how to actually structure the dow um that's next hour so we're going to try to keep this more on the question side and there's been a ton of fun stuff going on over the past couple weeks and if anything this is the first class we've had in a while where there isn't anything urgent or immediately you know on our minds to talk about uh perhaps other than dip seven uh which you know went live around 24 hours ago or so a little less than that and i think overall it's been a big success um i think people are seeing and we're certainly seeing that this doesn't guarantee the price will always be at a dollar which is great um you still want some price discovery away from a dollar on both ends but in general it should result in a much tighter peg being held which when we talk about making beans attractive to other protocols uh that should go a long way towards that so we're very excited about what beanstalk is looking like and and what the road ahead looks like there's a ton a ton of work to be done on growing the dev building up the dow infrastructure a la the meeting that we're having in an hour um tons of work on protocol integrations getting beans integrated in various uh ethereum protocols uh we're working on getting stock and seeds and silo beans liquid uh and tradable and then once those are alive getting those integrated with other protocols and projects that's maybe three months down the road or so maybe two months um we're hoping to get stuff and seeds starting to be liquid and stuff maybe january so maybe a month or six weeks uh we don't want to be too aggressive and over promise but we're trying our best to move forward on that front and the hope is then once all of those assets are fungible uh sort of running your d5 yield strategies through the silo or then you get stalking seeds and can use the stock and seeds and other e5 protocols as well that's where things get super exciting and things potentially can can really take off so working towards that and and then at a at a at a higher level or maybe not a higher level but a lower level if you will i'm thinking about the infrastructure of being stuck long-term and how it applies to chain uh relayer two infrastructure so what we would generally call like x chain uh and uh you know we've been doing a ton of research and conversations on that end over the past couple of uh weeks and candidly we've been very disappointed by the current options out there for decentralized bridging uh even between ethereum and any other chain um so we're we're starting to try to figure out what this looks like and it's going to require a ton of all of this stuff it's going to require manpower uh like lots of effort and brain power and money um so with that in mind we're also putting the q1 budget uh we're starting to put that together and structure it and uh happy to talk about that as well um but that's like the short version of what's been going on um you know we never want to oversell uh on b and stuff but we are very excited about what's going on uh this is we think we have a real opportunity here to make an impact in defy and it's very exciting to us so the most encouraging thing in our opinion is a really high quality like we're we're sort of amazed at the high quality community being stuff that's attracting and we think that's probably the best indicator of its success so uh we're gonna over the next week or two hopefully set up uh you know start to get set up a notion uh and the hope is to have like a really robust uh notion and discord process for the beanstalk dow uh to to run uh smoothly this is all we're working on all of this and lots of different people are working on different parts of this so uh enough said at this point as a as an intro i'm happy to answer any and all questions about anything going on and uh thank you guys for spending some time with us this the you know this evening or this morning okay well thanks for afternoon i guess it could be not the morning or the evening so just to be clear or the afternoon thanks for that overview it is great to have so much exciting stuff going on and to uh not have any you know any any things we need to talk about so that means we can talk about some of the some of the more fun stuff so with that said um i'll open it up for people with uh with questions you can raise your hand or you can put a question in the discussion board i see here um let's see anything i have a question actually dumpling if i could chime in um perfect publius i saw there was some discussion i think uh theodore had asked in the questions channel about what a reverse season of plenty mechanism would look like in cases where the price or or demand for being is is falling dramatically i'd be curious to i'd love to hear you talk about that live and then also kind of what would happen to being like from an economic perspective and in the event of a like quote unquote bank run scenario that kind of uh failed some of the algo stable coins that led to uh beans inspiration if you will so the short answer is the way just answer your second question first the way beanstalk has worked is evidenced by like the pump and dump in september and i think that's a really great data point for everyone to look at if they pull up their um their website and go to the all-time price chart the season of plenty that kicked in after the price one's highest four dollars um lasted for a couple hours and then eventually uh sort of the people that all the aides that were rushing in were able to coordinate uh getting the price below a season for one season such getting the t-walk for a season below a dollar excuse me uh to restart the rain stock so that they could start receiving eath from season aplenty and at that point uh it went it's once once they reset it then we went above a dollar again then the seasons of plenty kicked in and then we were back below a dollar and eventually after these couple of days i mean it was really like five or six days um where there was just aggressive demand for beans all these people realized we don't we we didn't make enough money this is dead like we don't understand this for whatever reason they all left and what we saw um is reflected over the next couple weeks this huge dip there was an initial dip to 0.4 and there seemed to be like a quick rally back up to a dollar for a couple hours um but then basically the the apes continued to leave and leave and leave and that was reflected in a major decrease in the bean price um and over time by issuing so now let's let's try to just decipher a little bit of what happened so if you go to liquidity and you go to the all time you can see that in addition to just price going high there was a major increase and then a decrease in liquidity where that exacerbated both the amount of beans that were printed at the beginning and then uh just the the rush and the immediate decrease in price because there were more beans that were sold into less liquidity and that resulted in a further decreased price um but if we go to the field and we go to uh the sewn beans the fourth tab and we go to all time you can see that that was also how the increase in stone beams was ultimately the main driver for the pro the beam price returning to a dollar it was the ability of beanstalk to attract uh people to lend beans to beanstalk in the millions uh that that ultimately led to the price returning to a dollar so when you ask substantively how does beanstalk respond uh in cases where there are runs on the bank uh it does have short-term uh price deviations from a dollar and if anything that's the main trade-off you make between a collateralized and a non-collateralized credit-based stablecoin is that liveness guarantee where you may have hours or minutes or or even weeks where the price is below a dollar and that's okay because you get all sorts of incredible benefits from it decrease in liveness should decrease to near zero over time uh but we're still at a period where there will be periods of non-liveness where beans isn't at a dollar like right now um and to answer your first question about how would a reverse season of plenty work so there's one thing to note about the season of plenty mechanism is that keemstar does it uh only sort of in like a a must a must sell scenario where you have all these apes that are clearly not in it for the long haul because they're buying it one four or one five or two dollars or three dollars or four dollars and they don't understand how the system works because no one would be buying at that price so the point is beanstalk is designed to a not for those people who are apes and buying up of one to make any money but b it's designed to disincentivize that from happening because one of the major problems that stable coins have is albostablecoin specifically is if you put into the rules um if the price is too high increase the supply that creates inorganic demand anytime the price is too high or just the inflation rewards make it attractive enough uh to join and having nothing to do with the long-term desire to hold or use or invest in beans and so in that case scenario beanstalk basically says we will if no one else is willing to sell on the market we will beanstalk will mint beans and dump it on the market and then it will distribute the proceeds which are ethereum to the holders of stock before it started to rain that's basically designed to disincentivize people from buying beans and depositing them when it's raining um and the the main reason why that wouldn't work in the reverse direction which again is designed to greatly limit in organic demand is because while there is such a thing as like inorganic decreases in demand you might say where the fact that the price is below a dollar results in a decrease in demand for beans that's certainly true like there's no way for beans or bean stock i should say but to buy the price of beans back to a dollar um but you need aetherium to do that so furthermore we don't want install to have in its rules uh that it will spend ethereum on anything because ethereum is a valuable asset and can be like people will then try to gain beanstalk just to make it pay them ethereum in whatever capacity um whereas beanstalk is happy to do that on the plus side with beans because it doesn't want the price to be above a dollar and so it's happy to say like anyone who wants to sell before beanstalk you should sell like we're going to sell so if you want to sell you should sell therefore the fact that beanstalk is going to sell makes it highly likely that other people sell before beanstalk right because the beanstalk is going to sell you want to sell before to get a better price so that dynamic should create an efficient market above one unless you really do have crazy inorganic demand for beans um there's never a season of plenty on the flip side you can't really do that or you have a run and people are selling beans in mass there's no way for beanstalk to sort of back up the truck on its own and say we're gonna backstop this so bip7 does alleviate that to some extent and does allow silo members to withdraw excess beans from the pool to return the price to a dollar but at the same time like the main mechanism underlying the stability remains beanstalk's ability to attract debt and in in a healthy market especially going forward once beanstalk is able to deleverage one would expect there to be much more demand for soil and in an environment where there is demand for soil uh you would expect bean stock to be able to regularly return the price to a dollar independent of the amount of arbitrages that are playing the system so when that's not the case you do actually want just from a macro perspective like longer periods where you have a day or a couple hours where the price is not a dollar to flush out bad bets and stuff like that so not to get too meta on us but that would be the equivalent of the federal reserve uh not pushing their finger on the scales and greatly manipulating the the markets right now by just purchasing a ton of assets every month like it's healthy to let things flush out there's there's benefits to letting the system clean itself out and people that are over levered get flushed out because if you can't handle a price deviation for an hour or six hours you're probably over levered right the way the system works isn't designed to have minute to minute guarantees at a dollar so uh to some extent there will be different primitives and financial primitives specifically built on beanstalk because of that aliveness trade-off um but at the same time the sky is the limit because you don't have the supply limitation that comes from something like collateralized stablecoin so that's might have been a long-winded explanation but i hope that was helpful yeah that's definitely helpful so is the kind of like high-level one-liner there is always some weather rate that would incentivize sewers in the long run yeah i would say the one-liner is you can't one liner is beanstalk can't spend ethereum unilaterally right there can't be a rule in the code to spend aetherium okay gotcha someone would take advantage of that yeah and syncubate want to invite you up here too sorry i didn't mean to ignore you everyone will get a chance to participate hopefully merchant what's up how's it going i actually have a question i don't want to jump in front of anybody though but um is thank you bank can ask a question uh we'll get you first and then we'll do syncobate right after okay cool my question is uh just if you would explain a little bit more i think i've gotten a lot of questions recently around why credit based stable coins you know being stock specifically uh are superior to the kind of collateralized models that dominate in the market and so i wonder if you could just kind of at a high level explain yeah why is credit base so important you know why does this kind of flip the defect economics on its head and i guess the specific thing in there is you mentioned negative carry costs you can just kind of explain you know what those are and why that matters so let's think about this at at scale right i there's billions of die but why aren't there hundreds of billions of die but the reason is there's not enough collateral to create enough dye to meet demand and so the same thing even though it's a lesser scale applies to usd collateralized assets but not really because tether and circle uh they can't hold a hundred billion dollars in their bank account both of them have diversified their holdings so in practice there's just a general shortage of collateral available to create stable points and anytime you have a shortage of something it's going to be reflected in a high price so in the case of a collateralized stablecoin that has sufficiently sound arbitrage opportunities to make the price stay at a dollar that will ultimately be reflected in borrowing costs right so the high price will be reflected in a cost to use it so the negative carry costs are inherent to the collateralized model because there's simply not enough collateral to meet demand for stable coins so whether you're using physical assets whether you're using uh digital assets in general there's just not enough collateral to meet the demand for stable coins and so when you flip from a collateralized model to a credit-based model you go from having this supply shortage which manifests itself in high borrowing costs having no borrowing costs and having positive carry especially in a world where uh you know the withdrawals from the silo are lower um you think about it as like a normal checking account where you uh when you're spending money you pull it out and then when you're not spending money you put it right in the silo and you earn positive carry based on the growth of beanstalk and the bean supply over time so as the system becomes more liquid this becomes a more natural just positive carry inherently stable point or when you're using it you pull it out of the silo and you know the website or hopefully there will be multiple websites will facilitate the most efficient withdrawal from a stock burning perspective and then uh whenever you make make money or win a better your your your bets on the nfl game on sunday pay out you put your money right back in the silo until next uh next thursday when you're betting on thursday night football so you go from a negative carry stable coin to a positive carry stable point where um people aren't like hesitant to hold the stable coin they're happy to hold beans awesome that's a great explanation thank you okay syncobate go ahead hey good evening do you hear me okay yeah just speak up a little bit more so you're a little louder we can hear you all right great um yeah thanks everybody um puglis i just had a quick question for you uh so my understanding is the protocol only mints beans when bean is above its peg for an extended period and however in the field in the credit facility in the field um is there soil that's always available to be sewn at any time regardless of whether what the bean price is the reason i ask is because does it i'm curious why doesn't the field shut off this the mechanism for issuing debt when the when being is above its peg yeah that's a fabulous question and to some extent uh in a very short term perspective beanstalk would be better off if that had been the case over the past couple weeks because if anything the main reason why at least from an economics perspective one might speculate we have been below peg for a couple weeks is because over the month while beanstalk was really churning uh even after it returned to peg and was significantly above peg because the field was still active and there was too much available soil pinstock issued 200 million plus odds that it didn't necessarily need to so to answer you substantively why is this why is there soil every season reason is you need to price the weather so beanstalk the way the model works is every season stock looks at three things it looks at the time weighted average price it looks at the debt level and it looks at the changing demand for soil from season to season and so specifically in order to measure changing demand for soil there needs to be some soil there doesn't need to be a ton of soil which unfortunately there was for a couple weeks which is fine um in the grand scheme of things we're still tweaking parameters and we think f6 fixed that issue um but at the same time uh the the benefit of having soil every season is it allows you to accurately measure demand for debt and therefore it allows you to accurately price the weather accurately pricing the weather is ultimately the thing that allows beanstalk uh to over time return to ideal equilibrium so if it can't beanstalk can't price the weather it makes returning to ideal equilibrium a little bit more difficult okay yeah thanks for thanks for clarifying that i'm just saying i'm sorry yeah the reason i brought that up is because i listened to your um podcast um discussion with nasdaq which i thought for anybody on this call i think it's really an informative discussion i greatly um you know recommend you guys listen to it one of the points that you made in that discussion publius and that's where i kind of thought about this question as you mentioned in that discussion and again i'm quoting you out of context because it was a very long discussion so um don't mean to do that but just be specific to this question you mentioned that um the one way beanstalk fails and this is said explicitly in the white paper is if it can no longer attract creditors so if that is because the pod line is so long that nobody thinks no matter what the weather is it is attractive to lend to beanstalk if beanstalk can't attract creditors ultimately that would be the kiss of death so i guess my question i'm trying to understand is there a need for creditors when bean is above one or would it make more sense to shut off the credit facility at that point and then reinstitute it um when it if it falls back below one i'm just trying to understand uh it's a great question so this actually reference uh basis uh had something closer to this model uh that you're suggesting where sort of there wasn't any bond issuance when the price was above a dollar and in our opinion and this is a theoretical economic opinion so um it could be wrong um but in our opinion the benefit of issuing soil uh so being willing to issue debt every season even if it's a small amount the problem before was that it wasn't small enough um but if it's a sufficiently small amount it allows you and when i say you i mean beanstalk to measure accurately whether the weather can be lowered or whether it should be raised and speaking just at a high level on the way that beanstalk works basically by changing the bean supply the soil supply and the weather uh over time specifically the weather over time uh paint stock hopes just to gent over time like push system towards ideal equilibrium so the natural flow of the system and specifically whether the weather should be higher or lower changes constantly based on an infinite number of factors which are out of the realm of computation for for something that happens on chain and accordingly the way to simplify all of that is beanstalk just tries to figure out should i raise the weather or should i lower the weather and the only things i'm going to look at are the price the t-wop the pod the pod rate and the change in demand for soil over time so being eight like that is an incredible simplification of an incredibly complex analysis you could be doing of the market but by breaking it down into just those three data points you're able to have beanstalk taking a continuous stream of data over which you can continuously tweak the weather slowly over time so it's it's it's not necessarily the right answer but the benefit of having soil every season is it basically allows the mechanism as its design which again is as simple as humanly possible to run so the problem is that if your cost to run the mechanism is 200 million pods in two weeks uh you're you're an idiot right that's a bad mechanism so we changed that f6 changed that so now going forward uh the pods that bean stalk is willing to issue every season is only equivalent to the amount of pods that were harvested at the beginning of the season so even in scenarios like there were for two weeks where there was excess demand for soil every season all the soil was getting filled the pod line will stay exactly the same and therefore the pod rate will start to decrease aggressively so going forward beanstalk shouldn't have that problem but candidly that was a a true inefficiency in the mechanism uh up until bip six okay great thank you for that clarification and i also that you know listening to that podcast i think it's insightful for everybody to listen to that one and i think the other one that you had with brad um that was also insightful i forget which one of them you mentioned in it but i recall you mentioned something which i didn't consider before the field is essentially also aside from just being a credit facility it's also a way for um a creditor to essentially project their expected growth of the protocol right because if you're willing to accept buying um or sowing the field when the pod line is let's say roughly 370 million or wherever it's at right now you're essentially projecting that or you expect that the protocol itself will grow to roughly uh 800 million dollars right something like that so um i didn't consider that before and i thought that was really interesting so um thank you for that clarification yeah and and we definitely want to let other people chime in but just on that note we we just recently added uh bernoulli bean who i'm not sure if he's here but he's going to start doing more analytics work he has a great uh economic and math background to present more and more data like that like the implied market cap on the podline side and other things like that so uh appreciate that incubate tremendously and anyone else so evan you're up here uh and bp and beanboy won't get to all you guys or gals hello uh so i have a kind of a two questions the first one can be a simple yes or no and then the second one is going to be the main question so the first question is when stock and seeds become tradable and when pods become tradable will they be traded exchanged for beans or like what will they be uh exchanged with so first off just to clarify pods can be transferred already but agree they're not tradable yet there's no market um the short answer stock seeds deposited beans of silo beans and the pod marketplace are all gonna have native like trading against beans so in the case of cylo beans stock and seeds we're going to integrate tuna swap v2 pools for those three assets against beans um those three pools uh have you you're going to be able to deposit the lp tokens for those pools into the silo and sort of like leverage up your stock and seeds so you'll get stocking seeds for depositing and then you'll be able to burn them when you get deposited beans and and get more stock and seeds and so that will require a slight tweak to the incentive structure um for like number of seats and number of uh in terms of beans versus lp um in general the short answer is yes the goal is to have everything start to trade against beans okay i uh kind of guessed that i just wanted to confirm um and so my second question is um you mentioned earlier that the biggest difference between uh collateralized stable coins uh which is literally every other stable coin out there and uh credit stablecoin uh is that uh is the uh like there's never gonna be enough collateral to meet the demand and so with this credit-based model um i guess how how does the supply expansion for credit based model look like because i think it's uh quite fascinating that in the three months since uh bean has launched i mean you quickly reached uh like if i remember from the charts correctly like the 10 million mark 25 million now beans at like i think 40 million supply peaked around 50 million so it's growing quite fast and so what kind of you know is this kind of like the growth rate to expect like this kind of huge exponential growth because it's it is a credit uh credit backed stablecoin so i think the growth rate will decrease dramatically over time but just the nature of you know italic has a great line uh talking about uh in shiba you know he says uh well people look at dogecoin they say well that's worth a couple billion therefore the second best dog coin should also be worth you know at least a couple hundred million and beanstalk has benefited from that to some extent but some people have been scared away but a lot of people uh played esd and basis and similar assets and esd was worth a couple hundred million at its peak so to some extent a lot of this initial growth and some of that like initial pump that took us to a 40 million dollar market cap from a two and a half million dollar market cap to 40 in a couple hours that was age who thought this was esd i thought this was basis and over time i mean beanstalk has grown much slower than those coins did uh by design and that's played a major factor in its ability to return the price to the peg not growing too fast when p is greater than one is uh like we said we're solving this stability problem starts at the same time you know this is not uh it it's it's difficult to project over the coming over the coming months how quickly beanstalk is going to grow beyond you know we think about things in terms of just the economics the timing tends to be sooner rather than later because markets are pretty efficient you know um that's that's a separate issue which is right now you look at the debt side of things and you know none of this is financial advice this is just how we tend to think about some of this so there are 380 million pods and a 45 million bean supply so as incubate was saying that's basically assuming that the bean supply if you're lending to beanstalk is going to grow to 805 million beans or 806 million beans which is a lot and so so the short answer is when you already have a set of um set of market participants that are pricing beanstalk at that price question becomes well how does beanstalk's internal economics work in terms of getting it there when we talk about bip6 right at some point when there's excess soil uh or excess demand for soil excuse me stock will no longer increase the pod line so let's say now um there's still 11 million soil the pot the weather is 2700. so uh roughly beanstalk is willing to issue another 300 million pods at maximum now it may be less than that because the soil will decrease when the t-wap is greater than one so let's assume another 200 million pods get minted or so now we're up to 600 million pods and at that point the price starts to really trend above one like the that we we get through all the available soil and we go through another mini growth cycle like the one we saw two weeks ago or three weeks ago at that point uh the the pod rate will be something like 10 or 1200 percent which is a ton and at that point the grand deleveraging begins so when because the pod line won't grow any longer from that point on beanstalk is sort of risk off where every time the b and supply increases the pod rate decreases and therefore it is deleveraging so at that point in time it's especially given with with ip7 live where now you have convert where you're not gonna have real time above one unless there's excess demand um stock is going to start to grow and deleverage pretty aggressively would be our guess at that point how quickly um how quickly you know it takes until until beanstalk sort of deleverages all the way uh remains to be seen but it's probably going to be on the order of a couple of months like sometime in q1 q2 at the latest um and keep in mind deleveraging all the way would mean that being stuck is a couple billion in supply so deleveraging all the way would also result in the weather starting to come down really significantly um and at that point the hope is that beanstalk will start to issue continue to issue a decent amount of debt so that the pod line stays at 600 million even if um the supply is up to a couple billion right so now you have a 50 debt ratio now you go down to you know oh my god there might even be a season of plenty at some point that's where then you start to get into the next debt cycle because if you have a major growth cycle from there from a couple billion to five billion to a season of plenty um that would be when you would expect the system to start to deliver to lev have to lever up again and issue credit more aggressively after that so at that point though and i know this has been a lot of a roller coaster of a theoretical ride um at that point you would expect the system to start to stabilize a little bit more because if there are creditors right and beanstalk just paid off 600 million pods uh now there's no pods because there was a season of plenty and now it's like okay there's going to be a ton of demand for beanstalk's debt going forward at that point you would expect the more efficient market dynamics to take place and obviously at that point beanstalk is operating more at scale so you would have some real volatility around the season of plenty um from there things should stabilize around a dollar and that's when things might become you know long-term stable if you will add a couple billion beans so that's that's a really aggressive vision that we laid out there especially than to say that this will happen in the next six months um that is the timeline that we're operating on to be candid so we're working our asses off to make sure that the dow scales to meet that and that the the protocol and the development side of things scale to meet that uh but it's non you know it's a lot of there's a lot that needs to happen to get from point a to point b and the main point is even if the economics make that likely the protocol in terms of the development of the protocol the integrations the the the audit all of that stuff needs to happen in tandem such that uh peenstock can can grow in line with the economics if that makes sense without growing to a billion when there's no growth in the in the in the fundamentals that would be a problem right right and i'm glad you took us on the theoretical roller coaster that's actually exactly uh what i kind of came to the conclusion to and why i asked the question and i guess to end on this note is i you know then it's my understanding then that uh the stocks seeds and pods you know once they have their own marketplaces they're going to start taking a cute like relatively non-trivial amounts of or like starting to uh create non-trivial amounts of demand for bean to help get past that one billion mark you betcha and more than that as people start to speculate on the stock price upward the arbitrage opportunity to sell stock for beans and deposit those beans and mint more stock and seeds basically creates a ceiling on the price of stock and seeds relative to a bean and creates a positive upward effect on the demand for beans when there is demand for stocking seeds and silo beans so people speculating on the future growth of beanstalk will be reflected in the growth of beans itself and the bean price yes awesome thanks thanks for that question evan that's some pretty exciting stuff um all right i have next uh bp 280 and then i have bean boy coming up hey all i actually was going to ask the exact same things as evan um i was really glad to hear him ask that and hear the answers but that kind of cleared up what i was going to ask if i've got something else i'll throw my hand up later but uh you know thanks for the thanks for the great answers and happy to be here okay great yeah and not to single anyone out or anything but just pp280 and evan you guys both have been great new members or more active recently in the in the discord and just wanted to say thank you you you guys are awesome yeah um this is such a great community um everyone's here to learn more and um i see from the dow side and we'll get to this later but there's there is a long journey to go but you know it's an exciting journey to be on nonetheless and how cool is this to have 43 people here for this call really really amazing i mean just to put it into perspective uh a a month ago dao was like five people maximum and two months ago it was just published so this is growing so fast and we're so excited uh but it's gonna take a real collaborative effort to get organized over the next couple weeks and we're hoping by mid mid january or so to have a real infrastructure in place so the next month as we've said it's going to be really hands-on getting things set up but uh we can talk about that in in the next meeting so uh boy what's up with us um so i just want to actually double down on b merchant's question earlier kind of about centralized stable coins versus decentralized stable coins so yes my first question is like um like what like how is this like a negative uh negative carry cost like reflected in in the borrowing is this like like people borrowing stable coins from usdc or tether and like having to pay interest on those that's that's kind of my first question my second question is like by removing that negative carry cost and kind of creating this like positive network effect i'm curious to know like what do you kind of see the impact being on like the wider like defy ecosystem by having like a truly decentralized kind of stable coin here so to answer your first question uh it is reflected in the high borrowing cost to use stable coins and it's it's sort of a catch-22 right on the one hand you have maybe it's not a catch-22 we'll we'll figure that out in a second but um when you have a shortage of supply um that has to manifest itself in some capacity and so when i it's really two separate effects that are working in the same direction not a catch-22 so one is the shortage of supply where there's excess demand for stuff right so when you have too much demand people are willing to pay a premium for something and the fact that people are willing to pay a premium for something like usdc but keep in mind the arbitrage opportunity uh where you can if the price is too high uh effectively mint more usdc like deposit something with circle and then sell it on the open market that arbitrage opportunity should in theory keep the price at a dollar and it seems to do that and therefore that the excess demand for the stable coin isn't isn't demonstrated in its price um it's demonstrated in its excess borrowing costs so if you go to somewhere like ave or compound and you look at the cost to borrow usdc uh tether or die the borrowing costs are just crazy high especially compared to the cost to borrow us dollars in the physical world which are basically zero percent you go from zero percent to ten or twenty percent that's nuts that's nuts and that's def you know demonstrative of just a crazy imbalance of supply and demand the second way that this plays out is when you have a stable coin that has negative carry um that has a cost to use in the sense that there's other there's other people that want the stablecoin to use it so there's never a time that you're just gonna have the stablecoin sitting in your pocket right it actually plays out in another area which is you end up not being able to use your stable coin for much because now you don't just evaluate the productiveness of your stable point against you know its purchasing power you evaluate evaluated what when factoring in the borrowing costs or at least the opportunity cost that you could get for lending it out so now betting on sunday football has to factor in the fact that i'm paying 10 a year on my stable coin right so i don't want to hold money in a you know the equivalent of like a fan dual account where i'm paying 10 a year so the the the point is and you may say and this this is actually the main segue into second question which is well isn't there that same opportunity cost and leaving the silo to some extent yes a the point is you don't need to give up your stable coins uh to participate in the yield uh because you can just deposit your beans in beanstalk natively as in other protocols you have to lend you know give it to another protocol beans are native to beanstalk um the second thing is like like we've seen over the past couple weeks the price of bean has been at or below a dollar there hasn't been much inflation right and so in an environment where the silo really goes through short-term bursts of growth but in general it doesn't doesn't grow all the time most of the time it'll make sense for you to be using your stable points using your beans and then if if things are popping and the silo is growing you may want to deposit your beans in the silo for a couple days but there's going to be a real use case for just using your beans across d5 so without giving like the grand you know beans are just going to become part of every single protocol and stock and seeds are going to be widely integrated and stuff like that just talking more at the micro level you really do think that beans have the opportunity to change sorry change the game for d5 by by making making the economics of betting on sunday football positive and all and and i'm using sunday football as like a ridiculous example because obviously economic uses that are less day-to-day and and retail make more sense but the the use case is there right if you can make sunday football betters like using poly market or auger make that doable and economically viable then everything else is viable on top of it so that's sort of how we think about it really great thanks for answering that question i really appreciate that i think in one of your early podcasts you mentioned auger and the relative the almost failure of it not that it failed but that it didn't succeed as much as it should and largely because of that negative carry um and i think that was really instructive it'll really open up a lot of things in d5 when we have when beans are the native uh stable coin um all right next we have mod 323 hi guys and after that we'll have uh windy if we have time can you hear me yes great um hi publish and the rest of the team uh thank you very much uh for having this and and enough for the whole community it's been great um you know i'm new here just catching up uh with everything and it's been really great seeing uh the work that you're doing um the question that i have i wanted to expand uh on a question from someone as i was asked i think a few weeks ago which is about the monetary policy uh of of uh uh being stocks i i understand you had you had answered that publius and you said that we don't have a monetary policy uh and i just wanted you to maybe explain this better for for us or for me to understand that um if we were to imagine that there's a country um you know being a country that uses uh uh beings as as this currency that's packed to the daughters just like you know other countries uh who do that what are the similarities and the differences uh uh between us and them okay so you know to answer at a theoretical economics level the question that was asked was concerning the the possibility trinity or the impossible trinity related to the ability for for um basically a central bank or a currency issuer um to be in control of its own monetary policy uh and maintain the price of the the currency that they issue at the same at some sort of target and have the free flow of exchange right so you can't have all three at once and the specifically the question was asking well how is it that beanstalk is able to maintain the price at a dollar when countries like russia for example and britain uh have famously had their currencies d pegged uh due to the theoretical impossibility trinity right and uh our answer to that is that we would argue that beanstalk isn't actually setting its own interest rate that is really where there is a main difference so in the case of a country for example um and let's talk about why a country might want to set its own interest rates um in general the cost of capital is is fundamental to a country's economy so when you have a a debt based borrowing based economy like most of the world has um most investment is made on borrowed capital and the assumption on that borrowed capital is we're going to borrow capital invested and in the future make more money on on our investment when we factor in the cost of capital the interest rate um on our investment and so in order for an economy to grow um healthily there needs to be a sufficient return on those investments that are made with debt in order to pay back the debt right and the problem that often happens is that uh when economies start to slow down uh basically investments that were made in places that might not have yielded such a high return for whatever reason are no longer able to pay back their debt uh having made money and in those scenarios that is where the ability to toggle your own monetary policy and adjust your own interest rate becomes fundamental and central banks have varying degrees of success use this toggling of adjusting the interest rates adjusting the cost of capital to basically allow the economy to pull forward future gains and and sort of lever up the expected return that is necessary on future investment to pay back these loans but but it can sort of decrease the amount of returns that you need by decreasing the interest rate so from a macro perspective just as a note you would look at the fact that currently interest rates are basically zero across the world is an indication that none of the investments that have been made over the past 10 or 20 years have been enough to pay off their interest and accordingly now the only way to keep the system solvent is to have everyone roll over all of their debt at a zero percent interest rate so there's no new cost to rolling over debt or taking on new debt which is a very scary thought so without commenting more about the general economic situation the reason being stock isn't the same is beanstalk doesn't say we're going to lower our weather or we're going to raise our weather uh because we want to um that would be much closer to what the what the system like what what what central bank operators do where when the system is levered up they're able to take their foot off the gas that would be and this is where it will become apparent what we're talking about how this is not the same and we're not solving the impossibility trinity because we don't control our own monetary policy now beanstalk is super levered right and uh there's a high debt rate uh there's a high weather and so if if beanstalk were in control of its own monetary policy in the traditional sense it would lower the weather it would lower its cost of capital and in that case you know since it's a country and it's in control of its economy and it assumes there's demand for its debt that's the fundamental part that violates the impossibility trinity why you if you're russia you can't do this on a sustainable basis if you lower the interest rate people may look at that and say we have no interest in your debt anymore and so while all these countries may choose to do that uh ultimately it's to their detriment and accordingly uh you know you've seen like world famous deep eggings like uh like we've mentioned in russia and the uk and the like um so the short answer is beanstalk doesn't do that stock doesn't lower the weather right now beanstalk continues to on a slow basis raise the weather because the price is too low and the demand for soil isn't high enough and isn't increasing and until it does it will continue to adjust the weather to try to meet whatever the market is pricing the necessary weather at um independent of what beanstalk would like to happen and in this case it would like to lower the weather but that's not possible if that makes sense so where we would say beanstalk compromises is it is not in control of its monetary policy okay thank you uh publish i'll i'll do more reading about this um given the examples that you've shared and if i have follow-up questions i'll post them on on the channel i appreciate your your lengthy answer uh thank you for that our pleasure um so uh we we we do have this other dow structuring meeting in just a second um absolutely real quick that's not until uh that's not until 8 45 so we have a couple of minutes uh wiggle room fabulous so um why don't wendy what's up wendy yeah guys i jumped on a little bit later just just a quick one with regards to hosting the beanstalk website uh i don't know if you're aware but the the un can now censor websites at the dns level just wondering if you've thought about hosting it maybe on ifps or something like that so we're definitely going to hopefully move the website to r weave and at some point now uh given the permanent nature of our weave we we want to get the website to a little bit of a better place before then but yeah talking about being stuck into a billion beans in the next six months this is something that's certainly on our mind and in fact hold on maybe we can even drop this this is fun we were just experimenting with um with the our weave today and we dropped the the beanstalk white paper uh on our weave i believe um so we can try to find that and drop a link for you um somewhere but we're getting we're experimenting with that and uh you know it's definitely top of mind is the short answer and furthermore just as a side note once the website is open sourced um then even if one dns is is blacklisted uh that won't be a problem because people can run the website locally or lots of different uh you know uh browser independent people can maintain their own their own version of the website or server hosting the website awesome one question that was posted uh to the discussion board is biblius how many other bips do you have in mind at the moment um so like faces up your sleeve there's uh you know not uh not to call us uh uh sort of the opposite of a magician right we don't wanna have aces up our sleeve in the traditional sense where you have no idea where it's coming our hope is to have aces up our sleeve like the convert bit where we've been talking about it for a while and when it's appropriate sort of implement things based on the specific situation bean stock is in at the moment so the hope is excuse me hope is to get beanstalk a place where it no longer needs any tweaks to the model uh we're a long way away from there um so so many different places where the incentives can be slightly tweaked to be more efficient or the system can be less for have less friction in it to name them all would be uh an exercise in futility um but like we keep we are a like actively building out a list of what those bits look like and trying to organize it and be focused on building out a real back end core developer set that can a group of developers that can start to implement lots of these bips and beasley and leo fib are are two really fabulous back and desks that are starting to do that so to ramble off sort of just off the cuff some of the stuff that we are working on in the near future um or or hope to work on in the near future and across you know some of them may be sooner some of them maybe later um you want to lower the withdrawals and stop timer uh down to four uh seasons and then at some point down to zero um doing that and making sure that the incentives aligned like like making making it such that you can withdraw at any time would result in beings even if they're awarded in a season like being paid out pro rata over a week perhaps um so there's like things like that are not so technically easy to implement efficiently on ethereum so it takes a little bit of development time but uh we're thinking of like in the short term we're probably gonna propose a bit to lower the withdrawal time to as low as four and then try to get it below that even um speaking a little bit more on the efficiency we want to make it such that people can withdraw ethereum from beanstalk not even with raw beans and have to sell the beans so you deposit the theory and we withdraw ethereum um we want to make farmings like slash updating your silo optional across all of your transactions um where beasley has been working on a bib to allow you to like partially claimed plots and withdrawals so you can leverage bip2 um pieces at a time and if there's any remainder that doesn't go into your wallet um there's we we think that sop beans uh you know like season of plenty beans that are sold into ethereum should be like in lieu like not additionally minted but just in lieu of some of the beans distributed to the silo that's a pretty easy change um you want people to be able to claim their ethereum from seasons of plenty and use like like bip2 in an efficient transaction uh simultaneous voting uh there's so many different things that uh we want to add in addition to making all the assets fungible and stuff like that we want to add an oracle suite to support lots of integrations we want to roll out factory contracts for other protocols to integrate stock and seeds which are yield bearing assets so making it easy for them to do that in a way that can earn beans and stocking seeds from their like yield generating assets and roll them into other protocols uh that will will help growth so there's you know i'm rambling a little bit here but there's just an endless there's an endless not to call it endless there is an end it's just it's not in sight in the moment and we're talking about there's like over the next six months in addition to the integration front in addition to the multi-chain front um there will be a lot of just continual tweaks and improvements to beanstalk to put it in a position to be able to run 100 autonomously at some point okay that's a great answer and very exciting um well i'm going to check the discussion board see if there's anything else actually i have one quick question if we have an extra few minutes if there's nobody else i don't want to cut anyone yeah go ahead thanks um so the one thing that uh i was just hoping to learn a little bit more about i think i have a basic understanding but um i'd love to hear it in your words just kind of what how you would explain uh the curve integration and kind of what purpose it serves and why it's good and and all that kind of stuff so similar to like let's just talk about unit swap v2 for a second so the x times y equals k curve is like really innovative and amazing uh and has enabled so many incredible autonomous x's in d5 at the same time it's pretty pretty damn inefficient right so we've experienced even when you have you know we we have millions of dollars of liquidity in the unisoft v2 pool uh like a hundred thousand being trade all right uh my microphone's getting messed up a hundred thousand being trade moves the price pretty significantly curved stable swap is much more efficient when handling uh larger trades at similar volume and we expect that will result in basically the price oscillating a lot tighter to one and provide an arbitrage opportunity against where the unisrock v2 pool cannot be arbitraged against the curve pool which will trade against one much tighter and therefore the unesco pool will also be able to trade much tighter to a dollar that's a great explanation thank you okay well i think we can uh probably wrap up here given that we we want enough time for the people to get over the dow meeting um so yeah i want to thank you all for coming i'll give publius a few minutes to um to wrap things out i do want to say that everyone who came should have at least the humble farmer role on their uh on their profile so you can check that um we're looking to kind of update those as people go and uh make a more formal system for for the roles but you know everyone who's who's making the effort to come to meetings like this should at least be a humble farmer so if not uh send me a message um and uh over to publius and then everyone here is welcome to come to the dow structure meeting which is after this held in the barnyard so thank you dumpling uh thank you everyone for coming and for your fabulous questions oh we're sorry if we weren't able to get to everyone um just we would use this as a call to action as we've made you know previous times we've we've had a large group of audiences there's so much stuff to get done across across the board here over the next couple months to get beanstalk and beans to become ubiquitous across d5 and uh we're really encouraged by the really high quality community that is aggressively forming around beanstalk it's really mind-blowing and uh it's amazing to us and we're super excited about it but but it is going to require people to step up and to say i am i want to help and here's i want to help doing xyz and uh over the next month it's going to continue to be a little bit disorganized but things will come into place and and uh we would just encourage everyone that wants to get involved to make it known and drop your your your your skill sets and skill set volunteer uh that channel uh reach out to dumpling reach out to us um make it known that you want to help uh and what your skills are and you know we'll try to make it happen so this is super exciting and we look forward to uh to talking to everyone again soon you