Mission DeFi Podcast #4

September 9, 2022
Other Recording



hey this is brad nicholl i want to thank you for taking the time to listen to mission defy today i know you have lots of choices for your listening and learning and i'm honored that you consider this one of the things that is important for your knowledge in the defy space i have a big favor to ask you and that is if you really love what we're doing here if you could take just a couple of minutes to go to apple podcasts or spotify and just quickly rate and review the show it would do amazing things to boost our reach and the algorithms of those systems and will help us spread our mission of financial freedom and defy everywhere thank you for listening and thank you for participating you can listen to all of our previous episodes at missiondefy.com today's episode is with publius from beanstalk farms and this is our third interview with him if you want a deeper dive into the protocol and how it functions i really encourage you to go listen to episode two you can see the links in the show notes to those previous episodes so if you're a business and you're trying to run a business profitably you can't be denominating things in bitcoin or ethereum that are excessively volatile you can microstrategy does it but in general it's hard for businesses to do that reliably sure and they're looking for a stable denomination of value a stable unit of account stable medium of exchange even a store value depending on the company and the concept is that stable coins are really the low volatility option on chain but stable coins have really high carrying costs you can use decentralized stable coins that have limited supply you can use centralized stable coins with slightly larger supplies but all of them have non-competitive carrying costs and what that really means is that the cost to use the stablecoin doesn't compete with the cost of using dollars and let's try to get into a little bit why that is so why is it that businesses built on bitcoin can't compete with businesses built on dollars the reality is that the interest rate on dollars is much cheaper than the interest rate on bitcoin why is that well the interest rate on dollars is heavily manipulated by the federal reserve and they're minting dollars constantly in order to buy bonds and artificially manipulate the interest rates lower and in short if i'm a business i'd much rather build on a subsidized system with lower interest rates than on a non-subsidized system with higher interest rates just from the naive perspective of maximizing my business profits sure and the reason the government is able to do this is because of the fiat system they can mint new dollars almost like new beans and buy pressures someday exactly so beanstalk similarly is able to mint beans arbitrarily and through the senior edge through the distribution of beans beanstalk is able to create competitive carrying costs where in fact the cost of holding beans for your business is probably competitive with the cost of holding dollars and we would argue more competitive [Music] [Applause] [Music] welcome to mission g5 with brad nicholl where we explore projects in decentralized finance that are innovating and driving our mission a financial freedom forward thank you for listening 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 mcelroy'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 nichol all right i am excited to have for the third time on mission d5 publius from beanstalk farms one of my favorite projects and full disclosure i have some money in the protocol and i'm proud to have it so because i really like what they're doing i like their ethos i like how they're approaching things but first of all publius introduce yourself and tell us a little bit about yourself and the background of the project if you would thanks for having us brad so publius is the founder of beanstalk i'm one-third of publius prior to the april exploit which we'll talk about we were totally anonymous and the reason for that is we don't really want to be the center of attention with regards to beanstalk we recognize we're decent spokespeople for the protocol and are happy to do things like this and talk to you about it brad but in general at this point i think the most exciting part for us is that the beanstalk community has grown over the past year plus since we originally deployed beanstalk the protocol and its community has grown to include over a dozen full-time contributors as well as a bunch of part-time contributors and volunteer contributors so it's a lot more than just publius at this point but that's a little bit about us yeah so you weren't speaking about yourself in the third person publius is a group of folks that that actually started this whole thing but you guys have an ethos of full decentralization you want this to be something that lives on and that a community governs tell us kind of real quick because we've covered this on our other episodes and i'm gonna i'm gonna link to it for anybody listening to this i recommend you go back and listen to the first two times we interviewed but tell us a little bit of origin story and you know the launch story i remember your first interview how excited you guys were that there had been a severe event a dump in how radically and well that bean maintained its peg that was actually one of the things that got me most interested in the project was kind of understanding that but anyway give us a little background and then we'll talk and jump into more recent history and then the future yeah that first podcast we recorded together i think is quite the artifact because that was happening during the middle of that major first d-peg in september that was before we'd figured out the luxuries of electronic voice modifiers so lots of good nuggets in that interview but to talk briefly about the history of beanstalk so publius deployed beanstalk on the ethereum mainnet on august 6 2021 when the protocol was originally deployed there were only a hundred beans and over the ensuing eight and a half months or so until april 17th of 2022 the protocol grew from a hundred dollar market cap to over a hundred million dollar market cap and that was through a wide variety of pump and dump cycles growth cycles debt cycles beanstalk really went through the whole ringer and at some point in january or so the debt level which in addition to price because beanstalk is a credit-based protocol it also optimizes around its debt level the debt level started to flatten from when it was deployed in august until january the debt level was just a straight line upward but over time through the improvement of the mechanism through various on-chain governance proposals beanstalk was sufficiently improved such that the debt level actually flattened and then in march or so started to decrease which was a major proof of concept in terms of the protocol demonstrating an ability to deleverage and pay off debt and demonstrate its credit worthiness which again because beanstalk is a credit-based protocol is a big deal so that that deleveraging that started in march continued into april and the protocol was growing exponentially effectively until there was an a governance exploit and an attacker was able to take advantage of the on-chain governance system that beanstalk had implemented and its lack of flash loan resistance and effectively take a billion dollar flash loan borrow a billion dollars from ave deposit a billion dollars worth of value in beanstalk in doing so acquired a two-thirds majority of stock the beanstalk governance token and then they could do whatever they want with the contract so they withdrew all of the exogenous value from the contract the non-beanstalk native assets the beans excuse me not the beans the ethereum the ether the usdc three curve and lusd so it's three three currencies ether three curve and lusd and left the beans totally worthless so all of the beans derive their value from whatever you can get trading trading them in a liquidity pool and all of the value in the liquidity pool was stolen making the beans effectively worthless so this was in april and at the time again we were totally anonymous up until that point everyone thought we did it because it's we're anonymous founders we're talking through robot voices and all of a sudden everyone's money's gone right so we made the at the time difficult but in hindsight seems like an obvious decision to dox ourselves tell everyone who we were that we had nothing to do with the attack and that we still have high conviction that beanstalk is worth building and it's hopefully going to change the world and the response it was a difficult week there was like three hour plus discord calls with hundreds of people every day for at least a week it was dude that was a crazy marathon every time i looked up there was another town hall another discord call another people have questions people want to know where's my money you know so exactly yeah it was a crazy time and the hardest part was telling everyone we the money's in tornado cash so we know where the money is but there's nothing we can do so since then we've really been totally amazed by the response from the community and contributors more importantly that a real chunk of the core contributors i'd call maybe a dozen or so contributors over the past four months have without pay without any expectation of anything from the dow have just been grinding their asses off hustling as hard as could be and in on august 6th of 2022 one year after originally deploying the protocol we along with a dozen plus of our new friends paid it in the redeployment of beanstalk and that was done according to the will of the dao even though on train governance has been removed governance is still happening through snapshot and the will of the dao is continued to be executed the terms of the recapitalization which is well underway were all approved by the dao and so despite the attack the and there's certainly some compromises that have had to be made particularly in the short term the ethos and integrity and spirit of being stuck as a decentralized permissionless protocol is still intact and while at the moment the protocol is run through decentralized governance via snapshot which can certainly be improved back to on-chain governance the reality is that given the circumstances we're quite enthused about how the past four months have played out and very excited about the opportunity the protocol now has so maybe to wrap it up since deployment on a redeployment on august 6th the price has been pretty hard pegged to a dollar uh the the the pool that beans trade against now is just being three curve whereas when it was originally deployed it was being eat and so there is less volatility from trading against three curves and trading against ethan that does factor into some of the decreased volatility but nonetheless the protocol is doing a pretty good job of oscillating the being priced above and below its peg of a dollar so so far so good this is very much a long game here and the only way for beanstalk to win that game is to continue to be on and demonstrate that it works but every day and every hour that the protocol continues to demonstrate efficacy is a success for us yes so i think i want to climb a little bit into the mechanism you guys decided to use to try to repay the folks who lost out with it when their beans were made worthless but i think in order to do that if you could do a quick overview on how the protocol functions and again i will reference everyone to previous episodes where you went into a lot of detail on that so you know just in brief summary and then kind of the mechanism that you have used to raise funds to help you know at least make it less painful for people that did lose the value of their beans in the exploit sure so with the classic publius caveat that the u refers to beanstalk or the beanstalk dab but i'm sure there are no big vcs well they may have bought since but this was a fair completely fair launch you guys the royal you the royal we it's all exactly exactly so the state of beanstalk prior to the exploit was that there were really two classes of holders of the system there are creditors and obviously anyone can be any mix of the two but there's creditors who lend to the protocol and they have pods which are debt that is paid on a first in first out basis with no maturity so at some point each pod will become worth a dollar worth but only when the price of a bean is at or above a dollar so you know at some point the pot will be worth a dollar but you don't know when right then the other class of holders in the system are silo members and the silo is the beanstalk dow but you can kind of think of it as a bank where anyone can come and deposit either beans or lp tokens into the protocol and in exchange receive governance tokens stock and if you hold governance tokens you are entitled to a portion of new bean mints so every time the bean supply increases a portion goes to paying off debt and a portion goes to stockholders and it also entitles you to participation in governance and so when we say the dow voted on things we mean that the silo members the people with assets deposited in the protocol they voted on things now the starting point prior to the attack as we were saying is that the beans derive value from the liquidity that they trade against so what's the price of a bean well it's whatever you can get in the liquidity pools that they trade in and so that's why in addition to depositing beans people can deposit lp tokens into the protocol and the protocol facilitates within the protocol the conversion of beans to lp tokens and vice versa in order to super support peg maintenance and so in short to set up the state of the attack before or the state of beanstalk after the attack before talking about the recapitalization the point is that all of the silo members the dow members had all of their value either stolen or destroyed so all of their lp tokens that were half beans and half ether or half three curve or half l usd all of the non-bean portion was stolen and therefore all of the beanstalk and re-issue new beans they're still worthless so the point is that the stockholders the silo members they were the ones that had the values stolen from them the pod holders they're holding debt and their debt will be paid back whenever it's paid back but there's not there's nothing that has changed the state of a debt holder effectively other than the state of the protocol is not doing so good which probably doesn't bode well for you're holding the protocol's debt so that's where beanstalk was in the immediate aftermath of the attack and the primary questions were a how to try to recapitalize some of the approximately 77 million dollars in non-beanstalk assets that were stolen from silo members and two how to recapitalize the protocol in a way where you're aligning the old holders the new participants and most importantly beanstalk with its peg maintenance so you can't compromise the ability for beanstalk to maintain its peg in the name of recapitalizing old money that's not an ethical thing to do so when it comes to what's the right way forward the priority has to be putting beanstalk in a position to succeed and then if beanstalk can succeed hopefully over time everyone will be made whole but you can't fight beanstalk in the name of recapitalizing people and so with those guiding thoughts in mind the doubt it was like six weeks or so maybe a little less but four to six weeks of heavy discourse iterations on ideas votes it was total nonsense but it's like you gotta figure it out in real time a lot of moving parts and the point is that over a couple of weeks again probably four to six weeks the dow decided on a final game plan and the structure of the recapitalization ultimately called the barn raise was to sell fertilizer tokens and the fertilizer tokens can be sold for usdc you can still buy the fertilizer tokens they were on sale for at least maybe i think was like two months prior to the replant the relaunch and if you had purchased the fertilizer before the replant beanstalk would over time pay you a 500 interest rate so 5x plus your money back and that interest rate was cut down to 250 upon replant in august and since then has been coming down by half a percent every hour until it's supposed to hit a low of 20 percent i think in a couple of days okay so at that point it'll just stay at 20 until all of the fertilizer has been sold out and the point is that well there's a couple points one is all of the debt issued from the purchase of fertilizer now forms a third class of uh holders in the system so before there were pod holders there were silo members and now there's fertilizer token holders and when new beans are minted until all the fertilizer is paid back one third of bean mints now goes to paying back the fertilizer debt and so instead of half to pods half to stockholders or silo members now it's a third and the point is that the protocol is selling this new class of debt in order to over time bring in the non-beanstalk native value that was stolen now the fact that the interest rate is going down to 20 makes it such that it's not really likely that more of the fertilizer or a significant chunk of the fertilizer is sold now it's more likely that there's no more fertilizer or minimal fertilizer sold for the time being until a lot of the debt that already exists on fertilizer has been paid back and once all of that debt has been paid back now earning that 20 and getting a third of bean mints looks much more attractive because of the time preference so it's this unique new asset that's been introduced into the protocol it was very neat to see how it traded and to see the demand prior to the replant a little bit of demand after replant and then the demand basically disappear in line with how you'd expect people to play it because it because of the structure we just described but the concept is if we go back to what we were optimizing around which is peg maintenance beanstalk has since replant continued to cross the bean price above and below its peg the price hasn't really dipped above and below one cent plus or minus the peg with the exception of a couple of short stints where there was a major sell or a major purchase and it was relatively quickly returned to the peg and obviously this is no guarantee that the protocol will continue to perform in perpetuity but again from our perspective every day and every hour that this thing continues to demonstrate efficacy is a win and something that the protocol can build on into the hopefully indefinite future yeah you know that was awesome explanation by the way thank you you know look right now 23.51 of the fertilizer was purchased which essentially means those people that were holding beans that went worthless if today were factoring in kind of what they're getting back they're getting back basically 23.5 of their money is that correct way to look at it it's a little funky so one of the things is that in order to align the incentives between the people buying the fertilizer and the people benefiting from the purchase of fertilizer is that the assets are immediately recapitalized so 23 has been ready sold therefore if i had 23 or 100 beans in the silo i now have 23 beans in the silo however until the fertilizer is paid back 100 the 23 beans that i have is subject to some what is called a chop rate where if you want to claim the beans you have to chop them and the chop rate is a function of the percentage of fertilizer that has been paid back so if right now one percent of the debt issued to fertilizer have been paid back so you're actually getting one percent of the 23 beans but you have the 23 beans as long as they're willing to wait and more importantly is that the stock the governance tokens for the 23 beans those are yours those have been revitalized and so people today that had a hundred beans in the system prior to the exploit are receiving interest new interest on the 23 beans that have already been recapitalized so there's almost uh a separation between the recapitalization of the old assets which is going to take time and the distribution of new assets which is happening all the time and so the even though the holders of the old assets they're called unripe assets and they're ripening they have to wait for the ripening process as more fertilizer is sold and more fertilizers paid back on the flip side they do every time fertilizer is sold earn more stock and therefore are participating in a significant amount of the bean senior rich that is being created as opposed to another way of doing it which is like tough and you'll get your money whenever you get it people are still continuing to participate in the upside and growth of the protocol which does seem to have properly aligned the old holders and the new holders and peg maintenance yeah i when i saw how you were doing it i thought the concept how the community was doing it i thought that the concept was absolutely brilliant right it not only aligns everyone's incentives but it also creates this kind of pent-up energy in the community for creating more uses for being right because the faster there's more adoption and integration of being elsewhere and use of it and more demand for it then the faster everyone starts to see more from what they've put in right i mean that would make sense were you surprised that at 500 and 250 returns about the num amount that was actually sold that was that we got to 23 and a half percent or did you think that the pod line was so long at that point that it would probably peter out and it would have to take kind of remobilization of the protocol for that energy to come back and more people to buy more fertilizer so on the one hand one thing that i don't claim to know is what what guides the market spirits if you will and so it was very clear that there was a large macro undertone happening since april until august which was the collapse of terra the crypto bear market the horrible macro environment and so to some extent we had no expectations this is one of those if the protocol had re replanted a couple days after the exploit in april before the terror implosion and the ensuing collapse of crypto the i think the protocol probably could have raised more money but it also could raise less money and the plan that was implemented in two days after the exploit certainly wouldn't have been as good as the plan that was ultimately implemented by the dow in august or by by june by the time the sale started so the concept is it's hard to know what was expected i think the thought of selling out the full 70 million to to to the world at large probably seemed a little bit extreme unless there was a major buyer that announced they're going to take 25 million of it or 50 million of it which didn't end up coming to fruition and is arguably for the best because doesn't want necessarily one major holder like that and that probably would have come at a lot of different you know the reality is that what the right amount to raise there was no answer and so the structure that the dow ultimately went with was a structure where it didn't matter whether the protocol raised ten percent or a hundred percent there was a path to replanting the protocol and once replanted what happens who can say right but right the point is that just getting to a place where the price was live people could buy and sell the protocol was demonstrating efficacy once again that was really the thing to optimize around not how much money came in now had the protocol only raised five million dollars i think that would have been disappointing had it only raised 10 million dollars i think that would have been reasonable a little bit low but something that the protocol certainly could have gone off on and where it ended up settling i think it was around 15 million prior to the the replant and maybe a little bit more maybe a little less and now it's up to 17 or so that is it was certainly enough for the protocol to healthily replant and that was really all we cared about so i think given the larger implosion around crypto it was quite a successful beanstalk demonstrated a successful ability to attract credit because again the whole protocol is credit based the only thing that matters is can the protocol attract credit in its lowest of low moments while the rest of the world is blowing up beanstalk was able to borrow like 15 million dollars from the market at large that's pretty cool that's awesome no i love that approach and look i mean i think you're absolutely right that the brand of well that the entire market sentiment was horrible at the time and that at the same time you know you had algo stable coins taking this kind of sentiment hit out in the market based on you know the colossal failure of one that obviously didn't have what it took and i think that's got to be frustrating for everybody that's involved right it's like here's this model that was working beautifully cranking along and a simple governance exploit you know kind of takes it out of commission when it could have actually filled the gap right it had the opportunity at that point when everyone else was losing their mind to to fill a gap and you guys couldn't and i'm sure that was incredibly frustrating i also like the idea that as this as the returns speed up on people buying fertilizer that even at 20 people are going to go for that in a heartbeat right after you guys have things kind of running on all cylinders in terms of market and integration that's going to make a huge difference in terms of where you go from here what is the dow up to these days in terms of from my perspective as someone who's not engaged daily in in the dow i watch it on discord i listen to the discussions i catch your town halls in your university but what do you believe or what is the dow kind of leaning towards in terms of activating and get more getting more happening and being i heard the other day that there's actually some outside projects that are building on bean that have actually raised funding can you tell me a little bit more about that and then kind of give me kind of where the direction of the project in general is going sure so i think to start because this is really a question of utility and what are beans going to be used for how is the world going to go about starting to accept beans and what activity is going to be done to help facilitate that i think the starting point has to be economic and one of the perhaps the inspiration behind beanstalk is that right now using decentralized financial primitives to do cool to build businesses it's impractical because at one layer of the stack or another you've got to use centralized primitives so you're using usdc or another centralized stable point in your stack as well as potentially other centralized protocols to facilitate your business and economically it's not cost effective you cannot compete why can't you compete if you're building on a decentralized network as opposed to the traditional ones it's because of the carrying costs of stable coins so if you're a business and you're trying to run a business profitably you can't be denominating things in bitcoin or ethereum that are excessively volatile you can microstrategy does it but in general it's hard for businesses to do that reliably sure and they're looking for a stable denomination of value a stable unit of account stable medium of exchange even a store value depending on the company and the concept is that stable coins are really the low volatility option on chain stable coins have really high carrying costs you can use decentralized stable coins that have limited supply you can use centralized stable coins with slightly larger supplies but all of them have non-competitive carrying costs and what that really means is that the cost to use the stablecoin doesn't compete with the cost of using dollars and let's try to get into a little bit why that is so why is it that businesses built on bitcoin can't compete with businesses built on dollars the reality is that the interest rate on dollars is much cheaper than the interest rate on bitcoin why is that well the interest rate on dollars is heavily manipulated by the federal reserve and they're minting dollars constantly in order to buy bonds and artificially manipulate the interest rates lower and in short if i'm a business i'd much rather build on a subsidized system with lower interest rates than on a non-subsidized system with higher interest rates just from the naive perspective of maximizing my business profits sure and the reason the government is able to do this is because of the fiat system they can mint new dollars almost at new beans and buy treasures someday exactly so beanstalk similarly is able to mint beans arbitrarily and through the senior ridge through the distribution of beans beanstalk is able to create competitive carrying costs where in fact the cost of holding beans for your business is probably competitive with the cost of holding dollars and we would argue more competitive so the starting point is that the interest rate for holding your position in beans as opposed to dollars is going to benefit businesses so businesses that are willing to hold bean exposure are going to have some sort of edge relative to businesses that don't economically that's the starting point and that's a pretty ripe ground for businesses to come and to build cool on top of it so this is now you can start to think well maybe d5 will actually work now for the first time because the economics have started to work you obviously still have transaction fees to deal with but as we've long joked about that's above our pay grade and we hope someone else will figure that out we're very excited about some of the stuff going on at the moment particularly zero knowledge proofs and the ability to really dramatically decrease fees so we're hopeful that all of that will also get solved but the point is with those competitive carrying costs as a starting point there there does seem to be some cool stuff being already built on top of beanstalk so a couple of weeks ago root announced a nine million dollar seed round to develop prediction markets on top of beanstalk and you may say well prediction markets aren't that interesting but the reality is if you look at poly market or auger and the current structure of decentralized betting platforms that exist they all suffer from a liquidity problem and the liquidity problem can really be traced back to an opportunity cost or cost of capital problem or a caring cost problem which is that the cost of providing the liquidity in these betting markets is too expensive where if you need to factor in your carrying costs while you're making a market it eats into your margin to a point where you can't actually compete with traditional businesses so if you look at vegas for an example they're making markets on nfl sunday at plus 110 minus 110. so the spread is minus three they're saying the the spread on the game is minus three but they're really collecting 10 on both sides of the bet it's hard to imagine a higher friction environment than 10 on every trade right why is it that poly market or auger haven't out competed vegas thus far it's because the cost of providing liquidity on these betting markets in order to collect some vague is is so high that you're actually not making money and you can't offer competitive spreads relatively interesting yeah and again the core problem is opportunity cost and carrying costs and in particular let's now talk about beanstalk and how this all relates to building on top of beanstalk so what we said before is that these silo members have assets deposited in beanstalk they either have beans or they have lp tokens but some bean denominated value and the concept is that they're constantly earning interest on these deposited assets they're earning carry and if you had to withdraw your beans in order to do stuff with them you have the same problem as you have with usdc or any other asset where now there's some opportunity cost in this case even higher because now your assets are outside of the silo and you're not earning the competitive interest so what root is doing and we've started to talk to a bunch of other protocols or people that are interested in building protocols to do similar things is to develop on top of the silo so what that means is that people will be able to keep their assets deposited in beanstalk earning competitive carry while using their deposited assets to do cool things that's brilliant there's no opportunity cost associated with making a root market or doing anything else for that matter on top of the silo because you're still earning all of your positive carry and so this is where things start to really click where people are going to say oh so there's all this money in the silo there that's just looking for things to do because they're collecting interest they're in this base layer of money that is being stock and now what can we do with our new money the businesses that plug into that are going to do really well and we think compete with traditional businesses so root is the first there seems to be a lot of interest in building different really cool stuff on top of the silo and we're excited to participate and be a part of it and contribute to some of the ideas that are being thrown around but it's a very exciting thing to be building on top of and that's what makes beanstalk so exciting it's like if it works as a base layer the economics really do start to get people excited about maybe all the we've been building for 10 years might actually work for the first time that is absolutely brilliant what's great about that is number one that there was the thought to do that but number two that there were investors that said oh holy i like this concept but also oh holy i trust being stock enough to put my money into something that's building on top of that protocol right to me that's 100 such a validation that's absolutely amazing and for us again we started this a little over a year ago anonymously no one knew who we were the concept that you have another company going out and raising money and doing funding to build on top of beanstalk and say this is an economic model we think will support our business into the future that is really in and of itself proof of concept it's not the same as the peg maintenance and the debt the debt maintenance but nonetheless it is a very exciting piece of social validation for the protocol yeah that's fantastic i love the idea of assets being usable it makes sense to do it that way starting with like the prediction markets right i mean it makes total sense that makes it easy it's something people are going to be willing to try but i can see all kinds of things being built on that right because you know you know that the value's there i'm assuming there's some kind of mechanism for transferring the asset held because i haven't looked at the docs that deeply but what a great idea i mean it makes you want to say maybe the dalwood shell itself should start a fund to incubate and invest in projects utilizing that well well that's an interesting thought i think that so bean sprout is this incubator program that was launched by the dow a couple quarters ago at this point and was just after replant a new bip a bean stock improvement proposal minted new beans for their budget for the rest of the quarter so there is some sort of acceleration program root actually was came out of being spread out awesome awesome so it is the type of thing where to get to your original question how's this all gonna happen there does need to be activity there do need to be people that are working to make all this stuff happen but i think that the interesting thing is that beanstalk offers an economic reason to do so it's a very compelling one and therefore the only question is one of education getting people to be aware that this does exist that they can go build their own businesses on top of this that will compete with other traditional businesses and the cool thing is that beanstalk has what i call the beanstalk brain trust just an incredible group of contributors community members that are all spending a ton of brain power just trying to figure out how to improve the model what else to do with beanstalk and the result is lots of cool ideas so some of the different contributors to the protocol have already started reaching out that they have different ideas to build on top of the silo i think that root was generally pretty inspirational to people and they realized hey like i can go build my own business on top of beanstalk and that's it's an exciting place to be so from our perspective the protocol still has a lot of work to do demonstrating its efficacy the dow has a lot of work to do with re-implementing on-chain governance and to some extent the real lindy effect doesn't start until on-chain governance is back and at that point the protocol goes back to being totally permissionless and that's i think when we talk about high level goals for beanstalk and becoming money you have to have the permissionless governance and so while it's great to have the peg maintenance demonstrating efficacy and nothing blowing up at the moment the reality is that there is still multi-sig governance and that's something that the protocol does need to move away from sooner rather than later so to that point hal bourne which did one of the two audits of beanstalk since uh the exploit and prior to replant they've been retained on a basically continuous basis in order to continuously audit bean stock audit updates to the protocol in real time prior to being proposed and so that should allow the dow to in an expeditious and relatively safe fashion move back to on-chain governance in the coming months let's call it yeah i mean that's not an easy nut to crack right i mean exploits of unchained governance have been happening across the ecosystem for quite a while so obviously i don't think anybody wants us i personally wouldn't want to see the project the dow rush into that right i would definitely want to make sure that's really thought through and there are examples out there for you to work through now the other big piece of this is use of being right as a community we all want to see more projects using being potentially integrations and somehow to the real world to fintech to whatever i mean there's we all have these dreams in d5 no matter what the protocol but obviously the more use of beam the faster everything kind of speeds up the protocol is tested further the functioning of the economy of it gets to do that from a kind of partnership biz dev capability do you guys have are you guys the people on the team that are doing that do you have people in the community that are out like trying to put deals together or trying to encourage and recruit projects and developers in to build on it so i think you can kind of bifurcate things in terms of on chain and often there has been previously i don't know what the current status is post replant but prior to the exploit there was like a beanstalk farms bd team that was focused on building relationships with some of the other d5 protocols and getting the word out there that this exists i think at this point beanstalk does have some name brand recognition and sure hard to find people in crypto that have don't know about beanstalk so it's a little bit of a different focus than just general awareness but in terms of integrations with other protocols i think that's something that's likely going to take a little bit of time particularly given the exploit and we're not i think as a collective we're not rushing to jam this down anyone's throats after the you know perhaps the bad taste from april so as an example the bean three curve pool was white listed for curve gauge a couple weeks before the exploit and so that's the type of thing that's like well how quickly do you go back to the curve down and say hey you know ready to go again you know it's like well there's a little bit of art to this as opposed to science and from that perspective not sure anyone's in a big rush either like we want to be respectful of given the protocol it's time to demonstrate it still works now on off chain and i think one of the big problems around adoption in general and beans in particular is the friction associated with going from off-train assets to on-chain assets and there's a real that's not something that we focus on right that's what the exchanges do they handle that bridge between the physical world and the metaverse to some extent and the question is well if you want real world use of beans to some extent you need them on exchanges and that's not really something that we think it's valuable to spend time on because if the exchanges view it as profitable for them to list because they think they'll be volume they'll do it and so at some point that'll hopefully sort itself out it may not that you know can't can only worry about so many things right i think if you go back to the economics and trying to think about over maybe not a couple months which is less of a focus and more a couple years how do we get to there being a real an economy that makes sense operating on top of beanstalk let's take a business let's say a something simple like a water bottle plant that takes water it puts it in bottles and now it ships out the bottles right if this business has decided due to the economics of beanstalk to move some or all of their cash position into beanstalk there is now going to be a significant friction associated with moving their cash position into and out of beanstalk into the fiat world right and so presumably in order to get away from that friction they're going to want to offer some slight discount to people that are going to pay in beans so they don't have to go through the friction of converting back and forth sure and if from that perspective you can quickly see how consumers that are in the beanstalk ecosystem will start to prefer buying from beanstalk businesses well because i get one percent discount or a two percent discount and that's beneficial for the business because now there's lower friction they're saving on the friction costs they get their beam position immediately and for a consumer it's better and so when we think about real economic activity and not just someone adding the bean token to a contract that already exists we're talking about people really starting to use beans as a cryptocurrency to do to run their lives and run their businesses that's what gets us excited and i think that you can see that the slow steady adoption the marginal adopter of beanstalk and beans there's a lot to benefit that individual adopter and there is something to be said for creating a sufficient minimal set of users and businesses that there's a mini economy forming where you kind of go from zero to one right but we're big believers in that economics sort of rules everything and that if you just get the economics right a lot of the rest should play itself out so from that perspective we're trying to just have beanstalk continue to get the economics right continue to put its best foot forward from a peg maintenance a community and a communication perspective and think that the rest will sort itself out because of the world that we live in the the curiosity of humans and the cat the wonderful free market capitalism that we're all still clinging on to that seems to be uh further and further in the distance every day but we still have faith that there's enough there's enough of that spirit to really get this thing going so we're glass half full on that front i love it that's awesome do you find look i mean i truly believe in your ethos or your goal for full decentralization i understand that you want the dow to be making decisions you publius as a group obviously planned and built this thing and deployed it with a vision for where you wanted it to hopefully go do you find it difficult now to kind of especially after the exploit to kind of straddle the fence between leader vision community member i mean is it getting easier now because things are rolling again and so you can and the dow's rolling and people are engaged is it getting easier for you to just suggest things or are you still having to play kind of the role of leader slash community member so it's a fabulous question brad and one that i don't know if i can answer being kind of in in these shoes right it's hard to have a third party perspective on this to some extent now the i think it has to be said in the spirit of honesty that we were anonymous for a reason right the goal was always for publius to disappear because we recognize that people make idols and people want to be told hey here's the right answer and this isn't a system where there are right answers and to some extent having having an ecosystem where there are no right answers is kind of the point right right and we don't want to be the source of the right answers so it has to be said that the there was a major cost in us doxing ourselves in hindsight it feels like an obvious thing to do and was probably the right decision but it still sucks and we would much prefer to still be anonymous there's some nice part switches that we've gotten to meet and we'll hopefully get to continue to meet a lot of the people now that have moved their whole lives to beanstalk and that's very rewarding and there's a whole community that we get to be a part of but nonetheless we do want publius to disappear and getting published to disappear when people know where i live is a little it's a little harder to do brad that's brutal and so it is brutal to some extent and i and it's not like we spend a lot of time mourning the death of publius if you will like it's a it's a shame that we had to dox ourselves but you got to do what you got to do and so to with that said i think people still generally do view us as a guide hesitant to use the word leader although if you ask other people they may be less concerned about using that word but certainly people are looking for us as a north star and i don't think that at this point in time there's necessarily anything wrong with that in the sense that the protocol is not done so when beanstalk was originally deployed in august of 2021 we thought this is pretty close to the fine you know we tried to do our absolute best and you're trying to create something perfect or you know you can't make it perfect but you're going to do everything you can to make it as good as possible you look at beanstalk today compared to the model from a year ago they don't it doesn't compare the model today is orders of magnitude better than the model that was deployed a little over a year ago and so from that perspective can the model be infinitely improved probably is there going to be a point where the model is good enough that publius's job is done also probably right and so where we're at now is this weird intermediate phase where there's clearly a lot that still needs to get done we do have thoughts about how it should be done in order to maximize the economy that can one day exist on top of beanstalk and so there is like a real open question as to what's the right level of involvement should we continue to be involved as publius should we start to be involved as just contributors ben brendan and mikey like what is the right balance there we really don't have a good answer and this is a question that we sit on a lot and try to figure we're thinking constantly about what the right thing to do is and want to say that we're optimizing around the success of beanstalk but it's hard to know what is actually going to lead to that success and it's like maybe just throwing our hands up and walking away right now that's the best thing for beanstalk and if it lives and if it does but on the other hand we tend to believe that there are some improvements we have to make or we'd like to propose to the dow to make that should make a real difference and it's like what will we ever get to the point where we think we've done enough and we really can walk away we do believe we that's within sight it may be a year two years away but i think the goal remains for publius to disappear this is a really tricky question to answer properly brad because we don't know we really don't know what to do here sure and even more than perhaps beanstalk which is optimized around human behavior this is even more so like just a question of human behavior yeah and really tough to get right so one we'll continue to ask ourselves frequently and re-evaluate in real time but don't really know don't really know on that one yet all right this next question is going to sound a little silly but i'm compelled to ask it anyway do you think that the three of you and kind of your desire to to delete yourselves right i always tell my kids my job is to delete myself my my goal is so that you never have to use me for anything right or need me to carry on an independent life do you think and like i said silly question but it just feels like i need to ask do you think the three of you gained kind of that attitude that ethos of this decentralized i want to let it go i want the market to work on it i want the community to grow it came from being engaged in crypto or do you think that came from you know your parents how you were raised your community i mean because most people in this world you know we build something we want to own it we want to take credit for it it's for me living in this world has really kind of re reprogrammed my brain right to have that do you think you guys had that coming in or do you think that's something you learned throughout the process of getting involved in crypto and understanding decentralization et cetera what it's not a silly question at all brad it's a quite a thoughtful question and one i've never given much thought to why is this why are these the things that are important to us i think that it would be very hard to discount the role that our families have played and obviously there's a lot of ego and hubris associated with thinking you can start your own global money so we're not going to claim to be the most humble people in the world but i think that there is some recognition that it's not about us and that applies to in life in general and i do think that's a life lesson that we've learned from our families and through life that things really aren't about us and that does speak to the ego but i think more than that even the goal is to create something that's bigger than us and we're gonna die we may die sooner rather than later hopefully not but the really cool thing about cryptocurrency is that and tech that's built on decentralized primitives that that it's not for anyone in particular it's not by anyone in particular it just is it's totally neutral the software doesn't care if you're gay or straight if you're black if you're a jew in my case like that this is something that a hundred years ago all of my family's wealth i was just reading my grandfather's memoirs all of our money every czech greece turkey france everywhere all of our money was taken i'm talking about i'm introducing cryptocurrency to some 11 year old that was visiting my family this weekend and i say to her i say so this money's in the metaverse it's not physical do you know what's good about that and she responds without meeting a missing people no one can take it it's like it's there's something so there's something so greater than the individual humans about this technology and [Music] i mean speaking candidly if you look at what satoshi created by doing it anonymously and then disappearing they created like a meme it's a from a memetic perspective it's this thing that people have bought into and it guides their life and we don't want us to be the reason for people to buy into the beanstalk meme like it's not me i'm gonna disappear if you're buying in because of me you're in it for the wrong reasons so the point is if beanstalk is to become successful we need people to use beans and love beanstalk because of beanstalk not because of us or because of any other reason and from that perspective it becomes very obvious what to do right and then it's a question of well how do you minimize the effect that you're taking control of this or that you have influence over this and even though we can't control the governance anymore we don't have ownership privileges of the contract or anything the human element of it is if i say something people are going to listen and so that that really gets to the point of you can't if this was about us brad it would be so easy to make it about us sure and therefore it's not even a question of making it about us it kind of already is so the point is how can we make it as not about us as humanly possible recognizing that human nature is to describe ascribe the author the credit of the words when it's like well you know they got their words from lots of other places but the people that wrote it down they're the ones that get the credit so we recognize that's human nature and we're heavily fighting against that because we want beanstalk to speak for itself and it's a tough thing to do so hopefully that gets to the spirit of a little bit but yeah not sure exactly where it came from but definitely came from a desire going back to that ego or hubris to create something amazing and create something great and we would get in the way of that that's awesome that's great nah i think that's an awesome answer so speaking of your family when the last time we spoke you were talking about the pain of this exploit happening over at passover weekend correct how are they all doing and are you able to like describe how you're solving this problem to them or is it just hey we're working on it so i think in general how how are they doing that you know it's all meaningless to them so from their perspective you know it's like i think the levels of understanding depend on the family member sure you know the reality is that if the people that are closest to us have questions we're not explaining things well enough so i think to some extent we over the past two three months since the exploit there haven't been that many incoming questions so maybe that's an indication that we're explaining ourselves really well maybe it's an indication of you know even the family members have checked out you know you know it's one of those things where after the replant started getting the incoming text again who knows brad it's all it's hard to it's hard to know sometimes but they didn't kick me out of the family and therefore so far so good awesome awesome okay last kind of important question you know look we're all aware of the sanctions against tornado cash a contract of all things code and i think we all are unanimously in agreement of how ridiculous that is how wrong it is what a violation of free speech that is all of those kinds of core things but it brought up for something i have been talking about for a very long time in this space and that is our dependency on stable coins with blacklists usdc and usdt and i actually had a a com a pretty in-depth conversation with founder of circle about this because i was ranting about it one day and he said well if we're not if there is not a regulatory compliant stable coin then the money from trad fi and the money from institutional is not going to come into the space and we can debate whether that's a good or a bad thing them coming into this space but i understand that positioning for them but all of deepai has this massive dependency on usdc and even beanstalk has a level of dependency on usdc so i'm curious number one is that something that worries you makes you concerned the sanctions and everything else and number two how do you see a path forward for us to start unwinding at least some of that either as beanstalk or as a community as a whole sure this is a great question and very important so to start let's talk about the relationship between beanstalk and usdc so currently the only pool that beans trade against is the bean 3 curve pool now that means that the value that beans have in their liquidity pools mostly comes from usdc and usdt and dye is a wrapper of usdc for the most part so it's still usdc yeah and in particular we talked about where's beanstalk at right now it's far from where it would like to be in the sense that which chain beanstalk runs on after the merge is going to be 100 up to the operators of usdc and usdt because whichever chain three curve retains value on will be the chain that beans certain value on because that's where the beans are trading and so that's what beans are trading against we should say and therefore that kind of sucks that's not the what you'd like you'd like your dow members to be able to choose well which chain would do we want to honor or maybe both chains the that's the starting point now when beanstalk was originally deployed there was only a bean eat pool and beanstalk was able to derive the price of a dollar by comparing the bean eath pool relative to the usdc equal on uniswap and this is where things get i think interesting so why is it that that beans wanted to construct this bean eat pair and then compare it to the etheusdc pair well the first part is that beanstalk doesn't want any direct exposure to usdc right so the first problem that any stablecoin needs to answer is what is the price of a dollar so or what is the price of whatever it is that you're pegged to right and usdc and usdt function as pretty good bridges from the physical world to the metaverse what is the value of a dollar well there are some there's centralized dollars on the blockchain but they're pretty close to dollars and so the point is that beanstalk could derive and still does in some ways but it's a little more directly related can derive the price of a bean without any direct exposure to usdc so there's a theoretical implementation where there's no direct exposure right now there is because beans trade against usdc in the form of three curve however the problem is that the three curve and the ustc it is highly sensorable as you said they have blacklists right and the question there's a couple open questions one open question is maybe having a chain link oracle that determines the price of a dollar is better than usdc because usdc is just centralized and can be censored at any time and even though chain link has its issues maybe that's a better more censorship resistance for the source of a dollar that's something we're thinking about another thing to think about is that at scale let's say that usdc becomes like a highly centralized sense censored stablecoin but it's still used in some cases the point is that beanstalk can still use usdc to derive the price of a dollar even if who can use usdc is highly regulated beanstalk doesn't need to use the usbc as long as it's on chain it can use it to drive the price of a dollar but and it's a big but the more centralized and censored and select the user base the less efficient the market and therefore the less reliable the market is as an actual price source for the price of a dollar and particularly as beanstalk scales manipulating the price of usdc one basis point can be quite significant and so so from that perspective it's unclear if centralized stable points will really scale with beanstalk as beanstalk hopefully goes grows to the trillions of beans at some point you may kind of reach that maximum size where usdc or usdt or any centralized stablecoin functions as a good source of the price of a dollar or any other price for that matter and therefore a shift to a chain-link style oracle solution or a taylor style oracle might be necessary at some point so that's the reality think that the original eth bean usdc ratio that was a pretty unique way to derive the price of a dollar without any direct exposure to uscc but as evidenced by or yeah as evidenced by the fact that the protocol replanted with a bean three curve pool it's not really viewed as a perfect solution and the plan is to launch a beanie pool soon but nonetheless particularly at this stage of the game hard to hard to have a stable coin without some exposure to usdc at least in the form of trading right you can have a bean usdc pool that could get blacklisted at some point that just means that some of the value beans are trading against is now worthless that doesn't mean the beans are worthless but it definitely hurts sure so you can't really get that down to zero you can by diversifying the exposure of the protocol to different assets that it trades against minimize the exposure to any given single centralized issuer i think at the end of the day you do also have to be prepared for a coordinated sensor attempt where usdc tether and maybe a couple other issuers of assets that beans trade against all at once blacklist pools beanstalk really needs to be ready for everything so that these are some of the things that the new governance system that's being designed is being optimized around and really trying to figure out how to create decentralized permissionless governance in perpetuity that allows for the answering of all of these really sophisticated economics and social questions awesome anything else going on that we need to know about that we didn't cover today well there's lots of stuff going on brad but i'm sure we'll talk about it next time there's a lot of good stuff going on sounds good man i appreciate it thanks for coming on you're an awesome interview man you do a great job with us love talking to you so appreciate you taking the time appreciate your time as well brad