The Idols <> Publius

The Idols <> Publius

May 11, 2022

0:00 Intro • 1:45 Overview of The Idols • 3:24 Overview of Beanstalk • 7:38 Governance • 11:30 Beanstalk's Improvements Over Earlier Attempts • 20:41 Nature of The Peg • 22:21 Origins of Beanstalk • 24:33 The Idols History • 26:32 The Exploit • 28:48 Future Plan For Beanstalk • 33:01 Thoughts on UST Situation • 39:41 Bank Runs • 44:51 Convert Function • 49:36 The Idols Events

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So. Yeah. Thank you. Thank you, everyone, for joining this. This is a joint spaces with Beanstalk. The items and I'm created with this. This spaces was planned a week ago and then we postponed it just given the updates about what was happening or took place with Beanstalk in general. The purpose of this space is first of all, to talk about the developments that have been happening with the beanstalk and then also to update the ideas community or, you know, the joiners of them about the journey of what's happening within silicon, the boundaries, and then as well about, you know, potential collaborations or let's say work that, you know, being stuck on the ideas.

Earlier today we, we tweeted a custom NFT that the items are made for for Beanstalk, which is called the Guardians of Beanstalk following their on their collection which is, you know, the items themselves. And we'll just talk more about, you know, on their collection or or their creative outlet through it and as well you know go through of you know, what's been stock's acclaim and as well you know discuss in general what's happening with the market.

I'll leave that down to Neptune. You can you can take it from here. Yeah. Hey, Hey, everybody. Thanks for having us. We're very excited. You know, we've kind of been fans of the Beanstalk community for a long time. Just a quick overview of the idols for you guys that haven't heard about us. We are an NFT slash defi project.

Really. The purpose of the idols, the goal of our community is to continue to secure the Web3 community, to secure the world of Web3, continue to secure the Ethereum network, and then also trying to build an NFT community where the founders and the community is ultimately, ultimately aligned. You know, for those of you who aren't familiar with our project, one of the things that we've done differently versus other NFT projects is that we actually took 100% of the proceeds that we raised during our main event, which happened in March, and we staked it was like, okay.

And then 100% of the state that we raised has actually been locked away on our treasury on chain forever. And, you know, our treasury is fully unchained. It's a fully smart contract governed. So it's not a multisig It means that everybody, well, nobody, even including the founding team, has the ability to actually withdraw principal from the Treasury. The only thing the Treasury does is it pays states rewards to idle owners forever.

Additionally, our project also has an E or C 20 token, which is the virtue token. And the virtue token. Actually, if you stake that, you'll actually be receiving 100% of secondary sales commissions on the, you know, on the Idols NFT collection. That's a very high level overview of where we are. You know, like we have a lot more resources for anybody who's curious and wants to learn more.

But you know, the inside team would love to hear from you guys, just like, you know, for some of our community that's on here who may not be as familiar with, you know, what you guys are about and just kind of the mechanism and just the idea behind Beanstalk will be great to give them an overview to for sure.

So you guys, it's great to great to have you guys and very cool to hear a little bit more about how the idols actually works and as you guys know, Bienstock is very big on on chain governance, even though at the moment that seems to be a a cause for distress, if you will. So what is the the goal behind Bienstock?

What is the mechanism? So Beanstalk is a credit based stablecoin If you're and unlike every other current Stablecoin issuer which uses collateral of some capacity paying stock, uses credit in order to create stability of its stablecoin what does it mean to use credit? So in practice, credit is the ability to attract loans or to issue debt. And any time the being price is too low, meaning that these need to be removed from the supply or removed from the market, people start trying to borrow billions from the market, from anyone that's willing to lend to us in order to remove the beans from the supply and ensure the main economic assumption behind fintech stability is that

there is demand for beans, stocks, debt or in other words, that Beanstalk will be able to, at some price attract a lender. And so over the first couple of months of its existence, there have been periods of time where there haven't been significant demand to lend to be in stock. And then more recently, there was significant demand to lend to the stock, and that's when the model really started to turn.

So over the maybe three months prior to the attack, we really started to see how the model works in a in a world where there is a lot of demand to lend to the protocol and being stock, it started to be viewed as credit worthy. So while it is a very cool economic experiment, it's also very much an experiment and on chain governance.

And as we all learned a couple of weeks ago, the the on chain governance is just as important as the economics. And, you know, that is that was where the attack ultimately sprung from. So maybe we'll get to talking a little bit about the attack, but that's the short version about the stock and how it works. Yeah, awesome.

Awesome. That sounds good. Dunks. Are you on are you on the chat right now? I'm here, sir. Hey. Hey. What is just. Just waking up and just. Just just here. Just here. To my favorite projects. Okay, brother. Well, nice to see an idea from you. Yeah, yeah, yeah, yeah, yeah. Thanks so much for joining us. You know, I think, like, kind of we the two of our two projects actually got introduced by Dunks and then, you know, I think like kind of I think we share a lot of similarities in a lot of ways.

So I'm specifically like just in terms of, you know, both of our projects is emphasis on just being a decentralized on chain Web three forward project. You know, I guess with that said, we'd love to hear a little bit more about, you know, just like your guys is ultimate. You know, I'd love to hear a little bit more about your guys's ultimate, you know, on chain governance model.

And then aside from that, also just like, you know, some of the things that some of the design decisions you guys made when you guys started the project, when you guys started the Dow, like why did you choose to go the route of, you know, having everything on chain as opposed to as opposed to some more centralized, you know, system?

Yeah. So I mean, frankly, with regards to what the ultimate on chain governance solution will look like or implementation will look like, we are probably at the point of least clarity in the history of being stuck on what that will look like. And that's probably something that that the Dow will have to work on. Re-implementing some time after the relaunch of GameStop.

For the short term, buying stock is going to be governed by a community run more basic, which is unfortunate, but that is a step back in terms of the decentralization and censorship resistance of the protocol. But we still feel like there's very much clearly a there's a clear path forward to get back to the level of censorship resistance that the protocol had prior to the attack.

And the exact details of that are unclear. But why is this class so sorry? The Yes, I just I just totally interrupted you there. I was just I was just thinking just it's really it's really the values, right. That is the clear path forward. Right. Like having those values of the centralization is even with that, having the like necessarily having the exact practical, practical implementation nailed down of what it's going to look like.

But because those values of decentralization and censorship resistance are the founding essentially the founding values of the project, then the path is still clear towards decentralized governance. The need for it is obvious. And, and yeah, I just wanted to throw that in there. Sorry for interrupting, but no problem whatsoever. We sure hope that is the case. And to speak a little bit to as to why, why decentralization and censorship, resistance and permissionless are so important to be stock ultimately beyond these being the core ethos under which Bitcoin and Ethereum and other decentralized technology should really be built, on top of which is totally open access, total censorship, resistance, total permissionless.

Those are difficult things to achieve out in the wild, and those remain the main goals from an implementation perspective for being stuck. Now with regards to why that's so important, I think it goes without saying in the current environment that in order for another, another protocol to present itself as a potential issuer of money, it needs to be incredibly censorship resistant and incredibly decentralized, incredibly resistant to attack both economic and and other one.

So building these from a a decentralization first perspective was a a no brainer. Now, how to how to do that in practice and to launch anonymously and to draw without A pre minded A, B, C launch and really take it to the degree that that was you know, that was a decision that we felt like we hoped would instill the community with this struck.

Oh, apologies. We hope that that would instill the community with a strong a strong sense of the importance of those principles. And as Douglas was saying, it seems like that that is certainly resonant. Yeah, I mean, it certainly resonates with us. And and, you know, I, I imagine that it resonates with much of our own community. I guess like can we hear a little bit more about Bienstock?

And, you know, because obviously there have been other projects in the past and then, you know, let's let's let's completely ignore, at least for now, the situation with USB and Luna. But there have been other projects in the past who have tried similar models. Right. Can you help us understand a little bit more how like what bienstock does differently as a stablecoin issuer?

For sure. So if we if we ignore the elephant in the room for the time being and we instead compare bienstock to previous attempts at non collateralized stablecoins, whereas we would say USD or Tara had the protocol native collateral, so ESD basis cash, those types of attempts. There are a couple of really key differences between Bienstock and previous attempts.

The first was that Bienstock didn't have like a predefined minting schedule. Those currencies did and that set them up for for failure kind of from the get go because they over minted at the launch. Now beyond that, the minting of the stablecoins was a function of the quantity theory of money for those different stablecoins for the most part.

So if the price was 1% too high, they would increase the supply by 1% and in practice that was way too much inflation. And when you consider that one of the main problems that protocols like this face is in organic demand, when the price is too high, because anytime you write into the protocol or into a smart contract at a given price, there will be inflation.

When you're at those prices, there tends to be inflation. So if you if you made too much at a low price, that tends to exacerbate the organic demand. So when the price was too high that those protocols tended to way over print, which then when the price would go too low, created a worse down period. Now, when the price was greater than one, one of the cool innovations of something like USD was the ability to collect seigniorage from being deposited in the Dow.

So if you look at like a basis model, there was a senior edge token which was unique from the STABLECOIN, whereas in the case of USD there was the opportunity to deposit your assets in the Dow and receive seigniorage in addition to via the coupon mechanism, the lending method, and ensure it. The one of the main problems that we had was that there was no incentive to hold your assets in the Dow when the price of the stable pump was below a dollar when there was no seigniorage, the addition behavior to do was to leave the Dow and anchor your position, or at least not be in the Dow.

A And that created a major run on the bank and in almost all instances. So the other issue, the other main issue we would highlight is that debt based protocols like, yes, zero credit based protocols where they lead, one of the main keys to their success is the ability to attract lenders to the protocol. The structure of the lending markets for these protocols was incredibly inefficient.

So if you look at ESG in particular, the structure of the lending market growth and coupons were problematic for a couple of different reasons. So and the reasons combine to create the real problems. So ultimately, the rules were as follows The coupons were fundable. They were party pos. So if you purchased debt from the protocol, if you rent, if you rent assets to the protocol, in short, the it didn't matter.

When you entered the protocol, you were considered equal to everyone else. And the second issue was that the interest rate for when this is the protocol was deterministic and it was hardcoded as a function of the interest rate of the of the protocol. And so in short, those two rules created a really horrible negative feedback loop and tragedy of the commons whereby if at any given time you felt it was a good time to lend to the protocol, you were still incentivized to wait until someone else wanted the protocol, because then you would receive a higher interest rate than they would.

And so that tragedy of the Commons created a super inefficient lending market, which if we go back to where we started this, which is that the main underlying assumption under being stopped is that it will be able to attract lenders. You can imagine how a super inefficient lending market for something for a similar protocol was the kiss of death.

So inefficient inefficiency all around and people stuck addresses each of those things in specific ways. So in particular, there was no pre minting schedule or anything like that at the launch of that, no team allocation of presale or or anything of the sort. When the price is above a dollar and below a dollar is not tried to adjust the supply, not based on a theoretical approach but instead a market based approach.

So every hour, every year and everything is being started, farming deals every hour, being stuck, take the time and liquidity weighted average of the number of beans that needed to be bought or sold over the previous season in order for the price of a bean to have been exactly a dollar over that period of time. And so in short, if the stock needed 100,000 beans to be sold on average over the previous hour in order for the price to have been a dollar, it meant exactly 100,000 beans.

And if it needed, 100,000 used to be bought in order for the price to have been a dollar on average, then it will try to borrow 100,000 each from the market. And so it takes a very market based approach. Now, in terms of minimizing the run on the bank, when the price starts to dip below a dollar, we'll start uses.

Sorry about that. Again, you start using something called the stock system whereby the only way to participate in seigniorage in addition to lending to the protocol is to deposit your assets in the Dow. And when you deposit your assets to the Dow, you receive the stock, which is the governance token. The stock is sort of a play on words on stock, but the concept is that the you receive more stock over time, the longer your assets are deposited in the Dow.

And so if your intention is to withdraw your assets from the Dow and then quickly be deposited them or redeposited them again at some point in the future, there's an opportunity cost associated with that action in the form of all of the extra stock you received over time that you need to forfeit when you withdraw your assets. And so that in practice has created a very sticky effect on leaving assets deposited in the Dow, in practice, in these stocks now in my history now, in terms of an efficient lending market being stock has two main differences from Yes.

The first is that debt is not undoable. Debt is first in, first out, and the second is that the lending rate, the interest rate, the whether in the protocols for the leather, for lending to the protocol is non deterministic and there's a protocol adjust the interest rate every every hour by up to 3% which given that the weather was 50 800% prior to the attack, a 3% change is pretty marginal.

And so if at any given time you think it's a good time to loans stock, the incentive structure is such that you're incentivized to lend to the protocol immediately because otherwise, if someone else understood the protocol ahead of you, that will change your expected return and it will change your expected return more than the marginal benefit or the expected chance for the expected value of the whether the interest rate increase in the time that you risk someone lending to the protocol ahead of you.

So there's a much more efficient lending mechanism. The pain stoppage due to these rule. So at a high level that all of the problems with previous attempts, that's how bienstock changes them substantively. And then there's all sorts of other bells and whistles and nooks and crannies we can talk about that. I help you stop it is the price of a dollar.

And then I Yeah. Wow. That was definitely a very in-depth explanation. Thanks a lot. Previous. It's it's quite fascinating. I mean, it sounds like I mean, obviously you guys have made a tremendous amount of innovation on top of this earlier model. And it sounds like kind of a lot of them, if I were to like very broadly summarize, kind of revolves around the idea of letting the open market set, say, set the rate and set the type and timing of the debt.

It's really fascinating in a lot of ways. And maybe not to jump the gun and start talking about the U.S. situation, but Beanstalk has had multiple deep pegging events through its history. And in fact, the the model is is designed not to keep the price at a dollar exactly at all times, but instead just to oscillate the price regularly above and below the pack.

And given that there was no collateral backing the system, it's basically impossible to keep the price at a dollar and guarantee that. So instead being stopped, recognizes sorry, being stopped recognizes that the the it can't it can't keep the price at a dollar. All it can do is when the price is too high, try to lower it and when the price is too low, try to raise it.

And even in terms of volatility above and below the peg, being stuck doesn't really make any guarantees as to what's acceptable or reasonable volatility. Instead, it does try to create incentives to minimize volatility. But at the end of the day, the market really does know best and being smart doesn't try to make any hard promises one way or another.

Yeah, no. And that makes a lot of sense. I mean, ultimately for a system like this, it probably you know, ultimately it probably has to be something like what you mentioned is probably impossible to really create a coin with no collateral that is like strictly at a dollar all times. Definitely impossible. But at least we would. It's it's above our heads, if you will.

No, I mean, clearly that you couldn't. You guys have built a very, very, very well thought out and interesting system. But I'd love to hear a little bit more about like, I guess like the creative process or just like, how did you guys how did this idea come to you? Well, you know, it was a lot of serendipity.

So the the long and the short of it is that we we all know each other from U. Chicago, and we've been doing kind of our own things for the most part. We all had various crypto experience, but, you know, the serendipity was that during COVID, I happened to be out in Los Angeles. I was driving across the country and reading lots of books and, you know, just kind of just kind of lost in thought, if you will, And Brendon, who's from Los Angeles, he happened to be out there for Thanksgiving and we were hanging out and he was kind of complaining about how he was bored of bored of his job at Goldman.

And I needed something that was going to be more interesting and meaningful and take up his time and, uh, you know, change the world was what he said to me. And I looked at him and I said, Well, Brandon, I hate to say this to you, but I've got I've got some ideas. And he kind of looked at me like, you know, what could you possibly be talking about?

And so that evening we read the white whitepaper together. And while it was very inspiring and very interesting to us, it was also very clear that there were some obvious economic inefficiencies with it. And so we that evening decided we would work on a fork of ESD and we thought it would take 2 to 3 months very quickly into the process, we realized it was actually going to be a much more intensive process and the model was going to require basically it round up rebuild.

That was going to require a new code base and a new white paper. And so it went from a 2 to 3 month side project to a nine month all intensive Mike. He was Brendon's roommate and he heard us talking about it all the time and he quickly hopped on board. And you know, the rest is history. Yeah.

Wow, this is so interesting to hear you say that because, you know, I would say kind of the idol's team in a lot of ways is similar to a bunch of us. We all know each other in real life, actually. And then we kind of came to we kind of came to the idea of our project after looking at just a lot of other nifty projects out there whom we felt weren't really aligned, where founders were taking a lot of them in funds and such.

It's always fairly fascinating to me to hear other founders stories. It's everyone's got everyone's got a reason for what they're doing, you know, And it's there's something to be said for the community and different communities that are highly aligned on similar values, Somehow finding each other in this crazy defi universe. Absolutely. Absolutely. That's why we're all here. Yeah.

So, you know, like, you know, my understanding is that, you know, because so we like, you know, I think everybody is aware that Beanstalk did suffer and exploit possibly is around like a month ago at this point and then holy moly almost a month. Yeah, it feels like yesterday. I can imagine. It's been a wild time, even even ignoring just the craziness of the market over the last two or three days.

But yeah, I mean, the only silver lining when there's blood in the streets like there have been over the past couple of days is, you know, not having a book basically. So being stuck, not having skin in the game at the moment, it's like it's very painful. We feel like it would be a great time for the model to really shine.

But at the same time, it'd be much more stressful if if the model were we're up right now, so good and bad with everything, but we would much prefer it was a lot. Yeah. Yeah, I guess so. Just, you know, just for some of us who maybe aren't 100% familiar with this, the specifics. So, you know, my understanding is that you know, the incident or the exploit has something completely unrelated to the beanstalk model, like the actual economic model of Beanstalk.

Can you tell us a little bit about that? So so unlike what happened with USD, this was not an economic attack. So if you look at the the the actual exploit, this was an attacker who took out a flash loan and was able to acquire a two thirds supermajority of stock the governance token and commit a malicious online governance proposal and withdraw all of the funds from the protocol.

So in practice it was the on chain governance that we were just talking about as being so essential to the ethos of the protocol that ended up being the victim or the vector attack vector that was vulnerable. And so it was not an economic attack in any capacity other than there was a flash loan taken out of that make.

Yeah, no, I totally make sense. And, you know, it's like these things, it's like so unfortunate because obviously it's like the space basis, so brand new, everything, you know, we're all working like on on the frontier, in my opinion. So it's like it's so hard when like one small thing, like, you know, and this is like it's the governance module, which is completely it's not unrelated to the project, but it's not the core of the project.

So yeah, it's like it's just very unfortunate that definitely, definitely not where we would have thought the, the heart, the hard problem to solve would have been, you know, you tend to think that would be the economics problem, but at least for the time being, you know, it's the least common denominator problem. It's the least common denominator problem.

And right now the the governance is the least common denominator. Yeah, absolutely. Um, yeah. So, you know, I know that like, I know that kind of right now everything is in somewhat of an uncertain time. You know, obviously, like the market right now is somewhat uncertain, but we'd love to hear from you guys, like, what are your guys is going to of course, not so late to the market.

Of course. Of course. But I'd love to hear from you guys a little bit on like what's your like what's the current future plan for buying stock? So there's a lot of stuff going on. In short, the goal is to recapitalize stock as much of the 77 million that was stolen as possible over the next couple of weeks and upon completion of the trail of bits and how for an audit to the protocol that are scheduled to be completed in late, late June to relaunch or restart, maybe it's the better word restart or unpause.

We'll start early July, God willing. So there is a a a a plan that the Dow has voted on and approved in terms of setting the protocol up for a successful restart. So there's a couple of legs to it. First is that Beanstalk is going to issue debt up to $77 million worth of debt at a 500% interest rate.

And so anyone to lend to the protocol up to $77 million for 500% interest and anyone that lends to the protocol will receive a tangible token. There's a nonfungible element to it, and if that will get do or receive a vulnerable token, the receives a third of all being met until that 500% interest has been paid back. Now the there was some question as to how to make it the most accessible and easy to use and implement.

And one of the implications around using an actual ERC 20 token for this would be to handle the distribution of the yield. In the instances where this Erc20 token started to trade in an AMP because according to the way Bienstock works, the amp would actually be the where the build scenarios would accrue up. The tokens were deposited in Vietnam, and so there would need to be additional development work done to support a truly vulnerable implementation of this.

This one time debt issuance, if you will. So by wrapping it as an NFT and hopefully attaching some cool art to it, that will facilitate a much simpler exchange process whereby people can use opensea or another NFT market, which doesn't doesn't require any additional development whatsoever to facilitate the distribution of piece. So the concept is to to do an NFT sale that should start first week of June or so.

Don't have the exact date on that, but that's the current plan at the moment and we're very excited. We think that there's a ton of interest in restarting the protocol and recapitalizing it before this thing happened to Luna and and especially after it has happened. Maybe, maybe tomorrow would be the better thing that happened too. But it's happened to, I guess, both Terra Luna, you see on all of this kind of down battle at the moment.

But the concept is at least in our in our conversations, there seems to be significantly more interest in buying stock, not less, as a result of what's happened. And so we're pretty excited. Yeah. And that is that is really interesting and really awesome to hear. I mean, you know, we think that kind of, you know, these personally ideals, like, you know, we think that the intersection of defined entities is really, really just that it really at to start so and this is a really interesting use case.

I mean like people say like, you know, like you hear all these things from people who say like, oh, nfts, like they're just JPEGs, Like they don't have any they don't have any utility or value. I mean, like, you know, while we disagree with that, like there's a lot of people out there like you guys who are thinking about the NFT market and then using it towards, you know, real, real financial purposes as well.

So, you know, it's a very exciting yeah, man, What you can do with what you can do on permissionless networks is really infinite. And that's what gets our our brains chugging. And so excited. You know, the world is really your oyster. Yeah, yeah, yeah, I guess. I guess. Just a final question for me, really. Like, do you guys have any input or would you like to say anything about just the current U.S. Luna situation, all about input?

You know, we hey, it's horrible what's happening in the sense that we feel very bad for everyone that's lost a lot of money over the past couple of days. It's it's very ugly. It's it's a horrible situation for people that have lost money. And that's you know, that's too bad. Now, this this is very much the nature of the beast.

And we're all trying our best to figure out how to minimize the reflexivity of these types of protocols. And what we feel being stuck is a significantly better attempt at this than Tara is or was or whatever you want to say. And we've been talking about for months and months how the demand from anchor for USD has been highly subsidized.

It is incredibly know organic and ultimately a problem that remains to be seen, remains to be seen whether there will be any any bid whatsoever on Luna and the blockchain will continue. And then at some point you'll be able to get enough liquidity to price, which is the fact that seems possible. It also seems possible that the thing really does go to zero at this point, but we're looking to be a unique case because because it did happen.

The thing underlying the support for USD as Luna and Luna is used as a proof of stake token. And if it's useless, then I mean, in theory you could, you could make the argument that the protocol wasn't isn't safe. And I did see something. I don't know what it was, and I didn't pay that much attention to it, but there was there was some security vulnerabilities already introduced or potential vulnerabilities introduced by the collapse price of Luna.

So there scary days across the board for that protocol. But I certainly don't want to spread any fire that it's just scary days and all we can do is use this. And when I say we, I mean the royalty. Everyone involved in the stock in the community use. This is really a learning opportunity in terms of the do's and don'ts and one of the most important things that's very evident to us is that an educated community is is one of the three most important things.

And so as we as we think about how to how to how to try to create collectively a really entire reflexive system, it's evident that that the current and again, bienstock, we'd argue, is it's much better than Tara, but it's unclear if Beanstalk is going to be resistant to stories while attacks like that it's designed to be. We think it'll do much, much better in practice than than the terror that faced us facing a similar sized attack.

But at the end of the day, if everyone loses faith in the competence and the protocol, for whatever reason, those things can be very, very hard to recover from. So that's one of the reasons why education and having people understand that the oscillations above and below peg are normal and expected and being some response to it. That's, you know, that's very important.

And I would say one thing that probably does bode well for Beanstalk is unlike the U.S. situation where the vast majority of type BYTEDANCE in terms of USD and Luna conversion was done by a very small handful of parties, and therefore it made the impression from from retail or potentially sorry about that, potentially made the impression that, you know, oh, the price is below the tag, someone will fix that, you know, and there was always the expectation that the peg will be restored within a certain margin.

And as soon as it dipped below that, there very clearly was a total loss of faith in the model and that that probably was exacerbated by the fact that people didn't really they weren't familiar with how how do how to participate in their own their own individual way of of taking the protocol, if you will. So in the case of Beanstalk, one of the things that's really unique and it was only introduced in 57, this wasn't originally in the model and we would point to this is one of the needs for continuous improvement and why on chain governance, which was implemented the way it was when Beanstalk was deployed, is the ability to convert your

assets within the silo and that really is a major dampener in terms of reflexivity. We view when when faced with a similar situation whereby the people that actually are responsible for peg maintenance are the same people collecting the senior edge from the system. But it's, it's the user, it's everyone. And so everyone has the to buy low, sell high and participate in peg maintenance and hopefully in practice that will result in a radically differently educated user base and a much more resilient user base whenever it is that the being priced inevitably, inevitably returns to $0.99, $0.97, $0.95, there's always going to be downside volatility.

But the question is not, you know, can you prevent the downside volatility? It's how does the protocol respond to it and how does the user base respond to it? So in general, we were very excited that that it seems like the stock is going to live to fight another day, that this economic experiment is going to get to be seen through and who knows what happens.

But we do we do feel very strongly this is the best model far and we're excited to see how how things play out. Yeah, I love that. I love that. You know, I'm in full agreement. Education is definitely the most important and and ultimately it's just alignment of incentives. And I think that's something that like that's something that you guys have really, really spent a long time thinking about.

So, yeah, thanks for it. Thanks for telling us. But yes, I have a question for you. You tweeted earlier today that you can never prevent the bank run, but you can only disincentivize this from growing even larger. Can you expand a little bit on that? And how does being stuck do that? Sure. So there's a couple things. One, why can't you prevent a bank run ultimately unless you have 1 to 1 collateral and not just 1 to 1 collateral or more some sort of instant redemption mechanism.

There's no way to prevent a run on the bank because the people are holding the Stablecoin lose faith in it or lose the desire to hold it, or for whatever reason, want to sell it at less than a dollar. There's no way to prevent them from doing so. And the very nature of these types of systems is that when when things go sour, some people that have low levels of conviction or low levels of understanding tend to run for the exits.

And so a small a small problem can quickly become a big problem, as was the case of delisting or in the case of any sort of negative feedback loop. A small outflow can quickly become a big outflow. And so there's a couple of things. One, being stuck does not prevent bankruptcy whatsoever. If you want to sell your being $0.60, good to redeem, feel free.

However, Beanstalk does a bunch of different things that are designed to or creates incentives that are designed to minimize the attraction to follow other people out the door. So if we think about at the margin following people out the door, the main cost of being a late is that the price is less. So if there's a run on the bank and you're after everyone else, you're going to get the worst price most likely.

So that's what actually creates the run is everyone gets scared and everyone wants to get the best price. And so everyone then leaves all at once. And so a piece of that is there reward people for sticking around. And in fact, the amount that you're rewarded for sticking around is disproportionately higher. The more that more people leave. So this plays out in a couple of different places.

The first is just when the price is lower, the margin for buying and lending to the protocol is a multiple for buying low and then lending to the protocol is much higher. So that's one naturally Anti-reflective piece. But the main the main thing we would we would probably point to is the nature of stock whereby if you have a run on the bank where everyone is withdrawing their assets from the Dow and selling their being the stock supply, the governance token supply is likely to decrease dramatically and therefore if you are holding stock and in particular when you're evaluating your own individual opportunity cost of leaving the Dow and burning all of your own stock,

in practice, the less the stock supply and the further that the stock supply decreases in general, the higher that you're a grown stock will represent the bonus as compared to the total stock supply. And so individually, the bonus for each individual farmer goes higher and higher for sticking around the the worse the bank run gets effectively. And so while there is nothing to prevent people from saying, you know what, this is due to nerve racking, I'm going to take my $0.50 on the dollar.

At the end of the day, the stock has created a very strong reason to say, you know what? You're better off sticking around. And then the question is, well, if you're going to stick around now, one and that's where Converse really comes into play. So I would actually make the argument and use this time given us two years down that to say convert is is a powerhouse but it's not perfect.

The fact that when you convert when the price is too high down to help from LP, you don't lose any stock. That's great and really low friction. But at the moment when you convert from LP to pay and there are instances when you forfeit some stock because of the change in the BTV of your LP. And that's something that should probably change to really minimize the friction of in these scenarios where you have runs on the bank for people to buy low within the stylo or convert their B and so that's the that those are the two main main things are that when the price is low the multiple for lending multiplies exponentially.

The lower the price gets on the beans because you're buying these lower and then the convert and stock mechanics that are highly complementary to one another. Thank you for that. I'm going to follow up as well with the convert function. Do you do you think or see the given given that being stuck has the ability to convert between spools within the silo that naturally is expected to lead to a quicker price equilibrium?

Do you think, just given that we were talking about earlier, how, you know, something small can lead to something big, having a quicker price equilibrium within within the silo or within being stuck, does that lead to more or less, let's say, panic? Well, I don't know about panic, but in terms of just economically the the convert functionality, it's really hard to understate how important that so the our favorite chart or one of our favorite charts is the liquidity to supply ratio, whereby you could see that over the couple of weeks prior to the attack, the liquidity relative to the supply started to increase dramatically and that was that was entirely a function of convert when

the price was too high, beans were getting minted, but a ton of that was getting converted into LP, into liquidity out. And the concept is that if you look at how the US ecosystem grew or the terror ecosystem grew, the U.S. supply grew to tens of billions, but the liquidity for the token didn't really scale whatsoever. And so how the how the pegging actually started was a curve because the curve of liquidity relative to the total supply of the stablecoin was really small.

And that's what created people fear that, hey, we're kind of screwed here. We're not going to be able to get a dollar for our stablecoin because there was actually very little liquidity for USD relative to the supply. Whereas in the case of beans in the silo, you can make the argument that theoretically beans will trend towards 100% liquidity.

So while they're not collateralized when things are going good, every bean should have at least $1 of liquidity trading against it. And then whenever you have this run on the bank, there should be ample liquidity to absorb those outflows. Now, again, that's not to say that any magnitude of outflows can be absorbed. Certainly not. There's certainly going to be downside volatility when there are outflows.

But the concept is the protocol should be able to incentivize participants that are endogenous and exogenous to participate in returning the price of the peg whenever it does. And we would just note this has happened now a couple of times in practice. Convert was only introduced in December and it very clearly has had a strong impact on tech maintenance since then.

But the protocol in general, just relying on the lending mechanism has been able to turn the price of a peg multiple times. So we're we are convicted that this is significantly more resistant than the U.S. situation. And we were kind of remarking today that this did feel a little bit like it did feel like the September pump and dump where just a ton of inorganic demand came into the system and then left immediately.

And it was like, yeah, not very sustainable. So that that that happened in a much grander scale in the case of anchor. But for years there are terra and anchor. But that's, that's not a problem that being faces given that given the converged functionality now that's to say that you can't have a run on the bank, not that you can have a ton of downside volatility, but it is to say that the main drivers of demand are not in organic or subsidized, but in any capacity, and that is that is meaningfully different.

Yeah. And to those who are wondering about those two rounds of problems was describing, you can find this on the doing the doing dashboard of the stock and you'll be able to see it over there. Okay. I think we have 10 minutes till the hour. Neptune, did you have anything else to add? Or maybe we can take questions if anyone has it as well?

No, I think it's a good time to move to questions. Just anyone has a question you come across to speak and we'll let you follow you. Come on. There's a lot of information being presented already. I think so. All right. Well, we'll we'll we'll go on. And if anyone has a question, we'll let them do that. Otherwise. Neptune, do you want to maybe before we close out, tell us a little bit more about Idles.

What are you guys up to right now? What can we expect from you? Where can we check out more stuff about you? Oh, yeah, Yeah, definitely. So definitely check out our website, The idle start out and then, you know, follow us on Twitter. We post most of our updates on Twitter. Really, it's like for us, I mean, you know, the NFT market obviously is not immune to kind of the broader market, just broader market action that we've all been seeing.

But, you know, one thing that we are really excited for is that we're actually going to be at what we're going to be in a gallery at Etsy NYC. So we're actually one of the first projects to be working directly with Web3 NYC Gallery. I recommend you guys check them out. They are trying to build the preeminent first premium web3 oriented NFT gallery, Permanent NFT Gallery in New York City.

So they've got a look. They've got a really nice location. It's near Fifth Avenue and near Times Square, and then we're actually going to be the first. Also during NFT, NYC. That sounds pretty exciting. And, you know, I guess when we're in New York will want to check that out. Otherwise, you know, we look forward to seeing pictures of it.