What is the alternative to US Treasuries in the crypto world? - Michael Svoboda

Transcript

[Music] thank you very much hello everybody my name is Michael I'm from liqu uh we just launched our version two uh borrowing protocol on ethereum which allows you to borrow against your e and which issues a bold stable coin so my background is in defi but today I want to talk about yield everybody wants yield on its asset um and the easy part is to compare the yield you know it's just numbers it's higher it's lower the hard part is the risk what risk does this yield has and today I want to share my learnings on the quest to find the sa safest rate in

defi so I don't have Financial background so I'm still on my quest happy to get your feedback and learn more but that's why it's a title um what are alternatives to us treasuries in Defi and users why us treasuries from US Government because they are the risk-free rate and why are they called the risk-free rate um because we have the Fed so you give your dollars you give up the control you give it to the government and in return you get a a reward and why is it so safe because everybody says the US government can't go bankrupt they have Trump yeah they have uh tanks so what can what possibly

could go wrong huh um so this is kind of the the safe rate the rate you should get if there is no risk and what this means is let's let us introduce some risks what would be nice risks in the tread five world let's give your dollars to a bank what a good idea uh what changes Banks can go bankrupt as you have seen um and why can they go bankrupt because there is a black box and you have no idea your dollar isn't sitting here your dollar is doing funny stuff here and you have no idea what kind of credit risk is involved so with banks we already see um risk is greater and you get a lower rate so how do you compare

that so I came up a bit with this mental model how I could compare the different risks above and what do I get it's a risk reward thing and what you see and I quickly go through that because we'll use it later on is the main thing is the counterparty who are you giving up the control of your dollars um control also means do you know kind of how it's used that's more a bit the the credit risk so of your dollars that's just how well is this party managed flexibility is also risk how quickly can I get it out um you're giving up some control that's why I have it as a risk transparency what is happening there and you don't see it

control and transparency are gray because with the US Treasury you don't know but actually you don't care because it just can't go bankrupt so you don't care what they do with the dollars if they buy planes or build Bridges and transparency doesn't um matter either and then the question is what do you get interest um how predictable is that you know do I know what what I will get in the future and in which currency how volatile is that and what you see I mean obviously the bank is a worst Choice why counterparty is um worse credit risk is higher you have no idea what happens and

here it matters and the interest is really low so I don't know who has money in a bank but obviously kind of a rational user shouldn't put money in a bank so ask yourself why do you have money in a bank it's safe no it isn't that's safe that's concerned the safe rate you know and that's for me it was totally mind-blowing because I'm I'm not from Finance it's we have money in our bank because we want to do payments that's a nice trick that they play how can you do payments if you don't have money in a bank and why is it for free because they give you a really low interest so that's just a side mark

on my quest so let's move on to defi trases what would be now the equivalent of something safe in defi so where do we get the best risk adjust the yield um yeah my my search for def5 Benchmark rate so same situation we need something that is a good counterparty can't go bankrupt and get gives a decent uh rate and looking at that what should we consider so where do we find in defi something and I will ask you where where you would find that so please keep that in mind um where you still can keep your cost over over your asset how cool is that that's not possible in trfi you you can get and you have still control over

your assets um so a low credit risk where can you get it out at any time sometimes it's locked sometimes it can be funds aren't there so it takes longer is an additional risk for your yield uh an example is is landing uh in in a it can be if the pool is really UTI utilized you can't get it out immediately maybe later but it's a risk um transparency data on chain verifiable I think in defi usually that works well um counterparty is an interesting one so we said we don't want to have a counterparty risk so there is not a company there's not a management um so that's great because we know if people have power if people see money they make

funny decisions so I think smart contants are great that should be more or less green because no counterparty it should be green if there is really no counterparty minimal governance minimal collateral risk um so for example in a landing protocol what can kind of assets are on boarded with which parameters minimal Oracle risk but what we have is more contract risk I mean yeah that's obvious that's the big risk um that you need to take um and then the question is how big is the yield how high is the yield how predictable can be very volatile in landing markets in a Unis swap pool based on usage and in which currency do I get it do I get a funny

token that maybe in three months when it unlocks it has no value or do do I get today now hard dolls now the stage is yours can I hear some some Benchmark rates in defi where do you get your benchmark rate kind of a good rate with the lowest risk okay yeah 5% of franking okay yeah sorry maker yeah good um yeah I think

these are all pretty good ones they're a bit different you know what I learned and now okay that's a bit bit of Shilling how we'll see that our own product by surprise is also doing very well you know but in the league of maker and other ones no but really honestly I I was surprised and say oh others have so much risk and I can explain it to you and of course it's it's one week old it doesn't have the lind effect like an a you know but just kind of now from this framework looking at the risks let's quickly look at that and let's quickly check the time good so now I go through all the seven things and go through it for maker for a and what did we have uh Franken coin great and how do we score first um risk

control do you keep custody over the assets so aren't they lend out and there we have a they are lending out some of the assets because they couldn't be there something could happen so not at any time you can take it maybe the risk Isn't So severe but you should be aware of it um and that's something in in V2 your stable coin is always there you get it when you want so I think that's something really nice you earn something and you still have the asset um flexibility that's what I meant can you redeem it at any time are you free so do you have control smart smart contracts how immutable are they how much governance how quickly can that act that we've seen that in maker rates can

change quickly maybe it's not so dramatic but something just to keep in mind um parameter can be set wrong like with gauntlet um also something to keep in mind with our product V2 it's also a bet because it's immutable but especially institutions really like like that they know it won't change they don't need to do an ongoing due diligence monitoring governance as something can go wrong um so i' say as a counterparty you have only the co uh the smart contracts you have an oracle that's a risk smart contracts are not really old and can always have box but otherwise I would say it checks the boxes and the other interesting thing on the rewards where you need to

distinguish is the currency yes all stable coins Franken coin and so on so that's great is it verifiable yeah um that's cool too is it predictable are they not so much it's fluting but usually stable maker it's governance with us it it's a market rate that adopts the average one so I think that's a really nice property if you're in there you can expect that the rate will adjust to the market without doing anything without watching governance without having crazy spikes so it's like a that's why I think it's like a defi treasury um and you should get a good rate with us because we are one of the first protocols that passes 100% of the

revenues uh from the borrowers to the other side you need to study all these um protocols um the other ones where the revenues go to the Dow treasury or they go somewhere else and really hard to follow and that's why I think we created one of the most efficient system because we funnel it through we make um low spreads between borrowers and what the others get okay I'm getting over time I'm going quickly that's the situation today that's the borrowing rates right now on V2 very competitive the yields are high because it's a bit early but you see the spread that will come very much together and then you get very competitive rate but it's not the rate I explained you also the risk behind it

and and I think that's why I think um yeah our saber code is bold I think it's a bold design and in my opinion it has it's like a bit defi Treasury and happy to be challenged uh you know um on that but that was a bit my conclusion looking into that um yeah and I think with that um that's from my side that's my telegram yeah please if I oversaw something if you have feedback always open and eager to learn Michael thank you very much we actually can continue this conversation in about five minutes on the panel um and let's use uh that time also if anyone from the audience has

questions so we'll be setting the stage but is there anyone who would like to ask any question liquid is a immutable protocol so you know that that's then you it just runs out there so you don't have an operations we have um um um how do you call it um we have a token from V1 that participates in the revenue and you can steer so I have to go into 75 go to stable coin holders 25 to liquidity pools um so the the revenue goes really

to the users and where we benefit is from from the token the benefits from the tvl and if if um the protocol is big enough you can steer some of the revenues um in different ways back so there is a switch that's a potential right all right thank you just one more if you if it's like always redeemable then why should the for the borrower it's not always borrowed right if if you're locking up the borrowers and it's

always redeemable on the lender side then that's not a working model because that's what banks do banks you're shorting longterm with you're going long with shortterm you didn't remove the risk right I'm not sure no let's take an examp it doesn't work like a bank I know but let's take an example I put in 100 bucks I can take it it take it out whenever I want but somebody else borrowed the 100 bucks and he hasn't repaid it what do I do you redeem these are over collateralized loans so you have a guaranteed claim on their collateral of the borrowers we can get into it later but than [Music]