Inside Ethena's new neobank built on AVAX

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Kelvin Sparks: Hello and welcome to Layer One podcast. I'm your host, Kelvin Sparks. Joining me today, we
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have John Nahas, Chief Business Officer at Ava Labs, and Guy Young, founder of Ethena Labs.
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Welcome to the show. How are we all doing? Good. Good to be with you guys today. Thanks
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for having us. Yeah, excited about this one. But before we jump in, Layer One's a podcast
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focused on the intersection of crypto and the real world, and it's brought to you in
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collaboration with Avalanche. Nothing may say in this podcast is investment or financial
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advice. Please make sure to always do your own research. And in today's episode, we'll be
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talking about Ethena Pay going live exclusively on Avalanche.
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Ethena Pay is the internet money neobank built on Avalanche.
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So before we get into today's episode, I really just want to touch on the Avalanche
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Summit. That's coming up September 16th and 17th. It's really only a few weeks away at
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this point. And Guy is actually one of the featured speakers alongside John d'Agostino
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from Coinbase, Sandy Kaul from Franklin Templeton, Stani Kulechov from Aave, and so many
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others. So it's right around the corner. Guy, do you want to say a few words about what
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you're looking forward to? Yeah, for sure. Yeah,
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Guy Young: keen to be there. I think we've got a few announcements coming out around the CinePay
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there where we're going to be doing quite a bit more with the Ava team outside of what's
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being announced this week with the product launch. So very keen to be there. And I think
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the list of speakers is super impressive from the outside.
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Kelvin Sparks: And John, you're hosting. So any words from you on the summit?
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John Nahas: I mean, yeah, look, we're looking forward to it. Something we look forward to every single
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year. We did Barcelona twice. We did Buenos Aires. We did London last year, and it's nice
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to be back home in the US, especially in our backyard in New York.
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some of our great partners, friends, members of the community and everybody in between.
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And to Guy's point, I think we've got a great lineup of people that we work with to be
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talking about all things, Avalanche, crypto, blockchain, adoption, and just
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all the great stuff that's happening in the industry and especially with Avalanche right
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now.
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Kelvin Sparks: Nice, yeah. Thank you for that. So now we can finally jump in and we got all the
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particulars out of the way. So Guy, there was a mobile app that just launched, maybe a
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good place to start. What is Ethena Pay?
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Guy Young: Yeah, for sure. So this is really our vision, I guess, for taking our core savings
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stablecoin products out to an audience that doesn't exist within crypto at the moment.
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I think the super high level opportunity and sort of thesis we have around this is that we
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think that like one of the largest TAM products that exists within the space is just
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providing a basic dollar with a yield for anyone on earth.
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And I think we've kind of seen the demand for Tether being the first example of that, but
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I think this is really trying to take this to the next level, which is how do you actually
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build a consumer experience around that core idea of dollar rails for everyone that exists
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outside of the US. I think the interesting piece about this is really it's one of the very
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few cases I think you can point towards for crypto and stablecoin rails, just making the
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product 10 times better for users. And there's a few sort of areas that you can point
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towards within the app. So if we really just think about like financial services for 90 %
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of people on earth, it's kind of three three core, very basic functions, which is I want
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to save money, I want to send money, and I want to spend money.
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And it sounds super simple, but being able to just do those three functions slightly
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better than existing fintech applications is a very big deal in our view.
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And so, yeah, we kind of think about those three core functions and everything we're
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building here is just trying to improve on those, whether it's sending, settling on a
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blockchain, obviously being instant, almost cost -free is just obviously a huge
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improvement versus normal remittance and sending through banking rails on a normal, you
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know, fintech app that's plugged into the existing banking system.
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The other one's around the savings within the app, where if you're able to plug into DeFi
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and all the, you know, interesting financial products that actually come out of DeFi,
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you're able to beat the 20 basis points that your bank account is giving you in the normal
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world. And then the other one is really the emergence that we've seen around card spending
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on stable coins in the last few years, sort of led by Rain initially, and I actually
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think Avalanche, and John, correct me if I'm wrong, was actually the first card program
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that actually launched with them a few years ago. So I think pretty present when that came
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out. But yeah, you kind of are able now to really bring that all together as a consumer
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experience. And as I said, I think the time for this is much larger than the existing sort
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of crypto user base. And it's really kind of the first time that we're taking our product
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direct to consumer for users that exist outside of crypto.
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Kelvin Sparks: Awesome. Thank you for the primer. And really, maybe question for both of you,
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specifically starting with you, Guy, what changed most in the past year that made consumer
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apps viable growth opportunities for crypto companies like Ethena?
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Guy Young: Yeah, I think it's just a funny confluence of disparate pieces of infrastructure all
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coming together and being able to work as a single application for the first time.
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So I mentioned Rain as one, you know, sort of partner who's really kind of grown in a very
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impressive way in the last few years. But if you look back even three or four years, that
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type of infrastructure that allowed you to spend directly and settle with Visa on top of
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stablecoin rails didn't really exist in a sort of production way.
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At scale, you had, you know, apps and wallets that were built with Privy in the last cycle
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that really allowed you to build that sort of self -custodial experience that actually
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sits within an app like this. The emergence of being able to settle, use stablecoins on a
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blockchain. These are all kind of like very different pieces that actually all come
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together to provide each of those product functions that I was describing within the app.
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You're sort of like bringing together many multiple businesses and or products to produce
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polished and consumer application in the end.
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And I think it's just taken time, I think over the last four to five years for each of
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those to get to a level where it really feels on par with using a normal FinTech
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application. So yeah, it's stuff that we've been talking about for years actually sort of
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coming into production now, where the user experience, I think for some of these
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applications, even outside of Ethena Pay with existing ones that are out there right now,
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really is on par with, you know, Web2 fintech experiences.
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Kelvin Sparks: Yeah, the days of 2021 horrendous DeFi front ends seem like a distant pass and thank
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goodness for that. But as Guy was talking, John, I'm curious from like the infrastructure
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provider perspective, obviously this is something that Avalanche has a ton of distribution
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and a ton of users. So like, What does this mean for the Avalanche community, getting
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access to these novel financial products?
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John Nahas: I mean, I think this is a great win in general for people that need these products, first
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and foremost. And Avalanche is just the infrastructure that enables it, right?
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So to Guy's point, I think a couple years ago, this was not really that possible.
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And the team has really worked hard over the course of the last few years to build these
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kind of Lego pieces that come together, whether it be our early partnership with Rain, not
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with the Avalanche card, our work with Guy, or work with other DeFi protocols.
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Like for the longest time, I feel like the industry kept building crypto products for
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crypto users and we kept circling the same time in like a circular fashion that would jump
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between chains, between ecosystems, between applications. But it was the same capital, the
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same users being recycled over and over and over again through whatever narrative of the
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quarter or that six months was. We haven't really broken out of that.
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I like there's statistics that show how many active daily users there are in crypto or on
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Web3, and it's not that high, right? Despite whatever metrics you see,
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we haven't, till this point, really delivered meaningful products to retail
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users, to consumers, to people outside of the ecosystem, outside of the bubble and outside
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of crypto, right? And to Guy's point, people want to save money, spend money, and send
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money. And we keep talking about this on -chain world that's this fantastic utopia, but
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for most people, it's still like a different planet. The onboarding is difficult.
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The UX and the UI is difficult. We've kind of made it purposely difficult in an elitist
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fashion because we think that we know better. So kudos to Guy and team for really
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building something that's needed, something that makes people's lives better.
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It makes sending money easier, cheaper, and faster. The same with saving and everything in
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between that. So our goal from day one is always to be the infrastructure that powers the
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next generation of products, of financial products, to provide people with better
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applications and better use cases and to be that kind of invisible layer behind that
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connects all these great things, whether it be Guy and Ethena and the rain cards and
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everything in between the yield and DeFi. I mean, that's where we really shine and that's
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where we've been focused on for the longest time, particularly through whatever narrative
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seasons come and go. So we're looking forward to this.
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This is going to be a big one for us and for Guy. Yeah.
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Kelvin Sparks: And this is the first time Ethena is actually going direct to consumer.
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So Guy, can you talk about like owning that entire customer relationship and just
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how the economics allow for Ethena to deliver better product for users?
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Yeah, I think it's maybe
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Guy Young: just to like expand on like the premise of the question around like the direct to consumer
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piece. I think we kind of went through different stages in our growth in the beginning,
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right? Where in the beginning, we were kind of direct to consumers within DeFi where we
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kind of launched the application. We had zero integrations on any exchanges and it was on
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us to go find users to actually grow to the first sort of like two, three billion dollars
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of supply without having any like external integrations with, you know, fintechs,
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brokerages, neobanks, that kind of stuff. And then I think the next phase of growth really
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came from the acknowledgement of what John was describing, which was there was just a
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limited set of users who are sitting on chain and are going to, you know, load up a
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MetaMask account and actually interact with your app direct. And so the sequencing for us
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was you start direct, as we did in the beginning, then you build a relationship with
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distribution platforms that have 50, 100, 150 million users on the other side.
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So USD, I think in the last five years has probably been the most widely integrated dollar
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asset since Tether and Circle with integrations on Binance, Coinbase, Robinhood, BlackRock
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even has it in Aladdin, et cetera, et cetera. And then I think we've sort of got to the
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stage now, which is it's really great to have of this distribution and be able to tap into
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the user bases that exist with all these platforms. And I think we're very grateful to
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have that opportunity. But at some point, we want to be able to control the destiny of our
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own distribution in a more meaningful way. And the real driver for that is really just
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thinking about how do you extract margin as a business, which is it's great to sit in the
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back end of these very large platforms as they serve their end user.
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But if you can't get a step closer to the user yourself, you're never able to fully drive
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the destiny of your own margins with the end user. And so I think the big view here is
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actually for normal individuals who are going to be trying this app and aren't in crypto,
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we kind of think about actually like the DeFi user in some senses is one of the most
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difficult user to actually retain going forward because they're so mercenary.
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And if you're 10 basis points off expectations, they're pulling out their money and
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they're going to a different chain or a different app, et cetera, et cetera. But a true
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retail user who's actually just using an application like this because it just makes their
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life slightly more simple day -to -day when they're spending and saving you know they look
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at this and they think wow revolut is at 50 basis points rather than you know 10 in some
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uh dgen application on chain and that's actually the most sort of sticky type of user that
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we actually want to interact with on the other side so for us it's really just can we
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control the destiny of our own distribution in a more meaningful way and the downstream
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impact of that is you create better margins as a business i think if you're able to and
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Kelvin Sparks: when you're talking about that mainstream user that target demographic How does Ethena Pay
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fit into their regular habits or even their daily life for that matter?
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Guy Young: Yeah, I think it's actually one of the applications that everyone uses every single day,
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which is paying for things and saving. And I kind of think about it's really one of the
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most important things to get right. If you're spending five out of the seven days in your
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life kind of working and saving money, being able to do that properly is kind of one of
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the more impactful things that I think you can do in finance for normal people.
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So for us, we just really wanted to sit there alongside or replace existing fintech
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applications where you're just providing a 10x better product experience because you're
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enabling it with stable coins and blockchain rails sitting underneath.
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So yeah, not to sort of deflect from the question, but I think it's the one financial
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application I use every day. It's not picking up a trading account and trading every day
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for me. It's just being able to send and save, which I think is actually a much larger
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term of users who want to use these products.
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I think you can even think about like the benchmark for just looking at like the market
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capitalization of banks versus brokerages in the US, like JP Morgan is worth ten times
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more than the sum of every single exchange and brokerage that exists within the US.
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And it's really around like saving credit and the movement of money, which is a much
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larger sort of marketing business than just trading, basically.
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And I think that that's kind of the core focus of what we're trying to do here, which is
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not just another speculation app to trade on chain, but trying to use these products to
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sort of attack that sort of money and savings use case.
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Kelvin Sparks: And as Guy was talking about the habits of these regular users of Ethena
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Pay, it got me thinking, John, what's the 30 -second elevator pitch of what Avalanche is
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trying to achieve as an infrastructure provider for this consumer mobile app?
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John Nahas: First and foremost, I think it's just invisible adoption at scale.
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At the end of the day, we are providing a platform for businesses to
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bring better products to their users.
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Avalanche is technology built for business, and that business can be institutions and
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enterprises and community -focused things, and it's payments.
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Guy and Ethena are founding members of the Avalanche Payments Collective, and this is like
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a flagship launch for us and for him. but it just shows that the technology under the hood
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allows for the product and the business to be better, right? Avalanche has that ability to
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fit the product, right? The product doesn't need to fit the blockchain or the tech stack.
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The tech stack is there to support both Guy and Ethena Pay, but also all the other use
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cases and all the other potential things that they can plug into, right?
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And this is like part of our North Star in regards to like our thoughts on just being the
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embedded finance layer, right? Like Avalanche allows Ethena Pay and every other partner in
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business to spin up an environment where their users are wallets, where their dollars are
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stable coins, where the yield is DeFi, where their assets are tokenized, and really be
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digital first from day one, right? I think a guy's probably been in this space dealing
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with all of these kind of incumbent systems that exist.
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And for the most part, what we see in the financial systems is a multi -decade kind of
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Frankenstein monster, right? Like these were designed decades ago using
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old technology, and they've been band -aided over and over and over again every few years
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to improve this technical feature and this spec and make it a little bit faster and a
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little bit cheaper and a little bit this or that or the other, kind of like the chain
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wars, right? Like how many chains do you need that are incrementally better?
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Well, that's the financial system. It's just on repeat incrementally getting better, but
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not enough for the user, right? They just make enough changes to keep you happy, to keep
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you from leaving to another bank or another provider or another FinTech or another or
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another, right? So they keep giving you this little bit of a taste of what, how much
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better it could be without providing you with where it should be.
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And I think with Guy and Ethena Payne, everything that they're doing, being digital first,
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right? Being on chain first from day one is really the vision that we've been trying to
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push towards. So this is like a perfect joining here of our vision and mission and what
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they're building because the ecosystem and the network enables their business, right?
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So people will have a digital -first on -chain experience from day one, and they won't
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know what it's like to use the incumbent stuff.
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So there will be people one day who onboard to Ethena Pay who have never used the incumbent
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slow system in emerging markets, etc. And the people who do will know the pain that they
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deal with and will be very happy to see how much better it is.
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And I mean, as an industry, forget just for Guy and for me and for Avalanche, it just as
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an industry, these are the things we should be pushing forward, right? Use cases that move
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the needle and like that are not just speculative in nature and narrative driven, but are
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actually in practice making a difference.
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Kelvin Sparks: You nailed it. My first job was actually, one of the things I had to do early on was
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decomposing COBOL code from like IBM mainframes.
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And I mean, you could tell I'm not that old. So I definitely do understand that
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pain from somebody who had to actually build and pay down technical debt inside the system
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itself. It's not a fun job. I could tell you this podcast thing is a lot better in my
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opinion. But I guess, so Guy, Why decide to move to a mix
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of public and private infrastructure that the avalanche technology provides when
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competitors like Stripe and Circle are building their own layer once?
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Yeah, I think for us,
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Guy Young: you know, we've kind of danced with the idea since inception, whether kind of like trying
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to own the infrastructure ourselves was something that made sense. And I think a lot of,
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you know, application builders have sort of gone through the same thought process in the
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last few years. I think for us, it would have been a mistake actually to push ahead and
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actually try build and actually own the infrastructure in some senses because we sort of
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actually view chains as some of the biggest and most important partners and distribution
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channels that we have within the space. So I think in my view, and obviously people have
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a slightly different view here, when you try to own the full stack in that sense, you
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actually sort of close off and sort of put people off from working with you going forward
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where you otherwise would be able to try and grow your core product. And I think that
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that's like the business that we're in is trying to build and grow the core savings
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products of USD and other assets that we launched, like the white label stable coins.
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And the second that you start competing with your biggest customers, I think it just puts
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you in a slightly fragile state going forward in terms of being able to do more with them
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in the future. So that's just one piece where we decided that that actually was not the
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best route for us to take. And I think other people might arrive at the same conclusion
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when they kind of run down trying to build their own chains. Because I think we sort of
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got to the stage in the market where people are just not looking for more generalized
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chains, which are trying to serve everything to everyone. And I think that that's also
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just like a piece of alignment that we've had with the Ava team three times, which is it
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makes sense if you want to have your own customer environment where you're trying to build
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for very specific use cases or whether it's, you know, adding compliance in some ways that
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a generalized chain can't actually serve for. But I think the days of launching a
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generalized chain from scratch now is just a lot more challenging in terms of what people
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are asking, like, why would I bother coming over there with great options that are in the
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market right now? So yeah, I think that's the thought process on our side where we want to
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actually work with chains and we view them, including obviously Ever as some of our
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biggest partners, rather than trying to directly compete with our partners.
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Yeah.
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John Nahas: I'll jump in on this real quick. I think this is something that we've been seeing shifts
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over the course of the last several months or years even, where there's two different
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players here, right? Guy is a business we are an ecosystem.
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And you've seen ecosystems try to be businesses and that hasn't happened yet.
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And I think that's the shift where layer ones or blockchain networks need to kind of
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become a business and find better routes for monetization. But on the flip side, you've
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seen businesses try to become ecosystems, right? You see this with some of the exchanges.
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You see this with some of the products that are launching. And that works, right?
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Like you can have your own chain if you're hyperliquid. Hyperliquid is a product that just
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happens to have its own chain. And that's fine.
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You know, Stripe and Tempo, like Stripe with Tempo, like they have their stack.
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They're not trying to be a general chain. And if they are, that's a completely different
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animal that they haven't experienced yet or dealt with, right? But they already have their
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stack. So they're just moving their business on chain as a infrastructure thing they're
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going to own it. So we've seen a lot of businesses try to become chains and
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ecosystems and build this stuff out. And these two things sometimes are
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at odds with each other, right? There's different goals.
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There's different purpose there. And the work that we're doing, I think we're aligned with
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what Guy's doing, right? At the end of this point, you don't want to be competing. Where I
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think we differ specifically, though, is Guy is going to be part of the ecosystem.
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He's going to connect to all the other use cases and applications and anything else that
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can be beneficial to his business as well as the distribution.
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But Guy could also eventually graduate to his own chain within the ecosystem.
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So that kind of flexibility doesn't exist. I'm not saying that he will.
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I'm just saying he can. Right? And whether it's a guy or an institution or another
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payments company or an enterprise, the idea of launching on a general purpose chain and
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being stuck there forever or having to build their own chain is kind of very at odds with
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each other. It's very black and white and there's nothing in between. Whereas with us, Guy
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is part of the ecosystem. He has a distribution. He has a connectivity. But if and when he
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gets so big and he says, I think I need my own environment to own this full stack, he can
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do so within the Avalanche ecosystem. He can have his own chain that connects to the, that
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is part of the network that connects to everybody in the same way by moving from a C chain
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to his own L1. I'm not saying that he is, I'm just saying that he can, right?
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So the fact that a guy can do that is also appealing to other institutions and partners
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that we have because, you know, being on chain is a journey. Like the idea that you work
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with people and that on day one, your technical decision is what locks you in forever, or
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you have to tear it all down and then redo it again somewhere else is a lot.
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Like we have built tech in this space on our site for tech's sake, without thinking about
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what the client needs, what the partner needs, what the business use cases need.
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And the fact that you have that flexibility, I think gives us a differentiator, especially
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for where the market is going, where participants are going, where enterprises,
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institutions are going. Like, You know, the tech supports the business.
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That's the ultimate goal. And that's what we've been doing. I think it makes a big
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difference.
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Kelvin Sparks: And on the topic of ecosystems, kind of just came to mind as you were just answering the
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last question, John. Guy, how were the conversations internally with the team
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around the different, like, high -quality asset issuers that were already building on
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Avalanche when you said, okay, I want to actually now build Ethena Pay and it's going to
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be in this ecosystem? them?
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Guy Young: Yeah, I think for us, well, we've been on Avalanche actually for, I think, close to two
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years, year and a half at least, and have been integrated into the ecosystem already
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before Ethena Pay was even sort of conceived as an idea.
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I think the one very interesting crossover has been the focus from the Avalanche team on
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kind of RWAs and tokenized assets and sort of assets that aren't crypto native and how we
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actually bring them on chain really before anyone else was actually talking about it.
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So Securitize has been a big partner for us. They issue like the money market fund that
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sits behind our white label products. And I know that Avalanche was actually one of the
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first chains that sort of like pioneered bringing them over in their assets in the
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beginning. The reason I think that we find this particularly interesting is that the
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savings suite that's going to sit within Ethena Pay isn't just exclusively going to be
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USDE. Ethena touches a bunch of different assets, whether they're crypto native in nature,
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and that's sort of the source of the return that sits behind them. That's kind of where
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USDE started in the beginning. But actually, I think through time, we've actually grown
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into the second largest holder of RWA's in crypto, just full stop.
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And a big piece of that is actually thinking about new origination of different businesses
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or assets that are actually coming on chain in tokenized format.
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We want to be able to actually pick those up and actually offer them as products within
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Ethena Pay as options that sit alongside the existing products that we have now.
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So I think there's a big piece around that. And then I think there's another one, which is
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a lot of what we're actually trying to provide here is really a simple front end that
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actually interacts with DeFi and where it's sort of safe.
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And we think it actually enhances the product experience where one example here is
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actually a plug into Aave, where a lot of sort of the demand and success that you've seen
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with the growth of USTE has actually been plugged in with different strategies and
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composability with Aave on different chains.
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And so a big piece here is actually being able to plug into existing and liquidity and
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applications that are already sitting within Avalanche and kind of serve that up as an
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experience for users where they're not even interacting with MetaMask wallets and that kind
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of stuff to be able to access sort of DeFi -enhanced financial products.
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Kelvin Sparks: On that topic then, let's say, how does Ethena Pay compare to existing crypto
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neobank products? Yeah, for
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Guy Young: sure. I think in some senses, right, I kind of described those very three core functions
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of send, save and spend. And it's quite difficult to do those in a very materially
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different way when it's such a simple sort of function. I think the core differentiator
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here is actually, this is the very first time that you've seen a dollar issuer or asset
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issuer at the scale of Ethena launch the neobank in a vertically integrated way with
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stablecoin issuance. So if you look at the other offerings in the market right now,
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they're essentially taking a RAIN card program and then putting it on someone else's
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stablecoin. And if we just take a step back and think about what are the core revenue
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drivers for these businesses in the sort of like fintech, web2, lens, you really have like
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interchange on the card spend, but then the generation of interest income on the balances
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that are sitting within the actual fintech.
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And yeah, one comp here, you can even just look at Revolut, 40 to 50 % of their revenues
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actually just come from interest generation on the balances. So the core issue here is
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that if you're putting a card on someone else's stablecoin and you don't own the full
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stack and have vertically integrated the full stack of yield generation with the
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stablecoins, you're basically giving 50 % of the businesses potential revenue to Circle
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and Tether on the other side. And what that means is that you're actually at a structural
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disadvantage to be able to provide better product experiences throughout the app on other
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things. So being able to vertically integrate and own that entire thing means that we're
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able to offer other features like free on -ramps, free FX, no markups on those pieces.
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It's sort of the small pieces around the edges, which we can actually monetize the
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balances within the app to then improve everything else that sits alongside it.
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I think another core piece here is actually the bread and butter of what Ethena I think
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did well in the last three years in a very simple way was just the best return at scale on
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dollars, the best sort of like risk adjusted savings yield in the market at scale.
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And that's actually a very core structural advantage that you have versus other people,
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which is if you can provide people the best savings rate, it's just a very easy reason for
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why people want to come over and leave their money with you in an end state. And so I
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think sort of taking that core, you know, area that Ethena actually leaned into and was
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the best, I think, in the last sort of like three to four years in terms of competing and
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then building a new product experience around that, I think gives us a structural
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advantage versus others in the market.
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Kelvin Sparks: Yeah, it sounds like you're bringing this idea of blockchain is becoming invisible to the
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end user life by just providing overall a better user experience, high quality yield that
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people know on a platform they can trust and in a protocol that they can park their money.
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So, makes sense? Makes sense. And John, on the topic of really, I guess I would group this
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in like the category of almost like embedded finance in a way.
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Maybe I'm incorrect here. But really, I want to think about how you look at the
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opportunity overall for Avalanche and just growing embedded finance in the ecosystem.
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John Nahas: Yeah, look, I mean, I think you have to look at it. There's two worlds that exist right
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now, right? There's like the on -chain finance world that we have, which has users and it
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has liquidity and it has yield and it has great products, right?
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But that, again, is a very limited TAM, right? We're still crypto users, crypto products,
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that same circle, and it exists in a vacuum or on an island or on a different planet,
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insert whatever analogy that you can come up with there.
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Whereas like the embedded finance piece, right, it brings Guy and Ethena Payne, all of
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those users, and it brings, you know, other existing incumbent products that exist that
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are not on -chain, on -chain, so that those users are wallets and those dollars are
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stablecoins. And really that provides users in liquidity.
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So those users in liquidity can flow into the on -chain, into the on -chain finance
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ecosystem, can generate yield, can provide purchasing power for RWAs,
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liquidity for DeFi, and really be part of those kind of DeFi Legos that build the on
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-chain finance stack that funnels yield back to those embedded finance users.
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And if you look at it that way, the thing starts to become a virtuous cycle.
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You bring yield back to the users, more users, more liquidity flows in, generates more
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yield, and then you start to grow this pie in a meaningful way on chain by bringing in
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more people and more users. Instead of that same pie going in a circle, we're bringing in
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more people, bringing in more users and more liquidity into the system.
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And it should grow the thing. And it should just keep on building upon itself by showing
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what's possible on chain.
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Kelvin Sparks: Overall, from an onboarding perspective, yield on RWAs is a hot topic we're seeing even
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on the timeline now. Yield capture has been a huge conversation.
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Didn't really get the respect it deserves. We even spoke with OpenTrade and some of the
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yields and services that they were providing as well. So it's cool to see this come back
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into the forefront of conversations we're having today. But sorry, John, it sounded like
410
00:29:45,020 --> 00:29:48,220
you were going to say something. Yeah, I was just going to say, look, I think we
411
00:29:48,220 --> 00:29:51,720
John Nahas: keep talking about users, right? Like, where are these users going to come from?
412
00:29:52,320 --> 00:29:56,340
If we look at the statistics since last, at the end of last year, there's been less and
413
00:29:56,340 --> 00:30:02,320
less users in this space, right? Developers are going to AI, capital is going into AI
414
00:30:02,320 --> 00:30:05,600
and prediction, and retail capital is going to prediction markets, et cetera, et cetera,
415
00:30:05,680 --> 00:30:09,800
et cetera. And unless this industry wants to continuously grow and not follow these
416
00:30:09,800 --> 00:30:14,400
cycles, these market cycles, right? Your user counts should always be up and to the right
417
00:30:14,400 --> 00:30:20,380
and not contingent on market cycles. And we've seen user counts ebb and flow in this space
418
00:30:20,380 --> 00:30:24,640
because we haven't built something that's just sustainable. It's, again, narrative -driven
419
00:30:24,640 --> 00:30:30,180
and cycle -driven. But when you provide something that's not super confusing to people,
420
00:30:30,300 --> 00:30:35,760
like when you talk about bringing users into crypto, you can't sit there and spoon -feed
421
00:30:35,760 --> 00:30:41,280
every single human that you know about the benefits of blockchain and Web3 and
422
00:30:41,280 --> 00:30:44,500
decentralization and all these great things when they're just like, dude, I want to save
423
00:30:44,500 --> 00:30:50,340
money. I want to spend money. I want to send money. How do I do that without oopsing
424
00:30:50,340 --> 00:30:53,320
into something? Or what am I putting my money into?
425
00:30:54,220 --> 00:30:56,060
Explain this to me without a white paper.
426
00:30:58,060 --> 00:31:01,480
We need to grow the pie. We need to grow the TAM. We need to grow the users.
427
00:31:01,620 --> 00:31:05,940
And we need to grow the liquidity outside of the usual things that we just keep doing on
428
00:31:05,940 --> 00:31:10,060
repeat that haven't worked sustainably over the long term, right?
429
00:31:10,620 --> 00:31:14,700
So dollars makes sense.
430
00:31:15,020 --> 00:31:20,640
Spending dollars easier makes sense. Doing these things, and when you put them into RWAs
431
00:31:20,640 --> 00:31:24,620
or things that people can tangibly understand, right?
432
00:31:24,740 --> 00:31:29,580
And know, it just makes it all easier, right? So it's where the industry should be going.
433
00:31:29,740 --> 00:31:31,840
It's where we think it's going. It's where we're doubling down on.
434
00:31:32,180 --> 00:31:36,160
Kelvin Sparks: Yeah, one of the best quotes I heard about the crypto industry at large was, it's
435
00:31:36,160 --> 00:31:39,280
everything you don't understand about money combined with everything you don't understand
436
00:31:39,280 --> 00:31:45,260
about computers. But we're actually at the point now where the grandma test is, it's kind
437
00:31:45,260 --> 00:31:50,820
of passable. Like, I don't know two years ago if I could show my mother, grandma,
438
00:31:51,460 --> 00:31:55,940
aunt, uncle, cousin, any just random person about some of these apps and they actually get
439
00:31:55,940 --> 00:32:00,860
it, that eureka moment. But now it's starting to see early signs of that.
440
00:32:01,200 --> 00:32:07,140
And I expect the growth of, like, to your point, new users, regular retail capital to
441
00:32:07,140 --> 00:32:12,100
continue but from a user perspective what would be one of the most interesting features of
442
00:32:12,100 --> 00:32:16,000
Ethena Pay that would actually convince them to switch over from their bank guy yeah
443
00:32:16,000 --> 00:32:20,960
Guy Young: i think uh not to over repeat the point made earlier but i think the savings yield that
444
00:32:20,960 --> 00:32:24,540
sort of generated within the account uh really is kind of like the best at multi -billion
445
00:32:24,540 --> 00:32:28,600
dollar scale anywhere in the world on a safe product that sort of battle tested over the
446
00:32:28,600 --> 00:32:33,020
last uh three years i think that's one piece but we try to develop on the idea and this is
447
00:32:33,020 --> 00:32:37,180
actually the first time that Ethena is trying expand beyond just dollar savings products,
448
00:32:37,360 --> 00:32:41,280
which is actually expanding to local FX and multi -currency savings as well.
449
00:32:41,800 --> 00:32:45,520
So I think there's a broad acknowledgement that yes, a lot of people want access to dollar
450
00:32:45,520 --> 00:32:49,660
rails and dollar savings around the world, but the whole of crypto has just been dollar
451
00:32:49,660 --> 00:32:52,820
centric entirely when you think about the denomination of DeFi.
452
00:32:53,460 --> 00:32:58,220
And there's an acknowledgement that actually people in countries outside of the US
453
00:32:58,220 --> 00:33:02,320
actually also just want to have their own local currency in an account that feels like the
454
00:33:02,320 --> 00:33:05,460
bank account. So that's one piece, which which I think is actually quite different to a
455
00:33:05,460 --> 00:33:08,720
lot of the apps that are out there right now, which are basically just entirely dollar
456
00:33:08,720 --> 00:33:13,500
denominated. And here we're taking the core idea that we have with USD and then localizing
457
00:33:13,500 --> 00:33:18,820
that into other effects. Another piece is actually just the core design of the entire app.
458
00:33:19,360 --> 00:33:23,900
Really not trying to ignore the fact that a lot of people do want still fiat functionality
459
00:33:23,900 --> 00:33:28,760
within these applications. I think the first cohort of these products that came out were
460
00:33:28,760 --> 00:33:33,060
almost kind of too crypto -centric, which was all about you control your keys and you're
461
00:33:33,060 --> 00:33:37,240
kind of focused on like Bitcoin borrowing and those type of use cases.
462
00:33:37,840 --> 00:33:42,180
For us, I think there's just, again, another acknowledgement, which is it's great to have
463
00:33:42,180 --> 00:33:45,140
the option to sit in stable coins within the app and we make that a completely seamless
464
00:33:45,140 --> 00:33:49,080
experience with fiat accounts. But other people also just want to hold fiat alongside that
465
00:33:49,080 --> 00:33:53,960
in a unified balance that sits within the application. And so for us, it's really just one
466
00:33:53,960 --> 00:33:57,980
interface that actually combines the two between fiat and stable coins sitting within the
467
00:33:57,980 --> 00:34:02,340
application as you move kind of seamlessly between them. So small sort of pieces like
468
00:34:02,340 --> 00:34:06,380
that, free on ramps anywhere in the world to come to the product again is a pretty huge
469
00:34:06,380 --> 00:34:10,340
difference. And we sort of, you know, sitting in the position that we are as dollar
470
00:34:10,340 --> 00:34:15,420
issuers and issuing our own stable coins, I've always been pretty shocked by how poor the
471
00:34:15,420 --> 00:34:19,680
infrastructure is to actually get on ramps outside of the US into these products in a cost
472
00:34:19,680 --> 00:34:23,660
efficient way. So we spend a lot of time sort of building that up and making that
473
00:34:23,660 --> 00:34:27,040
experience actually better than even trying to get through centralized exchanges to get
474
00:34:27,040 --> 00:34:32,560
into stable coins. is going to be the best way to onboard in NEFX into local savings
475
00:34:32,560 --> 00:34:35,500
accounts or to dollar stable coins as well.
476
00:34:36,180 --> 00:34:42,100
Kelvin Sparks: Got it. Got it. And there's been some incredible growth in TVL for USD in the past.
477
00:34:42,240 --> 00:34:46,760
Can you walk us through what your vision is for the next phase of scaling this protocol
478
00:34:46,760 --> 00:34:49,300
and maybe how Ethena Pay ties into that story?
479
00:34:50,060 --> 00:34:50,420
Yeah,
480
00:34:50,460 --> 00:34:54,380
Guy Young: for sure. So kind of have three business lines at the moment. We have the core USD
481
00:34:54,380 --> 00:34:58,360
product. I think the core focus for us now there is really just going back to the heights
482
00:34:58,360 --> 00:35:01,680
that we're sitting at last year, just under $15 billion in supply.
483
00:35:02,700 --> 00:35:05,960
Obviously, you know, a lot of businesses within DeFi have been pretty challenged with the
484
00:35:05,960 --> 00:35:10,920
unwind in the market since 10/10 last year. And the core focus for us is we just need to
485
00:35:10,920 --> 00:35:14,460
get the supply and size of the business back to where it was around a year ago.
486
00:35:15,620 --> 00:35:19,680
Ethena Pay is kind of core to that, which is everything we sort of spend time on is how do
487
00:35:19,680 --> 00:35:24,820
we either create distribution or build distribution ourselves to actually just push USD as
488
00:35:24,820 --> 00:35:29,260
a core product. And I think Ethena Pay is the most exciting evolution of that idea, which
489
00:35:29,260 --> 00:35:34,340
is us actually building the distribution ourselves and going direct to users with this
490
00:35:34,340 --> 00:35:38,700
product experience. So yeah, I think all the products are feeding on themselves.
491
00:35:39,160 --> 00:35:43,520
The other one is around white label stable coins where we work with different partners
492
00:35:43,520 --> 00:35:48,240
where they're able to build in our infrastructure and launch their own stable coin within
493
00:35:48,240 --> 00:35:53,300
a week. And yeah, I think the core view that we have is everything that we're building
494
00:35:53,300 --> 00:35:57,040
from here are products that sort of enhance other products that sit within the business.
495
00:35:57,360 --> 00:36:01,320
And I think Ethena Pay is probably the most exciting iteration of that, of us just going
496
00:36:01,320 --> 00:36:05,600
direct to users that exist outside of the space with USD.
497
00:36:06,520 --> 00:36:11,240
Kelvin Sparks: You did mention 10/10 and John also touched on Hyperliquid.
498
00:36:11,360 --> 00:36:14,520
We had a conversation in Wyoming a bit about perps as well.
499
00:36:14,860 --> 00:36:20,120
So you've had some pretty bulled up tweets where you're talking about perps.
500
00:36:20,300 --> 00:36:23,100
What are you seeing in the market that maybe other folks are overlooking?
501
00:36:23,960 --> 00:36:27,300
Guy Young: Yeah, I don't know if it's being overlooked, but I think, and it's something I tweeted
502
00:36:27,300 --> 00:36:33,280
about the day that TradeXYZ launched the first equity perp a year ago now.
503
00:36:33,540 --> 00:36:37,280
I put a tweet out that said, I think that this is going to be like a bigger market than
504
00:36:37,280 --> 00:36:41,520
crypto perps in the next sort of like 24 months. And I think we've started to actually see
505
00:36:41,520 --> 00:36:46,020
that happen in the last month already, which is actually quicker than I expected, where,
506
00:36:46,020 --> 00:36:51,460
yeah, volumes on hyperliquid actually flipped crypto perps last month in terms of RWA's
507
00:36:51,460 --> 00:36:55,440
overtaking them. I think the core thing that we're just excited about there is expanding
508
00:36:55,440 --> 00:37:00,260
this idea of perhaps on just crypto to $150 trillion of other assets.
509
00:37:00,400 --> 00:37:05,880
It's just a much larger market for Ethena to be able to do the core piece that we came to
510
00:37:05,880 --> 00:37:10,420
market with in the beginning, which is finance the derivative market around those assets.
511
00:37:10,760 --> 00:37:16,280
And for us, that's really an expansion of like 10 from $2 .5 trillion of crypto to $150
512
00:37:16,280 --> 00:37:20,460
trillion of other assets. And so I'm just incredibly excited about that because I think
513
00:37:20,460 --> 00:37:24,940
it's just the best form of derivative for people who are trying to hedge or speculate on
514
00:37:24,940 --> 00:37:28,860
the underlying asset. And I think it's one of the very few exports from crypto that's
515
00:37:28,860 --> 00:37:32,440
actually just like an outright better financial product versus what exists within TradFi
516
00:37:32,440 --> 00:37:38,360
right now. So yeah, I think that tokenization and kind of the growth of stablecoins are
517
00:37:38,360 --> 00:37:42,720
sort of the three 10 to 100xs I feel the most confident about in this space going forward.
518
00:37:43,480 --> 00:37:48,600
Kelvin Sparks: And I love both your guys' takes on this, but perps as a product relative to options,
519
00:37:48,900 --> 00:37:53,620
like, do you see people just kind of leapfrogging and going directly from maybe trading
520
00:37:53,620 --> 00:37:57,440
spot, getting familiar with markets, moving directly into perps?
521
00:37:57,660 --> 00:38:02,740
Or are a lot of these, I guess, options traders going to be siphoned and pulled into
522
00:38:02,740 --> 00:38:05,840
these actual perp trading markets? Yeah,
523
00:38:05,880 --> 00:38:10,060
Guy Young: I think the interesting data point, right, is like, we had both exist in crypto over a
524
00:38:10,060 --> 00:38:15,600
long time and perp volumes have been 25, 30 times the scale of what you've seen in
525
00:38:15,600 --> 00:38:20,320
options, even despite their success over the last six or eight years.
526
00:38:21,400 --> 00:38:24,600
You can do things with options that you can't do with perps, in particular in the way that
527
00:38:24,600 --> 00:38:27,740
you can hedge and create different payoff structures that just simply aren't possible with
528
00:38:27,740 --> 00:38:32,040
perps. But I think the one that's kind of most popularized is our sort of view of the
529
00:38:32,040 --> 00:38:35,320
retail person trading on Robinhood on leverage.
530
00:38:35,580 --> 00:38:40,220
They're really they're trying to price the Greeks or underwrite volatility and all the
531
00:38:40,220 --> 00:38:44,240
different pieces that come with an option. They're just saying, I want to get long 10x on
532
00:38:44,240 --> 00:38:48,600
Tesla. And actually, I think a perp is a more efficient instrument to just express a very
533
00:38:48,600 --> 00:38:52,740
simple, I want to be X levered long or short. And so they are kind of different.
534
00:38:52,760 --> 00:38:58,660
I think for professional risk managers and investors, options will always have a purpose
535
00:38:58,660 --> 00:39:01,700
that perps can never fulfill entirely.
536
00:39:02,140 --> 00:39:06,780
But for the very simple use case of I want to just get slightly levered long X underlying,
537
00:39:07,080 --> 00:39:10,700
I think that that's where perhaps can actually eat into a lot of the share that options
538
00:39:10,700 --> 00:39:12,980
have on retail speculation. Yeah.
539
00:39:13,620 --> 00:39:18,340
Kelvin Sparks: Speaking about, I guess, future growth, John, on the Avalanche side of things, credit
540
00:39:18,340 --> 00:39:24,320
receivables are coming to Avalanche via Black Opal. And now there's another really just
541
00:39:24,320 --> 00:39:28,600
payments announcement with Ethena. So what is the next year of growth look like for
542
00:39:28,600 --> 00:39:29,040
Avalanche?
543
00:39:29,300 --> 00:39:33,140
John Nahas: For those that are familiar with the Avalanche story, you know, we really earned our
544
00:39:33,140 --> 00:39:38,840
stripes back in 2021 with DeFi Rush. And I think where the market is going right now is
545
00:39:38,840 --> 00:39:43,020
where we have been for the last two years or so. We've been focusing on building utility
546
00:39:43,020 --> 00:39:47,740
and growing out the use cases and putting together all the pieces that would finally come
547
00:39:47,740 --> 00:39:52,360
together. And I think we're going to start to see that towards the end of this year with
548
00:39:52,360 --> 00:39:56,120
new launches and new ways to do on -chain finance, right?
549
00:39:56,300 --> 00:40:00,740
And to do DeFi with RWAs and to really utilize all of these great things.
550
00:40:01,220 --> 00:40:06,220
You know, we're excited to have Ali D4 live on Avalanche.
551
00:40:06,360 --> 00:40:09,680
We're going to be working closely with them as well. I mean, I think the market is going
552
00:40:09,680 --> 00:40:13,540
towards, you know, real -world assets and real -world adoption and real -world utility.
553
00:40:13,560 --> 00:40:17,660
And we can keep using these great words to describe everything there.
554
00:40:17,780 --> 00:40:23,140
But effectively, you know, I think RWA looping, maybe a little RWA type rush
555
00:40:23,140 --> 00:40:27,680
situation could be exciting to bring back capital because at the end of the day, I think
556
00:40:27,680 --> 00:40:32,640
we were talking about, right, the guy was talking about RWA perps versus crypto perps,
557
00:40:32,740 --> 00:40:37,440
like people are just not trading crypto as much anymore, right? Like why try and build a
558
00:40:37,440 --> 00:40:41,820
new asset class from the ground now completely when there are existing asset classes that
559
00:40:41,820 --> 00:40:47,420
we can bring on? The two do work side by side and can be helpful, but we need to do a
560
00:40:47,420 --> 00:40:50,960
better job of that. And we've been working towards that. So we have a whole bunch of
561
00:40:50,960 --> 00:40:54,540
things that may be in isolation. People have wondered why this and how that.
562
00:40:55,240 --> 00:40:58,260
Black Opal is a great product. It provides a fantastic yield.
563
00:40:58,580 --> 00:41:01,900
We have other products that have been coming out too through our partners at Securitize
564
00:41:01,900 --> 00:41:06,620
and other tokenization platforms. But in totality, when you look at all of these things
565
00:41:06,620 --> 00:41:10,380
and everything else that we're doing, it'll start to make sense that there's a full stack
566
00:41:10,380 --> 00:41:16,120
here, right, for a financial future, for earning yield, for doing new forms of DeFi and
567
00:41:16,120 --> 00:41:21,060
exciting things there. So for us, that's really, I think, what we're looking forward to.
568
00:41:21,400 --> 00:41:26,440
Kelvin Sparks: And to round it out, I guess, we had a lot of talk about stablecoins on this podcast, but
569
00:41:26,440 --> 00:41:31,640
Guy, in the timeline recently, you said that you're basically on a path to make tokens
570
00:41:31,640 --> 00:41:33,880
great again. So now I have the author in front of me.
571
00:41:34,920 --> 00:41:37,340
What was going through your head when you were tweeting that?
572
00:41:38,620 --> 00:41:44,320
Guy Young: Yeah, we came out with a reasonably big update from the foundation on our side back in the
573
00:41:44,320 --> 00:41:49,440
last week, which is more a combination, I think, of just acknowledging the different
574
00:41:49,440 --> 00:41:54,120
challenges that we and other projects, I think, in the space who run tokens have sort of
575
00:41:54,120 --> 00:41:58,380
faced in the last few years in terms of alignment with equity, how you sort of communicate
576
00:41:58,380 --> 00:42:03,140
value capture within the system, et cetera, et cetera. So yeah, there was just a kind of
577
00:42:03,140 --> 00:42:07,880
big summary piece that came out, which I think just addressed a lot of people's concerns
578
00:42:07,880 --> 00:42:12,200
head on in sort of three or four different changes that were made, primarily basically
579
00:42:12,200 --> 00:42:17,300
just buying out the seed investors that we had with VCs who had been selling in a
580
00:42:17,300 --> 00:42:23,080
non -friendly way, I'd say for the last year, and then
581
00:42:23,080 --> 00:42:27,520
introducing a bit more certainty how we think about value capture with revenue buybacks
582
00:42:27,520 --> 00:42:33,500
that come back toward the token alongside a pretty interesting setup where we combined the
583
00:42:33,500 --> 00:42:38,280
IP from labs to sit under the foundation so that basically no value could actually accrue
584
00:42:38,280 --> 00:42:42,480
to the equity within the lab entity going forward. that's like a binding framework that's
585
00:42:42,480 --> 00:42:47,880
actually published publicly so that people don't have any confusion around the fact that
586
00:42:47,880 --> 00:42:50,380
the equity has no value within our structure.
587
00:42:51,380 --> 00:42:56,780
So yeah, I think it was just a comment around us trying to take the right steps to address
588
00:42:56,780 --> 00:42:59,980
some of those concerns that other people have had over the last couple of years.
589
00:43:00,240 --> 00:43:05,520
And I do think a lot of people sit in the same situation as us where a lot of regulatory
590
00:43:05,520 --> 00:43:09,340
uncertainty has, I think, sort of pushed people into structures that didn't really make
591
00:43:09,340 --> 00:43:13,640
sense if you sort of ask yourself the question, if I started from day one right now, is
592
00:43:13,640 --> 00:43:18,060
this the way that I would have set things up? And yeah, I think just an acknowledgement
593
00:43:18,060 --> 00:43:19,640
that we're trying to take the right steps there.
594
00:43:19,940 --> 00:43:24,600
Kelvin Sparks: Yeah. Yeah. It wouldn't be crypto without the main characters and the banger tweets.
595
00:43:24,860 --> 00:43:29,720
So thank you for unpacking that. But gentlemen, thank you for the time.
596
00:43:30,080 --> 00:43:33,820
We are approaching the top of the hour. So I do want to round it out and thank you both
597
00:43:33,820 --> 00:43:38,520
John and Guy for taking the time out to chat. As a reminder, our newsroom works tirelessly
598
00:43:38,520 --> 00:43:42,520
to get you accurate, informed crypto news. If you want to stay ahead, read the block.
599
00:43:42,820 --> 00:43:44,240
Thanks. See you next time.