Chronicle CEO: RWAs Will Lead The Next Bull Market (Biggest Wave Ever)

Transcript

Chronicle actually spun out of Maker Dow. Myself and Mariano Conti actually created the first oracle on Ethereum. Our goal was to build D. [music] How do people get exposure to the tokenization movement? >> What are you doing with Black Rockck? What are you doing with BNY? >> We just wanted to build a decentralized stable coin. >> Nicholas [music] Kungl, founder of Chronicle and a key builder of decentralized oracle infrastructure. Chronicle powers high integrity data for onchain finance with deep roots [music] in the maker ecosystem and a focus on transparency, resilience, and security. Nicholas Kungl helping define [music] how trustworthy data enters decentralized systems. I I agree with that. Um, but I'm a little bit biased because I helped design it. [laughter] >> Last 48 hours, I've never had more

bullishness from institutional capital allocators, the largest brands in the world on digital assets. while simultaneously the price action currently as well as the sentiment in the more crypto native circles is down. It's apathetic. It's what are we doing here? It's Monad is not going to be a good project. It's a scam. It's that L1 is dead. Why do we need new chains? We don't need more DEXes. What are we even doing here? There's this complete divergence in the market. How do we even explain this?

>> So, I think the question is which one is real? Which do we believe? the bullishness that's happening off of Twitter, off of the charts, maybe inside of the rooms where business is being done, or do we believe crypto Twitter sentiment? [laughter] >> When you put it like that, I mean, >> I I mean, I I think crypto Twitter is usually like a looking back type of indicator rather than a looking forward indicator. um institutions are much less subservient to these short-term narrative cycles uh for these types of projects to be green lit for the enormous capital outlays, right? Uh that that go into doing these projects,

right, to to be allotted. Uh there needs to be a real tangible plan kind of backing this, right? And it it's really irrelevant if uh what BTC is doing and and what ETH is doing. Um I I think this distinction that you pointed out is like so important though. um primarily because uh ETH and BTC and and general right alt markets going up or down has usually been correlated with like the eb and flow influx of um of retail, >> right? And I think this was kind of the first

um secular kind of cycle, right? where it was almost entirely institutional driven. >> Yeah. >> Right. I mean even even with DATs, right? DATs were not a retail driven phenomena, right? It was a very institutional driven uh phenomena, right? >> Definitely. >> Um same thing with asset tokenization, right? Um and I think that's also why kind of uh we didn't have like an alt market, right, this this cycle, right? because it it wasn't crypto protocols, right, for the most, you know, besides something like a pumpf fund, right, that were really generating all of the the revenue, right? It was more, okay, there

are these institutional products that are being tokenized, right? And it's the it's the same classic business model, right? There's a management fee on these products, right? And we allocate into them on chain, right? But uh it it's almost like that value that value escapes, right? So um it it kind of makes a lot of sense, right? Cuz re retail is not seeing the the upside why why they would be down. But as a as a space, right? Uh I mean the the amount of growth and collaboration between like you mentioned right uh government institutions, financial institutions and and kind of crypto uh particular DeFi, right? Um, it is

it is like hyperrowth at the moment. >> We were saying it feels like like 2025 is like this line in the sand type of year. And Yano said this on a podcast I was listening to earlier today as well where you know you're really earning your seat at the table, >> right? Like the table is being formed of the winners >> uh in terms of the the market, right? And um you know obviously we're at SMARCON the last two days. Chain link is probably somewhat competitive with what you guys are doing. We we can talk about that. Um and it it's very clear that this institutional adoption wave is only going to happen once and that you know once that's done the you know we have a bunch of wet concrete it starts to be kind of you know paved the asphalt is

laid and so you know with that framing in mind it actually applies more pressure now I think to investors builders entrepreneurs etc more than ever. >> Yeah. So, I'm curious how, Nick, how you're thinking about some of the winners of DeFi in 2020 through 2024. We've seen some of the winners become become made. We know who the winners are, right, in DeFi, but those winners aren't necessarily the winners that could take place in the institutional world. And so when you're opening up some of these opportunities in the institutional world, are they looking at some of the existing players in DeFi that have found product market fit to a certain extent? If not, what are they looking for in a business to partner

with to ultimately extend into what this next cycle could look like, which is probably a lot more institutional driven. I think it's important to just take a very simplified view of like why would an asset manager right tokenize something a money market fund right CLOS's private credit right what have you um these are existing financial products that there is a existing business model around and they view tokenization as a means for one increasing the utility of these financial products uh but two more importantly increasing distribution of

those financial products and so I I don't think they necessarily are as red team versus blue team as uh crypto Twitter typically is right uh um they are much more will work with anyone provided that you and assist us with our two goals, right? Can you give us more utility and can you give us more distribution? Um, so I think um I I don't think it's going to be as much of a shock for example for the credit protocols. So the uh morphos, the sparks, the ave u because they still

play a very important role in tokenization. Um I I do think right that the um this race for everyone to try to be a perplex or just the the decks on xchain um that that's not a winning path >> when you're thinking about utility and distribution. I'm curious to get a little bit more specific into Chronicle. How are you thinking about these two dimensions? Um how are you able to bring institutions more utility and more distribution at Chronicle?

>> So that that's kind of the problem that we solve. Um, I think the first generation of tokenized assets were this kind of herculan effort just to get the kind of entity structuring, all of the legal ease, all of the >> infrastructure, all of the compliance kind of built out. And but there was a little bit of a failure in the sense that uh um almost like this engineering trope of like if you build it, they will come right?

um kind of mistake that was made here where just because you tokenize something doesn't mean you've stimulated demand for actual adoption of that tokenized product. Um, and I think it's just in the last 12 months or so that the acknowledgment right that the the big win here is when right after you tokenize a token is just this like inert kind of wrapper abstraction right uh the utility and distribution come from like when you actually integrate this into onchain in finance,

>> not just integrated it >> onto a blockchain. >> Yeah. >> Right. >> Um now the problem when you want to integrate a >> what is essentially just a wrapper token into a DeFi protocol is the DI protocol doesn't have any of the contextual metadata um around the tokenized asset. Um, and that is a really important distinction. Um, because we've built our, let's call them like risk systems or risk management systems in DeFi around cryptonative collateral.

>> Right. >> Right. >> And that just isn't possible with tokenized assets. And so the role of oracles um has really over the last 12 to 18 months uh become redefined in having a a new purpose. I I think historically I know if if we can if we can call uh DeFi old enough now to have history, right? Historically I think like the trope of oracles has always been around like oh it's that thing that tells you a price.

>> Yeah. >> Right. Um, with the advent of tokenized assets, there is so much more than just price. That is this necessary data that D5 protocols need to have access to to appropriately riskmanage um these integrations. So um I'll give you some examples rather than just handwaving. >> Yeah. >> Um you know that this you know what what is the metadata? Yeah. Right. Um well, one of them is certainly reserves, right? And that's where this kind of proof of reserves moniker kind of comes from. Um I do think we have to acknowledge that in finance reserves has a very specific meaning and it really

only applies to um financial products that are directly redeemable for the underlying. So I think stable coins are kind of the perfect example here, right? you can redeem your stable coin for a dollar, right? So, okay. Um, when you, for example, tokenize a fund or like a CLLO or um a money market fund, right? These are not reserves anymore. Um, you can say they're holdings. You can say they're underlying assets, right? Uh, and it sounds like I'm being pedantic, right? Um but in crypto we have a tendency to [snorts]

come up with new terms or redefine existing terms and uh the problem is when you now speak to uh institutional teams and companies right >> words matter right terms matter right uh so uh it's one of the reasons for for example why we called our kind of tokenization oracle proof of asset rather than proof of reserve Um but I I digress. So using like a Chronicle proof of asset oracle, right? What data is actually being looked at by the oracle and what data is actually usable by the D5 protocol. So the oracle itself is plugging in at the custodian level. So

it has uh real tangible view of the underlying assets of uh a fund. Um it is then constructing right its own um kind of aum calculation its own you know nav or price per share right calculation. It's looking at the amount of outstanding shares. Sometimes that's the same as tokens sometimes it's not. um it's driving uh the yield of the product, right? And so now you can start to get a sense of like, okay, well, how can these things be used? Well, if you have an oracle that is in real time

telling you like what the reserves are of something, right? Okay, now if there's ever like a hiccup, right, the D5 protocol can be like, okay, circuit break, don't extend any more exposure. Don't, you know, we don't want to have any more additional exposure to this product until this anomaly has resolved >> or uh maybe we cut down on the amount of leverage that is available, right? So, you can't have 5x leverage anymore. or you can now only have I don't know 1.5.

Um it's also really incredibly useful for building structured products. >> Mh. >> And this is also something that I think institutions are really excited about where their own kind of tokenized financial assets kind of act as like these base primitives and then onchain you can build these more complex structured products. Right. Yeah. >> Um I think in DeFi we've started calling some of this stuff like vaults. >> Yes.

>> Right. So a vault strategy. >> Um but if you want to be kind of correct in terminology, these are just you know more complex structured products. >> Yeah. >> Um >> we've seen what happens this past week when these structured products due to a lack of data fail spectacularly, >> right? [clears throat] like with the streamer um stable coin. >> Yeah. >> Right. Which did have proof of reserves, but those proof of reserves were done by streamer themselves. Uh which is just nonsense, right? Um >> you should never trust an issuer of a tokenized asset or in this case a stable

coin, right, to tell you what their reserves are, right? That is just complete moral hazard, >> right? it has to be an independent third party uh like a chronicle right there there's a correlary to this in traditional financial markets right we have credit rating agencies right we have Moody's we have standard and poor right and there are others um that are assessing the quality of of credit right and and grading it right and those uh ratings are um explicitly uh plugged into risk models by by institutions right and and factor into how they they they quantify that that risk.

>> You know, when it comes to actually institutions and DeFi protocols using Chronicle, you know, you guys are relatively new. Why would anybody trust you guys over more long-standing teams? Like, why would I choose Chronicle? It just seems like a big risk. I'm I'm glad you asked that um because it's probably one of the questions I get the most and it's it humors me a little bit um because we check all the boxes. We've just done a atrocious job at at marketing and branding over the years. Um so Chronicle actually spun out of MakerDo where myself and Mariano Conti actually created the first oracle on Ethereum. Um, and you know, we,

you know, our our goal was to build D, right? We just wanted to build a decentralized stable coin and, uh, we just needed an oracle and nothing else existed, right? There there was no chain link at the time. So, we're like, great, we we built it in like a week. Um, and then we went back to what we were doing. And at some point, we're like, oh, we need a DEX. So, I think few people actually know this. Maker also invented the first decks on Ethereum. Everyone thinks it was Ether Delta. It wasn't. Was simple market. It's made by a uh like crazy savant guy named Daniel Brockman over the course of a weekend.

Um but uh so you know we actually have more history in in DeFi um than than anyone in the space, right? I think at one point uh in I believe like 2022 um Maker Dow now Chronicle was securing somewhere around $22 billion in in DeFi uh was was the largest oracle player by by far. Um now uh fast forward to uh today right we are the second largest oracle overall. We secure uh just over $16 billion in in assets. Um you know, a lot of the other

oracle players in the market, they they don't even come close. Um specifically in our our new tokenized asset oracle, proof of asset, uh was launched earlier this year. So completely new product uh you know, securing zero in value. Um today it secures just under $6 billion in value. It is the largest um tokenized asset oracle. Um and I think from a business point of view, um we are exceedingly well positioned to one continue to maintain that kind of market share domination in this growing

tokenized asset vertical. Um but two to leverage the expected outpacing of growth in tokenization versus DeFi in general uh to become the the number one oracle overall uh in I I would say less than 12 months. Um like let me quote you some numbers that that are going to sound kind of insane on the surface, right? But uh the size of DeFi right now um is just under 150 billion. Uh size of stable coins if you depending on what what you want

to include in that basket um it's more or less 500 billion. DeFi growth has been relatively stagnant over the last three, four on ETH price, >> five years, >> right? And that's >> that's because kind of the inherent problem that DeFi has is that the kind of collateral basket has traditionally been limited to ETH, BTC, Salana to an extent.

Um and so that means inherently the growth of DeFi is limited to well what is the combined value of BTC ETH and and soul right and so if the majors only do a 2x well guess what like defi growth is going to be heavily constrained to around the same multiple right the big unlock that comes with tokenized assets right is here is this giant injection of highquality kind of assets, right? And that can uh [snorts] really scale DeFi in a way that we've never seen before. Um Standard Charter, I think, said a couple weeks ago they

expect uh tokenized assets uh to value around $2 trillion by 2030. Um >> and and I think that's even being a little bit >> conservative >> conservative. >> Um the the combined total sum of all kind of financial assets in the US alone is somewhere between 300 to 450 trillion, right? And and that's the opportunity here, right? That in the words of Larry Frink, right? All financial assets will be tokenized.

That's part of the value of the utility that you described. Um, thinking a bit more about the distribution side of this, >> the audience that is currently on chain from my perspective doesn't >> enjoy or crave the CLLO, the money market fund, you know, they're looking for >> the the speculators on chain are looking for the next 100x, right? And so when institutions are integrating tokenized products and they're tokenizing their existing products that that's great because it it creates a new form factor for the existing um the existing structured product but the distribution of that structured product to me doesn't

find any new buyers on chain. The new buyers may come from somewhere else maybe the existing institutions that now have greater access to this product. So thinking a bit more about the distribution dimension of tokenized products, who are the buyers of these tokenized products? >> That's a great question, right? And and I think this will evolve over time. Uh at the moment, um you have uh DeFi protocols, right, that are rehypothecating their their books um into the these types of products, right?

You have treasuries um sometimes of of chains, right? sometimes just any any other kind of onchain treasuries. Um and and when I'm talking about treasuries, right, not T bills, right? Uh really just the treasuries of of protocols, right? >> And I I think it's underestimated like how much value is is sitting in those, right? Um, I I do think that uh it's been really interesting just to see how tokenized assets have been bootstrapped, right? It it really was uh prompted by postco when rates were being pushed up, right?

to counteract inflation. Um, and you started seeing 5% T- billill rates, right? And everyone started wanting to allocate into T bills, right? And that's that was the 0ero to one moment for tokenized assets and when everyone rushed to create money market funds, right? Tokenized Treasury bill um exposure products. Um now you know we have uh the Fed uh lowering rates. >> Y >> um it makes those products less attractive. I still think those products will grow. Um but I think they will grow at a much slower rate as you start to see some of that capital rotate from out

of those treasury bill positions into these CLO and private credit positions. Right? That is why these products are being released now with the foresight and anticipation, right, that this rotation out of money market funds, right, is has started and is just going to accelerate as as the Fed continues to or is expected to continue to to lower rates. um that will get us so far. But you're right, there will be an evolving kind of profile of what is the right product for the current context, >> right? And who is going to be the ultimate buyer for these products and

you know at this moment of the bootstrapping phase, right? It is right the the onchain treasuries and and the DeFi protocols themselves. >> [clears throat] >> Um but I I I think as more institutions come on chain uh that that will start to evolve and change. >> What's your take on on a horizon their RWA implementation? >> Do you have an opinion on it? >> Yeah, I I think it's great. Okay. >> Um I think it's a very competitive market between >> uh of course a um you have Spark, right? You have Morpho. What I'm trying to get to is kind of like do you think there's going to be like is there a leader right now in kind of like DeFi native, >> you know, forest tokenization play for

RWA play? Like is there there's obviously the stable coins, the tethers, the circles. >> Um I I'm trying to figure out which which protocols you think are really just capturing the you know this wave the best currently. >> Mhm. >> Just kind of like if we can study like what they've done. So I think what you need to realize is when you see this headline of you know Black Rockck launches Bidd or something right um it is abstracting away the sheer number of stakeholders and players involved >> right >> to deploy and and not just deploy but to to get that distribution right and integration into one of these these

tokenized assets. Um so I wouldn't say like oh it's a or it's spark right uh you you're ignoring the fact that there is the the issuers right like a securitize or like a centrifuge and and certainly there there are others as well um you're ignoring the um funny term we've come up in DeFi risk curators right another thing or a vault manager right another thing doesn't necessarily have a correlation uh in in Trafi, right? Um you can call them fund administrators. Yeah. Right. Or uh you can think of a vault strategy as just like a hedge fund basically, right? That

you're >> allocating capital into >> um certainly I think in that respect I think the the leader on that front has been growth. Um uh one I mean they have the history I think of like uh originally coming out from that that OG DeFi Maker Dow group. Um but they also have the um capital of of Maker and Sky kind of behind them, right? And that gives them a huge amount of uh huge amount of of leverage. Yeah.

Right. And it's almost like a chicken and egg kind of thing where you have that capital backing. You get the best opportunities and now you are the biggest adult in the room because you've done the biggest opportunities. You are now the most credible partner for uh the next big opportunity that that comes around, right? And Chronicle was bootstrapped in a very similar way and that you know we started very small right in uh Maker has this problem right they really want to allocate into tokenized assets uh but they're worried about this you know risk exposure problem. Okay

we're going to start just by solving this for Maker >> and then once we've proven that that works right then we're going to expand it to to everyone. Yeah. >> Um, and I think that was enormously helpful for us in kind of massaging out the initial like rough edges. >> Yeah. Um, you know, and now, you know, we work with, uh, we work with people like Stripe, uh, we work with Black Rockck, we work with BNY, we work with Apollo, um, we work with Galaxy, you know, we work with >> some of the best some of some of the largest and and biggest, you know, not just players in the crypto space, but just in finance in general, right?

>> And I think we ought to get into that. I'm curious a bit about about the business model. I don't I don't know if you had a a follow up there. I have one which is that um I think one of the reasons why those not the teams you mentioned there but some of the teams that you know are are building some of the biggest brands in this convergence between these two worlds like the Groves I I think one of the reasons that they get overlooked and we look a little bit more into the DeFi world or the or the more traditional institutional space is because let's not overthink it. I mean I think those aren't they don't have liquid tokens. there's no way to get exposure and I think you know we look at a we look at maker dowo uh they have liquid tokens and and so there's a way

to access that opportunity stable coins also going through the same this same phenomenon um for so long I think everyone realized that stable coins were such a important piece of this industry and it's contin continuing to grow a lot of people saw that early but they didn't realize an opportunity or access to the growth of the stable coin industry similarly [snorts] stable coins are continuing to grow. But the next phase of this is tokenization uh ultimately once we have tokenized cash in stables, the next logical step is some sort of yieldbearing structured product onchain. Uh and I think this is the way the world is headed. But again, we're faced with the same problem. Uh people are unaware of how to get

exposure to that portion of the industry and this potential opportunity. So question is how does how do people get exposure to the tokenization movement? >> I think you're touching on something really important. Uh because in general how tokens are viewed and whether tokens actually give you exposure um that sentiment has really changed over the years. Um, I think it used to be much stronger, right, that uh if you were invested in a token of a protocol, right, that if the protocol succeeded or did well, so did the the token,

>> right? Um, and it's just been the market has had to repeatedly just learn through almost just getting beat down uh into submission, right, that tokens are not equity. >> Um, and so uh for better or worse, uh you have some teams, right, that will release a token but then also have equity, right? And there is this conflict of interest, right? And potential bifurcation of value either in part or or in whole.

Um, I think that gives investors kind of pause of if I invest in this token, you know, is the token a good proxy for the bet I'm trying to make or should I invest in the equity? Is it even possible for me to invest in in the equity? Right? And I don't think uh you are going to see the altcoin prices pick up in a sustainable manner until we see regulations evolve that allows projects to more easily

issue um actual shares as tokens, right? Um I I think for years, right, the problem was always like, oh, it's a security token, right? >> Make your token do anything except what makes it a security, right? And ultimately, um, I I think it was kind of proven through trial and error, right, that like, well, the tokens that are functionally securities, right, are the closest thing we actually have to a good proxy right?

>> But the ultimate goal should be that they are actual securities, right? that you have these strong guarantees of of ownership of the value that is being created that aren't based on like oh I trust this team oh this guy is an OG you know or he's you know a really big public figure or you know uh whatever right you're you're inserting a reputational element of trust in a place where trust should shouldn't be necessary.

>> Yeah. I was telling the team last night like guys like look it's okay if you're not making a ton of revenue right now. Like that's fine. It's early >> but what you can't have is you can't have this opaque accounting that isn't public that the market can't even evaluate and [clears throat] you can't you know you you don't know what your max supply is. You don't know where the tokens are. You don't know who's who's selling who's buying the inflation. Like guys, we just need to have a programmatic, a transparent public and open and a consistent process of growth here so we can actually have institutional investors come and forecast and actually make a plan to, you know, invest into this thing and know what they're getting. And that's the big problem with crypto assets today is you really just don't know what

you're getting. >> Yeah, >> Hyperl has solved this. Hyperl is the only one that has solved this. the only to on the market right now other than Bitcoin, other than a couple others that are like more store value and of course you can you can pick out nuances here, but as a [snorts] as an example that like they have set the standard for what the pro what a verifiable programmatic setup of of a token structure looks like. Now obviously not everyone's going to make as much money as them and that's not what I think the market's asking. I think the market is literally just asking like just have a programmatic, open, public, honest and welloiled, transparent uh kind of like accounting book and and you know Vance and Michael from Framework are friends of the show.

They come on quite a bit. They're big sky balls and they say that Rune and and and the team have the best accounting in all of crypto. >> I I agree with that. Um but I'm a little bit biased because I helped design it. [laughter] What do you think are the principles that you took into took into account and and applied to Maker Dow that others are lacking? >> One of the principles that Maker Dow always had was a relentless focus on um doing things the right way. Um there are a few ways to build something, right? or uh let's let's say like uh you write the code for

some new feature, it's done, right? Like or okay, you can test it a little bit, you can get it audited, right? Now it's done. Um for if you're a really serious player, that's not how you build products. um you are after you've done like step one, you're like looking at it again like how can I build this differently and you just try to build rebuild the whole thing together again and then you do it like a third time like how can I do this differently right and you start to notice patterns that are like uh recurring right in all of these

different implementations and then you say okay that is like the true essence of this thing And now I know how to like actually architect this because it has to be architected with like an abstraction like a box around that essence right that is the simplest way. This is the simplest like primitive or or kind of way to modularize this thing. Um and I think that that is rare. Um it is very slow. It is very expensive and I think [snorts] it has at times really crippled

um maker right now Sky in the sense that they were not able to react to trends in the market very quickly. uh like I think one of the biggest failures was um with the emergence of L2s. Um prior to L2s, you know, D was one of the biggest stable coins, right, in in DeFi period in so far as DeFi just essentially only existed on Ethereum. Um and part of the hesitancy with really deploying die on L2s was this uh problem of fungeibility, right? is a

die on optimism, fungeible with a die on arbitum, fungeible with a die on Ethereum and that it's actually really difficult to do that and and most people just said screw it, right? Uh let's just bridge and uh the token that you bridge over will just be a wrapped asset. >> Mhm. >> Um but that's different. That's not fungeability. That's uh what like if you use a bridge and you know this die is stuck on Ethereum and some smart contract and now on some L2, right? A die is issued. It's not a real die.

That's an IOU [snorts] that's redeemable at wherever this bridge contract is for an actual die. But that IOU is not fungeable with real die. And I think this was so paralyzing for Maker that by the time they figured this out. Um they had already lost the the race to to USDC and USDT that were much more aggressive, right? Uh where you know USDC could natively mint right on on every chain, right, that they deployed on, right? Um, and I and I think that was like the biggest misstep, right? And so it's a it's a

double-edged sword, right? I still think [snorts] that this approach to building software is um by far the most secure like any monkey can uh make a really, you know, thousand plus line smart contract. It takes someone incredibly intelligent to write that same smart contract, right, in like 50 lines of code and make it like the simplest Yeah. >> possible thing to make the surface of it so small, right? And I think it's it's uh >> I think the the Lindy, right? I think is how we always what we call this, right?

Is oh that that protocol has Lindy. What we really mean by when a protocol has Lindy is like it was very thoughtfully and methodically designed to be so simple and and that's why it's withtood the test of time right and uh and I don't this is not to poke holes for example at at balancer right which unfortunately just had the the v2 exploit or you know depending on when when this gets published right maybe uh this was a while ago right um but I remember when bouncer V2 came out, right? Or even Balancer V1, it was considered to have a relatively large attack surface because all of the assets

were kind of pulled together in a in a single contract, right? And this allowed them to do some very elegant um optimizations, but from an attack surface point of view was incredibly flawed, >> right? the uh the thoughtful and methodical approach that you describe is is value valued very highly by institutions. It's not as much of a fast-paced environment. They make sure to check, recheck, and check again some of the things that are implemented. Um, and I think that's part of why Chronicle as an Oracle has been valued by some of the highest institutions in the game. Um I think

you've got some exciting things that maybe you can share that you know partnerships uh with some of these institutions that Chronicle has been able to secure uh where really there's every Oracle in the game. You know lots of players would love to have these not just backdoor into these relationships but really have these complete partnerships at a comprehensive level. um how have you been able to secure these partnerships and how highly do they value the approach that Chronicle has taken with the software with the Oracle um how important is it to them and and how have you found success and how they have found success by by this partnership

>> very multiaceted um I think serious people seek out other serious people Um, maybe serious is the wrong word. Maybe uh play long-term games with long-term people. Uh people who have been around, people who for a long time, right? People who have real values and conviction and are not just here to make a quick buck, right? Um, I I think the Centrifuge team is like a perfect example of a team that had really strong conviction in behind tokenization,

but we're just so early. >> So early. >> Yeah. Insane. >> So insanely early, right? And were very much I think ignored the first few years. Um but you know we uh at maker um to Makaker's credit they were extremely early to RWAS. Um >> I remember in the University Blockchain Club 2017 Robbie and I were there at at the University of Florida. Our friend Kenton uh had internship. >> Oh yeah.

>> And he told us about D >> and and over collateralized stable coin loans. >> Exactly. Right. But so they were so early >> we were like why would anyone ever want to do this? >> Um >> that's literally what we told him to his face and then never had any interest in D or Maker after that conversation. >> I I I understand it's [laughter] that was the Ruby Goldberg machine of of stable coins. Um but but yeah go going back to for example center right they were right um for all the the right reasons right but they were just too early. Um, but they engaged uh and did the hard work, right, the the slog of getting those early prototypes, most of which all just fell flat on their face.

Um, and that's not necessarily that they did anything wrong. I mean, yeah, of course, mistakes were made along the way, right? Um, but when you're a pioneer, when you're doing something new, you're never going to succeed the first time, right? uh makers first foray into RWAS I think almost I shouldn't say almost uh all of them uh lost money I think all of them literally went to zero except for one of the ones we did with centrifuge called new silver um and uh you know it was uh just convincing maker to like onboard this thing right centrifuge was like relentlessly coming on the governance

calls uh on I think it was like every Thursday or Friday, right? They would join the governance calls and like preach and pitch and eventually, right, it was it was finally um adopted and uh it was funny cuz I was like sitting on the other side of the table, right, like pushing back at them like uh um usually around oracles like, oh, how can we, you know, we have no visibility into this, how could we like onboard this thing, right? Um but now years later, right, um I think Center Future is doing exceedingly well. Um they're they're one of the leaders in in tokenization and and rightfully so. They've earned it. Uh but more importantly, that that team,

right, is uh really here playing long-term games, right, and they've really uh earned that reputation, right? And so for us, right, it was a no-brainer to bet big on that team. Um, so we have a a very strong uh partnership with with Centrifuge where, you know, we cover all of their tokenized asset uh products. Um, and you know, that's kind of how we go about, you know, choosing our partners, right? Um I think there's always kind of dark horses that come out of left field.

I think uh the one for this past cycle is probably like Athena. >> Mhm. >> Right. Which just zero to one enormously quickly. Uh but for the most part the projects that I see succeed and the people that I see running these projects have been around in this space for a really y >> really really long time. Right. And uh so you you just work with people that you you know know are capable, that you know are high integrity players, that you know are playing long-term games, that you know are trying to build something uh sustainable, right? Uh with viable business models.

>> Y >> um and not just looking to drop a token and and then exit. Well, congrats to Sky for reclaiming the number three spot in terms of total stable coin supply around 9 billion. I think Athena had some trouble after 1010, but that all you know gets sold for everyone's sake. Um I think some of the more perhaps interesting partnerships to those listening while I think you know we love centrifuge we love Baji um is is Black Rockck is BNY >> you know these are high high level capital allocators the biggest in the world >> you know what do they see in a nice little Italian guy like yourself and uh [clears throat] in in Maker Dal in Chronicle how did you pull these off?

What are you doing with Black Rockck? What are you doing with BNY? First thing, I'm actually not Italian. I I I I live in Italy. >> You're not that little either. [laughter] >> Um I'm I'm actually German, but I I grew up in in Silicon Valley. Um so I I spent >> He's also 66. >> I I spent somewhere 15 years in in San Francisco. >> Are you in Tall Dow? >> I I am not. I'm too short for tall D. >> Wow. Okay. >> You touched on this earlier, right? It's really the reputation that you build up over time, right? Um, uh, the amount of compliance that you have to do to work with some of these

institutions is relatively high, right? And it's a pretty big slog to to get through those. And it is not a you make a deal and then 8 weeks later you do some integration together, right? It's like you take steps over the course of a year and starts coming together, right? And you're going through all of the compliance, all the due diligence, right? And uh then finally, right, you can get to to really like uh doing something, right? that thing then goes into production. Right. So it's like a measure not just twice, three times, four times, right? Cut once.

>> Right. >> Right. Um I I do think the pedigree we had coming from being the builders of maker da of of die um of you know chronicle having over the course of six years uh maintained that second largest oracle spot in uh DeFi despite I think the amount of players in the oracle space multiplying like by a factor of five. Um I I think kind of speaks volumes.

>> When you say compliance, can you help our crypto native minds kind of understand because when you know where we come from, it's like code is law, >> you know, test and prod, right? Ship and you know, get a security audit, make sure there's no smart contract, you know, there's not a surface area for vulnerabilities, but you know, as long as the code is secure, then you're pretty much good to go. When you when you say compliance at an institutional the highest institutional level, is it background checks? Is it code audits? Could you just give us some insight into the type of compliance they're looking for?

>> I mean, it's it's everything. Um but in particular right uh outside of crypto mostly you have uh kind of standards and like ISO certifications and and all kinds of othererts right um of ways to structure processes to silo [snorts] data how to run certain operations um uh you know are you complying with sanctions, GDPR, right? Um there there's an enormous amount of like back office um [clears throat]

substance. >> Yeah. >> Uh that that goes in here, right? And it's very different from what we think of uh when we think of like uh crypto where it's like, oh yeah, we got audited, we did formal verification of the smart contracts, right? We um did a bug bounty. We right like that is a very very small part of of the equation. >> Um uh still very valid and and necessary part but um very small part. >> You know I think we're you know coming to coming close to a close here. I'd like to just kind of circle back in into Chronicle. I you know we have a lot of in investors in our community a lot of

venture investors liquid investors uh they want to know what the business model is here you know we know that there's oracles are a very profitable business >> uh notably there's been uh price setting from the leader in the category chain link very high that is a known thing in in the industry and then >> I'm sure there's a lot of competition uh you know undercutting and uh doing different types of deals there's different structures utility tokens, cash deals, >> all different types of things. [snorts] What's the revenue kind of outlook for Chronicle? How do you guys plan to make money? Um, do you guys plan to launch a token and kind of think that way? Does this come back to Maker or Sky token?

How do you think about the that part of the >> So, I think oracles have a very clear uh business model, right? They are a critical infrastructure service, right? which needs to be paid for, right? So, it's a software as a service type of business. Um, I I think tokenized assets lend themselves relatively well in that most of these financial products, right, the business model for institutions is usually to collect some kind of management fee, right? and every other player kind of gets a cut of the the management fee.

And I think this is a very scalable business model, right? Because as the size of the tokenized asset scales, so does the value of the service, right? Because it's generating more primary revenue through through the management fees, right? So I think that's kind of the uh the business model around tokenized assets, right? on on the DeFi side, right? It's uh more data consumer focused, right? So the DeFi protocol is, you know, charging interest on credit, right? So the oracle should should be getting a cut of of that, right? So it's

really like who is making money here, right? And who are who who benefits, right? Who are you providing the service to? >> Who are you enabling? Exactly. So, so as long as oracles can show that they are providing value, right, which they are on both sides of the table, um I I don't think there there's any problem there, right? Um on the the revenue generating front, I think, you know, there's always a question of like um like strategy with respect to are you more growth focused, right? are you strategically trying to focus on market share versus revenue maximization?

Right? And that's where I think you see some of the differences between different oracle entities, right? So you you mentioned chain link for example, relatively uh mature type of company, [snorts] right? Uh really flexing their muscles to try to maximize revenue, right? Versus on the opposite end of the spectrum, you have like these upstart oracles, right? that are just like, I'll give it to you for free. Just use us, you know, we need to prove traction, right? To show our investors, right, that like, you know, to to fund us again for the next round, right? Um I I would say we're we're on neither of those sides yet, right? We're we're kind of in in the middle. Um where, you know, I I

think we generate decent revenue, but uh the focus for now definitely is more on on growth. >> Are those numbers public currently? I would assume so. for the >> they are not public >> because a lot of it's offchain, right? >> Yeah. >> Yeah. >> Exactly. >> Are you guys going to launch a different token? Is that confidential? >> There will be a token uh in in the near future. >> And do you think that that's going to take away from Sky? >> I don't think so. No. Um so, you know, we're independent of of Sky, correct? Right. I mean, we we work incredibly closely with them, right? Sky uses Chronicle as as their oracle, right?

We've we've worked with all these guys for many years. We we know them quite well. Um, but we're we're completely independent. >> Follow up on that. Will the token have a a role to play in the oracle mechanism, a staking role or a economic security? >> Absolutely. Yeah. Okay. >> Y >> uh I'll I'll I can't share more details at the moment, but uh >> um yeah, it will be very embedded in into the core protocol. >> Just a sidec car tangential note here, prediction markets have a big oracle problem. Poly market has an uma oracle problem that consistently is it seems like every quarter something happens.

>> Koshi's effectively just gone out and said we're just going to do it offchain. >> Um then you know there's a mix in the middle of the rest. >> Um [clears throat] is is is Chronicle suited for solving other types of use cases other than just kind of like tokenized assets like traditional finance. um this like defi >> um kind of you know sector. >> I I think there's a misconception that um oracles are more complicated than they really are. [clears throat] >> Um in general like most general use oracles can accommodate any use case.

>> Yeah. Um, I I understand why this misconception exists because uh our industry or the the Oracle niche has a tendency to uh create new names for things that aren't exactly new tech. um it's more of a segmenting the market um by presenting you know different products for different use cases but the underlying tech for the most part is copy paste um I I think um what's interesting when you look at the Oracle kind of competitive space is that everyone kind of looks to different

vertical goals to kind of uh cement their you know one market share right and and cement their growth. Um I think trying to do everything for all people is is a mistake. >> Yeah. Um I I think you need to be very deliberate and of where the market is heading, what verticals are going to to grow, right?

Uh what verticals can generate uh like revenue sustainably, right? And and resultingly how you want to position yourselves, right? And our core ethos for uh many years now has been this barbell strategy of one foot in DeFi, one foot in tokenized assets. And our thesis is right that um finance and you know what we you know call onchain finance or defi right that these will just converge and become the same thing right. So, um, if we burn the candle from both ends, right, eventually we're all going to

meet somewhere in in the middle and and this will just be how how finance is done. >> Finance, >> right? >> It'll just be finance. >> Finance. >> Nick, thank you for your time, man. >> Pleasure. >> Great. Thanks for having me. >> Yeah, it was a lot of fun. [music]