Turtle Club: Helping Web3 Users Monetize Their On-Chain Activity - Esfandiar Lagevardi. Ep. 586

Transcript

I think the problem that a lot of these different applications or adaps have faced is that they weren't able to reduce their cost of capital faster than the rate at which their emissions trailed off so a lot of these applications are subsidizing their yields by issuing their own incentives in the form of their governance token or Dow token that gives their users a a vested upside in the protocol the protocol treasury really the idea of turtle was how could I leverage the collective liquidity and bargaining power of numerous LPS and liquid funds at the same time to negotiate better deal and sort of incentives or upsides on behalf of the entire community and if they interacted with any of the partner protocols that had a kind of a liquidity

offering in place the turtle D would start issuing rewards directly to these addresses of elps of ours that essentially conducted those activities that our partners been valuable enough to start paying the down for it's a a much safer way for us to essentially the activity of all of our users and and PID them additional boosts from the partner protocols that we work with on the upside welcome to epicenter the show which talks about Technologies projects and people driving decentralization and the blockchain revolution I'm Brian Crane and today I'm speaking with Essie lardi he's the founder and CEO of Turtle Club and Turtle Club is a defi liquidity protocol so I'm really excited to talk

with him about Defi and about turtle and all the exciting things happening in that area now just before we go into it with Essie would like to share a few words about from our sponsors this week if you're looking to stake your crypto with confidence look no further than course one more than 15,000 delegators including institutions like Bido Penta capital and Ledger trust corus one with their assets they support over 50 blockchains and are leaders in governance or networks like Cosmos ensuring your stake is responsibly managed thanks to the advanced me research you can also enjoy the highest staking rewards you can stake directly from your preferred wallet set up a

white label note restake your assets on iena or symbiotic or use their SDK for multi-chain saking in your app learn more at chorus. one and start staking today this episode is proudly brought to you by nois a collective dedicated to advancing a decentralized future nosis leads Innovation with circles nosis pay and metry reshaping open Banking and money with hashy and nois VPN they're building a more resilient privacy focused internet if you're looking for an L1 to launch your project nosis chain offers the same development environment as ethereum with lower transaction fees it's supported by over 200,000

validators making nosis chain a reliable incredibly neutral foundation for your applications nosis Dow drives nosis governance where every voice matters join in no no community in the nosis Dow for today Deploy on the evm compatible nosis chain or secure the network with just one gno and affordable Hardware start your decentralization journey today at nosis doio cool well thanks so much for coming on I'm uh I've You Know spoken quite a few times with you recently uh should also H note here that uh with course r with practice and personally we all

invested in turtle um so I've been yeah like learning much more about defi even though I've been in crypto for such a long time in recent times so I'm really excited to to dive in the whole def world with you today but maybe to start off with share a little bit like how did you get into crypto first yeah absolutely I'm uh from London originally uh I was born and grew up in the UK and um back in 2011 you I kept coming across uh Bitcoin unfortunately didn't understand it didn't really take the time to look into it which uh obviously with the benefit of hindsight I I regret

deeply but uh given that I uh studied uh business and management and I was very interested in economics uh when I was younger and growing up as well as technology and always had a thesis that te technology would eat the financial sort of world like Amazon 8 retail or a lot of these tech companies were starting to eat the lunch of existing Industries uh BTC kept coming up in my feeds online and then in early 2013 I came across an Andreas Antonopoulos video online and he was one of the early great communicators and he just kind of broke it down in a really you know um really

easy way to understand and from that moment on I was kind of hooked and obsessed unfortunately this was a stream last year of University so I didn't have very much money but uh yeah I worked pretty hard to try and you know acquire some crypto back then at you know obviously much lower prices than today so uh yeah been just kind of a hodler ever since really and uh and yeah just and I've learned a lot throughout the years um after University I I worked in Trad fine the city in London mainly working as a Matchmaker between the buy and sell side for small Financial media companies so we organized lot of banking conferences and Switzerland uh Singapore London and it was my job to try and get a lot of these

big LPS on the buy side and uh a lot of these saleside uh institutions whether it be investment Banks asset managers family offices hedge funds that had created financial instruments to sell to the buy side so uh after that I worked worked for around 2 three years as a financial accountant for Edelman as well before you know just going full full deep into the space fulltime back in 2017 so yeah it's uh time flies when you're having fun for sure so let's let's talk about defi all sort of a little bit on a high level and you know looking a bit at the

history how do you how do you think about the defi history like when did it start and what are sort of the most important milestones in the history of defi that's a great question you will get a very different answer based on who you ask I think there was definitely a lot of big milestones and important uh phases within defi I think early on in ethereum you weren't able to do much with it so obviously you had the Ico phase back in 2017 Romania is about I guess kind of minting tokens uh but I think the first um kind of you know beginning of

defile the very very beginning was actually the da that led to the ethereum classic fork in a way that's kind of a very defi thing to kind of bootstrap a da um and Stefan TW one of the co-founders he wasn't I didn't know him at the time but but he he lived across the river TS from me in London so that actually was the first thing that really caught my attention uh to a theory uh in terms of when it really started I think for me the first kind of Blue Chip B5 protocol was maker um the idea of using eth to Min a synthetic stable coin against in the form of a CDP

was uh I guess kind of ushered in the defi era in my opinion and it's great to see that you know maker you know were the first they're still around today and they built a really really good business so uh but but then there's a lot of other big Milestones um the synthetic guys don't really get sort of much credit for this but in my opinion I think they started def5 summer you know I think with the S USD pool and the incentives they from my understanding created the first pool that was incentivized with the seal farming incentives and then off the back of that you had you know c y obviously Andre cor Michael eager Roth from cve

you know and a bunch of these really uh talented Founders that started you know combining multiple different con uh Concepts and ideas and really kicked off defi summer um you know you obviously had sushi Swap and their vampire attack on Unis swap um compound issuing a bunch of incentives as well so uh I think a lot of people in defi you know have very fun memories of defi summer back in 2012 what do you think are the most important Primitives when you look at defi today sort of the core fundamental protocols that are

actually um yeah the most important ones so I have a very simple view on it kind of segment the market by revenue and and protocol fees I think the biggest use Case by far in defi is just kind of payments and stable coins uh the amount of money that tether usdc and a bunch of these other stable coin protocols like Adena Starling to print is you know truly insane and also very good for the space given that they issue a ton of onchain yield which then drives further [Music] adoption um the the second biggest use case from my understanding is spot and P dexes we' seen recently with Hyper

liquid that they were able to create a really unique yield Source from all of the yield and fees that are generated by all of the Traders on hyper liquid that make it very very difficult for other chains or ecosystems to replicate after that I think lending and borrowing is uh I think by market size probably uh the fourth largest uh but then there's also some really other you know really good use cases like obviously yield markets with Pendle Spectra hyperdrive uh and then you know host of I guess smaller ones um and now you know turle is also trying to uh create a market for uh liquidity as well or you

know you know a distribution protocol that helps kind of monetize the onchain activities of our web free users and in terms of the the size of these I mean of course everyone uh is aware of tedar uh which is yeah producing insane amounts I think 15 billion last year or some something like that I think something crazy and they keep buying Bitcoin with a percentage of their revenue and and obviously you know that's doing pretty well so yeah I think in terms of Revenue per employee they must be sort of up there with the most profitable companies in the World it wouldn't surprise me frankly if ever become one of the biggest companies in

the world at this point in terms of the size of these different categories uh how do you have a view in in terms of the the relative size I haven't done a kind of a analysis of the Tam of all of these markets however kind of a good friend of mine um he uses this example that currently the the way the space is shaped is a bit of a pyramid you have kind of a bunch of users on top of the pyramid and then at the bottom of the pyramid you have uh a lot of these protocols that are kind of fighting for a limited amount of web free users which is kind of fract fracturing the liquidity in the user

base between a lot of obiously different chains asset protocol steps Etc and then he uses this example of this inverted pyramid for connecting existing web free chains or community with uh existing distribution channels that are kind of higher up the stack or generally sort of more Web Two based so a great example of this was when metam switched on the swaps uh at one point metam swaps accounted for 80% of the trading volume on one inch uh which obviously made one inch a lot of money and then all of the downstream protocols from 1 in so all of the different dexes that they would

source that liquidity from um made a ton of fees right which then they passed on to their token holders and their LPS so I think there's a lot of really big web free align communities in the space currently uh like telegram um uh that you haven't uh kind of really switched on or connected their user base fully to web free yet but are in the process of doing so and when they start switching on uh and connecting their users to a lot of the these key defi Primitives that you talking about terms of stable coins lending borrowing sport per Dees yield markets Etc that's going to drive a lot of a revenue generation Downstream

to a lot of these different you know protocols whether it be aggregators or different you know dexas Etc lending and Bing markets that sit sort of below the stack uh and I'm very excited about it I think myself as a a bit of a d gen right I'm uh spend a lot of time right on a lot of the front ends of a lot of these STS but the reality is that majority of what I call you know normal or just normal people aren't going to do that and that over the coming years I think there's going to be sort of the uiux problems that we've been experiencing in web free so far uh a lot of that is going to disappear by uh extracting that onto the

application layer you know think about mini apps with in telegram that allow their users to swap or lend and borrow through the front end of the minia app by connecting the mini app into different deps that are built on top of Tod for instance uh and if you look at you know great communities like let's say bass that have built a really good distribution uh sort of Channel they're able to connect you know millions and millions of millions of users really efficiently with different daps and sort of killer products and services that are built on top of Base so that's how I think the the space is going to develop but you know I may be

wrong now in terms of you know kind of like where the yield comes from right so I mean you mentioned okay stable coins right so in the case of stable coins it's basically um well one thing is okay you give dollar to tther or to someone and then they do something in the back end that produces yield and then you maybe they pass on some of that to users spot and Pur Dex is I guess it's the the trading fees right lending and borrowing it's it's the fees people pay right to to lend or to borrow uh yield markets I guess it's

it's again kind of trading fees in there do you feel like the yields in defi are they sustainable do how do you think they will change with time that's a great question I think currently uh there just isn't that much or that many users or kind of applications that are generating a ton of fees so a lot of these applications are subsidizing uh their yields by issuing their own incentives in the form of their governance token or Dow token that gives their users a a vested upside in the protocol the protocol treasury um and it's really one of the best use

cases of kind of web free that we can issue a token to our community and give out Community vested interest and upside in the network that we're building um in a way that we wouldn't be able to do so in let's say a web two scenario I think the problem lies in the fact that many communities or or projects they become addicted to these incentives and this free subsidy where they aren't really meant to be issued in my opinion over the long run uh because you really want to build a a Dap or product or service or protocol that provides value to your users or Community without having to you know pay a free subsidy over the long

run so these uh subsidies or tokens should only be issued in my opinion over the short to medium term to bootstrap a community uh and give you a bit of time so that you can transition to a much more sustainable business model I think the problem that a lot of these different applications or deps of face is that they weren't able to reduce their cost of capital uh faster than uh the rate at which their emissions trailed off and it's you know very hard thing to do uh I think great examples of protocols that were able to do this really really well was are Unis swap you know Athena are currently going through

this process and doing very well uh you know Bas they don't even issue a token uh they just have such a good cost of capital distribution and uh you know seen as being a very Security First type chain that they're able to attract and retain liquidity at a much lower cost of capital which means they don't need to subsidize that Capital with their own emissions right uh I think the the fees that are generated on Bas or the uh the you know the token issuance on all of these different deps that are built on top of Bas provide ample sufficient kind of yield to you know continue sort of attracting new users and liquidity to the shade so um I'm not sure if that

anwers your question right but yeah I mean I do think that that seems to be kind of like one of the fundamental things is now it's like oh I'm I'm someone creates a new protocol and then they use their own token and then you know liquidity comes they pay with their own token and and then you sort of selling the future claim right on the success of that protocol uh but then yeah right if if the if there's not actual yield generated in the long run right that then outweighs yeah the what they're spending then it kind of it's bound to kind of imploded at some point right because at some point then I guess you have a just a download pressure on the

token you know because people sell the token because they w't yield on whatever liquidity they put in and and then uh you know if if the token keeps going down then the incentives kind of decrease for the liquidity and then people are like oh let's go to the next protocol yeah before you know it you get caught in a death spiral yeah yeah yeah for sure I mean we've seen it happen over and over again uh that really is one of the core problems um kind of within Defi and crypto um about trying to kind of reduce your cost of capital faster than the emissions Trail off it's a very hard thing to do um given that title is a distribution protocol and has now spent a lot of time

throughout the last 128 months in particular uh learning more about uh distribution and uh kind of liquidity and how it flows through the space I've come to the conclusion that each protocol actually has a different cost of capital and that depending on uh kind of numerous variables but the main two being kind of your access to users or your distribution channels and the second thing is you know how safe is your protocol perceived to be relative to others that these two variables have a really big impact in regards to the amount of emissions that you need to um kind of emit to LPS or adapts to

essentially adopt uh whether it be deploy liquidity within your ecosystem or protocol or or build on top of it um and I think that's uh really been apparent now that as the time goes on and on and it's just become much more competitive to compete on an ecosystem level on a prodical level on AAP level that that a lot of these new ecosystems that you know have a kind of a differentiator or different idea and they want to kind of boot trap the community or ecosystem around that are finding it very very difficult to boost trp this ecosystem from zero to one given that they need to bribe and pay lot of these Blue Chip

apps uh that are kind of you know trusted and well loved in the space to deploy into their ecosystem but for the daps to do it they will want a very large degree of incentives assigned to them and they also want to know that the chains that they deploy onto have a lot of users especially new users that they can acquire right and then on the lp side you have the same issue because you need to now bribe the LPS with ever higher rates of emissions to Port over liquidity to ecosystem to you know obviously deploy that liquidity in the different deps and the reality is when your cost of capital is too high uh you end up just having to print emissions that are fast and Fast the clip which

then again create that cell pressure and that death spiral that you were and just refer to so I think for you know myself and and my LPS we really appreciate the fact that uh you know earning tokens uh or or yield in a token that's actually backed by a real user base or or kind of a real business and one thing that you said which resonated with me is um when you deploy liquidity in a protocol and the vast majority of your emissions are in the form of the uh the Dow token or the Govern token relative to the underlying APR that's actually being generated by utilizing the liquidity in a way is sort of supposed to be in defi

right that is a big red flag and that in my mind means that the token is going to be dumped pretty quickly and the fundamental value or or the fundamentals of the business of the protocol itself is uh you know not really doesn't have a high probability of withstanding the test of time I'm curious is if you look at the the size of the defi economy compared with the the the traditional Financial system you have a you have an estimate in terms of like what is the relative size of and it's obviously very small but how where are we if you put those in

relationship it's a drop in the bucket I had a you know work work with a lot of the kind of biggest institutions whether it be you know investment Banks asset managers wealth managers private Banks hedge funds even the odd Sovereign wealth fund here and there when I was working for that small Financial Media company in London being a Matchmaker between the buy and the sell side and you know if you look at institutions not even the big ones like let's say a black crop for instance or a Vanguard but even you know smaller sized large institutions have just more Capital assets on the management than the entire crypto market and obviously the crypto Market the def5 market accounts for a very

small percentage right now of the entire web free market so I think directionally speaking maybe unbiased but directionally speaking I think uh the potential of defi has just a huge shoes Tam to grow into given that you just utilize tokenized liquidity to a much higher degree and much more optimally and efficiently you know in this new internet of money that we're building and I think it's just a matter of time once we reach a point of I guess no return When the technology is and the sort of defi Primitives and use cases have been stress tested enough and built

out enough that the cost of capital is kind of at a level where it will just kind of start sucking in a lot of the liquidity from the Trad five Market just because you can utilize your liquidity far more effectively and efficiently than you could ever do in the traditional banking system for instance so you think the the big advantage of defi is really that you can you know you can use different protocols on top of each other then tokenize it and then basically use your kind of use your Capital more efficiently then what would be possible in the traditional Financial system I mean it's not even close right so yeah you know I've met quite a few LPS during

my time in in in crypto and in particular Defi and yeah some of the degenerates like flywheels that people invent or come up with is is truly astounding where they can in some cases re hypothecate the liquidity in up to 10 15 different protocols at once and generate a yield on the same underlying liquidity across all of these protocols simultaneously obviously there's a a risk every time you re hypothecate the liquidity in terms of the underlying code base of the protocol that you're re hypothecating across or the counterparties involved so um it's not a decision or thing that I'd necessarily recommend the average show to do

but but the point is as the infrastructure and these smart contracts become more and more stress tested and battle tested you're going to see more and more protocols building on top of one another um and really building out these defi Lego blocks uh that really become a core fundamental part of you know this new the infrastructure of this new internet of money and I quite like the you know idea of essentially having your liquidity in multiple different protocols at once generating your Revenue where you can essentially just ping your money around the internet uh and the money will continuously being deployed in real time to the different protocols or use cases that can utilize

that liquidity to generate you know the most protocol fees or utilize that liquidity most efficiently at that point in time right because if you take like let's say if you take the example of sable coins then I mean today right if you use that in defi I mean it seems to be very common right that people can generate 20% or 50% or like you know very high uh y you know doing some of these uh using different protocols putting it in which obviously is extremely attractive right if if you're sort of in the trafi space and and okay you can put it in treasuries and you're obviously the risk here is is lower right if you just buy

treasuries and you earn 5% but then if you compare the I don't know 5% versus maybe the 50% that you can earn in defi that's a massive Delta right and and I I imagine the risk isn't well it it seems to comate very very well for the additional risk that people are taking 100% um every time you re hypothecate liquidity in defi you really need to ask yourself are the rewards that I'm getting large enough or do they justify the risk that I'm taking and whenever you find an uh an opportunity in theory that it's paying you out you know uh a

differential between the reward that you're making and the risk that you're taking in that situation you should reh hypothecate assuming that you know you you you've deployed your liquidity across a diversified set of strategies because in the long run you'll be making or increasing uh what we call in like poke expected value right uh that that kind of move or play will generate more value uh you know over an infinite amount of or or or you just kind of removing the variance from the situation and now the hard part is actually quantifying the risks so it's uh so the easy part is to find out roughly you know what your APR is going to be or you know what are the

types of tokens and incentives and yield that you're generating the hard part is okay if let's say you find it strategy and you're generating 100% that could be a good strategy or that could be a bad strategy right it has nothing to do do with the amount of yield that you're generating it's all relative to the amount of risk you're taking to generate that yield and the reality is that the vast majority of even you know liquid funds or professional LPS don't really have a sophisticated framework for uh risk in web fruit and a lot of people kind of rely on the due diligence or risk assessments of you know very few counterparties in the space right and we

all know what can happen will happen right Murphy's Law so you you'll kind of always reach a point whereby if too many people rely on too few people doing the due diligence then you know that could create potentially some systemic risks right I think Luna was a great example you know of that uh even though there were you know granted some people that did point out and mention some of the underlying flaws of the design of USD so I think where the edge really is is in quantifying the risk because if you can quantify the risk you can then find out which opportunities relative to reward and risk ratio are the best for you to consider reh hypothecating your capital and how how does one do that

like the this risk quantification like what what there are there Frameworks or what do you have to look for like how do you approach a problem like that um yeah there isn't that much uh openly available on the market today I'm currently working with Gonzalo the co-found of consensus diligence to create a new uh framework also with cheyen from Creed so uh you know we are frankly having to do a lot of the leg work ourselves I know there's a couple of you know top liquid funds or you know very sophisticated uh LPS or treasury management professionals that have developed their own due diligence process or kind of risk models but I

wouldn't say there's a I think the that part of the market is still very nent and isn't very developed so there isn't really a holistic or or kind of bulletproof uh kind of framework that is being adopted on the market today uh which is why we'd love to invite anybody to come and criticize the risk framework that we've developed that we're get to publish and you know share publicly with everyone kind of like open sourc it in a way uh and would love to hear some you know feedback or criticisms of like see why you doing this like you know this could be better done by adopting this right because ultimately we just want to uh kind of make sure that we can uh

reduce the risks as much as possible right uh by adopting a better and better risk framework in terms of there's a bunch of different things um sort of on the financial side you have the you know different risk of you know the strategies that you create whether that be you know the liquidation risk I risk for instance then you have the counterparty risk of all of the different protocols or people or counterparties involved in the strategy as well um and then on the technical level on or on the smart contract level you have obviously the risk associated with smart contracts being hacked or drained or you know

even uh you know down to um you know how do the team uh kind of manage the multi sigs of a safe for instance right or you know the treasury that backs the underlying token right that you're holding right so uh then you have real- time monitoring you have sort of protect prevent I mean again it's probably best to to ask like a thoroughbred auditor when it comes to some of these things but there's really a kind of a whole round trip or of different security risks Financial risks counterparty risks Etc that you need to take into account uh when you know developing this risk framework and and doing your due diligence so I'm

curious what what do you think are the main blockers because in the end right it does look like it would it's actually very attractive for Capital to move into defi because you know you can earn higher yields in defi than I think in you know probably most things in trafi but what what's what sort of what what needs to happen for you know defi to absorb you know a lot more Capital coming more from the traditional Financial space and you know really starting into really starting to eat into that market share that's a great question so on the

top level you have all of the different like use cases or def5 Primitives right in other words you can utilize your liquid to a much higher degree or much more profitably and efficiently by pting it that over to the defi space right and deploying that liquidity on the D player itself so that's I guess one point the second point I would say is you have you know what's called the risk-free return on let's say dollars which is the US Treasury yields right and you also have a risk-free return in defi which you know some people consider the native staking yield on you generate on ethereum right or the on stable coins let's say the the yield that you would

generate on arv now you have a what's very popular you know with the rise of Athena is that a lot of people are essentially doing this carry trade right where they're arbitraging the funding rates on these Perpetual exchanges so you know it's it's all relative right um so if the risk-free rate in defi is much higher than it is let's say uh in the trafi world with the interest that these money market accounts are paying out you know from the treasury bills right the larger that Delta is the bigger the pull uh of capital from the trafi world into the defi world now we had a

situation in the bare Market back in sort of late 2022 2023 don't sort of uh quote me exactly on the time but there was a inversion that took place place where actually the treasury yield was higher in trafi than it was in defi so you had a lot of stable coins and a lot of liquidity actually being pulled out of the space given that you could generate a high risk free return in tradire and this is why a lot of protocols has started passing on the underlying treasury backed yield to the stable coin holders to kind of stem that flow um so so yeah so the tldr is that uh you know the in my opinion it's the

risk-free return and and how you can also utilize your liquidity and the bigger that delter is the greater the pool and generally the more the floodgates open for Capital to kind of flow to where there's what I call like lease friction um and I think that's generally how sort of how I interpret the financial markets to work right liquidity or Capital just flows to where there's least friction and that Capital can be utilized best one thing I'm curious about um in in onchain right you basically you have a tremendous amount of transparency right like you can check the different wallets you can check what they're doing you can see what's going

on in each protocol obviously there's a lot of value to that right because you can understand better what's going on you can understand risk better um and it's easier to build on top of other protocols uh I feel like in the past people would often talk about oh we need more privacy on chain and you know this is a big barrier to um maybe uh some investors or some more traditional players uh participating in it how do you view that do you think D def5 will remain as transparent as it is and and that's just sort of

inherent and it's a good thing or you think that privacy in defi is going to become a bigger thing that's a great question I think right now there's been many uh initiatives in the past or protocols that I've tried to tap into The Narrative of privacy it's uh it's been a frankly a bit of a hard cell in the fact that right now the most of the market doesn't really care enough about privacy for these types of solutions to really kind of take off in a big big way obviously you have hackers or uh I guess sort of Bad actors that are kind

of leveraging uh Technologies like tornado cash for instance to obus skate the transaction history or the sort of fund flows uh but then you also have like newer uh Technologies like fhe for instance uh good friend of mine she works for Phoenix that allow you to conduct confidential transactions or uh you know friends of mine at HL as well uh that actually provide a really good use case and utility that allow institutions to deploy liquidity in a legitimate way uh whilst having their um activity across web free uh sort of being private and

confidential uh again there just isn't at this point I think enough interest from the What I Call Core web free crowd uh in these types of solutions but especially as you know more and more funds and financial institutions come into the space uh the incentives to adopt that technology is just going to grow and grow and grow because for instance let's say you know I'm running my onchain strategy and I found a really good ELD Source given that you know everyone can see my activity and the strategy that I deploy on chain that will be you know kind of identified and copied very very quickly by other LPS in the market which

will then pile into my strategy and then dilute my rewards and then before you know it the alpha that I'm generating will just evaporate so there's a so I think the biggest Factor really is the profit motive right if there's a big enough motive for institutions to you know adopt that technology in terms of actually like making money or saving money I think we'll see more and more people adopt that because right now you can again go on chain and see what all of the top liquid funds are doing like if you kind of know their addresses or uh well you can just kind of track addresses that deploy their liquidity really sophisticate in a very sophisticated manner right and then you can just kind of copy them which is

quite nice or we learn from them right what I like to do is I say oh you know this add address is doing this I like this but actually in this case I'll probably do this and this not because you know I'm better than them or what not just because I have a different sort of risk profile or preference or I might have different digital Assets in relation to them what's missing in defi now do you feel like there's some sort of you know Primitives or protocols or you know that you think would be really important and uh you know would be super helpful that uh don't exist yet that's I mean I'm biased right because I think like a liquidity of distribution

protocol is missing which is why I'm un we'll get to that let's get to that after this question but in terms of other stuff I think that you know the more liquidity the better so there are some really interesting kind of use cases um that haven't really been fully developed yet um you know or even existing use cases that just it would be nicer to have more of a liquid Market or more efficient market given that a lot of these sort of use cases are kind of starting to emerge like for instance some of my friends that derve it's just a a options onchan options Marketplace so you know 12 months ago 18

months ago you really couldn't do much in terms of onchain options sure there was you know a couple of different sort of early protocols that were providing it but really the markets were very would now derive has started to gain a bit more traction and the more liquidity they get the you know essentially the now for the first time you can use options to uh within let's say a delta neutral strategy right or you can use onchain options in a permissionless way which you know adds a lot of utility to the defi ecosystem as a whole um then yeah in terms of I guess other use cases um I think the use case isn't really the

issue I think you know per dexes spot dexes Ling anding I mean there are quite a few killer applications in defi already I think where the friction lies is on the uiux layer and this is why I believe that for a lot of the kind of just normal people out there they're they're not going to be willing to go onto the front end of a lot of these defi daps and you know actually you know approve a transaction and then submit a transaction like we would do when we interact directly with smart contracts or the uiux on the DAP layer I think that's going to be abstracted away to the application layer where existing popular applications you know whether it be on on telegram or you know on your

iPhone or whatever the case may be will connect directly into the different dabs and then through the front end on the application they allow their users to swap lend and borrow and anden she kind of uh provide all of these key def5 Primitives and use cases uh yeah directly into these different deps front an application sorry yeah I mean I think one of the big challenges here is also right if you think of a lot of these def strategies where like oh you do this and then you get a token and you put it somewhere else and you get other thing it's it's pretty complicated and uh it's hard for people to do that so I think well all obviously would be very attractive I think for a

lot of users is if it's just I can just buy I don't know deposit my tokens into some Vault or I just buy a token that's kind of like you know then on the back end does all of that stuff but then of course I think the Big Challenge there is well there is like some obviously there's like Risk going on underneath and uh like how do then these people deal with that risk right if they don't understand really I mean it's it's hard enough to understand the risk if you actually do those swings but then if it's fully abstracted then I think that's you know it's also it's a tricky one I think oh for sure I mean this happens in tradire

as well uh in during the financial crisis of 2008 a lot of these Banks were creating these toxic uh essentially Securities right or mortgage backed Securities when they were just packaging a bunch of these you know ninja loans together like from essentially lending people with no jobs no income and no asset right and they were like bundling them up in the form of a collateral debt position or CDO and then you know they didn't really care how they constructed the their asset because it was their business just to sell it so that the liability would be on the book of someone else's balance sheet right the problem was obviously as the music

stopped they got caught with their pants down holding all these toxic assets uh but yeah we we don't need to sort of go off on the tangent there but but yeah that uh kind of happens in in the traditional worlds and and actually there's been kind of much bigger blowups right given the obiously the history of the traditional Financial Market over web free but uh to sort of go back to your point I think you know a lot of these things are quite complicated in terms of how a lot of these strategies are you know the different moving parts that they're sort of made up of and the way they interconnect with one another under the hood but all you need to do is you just need to put a shiny token wrap around it you know and a nice sort of Meme and you know people like you know

kind of buy it right so uh so yeah I mean there's a obviously you know like I was mentioning sort of Prior in in in our conversation there's obviously a lot of risk in the space and people even professionals find it very very hard to quantify so what feels sometimes like a good move can you know be obviously terrible uh but I think a great um example actually of a really interesting kind of strategy uh is what you're doing with the state wise right when you're allowing people to essentially deposit a you know OS e as collateral um that generates a you know the native staking yield and then borrow against that collateral on arve at a lower interest

rate right and then kind of Leverage Loop it obviously gear towards the individual uh risk reference uh an exposure of blp right and to you know have a you know to tokenize that I think makes a lot of sense because now for people that are willing to take sort of a higher risk right they can now leverage that leverage looping strategy as collateral again sort of to to leverage you know uh and and deposit or kind of utilize within the sort of wider web free or defi ecosystem right and as long as the risks are sort of well understood or communicate like I see no problem with that right people should be able to uh you know kind of deploy their

liquidity or take on risks right yeah so just briefly for listeners uh so at course one we use a lot is a protocol called Stak wise and we have a e staking Vault and that now allows uh yeah this what as he mentioned right basically staking the eve and then meting good taking as at o Eve and then putting that into Ave borrowing Eve and then looping this uh and then you can you can generate with that on on ethereum I think at right now it's around 7% obviously much higher than the the base staking rate so yeah people are interested in that just go to the Stak

wise website and then you'll see the course one world there let's talk about Turtle so how what's the Genesis story of turtle yeah it's it's it's a pretty long one so I um I was working for one of the large GPU miners in the space as a director defi in 2021 uh I was really enjoyed my time there and uh you know back in 2021 I was I guess inadvertently I started building a bit of a network of you know LPS just being in the trenches and all these disc worlds coming across some really clever LPS and you know sharing ideas and getting second opinions on my strategies or vice versa

sharing my opinions on other friends of mine strategies and uh I was always looking to how can I you know generate uh a better upside or increase the rewards that I was generating whilst reducing my risks uh and in 2021 I came across a lot of you I started noticing that a lot of protocols were starting to engage in what I call these sort of back room deal that were happening behind closed doors where they were offering LPS a certain amount of additional private incentives that they weren't extending sort of publicly to the market uh for different liquid funds or LPS that would commit a certain amount of liquidity over a

certain period of time to help bootstrap adapt and there's nothing wrong with that right so for instance imagine using an exchange or lending and boring Market but when you buy and sell there's a huge spread right right and it's very liquid and you can't really buy and sell much right because there's just not much liquidity in the order bit well same with sort of lending and borrowing right there just you can't borrow much and if you do borrow much the apy start shooting up because again there's not much liquidity so you actually need a certain amount of liquidity within a that um so that it operates at a really effective utilization rate and and when I noticed these deals were occurring I said you know I wanted to kind of look

into to see if I can essentially gather deal flow that you know other friends of mine could be potentially interested in and obviously myself as well and then on the downside so um on the auditing side A friend of mine set up omisha uh in early 2021 it's a smart contract auditing firm uh I believe they've done over a thousand plus Audits and they asked me to join as a part-time CFO so I I did some you know high level BD for them I onboarded and some of their biggest clients uh but they'd also Outsource on a case-by casee basis you know really fun jobs frankly uh sometimes we had a you know crypto hedge fund that wanted to do a risk

assessment or wanted a second opinion on a strategy or maybe some LP engagement uh or just toonomic modeling prodal design and uh yeah so I I learned a lot uh also working with some really really talented hackers inside of omisha as well as just more generally within the auditing industry and one of the best things there was trying to learn to quantify risk also on a more technical level given that I'm not a developer by tro uh and so so so the idea of turtle kind of sprung out of that uh given that now I had a really good insight into how I could quantify risk better or you know

get Auditors within my network to audit certain strategies before uh you know different LPS uh would deploy into these strategies right the problem with that model was that um you know auditing is very very expensive especially if you not work with the best guys but you really do want to work with the best Auditors because if you don't then the best was it is or hackers are going to hack you right so um the problem was that if you deploy a small amount of capital you need to absorb the security cost over a small amount of capital so if you're only deploy say $100,000 and you're paying you know 10K to do your due diligence you're already down 10% on your principal uh which makes the

strategy just not economical so really the idea of turtle was how can I leverage the collective liquidity and bargaining power of numerous LPS and liquid funds at the same time to negotiate uh better you know deal and sort of incentives or upsides on behalf of you know the entire community while also being able to spread the cost of security over a much larger subset of capital so that I wouldn't need to pass on the cost of security to my LPS but I would still be able to pass on the benefits of doing a extensive risk assessment or kind of a light audit quote unquote uh so again boosting the upside of my LPS and uh decreasing the

downside risk uh so in March of this year I decided to step down uh from just to kind of give it a go and really it was more of an experiment at first just launched an MVP very very quickly and I think the MVP uh kind of pro sort of proved that there was a lot of demand for something like this uh the way I went about it is rather than developing a set of smart contracts that would rout the liquidity of all the LPS into and then deploy it like a traditional you know Vault or like a traditional protocol on top of it I wanted to I didn't want to have the I guess risk or or like legal liabilities

compliance liabilities uh uh and also kind of create like a bit of a Honeypot uh to sort of adopt a structure like this so what I did was I created a set of apis that would track the positions of all of my LPS across different chains maps and protocols and if they interacted with any of the partner protocols that had a kind of a liquidity offering in place that the turtle D would start issuing rewards directly to these addresses of elps of ours that essentially conducted those activities that our partners being valuable enough to start paying the D for and the way it works is you just connect your wallet to

turtle. Club you are prompted to sign an onchain message there's no risk in signing this onchain message it's not like an approval transaction or transfer transaction we don't you know C from any of your existing rewards we literally can't do that we can't get you know hacked ourselves uh or or the protocol can't get hacked in that sense so it's a a much safer way for us to essentially track the activity of all of our users and and PID them additional boosts from the partner protocols that we work with on the upside and then on the downside uh we're starting to do more and more risk assessments and spending more and more money on doing due diligence on protocols before we integrate with it I wouldn't say that

you know LPS should just rely on our due diligence but the idea is that uh as time goes on we just want to spend more and more time uh you know doing these risk assessments due diligence and you know hopefully eventually we'll get to the point where we're conducting full audits on all of the different protocols that we work with uh and this way we can again pass on greater rewards to our communities while uh you know trying to pay C or reduce the risk that they're being exposed to so that was title V1 uh that worked pretty good we have around 300,000 wallets give will take that have signed up to Turtle uh we generated again depending on the all price all coin prices because sort of they've gone

up or down quite a lot but between five to 8 9 mil in uh contributions to the Dow um however V2 is kind of we're now evolving from a pure liquidity protocol that monetizes just onchain activities in terms of moving liquidity to a distribution protocol which uh what is a distribution protocol it means that rather than just limiting our um you know the part of protocols that we work with that are willing to sort of pay to tap into distribution right because they want to know get users to use that the Apple platform now we allow them to plug into the user bases of the different

distribution partners that allow plugging into turtle and building different communities or networks or reporting other existing communities and networks into the turtle distribution protocol and this enables quite a few very interesting things know imagine you have a web free wallet right and you have a lot of multi-active users uh by partnering with Turtles as a distribution partner you can monetize the activity of all of your users across all of the different partner Protocols of ours that want to sort of plug in into and pay for that distribution we can do it in a way without exposing any of the users to any additional risks and smart contracts and then we can then acre that extra value that we're

generating to both the distribution partner and their users right uh and I think this is a really nice way to monetize your existing user base whilst also acre more value to them and providing more utility to without again exposing them to any additional risks uh so yeah we've uh you know we're making that pivot now to V2 uh to yeah hopefully become uh a bit of a One-Stop shop or essentially allow our clients to tap into a much larger base of different distributors as well so to to walk through an example here so that would be let's say you go to some wallet and then the wallet says okay we want to participate in

this um then the wallet would kind of register all the wallet addresses with turtle and then and then kind of like surface to the users like hey there's this uh you know special program used a protocol a and uh you're going to earn uh you know a little bit additional yield um that you guys negotiate with the protocol and then some additional yield goes to the users some goes to the wallet maybe and then some goes to Turtle do something like that correct so there's I guess two parts to this and in the V2 you have

like the signing up to Turtle so if you as a distributor going to promote turtle on your front end and and get your users to sign up when they sign up uh they use essentially your referral code and and as a result that user is assigned to your community that is kind of built on top of tot uh that means that now from then on uh from the point at which the user signs up to Turtle any activity that they do current or sort of current or in future on any of the turtle partner protocols they'll start acre additional value um and as a result uh whether be Turtle the title

token holder the distributor and the user that generates that activity willr an additional value uh so that's kind of one part the second part is we're in the process of developing a plugin that shouldn't should be ready sort of sooner rather than later and that will allow every distributor that we work with to essentially spin up their own what we call earn page on their front end where they can select all of the different current deals or Integrations that we have in place they can kind of Select which ones are aligned with their Community potentially this one is too risky so they don't want to sort of show it on their front end or promote it or this one is of a competitor so they don't obviously want to promote that but they can kind of C in a very C

customizable way essentially curate their own list of different deals on their front end and then whenever user essentially deploys liquidity through their front and not only can they sort of retain the kind of control or retention of their users but they'll also be able to you know monetize when their users deploy liquidity into these different protocols and more importantly actually provide their users with some really really competitive and interesting you know offerings in the market in terms of being able to utilize their liquidity in interesting ways by deploying it directly and kind of um yeah like a sheet of some of the most competitive

deals of the space I think one of the challenges still is right like okay you have to choose these different strategies figuring out which one it maybe runs for some time uh I know you were saying before like you don't when you started you know you didn't want to do that kind of Vault thing but I'm sure this is still something that would there would be quite significant amount of Demand right if if like you know users can just say okay I'm going to put stable coins into you know Turtle VA and then I don't know maybe the doll the some sort of process where uh you know different strategies are created and it says okay I'm going

toloy into that and then maybe something else in the future um is that a direction you think you want to go in as well or or that's kind of like a different um something that doesn't align with your vision for turtle yeah that's a great question so on the Bas lay of the protocol you know I don't want there to be any smart contracts uh meaning tell is a trustless protocol right we we can't get hacked and we can't rug our users saying that uh it's clear that the yield Market changes all the time right and you know what was a nice yield Source yesterday

is no more and a new yield Source brow is like Sprouts up right and as a result you continuously if you want to generate the best risk adjusted returns you're kind of forced to move your liquidity continuously throughout the space to try and move that liquidity closer to the alpha Source right as the alpha Source kind of moves around and it's clear that because of the uiux and a bunch of other stuff the average you know user or even very sophisticated users they just don't have the time or just don't want to kind of manage that whole process manually they actually like the idea of deploying liquidity in a vault that automates that whole process for them and there's just a lot of great Vault providers now

infrastructure providers for instance that we just partnered up with fad uh by tvl they have the most liquidity in their vaults uh and yeah there's just like a lot of really great builders in the space that have just created yeah very like you know nice vaults and and they've you know made the whole user experience much better for the mass Market in my opinion so I'm not against vaults I think they're great uh I just again just in the first iteration of turtle I I didn't want to take any kind of custodial risk for legal compliance reasons but also um you know why would I would want to kind of control the liquidity of my users if I don't have to right but I think after obviously kind

of working on Turtle for like 11 months now it's clear to me that uh many of my you know friends or LPS class have you know been asking us to do this for quite some time so uh we're planning to launch a like our first vaults in tandem with our first ecosystem Bo track in campaign with Tac but bu uh later this month so really really excited about that the way I'm structuring the B is slightly different in the sense that um yes it's going to be on the turtle front end right but we're not actually going to use any of our in smart contract so we're going to piggy back off the Vault infrastructure that vader. Tech created so all of our vaults will be vader. Tech

vaults in terms of curation for legal reasons according to my lawyers I'm not allowed to curate strategies unfortunately so I need to work with external curators so uh we'll be working with re7 on the ethereum side CH lier capital on the BTC side and Edge capital on the stable side uh so they will be the ones you know actually kind of signing off on these strategies and deploying the underlying liquidity through default infrastructure provider uh however given the risk-free framework that I developed uh with Gonzalo and cheyan the idea is that we want to conduct you know very um you know thorough risk assessments on every strategy and

protocol that we plug into the Vault uh with the intention obviously of trying to reduce that risk as much as possible uh I want to actually keep the Vault uh in terms of risk adjusted rewards very high obviously but the underlying strategies uh I don't want to you know kind of expose our LPS to too much risk but we are going to start developing a secondary market for the receipt token of the Vault so that you can you know start generating really good risk adjusted yield on your underlying ethereum deposits Bitcoin stable coin deposits and then for those LPS that you want to go up the risk curve and leverage their receipt token of the vault as collateral on let's say a Morpho or Oiler or you know in curve to

generate some additional trading fees can do that and as a result then the LPS can kind of create different strategies or fly wheels that are GE towards their references and their risk profiles cool cool anything else you want to share about uh what's coming up for turtle yeah we've been working on a lot of different things um it feels like I've aged about five years and over the last 11 months uh it was meant to be a kind of a bit of a hobby to be honest uh more of an experiment that has sort of Taken on life of its own and before you know it up uh yeah working a bit more than I have

liked or intended to but it's been a really enjoyable journey I got to meet a you know a ton of very very clever people in the space that I've learned a lot from including yourself Brian so you know at the same time enjoyed it a lot uh we will be the the TT team will be at e Denver in full force so if you're out and about or if you're intending to come to e Denver uh yeah definitely reach out would love to meet in person but yeah in terms of uh a couple of other things yeah like I kind of touched upon we're developing a lot of different sort of products and services we're porting over to our V2 uh redesigning the website launching the vaults doing an ecosystem boot

trapping campaign with t which is really really interested we are also uh you know very very close with the linear te ecosystem and again I can't mention too much but uh but yeah a lot of people have been asking me about a token so uh yeah they should look for a couple of announcements uh with the linear team about that cool well thank you so much for coming on I really enjoyed the conversation I'm super excited about what you guys are building and yeah excited for def in general and then I think that this sort of liquidity layer that you're building which I think is super useful so thank you so much for coming on thank you for having me Brian take care everyone all the best