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the system really was designed theory to handle anything you want to throw it in and specifically anything you want to throw at it right like when you think about attack vectors you know like one of the potential attack vectors is to artificially inflate the price and then try to crash the price and so like this isn't something that was uh not only not planned for like this was this is expected like if anything this is what the protocol is designed to handle so the fact that the test is just so large because the order of mac like there was literally four or five times the like the total market cap of the system that came in in us in just a few hours like the test is a big test but at the same time and we don't say this lightly beanstalk is designed to be resistant to attack from governments it's designed to be resistant to soros type attacks it's designed to be resistant period so it's just very exciting to see and to also have the opportunity for being stuck to show that even in such an infant state even with such an unsustainable period of growth for a couple of hours even with all of that capital immediately leaving the system the system fights on and the system lives to fight another day and eventually the peg will be returned and at that point the system is going to be in a really really really good position moving forward and that's what excites us now [Music] [Applause] [Music] welcome to mission g5 with brad nichol where we explore projects in decentralized finance that are innovating and driving our mission a financial freedom forward thank you for listening if you like what you hear please subscribe rate and review mission defy and spread the word by posting a tweet to the show all opinions expressed by brad nicolaur's guests are their opinions and do not reflect the opinions of black knox material indicators or any other affiliated organizations you should not treat any opinion expressed by brad nichol or as guests as an inducement to make a particular investment follow a particular strategy or become involved with any project a project being featured on the show is not an endorsement of that project in any way this podcast is for informational purposes only now here's mission d5 with brad nichols [Music] [Applause] [Music] [Applause] [Music] [Applause] [Music] i'm excited to have a fairly new project on the show today we are talking about beanstalk which the core of the project is an algorithmic stablecoin and i have the team from beanstalk publius here with us today and i want to welcome you guys and uh thank you for coming on and i can't wait to kind of talk about the value proposition and what you guys are creating but if you could first kind of give us a little bit of background about how you got into crypto and then you know the origin story of how this whole thing came about and why you created it sure thing so thanks first off thank you for having us on on brad it's it's a real pleasure so and we appreciate you you offering this platform for us to share a little bit of what we've been working on so we we're a team that has been incredible and varying capacities for almost five years now in our in our varying facilities and kind of stretching from like deep economic analysis on tokens and more on the investment side of things and then also you know some of our team members as evidenced by the code and the development side are deeply technical on the on the smart contract development side so we've been you know the team has known each other for an extended period of time and about a year ago as esd was really blowing up it it became evident to us that a this was a real place that the market placed a lot of value in as something that the market needed specifically a decentralized algorithmic stable coin that was not backed by collateral and that was also evidence to us by like the frenzy around esd clones like faye excuse me dsd and tsd and then ultimately you know in march of this year when faye launched at you know almost uh two billion dollars committed capital when they launched you know the market kind of reinforced that this is a really meaningful thing for for cryptocurrency and the d5 space to to continue to grow so we were asking ourselves around thanksgiving of last year where can we really you know we were looking for something to really put our hands on and build and you know we asked ourselves what are the biggest problems in the crypto space to solve right now one one is obviously scalability but frankly that's a little bit above our pay grade and well this it seemed to us that the second biggest opportunity and the need in the cryptocurrency and defined space was a decentralized algorithmic stable point and so ultimately we set down that path we originally thought it would be a a couple months work to make some slight modifications to the esd design and fix some of their you know what we would call tragedy of the commons issues where some of the uh game theoretic design was flawed but ultimately we basically couldn't help ourselves and it ended up becoming like an all-consuming all-encompassing built from everything you know totally our own and original so it it quickly became all and got the same thing where you know we basically realized that a we had a lot of a lot of potential and b we felt an obligation to give this really everything in our power to to make it as give it the highest possible chance of success possible so that's that's that ended up being about nine months or so of development and working on the white paper and getting everything set up and about 50 days ago or so we finally deployed the contract to the ethereum mainnet okay so you're you were saying and i'm going to make sure i understood this you guys started off kind of saying okay can we take the existing contracts from the esd project and tweak it make it better fix some of the game theoretics and then we'll get something out in a couple of months and instead you guys ended up basically starting from scratch or or continuing down that path but just doing a whole lot more to what to what you were creating so the and this does start to get into a little bit of the the mechanism design but you know if you look at something like esd very simply it says that when the price is too high increase supply and when the price is too low try to decrease supply right and so that that really was the starting point so for you know it it's not fair to say that we we started from scratch sure from an economics perspective but but but once we once we realized what our our vision for what the system should actually look like consistent of it ended up requiring sort of a ground up reimagining of the entire system with with the starting point being you know increased supply when the price is too high and decreased supply when the price is too low nice okay so i think that's that's great and i look i you know i think there's a lot to be said for for utilizing other open source code but i think there's also something to be said for not not not inheriting other people's technical debt but also um being able to understand exactly what you're creating from the ground up so i think there's value there i think it's important so we have a wide variety of listener types here on the show we have you know full-on d-gens that don't have any idea what they're investing in they just throw money at high aprs we have technical people project leads a lot of project leads that listen to the show and so they'll really understand at a technical level and then we have just kind of casual investors and people who are enthusiastic about the device space and they follow another project and started listening to the podcast because we interviewed somebody but i think one of the things that people um need a better explanation of is really kind of theoretically how algorithmic stable coins work right you talked about increasing supply and decreasing supply to alter the price to get it closer to its peg but can you explain for people why that works and i think we're seeing more and more projects trying to not just in the stable coin arena really trying to utilize human psychology to influence how a particular project performs but i'd like to if you could kind of give us a bigger picture look and then climb into beanstalk and what you guys have created and why it's why you think it's better certainly so the the starting point is you know what is a stable coin and there are obviously a wide variety of different stable points already on the market so a stablecoin is just any blockchain based asset that is designed to retain a market value equivalent to a non-blockchain native asset so by far there seems to be the most demand for us dollar stable points and this is almost certainly because the us dollar is the global reserve currency and is used all around the world and so there's a high demand to bring us dollars on to the blockchain but of course because dollars don't exist natively on the blockchain there needs to be something to bridge bridge them on to the chain and so in the case of ethereum uh so there are two other in addition to purely algorithmic stable coins there are two other collateralized models the first being the tether and the usdc model where basically a private company says we're going to issue on the blockchain like a usdc for every dollar that we hold in a bank account and therefore you can you know as long as you trust us who are holding the money in a bank account you could basically get dollars on the blockchain and on the one hand this offers really high utility and it is by far the most popular version of the usd stablecoin today with over 100 billion of these types in existence but it really does present a fundamental weakness which is the reliance on a centralized party to administer the system and given the the current regulatory picture and there seems to be a large uh desire on the part of regulators to give crypto a really hard time in a lot of capacities in the long run this doesn't really appear to be a solution so the market is actively looking for a way to replace the reliance on on on collateralized centralized usd stablecoin and i think one of the other things that's been talked about a lot lately relevant to usdc is that they can actually blacklist wallets and addresses on the chain and not allow people to participate in transactions using usdc which in effect because of the dependency on usdc could have a dramatic impact on a lot of d5 projects if regulators force them to to to blacklist projects so i definitely think that's another big concern we all should be uh really thinking about so i'm always glad to see uh more algorithmic work being done on the stablecoin front just to wrap up that point and kind of introduce one of the aspects of beanstalk is that we we've really gone uh and done everything we can to make this as decentralized and become more decentralized over time but one of the design decisions directly along what you're talking about with blacklisting potentially usdc from addresses is that we didn't build the the oracle for the being priced from a uniswap pool that trades against usdc instead we built it using two pools for the usdc eve pool and then also the being heath pool and then by uh comparing the ratio of beans to eat and usdc to eat we can derive a price for a bean but without exposing it to you know the operators of usdc so to go into die now die offers an interesting alternative whereby you can basically add value and actually the collateral that they allow you to add isn't necessarily decentralized so there is some level of centralization still would die but ultimately you can add collateral to a cdp uh collateralized debt position and then mint die against your cdb and you know the idea being that the smart contract enforces that at least a hundred and fifty percent you know your die value against your cdp will be collateralized in in the in the smart contract and therefore you know there's a guarantee that there will always be more assets backing the die but the problem is of course this is very capital and efficient and in practice you know who can say what the actual market size for this is but fundamentally having to lock up ethereum or another ethereum native asset to create a usd stable coin is not really a good solution and that's evidenced by the really high borrowing costs to use die and in practice if you look at the high borrowing costs for both collateralized stable points that are operated by a centralized operator and something like dye which is a little bit more decentralized the borrowing cost for both of these types of stable coins is effectively cost prohibitive so if you think about like what what what could be done like for example i said we got into crypto around five years ago one of the things that was promised was augur and all sorts of really interesting decentralized betting markets were potentially one of the main use cases for this technology but fundamentally if you have like 20 borrowing costs on your underlying asset that basically changes the math on what is a cost effective bet to make and therefore basically what actually is a market that you can make on auger is drastically reduced so something and beanstalk is designed to do this but something that can radically change the tide and basically make the holding or the opportunity cost for just holding the currency near zero is is potentially a really meaningful fix to bring a lot more of this technology into a range where it's financially viable even if it's technologically viable so that's kind of the way of the land as it currently stands and that's also the opportunity that beanstalk sees as what we're looking to to really disrupt and you know the opportunity to offer and we'll get into it but instead of paying like really high borrowing costs i don't have to tell you what the cost is to borrow a real dollar in the physical world today but to be paying orders of magnitude higher to borrow a dollar on chain is just fundamentally wrong so the the goal is how do we flip that dynamic now let's talk about how beanstalk functions and why it's different and why you feel like it's a superior model and then kind of let's walk through the other components of the protocol in the platform after that right so fundamentally the the way beanstalk works and the way it has worked since it was launched meaning there was no pre-mine there was no pre-sale from the time the contract was deployed on ethereum when the initial 100 billions did 100 of the growth in the supply has been you know as determined by the algorithm as it normally functions so how does beanstalk actually work uh every hour which is in beanstalk we refer to it as a season so every season every hour the beanstalk price oracle is queried at the top of the hour and if the price is too high the system increases the bean supply and if the cis price is too low the system creates soil which is the willingness to take on debt and any time the system is willing to take on debt so anytime it has issued soil anyone who holds beans uh can take their beans and lend the beans to the protocol in exchange for pods and pods being the dead-bearing asset of the system so at any time the price is below one and in fact the system is always willing to issue debt but specifically when the price is below one the system will raise the interest rate on on the debt and so by raising interest rate the system can basically or lowering the interest rate of the price is too high the system can effectively toggle in a somewhat deterministic way the supply and demand for beans and by every hour taking a sample of the system and adjusting the supply of beans the supply of soil so the willingness to take on debt and the interest rate on that debt the system can you know respond to market conditions in in somewhat real time and over time return the price of one bean to one peg to one dollar excuse me and the main the main idea being and there's a lot of you know like behavioral economic theory kind of built into this thing is that over time as the expectation that beanstalk will at some point return the price of beans to a dollar because it has done so in the past the expectation is that the market will over time start to closer and closer track the price of a dollar and real deviations from the price of a dollar will be reflective of actual like real increases or decreases in the equilibrium price of beans as a result of changes in the supply and or demand for beans so really you know obviously right now with the system having just launched a month and a half ago there is no real expectation at this point in time that beans will return to a dollar and so all of the mechanism is kind of on full display and really you know being put through the ringer and having to show off its muscle and its design which ultimately is a good thing but over time we expect that volatility will come down significantly and the price will generally track the value on the us dollar so yeah that's very interesting so obviously um i want to make i want to kind of recap what i got from how the system functions and i think i got it and the idea is this is that when the price when the price is over a dollar you are increasing supply in order to drive the price per bean down and the reason for that is is that behaviorally the more of something there is the less value it has supply and demand kind of basics and then when the price gets below a dollar you actually are are pulling beans out of the market with borrowing uh borrowing against the or borrowing beans barring against the beans to reduce the supply and increase the overall value of each bean to get it back to the peg is that basically the whole concept yeah and maybe just a a semantic correction on verbiage but the the the protocol is the one that is burning the beans and so in practice like bean stock needs to attract creditors so right like the only way that in the long run bean stock failed is if it is unable to attract credit so the number of participants is critical the interest rate mechanism well exactly and so the idea being as long as the system can uh react by altering the weather the interest rate the weather being the name of the interest rate and the system but by by altering the weather by toggling the interest rate the system can find a price where it has creditors so given that the system is like novel and going through its first dead cycle the expectation is that this is going to be one of the highest interest rates it probably ever has to pay and over time as it establishes a decent credit history the willingness for people to lend to the protocol should should improve over time that's very cool now let's go through let's go through the components of the system right and what the experience is of someone who is saying i want to be a part of i want to be a part of beanstalk i like this model it makes a lot of sense to me what are the ways that they can participate what are the components of the system called you know looking at the website i see silo field trade obviously and then you talked about we talked about weather we talked about soil being the debt market and i think there's also stocks in the marketplace yes so can you kind of relate each of those components to things that some things that people might be used to you've already kind of done that to some extent but also then in in doing so let people know how they can participate and why why it could be valuable to them to participate obviously no guarantees so one of the one of the main design considerations of being stock is like what what what do people actually want to have if we assume that being stock is kind of ubiquitous and so the the first opportunity to participate in beanstalk or you know benefit if beanstalk continues to grow is to simply deposit beans in the silo and the silo basically you can think of it as the bank but it's really the dow that controls being stock and so in practice this is basically like a simple usd deposit account where you earn interest on your deposits and this is kind of the base layer of interacting with beanstalk so if you have a bean deposit you're basically earning passive interest and there's no action required from you know being depositor in the silo okay so if you said i think this is interesting you can literally just take exposure to the price of beans deposit those beans in the in the silo and then upon deposit this gets into a little bit more of the verbiage you get stock and seeds so stock is the ownership token of the dow so if you own stock that entitles you to vote and governance decisions bean stock improvement proposals so you have a vote in the future of the system but on top of that stock is also you know the asset that determines how much of bean supply increases you are entitled to so anytime the bean supply increases meaning the price was above one for a season over the course of an hour the average price was above one so the system is going to mint more beans um your percentage your the amount of beans that you are entitled to from that mint is determined by your stock ownership got it so the more you deposit in the silo the more stock that you have and therefore you know the more interest you will earn that's awesome okay so the the other asset that i i just introduced is this is a seed where the only function of seeds and basically this was primarily implemented as a second asset both stock and seeds will become erc20s and liquid and tradable in the near future but the reason seeds exist is to create an opportunity cost to withdrawing assets from the silo so basically every hour every season that goes by uh every seed that you own yields an additional 110 000 of a stock and so basically if you're if you're in the silo for an extended period of time the amount of stock that you will have earned from those seeds goes up linearly and if you were to withdraw your assets from the silo you must forfeit all of the seeds and stock that is related to your deposit and so therefore people are encouraged to stay in the silo for longer continuous periods of time and that does create like sort of a base of capital that is going to stay in the system over you know even during downswings so for example right now and looking at how that actually has played out and during the first dead cycle about 80 percent of the beams that were in the silo stayed in the silo during this first debt cycle which is very exciting given that you know in in something comparable like esd during the debt cycle is almost 90 percent of the assets and i am making up that number but it was a very large uh percentage of the assets would immediately leave the silo or you know in the case of esd it was the dow because there was no expectation of profit for staying in in the dow with the price below a dollar right so this does create much more consistency on that front so essentially it causes a bank run unless there's an incentive and the incentive that that that people get for staying in your in the silos is that they're earning more stock bean stocks and what's the other thing sorry well this the seed stays fixed but right the seeds yield more stock over time so the opportunity cost comes from the requirement to burn the extra stock okay got it and the people that when at what is there like a maturity on this where a withdrawal doesn't equal loss of those gains or how does that work so so once you can withdraw your assets from the silo at any time so you can withdraw your ad there's anytime you want you can withdraw from the silo in order to withdraw from the silo you have to burn all of the seeds and stock related to whatever assets you're withdrawing uh so there is never a point where you like actually get those stock and you come withdraw and still hold ownership in the protocol yeah but in practice you know the the only liquidity limit on the silo is assets are frozen for 24 hours upon withdrawal okay and so this is now going to require us to take a little bit of a leap forward on the technical front but there's something in the system called a season of plenty whereby basically if the system has low debt and a high price for 24 seasons straight so for a full day the system will automatically mint extra beads and sell those beans on unit and then distribute the ethereum to stockholders from that sale and so when you combine when you combine the 24 season withdrawal time with the 24 season soft timer you basically make it so that anyone who's withdrawing from the silo has to make sort of a price independent decision on whether to withdraw or not now now i get it so it's it's like a governance token at that point that's why you're not keeping any of the that that's coming in but you're gaining the benefits of the system because you have that ownership in the dow or the silo and that's why you're not retaining that when you leave because you're no longer participating in the system and then there are going to be built-in bonuses or capabilities because you will be mentioning more beans when the price remains above a dollar for more than 24 hours and the proceeds of those being sales will go to those folks that are in the silo yeah that that is generally correct so in addition to the simple deposit account where you can deposit beans in the silo you can also deposit liquidity pool tokens lp tokens for the b unison pool and this is obviously to encourage consistent liquidity in the in the being 8th pool and you know an additional small incentive to add lp as opposed to just straight beans is that you do get more seeds per bean that you deposit and so the there is a slight incentive to add lp into the deposit lp and the silo as opposed to just depositing beans but both are you know totally viable ways for people to get exposure to to be in stock so so that is like depositing in the silo is the passive option for players who who are interested in being stock and and like we said there's no action required from silo members they can set it and forget it if they'd like and then on the flip side you know we've talked a little bit about the lending market what's known as the field which is the decentralized credit facility of beanstalk and so the field is not a place where there's passive returns instead it's it's an active lending market so if instead of depositing in the silo you you want to sow beans in the field which sewing is is lending beans to be installed you know all of that is requires a little bit more of an active maintenance but on top of that you can potentially earn you know a higher rate of return for being an active participant on the debt market side so in terms of the the lending process the field process i could buy beans deposit them in the field and then the protocol would borrow against it when the price of bean is below a dollar and i would earn whatever the current weather rate or interest rate is at that time against those that i had deposited in the field but when the price is above i'm not earning anything from it so that's kind of why there's like a more active role for someone who's investing in that way so generally correct a couple things to clarify is if you lend money to beanstalk you only get paid off when the bean supply grows and so everyone who is a member of the ecosystem really receives their interest when when the bean supply is growing but the underlying dynamic and economic incentives and structure around lending beans to to the protocol is sort of fundamentally different than depositing assets in the silo so to walk you through a little bit of how that works the the the terminology just restated for clarity so soil is the willingness to like borrow beans so anytime beanstalk has soil in the field it says if you know if there's a million soil beanstalk right now is willing to borrow up to a million beans okay and the the interest rate dean stock will offer uh to borrow those speeds is the weather and so the weather changes every season based on you know supply the price the debt level and demand for soil and change demand for soil specifically but the idea being that by um by changing the weather we can we can toggle the interest that people may have for for for lending beans to be installed so the economic structure is if i if if i lend beans to beanstalk right now beanstalk immediately burns those beans that i went to the protocol and in exchange for sowing beans i get pods and again pods are the debt asset of the system okay so pods unlike stock which just to reiterate stock is paid pro rata every season so if i have one percent of the stock i get one percent of the payments to the silo okay uh pods are paid on a first and first out basis so uh the sooner you lend money to beanstalk the sooner you get paid off so there is you know when we talk about behavioral economic incentives if we think about like an individual participant of the system deciding should i lend money to beanstalk or not if the weather is high enough such that i feel like this is a good time to lend money to beanstalk i am incentivized to lend money to beanstalk immediately because if not someone else might and i will move back in the pod line and my overall return will go down and so when you compare this to something like the the debt mechanism and esd this is like a primary example where we we think we've solved or are solving for some of the tragedy of the commons issues that were present in something like asd where just to state the specifics the the interest rate for for lending esd to the protocol was determined by the debt level in the case of esd and so obviously like someone led money to esd raised the debt level and therefore also raised the interest rate of the next participant so there was this real tragedy of the commas issue where everyone was kind of waiting for the debt level to go high enough ex exactly and this created a problem where at the beginning of each debt cycle you had like a pre-forecasted and easy to understand reason why the price was just going to tank and so that ultimately is is something that in the case of beanstalk we think that there's a much much much more efficient market for the debt and being stocked than there were in previous algorithmic stablecoin attempts yeah makes sense when i when i deposit when i deposit and lend to the protocol so i'm looking at the website right now right it shows weather at 419 percent so just just to just just to clarify so depositing and lending are are the two sides of the coin so you either deposit or you land you get deposit and land but they're two different right yeah just to just to clarify for everyone yeah i think that for the reason i keep mixing it up is is the action of actually saying okay here's my coins to lend to you it feels like a normal like a deposit action in the interface so lending to the protocol it shows currently weather's at 419 percent from the perspective of someone who is coming in and saying okay this this looks like a an opportunity to earn and to help the protocol get back to its peg what what's the what's the experience like for them so let's say i i i put in one eighth right now and that would equal 30 33 730 pods i've i i lend to the protocol and then the process is how long how long should i leave that in does is the 419 an apr an apy rate can you kind of relate to people what they're used to in other lending scenarios what they should expect if they were going to participate definitely and this is a little bit of a a new and unique experience so this is a good thing to to focus on so the weather it is the only thing that determines your rate of return and so just to clarify so you ask how do you do it so on the website being dot money you can actually lend beans to beanstalk directly from the theory so in one transaction you buy the beans you set the beans to be in stock bean stuff burns the beans right it'll happen instantly and in exchange for however many beans you lent to beanstalk let's just stick with a simple example if i lent a hundred beans to beanstalk and the weather is 419 percent i am going to get 519 pounds so for each bean that i burned i get one pond back and then i also get plus however many beans i burn times the weather so in this case it's 419 additional pods so that it you you immediately lock in how what your what your expected return is wow so at that point the 519 pods that i just got go to the back of the pod line which right now uh i haven't checked in a little bit but it was something like seven million pods and so in the future when the system pays off all of those pods in front of you and then pays you off you will then have 519 harvestable pods and when you harvest your pods you basically redeem them one to one for beans so once you've completed a full lending cycle you want the beans uh and then you harvested the pods you'll have taken your 100 original beans and turn them into 519 beans and obviously this is uh changing over time based on the weather which changes every hour got it okay now that makes total sense so in terms of someone kind of saying to themselves okay how long am i putting my uh 100 100 beans i'm how long am i waiting for my 519 pods to come back that i can exchange for beans what's the if you have seven right now we're at 7.52 million in the pod line what what kind of is the expected timing on the return and is the pod line a way to um [Music] throttle you know exchanging and dumping if is that kind of its purpose is to make it so not everyone everything is coming out at the same time and being sold is that kind of part of the reason for way the pod line works and re getting your return on your landing so is it there's a couple different things to answer here one is that the the first and first out pod harvest skit is primarily you know a behavioral incentive where you are incentivized to sow your beans as soon as the weather is sufficiently high and you deem this as a sufficient return right um in terms of payouts so let's go back to kind of a high level view of the system let's say that the price is too high and the system is going to mint an extra 100 000 beans this hour a half of those beans go to silo members and half of those beans go to paying off potholders and so in practice what happens is any anytime pods are harvested they will be harvested with the price above or just about one and so the idea being that especially like right now you know with the price at about 50 cents you can buy two beans for every dollar you can sell those beans and get a 400 return on both of those beans so it's really like double that and then when you have the opportunity to harvest your pods and sell you know almost guaranteed you'll be able to sell it over a dollar and if not you'll basically be at exactly a dollar and so to answer your specific question on the time or the duration there's no guarantee as to the time for when the pods are harvestable bean stock will never default on pods but there's also no time that the pods expire and so there's no risk of default necessarily but the the exact time until you get paid off is not determined so you kind of this goes back to the different opportunities in the system you can have 24-hour liquidity in the silo or you can have illiquidity in the field but typically the field will offer you a higher rate of return for that liquidity right right so there's a so now i get it the the pond line reduces when beans are over a dollar right and that's when the minting happens and that's when the the beans are are given to people that were in line on a first come first half basis and you're right the beauty of it is is that right now with the current price of 50 cents and the weather at 419 percent it's a pretty attractive investment and you're also as a community incentivized to continue to help the protocol get back to a dollar in order to see the gain that you've had on your your lending investment am i correct on that yeah that's all correct and as as you can probably tell each of the different participants in the system all have their own unique incentive structures that are designed to facilitate people to you know without direct coordination but to get everybody to be in line with the general interest of the system so you know you can't dictate what people do but you can you can offer them incentive structures that hopefully facilitate the type of behavior that the system wants to see right absolutely and so yeah no i mean it makes complete sense and look we everything in life is based on incentives so i i think the the model here makes a ton of sense uh a lot of sense what else should we know about how the system functions or the opportunities for participation that you'd like to make sure people understand and are aware by way you guys did a great job on the interface it's it's really nicely done elegant smooth clean well well we we really appreciate that you know uh not to not to over pontificate but we really have taken this seriously and our our main our main focus and our main goal and how we have conducted ourselves throughout this entire process are certainly you know over the past six or seven months once we decided that you know we were going to do this thing really the the complete and right way is to put beanstalk in the best position to succeed as this you know as as the stablecoin protocol for d5 and so part of that is is making a user interface that is somewhat easy to use obviously there's a steep learning curve when you first come to the protocol so you know there's a how-to guide and uh step-by-step instructions and a lot of supplemental material but in terms of what else you know we'd really like to highlight other than you know the focus on making this work in the long term is that the system is going through right now like really through the ringer in the sense that you know we didn't have any marketing or any sort of uh big launch you know just to juxtapose it with something like fey which had over a billion and a half dollars committed to the protocol before they launched you know we basically decided to go the radically opposite route and stop start it at really zero and the the main reason for that is a protocol that requires lenders also needs a credit history and so the idea being that the it you know if we started on a hundred million or a billion dollar supply and now the price tags ten percent like good luck finding a hundred million dollars of creditors if you're a brand new protocol with no credit history yeah so instead we really did start small and organically and you know just to give people who are probably looking at the price charts over the past week or two and think well what's going on so the system basically a week and a half ago kind of blew up and we don't even really know necessarily where it first kind of caught the eye of the public or crypto twitter but in just a few hours the system went from like a two and a half million dollar market cap to over 40 million dollars and you know obviously that type of volatility is a lot for a a new stable point protocol to handle sure and that was perhaps exacerbated by and this this did put a big smile on our face but one of the the discord community members basically said something along the lines of once all of the people that were eating into the protocol realized there was no way for them to easily extract value from the protocol they quickly left because they realized they could game the system effectively so on the one hand that's a very good sign for us that the the protocol is working as intended but on the other hand you know eight to ten million dollars of capital flowed into the protocol very quickly and then flowed out of the protocol just as quickly and so now the system is you know and ultimately the joke is even though this wasn't how we drew it up on the big board it is certainly like an incredible thing for the system to go through and prove that it can survive basically anything because going forward the idea of having a similar type of volatility like you know a 20 million dollar market capital will probably settle towards the end of this debt cycle you know even if we took in 20 million dollars you wouldn't have anything close to that type of volatility so this is really like the you know a huge test and also a huge opportunity for the system but in general we're incredibly thrilled by you know the functioning of the system the response of the weather to to the current you know real-time situation in the system and you know most importantly the system has attracted you know as you just said a little bit before seven and a half million pods so when we talk about the system issuing debt and attracting creditors it seems that there is you know if you can look at the growth of the pod rate the pot line over time like every day over the past couple of days there's been a major increase in the amount of money that's been led to beanstalk which is very encouraging so you know when we think about where we actually are in this cycle immediately after the system kind of blew up and spiked up to as high as four dollars there was pretty consistent withdrawal activity from the side where there was over two sometimes three million beans being withdrawn from the silo every day and the system you know obviously the price went down significantly as that was happening but two days ago the withdrawals finally fell below a million dollars and then yesterday they fell below half a million dollars and today they're as low as like something like 300 000 beans so the the withdrawals have almost entirely stopped the people that are still in the silo have more opportunity cost to leave now and seem to be you know here for the entirety of the cycle and the selling has effectively you know dried up and as is evidenced by the price action over the past 36 hours or so since the withdrawal has really dried up you know there is demand for beans there is demand for for debt and it's just you know a question of you know how how how the system how quickly the system is able to attract attract new no new new lenders but it seems that the system is is doing that effectively and somewhat efficiently as well even during its first major test yeah that's that's actually pretty awesome i i i gotta believe i mean i know you guys obviously you thought through this thing quite a bit and and modeled out how it would function but i have to also believe that there was like this mix of excitement and dread when all this money piled in because it wasn't really what you wanted yet i'm assuming based on kind of what you just talked about because you had this nice steady line of maintaining the peg and then suddenly there's this massive surge and on one hand you're like oh god you know i'm sure you're thinking through did we do everything right and and but on the other side of it it's like this awesome test of yeah did we do everything right and it looks like you know maybe we did and things are functioning the way they should was that kind of like what the experience was like for you guys over the last week well you know it really was surreal and on the one hand there was immense tribulation that there were more eyes taking a look at the protocol and obviously you know it was very exciting to see a generally positive reaction to everything you know and our families are calling us oh my god what's happening you know the whole the whole yards and ultimately you know a having seen the way that these other other algorithmic stablecoin attempts go through cycles and b having designed the whole protocol you know our advice to everyone who called us was basically like you know the real test is just getting started yeah so on the one hand it was very exciting but on the other hand this is you know and not to be overly academic because we're not we are not academics and don't pretend to be the system really was designed theory to handle anything you want to throw it in and specifically anything you want to throw at it right like when you think about attack vectors you know like one of the potential attack vectors is to artificially inflate the price and then try to crash the price and so like this isn't something that was uh not only not planned for like this was this is expected like if anything this is what the protocol is designed to handle so the fact that the test is just so large because the order of mac like there was literally four or five times the like the total market cap of the system that came in in us in just a few hours like the test is a big test but at the same time and we don't say this lightly beanstalk is designed to be resistant to attack from governments it's designed to be resistant to soros type attacks it's designed to be resistant period so it's just very exciting to see and to also have the opportunity for beanstalk to show that even in such an infant state even with such an unsustainable period of growth for a couple of hours even with all of that capital immediately leaving the system the system fights on and the system lives to fight another day and eventually the peg will be returned and at that point the system is going to be in a really really really good position moving forward and that's what excites us now that's that's awesome i'm excited that's actually that's actually really cool you know on the on the decentralization perspective of this thing do you are you guys kind of taking an approach of you know uh deploy and your hands off or or how much control do you have over over things as as this thing progresses did you kind of maintain some admin control to be able to still uh tweak things or handle any problems that might come up so so the the short answer is uh yes like currently the deployment address still has unilateral ability to modify the beanstalk contract and that has come in handy there have been you know especially as the system blew up over the past couple of weeks you know we had a large uh you know set of bugs that were reported only two of them turned out to be actual issues with the contract both were minor there was like a total of less than 5000 beans or so that might have been misallocated but you know it was a very quick fix and those are the types of things that for the short term you know are the reason why we the deployment address still has the unilateral ability to modify beanstalk but you know beanstalk was implemented as an upgradable diamond and through a bid through a beanstalk improvement proposal in the future our hope and our expectation is that the community is going to you know remove that ability from us in the future and when you ask about kind of what's our mindset on being hands-off or being hands-on you know this is a deeply pivotal time for beanstalk in the sense that you know the quality of the community and the quality of the the discourse that is happening around the future of the project and the ability of beanstalk to attract high quality developers and other high quality you know minds in this space and to potentially make the pitch that beans should really be adopted as the the the stable coin that is used across d5 there really needs to be a high level of fake in the protocol itself and so you know in addition to obviously like resistance from you know being strong armed by governments you know another reason we we like being anonymous is that it does really provide the opportunity to you know not necessarily immediately but in the near future transition this to a primarily community developed that community run you know protocol our goal is not to be uh you know and it's not about hands-on or hands-off our goal is not to have everyone reliant on it to keep in stock going our goal is for beanstalk to keep going because beanstalk is sufficiently well designed and has a sufficient pool of supporters and creditors behind it you know that we don't need to be there right so it's it's not an exact science as to how to make that happen or or when to lower how much we have to do with the protocol you know right now we're still in the process of putting out supplemental materials you know and doing an interview like this this is our first such interview but things like this are really meant to bring this to more more people bring this to more eyes and ears and and hopefully facilitate that you know transition away from uh being dependent on publius but you know we did just get started 52 53 days ago or something so you know beanstalk remains young decentralization never is instantaneous or rarely instantaneous so no i totally i totally get that here's something i'm kind of interested in it sounds like you've already built kind of a strong community and this is something i think is actually interesting about this when i first looked at your website and then started going through the documentation i found a bit of a disconnect for me in terms of the the nomenclature the the terms that you use to describe the different components of the system and my my initial kind of traditional concern from a marketing or business development perspective on that is is what that means is is that you potentially lose out on some users who don't go through the work but as we've talked through the system i actually am starting to believe that and i haven't really jumped into your community to take a look yet but i'm actually starting to believe that that actually is a um could be a feature of the system and by that i mean is that i think that obviously community is critical and you want people engaged with it and there's a there's a level of investment required to get conceptually how things function with beanstalk and so i'm wondering if what if you're seeing that reflected in the community as it's growing are you seeing that the people who are participating and are enthusiastic about the protocol are people that are more likely to stick with it because they've invested the time to conceptually understand it well the short answer is definitely and you know what what one of the ways that we really like to to live our lives not just with regards to being stuff but in general it's you try to act in a way that like you put people in a position where however they act you're comfortable with the outcome you know ultimately people are going to do what they're going to do but in the case of being stock the real goal is to to attract people that are curious and people that are uh really uh interested in putting at the time and you know i don't say this lightly but the people that came in and then quickly left the system last week are kind of the opposite who never wanted to and you know granted us you know some some percentage and certainly not zero of the money that came in last week does fall into that category and those are the people that have stuck around that have done their research that are now you know still in the system when you consider you know the ultimate you know the market cap was two and a half million before the system pumped uh you know the bottom was somewhere around five million or a little bit above that so you do consider like there was still a major growth in the community there was still a major growth in the value of the system and the capital invested in the system but we're not you know being struck is not interested in just being another another another throwaway project you know being stalking is designed to set precedent for the industry and part of setting precedent is you know and it's not about oh we wanted to be original and we didn't want to do everything the way other people did it we realized that and recognized that there's an opportunity here to set the stand for for for the industry with regards to to stable points going forward so you know using an epic as opposed to a season you know it's all just nomenclature but at the end of the day it's actually so much more than that and it's a real litmus test for for the type of the type of people we're hoping to attract that's great yeah i think that makes a lot of sense in terms of look i think one of the things that happens in in in looking at a project like this right people are in defy to turn some money into more money or and or i'm very similar that way right my initial attraction into crypto years ago was oh there's an opportunity to make some money here and then once i dove dove deeper and understood conceptually what i was getting into it became much more about how do i make sure that the whole world operates on these kinds of principles of freedom and decentralization and that becomes part of what you're doing and i i think that there's a similar thing here right there's an opportunity in this project for people to come in and make a lot of money and then become true believers or participants in the dow and in the project overall do you think that there's a risk with algorithmic stable coins in general that once things once once a project has proven itself and is functioning well do you think that as the kind of individual returns that can be gained leave you with just a hardcore group of people that just like the project and what it does for the ecosystem and it's more motivation the motivation is less about making more money and more about just changing the system or do you foresee that that along the lines that over time that that people will still be able to kind of earn from the protocol and participate because they want to see a better algorithmic stable stablecoin and they want to see a better source of money well uh you know i'm going to kind of go a third route of answering this and not accept either of the two options which is it's not necessarily exclusive so you know right right now obviously with the 10 million dollar market cap and you can look at this and say well you know if this thing works it's a 10 billion 100 billion dollar you know you look at the supply of other us stable coins there's obviously right now a much higher potential return than if you deposit into the silo at a billion dollar market cap right however there's two separate things to focus on here one is that the type of capital that would be interested at different sizes is kind of built into the growth model meaning that as beauty stock grows it should attract like a different set of capital right in the sense that you know there's all sorts of different participants in the d5 ecosystem and they all have their own unique risk return profiles and so in line with the overall potential return that you can earn from being stuck going down that will also go hand in hand with being stuck no longer being a brand new protocol that's never been through that cycle and has no no consistent credit history you know so over time your return may come down but your risk may also come down significantly and then the second prong to this is when you consider what we're actually setting out here to do which is to have beans adopted as kind of the base stable point of all of d5 there's a lot of utility that isn't even accounted for here so like previously we've just been really talking about and envisioning how does the own internal mechanisms of beanstalk enforce beans to return to a peg but that doesn't even account for over time there really should be especially if beanstalk can establish that it will return the price of one bean to one dollar over a period of time there should be real demand organic demand for beans that comes from people that don't want to deposit into silo or or so beans in the field but instead want to use beans across d5 and so that really becomes where uh you know it's not necessarily about where how does the change in turn affect you know the people who want to participate in the system that's not the best problem to have because that means the system is working effectively beautiful love it so i i think that makes complete sense and i love that answer i absolutely do agree that you'll have a different type of people participating when the risk reduces and the gains reduce but i think that's evident in other protocols in d5 over time there's a shift from kind of aggressive thrill-seeking early adopters fascinated with the whole thing to people who are more risk-averse and so see something that's stable and functioning and integrating in the d5 world as a whole and they see the value in that as well in terms of um look it's you've already got great success in a very short period of time in terms of proving the protocol and getting people engaged with it and seeing that it's functioning the way you had hoped it would function right and and i think that's phenomenal but then i guess the next big step for you is are you as a team or as a dao planning to go out and really start working and trying to engage with other projects for integration and for use of beans within their protocols kind of what's your what's your approach going to be to kind of growing and seeding being throughout the dfi ecosystem yeah that that's a really great question and something that you know we feel like there's a a right way and a wrong way to go about this so many many protocols in d5 have these large treasuries which we find to be incredibly inefficient uses of capital and they end up just kind of sitting there and are almost always either not used underused you know or misused right and so you know our basic philosophy on this is especially as beans you know returns to a peg and completes its first major debt cycle over the next week or two god willing you know the hope is that through specific dips speed stock improvement proposals the protocol can you know fund a additional development on beanstalk so the hope is to use bibs to to facilitate and fund developers to join the team contribut like continue to contribute to beanstalk and then specifically this model instead of like an omnibus treasury model this also is directly applicable to incorporating with other projects so if there's a protocol that wants to incorporate means into it and there's some added complication through a simple bit we can fund that and the idea being that the community and the dow can have an effective control over where the specific uh assets are being spent and on what projects and how to incorporate it but generally you know given the interoperative nature of ethereum and d5 and the ease of integrating you know another erc 20 standard token our expectation is that a lot of that integration is going to be driven not by you know paying for it but as much as just demonstrating utility and as soon as this being stock does demonstrate the beans are a reliable truly decentralized algorithmic stable coin that is valued at one us dollar over time our expectation is that they're like just the you know kind of we go back to the longer example there's a natural incentive for a lot of these protocols to add beans to to their protocol so uh step one is completing the first debt cycle you know at that point given that the system will really be at some sort of equilibrium our expectations that volatility will come down for a period of time you know and at that point it that becomes kind of the first major opportunity to start uh actively doing some of that you know development and potentially also you know starting to to directly incorporate with other other protocols any plans for direct layer 2 integrations any you know polygon any of the others that are out there now other chains any any thoughts on that are you guys going to stick strictly to mainnet for now what what are your thoughts around that so so the conversation around layer two and different networks are are related but separate right you know in general we really do want bean stock and like basic us dollar deposit accounts to be accessible to everyone even if they are you know really smaller silo members and that's very important to us but at the same time one of the main things that really must must be part of beanstalk is censorship resistance and decentralization and so you know to start with these these layer twos and they really are doing some incredible incredible things we're you know we're actively watching those protocols and as we feel much more comfortable in their level of decentralization and their resistance to um to attack that becomes something that's very interesting to pursue in some capacity but as of now we're not in a rush to do that and we're you know our main focus is just having beanstalk establish it's its economic mechanism fundamentally works but with regards to other protocols and you know even depending on the specific implementation of the layer two in most cases let's say that someone wanted to issue you know a us dollar being on solana just to give an example like the economics basically dictate that what is much more likely to happen than some sort of like cross-chain bridge is to actually have a separate totally independent beanstalk on those other chains right that issue their own assets have their own funding rates have their own kind of mini ecosystem but if you know if the the the grand daddy beanstalk the original beanstalk on the ethereum that continues to hold its dollar peg that should really be you know kind of a nice a nice tailwind to to help some of those other beanstalks get off the ground but that's not in our immediate plants you know if you look at white paper that's consistent with the original vision and then a man's division but at the moment you know goal number one's just having been stuck continuing to develop a strong community and as part of that community development returning to a pig and you know that that's really that's that's more of our focus than layer two but everyone is actively asking about that and it's definitely you know it's important to us to make this more affordable going forward sure yeah i mean look i i think for for smaller investors it's tough to do mainnet these days and so i i definitely can see why you'd be getting pushed for that but it also makes sense for you to to build and stabilize and prove what you want to prove i don't mean for proof's sake i mean prove that it functions so that people can trust in it and you can expand its reach and it makes sense to to start where you are and not try to expand too much into other layers or other protocols right away is there anything that we haven't covered about beanstalk and the protocol that you really think we should talk about i think we've kind of covered all of the basics you know maybe one last thing to highlight is that the stock ownership from seeds you know if you think about how that is dilutive uh really is designed to increase the decentralization of the ownership of the protocol over time because anyone can you know and this is specifically we want to highlight that this is not a senior edge coin there's no senior edge token there's no early group of investors that basically have this unlimited upside on the growth of this protocol that they seeded we think that's fundamentally wrong okay and instead by having the ability for anyone to get their stock and seeds by purchasing beans on the open market and then the way that you know your stock runs over time and which is effectively non-diluted it's slightly dilutive to bean deposits over lp deposits because lp deposits get more seeds but the growth of stock over time the primary function isn't to dilute people it's to encourage people to stay in the silo and then when you consider the way that people anyone can mint their own stock and feeds it really is a model that should lead to much more decentralization of the protocol over time i think people like mission driven and i think it sounds to me like puglius is as incredibly mission driven for censorship resistant and decentralization and so i think it bodes well for your your success and your growth i always ask everybody that comes on the show are there people and or projects in the space that you have a ton of respect for or that people should be watching either people that we know about or people we don't know about or people that from in your particular case that are really kind of mission driven you believe the way you are and are delivering on that are there are there people or projects that kind of fit that for you you know we're going to take a little bit of a comp out here at risk of you know really to prevent the risk of offending some you know the building building decentralized protocols is really really difficult because at all kind of all points in time there's an opportunity to cut corners and you know to not cut corners and to to kind of stick with the original vision you know and obviously the vision needs to change in line with new market data you know we are we are kind of continuously going to propose updates to the to the stability mechanism although they're generally minor updates their updates nonetheless you know what when you talk about do you want to give like you know other people that inspire us in the space like we are so deeply inspired by like if you really think about the story of of the founding of ethereum the way the team was you know eventually had a lot of problems it was the dow hack you know now you have charles hoskinson building his own network uh when we look at all of the things that went wrong and still you have this incredible network that is is decentralized and is supported by like a wide variety of teams you know i think that's one of the best things about ethereum is that theory and v2 is being developed kind of in tandem by lots of different teams and they're coordinating but they're also somewhat competing that is that's what inspires us and that's you know that's one of the reasons why we we ultimately were building on ethereum but that's also you know that's also what we aspire to have happened to beanstalk where there's a deep deeply you know variant and diverse community but that all the different members of the community even if they disagree you know believe that being stuck that's going to be a real a real factor for positive uh change both in d5 and cryptocurrency and in the world in general i think you answered the question and didn't cop out at all i mean i think that that's something that you know i tweeted earlier today somebody who was working on some zk roll up stuff all on their own and post publish their paper about it i love seeing the participation by this incredible diverse community of people who are just driven to make it better all the time and i i think that's a that's a great answer it really gets you fired up doesn't it totally does it really gets you fired up it's incredible to see what people are willing to do to drive the whole thing forward and so yeah absolutely i think you had a great answer there i think that's perfect so how how should people reach out get involved and what's the best way should they just go to the website what's what what would you guys like to see them do twitter all that so you know to participate you should just check out the website bean.money but you know in general if this is something that interests you and you want to learn more or join the community our discord is very active so check us out in there and you know the link to that is on the bottom of the website and you know the email on the white paper is is an email address if you really want to go in the email route but we're accessible we're here and we are determined to make this a success it is great to get to know you guys and great to hear more about what you're building and get a much better understanding of it i'm i'm very excited for you well we really appreciate your time brad and thank you for having us on and sharing your platform with us absolutely [Music] [Applause] [Music] i've worked with a lot of startups in my career and i never get tired of working through the excitement and the danger and the ambition that they all bring to the table and it's a lot of fun and i'm excited to see where beanstalk takes this they're obviously motivated mission driven and excited about what they've built and they seem to really plan for what they think is coming next we'll keep an eye on them and get back to them in six months or so and just see how things are going thank you for listening please rate review subscribe tell your friends share it on twitter anything you can do to help us spread the message of financial freedom and innovation and defy is greatly appreciated have a great day