29 - Aave to Billions | Stani Kulechov

Episode: #29 September 07, 2020 ----- Tools from our sponsors to go bankless: 🌐 UNSTOPPABLE DOMAINS https://bankless.cc/unstoppable - GET A HUMAN READABLE CRYPTO DOMAIN https://bankless.cc/unstoppable 🌈 ZAPPER - ULTIMATE HUB FOR DEFI http://bankless.cc/zapper - ZAP INTO DEFI 💳 MONOLITH - GET THE HOLY GRAIL OF BANKLESS VISA CARDS https://bankless.cc/monolith 💸 AMPLFORTH - MONETARY EXPERIMENT FOR BASE MONEY https://bankless.cc/AMPL-MINE ---- Stani Kulechov is the Founder of the Aave money market, a place for lending and borrowing assets in DeFi. Aave has marched up the DeFi leaderboard to become one of the top protocols with the most amount of value deposited into its contracts. Aave's token LEND has increased 3300% since its bear market low. What contributed to Aave's success? What did Aave do differently? Why did Aave's community thrive when others died? What's next for Aave and Aavenomics? We ask Stani these questions and many more, in order to get a glimpse of what is successful in this DeFi frontier! ----- WE COVER 1) Crypto-Native Founders 2) Early days of Aave -- ETHLend and the Aave pivot 3) Sticking it out through the bear market 4) Establishing the team-community relationship 5) Rising the Ranks of DeFi 6) VC investment vs ICO investment; pros and cons 7) Aave moves FAST! 8) Aavenomics and Aave Roadmap 9) Bull Market Predictions! ----- Resources discussed: David's article about MKR references by Stani https://bankless.substack.com/p/evaluating-mkrs-tokenomics ----- Episode Actions: Read delegated credit explainer article https://bankless.substack.com/p/unsecured-loans-are-coming-to-defi Read about Aavenomics https://docs.aave.com/aavenomics/ + Aave roadmap https://medium.com/aave/aave-v2-the-seamless-finance-d52075d97a70 Give us a 5 star review on iTunes! ----- Subscribe to podcast on iTunes https://podcasts.apple.com/us/podcast/bankless/id1499409058 | Spotify https://open.spotify.com/show/41TNnXSv5ExcQSzEGLlGhy | YouTube https://www.youtube.com/c/bankless | RSS Feed http://podcast.banklesshq.com/ Leave a review on iTunes https://podcasts.apple.com/us/podcast/bankless/id1499409058 Share the episode with someone you know! ----- Don't stop at the podcast! Subscribe to the Bankless newsletter program http://bankless.substack.com/ Watch Bankless shows and tutorials on YouTube https://www.youtube.com/c/bankless Visit official Bankless website http://banklesshq.com/ for resources Follow Bankless on Twitter https://twitter.com/BanklessHQ Follow Ryan on Twitter https://twitter.com/ryansadams Follow David on Twitter https://twitter.com/TrustlessState ----- Not financial or tax advice. This podcast is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Do your own research.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:13Ryan Sean Adams?

  Welcome to Bankless, where we explore the frontier of internet money and internet finance. This is how to get started, how to get better, and how to front-run the opportunity. This is Ryan Sean Adams. I'm here with David Hoffnig, and we're here to help you become more bankless, David. How are you doing, my friend?

• 0:31David Hoffman?

  Super good, Ryan. Just came out of this interview with Stani Kolotrov from AVE. Ryan, what did you think of this interview?

• 0:38Ryan Sean Adams?

  Man, it was so much fun. I think it's a perfect next episode from our last episode with Vance from Framework, where Vance talked a lot about these unique characters in the DeFi space, these crypto-native founders. And he actually mentioned Stani by name as one of the archetypes of these types of founders. And we're going to be doing a series, the next few episodes, including this one, are a series where we actually talk to these crypto-native founders, the actual builders, the people that Vance was talking about, the people who are sort of unique to this, I guess, generation of DeFi protocol building. And

• 1:18Ryan Sean Adams?

  I think one of my takeaways from this conversation with Stani was just how understated that Stani and his team at AVE are. Almost, I almost used the word kind of humble about what they built. At one point in our conversation, Stani says, at the beginning of the year, they would have been happy with 5 million locked, total locked value, inside of the AVE protocol. And here we are. They have about 1.4 billion locked in, six months later. Just the amount of kind of building that's been going on with AVE, you know, his team's style of just constant shipping product, never stopping, partnering with other protocols

• 2:00Ryan Sean Adams?

  wherever possible, really building for the ecosystem, I found frankly refreshing. It's not something that you typically see, but I think it is one of the patterns. In successful DeFi protocols. So if you're looking at like the future, trying to front run the next opportunity, maybe you'll see some of the the patterns in the Ave team and what Stani and his team have have developed play out in future protocols. Maybe those types of characteristics are the investable pieces. What did you think, David?

• 2:30David Hoffman?

  One of the lines that stuck out to me in the Vance episode was when he is interviewing or talking to founders of protocols that are looking to like, you know, eventually turn over the keys to the kingdom to the community. He he asked them, are you really about that life? I thought that was a funny line.

• 2:48Ryan Sean Adams?

  Yeah.

• 2:48David Hoffman?

  And Stani is absolutely about that life. And that life is what what he means by this is, you know, if you are interested in building a protocol on Ethereum, it's fundamentally different than like building out like an LLC or a C corp or, you know, going public on the stock market. It's just a different deal. And I think Stani is particularly well suited as an exemplar, a person who is about that life, right? Because, you know, Ave has one of the most insane histories of 2017 and 2018, where they initially tried out this thing called Ethland. It was, it became clear that it wasn't going to work. So they pivoted a protocol, like a protocol pivot is a is an interesting thing in and in of itself.

• 3:32David Hoffman?

  And what one thing I think why we, why you think that, you know, Stani and and Ave is understated is because, you know, I unlike companies like, you know, Amazon and Jeff Bezos and and, you know, Steve Jobs and Apple is like, I don't think Ave had this grand, like, you know, one, three, five, 10 year plan. I think in the middle of the bear market, they just started working on what was obvious and what was obviously wanted and needed by the community. And they just put one foot forward in front of the other. And then all of a sudden, because because of their relationship with their community and the and the feedback that they got from the community, which is a topic that we talk about in this podcast, they were just able to create what the community wanted.

• 4:16David Hoffman?

  And as a result of that, there's like 1.5 billion dollars in Ave.

• 4:22Ryan Sean Adams?

  Yeah, it's really an amazing story and I think it'll come through in the conversation. And really, maybe the last thing I'll say before we we jump into it is there tend to be two types of people that come into crypto. You know, one type is the tourist and they're here just because they've heard the hype and you know, they want to build something because it's hypey and they're all about that glitz and the glamour. And there's the other type that's more the crypto native, the builder, the one that's going to keep going in the trenches of a soul sucking bear market. And those are the teams and the individuals, the crypto natives, the people who are there in

• 5:03Ryan Sean Adams?

  the bear market that I tend to trust more to carry us for it. In the future bull market, there is going to be a host of new tourists that come aboard. And you only can tell whether they're crypto natives or not, if they're willing to continue building during the bear market as well.

• 5:21David Hoffman?

  Yeah, making it through the bear market is just the biggest signal of commitment. Like, no one can ever question whether you're here in it for the long term or not. And AVE as one of the protocols on Ethereum, one of the biggest protocols on Ethereum, I think is pretty clear, is in it until the very end. So, big fans of AVE. Let's just go ahead and get right into the interview. But before we do that, we're going to take a moment to talk about our sponsors. One of the tools I've started to use recently is Zapper. For those of you that were a part of the 2017 bull market, it was characterized by just opening up Blockfolio and refreshing it over and over and over again. And also, anytime you ever made a trade, you would have to go into Blockfolio and manually input that trade information to make sure that your portfolio

• 6:04David Hoffman?

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• 6:50David Hoffman?

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• 7:24Ryan Sean Adams?

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• 8:04Ryan Sean Adams?

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• 8:40Ryan Sean Adams?

  Bankless Nation, I am super excited to introduce our next guest. This is Stani Kulechov, who is the founder of the Aave Protocol, which is, as you know, because you are a Bankless listener, a money Lego for lending and borrowing assets in DeFi. It has a phenomenal growth story. So, right now, there are about 1.4 billion in locked assets inside of the Aave Protocol. The price of lend, its native token, has also increased about 3,300% this year. So, that means if you bought $100 worth of lend on January 1st, you'd now own $3,300. An absolutely

• 9:23Ryan Sean Adams?

  insane growth chart, insane year for Aave. Stani, how's your year been? Are you doing okay? How's the year going so far?

• 9:32Speaker 02

  I'm pretty much dying here with all the things that we're building and also the traction that is coming and in the whole space. And it's hard for me to keep up with everything, what's happening, even inside of it. It's just been amazing, amazing year so far.

• 9:49Ryan Sean Adams?

  You know, so David and I are both like, full-time, like, this is our job to cover all of these things and to try to keep up. And we're having a hard time, not just keeping up with just things that are going on in DeFi, but keeping up with all of the things that Aave has been shipping lately. Is this just like, are you guys accelerating in your ability to ship things? Or is this just the symptom of a bull market?

• 10:12Speaker 02

  I think we're more organized in the sense, I think we're more, we have more resources than we used to have. And I think we are more somehow smarter in the way we build, not just code, but ship products. I think it's a combination of multiple things. But we're super organized, and we just, when we get a good idea, a good feature, we just want to get it kind of like to the public. And We tend to see that many of interesting things hasn't come up into mainnet because

• 10:50Speaker 02

  I think projects are hesitating too much, but I mean, it's all about innovation. I mean, the more you get stuff that helps people removes inefficiencies and brings value. I mean, there's no reason to wait with it.

• 11:07Ryan Sean Adams?

  Well, you guys certainly don't wait. You've been shipping like demons this year. It's been absolutely insane to see. I wanna, you know, start with this. And we don't usually do this on the podcast, Stani, because we tend to like to skip over the kind of the intro and get sort of into the meat. But I think part of the meat, actually for you, is the intro. Like, we're doing this series on crypto native founders. And Vance Spencer from Framework came on last episode, and he talked about this, how it's his goal and Framework's goal to find these unique crypto native founders. And they're typically not

• 11:43Ryan Sean Adams?

  found in the places that traditional Silicon Valley venture capitalists look for them. And now you guys started Ave in Finland, right? Helsinki, Finland, is that right? So this is a, you know, a country of five million people. It's, you know, for folks who aren't familiar, it's very far north, very likely north of where you're listening to this from. Why Helsinki? How did you guys found a major DeFi protocol in Finland?

• 12:13Speaker 02

  Yeah, I mean, definitely, it's kind of like, I mean, it's not the place where you would expect

• 12:22Speaker 02

  big projects come from. But in terms like Finland is a small country, but in some way, there is a lot of things that are very good. I mean, in terms of education, innovation, and just, we don't just see usually Finland represent that much. I mean, we have a very good gaming industry. For example, if everyone remembers, for example, Angry Birds, Clash of Clans, these are Finnish games, actually. And if someone remembers still like Nokia, like, they made the best phones and they went to

• 12:58Ryan Sean Adams?

  Right.

• 12:59Speaker 02

  the worst phones. And I mean, there is innovation there. It's just, I don't know. I mean,

• 13:09Speaker 02

  I see it kind of like, maybe it's because of DeFi, we're able to do this. Maybe because it's the fact that anyone can build permissionlessly, not just like use permissionlessly. DeFi primitives and the protocols, but actually you can build. And if you allow that, I think the next biggest thing might come from, I don't know, from a smaller country. And that's, maybe that's the point of all decentralized finance.

• 13:39Ryan Sean Adams?

  I totally agree. I think that is the point, that anyone can get started from anywhere. It's permissionless. You don't need to ask anyone. You don't need to know someone on Wall Street or know someone in Silicon Valley to go build something and to go innovate and to go ship something. You know, another fascinating point, I think about you, Stani, is that you've got a master's degree in law, right? So this is also not necessarily the typical, I guess, motif of the, you know, the tech founder. Can you tell us about law and how that intersects with cryptos? Like, just tell us the story.

• 14:18Ryan Sean Adams?

  How did you get involved in wanting to build something on Ethereum and in DeFi to begin with?

• 14:26Speaker 02

  Yeah, I mean, before going to law school, I actually, I did web development. I did mobile app development before that. And I used to focus quite a lot on financial applications. And I even had a startup where, well, it wasn't a startup, it was more like a small project where I build an app where all the gamers, gamers, for example, or anyone who gets income from App Store or Google Play, there's this waiting period of one month and 15 days or so.

• 15:05Speaker 02

  And our kind of like product application allowed them to get their income the next day. So we did a bit of financing in that sense. And I I loved always development like I I was born always somehow like close to software. My brother used to used to used to basically tweak Linux kernels and and Linux was a big thing. It's it was very big thing in Finland because I mean Linux actually is from the founder is from Finland. The project started from there. So there there is another like thing that and it's open source. I think Linux is the biggest open source thing out there, one of the biggest.

• 15:45Speaker 02

  And what was interesting is that programming, it's mathematics, it's very proof like. So let's say one plus one, one plus one is two. But then again, whenever I encounter a regulation or law, which is very common in finance. I I noticed one interesting thing is that law law is basically opinionated. In in the sense that there is no right or wrong, but there's actually a consensus of of of like different kinds of opinions and that forms the the law.

• 16:24Speaker 02

  And and I was I was like, I wanted to understand more and I I went to study law and and that was pretty, pretty, pretty funny.

• 16:32Ryan Sean Adams?

  So like it was it was intellectual curiosity that drew you to law school. Is is that the case?

• 16:38Speaker 02

  Yeah, I I never intended to work as a lawyer. I I mean, somehow it was as a professional, it could be fun in terms of like you. You're able to, if if especially if you're like a commercial lawyer, you could actually see how companies do transactions and and and help them startups, scale ups and and also kind of like a a a bigger blue chips as well. But somewhere in in middle of the law school, I started to get more involved in Ethereum. I I guess I was researching something about automatizing legal agreements. And somehow somehow I ended up into a post about smart contracts and started to read more

• 17:19Speaker 02

  and ended up in Ethereum Reddit and started to think like, what is this thing? And and and just researched like weeks and weeks and. Try to understand and and grasp like what you could actually do with this this technology. And that was like when I understood like smart contracts and and the power, especially like the the power of of having immutable code. And then it kind of suddenly clicked to me like actually we're building a something that kind of didn't exist before in this efficient way. And that was mind blowing. The interesting part for me was that when when I was designing and and and building

• 18:03Speaker 02

  the the financial applications, like programming itself, it it's kind of like fail and and mathematics. It it feels like it's it's very rules based. So what it basically means that let's say you have a a a equation of one plus one, it's two, but in in law, when it comes to regulation, it's not like that. It's very opinionated. So if you think about law, it's it's kind of like different kinds of opinions based on in in interpretation. And then you kind of like have a consensus on what what is the the right interpretation of of let's say law or or what is right or or wrong in that sense.

• 18:44Speaker 02

  And and that part of fascinated me quite a lot because it was very uncommon to to to me and I wanted to feed this this in in intellectual and part. But what's interesting is that I I started somehow get more involved in Ethereum because I was researching at some point in in my studies about automatizing agreements or efficient way of making legal agreements. And somehow I ended up reading something about smart contracts. And then was one thing led to another. I was in the in the Ethereum Reddit community and reading all this stuff and and people

• 19:29Speaker 02

  doing transactions and and reading kind of different kinds of use cases potential. And once I realized the the potential of of of of smart contracts in terms of immutability, I was pretty much sold because it was mind blowing because once once you you deploy the code and and and in a way that. It's immutable. You kind of don't need to trust and you can even get rid of the lawyers and in one way and simplify transactions and make it more efficient. And that is was something that was very mind blowing to me.

• 20:06Ryan Sean Adams?

  So it sounds like it was almost like this confluence for you of things like so, intellectual curiosity. I'm sure you probably saw that in Ethereum and in crypto and this idea of smart contracts as law, as immutable law, and also harkening back to, you know, kind of the Linux experience with with open source. It's all of those things combined. Is that why you kind of fell in love with DeFi in the space? And at what point did you decide to actually build something here?

• 20:35Speaker 02

  Yeah, I mean, the the open source part was was really fascinating because you you have people around the world and contributing. Like, I always understood the the open source because I I usually tend to use open source software when I was younger and developed software and and doing college. I didn't want to pay because I didn't afford to pay different, different kinds of software. So I tended to try to always find open source versions and and not much contribute. I I I wasn't that kind of like a talented in the sense or skillful, but but but definitely like I I I always understood what what it means.

• 21:16Speaker 02

  And I think even more in Ethereum, it became quite clear because you had a community which is very open source centric, but actually you could build a lot of proprietary technology on top of on chain ecosystems and in DeFi as well. But many tend not to because you kind of lose the the edge of having a community and the contribution of of community. And when I saw that happen in in the Ethereum space, that was pretty fascinating. There was one incident that kind of like was weird to me because I came a bit before the the the DAO hack and and and I I things were very unclear to me.

• 21:59Speaker 02

  Like, I haven't grasped everything what's going on in Ethereum. And the DAO hack happened, a lot of people kind of turned their backs and thought that the experiment was a bit of failure to some extent. But for me, it wasn't ever like an issue. I mean, like, I wanted to still build something. And somehow, I realized that I want to build something related to finance. And then I kind of started to think what that could be.

• 22:26David Hoffman?

  Okay, Stani, so you like, you discovered Ethereum, you're intellectually curious, you like smart contracts. But why did that end up you creating Ethland? And as a piece of trivia, for those that aren't familiar, before there was AVE, there was Ethland. And so Ethland is actually the precursor to AVE, which, you know, Stani and the Ethland team started before AVE ever was a thing. So, Stani, how come Ethland as a protocol or as a project, how come that interested you?

• 22:54Speaker 02

  Yeah, I guess I wanted to do some sort of a proof of concept of a loan transaction, where we connect a lender and a borrower, and they can basically do a loan transaction in a distrustless environment, and especially like, addresses are basically pseudonymous, and still in a way that the borrower has an incentive to repay the loan. So what we came up is, interestingly, this was the period when we saw the first kind of like decentralized exchange coming in Ethereum in 2016 was the Ether Delta. And there was absolutely no traction,

• 23:39Speaker 02

  nobody cared about it, nobody understood how to use it, and it was difficult to use it, and it was an order book exchange. So it took a bit while when these tokens, ERC20 tokens that are Ethereum, got a bit of more volume and traction, and people started to actually trade them. And we saw, like, actually,

• 24:02Speaker 02

  Liquidity. So in that part, I was thinking like, okay, so we have here like tokens that could actually be assets, representations of anything. Why not use these assets as a collateral until the and make a loan transaction and release the collateral when the borrower repays it? And that was the very first concept of over collateralized loans. And we named the project ETHLAND, short for Ethereum lending. And it wasn't like the, I mean, the designs were very crappy. Those days when you build decentralized applications, you didn't give much about user

• 24:43Speaker 02

  experience, the front end, it was just all about like deploying smart contracts and having some sort of way to interact. And that's fine. Like, if you can connect to a DAP and then just initiate the transaction, rest was kind of like obsolete at that point. And I'm glad that we got rid of that. And now we are in a state that we have beautiful user interfaces and actual user experience. But that moment was there when we actually started. And that was, I mean, fascinating enough, ETHLAND model, the over collateralized loans, is basically where half of the DeFi is based on. You borrow against a collateral. And we didn't understood back then,

• 25:25Speaker 02

  I didn't understand back then, how big the space could become. I thought it was a very nice proof of concept and probably I will forget about the project, but that didn't happen.

• 25:35Ryan Sean Adams?

  Yeah, people, people talk about the user experience of Ethereum and crypto being difficult today. And I think those people never actually tried to use Ether Delta back in 2016. David, did you ever trade on Ether Delta?

• 25:51David Hoffman?

  I'm pretty sure I still have funds inside of Ether Delta. I didn't bother to go get them because it was such a pain.

• 25:57Ryan Sean Adams?

  It was just so janky, like, but it was at one time, the only place where you could get particular tokens. But man, it felt like something out of like the early 90s. It was just. Yeah, terrible to use. But, okay, I want to, before we get to AVE now and kind of finish the story on ETHLend, I want to talk about this because ETHLend was similar to the initial version of Dharma, right? Another protocol that was doing peer-to-peer lending in that it was, it was peer-to-peer, right? So it was, you know, one individual with an ETH address matched to one other individual with an ETH address.

• 26:41Ryan Sean Adams?

  And I don't know, like, how you think about it, Stani, but it feels like peer-to-peer DeFi contracts haven't taken off in the way that peer-to-contract DeFi protocols have. In that, like, a peer-to-contract is sort of like there's this aggregate pool and you sort of, you know, match liquidity and you pool liquidity inside of the contract rather than always having to match peers. Was that a, an insight that you developed? Or what are the kind of insights that you developed when building ETHLend that led you into what AVE eventually became?

• 27:15Speaker 02

  Yeah, I mean, I definitely agree that the peer-to-contract model is more efficient in that sense. What's interesting back then is that when we started, there wasn't an ecosystem like this we have today. So, so, I mean, EtherDelta, where I remember first time I wanted to actually sell tokens or buy tokens, I waited a week that someone bought the tokens and they were quite liquid ones. I mean, I mean, it was first blood tokens and it's like, it's just fascinating how low liquidity there was.

• 27:55Ryan Sean Adams?

  You opened a trade, so this is like what people don't realize, don't remember about EtherDelta. So you would open a trade and there would be no buyers on the other side. So you'd have to wait like a week.

• 28:05Speaker 02

  For one week, yeah.

• 28:06Ryan Sean Adams?

  Like, yeah, to get that trade filled, right?

• 28:09Speaker 02

  Yeah, yeah, that's how crazy it was. I mean, and then you have the gas cost and then you, you wonder like, why I'm paying gas? Well, you wonder these days even more, but, but, but it's kind of like.

• 28:22Speaker 02

  In in interesting aspect and yeah, I mean, the liquidity was very low. So and we wanted to make this transaction to happen and and this proof of concept. And we're thinking like how, well, what happens if if actually someone needs to liquidate the loan and and resell the collateral? And and and uh how we make it work in a way that uh we don't kind of risk other users. So so when the liquidity is very low. It's way better to not not to pool uh the risk together into a systematic form. And that is very typical uh in in uh. Low risk, uh low uh liquidity instruments. So so what we wanted to do is kind of like separate the the agreements and.

• 29:06Speaker 02

  And uh we even technically did it quite separately. We we deployed uh uh for each loan that was created, we deployed. Uh a separate uh smart contract, which was very stupid to do because. The every time you deploy a smart contract, you you you pay a lot of gas, but then the gas price was quite low and we found out like six months later that. Uh the gas prices like uh went ten X and and then we were in the place that we had to re-figure everything else, everything out out again. But uh so we had to separate the risk. So we want, we that was like one of the things. We didn't want to make a situation where. Uh someone can come and and and uh somehow use this uh systemic risk in their advantage when they.

• 29:51Speaker 02

  The collateral values are low liquid in market. So so we made the peer-to-peer model where everyone who is funding a loan can actually decide upon their risk level. And and at that time, uh it it made a lot of sense and and. What was interesting in in this fashion is that uh it was the very first primitive of of on-chain lending and and kind of like we we wanted to. Look something that already exists in the traditional finance, which is peer-to-peer loans, even though they are these days also kind of like liquidity providers. Uh are already like aggregated in in one one way. And and and we we started the model.

• 30:32Speaker 02

  This way and at some point the DeFi started to accelerate in the sense that some of these tokens started to actually have some value. Like now we have actually shitcoins that are traded and not just shitcoins that that that that uh aren't like traded anywhere. And and and that changed quite a lot. So you could pool risk and and we started people to do this. And that started to actually inspire us that, okay, if they if they can do it, I mean, uh, we can do it and we can improve something. And I think that was the the moment that took us forward.

• 31:05Ryan Sean Adams?

  So before we get to the happy 2020, want to talk a little bit about the bear market, the grueling bear market, right? So, you know, back to back to tokens, you guys launched the lend token in in happy days, right? December 2017, when everything was booming, even CryptoKitties were were selling for like, you know, thousands of dollars. Uh, you launched it then, it shot up, right? So from whatever the launch price was to about, you know, thirty nine cents in January 2018, right? Everything was going crazy. There was not a lot of rationality to it. Not a lot of uh cash flows or token economics that were thought through. People were just buying everything.

• 31:50Ryan Sean Adams?

  But then we had the 2018 bear market start shortly after, and it seems like shortly after you guys launched. Ethereum lost ninety five percent of its value. Uh, but like tokens like lend lost even more than that. It lost ninety nine percent of its value um and by by 2019. So like the pit of the bear market, um, I think again, you know, memories are short-lived, but uh people don't remember how um despondent.

• 32:25Ryan Sean Adams?

  Uh, DeFi teams were feeling like, um, you know, Ethereum was dead, Bitcoin is the only uh app for crypto, all of these things. How are you feeling?

• 32:38David Hoffman?

  And to add a little bit more color to that, there are plenty of 2017 tokens that did exactly what the lend token did at the start of 2017 and then and then mooned and then in 2018 went to like not lost ninety nine percent, right? And there are plenty of tokens that are still at ninety nine percent losses, whereas Lend has not. And and

• 33:00Speaker 02

  There's also, there's also, and there's also tokens that that they used to do something completely else and and lose ninety nine percent of value and now they're doing DeFi.

• 33:10Ryan Sean Adams?

  Yeah, exactly, exactly. Well, okay, but but in in the bear market with, you know, your your token ninety nine percent down, down, everyone's saying like DeFi is dead, Ethereum is dead. How are you feeling like it seemed like you guys kept building, but how, you know, did you ever think it's over? Ben Horowitz has has a book, which I love. It's called The Hard Things About Hard Things, and he talks about every every, you know, protocol, every startup has its Wifio moment that's W F I O, where it's like, we're F'd, it's over, right?

• 33:44Speaker 02

  Yeah.

• 33:44Ryan Sean Adams?

  And they have to go through that to come out on the other side. Did you have that moment? Did you think it was like not going to work out?

• 33:50Speaker 02

  Well, actually, never, because we, I mean, we did raise substantial funds, but kind of in terms of like building the the ideas that we always think about at at AVE and back in Etlan, like we were always like thinking like, like, like, like, when can we ship this new thing? Like, when we could move to the next thing? And like, we we had so many ideas that we wanted to actually get into the mainnet. I still have, I still have a lot of, a lot of kind of like a a proof of concepts that we we basically were brainstorming to two, three years ago, and that are very viable products today if we will ship them. And it's just kind of like

• 34:37Speaker 02

  we're, we have always been a bit un-resourced and because we are small teams, so we have to focus into very, very core. And but I can say that during that

• 34:50Speaker 02

  That kind of crypto winter period, it was, it wasn't easy. I mean, it wasn't like people like losing faith and just because of the the devaluations in the market is, is going down and, and, and not giving like a much about what people are building. That was like sad. At least it was sad to me like because like, I mean, we were shipping more stuff all the time. We're, we're getting more knowledge. And, and we're building more things than more than ever. And, and, and basically people weren't that excited about it. And, and and I think the good part is that we, we, we definitely had very diverse community.

• 35:29Speaker 02

  And we had a lot of users from, from even today, like many users from, many other users are actually from, from the Eathland era. And for them, it's fascinating because they have seen our very first products and like which look completely like crap. And where we are, where we are today. For, for them, this is like a, like a journey and they have been part of it. And that's like fascinating. And, and there's still a lot of people who come all the time that they're saying that's been following all the time and haven't been active, but, but it's just amazing how you guys are proceeding. And, and I, I, I think for us, the, the

• 36:08Speaker 02

  the, the thesis has always been the, the innovation. We didn't care about the markets. And, and to be honest, when I came to Ethereum, I never came to invest. I, I bought Ethereum for gas and that's all about it. I, I had, I, I needed gas for deploying contracts and, and to to pay transactions. And that, that is why I needed Ethereum. I never needed for as an investment. I, I like to build financial products. But I don't want to kind of like focus too much on investing. I love to build things. I'm a builder, I think.

• 36:41David Hoffman?

  So let's talk a little bit more about the AVE community during the bear market. You said that there were people that stuck around and people that paid attention, but that couldn't have been the same throughout 2017 and then into 2018 and 19. So how did the AVE community kind of fill their niche around AVE? Because from what I understand now, the AVE community is one of the, probably the gold standard in crypto, right? In terms of like having a strong relationship with the team and the team using the AVE community to iterate on their products. Tell us about the transition from 2017 to 2018, 19 with the AVE community.

• 37:20Speaker 02

  I think what was important that we, when we were building EAT Land, we basically finished all the features that we wanted to deliver to the community. And then we started to build the next thing. But for us, what was important that actually like our communities were about what could be built next? And compared to that, too much giving, giving kind of like too much sticking on something very puristic. And I really love that because it gives space to ship. And it's interesting now, like, I mean, we're shifting towards decentralized governance, where the token holders make all the decisions.

• 38:03Speaker 02

  And I'm really curious to see like how it will play out in the future. Because AVE as a team will build things. Like I hate the idea when, when, you know, you basically give, you build a protocol, you build the product and give it to the community. And then you, you basically say, okay, I'm out of here. And I just don't believe in that. I believe that you are still like a stakeholder in what you're building. And if you look at, for example,

• 38:32Speaker 02

  Linus Torvalds, as a kind of like member of the Linux community, he's still very active. And same for, for example, Vitalik in Ethereum. And I, I, I, this is a kind of like a people were actually like, I like the, the idea of like, kind of like being present in the, in the ecosystem. And I think it will be interesting to see because there will be other teams also building on, on top of AVE and also making pull requests into the core of the protocol. And curious to see like what direction it will take. And I, the good thing about we're always listening to community in, in, in that sense. So, so, so there, there usually haven't been like

• 39:17Speaker 02

  difficult times. I, I, I guess more when there's difficult times, we have got a lot of respect in the sense that we build things and we, we, we don't disappear if, if we fail with one thing or something doesn't work. We just try to find a solution. And I think people just trust us in, in that sense that they want to give us support and, and pushes forward. And I, I think, end of the day, like your, your product is as strong as your community and your, your, including users within the community. So, so, yeah, I mean, that's, that's, that's vital part of AVE.

• 39:55David Hoffman?

  Did the community ever take a more like active role in, in product development? Like, how, how did the communication between team and community go? Like, while you guys were making this pivot from ETHlen to AVE, like what, what impact did the community have in actually making like design decisions? Or, or, you know, meaningful and impactful choices? Did any of that happen?

• 40:16Speaker 02

  Yeah, I, I remember like, kind of like we, we, we showed some designs and, and we, I mean, when they were crappy, we got like a lot of, a lot of like negative feedback and we realized, okay, now we, we really need to like make some, some better UX. Like, and we understood like the, the importance of it. Because many of the community members, they're not like always this kind of like a super DeFi, super user. Type, we do have them in our community and and and and uh but we also have uh community members who are just uh they might deposit once and and forget for a long time or they might just basically uh they support DeFi but for some reason they don't want to use it at the moment

• 40:58Speaker 02

  and just want to follow the a the action that is happening and and might might be like a token holder but holding still in centralized exchange. So the the feedback has been very, very uh, I mean, the community is is somehow you have this feedback loop and go back and forth and having this for many years is is amazing. It it the the feeling is just super nice because you know there's there's certain people there like if you if you publish uh some designs or like product updates, you know, you you know, there's there's there there are people who have followed you and and are like actively participating and that feeling is amazing. So you you you you kind of trust that

• 41:39Speaker 02

  uh you you have you have uh you have audience and uh uh I I I think it's it's we we we never we we try to not take it as a granted and and like appreciate like where we are uh and I I think we wouldn't be here without uh the the the whole uh token sale and and this this this kind of like a path to to roller coast coaster from from bull market to bear and and back here. Uh I think this has kind of bring more strength in in our community.

• 42:13David Hoffman?

  Hey guys, we're gonna pause the interview with Stani so we can talk about some of the bankless sponsors that make the bankless nation possible.

• 42:20Ryan Sean Adams?

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• 43:01Ryan Sean Adams?

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• 43:24David Hoffman?

  Ampleforth is a new base money experiment on Ethereum. Many people have heard of this new rebasing mechanism. And Ampleforth was the protocol to first introduce that into the Ethereum space. Ampleforth is very comparable to Bitcoin in the sense that it has a non-dilutive supply. However, there's one thing about it that's inverse with Bitcoin. Whereas Bitcoin has a completely inflexible supply, meaning any demand for BTC the asset is therefore reflected in the price. And Ampleforth is the inverse of that, where Ampleforth is pegged to $20.19 and any demand for the Ampleforth token is reflected in the supply of the asset, not the price of the asset.

• 44:08David Hoffman?

  So the Ampleforth token tracks $20.19 slowly over time. So it should never be too far away from $20.19. And in order to achieve that goal, it adds or burns Ampleforth token supply, so that the market generally prices it around the value of a $20.19. It is definitely not a stablecoin because the volatility of the value that you hold will fluctuate up and down wildly. But the token itself is supposed to track a dollar. Pretty interesting experiment. There's been a lot of spinoffs using this rebasing mechanism. They also have this liquidity mining program where you can supply Ampleforth and Ether tokens to the Uniswap pool. And you'll be able to get an extra dividend of Ampleforth tokens from the Ampleforth geyser.

• 44:54David Hoffman?

  So check them out at ampleforth.org and see if this is an experiment you want to partake in. All right, guys, let's get right back to the interview with Stani. So you mentioned the token sale. Did you guys have funding before that token sale from like venture capital?

• 45:09Speaker 02

  No, I mean, it's quite difficult in the sense that we were building a technology back in days that was very, very novel in the sense that the ecosystem didn't exist. And also, me coming from Finland, small country, which is like not a VC playground. And, and, and, yeah, being at that age, still studying, I mean, I could not see a VC fund placing a bet on what we were doing back then. You will need something more like, kind of like a democratic way to raise funds. And as we did the token sale, I afterwards realized by analyzing that actually like,

• 45:54Speaker 02

  if, if this way of funding would not exist, we will not be here. I mean, no way, any like, kind of like a, I mean, in that stage, early, any VCs will have invested us in those, those kind of like circumstances. I mean, we, we knew that we could build things, but betting on this kind of technology and ecosystem, today it's easy. I mean, it's very easy to go and, and, and, and, and find a project and, and, and which does some solid stuff and just invest because there's an ecosystem, there's like market and like cross interactions. But, I mean, back then there's

• 46:34Speaker 02

  Ether Delta, which wasn't even liquid. And, I mean, not, not, not an easy scenario in that sense.

• 46:41David Hoffman?

  The lend token sale happened in November of 2017. You guys, from what I just looked up just now, you guys raised a little bit shy of eighteen million dollars, which, I mean, as far as market caps and valuations go, that is insanely low for what we know of today. And so you're telling me that the eighteen million dollars that you guys raised in November of, of 2017, plus I'm sure there were some AVE tokens held by the team, all, all of that raise was done in an ICO and all of the That you guys took was done from the ICO to people that were involved in the community at that time. And to me, I want to highlight something here because, you know, the ICO is kind of synonymous with like, you know, the F word.

• 47:25David Hoffman?

  It's like a bad, it's like a bad word now, like the I like the, we always look back on the ICO mania as like this time where a lot of retail got scammed. You know, people got burned, but I think we forget that like the, the bad side of the ICO mania came out of like a very, very good side of the ICO mania. Like the, the, the, the most good, for example, I would say was like Ethereum, like the most fair ICO of all time. And then Augur came not too long afterward and, and Ave, I think people should remember that like, and, and Ave is a leading example of an ICO. That was fundamentally good, that did its job in both at like giving funds to the team because they need that funds to build out the prot- protocol.

• 48:08David Hoffman?

  But also using the token as a community shelling point, a community coordination tool. And so I just think as the ICO model was done with a complete success with the Ave team.

• 48:21Speaker 02

  Yeah, and I think what's, what's funny is that, uh, like I, I see kind of like, uh, betting on the Ave team is, is, is, it feels like betting on reliability. So, so we, we kind of went the ups and downs and, and we're still here. So, so, so it's, it's, it's more certain in, in that way. But, uh, yeah, I, I totally agree. I mean, uh, lots of things happened and I, I'm pretty sure that once this whole yield farming craze, uh, will end. Uh, we will see like a lot of disappointments, but also if you look at the venture capital award and, and investments in general. Let's say, uh, you make 10 bets and nine will fail and one will be the jackpot.

• 49:01Speaker 02

  Yeah, I mean, there's even more kind of like, uh, Simmerers and Arios and investments in general. But I really like the idea, like, I, I, I still don't understand, like, why people aren't doing uh this so-called Dicost, which is a combination of, of a DAO and ICO, uh token sale, which, which, which is something that uh uh Vitalik himself uh kind of suggested that that could be a, a, a, a model to try in the sense that uh you actually have a, a fair launch model where, where uh you, you basically sell the uh sell, sell, sell the governance power to the token holders and, and that

• 49:40Speaker 02

  that those funds are going into the DAO and, and they get instant governance in, in that sense and there's like incentives are so aligned and, and we're now having this kind of like a fair and launch model that we call uh where you give everything to the community with this uh farming. But uh I think it's very unfair and I can, I can uh later tell why.

• 50:04David Hoffman?

  So, Stanley, to wrap up this, this portion of the conversation, when we had Vance on, uh, on the podcast from, from Framework, he talked about how teams that were handing over the governance of the protocol off to the community were looking, uh inherently looking for valuations that were far beyond like the traditional C corp valuations or the corp, the, the companies that you find on the stock market, right? And because these thing, because inherently these things are protocols, they aren't companies and protocols just are bigger, right? And so when you guys were in 2017, 2018, building out Ave, uh were you guys thinking along those lines or were you just kind of, you know, heads down building?

• 50:44David Hoffman?

  Or we, what was the, and what was the end goal for Ave back in 2018 and 2019?

• 50:50Speaker 02

  Yeah, I, I, I think uh mostly we were uh heads down building, but we, we kind of tried to a bit of like

• 51:00Speaker 02

  Think of like where the space is going and sometimes there there were difficult times in the sense that we didn't see things moving uh in in the space, kind of like we we had a long narrative, I mean, there was a long time narrative where uh like there's uh only a few DeFi users and you know, like we build a lot of stuff. I mean, because we we were embracing how much there is developers building in DeFi and so many cool things. And there just a couple of users and and this this kind of like a meme. And now it's it's insane. I mean, this this kind of like a narrative was back in uh year and a half ago and now we're in completely different uh situation and it's it's interesting.

• 51:45Speaker 02

  So one of the the the the time times on those two thousand eighteen nineteen, like we had this kind of like periods that we we are not getting more users and like why why isn't this working as a e- ecosystem and like and we weren't like disappointed, but we we were thinking like what in a funny way that what we like didn't build or what what's left to build that we can actually get more people uh involved and funny like like what's really funny is that it's actually the incentives that drew everyone. And the very first incentives were basically uh having stable coins and earning interest on them.

• 52:25Speaker 02

  And that grow got a lot of attention. I mean, you saw interest rates from five to seven percent uh annually and then you compare it to the traditional finance where it's close to zero. You it makes you wonder like, wow, uh this this uh this new world could be, there could be some potential here.

• 52:46Ryan Sean Adams?

  I personally absolutely love the fact that the Silicon Valley VCs of the world and the Wall Street finance people totally missed AVE. I just love it because it's just like, you know, that's the story of of DeFi. That's kind of the bankless story. It's it's kind of the underdog, right? The the anyone has access to these tools. From anywhere in the world, they don't have to be part of these established networks in order to succeed here. What they have to do is build something that people want. But it it it still is, I think, an incredible story.

• 53:27Ryan Sean Adams?

  So not that long ago, we're talking six, seven months ago, Stani, all they had less than a couple hundred thousand dollars locked inside of it. So it was tiny. Now, fast forward to to now, we've got like over a billion. We've got like something like 1.4, 1.6 billion locked in this protocol over the past seven months. Like that kind of growth is absolutely insane, even by like Silicon Valley standards. They don't see this sort of thing.

• 54:00Ryan Sean Adams?

  Can we talk for a bit about why you think that growth has come? So you mentioned incentives. Is that the reason? Is it? Is it also that you guys have just been like, you know, building so much? And you're just building faster and innovating faster than every everyone else? I guess my question is, in the in the two years of the the bear market, what the heck did you guys build to account for this seeming overnight success that we've seen in 2020?

• 54:29Speaker 02

  Yeah, I mean, we we definitely didn't expect this kind of growth. Like, our our our idea was very, uh,

• 54:39Speaker 02

  I mean, it was, we always had ambitious goal to to to achieve. But it wasn't like we, I wasn't expecting even the DeFi space to grow so much, honestly. I I mean, we would be happy if we had like 5 million locked value. And that will be, that would have been super awesome. And then we will be thinking, okay, what what will be the next features we will build? But I I kind of felt somehow that we we put a lot of effort in the the actual protocol launch. I mean, we built it for quite a long time. I I think it took us almost a year to deploy. And we put a lot of effort in in what we were building and and trying to perfectionize it.

• 55:22Speaker 02

  And in adding all these features, like the A tokens that that accumulate in in in user balances and having native flash loans and all the stuff that we we were.

• 55:35Speaker 02

  Implementing, I mean, it kind of paid off. And I, I, I guess one of the bigger things is that it's quite developer friendly protocol. And it's, it's very easy to build on top. And we noticed that most of the liquidity comes from actually, and transactions comes from different kinds of products that have been built on top. For example, we were, when we launched in January, we, we got quite a lot of deposits and borrowings, but no one actually was using flash loans. And, and, and, and that was actually interesting part of this kind of underdog story because

• 56:18Speaker 02

  our flash loan has a, this kind of like a reward fee to the depositors. So whenever there's a flash loan on particular block, it means that it, it gives a, this kind of like a spike in their yields, depositors yields. So let's say if there's a die flash loan, typically now, today, there can be even like a 14 million worth of die borrowed in a flash loan that gives a small spike in the, all the, the depositors yields. And that's, that's pretty cool because it's arbitrary. So, so, and what we noticed that kind of like the, the Silicon Valley, this perception

• 57:02Speaker 02

  was that actually you don't need to charge in the beginning, you don't need fees and, you know, you, you're looking for market share. And, and for us, it was like a bit of bullshit in the sense that, I mean, if you're building products, you can, you can, you can have fees, you can, you can, because you're building value in, in that sense. And when you're building value, you can, you can definitely charge. And how we are doing in the, in the protocol and in the. Future is actually that the fees goes to the stakers and eventually to the token holders and whatnot. But I think people were too shy on breaking things in a good way.

• 57:43Speaker 02

  You know, there's so many patterns, not just in DeFi, but in product development. And those people who are actually going in and breaking those barriers, they're succeeding. I mean, that is the innovation and how we get further. And we promoted the flash loans and talked to different developers and showed them like how, what kind of cool things you could do. I did a blog post on like seven different, eight different use cases of flash loans. And then some of the actually developers listened to me and kind of like they started to implement and I didn't even know about that.

• 58:26Speaker 02

  And then what happened, the Black Thursday came and we see, you suddenly see this kind of a needle in the graph. You know, we have this kind of, if you go to AWE Watch, you have this graph of like the usage. And we had this kind of huge needle that went up and that was basically flash loans. And we were like, whoa, where is it coming from? And there was a project called like DeFi Server that allows you to liquidate your CDP before it goes to the liquidators. And you lose your kind of like the incentive to them. And I mean, this kind of things and once people saw like the, what kind of things you could do with flash loans, it took forward.

• 59:08Speaker 02

  Of course, there was a couple of flash loan related attacks that gave a lot of publicity to the actual function. But I don't know, I mean, being close to developers and being part of that with them when you brainstorm adds a lot of value added and helps others to actually use your product as well.

• 59:30Ryan Sean Adams?

  And for those that aren't aware, this flash loan mechanism that you're describing was pretty innovative, right? And I think Ave, did you guys, I don't know if you came up with the idea of flash loans, but you certainly popularized it. And it's this idea, and jump in here, Stani, if you know, if I don't recap it quite correctly, but it's this idea of in a single block, so in a just one short Ethereum block space of time, you can in an instant borrow some funds, use those funds to accomplish some purpose in, you know, kind of the DeFi landscape, and then give the funds back and you're charged a rate for that.

• 1:00:10Ryan Sean Adams?

  But it's a, it's the kind of thing that doesn't really exist in traditional finance. Is that how you describe what a flash loan is? And like, who came up with this idea? Where'd you guys, you know, figure this out?

• 1:00:23Speaker 02

  Yeah, I think it's kind of exactly, I mean, it's something that isn't in traditional finance in the same form. And flash loan itself, I mean, it always existed in Ethereum because of the atomicity, how the Ethereum settles transactions. But I've seen a lot of flash loan implementations before us. I've seen like, I think even like multiple, but I never saw like actual mainnet implementation utilization kind of like before us. So I think what happened is that we just made it fashion and somehow popularized it.

• 1:01:05Speaker 02

  But definitely I've seen before implementations and I go a lot of code. I used to go a lot of code more than I do today, but I used to go like representatives and search from different kinds of, like what kind of projects people are building and

• 1:01:22Speaker 02

  And I definitely saw a couple of implementations, but didn't mind that much. I think one of our developers, Emilio, basically started to, I mean, he was very into this atomicity and kind of came up with his own sort of implementation that we eventually used and still use. And we are coming with version two, where we have, again, a completely a bit different kinds of, different kind of a flash loan implementation. And I mean, yeah, it's one of those things that, kind of like this DeFi thing. DeFi existed for a few years, nobody cared, and now everyone is caring because of the incentives.

• 1:02:05Speaker 02

  So, I mean, it's fascinating how the network effects work. Like, they come, and when they come, they come all together.

• 1:02:15Ryan Sean Adams?

  Yeah, I guess another, I guess, way that AVE was an underdog is it's actually, you know, fuels in a way, almost like a second mover advantage type of product, right? So, you know, Google certainly wasn't the first search engine. AVE wasn't the first lending and borrowing protocol to do something in a kind of a pure to contract type way. Compound seemed to be first. Compound, a Silicon Valley company, you know, if coming out of that, the A16Z, coming out of that whole zone, it seemed like at the beginning of the year that kind of Compound had this space covered completely.

• 1:02:56Ryan Sean Adams?

  But here you guys are, and you've now surpassed Compound in terms of total locked value. Is there something to that second mover advantage that you think counts for your success?

• 1:03:06Speaker 02

  Yeah, I mean, it's always difficult to be the kind of like a top dog. I mean, we were in DeFi polls in like for a week and something as the most value locked. Even the metric is a bit not suitable for covering all the different kinds of financial protocols. But, I mean, we felt bad in the sense that like it's not cool to be there. I mean, it's way cooler to be below and and kind of like uh compete with with the with the innovation and not not not worrying about like what's your kind of rank in in that sense.

• 1:03:44Speaker 02

  And uh I I I think for us, like, our goal was always to to build a product that everyone uses. And I mean, everyone that that we have certain user base and and we're happy what we're doing. And and uh I mean, we're always competitive. We love what others are doing in the space and and really admire everyone's work. I mean, the stuff people are building these days is is amazing. There there is some and technical even, technical implementations. Uh, there is, there is good amount of talent now, and I I I I hope we get uh even even more. So I I guess like the the being an underdog is way better, uh at least for us, because we don't need to worry

• 1:04:28Speaker 02

  that much of a pressure. But of course, you get a bit of pressure when when you're uh getting closer to to uh someone that is that is above you and but it I mean, I don't know, it's it's fun competition and we work quite closely with everyone. And and we try to be uh very approachable and and and kind of like be as as as as uh collaborative as possible. I I still think that the the the ecosystem is like everyone uh works together in some way, but we have like difficulties to reach upon coming up with standards, best practices and and actually like uh embracing them.

• 1:05:11Speaker 02

  Even even though we have been already a while and I don't know, it might be because everyone is is building heads down or or just kind of like we're still like looking too much on on TVLs and and and and and kind of like competing a bit. Uh but I I think that we will move forward from this space and uh interesting times will come.

• 1:05:33David Hoffman?

  So Stanley, what about the culture differences between a team like AVE and a team like Compound? Where, like Ryan alluded to, Compound is this Silicon Valley-esque, A16Z-backed startup that is a startup from a founder that has plenty of startup experience. And where AVE is like this team out of Helsinki, very grassroots organization, very grassroots leadership, grassroots community, funded by an ICO, and that ICO seeded that community in a way that Compound never really... Compound earned their community, to not... to give credit to where credit is due, but the genesis of Compound came as a venture capital type of investment, right?

• 1:06:17David Hoffman?

  And AVE is just not... is just a little bit of the opposite. And Compound seems to kind of go along with this like very slow, very meticulous, never ever risk anything type of attitude, where AVE is much more move fast and experiment quickly. Definitely not alluding to move fast and break things, if any of the listeners just had that pop into their head. How do you credit like the culture differences between these two organizations? So like the differences in the resulting product?

• 1:06:48Speaker 02

  Yeah, I mean, like, of course, I'm from Finland myself, but actually, when we look at the theme, it's quite global and in the sense like, I mean, our headquarters is now in London. We have an office in Switzerland. We have so many nationalities. I think there's like 23 employees in AVE, and most of them are developers. That's why we ship quickly. But what's interesting is that I think everyone has somewhat like a...

• 1:07:26Speaker 02

  Persona or media, like social media presence and and and participates in different kinds of communities. And I think that's very important for us. I I can't speak much about like how Compound is doing things. Of course, like they they have their own way of doing stuff, but uh we we really want to be uh very open uh and innovative how we do things. And and definitely like if we see an opportunity, uh we want to take it and we want to take it as fast as we can. And and and kind of like experiment how things go. And even in terms of like building,

• 1:08:06Speaker 02

  it's it's very challenging to build uh protocols that are holding a lot of funds because it requires so much uh procedures and and effort in terms of uh security and and the way you develop uh the architecture and and all the the the afterworks uh that you need to do. So in in that sense, it's not easy. But I guess it's also about how you build and and structure and architecture, your your your your offerings. Because you could always build products on top. And I I think that we have done done pretty well. But I think important stuff for us is that we we don't want to be associated into one particular place.

• 1:08:49Speaker 02

  I don't think uh we want to be European or we we we want to be like a a a seen more preferred in US. We want to be this kind of like a global uh thing in a way that uh we have brand exposure in US, Europe and Asia. And and we we try to get like as as wide demographic as possible. And that is the key when you build something that is very decentralized and like autonomous protocols. Because you succeed if actually that protocol is used globally in different parts of the world. And not just like used, but like you have contributions that that people are like contributing and building

• 1:09:31Speaker 02

  and and and helping out in in the community. So so when we achieve that thing, uh that's pretty important. And I I personally like I I I think VCs coming into the the the space uh and it was a couple of years ago. And it was like a this institutions are coming moment for for DeFi when we saw like VCs taking uh investments.

• 1:09:54Speaker 02

  I think in one way that was really good because we a lot of good projects were were built. Now it's difficult to say when we are in this like a fair launch model. Give it straight to the community and and how this VC VC part will play. But I I see like benefits in both of them. And I I think the the the community members at at least have decisions to make what kind of community they want to belong. But definitely like our goal is to be as open community as possible. And and and yeah, I think maybe that's the the difference. We want to be global.

• 1:10:34David Hoffman?

  So I wanted just to harp on this a little bit more. The so AVE has had their token out for since 2017, right? Since the ICO since November and the AVE like number of addresses that hold the AVE token is over over a hundred thousand. Whereas Comp and their brand new token has only been out for a few months. And it did this fantastic job with kicking off this whole like concept of yield farming and liquidity mining as a fair distribution mechanism. But as a coordination tool, Comp is just behind. They just they are very recent, they're very new. And whereas AVE's token as a coordination mechanism, both as a coordination mechanism between the community and the team, has been going on for years now.

• 1:11:16David Hoffman?

  Do you attribute any success of to to AVE's protocol as to this the establishment of the token much earlier than compounds?

• 1:11:24Speaker 02

  Yeah, I I think honestly, mostly I think it it just takes time to to to to actually like build this reliability of of of success. And I I think like it boils down to the discussion like that we we we we saw the ups, we saw the down and we're still here, we're building, we're shipping. So I I think our community and and and in in general, people understand somehow that like we are we're serious on what we're doing and and we we keep building and and like that there there isn't like a this isn't like a trial or this isn't something that we are.

• 1:12:04Speaker 02

  Uh trying to to to figure out like whether this works or not. If if we don't succeed in the first time, we will we will we will kind of like we will pivot and do something uh differently. If it doesn't succeed again, we will just redo. I mean, we're not leaving anywhere. Uh on on the opposite side, like we we want to expand and we want to uh grow the the product offerings and and improve our protocol and and and and kind of like get get community involved as as much as possible. And I definitely agree that it takes time to to to to build things and uh and I I don't have like anything like uh bad to say about Compound because I I really respect what they're doing and I

• 1:12:49Speaker 02

  I kind of I I like to have them as a competitor or like a kind of like one part market participant in the space because they're doing good job, so it it keeps me uh even more active to do even better job and and try at least try to do better job. And in in in that sense, uh and but in terms of like fair distribution models, uh I I I don't know, like if you look at the yield farmings, I don't see them that fair because like this isn't already to compound itself, but it actually like what we see today, for example, where where we have this liquidity mining purely in the sense that uh you you you get you you generate the you print this token to the governance

• 1:13:32Speaker 02

  uh to the to the liquidity providers who are who are basically putting liquidity into whatever you're doing and and farming farming the token and and what happens is that's uh uh it's kind of like a free money in in that sense. So so liquidity providers come and the more you have uh money, the the more you're farming, right? So so you're getting more tokens. And then if you are smaller, uh you have a smaller uh amount of funds and and you want to talk and you actually by farming it the same way, you are not getting uh as much as governance power. So you are kind of like forced to uh. Buy the token. So you see other people are printing with large amounts of money and selling

• 1:14:15Speaker 02

  it to the uh to the smaller audience. And I see it actually uh the opposite as unfair distribution model. And I think it will will will not end well. I mean, uh, I I definitely like, I I've seen like very good models of of of this liquidity mining or in in inflation, incentives, rewards, uh, whatever you name it, uh, for example, synthetics, which which was one of the earliest models and their their systems seems to work uh uh quite well. But the stuff I see today is a bit uh uh bit kind of crazy.

• 1:14:51Ryan Sean Adams?

  Yeah, things are certainly getting a little crazy. That's for sure. And so, you know, one of the things I think is is super underrated is actually going through a bear market. Um, that's, you know, part of what distributes your token to the community, and particularly to the holders, the the true believers of that community. Bitcoiners have been saying this for a long time, actually. Uh, and I I think they're right. You know, Bitcoin is the probably the most widely distributed, probably Ether after that. Um, both going through bear markets, going through a bear market can be the best thing you can actually do, counterintuitively, to build up uh build better distribution of your token and to build your community. Um, I want to talk about one last area of, I think, success

• 1:15:36Ryan Sean Adams?

  or something that's unique about AVE before we talk about roadmap and Avonomics and everything cool you guys have in the pipeline. And that's this. It feels like you have an uncanny ability, um, your team, the AVE protocol, uh, of building up these unique partnerships, like these protocol partnerships, like bringing other DeFi um tools and and DeFi protocols together to build something cool. So, you know, partner partnership with open law to create this unsecured lending, almost like a credit primitive, uh, partnership with with real tea, you've got real world assets coming into AVE. Um, even maybe I want to talk about this the most because Andre is uh somewhat from the YFI project we had in the podcast a few episodes ago.

• 1:16:20Ryan Sean Adams?

  Wire, and that is, he is a becoming kind of a DeFi celebrity, if you will. And I feel like, you know, it's the case that you guys were working with, or you were working with Andre, you know, many months ago on some of these projects, like you saw the potential of the sorts of yield farming that he was doing and building. And it feels like there's, there's a partnership there as well. Can you, can you talk about some of those partnerships and maybe focus on your partnership with some of these developers like Andre?

• 1:16:49Speaker 02

  Yeah, I mean, in terms of like the different projects and like, kind of like, I, I think one of the interesting success usually is that we, we're trying to find a simple way to make things happen. Like, when, when we, when we discuss with different projects and we're trying to find something that we could do in common, like to solve some efficiencies or provide value added. Like, they tend to become complex, like that, that was my like previous experience. But now I, I see that we are very good at like finding something very, uh, very easy and simple way of, of executing. And that's, that is what has happened, like with, with the

• 1:17:31Speaker 02

  different projects and we're doing really cool stuff with, with Realty and, and, and open law and and just like showing the potential, like the, the credit delegation. Uh, I mean, many missed kind of, uh, actually the, the bigger value proposition. So, so, so definitely like the, the open law, uh, and kind of like, delegating your credit to someone you trust or, or, or, uh, someone you make a legal agreement. That, that just shows like how you can unlock liquidity from DeFi. But actually like what's, what's the cool part is that, for me, who, who kind of, uh, is, is, is, is very like a crypto native, is that, and, and a smart contract native, is that

• 1:18:13Speaker 02

  you could delegate your credit into a smart contract. And if you know the predefined functions that what that smart contract can and can't do, you can assess the credit risk and say, okay, there is not much risk here because it just can, borrow the funds, deposit them into somewhere else and And and farm some token and and sell it. And then after a period of time, uh, return the funds. And if it's not returned, I can myself call the function and the funds will be returned. And I get whatever proceeds there are. And this is like credit delegation, uh, the actual potential, like from one smart contract, from, from the protocol, from the depositors to, to smart contracts. And, uh, Andre is an interesting individual. I mean, we have worked for, for quite a while and, and, uh,

• 1:18:58Speaker 02

  uh, like we, we always brainstorm and things and, and like what I like about Andre is that, uh, uh, we, we build the things for Abe and we build, I mean, uh, common stuff and, and also, uh, we help each other in terms of brainstorming, uh, I, I, ideas. And I mean, it's also kind of like a, a, uh, uh, like a mental support for each other in terms of like, things are going quite hectic in DeFi and it's not, not easy, especially for Andre, because I mean, uh, he started to develop by himself. Now people are helping, which is amazing. Uh, but there's a lot of stress when you're building stuff on DeFi. The, the, I mean, he made a post once about like how building on DeFi sucks.

• 1:19:41Speaker 02

  And it, it really sucks in sense that, uh, people want to blame and, and point, point fingers and, and, and it's, it's kind of like, uh, it's always right. But, uh, yeah, I mean, the, the coolest part is about this relationship is that Andre has big old things. Like when you, when you talk about ideas with someone, like maybe this and that could be built. Like normally it never happens or you find only kind of like, uh, reasons not to build, but usually with Andre is kind of like, uh, uh, he, he builds it. And I, I mean, that's a, that's a cool thing to do.

• 1:20:21Speaker 02

  And I, and there's like many of this kind of like developers that are shipping and some are like doing it in a different way. And, but, uh, I, I really like what's happening in, in, in, in the whole ecosystem. And I really love how like Andre was using, uh, Abe already in a way that was, uh, Pretty cool before this this whole Wi-Fi phenomenon. And that was that was like really, really amazing. And I am pretty happy that he he he continued back in the days. I mean, and continued to build. And yeah, and I mean, part of this relationship stuff with everyone. It also requires that your team is very active in the sense that

• 1:21:07Speaker 02

  your developers are happy to help other developers who are not not in in in, let's say, AVE, but are building something else, helping them, contributing to their projects. For me, it's very important that I can actually help someone to to to build a better product. And whether they utilize AVE or not, because they're in the ecosystem. And it's important, especially security wise, that everyone like kind of like gets the resources that they need. Because you can build the whole reputation and lose it quite quickly if something goes wrong.

• 1:21:38Ryan Sean Adams?

  You know, you almost get the sense with with, you know, teams like AVE and developers like Andre that they're not just building for their own products. They're building for the entire DeFi ecosystem. Is that right?

• 1:21:51Speaker 02

  Yeah, yeah, yeah. And I think we all are in the sense that and and and the the DeFi is just one step, like it's the step one, you know? And it's funny, we we started with with with DeFi because talking about the the whole Ethereum ecosystem, because like it it's just like finance makes sense to have financial backbone. But then there's going to be cooler stuff. There's going to be NFTs, collectibles, tokenized different kinds of value and and and e-commerce on on chain. There's plenty of stuff. Once we realized that actually those barriers that we had in our in our minds actually are just restrictions for imagination. When we get that on the side, we we will unlock the real capital, you know?

• 1:22:33Speaker 02

  I mean, if you can custody and and you can you can token as a dollar, why can't you tokenize a a a TV or or a PlayStation and or or a game? And and you know, there's so many things you could actually do in the future. And I'm bullish on on that side. And DeFi will be this backbone that will will help help fuel more fire in these different spaces that we'll see.

• 1:23:00David Hoffman?

  So Stani, I want to turn to Aavenomics. And I want to read a little excerpt from the Aavenomics introduction. Just the very first sentence. "The goal of the AVE Tokenomics through its incentives and policies is to create a shelling point where the protocol's growth, sustainability, and safety take priority over individual stakeholder objectives." Stani, can you kind of give us the too-long-didn't-read on the... Let me redo that. Stani, can you give us a summary of Aavenomics and its ethos and role and importance of the future of the AVE protocol?

• 1:23:39Speaker 02

  Totally, totally. And that basically part of actually was Jordan from our team, who basically led the bit, the Aavenomics project in AVE, came up with, and I really like the quote. And what's interesting about Aavenomics, like, we, once we shipped the protocol back in January, like, that was like the very second thing we started to focus on, the very next day. So we continued straight away to work with Aavenomics, we didn't rest at all. And our goal was just to figure out, like, how, like, how we could actually benefit our token holders.

• 1:24:20Speaker 02

  So we never thought about, like, token itself, like, it's just a commodity, like, a token for, for actually, the, how the community can voice out, but how they could actually, like, benefit from the protocol, but also, like, contribute into it. And we were thinking, like, what is the most important thing for a financial protocol? Like, what's the most important thing? And we were thinking that, like, if something goes down, let's say, if there is some sort of, like, a shortfall event, failed liquidation, or there's a security breach, or whatnot, that will be very devastating, not just for AVE, but the whole space.

• 1:25:07Speaker 02

  And at some, to some extent, we understood that the, these protocols will scale, especially if there's adoption. I never knew that it will come more faster than I expected. But we know that like what we're, what we need to build in terms of like token economics has to also like, taking into consideration the, the scale that we can

• 1:25:28Speaker 02

  scale at some point. But we started to think that we really need to somehow get people to contribute to securing the, the protocol. And in essence, what the, the AVE token, it's, it's basically a migrate token from the LAN to AVE.

• 1:25:47Speaker 02

  That we have the migration coming up actually quite soon. And the, the idea is that when the token holders are making decisions, they factually are making decisions on risk parameters and risk-based decisions. So, so what kind of collateral could be added into the protocol? What kind of markets could be created and risk parameters? And on the return, they're taking the risk transfer. So, so they're, they're taking the risk of what they're deciding. And because they're doing that, they basically get rewards. So, so there's passive and active risk-taking. So, the, the active risk-taking is when you're staking into the protocol. You're staking your tokens.

• 1:26:30Speaker 02

  And, and what it means is that if there's some sort of like a shortfall event, let's say failed dequitation or a bug or smart or jackhack, what happens there is that 30% of the, the staked amounts that you're risking and getting rewards. So you're, you're basically earning AVE could be slashed, which basically means that they could be sold. And the passive one is the version where if that stake doesn't cover

• 1:27:01Speaker 02

  and the loss is, is, is more substantial, then there's this maker-style minting facility. And then we added one additional function here is this built-in backstop module of stablecoins that are placing auction bits and, and, and buying that.

• 1:27:20Speaker 02

  That those slashed or minted tokens. And all of the reasoning why we came up, besides like the the safety, like why this type of mechanism? There were certain events during this year, like the the Black Thursday, the the Flashon attacks, the T4 hack and BCX hack as well. And what was interesting for us is actually to monitor like how was the aftermath handled? And it proved some interesting parts, like the Maker Model worked in in in one way. I mean, they they were able to to use their their token economics to to cover a deficit.

• 1:28:01Speaker 02

  Then there was the, for that as well, there was there was this group of individuals and and entities that went to this die backstop syndicate. And that kind of like mimics our backstop module that is built in. And yeah, I mean, the the idea is is kind of like focus on the safety. But we we have liquidity provider rewards, but they're not that substantial. And the idea is that when you get those rewards by providing liquidity, you're incentivized to bridge them into this taking facility. And then your governance is kind of like in line towards making secure protocols.

• 1:28:41Speaker 02

  So you you don't want to have this kind of governance war where you have on on the on the one side, you have you have people who want safety and other side, you have people who want like higher yields and just providing liquidity. So it's actually like even i- i- there's a lot of functions. The the in simplicity, we just want to use the market capitalization of AVE to to recapitalize the protocol when needed. That that's simple, that's simple explanation of of my complex explanation.

• 1:29:15David Hoffman?

  So when I look at the ecosystem overview, and for the listeners, this will be in the show notes. It's docs at dot ave dot com slash avanomics, where there's this fantastic, well, A explanation, just document of explanation, but also some really nice graphics, which are really helpful to understanding how this ecosystem works. And Stani, when I look at this, I see a lot of different protocols having their influence in these graphics, right? Like, I see components of Synthetix, and I see components of Maker. I see like the Compound Governance Module in here. Can you talk about the influences that have helped guide the architecture of the Avanomics system?

• 1:29:54Speaker 02

  Yeah, I mean, I think for, in terms of like, the kind of like, having the token as a way to secure the protocol, like, we looked quite a lot into the Maker model when it comes to the minting. The staking is more of like what we have in Synthetix and this kind of like inflation. We were balancing between actually inflation and, and the reserve model. And we have had an active discussion in our community forums. And, and it's actually quite interesting. In terms of like even more, what influenced us is the Ethereum itself.

• 1:30:37Speaker 02

  So if you think about it, like, people in Ethereum, like, they're not actually paying for transactions. Like, you're not paying that your transaction is, like, safe. You're actually paying for security, in the sense that you're basically paying that the transaction doesn't get somehow manipulated, in one sense. And Ethereum as well, it has an inflation model. And so we tend to kind of like look what's happening in DeFi, but a lot of good stuff has been built already on the blockchain network level. And Ethereum was a very big inspiration.

• 1:31:20Speaker 02

  And then we had SNX, Synthetix, very influential.

• 1:31:25Speaker 02

  And and the Maker Model and and like we and and we looked kind of like almost every major protocol, how how their token economics were built and we tried to find like what's suitable for us. Uh for our community and what was the uh narrative and and also like we we look at Compound when when Compound came with uh also with the liquidity uh mining and we we just were following like how that develops and and uh yeah, I mean, it's a combination of uh everything that's out there and picking like the pieces that fits well in what we're trying to achieve and and uh somehow I think we we did uh

• 1:32:10Speaker 02

  quite a good job, but also I noticed that we we spent six months like uh every day a lot of time in designing and uh like uh it's it's kind of funny that how long it takes to design token economics like it's not uh it's not that easy that that that that I usually have been thinking about, but it took a lot of time to design.

• 1:32:38David Hoffman?

  So I want to get into the backstop module a little bit more because I think that's one of the newest innovations that Aavenomics brings. Uh and so to to add some context, if you decide to purchase MKR for MakerDAO, you are taking the risk of the of the MakerDAO system because if a maker ever becomes under collateralized, it needs to mint MKR to fulfill that need, to fulfill that capital. And so as an MKR holder, you are therefore being diluted. So by buying MKR, you are buying access to the you're buying exposure to the upside and you're also buying exposure to the risk. Now with the AVE safety module and the backstop module,

• 1:33:18David Hoffman?

  there is a more explicit way to have more upside and more risk to AVE separate from just holding the AVE token in your wallet. Can you explain that differentiation and maybe just elaborate on the backstop module and how it distills risk away from one part of the system and compartmentalizes it into another?

• 1:33:39Speaker 02

  Yeah, definitely. And actually, uh, big thanks to you as well. David, because I read one of your posts where it explained it very well, the maker model and also some of the posts on what Ethereum is in Ether. And what's interesting about this model is definitely like we want to make token holders to feel that they're participating. So many, if you buy a token, if it's very just passive risk, it's less direct, whereas you actually take that value and lock that value and actually you are subscribing to

• 1:34:24Speaker 02

  another risk level. And that also is a risk transfer from the passive holders to the active ones and also they get rewarded in that sense. So I think like the, it's a kind of like an interesting combination. And of course, if the short far is substantial, that it doesn't cover, the stake doesn't cover the full amount, then there is the passive, kind of like subscribing to the risk. So definitely, I think like as a model, this is more, it has more ladders and I really

• 1:35:08Speaker 02

  like it because then you can decide to what kind of risk levels you want to subscribe into. And it's interesting to see how it will play out. I don't know if there's any similar tokenomics actively been for a while, but yeah, I mean, I feel this is the right thing to do. And it's really, I mean, the good thing is that it's basically up to the governors to decide how to continue in the future and how to change token economics. And that's the cool part about decentralized protocols. But so far, so good feedback.

• 1:35:51David Hoffman?

  Well, one thing I'm particularly bullish on is the ability to give users choice, right? And that is definitely, I think, one of the goals of Avenomics is giving the user the ability to choose their level of risk. And that's definitely one thing that smart contracts really allow you to do if you harness their power correctly, is to be able to, there's no such thing as eliminating risk. There's always risk. But if you can control and harness that risk in a particular way, that just means that the AVE protocol is going to be able to scale to more and more users, more and more capital, more and more entities using AVE. And so a line from Ryan is that "safety makes DeFi real-world ready."

• 1:36:33David Hoffman?

  So when you were building this safety module and this backstop module, were you thinking in the lines of just like scale and growth? Or were you just thinking in the lines of doing what you need to do to lock down AVE to be as secure as possible? What was going through your head as you guys delivered the backstop module?

• 1:36:50Speaker 02

  Yeah, I mean, for us, for us, what was interesting in the, so the backstop module is the actual kind of like a backstop for the slashed or minted AVE tokens that you put stable coins and you can buy it. But the actual like safety module is the, so there's two things, but it's, they kind of like compensate each other. But in terms of like what we were thinking is that we somehow need to provide some, some sort of a value in case something happens. And the problem that we were facing is that, let's say, if you have one or one billion

• 1:37:35Speaker 02

  locked value in the protocol or more, how, what kind of ways we can have like to somehow ensure this amount? And the token economics is an interesting way because you could incentivize people to stake and kind of like, and use your market capitalization of your community to, who are actually making those risk decisions and putting skin on the game. And and adjust the incentives in a way that if the protocol grows, the incentives should actually grow as well to incentivize more staking.

• 1:38:18Speaker 02

  And you get this kind of like a value loop. And and the more the protocol grows, the more actually you can adjust the incentives to incentivize more staking. And I I think that is something we we hope to achieve in a way. I mean, whether it will work or not, it it really is is is something we need to see in practice. But at least we know that we are able to incentivize our community to to provide this safety. And and then time will tell like how how it will play out.

• 1:38:56Ryan Sean Adams?

  So, Stani, this safety module and many things that we've been talking about that, I mean, that's just one piece of what you guys are releasing with what I think you're calling Ave V2, like a whole version upgrade. I get, when is Ave V2 actually coming? And is there any other additional thing you'd highlight? I know it's it's shipping with so much, and we're going to include a note to the roadmap in our show notes. But when is it shipping? And is there anything else that you'd want to highlight for folks?

• 1:39:29Speaker 02

  Yeah, I mean, version two, we we started to work quite a while ago. I mean, it's it's it's based on the version one in in terms of like as a base layer. But what we what what what we worked quite a lot is on on the gas optimization and to get rid of all this like excess cost. And we were able to reduce like how over half of the gas costs even more. And it like we have a bunch of cool features, but like this is so important to mention because like you can actually, you you can optimize quite a lot and and by designing things.

• 1:40:14Speaker 02

  In a, in a right way and organizing. So, so that is something that I think is important because it allows smaller deposits to be utilized and, and, and that is like, because if you think about the gas, uh, high gas price is actually a barrier to finance. So if you, if you're spending in, in gas costs, so similar amounts that you're, you're earning interest, it doesn't make sense to deposit and take the, uh, the, the risk. But, uh, besides that, I, I think what's, what's important that, uh, we deploy with a lot of interesting features. So we're trying to help, uh, users to, to switch their positions. Uh, for example,

• 1:41:00Speaker 02

  what you can do in, in the AWE version two, you can swap your collateral. So you can, you can, if you're deposited, for example, uh, eat and you, you want to, and you, and you borrow die and you want to, for example, to get exposure to land, you can swap your collateral in, in one click without returning your loan. So you, you change your loan position and, and it enables actually collateral trading. So you can trade collateral at the same time that you have borrowed. And we also have, uh, debt swap. So you can swap, your debt position. So if you borrowed, let's say, die at, at, at five percent and you already spent that die

• 1:41:41Speaker 02

  or converted to, to USD and, and you, and let's say USDC is, is a few percent cheaper, uh, for some reason, you could actually, uh, with one click, uh, swap your debt, uh, to, to USDC. So actually you're making debt, uh, currency swap and you're making also, uh, interest rate swap in the same, uh, transaction. And you could perform all the, all the three, even like the, uh, collateral swap as well. And we're also having more trading functionality. Uh, there's going to be ability to trade on margin.

• 1:42:22Speaker 02

  Uh, we improved uh the, the, the, the A tokens uh and, and then uh, I mean, there's a lot of features. I, I just, I think it's a long list that, that's coming up. But also like we, we improved quite a lot of the base structure as well. And there's going to be some stuff that we haven't announced, but also like we, we are going to deploy as well, which will be pretty cool things. But uh, something to leave a bit of in terms of excitement.

• 1:42:52Ryan Sean Adams?

  Stani, you had me hooked on the 50% gas reduction, sir. Every like, oh, that is definitely in these 400 Gway times. That is definitely something we are looking forward to. When, sir, when are we going to see some of this stuff?

• 1:43:08Speaker 02

  Quite soon, actually, quite soon, sir.

• 1:43:14Ryan Sean Adams?

  Excellent. The sooner the better. And, and at the pace you guys are shipping, I think that um, I'm interpreting soon to mean actually soon.

• 1:43:23Speaker 02

  Soon.

• 1:43:24Ryan Sean Adams?

  So uh, very exciting, I think, for the, for the bankless community. Um, can we talk about that though, really quick? I mean, we're talking about um, you know, 50% reduction, right? So in gas fees, that's great. That's fantastic. It feels like all protocols are trying to do that sort of thing right now in this high ETH gas price world. You also talked about earlier about like, you know, there's some, some competition sometimes between protocols. But sometimes there's not as much coordination as you'd like to see. We were talking to Kane from Synthetics recently about this. Why isn't there a court, or maybe there's something I'm, we're not aware of.

• 1:44:02Ryan Sean Adams?

  But what, is there a coordinated effort from DeFi protocols to work on some kind of a layer two solution? It seems like optimistic rollups are uh, sort of the, either preferred solution. Um, if everything we're, we're hearing and reading about them are, are, are true. Is there some kind of a DeFi rollup that DeFi protocols can coordinate on and to start building together? Any initiatives like that, that could help solve this problem?

• 1:44:32Speaker 02

  Yeah, I mean, uh, I, I definitely agree that the, they There is like collaborations, but there isn't like actual like wider collaboration like. Uh, and, and, and somehow if there would be like, I, I feel that there's like a bit of like. Clicking in the sense, uh, you, you might have projects in, in Silicon Valley that are close together and. And, and then you have, uh, other projects and that are somehow interconnected together. Uh, and, and, and somehow like what I saw in previously in DeFi like happen is that. Like some, some projects were working very closely together and, and, uh, like, and, and.

• 1:45:12Speaker 02

  Uh, trying to take the ownership of DeFi and that is something you can't do. I mean, belongs to everyone, every project that is. Uh, in the space and, and, uh, every user and, and so forth. So, so. Uh, maybe that is one of the kind of like issues that we, we, we are a bit selfish in that sense and. Need to coordinate a bit more. And of course, everyone has like, uh, are busy and focusing on their own communities and also like. Uh, trying to build stuff and, but I, I think we'll see some effort. I, I think like, I, I, I truly believe optimism is quite interesting. Uh, StarQuery is some, some quite, quite cool and, and Matic as well. Matic has some gaming activity and AveGachi.

• 1:45:57Speaker 02

  Uh, a, a, uh, Ave ecosystem project that, that is. Uh, launching this kind of like funky cool, uh, NFT project. Uh, where you, you unlock, uh, this AveGachi NFTs by, by, uh, saving, uh, on, on Ave. So that's, that's pretty, pretty fun. So they're, they're looking into Matic. And I am seeing a lot of effort and coordination. It usually is happens in a way that if, if, if the, the EFA community sees some su- success. Then everyone else follows and. These multiple reasons, I, I, I guess it's, it's, it's a bit of like.

• 1:46:37Speaker 02

  Also on coordination, like what could be, uh, the perfect solution and also like many of the. Uh, I, for example, I have an issue in the sense that. I'm very good friends with, with many of these layer two solutions and. And and it's very hard to promise to everyone like uh we will deploy here and there and like and you know like you're trying to please everyone at the same time and and be very very like friendly and uh I don't know I would see like when we see more tools that are able allows you to let's say to uh transfer your funds from one layer two to another layer two like we we

• 1:47:18Speaker 02

  come more closer together even this this this layer two solutions themselves but I but I think now I've seen a couple of initiatives where uh projects have come together and and tried to make an ecosystem and I think this will grow and once there's just you just just a couple of projects or few projects doing this like rest will follow indeed.

• 1:47:39Ryan Sean Adams?

  You know that some of the DeFi talk founders that we've talked to recently like Antonio from D Y D X they're developing something on Starkware which you mentioned. Uh Kane had an interesting approach from from uh Synthetix where we we kind of talked about Ethereum mainnet being like Manhattan and it's overcrowded and busy and it's expensive. And he said, you know what I'm gonna go do and Synthetix is going to go do is go build a a Brooklyn, go build and uh you know an O V M roll up and make that really nice, get kind of a tooling setup for DeFi and then hopefully other DeFi protocols will will come move to Brooklyn. Is that kind of the approach that that you're thinking will happen? It'll be a few pioneering DeFi projects that kind of

• 1:48:22Ryan Sean Adams?

  build it out for everyone else and once they find some success then everyone will sort of you know move over and coordinate that way?

• 1:48:29Speaker 02

  Yeah, definitely. And I I kind of like find similarities like uh we we have a like in in London uh all the like financial action and all the traffic and everything is is in in the city. You know, that's the financial center, all the jobs are there. But then we have uh we have shortage, which is basically where the tech tech industry is and it it used to be a rough area, but now you you see more and more startups there and it's it's getting like better in the ecosystem and grown there and even Facebook and Google have offices there. So I I definitely like this is exactly what like uh I feel that actually you don't need to be in the very business place and that the most business place might have certain types of transactions which requires a lot of security.

• 1:49:13Speaker 02

  But then when you want to innovate and and and you you could actually go uh uh you know a couple of steps uh. On the side and built there and have this kind of like a clusters. So I definitely love what Kane is visioning.

• 1:49:30David Hoffman?

  So you guys just announced that you guys got a electronic money institution license from the UK Financial Conduct Authority. So I don't know personally, as a member of, a citizen of the US, what that means. Can you kind of explain the significance of this license?

• 1:49:46Speaker 02

  Yeah, I mean, the, the, the Abi Protocol itself, it's decentralized, autonomous running in the, on Ethereum network. But one thing we noticed that actually like many people don't have access to this network and how like the steps to take and access into our protocol or our like our ecosystem or DeFi in general, there are still many steps. There are not that many as, as, as there used to be, but still like, I think it's not as much as available as it should be. So what we decided to do, and we actually started this work a couple of years ago in

• 1:50:26Speaker 02

  2018, when, when, when everyone else were fleeing out of the, the, the, the space is,

• 1:50:36Speaker 02

  is that we, we wanted to actually kind of ensure that once we build this, this protocols, that actually there's access points. And, and one of the access points we, we wanted to have actually was, was our user interface as well. Like you can access the Abi Protocol from, I think there's like 50 different ways in wallets. I mean, my Ether wallet, you can access and deposit and borrow and so forth. And, and there's a bunch of cool ways to access. And we wanted to ensure that we could widen the demographic that, that is using, using the DeFi. So we, so we went and applied last year.

• 1:51:22Speaker 02

  We we we put our application in and and we got our electronic money license last month. And and the idea there is what it means that this entity that we have in UK that is practically responsible of integrations and and so forth can actually build a a gateway for users to to have a a payments account where they can convert national currencies into to stable coins. And then they can decide what to do with those stable coins. And for us, the most important thing is that they could actually then dive into this DeFi world.

• 1:52:05Speaker 02

  So it's kind of like this idea of that protocols are the ocean, like they're self-regulated and so forth. But then we have this kind of like a ports that where we're dealing with the local currencies and and so forth. We we have their regulation. And that is something that we want to test out how it will work. Will it bring new users? And will it bring a new adoption? And and I'm really eager to see how things will move on that front.

• 1:52:37Ryan Sean Adams?

  Yeah, it's super exciting. I mean, it's something we talk about where there's like this bridge from the traditional old FIA system, right? The fiat world and this new DeFi system. And generally, the like the the the groups that have kind of bridged that gap between these two worlds have been crypto banks, have been exchanges, like the Coinbase's or the Binance's of the world, and Gemini's of the world, and God bless them. But wouldn't it be great to have a direct point of entry and port of entry and a direct bridge from the fiat traditional banking system into a DeFi protocol? That seems to be essentially what this new license is unlocking for Abbe.

• 1:53:17Speaker 02

  Yeah.

• 1:53:18Ryan Sean Adams?

  Super exciting, particularly when we get into like, you know, layer two stuff too. And we can operate with the the speed of of centralized crypto exchanges as well.

• 1:53:27Speaker 02

  Yeah. And I mean, it's it's the very same license that Coinbase is operating in in Europe. So I'm it's really exciting like how how it will. Help in like adoption in the future. I I I'm really like, I want new users like I I want people who never used DeFi to actually use. And and that is that is something that is close to my heart.

• 1:53:48Ryan Sean Adams?

  All right. So, uh, you know, we usually at at this stage, we're the bull markets, Donnie. So we usually ask about, uh, you know, bull market price predictions because price predictions are always fun. But you know what I'm going to ask is actually number of user predictions, uh, and maybe amount of capital predictions locked up. So how soon we we've got DeFi has got about maybe 200,000 users right now for being generous. How soon until we hit 10 million? How soon until we hit 100 million? And how soon? This is something that Vance from Framework said. Uh, he he thinks that there's the potential that we could get 500 billion in total locked value in DeFi.

• 1:54:32Ryan Sean Adams?

  Uh, in the next, uh, you know, in this cycle, um, do you think that is possible? So give me user estimates. Uh, and then give me, um, total locked value in DeFi estimates, if you will.

• 1:54:46Speaker 02

  Yeah, I I think we could easily have by end of the year. They could be definitely like a, a, a, uh. It's hard to estimate. I I I usually get them wrong.

• 1:55:03Ryan Sean Adams?

  That's why it's so fun. Yeah, everyone gets them wrong.

• 1:55:07Speaker 02

  So so so let's be let's be optimistic. I think we'll have 1 million DeFi users by end of this year. And we will have, um, let's let's let's think of something very realistic. We have 100 billion locked value by end of this year. So yeah, either of them, I might be right or both wrong. I mean, I'm I'm really bad at predictions.

• 1:55:37Ryan Sean Adams?

  Well, in the past, uh, it sounds like when you were hoping, you know, to then in 2020, you'd have 5 million locked. And now you've got 1.6 billion locked. Uh, if anything, you've been underestimating it so far. So we will see. Those are bullish predictions, but, um, you know, we

• 1:55:52David Hoffman?

  Yeah, Donnie, if you could go ahead and be as incorrect by an equal order of magnitude, I'll I'll be down.

• 1:56:03Ryan Sean Adams?

  It's definitely very exciting. Stani, thanks so much. I guess the last question for you is, what can the Bankless Nation do to help AVE today?

• 1:56:14Speaker 02

  I think the most easiest way is to experience like how, I mean, just experience the possibility of having permissionless, permissionless global savings account by just holding A tokens. So getting a bunch of A tokens, let's say ADI, AUSDC, and holding in the wallet and seeing the balance grow without any transactions to see it update. That is fascinating. And what I really love and hope to see is that everyone spreads word on what DeFi is. Someone who

• 1:56:56Speaker 02

  you might know, might not know, I mean, tell to your friends, family, and what is DeFi? And like, what do you see the value in? And that is something which brings more people here and the adoption. It comes in a way that we kind of share it to others and use A tokens, ADI, as an example. Show how the thing works and get people excited. I mean, that is something that you could help the whole ecosystem and also help AVE.

• 1:57:35Ryan Sean Adams?

  Fantastic. Well, you heard Stani, Bankless Nation. He wants you to tell your friends about Bankless, tell your friends about DeFi, tell your friends about AVE, this A token, which is essentially a programmable savings account that you could just hold without a bank, all banklessly. Fantastic stuff. Stani, thank you so much for joining us today on the podcast. It's been a pleasure.

• 1:58:00Speaker 02

  Awesome. Awesome to be here. And thank you so much, David and Ryan.

• 1:58:04David Hoffman?

  Cheers.

• 1:58:05Ryan Sean Adams?

  All right, guys, action items, a few things for you today. The first is, we've written up a delegated credit explainer. You heard Stani reference it during our conversation. We've written that up at Bankless, we'll include that in the show notes. Also, second action item is read about Aavenomics in the Aave roadmap. We will include some links in the show notes. Stani also mentioned an article that somewhat inspired their tokenomics that David wrote. We'll include that in the show notes as well. Lastly, David, did you see we passed 100 stars, sir, on Apple iTunes? I just, I just noticed that in the past week or two, so we hit our goal. What's our next goal?

• 1:58:41David Hoffman?

  Next, next goal is 500. We, I think you, Ryan, told me you got an email saying that we broke the top 100 podcasts in the investing and finance category. And again, it's just at the beginning of the bull market. And I, I think it's with, well within reason that as this bull market continues, you can see Bankless in the top 10 of the investing and finance podcast space. That's my personal goal. I want to do my best to get, to get Bankless there. And so I've gone and given my, my own podcast a five star review, and you should too. So by the time 2021 rolls around, by the time there's 500 billion locked in DeFi, Bankless is the top of the iTunes charts and we are onboarding people into the Bankless world as fast as possible.

• 1:59:22David Hoffman?

  And you can help in that effort by giving us a five star review wherever you listen to podcasts.

• 1:59:28Ryan Sean Adams?

  All right, let's do it, guys. Finally, risks and disclaimers, of course, we always end with this. ETH is risky, Ave protocol is risky, crypto is risky in general. This is not financial advice. You could lose what you put in, but we are headed west. This is the frontier. It's not for everyone, but we are glad you are with us on the Bankless journey. Thanks a lot.