Beanstalk University Class #7

Beanstalk University Class #7

December 21, 2021

• 0:00 Intro • 2:10 What if BeaNFTs had their own Bean marketplace? • 4:10 What makes creating more USDC/USDT difficult? • 9:19 What other projects inspired Beanstalk and how are they different? • 16:01 Why is a credit approach better than collateral? How is the oracle decentralized? • 22:19 How are the borrowing costs different between Beans and other stables? • 28:16 Where is the interest-earning opportunity with Beanstalk? • 29:23 How has the protocol performed compared to your expectations? • 32:50 Publius’ Advice for learning/working in crypto? • 35:05 Why is the weather high and increasing when we are at peg? • 36:38 Why excess demand for soil causes Beanstalk to deleverage • 40:10 What are customer profiles that will drive demand? • 45:56 Why would people be willing to lock up capital in credit? • 48:02 Why is protocol-native interest opportunity important? • 50:42 How do you think about retail vs institutional capital entering the ecosystem? • 55:05 What happened in the pump and dump in September? • 58:40 Beanstalk on AVAX? • 1:02:00 Closing remarks

Beanstalk University




  • Town Hall DAO meeting Thursday (see Discord time)
  • DAO project standup right before that
  • reach out to Dumpling if you want to contribute to the DAO!

What if the BeanFTs were denominated in bean? Thoughts on our own NFT marketplace?

  • OpenSea link:
  • That’s a great idea! As development capacity improves, the goal would be to fork OpenSea to have a bean-denominated version, this would also circumvent the 2.5% fee and fund projects in Beanstalk accordingly or remove it entirely.

Requiring collateral slows down the growth in market caps of other stables. With centralized companies like USDC, I assume they just mint a new USDC any time . Why is that process hard?

  • Well one way of looking at it is that the only entities that have figured out how to mint stablecoins like that are doing on the scale of hundreds of millions and billions ⇒ because that process of exchanging USD for a token on-chain is difficult
  • Macro reason: there aren’t enough dollars people are willing to lock up to meet demand. No one wants to hold dollars in a bank account because it yields nothing. Coinbase has had to diversify holdings in order to attempt to meet that demand, reflective of the fact that it is difficult to put a trillion dollars into a bank account (people don’t want to lock it up)
  • with DAI or MIM it’s difficult to lock up a hundred billion of ETH, at some point you run out of Ethereum because there’s so many other things people want to do with it
  • additionally, Coinbase almost doesn’t want to flood market with USDC to bring the borrowing cost down because you would have no reason to add collateral if the yields went away
  • Good luck issuing a trillion USDC! It’s very difficult

In what ways is bean different from other algo stables like Empty Set Dollar and Basis Cash?

  • The most meaningful difference is that increase in the supply of beans is a function of the liquidity in the Uniswap pool. In other cases, they would increase the supply of beans as a function of the market cap. This increases supply by way too much especially when there aren’t protections against extreme organic demand (apes)
  • The way Beanstalk handles not entering a death spiral when demand very high is simply by minting fewer beans. Bean takes into account how many beans would need to be sold in the BEAN/ETH Uniswap pool in order to bring the price back down to a dollar
  • Basis Cash would hold regular auction windows—allowed the market to set the price for debt at any price. The tradeoff is that Basis has to immediately attract that demand which means it is willing to pay any (infinitely high) price for that debt.
  • Beanstalk is willing to move a bit slower, and when it mints soils, it’s not willing to pay any price for that debt. It’s just subject to the weather (which moves slowly).
  • ESD/DSD had a tragedy of the commons issue where the interest rate was dependent on the debt level. This meant you’d be incentivized to wait to lend to the protocols so you could get a higher interest rate. The FIFO mechanism and weather not changing radically from season to season are what make the economics of Beanstalk sound—you should sow immediately when you feel the conditions are appropriate.
  • Bean Merchant’s analysis of BEAN vs. other stables:

Could you explain why the credit approach is better than a collateral approach?

  • If you have capital that you need to lock up in perpetuity in order to use a stablecoin, and specifically locking up an abundance of capital like 150%, there’s an opportunity cost associated with that lockup. That cost is reflected in high borrowing costs for current available stablecoins, which are all collateralized one way or another.
  • When you switch to credit based, it untethers you from the need to lock up collateral and pay the rent associated with locking up your capital.
  • You can lower your cost of capital by depositing your beans in the silo, and they can be used in the rest of DeFi. Bean has these positive features AND the market cap of bean can grow much faster to meet demand. Far less capital inefficiency

How are we more decentralized than other stables given the Beanstalk oracle points at the ETH/USDC Uniswap pool?

  • Beanstalk compares the BEAN/ETH pool vs. the USDC/ETH pool. In order for the issuer of USDC to ban the Beanstalk oracle, they would need to ban the USDC/ETH Uniswap pool, which would make that pool useless and a lot of DeFi depend on USDC liquidity.
  • When government pressures Uniswap to delist assets, they remove pools from their frontend but not the underlying AMM. This is a great sign that Uniswap wouldn’t ban specific AMMs as well.

How do you compete with USDC and DAI when their borrowing costs are so low (they aren’t low!—they have double digit percentage borrowing rates)

  • It’s not possible to issue 1T USDC in a short period of time because of the collateral requirements, as a result there will always be friction associated with USDC
  • A high borrowing cost of USDC is natural for a collateralized model. The cost of borrowing USDC on Aave is 11.5%, which is crazy
  • with USDC, you have to earn interest by depositing into a protocol that is not native to USDC
  • Beanstalk will mint beans until the borrowing costs are zero, and it pays those beans to farmers

How has the protocol economics behaved differently on mainnet vs your expectations when writing the whitepaper?

  • Honestly/humbly, a lot of things have gone according to plan :)
  • We had no pre-mine, no pre-launch, no guaranteed inflation schedule. We started from zero, which exposed Beanstalk to the type of pump and dump that happened in September. We were surprised how young it was when it went viral on Twitter during that time, but it ultimately behaved in line with our expectations
  • Not everything has gone perfectly—BIP 6 is evidence that certain parameters can continue to be improved (like amount of soil available). We have more economic data to look at now
  • We’re incredibly pleased with the way the model has been performing thus far. But there’s a lot of work to be done for Beanstalk to fully realize it’s potential
  • @33 minutes: Come work for Beanstalk! :)

Why is the weather so high and increasing when the price is so close to $1?

  • Beanstalk optimizes around price first and foremost. At a more macro level, if the price is at a dollar and the debt level (pod rate) is 1000%, that isn’t sustainable in the long run. Optimal debt level is 15%, goal is to return to this. The weather continues to rise so that sowers eat up the soil. Excess demand for soil reflects that every season, beans are sown in all available soil. This creates a positive feedback loop in which Beanstalk would deleverage to the optimal level.
  • During that time where that happened in late November where demand picked up, Beanstalk was issuing too much soil (BIP 6 fixes this in the future). Even though it paid off debt, the debt level increased.
  • Extended period of excess demand for soil would start to significantly deleverage Beanstalk because the pod line will still grow, but the pod rate will decrease because more beans will be minted.

What are the different customer segments that Beanstalk wants for demand?

  • We view the economic opportunity opened up by a positive carry stablecoin like bean as sort of infinite.
  • “Enable people to bet on Sunday football”—depositors are able to withdraw on Saturday, and redeposit on Monday. From Monday to Thursday, they are earning passive interest.
  • Anyone with an internet connection can now access a high interest USD bank account.
  • We’re still bootstrapping the economic mechanism right now. The ideal customer is still the person who is betting on the economic mechanism itself. With such a high debt level, we’re still attracting investor types, but there are people in the DAO thinking about more sophisticated strategies from an “attracting users” perspective.
  • From discord: “publius was saying that people are unwilling to put their money into collateralization, but he never talked about why people would lock up in credit”
    • You don’t need to lock up your capital in Beanstalk to mint beans. With DAI/MIM, you have to lock up more ETH than the stables you get back are worth. You just buy the beans.

Why is it important that someone can gain yield on their stablecoin from within the native protocol itself?

  • Depositing into the silo is a “risk free” rate of return
  • There are certainly risks associated with Beanstalk, there’s no additional risk you take on by taking your circulating bean and depositing them in the silo (especially when the withdrawal time is brought down)
  • with Maker CDPs, Circle, etc, in order to earn yield you are putting them in another protocol, not a risk free rate of return. You are exposing yourself to counterparty risk

Can you talk about the value of bringing in retail investors vs. institutional?

  • from the perspective of Beanstalk, all capital is created equal. Not necessarily true, given that some capital is willing to provide labor, connections, etc :) (DM Dumpling if you want to contribute!)
  • btw — if you have connections with podcasts, that would be great!
  • these useful value adds come across investment sizes
  • nothing will do more to attract capital than continuing to oscillating around a dollar and deleveraging

What happened during the pump and dump in September for those who weren’t around at the time?

  • Beanstalk went viral on CT, a ton of apes who didn’t understand the protocol brought a ton of capital in. BEAN went from 2M to 40M market cap in a short amount of time. Majority of that capital left when they realized they couldn’t exploit the protocol. The result was a major debt cycle that followed. Over a month or so, Beanstalk attracted millions of dollars of loans from hundreds of lenders in a decentralized way in order to bring the price back up to a dollar. (Check out the price chart!)

From Dave Craige: AVAX—when I tweet about something and it’s $100 in gas fees, I get DMs from folks in other countries that say “I can’t afford that!”. Has there been discussion about Beanstalk on other L1s or AVAX specifically?

  • Community has really stressed desire for multi-chain Beanstalk
  • Celer team—cross chain bridge. Highly encouraged by their progress. Hopefully in the next 3 months Beanstalk and beans will be on AVAX


we could probably get started published you have anything to say before we get uh class started so not anything in particular um worth noting uh if you want to continue to get involved in the dow uh reach out to dumplin the daff continues to grow incredibly quickly which is very exciting and the hope is that the increase in the organizational structure over the next couple weeks will greatly increase the output from beanstalk farms that is independent of poopleus and obviously there's some sort of friction when people are getting onboarded and things like that so the hope is that as things become a little bit lower friction the output improves and we're very excited about the quality of talent being stock farms is is attracting so if you are a high quality individual or know someone who is and want you want them to try to work on beanstalk happy to happy to chat with them so uh that's uh that's maybe the only announcement uh as the dow continues to grow but otherwise happy to answer any and all questions obviously we haven't been as active in the discord recently as we were maybe a month or two ago that's a function of the fact that there's so much going on in the discord and uh in general around being stuck that you don't have that that that much bandwidth to respond to any and all things in the discord but have still been trying our best so uh hopefully going to use this opportunity to get to anyone's concerns or questions or whatever is on people's minds so uh without further ado uh you know if people have stuff to say or add or ask just feel free to raise your hand and we'll try to get you up here um i had a question to start things off i suppose how you doing evan good publius how's it going um so this is a sequester regarding um beans that being nfts and i was just wondering um is what your thoughts are on having the bean nfts denominated in being and this might be a new question but is it possible to do that on open c and if not then thoughts on an nft marketplace that denominates things in beans that's a great idea and in fact something that is attractive to us to do as the beanstalk arms development capacities improve is to basically uh fork open c and uh have a like a bean denominated open c for b ft's and um then you can circumvent the uh open c two and a half percent fee and either reallocate that fee to like funding the bnft dow or removing it entirely so there's a lot of wiggle room there but the hope is to given that most of the demand for being enfts are going to be native to beanstalk if that makes sense people who are already part of the ecosystem uh there probably isn't that much of a loss of a network effect from moving the main exchange off of open sea um so yeah that's a very attractive option to us i like that idea and also other if we could uh the more things we could denominate in bean would be pretty awesome i have a question if that's okay um so i think i've wrapped my head around you know the idea of how you know requiring collateral with a stable coin slows down the potential growth of the market cap but i'm wondering with more with the centralized entities like call it circle or tether my understanding is what happens is whenever someone you know wants to trade a us dollar for usdc they figuratively click a button to mint mint wanna unchain and so i'm curious if you have any insight like more specifically what makes that process difficult for circle is it just that they can't possibly come up with the capital to back it up quickly enough or what exactly is it that makes that difficult for circle so at the micro level there is a lot of friction around kyc and like do you know anyone that's ever uh done what you're describing which is take dollars and exchange them for circle the only people i'm familiar with that have done that have done that in massive size billions or tens or hundreds of millions of dollars at a time and um ultimately that is like that's the nature of the centralized issuance model where uh it doesn't happen on a continuous basis typically um and the the more macro reason why it's a problem and a friction for the market in general is that there simply aren't enough dollars that people are willing to lock up to meet demand and so right now basically nobody wants to hold dollars in a bank account it yields basically zero percent a year and accordingly uh there's a shortage of dollars that coinbase uh has found people who are willing to lock up dollars in a bank account and the result is that coinbase has had to diversify their their holdings um and so they're no longer holding just dollars they're holding other other assets as well and that's reflective of the fact that there's simply not enough uh you it's hard to put a trillion dollars in in a bank account um simple as that and when you think about the just at a even on an ethereum level die or mem or liquity um it's difficult to lock up a hundred billion dollars of ethereum right there's there's a lot of other things you can do with your ethereum and even though there's a ton of demand to do that at some point you run out of ethereum and that's where the cap and supply of a collateralized model ultimately comes from so losing the that that that that limitation that is derived from the fact that there's simply not enough capital to support the stable coin market in a way that there aren't egregious borrowing costs uh or opportunity costs associated with using your stable coins uh you know that's that is almost entirely a function of a shortage of available collateral people are willing to lock up okay got it so coinbase doesn't have enough capital because people aren't willing to lock up enough dollars because there's so many other ways to gain returns is that how you think about it correct like if you have a dollar right now uh is on the list of if you have 100 million dollars let's put it this way on the list of things that you're going to do with your dollars where is leaving it sitting in a bank account where does that rank on the list right and so in practice and this is where things get a little finicky coinbase almost doesn't want to flood the market with usdc to bring the borrowing cost to a dollar because then you would literally have no reason to add collateral right so it's to some extent that's where the market-based dynamic comes in where the more demand that there is is reflected in higher borrowing costs which potentially makes it more attractive for people to give money to coinbase um but in general like good luck issuing a trillion or 5 trillion usdc that's going to be very difficult that makes a kind of sense thanks for the answer hey publish i've got a question i guess i i would love to hear more about some of the more about the inspiration pulled from past like algo stable projects and like more of you know what are beanstalk's unique improvements on some of those compared to systems which ones i think just passed attempts at algo stables and it's like esd dsd basis cash studies so in many ways that's an open-ended question because we could talk for hours and hours about the differences um but i think to give a couple of concrete examples where things are substantively different and how that has a meaningful effect on beanstalk and its sustainability the first one which is most meaningful is that the increase in the supply of beans when the price is above a dollar is a function of the liquidity in the being ethiopia whereas esd dsd basis cash they would increase the supply as a function of the market cap or the total supply we should say and so if the price was one cent too high it would increase the supply by one percent which is way too much and when you combine the fact that when you have such egregious inflation uh with the fact that there weren't many limitations on inorganic demand to ape into the system when the price was above one you had massive rushes of capital into the system that caused it to over inflate that cost more capital to come in that caused it to over inflate and whenever that ran out of steam it it crashed and burned and so in many ways you know the way that beanstalk handles uh not entering a death spiral when the price is less than a dollar is by not minting too many beans when the price is above a dollar um and so beanstalk tries to mint beans in a more market-based than a true theoretical economics-based approach which factors in the amount of beans that need to get sold on the beneath unit swap liquidity pool in order to bring the price back to a dollar and on the dead side of things esd and dsd are and we're skipping over a lot of differences but they're very different than basis cash on the debt side of things so basis cash uh and more of the basis model which is more what we're familiar with in the specific basis cash implementation uh the was that uh every ever there would basically be continuous auction windows or every certain period of time uh i don't recall the epic period whether it was a day or an hour uh what would be it uh basis would basically hold an auction uh we would say okay we need to fill this amount of demand for basis and so we're gonna we have to fill it so we're gonna allow the market to set that price and basically allow people to bid higher and higher whatever that closes at the point is at least basis will be able to guarantee accessing enough demand and that is in a theoretical way an efficient auction to ensure that basis gets the best price for filling the debt that it has to fill um but the trade-off that it makes as compared to beanstalk is that asa says it needs to immediately attract that demand and therefore basis is willing to pay any price for that debt up to an infinite rate um in beanstalk's case beanstalk is willing to move a little bit slower and so while issues soil um it's not willing to pay any price for that soil the weather only changes a little bit every season and that as compared to basis prevents it from overpaying for its uh debt and as compared to esd and dsd um on the death side of things esd and dsd had a real tragedy of the commons issue um which uh not to speak specifically of basis coupons in general but which had uh separate issues but the esd and dsd coupons were particularly flawed um where they were redeemable uh at the same time and so there was no preference for when you lent your money uh to esd or dsd for when you could redeem ever all bondholders were an equal class of bondholders and uh the real problem with that but was compounded by the fact that the debt uh excuse me the interest rate that you would get for lending money to esd or dsd was a function of the debt level and as the debt level would rise the interest that you would get for lending to esd or tsd would also rise and so they predefined an interest rate based on a debt level which is sort of ridiculous in and of itself but it also created this horrible economic incentive structure where even if i was incentivized to lend to esd or dsd right now i would actually want to wait for somebody else to do it so that i could get a higher interest rate because the debt level would go up between now and then and i would get a higher interest rate whereas in beanstalk because of the first in first out harvest mechanism and the fact that the weather is not changing radically between season to season the incentive structure is if i am incentivized to lend to being stuff right now based on the price the weather the debt level etc the incentive structures that i do it immediately because the risk that somebody else sews ahead of me and is now in front of me in line will have more effect on my on my return and therefore i'm an incentive that more of an effect on my return then at the margin the weather might improve by going up six percent over the next couple hours per se so that's how beanstalk creates a very efficient market around the debt around the debt side of things that's awesome thanks for answering that it's cool to hear how thoughtful you guys are about building this thanks hey i also have a question uh mine is more so focused on could you give a little bit more of an explanation on why a credit approach is superior to a collateral approach and then the second question following that is um at the end of the day this is linked to the usdc eth liquidity pool so could you explain a little bit more on how we are more decentral or are decentralized and why that is the case with us um this and how maybe that liquidity pool aspect doesn't contribute to that thanks so there's there's one question of decentralization uh which is somewhat separate from the main benefits of a credit-based model over a collateral based model so with regards to the decentralization of the oracle uh beanstalk derives a price for one bean from the bean eat unistraw pool and compares it to the usdc eq in a swap pool and therefore beanstalk can get a pretty good price for a dollar at the moment um without any exposure to any centralized operator how is that possible in order for the issuer of usdc to ban beanstalk's oracle they would need to blacklist the usdc eth uniswap pool which would effectively uh make usdc more or less useless going forward within d5 if they're just going to start blacklisting random uh amm pools and accordingly it's highly unlikely based on the actual the potential actions of circle the operators of ustc but that's going to happen and when you look at uniswap when when the government has sort of stepped on the neck of uniswap uh to delist certain assets what they've done is they've de-listed it from their website but never have delisted any amm from their protocol um and so we look at that and feel like between the fact that the being eth uh you know pool is trading against ethereum which is the native asset of ethereum uh and so in that oracle model you don't have any any any exposure to the actions of circle when it comes to censorship um you do have exposure to their actions when it comes to uh like fraud or uh theft or losing their usd you know their collateral um but that's sort of a different type of exposure than uh than a censorship risk per se and the answer you substantively on succinctly on the the benefits of a credit-based model versus a collateral-based model is to build off of our answer to austin if you have capital that you you need to lock up somewhere uh in perpetuity in order to use a stable coin uh and specifically you need to lock up uh an abundance of capital 150 200 percent uh maybe as low as 110 but more capital that you intend to use um you need to lock that up there's a cost associated with that uh capital being stuck there specifically an opportunity cost and that opportunity cost is reflected uh in multiple different places um but specifically we see it in really high borrowing costs uh for for for the current available stable coins which are all collateralized one way or another and in short when you switch to a credit-based model what that does is it untethers you from the need to lock up collateral and pay that rent associated with locking up that collateral so you have a one-time purchase of your beans you take your capital you buy beans and then there's never any rent or a future locking up of any capital associated with that and the only capital that you're locking up so to say is the capital that you're taking and trading into beans which you immediately then have as liquid so there's no capital inefficiency there and furthermore when you then have the opportunity to deposit those beans directly in the beanstalk protocol you can then lower your cost of capital so you start with one bean that you bought for a dollar and now you have two beans well now your cost of capital is 50 cents but you still have two beans that can hopefully in the next couple months be starting start to be used throughout d5 so whereas with usdc you take your heath uh you know you lock it you buy you know well let's take diet right you take your eat you lock it up you're over collateralized you're paying a stability fee um uh in the case of beanstalk you just buy your beans you deposit them in the silo and now you're earning interest on that natively from the protocol so just that dichotomy between a model where you're locking up your capital and paying continuous rent on it versus not locking up any excess capital and collecting interest on your beans um that's that's where you can most clearly see the difference between the two models thanks okay uh steven and then i'm gonna bring up mr juice who can be next cool thanks i actually had two questions um the first is how like you mentioned earlier that usdc uh well i guess like my my question is like how do you compete with usdc and die as like a stable coin and defy when they're borrowing costs are so low well specifically like being like like i'm trying to like imagine this so you said like usdc for example like us dollar for example like if you deposited it in a bank account you're getting close to like zero percent um return which also means like the borrowing costs also pretty low um and in terms of like actually having usability for bean um like if we have like a borrowing cost of like 20 or 30 percent or whatever it may be like i don't think it's a very good option as opposed to some other stable coins so i have a question yeah where are you getting a borrowing cost for being oh no uh well this is like uh in the future that you uh i mean maybe a misunderstanding but like a potential future where being can be used in like defy so uh there's we'll try our best to address sort of what you've said here but it's you know we'll try to we'll try to piece it together okay so uh in general the fact that interest rates are so low um doesn't necessarily mean that you like circle has access to infinite capital um in any competitive market uh capital is always looking for like an efficient place to be deployed based on uh the risk and return goals right and so circle has to compete with every other every other [Music] potential use of capital that exists basically and the the option to take your dollars and give them to circle in exchange for usdc that you can earn you know nine percent on or something and if you start to do that in size you'll start to eat into your return it's only so attractive to so many people and specifically when you consider that that's happening basically in an otc fashion where it's very few parties that are going through kyc in a non-continuous fashion there's a ton of friction associated with actually raising capital to issue more usdc even if like the underlying economics make it possible to issue more usdc over time it's not possible to issue a trillion usdc in in a short period of time if that makes sense and as a result there's always going to be frictions associated with usdc and just to restate it one more time the main attraction of performing the arb to give capital to usdc is then take advantage of the the opportunity to lend out the usdc on chain for some sort of interest native to some other protocol and specifically that that behavior is only incentivized as long as that interest rate is high and so a shortage of usdc is actually what keeps that market healthy so a high borrowing cost to usdc isn't is natural and is is inherent to any sort of any sort of collateralized model and that is reflected on the fact that if you go to a product like ave right now of the cost to borrow usdc you know on a stable basis are still double digits 11 and a half percent that's craziness um whereas and now to address your future scenario uh we don't envision a scenario where there is ever uh a need uh to pay a borrowing cost or a yeah borrowing costs of 20 to 30 to have beans because you can always buy a bean on the open market right and so specifically when we talk about the structure of the of the interest in a usdc market versus a beanstalk market uh you take your usdc you don't have to put it into a lending protocol or or another protocol to earn interest in a protocol that is not native to usdc in the case of beanstalk you buy your beans for a dollar each and then you can passively stake your beans in beanstalk in the protocol itself and collect interest in a passive capacity and so there's there shouldn't be certainly when we think about efficient economic behavior there should never be a scenario where people are paying 30 borrowing costs on beats because if that's the case like the fact that beanstalk isn't inhibited by a shortage of collateral beanstalk will just basically mint beans until the borrowing costs for beans are zero and it will pay all of those mints to silo members and and field uh sellers so it literally takes all of those borrowing costs from the current stablecoin market and it pays it to beanstalk farmers gotcha okay so i think i was misunderstanding yeah like you said like there's platforms that you can lend out your your stable coins to um so in in beans case it's basically all within the protocol itself is what i heard from you well just specifically that the native uh interest uh earning opportunity we do anticipate that beans and more in a more sophisticated sense stock and seeds we have no idea what the borrowing costs for stock and seeds will be um or silo beans but uh the perspective on the cost of acquiring a bean beans can still be uh adopted in various borrowing protocols but there should be near zero borrowing costs for beans in general um now some sort of time preference for locking up a bean for a period of time there's a cost associated with that just from an economic perspective so capital isn't free um but in beanstalk it should be pretty close to free okay and sorry i don't want to take up too much time but one other question i had was how like i i saw on discord you mentioned that part of beanstalk is like behavioral economics and um so i was wondering kind of like uh you created the white paper and i was wondering like how has how has like the actual protocol worked out differently from what you expected when you uh originally created the white paper if at all that's a fabulous question um it's a little bit difficult for us to answer um because of how how much things have played out almost exactly as we have expected them to and it's hard to start to talk about that without sounding either like we're lying or you know full of ourselves um but when we think about the launch strategy that we ultimately decided to go with which was no pre-mine no pre-launch like to compare it to something like esd which said for a given number of epics the price will be locked in at 1.40 or something and guarantee some sort of inflation schedule um by deciding to go from zero it did sort of expose beanstalk to the type of pump and dump that happened in mid-september and while we were a little bit surprised at how young beanstalk was when it went viral on crypto twitter and went through uh you know the difficulty that was mid-september through mid-october um it was very much in line with our expectations now uh did we see 24 cents coming when we launched the protocol no did we see it when we saw beans at four dollars that made a lot more sense given the immediate context that we were in um now not to claim that everything has gone perfectly for example bip6 is a reflection of the fact that certain parameters can certainly continue to be improved like the amount of soil that is available and we intend to continue to tweak those parameters now that we have a ton of economic data to take into account but at a macro level the model is not going to change and that's largely due to the fact that at a macro level the model has demonstrated some sort of proof of concept and things have played out more or less in line with our expectations um now we have a lot more expectations about what the future looks like and we don't count any of our chickens and there's a tremendous amount of work uh that needs to be done to get from here to there but thus far things have been like almost in a in a magical way it's been things have been you can't call it smooth sailing right because it's been very volatile but uh we're incredibly pleased with the way the model has been performing uh in the real world okay thank you steven uh next up mr juice hey uh so my question is kind of unrelated to bean is that all right but it's still about like the decentralized environment go forward sure sure so i'm like i'm soon to graduate computer science graduate got a job lined up as a software engineer but i really want to build in this space in the decentralized space i was kind of wondering what advice you guys had for me to sort of position myself to learn a lot more and uh to be able to build a lot more homework for beanstalk i loved it so we're serious about that you should talk to us after class um in terms of you know at a substantive level crypto as an industry moves faster than basically anything certainly anything we've ever experienced um but faster than almost anything else exists or the state six months uh from now or in the past is just so radically different than uh today's state and that's continuously the case and that's why there are such quick cycles throughout the space and ultimately in order to stay on top of crypto it requires you to be in it in some capacity and so at least what we have found is doing things in a hands-on capacity and just diving in and working on projects or making forcing yourself to have an obligation to be to stay on top of this on a daily daily basis is really the only way to a get up to speed and then be stay up to speed because of how quickly things ultimately change that makes sense i guess i'll take you guys up on uh working for beanstalk after this fabulous this is uh this is what what we want to see in class everybody so everyone can come up here and get a job um all right who's next um i have a quick before right before you go ori um i have a quick question from don uh who who just dm'd me and earlier in the week in discord i promised to ask it so um okay so from dawn why is the weather so high and increasing when price is so close to one why doesn't weather get close to zero when price gets close to one that's a great question don so beanstalk optimizes around price and first and foremost the goal is to get the price back to a dollar but at a more macro level if the price is at a dollar and the debt level is 10 000 that's not going to be sustainable in the long run and so being stock is trying not just to return the price to a dollar but to return beanstalk to ideal equilibrium which is the price at a dollar and the debt level at an optimal debt level which is currently defined as 15 and so even when the price is at a dollar or close to a dollar the weather is going to continue to increase in order to hopefully create at some point uh excess demand for soil to create a positive feedback loop that will start a deleveraging of bean stock and ultimately return its debt level to the optimal level so the weather continues to rise because uh it needs to attract enough demand for soil such that there's excess demand for soil which will cause beanstalk to deleverage so following up on that can you explain why an excess demand of soil will cause uh bean stock to deleverage can you walk us through that definitely so specifically if we take into account dip six and how it affects the minimum soil so when there's excess demand for soil that that is reflected in the fact that every season all of the soil is sown beans are sewn in all of the available soil and just for reference during like the two two and a half week period starting around thanksgiving when there was excess demand for soil um beanstalk was issuing too much soil and accordingly even though it was starting to pay off its debt in mass it paid off like 15 million pods uh the pod line increased almost 200 million pods during that time and so even though it paid off debt its debt level increased its its pod rate increased and so bip six uh changes the amount of soil that is issued when there's excess demand for soil such that as an example let's say beanstalk paid off a hundred thousand pods at the beginning of this season accordingly it will only be willing to issue a hundred thousand pods this season so the pod line will stay the same line the same length but because the bean supply is growing the pod rate will start to decrease and thus will begin the deleveraging so an extended period of excess demand for soil will start to deleverage bean stock in earnest okay so if if uh there's a 100 million uh that comes into beanstalk then a hundred million uh in pods are issued but the protocol has grown and so the ratio uh the pod rate is declining even though we have the same amount of debt sort of similar to someone who had a fifty thousand dollar uh debt and made fifty thousand dollars a year if they get a raise to a hundred thousand dollars if they still have fifty thousand dollars in debt their debt to income ratio has has gone down yeah we rejected the size of that to a hundred mil from a hundred million to a hundred thousand because if a hundred million dollars came into being stock all of the pods would get paid off almost certainly um now like being stock does the way that beanstalk grows um it wouldn't it wouldn't be the expectation that uh if for every if a million dollars for example uh about a million and a half dollars that came into being stuck in a short period of time around thanksgiving started that growth cycle that then around 10 million uh dollars came into beanstalk or so but the bean supply increased by 30 million and the pod line decreased by 15 million the problem was that there were too many beans sown and so the pod line itself continued to grow so going forward that will not be the case and exactly as you said dumpling uh your debt is it stays the same but your income doubles uh so therefore you're you're in a much better position from a debt perspective so it has a very similar dynamic to that exactly right okay um that's great thanks for answering don's question uh to you now worry sweet thank you um so pretty basic question but i haven't been able to wrap my head around it um what are the different i guess like for lack of a better word customer profiles or segments here that's going to drive demand trying to think of like die and mim to me that makes sense because they're targeting people who want to take on leverage so that's kind of like their main driver or lover for demand but i don't know what the analog here is for beam so in short we sort of view the economic opportunity opened up by a positive carry a credit-based stable coin as opposed to a negative uh very stable coin as sort of infinite and some sort of ideal customer that we've spoken about in the past the use case we want to enable in crypto even if on the current evening that the gas fees are too high but the hope is to scale beanstalk onto other blockchains as well with lower gas fees is to enable people to bet on sunday football where people can pull their beans out of the silo bed on sunday football uh win or lose and then uh save some money to bed on monday in on monday night football and then deposit deposit your beans back in the silo and throughout the week until thursday or sunday you're now earning earning passive interest and that will base if if we can make that possible uh and beanstalk and beans basically becomes your credit card your bank account in general so what's possible when you have a high yielding positive carry usd bank account that is composable and plug plug-and-play into a wide variety of decentralized networks um and anyone with an internet connection and a wallet on any of those networks can access that usd deposit account uh our our ideal customer uh is everybody and so uh what what being stuck in beanstalk farms specifically when we talk about organized uh effort to get beanstalk there um there's a lot of work that needs to get done to get there but the amount of you you know at the [Music] risk of repeating ourselves too many times uh something we've also said is you know when the iphone came out if you had uh proposed that uh i'd call i'd open up my phone and call some stranger to come pick me up and take me to dinner in their car i would tell you you're crazy right so there's sort of an infinite number of incredible use cases that's similar to a game-changing technology platform a game-changing platform like the iphone we hope that beanstalk uh radically changes what's possible in d5 cool thank you so i guess maybe pushing on that a bit like to get to there like you have to have like kind of like one initial i guess like very specific type of person you're going after right so like is it the the gambler or i guess like i'm still like a there's a long path to get there right yeah and in the short term like if anything the customer focus is is a little bit further down the road um and right now we're still in the bootstrapping phase of bootstrapping the economic mechanism and um if we think about where beanstalk is at uh with a high debt level and looking to attract capital to d leverage ultimately it's current uh its current optimal uh client or optimal customer is is is still people that are looking to invest in the in the stable coin model itself right either so in the field or participate in the silo and even as the various complex economic mechanisms like stock and seeds becoming liquid and their associated complexities go live ultimately it will for the next couple months like just beanstalk adding functionality and smaller integrations will be enough to sustain itself at the peg and uh attract hopefully attract enough demand to start to deleverage and ultimately what we believe is that that deleveraging is sort of going to be the grand proof of concept that will then open up beans to a much wider audience so right now with such a high debt level there's still a very niche group of people which are more investor focused so not necessarily orienting ourselves towards a customer at this moment but um our ux ui team might be shaking their heads and and want to come up here and and say differently so if anything that the right thing would be to say that's just not where our focus is at the moment um but there are certainly people on beans at being stuck fonts who are starting to think about uh more sophisticated strategies on that front cool thank you that makes sense so like in the short term primarily it's like demand driven by yield exactly right thank you okay i was going to ask the questions on the discussion board from light bean when discussing collateralization versus credit as far as stable coins um he says publius was saying that people are unwilling to put their money into collateralization but he never talked about why people would lock it up in credit so um i was having a little bit of trouble understanding the question but if you could speak to um you know people's motivations um regarding collateralization versus credit with stable coins this will be a short answer which is you cannot there's no need to lock up your capital in beanstalk other than i guess depositing your assets or selling them but in the case of any collateralized model die nim liquidity you're taking more dollars of ethereum that you want to mint in die mim or or liquidity effectively and now uh minting stablecoin against those assets and so you're now for every dollar that you meant you're locking up more than a dollar of capital in the case of beanstalk if you're buying your beans at a dollar that is literally never the case and furthermore there's no rent associated with that now something like liquity doesn't have rent um so there's only a one-time fee um but in beanstalk other than the trading fee to acquire the beans there's there's no fee at all and no rent um so it's a it's just a different model entirely that doesn't require any capital to be locked up anywhere unless you want to you know put your beans in the silo or in the field to earn interest but in terms of just having the beans to use like minting the dye or the mim to use you know there's no need to lock up any capital anywhere you just buy the beans okay great um all right we have now we have an open floor if anyone has a question i have another one puglis um you've mentioned a few times like take for example usdc where saying it's problematic that there isn't a way to earn interest on usdc in a way that's native to usdc and you've spoken a lot about how it's being like earning interest is native to the protocol you can deposit them in the silo and passively earn yield um could you talk a little bit about why that's important the like staying within the protocol piece so the when you think about economics um there's something the essential effectively in in market theory when you're pricing different assets um there's something essential about the risk-free rate of return and while there are certainly risks associated with beanstalk um there's no additional risk that you take by taking your circulating beans and depositing them in the silo effectively and that's especially the case once the withdrawal time comes down to near zero and so when we consider how in comparison to the higher memory usdc where you have exposure to the issuer whether that's the cdp that you're in or circle the issuer in order to earn yield you're now taking your assets and putting them in another protocol so there's now more risk and there's a exposure there so that's not a risk-free rate of return and so when we consider that the goal of beanstalk is to make being a ubiquitous stable point of defy and to really change the entire structure of the crypto economy offering that risk-free rate of return is is a game changer got it yeah that helps a bunch thanks see if there are any other questions on the discussion board i came with a list i'm happy to happy to go again yeah keep them going austin i thought yeah yeah i've got a quick one if that's okay um so publish i guess i've just i know we've talked uh i don't know if this is a conversation to have now or the dow meeting but when it comes to capital coming into being stock and into the protocol um we've talked a little bit you talked a little bit before about kind of like the retail side and i think it was already that was asking a question about kind of this this profile of what that customer might look like there uh what that user might look like oh you know obviously one niche thing expanding to everyone in the long term but could you talk a little bit more about the the value of looking at kind of retail um i would say investors or retail farmers or anyone just kind of coming in off the street just learning about the protocol and the significance of getting them on board versus institutional capital or some kind of liquidity volatile tie in terms of just growing the protocol so from the perspective of beanstalk all capital is created equal now in practice that's not exactly the case because capital that has connections and capital that's willing to devote labor or resources is different than capital that's not especially in the current state of beanstalk and so without targeting detail versus institutional capital or large capital um there's there's a lot that can be done to make beanstalk uh get in front of more people and that that spans across the investment size uh and so stuff that that may have a smaller impact or a larger impact it's hard to tell is uh you know we're happy to be on podcasts um so maybe as a call to the community if you have any connections to podcasts um that would be great um in general there's a lot that can be done here but it's at the bnfts which jww maybe this was just a machiavellian ploy for us to talk about your bfts but to be the b2b ft's which will soon be announced uh hint into wink wink on which jww and where have you been i've been working really hard to get uh get going um that will hopefully bring more attention and more eyes to uh to being stuck and and then at a larger scale continuing to demonstrate the model and just being added tolerant oscillating above and below a dollar and then ultimately deleveraging but nothing will do more to attract capital than a proof of the model because the proof is in the pudding and so we at least personally are less focused with targeting an individual uh demographic uh than we are about just the model continuing to be refined and improved and us continuing to try to cultivate a strong organic community through things like you know this this class and and [Music] we think the rest will sort of sort itself out um especially at this stage in time and if anything when we talk about you know beans being widely adopted across a ton of different things beauty of the mechanism and its simplicity is that all of that can be built on top of being stuck by independent parties the only thing beanstalk has to worry about is the price and the debt level and so all of this while it's in our mind uh we're more focused on enabling with the core getting the core platform right then we are about implementing it ourselves so uh if consumer focused businesses are appealing to you and you love beanstalk you know that you should apply for a bean sprout grant um and bean sprout is the accelerator that uh is hopefully going to get proposed as part of the q on budget uh which people can read about in the q and budget channel we dropped a proposal there a few days ago or yesterday i guess um so uh hopefully that answers your question yeah yeah it does uh and thank you for the overview i guess then just in light of that um just because i'm interested in the protocol responding i guess to larger investments um there are probably quite a few people in the audience who weren't here for the pump and dump uh that happened in september um i know you talked a little bit about it earlier in the call but would you mind just giving a quick overview of kind of what happened and how the protocol responded to it um i obviously would be shaking out the way that um as you've mentioned before you're expecting it to play out in the long term but just to give an overview of what happened so there is we'll try to keep it short especially because we're we're getting to the hour mark of class but the long and the short of it is that somehow or some way um bean stock went viral on crypto twitter and for better or worse a ton of uh apes let's call them uh who didn't quite understand beanstalk uh brought with them a ton of capital into beanstalk over a very short period of time and so uh beanstalk went from a two and a half million dollar market cap uh to a 40 million dollar market cap over a couple of hours and ultimately grew to around a 25 million bean supply um because around 25 million beans or dollars of demand came in to be in stock and bought beans um so when we talk about beanstalk growing as little as possible it literally grew basically as little as possible um but then all of that capital um and one of the members of our discord said it best they said all of that capital all the apes when they realized they couldn't exploit the protocol immediately left and so uh 20 million dollars of capital came in and then uh the majority of it immediately left and uh the result was that beanstalk went through a major debt cycle and had an opportunity to demonstrate at a macro level how the weather mechanism ultimately works and what happened was over a month or so in stock was able to attract billions of dollars of loans from hundreds of lenders uh a totally decentralized capacity to ultimately uh bring the clearing market price back up to a dollar and from there the price oscillated above and below a dollar for a month or so until it started to pump around thanksgiving and again because the soil parameter wasn't set as well as it could have been um that didn't ultimately start any sort of deleveraging and being stuff continued to lever up but that can like we said we think that that has been fixed and should not be the case going forward okay um if we have uh time for two more i think we could do um db three four five six and then and then over to dave or if tv is sorting out their mic they will do reverse order sure um hey it's great to be here guys um uh publius thank you for for letting me speak and dumpling it's been great talking to you over the course of the past day or so and i'm a newbie just you know your picture makes you seem like you're like a 60 year old british man well maybe i am there are enough fair enough um yeah i'm a big fan of what you guys are doing i got a chance to jump into the white paper just yesterday i got a chance to look at some of your uh your work and it's very inspiring and impressive the community building the new hats you're working on uh and just the one quick question that i have for you probably this and maybe for anyone else on on the stage um is um avax um i've been very blessed to have almost 14 000 people that follow me and whenever i tweet about something and it's you know 130 or 140 in gas fees i get a bunch of dms from people in you know vietnam and in the philippines saying i can't afford that i'm sorry i can't do that so you know constitution dial recently launched in order to get your assets in and out of constitution dial is about 140 us dollars to do so so my question is um has there been any or is there any potential discussions around being able to get access to being on the avalanche network or something like avalanche maybe solana or um maybe matic or something but specifically my questions about avalanche yes so it's a fabulous question it's been on the mind of our community for a long time and in the original white paper uh we actually stated that we assumed that there would be independent being stuck on different blockchains but the fact that the community stressed so much the desire to have beans on multiple chains uh has led us to go into like a lot of research into what's available in terms of decentralized cross-chain solutions and if we had spoken if we'd had class 48 hours ago um we would have said so far we've been horribly disappointed we haven't found anything even close to up to par where we feel like there's a an easy decentralized solution to bridge to something like avalanche or solana but yesterday we had a fabulous call with the seller team c-e-l-e-r were incredibly impressed and uh obviously it was only one call but were highly encouraged at their progress and hope that in the coming months um talking three months or so not not a year like in the next three months um hopefully beanstalk and beans will be on avalanche well that's pretty exciting it's awesome um don't don't hold us to don't hold us to april first uh you know but but like that you know we're going to be working our asses off to make that happen okay i'll just put april 1st here in my calendar okay uh tb it's april fool's day guys so we're we're setting ourselves up for something fun regardless see if you want you could type it out tv in the chat guys let's see if i have anything else here i got a bunch of dms okay well we're well over the hour i think we can probably probably call it want to respect everyone's time uh and uh yeah thanks for everyone for coming this was really great you can look for the austin we'll have the notes and the recording up and we're going to be trying to get a class notes section too so we'll we'll put uh if i can figure it out i'm going to put all the class notes from the previous classes in the class notes um and that'll have a link to the recordings too so you guys can check out old classes if you haven't if you haven't listened to all eight of them so thanks so much for coming um any last words publius thank you everyone for your questions uh and uh this is uh very excited about about what what where being stuck is and what's to come and i just want to encourage everyone to continue to ask questions and to continue to participate and if you want to get involved you know reach out so very exciting to have you all here and we'll we'll talk soon and dao meeting on thursday uh 8 30 eastern and if you want to be there for the stand up that's going to be at 8 15 eastern so i look forward to that okay thanks everyone