Publius <> Fiscus Digital

Publius <> Fiscus Digital

April 24, 2023
Twitter Space


Meeting Notes


I'll start with a quick introduction and then we can move on to the main topic. I'm the founder of Fast Cars. I'm a myself and we focus on stablecoins. Our use of we have a deep dive platform on Stablecoins so that we're focused to develop a go to platform for all things of Stablecoins that would have the data intelligence platform and eventually ratings. So that's what we are doing at Fisker's and we are currently at our MVP stage. So we do have a research partner to have a deep dive platform which would give the details on different stablecoins which are out there. And we also have traction on on the news, which is dedicated to the STABLECOINS as well. So would you like to give a brief introduction of yourself and then we can we can start. Sure. Introduction on ourselves, on the protocol for which would you sell yourself? We'll go to the protocol later. Sure. So I'm Ben. I am one third of Publius. Publius is the pseudonym under which we founded Beanstalk. We founded Beanstalk about a year and a half ago in August of 2021, anonymously at the time. And the beanstalk is an attempt, an anon collateralized stablecoin. So happy to get into as much of the weeds on how the protocol works, how it's done so far. Answer any questions. We can take this anywhere you want. Yep. Yep. Great. Great. Great. I usually start with the macro outlook on on stablecoins. You know, when I when I'm talking to founders of Stablecoin protocols, I'd really like to get an idea from themselves and what they actually think about the long term outlook. Today we are a 130 billion industry overall, and most of that is you guys dormant. It is like exalt genus, right? And in only 3% are under $3 billion of that is into algorithmic stablecoins. Right. So how do you see the overall industry evolving in the longer term? Really, I think the market cap is heading in really see the place for algorithmic stablecoins is in this space. So first I think it's important to talk about what what a stablecoin is, so why people want stablecoins now. So in general, cryptocurrency as a technology presents sort of a blank canvas on which to design new types of currency or new types of money and fundamental only there is a demand for low volatility money, particularly when it comes to economies that are credit based. Businesses want to denominate debt and their obligations in some unit of account or some currency that is low. And volatility, meaning if you're a business and you want to borrow assets to do some research and development or build a new factory or what have you, the last thing you want is for all of the variables that you accounted for to to go according to plan, except for the denomination of the loan skyrocketed. And so while currently the two most popular or largest cryptocurrency by market cap, Bitcoin and ether have both been designed with a number go up economic designs. There has been a lot less focus on number, stay relatively the same cryptocurrencies and from our perspective, in order for a crypto economy to ultimately flourish, there will be a need for a low volatility crypto asset at least one such that the crypto economy can compete with the traditional economy. And that's the starting point. Now if you look at the landscape for current stablecoins, they can be bifurcated into stablecoins that derive their value exogenous only through some sort of collateral or indigenously through the value that the protocol itself creates somehow. And from a theory perspective. Go ahead. Yeah. So can you can you, like, explain a little bit into detail with example for the listeners because we are going to post it also as a podcast, is that how do you differentiate between Nagarjuna's and endogenous Stablecoins? Sure. So an exogenous, highly valued stablecoin is an asset that has value due to some other asset having value. Can you hear me, sir? Hello? Yep. Can you hear us? Yep. Yeah, I can. Great. Good. Great. Sorry about that. So the the concept is that an exogenous, devalued stablecoin is going to derive its value from outside of the currency. Typically, that would be some collateral with other value that is locked up, that is being used to create the value of the stablecoin. So some examples of that would be us DC which circle claims to have locked value in bank accounts and treasuries that account for each US DC. That is outstanding. The exogenous value comes from the collateral underneath US DC or similarly, LAUSD is derives its value exogenous from the ether. That is underlying the debt. So any sort of collateralized model is going to have exogenous value. Now, before we get into engine of value, it is it is worth saying that while exogenous value is generally sufficient to create a stablecoin, it has two major flaws. The first is that there is a limit to the amount of exogenous value that you can lock up to mint stablecoins. You may be able to do it for a couple of hundred million, maybe even a couple of hundred billion. But collateral doesn't really scale to the trillions or tens of trillions of dollars. It's really hard to acquire enough collateral, enough exogenous value to mint, enough stablecoins to meet the demand in the trillions. The second problem is that there is a high cost to locking up so much collateral. So if if you're going to have to lock up $1,000,000,000,000 of value in stablecoins, you are faced with all the opportunity cost associated with locking up that collateral. And so while exogenous value stablecoins are relatively good at maintaining their peg, they are they are expensive because of the opportunity cost of collateral and they are limited in supply because there's only so much collateral. Now to what you said earlier, the vast majority of stablecoins that currently exist are exotic, most valued stablecoins they're collateralized. Now, there have been many attempts at implementing an endogenous value stablecoin which the value of the stablecoin doesn't come from collateral, but instead comes from the value intrinsic to the currency itself or the value intrinsic to the software that issues the currency itself. And the there are a variety of different models that have been attempted in order to create endogenous value. Being stock is one such attempt. So happy to get into the weeds on some of the attempts at creating endogenous value. What's worked and hasn't worked. We can, you know, get into as many of the weeds as you like here. Yeah. So just on on that exogenous card. So you from what you've explained to you, there is a scalability issue there. From what you explained that it cannot be, you can have like couple of hundred billion dollars of collateral or maybe, you know, $500 billion or both. But then when it comes to having the highly liquid stablecoin, then you're saying that it has to be endogenous because then we don't have any limitation of putting in collateral out there. Right. Correct. And in particular, where the problem really manifests is in the opportunity cost of the collateral that the interest rates on some exogenous devalued asset are just going to be too high because of the opportunity cost of capital. So I have a question. And so, for example, like I, I go and put fiat dollars and go to circle in mint, some usdc three. Now I have an opportunity cost on my fiat dollars. So what circle is doing is probably taking 70% or 80% of the collateral in investing into T-bills, which is probably, you know, getting them 3 to 4% of interest rate. So is it correct to say that that is my opportunity cost, Right. Which they are getting on mine? Collateral on my part. Now, if I compare that with what usdc I have in my hand, would you term the carrying cost as how much it what percentage I can lend my you? Is this the item though? Maybe it is less than what circle is earning or more than that, but potentially it could be more than that. So but you guys can comment on that. Like how would you define the difference between the two as the carrying cost? Well, it's a little bit more nuanced than that. So circle is holding T-bills. Now, those T-bills, in theory, could be lent out for some interest rate or re hypothecated in some capacity. So the real opportunity cost of the system comes from the fact that the collateral, which in this case is either cash or T-bills, actually needs to stay put, if that makes sense. So it's not that there is a difference in the interest rate that you will receive on chain versus off chain. The opportunity cost comes from the fact that the capital that is being used to issue the STABLECOINS needs to stay owned by the issuer, in this case circle. So circle could make more money lending out their T-bills, but they can't. So you're saying that that Fiat dollars should be locked, right? That that shouldn't be the case, that they go out there and should be invested into T-bills by circle? Well, not necessarily. So in a perfect world. Circle would just hold $1 for every USD fee that has been issued. Now, what we experienced over the past couple of weeks was that holding cash is actually not such a zero risk proposition and in fact holding T-bills or having an account with the Fed are really the best ways for circle to custody such large amounts of value where the opportunity cost ultimately comes from. It's not whether or not they are buying T-bills with the cash and collecting some small spread. It comes from the fact that whatever assets they are holding as collateral to issue the USD cannot be lent out, cannot be re hypothecated. So circle has on their on their books, you know call it $40 billion of assets and $40 billion of matching liabilities. But those assets are effectively useless because the only thing that circle can use them to do is to match them against the usdc liabilities. So there's a massive economic inefficiency introduced through the fact that circle needs to hold on to all this value and cannot lend it out or do other stuff with it. Hmm. Yeah. Yeah. I mean, like, whatever they can do, they're doing with the by investing in T-bills, that that's the most they can do. Right. Because they have those dollars in hand and they kind of maintain that 20% liquidity for redemption and then probably 70 to 80% is kind of interest in the T-bills. I think that's kind of the limit to which what they can do with their fiat assets. Correct. And it is important to note that they can only even do that because the T-bills are redeemable for dollars within I think 90 days is typically the the you know, the duration over which they're holding stuff. And so at the worst, they would expect to be fully liquid again within 90 days. Know they're willing to take some time mismatch or duration mismatch in order to receive some additional yield. But that is that is a different thing going on than the opportunity cost introduced or maybe that's like a slight it's a slight improvement over the absolute opportunity cost that they're realizing. But it really is only marginal because they have $40 billion and they can't do anything with it except hold T-bills. Yeah, that's that's interesting. Yes. So I would move on to the two other parts, which you have described on your document sections on advanced Stablecoins, which is then it moves down to network native and non network native stablecoins. Can you can you please explain that? How do you differentiate between the two? Well, this is sort of self-explanatory in the sense of is the way that the STABLECOIN is issued, is the value that is created through the STABLECOIN protocol? Is that due to value that is native to the network on which the stablecoin lies, or is it not native to the network on which the stablecoin arrives? So if we go back to U.S., DC and LAUSD, USD sees value comes from collateral that is non network native. So T-bills and U.S. dollars are not native to the Ethereum network and therefore it is a non network native exogenous valued stablecoin. On the other hand, you have something like LAUSD, where the collateral is is limited exclusively to ether, which is native to the Ethereum network. So when it comes to defining the the the risk assumptions made around a given stablecoin, whether or not the the collateral being used to issue the stablecoin is native to the network or not is a fundamental piece of understanding the risk of a given stablecoin. Mm hmm. So like, what argument we give here? Like a network need Stablecoin is deemed as a better stablecoin, certainly in our opinion. And that comes from the fact that if you are limited to net network native assets, then you effectively inherit all of the security guarantees of the network on which the stablecoin lives. So in the case of Bienstock, that would be the Etherium network, whereas or LAUSD, that would be the Etherium network. Whereas something like USD CE, even if you assume the integrity of the Ethereum network, there are still other places where there may be lapses in integrity. For example, the collapse of SBB, where now even though nothing happened on the Ethereum network, the integrity of the STABLECOIN is now in question. So due to something outside of the network itself, so there's additional risk there. Mm hmm. Okay. And then the last one, which you have described and you have compared Stablecoins is based on whether it is convertible or not convertible, because then you combine these three and kind of come up with eight types. Right. So you can kind of throw sunlight on the convertible and non-convertible as well. So convertibility is an essential component of or an essential feature of a stablecoin. So if you take something like USD C or something like LAUSD, both of those stablecoins are convertible to the underlying collateral of the net of the of the stablecoin. Now, if you take something like Terra Luna, Terra was convertible to Luna, so it wasn't collateralized, but it was still convertible to something. And the notion of convertibility is very important because convertibility effectively mandates a hard peg. So any stablecoin that is a convertible typically is going to be much lower volatility than a non convertible stablecoin. And this is because convertibility typically introduces an arbitrage opportunity where if the price is too high, you can bond, you can mint the stablecoin with the collateral and then sell the stablecoin. And on the other hand, if the price is too low, you can buy the stablecoin and then redeem it. You can convert it back to its underlying collateral and make some money. So convertibility is a core component of stablecoin design in the sense of it's an explicit trade off by the protocol to minimize volatility at the cost of something else. So when it comes to what are the value propositions of a stablecoin protocol, how volatile is the asset is obviously a key component. How stable is the asset as a key component of defining the utility of a STABLECOIN? And convertibility is a a very aggressive way to maintain low volatility. So is is it like it would be applicable to all exogenous stablecoin? Not necessarily. You can take something like OMO, which is collateralized but is not convertible back to its underlying collateral and say that's a non-convertible exaggerated stablecoin. Hmm. But like in an event, like if if a non-convertible becomes highly liquid, like goes at like trillion dollars, so then you would still say that it is of all the time because then that that kind of, that level of liquidity in the market, don't you think the volatility goes down? Well, this this is the point of the convertibility tradeoff. A non convertible stablecoin design is expecting the market to price in lower volatility over time, whereas a convertible stablecoin is explicitly promising low volatility. So it's a question of whether or not to decrease volatility with scale, with increases in liquidity, or whether to make the low volatility the most important feature of the asset. And it makes sense just to jump a little ahead. Being stock is unique in the sense that it is non-convertible. So there is no promise from the protocol that the price of a being will always be worth whatever it's pegged to and instead being stock tries to create incentives that over time, to your point, as the system grows, as liquidity grows, as supply grows over time, you can expect the volatility of the stablecoin to decrease, but it's not guaranteed by the protocol. Yep. Yeah. So over time, it's a function of over time volatility if it's a non-convertible stablecoin. Because then you're betting on the scalability in deep liquidity, which would come with time and kind of reduces the volatility. Right. It's it's a tradeoff around short term volatility or long term volatility. Long term. Yeah. Yeah. Yeah. Okay. So and then like the final thing before we move on to the protocol. So this is though it was stablecoins one on one class, the function of the for any stablecoin the utility could be a function of four things which which is then mentioned. There's breathlessness. Right. The carrying cost, low volatility liquidity. We have talked about carrying cost and liquidity, low volatility. I think we can touch base on the trust laxness part and how important it is. So this goes back to the uses of money. So this isn't unique to Stablecoins. This is a a feature of any money or a factor that goes into the utility of any money, which is how resistant for censorship is. How spendable is it? And one of the core value propositions of decentralized cryptocurrencies like Bitcoin and ether is they're permissionless less. And so when it comes to trying to fill the gap in the market of a low volatility money, one of the other problems that comes from exogenous collateralized stablecoins that are non network native in particular like U.S. DC is that they are highly vulnerable to censorship when compared to something like LAUSD, which is network native and immutable. So if if, if you're trying to contextualize, why would somebody want to use one currency over another? The censorship resistance of that currency is likely to be an important component in in people evaluating the utility of a given currency. Yeah. So like the recent events, for example, if there is a custodian in between for a stablecoin issuer, then that kind of takes away the whole trust from the from the as as kind of from the point of view of the user itself. So I think that that that kind of is one of the example. I would say in for Beanstalk, for example, that that's that is not the case. There is, I think, no custodians. So they would talk about that in the moment. So now I'll start with the protocol and before I jump in, it's just that, you know, one thing I would like to add going through the white paper I also heard from is kind of consensus guys that it's you know, it's it's kind of very complicated. And there are so many mathematical equations. So our objective here is to break it down into very simplified things so that it is easy to understand for, you know, average person out there. Okay. So that's we will try today. And I hope it's it's going to be the case. So let's let's start with the protocol itself. And if I am interested in beans. Okay, now we can start with how a person who is interested in the bean ecosystem would enter the ecosystem. What would be his first step? So we can start from there and then we can go step by step into further details. Well, to your point about the complexity of the system, beanstalk is as simple as possible, but no simpler. And to that end, it is relatively complex. And the first step for someone that is interested in getting involved is to do a probably a significant amount of reading and diligence and research. It's not it's not so simple to get get your bearings on a system like this. And it is just because it is, although it is minimally complex in terms of how complex it could be, it is still quite complex. So maybe the best place to start talking about beanstalk is from a macro level where it actually fits into the endogenous stablecoin design space, if that makes sense. Because there have been a lot of attempts and they have all failed with the exception of being stock to date. So it is important to understand where Beanstalk fits into this whole thing. So in general, when it comes to creating endogenous value, value that is native to the protocol itself or the currency itself, there are two there have been two classes of attempts at endogenous value. There is equity based endogenous value and there is debt based endogenous value. So you can think of equity based endogenous value as a system like Terra Luna, or a comparable example would be if Microsoft decided to issue a stablecoin where that stablecoin was convertible or redeemable for Microsoft stock, Microsoft equity. And so the value of the Stablecoin, which is debt of the issuer in some capacity, gets its value from the equity of equity equity, the protocol or the company, whoever the issuer is. And if you think about equity and where the value of equity comes from, it's typically some sort of discounted future cash flows. So whether that's the future revenue of Microsoft, the company or the future revenues of Luna, the protocol, the concept is that there is some endogenous value, Microsoft stock, Luna tokens, that the the STABLECOIN is convertible to or is backed by in some capacity. And the problem which the market has discovered with equity based dodge value valued stablecoins is that the equity is and particularly the value of equity is highly reflexive. And this has to do with the fungibility of equity in the sense of when there is a bank run and there is going to be a significant amount of sell pressure on the source of the endogenous value be at Microsoft stock or LUNA tokens, an efficient actor in that market is ultimately going to sell the Luna tokens to buy them back in the future. That's the efficient activity. And so during a bank run equity has proven to be highly reflexive, which is sort of the opposite of the property that you want in a stablecoin design, which is anti reflexivity. So when the system is pushed away from its equilibrium peg, how likely is it to bounce further away from the peg or bounce back to peg? And an equity based system has to date been highly reflexive. An initial de peg tends to grow as opposed to shrink as time passes. And again, fundamentally, this comes from the fungibility of the the equity. Now, it's not to say that it's impossible to create an equity based endogenous value stablecoin, but from our point of view, it seems very difficult and suboptimal when compared to a credit based or a debt based source of endogenous value. And the punchline reason for this is that whereas equity does not scale to infinity, again, equity is really a function of just current and future cash flows. Credit is something that can scale somewhat infinitely, and therefore when it comes to creating endogenous value, credit does seem to be a significantly preferable alternative to equity when it comes to issuing Stablecoins on top of some sort of endogenous value. So now if we talk a little bit about credit in issuing Stablecoins based on credit, there have been a number of attempts at credit based, indigenously valued stablecoins. Basis was an example for basis cash, empty set dollar. There have been a variety of credit based indigenously valued stablecoins and with the exception of Bienstock, they have all also failed in one way or another. And so to get into the weeds a little bit more on this, not all debt is created equal. Not all credit is created equal. And what we mean by this is that the way that the protocols, the other attempts at credit based stablecoins endogenous to valued stablecoins were issuing debt ultimately resulted in a lot of the similar downsides to equity primarily lead fungibility. So one of the and this is maybe getting a little bit too into the weeds, but one of the key innovations of bienstock is that the debt of the protocol is not fungible. The debt of Bienstock is payable on a first in, first out basis. It's an ordered debt system, and it may be to just go on a very brief tangent, something like this and or a line of debt or an ordering on debt repayments is not something that was really possible prior to SMARTKOM tracks. And the reason for that is you would never go to a bank and accept a bond or an asset that is payable whenever the bank says that they're going to pay you back, if that makes sense. So unlike Bienstock debt, which is not payable on a given date, it's payable in an order based on certain conditions that are native to the system itself. You would never go to the bank and say, you know, I'm willing to lend you money that you can pay me back whenever you say you can pay me back. Type of thing. So the fact that the smart contracts are a neutral setting over which people can lend to bienstock facilitates the creation of a new type of debt, a new type of asset which is nonfungible in nature and can be used to effectively circumvent or fix a lot of the reflexivity associated with fungible endogenous value, if that makes sense. Can you would you draw parallels between the endogenous nature of dollar itself and a stablecoin like being? Sure. So the fundamental value proposition of Benz is that beanstalk as a issuer will remain creditworthy. So what that means in practice is that as long as people, as long as the market is willing to lend to being stock, as long as the market continues to view Beanstalk as creditworthy, then over time one can expect the value of beans to return to its peg value. Similarly, users of U.S. dollars users of fiat currency are making the fundamental assumption that the big government that issues the fiat currency, the U.S. government, will remain credit worthy, that in practice people will continue to buy Treasury bills. So it's it is a very similar assumption that people are making in the current fiat system, which is that the issuer of the currency will remain creditworthy. And as long as that assumption remains true, then the asset itself should retain its value. Mm hmm. So, like, if I like I'm just thinking out loud here between a fiat sell, for example, in the longer term, do you think the credit worthy creditworthiness of fiat systems like U.S. dollars euros is going to decline and then more part of that is going to be taken by endogenous stablecoins? Well, the punch line is. Yes. The the concept is that if you assume that the systems are relatively similar in nature in terms of their fundamental design, now the question becomes who is going to be a better determinant of monetary policy? And currently the fiat systems are run by humans, by the Federal Reserve Board of Governors, for example, that are making decisions in generally arbitrary ways to try to maintain a given inflation rate. The concept or the value proposition of a system like Bienstock is that that function can be done better with computers, with algorithms. And so this is the beginning of experimentation in the process of automating those decisions around monetary policy that are currently made by humans, but in theory could be made by an algorithm in a in real time. So whereas the Federal Reserve Board of Governors only meet infrequently, Bienstock is able to change its monetary policy every hour. Currently, or in theory, it could be upgraded to update the monetary policy every block, for example. So the frequency over which and the data that is available to iterate or improve monetary policy on is infinite effectively. Okay. I think I will go back now and to the protocol itself and try to. Yeah, sorry for taking us on that. It's good to just get a high level sense of what's going on. We have the basic understanding of, you know, if I'm a first time user, I think I'll go to probably I will exchange my idea or I'll go to a decentralized exchange like Uniswap. Yeah, no problem. Yeah. Box called title. Right. Which I can use to or I can correctly say like take my beans or if that's the right way and get in exchange seed and stocks. So would you like to explain this this process or is it exactly staking or how do you like coin this domain? I can actually put my beans in the silo and get I get an exchange, some seeds in some stocks and stocks, which is going to give me the voting rights. Sure. So there's there's really two sides of of the protocol to two main sides. The first is the silo, which you just talked about, and the second is the field. Before we get into the silo, which is a little bit complicated, let's just start with the field. The field is the lending facility for Beanstalk. So if we go back to the users of the system are making the fundamental assumption that Beanstalk will remain credit worthy. The field as we're lending to Beanstalk takes place. So the the core value proposition of Beanstalk that it's creditworthy that ultimately all plays out in the field where beanstalk every hour, every season, every hour of the season. According to the Beanstalk terminology, every hour Beanstalk is willing to borrow a certain amount of beans from the market and at a certain interest rate and all of that takes place in the field. So anyone can come And assuming that Beanstalk is willing to borrow beans at that time, they can lend beans to Beanstalk in exchange for debt. And again, that debt is nonfungible. That debt is paid on a first in, first out basis. And so when you lend to Beanstalk, you get debt and that debt goes to the back of the line. Does that make sense? Yeah. So if I did one like giving my beans first, that that would be first in first out basis though my debt is going to be served first and I want out. Correct. If I'm. Exactly. Exactly. So it's and from an incentive perspective, there is an incentive to if you think right now the conditions are such that it's a good time to lend to bean stock, you're incentivized to do so immediately because maybe someone will lend to bean stock before you even get in line in front of you, if that makes sense. So when it comes to creating an environment for anti reflexive anti, the first in first out ordering in the field is very important. Now the the interest rate in the field goes up or down every season every hour based on the monetary policy of the system. So Beanstalk can increase or decrease the interest rate based on market conditions effectively. That's the 32nd version of the field. Now the silo is more complicated than that. The silo is you can sort of think of it like the beanstalk bank, although it's an imperfect analogy in the sense that people can come and deposit value into the silo and. There are certain assets that are whitelisted for deposit in the silo, beans can be deposited in the silo and then more generally LP tokens contain beans, you know, can also be deposited in the silo. So for example, right now Bean three curve is the main liquidity pool where beans trade, you can deposit bean three curve LP tokens in the silence and when you deposit first off, why would anyone want to deposit a value in the silo? It is for two reasons. One, depositors in the silo receive a portion of seigniorage. A portion of newly minted beans and two depositors in the silo are entitled to governance rights over the system. So in short, if you go ahead. Yes. I just want to do was, I think, the newly minted beans are received are conditional and they would get that only when the peg is about $1 if I'm right. Correct. So if we go to like the core peg maintenance model of Beanstalk, it's quite simple. When the price is too low, Bienstock tries to borrow beans from the market in order to reduce the supply of beans. When the price of beans are too high, Beanstalk means new beans in order to increase the supply and to decrease the price. When the newly minted beans are minted, they are distributed basically pro-rata to the field and the silo. And so some of the newly minted beans go to paying off the debt in the front of the line and. Then some of the beans go to paying all of the depositors in the silo, if that makes sense. It Yeah. Yeah, it does. I think the peg maintenance, if you take the two case, the one the first case when the peg is about $1 because I think this is important to understand, you know, for everyone because this is the core mechanism, how it maintains the peg. So if I'm basically for example, if I'm providing my beans or my LP to the silo, then I am entitled receive the printed beans, for example, if is the beanstalk when the peg is about $1, if it's meant the new beans, then I'm entitled to receive those payments on a pro rata basis. I think that's what you mentioned. And then that means that the supply of beans is going up and then the bag is going to be, you know, in the direction of to what's going going to to kind of go towards one in maintenance bag because the supply is going up. And the question on the other side now, which is then you have this terminology pot. And when the peg is below $1. So we can take the example of the current situation, for example, if it today, if it's at around 0.9, 0.91, then I I'm holding beans, then basically I can buy beans from the market at 0.95 and you have the soil I can salt my beans and get bought in exchange. Right. And then those bonds are basically the middle at $1 when the peg goes like to one because a lot of buy thing is happening from the market. So there are two which can be retained for $1. Are there like two different ways? Well, you could also buy the pods on the secondary market, so you can either lend beans directly to beans stock and receive pods at the back of the line, or there is a secondary market for pods which again are the debt asset of beans stock. And so you could also buy pods anywhere in the line on the secondary market. But generally that's correct income. And so from what we noticed that until December it was at $1. We have seen in 2023, the pack is now currently at 0.9.91. So what are the key challenges at the moment, which is kind of limiting it from going back to $1? So the the punch line is that at the current interest rates that are being offered in the field, there does not appear to be demand to lend to bean stock. And so Beanstalk is in the process of raising the interest rate in order to try to find the rate at which the market will lend to it, if that makes sense. Okay. So you are planning to raise the interest rate so that people find it, You know, the people are not finding it. The incentives are high enough to actually buy from the market and kind of send it to the bean stock and get bought and exchange, correct? Well, the only caveat to that is that I'm not doing anything. The protocol is autonomous and will adjust the interest rate upward automatically until it does find lenders. So is it like if it is going to go through the governance process, like someone, one can kind of propose that to raise the interest rate and it passes through the governance? Sure. But that that would be like a manual change of the interest rate, which again, you could you could do that. But the whole concept of being stock is that it has autonomous monetary policy where the decisions to raise the interest rate or lower the interest rate are not done manually via governance, but are done autonomously according to the algorithm that runs the monetary policy of the protocol. So in particular in current scenario and how the algorithm is going to treat it like and one what basis is it a certain timeframe that it kind of the tax that, Okay, so every hour, every hour the protocol evaluates the state of the protocol at the moment and over the past hour and looks at the price, it looks at the debt level and it looks at the change in demand to lend to the protocol and decides to adjust the interest rate either up or down based on those factors. Okay. Okay. Um, my next question would be, so we have, I think, covered the PEG mechanism and how kind of it is it is functioning in case of ever so ever so briefly. Yeah. I was ever so brave. Of course. Otherwise we would have to, like, go for so long. We are trying to squeeze in a very short period of time. So my question is on. I think I forgot the one I was going to ask, but I would ask the next one, which I had in mind. The question is basically on the on the security side, like there is of course, there is an element that we are saying that the exogenous and the unknown, there are stablecoins which are acknowledging this and then the endogenous component is itself or many stablecoins do consider it What the risk of those Stablecoins would you would you comment on, you know, when, when the stablecoin grows to like very high size, like there are protocols out there in the market and of course Bienstock has failed the bid so that it was last year we the so case happened with Bienstock. So in the hacking case which happened so going into the future, do you see this as a risk which is going to be there always or what are some ways in which we can actually, you know, scale and eradicate the security risks associated with it as well? It's a very big question. Your pose and the the punch line is that systems like Beanstalk or like Etherium or like Bitcoin really are only safe as a result of the Lynda effect. You only really get to a point where you should feel confident in the safety of a protocol when it has been around for a long time with a lot of value in the protocol for a long time, such that there is a major incentive to try to attack the protocol. Now with that said, there are a lot of known risks associated with being stock in particular and stablecoin protocols in general, which are probably deserving of a whole podcast, just dedicated to the risks. But for example, currently all of the liquidity that trades against beans is three curves and so three curve, the value of three curve is effectively a least common denominator value of the three assets that make up three curve us to see USD ten die. And so currently, if any of the 3 USD USD T or die went to zero for whatever reason, that would also destroy the value of being stock independent of the fact that beans aren't collateralized. The fact that the liquidity that trades against beans is still collateralized, that it inherits all of the risk associated with that liquidity. And so one of the things that will mitigate this particular risk is over time a variety of different assets trading against being such that even if DAI goes to zero or USDC goes to zero, the there will be some liquidity trading against beans that retains its value. Now with that said, if 5% of the liquidity trading against beans goes to zero, it isn't reasonable to expect that the value of beans won't change as a result, if that makes sense. So it's not to say that beans are insane lated from all of the risk associated with any other cryptocurrency that it trades against. Quite the opposite. It inherits a lot of that risk and instead the question is, as the system grows, can it diversify that risk such that there is a low likelihood of correlated risk? So it is very likely that over if Beanstalk is around for ten, 20, 30 years, that there will be significant periods of volatility due to factors that are only somewhat related to bean stock itself. But nonetheless, because beanstalk is a system that doesn't exist in a vacuum, it will inherit a lot of the risks associated with other crypto assets that it has exposure to. So when it comes to that type of risk, that is something that will get mitigated with scale and over time. But then there are design risks. For example, the hack that actually occurred was the result of a design flaw. Then there is code risk, right? That the code that actually implement the design may contain flaws or vulnerabilities. And so when it comes to creating a system that is ultimately safe or is viewed by the market as safe, that is something that will likely realistically only take place with time. So this is not going to this. There is no way to wave the magic wand and say, voila, now the system is safe or protected. It's quite the opposite. It's a it's a long journey to get to a point where something is viewed as safe by the market, and particularly given being stocks history of having a major exploit, it's probably going to take even longer than it otherwise would. Mhm. Yeah. I mean I can totally relate to that, that, you know, it has to be kind of very, I mean when it reaches a significant scale that kind of make it decentralized in terms of utilities and different, it is trading again different payers. So it kind of becomes too big to fail. If only one of one of the pair fails, for example, and gets it would, depending upon how much it is part of the overall, you know, share, it would have an impact. But if it's too big, for example, overall adoption is is in like this trillion dollars and something which is of the scale of 10 billion goes to zero and then that but not kind of just, you know, deem the protocol itself. It fails or fails the protocol. So, yeah, I mean, it's I agree that, you know, that would come with time and you know scalability of of the protocol itself. And I think the next question is is on the I mean, we are already like no 1 hours. So I would like to keep it short. Now, we'll have some time for questions of the last question I have is or the regulation side re fiscal. We are looking at regulations and we are developing the stablecoin regulation dashboard. But still, you know, you must have been following already what's happening in different parts of the world and the inclination is from the regulatory standpoint is towards, you know, all these exogenous stablecoins. That means even in exogenous stablecoins the focus is on the backed stablecoins like USD three and for example. So, you know, in terms of that, how do we see going forward the scope for endogenous stablecoins what would be the long term view when it comes to regulation? Do you see any scope that is going to change? The view of the regulators is going to change. They would see that there is a need for a native crypto and in this stablecoin the the reality is that it's very hard to to get inside the minds of the regulators these days, particularly when it comes to consumer protection. And from that perspective, it's very hard to speculate about where the regulation is ultimately going to land. From our perspective, the the hope is to have an end buyer meant where it is safe for people to experiment on these types of currencies, which we view as essential to the ultimate flourishing of a digital economy, but because of the because of the obvious risks associated with Stablecoins, you look at the collapse of terror, you look at the collapse of Beanstalk last year. There is a ton of risk here. Therefore, it is hard to know exactly what the right mindset is around regulation and from our perspective, we we continue to hope for the best in terms of getting some sort of clarity from the various regulators on what what they're looking for. But on the other hand, this is a piece of permissionless open software that anyone can participate in. And from that perspective, it's unclear what the role of regulation is in terms of the development of the Stablecoins and the use of the stablecoins. So it's this is a big open question and one we don't have particularly interesting godson, unfortunately. And I would also touch base on before we go into question, one more thing. I mean, I think it's important the you know, this this is kind of an experimentation and, you know, there is a lot of interest as well for people who people who really understand what it is. There is a lot of interest as well on such stablecoins I would like to a bit more about the use cases for such stablecoins like how do you see the use cases for such a stablecoin developing? You know, there is one part where you have to use cases, you know, in defi itself in but but then if you look at long term, when you think about the scalability, then the scalability would come when there is, you know, there are multiple use cases of it. So we what do you think are those the use cases which would bring the scalability for such a stablecoin? So this is one of the core questions that we hope being stock will answer, but it's not a question that can be answered explicitly because fundamentally a stablecoin or any cryptocurrency should be used for whatever any money or currency is used for. So it's less a question of defining one specific use case or a series of specific use cases and more trying to answer the question of how to get from here where no one is using these currencies to a point where everyone is using the currencies for everything. And so from that perspective, there are likely to be some smaller economic loops where the currency is just traveling in a in a circle, effectively being paid for various goods back and forth without needing to be sold for outside value, if that makes sense for another currency and so where the network effect around using any particular cryptocurrency would start to take hold is probably at that point where you start to have smaller economic activity loops, where all of the transactions in that loop are being defined in a single cryptocurrency and don't feel like that is unique to Stablecoins That is just a question of getting adoption of any cryptocurrency and from that perspective it's more of a technical question around which currencies are useful for any particular use case. MM Yep, I think like for scalability. So you start with Defi, but then you have to think about like you know, stable currency which can be also used for quick remittances in a scalable way like institutions adopting these stablecoins for big remittances or so, because that is one of the sector where there is, you know, I think trillions, billions and trillions are being transferred annually. And then of course, the end game would be to pay for goods and services. Also work with Stablecoin already happening with, you know, as as experimentation that's going on already happening with some of the stablecoins in the market like the US state, which is the protocol Stablecoin So I think these things are happening. Do you think like there is going to be one winner takes all or going to be kind of, you know, multiple stablecoins which are addressing particular use cases in the market in the long term, In the long term, this is likely to be a winner take all or winner take most type of market due to the network effects of money. Are your own things. So that that would be a winner takes all kind of a market. That's interesting because it was always kind of, you know, the thought processes that there would be emergence of stablecoins kind of addressing particular use cases and they are going to grow in that domain and capture the market for that particular domain. The reason for the thought is that if we go into each of the four sources of utility for currency that we've been discussing, each of them tend to be highly correlated, meaning there aren't any explicit trade offs where it's like, Oh, now there's a state space where you may have two stablecoins that are optimizing for different things. In practice, every stablecoin is really optimizing for the same things and therefore it's likely that the asset that optimizes the best is going to win. Yeah, that doesn't make sense. Like all all are fighting for those for like if, for, for optimizing on all those four fronts in the best one would probably likely to say is going to be the one which is highly scalable compared to the others. Right. Okay. I think we we can we can take some questions now if anyone has any questions to the beans team on the protocol, on the macro outlook and the thing from the listeners, we can take a couple of questions. No questions is shown in the question. So I was there on the Cup. Okay. So there is a request from from my team actually. So Andy has a question and works with me. That's Hi. Hi. I'm I can hear me. Yes we can. Yeah, I noticed last September when Ben's price is around $4, I just wonder what happened during that time. I don't know whether it is correlated to the hacking, but I think too price just goes inversely. So. So I just want what happened during that time. Yeah. Thank you. That was when Bienstock went viral on crypto Twitter for the first time and went from like $1,000,000 market cap to a $40 million market cap in a couple of hours. And the system was very small at the time and like orders of magnitude more than the market cap of the protocol flowed into the system in a couple of hours. And the result was that the price skyrocketed for a period of time since Zillow was not able to print enough beans to industry. So I guess, yeah, took a turn in a couple of days for the system to really repay itself and then won. All that money that came in immediately flowed out and the price went from $4 down to $0.24. And then it took another month for the system repack itself after that. Interesting. Okay. Thank you. Any other questions? Okay. I think the we do not have any other questions. So thank you. Thank you very much. And I think we we we've learned a lot on on the macro outlook is on the been protocol. I still think there is a lot in the queue to share going forward which would benefit the community. This stablecoin community defi community. So it would be great to converse with you at a later date in the future as well. Thanks again for coming to this space and sharing your thoughts on the sector Stablecoin sector Giving the stablecoins one on one On the advanced definitions, we look forward to hosting you again at a point in the future, at some point in the future, and we would applaud this. Also, there's a podcast on our website. We plan to do a deep dive, Titusville on Beanstalk, so keep an eye out. Thank you very much for having us. Thanks. Thanks. Thanks. Thanks, everyone, for joining in by.