Joey Santoro: Fei Protocol – Introducing Fei v2

Welcome to epicenter the podcast where we interview crypto Founders filters, and thought leaders. I'm Santiago real, and I'm here today with State layer. State layer is a guest host today. He is a, if, for anyone who doesn't know him kind of and GM III, guess Yes, but you know, for anyone who does it, he is a prolific Twitter Anon, who it, you know, just has awesome thoughts on crypto and wanted to come on today and guest host an episode. And so, here he is today, today.

We're speaking with Joey Center. Oh, he's the founder of a protocol, which is a stable coin being built on ethereum and takes a lot of ideas and the, you know, long lineage of stable coins and applies them which will learn about today. But so Before we talk about, show you about Faye would like to tell you a little bit about our sponsors for this week. So the first step is tally. Tally is a new wallet for web 3 and defy. That sees the wallet as a public good. Think of it, like a

community-owned. Alternative to mask. It has all the same features as meta mask, but the difference is that it's 100% open source under a GPL V3 license and it's also 100% user owned with all the prophets flowing to the community. Not Not a corporation.

The launcher penalty is coming in the new year, but there's an early version available right now called the tally Community Edition, which is before the law before the Dow Launches on December 15th, you know, and because it's his community wallet, they're ready for feedback and want to know how

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today. On top of that of six. They've also provides opportunities for developers to plug into the platform and build their own daps and permissionless modules. Visit gnosis Dash saved dot IO to learn more. And get started with setting up your own save today. Who so Jerry welcome to the podcast. I'd like to you know start off this with a disclaimer that I was an investor and face.

Oh you you know, that should tell everyone that I love fail a lot and which is why I'm so excited for this episode, but just want to give a fair disclaimer before jumping in. So Joey welcome to the show. Hey, thanks, honey. It's good to be here. And yeah, it's been a it's been a ride then, you know awesome like having you around and state to he hopped in later when it wasn't cool. And and so for that I think he brings a very good context as well. So yeah, very excited to be

here. You want to maybe start off with this colors a little bit about your background? And you know, what got you into crypto in the first place. What were you doing before? I think we first met at the SF blockchain week hackathon a few years ago back in like 2019 and you were like you were building something. There. Was that your first parade decrypter. Where's the stuff you were doing

before that too? Yeah. That was my that was my first time building something sort of in public, but I've been into crypto aetherium since like, 2017, I definitely hopped in that last, you know, cycle and I was trading shit coins, as, you know, buying a bunch of stuff and losing money and making money all over the place after

everything went down. I maintained a very strong, you know, intellectual love for aetherium and for all the apps that were being built it back, then it was basically just compound and maker it out and, you know, swap. But then like slowly, Mike more apps came out. Read every white paper to get my hands on. I even taught a class on solidity and I do where I went to school. And, and then when I graduated, I came out to the Bay, they had the SF blockchain week.

We built a really cool, like it was kind of like fruit combo or like, I don't know like, like in sedap or whatever where you could like, chain actions and it was built on. Are they using their flash loans, which I thought were the coolest thing ever. When I, when I first heard a flash loans, I was like this is gonna be sick and it feels like

People like now flash. Those are just like, oh you got rug because they were some bug that a flashlight exploited and that's like why flash sons are still relevant. But anyway, they technical, I'm a developer. I wrote all the code for baby one and a lot of the code for v2, but now we have some sweet devs on the team that aren't just me. And yeah, like always trying to innovate. I care a lot about defying, where we're going and that's kind of how I got here and how I

built that. So I'm happy to jam more on that as we Yeah, as we as we chat. Cool. And so then how do you, you know, in this process? How do you choose to? You know, I remember you were working on some things around, flash loans and stuff. How do you decide to like, you know, stable coins? That's what I want to go fix table coins, as opposed to the many other things you could be doing.

Yeah, so I think the like when you're a builder like at heart, the way that you want to go about, like starting a project is you have to see a need that you feel like you're the right person to solve and so it wasn't that I'm like obsessed with stable coins or anything. Like I just care about defying crypto and I saw that like our options were tether ill USD see like cool but you know, not long term and died, which was like slowly becoming not cool. Like I I still love maker now.

I think it's like, you know, foundational infrastructure, but at least you know, especially in like the 2020 time maker doll was not like the coolest thing a defy at all. And I think that they've really like, you know, made some strong moves kind of they're setting themselves up to do, you know, real-world assets and a lot of like ESG stuff. And you got some really cool Niche that I think they'll continue to fill and they'll continue continue to be

dominant. But anyway, like those were the options and I was like not very inspiring. Tired. And I saw these cool lending markets and derivatives and things popping up. But stable coins were going nowhere. And then there was all these algo coins that were like really shaking it up. Those were not going to make it.

Like I was involved in empty said dollar, you know, I did a little bit of development work there and I tried to make it like less of a Ponzi and more of an actual stable coin, but you know, we saw how that turned out and it was really cool because it was super decentralized project.

It really got my like my Brain, kind of thinking about stable coins and I realized that like where we want to go with stable coins who want to have like asset-backed stable coins that have more algorithmic management. Redeem ability. We want to have like protocol controlled liquidity. That was a big theme in one of the reasons why empty said dollar failed versus things like Olympus or kicking ass right now is because of protocol on

liquidity. That was the big idea behind Faye and I was like, why is no one doing this? I'm going to quit my job as an Enterprise software engineer and just like, go build it. And that's how that's how we got

here. So it wasn't like, I was obsessed with stable coins, but I was very much like trying to follow the pocket and defy and Faye is just kind of, you know, it was so in the Zeitgeist that we had the crazy launch that we're going to talk about and that's because it was like we hit we hit it on the nose with the idea.

But the execution was, you know, a little bit behind the idea at least in an initial stages, but baby to is going to be really sick and so I'm I'm super excited to just like tell the whole story and and where we are now. Cool. Yeah, maybe you want water. Let's jump into that story. So like, you know, okay, so it's a what is it? November 20, 20 USD just fell over and you are like, okay. I want to take these learnings and start to do something with it.

What was the story? What was, what were the steps? Did you start working on it by yourself? And you try to put the other team. Did you come up with the idea of first, or did you start just like, yeah. Well, all of the steps from there until. Yeah. And you launch relatively pretty fast, right? Because you went from like, you know, almost I DIA to, you know, raising and launching within what 3 to 4 months.

Yeah, so the the I was involved in empty said dollar and call it October 20, 20. And I had the idea for Fay like right around the end of October. So it was literally like I was in a side aisles like guys we need protocol own liquidity and they were like, yeah, whatever. Let's just keep incentivizing

people. They were like having a lot of fun and empty said dollar continued to blow up through December but in a good way, like if I mean, not in a good way, but in like a TV, elcano way, like it went up to like 600 million. Ian Supply. And that's while I was building faith because I realize like a that dollars is probably not going to make it.

They actually wanted me to build their V2 or be at least be one of the devs on V2. And I told him, like, oh, I'm busy with work, but I was building faith. And so so yeah, like I had the idea for like protocol own liquidity. I was I was jamming on a bunch of mechanisms in my head if you want to like your more Like maybe what I've done. Like several podcast about it, the Delphi one was really good as like historical context, but the tldr was the market was like crazy.

It was equals 600 dollars when I went in October, by the time we launched it was 2000. So we were like really trying to just like get the idea out there. Like it was like a ship or die kind of mentality in retrospect. That was a mistake and I was probably the biggest one which was like we just It wanted to get Fay out there because we

felt like stable coins. There were so many competitors, you know, tracks was coming out Olympus I guess was like kind of a stable coin, but now it's clearly like not a stable coin it but it's still pretty similar to Faye. And then, you know, empty said dollar V 2, you know, they finally ship that didn't really go very well, but there was all these other algo coins so much competition.

And so it was really like we race around with, you know, some investors that I like new and friends and then and recent To invest and I was like, no I'm building. And then we did another round like within like a month and a half and we probably didn't need to do that round and it definitely attracted a lot of attention and all those backers are awesome. They're cool to work with but it really elevated the stakes a lot. But, yeah, it's sunny, sunny you and Sonny was in there.

It elevated. This takes a lot because now, like all eyes were on us and, you know, we were moving so fast already that. Yeah, in the market was going crazy. As it was, it was honestly like a surreal experience to be a part of that, you know, very small team, very ambitious idea and that. So I would say like one of the mistakes was like, just trying to get to Market as fast as possible like just because it was like, that's what everyone was doing.

There was so much pressure from like the bull market and all the competition. I would say like do things right like take your time, take like blinders on. That would be like the big lesson. There is like Don't just do things because you feel like pressure from anyone else, like, do things the way that you want to do them because that's the way that you want to do it. That's the one that's like one of the pilot. Like two, biggest lessons. And then the other one was like,

keep things. Super, super simple, the launch. So save you want itself was very ambitious. The launch was also an ambitious type of lunch. I think it was actually super close to being really good. But the there was a couple things we did wrong. Wrong one was, it was uncapped and to was there was this like,

weird airdrop? That was kind of mixed in with the launch plans, where people would get like more dollar value than what they put in in terms of like so everyone thought everyone who came into Genesis thought they were going to make 20% immediately. And if you've been around for long enough, you know, that that's when you should be very worried. And like, we tried to tell people, like, hey, here's how Genesis works. We put out all these Goals, we gave spreadsheets.

We wanted to like educate people but it's so hard. The market just like really ran away with it. And then we got so much demand like way more than we possibly could have expected. We it was the biggest defy launch. I think in history still to this day 1.3 billion in eith absolutely nuts. And yeah, there's like, those are the two big lessons I'd say like, don't rush and keep it as simple as possible.

So that like, you know, people who only look at your thing for Ten seconds before a pink and like know what's gonna happen. And I yeah, there's a lot more in there to unpack but that's kind of the very broad strips of of what happened. And and then obviously there was like that's up until Genesis right? Then there's a whole like what happened after we can go there. But yeah. What, like it looks like you unmuted. I'm curious. Like, what was it like from your

perspective or on the outside? Like what, you know, What are your thoughts on like the launch or whatever? I'm curious. I think I'm going to, I'm going to take this one actually. Yeah, cuz I was watching it more from from afar and I like I one thing that I realized is that or probably even if there was like a lot of like extra like too much like fake creation like you couldn't like like you create like too much Faith first, and I probably that wasn't

sustainable. First because there was like so many people that that like try to participate in the launch but like, even then I think which your current design without like the penalties and the incentives, like the current design and especially like the V2 design. I'm thinking that it's possible that I think it was still still

still of work, right? Because if there was like a certainly less demand Than People was just as of like redeem, their favor teeth like in your current V2 design and Like things would have went smoothly possibly. I think, which is kind of interesting. Like, even in those like kind of like adversarial, like conditions, like probably would have still work if like I'm thinking about this correctly. Yeah, I agree completely. And the, the old like your V2 is your V 1.

Oh my God, that's never been more. True than with Faye. Like say V1 was basically broken and Favi to is really the goal. It's the protocol, controlled value back to preserve, you know, want to one, radium ability, algorithmic risk management. It's like everything that Favi one should have been. And if we had lunch with Favi to it. I would have really, really like we would be in a much different position now, and we're already in like an objectively, really

good position. There from a protocol perspective. Like all of the numbers are fantastic. The protocol is making like eight figures a year on yield. You know, like we have a ton of Doubt Partnerships. Like that's really our product Market. Fit is like working with other Dows and yeah, like it took time to get here but not that much time that was six months ago or seven months ago, you know, so it's pretty crazy. How fast this.

His moves and, you know, we're just trying to learn and stay relevant and really like the on the edge, with all these other like defy 2.0, dowels or whatever. Like that's that's where we're most comfortable. And I think that we're hitting our stride right now. Don't want to belabor too much on the launch, but I think in general, you know, I think that I do actually think this side of the launcher is not the issue. I think the size of the launcher

is a good thing. I think that the getting that billion dollar in protocol controlled value is what gives sort of this flexibility to like sort of really, you know, take this thing to end like have scale and like should start to you know, that side of the PCB is what enabled sort of doing some of the doubted, our interactions that are going on, which we'll get into. I think that. Yeah, firstly, I think the only thing that could have that would

have been solved. Would have been like, you know, like you mentioned that like instant 20% increase when and said, maybe there should have been a little bit of a delay between the sale and the distribution of tokens and that would have allowed for sort of a, you know, I think that could affect it but you know, aren't sort of maybe let's go a little bit into some of the technicals of like how Favi one work. And so that way we can use that to like learn how baby to

differ. So you want to just give us a brief overview for the listeners on what the mechanism of baby one. It was and what was sort of the like the main Insight that you usually brought in. Yeah, so if everyone was just complicated like it had to Peg mechanisms and one likes of core engine, which is protocol

controlled value. That were absolutely keeping first, baby to like that was the big idea that I think is the real staying power in terms of maintaining the peg, they V1 had Direct incentives and rebates where direct incentives. Were basically a penalty applied on trades. If you're hurting the peg. Egg and a reward. If you're going back to the peg, sounded really nice and like, you know, some simple models basically showed that it was like fine, but the problem was that each was like super

volatile. And that it's a very soft touch kind of mechanism. And when you throw a billion dollars at it, it just totally breaks. Can you talk about? How does it break? Like what, what, what specifically breaks? Yeah. I mean, I mean, I mean, look, if you're if you're selling a stable coin and you're facing a 25 percent penalty, that's not a stable core. It's worth 75 cents. If you can't sell it for a

dollar, it's worth 75 cents. And that was the big problem is that the protocol effectively rugs liquidity.

When people want to sell and that is like, you know, it from a game theory perspective, like you would just hold it because you'd be like well someone else is going to take the penalty and I'm just going to hold it. But the problem is that game theory is like not a good way to design a defy mechanism and like I'm going to I'm going to stick to that like you want to have much Like more Savage mechanisms like Game Theory, works until it

doesn't. We saw that with empty said, dollar, maybe someone will do it like, you know, whatever but you want to have like hard mechanisms, 33 question, mark. I would love to talk about Olympus for a second. I like the project. They have an awesome community in order to like we could talk about them if it comes up again, but but basically. Yeah, like Game Theory stuff, man. And so you need to memes. You need. Hardcore Community. They have it. We'll see how it goes.

I'm definitely cheering them on that being said. So like there's this game. Three aspect of direct incentives that didn't really work. Especially when you throw like hard adversarial conditions out it because that's when you're it's like if you have any kind of unstable equilibrium that is going to get snapped in half if you if you throw a lot of chaos at it. So and then the real weights were like very Innovative and

actually they worked. The thing about re weights, you just bring the secondary market price back up to a dollar and that's basically like redeem ability, you know, but it's redeem ability with this time component that you like re wait every, you know, so many hours. So what we realized was that it was just complexity for no real reason. It kind of gives them an advantage has two Bots,

arbitrageurs? Like so we just said, you know what screw direct incentives, we scrap those really early and then re weights we transition to redeem ability model in June and Early, June or end of May and since then the faith has been like airtight. So really like, I completely disregard those first two months of this history. I was like You know, learning in public and iterating on a very high-risk mechanism, you know, and we made very safe moves. We move slowly carefully since the launch.

We got it all sorted. And then and since then we were just like put our heads down planned, V2, like phase been in this very like transitionary period since June where we've been like scrapping old code, adding like putting diversifying at like buying stable coins, doing all this stuff and now The thing is like, ready for Favi to which is like going to go live basically tomorrow with an asterisk. But yeah, like really really, really pumped about like the

path and where we're going. However, one of the things I was like, sort of interesting about V1, what and I were just the PHA idea, was you were one of the first to sort of really try to tackle. How do you do an under collateralized stable coin? You know, before that everything was either over collateralize or like, no, collateralized.

And you, you one of the one of the Theses of bay was that, like, hey, is there something somewhere in the middle that gets some of the best of both worlds? Is that still, the goal or is that something that has also transitioned away? I'm glad you asked. So basically, what I have learned the hard way is that the only way to make a stable Corners to have redeem ability, obviously, like I don't really believe in like absolutes.

So I'm sure that somehow somewhere someone's going to make a stable coin that doesn't involve redeem ability. But if you point to any stable coin that's working at scale. It's redeemable for $1 worth of something.

Hang on both sides. Tara's like this for axis like this U STC is like, this guy is like this with the PSM, you know, like any stable coin that works at scale is redeemable period or you have a rye like stable growing where it's volatile but only like a little bit and that's the only way because otherwise, the volatility has to go somewhere. So redeem ability is like absolutely essential and so it actually doesn't matter whether you're over or under a

collateralized. If your redeemable at scale, then it's the other properties of your stable coin that are interesting whether you're over under collateralized is just a symptom of your goals. Right? So under the under collateralization, in a vacuum is a - property. It's like you're all things, all things equal. If you have radium ability, you want more collateral, you want collateral?

That's not your own token because like, that's a, you know, systemic risk, if your collateralizing with your own governance, do In when things go bad, they go very bad and like it can work. I am very very like, you know, curious and optimistic about like Tara and fracks. And you know, those teams are executing phenomenally. They have great ecosystems. The the spirit of theta B2 is minimize dependence on internal assets.

So tribe is like qualitatively different then fraction Tara, even though it uses some similar mechanisms and I would love to get into that. And the idea is like, let's have as much PCV as possible because that's where we win. You know, like PCB is the moat. So we don't want to be under collateralized, we can be, but like, in the long term, the mechanism should Converge on either 100% or monotonically and not monotonically increasing but like, increasing Cloud relation

and reserves. And it all depends on like how much demand there is for Fay versus how fast we can grow PCV. And Like the V2 is designed to absorb under collateralization but not stay there. That's pretty much the that's pretty much the unlock. It's like you just need to have redeem ability and then all collaterals. Good collateral. You've mentioned, this term redeem ability a couple of times. Can you explain? What does that mean? And what does that look like? Yeah.

So if you have an asset that you can sell for a dollar and buy for a dollar at all times, it's worth a dollar. That's the whole idea of like a stable kind. So I say, iridium ability I say, You can mix a for a dollar worth of something. Right now. It's ev2 is going to be eat and die and we're going to add like other assets as well. If you could buy it for a dollar and sell it for a dollar. It's a dollar. That's the idea. So you redeem it for protocol reserves. Sam.

Will you redeem you? Oh, CeCe for a dollar from coinbase. Basically, the learnings that is, that's the only way to have something at exactly $1. Right? Like died. I tried to make this like and eventually realize like, yeah, I need something where someone can come in and like dearly exchange for a dollar. Otherwise, it won't be like otherwise, it might be at 1.1 1.0 1.0 1.0 to it. Like you can't really make something stick out.

Exactly one daughter just with Game Theory, like Joey was saying Yeah, at least not not at this scale of defy, where everything is like, you know, 30 percent volatility. Maybe if we have like, you know, if you talk about like very very sophisticated financial markets, like if the if the FED If the Fed lowers interest rates by 25 basis points, everyone loses

their shit, it's like that. That is not the world that defies in right now and maybe like you could have more game theoretic like soft-touch, institutional mechanisms, but I Do have this suspicion that like the traditional Finance industry is basically just run on like human algorithms. Like oh the FED lowered interest rates. I'm going to go sell all these assets. Like I don't think there's like it's just like all this like coordination at like a big scale.

I don't think there's anything like objective about like interest rates directly affecting the economy on, such a fine grained scale if that makes sense. Yeah, okay. So Joy like for the V2 is this the redeem? Oh redeem ability mean that you're like completely gonna like like ditch the re weights and like directly balancing the units for pool. Yeah, so re weights are gone and like same thing with direct

incentives. Like both of these features in a vacuum or interesting mechanisms that were not gone forever necessarily but like V2 is going to be fine without them. So like what we're going to do is we're going to build on down sir. We're really like we have a great relationship with that team. We did a treasury swap like a couple of weeks ago and bouncers Kind of Perfect for like a PCV system. You could have a Liquidity. You can re hypothecate assets.

So if we do any kind of rebalancing it's going to happen like using balancers mechanisms and not using like crazy custom code that we wrote. So that's idea. But V2 doesn't need it. It's probably not going to have it at least not in the same way. It'll look different if we if we had free weights back in. Then I'm just curious. Like, do you think that means? Because right now it's like the, the liquidity, on Faye and Ethos like a hundreds of millions,

right? Like the, are you do you think you're going to end that, that accrues, like a lot of impairment loss, right? Like over time. Do you think like your you could like reduce that that liquidity a lot since you? Yeah, absolutely. We're going to move it all into probably a balancer pool, and we might lightweight it more towards East, like maybe 70/30 or something. So that way we're like maintaining some upside exposure to eat.

And yeah, like I think we're going to focus a lot more on what asset allocation do we want and the kind of putting using bouncer as a tool to have that asset allocation and algorithmically rebalance. It versus like oh, let's just

have liquidity everywhere. That was a very like V1 mentality and I don't think that's scalable because like in permanent loss and these things like we'd rather leverage Solutions like balancer in Tokamak and whatever to Have the right liquidity in the right places and make the PCB composition what we want. Like that's like far more important. I think than just like liquid in

a vacuum. Yeah, you mentioned that earlier about like the PCB composition and like how like, you know, the goal should be like increasing the PCB wouldn't be like Fair almost to like in one way think of like tribe as this. Well, I like the PCB has this like fund that's being invested in and fit and like the FAE that's outstanding or bomb or like bonds and then the tribe is like shares in this like fund.

And so basically they like tribe, is this fund is like borrowing money from the bondholders will pay them back and then like X is captured by the shareholders. That is certainly a mental model that You could use for at least some of the mechanisms obviously tribe is, you know, uh, governance token, but given what it? What it controls. It's a lot more than that. And so, like, tribe is kind of a direct. They are responsible for the future of the PCB. Like try Boulders vote on these assets.

There's a buyback and Favi to that's algorithmically managed by the mechanisms of tribal Elders, are heavily incentivized to protect PCB. Grow PCV. Maintain, you know, and grow the face. Apply. Because stay is like you said, like like deck against PCV. So really it's leverage for tribe holders. Tribe holders can earn yield on the whole PCV and it can send feii into circulation earn yield on that and they can like have a productive, useful, stable coin

that like makes defy better. So really it's like an awesome awesome mechanism. That's really healthy. If done right, you know, and it's very flexible, which means there's a lot of booby traps and dangers which is why I like, you know, they Labs is hiring quantitative. Traders were like, we're really trying to like go deep on how to make sure that we can keep PCV safe and make the protocol safe because it's powerful and it with great power comes

responsibility. And like I think that these PCV backed Mega dollhouse like they and Olympus and Fracture gonna just absolutely take over in the, you know, in the next wave of D5. So that's pretty much the thesis there. And I'm curious. If you can talk about like my favorite, like potential, use case for face, like to solve the problem where like all these CDP collateral collateralized, that position stable Queens, like

die. Like they need a little PSM which is like this thing where you like can redeem you can redeem die for like $1, but of something in right now is you SEC but they might favorite potential use. This is instead of using USD. See you could use like you could use Faye instead because phase directly redeemable for a dollar or something. So that I think yeah, that's my first use case potential. Maybe if you can talk about that. Yeah, absolutely.

So they really like the vision for Fei is to be decentralized. You SEC. That's what it is. It's like only decentralize Assets in reserves which are obviously volatile. So that means that we have to have very sophisticated portfolio management. And the problem is that there's not a lot of liquidity for hedging opportunities like assets that can be stable relative to relative to the dollar like you can't poke. Like, write a bunch of put options on E, you know, on chain

right now, you can. But there's no liquidity for that. So we have to resort to other mechanisms right now. Phase like semi dependent on other stable coins. And that's on purpose. We have LAUSD Diane dry in the PCB right now. We're looking at other options as well. So if we can get to a point where the market is mature enough, that we can basically hedge portfolio. Nobody and continue to like earn reliable yield. Then they becomes an extraordinarily compelling PSM

asset. It's basically the on chain USD see that's been the vision. It's like if you can buy it for a Dollar, sell it for a dollar at all times. It's a dollar and then we can truly break away from our dependence on usec as an ecosystem and I want PHA to play a huge part in that. And so that's that's really like I would say we have like to North Stars One.

It is like being the decentralized u.s. DC and to is being a home for douse like a place for douse to have a ton of financial services, you know, the merge has a lot to do with that. We're building some really sick products for next year. One city to is shipped. It's going to be like heavily focused on on doubts. And yeah, those are the two big use cases. So I think you hit it on the nose. We actually talked to Danielle a and MIM is considering pha-4.

It's PSM for form M. Which I Would be really sick and kind of just validates this narrative, which all about, and is like, one of our main goals. So it's pretty exciting to see the project get to that stage. It's basically like two sides. So, is that a right way to think about it? Is that you do you need like the, you need like the customer, right? The, the person that like once

face. So because of that, there's Assets in the, in the PC because without people holding Fay, you know, you won't have assets, right? So it's like someone like me and would be like a holder of a and then like a kind of like a depositor in the in the Fade Out. Yeah, exactly. You have like the the people on the other side, the other side

of the That was the people. I like want to like that can benefit from the, the PCV, which is like that was right, like people that that need like lping people that need like a just services in general, that require Capital. But without the depositors, you can have anything because you don't want to have money in there, right?

Yeah, so basically we're building a two-sided market place right where you want people to hold Faith because it's the most decentralized and scalable stable Quine or at least one of them. Right?

And so MIM is exactly like a perfect girl, you know spell I guess so that protocol is like a perfect candidate for this and that's what I said by going hard on douse we want to make use cases for douse to hold Faye. That's are like that's how we build the demand side and then this the, you know, The supply side is easy or rather like the demand to hold Fay, right? The like to make more supply of you. Just meant it. You know, we meant they into

fuse pools. We meant a and Ave. We meant Fay like all over the place that's easy. As long as you're careful about your collateralization ratio and making sure that like all the mechanisms are sound. So yeah, it's really like building that demand side through the house and through the narrative that like they is on chain USD. See, that's the real like

vision. And I think phase Is very well positioned for like, you know, you know, the next, the next phase, we're trying to stay on the edge of defy. We want to keep innovating where we're partnering with very Innovative team. Staying on the edge staying Innovative staying competitive. That's always been the vision like a very like execution Innovation focused. Ow. He and another one. What's the, what's the like a breakdown? Because you didn't, you do need to think eventually.

Like what do I actually want to hold in the in the treasury right in the PCV? Right? What's the, what do you think? Like, I imagine like it's not you as did. Alright, but what do you think? Like what should be like a right breakdown for like was you're holding in general? Yeah, absolutely. So this is entirely dependent on the collateralization ratio actually think the current asset allocation is approximately perfect, which is, you know, it's good. Right? Like we have 220 50 million in

stable coins. And that's a mix of die, Ryan LAUSD, and I consider those to be like the three most liquid and decentralized candidates, you know, like dies. Really like weird and it's censorship resistant but there's some questions about its collateral composition value, whiskey. And rye are, there's no question. It's like totally backed by E using CDP style mechanisms enough, windy to feel comfortable holding them in size, but definitely not to be

100% dependent on them. So it's this like as much of kind of those type of stable assets as we can get comfortably. How did you acquire this table? Queen PC, because I remember it started off with Easter PCP. Yeah, so the like I guess to wrap up that last thread like and then the rest we want to hold like a ton of eat and then go to amounts of other like fully decentralized baskets.

We love like kind of the index Co-op product Suite, like you have some DPI, maybe some data may be some metaverse index. Those are not in the PCB at the moment because we're kind of waiting for Favi to what's the percentage right now between eat between stable coin versus non. Yeah, so there's two different numbers that are important. Here one is the raw, like asset allocation. It's about 25% Stables.

But then if you talk about it, in terms of collateralization, we're over 70% back by Stables. So each would have to really really eat shit for the protocol to be in danger. So it's awesome because we're free rolling a ton of eith right now and that's a really good place to be in. So we're pretty much like short. Up for a bear. We're like fake. Like phase going? Nowhere, basically. And that's the goal. So, so to answer your question, how we got these Stables.

We got the Diane drive-through bonding curves, where we would like buy them at a small discount and we just like arbitrageurs kind of fill up our buffer. And then what we realized was that that's kind of like a little bit of like it's not like a totally sound mechanism, you know, because you're just giving away like one or two percent. Red just to acquire the assets. So, what we started doing is we started using liquidity bootstrapping pools to basically

auction pha-4 assets. And that's how we got a hundred million dollars worth of value. SD with only like, let like about 1% slippage, which is awesome, given that there wasn't even that much l USD in circulation like that. You know, I mean there is but it's all in the stability pools. So like the market just kind of took care of it for us, this huge by order that we place over two weeks.

So we started, we're going to use more like automated tools, like bouncer to do these like asset rebalancing and acquisition and stuff like that. That's really cool. I typically use of the lvp is ya go. What if you are just sending a transaction on you to soften getting front Rod or something like that. So that's cool. Nowhere. Dude. If you're you got to move slowly and carefully when you have that many Assets in public. So all we're always thinking about how can we get front-run?

How can we avoid that? How could we like, you know, make these these asset allocations in the open and it's something that we're building a strong competency for Who makes these decisions, is it governance votes? Or is it owed as governance delegate to a more sophisticated? Treasury manager? Governance is totally controlled by tribal Elders with the exception of the optimistic approval multisig, which is currently responsible for our liquidity Mining and it can

allocate say to some extent. It can like do like, say liquidity as a service kind of stuff like Infuse pools, or with our Ando, partnership, but asset allocations are totally controlled by the. Now that may not always be the case in Favi to, we're going to have risk curves. But you're like an automated mechanism for rebalancing using bouncer. So it's kind of its kind of like compound has an interest rate curve that tells you

programmatically, what? The borrower interest rate is and what the supplier interest rate is, but instead of controlling interest rates, you control asset allocations, and the input parameter is the collateralization ratio. So it's just a really cool like automated function. We're still doing a ton of analysis on how to like optimize

that before launching. It that'll come in like probably March or April. Next year, we're also locked on bouncers timelines for releasing that feature on their managed pools. But, but yeah, I wrote a really. I like, I've thought so much about governance that I wrote an article about it that I published last week.

Maybe you could put it in the show notes or something, but it's about it's about governance and like where I see defy governance going and I think that there's like three really critical aspects to any sufficiently complicated protocol. You want to have token governance, but you want it to be pretty light. Like, Government should only control really important decisions. Like, you know, do we inflate the token Supply? Do we change Access Control?

Do we update contracts? Like that should be like, you know, very big decisions should be managed by token holders and I think you can delegate a lot of decisions to like a committee or like a group of like you specialized stakeholders. Most decisions in governance are just on party lines. It's like everyone votes. Yes, and to me, that's a sign that we're over you. Lysing. Token governance, like soaking governance is an extremely heavy

handed process. And if everyone just going to vote, Yes, on most things, then that's sub optimal use of of resources of gas of all these things of people's time and energy. So where I think we should go as more towards optimistic approval. I first heard of this idea through the gyroscope, I think, their intestine or something right now, but it's basically - consent governance. It's not anything totally new but it's that like you appoint a committee.

That committee can make decisions but there's a time lock. And during the time lock, the Dow can veto. That's so much easier because I think people when people want decentralisation, they just want to say no when something's messed up, they don't want to be involved in every decision and that's what I think. Like, for example, you know, if people are getting censored on Twitter and stuff like because Twitter centralized.

Like the people should be able to vote and say, no, you can't censor that person, but they don't really care like what the algorithm does day to day. And so that's mine. Model for decentralized governance is that the people want to just know what's happening?

They want transparency and they want to say no when they don't like something and I think we're going to start leaning more and more on those type of mechanisms, especially after the merge because tribe is going to very quickly become governing like a ton of stuff so we can't do token governance for everything. Yeah. It's almost like few turkey for governance where like if everyone can predict, how governs would vote. You probably don't need to actually run the governance

system itself. Yeah, you see you turkeys few turkeys. I'm, I've been, I've been obsessed with you turkey since I first read that Merkel paper, but it just seems like so hard to program an objective function and like defies moving so fast that we can't have decade's worth of data. But yeah, that like I can't wait to see smarter people than me solve governance. Like I don't know, State layer is a layer, might do it. You know, I'm whatever whatever he does next but State.

Are you working on solving governance? Not right now, but I did like that article. I think optimistic governance. Yeah, that's that's pretty good. Like you delegate to people and if like the governance holder is still remaining control. They can still this of the council's or whatever but it was in place think that's the right

model. Yeah, I plan on posting something on the sushi Forum, trying to get them to use this model because I think like if they had optimistic governance, all this controversy would have just been like, oh, okay. No, the people voted. No, you know, instead of giving absolute control to the treasury multisig. And I think the sushi team is like pretty on board. For this would be a big win for everyone. So one other question about the PCB you mentioned?

So you mentioned balance are a bunch of times now, so you're not holding the piece, you're not holding the PCB in like a balancer, a map. It's like you're holding it. How, how, how are you? How do you? What do you mean by using balancer for this? So, right now, Faye is basically a patchwork of PCV deposits, which are just literally, like, wrappers around, like you'll generating assets, like compound Ave fuse pools.

Whatever. This is not a sustainable architecture and I'm wrapping up the thread on the initial V to launch and the merge. And then I'm going to spend a lot of time re-architecting from the ground up like a full stack kind of PCV system. That's like more elegant and more streamlined and that's going to involve balancer very heavily. So what I'm imagining is basically balancers kind of the top layer where everything is in a bouncer pool that decides the macro asset.

Option of the portfolio. How much he's do? We have? How much DPI that we have? How much? Why do we have? How much l USC do we have? And this is controlled by the risk curves at the very top level, and it should be pretty light. It shouldn't move that much because if you move too fast, you're moving the whole market. And if you move the whole Market algorithmically, you're going to get destroyed by hedge funds and Traders.

And so we're doing a lot of analysis to make sure like, what's a safe mechanism for that? But that's Imagine the top layer being and bouncer has a cool feature where the way that they solve the capital efficiency problem is not by concentrating liquidity, but by actually giving you access to all the liquidity outside of the, the price band that you're in. So you could take assets out of balancer and put it into like some other deposit.

So what we're thinking is using the fuse yield aggregators or are yield aggregators, that are aggregating on top of use as like a big component of PCB. So baby, bouncer on top. Top and then he'll generation sort of abstractly using these aggregators. And then at the base layer, we be using to use poles that would control kind of where pcbs

going. So it's kind of dislike full stack integration where you get lent you get swapping liquidity, lending liquidity and yield aggregation kind of all all in in a hierarchy and that is a really nice architecture. I'm going to like do a whole ride up on it. Come up with a transition plan from our current. System. And that's going to be like a big theme like early next year, probably. So that's kind of the the alpha leak I guess for for where we're going. After Fay be too.

But when you're keeping your PCV in the balancer pool, does that mean that like it's suffering the IL because I've always heard my balance or try to pitch it as like, hey, this is you can build ETFs. Using balanced rails on isn't having it in a pool, like a terrible ETF because you're like just, you know, whenever I'm asked it goes up, you're like selling that asset basically and like, so here's the thing like when your Market making like the goal is there like whether it's

a goal or not. The idea of Market making is like, you're always selling the asset that is in demand. Like if someone wants it, you're selling it to them and you're taking fees for that. That is like market-making is a a trade. It's a trade, that's long, volume and short volatility. So in permanent loss is like that's a stupid name. Like it should just be called market-making like that's that's the whole game. I guess. The question is, why are you market-making with your entire PCB?

So so and then there's another question which is that market making an amm is Two things. It's it's actually a portfolio management tool. Like if you're an LP, you're making a specific trade on your portfolio. You want to be 50% exposed Ethan, 50% exposed to USD, if your Market making East Bay, and maybe that's not what we want.

But if we know what we want, we just plug it into balancer, bouncer decides the asset allocation, and, you know, instead of thinking of it as selling on the way up, think of it as rebalancing, like, your, your rebalancing to have the asset allocation that you want at all times. And you're actually getting paid for that because people are swapping on your liquidity, getting you swipe fees to have the asset allocation that you want.

Does that make sense? Yes, but I'm going to claim that the balance or a mem is the opposite of what you want because like you mentioned, you know, 25% of your pulled for folios in stable coins right now, but set the it's 70% back with with stable coin, but the problem is as eat starch to crash, you guys are to end up owning more and more eith which is crashing and less and less is going to be back by stable

points. I would argue that you almost want the opposite with which by the way, this is something we're working on at a smoke. Osmosis is you want a leveraged amm, which actually lets you sell. He's on the way down rather than by either of the way down. Yeah, that's literally what we're building for Favi to we're building risk curves, on top of balancer, that change the weights of the portfolio, as the collateralization ratio.

It is so we can actually we're making an abstract generalization layer on top of balancer that lets us do exactly what you're saying where we can sell on the way down, or bio on the way down, or do nothing on the way down. And that's totally dependent on the the inputs. Like, we're providing the function. And so like, yeah, like the answer is whatever we want we can do and we're doing a ton of upfront analysis.

We have data scientist quantitative Traders, on the team, who are doing this analysis. So that when we put it in, we have like a pretty good understanding. Understanding of what's going to happen and then you know, it's a very chaotic system. So if something happens, we didn't expect then we change the mechanism, we change the Curve. Weren't you saying joy that like you were thinking like you might not necessarily like put the whole thing in the in the balancer pool, right?

You might just pull like a hold some outside of it, right? Yeah. So the, the rollout and the architecture are still totally up in the air. I think that it's very wise to start out, like, we're going to start moving pools over to bouncer pretty soon. Like the East Bay pool, on Eunice W, V2. There's no reason it should stay there. Getting any incentives and you know, it's like it's a dumb fool. So we're going to probably move that over to balancer. We're going to make a tribe pool

on bouncer, probably. So we're just going to keep like moving assets over to Bouncer. And then eventually I do imagine that near 100% of PCB will be in Bouncer and maybe it's not a hundred. Maybe it's like 50, but we want to build an ecosystem. We want to build a stack that we're like, I believe in like concentrating your resources. Has both from an architectural perspective and from like an alignment perspective, like we want to own a ton of value.

We want to be a part of the bouncer ecosystem. They want to pump tvl, their pom volume there, same thing with the merge, like the Rari. Merge is like we want to put as much PCB and diffuse as possible, and into R re v as possible because like, we're going to become one protocol. So that's the, that's the idea. There is like, maybe not at once. Made for technical reasons and security reasons. We'll roll it out. But eventually, we're going to put as much as we can.

There assuming that it We have the properties that we want of PCV. Like the end goal is to just have the asset allocation. We wanted. PCV at all times, and we're going to use balancers to tool to get there. then you still have like some of it in like in balancer, but like just like static, like just like, not actively being like market May Market made with or That's possible at that point. We might as well just keep it outside of balancer. So it's really like that's what

I mean. Like maybe we don't want to put our index in bouncer because we want to make sure we're not ever selling it because we want to maintain 1% of the fully diluted supply of index will just keep that outside of balancer and we could do that with any amount of PCV. Like, maybe we just like, always want to have 100,000 death, no matter what. And we're just going to keep that outside of balancer forever and put it in steak teeth and

just leave it there. Like, you know, we give yourself like, Definitely like, I don't believe in doing anything arbitrarily, like, we should have put it on down, sir. Just cuz we should do it because we have a very specific goal. So, having a lot of smart people in the community like you and, you know, all the various stakeholders kind of pitching in and deciding like what we want to make this thing. That is what I'm going to support and provide Technical Resources. For So we said okay.

We talked a lot about what happens in like the over over clockwise regime like, you know, ideally everything is 141 redeemable for something. In the PCB. What happens when the PCB gets completely if the piece of each has completely drained and you know because we offered this one-to-one, redeem building. Now, that means that there's outstanding Faye what happens next. You're saying we're under collateralized in this scenario

or what? Yes, I yeah, yeah what happens if what happens if we're under collateralized but you know, you still keep and keep offering 12 one would even bility but then we're all out of and we get and the all the PCB gets wiped out. Yeah, I mean, that's a textbook Bank Run. So that's the V2 is designed to avoid that. We have two mechanisms to avoid. That one is if we go under the target collateralization ratio, we backstop with tribe.

And that's the only scenario where tribe is used to absorb volatility on the downside. Is, if we go under the collateralization ratio, the targets, going to be 100%. There's technical reasons why it shouldn't be over a hundred percent and we can actually lower it. We can lower it to like 90, or maybe even a tea, but you want to keep that number pretty high. Because like, you don't want

anyone to be scared. Like, if people are like, oh, if they is 90% back, that's gonna be fine in pretty much all market conditions. So, as long as there's this, like, guarantee from the Called to backstop with its own Equity. When shit hits the fan that's like a really good way for people to kind of like feel comfortable. We also have a rate limit on how much tribe can be inflated at a given time. So that tribe holders are not freaking out and like dumping to front run any inflation.

And then like I said, the risk curves are going to be selling into Stables basically as PCB goes down. So there's all these mechanisms to kind of stop us from getting under collateralized. But if we do, Tribe, is there as a backstop and if we get so under collateralized like black Thursday, like, you know. I guess in an extreme scenario fade zeros out. That's like, you know, we're doing everything in our power to make that not happen. And I'm extremely confident in the mechanisms.

But like, if things had gone much worse on black, Thursday Maker, Now wouldn't be here right now. So that's kind of the, yeah. It was black black Thursday or Monday. I don't know, whatever, whatever happened in, March of 2020, if it had gone, much worse maker doubt would be toast. And so, like, that's the risk, and that's what we're building to protect against. But yeah, like, you know, Defy, you can't have an airtight mechanism when you're doing something that's complicated.

So it's all about like launching incentives, asset reallocation mechanisms to protect against the backstop event. That makes sense. One funny thing. I was thinking about before, well, prepping for the show was if you actually allowed redeem ability or mint ability of tribe. First right before, it's at the finalization ratio. It kind of becomes like Tara but with a bat with like eat backstop, so, you know, the whole thing with like Tara is like, how does it work?

Well, the tfl balance sheet is back stopping it, but here it's like, hey, there's this on chain balance sheet, which it you create Kara. But this on chain balance sheet is what's backstopping. The protocol just kind of cool here is the difference between Faye and Tara and I love this analogy. I Bike riding. It makes a lot of sense to me. So like let me know if it

doesn't make sense. But basically Luna is absorbing volatility and UST, demand directly when Luna when you st, goes over a dollar Luna gets botton burned. When USD goes under a dollar, Luna gets minted and inflated, they backs the peg with hard assets. If other stable clients like Peezy B, so the peg is completely managed by PCV and tribe is absorbing. Leti in the PCV, so it's kind of like Luna with an extra step where it's managing volatility in the asset not in demand for

the stable coin. Yeah, I think like, for me, I remember like, I was always very skeptical of Tara and I guess I just never understood it until I saw understood today and I think faith in me was like this, like stepping stone where I like at this. I understood the game theory of Kara. I'm not, it's still something that's a little bit, you know, will it blow up in a good way or a bad way? I don't know. We'll see. But I think that definitely helped me understand. And Care are much better.

Yeah, and then the reason why we're obsessed with being fully collateralized is because we're nervous about mechanisms. Like they're alike. We've seen Titan zero out after two billion dollars Supply and like there's a bunch of things that went wrong there, but the market has been in our favor for a year and a half. Now that's not going to, it's not going to be like that forever.

So, you know, we want to have a mechanism that can weather, the storm and like a really gnarly storm because I think, you know, I remember Marsh 2020. I remember, you know, 2018 like shit is not always very pretty. It's like it's brutal sometimes, you know. I was like a hypothetical, like

scenario. Like the only way I could see like Faye become like close to Luna would be like, if a would swallow up, like so much eat that like it would be like really like, like ingrain like with its fate self. Right? Like then that would be closer to the not, right? Because basically there's a point where face selling could affect the market, right? Yeah, I mean we are at that point.

It's just like not it's not like if ether would like get destroyed if we unloaded everything but the East price went up, 10% during say Genesis and the gas price went up like 200%. I'm pretty sure that like a sucking up, you know, almost a full percent of the East Supply was like, definitely moved the price and we still have like, you know a quarter of a percent of the eat Supply. So we're here. Huge actor, we're probably one of the largest teeth holders as an entity and the entire

ecosystem. This is I'm just having this crazy idea to now like right now while we're talking so this might make zero sense. But what I mean, what are those? My food is State earlier was like Hey, what if like Favi one

idea what like? But you have at the ready Mobility. Let's say you had something more like Tara. We're like you meant in Burn tribe for USD for Sheriff a but then you use your PCB to instead of Market making on. They like the one was doing you instead, use the market make on eith tribe instead and you basically have like, hey, here's this like exit liquidity for for tribe out and it's like that feels very interesting.

But then when I just thought about just now with like I would like those like this a way of like using this with like an olympic-style mechanism to keep like increasing the PCB. And then like I would never Olympus could Could issue a stable coin with like they're actually, you know, actually earlier on the thing you were you're offering up your views on Olympus. Maybe maybe we can do that and we can talk about that a little bit. So remember back when like they was when it was first like

launching and stuff. I remember at the time like everyone was talking like the two things, everyone's like oh to Big stable coins coming out right now Fay. And ohm and cleome does not seem like a stable core. Right now. So what do you think? It's like about? What your thoughts on Olympus? Yeah. So the, the spiritual core of both Protocols are identical. It's a PCV back asset period, like Faye is a PCV back USD stable coin. Ohm is a PCV. Backed futuristic, Reserve

currency that has a floor price. And so in that respect in that regard, I think Olympus is one of the coolest things ever because I think Faye is one of the coolest things I've ever and they're very similar. The way that Olympus is different is that they use staking and bonding to kind of growth hack. This like PCV or protocol on liquidity. It's super sick. Like I don't have no idea what's going to happen. I like I don't, I don't have any own bags, but I really like the

team. I like, you know, I like the community a lot. I'm always buy, always hedged when I talk about it. Like, it's a dangerous mechanism. I think even the leadership kind of knows that it's like, not to be trifled with. So, The memes and shit are fun. But, you know, it's trading 8 or 10 x over its Reserve value at any given time and that could 0, not 0. But that could, you know, that could do a 5x dip at any point and everyone's kind of aware of

that. And but like they have such a strong community in the markets been in their favor like they're acquiring so many assets. Like Olympus is not going anywhere and I think that's the long-term play is like even when shit hits the fan. They just pivot to being more like a stable. A coin and less like a like a growth machine, you know, I yeah, I've I like a very nuanced. Like I'm following Olympus very

closely. I'm you know, like I think that they're really executing pretty well and that's my that's my like broad take on on Olympus. It's funny because like one of the because I have like a lot of like a commis friends, right? And like one of the ways I like cannot like explain them PHA or like peel them on. Faye was like imagine if all inputs was to like issue like an acid like a like a stable coin that's like fully backed by their their PCV.

Right? Because they have like hundreds of millions like they could do that like tomorrow.

They could issue like a well maybe not tomorrow, but you know, like issue a stable point is they're essentially like If a and just sell, when it's over one dollar, and, and by bag when it's under $1, right, so like that's kind of how, like, sometimes I explained to fade because like tribe would a gnome would become essentially like try because it would be just like the governance token and like they get like the upside on the PCV growing in everything. That's kind of like one way

dude. That would be a crazy time line. If Olympus just like launches a stable coin and turns them into a governance token. That would be an absolute. Crazy timeline. Yes, that's exactly what I was just thinking. It seems that the mechanisms are very similar. But what own did was it, packaged tribe? And what in, Faye is two separate tokens one, which is stable, and one, which is this like accruing value Asset. Because it's like a portion of

the deck to the PCV. It catches up into 12 asset, but it would be. But I feel like, oh, maybe could separate these out where, like, you know, they have this like lower value. That's backing the oh, umm, what is clearly under collateralized are? They could issue a stable coin based off the floor value and then have this other thing become this like PCV traffic accident. It seems like that's a little bit. What's going on here? Oh my God, that's so sick. I don't think they want to do

that. I thought to like I've suggested like how could you do this? Like to some friends like OG omi's and they were like, yeah, that's not that's not like that the vision, right? Because they want the acid itself to become the reserve currency, but I think it's a cool. It would be cool. Right? And they could they could make it. So that's not it's not like Faye like exactly $1. It could be more of a like a

floating one, right? Like a let's say it's like they don't let it go past 1.05, but they might you know, that type of thing. Yeah, I mean I think like they should keep it as just home right? Like they should stick to what they're good at. That's been the narrative that's been the vision then like if they can execute it. It's fucking huge and like, you know, I definitely think You know, it's worth it's worth giving that it's full shot. Right?

So but if they want to launch a stable and call me, I could I could give you some tips. What is the PCB right now? That the dollar value approximately? Yeah Eastman tanking. So my guess is it's around a billion. It was like one point to a week or two ago. Yeah. It's almost exactly a billion as of right now. Okay, so there's a so there's about 1.2 billion dollars of PCV and about 750 million dollars of outstanding Bay, right? Yeah, but half of that, say it's 700 and half of it belongs to

the protocol. So in terms of debt, there's like 350 million. Okay, so then maybe let's talk a little bit about this are very merger. So you know what, maybe the before we go into the merger like, you know, what was this like relationship and like what was the interaction between the PHA protocol and the Ferrari protocol before any talks of merger even popped up.

Yeah, I mean, it's really a perfect fit like say is a you know phase a stable coin looking for a product and Rari is a product looking for a stable Point. Like they have a leveraged Market but you need liquidity as particularly in stable points to, you know, satisfy the demands of people who want Capital efficiency against their tokens. And so we basically put feii into every fuse pool. We could, we have say in like, you know, like nine of the top ten two spools are.

Thing like that, maybe eight or nine of the top ten and, you know, a ton of pools like all the top walls have faded because we put liquidity in them. And then that attracts Capital also very strong relationship on the mechanism level.

Also, the team's just like really gel very, very similar Vision execution-style, very aggressive Innovative, like wanting to be on The Fringe and like, you know, be the ones kind of leading the charge, like that's always been like jayde's Vision their team is. Phenomenal and great to work with. So when when J first like floated, the idea by me. It's funny because I had actually been thinking about it for a while. I thought like, man, what if we like merge with Rari, that'd be

so cool. And then Jay was like, dude, what if we merge protocols to me and it just felt right when he said it, but we spent a lot of time kind of syncing up with the team's getting everyone on board. You know, it's a big big decision. It's like getting married. And so that's kind of how we like got here and And once the teams were all totally on board. We took it to the community. No one else knew about it. We didn't tell any of our investors or anything.

It was literally just like from the core teams and then we took it to the community, got a ton of attention, had some really great conversations. It's honestly been the coolest example of decentralized governance.

I've ever been a part of because you have two different communities, trying to negotiate all these different, narratives, all these different stakeholders, really, really like people showing up to like contribute value and like, you know, fight for their you know, their protocol very awesome, kind of process and cool to you know, cool to be a part of Was there a vocal minority? Or that was like, very against

the merger? Yeah. I mean, I think calling it a vocal minority might even be like, you know, belittling like the sentiment, like, there were people who were very upset on both sides. I have no idea what, like, on the tribe side. It wasn't even on minority. It was like all the biggest tribal Elders were like, dude. What are you doing? And, you know, there was a lot of like negotiation and we A proposal of time to really make it work for like all the key

stakeholders. And as much of the community as we could and Jay and I have been like really emphasizing the vision of what we can do together. And oh my God, is it going to be sick? Like get ready? And so, yeah, like there's a ton of detractors when we first proposed most of that was because people just it was out of nowhere.

Like no one was expecting this because it only makes sense after you spend like some time, like, thinking about it and looking at where defies going and So we think that this is like, a very forward move that, you know, already. We're seeing like the spell ecosystem. Like they're consolidating at on, I think you're trying to merge with sushi right now. Like we're going to see consolidation all across the defy stack.

And so it's like choose your friends and I know who my friends are and I want to merge with these guys and like, you know, I'm trying to sell this Vision to people who aren't into it. But ultimately, we're letting people who aren't into it kind of exit like tribe holders, get the rage quit. Rtt. Holders are going to swap into an asset.

That's 10 times more. So everyone's going to have the ability to leave if they don't see this new vision and it still needs to go until I'm chained vote. So it's ultimately still a decision by token orders and I'm pretty confident that it'll go through and we'll like will be able to execute something really awesome. The looks like the snapshot vote is currently at 99.99%. Yes. So it looks like a probably gonna go through as of the moment.

Yeah. It was the most voted on Snapshot ever and Faye protocol by a long shot, 10% of the supply showed up fully diluted Supply. So it was like of all of the tribe that could even possibly vote over half of it, showed up and fail, ABS participated, very minimally. Like I didn't vote Seb didn't vote, most of our investors. Invoke. It was very just like totally Community. Like I'm so I'm actually floored at how positive it was received by the community. After we have here.

We added the rage, quit and change the proposal. Like everyone was on board, even the people who like, aren't down for this new vision or down because of the rage, but they're like, yeah, like you guys do your thing. I just want to take my thing and get out of here. And I think that's going to be a really positive kind of healthy

moment for defies a whole. But particularly, you know, The fake community and the writing Community, it's going to be it's going to be really, you know, a powerful event. Yeah, I mean II that's very interesting about this whole ecosystem think is that something I find? I see happening as well where it's like, you know, you know, you take a stable coin, take a landing protocol. You take a decks and you're not a pack of them all up.

And so like you mentioned, you know, I think you know, this is happening in Tara. I think that's happening in like as you mentioned in like the spell commute ecosystem with that Daniel Lester is like putting together. And you is that really where you see like sort of tried going as well where it's like, okay, you know, you have this like stable coin. Yeah, they're letting protocol eventually. You guys are always going to acquire balancer, Alpha leak right here, blah blah.

Ladies that were, you see where this is all going. Absolutely. I think like tribe is tried like new narrative. Basically like I want tribe to be synonymous with defy in like two years, you know, and that's the, that's the real vision is. It's like full stack, a bunch of Very values, align teams, all independently contributing value. Like I will continue to lead the stable coin side for as long as I can and I'll try and help with this like broader Vision, but everyone I want to bring in

leaders. I want to bring in people who can like build a product and help us integrate and create a really full stack experience for defy and we're going to use PCV to make that really, really kick ass. And like that's the trick is that everyone who integrates with us, gets hundreds of millions of tvl immediately.

And if you did and if you're a builder and you're like, thinking about like what's going to happen to defy, when everyone consolidates like and you're and you're like excited about what we're doing with like Faye and Rari. And you know, we're already in talks with other teams and like it's going to happen and we want to talk to you if you want to build on us like dma. It's a really powerful value

proposition. When you have this tightly knit community that sharing resources and like fostering leadership, you know, like I want team. I want to see, like, people fighting for like, what they believe in like in governance and like, really sharpening The Sword and not just like one team, kind of saying what's happening and that's what's happening, a lot with a right now.

And I think we're doing a good job as kind of stewards with the community and we were elevating the community more and more. But when you add in more development teams and more products, so you really get something magical where it's like true decentralization and that's what we're going for. So you guys remember those is one line and I think the governor's proposal or somewhere but it said like different compete separate communities in one token.

What exactly does that mean? So I do think that in particular the community is I really want to like mesh together because like rawr team is maintaining its own brand and Faye is maintaining its own brand but tribe is like the umbrella. And I think that there's like You know, it's kind of like everyone who's on the Terrace ecosystem. You have like anchor protocol and like I don't even know what

other stuff is over there. But like, that's all over on Tara and everyone still like identifies very strongly with like Luna and the whole ends like aetherium almost like communities within communities. I want it strive to become like an asset that represents a lot of different communities that all come together and like I cared talking about tribe and I care a ton about either like I'm buying as much ether as I can

get. My hands on right now and like I want people to like also feel that way about like tribe and have multiple teams all like building on drive. That's really the vision. So the development teams will stay independent, but they'll be much more resource sharing. I'm actually on calls with the right team. Almost more than the PHA team these days because, like, we're planning so many Integrations and so much about the merge.

So yeah, it's going to be very fluid and kind of like, you know, authentic decentralization that kind of the day. Level scale. One thing I guess makes this merger interest different is like so like this is probably the largest is this the largest like token merge in like ever in crypto, or do you know if there's any larger ones? I don't know of any larger ones and it's definitely the coolest if it's not the largest because it's too. It's so here's the thing. It's two teams with product

Market fit. That's that's what's so cool about this. Is that like other mergers? It's like you take one dying thing. And one thing that's not dying and you like put them together. This is like two teams. I would have continued to kick ass if we stayed separate forever, but we just saw that like one plus one equals three and that's like the meme that we're going for right now. Like you take two things that are already good. You put them together, you get

something like that. Greater than the sum of the two parts. And that's really the, that's really the vision and why it's so cool. In my opinion. Why don't I remember last year? There was this whole thing about like sushi and yearn are merging and that they're going to share a depth, but then I never heard, there's like a blog post about this, but I never heard about it again. What was like the deal with that? Look, I mean, here's the thing, like the urine ecosystem tried to do this.

They realize that consolidation is power. And to be fair, the urine ecosystem is powerful. But because they have all these separate tokens, there's not really a ton of incentive alignment. So people are kind of just doing their own shit and it was honestly pretty lackluster in execution and then the sushi sushi, tried to Vertical ice defy, my building every single product possible with one development team, and that didn't go well either. So what?

Jay, and I realized that, even though it's In folder smash two tokens together. It's the right way to do it. And like, we are going to continue on our product road maps. We have specialized expertise in what we're doing but we have dramatic incentive alignment because we have one token instead of two and we think that that's the model that consolidation will like will win and so it's really a bet on like a certain type of consolidation.

That's at the token level and that's that's what that's the best that we're making. Yeah, because even if you make a large token. So up with that when you think about it like that, maybe you'll be happy if the other protocol does. Well because you're like, yeah, we own some of the token but it's really not the same. In the sense that like in the at the end of the day, you're still rooting for your token and you want like your token to do well.

And like that's not probably the only way to like actually be on the same on the same side. The same team as like, you need to have the same token, right? Like otherwise, you're going to want to you're going to want the best for yourself. It's just natural. Yeah, exactly. So that was the key intuition. And this was a common criticism from a lot of community members. Like why don't we just do a token swap? It's like, well, we've done token swaps with other teams and we still do them.

I think they're very useful and important, but it's a totally categorically different type of incentive alignment. Like, we love index Coupe, but we would not like give them PCB for any reason, right? Like we would we would buy DPI and we would use it and like, do stuff like that. But with Rory, it's like We are going to put assets into their protocol. We are going to pay off their hack. We are going to do development

with them. Like that is true incentive alignment and that's what a token. Merge gets you that a token swamp doesn't. So what are some of the plans for the future? Perfect for, I guess Bay and Rory now and the tribe ecosystem as a whole. How do you? What? What? Yeah, so, you know faii mentioned Favi to is launched from tomorrow. What are the things? NG what are the assumption is that you're looking to validate from this launch tomorrow? Yeah.

So the baby to launch. Its really like Faye is kind of the ship of Theseus. Like it's, it's one system that has a bunch of changing components all times, like, even today before the Favi to launch. The only contracts that are the same from Favi one, or the fake token, the tribe token and R1 Access Control core module. Every single other contract has been completely replaced since Favi one.

So it's already like, they'd be three if you think about it in like a pure like software perspective, but the thing is that we're going to keep like adding new components and replacing old components. They is like a very fluid system and it uses a different architecture than most aetherium projects, like it's immutable. But with like very modular. So we don't have any upgrade ability except for two contracts

in this system. Everything else is just plug and play, like Legos you get rid of I think old put in something new. So, the baby to lunch tomorrow includes two really important features. It includes the tribe backstop as well as a rate. Limiting module on Drive inflation, which is useful for tribe holders to kind of game out. Like, there's no infinite minting attacks. There's no like craziness, like the hard rate limit on how much tribe can be inflated and to is the die.

Redeem ability contract. It's really a PSM, just like maker now, and that is the most important. Mechanism. Because right now we have redeem ability against East which is great. But it on its own, it's a little bit leaky because the chain-link oracle's not perfect. It's the best that we have but it's not good enough to not leak value to arbitrageurs and predictive like, you know, predictive Bots and stuff. So, we're adding a diet regime ability contract.

What's awesome about this is that it's categorically different from the maker, dou, P SM. Make your dog does not control how much u.s. D.c. They have, they only have a cap. It's not PCV. They can't unload that usdcad where we can decide how much die exposure we want. It's currently ten percent. It's going to go up to I think 12 or 15 percent after this next album passes, but that is a number that we control as a doubt. So, like maker Dow doesn't control how much you SDC

backing. There is, it's truly Market determined, but we can say we're going to sell all this die or we're going to buy more and that's totally up to us. So we can we can decide the The level of dependency that we have, which is really powerful. And so we just want to see that like that ready Mobility. Tightens the peg system spares us from like buying and selling eith all the time and then we can focus on kind of the fun part, which is what happens

after the merge. We're going to build a ton of products that focus on, you know, like Dows. I have one product in particular that I'm really excited about and and then like some future plans that I'm super excited. About. So what is the, what's your, you know, I think every protocol is, you know, kind of mandated at this point to have a plan for multi chain or entertaining.

What is yours guys? It's looking like, I'll admit I've made one at their young friends auction in the last month because a little part of me dies every time I pay a transaction fee that's over $100. Yeah, so our multi chain strategy is like not right now pretty much and that's changing rapidly. But basically they is a protocol for dowse and dowse operate at a scale that is still comfortable on aetherium layer 1. So we're going to stay where the dowels are.

We're not fast enough stable coin for consumers. We're not competing with die and u.s. DC, we will eventually but our our like foot in the door is douse like I'm not concerned with how many retail users are holding Fay because it's such a hard sell. It's like phase of stable coin. That's not doesn't have as much of Lindy. It's not as useful as die yet, but it's quickly becoming integrated everywhere. So, why would we try to compete there?

When Fay is literally the best stable going to integrate with a dowel and all the dolls are on maenette. So, we're staying on May 9th with the Dow's, basically until L. 2 is more certain right now. It's kind of a shitshow. It's like you got Arbitron. Do you go to optimism? Ock sink is coming. Like, you know, we're going to just wait and see you go. Build tribe chain. That's the answer dude. Loki that's going to happen. But don't like, like, that's the mega Alpha leak is like, I don't

know when, but that will happen. Loki on this podcast with 10,000 prisoners. Don't tell anyone.

There's wonderful multi-chain thing that that you probably could do or probably will do if I'm guessing, like, so transmissions in Harare, like they've been working on this Nova thing where it was like a protocol for like a you can use for fast bridging like between roll ups or chains and like the the hard problem with these protocols for like A chain and like Fast. Bridging is like you need Capital like so face, like a perfect fit because they can

literally just print into these these fast Bridges and like use their use their, their, their protocol Nova for and do that. So that's kind of like a multi-chain type thing. Yeah, absolutely. So basically like steak or is staying on L1 for a long time, probably until it's very clear that we need to move but launching products and certain amounts of PCV on to other chains is in the works at the moment like Transmissions is working on it. David's working on it. One of our developers.

Caleb is working on it. Basically we want to Joint lunch fuse and Faye on a bunch of chains and I think fuse is getting a little bit of a head start because their devs are more Farmers on that than ours are at the moment, but we will get there. So what imagine, like, fuses on all these other chains. Face-eating pools there. But it's not like core PCV is on these other chains, yet if that makes sense. You could get it on us - Moses to Charlie. Thanks for coming on.

And, you know, sharing all this fun stuff about they and tribe and everything going on. Where can people sort of like, find you and learn more, and what's the best way to for people to get involved? Yeah. Absolutely. So, follow the PHA protocol Twitter account. It's just at FEI Protocol. No spaces, or me. I'm Joey underscore underscore. Score Santoro. I tried to buy a better Twitter handle if anyone knows how to do that.

I will. I will get one but that and then join our Discord. I think the Discord links in our Twitter bio. So, you know, we want to hear from you DM me especially if you're a builder looking to join us. Sick Mega doubt ecosystem. And yeah like, thanks again for having me. This was awesome. Thank you. Thank you for joining us on this week's episode. We release new episodes every week.

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