DeFi by Design EP#71: FRAX Stablecoin Strategy Debunked

Transcript

welcome to d5 by design where we talk all things blockchain and cryptocurrency while striving to educate empower and enrich it's your boy andy and welcome back to the defy slate youtube channel smash the like button on this video that really helps us out and sit back and enjoy the content thank you very much what's going on y'all welcome to episode 71 of d5 by design podcast and we are talking about some really interesting stuff today it's been a while since we've heard uh the algo stable conversation in fact we've seen a lot of iterations and today we have the pleasure of speaking with sam who basically was building around in d5 kind of like in the first early stages really i mean um you know i'm sure i'm sure he was around d jenning you know during

defy summer but really fracks it had come up kind of before everybody knew what defy 2.0 was going to be and let alone all the convicts and curve wars that have came and all of that kind of stuff so it's been interesting to see how we've grown um and i was just talking to sam about how the two coins algo stable was was bound to fail according to crypto twitter um and now it's you know it's it's really has seen it it's it's uh it's growth and and success as like one of d5's you know solid stable coins i remember had to have been usdc s usd tether and die was basically our only options two years ago you know now now we've got plenty of stable coins in different currencies different pegs

different different um you know types of mechanics and yeah definitely excited to dive in with sam's day um and get after what's going on uh we have a bunch of questions man all the convex stuff all the bribe stuff all the gauge stuff how frax fits in the vision there's so much to go over so excited for this one rob how we doing brother yo yo doing well guys yeah super stoked to have sam on today algo stables were you know quite quite a um narrative going on a few months back and we we saw you know some of those experiments fizzle out and then the ones that uh you know really had a strong use case stay strong um and

and survive uh you know of course one of those being fracks so yeah i'm i'm really keen to hear sam's thoughts on how the uh concept and and uh application of uh stable coins have evolved kind of you know what what the um implications of stable coins are on the on kind of the traditional financial world and then also yeah like andy said uh learning more about the convex and curve wars and and also the new uh ust pool the floor pool that that is live with frax as well so i will uh yeah i'm stoked to have you here sam and uh i'll pass it over to you for a quick intro yeah for sure hey guys uh happy to be here so yeah i'm uh

yeah like uh like andy said i've been around the block a little bit uh got into crypto 2013-ish uh and i've kind of been uh in it since started out mining and doing some like stuff back at college or ucla then i started everpedia which is like a decentralized uh wikipedia and that's really successful and going and in 2019 i started working on fracks and i think like like andy was saying um back then uh you know there wasn't any algo stable coins but then as d5 summer started the year after like in 2020 uh you had all that first wave of stuff that everyone

uh felt really smug about saying all these things all you know implode or or whatever and stuff uh but frags was totally unique in the sense that it was the first uh stable coin design that uh was partially backed or fractional uh reserved in terms of like uh the name for for like its stability mechanism in fact that's what uh frax is named after it's it's a portmanteau of the words fractional uh algorithmic uh stablecoin so literally we we came up with it because there was you know back then two types of or proposed types of stable coins one was those like you know basis or zero percent you know esd or whatever types

of stable coins uh and then uh then there was maker dao right the over collateralized die uh over qualities lending model and we we asked the question like okay what's in between these things right like what's actually uh between like 150 percent collateralization ratio and zero percent collateralization ratio right because uh the there must be some design space here right and so that's how we we created uh frax and the thing i'm i'm really proud of overall is we've never broken our peg a single time uh in in the history of launching this and we define that as one percent uh price deviation on either side of the

dollar so so one dollar and one cent and uh 99 you know zero cents um and i think that's uh that's a really good testament to like this design works and in fact uh as you guys probably know and everyone in crypto uh knows as well i'm you know happy to see that tara has implemented some form of this with their like partial btc backing and you know i've gone to become really you know good uh friends with dough we've talked a lot of like strategy a few times and stuff which is how the four pool came about and you know we can we can talk about that uh as well a little bit down in the conversation but basically the idea is like everyone is kind of converging on this this view

that look this is how uh partial collateralization or algorithmic staple coins will work on chain it's really cool that kind of fracs literally came up with it and named it after itself but the the interesting thing is there's like a lindy effect or kind of like a consensus that okay generally this design works right and and there we're seeing more and more stable coins have some kind of similarity to this kind of uh design so that's kind of the the uh you know the the back story with fracs currently you know to to bring up to date uh everything fracs is doing extremely well uh we're on natively minted on 12 different evm chains and expanding quickly we have

just under 3 billion in in stable coin supply and protocol revenue is right about you know 180 million uh dollars annually which is uh pretty pretty hefty and so we're able to do a lot of things with with both cash flow as well as sign ridge that makes it a very very powerful protocol and kind of a force just kind of like terra uh smaller supply obviously terra is there is very big uh in terms of there's 15 16 billion stable coin supply but uh we have a lot of really cool stuff shipping this month that i'm you know excited to talk to you guys about which includes fbi and frack swap and how that fits into kind of a

grand vision because everything we do actually one one thing is like everything we do is is for a specific reason uh and it's and it's kind of calculated right it's it's actually a piece of the the puzzle that if we can execute everything as uh according to kind of our you know brand chessboard so to speak uh we should be at the top of you know the cmc coin gecko rankings that's the goal there's no uh there's no uh second place as michael saylor likes to say right so hey hell yeah yeah to the moon brother frax to one dollar one cent soon one dollar and two cents never sir never

so do you think sam that the reason that a lot of those like dj algo stables died is because like their incentive model just didn't work and they had zero backing like i mean the dsd and the esd days i mean those rebases i mean that was something else i mean i felt like i was like the federal you know like i was the fed you know and you know just killing it and then all of a sudden boom so like do you did you take the model uh of understanding why that failed and implement that into fracs and you know is that kind of why you think those kind of died out uh no i mean actually uh we predicted it so if you actually look historically our first white paper was actually uh before defy summer 2020 like like the design that we proposed frax

itself wasn't launched on mainnet until december 2020 so like slightly after device summer but we were working on it much uh before you know esd and all of them uh came up in fact the the thing that we claimed uh that i think is a totally accurate uh you know claim it now is like you can't have a stable coin with zero percent uh exogenous collateral meaning collateral that has nothing to do with its own system because that's like having a bank with no balance sheet right i mean now it's so obvious all right like but but you like you said rewind it back to like 2020 um people weren't thinking in those terms right they were like oh my god this is the

federal reserve i'm so i'm so rich there's money just raining down everywhere whatever right but like economic realities like you can't just issue a liability for like a protocol expect it to be stable in in like purchasing power and the only way that you're able to stabilize it is is literally just by issuing you know equity like or you know like governance token like you know minting of uh its its other token right in fact that's the whole point of practice even though it's two tokens it's two tokens in the protocol right like track share and and frax the stable coin there's many more tokens inside of the protocol the collateral right the ones that don't

come from the the actual frags protocol there's you know we started with usdc now we have very little usdc we have lp tokens from curve we have wbtc we have we have cvx we have all of these things none of these are our frax protocol tokens right so uh it's really obvious now right everything is in kind of like retrospect right but uh back then like you're saying andy it wasn't and so i think um i think you know applying that principle today i think in about a year or so things that people think are are really like uh you know like workable today will be like okay obviously that that wasn't

workable you know before and then whatever it is working today and lasts you know the test of time like you know for access mechanism or or something else will be like really obvious in hindsight but you have to always remember when you're living through it it's not actually that obvious no yeah like i mean esd could have been it you know esd could have been top ten but then once you exactly once you look back you're like okay yeah that didn't exactly make sense so when you're talking with du quan about kind of what's going on with luna and tara and ust is this kind of a similar conversation like all right we need to you know we need to get other assets to back the stable coin is is that um you know is that something obviously it's not a

crazy new concept but it's kind of like you're saying in the middle between where those degens tables are and like where something like like a maker dao is like what do you what's the what's kind of the thought process behind uh duquan and like tara going and just trying to do bitcoin and avalanche to back their stablecoin like um yeah what what does that mean to you uh in terms of the the vestability of that um and obviously frax is a different system as you're explaining um you know but is this something that you have ever considered to use like a bitcoin or an ether or something to also help back uh forex yeah of course uh first of all you know uh i've known dough like we've briefly talked here and

there since like 2018 i actually remember talking to him very very beginning when he was like uh launching uh tara back when he like they published the original white paper which has come a long way and it's different um dough is honestly like a chess grand master right like a master strategist when it comes to um the the kind of crypto chess board of the industry and finance dude is is uh brilliant and so the thing is like we do actually see eye to eye on like a lot of a lot of things because i think both of us see that the designs for stable coins are kind of converging along the the same like kind of uh timeline right and

for example uh yeah like frax was fractional you know like first or it's named after it and now tara is but like for example one thing tara is doing is they're starting to use bitcoin and l1 tokens and back to your question we've actually been working on that for the past few months as well with with rackswap in fact uh there was just an article released by the block today uh which i retweeted for anyone that hasn't read it and stuff they should check it out and it's basically uh our plan actually like our version of the plan that we've been working on which was uh you know prior to tara doing this awesome release of btc you know strategy and stuff uh the

reason we built frack swap and for for listeners that aren't familiar frac swap is is a full range amm like uni v2 except it's uh very unique it's coated from the ground up it's it's not in any way a fork it has this thing called a t-wam which uh it stands for time weighted average market maker and it basically is a system for very large uh orders averaged out over a long period of time on the blockchain is actually designed by paradigm for basically designing the most efficient way to accumulate uh one asset for another on the blockchain in a trustless manner so it's actually very very interesting so the the way you do it is like there's these you know like for example frank's lp right and there

there's these this pair and anyone can come and then they can put in for example 30 million fracks or whatever right and then they say okay uh this 30 million frax drip it into the lp over a 30 day period so you know one million frax into the lp just smoothly per block uh and then give me out the amount of eth uh that is at the current spot price literally every single block right because like an amm pair is an oracle right and so it's really smooth efficient uh gas efficient as well as it's mathematically the most uh elegant way to get out one token um basically for another right and so frac swap is the first tum implementation amm and as

you could probably guess the reason we built this is you can deploy brack swap amms on every chain right and so like fracs is on 12 different blockchains and our goal here is if you could build deep frac stablecoin liquidity against the l1 tokens or even you know important governance tokens on on that chain or something it doesn't just have to be the l1 token but we're going to start with all the l1 tokens and you can algorithmically accumulate uh the l1 token proportional to how much frac supply is actually out in that economy right in that chain literally just query total supply right of fracs on that chain and have an algorithmic

system where you accumulate uh reserves in that l1 asset it's literally like kind of what a central bank does right it looks at the economy how much money supply is out there in an economy how much is it being used and then uh it conducts open market operations right to make sure that it has uh you know either enough treasuries or are basically buying back enough cash to maintain purchasing power et cetera right and uh this is sam real quick can you can you do can you set your transaction time to as long or as short as you like yeah um that's the exact point of like a t1 because for example right now every amm if you think about it it only allows you

to do spot trading right like and so you have to either set up like either a uh script which is like off-chain right like that like pokes you know every like hour or something or you know you do some automation uh that's like off-chain or um you have to do treasury swaps or something right like like all these dows and stuff they they like uh vote and then they like talk to each other on discord agree on like a token price and then they do like a big swap right but what about accumulating a a balance sheet of like btc eth or like you know matic or something right or like moonbeam glimmer tokens or all these other chains proportional to uh the the usage of the currency in that

economy right if you think of a chain as kind of a country or an economy uh the most elegant mathematical way to do that is through slowly rebalancing a lp pair of that stable coin and that l1 token right and so that that's exactly what we've built and we were working on this for the past few months to coincide with the release of fbi and um that's going to be really interesting so like i was saying there's there's just a convergence on a lot of this the same economic principles that obviously like work right and that they're promising obviously you might build something next that says it needs tweaking or that one might not work but it's it's a trial and

error process and currently in the stable point space it's pretty obvious that this this mechanism in in its abstract form is is a winner right interesting nice and and as you mentioned that elegant mathematical kind of drip is kind of the blockchain programs that with the block time and each each block you know it kind of uh you don't really get confirmations in between blocks so it is uh you know giving giving that procedural just kind of uh frequency where it's going to drip every every block um and then like you said you can automate that over the over the duration

of a window and i'm curious kind of how this plays into your grand vision that you mentioned of incorporating fracs into you know the mult the the omni chain if you will and and kind of uh bringing bringing this mathematical solution and the technology that fracs has built out and how that incorporates or how other chains and other applications are going to incorporate that to make a more elegant uh stable coin economy uh that that kind of underscores the crypto economy and you know if your grand vision incorporates how that stable coin economy uh is involved with kind of traditional finance and the

traditional economy i'm keen to hear your thoughts on that as well yeah definitely uh and and so basically i think like the the bigger these stable coins get right like in in the tens of billions and then in the hundreds of billions the more you have to think about it as kind of like a macroeconomic view right like that you you don't uh think about it on like the like single user incentive level anymore right like oh how do i get like farmers to add liquidity or something you think about it in the macro like global space in terms of at least the the crypto industry and then like you're saying you know soon hopefully the the global economy or the world right um but basically the the

way that i think about it in terms of my mental framework is like every chain is basically like a economy that you know is connected between other ones by by bridges right and so like capital can flow back and forth and liquidity can flow back and forth it's a stable coin issuer's job to essentially like a stablecoin protocol to supply liquid currency right stable currency to all of these economies and so that's why for example you see terra is is aggressively going cross-chain which is a great thing uh even though they started with their own uh l1 blockchain right like you can't actually be the largest currency if there's economies

that are growing very quickly that actually do not use your currency and you you know you just are there and you're like okay we have our own chain you guys please come to us it's actually a totally different game it's actually why we did not start with our own chain and and actually are uh as far as i know so correct my work but as far as i know frax is the most cross-chain stable coin in existence today in terms of natively mintable or or issuable on different chains we're on 12 uh chains i actually think there might be even one or two last week that we we deployed to as well but i don't know any other uh stable coin that is actually natively issued on that many different blockchains so

that's that's our philosophy right our philosophy is if you are the best and most useful money you'll have liquidity and circulation in every major economy essentially right whether it's digital in the blockchain space or you know in the real world and that's what you see with the dollar that's why the dollar has like 80 percent of global trade is denominated in in the dollar right so that's how i think about it and then the grand grand vision right the the final kind of grand vision and i usually don't bring this up because it's it's like at least the year uh out because usually in crypto you want to believe it or not you want to

under promise and over deliver which is i think it's in the one percent of people that i like that i'm saying this because everyone likes to over promise and then under deliver but we like to under promise but the the grand vision is that once frax is everywhere uh the most important like metal ledger or like you guys brought up the omnichain concept and stuff right is actually the the balance of like fracks that people have across all these chains right so you have to kind of ask yourself how do you connect the frac's kind of global state of all the balances of all the collateral that uh fracks the protocol uh has access to and controls and

that's when it comes full circle that's when you could either have your own chain or like your own dedicated like roll up that you know then pushes to uh east for for data availability and and finality or something right not at the beginning right at the beginning if you're a currency issuer you want it to be everywhere right and then you want to uh essentially monetize and secure the the shared state of everyone's balances that's how i think about what we're doing in fact you see that with tara right it's great tera already built their own blockchain right so so they like they don't have to go back and work on it but but it doesn't help unless it's everywhere else that's why they're really really really pushing

tara to to go everywhere right and uh we're we're also helping and doing you know joint liquidity and you know partnering with them in that so i think it shows that you want currency everywhere where there's economic activity right and then later you can essentially uh monetize so to speak the fact that everyone has a balance in your you know currency uh essentially right and then turn that into a ledger right like like a blockchain is just the ledger of like either code execution or balances or whatever right and so like it's only as valuable as the shared state between everyone having balances on that ledger right and so first like we actually do

the opposite first we actually make sure everyone uses racks everywhere and then later we turn that into a global ledger where whether it's a it's a zk roll up style uh roll up or an l1 or something like that instead of starting first with our like own frax chain or like evm fork or something and then having that but it's like not extremely vibrant or or composable right and then being like okay now we have to get fracs everywhere hurry up and get it like on ethan and stuff we do the hard thing first and then bring it all together basically that's the grand vision it's awesome beautiful yeah i appreciate the uh the explanation there and it

makes total sense i mean it's like it's almost kind of like um i don't know like in the nft world they're like community first you know you know and then product in this case it's kind of like you know get being everywhere first getting your economic activity up getting your your tokens being used and then being able to execute you know things like frack swap etc etc um i think a big part of frax's success up to this point has been kind of the integrations into the convex and kind of curve world um you know kind of like solidifying some uh like level of power and stronghold in that ecosystem if you will it's kind of like a whole other world for a lot of people so um yeah i guess i would just love to

kind of hear your thoughts on how fracs is fitting in with that entire world um of course we've got that's just grown up from convex and curve to now len flair and bent protocol and and all these different types of applications fracs um you know fractures do in there now and even this fpi airdrop coming like just kind of what's the what's the overall kind of feel you have for fraxx's integration into that ecosystem um and i'd love to just you know dwell on this for a bit just to really set home kind of what's happening in that world and kind of what that means to you yeah definitely um i i think that people uh misunderstand the curving convex

ecosystem a lot um and one thing i will say is like brax was the first partner of convex back like last year when they launched like may-ish or something we actually were accumulating cvx tokens before it was it was a thing and and we've never sold a single token and we never will and so we i like to think we actually understand what's going on and what was going to happen before uh everyone else did that's why frax currently has the largest cvx supply and we work closely with uh the the convex guys there they they integrated v e f x s right it's the the next thing they they support after the vcrv uh stuff that they launched on it's a it's a really brilliant system right like the

curve guys and the convex guys um they're very methodical and they understand how a lot of this stuff works and you know michael at curve charlie and and all of them there they've they're basically like one of the most strategic and methodical people when it comes to uh liquidity and kind of coordination of liquidity and so like the the fact that they designed like vcrv in in this way and you know some people think it's it's uh inefficient or like there's too much emissions uh for like the fees curve generates i think those people just don't actually understand what's uh what what's going on like what what the

use is right um but we we deeply integrate in that system we're gonna have um we already do have curve pools uh everywhere on other chains we're going to have that for pool with with tara uh and everyone and essentially curve is it two things it's it's deep liquidity with like you know uh low slippage and extremely efficient stable swaps it's also a savings account this is what like people misunderstand and and think like oh curve is just a dex therefore its entire value the entire model that i should be you know evaluating curve is just based on the

future expected cash flow of the the fees that that come from the volume which is uh clearly lower than the the amount of crv emissions that that's currently going on right so then they're like okay i'm so smart i know this is all just a big ponzi uh how come everyone is not as smart as me haha you know and and this is stupid but they obviously miss the entire point which is curve for lps is a low risk uh depending on the deposits obviously right but a low risk savings account that uh is is a yielding system right it's almost like the backbone of of defy right when things get bearish and stuff um the main place you can get at least

some yield reliably and an escape to basically stable coins right is is curve it's always the the kind of backbone of the entire defy uh yield industry right thing yields are built out of models of curve lp tokens and and things like that to just completely discount that and be like oh that's that's just uh not valuable right and and the only value of curve and convex is just the the cash flow from the swaps is just totally missing the plot right and so that's how i think about it and and you can actually see this they like michael knew this and and was uh you know thinking about this literally

when they wrote the curve white paper i actually tweeted this the other day it's literally the second sentence in the in the curve white paper it says curve also acts as a fiat savings account for lps on the other side right and it's just important to to look at you know d5 primitives as new things that don't have the exact same analog to their to their like traditional finance financial thing uh you know assets like not all governance tokens are just pure equity-like right these things are programmable assets that have like a mixture of different properties right so it could be and and

in my opinion it is that the crv token is not just the the model of the future discounted cash flow of the fees from from curve decks but it's it's that as well as the ability to channel yield and and interest rate right into different kinds of of pools and and that makes it a completely different type of asset than just like a the equity of a of an exchange like the the like stock of the new you know nasdaq right if you own nasdaq stock it's a company right and and you can value it as okay how much you know cash flow does the nasdaq exchange make right how much uh equities are people trading on it and you know

what like fees does does nasdaq make and how much should the the company be valued right just valuing curve as if it's a an exchange is is kind of ridiculous in my opinion right and so people miss that a lot so that's usually that's my take on on the whole thing that that's awesome and you touched on the four pool integration that that is launching and um when that is available when curve has that lp uh programmable token integrated into the rest of its economy how does that add value what are what are the the key

uh differentiators between that four pool some of the other pools and and you know what is the value proposition of the four pool with respect to curves grander economy yeah so the the four pool uh for people that don't know is is a is a pool of fracks ust usdt and usdc um and so that pool is going to be deployed on as as many chains as you know our our partnership with tara is going on and the fact that we want to make sure there's deep liquidity for stable coins everywhere it's already on phantom we're working on uh getting the the gauge up and everything on arbitrarium on uh optimism soon just a lot of places polygon

and then soon hopefully on on ether mainnet and the idea behind it is that like i was saying the every curve pool can be thought of as both a dex but also a savings account for for lps on on the other side right and so in if you want to provide some kind of yield for people to save in a mixture of different stable coins over this you know four pool it's it's the four that i listed for axe ust usdc and usbt you can essentially channel crv emissions and and now cvx because because convex does a lot of the the farming and deposits uh you can basically create a savings account with different yield properties and obviously

different risk properties right the deposits in the savings account is the is the tokens of the pool right and um there there's a lot of talk on you know crypto twitter about oh this thing doesn't include dye so like this is like a uh a big you know like you know like finger to make her or something like that and just discounting all the color and everyone likes to you know talk about you know uh drama and things like that on twitter discounting all of that it's not about that at least in my perspective everyone has different personalities right like like the uh you know dough is very colorful uh i'm usually uh i actually don't don't like to come out and say a lot of like

color i just like to talk about exactly the technical stuff that that we do and the reality of this pool is like the maker guys view curve as just the the cash flow model of like a dex they were not going to actually uh channel liquidity or yields to this to increase demand for die right and so we couldn't work with them i would love to work with them like i'll just say like i i actually think uh a lot of the maker guys in terms of classical financial you know like economics they're they're brilliant they're working on like interesting structures for real world asset loans they're thinking about you know macroeconomic uh expansion of dye right but they just don't like the the

curve model and this is really obvious you could just go and then look on crypto twitter uh people on you know different maker you know core units or their risk team or or uh other people that they basically think it's a waste of time to you know think about curve like this and that's fine right there they're entitled to their own opinion and so we just made this poor pool essentially right to give people the ability to earn yield in in these four stable coins especially terra and and fracks and if maker wants to do that right if they want to do something where we team up with them and and have like a meta pool with four pool and die we would be more than happy at least i would right i mean i can't

obviously speak for anyone else but it's not really a zero-sum thing i always say this everywhere because like growing the entire size of the pie increases everyone's wealth and it doesn't need to be something where in order for frax and and tara to be successful we have to you know destroy die or something like that right and you know i discount the color like what if like you know like roon said or this guy said you know ust is is a scam or dose that like die will die or whatever uh just discounting all that stuff at the end of the day uh if everyone just sat down and was like listen uh let's do something uh positive sum i'm always

interested in in figuring out how to do that right and so that's just from from my end i think the main reason that from frax's perspective or from my own perspective dai was was just not here it's like they they chose not to be here and they can obviously choose to uh do something with the four pool and we will directly support that as well at least i will at least i i think i'll put up you know frank's governance proposal to support that and everything anything we do is for the entire industry as a whole like i said macro economically to grow the size of the crypto economy as much as we can without trying to take other you know stable coins or projects

as piece of the pie right that's how i've always looked at it that's what i always say uh everywhere and i think our actions have clearly demonstrated that yeah yeah and the take here is uh potentially five pool coming soon um but it would take uh the the dye uh team to uh come around and and kind of embrace curves model um i'm i'm thinking about kind of you know four pool going into five pool does that mean six full seven pool eight pool like is that inevitable like what are the risk profiles well like we were having yeah we're talking with with michael the the curve uh founder about this the plan

right now since we're really interested in supporting anyone to use the 4-pool is that the four pool will be a base pool right it'll be like a essentially a metapool that any stablecoin project including maker including anyone else can compare with right and so technically it won't be a five pool it'll be like a a four pool metapool right where the fifth token is die and then another project can launch their own with the four pool and then theirs right and what what doe and i have talked about is anyone that wants to do that uh we will directly help by giving them uh you know incentives uh yield and things like that so that

their you know meta pool can also act as a savings account a yield yield bearing account uh so that they can grow their own stable point right and that's in everyone's interest right that's that's positive sum that's basically creating a larger deeper liquidity between all of the most important stable coins and so that's the current strategy it's like if you want to pair your uh stable coin with the four pool in in a in like a metapool design on curve we will support it uh and and we're willing to do that with we've got actually a lot of people to hit us up um so there's there's an intense amount of interest there sounds like we're going to be saving the

waves stablecoin soon usdn i saw that i i don't know uh exactly all the details of like what uh what transpired to get the the pegs so you know they're pexo uh lopsided i think it went down as low as 80 or something 83 cents or yeah 70 is crazy yeah uh i think that doesn't follow the one percent rule sam yeah that's a little bit uh that's a little bit off effect right and so but if you borrowed against it all of a sudden your debt was a lot lower yeah that thing off get hung out of there yeah and so that that's actually a

good point you make because one thing that people you know just have like a false conclusion is like they're like look this this usdn stable coin or this thing looks a lot like fracs or like terra or if you guys remember iron which was a fork of fracks we won and failed and imploded mark cuban spectacular yeah um and then they're like look look at these they all failed so therefore this this mechanism or this this actual uh idea is is total nonsense and and it will fail that's just clearly being extremely lazy right that's like saying they don't have sam on the team they don't have sam and do brother i tell you what you know

straight up but i mean even even so i mean i guess what i was gonna say was like you know you could look at ethereum classic right and that thing has been attacked and destroyed multiple times and it's literally the same code base or as ethereum right uh mainly and so you don't say look look at ethereum classic it's it's imploding therefore ethereum like eth is like a nonsensical idea right and so like this is the the kind of thing it's like the execution of the idea clearly matters especially in the stable coin space right the the integrations right one of the things tara has done uh extremely well is created a vibrant

demand from both retail and crypto you know uh users and everything for ust right the actual way you you execute the the idea is is as important as the idea itself or the stability mechanism itself because now you you have examples of stable coins that look like fracks that have failed but then how come fracks and ust are doing extremely well right because there's uh there's actual proper execution for for their growth so sam for some of the more degen users here with us wanting to get those spicy yields going where can we find some of the best yields on frax or a variation of fracks stablecoin pools um you know and any

chain any protocol what are some of the top ones that you've seen in the last few days yeah so i'm always working around the clock with uh pretty much any project that hits us up that wants to work on integrating frax getting pools up and and things like that the there's two places on eth right which is the convex uh you know tracks curve pool for for basically low risk uh stable coin yields obviously like that's that's like the hallmark that's like the quote savings account there's frax gauges themselves so the fxs token which is the governance token that is emitted on a fixed schedule two different gauges inside of

fracs and so there's obviously very similar structure to curve where those get admitted to different pools or amms and and different mixture of assets so you can always check what the highest yielding places is in the fxs gauges and we actually have cross-chain versions of those uh rolling out as well you can just check it at app.fracks.financestaking [Music] we have literally a list of everywhere you can get a frax sealed fxs yield uh my personal favorites are like tokamak for uh fxs staking cvx fxs on convex and just yeah yeah the the hobby that's the one that's the airdrop one that's the one that you

guys locked me up in for months with no peril only leading to stronger iron diamond steel hands that are now leading to this fpi air drop so what is fpi and how does that come into play in the ecosystem yeah i think you're gonna you're gonna like the the your your iron hands because i think it's gonna be worth it um because so we also have fbi which is the second stable coin of the frax ecosystem which is the first cpi pegged stablecoin uh and so it's basically a stablecoin that instead of pegging to the dollar or you know the euro or any kind of like national uh you

know denominated currency it's pegged to a basket of consumer goods which is called the consumer price index in fact uh most people now know this in crypto because there's a lot of talk about inflation and things like that but the dollar itself is loosely pegged to the cpi uh it loosely should track a basket of consumer goods and and people didn't really talk about this before because it was working quite well right recently inflation has has increased to multi-decade highs and so people have been aware of and starting to become more aware of what inflation actually means it literally means the dollar's uh

devaluation against the basket of consumer goods that everyone uh needs to keep their standard of living the same right the basket of consumer goods right now it's like food medical care rent electronics cars automobiles things like that and the idea is that a good stable currency should be able to buy fairly similar basket of those things across a long period of time right because those are the things we actually need to keep uh our lives you know fairly similar and standard of living and so that's that's the main thing i like to highlight is like if you think of what a currency should be and what an investment should be right a currency should keep your

standard of living the same so you can save in it you can take debts out in it you can repay debts in it you can actually plan your your life in it right and keep your standard of living the same an investment if it's a good one should change your standard of living right it should be able to actually if you make a good investment change the amount of you know cars food uh rent you know housing and and stuff that you want to buy it should increase your your ability to actually do that right so that's how these things work right an investment should actually increase your purchasing power against the basket of consumer goods and a currency should stay in lockstep with a basket of consumer goods

right and the fpi is the the first stable coin that is actually pegged to that basket of goods it's not pegged to the dollar um in fact yeah if the dollar keeps inflating the fpi will will grow against the dollar because it'll continue to distract the basket of goods and is this done via like a rebasing mechanism no it's actually uh done it's it's a you know uh partial reserve similar structure with with uh amos and uh and basically a liquidity system it's similar to how frax keeps its dollar peg except instead of a dollar pack right the the fbi keeps a peg similar to uh you know the the cpi

instead right and so this is actually it should be going up a fair percent every year as long as inflation goes like the inflation numbers of march come out and they're eight percent does that allude to fpi increasing in value at eight percent that month or that year or kind of right so the current inflation rate i believe is right around seven percent which is pretty pretty high at least reported by the government right and so if if you take that as as uh accurate that means if you just hold fbi you don't even stake it you just hold it in your wallet it will grow at a rate of seven percent against the dollar because the dollar is inflating at seven percent right and so

the coolest part about the fbi is in one token it's literally a savings account you don't even have to stake it anywhere you could just hold it in your wallet and obviously i think people will integrate it places so there will be places to stake it and lp it but it's actually the the first d5 primitive that's inflation resistant and there will be more uh cpipex stable coins i assume once this is like super successful in fact there's a second team uh called volts protocol that that we're working closely with and they're uh launching soon after us and he's there volt volt yeah v-o-l-t like on fuse network right

yeah it's a it's like a nice high you know fey uh sister project or you know partner project and yeah led by uh kirk and elliot and they're super smart super cool guys and it's actually really cool that they're working on this in parallel to kind of release this other you know cpipex stablecoin after the fbi because then there's there's going to be able to be deep liquidity against a cpi peg right like instead of it just being you know this one stable coin that there's no you know deep curve pools or univ3 liquidity there's immediately going to be two separate projects pegging to the same unit it actually uh legitimizes the cpi

peck right like it actually makes it this a new class of stable point right because yes sam cause i was gonna say i bet i know that we talked that crypto twitter is not where you're supposed to listen to the critics but i've i've read a lot of anti-inflation peg stablecoin tweets as of recent um yeah mind touching just just that they're pointless that they're useless that they don't make any sense that that that they're not going to work that it's not going to be able to actually keep peg um you know that kind of stuff like i guess like from your point of view like what are the you know what is the argument against fbi and against vote like what is the you know what are the challenges that you talk about like if you were to present

this as a bad idea or as a critic you know like what are some of the things that may be in in your way of making this a reality um i know it might be tough to kind of like switch perspectives but it's probably good to kind of step in like in a hater's shoes and you know what is the what is the like the blockers um yeah yeah yeah you're totally right right you steal man up and build up the the opposing side right and and uh you know then you actually address their points so i think a lot of the empty ones the things on if you're like this will never work or whatever is is just not worth the time to address but the the real you know nuanced uh you know response is like so

why do you need to have this stable coin why don't you just give like a fixed yield on dollars uh proportional to the interest rate right that that literally creates uh the same thing that you know inflation resistance that you know everyone's uh thinking about and wanting and the answer to that is again we do everything for a very very strategic and an important reason down the line we don't just uh work on all of this stuff like frag swab fbi just because it's cool or or we think like it'll you know increase the price or something like that the reason we built this as a new stable coin is because i think personally and and i think a lot of people will come around to this is

that the next generation of stable point advancement and is basically completely uh separate pegs to non-national units of account right if the crypto economy is actually going to uh become a global digital economy that's not connected to a specific country or a specific currency like the dollar what has to happen is people have to have a new definition of of what stability is right and like i said stability has to be something like a basket of goods that keep your keep your standard of living the same right and so if you start with the stable coin that has a basket of goods very similar to

what the dollar is except it doesn't inflate against it you have people starting to save in it right you have people starting to denominate things in it you have people starting to to hold it in their wallets getting familiar with it right and then as that you know fbi stable coin gets you know tens of billions of dollars of of supply then what happens is you can actually on chain give the governance rights to people that that are participants in the protocol to actually decide what this basket of goods is in the long term right when this thing is is sufficiently huge and and basically a force in in the global markets you can basically have the

people that participate in the frax protocol decide the weights of the cpi stablecoin what does that do that now creates a fully self-sovereign unit of account that's entirely separate from any country or any central bank's definition of stability so you finally have a a fully distinct tag right and a fully uh self-sovereign monetary policy right and so that's the main reason we did this right the main reason is that you want to actually start off by providing a more stable inflation resistant dollar right and then the critics might be saying okay why don't you just build like a uh a staking contract for your

frac stablecoin that just gives you yield you know proportional to interest right like your your fbi stablecoin won't work it's just a dumb idea what's the point the point is yeah it starts off as an inflation resistant dollar and it ends when it's sufficiently huge as its own unit of account that's completely separate and independent of the fed's monetary policy right that's the end game that's the goal that's the reason that it's a separate stable point right and so that's kind of the main response to to a lot of the these critics that are like just give a give an inflation resistant yield this thing uh is it is a dumb idea or it's you know it's not gonna gain traction it's like

there's a very specific reason and plan uh in the grand scheme of things for why we've we've deployed this the way that we've done is the integration strategy to generate demand for fpi consistent with in the integration strategy of frax like you know incorporating it across all all the different chains and in several curve lps or since the uh fpi token is is uh tracking a different index than uh you know us dollar peg stablecoin and that creates the potential of il is there a different integration strategy that that

you have planned yeah so it's the the macro strategy is fairly the same right it's it's supposed to be a currency it's supposed to be stable you're supposed to get it out to as many places in the economy as you can right in fact we're going to use a lot of uh technology and amos that we've developed at frax to you know do that with the fpi however it has a different profile than than a usdpx stable point right just like you said it's it's going to be growing against the dollar uh in times of inflation uh if there is ever deflation i mean i'll go ahead and say this as well technically it will shrink against the dollar but but uh that would mean the dollar is is

deflating right it's actually gaining value against the cpi which you know i i would venture to say is probably uh unlikely in in the near term and so that has never happened or at least not for a long time for a long time i mean it happens during recessions where there's like a massive uh demand for for cash in fact it was going to happen or you know so the the fed says during like when when kovitz struck and that's why they printed a bunch of money so that you know huge demand for cash doesn't uh you know depress all prices and lead to a uh recession so it's almost like the fed will not allow uh deflation to happen but technically it can't but back

to your question uh that's why we're excited to work with bolt right which is like two cpi pack stable coins that can have deep liquidity right there's no il there um that's why we're excited to work with a lot of projects that want to just save in fbi right like it'll grow against the dollar during exactly these these times of of macroeconomic inflation um so it'll it have it's going to have a little bit of different uh profile but being a currency and a stablecoin the macro plan is is essentially the same and you can i mean i'm assuming you guys are gonna incentivize some sort of yield on top of that as well um you know or or other teams will curve will you know

convex will et cetera et cetera so yeah definitely excited to see that play out uh all in fxs this is not advice i'm going all in talk to you guys see you guys on the other side at like three hundred dollars um and uh yeah sam's giga chad so uh i think that's about all we got we're running low on time but thank you sam for coming on man it's been an absolute pleasure of course of course always great talking to you guys and you can catch me on twitter and telegram and please feel free to reach out super available and thanks for having me on