# ETHWarsaw 2023: ad hoc Stablecoin Panel - Panel Discussion

- Channel: [ETH Warsaw](https://streameth.org/eth-warsaw)
- Date: 2024-10-07
- Duration: 28:20
- Watch: https://streameth.org/watch/yt-tTMZNWU3LAw
- YouTube: https://www.youtube.com/watch?v=tTMZNWU3LAw

## Description

Panel Discussion - The ad hoc Stablecoin Panel at ETHWarsaw 2023, where experts debate and discuss the evolution and future of stablecoins in the blockchain landscape. 

Follow us for more updates: https://twitter.com/ETHWarsaw

## Transcript

hi hello everyone so like Welcome to our ad hoc stable coins panel uh actually today we have two amazing guests uh Robert from liquid uh that I have just attended an amazing presentation today about their new project and bck from Phoenix lab so like spark and Market maker doll maybe you guys would like to kind of do some sort sort of like a longer version of your introduction yeah sure so thanks for the chance of participating in this at hoc panel so yeah I'm Robert the founder and now head of research at liquid liquid as some of you might be familiar with is uh mainly a borrowing system it gives out interest free loans and IT issues its own stable coin the L USD uh to the borrowers so borers basically need to collateralize the loans they bring e uh that's the so collateral and they can then kind of borrow up to around 90% of the value in this LD which gets minted by the system so it's basically an interest free borrowing system that's running autonomously on ethereum Main net it has no governance it is immutable and it even has decentralized front ends that's it in not yeah thank you like no governance like immutable these are my values so thank you bck so now it's going to be a crash with not your values um hi so uh I'm BK also really grateful for the opportunity to be here I'm a smart contract engineer at Phoenix Labs so here the governance part comes in so Fenix laps is a Servicing Company to the spark Dow which is a subd of a maker Dow um so quite complex structure and uh yeah working on spark protocol which is a part of maker ecosystem these days um creating utility for D stable coin one of the oldest and the largest stable coins out there um I don't know what else can I add I think yeah that's that's it about me for today yeah that's perfect thank you so like before we go like into like the panel section and at this point you guys know like we're a bit improvising here like I I would like some sort of like engagement from you and understanding of like where we are like so let's start with the easy question like who has ever used held a stable coin I expect all hands at this point up okay so uh held and used decentralizes stable coin okay for who has uh actually minted against collateral a stable coin oh wow so it's like half uh maker like the Dy anyone minted liquid oh cool so we're getting less people but still like the the audience is already you know kind of knowledgeable with this project anyone tried liquid Forks so there are like plenty of them at this point that's going to be two of us um and by the way this is like one of the great things about liquidity it's like it's very Fork friendly as I've noticed or like some of the forks are friendly Forks well being Fork friendly and having friendly Forks is not the same but yeah I think it's Fork friendly it makes it it's not as hard to Fork as maybe maker would be but yeah and so how do you think about this like while we're on this topic like is it some like liquidity is immutable so you're thinking okay that's fair these guys are innovating like is it like what's your point of view on that yeah I mean first of all I think being forked is a form of flattery so in a sense I like it I mean it it's kind of also confirmation that our system yeah is is is solid and vers being forked and some of the forks has been have been successful and I mean we kind of deliberately or chose the strategy of just be on Main net like you mean you know the main system is only on Main net while LUSD can be bridged but still as think there is alleged demand for like borrowing something like LUSD on a layer two for example so our earlier Forks they they kind of basically just copied our system and went to binance chain Phantom even like but of course then also others um even on Solana there was a fork which is like Rewritten in Rost and stuff like that so I mean that that's legit I think that that's not a something I would say is against our principles I mean we are here for or we stand for like openness I mean of course we we value if Forks are friendly if they give back something or at least they recognize that there are Forks of us and they they kind of try to kind of do something together which uh may also help our community because we were like the inventors of the concept and we also implemented it so so I mean we are open to collaborate and also do co-marketing with those Forks that are the chair of values mhm and and yeah now you know this latest uh type of fork is is based on liquid stake derivatives which also makes sense because we I mean we are stuck with with ether at least in our current version which will be running forever but so I I see there is like room for for like offering something new or offering at least um yeah this loan potential against uh staking e Stak e b you want to add something yeah yeah absolutely I wanted to one thing we like of course can deny that that that forking is a form of flattery but also is kind of a signal of demand for change of sorts I would say because if a fork appears that means it's somehow different from the original version and if the protocol is immutable and is not kind of is not is not sort of I I wouldn't say willing to do that change but maybe its values like one of the values is not making changes then then if people want change then just need to need to Fork which is very natural like in the old kind of blockchain days it was very natural that that blockchains were forking each other then when the smart contracts started to be hidden behind proxies and upgradeability became like a normal thing then then for forking wasn't that common practice to change anymore maybe in the def space but but here yeah I also feel that maybe this is also the second part of the story that need for changes is the other part and I've noticed like in your today's talk like the new protocol bald uh is kind of implementing some of this feedback like implementing liquid staking der derivatives as collateral am I correct um yeah but it's also based on a very different mechanism I mean we it would be based on a liquid state e but it would not be at least not mainly be based on cdps so it's not a boring system in the first place and maybe it will be like a solely Reserve backed stable coin which means yes we are now realizing that um pure ease in the long run may have like a disadvantage uh compared to e but at the same time we want to innovate much beyond that it's not just you know this realization yeah hey let's do something with stake de but let's do something that scales native and that's a much bigger challenge or ambition yeah I just just wanted to ask actually one question regarding the the the choice of collateral in the in the liquidity V liquid TV2 can you move the M uh yeah uh so is it is it going to be like only one of the assets or is there a chance that there's going to be a set of different at at the start uh yeah at the moment it's more likely that we would end up with just one um but I wouldn't completely rule it that so that's kind of one of the questions I mean implementation details it's a very important detail but still in some sense it's a detail uh because we only need the address in the sense to kind of plug it in as collateral but uh yeah so this is one of the questions we are kind of deferring because we are we just see that the liquid state space is is quickly evolving and uh maybe there will be interesting alternatives to the you know the big names in the space maybe not so we'll see um but but yeah I mean there is a chance we may end up with two or three but you know we don't want to build in a governance just to replace or like upgrade the LSD okay so like because we have introduced the concept and who had attended the Bal presentation like the liquidy presentation today like two three people out of the whole room so I'm going to ask you for impossible you did like a half an hour presentation I ask you to like a very short you know explanation of you know what is this new protocol yeah so the main difference to liity but also maker uh is that it's mainly a reserve backed um stable coin so it's a stable coin in the first place um which means that um in order to Mint a stable coin you you wouldn't like take out a loan but you just mint it by providing some Stak e and you get like the face value like you get let's say you put in one stake these which is worth $2,000 for now and then you get like 2,000 um stable coins minted by the system paid out to you now the big question is how can the system guarantee redeemability how can it make sure that every single stable coin out there can be redeemed for for $1 vers of St e and here the big uh challenge is how to hedge this Reserve against price volatility so we need kind of hedgers another user group not borrowers but like people who bring more Stak ease to the system uh at least then when the system needs it so to kind of create like some over collateralization and we came up with like an interesting way to build such a hedging mechanism where the hedgers would not just get leverage because if you could think of it you get like increased exposure by becoming a hedger of the system um so leverage in and by itself is probably not enough so we kind of add principal protection on top so it means that while you get like this Amplified upside from The Leverage there is also a guarantee or at least some protection that caps your downside and this makes this hedging product more attractive in the first place so that we can be more confident that the system will be able to attract enough collateral when it needs it that's kind of a I yeah that was good like my one liner that's my understanding is like a principal producted leverage where you don't get liquidated and it doesn't describe all the mechanism of course but like kind of the selling point for me yeah good at your point I you cannot get liquidated I forgot to say that yeah and so I'm right now going to do the same to BC so asking like for a little impossible can you like quickly describe the concept ccept of conduit on maker right so uh I think the core idea is that in the in the long run maybe not even long run but in the midun maker wants to move away from the CDP based borrowing completely um CDP based borrowing is is not ideal uh like for example one of the kind of issues that sparland is is targeting right now is the fact that in the CDP based Landing you cannot borrow against the whole basket of different types of collateral you can only have one volt with one collateral and borrow against that second and second Vault with other type of collateral borrow against that one of these going to be liquidated and basically you cannot like put your like Whole Net worth in the money market protocol and borrow against your whole net worth that's that's a big usability issue plus the fact that uh each of these is a separate smart contract there is an old Design This is just not not not the greatest and the idea um of what maker Dow is moving towards is uh this uh idea of abstracting away the borrowing activity from the from the core of the protocol so instead of having this functionality in the core of the protocol there are going to be allocator Doos which are going to be assigned a certain credit line from the core of maker and then then these allocator DS are going to come up with different strategies to allocate D of course the most obvious ones are going to be things that we see already like money market or or maybe someone will create a CDP based product but some other with some slightly different properties and these allocator dos then are going to create the things that you mentioned conduits U which are these adapters that allow uh plug Di liquidity directly into something existing somewhere in the defi so basically we could have for example uh I don't know just kind of guessing like a Unis swap pair or curve uh curve Market with a conduit attached to it and then maker would directly fuel the liquidity on that amm uh instance so yeah that's that's kind of kind of the idea I think thank you like do you guys know where I'm heading with that questions like this ask already I mean I'm all for like really my values decentralizations UNG governance but at the same time if I put my user hat I'm going to to say like something controversial not controversial like we don't need more stable coins I'm observing all these coins and these tokens and you know I even got engaged as a community member in gravitas so a fork on liquidy and and what I'm seeing is like there's pretty much no Demand on this new token that is cry like it it it cannot be used anywhere but like some farming on some you know LP tokens or Unis swap or whatever and it just like from the point of view of the user they probably need less coins than more and so I wonder like would it be possible to use the amazing mechanism that you're describing to like be uh like a conduit am I saying it correct like to create die I mean I don't know I I can maybe start with that I mean like the the new one I I I'm not I'm not sure I mean okay maybe I'm going to circle back to the to the take before because that was that was quite a hot take that that that that no new coins are needed I mean yes it's it's sometimes tough to to navigate all the ecosystem if there are like dozens of of coins with like 10 million of of of the total capitalization then on amm the exchanges are not efficient there's a lot of slippage maintaining the peg is tough of course that's that's that's not ideal but at the same time I think there is a place for multiple large uh kind of uh actors um and yeah and I you know respect uh the attempt to kind of break into that that that group and if the protocol is small then I think they know that they are what kind of fight they sign up for that they're probably either completely disappear soonish or they're going to be among among the largest ones um yeah but now it's nice that that I think that that maker offers this other way that if someone don't wants to participate in this fight there's there's the other way um yeah that's exactly my point what if mechanism is amazing you know and we can find like by marrying this concept we can find adoption you know uh well I mean on a technical level I was always considering this Reserve as something which is similar to a decentralized PEC stability module which I think was invented by maker so I think from that perspective yeah I mean why not I mean I guess it it would be technically possible to you know have this as a core PSM and then like or S one um facilitator or allocators or yeah um but at the same time like maybe it would be also possible to use let's say our novel stable coin as your um currency in your PSM if you want to stick stick to it so I think there are multiple ways of combining the system so it yeah I mean becoming a PSM um currency or base currency for other stable coins could potentially be interesting for us as well so yeah I mean just just just that's just brainstorming but I mean coming back to your first first point I mean I also think there are too many stable conss and yeah the market we don't need that many but I think we need stable coins that adhere to principles or at least that make it very clear that they are optimized for for some principles and uh yeah I think there we are trying to push the boundaries um yeah and I think yeah there are other ways of you know can of other tradeoffs that you can can do uh and yeah I think the main problem that I guess both of us or like all decentralized or somewhat decentralized stable coins are suffering from is that like it's much easier for a Fiat back stable coin that is kind of supported by a centralized exchange to get main option well I think that that's really hard to penetrate yeah for forgive my poor attempt of kind of like marrying two protocols here like on like spontaneously I mean uh that that would be super cool I wonder if like if there are like any other mechanism of creating this sort of like meta stable coins like yeah it's a it's a it's a tough question in a sense that of course like all these protocols can be like stitched somehow together even like the smaller ones we could have like a large machine that kind of allows you to accept I don't know your your your payment or your salary and basically like any token and then you would go to you know the thing and you would instantly land in some other coin and and I think you know the amm with like super concentrated liquidity is something that kind of leads us maybe there it's it's more efficient even with smaller capitalization it's it's better but but still each of these coins and each of these pieces would come with a unique set of risks and um and I'm not sure if they're going to be sort of compatible with each other in in the long run um so to speak fair so like my next question is like because we already touched like centralized stable coins it's like for me they're power and their strength is the low friction onramp they just like so easy to onramp new money and new capital and my question was like would be do we and by we I mean like decentralized stable counts do we even stand a chance with that well that that's a interesting question because it's uh maybe the regulation will work in favor of decentralization at least in Europe I mean it seems that you know fully centralized Fiat back stable coins may have a different uh um stand and it also seems that as long as you are really decentralized you can kind of uh yeah I'm shouldn't say sleep through but you are not like you know targeted by those regulations so I think there is there is a point in in increasing decentralization not just from like this point of view but also because you want to kind of uh yeah reduce the main point of failure um and kind of broaden the whole like basis um but yeah I mean coming back to your question it is it is a like a difficult yeah situation to be in right now but I think in the future this may change in favor of like decentralization yeah I mean for web free native people it uh seems pretty intuitive that decentralized coins maybe not all all of them but by principle are more robust uh more trustworthy safer and I hope that this is a matter of time when Regulators recognize that that um these kind of structures are really um yeah robust and and and it's it's easier and um it makes more sense to trust um this immutable and that's where actually immutability um is is is a strong value that this immutable uh kind of structure somewhere on chain on on a public blockchain is actually more trustworthy done you know like set of guys in suits that went to you know an office and registered a company and now they want to like accept billions of dollars and deposits I mean to me it it feels quite normal that that that the centralized stable coins are are are are stronger and and better option uh to pick and I hope it's only a matter of time when when Regulators recognize that I'm glad we are on the same page then yeah yeah like I'm think it's going to be tough fight after you know Terra Luna us you know the reputation of algorithmic whatever you know it kind of mixes the reputation like with you know proper legit projects that are like maker and liquidy so yeah that might be hard so my next question will be like what actually users needs from the stable coin what are the criteria you think are important for users what can we improve here I mean now lately with the like you know the interest rates or fed rates going up I think uh yield has become a more and more important thing because it it turned out that while let's say one or two years ago in the defi summer um there were like you know literally zero interest rates in most countries while um you could like by yield form you could get crazy aprs now it's a bit different now it seems that uh just holding uh your or like having some fixed rate deposit or buying treasury bills may give you higher yield than like holding a stable coin or even like depositing it somewhere uh I think that's something we need to be thoughtful of and make sure that the stable coins do not you know get in a competitive disadvantage when when it comes to Fiat itself um so yield is important and uh also usability um I think just onramp offramp what you mentioned is very important and hopefully we'll get to a stage with account extraction abstraction and everything that um gas and uh yeah and and keys become a smaller issue for the end user yeah I think those are the main topics yes so sort of like cir circling back to the original questions which question which was uh what users want from uh stable coins well unfortunately I didn't conduct the complex research on that topic so I don't know what everyone wants from them I just know what what I would want and uh that's first of all stability and um stability yeah I think it's it's it's just stability and resilience because uh I wanted to say resilience but it also kind of like stability over time not only stability to the peg but just ability to sort of its existence it needs to transport the value in time uh and uh these would be the key features then the yield of course is is is very nice it's it's it's great that that that maker we have the DSR and that can offer a decent yield these days uh which I hope will stay that way for for a long time but but still stable con primarily is this vehicle to transform value to transfer value or just store value um even if there are better storages of value like if itself or or or BTC or whatnot but U but yeah I think I think stability is is the ultimate goal yeah I think like one one thing that I'm missing from what you guys said is kind of like a way for users to assess you know what they are looking at uh so like let's activate our audience One Last Time who has heard of like a blue chip ranking no one so one person so blue chip is like the this new thing it's like a ranking for for stable coins like an snps or Moody rating bot for crypto stable coins have you guys heard about this yeah I mean we were ranked pretty high so yeah yeah was a great uh yeah that was actually something that I wanted to kind of end with like liquid is an a gred uh stable coin and D is I believe B+ for like the governance attack Vector risk so if it this would be eliminated it would become like a minus I think yeah so I mean uh B+ is is is nice though I guess a minus or a would be better I mean Teter is D so like congrats yeah I think they they are like very much in favor of decentralization which of course is close to my heart so yeah I think the more Fiat backing you have especially when you're not transparent I think transparency is the other big criteria that they value high like I mean if you are Fiat back then you should make it very clear like where your reserves are and and what you're like and and if that they audited and stuff like that's why tther is obviously not kind of ranking very high yeah yeah it's always also a matter of kind of trade-offs that that one is willing to make because of course I suppose that not only the governance part is is the the the the wobbly part of maker but some might not like the extensive exposure to rwa but at the same time uh the fact that this exposure is in place uh maker can offer the yield on DSR so um so yeah uh of course we need to make it better and better but uh you always make some tradeoffs and um and you just need to make sure that you uh make right choices obviously thank you B thank you Robert like let's move the space of you know stable coins forward and decentralized stable coins for the win thank you thank [Music] you great