From Idleness to Productivity: Building Institutional-Grade Yield System for DeFi at Scale

Transcript

Can you hear me? Well, oh, fantastic. Welcome to ETC CC. Do you have your sun cream swim bath as well? Well, it's a beautiful day in K. And I'm Lasabo, the co-founder and CEO of Kilm, one of the leading on Yel platform um serving hundreds of institutions. In fact, we were the largest Ethereum validator provider last year, owning and running a little more than 6% of the network. But today, I'm going to talk about something we've been working for months uh for nearly two years now.

Railets RNet um as we call it the Alladin moment for ancient assets. Alladin refers to Black Rockck Aladin but we can also call it the open connectivity layer um between DeFi and real world assets. So there's a couple of observation we did um and we made in the um yield space in the crypto space. So first of all I think we all agree at the stage that institutions are coming onchain and they're moving stuff they're tokenizing stuff. We it all started in our view uh with these large asset managers Black Rockck and Flint Templeton as a good

example that launched ETF in January 2024. Bitcoin ETF then Ethereum ETFs uh was a huge success. Then they they started to tokenize their assets. Morning market fund tokenized. There was a case of Black Rockck was Bidd of Franklin Temple that was Benji. But what they will do in the coming months, in the coming years, which is much more trans transformational for them, um is essentially replicating what they've been doing offchain for years, offchain asset management, but onchain through vaults and that's quite exciting. The other observation we did is in the crypto

space um the yield opportunity sits more and more into stable coins and also into Bitcoin a bit less into stable assets uh with Ethereum leading the pack because you it starts to be a very mature ecosystem where stakable assets proof ofstake blockchain um native assets of proof of the blockchain are um in majority stake more than 50% of them are staked when the case of Ethereum it's more than 30%. Um but when it comes to stable coin only 15% one5 of these stable coins are bearing interest and you can see a future where a majority of these stable coins are bearing interest

while you pay you earn you receive you earn um and it all happens um at the speed of blockchains. Bitcoin only bear interest to 1.6% of the time and the reason that is is multiple. First of all, it's not um natively yielding assets as opposed to Ethereum and Ether. Second, you had yield on Bitcoin preft FTX with centralized lending desk and Genesis which kind of evoporated after FTX. Um, you also had this narrative of Bitcoin staking, folks that were trying to make Bitcoin stakeable. Uh, but that's also evaporated. But now what you're going to

start to see is Bitcoin being bridged, being wrapped, um, and the value of Bitcoin being deployed into, um, DeFi and real world assets on Ethereum, M1, and and and L2s. But today's DeFi yields when it comes to yields through vaults through creators as they call themselves is mostly similar. When they borrow an asset, let's say Stecoin with rap bitcoin or ethereum as a collateral, they loop it one to two, three times um and the protocol farm it um launch incentivized program that generates the yield. This

is not really sustainable because in a bull market the yields are high. Um the borrow interest is important but in the beer market well um you you you start to see these yields completely fading and same for the farming programs these uh token incentives only last couple of months because these token cannot um these defy protocol cannot print money indefinitely. So what if we applied traditional asset management on chain so that instead of boring looping farming generating the yields you could take the capital allocate into various D5 protocols but

also scalable real world assets money market fund private credit fund stocks and commodities manage the risk and optimize returns. Unfortunately, the current standards in the Ethereum ecosystem are not really meant and built for that world. 4626 standard which is the most adopted vault standard in D5 today is really done for synchronous DeFi so that you can create lending vaults lending pools so that you 4626 works very well when you go can go in and out in a purely liquid way but that doesn't work with real world assets

because most of the time these um RWAS have KYC requirements offchain as as well as redemption times. A morning market fund is one to two days, private crane fund is 30 days. Private equity funds is couple of years. 7540 tries to address that um by including a pending state. You stake into a vault. If you allocate into a real assets, there's a pending state. But the problem of the spending state is it's not rejected if the KYC doesn't go through offchain for example or you don't see um how long you're going to be waiting for that real assets to be liquid offchain.

So there's a missing layer a connectivity layer that brings these two positions in DeFi. the synchronous one so that you can allocate into liquid defy and the asynchronous ones where you can allocate to real world assets and see what's happening on offchain through smart contract. This is why we introduced Railnet. Come on. Well, Rayet is the orchestration layer for onchain asset managers to build strategies combining liquid positions in DeFi, lending,

liquidity providing, per stacks and real world assets. whatever the reward asset is and distribute them anywhere. So, how does it work? At core, it's a new standard, a nonchain yield state machine that we call steam, the state transition engine for asset management, which will decompose any flows um regardless if it's a D5 flow or if it's a real asset flow. when it comes to real assets in that case bid um there will be a deposit a pending time which can be rejected if the KYC didn't go through and it will tell you well as an asset manager you

have allocated your funds USDC into B and this asset is still unlquid for the next 24 hours and you see that clock through the smart contract it enables an asset manager to essentially staggered a lot of positions, liquid and liquids inside the same vault and through a Q system to um staggered as well um the deposits and redemption times of these positions and you see all of that onchain the Nav calculated off onchain and there's no um logic that is push offchain

it's also an eosystem system. So on top set of smart contracts the yield layer uh which by the way it's you know we will most probably launch it as an EIP so anyone can build their standard their adapter using the steam standards so that they can plug to their D5 protocol or their assets that they're tokenizing. Then there's the omnivol which essentially assemble all of these queries and build a launching portfolio strategies composed of defy and real assets and on top the integration layer for platforms so that they can offer these yields to their customers.

There's also also the the compliance system built in KYT and KYC. So you can essentially address the KYT and KYC needs according to geographies, jurisdictions as precise as state in the US. You can say well I want to give access to my product to 45 states uh and not uh these five specific states. And lastly, what is very important in DeFi is to understand the risk and I'll talk about it later, but we provide risk data room to grade the certain the different layers of of the strategies.

So that's how we think of compliance, right? A big word. But for wallet, usually you would use a complete KYT flow. You don't need KYC. you don't want KYC KYC because it breaks the staking flow if you ask on ledger if you're on safe and you you start um um we start to to ask you KYC if you want to allocate funds into a vault and in Yel product um you you might um just lose the user uh but you need a KYT flow end to end ensuring there's no flag fund in the vault and no flag funds in where the uh assets are allocated uh in these D5 protocols or real assets. Then there's a

sim subation flow for an exchange where you want to make sure all of the funds in the vault are KYC and it can be leaked linked to a KYC user of an exchange but at least the asset manager when received the funds um can deploy into permission as D5 and permissionless reward assets and for large institutions regulated institutions that want only to touch KYC flow in D5 you can have KYC at the entry in the vault and at the deployments uh with asset managers only deploying into um KYC pools in DeFi or KYC real world assets the risk data room. So we will tell you

our head of asset management was the exio of credor the first um yield rating mechanism in defi and involves we'll tell you what is the quality of a collateral what is the quality of a certain assets what is the quality of a defi protocols the risk the audits the liquidity risk of the overall strategies through data rooms you don't have to trust us most of the time the asset manager plug their own assumption. You can tweak this assumption thinking well we have been overly bullish or bearish on a particular type of risk um so that you can think of D5 risk that are complex that are

multi-layer um as close to the TRFI standards. So we announced our first product with Monarch, the asset management arm of Falcon X, so that they can take Bitcoin or Ethereum or stable coin as an entry. Um when it comes to Bitcoin they wrap it uh and then they will deploy into various D5 protocols funding arbitrage strategies on chain and reward asset strategies tokenized treasury and private credits which makes the the the strategy quite sustainable regardless of market cycles. We've also announced two weeks ago our partnership with coin

shares the largest European crypto asset manager Mika regulated also US regulated um so that they uh using rail nets essentially to offer stablecoin strategies ac across defy uh lending protocols as well as private credits and um stocks and commodities inside the same onchain portfolio. Well, we you're going to be able to see these products and these tier one asset managers will announce more in the future from your favorite interface. Uh that's what we've been doing uh in staking for years is making sure these

platforms, these wallets, these exchanges, these custodians can collaborate uh with us uh have the right set of APIs and and offer the best yield product to their users. So you will be able to access um these DeFi to real assist onchain uh strategies from your favorite interface. Thank you very much. If you are a builder and you want to build on Railnet, you want to build adapters according to the standards. If you're an asset manager, you want to build strategies. If you're a fund allocator, you want to allocate funds or a platform, want to offer these strategies to your users. Um, I'm happy to chat and have a great eat.