Future Visual w/ Publius

April 11, 2022


Other Recording



fantastic so this evening i am joined by publius who is the founder of beanstalk and uh i'm really delighted to have this guest along tonight it's a little bit out of my uh knowledge base uh certainly uh with any degree of authority um but in the context of building new realities and uh publius and his work with beanstalk and what he's doing in the finance sector uh i'm really interested to learn more so publius thank you for joining us this evening yeah thank you for having us so yeah our audience sort of tend to be from a tech and creative background so obviously they'll they'll know about crypto currencies and and a lot of them will hold cryptocurrencies um but they they're probably not familiar with the some of the the next level of technical uh terminology so to begin things we should probably try and keep keep it at a little bit high level um but really starting at the beginning perhaps we should start with the the basics of you know what a stable coin is why it's important and and and why it's an important part of the ecosystem and and within and within that description a little bit of context of of where beanstalk sits in uh in the stable coin versus what what many of our audience would consider a normal uh cryptocurrency sure a lot of a lot of questions there so we'll try to get to all of them in time the where do stable coins lie within cryptocurrency so to start off with we should probably put cryptocurrency in some perspective fundamentally cryptocurrencies are some sort of protocol native asset that is issued by it by a protocol in general now uh decentralized cryptocurrencies that are run on networks governed by uh decentralized sets of miners or network participants uh and and those networks are typically organized in the form of blockchains the cryptocurrencies issued by those networks have both proven to be uh new exciting technology which is right for speculation uh we're talking about bitcoin ether uh and a variety of other uh popular cryptocurrencies uh i'm sure you've heard of uh but the the primary problem with them if it if it is a problem and it is to some uh depending on what you want to use your cryptocurrencies for is that the value particularly the fiat denominated value the us dollar value or the euro denominated value of bitcoin and ethereum and other cryptocurrencies is incredibly volatile and accordingly it makes using cryptocurrencies for lots of different things uh particularly difficult uh and the excess volatility in cryptocurrency has thus far been uh one of the things that has prevented cryptocurrency from uh growing into its full potential and there are a lot of uh technical and economic difficulties to work through and as a whole the decentralized community that is working on cryptocurrencies is solving problem by problem in a in a uh decentralized fashion now stable coins uh are are somewhat aptly named in the sense that they solve that volatility issue or attempt to solve that volatility issue by maintaining a stable value and so over the past five or so years stable coins and we can talk about the various different types of stable coins that have gained in popularity over that period of time but stable coins have become an integral part of d5 decentralized finance primarily because of their uh low volatility compared to other cryptocurrencies and so to put it in full context you get all of the benefits or most of the benefits of decentralized networks uh without exposure to the volatility of their main protocol native asset or other assets that may be issued on on their networks and in short uh the vast majority of stable coins that have uh existed or or exist today are all credit based excuse me collateral based meaning that they use some form of collateral whether that's locked up in a bank account whether that's locked up in a smart contract on chain or there's a couple other forms which collateral may take to back a given stable coin but every other stablecoin protocol that currently exists except for beanstalk uses collateral now to to put it into perspective before we talk about beanstalk and how beanstalk uses credit and why that's fundamentally different let's talk about the problem with collateral so in general let's say somebody wants right now there's a couple hundred billion us dollar stable coins uh on the ethereum network that are backed issued by different protocols backed by different baskets of on-chain or off-chain assets but whether you're locking up us dollars in a bank account or ethereum in a maker dow cdp the fundamental question is well how much collateral do you have available and the amount of stablecoin supply that you are able to mint or create is handicapped or or capped we should say uh by the amount of available collateral because every collateralized stablecoin model uh claims uh in some capacity to back each of their uh outstanding stable coins with some form of collateral and so the fundamental question around how much stablecoin supply can there be is is equivalent to how much supply of collateral is there and the problem even though you have these protocols with pretty good stability mechanisms such that their stable coins follow their target price the collateral shortage and the supply shortages typically in economics when you have a supply shortage you have high prices uh in the case of a stable coin where the price is maintained the supply shortage manifests itself in high borrowing costs and so even though the coin is priced at uh what it's pegged to most of the time uh there's a high talk about 10 12 14 uh borrowing costs annually uh to hold these stable coins and so why is this a problem in practice if you want to use your stable points for things you now need to judge whether or not that use has a positive expected value as compared to that 10 or 12 or 14 percent passive interest that you could receive for just lending out your assets because of the high borrowing costs at the moment and in short the really high borrowing costs have made doing lots of cool stuff across decentralized finance and cryptocurrency somewhat cost ineffective and so that's where beanstalk comes in and beanstalk takes a fundamentally different approach to uh stablecoin issuance instead of using collateral in any capacity being stock uses credit uh and by credit uh we mean the ability for beanstalk to attract lenders so whereas any time the price of another stablecoin is too low uh the fact that you can redeem the stablecoin for the collateral which is worth whatever the stablecoin should be pegged to or more uh should in theory uh cause somebody to buy the value of the stablecoin back up to its peg or uh basically liquidate the debt position and claim the collateral uh in the case of beanstalk it's fundamentally different because there's no collateral any time being stopped the price is too low beanstalk attempts to create demand for beans which are the bean stock stablecoin by attracting lenders by attracting people that are willing to lend money to beanstalk and in in reality beanstalk only accepts loans in the form of beans you can only lend beans to beanstalk and so anytime beanstalk needs to raise the price of a bean in bean stock tries to borrow beans removing beans from the open market uh and and decreasing the supply of beans and on the other side of it most people need to buy their beans to lend them to beanstalk so it creates demand and decreases supply and in doing so it should return the price of a bean back to its value pack so there's a lot of different uh economic incentives and uh structures around beanstalk to actually get it to maintain a stable price in all circumstances uh without collateral uh but that's fundamentally uh how beanstalk works and where it fits into the stablecoin space and just so that we're being a hundred percent honest and accurate uh terra luna is the only other protocol that to date really has a solution to the collateral shortage problem and they've been incredibly successful recently uh but they still do maintain a collateralized model so don't want to group them in with the rest of the stable coins that suffer from this uh collateral shortage uh in the spirit of uh honesty great thanks for that comprehensive uh introduction interested i mean i think the volatility piece is is what's so fascinating uh uh about cryptocurrencies and you know as as inherent in their name stable coins um have have reduced uh volatility compared to most cryptocurrencies you mentioned that there was still you know like 10 12 which is a high interest rate even on stable coins do you think that potentially because stable coins have easy access to the purchase of crypto currencies that they've been paid to that right because they're largely used for speculation with other coins with other cryptocurrency coins so what i'm interested in is just to dig into a little bit more on perhaps why there's such volatility um in cryptocurrencies and with what still could be considered a high interest rate 10 or 12 percent is that because it's perhaps predominantly those stable coins are used for speculation well to answer a former question about the cause of volatility in cryptocurrency fundamentally markets are a question of buyers and sellers and a function of buyers and sellers and the volatility in cryptocurrency is a function of the fact that uh the buyers and sellers are often using leverage and the market is currently pricing in a wide variety of different scenarios that i mean the the outcomes are changing in real time in a way that in short the structure of the cryptocurrency market is not there it's very because there's no intrinsic value and there's no revenue in the vast majority of these protocols uh the there's a really open question as to the value of any of these given networks for their tokens and due to the fact that the the market doesn't have any sort of established way to price assets you tend to have particularly high volatility in each of these markets both compared to other markets and compared to uh other cryptocurrencies where just uh even though you have a highly correlated cryptocurrency market in general you also have a high amount of volatility within cryptocurrency and d5 between different cryptocurrencies and assets so things are just very early and the uncertainty is largely the cause of the volatility but ultimately crypto is a market and markets are a function of buyers and sellers uh i don't think that's uh particularly informative information though that's that's the playground that everyone is playing on together now to answer your question about whether that volatility is particularly the cause of the high borrowing costs for stable coins uh it is in part in the sense that uh the high volatility of cryptocurrencies certainly is one of the causes of high demand for stable coins now the utility of a low volatility asset is such that it's de facto dependent on volatile assets right something as stable as compared to volatile assets and so the fact that there's such volatility in crypto creates this uh high demand for less volatile stable assets but with regards to the actual reason why even today despite the fact that the stablecoin supply has continued to grow rapidly 100 billion plus over the past uh 18 months or so and it might even be more than that at this point uh maybe like 150 billion i don't have the numbers in front of me at the moment the despite the massive increase in supply uh borrowing costs remain high simply because there's not enough collateral to meet demand for stable coins there the stable coin issuers cannot issue sufficient stable coins such that uh the borrowing rate should approach the borrowing rates for dollars off-chain if you look at uh how you would expect the more the more the more operate if it were frictionless and efficient you would expect the borrowing cost for dollars on the blockchain to be quite close to borrowing costs for dollars off the blockchain but in reality that's not the case at all and the reason for that is frictions and the the frictions particularly around creating the supply of dollars on on chain and so the supply limitation is where all of this derives from understood what drew you into finance well markets are markets are the place where uh you find out if you're right or wrong and uh there's something quite beautiful about that and particularly in the society we live in where so much is prescribed as either uh right or wrong uh markets are the most exciting because you you don't get told whether you're right or wrong by any individual uh the world uh you know and the market gets to decide and that is that's what uh that's what enticed us and ultimately when we put beanstalk into perspective uh we we you know publis is a small group uh we deployed beanstalk on the ethereum mainnet a little over seven months ago and we did it cold turkey we didn't do any sort of pre-mine or pre-sale or vc allocation or any sort of advertisement we just put it out into the world and let the market decide and the thing that's been so exciting over the past seven plus months is the response from the market and that in practice out in the wild bean stop is actually operating and so uh it's it's a very thrilling experience yeah it's one of my favorite uh memes actually there's uh i don't know if you've seen it there's uh two guys in a in a sort of wrestling ring and one's like a sort of really fancy thai boxer and he comes in and does all these kick flips and somersaults and all this kind of crazy stuff um and the text that's overlaid as he does all this on the video is brainstorming market analysis what color should the font be let's do the website so all the kind of speculation that would come along with creating a product and in the other corner there's like this guy that's just walked off in the street as this as the other person's doing all their fancy kick flips he just comes up and does one punch in his face and knocks him out and it just says the market um so you can have all these kind of great hypotheses and fantastic ideas but it's not till you put it in the market till you get a clear response of your hypothesis so yeah i understand your excitement around a essentially non-biased set of judgment you just put it out and see what see what comes back how would you explain defy to non-professionals or not you know not to lay people people like people like myself so d5 is short for decentralized finance finance uh i don't you know don't feel particularly compelled to explain uh most people have a sense of what's a financial transaction or what qualifies as finance uh and d5 probably stretches to everything that comes to mind when you think of finance and more and so instead we'll focus on the decentralized currently the entire financial system from the issuance of u.s dollars to the payment rails that you use to buy your lunch the entire system is centralized every piece of the system from the banks to the credit card companies uh to the issuers of money are all some form of centralized entity and in general cryptocurrency uh and decentralized networks that support cryptocurrencies are in a potential alternative technology stack or the beginnings of a potential alternative technology stacked to all of the current uh centralized technology and institutions that exist and so the answer to the question what is d5 d5 isn't one thing in particular but d5 is a set of different uh protocols that are all uh leveraging the composable nature of decentralized networks which is that different assets from different protocols can uh work together and different protocols can communicate with one another in a way that is uh sort of like building blocks uh decentralized finance is uh the the building of a new a new tech stack and a new economy built on open source technology without a single point of failure or a centralized intermediary that is rent seeking in any capacity and so in practice you know why does anyone care about this in practice two things are going to happen uh one uh rent uh costs are going to go down we talk about uh high borrowing costs in stable coins uh currently borrowing costs in cryptocurrencies are still incredibly high um and and the rent seeking models of stable coins uh is still winning that's one of the things that beanstalk is a response to but in in the grand scheme of things uh well-designed decentralized protocols that create protocol native incentives to to encourage independent participants all across the world to perform some sort of network maintenance to create some sort of utility that's decentralized finance the it's this it's a it's a network of different protocols that all provide different services and utility and create different assets that are all in time i mean currently you can't do much but what what you will hopefully be able to do in the not too distant future is anything that you could do today using a credit card or a bank account uh or cash uh and then like infinite things on top of that the the way i like to think about it or we like to think about it is uh in the same way that i think this is like a travis kalanit quote from uber uh in the same way that if you had said uh you know in 2000 that we'd be oh you know calling some stranger to come pick us up from a nightclub at two in the morning and drive us home and be like uh you know that sounds a little bit funky to me like do they have a company they work with no they're just they just have their car they're just gonna come pick you up uh you'd say like that doesn't that doesn't sound like something i'd like to sign up for um but with the way uh cell phones have totally changed uh every aspect of human society that the different use cases and new uh technology that is opened up on top of it is is unknowable at the time and so when we think about where defy is going i have no idea but where it is today is we're still and when i say we i mean the decentralized finance community that is all investing in and building new tech uh we're trying to answer some core fundamental problems to to facilitate the adoption of something like the iphone uh a couple killer use cases uh that will ultimately open the door to who knows what um but we're still we're still in the early days and things like really high borrowing costs for dollars on the blockchain make make using d5 really impractical and so that's where beanstalk comes in and tries to be a part of the the solution and uh a part of the the bricks that will ultimately become d5 and so what are the different ways that people can engage with with beanstalk you know if i you know let's say i'm a casual um a speculator in crypto because i invest in uh some currencies that kind of catch my eye or i like story around them or i just like them because they're a top 10 market cap what's uh what what's a good way into it engaging with beanstalk so beanstalk exists on chain on the ethereum network now there's a user interface maintained by beanstalk farms which is a decentralized development organization that's formed over the past seven months to support the development of beanstalk uh and the website is bean.money b-e-a-n.money and that's where you can go to learn all about the protocol and access all the resources as well as access the protocol and so there are if you go back to the core of how any decentralized network or decentralized protocol works fundamentally the there are certain protocol native incentives that encourage different work to be done by participants to create some sort of utility uh in the form of bitcoin that's bitcoin miners uh doing the work of mining the blockchain to create the utility for the people that want to spend the bitcoin in the case of beanstalk uh anyone can participate just like anyone could participate in bitcoin mining anyone can participate in network maintenance of the beanstalk network in a variety of different capacities and beanstalk offers protocol native rewards for participating in protocol maintenance so there's there's a lot of sophistication and terminology that goes into interacting with beanstalk everything is farming themed and so if you'd like i'm happy to get into all of the weeds and uh all the the different terminology and the options that people will see when they go to the website or we can maybe just keep it higher level and talk about uh you know from an abstract perspective the different types of uh protocol maintenance that people can participate in yeah i think rather than getting into to to the weeds at this point um just like a sort of high level view on on what uh user involvement with with beanstalk um might look like if you know if they were coming to if they were fresh to it sure so we go back to beanstalk is a credit-based stablecoin protocol and fundamentally beanstalk is trying to attract lenders so anytime beanstalk is willing to borrow beans anyone can go and lend beans to beanstalk and the when you lend beans to beanstalk you receive pods pods are the debt asset of beanstalk and i'll try to keep light on the on the lingo here but the number of pods that you receive when you lend your beans to beanstalk is dependent on the interest rate at the time and you lock in your rate of return so right now the interest rate for lending means to beanstalk is uh 71 41 so uh you get 71.41 pods for every bean that you lend to beanstalk plus your money back so 72 and a half let's call it pods for every bean that you lend to being stuck uh that interest rate goes up or down every hour uh based on the protocol rules based on demand for lending beans to be stuck is that the equivalent of 72 percent or a different number 7200 percent right 1700. i thought i might be missing seven this is cryptocurrency this is cryptocurrency so uh now the thing to note is that your pods go and just reference not you can't always lend beans to beanstalk right now being like just this current moment uh you can't lend beans to beanstalk in about 30 minutes at the top of next hour you can probably my guess is you'll be able to lend some more beans to be in stock uh and and that's all done 100 autonomously based on the rules of the protocol and the current state of the protocol but to continue with what we were talking about the when you get your pods pop you lock in your your rate of return currently it would be like 70 2 72 and a half pods for every bean you lend to beanstalk your pods go to the back of the pod line so pods are paid on a first in first out basis they're they're a novel financial instrument in that regard they don't have any sort of fixed expiry there is zero coupon bond without any fixed expiry or maturity date instead pods are harvested uh or can be exchanged for one being each in the future when the price when when new beans are minted and so specifically if you lend beans to beanstalk today you go to the back of the line now when we talk about creating an efficient market for lending to beanstalk the reason for going to the back of the line is because it let's let's take any given individual let's say at a given moment you think it's a decent time to lend beans to beanstalk the question is well should i wait a little bit longer to lend to beanstalk or should i lend right now because pods are paid out on a first in first out basis the incentive structure is such that it's much more likely that someone says i'm just going to pull the trigger right now and lend beans to be in stock right now as opposed to weight it and that creates a much more efficient lending market than any previous attempt at an algorithmic credit-based stablecoin had had so the first and first-out pod harvest schedule is is is unique to beanstalk and one of the key uh drivers of his success in our opinion so that's that's the lending market side now the other side of the market is beanstalk is an autonomous protocol that's governed by a decentralized autonomous organization a dow the beanstalk dow exists on chain and so on chain governance facilitates upgrades to the beanstalk protocol short the other way that you can participate from uh upside in the growth of beanstalk is by participation in governance now you don't need to actively vote or anything like that but you can just join beanstalk dao and earned stock stock is the governance token of beanstalk and stock entitles its holders to a portion of all future bean mints so any time you know we've only really spoken about when the price is too low bean stock uh attracts lenders to create demand and return the price to adult when the price is too high and this is the key right every collateralized stable coin when the price is too high they're the fact that they're backed by collateral keeps the price pegged but but the excess demand results in high borrowing costs in the case of beanstalk and beans when the price is too high when there's excess demand for beans there's no collateral backing so the price actually gets too high and then what happens is beanstalk mints new beans it actually creates new supply to meet that demand to return the price to adult and so that's where you actually see the upside in the credit based model as opposed to the collateral model there's no limit to how many beans you can mint to meet demand and so as beanstalk grows and as the ecosystem grows there's never actually going to be a point where there starts to be a cost to borrowing a high cost to borrowing beans because there's not enough supply that will never happen instead time there's a supply shortage which in the case of a collateralized stablecoin would result in a high borrowing cost in the case of beanstalk it would actually result in new beans being minted which does two things it pays off debt and it rewards stockholders governance token holders and so when we talk about how you can participate in that you can deposit your beans and other assets that are helpful to the system relevant liquidity pull tokens for example but you can deposit your beans in the beanstalk dow and receive stock the governance token and participate in the growth of the system and so that is where beanstalk and beans really differentiates itself as compared to any other stablecoin and any other cryptocurrency you have a protocol native yield opportunity you hold your dollars your beans your stable coins you deposit them in the dow you don't need to do anything necessarily and you start to actually receive positive interest in the form of new beans that are minted and so uh the new beans that are minted they're also automatically deposited in the dow and you actually receive compounding interest and so that's how beanstalk works so there's two ways to participate you can lend beans to beanstalk or you can participate in the doubt understood and and and you mentioned it's like a first in um first out type system uh typically what the sort of time frames what are looking at obviously you can just leave your your beans in the system as you just described but if one wanted to withdraw what's the what's the sort of time frame on that so in the field when you lend your beans to beanstalk for pods you're stuck in pods you can never reverse exchange your pods for bees however uh there's a recently launched decentralized exchange for pods called the farmer's market which was mainly a community-led initiative uh and so now you can trade your pods back into beans uh but you can't do that through beanstalk if that like the protocol won't offer you an exchange you have to find a buyer on the market for your problems um so there's like a very high return 72 and a half x or 71 and a half x uh but you're not a lot of liquidity except for on the secondary market the silo go ahead no sorry i was going to say understood the silo which is the dow uh offers basically liquidity at any time so you can deposit assets into the dow into the silo at any time and you can also withdraw your assets from the silo at any time now when you withdraw your assets from the silo they are frozen for a short period of time that period of time is decreasing uh over time it started at 24 hours when the protocol launched and is now down to 10 hours and it's going to continue to decrease to as low as 4 hours at the moment and in the future the dow may vote to continue to lower that further um so the silo has passive yield and and almost real-time liquidity in a couple of hours delayed and then the field which is the lending facility uh where you get your pods that's much less liquid and what are the sort of returns in the silo so there's the silo is a little bit sophisticated to explain the returns for because you receive bean seniority anytime the bean supply increases which is a function of market demand that cannot be forecasted however and this is actually one of the problems that previous attempts at credit-based stable coins faced therefore anytime the supply isn't growing when beans aren't being printed when the price isn't above its value peg there's actually very little reason to stay in the dap right why would i stay if i'm not receiving my interest at the moment and so in addition to being senior ridge you also receive stock senior edge uh stock which is the governance token you receive more stock the longer that you're deposited in the silo in the beanstalk gap the amount of stock that you receive increases linearly over time now from an incentive perspective and this is really important when you withdraw your assets from the silo from the dow you have to forfeit all of the stock associated with your withdrawal you keep your beans you keep your senior age but you don't keep your governance tokens and particularly because you have to forfeit all of the stock that has grown while you've been in the dow if your intention is to withdraw and then at some point in the not too distant future deposit again in the dow there's an opportunity cost introduced in the form of all of the stock that you have to burn that you've that has grown for the previous time you've already spent in the dow and so what this does is it creates a really sticky effect for people the longer that they leave their assets deposited in the dow the less and less likely they are to withdraw them because the higher the opportunity cost is cool okay so let's say i'm joe punter right and i got a thousand dollars and i'm kind of interested in your approach and and let's not kid ourselves i'm also interested in in your in your return um so let's say i want to put a thousand bucks in i don't i don't i don't necessarily want to speculate on it but i'm happy to put it in the system and and i then want to be able to use it in a year for either purchasing other cryptocurrencies or even withdrawing um that money whatever's become of that thousand dollars what does a journey look like for for joe punter and their thousand bucks so there's two different journeys right one is that they lend beans to be in stock and the other is that they deposit them in the silo so let's start with the lending anyone who wants uh to lend beans to beanstalk can do so on chain and can do so very easily via the bean.money website uh the user interface tries to make interacting with the protocol as simple as possible it's not particularly simple to interact with and so it's a process and beanstalk farms is working hard to improve the quality and clarity of the user interface but the protocol is also changing you know in time there's been uh 13 upgrades proposed thus far 12 of which have been approved uh and so updating the website and updating all the relevant content is also challenging but so that's that's a digression uh the the the the person who wants to come joe wants to come to the farm and lend beans to beanstalk let's say they have a theory to start keep it simple they can in a single transaction through beanstalk uh take their ethereum and lend that aetherium to bean stuff now we said beanstalk only accepts loans in the form of beans so in practice what's happening is uh you're sending that ethereum to beanstalk beanstalk takes that aetherium buys beans on your behalf and then uh you know the loan is then in practice in beans and so when we talk about what the user experience actually looks like um and currently that simple flow is only facilitated for ethereum but in the next couple weeks uh the hope is that the protocol and the website will be updated to facilitate going from basically arbitrary acids that are liquid on ethereum into the field uh to lending beans to beanstalk with in a single transaction now uh a similar dynamic is at play in the silo let's say you have ethereum again currently you can deposit uh three different assets in the silo you can deposit beans you can deposit lp tokens for the b uniswap pool uh v2 pool and you can deposit lp tokens for the bean three curve curve pool now again you can start with i'm not speaking 100 accurately but this is the way the protocol will work in two weeks or three weeks let's hope so i'll just for simplicity say this uh you can start with arbitrary assets again and go into uh each of those three assets beans lp tokens on unit swap lp tokens on curve deposited in the silo in a single transaction so beanstalk will do all of the complexity for the farmer and all they need to do is select their input uh into the system and their output whether they want to lend beans to be in stock or whether they want assets in the silo okay so so that so my thousand dollars has gone in and it can be in either of those two locations um but will it will it either always stay in the format of beans whilst obviously receiving its um good rate of return 7200 but then as soon as i want to withdraw it from beans back into eath i am i'm gonna lose my stalk what would the potential return on me going back from beans to eat look like so one thing to clarify is that if you're in the silo you don't get the seventy two hundred percent that's in the field yeah um and you lock that in when you lend means to be in stock when you're in the silo you know the rate of stock that you're going to receive over time because that's linear and defined um but you don't know the amount of beans that you're going to receive and so the answer to your question of well in the future i put a thousand dollars in the silo how many beans will i be able to withdraw and sell into ethereum that that is unclear it's a function of the future growth of beanstalk and so the question that you need to ask yourself is well how much do i expect the supply of beans to increase over whatever period of time you're investing in beanstalk for and that's the the way to think about the or the way to from a from just a math perspective the way to actually calculate what someone would return in a given scenario is a function of the rate at which the bean supply increases it's not exactly uh dependent on that it's not one to one per se there's a couple other inputs into that function but in short uh the the most important factor into uh you know the the outcome of the state of uh a given farmers uh investments is the future growth of the bean supply understood but what i'm just a little bit unclear on is what those what those beans can be used for apart from lending them to other people who want beans what what what what can i use those those beans for that's a great question currently there's not much uh to be frank now beanstalk is super young it's only been around for seven months and so it's a little tricky to convince people to accept a currency that's only seven months old uh and so beanstalk is still in the proof of concept stage in which uh demonstrating a strong ability to maintain the price of a bean at a dollar without any sort of collateral uh is going a long way to uh opening up people to potentially accepting beans uh in their protocols or in their store you know in theory if you wanted to accept uh beans to in your in your grocery store that would that would work too but to answer you substantively the thing to the thing to realize is that the silo the beanstalk dow is a really unique opportunity for product market fit the current state of stable coins is such that there's if we go back to well what can you currently do with your stable points well you can use your stable coins in lots of different protocols that accept them but in reality the only thing you do use them for is lending because from an opportunity cost perspective you'd be a fool not to and so the starting place where beanstalk starts is it says well the first use case is lending we're going to start there and or at least the equivalent so you can uh hold your beans uh in the silo and receive positive carry so it's not exactly lending because again you still own your beans as opposed to lending them out uh and there's really it's not lending because the beans that are in the silo cannot be borrowed um but just by depositing your beans in the silo you can receive some sort of interest now one thing that we haven't mentioned is there's the ability to convert assets within the silo so you can go from deposited beans to deposited lp tokens for example that are part being and part of theory so let's say that uh there's a another cryptocurrency that is uh looking for liquidity right everyone every currency wants liquidity uh the more liquidity that a currency has uh that it trades against uh the less volatile and the more legitimate uh the price so the the real benefit of the silo and the fact that beans can be converted to other assets in the silo is when beans are minted you have new beans that are now automatically deposited in the silo they can be converted into liquidity pool tokens against lots of other assets assuming that those assets are whitelisted for deposit in the silo and so the expectation is that at some point and obviously there's a chicken in the egg here but let's say that now we've got chickens and eggs there's going to be a desire for lots of other assets to have liquidity pool tokens uh where where where the liquidity pools consist of their token and being uh because beans is by far the most liquid stable coin out there and offers the best liquidity keep in mind if you're trading against a stable coin that has borrowing cost of 16 that's getting factored into your price because all those stable coins that are providing liquidity for your asset are like that opportunity cost still exists right and so when we think about the market working in practice having the lowest cost stable coin the most liquid stable coin will be the most attractive for other coins to trade against and the way the silo works is it allows seamlessly for all of the new beams that are minted to actually acquire utility by starting to provide you liquidity for other against other currencies if that makes sense so that's where utility will ultimately come from and uh beanstalk farms is in the midst of a series of different bips beanstalk improvement proposals that are designed to totally generalize the silo the beanstalk dao such that and this is the final vision uh and this will be live hopefully in the next month and a half or so or less uh we're really pushing code here is you'll be able to receive interest from beanstalk stock and bean senior ridge and also interest from other protocols as well and so in doing so you'll have all of this beanstalk native utility uh really high liquidity and low cost beans and then leveraging the composability of d5 which again is the fact that there are all these building blocks that can be put together really nicely uh you're actually going to be able to use uh the lots of other protocols and beanstalk at the same time and that's that's novel that doesn't currently exist within d5 and all of it is enabled by the fact that being stuck is credit based understood um with and i start to get a feel there for for obviously based on growth you know how the utility uh increases where do you think the first sort of based on your perhaps your current growth how numbers have been going where do you where do you think me the first sort of meaningful um utility would come for that kind of joe punto and i know yeah i know you've you've touched on on some of it there obviously with um lp tokens and and liquidity etc um but perhaps it's it's not that far away so the the first example and this isn't again if we go back to the uber thing who knows what what will be built on top of this incredibly modular and composable infrastructure but the first uh or the likely first use case or proof of concept is gonna be the lp tokens for the beam three curve pool which can currently be deposited in the silo uh there's a proposal that beanstalk farms recently drafted for the curve lp tokens to be added to the curve gauge so for for those of you that aren't familiar with how curve works uh there's an incentive structure where providers to liquidity pools can receive curved native rewards and there's this whole separate ecosystem with other protocols built on top of curve to leverage the highest rate of reward you can actually receive from curve that's called convex and so within the next couple of again month and a half let's call it uh joe farmer will be able to receive bean stock native rewards in the form of stock and beans and receive curve rewards from curve that are leveraged and boosted via convex and so you're actually gonna have three different protocols uh that the farmer is interacting with and benefiting from simultaneously and that will be the first uh use of this uh this generalized beanstalk uh dow we're describing that it's being built at the moment okay and what is your what's your sort of overarching aspiration for the for the field you work in perhaps not perhaps i should break that down not just in terms of technical uh achievement because obviously what you're a lot of what you're doing here is it is new and elegant but i suppose aspiration for the field in terms of utility that it brings to to individuals so right now the global access to bank accounts is abysmal uh i don't i don't actually know the exact numbers but they're not good and in short what decentralized finance can provide it doesn't currently but it can provide every single person in the world with an internet connection uh is access to censorship resistant uh find this truly uh censorship resistant financial system a whole system where everything they could currently do if they had access to the centralized banking systems in the developed world for example anyone with a bank account excuse me not a bank account anyone with an internet connection uh will be able to access uh an entire suite of and this is this is the vision censorship resistant rent-free technology and the rent-free aspect of it is is really core because when you have something that is open source uh it and is uh potentially ubiquitous because everyone can participate uh due to its open source nature uh it's a race to zero in terms of fees and the the rent-based uh the rent-based business models that are a function of the fact that currently and maybe you know we only have a few minutes but if you'll humor me a short digression like when you when you consider every you know we talk we started this time about every financial transaction happens through a centralized intermediary well why is that because we need them we need them i i i jim you seem like a nice guy but i don't know you and i don't trust you and therefore it's really hard for us to engage in sophisticated financial transactions together and so even though it's a pain in the ass and hurts both of us to pay a fee to the bank to manage our finances so that we can interoperate uh we gotta do because otherwise it's just too hard for us to trust one another and so in exchange for providing that trust the bank can charge a fee the credit card companies can charge a fee and fundamentally when you make the switch to open source censorship resistant technology that anybody can participate in there's no room for a fee because anybody can provide the anyone can participate in the network and the network is providing that trust you have trust in the network because the network is open source you can go in and verify the rules of the network that they're accurate and that they're doing what you believe them to do assuming you have the technical know-how um but but the idea that anyone can go in and verify for themselves and not just verify then use the network or participate in the network for themselves that's ultimately the vision and so uh decreasing barriers to entry to just having the money to buy into the system uh decreasing uh access uh or excuse me increasing access to the internet such that uh low barriers to entry and and really high levels of connectivity to the to this decentralized financial world we're talking about uh that's that's i would say that's the hope for where this is all heading in the not too distant future lovely i've got i know nearly at time i've got three three quests two more questions for you um what do you think about nfts and some of the current values associated with them well value is so hard to speak about especially in such an inflationary environment and uh therefore it's very hard to be critical of the valuations but it's also very hard to buy uh you know a board ape at the price that it's currently trading at per se um but uh when we talk about representation of ownership of something uh on a decentralized censorship resistant network i think in general you have a similar transition from the government currently organizing sen who owns what um to and charging some form of rent uh in the form of taxes and other things to guarantee our our the security and our privacy property rights excuse me um we're seeing a similar transition to non-fungible tokens where the only ownership is actually represented on chain and therefore there's other than paying the miners on your network to maintain the network uh there's no other fees associated with that uh with ownership of that asset so from that perspective nfps are unique uh and and the start of uh i mean it's the start of uh the adoption of representation of ownership of various things on chain but what about when those when profits on on these items become taxable then we're sort of just back into the control centralized loop yeah i my my only comment would be everyone should pay their taxes okay um and i'm wrapping up if you had 100 million dollars to spend on a social program and no red tape how would you spend it you said 100 million yeah well it's a great article about how mark zuckerberg donated 100 million dollars to the new york public school system and it did absolutely nothing um that doesn't help us answer how we should spend the money but it it gets us some of the way there on how we shouldn't spend the money and especially you know i hate to say this but a hundred million dollars is not uh you know the type of money that can make uh impact at a global scale necessarily unless used particularly uh decided you know uh in a very pointed way uh i think you you're probably better off uh doing something smaller you know and this is waving a wand in the air and we have no no uh ability to manifest changes in policy uh unfortunately uh you know education is really uh the most important the most important thing period and uh i mean at least keeping it on the topic of what we're what we're discussing at the moment there there's a lot of educational materials and resources that could be put together uh to much better educate everyone about decentralized technology and fundamentally you know we said this technology allows anyone to go in and verify the rules for themselves but you actually need to know how to verify and so if anything putting together some sort of open source uh lab right where everyone can participate for creating tutorials and how to's uh to just explain uh how to understand more and more of this technology i think that would be that would be the best use of the funds like create some sort of educational incubator that was designed to create everything open source and uh make make accessing all this technology as simple as possible so i think that just thinking about yeah yeah i think it seems a fitting response given the conversation and it's along the lines of uh keep open source open uh it's been an absolute pleasure to talk to you um this evening this evening my time and uh i really feel i got a great insight into your uh your aims and motivations there um with beans and beanstalk so i look forward to following up a little bit further and yeah it's been a great uh addition to our podcast conversations around building and new realities um i mean this is part of what the future of money looks like and the the the future of interactions across individuals so uh thank you very much and uh great to to to to have a conversation with you thank you for having us it was really a pleasure great have a wonderful day thank you cheers bye [Music] you