Let’s Get Real with Polytrade: Ep 1 Recap with Maple Finance

To bring all the scattered noise around RWAs under one roof, we have started a podcast series called ‘Let’s Get Real with Polytrade’. We’re set to break RWAs down with the giants of real-world assets, “Let’s Get Real” is more than just a podcast; it’s unfiltered dialogue, real insights, and genuine RWA talk.

We have our first episode of ‘Let’s Get Real with Polytrade’ with Sidney Powell, CEO and Co-founder of Maple Finance. About Sidney Powell Sidney Powell is the CEO and Co-founder of Maple Finance, an institutional crypto-capital network powered by blockchain technology. Sid comes from a background in debt capital markets and institutional banking. During his career in traditional finance, he participated in $3+ billion of corporate bond issuance, established and ran a $200+ million bond funding program, and managed Treasury at a commercial lending fintech company. Before co-founding Maple, Sid was a Treasurer at Angle Finance, a non-bank asset finance company that services small and medium-sized businesses.

How was it raising in this market?

(01:21) It might have been hectic. We kicked it off sooner than we expected I think we were planning to do it later in the year like this sort of you know coming up to this period of the year but we took stock of how bad the situation was and we’re like well we can’t underwrite that it’s not going to get worse because you know it was a very fluid economic situation and all the Silicon Valley Bank stuff had just been happening so we said okay we better get cracky on this thing and go hard and then

(01:54) valuations were tough so valuations overall size had to come in but I think the firms or the funds that have a real thesis around lending and RWAs are still True Believers in the space and so that was ultimately where the support came from so you know BlockTower co-led, we already had a pretty good relationship with them and then other newer firms like Tioga was a new one for us and there are a couple of other new firms who came in and participated so, in the end, I think you can’t

(02:33) optimize it in this market you just have to get it done and it’s going to be coarser and a little bit worse than you expect but the main thing is just live to fight another day. I talked to a number of startups at the moment who were kind of saying well you know we’ve got like 6 to 12 months runway and we’re thinking we will go out and start raising in a couple of months and I’m saying you should start raising tomorrow, you should be

(02:56) treating it as if it’s going to take two or three times as long as you expect and you might raise only half of what you really want to.

How is it different raising this time?

The last time we did a proper rise was earlier in the bull market so it was 2020 mid-2021 so things were much more, the whole environment was easier because the ocean was pulling all ships up so raising was not difficult. Valuations were much higher and also we were earlier in our journey so there were a lot more tough questions.

(03:36) This default happened on the platform last year and people have gone really far, people have gone wide away from lending so you know why is this actually going to exist and thrive. There’s a big narrative around RWAs but there is actually not a ton of activity happening at the moment whereas before we could position ourselves as as a competitor to Genesis and Celsius and Blockfi, there were billions of dollars in Ave so that you didn’t

(04:11) have to go and argue the case for why lending would even occur on-chain whereas now you know you’re expected to do that in fundraising conversations also you know having a token and so you know this the regulatory environment’s definitely tougher now with all the regulation by enforcement, there’s a lot more questions around. Before it was a given that you needed a token for liquidity mining now people will be pushed back much harder.

What is the token doing, and how does it fit in the ecosystem?

(04:42) I do still think token-based networks are required for this, particularly for a global scale but that’s just now more of a contrary opinion rather than kind of the table stacks opinion.

(05:18) The question just came down to you know their team’s specific due diligence and negotiations around valuation and more of the commercial terms whereas you know teams who are let’s call it thematically driven or rather are trying to be across multiple thematics are much more skeptical at the moment of lending and RWAs so they like to educate themselves on it but they

(05:52) don’t actually want to put any money behind the RWA stuff. Before you would have both the hardcore RWA firms and then you’d have the generalist firms who just want to pick up some exposure to it.

Everybody is tokenizing but very few of them are buying, what do you think is the reason, is it education, is it availability where do you think is that we’re lacking? Also, a follow-up on that would be where you think this next wave of liquidity will come for RWAs. Is it the institutional side or do you think retail will come back?

(06:56) The reason people aren’t buying at the moment is that if you look at it, a lot of venture firms who want to learn about RWAs, require 10-20 plus percent IRR and so they’re not set up to actually buy the deals so they will buy the RWA platform and they’ll buy the token and the network or they’ll buy equity in a RWA originator but they’re not actually like participating in the fixed income or the lending side of it and so what we actually need is more capital formation around yield funds. A lot of them were formed during 2021-2020

(07:28) into like early 2022 but they had these ideas that they were going to hit hurdles of like 15 to 20 and so really they were actually set up to take advantage of yield farming and liquidity mining and then when you show them a deal at present an RWA could get maybe between 9 to 12 or 9 to 13 and that’s like just short of their hurdle and so a lot of those funds either had to wind up or look for other opportunities so what we actually need in this space is, we need new capital

(08:03) formation and new funds that are focused on a fixed income which I think we will get in the next cycle because a lot of people pick up on the opportunities the other thing is we need to do a better job of educating people on the difference between fixed income and lending on chain and lending in traditional credit so if you look at a traditional credit fund you know it could be like a 2 and 20 structure or maybe it’s like an 8 percent hurdle and then 50 profit share but the lending opportunities on-chain

(08:36) are pretty much you know they might be all variable cost. So if you look at how Maple’s doing it then you know we have the accruple and that’s pretty much all variable costs where you’re sitting, the pool receives 100 bucks of interest and then the lenders get about 80-80 worth of that they’re taking home about 80 but it’s an entirely variable cost and they can get their money out much sooner than a credit fund. A credit fund might be a three to five-year lockup so in on-chain

(09:05) opportunities I think this is what everyone in the space doing RWA should highlight, is you get your liquidity back quicker you get your capital back quicker and then the fee structure is mostly variable. There’s not that you’re not bleeding one to two percent a year whilst you know the platform is just sitting on your funds in the same way that like a traditional credit fund is, so I think there’s actually some good advantages there just over a comparable TradFi

(09:33) product that should be highlighted better not to bang on too long but I think institutions will come in and it will probably be more funds like hedge fund-type entities who want to get 10-12 for their clients so they’re trying to beat treasuries in a meaningful way. For the really big TradFi guys I think would be slower to come in just because they’re still not over the kind of the

(10:06) compliance side of things where it’s compliance risk, de-peg risk is another one that I get asked about a lot still and I think high net worths will come in because you’ve got a lot of folks who made money in crypto let’s say they made 20 million off Bitcoin or ETH and now they have enough to ensure a good lifestyle for the rest of their lives. So what are they focused on? They want capital protection and they want to get a yield that beats inflation.

(10:34) Degens want an eye-popping yield and they don’t want a solid 11 they want 20-20 and change yeah so I think that’s why initially all of us when we started the RWA journey I think that’s what we were missing. I think the teaching that we were selling to is the TG that doesn’t want constant yields they want to risk their money to get higher yields and I think over a period of this curve I’ve

(11:12) understood at least, we all have understood that we need to find a better newer capital to get into real-world assets. Comparing real-world assets to the D5 story is not the right comparison because they’re saying that I can get my money out of and add an instant with Ave, there is no comparison when you compare it to a real-world asset.

(11:42) Even after there was that default of the Africa-based originator on one of the other platforms, the traders all came out and said well this show is like lending is a waste of time and it’s like well if you had a diversified portfolio and you’re across all of the pools on Goldfinch or any one of these other platforms maybe you had maybe that was like a five percent loss um and your overall net yield

(12:15) compensates you so maybe the net gross yield was 10 you’re making and then maybe the net yield is five percent after that loss but they then come out and start throwing out these complex trading strategies which they say are less risk but it’s like if you if your whole one if you’re holding a venture portfolio I can guarantee you most of the Venture funds in this space are going to go to zero over a period of Ten Years or not go to zero but they’re gonna make they’re

(12:42) going to make less than one mou or moic I should say a lot of them are going to offer principal losses to their clients after five or ten you know five or seven years however long the lock-up is and then you look at the Traders yeah yeah that’s exactly right that’s how yeah you’re 100 right but they come out and they say oh no no no like um lending’s too risky because I could lose my Capital they don’t grock that you can

(13:17) also, lose your capital and Venture it just takes five years to play out and um so that that that’s kind of one aspect but then also there are traders who then try and set up these like complex Market usual structures but they still like Risk is risk um it’s fungible if you lose a dollar for risk because you had it on an exchange that folded you still lost you know you still lost let’s say 10 of your funds and so it doesn’t differentiate between how you lost your funds

(15:29) I will say though having read a lot of financial history there are certain asset classes that I think people don’t understand the true risk of you know for example sovereign debt so everyone says well you know U.S sovereign debt is great which it is at the moment very you know very good risk-adjusted yield but as an asset class sovereign debt still has defaults you know Argentina perennial defaulter a lot of LATAM for any lead defaults even Europe you know Germany defaulted in the 1930s and as you read Financial History

(16:00) there are a lot of examples of big banks that were holding sovereign debt that defaulted you know JP Morgan suffered a lot of balance sheet loss on um German debt that defaulted in the 1930s and so there’s no safe asset class what I would just encourage people to do is you should think about every asset classroom first principles and lending and fixed income on-chain is no different there are like good pockets of great opportunities the kind of depth you’re talking with is I think

(16:28) these the agenda that we’re talking about for them it’s either you know hit 20 paid 15 to 20 or if not I’m just going to keep it an army because that’s what I understand they don’t have like you said who understand risk from a traditional background right those guys need to come on the train and start doing this because this is a really so the kind of stuff you’re talking about is a very large education curve for you know the native people out there who’ve made their money in crypto right I think

(16:55) that the kind of Puck is to think about is we see you’re right to let’s get 100x or if it’s going to be yield farming let’s get 30 x let’s get 20x and if not I’m just going to put it in our way because that’s what I understand right then I don’t even know you know maybe we can but how many of them you know tables is probably the easiest asset class they are are these the natives who are coming in uh I know you guys have done a brilliant job on you know your cash management pool so hey are these the

(17:25) native crypto investors who are coming in like you said who made money in into uh you know I think you mentioned their Taos and so forth right are these the guys who are coming into tables as well is it is typos that are attracting a mix of lenders and depositors so you have uh we’ve got there’s a Dao in the maple so the maple cash management pulls about 24 mil at the moment and um uh the lenders depositing in so we’ve got a couple of dows and so they like it for treasury management uh you know a dow

(18:01) doesn’t have a great range of opportunities across traditional Finance then we’ve got startups who are like Steed and series a stage and so again they want it for treasure conservative treasury management where they can get liquidity back quickly they can see the collateral in our in Maples instance the cash management pool is structured as a loan collateralized by t-bills and uh reverse repo and uh and then the other one is offshore High net worth so they want to keep funds in Stables instead of um instead of Shifting it through the

(18:35) the banking system and uh and so you know again they just like a conservative yield and a liquid place to park cash for a while so that’s a very important lesson there for all these days startups don’t keep your money in crypto put it somewhere which is stable I think that’s a big lesson for where I was raising money through right there um so I follow up on that said you know there are now I think four or five major protocols right something completely different um but yeah you know these two or three

(19:13) instances like how would you compare the approaches they’ve taken and what do you think um you know are important differences for investors to understand between me so I’m definitely going to be biased but I’ll try and do a fair representation of all the other players in the market without being overly silly so the way that Maple was structured it was as I said you you lend into a pool so you’re a lender and you’re lending to a what we

(19:47) call a delegate and then they make loans to an SPV that buys t-bills and posts them as collateral against that loan so secured there is an account control agreement in place there is a perfected security charge and UCC filing over the brokerage account containing the T bills and it effectively means it’s a loan backed by other loans is the right way to think about it so that’s one structure so thinks of that as debt-based then another one so let’s take ondo for example because there are

(20:20) they’re the largest player in the space and so theirs is structured as an LP interest in a fund structure so equity-based fund structure-based and then instead of owning the underlying t-bills it’s uh the fund owns shares in the BlackRock ETF or or something very similar so very short-dated not taking a ton of Market risk but it’s more Equity-based and it’s done via a subscription agreement instead of a loan agreement yeah um and then You’ve Got You know Open Eden is another one um then Matrix Dock is another one so

(21:01) Matrix Dock is a product offered by Matrix Port and that one has slightly higher origination and minting or minting and Redemption fees um when you subscribe um but it’s interestingly actually just to go back to ondo it’s one of the interesting things they’ve done is they have flux which is like a decentralized lending protocol attached to the usd product and then Matrix stock has got an interesting integration with a curve pull for additional liquidity which I think is also interesting uh for like it you know

(21:39) because they don’t offer instant minting and Redemption they have tried to give more liquidity by having the curve pool for secondary liquidity which I think is interesting and then Open Eden’s done another slightly different structure again where they also have a float so they can provide up to it you know up to the cap of the cash balance the ability to instantly redeem so each of these products has their own strengths and weaknesses so subscribing to equity in a fund takes longer takes a few days so

(22:08) you pay the money and then you wait a few days to get your token on Redemption you you give up your token and it takes you a few days to get your funds back what I like about what we’ve done is that you hold your token from the moment you deposit your stable coins and the moment you give your token back which you know redemptions have been around 24 hours you get your money instantly so you’re never actually out of pocket either after you either have the token or you have your funds and um

(22:37) and so anyway I think that’s like a nice user experience I think for someone looking at the space it actually probably makes sense to have a diverse like diverse some diversification across these because you never know what could go wrong whether it’s a smart contract issue or something else like what we’ve found is that you you know you want to have some level of diversification um of your you know your different sources of risk when you’re in crypto because you never know where the next

(23:04) Black Swan comes from so I actually I will be sick for a loan on okay so I’ll just break down what we what conversation that we had I think maybe just for myself or somebody who doesn’t truly understand the terms you guys are discussing um so let’s say what Maple does is basically uh they will take your money they will put it they will buy tables put it in an SPV will issue a loan against it and you will use that loan as the main value right uh as a very basic step am I correct similar so so you learn you lend your

(23:41) money to us we lend it out and take T bills as collateral and then okay and under what they do is basically uh they will take your money and they will directly buy the table right no they buy an ETF that so they buy like a new year okay perfect so that’s a major difference and both of these cases I think and even comparing the other with the metric sport ones and so on so forth what do you think is the requirement here for somebody who wants to exit immediately like secondary liquidity in this current market let’s say

(24:22) um if I have my 25 funds in Maple 25 in Ondo 25 somewhere else 25 minute export and I want my money back today there is some fire in my house right or there is some particular need of emergency um how is it that me as a user can get access to these funds right like um is it that I will need to wait with every one of them like what is the structure there uh for an investor like me yeah so and again I’ll try and give a I’ll try and give a balanced and dispassionate critique of the the let’s say foreign

(24:57) If I wanted to get my money out as quickly as possible so if I’m doing it in a small amount um I’ll probably get my money first in order of speed fastest and slowest it would probably be I think open Eden if it’s small because if they’re carrying a float they just buy it back so it’s instant Matrix Port The Matrix dock one you could if you can get it out of the curve pool so if you’re whitelisted and can trade it through the curve pool you could also get instant secondary like instant

(25:33) liquidity out then yeah yeah when you say curve pool you mean like I can go to an LP and get my money out like will that be liquidity available and and then can you get a little bit more can you explain to us a little bit more on the curved side how does that work uh so there’s the The Matrix the The Matrix stock tokens is in a curve pool yeah yeah with uh stablecoins so you can take um you can yeah so you can take uh your your funds out that way now so it depends on size though so um if you’re too large to take it out of

(26:15) the curve pool for example then you have to go through a Redemption process now that one I think is about six months um as in there’s like a minimum six month hold um the third would have been us which is about 24 hours so we can do about a 24 hour Redemption and that’s because surprise surprise the slowest part is is the banking wires um so getting you know selling the t-bills um sending the money from from One bank to another is is the slowest weakest portion of the chain and then um then ondo is about I think it’s three

(26:48) to four days Redemption because I gotta still they gotta sell the BlackRock one wire funds um and then transfer you your funds back now if you’re doing it at a larger amount so if you’re doing it at a larger amount um then open Eden wouldn’t be able to just buy your buy your token back with the float so that might take that that might um take a little bit of extra time and then the Matrix support one if you can’t take it through the curve pool like if you’re too large then you would have to go

(27:17) through a minting and Redemption process yeah generally though like over overall they’re all relatively quick like you’re talking a matter of days um in terms of the current Solutions at the moment which is for most people’s purposes it’s it’s um it’s fine if you were like a high frequency Trader and you needed it instantly for trading opportunities you you know you probably wouldn’t want it but um but anyway for myself do you see these getting faster or like I think this is like fast

(27:47) enough I think a day is quite quite okay right I think I think a day is probably as fast as we can get at the moment sort of so where it can get faster is things like customers Bank um because you can instantly transfer transfer funds from the broker to coinbase and then on-ramp into usdc and um and make a repayment so that that’s that’s where the the additional speed could come from I think fed now was also just um just rolled out which which might also offer a speed uptick but it’s interesting that the slowest portion is

(28:20) is where it encounters the uh the Trad fire rails yeah we have two guys yeah yeah um users demanding faster liquidity than 24 hours have you seen at only so where where faster than 24-hour liquidity comes in is if you want to integrate with somebody so if you’re integrating with a prime broker or let’s say one of the Unchained PB Prime PB being Prime broker type platforms that does vaults so fractal for example uh you know we’ve we’ve looked at could we integrate the uh you know the MPL cache LP token as collateral and what they

(29:08) would need to be able to do then is if they’re offering margin against so they need to be able to close out and liquidate a position instantly and so that’s where having like a curve pool or some other way to get back to Dollars quicker um assists there because that that’s their risk management otherwise they have to hold the position for 24 hours so makes sense yeah um so uh first of all I think thank you so much for this particular good curve education um I’m I’m actually this is getting real

(29:42) uh like we are actually I’m going to take a second and play that music [Applause] why don’t you also introduce say because we haven’t done that yet we need to use yeah absolutely absolutely that’s where exactly where I was going going to I was going to um so thank you so much Sid first of all like for educating us on this one and also we would love to know more about you um why Maple uh why said what who is said and maybe just to get that drag going on and how do you know so much man like what is that hook that got you into

(30:19) real world assets what’s your what’s your background love to know the other side of it yeah sure sure so I I began to my journey I guess in crypto began probably end of 2017 early 2018 but I came from banking so while I was at banking I was very much I was reading word Buffett’s commentary and thinking crypto is a scam like why you know why does Bitcoin have any price and it it uh it wasn’t actually that I initially got on to gone on to bitcoin or crypto in general as an investment first it was

(30:51) kind of mid 2018 so I worked in I worked in banking I would do securitization so my clients were lending companies and we would help them take out a really big loan from the bank or from um Insurance funds and other you know other fixed income investors and then they’d make smaller loans they take out one really huge loan let’s say a billion dollars and they make out a lot of smaller loans you know 200 200k let’s say and uh I went from deal side to client side because we would work with these really interesting entrepreneurial

(31:23) clients and you know we were making them Rich right so they borrow from a bank at two percent three percent they lend out at five percent they keep the spread and they put down effectively five cents on the dollar or sometimes you know two or three cents on the dollar depending if it was depending on the quality of the assets so you know we we were helping these entrepreneurial clients um build a lot of wealth for themselves they were building you know great businesses and so I looked across and wanted what you know I wanted to learn

(31:53) how to build a business and I started to realize that my trade was going to be playing lending right so I went through this I went through this moment where I thought do I go back to University and learn coding to create a company or do I go to a different area of Finance or do I stay in the same area of you know Banking and lending and try and you know go to a different company and in the end I got head hunted to go to this lending company and they were doing equipment Finance so smaller loans to smaller businesses and

(32:28) I was running the treasury there so this meant kind of I had to know all the aspects of the business which was really helpful for understanding how a lending business works like how the sausages how the sausage is made end to end and but I also had to project manage uh all of as we’re putting together lending facilities I had to project manage uh lawyers um custodians trustees trust managers ratings agencies um all the while sort of being across everything that was going internally at the business and it was it was it was super it was super

(33:03) manual to manage all of that a lot of it is happening in manual calculations and spreadsheets it’s happening in PDFs traded in email inboxes and uh and then also you have these legal docs would be hundreds of pages of long that all just said you know if this then that and so I that was that that was the time I was learning about smart contracts and people were talking about doing like is does that could be executed by code and so I’m reading that and I’m scouring the internet for all these white papers to

(33:32) try and read and see if anyone was talking about loans on a blockchain and there was a bit there there were a few early Ico projects because this was mid-2018 but I started thinking of how could we do what I had done securitization on chain and the mental experiment I was doing in my head was we could you know we would do seven tranch transactions maybe five to seven trenches of debt and so that’s think of that as like a series of bonds where one bond is more senior than another and I had this idea in my head what if you

(34:07) could do a hundred trench transaction where just every individual token is an individual trench and because it’s done with code you can make that infinitely scalable and that’s something you like the manual uh web 2 version of that would just break but being able to code and automatically route all the money around would allow you to do that but you could only do it on a blockchain so you so we now hit a point where just from an engineering perspective you have something that can’t be done in traditional finance that could only be

(34:38) done on a blockchain and I started designing the idea for Maple around that with my co-founder who also worked at that company and then we get into like 2019 and we’re just putting our own money into this kind of concept with a software development firm it’s not really amounting to much and um it’s because we were so early so you know being too early is indistinguishable from being wrong and people are saying well you’re never going to have tokenized debt on chain you had no yield bearing assets but we

(35:11) kept plugging away putting our money in and so this was us putting in our reps and we’re going through what Balaji kind of calls the idea maze trying to find you know what what’s something that actually works like you can build some really cool Tech but if you don’t find anyone who wants to buy it you don’t have a business and so we we realized that we would need to create the yield bearing assets on chain so we’re like okay well we’ll have to do the lending we can’t just be a securitization desk

(35:38) and so then we we founded a developer at the end of 2019 and then we started we had him build a basic peer-to-peer lending play and then so then we’re just like originating small loans with our savings to like anons who would chat to us um through this this platform um which was called uh make maple loans or or Eastland eth loans or something like that and um it was just really basic but but it was enough to realize we didn’t want to be in consumer lending we didn’t want to do peer-to-peer lending and at this

(36:12) stage I was also reading academic reports on how people would lose money on um Lending Club and so you know on a risk-adjusted basis was it actually profitable to be a Lending Club lender and I was like why didn’t why didn’t peer-to-peer lending work and um that was then how we we evolved the concept so okay we’re gonna we’re gonna do a pool so instead of syndicating every individual loan we’ll effectively Syndicate a balance sheet for a length for an originator and then we’ll do like

(36:39) a trend so I have a senior and a junior to manage risk and then it’s a better experience for the borrower because they just come to one person who can tell them if they can borrow and tell them at what rate they can borrow but that was that then evolved into the first concept from April and then we and then we we raised funds and built that so that was like mid 20 two-thirds of the way through 2020 but it was like it was a long time right that’s 18 months of having gone through the Wilderness and just thinking your idea was and

(37:06) um having to revise it a couple of times and uh but we we persisted and then we found trading firms was the first use case of people who would be willing to borrow money on chain because imagine imagine you concoct this lending product on chain and if you’ve done it in 2017 well there were there were like no stable coins if you’d done it in um and then if if you’d done it in 2018 2019 there were hardly any trading firms not trading firms who would borrow like stables and so really you need we needed

(37:42) some evolution in the space for this idea to to be able to work and to actually fit into um into an environment that could take it magics yeah yeah that’s right climbing is yeah yeah but if I summarize that then I it’s legal paper drove you into this right in a sense it well so sort of it’s um it’s it’s project it’s project management like I think of we we took something that was like five different people on a team and then we turned it into a product so theoretically at the most basic level we

(38:21) just save you money if you’re running a lending business but you don’t have some analyst crunching spreadsheets and then sending emails to report on it we just like you know every loan is an entry on the blockchain we have a dashboard that can automatically read that like you can’t build a dashboard that’s going to read loans coming in from multiple bank accounts that’s like incredibly difficult and costly to build but to do it on a blockchain is trivially easy anyone who knows SQL can go and do it on

(38:47) a June dashboard um you know any of yeah yeah I think um one of them I think one of the mistakes people did early on was they tried to make it too let’s say you have uh the map in the territory right and the map the math is your representation of a lending business and then the territory is what you’re actually doing and people tried to make this crypto abstraction of it too high fidelity to to a complex securitization that happens in the real world and she had all these projects were just spinning their wheels burning funds

(39:26) trying to make something so complex that needed that looked exactly like a real world securitization well think about that why is a trustee gonna like buy into your idea of doing this on Fame when you’re putting them out of work so all these all these early attempts to do securitize on changes seem stupid to me um as in securitization because you were you were trying to sell it to a bunch of people who would be put out of a job if your idea takes off I think following up on this what do you think is next for rwa like like I think

(39:57) you have seen the past we’ve seen the current that’s happening uh where do you see this evolving as real world acid and I think even considering the custodian the legal part binding all that together um we all claim self-custody but we all pivot down to that hole of pep2 right eventually we have somebody that has to take an action for us um where do you see the overall ecosystem evolving and especially with some laws coming in favorable what is like that law that may just like kick this all off like it’ll just like maybe

(40:29) do this right and just ballpark this thing uh good question good question and and not a not a small question by any stretch so yeah I think if I look at the the early ideas for rwa So Real World asset lending we’re a lot around property and the the driver of that was it’s this eye-poppingly huge Market the problem is it’s one where there’s also a lot of very actually pretty efficient pricing in terms of cost of capital and just a huge throughput of volume so standing out in that market was pretty

(41:06) hard and um finding an edge like somebody who really wanted your product was was hard so yeah um so property kind of lagged like as in real estate lagged on chain I think it will come there eventually but it just it’s not going to be the uh it’s not going to be the scene of early adoption in my view where there’s an advantage in rwas is shorter shorter uh duration so I think accounts receivable trade Finance supply chain Finance um invoice factoring you know any any of this class that you guys are very

(41:42) familiar with which is shorter dated um debt yeah just kidding yeah no no with it with it and um yeah she got shorter day to debt it’s going to be higher yield so at the moment treasuries are what five five and a half five and a half on one month so people want um uh people want something that meaningfully beats treasuries if they’re going to take the extra risk and so you’ve got to be able to clear 10 and then you’re gonna have good collateral packages so you know accounts receivable Finance can be pretty good because you

(42:16) could lend to a company that ultimately sells to Walmart and then your real look through risk is not that company it’s Walmart so uh and also for trade Finance sometimes you can get an insurance firm that provides a guarantee so you’re already guaranteed for like 90 of your principal so what you’re being paid for in a lot of those instances is not really the credit risk you’re being paid for just liquidity smaller shops when they deal with larger companies get 90 days or 120 or 150 day terms and so you’re just being paid to

(42:47) give them money sooner when their counterparties are really actually very good credits and so you’re not really being paid for the credit risk you’re just being paid for the fact that there’s a huge bargaining imbalance between the small company and the large one and the large one leverages that against them and so as long as you can kind of warehouse warehouse that balance sheet um then you get paid for it and so anyway I’m I’m going on a bit of a tangent but I think real world s is going to Trend towards shorter dated

(43:15) like accounts receivable type Finance you know there are there are folks like yourselves trying to do that the key blocker at the moment is just supply of lending capital and so that’s where we’re going to do a really good job of highlighting as I said before the like the competitive advantage of doing this on chain in terms of you get return of capital faster than a credit fund and you get you know it’s a more compelling fee structure where you know it’s just it’s just a a variable percentage of

(43:40) interest earned um rather than you know like a 2 and 20 structure um I think trade Finance is also about access and so this is not inaccessible you know no nobody knows where like yeah for most people as importers and also for the the firms doing importing and exporting like most of them don’t know who to call to go and get financed so it’s it’s a very illegible OTC market and then your you know your your family office or your high net worth investor doesn’t know where to go to actually get access to the deal flow

(44:17) to to put their Capital to work so having that give the legibility of blockchain helps the aggregation properties of blockchain platforms help with this and ultimately that’s my view of why all finance will eventually move on blockchain because for you as well this is also a an asset class trade Finance International Trade Finance is one where you have overseas payment processing and currently the best that tradfi can do is text messages between Banks that’s what Swift is and versus think of think of that as that’s

(44:50) the difference between um the difference between uh Swift and blockchain is the difference between a game of Chinese Whispers with text messages and just an email directly to the end person that you want to send money to and so in trade Finance you often see that sub a fund who’s doing that as a business will often find their their transfers get lost in the banking system they get bounced or reverted or they might get stalled for days or weeks even and that’s no way to conduct a business whereas your your call the cost of operating

(45:24) this is a blockchain company is um it takes 15 seconds to send money it hits you know first time every time um it’s it’s not going to revert or bounce and um and there’s no interchange cost you don’t pay you know you don’t end up paying like five percent on interchange it costs you hardly anything to send it so I think when you said it will not revert or bounce don’t you think it’s even scarier for an Institute that it will not revert boundary you’ll just lose it if you send it wrong

(45:54) well if you read the disclosures in when you send a wire through the bank it says if you get these details wrong you’re just going to lose your money so um you know for example we we’ve been trying to pay a commission on um to uh to a broker for for um uh an internal service that we had so it was like it was like an insurance policy and it’s now bounced seven times like we’ve been trying to send this wire for seven months and if they just had a usdc address we would have got this done in 15 seconds on the first time but because

(46:30) we have to go like every time it bounces we have to go and get the details and then try saying again we’re up to the seventh or eighth attempt at that wow wow but you’re absolutely right globally in trade Finance it’s an issue you know it takes a long time to settlement and and you and especially if you’re getting business for a new buyer it’s the first time they’re putting in your details that’s that that can go wrong very easily right and that’s absolutely a question but the

(46:57) same thing applies said for the securitization you were talking about right so how easy is it on the blockchain to secure a ties versus actually spilling up that was the other thing I was going to make is thank you and because you’re saving so much interest like you don’t you don’t need to waste that time when you start making money custody is instant yeast organizational yeah yeah yeah you you save you save um you save on all of that and the way I think about it is uh I remember reading this book

(47:33) uh I remember reading this book and I think it was called Railroader and it was it was about this guy hunter Harrison who kind of revolutionized running a railroad in call it like the 60s or 70s so he just absolutely crushed it on the operating metrics but his his critical Insight was you had to keep the trains moving like a network you have to keep keep latency low before what they used to do is they would wait for a really big train to build so think you know like a hundred cars and then they’d send it off instead what he said is no no if

(48:05) it’s 20 cars or if it’s 30 cars or if it’s 40 cars it just goes off at the same time each day and you’ve got to keep the network moving so you keep latency low and uh yeah anyway he he crushed it in the operating ratios and that’s the way I think about running a financial network is you want to keep latency low and so when you’re running a finance business and your capital is held you know might take 15 days to settle stuff like that that is that is City latency and it’s a bad way of running a finance

(48:37) business you want to keep Network uptime which is the amount of time your finances deployed um you know as as close to 100 as possible or as as high as you can get it while still having meaningful liquidity for what your estimated liquidity needs are and um the only way to do that is with a blockchain you can’t do that with traditional rails just you specifically need the asset they will go on under the settlement token and the asset itself to kind of be in the same network right really really token and the stable coin yeah whatever

(49:18) right so Swift is only it’s only Fiat it’s just money but the asset is a whole other bunch of time for it to deliver um so both of those being on the same network and the network itself yeah yeah well I think I think that’s what oh yeah and to go off track I think I think that’s what a potentially delay CBD says is that like I don’t know that the bank networks could really be upgraded to handle them so I think see I think instead you’ll have private stable coin issuers will be the way in the in

(49:48) the same way that we have like you know private fixed Network fixed line Network infrastructure and private banking services at the moment but when you when you have that when you have broader stable coin adoption the financial system is just going to go so much faster and you can have more velocity to think of the number think of like if think of if you have a business that makes uh one dollar on every transaction let’s say like a merchant or something if you just increase the number of transactions per year then the GDP will

(50:17) grow because you’ve reduced the latency on finance you’ve reduced the number of time the amount of time that money M2 in that Financial system is sitting on yeah it’s sitting unutilized and unproductive yeah and so I think like coming on one can do yeah yeah exactly one of the other things one of the things I was going to say is when you can have ai and managing money because it can like AI agents can send it on a blockchain then you get like I think you get real pretty meaningful GDP growth out of it

(50:50) yeah and I was just adding to that I was just eyeing to that at the point that I think we have realized I think the more important the more important at least the number for us to track is the total volume disbursed for us right how many times can we spend the money in the same year is more important for us to track than to see how much money we can get on the platform obviously it’s important for us to get a million dollars but the bigger number is that how many times have we used this million dollars like if you’re giving 10

(51:19) on a million dollars and we’re not getting it deployed the full year we are we’re we might be maybe just losing money so for us to even cater to more numbers to get that money utilized at 100 variable yeah yeah that utilization level yeah yeah so I think uh like now we’re coming towards the end of the podcast I think we will touch an hour um another question that I have and maybe one of the last few I think um you can ask one more um what do you think about discoverability of real-world assets right I think we all are working in

(51:58) silos right every one of us is in one corner trying to change the world um if that if nfts were trying to be sold in one different Corners good nftp where they are and do you think we guys need to banner up together and maybe not do maybe not maybe not collaborate but maybe come together and make one flea market together do you think that is something that we should do more for discoverability uh where can uh that was going to be my question we all go together yeah oh perfect so if we all go to words if we go if we if we invite

(52:30) people to the flea market I think we’ll get more people together uh what do you think about that like a sing a single a single as in a single venue for all rwas yeah yeah there’s different there’s different ways to think about it because you could have a single call it a single Marketplace Amazon let’s say for rwas yeah but another way to think about it is our shared standards so having it all on a single blockchain so let’s say all rwas went to ethereum or an rwa specific you know app chain or blockchain then I

(53:09) think either case would be um either case would be interesting um the question that is how do you you know do we all then get commoditized because as a player in the rwi space whilst having liquidity is good being a commodity is is bad look at all the carriers who you know were commoditized by um Apple Apple’s phones but as a near-term tool to aggregate liquidity I think it’s very interesting so if you could have you know polytrades rwas Maples rwas Hondo’s rwas centrifuges rwas goldfinches rwas in a

(53:49) very easy accessible place I think there is I think there’s a benefit to that some people are trying to do that on the aggregation layer like if you look at rwa.xyz I think those guys um have a vision of of being the go-to place for you know for this type of asset discovering these yeah yeah yeah discover is important yeah we are exploring a down we are exploring something in that genre I think maybe in the coming months or something we will see something there too yeah um another one that’s interesting as well is

(54:21) you know you can have discoverability but you can still have legitimacy so people you know how do people know that something’s kind of like meets a certain minimum standard of best practice in crypto is as we all know we’re all generally regarded by Outsiders as um Hooligans and it’s a bit of you know it’s it’s the wild west the wild west but uh yeah I I recently joined a you know what hopes to be in an industry association called the crypto credit association which is you know anyone in the space I would encourage to

(54:52) join because it’s really just about saying okay here’s pulling our knowledge here’s what we think best practices are and you know members of that Association try and uphold certain standards of risk management and so it’s it’s like a good place for Outsiders who are not familiar with crypto lending to kind of look to for you know as a bit of a lightning rod for for best practices for sure yeah yeah successful Applause the last fun part yeah yeah I think I think you should take this one million um I just want to

Favorite NFT Project

(56:14) Favorite NFT project at the moment, it’s an oldie favorite but it’s called crypto cities and they do is kind of isomorphic grid small little grids of cities real ones and fictional ones.

Favorite unknown RWA project

(57:24) I’m interested in Trips I think is pretty interesting because I’ve been talking to the founder who’s calling creators on YouTube and tokenizing their copyright rights so if you’re a Creator on YouTube and you’re making a cooking channel let’s say you make 50k a year you could tokenize that stream of 50k a year I think it’s interesting for me because it’s a digital native web3 tokenized asset.

What’s your favorite book?

I do a lot of reading, and I do a lot of audiobooks because I find as I get older and also as I spend so much time in front of a computer it’s harder for me

(59:03) to sit still and read a book. So I like to go walk or go for a run or something and listen to it. So I think you have to be in this space you have to be like a really deep student of Financial history. I recently read The House of Morgan by Ron Chernow which is like a history of not just JP Morgan but the entire bank. I also read one of Goldman Sachs which was called The Partnership which was really good but if I had to say like kind of

(59:40) My General favorite book, I think: Ascent of Money is really good I don’t think you can beat it for like overall history of finance and then a favorite biography because I think biographies are really important is Titan which is the life of John D Rockefeller so I think seeing how like stoic he was how well he built that business because in the age of zero interest rates a lot of people think businesses get built really quickly but this is a guy who just painstakingly built it for a decade

(1:00:12) after a decade into the biggest, most important company in the world and is arguably I think the greatest entrepreneur in history.

What’s your favorite food?

My go-to comfort food is chicken wraps. I like chicken wraps and chicken tacos as well. I should give a plug, I pretty much every day eat a peanut butter sandwich.

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