Bringing Treasuries, Bonds and Traditional Investments On-Chain w/ Norton Wang (Cogito)

Transcript

[Music] hello and welcome back for another episode of The Strange waterer podcast thank you once again for the support that you keep demonstrating for this show it really means a lot to me for as long as most people in crypto can remember we've existed in a near zero interest rate environment then in March 2022 a little less than two years ago the Federal Open Market Committee aka the fomc or the group of people leading the US fed Reserve System announced the first of

what would end up being over 10 rate hikes in less than two years now look there is an endless amount to unpack about the postco rate hikes and we can tell plenty of stories of companies or even Industries being knocked over because of these policy decisions but let's focus on one aspect in particular for the first time in decades us treasury bills were actually yielding a pretty respectable return under this new paradigm you could earn four to 5% per year just by sitting on the ass it regularly referred to as risk-free

collateral and though 4 to 5% might not seem like that much the risk reward ratio is so favorable that vast swats of liquidity left Financial assets to quietly Farm about 5% While most of us in crypto watched the tide go out and lamented our plummeting net worths some very smart Builders realized that the only reason that so much money left the crypto ecosystem was because it was required to get access to these rates and so those same Builders realized that if we build it they will come and so I'm very excited to

introduce today's guest Norton Wang Norton is the CTO of the Cojo protocol a company dedicated to Bringing traditional financial investments on chain they began by providing exposure to treasury bills and are expanding to a green bond fund and Beyond perhaps most interesting Cojo is deploying new AI to give customers access to highly Advanced trading strategies all on chain this conversation is a really fun chance to Think Through many of the basic principles and purposes of defi I have so much respect for anyone what I doing what I call the Lord's work

making ethereum and blockchain Technology actually relevant to the real world and by the end of this episode You Will clearly see how Norton and cojito are doing exactly that one more thing before we begin please do not take Financial advice from this or any podcast ethereum will change the world one day but you can easily lose all of your money between now and then okay let's bring on Norton Norton thank you so much for joining us on the strange waterer

podcast yeah thank you for having me excited to be here of course so before we get into uh basically what you're building and everything on chain I'm a huge believer that the most important part of every conversation are the people in it so with that uh kind of as a frame can you tell us a little bit about like who you are um how you found like computer science and programming and then let's talk about like little a little bit about your journey into crypto sure yeah um I only worked in startups my entire career so my first job out of college was at a startup uh we ran out of money uh but the founders there they were super early in Bitcoin they were mining Bitcoin I think in 2011 and so I got into the space uh pretty early um my first role was at a uh a

company acquired by dcg called trade block um but now you know with their whole situation they have shut down um but that was sort of the first uh sort of what we were envisioning was the first Bloomberg for crypto right a place where you would go to get Market data you know look at charts do some uh trading that sort of stuff uh obviously that type of product is you know really uh necessary right now and there's lots of people you know lots of comp competition in that space um but that was sort of where I first did my toes into you know Bitcoin I did a little bit of playing around with like Bitcoin script which is kind of fun um and then ethereum happened so we sort of pivoted into doing Enterprise blockchain kind of stuff because that was sort of all the

rage in 2015 16 uh we're working with these large institutions to try to like put um you know Equity swaps and credit swaps on chain and uh I mean to this day that experiment is still going um these instit they move slow and they're basically upgrading their 4050 year old infrastructure to you know the Modern Age um so they're still you know sort of a new to Cloud right and so that's a bit crazy so trying to introduce you know blockchain and consensus and all this this this new technology to them is a bit of a challenge uh and so I guess that sort of leads me to where I am now at

coito um so coito is trying to tokenize you know tokenized T bills um we're starting with t bills just because yields are you know 5% uh still pretty good right now we figure that there's uh you know a big enough of a market for uh risk-free rates in crypto and so I'm taking my experience you know working with sort of these trfi people doing sort of chyy things but also you know I I I'm a software engineer I wrote solidity you know I've done all this stuff before and just taking these traditional assets and putting them on chain tokenizing them and here we are today right um people talk about uh real world assets which You Know This rwa

Acronym I'm not a huge fan of because really all assets are assets right some of them are onchain some of them are offchain so you can call them offchain assets you can call them traditional assets whatever they're all assets are real you know uh Bon and whiff are just as real as you know Golds and t- bills in my opinion so yeah that's that's where we are today yeah awesome so um obviously we're here to talk about like what you're building with so cojito right um you know with us internet brains I'm always scared when we get in voice and I have to say the words out loud but okay so COA before we get there um I just like want to spend some time like spinning on your journey to here so you it sounds like you got very lucky by

working in a startup that um if it wasn't directly it was at least it wasn't directly working in Bitcoin it exposed you to it and so I guess rewinding back to the time back to that time and before you know it became so clear that um that there was applications and opportunities for crypto to grow outside of just like digital gold or digital money can you talk a little bit about like what was exciting for you about Bitcoin in like the 2011 to 2015 errow was it really just about um you know the the kind of typical um decentralization trustless uncensor ability was it about like the um ability to deploy code and watch it

have like real world monetary value What attracted you to this space when you first uh were put in front of it yeah yeah so I guess uh like a lot of participants in the space you know I played a lot of MMOs I played RuneScape right so you know there was gold I I uh did a lot of uh trading you know I farmed gold and I it just became that that was sort of How I Learned economics right through playing RuneScape and and so the idea of having you know gold digital gold somewhere that you could trade and then collect and use it to buy stuff like that all just made perfect sense to me and so Bitcoin was my first introduction to that idea like

programmable money that you could just send to anyone in the world you know without having to do kyc without having to uh create a profile somewhere you just you know drop it an address and then you send it and you're done right and so it was hard to program you know in Bitcoin I I couldn't you know bar against my Bitcoin by writing code to do that it was really hard to to do anything to do to write any logic using Bitcoin um and then back then we were still experimenting with you know like colored coins uh all of these like weird nft Concepts you know counterparty uh none of that was particularly great to work with

and so obviously that's why ethereum uh was developed and launched uh so when solidity first came out I was like oh yeah this is way easier to work with you know compared to bitcoin script and then from there uh I just started you know writing solidity you know playing around with you know the first version of maker maker Dow you know the uh single side I think it was what it was called yeah I I lost a bunch of eth you know collateralizing against it when it you know dumped from 800 down to like 80 and uh that was my like introduction to to Defi and like oh we could actually take the current existing Financial system and rewrite it in solidity and you know you have all of these things like

Capital markets and uh decentralized exchanges and there you go it was it was great it was great I loved it yeah no it's so funny you say that because um I feel like there aren't that many people who like have the MMO background and like really use that to click together like obviously you know Internet Property like is valid it just like we don't know what it's going to look like but quick story I like the first time I got in like such serious trouble that like I remember my parents thought I was going down a bad path and whatever but it was when I convinced them to let me use their credit card to buy $20 worth of gold for World of Warcraft and yeah they were just like oh my God this kid is just like spending money on and like

it's it's like very much like a traumatic part of my childhood but it's just like so funny about how um you know just being in that space in the right time like really gave you some um just more gave you the tools to be more comfortable with like Bitcoin and digital currency when it came out and I think now that we're in 2024 and we have ETFs and like there you know everyone's comfortable with like paying for like digital property it's um kind of more trivial Point sounds stupid but I just I think there's something really special about like who were the first people to own digital property it it kind of was MMO players and so it doesn't surprise me to find people like you that were

there in 2011 yeah yeah exactly yeah the and you know just uh the a lot of the lessons that I learned such as you know don't don't like uh when you're trading with somebody you know make sure that you're actually getting what you think you're getting and that they're not trying to scam you a lot of these these you know ideas these lessons that I learned back then are still applicable today you know it's crazy like the the amount of knowledge that I gained just from playing this you know stupid game called RuneScape when I was 12 it's like I'm still looking back to those lessons you know as a 30-year old yeah yeah for sure so I think we can talk all day about um RuneScape and about like uh MMOs but let's uh get a little more serious and before we uh get to what

you're building today I want to spend a little bit of time uh just reflecting on that period in 2015 when like all the energy of yourself your company and a lot of the energy of the industry was around Enterprise blockchains or around like yes it's very clear that eventually somehow business and somehow trfi will engage with these systems but you know at the time we really thought it was by like private blockchains and and I guess like my question to you is can you reflect a little bit about that time and do you think that that was just kind of like the wrong direction and um you know Enterprise blockchain is almost like an

oxymoron and we know that now or do you think that a lot of the paradigms that were developed during that time were ultimately right and just um we'll see them again they just needed their kind of time to um you know distill yeah it's a good question I think probably the biggest takeaway from that period was how how long it takes for these large institutions to be comfortable with any slight change um I was actually on site at dtc's offices in New Jersey in Jersey City and really like it was kind of a sad place you know a lot of the

employees that I worked with they didn't have any passion for what they were building they were simply maintaining these systems that were built so long ago H you know and so they became stuck with like bureaucracy and all of this overhead and you know oh you want to like oh you want to look at this one file hold on let me get my manager approval so really getting them to open up and to embrace new technology was the big change you know it wasn't so much oh yeah we're going to make this decentralized or whatever we're going to have a bright blockchain I don't think they cared about that what they cared about was just like oh look there's there's this new system and it's time to upgrade our system because our system is handling too much money to

Break um but yeah like private blockchains maybe they have their place I'm not exactly sure but I think how I see you know like if if 2015 had gone in a different direction I would have liked it to see it Go probably okay okay let me let me take let me rephrase um if we had to do 2015 again right I would have liked to see uh for example Unis swap already deployed and the institutions seeing that oh there's a lot of onchain capital there's access to global liquidity you know that wasn't there before with this we can take our existing assets such as

these you know exotic you know mortgage back Securities or Equity swaps or whatever and we can give them more liquidity because that's really what institutions care about they care about liquidity you know access uh make the numbers go up right everybody has the same goal of making the numbers go up and so if we had just worked together to to provide liquidity to these weird assets and and to make it all about improving access then I think there would have been uh more collaboration and more you know productive outcomes from that rather than a bunch of these uh like four month proof of Concepts that really didn't go anywhere yeah I think that's like a interesting and a very fair perspective U my background I was in Technology Innovation at one of

the world's largest cpg companies and you know I think once you're on the inside of these like huge corporations you realize that like half the time when you're doing this new technology like proof of concept or you know like these are really marketing things and like specifically they're marketing things between CTO and CEOs not even really external and like it's a whole different thing to actually like as a organization Embrace a new technology and say we want to move over as opposed to like hiring a like Dev shop to like create to Fork you know ethereum to create um you know JP Morgan Chase chain and like kind of go from there and so well that's a bad

example because they uh you know point being is that um there's like a huge leap between like the proof of concept and actually embracing it and I think that in 2015 we really saw proof of Concepts and maybe hopefully we're entering in an era where um for regulatory reasons for maturity reasons for liquidity reasons like it's actually viable to start thinking about this as a real business tool and not just a buzzword yeah exactly yeah I what I I think the big blocker now is is compliance you know and and yeah you know working at coj now has taught me that compliance is really a big blocker to anything fun that you want to do yeah so I think that's a great segue into um

we'll we'll save the compliance and like the things that you're struggling with right now with cojito but let's get into cojito so you gave us a little bit about what it is but can you tell us um what's the founding story like how did you realize that there is a a opportunity and then how did you bring the team together to um you know like decide to tackle it and then maybe through that you can talk a little bit about the kind of products that you're starting with and then what the long-term vision is yeah so actually cojito began as a spin-off of a singularity net uh which is one of the probably one of the oldest uh crypto AI projects um the uh the founder Ben uh he really wanted to build

out his idea of like a AI driven stable coin so that was the original idea behind coito uh and so he actually hired my wife uh my so actually my wife is uh she was a former HSBC banker and then I met her and introduced her to crypto and then she did a master's program at uh pen and she got a degree in in computer science and yeah now she's just like full-time crypto you know with a corporate banking background so that's my wife and she was the one who uh tried to build out this stable coin idea and so I was just there in the background you know listening to the meetings and

so I was thinking this sounds really hard to builds um if you build it what does the product Market fit because we've seen so many of these projects try to do this and fail people just want dollars people want digital dollars that are you know like at a an account at the fed and they want to be able to send it to who whoever they want so really you know I think stable coins is really hard to break into so then we were thinking wait why don't we do something else that combines both of our backgrounds and experiences uh what about tokenization you know we tokenization has sort of been around for a long time now um but really it was like last year late last year when we

saw rates get to a point where it was like pretty attractive to go and buy t- bills that we were like okay uh let's just do t- bills you know let's let's start with T bills right and use that um you know as as a way to get our feet wet and and to learn how to tokenize things and then after that we can tokenize other assets you know equities uh we can probably do a fund that is driven by Ai and finally fulfill this vision of like an AI driven you know tokenized product right even if it's not a a pure stable coin so that was the the start of this idea uh we raised a bit of seed funding last year um actually no was it this

year it was this year yeah sorry no last year it's it's 2024 yeah yeah wow the the year passed that's crazy yeah okay so that was last year and yeah uh we had a few uh team members um from the original Singularity net stablecoin idea and then we hired um a couple of other people for marketing and uh you know designer role content creator role and yeah that's that's where we are now very cool so I I definitely want to like de dive much deeper into um the AI aspects of that but let's put that aside for a moment and just talk through kind of the CH

challenge es and and really what's been going on around um the the treasury bills right and I think to me what's been very interesting is that the whole the concept of tokenization has literally been around since you know the first like Bitcoin and we went through that whole phase of um like Dental coin and um like grocery coin and all this like crazy stuff right and so conceptually like literally in the ethereum white by vitalic he talks about tokenizing real world assets and basically up until 2022 like it was totally a meme and just wasn't going to happen right and we can

actually my question to you is going to be like can you talk us through this process and this change and why this happened but it it really took the changing interest rate environment and really treasury bills becoming an actual attractive investment before anyone really took this like tokenization thing seriously and I don't want to say anyone like there's definitely people out there that were trying to do stuff with like real estate and whatever this but it was really this paradigm shift into a like not even high but like a medium uh rate Market that like kind of opened up this entire um like sector of this industry in tokenization so I I guess can you talk a little bit through um why you see

like that change in the interest rate environment as such an important shift in like the mentality of people and like why that one thing was needed to get people to take seriously the idea that we can represent ownership of assets that exist in the physical world on chain so really the question here is like why own an asset on chain why would I own my house on chain other than to say oh I own my house on chain it's cool you should buy it uh I don't really see any major advantage um and so that's why I think tokenized real estate never really took off tokenized stocks never really took off so it took a combination of like you

said medium rates but also the bare Market of 2022 for t- bills on chain to become attractive um people made their gains in the 2020 to 2021 cycle and then they kept it in stable coins um I would guess that a large part of this stable coin Supply uh simply cannot be redeemed for example it's being held by Chinese Nationals right and then they can't get a circle account they can't get a tether accounts they're just holding stable coins because they don't want to hold anything else and they want to be risk off so there's this percentage of the stable coin Supply that is just sitting there being held as as a FX hedge right and it's not earning yield and all along uh

or all of a sudden rates are now 5% well naturally it makes sense for this this stable coin Supply that's getting 0% to suddenly get 5% and so it's an obvious product Market fit and that's why it really just took off the way it did I I think you know if there was no bare market right if we had just been in the Super Cycle all along and and you know your bitcoin's at like a million dollars or whatever then you know this 5% T bills maybe it would be attractive maybe there would be you know some product Market but I doubt they would have taken off as much as as they did interesting so like I I know we can't really have a bare Market without the higher interest

rate environment and like you know they're they're vote they're intricately tied together but in a world in which let's say like rates went up as high as they did or maybe even higher but and the word super cycle gives me heartburns but we were in a true super cycle like do you you really think that um we possibly like wouldn't have really seen any like very much if any energy into tokenizing um t- bills or do you think that like tokenization was always going to happen it's just like maybe it wouldn't have been t- bills maybe it would have been equities first yeah I I do think tokenization is always going to happen right but I I just I doubt that it would have happened so suddenly um if

there was no bare Market if there was no attractive product to actually like go through the hassle of buying uh then then I doubt they would have taken off um you know like tokenized stocks right that was one of the first things that I was interested in just because it's cool right you know why not hold hold like you know Tesla in in your metamask wallet um I think the challenge there is onchain liquidity isn't great and if you want a kyc it's a lot of paperwork and I already have a Vanguard account I already have a Fidelity account why do I have to do all this stuff on chain just to get access to the same product um fees are probably not as good and the challenges are are just too great I

think for you know for tokenized equities right now you know or or you know last year um going forward I am cautiously optimistic that this will improve um yeah I think fees have to get more competitive and I think uh in terms of ux onboarding you know kyc that should also improve I'm hoping for you know more innovation in the space uh you know I'm hoping for something like shared kyc so that you kyc one time on chain and then you know that's it that could be through for example like coinbase's uh adastation service or something else um but I am optimistic I just don't know you know how long it's going to take for

us to get there no I hear you and I wanna um let's put aside like the regulatory aspect for a moment we'll get right back to it but let's put aside the regulatory aspect ECT for a moment how much of I I think you made a very good point uh especially about the real estate where it's like what's the point of owning a security on chain other than like it's cool and I think that you exactly pointed out what um the point of holding like tokenized treasuries on chain is is that there is a huge amount of stable Capital parked that needs access to yield but like is not allowed to access it right and so there's like this Arbitrage that is offered by this technology that essentially says people

that traditionally aren't allowed to hold these assets like can hold them through crypto and I guess um in my head like that's exactly going to be the same Dynamic that brings equities on chain it's the same people want to own equities and want to own more attractive Investments and uh if there's a demand Supply will eventually find it right regardless of what Gary Gensler wants to say and so we'll get into how it actually works in the regulatory thing in a moment but I guess my question to you is do you think that that's like a healthy Dynamic that essentially um we're able to build these products uh because it's a way to get them to people that otherwise are not allowed like explicitly not allowed to hold them um

is it a healthy Dynamic yeah I I don't know if it's healthy but if you think about how for example tether got adoption it was through these people that otherwise couldn't access the dollar right uh how did Bitcoin even get adopted in the first place it was it was because of FX controls right people want an alternative to to like you know their government backed you know dollar or whatever and uh they want to be able to send it to their family you know remittances um all of these crypto you know IDE ideas were sort of born out of or or not born out of but

like they found product Market fit um out of out of pure need for an alternative you know and if the future is you know these Chinese Nationals wanting to buy Nvidia but they can't through their brokerage or whatever then of course if if the if going onchain is the only way for them to do that then that will have to exist right yeah uh Capital finds a way yeah I guess your point is like healthy or not like the the point of crypto is that if it's possible someone's going to build it and um I guess like maybe the real lesson here is to turn back around at the US

government and so if you don't build like well understood like easyto use guidelines like we're going to get more tethers and we're going to get like tethers that instead of just giving stable assets are giving volatile assets and like then what kind of world are we in yeah yeah exactly cool so let's talk a little bit about like the regulatory problems um and and like the things that you've had to go through in order to like make your first product like even viable so can you talk a little bit through um first like what are the regulations that are Salient to you um around treasury bills and then to like how do you as uh you know a co-founder and like a leader in this company how

does the company navigate through the process in order to get to a point where like you feel comfortable actually selling something to the public uh so the way we are structured is a fund uh we are a licensed Cayman Islands fund uh which is a popular jurisdiction for funds of all different types and there's uh plenty of uh service providers in the Cayman Islands and everyone sort of knows how the Cayman Islands operate that's why we chose them um the way who provide exposure to t- bills is basically you have to create a wrapper around it you can't offer them directly

because it's just really hard to do so because uh they have to be held by a rapper sort of if that makes sense uh it's just that um there's differences on the type of rapper that you choose so we chose the Cayman Islands right other people do the British Virgin Islands people do the Bahamas or SE shells or Switzerland or Germany and these are all fine um there's you know slight differences in each you know uh in terms of uh what the minimum subscription size is the number of investors it can have the accredit accreditations of each investor uh so on and so forth marketing

guidelines and um yeah we we've sort of looked at uh what was available in the market and sort of just uh went with something similar um there's no we couldn't find really a way to to get around like this this rapper uh and uh yeah so we simply spoke to a bunch of lawyers and talking to the lawyers was probably like the bulk of the work here just figuring out what the right structure is and like how many different you know pieces of this rapper do you actually need uh so in our case we have a we have a entity in the

British Virgin Islands and also an entity in Cayman Islands for various reasons that I don't fully understand because you know I'm an engineer right I like things that make sense This legal stuff doesn't really make sense but anyways yeah that's where we are we talked to a bunch of lawyers and we decided oh this is the best approach you know this is how much it costs and uh that was sort of that you know we we just chose the thing that made the most sense for us and so let's let's talk through how it works so um if it like can you go through the flow of funds to let's say like I am somebody on chain with like a certain like say $100,000 worth of usdc and I want to like get exposure to t- bills uh through using co co coito um like how what how does this

work do I send money to a Smart contract is that smart contract allow you to withdraw the usdc Into Cash where you can go buy the bills like just talk us through um what actually going on here yeah exactly uh so first you would have to kyc and we have a uh we use suub for our kyc which you know a lot of other exchanges uh and um tokenized funds will use and uh once you finish that process then your address is whitelisted so that gets uh sent on chain uh and then from that address you are able to um deposit usdc into our smart contract uh and this smart contract holds holds uh a little bit of usdc for instant Redemption um

but it also manages um the net asset value of the fund uh so we have a fund administrator who is going to uh take the usdc out of the smart contract redeem it for Fiat uh send the Fiat to our brokerage account uh and then we are going to buy uh 3 to six month T bills right then the value of the brokerage account will be calculated by the fund administrator and then they're going to take this number and then just put it on chain and so we put it on chain using chain link uh then this number gets calculated in smart contract and your number of shares are issued and then these Shares are just uh erc20

compatible tokens uh the one caveat is uh we have a whit list restriction so you can't freely transfer them to anyone you can only transfer them to other Whit listed addresses and uh this restriction is because of the Cayman I believe um but yeah so this does allow some secondary liquidity for example if you wanted to do an OTC trade with somebody else that is already whitelisted you could totally do that uh redemptions work you know pretty similarly you just call a function you know click the button in the UI and then the whole process works in reverse and after up to two days you know you would get your usdc back um if you're redeeming just a

little bit for example if you're redeeming like a hundred bucks and there's 100 there's more than 100 usdc in the smart contract you would just get it instantly no problem I think like what's really interesting and this is always the like problem with um treasury backed uh like products is this whitel list restriction you have on the token like you can only transfer it to essentially other kyc participants and so do you envision creating a ecosystem of like apps that allow like people whitelisted to like obviously not get the full benefit of a or of Unis swap but like at least get some sort of you know interact ability amongst other wh

list people like would you are you considering deploying A specialized curve or a specialized uh lending Market that allows people to at least like in some ways interact with defi using um their shares in this fund yeah yeah so that is a great question um of course you the whole reason we you know we're building this on chain is to allow composability right and the other benefits of building things on chain offers so we have thought about building our own lending protocol um and for example that would allow you to deposit your t- bill tokens and borrow usdc against that right and so the lenders uh could lend usdc permissionless and be able to collect some yield that's

slightly less than the the risk-free rate um there are other uh platforms that have already built this uh so another area that we're exploring is just partnering with these lending protocols and just allowing them to use our our uh T Bill tokens as collateral right and once we have other assets tokenized for example if we have an Equity Fund we could allow the Equity Fund tokens to be borrowed against as well so while we're still spinning on like the realities created by regulation of needing kind of a not not even a permission but a kyc space do you see this being solved with somebody at like a centralized credentialed person like coinbase

providing attestations and maybe some zero knowledge in there and and then just like you have kind of this universe of wallets that's allowed to interact and this universe of wallets that's excluded or do you see this activity kind of migrating onto a chain in which like to enter and exit the chain you need to deal with some kyc but within it like everyone is fair game I guess like where where do you see this industry going in order to deal with it the actual kyc problem yeah that's a good question I actually have not thought about that I I've always thought that there would be two parallel worlds right one that is kyc you know one that is waled and one

that is complete Anarchy um and so you I'm not sure what that wal's you know Garden will look like if it's going to be on base using coinbase's attestation service or or something else uh but I do know that you know in in the long term there is going to be some separation and then the bridges in between these two worlds um will be challenging to build and operate in but they need to exist um for liquidity reasons I I just I I fully believe that in the idea of just this Global liquidity just being completely uh liquid and able to move

round anywhere jumping back to our conversation about corporate chains um I just so today we have JP Morgan has uh it's not Quorum anymore it's Onyx right and what they do like today they're literally doing hundreds of billions of dollars of repo transactions between like 26 Banks and I don't know feel free to dis agree with me on this but like I'm just so so convinced that eventually that is going to end up as a permissioned but as an L2 on ethereum because if if that's not the end State there's no reason to have like a consensus engine like coordinating between these 27 Banks right like the 27

Banks they're all like real entities with real jurisdictions they all know each other they can all Sue each other like what's the point of any of this proof of stake between them and so I just I'm so convinced that eventually how like trafi institutional banking is going to interact with blockchain is just through like the either the L2 Paradigm or some side chain Paradigm or something like that and um I guess like this third space is what you guys are building which is deployed directly in the wild jungle but in this kind of like protected uh Sanctuary space and so um you know this is the like the scary part but the fun part about being on the bleeding edge is

um you never quite know where or how to build but to me there's just this blooming question and all this BTC uh ETF stuff makes it just so much more relevant but like how does kyc and how does like companies that need to worry about regulation deal with our crazy ass Twitter pfp um industry is uh like one of the like billion dollar questions open right in front of us I I'm hoping for a world where we have for example like uh kyc hooks on Unis swap before that would be kind of cool um I'm not sure like how far we are away from that

happening but like if we had that for example then you know you could just use you know whatever role up you want to or or even a main net and uh just like if you need kyc use the hook if not don't it's all good yeah and again now we're like a little bit spinning here but like when when my friends outside of this industry ask me like what what is actually the use case of crypto and and like the one that is just like actually the thing that's going to send us to the stratosphere and like really make crypto obvious is I just think crypto and like crypto identity is going to replace passwords like clear and simple like passwords are broken look at the Gary Gensler SEC tweet situation from uh just yesterday and so I think like part of

that is going to be like as soon as we have identity on chain like you know we're and and Z ZK makes this all so much clearer like I'll be able to register with my government at that I'm a US citizen and then can provide attestations to that and then I'll be able to register with my bank if one day eventually I have enough money to be a credited investor like I'll be able to register with them and provide that zero knowledge proof and so I just like the the questions are clear in front of us and but the answers are just like so obvious based on the technology that um again it's just like a really exciting time to be here no yeah totally so okay so we spent a lot of time talking about um treasury bills and I see if you go on

your website right now the your next product is already right in front of us it's I think you call it the green investment fund um so can you talk a little bit about what that is why you chose that as kind of the next product and why you think like of all the things you could offer that's going to um you know achieve like the demand that you want but um yeah I guess I guess like can you answer that with just like also helping us understand how do you guys identify what the right uh opportunities to like tokenize something and bring it on chain R versus um like what's just kind of noise that's out there that is like probably not worth your like very precious engineering time uh so the idea behind green fund is uh actually sort of

um back to the stable coin idea we wanted to have a stable coin that was picked some green Index right um and it could be independent from US dollar and uh it would be based on sort of environmental um indicators uh the realistic version of that is we buy a green Bond ETF right the BlackRock has one of those products it's 300 million AUM we just buy that and we tokenize it the reason we would buy this over T bills is um once rates go down and we are expecting Cuts this year then corporate bonds will have uh more of an appeal and uh green Bonds in

corporate bonds oh I'm sorry green bonds are a type of corporate bond so the yields are very similar right uh it's just sort of a branding marketing thing uh so the idea is you know uh we're launching with t Bills first because it's the most obious opportunity right now in a year or two corporate bonds will be the most obvious opportunity and you know if you want to go risk off on chain using your stable coins you just buy Corp bonds right it's pretty simple to understand now after that is where things get a bit tricky uh I mentioned before you know tokenizing equities is challenging but it's cool again I I I still think it's challenging

but cool um I think our spin on token equities is we just run machine learning you know on offchain basically and then we we just um uh weigh the portfolio dynamically you know based on all of these different indicators and there's that AI element which is kind of cool um not many people I don't think it's especially like not retail doesn't really have access to the type of investment um and so the angle here is that we would just do this Aid driven fund that you know is is on chain because it can be on chain you know why not so before we get to the aid driven fund and like the the next investment or sorry the next opportunities after the

green fund can you talk a little bit about so the the big difference between treasuries and green fund is one is issued by a government like the government and the other is issued by companies so can you talk a little bit about any of the um differences in like either the regulat side or just like how you had to build the product that comes from like this like distinction just between like Sovereign issue debt versus Corporate issue debt uh in our case because we are structured as a fund uh it doesn't make any difference at all actually uh any asset that is publicly traded whether it's us bills or UK

guilts or you know U uh corporate bonds from Boeing they're basically all the same to us we just buy them on the exchange and then we put it in the fund we tokenize that and we're done um yeah so you know because we're not issuing bonds directly we're not like a primary Market uh there is no difference uh there are a few other projects that are trying to do that which is slightly different from us and uh we we are not that and then sorry I guess I should have asked this earlier but um when we're like talking about the actual stuff that's going on in chain on chain like so let's say I invest with a hundred usdc am I earning returns in usdc am I earning them in a stable coin

that you're issuing like how does the actual flows of this work from the investor side yeah you would be uh earning interest in usdc um basically yeah yeah just you would buy the fund at some nav let's let's say you enter at 105 and then you exit a few months later and then now the nav is 107 right so you would just make $2 right off of your 100 and then you're facilitating that with like the the lynchpin piece being your ability to like redeem and create usdc at a one to1 ratio through Circle or coinbase or however you're doing it yep yep exactly got it and that's why like that distinction that you made that you're not actually issuing any bonds or anything I I don't mean to take away

anything from what you're doing but at least on this aspect like really all you're doing is acting as like the guy running back and forth between the like fund bank account and then the fund Ledger and just like matching them up right yeah yeah exactly I mean it sounds simple but you would be surprised at how much paperwork and like box checking there is in that you know two sentence process no for sure and on top of that like you you just really really want to make sure that like nobody can make a stupid error otherwise like you're just losing people's money so no I don't mean to take away anything at all but just uh trying to like wrap my head conceptually around what you're doing so I think now is like a great opportunity to move into like the AI stuff and um like the more

uh you know like open field like ideas that you guys are having so you talked a little bit about how like you want to deploy AI to like make just more sophisticated more Nuance um like stock picks I guess um and and to create like tighter funds that better reflect like an what an investor wants so can you talk a little bit about like what are the types of AI tools that you're using to uh just like create better funds but then also like what do you think the opportunities outside of just like better or faster stock picking do you think there are to uh deploy AI into like investment um planning yeah um so first I'll say I'm not the AI expert on

our team uh we have a Quant who knows more about this stuff than I do um I'm a web developer right I write solidity in JavaScript but the basic idea is we collect a bunch of data you know like perhaps thousands of different indicators uh and then we have these models uh and then we we train the models on the data and it spits out decisions you know to to buy or sell or to hold and we simply follow the instructions and uh this is not a new idea I think people have been doing this since the dawn of computing probably for a very long time um but perhaps now there's a you know we can we can do do some large language model type of stuff

we can say oh uh you know given all of these data points you know given all of the sentiments given all of these tweets tell us like you know is is retail gonna pump Tesla today or not yes or no right so it's slightly evolved and it's the 2023 2024 version of what we did 50 years ago so yeah um you know as for you know potential of AI in investing yeah I think uh it's a huge field again I'm not an expert so I don't know what state-ofthe-art is but basically there's more and more data being produced every day and humans can't analyze it but the computers can so we just pump all the data into this big model and run it

somewhere and it's just tells us what to do and then and then we just listen and that's that got it so it sounds like the big unlock that like cojito is bringing to the table is less about like the the specific application of AI and more in the realization that like Ai and the combination like the the the system that you built that allows you to bring like not real world but let's say traditional um assets on chain is like a super super powerful opportunity to like not only just bring the stuff on chain but bring like like the cream of the crop and like not just to allow Deens to make um Investments but like to empower them to

make like better Investments than if they were trying to do the exact same thing on just like a Fidelity account yeah yeah pretty much you know your average retail user is not going to have access to like a a powerful AI model that you know is trained on all of these data points that that tells some what to buy um it's a lot easier for them to say oh look there's an onchain fund that it uses AI to to you know to make to optimize its returns that sounds cool I'm G to invest you know it's it's a it's an easier uh concept to digest and and I guess like as you're you know we're still very early days I'm sure you're still building like some just basic nuts and bolt stuff but once you kind of flip into the the mode of

operation where you're really like searching for users and for Capital like how much do you foresee your potential users to be like at least your first potential users to be DG's onchain with idle Capital that are looking for this profile of returns and how versus people in the traditional investment world that are interested in these kinds of returns but like might be interested in getting what they have through a traditional broker uh like you know experience and exposure onchain there's basically two groups of people uh one is the onchain Dows onchain startups you know they've raised some money and uh you they

they're looking for safe return right I'm sure they could go deposit into AA compounds or they could buy t- bills um both are equally valid choices I think we're just giving them an alternative the other group of people are the ones that are not crypto native let's say they're living in Southeast Asia in Thailand or whatever and maybe it's difficult for them to buy t- bills right they have to go and open up an international bage account and then you know their Bankers are asking all these questions y y yada um it's much easier for them to Simply buy crypto right like buy tether and then deposit into our fund and get access that way uh so we're targeting both uh groups of people yeah I mean it it does seem like there's a

huge opportunity for the non- crypto natives but um God it's already so hard to get people like just interested in crypto in the fir like willing to touch the chain and then let alone to then you have to convince them like okay put your most stable Capital into this most volatile place and so uh I hear you but that sounds like a tough uh a tough uh Hill to climb the the Dow treasury one is super interesting because um like obviously so much Idol capital is just sitting in like in some like really weird places um my question for you is have you thought through how to allow these like really Crypt native entities

like specifically that don't have social security numbers or tax IDs and like can't kyc in the traditional way like how do you get them to a place where they can participate in your system yeah I think DS need at least one person to handle all of the paperwork right because otherwise it's really hard for them to deal with even basic things like payroll or you know uh spend money on marketing um so I think in a lot of cases there there is at least one person willing to kyc and for us um that's it that's enough got it so what it's less important that like let's say like the

entity it okay um fake da right let's say fake DA has like $10 million in usdc and I am you know a officer of fake da or I'm very influential in fake da and I'm like Norton I'm willing to like tell you who I am and give you my social security number in kyc but like I'm telling you upfront that the money that I put in is not my money and like I am not responsible for it uh and I I don't even really know where it came from is that like gonna be okay with you guys or like is that something that you kind of need to work through with each individual case to like really Shepherd it to something that's acceptable for

both of you yeah yeah that's something that uh they're gonna have to discuss with our uh fund admin uh because they're the ones that have to sign off on it uh you know they have their own guidelines guidelines because they're being regulated and so yeah you're right it's going to be a caseby casee basis got it yeah but bottom line is yeah I do think that like it makes so much sense to build products for Idol capital and like yeah we can talk about all the Chinese Nationals and like the Russians who Money's been locked away and the North Koreans who've stolen it and like yeah of course they want yield and that is what it is but like what is like objectively like just a legitimate thing are these Dow treasuries that um are

creating like real products and like have amassed real amounts of money and like I don't really know how the regulatory answer is going to come but like eventually they'll be able to deploy their assets and it makes a lot of sense to be like a place ready for that yeah totally cool so with the last five minutes here I would love to just hear about like what you guys are excited about in 2024 and Beyond and um you know we have a hopefully we have a bull market that is like building and maybe we'll see by the end of the year or early next year um let's all hope for that but outside of just like the liquidity and the money and the tvl and all that stuff in terms of building like what um are you guys really excited

about like building and like putting out there and like how are you going to make uh defi just like a better place to deploy Capital yeah um I personally am excited about building on new chains um there's PE people talk about you know like say like monad uh s all these you exotic new altel ones uh and I think it'd be cool to Just Launch on everything new and just be the place to go on each of these chains for you know like just safe yield um I imagine there's not going to be too many you know new products new Safe products especially on these new chains when they first launch um and so yeah uh we are

looking forward to just you know being first movers on some of these new chains um and just having a safe place to deposit money you know like once you bridge your usdc over there you got nothing to do just chill in some T bills I guess why not so when you're looking at these new chains and I we don't need to talk about like how each individual one has its own individual risk profile and blah blah blah but when you think about just moving liquidity across chains and like you know at the very least like let's say someone deposits usdc in say and like maybe um it's hard at some point you're going to need to worry about like liquidity across chains just within your own products and my question for you is do is that something

that keeps you up at night or have we reached a stage in this industry where like through chain link and layer zero and like all all of these bridging solutions that we actually have enough like Rock Solid infrastructure pieces that uh that's just something that you know will be like kind of plug andplay yeah I think from a ux perspective having all of these different chains and and layers layer threes four zeros whatever these different WRA versions of like seven different WRA versions of usdc in the cosmos ecosystem that's very confusing from a ux ux perspective you know I I personally have like 10 wallet extensions on my browser and like I

forget which one goes for which chain it's all very confusing uh there needs to be Improvement on this definitely um it's just we we are not the ones to do this um for us you know because dollars that you deposit with us are sort of moved offchain right we can just redeploy that onchain anywhere that we want um wherever tether's Ava or sorry wherever circle is available uh we can just issue you new USC on that chain you know so for us it doesn't really matter um but I do agree with you like from user perspective it's very confusing so I guess I guess really your choice of usdc as your base on chain asset kind of solves this problem for

you because Circle has like create has recognized this before we did and then created the infrastructure to basically like take on all the like minting and burning risk I I guess my final question for you is does that kind of lock you in uh at least for the foreseeable future into usdc as a asset or do you think about like how do we bring in other things like tether or even like non-redeemable stable coins like let's say a fra or a die um how do you think about like the world of stable coins in regards to like the product that you are building yeah of course we would love to accept every type of stable coin uh and for that we actually partner with market

makers uh and users are able to deposit whatever they want with us of course that'll have to get routed through the market maker and there could be fees incurred along the way uh so I would like to say that we are chain agnostic and stable coin agnostic just because we work with market makers so sort of um you know we we our our core um mission is to do all the legal stuff to do the fund structure to do the paperwork and in everything else we partner with as many different service providers as possible to make it easy for investors yeah awesome well is like an incredible note to walk out on because I think that as we like walk further and further into

the future and we really wrap our hands heads around the modular blockchain thesis I think it's going to become more and more obvious that in order to build companies in this industry we have to build modular companies and like what you're building is something that is like has expertise in like this one specific core part and then you um you you need to find other players ERS that are not in your core competency and um plug them together in order to create like a user facing product and so again I think like what you guys are doing is like very cool but more than that like you're building it in the right way uh for like the industry that we're in so Norton man I

really appreciate the time I really appreciate uh like you just sharing so much information on uh like really how real world assets are being built and how things are changing and I guess before I let you go can you please just uh share with the audience like where they can find you where they can find uh Co coito and um if they just want want to learn more what should they where should they be looking uh you can find me on my Twitter at float float boat you can also follow coito on Twitter uh coo protocol uh or check out our website and that's it thank you for having me Rex no man it was my pleasure and uh I can't wait to talk to you when it's not just uh like bond funds that you have on chain but like the entire uh spectrum of

assets so Norton good luck happy New Year and talk to you soon all right you to Rex bye