Private Credit in DeFi with USD.AI and Cap

Transcript

Defi might just die. [music] Nothing that we're building here in DeFi is good. Like all these kind of like Olympus D forks, etc. None of it will lead to anything. But then I thought, look, if anybody's going to build it, why not us? We are the DeFi people, right? >> How does your plat each of your platforms act as a [music] solution? USDA mints a yieldbearing stable coin that's backed by the AI capex boom. >> We lend to companies in the real world, but our goal is to import [music] the yield from the entire economy. paint the picture of how big is this opportunity in private credit.

>> Today we have a ton of loans [music] in our pipeline. But today, you know, I think it's about 400 million bucks of deposits, 200 million bucks of active loans. Pipeline is well over a billion dollars. >> We already have some of the world's largest financial institutions borrowing from us. These are institutions that have never borrowed from the blockchain [music] before and now are borrowing because of CAP. And yeah, there's a new token. We are TGing very soon. Welcome back to the Fully Vested podcast by Defi Llama. I'm Patrick here with my co-host DeFi Dave. And today's episode What's up, Dave? Today's episode is going to be focused on private credit.

So, we've got a couple awesome guests. We have Connor, co-founder of Perian Labs, the developer behind the USDA AAI protocol, and we have Benjamin, the founder of CAP. uh to start I'll leave it to uh Connor and Benjamin to introduce their protocols. >> Sure. Yeah, thanks for having us. Um so, USDA is a structured credit protocol specifically built for GPU financing. So basically um borrowers who own GPUs, own you know the servers inside of data centers can get financing from USCAI and then those loans are rolled into a

single yield bearing token and that yield bearing token is proliferated throughout DeFi. So, USDA mints a yieldbearing stable coin that's backed by assetbacked financing of basically the AI capex boom. >> Yeah. So, I guess I'll go next. Uh so, we we're a credit platform as well, but uh and we lend to uh companies in the real world, not AI companies. Uh but our goal is to import the yield from the entire economy. So there's yield to be had when a farmer, you know, collects harvest. There's yield to be had when somebody manufactures a car and we want to take a cut of all of that and bring

it on chain for our dollar depositors. And uh what sets us apart um is our principal protection. So every single one of these loans are not only getting yield from the real economy, but also they're fully backed by these sort of credit default swaps that we set up on our platform. >> Nice. Patrick, you want to ask the next one? >> Oh, yeah, totally. Um, >> uh, yeah, thanks guys. So, um, taking a thousand foot view, uh, podcast mainly focuses on def, defy, onchain finance, all those kinds of things. Uh, why does DeFi and onchain markets actually make sense for private credit? Like what structural advantage do you have versus

trady incumbents? I mean I I think um so if you look at like a lot of the challenges facing the private credit markets today it's really um around transparency and liquidity. So uh private credit funds you know deploy capital close-ended fund structure and um you can have lots of scenarios of kind of extension funds where you're selling the same assets into a new fund by the same manager. um you can have liquidity challenges because fundamentally these might be illlquid loan books and so for example like blue owl we saw you know many of these BDC's hitting redemption limits and you know

causing all these problems and these are kind of two categories that you know crypto does a lot of things poorly but transparency and liquidity are actually two things it does quite well and so um I think this only really holds true when you are sort of from first principles rebuilding the the the rails to support this stuff. And so what I mean by that is, you know, the loans actually being paid on chain as opposed to, you know, four or versions of SPVS wrapped up together and then selling some, you know, tokenized representation, but rather saying every single loan is being paid on chain. How much can I represent as transparently as possible and then ultimately what am I selling to the market is one single yield bearing product that can have the you know connectivity into the rest of DeFi. You

can have borrow lend markets against that representation. You can have secondary liquidity to swap in and out of that position. But ultimately, if an if an investor wants to drill into very very specific details, that's all represented on chain transparently. And candidly, like one of the big benefits of DeFi Lama is taking, you know, this source data and then representing it in a way that, you know, you can see clearly on chain for a regular user. So I think that's like fundamentally the big advantage. like if I'm issuing credit instruments for niche asset types, uh you know, you can't really tap into deep liquidity markets, but you can in the in the case of, you know, bootstrapping liquidity um transparently on chain. Those are kind of like where I

feel like we have big advantages over incumbent lenders. >> I I completely agree with you guys and I think USI and CAP have a similar approach within how we should be tapping into the real world. A lot of folks think that you you can just tokenize everything. So if you have a private credit fund offchain, let's just tokenize it. But that's not really doing anything, right? Right. Uh it's still just as bad, just as liquid, just as dangerous. And so what CAP and UDI are doing are saying, "No, we should originate everything on chain so that it can be more transparent, so it can be more liquid." And so I I definitely think we we're on the same page on that.

I think the specific thing that I'm interested about with CAP and how we're building it is that we're not credit experts. There's no way that, you know, CAP, we're lending to so many different industries. There's no way that we could ever allocate capital better than a company focusing on one industry and definitely not better than the big guys like a Polar and Aries. And so we made a a very important decision of uh allowing the smart contracts to allocate on our behalf. So we just set the rules. you know, these are the rules by which our capital can be allocated on our behalf and then we just let the market take hold. And so we think that as long as uh the game theory is correct, right? The good actors receive good outcomes, the

bad actors receive bad outcomes, then um you know, cap will be safe for its users. Uh but yeah, so similar similar on the let's originating on chain but separate on the you know, we we don't actually really take part in the originating of loans. >> Yeah. And I also want to take a step back and paint the picture of how big is this opportunity in private credit and how does what is what do you see is wrong with private credit and how does your plat each of your platforms act as a solution? Well, I think the scale is huge, right? Right now, outside of our protocols, how many people borrow on chain, right? And uh out of all of maybe 20 at at scale, half of them are Justin Sun with different entities. And so it's

like what are we doing guys? Right? Like so every time a grows is because somebody left Morpho because they're going on a every time Morpho grows because they left A. And it's kind of like terrible. Like we haven't been able to expand. And it's because we're stuck in this uh dynamic of borrow against your crypto or borrow against your long-term asset. And so what Cap and USA are doing, we're saying, well, let's just get all new borrowers that have never borrowed from the blockchain before. And they're doing it not because they love the blockchain, but because we're faster and cheaper or at least faster in market price. And so now we're able to get people like you guys just closed what, a $98 million loan. I don't know if you want to talk about that, but there's a completely new borrowers

coming on chain. >> Yeah. And you [clears throat] know, when when we're talking to borrowers, we're not really talking a whole lot about the crypto part. Um it's really behind the scenes. And I think that's really how it should be. Um but it's interesting, right? Like you think about, you know, okay, private credit markets are fairly deep today, but they're very much walled gardens. you know, you you have to be a specific accredited investor to participate. You know, it's kind of the boys club, right? Contrast that with the deposit base that we have for USCI, 75,000 unique wallet addresses all across the world. And the capital base within DeFi today, candidly, is actually much smaller than um you would want it

to be. But the opportunity is that that that can flex up, you know, instantly overnight because everyone in the world can access it. Um, and that's not really true when you think about the traditional rails and and the competitive landscape. I also think that DeFi as a whole started out really with sort of these recursive yield farming loops. Everything is reflexive to the rest of crypto. And today, you know, what USCAI is offering is, you know, basically like 10ish% yields, probably in steady state between 9 and 11%. Which are pretty strong, you know, credit profile like yield yielding

opportunities relative to the rest of DeFi. But if you compare that to the rest of capital markets, it's, you know, it's good. It's solid. It's nothing, you know, it's nothing crazy. It's nothing outrageous. There's lots of products that are offering high single digits, low double digits yields, but crypto itself has a real problem with that. You know, there's not a lot of opportunities that do offer those yield profiles. And so, we're kind of seeing like this this, you know, combination of now we're actually getting like real credit profiles, real actual borrowers that are not adverse selection getting plugged into the crypto market. And then you know today the capital base might be smaller but the opportunity for that to grow 10x from here 20x from here is like very easy for that to happen.

Yeah, I definitely view CAP and USCA AI as this second generation of D5 products where the first generation it was all crypto-based. It was all around the crypto ecos like crypto products, crypto tokens, bit the price of bitcoin and whatnot. But the second generation uh cap USCI, they're looking outside the chain. They're looking for opportunities that are beyond like that you want to bring on on trade. So, it's really unique >> and I think like the the advantages become way more nuanced and specific and things that if you aren't, you know, having subject matter expertise, you maybe not may not appreciate. But to give an example like what we're doing

today is we're taking individual loans backed by clusters of GPUs and rolling them up into a single yield bearing token. um that is to do that in the traditional sense you would have to one have a very robust origination pipeline of deals. Second, you'd have to be able to originate clos loans on a warehouse line with a bank lender. So you have to go get approval from a bank lender. Then third, you have to go to the securization market. You have to go get a credit rating. You have to securitize out all of that. The loans, by the way, are only three years long. So you have basically 6 months to get all that done.

The process to negotiate a loan itself might take 3 months. Like structurally, you really can't offer that product. And then now what do you do when you're doing this on chain? The second a loan is originated. It's atomically sold into this pool. The exposure of the pool can flex up. As more cash comes in, you're still getting treasury yields. Then as that cash gets deployed, you increase your yields. The whole time from day one, anyone can create secondary liquidity for that. Anyone can borrow and lend against that. So you have back leverage like people are already back leveraging SCAI. All of that stuff is done like programmatically day one. So that that's like a huge advantage. But the only way you can really appreciate the nuances of that advantage is if you

came from like you were structuring CNBS or something before and you're like oh wow this is way better. Otherwise that's going to be very hard to visualize as like an average retail user. >> So how do you pitch it to someone who's not cryptonative? How do you pitch the platform? >> Yeah, maybe I could take it first. Yeah. >> So I mean it's actually much easier to pitch a non-crypto people, right? All of our investors are non-crypto people, right? Franklin Templeton, Susana, MC Trading, Flow Traders, these are, you know, the world's largest financial institutions. It took them all five minutes to understand what cap is because they they all know private credit, right? I think what's a bit harder is is um understanding how you know smart contracts can automate

decision- making, how smart contracts can limit, you know, the you know malicious intent of of third parties, right? Um but it the same way that I explained it to you just now is is the same way we would explain it to traffic people. >> Yeah. I think for us, we we usually pitch the credit profile, um the asset story, the borrower story really as like the main focal point for any traditional capital source. And then at the very end, once they're kind of fully sold on that, then you add in the the fact that, oh, by the way, you know, you get to be able to trade out of this position. You have secondary liquidity. but they don't want to hear that as the kind of uh

focus of the story. And actually there's sort of a ven diagram of users. You have like the guys who understand credit and the guys that understand blockchain. And you'd think there'd be some amount that overlap, but honestly it's very very small. Um hopefully this changes. And so for the credit guys, you really just focus on the credit side. Then okay, how do I participate in this? Well, you have to admit this token, but you have all the same, you know, contractual rights that you would have traditionally yada yada yada. And then on the blockchain side, you know, I really am finding myself doing a lot of education on just how you think about credit as a whole.

And this is why I think we've benefited from being in the market. And so because we're in the market, we can see what people complain about and then we can address those problems. So when we started, we have something called value insurance, which is basically a credit default swap over the uh loan book. But when we started, we didn't have that. Um, we thought that candidly it was a little bit expensive to justify placing, but what we found was because there was such uncertainty around just general credit underwriting within, you know, the crypto user base, you're better off paying the premium for the value insurance and then selling a yield back to users that has coverage. So, they don't you don't have to like pay for their market education. You can just say like, "We're paying this premium now.

you don't have to be educated and you can just trust that you basically have insurance coverage over this to to protect your downside risk. Um, and that's been like kind of the the path that we've been navigating. Hopefully, this changes as we go, but >> I think you definitely need stuff like that because there's so many >> there's so many skeletons in the closet when it comes to direct lending in crypto, right? We've had BlockFi and all these guys >> that were largely just lending to crypto market makers, right? And they were doing it completely unsecured, right? in both of our protocols, we have some sort of principal protection. Um, and I think um, that's something that's really changed since last cycle.

>> Yeah, we're actually >> Yeah, this actually leads Go ahead. >> I was just going to say we're going through a process right now. We're getting like a um, accounting firm to do an audit of the things that are offchain because obviously there's some stuff that's offchain that you can't you can't like put tokenize the value insurance for example. Um, so we're actually getting this audit so that we can basically without disclosing confidential information be able to show to the market like here's a third party that checked all these things there are actually there. Um, and this is just like again more efforts around transparency and um validation to the market.

>> And are those things related to the um loans or to the the actual like GPUs or compute that it's being spent on? It's um basically all protection against default on the loans. >> Okay. >> It's pretty good. >> And uh Ben, what you were saying before actually leads to my next question quite well. Um what past experiences led you to build what you're building, what each of you guys are building, and what was each of your aha moments when it comes to that?

>> Well, you know, at least for me, I I really believe in in DeFi. I I think it's the best way to manage your money. Uh, and it's really sad that the majority of people in the world don't have access to this. And I think there are a lot of reasons for that, but at least on our side of the of the market, it's because all these like financial products not real. They're just part of this larger gambling machine of tokens, of trading, of arbitrage that doesn't benefit anybody and that doesn't scale. And so, at one point, I was just thinking to myself, you know, DeFi might just die, right? because nothing that we're building here in DeFi is good like all these kind of like Olympus D forks etc. none of it will lead to anything.

But then I thought, look, if anybody's going to build it, why not us? We are the DeFi people, right? And so I got, you know, people from Fracks, people from Beefy, from us, right? Like we're kind of like the DeFi Avengers and we built this product that's made to, you know, make something useful out of everything that we've been doing in the industry for so long, right? Something that actually can benefit the real economy. >> Yeah. I I I feel like the opportunity is so massive because uh there's just not a lot of people who are in DeFi that can can actually execute something that is touching traditional capital markets.

And yet we all get to benefit from these structures that have now been built and deployed. And yeah, like what you know, were were we all trading like scam coins or like leverage looping inflationary tokens? Sure. But that also stress tested these concepts. And so what you're left with are these these primitives that are super super powerful and the only thing you have to do to like have edge here is have had maybe some experience in traditional financial markets. Well, there's lots of people that, you know, know how to underwrite credit or underwrite private equity or something, but not a lot of people who know how to do that stuff and then will

take the the leap into DeFi slash have the experience to know how to navigate how do you get onboarded to an a or how do you like win over curator to support your tokens or whatever. And so that it just creates this like massive opportunity where if you elect to also I think the bar is so low for crypto founders. So it's like if you just elect to operate, you know, at at least on par with how someone would operate if they're starting a non-crypto business at a minimum, you're already like the most trustworthy person, right? Because so many people just opt in for, you know, the quick buck or whatever. So the opportunity is huge and it's just like it's a challenge to, you know, marry all those things together. But if you have

have that, you know, previous experiences and you can put that together, you end up in a position where like what else is there besides, you know, a handful of yield opportunities in DeFi today. You you could be basically like the show in town, you know, for hundred billion dollars of um of DeFi money. Um so that's that's super powerful. >> Awesome. Um so since this is the uh DeFi Lama podcast, sometimes we like to talk uh data a bit. Um, can you guys talk about what traction your platforms have gotten and um, as much as you can or are willing to share um, if there were any inflection points in terms of big users or things that really made a difference?

>> Sure. Yeah. I mean, we we launched in September of 2025. I think this is something else we left out, but another big benefit of using um, blockchain rails for product launches is that you can incentivize behaviors in a way that you simply cannot do uh, without crypto. And so we ran a points campaign. We attracted a ton of deposits. Um I think post you know TGE the the sort of incentivized behavior has tailed off and what you're left with is is possibly you know the more organic user base who's saying okay maybe I came for some points incentives but now actually these yields are quite good and I understand this product a lot better and I actually

maybe really just like the yield profile and want to stay in this you know on that basis. Um and I and that's like pretty awesome. Um now t today from here really the challenge is just incrementally growing the deposit base um to be able to continue to service the the borrower side. So when we launched we had too much money, not enough loans. You know DeFi Dave and I talked about this I don't know four months ago and it was like when are you guys going to get loans done? Like that was the question over and over again. Today we have a ton of loans in our pipeline and more more loans in the pipeline than we have capital. And so it's now it's going back to the other side of the equation making sure that you can continue to like grow

that capital side. Um but today, you know, I think it's about 400 million bucks of deposits, 200 million bucks of active loans. Um pipeline is well over a billion dollars. uh you know if we can do a good job of executing over the next six months we'll you know be able to hopefully get to you know target billion dollars of TVL billion dollars of loans deployed um you know that would put us somewhere around 100 million bucks of uh total interest income being generated by the protocol and probably around 30 million bucks of you know DAO revenue or or like protocol revenue. Um and so that's kind of like the the road map for the rest of 2026. Yes, it seems very similar to the things that we talk about

at CAP, right? Is uh we need to deploy and I think for a lot of time people were asking us the same thing. >> And the reason is that it's much easier to get capital in in crypto than it is to deploy loans in Trifi because there's a lot of red lining. I'm sure Connor you spend a lot of time like I do uh back and forth with legal uh trying to get these deals through the line and it's just how things go. Um today cap you know our our makeup we we launched what August 2025 and today 98% of our TVL is not from people wanting points right uh it's not from um kind of your retail uh speculative users instead it's just from institutions that I can name you know by

name a number and that gives us a lot of stability in TVL right um to the extent that you know bitcoin prices are not dropping too much and messing with our with our TVL Um but broadly speaking our our um our success will be measured not by our TV but by who we can on board. Can we get real companies from outside of the blockchain to actually use our platform on all three sides of our market? Right? Where it be insurance companies underwriting cap as underwriters where it be institutions like neo banks depositing into cap for yield and u different types of industries borrowing from us. Right? We already have some of the world's largest financial

institutions borrowing from us. These are institutions that have never borrowed from the blockchain before and now are borrowing because of cap. Um in the future now we have film financing coming up. So we will have real films uh from Hollywood with uh types of borrow types of u actors that all of you guys know the names of and I think these new type of industries will be very interesting for our users because they will know now that their yield is coming from you know real value being generated uh outside of the blockchain. >> Yeah. And both of you guys have been in DeFi for half a decade and a lot has changed. Uh, and I'm curious, what's it like seeing the space evolve over that time? And what have been your biggest takeaways and observations during that

period? >> Well, we started out as an NFT lending protocol. >> I remember I remember very well talking to you guys back in the day. >> Yeah. So, uh, you know, pretty pretty different. Um, it's funny, you know, what we're doing now. Before this, I was working in private equity, investment banking. Um, this what we're doing today is very very much reminiscent of, you know, my actual previous backgrounds. But you meet the market where it is. And in 2021, what could you do? Everything was very much a closed sandbox. And I really believe that was because Gary Gunler was, you know, trying to put everyone in jail. And so what can you participate in? It was really only the things that were purely

crypto. Now today things have changed and I think the background of the regulatory regime changing the market as a whole just being more open to this stuff makes it easier to onboard like Ben was saying a neo bank or someone who's maybe crypto adjacent or even just not you know associated with this industry at all. uh and that's been the big shift you know and and so again I think in many ways it was beneficial to have this sort of closed sandbox for people to experiment with things and you know battle test some of these primitives and now you can actually take it out and introduce it maybe to the traditional markets a little bit more directly um and that's really where I

think obviously that's where the pie grows as a whole is when you get to connect into the real world um and that's obviously what we're focused on now >> yeah I I agree with you um our industry has matured quite a lot and uh most of that has been regulations right ever since the election and uh with all these bills being passed we've had so much more influx of institutions wanting to work with us where before who could we work with right the offshore market makers and some liquid funds as real institutions the largest uh you know in each of their categories are all coming into crypto which is fantastic to see Um, but it's also so much harder to build businesses because

now all the easy stuff is out of the way, right? If you really want to build in crypto, in DeFi, you have to build something that has value because otherwise the markets uh, you know, won't have any pity, they'll just send you to zero. And and we've seen this time and time again with some of these launches and some of these protocols and and I think it's good overall because it will mean that most of the big protocols in crypto are, you know, actually providing value. Yeah, I just realized you both are second time protocol founders and uh you know the first one was the sandbox like you were saying Connor uh for both of you and then this one the second one is you're bridging out to the real world. So uh it's quite impressive what both you guys have built. I think you two are both some of

DeFi's best uh ambassadors to the real world. So kudos to you both. And um the last question before we go is uh if people want to learn more about CAP, if people want to learn more about USDA, uh where could they go go follow you, find information? >> Ours is easy. USD period AI is the domain. That's why we did it. So, >> you know, it's pretty good one, Conor. I have to say [laughter] you guys did a great job with the URL. Chip is a great chip is amazing. I saw that. >> Yeah. Good stuff, man.

We kept it super simple. >> Is is there a new ticket coming out? I saw there's a >> Oh, what? So, first of all, our website is cap.app cap.appb. So, um, pretty simple. And then, yeah, there's a new token. We are TGing very soon. >> And the token is going to be called CAP. Pretty standard, right? Our company's name is CAP. And soon, yeah, we'll be in the market alongside our friends that use the AI. >> Awesome. Thank you both for joining us. Uh, thank you all of you for watching. Uh, this is a new podcast so it really helps us out if you guys like, subscribe, follow us on X fully vested_pod and hope to see you next time.

>> Awesome. Thanks, guys. >> See you. >> Cool. Think yes.