Bankless - 29 - Aave to Billions | Stani Kulechov

Episode Date: September 7, 2020

Episode: #29 September 07, 2020 ----- Tools from our sponsors to go bankless: 🌐 UNSTOPPABLE DOMAINS - GET A HUMAN READABLE CRYPTO DOMAIN 🌈 ZAPPER - ULTIMATE HUB FOR DEFI - ZAP INTO DEFI 💳 MONOLITH - GET THE HOLY GRAIL OF BANKLESS VISA CARDS 💸 AMPLFORTH - MONETARY EXPERIMENT FOR BASE MONEY ---- Stani Kulechov is the Founder of the Aave money market, a place for lending and borrowing assets in DeFi. Aave has marched up the DeFi leaderboard to become one of the top protocols with the most amount of value deposited into its contracts. Aave's token LEND has increased 3300% since its bear market low. What contributed to Aave's success? What did Aave do differently? Why did Aave's community thrive when others died? What's next for Aave and Aavenomics? We ask Stani these questions and many more, in order to get a glimpse of what is successful in this DeFi frontier! ----- WE COVER 1) Crypto-Native Founders 2) Early days of Aave -- ETHLend and the Aave pivot 3) Sticking it out through the bear market 4) Establishing the team-community relationship 5) Rising the Ranks of DeFi 6) VC investment vs ICO investment; pros and cons 7) Aave moves FAST! 8) Aavenomics and Aave Roadmap 9) Bull Market Predictions! ----- Resources discussed: David's article about MKR references by Stani ----- Episode Actions: Read delegated credit explainer article Read about Aavenomics + Aave roadmap  Give us a 5 star review on iTunes! ----- Subscribe to podcast on iTunes | Spotify | YouTube | RSS Feed Leave a review on iTunes Share the episode with someone you know! ----- Don't stop at the podcast! Subscribe to the Bankless newsletter program Watch Bankless shows and tutorials on YouTube Visit official Bankless website for resources Follow Bankless on Twitter Follow Ryan on Twitter Follow David on Twitter ----- Not financial or tax advice. This podcast is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions.  Do your own research.

Welcome to Bankless, where we explore the frontier of internet money and internet finance. This is how to get started, how to get better, and how to front run the opportunity. This is Ryan Sean Adams. I'm here with David Hoffman, and we're here to help you become more bankless. David. How are you doing, my friend? Super good, Ryan. Just came out of this interview with Stani Kolachav from Avey.

Ryan, what did you think of this interview? Man, it was so much fun. I think it's a perfect next episode. episode from our last episode with Vance from Framework, where Vance talked a lot about these unique characters in the DFI space, these crypto-native founders. And he actually mentioned Stani by name as one of the archetypes of these types of founders. And we're going to be doing a series, the next few episodes, including this one, are a series where we actually talk to these crypto-native founders, the actual builders, the people that Vance was talking about,

the people who are sort of unique to this, I guess, generation of D5 protocol building. And I think one of my takeaways from this conversation with Stani was just how understated that Stani and his team at AVE are. Almost used the word kind of humble about what they built. At one point in our conversation, Stani says at the beginning of the year, they would have been happy with five million locked, total locked value, inside of the Ave protocol. And here we are.

They have about 1.4 billion locked in six months later. Just the amount of kind of building that's been going on with Avey, you know, his team's style of just constant shipping product, never stopping, partnering with other protocols wherever possible, really building for the ecosystem. I found, frankly, refreshing. It's not something that you typically see, but I think it is one of the patterns. in successful D5 protocols. So if you're looking at like the future,

trying to front run the next opportunity, maybe you'll see some of the patterns in the AVE team and what Stani and his team have developed play out in future protocols. Maybe those types of characteristics are the investable pieces. What did you think, David? One of the lines that stuck out to me in the Vance episode was when he is interviewing or talking to founders of protocols that are looking to like, eventually turn over the keys to the kingdom to the community, he asked them, are you really about

that life? I thought that was a funny line. Yeah. And Stani is absolutely about that life. And that life is, what he means by this is, you know, if you are interested in building a protocol on Ethereum, it's fundamentally different than like building out like an LLC or a C-Corp or, you know, going public on the stock market. It's just a different deal. And I think Stani is particularly well, suited as an exemplar person who is about that life, right? Because, you know, Avey has one of the most insane histories of 2017 and 2018 where they initially tried out this thing called Eithland. It became clear that it wasn't going to work. So they pivoted a protocol, like a protocol pivot is an interesting thing in and in of itself. And one thing I think why we, why you think that,

you know, Stani and Avey's understated is because you know, unlike companies like, you know, Amazon and Jeff Bezos and, you know, Steve Jobs and Apple is like, I don't think Avey had this grand like, you know, one, three, five, 10 year plan. I think in the middle of the bear market, they just started working on what was obvious and what was obviously wanted and needed by the community. And they just put one foot forward in front of the other. And then all of a sudden, because of their relationship with their community and the, the feedback that they got from the community, which is a topic that we talk about in this podcast,

they were just able to create what the community wanted. And as a result of that, there's like $1.5 billion in AVE. Yeah, it's really an amazing story. And I think it'll come through in the conversation. And really, maybe the last thing I'll say before we jump into it is there tend to be two types of people that come into crypto. You know, one type is the tourist. And they're huge. just because they've heard the hype and, you know, they want to build something because it's hypey and they're all about that glitz and the glamour. And there's the other type that's more the crypto-native, the builder, the one that's going to keep going in the trenches of a soul-sucking bear market. And those are the teams and the individuals, the crypto-natives, the people who are there

in the bear market that I tend to trust more to carry us for it. in the future bull market, there is going to be a host of new tourists that come aboard. And you only can tell whether they're crypto natives or not if they're willing to continue building during the bear market as well. Yeah, making it through the bear market is just the biggest signal of commitment. Like no one can ever question whether you're here in it for the long term or not. And Avey as one of the protocols on Ethereum, one of the biggest protocols on Ethereum, I think is pretty clear, is in it until the very end. So big fans of Avey. Let's just go ahead and get right into the interview.

But before we do that, we're going to take a moment to talk about our sponsors. One of the tools I've started to use recently is Zapper. For those of you that were a part of the 2017 bull market, it was characterized by just opening up Blockfolio and refreshing it over and over and over again. And also, anytime you ever made a trade, you would have to go into Blockfolio and manually input that trade information to make sure that your portfolio that you think that you have matches what you actually have. With Zapper, you don't have to do any of that anymore because all you have to do is Zapper is

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websites have domain names.com.org your bankless bank account on ethereum should have a domain name too so go to unstoppable domains.com register a domain name for your ethereum address now unstoppable domains.com all right let's get to the interview bankless nation i am super excited to introduce our next guest. This is Donnie Kolachov, who is the founder of the AVE Protocol, which is, as you know, because you are a bankless listener, a money Lego for lending and borrowing assets in Defi. It has a phenomenal growth story. So right now, there are about $1.4 billion in locked assets inside of the AVE protocol. The price of lend, its native token, has also increased about 3,300 percent. Sierra. So that means if you bought a hundred dollars worth of lend on January 1st, you'd now own

$3,300, an absolutely insane growth chart, insane year for Ave. Stani, how's your year been? Are you doing okay? How's the year going so far? I'm pretty much dying here with all the things that we're building and also the traction that is coming and in the whole space. And it's hard for me to to keep up with everything, what's happening. Even inside AVE, it's just being amazing years so far. You know, so David and I are both like full time, like this is our job to cover all of these things and to try to keep up. And we're having a hard time, not just keeping up with just things that are going on in

defy, but keeping up with all of the things that AVE has been shipping lately. Is this just like, are you guys accelerating in your ability to ship things? Or is this just the symptom of a bull market? I think we're more organized in the sense. I think we're more, we have more resources than we used to have. And I think we are more somehow smarter in the way we build not just code, but ship products. I think it's a combination of multiple things. But we're super organized.

And we just, when we get a good idea, a good feature, we just want to get it kind of like to the public. And we tend to see that many of interesting things hasn't come up into mainnet because I think projects are hesitating too much. But, I mean, it's all about innovation. I mean, the more you get stuff that helps people, removes inefficiencies and brings value. I mean, there's no reason to wait with it. Well, you guys certainly don't wait. You've been shipping like demons this year. It's been absolutely insane to see.

I want to, you know, start with this. We don't usually do this on the podcast, Stani, because we tend to like to skip over the kind of the intro and get sort of into the meat. But I think part of the meat, actually for you, is the intro. Like, we're doing this series on Crypto Native founders. And Van Spencer from Framework came on last episode, and he talked about this, how it's his goal and Framework's goal to find these unique crypto-native founders. And they're typically not found in the places that traditional Silicon

Valley ventured or capitalists look for them. And now you guys started AVE in Finland, right? Helsinki, Finland, is that right? So this is a, you know, a country of five million people. It's, you know, for folks who are familiar, it's very far north, very likely north of where you're listening to this from. Why Helsinki? How did you guys, found a major DFI protocol in Finland? Yeah, I mean, definitely it's kind of like, I mean, it's not the place where you would expect a big project come from. But in terms like, Finland is a small country, but in some way, there is a lot of things that are very good. I mean, in terms of education, innovation, and just we don't just see.

usually Finland represent that much. I mean, we have a very good gaming industry. For example, if everyone remembers, for example, Angry Birds, Clash of Clans, these are Finnish games, actually. And if someone remembers still like Nokia, like they made the best phones and they went to the worst phones. And I mean, there is innovation. There is just, I don't know. I mean, I say it kind of like maybe it's because of Defi we're able to do this.

Maybe because it's the fact that anyone can build permissionlessly, not just like use permissionlessly, the defy primitives and the protocols, but actually you can build. And if you allow that, I think the next biggest thing might come from, I don't know, from some even smaller country. And maybe that's the point of whole decentralized finance. I totally agree. I think that is the point that anyone can get started from anywhere. It's permissionless.

You don't need to ask anyone. You don't need to know someone on Wall Street or know someone in Silicon Valley to go build something and to go innovate and to go ship something. You know, another fascinating point I think about you, Stani, is that you've got a master's degree in law, right? So this is also not necessarily the typical, I guess, motif of the, you know, the tech founder. Can you tell us about law and how that intersects with crypto? Just tell us the story. How did you get involved in wanting to build something on Ethereum and in DFI to begin with? Yeah, I mean, before going to law school, I actually did.

web development. I did mobile app development before that. And I used to focus quite a lot on financial applications. And I even had a startup where, well, it wasn't a startup, it was more like a small project where I build an app where all the gamers, gamers, for example, or anyone who gets income from app store or Google Play, there's this waiting people. period of one month and 15 days or so. And our kind of like product application allowed them to get their income the next day. So we did a bit of financing in that sense. And I loved always development. Like I was born always somehow like close to software. My brother used to use to basically tweak Linux kernels. And then the big thing.

it was a very big thing in Finland because, I mean, Linux actually is from, the founder is from Finland. The project started from there. So there is another like thing that, and it's open source. I think Linux is the biggest open source thing out there, one of the biggest. And what was interesting is that programming, it's in mathematics, it's very proof like. So let's say one plus one, one plus one is two. But then again, whenever I encounter it's regulation or law, which is very common, in finance. I noticed one interesting thing is that law is basically opinionated in the sense that there is no right or wrong, but there's actually a consensus of like different kinds of opinions

and that forms the law. And I was like, I wanted to understand more. And I went to study law and that was pretty, pretty fine. So like it was it was intellectual curiosity that drew you to law school is that the case? Yeah, I never intended to work as a lawyer. I mean, somehow it was as a professional, it could be fun in terms of like you, you're able to, especially if you're like a commercial lawyer, you could actually see how companies do transactions and help them start-ups, scale-ups, and also kind of like a bigger blue-chips.

well. But somewhere in middle of the law school, I started to get more involved in Ethereum. I guess I was researching something about automatizing legal agreements and somehow I ended up into a post about smart contracts and started to read more and ended up in Ethereum Reddit and started to think like, what is this thing? And just research like weeks and weeks and tried to understand and grasp like what you could actually do with this technology and that was like when i understood like smart contracts and the power especially like the the power of of having immutable code and then it kind of suddenly clicked to me like actually we're building a something that kind of didn't exist before in this efficient way and that was mind-bloody the interesting part for

me was that when I was designing and building the financial applications, like programming itself, it's kind of like felt and mathematics. It feels like it's very rules-based. So what it basically means that, let's say you have a equation of one plus one, it's two, but in law, when it comes to regulation, it's something like that. It's very opinionated. So if you think about law, it's kind of like different kinds of opinions based on interpretation, and then you kind of like have a consensus on what is the right interpretation of, let's say, law or what is right or wrong in that sense.

And that part of fascinated me quite a lot because it was very uncommon to me. and I wanted to feed this intellectual part. But what's interesting is that I started somehow get more involved in Ethereum because I was researching at some point in my studies about automatizing agreements or efficient way of making legal agreements, and somehow I ended up reading something about smart contracts. and then one thing led to another. I was in the Ethereum Reddit community

and reading all this stuff and people doing transactions and reading kind of different kinds of use cases, potential. And once I realized the potential of smart contracts in terms of immutability, I was pretty much sold because it was mind-blowing because once you deploy the code and in a way that it's immutable, you kind of don't need the trust and you can even get rid of the lawyers in one way and simplify transactions and make it more efficient.

And that is something that was very mind-blowing to me. So it sounds like it was almost like this confluence for you of things like so intellectual curiosity. I'm sure you probably saw that in Ethereum and in crypto and this idea of, smart contracts as law, as immutable law, and also harkening back to, you know, kind of the Linux experience with open source. It's all of those things combined. Is that why you kind of fell in love with defy in the space? And at what point did you decide to actually build something here? Yeah, I mean, the open source part was really fascinating because you have people around the world and contributing. Like, I always understood the open source because I, I, you, you

tend to use open source software when I was younger and developed software and during college. I didn't want to pay because I didn't afford to pay different kinds of software. So I tended to try to always find open source versions and not much contribute. I wasn't that kind of like a talented in the sense or skillful. But definitely like I always understood what it means. I think even more in Ethereum, it became quite clear because you had a community which is very open source centric, but actually you could build a lot of proprietary technology on top of on-chain ecosystems and in DFI as well, but many than not to because you kind of lose the

edge of having a community and the contribution of community. and when I saw that happen in the interim space, that was pretty fascinating. There was one incident that kind of like was weird to me because I came a bit before the DAO hack, and things were very unclear to me. I haven't grasped everything what's going on in Ethereum. And the DAO hack happened.

A lot of people kind of turned their backs, and thought the experiment was a bit of failure, to some extent. But for me, it wasn't ever like an issue. I mean, like I wanted to still build something. And somehow I realized that I want to build something related to finance. And then I kind of started to think what that could be. Okay, Stani. So you like, you discovered Ethereum. You're intellectually curious. You like smart contracts. But why did that end up you creating Etheland? And as a piece of trivia, for those that aren't, uh, aren't familiar, before there was Avey, there was ETHLAND.

And so ETHLAND is actually the precursor to AVE, which, you know, Stanley and the ETHLN team started before AVE ever was a thing. So, Donnie, how come ETHLAND as a protocol or as a project, how come that interested you? Yeah,

I guess I wanted to do some sort of a proof of concept of a loan transaction where we connect a lender and a borrower and they can basically do a loan transaction and in a distrust, and environment, and especially like addresses are basically pseudonymous, and still in a way that the borrower has an incentive to repay the loan. So what we came up is, interestingly, this was the period when we saw the first kind of like decentralized exchange coming in Ethereum in 2016 was the Etherdata, and there was absolutely no traction, no, no, Nobody cared about it.

Nobody understood how to use it. And it was difficult to use it. And it was an order book exchange. So it took a bit while when these tokens, ERC 20 tokens that are in Ethereum, got a bit of more volume and traction. And people started to actually trade them. And we saw, like, actually liquidity. So in that part, I was thinking like, okay, so we have here like tokens that could actually be assets, representations of anything, why not use these assets as a collateral

until the, and make a loan transaction and release the collateral when the borrower repays it? And that was the very first concept of over-collateralized loans. And we named the project ETHLAND, short for Ethereum lending. And it wasn't like the, I mean, the designs were very crappy. Those days when you build decentralized applications, you didn't give much about user experience, the front end. It was just all about deploying smart contracts and having some sort of way to interact. And that's fine. If you can connect to a DAP and then just initiate the transaction, rest was kind of like obsolete at that point. And I'm glad that we got rid of that and now we are in a state that we have beautiful user interfaces and actually user experience.

But that moment was there when we actually started. And that was, I mean, fascinating enough, Eatland model, the overcollarious loans, is basically where half of the defy is based on. You borrow against a collateral. And we didn't understand back then. I didn't understand back then how big the space could become. I thought it was a very nice proof of concept and probably I will forget about. about the project, but that didn't happen.

Yeah, people talk about the user experience of Ethereum and Crypto being difficult today. And I think those people never actually tried to use Ether Delta back in 2016. David, did you ever trade on Ether Delta? I'm pretty sure I still have funds inside of EtherDilta. I didn't bother to go get them because it was just such a pain. It was just so janky. Like, but it was at one time the only place where you could get particular tokens. But man, it felt like something out of like the early 90s.

It was just, yeah, terrible to use. But, okay, I want to, before we get to Avey now and kind of finish the story on Eithland, I want to talk about this because Eithland was similar to the initial version of Dharma, right? another protocol that was doing peer-to-peer lending in that it was it was peer-to-peer right so it was you know one individual with an eth-address matched to one other individual with an eth address and I don't know like how you think about it stony but it feels like peer-to-peer defy contracts haven't taken off in the way that peer-to-contract defy protocols have in that like a peer-to-contract is sort of like there's this aggregate pool and you sort of match liquidity and you pool liquidity

inside of the contract rather than always having to match peers. Was that an insight that you developed? Or what are the kind of insights that you developed when building ETHLAND that led you into what AVE eventually became? Yeah, I mean, I definitely agree that the peer to contract model is more efficient in that sense. What's interesting back then is that when we started, there wasn't an ecosystem like this we have today. So, I mean, E2DELTA, where I remember the first time I wanted to actually sell tokens or buy tokens. I waited a week that someone bought the tokens and there were quite liquid ones. I mean, it was first blood tokens. And it's like, it's just fascinating how low.

liquidity there was. You opened a trade. So this is like what people don't realize, don't remember about ether delta. So you would open a trade and there would be no buyers in the other side. So you'd have to wait like a week or one week. Yeah. Like yeah to get that trade filled. Yeah. Yeah. That's how crazy it was. I mean and and and and and and then you wonder like why I'm paying gas. Well, you wonder this is even more. But but but it's it's kind of like a interesting aspect. And yeah, I mean, the liquidity was very low. So we wanted to make this transaction to happen and this proof of concept.

And we're thinking like how, well, what happens if actually someone needs to liquidate the loan and resell the collateral and how we make it work in a way that we don't kind of risk other users? So when the liquidity is very low, it's way better to not, not to pull the risk to get. into a systematic form. And that is very typical in low liquidity instruments. So what we wanted to do is kind of like separate the agreements. And we even technically did it quite separately. We deployed for each loan that it was created. We deployed a separate smart contract, which was very stupid to do

because every time you deploy a smart contract, you pay a lot of gas, but then the gas price was quite low, and we found out like six months later that the gas prices went 10x, and then we were in the place that we had to refigure everything out again. So we had to separate the risk. So that was like one of the things. We didn't want to make a situation where someone can come and somehow use this systemic risk in their advantage

when the collateral values are low liquid in markets. So we made the peer-to-peer model where everyone who is funding alone can actually decide upon their risk level. And at that time, it made a lot of sense. And what was interesting in this fashion is that it was the very first primitive of on-chain lending. And kind of like we wanted to look something that already exists in the traditional finance, is future peer loans, even though they are these days also kind of like liquidity providers are already like aggregated in one way. And we started the model this way. And at some point,

the defy started to accelerate in the sense that some of this token started to actually have some value. Like now we have actually shitcoins that are traded and not just shitcoins that aren't like traded anywhere. And that changed quite a lot. So you could pull risk. And we started people to do this. And that started to actually inspire us that, okay, if they can do it, I mean, we can do it and we can improve something. And I think that was the moment that took us forward. So before we get to the happy 2020, I want to talk a little bit about the bear market, the grueling bear market.

So, you know, back to tokens, you guys launched the Lend token in, in how. happy days, right? December 2017, when everything was booming, even crypto kitties were selling for like, you know, thousands of dollars. You launched it then. It shot up, right? So from whatever the launch price was to about, you know, 39 cents in January 2018, right? Everything was going crazy. There was not a lot of rationality to it, not a lot of cash flows or token economics that were thought through. People were just buying everything. But then we had the 2018 bear market start shortly after, and it seems like shortly after you guys launched, Ethereum lost 95% of its value. But like tokens like Lend lost even more than that.

It lost 99% of its value by 2019. So like the pit of the bear market, I think, again, you know, memories are short-lived, but people don't remember how despondent defy teams were feeling. Like, you know, Ethereum was dead. Bitcoin is the only app for crypto, all of these things. How are you feeling? And to add a little bit more color to that, there are plenty of 2017 tokens that did exactly what the lend token did at the start of 2017 and then, and then moon.

and then in 2018, like, lost 99%, right? And there are plenty of tokens that are still at 99% losses, whereas land has not. And there's also, there's also, and there's also tokens that, that, they used to do something completely else and, and lose 99% of value. And now they're doing defy. Yeah, exactly. Well, okay, but, but in, in the bear market with, you know, your, your token 99% down, down, everyone's saying like defy is dead, Ethereum is dead. How are you feeling? Like,

it seemed like you guys kept building, but how, you know, did you ever think it's over? Ben Horowitz has a book which I love. It's called The Hard Things About Hard Things. And he talks about every, every, you know, protocol, every startup has its, uh, uh, uh, withio moment. That's WFIO where it's like, we're effed. It's over, right? Yeah. And they have to go through that to come out on the other side. Did you have that moment? Did you think? it was like not going to work out? Well, actually never because we, I mean, we did raise substantial funds, but kind of in terms of like building, the ideas that we always think about at Ava and back

in Italy, like we were always like thinking like like when can we ship this new thing, like when we could move to the next thing. And like we had so many ideas that we wanted to actually get into the main net. still have. I still have a lot of a lot of kind of like a proof of concepts that we basically were brainstorming

two, three years ago and that are very viable products today if we will ship them. And it's just kind of like we have always been a bit unresourced because we are small themes, so we have to focus in the very, very core.

But I can say that During that kind of crypto winter period, it wasn't easy. I mean, it wasn't like people are losing fate. And just because of the evaluations and the market is going down and not giving much about what people are billing, that was like sad. At least it was sad to me, like, because like, I mean, we were shipping more stuff all the time. We're getting more knowledge and we're building more things than more. than ever and basically people weren't that excited about it and and I think the good part is that we we definitely had very diverse community and uh we had a lot of users from from even today like many users

from many other users are actually from the uh hitland era and for them it's fascinating because they have seen our very first products and like which look completely like crap and where we are where we are are today. For them, this is like a journey and they have been part of it. And that's like fascinating. And there's still a lot of people who come all the time that they're saying that being following all the time and haven't been active. But it's just amazing how you guys are proceeding. And I think for us, the the thesis always been the innovation. We didn't care about the markets. And to be honest, when I came to I never came to invest. I bought Ethereum for gas and that's all about it. I had I needed gas for

deploying contracts and to pay transactions. That is why I needed Ethereum. I never need it for as investment. I like to build financial products, but I don't want to kind of like focus too much on investing. I love to build things. I'm a builder, I think. So let's talk a little bit more about the AVE community during the bear market. You said that there were people that, that stuck around and people that, you know, paid attention, but that couldn't have been the same throughout 2017 and then into 2018 and 19. So how did the AVE community kind of fill their niche around AVE? Because from what I understand now, the AVE community is one of the,

probably the gold standard in crypto, right, in terms of like having a strong relationship with the team, and the team using the AVE community to iterate on their products. Tell us about the transition from 2017. to 2018-19 with the AVE community. I think what was important that when we were building EITLAND, we basically finished all the features that we wanted to deliver to the community, and then we started to build the next thing.

But for us, what was important, that actually our communities were about what could be built next and compared to that too much, giving kind of like too much sticking on something very puristic and I really love that because it gives space to ship and it's interesting now like I mean we're shifting towards decent class governance where the token holders make all the decisions and I'm really curious to see like how it will play out in the future because Ava as a team will build things like I hate the idea when you know you build a protocol, you build the product and give it to the community, and then you

basically say, okay, I'm out of here. And I just don't believe in that. I believe that you are still like a stakeholder in what you're building. And if you look at, for example, Linux Torvalds and as a kind of like member of the Linux community, he's still very active. And same for, for example, Vitalik in Ethereum. And this are kind of like a people where actually like, I like the, I like the idea of like kind of like being present in the in the ecosystem and I think it will be interesting to see because there will be other teams also building on top of AVE and also making pull requests into the core of the protocol and curious to see like what direction it will take and I the good thing about we're always listening to community in in that sense so so so

There usually haven't been, like, difficult times. I guess more when there's difficult times, we have got a lot of respect in the sense that we build things and we don't disappear if we fail with one thing or something doesn't work. We just try to find a solution. And I think people just trust us in that sense that they want to give us support and push us forward. And I think end of the day, like your product is a strong. as your community and including users within the community. So, yeah, I mean, that's vital part of AVE. Did the community ever take a more, like, active role in product development?

Like, how did the communication between team and community go? Like, while you guys were making this pivot from Ethelan to Avey, like, what impact did the community have in actually making, like, design decisions or, you know, meaningful and impactful choices. Did any of that happen? Yeah, I remember, like, kind of like we showed some designs and we, I mean, when they were crappy, we got like a lot of, a lot of, like, negative feedback and we realized, okay, now we really need to, like, make some better you acts like, and we understood, like, the importance of it. Because many of the community members, they're not, like, always this kind of like a super defy super user type. We do have them in our community. And, and,

but we also have community members who are just, they might deposit once and forget for a long time, or they might just basically, they support Defi, but for some reason they don't want to use it at the moment and just want to follow the action that is happening and might be like a token holder, but holding still in centralized exchange. So the feedback has been very, very, I mean,

community is somehow, you have this feedback loop and go back, and forth and having this for many years is amazing. The feeling is just super nice because you know there's certain people there. Like if you publish some designs or like product updates, you know, you know, there's there are people who have followed you and are like actively participating. And that feeling is amazing. So you kind of trust that you have, you have audience. And, And I think it's, we never, we try to not take it as a granted and, and like, appreciate like where we are.

And I think we wouldn't be here without the, the whole token sale and this, this, this, this, this kind of like a path to roller coaster from, from bull market to bear and back here. I think this has kind of bring more strength in our community. Hey guys, we're going to pause the interview with Stani so we can talk about some of the bankless sponsors that make the bankless nation possible. Bankless nation, do you want to go fully bankless but in the real world? Monolith is the defy account that you need. It wraps your eth address in a bankless visa card and it does so much more. It closes the loop from fiat to defy.

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It's optimized for European listeners. They'll be coming to the U.S. soon. you get that visa card the monolith card tweet about it when you do i love seeing people unpacking their beautiful bankless visa cards and makes me realize that the revolution is here search monolith in the app store ampelforth is a new base money experiment on ethereum many people have heard of this new rebasing mechanism and ampleforth was the protocol to first introduce that into the ethereum space Ampleforth is very comparable to Bitcoin in the sense that it has a non-dilutive supply. However, there's one thing about it that's inverse with Bitcoin, whereas Bitcoin has a

completely inflexible supply, meaning any demand for BTC, the asset is therefore reflected in the price. And Ampleforth is the inverse of that, where Amplforth is pegged to $2019, and any demand for the Ampleforth token is reflected in the supply of the asset. not the price of the asset. So the Ampleforth token tracks $2019 slowly over time, so it should never be too far away from $2019. And in order to achieve that goal, it adds or burns Amplforth token supply so that the market generally prices it around the value of a $2019. It is definitely not a stable coin because the volatility of the value that you hold will fluctuate up and down wildly.

but the token itself is supposed to track a dollar. Pretty interesting experiment. There's been a lot of spinoffs using this rebasing mechanism. They also have this liquidity mining program where you can supply Amplforth and Ether tokens to the Uniswap pool, and you'll be able to get an extra dividend of Ampleforth tokens from the Amplforth Geyser.

So check them out at Ampleforth.org and see if this is an experiment you want to partake in. All right, guys, let's get right back to the interview with Stani. So you mentioned the token sale. Did you guys have funding before that token sale from like venture capital? No, I mean, it's quite difficult in the sense that we were building technology back in days that was very, very novel in the sense that the ecosystem didn't exist. And also me coming from Finland, small country, which is like not a VC playground. and yeah, being at that age still studying.

I mean, I could not see a VEC fund placing a bet on what we were doing back then. You will need something more kind of like a democratic way to raise funds. And as we did the token sale, I afterwards realized by analyzing that actually like if this way of funding will not exist, we will not be here. I mean, no way any like kind of like a, I mean, in that stage early, any VCs will invest in us in those, those kind of like circumstances. I mean, we knew that we could build things, but betting on this kind of technology and ecosystem, today it's easy. I mean, it's very easy to go and find a project which does some solid stuff and just invest because there's. There's an ecosystem. There's like market and like cross interactions. But I mean, back then there's ether delta, which wasn't even liquid. And I mean, not an easy scenario in that sense. The lend token sale happened in November of 2017. You guys, from what I just looked up just now, you guys raised a little bit shy of $18 million, which I mean, as far as market caps and valuations go, that is insanely low for what we know.

know of today. And so you're telling me that the $18 million that you guys raised in November of 2017, plus I'm sure there was some AVE tokens held by the team, all of that raise was done in an ICO and all of the funding that you guys took was done from the ICO to people that were involved in the community at that time. And to me, I want to highlight something here because, you know, the ICO is kind of synonymous with like, you know, the F word. It's like a bad, it's like a bad word now. Like the I like we always look back on the ICO mania as like this time where a lot of retail got scammed, you know, people got burned. But I think we forget that like the the bad side of the ICO mania came out of like a very, very good side of the ICO mania. Like the most good, for example, I would say was like Ethereum, like the most fair ICU of all time.

And then Auger came not too long afterward. And Avey, I think people should remember that like, and Avey is like leading a lot. example of an ICO that was fundamentally good that did its job in both at like giving funds to the team because they need that funds to build out the protocol but also using the token as a community shelling point a community coordination tool and so I just think as the ICO model was done with a complete success with the AVE team yeah I think what's what's funny is that like I see kind of like betting on the AVE team is it feels like betting or reliability. So we kind of went the ups and downs and we're still here.

So it's more certain in that way. But yeah, I totally agree. I mean, lots of things happen. And I'm pretty sure that once this whole yield farming craze will end, we will see a lot of disappointments. But also, if you look at the venture capital award and investments in general, let's say you make 10 bets and 9 will fail and one will be the jackpot. Yeah, I mean, there's even more kind of like similar scenarios and investments in general.

But I really like the idea. Like I still don't understand like why people aren't doing this so-called dikes, which is a combination of a Dow and an ICO token sale, which is something that Vitalik himself, kind of suggested that that could be a model to try in the sense that you actually have a fair launch model where you basically sell the governance power to the token holders and that those funds are going into the Dow and they get instant governance in that sense and there's like incentives are so aligned And we're now having this kind of like a fair and launch model that we call

where you give everything to the community with this farming. But I think it's very unfair. And I can later say why. So, Stan, to wrap up this portion of the conversation, when we had Vance on the podcast from Framework, he talked about how teams that were handing over the governance of the protocol off to the community were inherently looking, inherently looking for valuations that were far beyond like the traditional C-Corp valuations

or the companies that you find on the stock market, right? And because these things, because inherently these things are protocols, they aren't companies and protocols just are bigger, right? And so when you guys were in 2017-2018, building out AVE, were you guys thinking along those lines, or were you just kind of, you know, heads-down building? Or what was the end goal for, for AVE back in 2018 and 2019. Yeah, I think most of the we were heads down building, but we kind of tried to a bit of like,

think of like where the space is going. And sometimes there were difficult times in the sense that we didn't see things moving in the space, kind of like we had a long narrative. I mean, there was a long time of narrative where there's a on a few defy users and you know like we build a lot of stuff i mean because we were embracing how much there's developers building in defy and so many cool things and just a couple

of users and and this this kind of like a meme and now it's insane i mean this this kind of like a narrative was back in a year and a half ago and now we're in completely different uh situation and it's interesting So one of the times on those, 2018, 19, we had this kind of like periods that we are not getting more users and like, why isn't this working as an ecosystem? And we weren't like disappointed, but we were thinking like in a funny way that what we like didn't build or what's left to build that we can actually get more people involved.

And funny, like what's really good? funny is that it's actually the incentives that drew everyone. And the very first incentives were basically having stable coins and earning interest on them. And that got a lot of attention. I mean, you saw interest rates from 5 to 7% annually and then you compared to the traditional finance where it's close to zero. It makes you wonder like, wow, this new world could be, there could be some potential here. I personally absolutely love the fact that the Silicon Valley VCs of the world and the Wall Street finance people totally missed Avey. I just love it because it's just like, you know, that's the story of Defi. That's kind of the bankless story. It's kind of the underdog,

right? That anyone has access to these tools from anywhere in the world. They don't have to be part of these established networks in order to succeed here. What they have to do is build something that people want. But it still is, I think, an incredible story. So not that long ago, we're talking six, seven months ago, Stani. Avey had less than a couple hundred thousand dollars locked inside of it. So it was tiny. Now, fast forward to now, we've got like over.

a billion. We've got like something like 1.4, 1.6 billion locked in this protocol over the past seven months. Like that kind of growth is absolutely insane. Even by like Silicon Valley standards, they don't see this sort of thing. Can we talk for a bit about why you think that growth has come? So you mentioned incentives. Is that the reason? Is it also that you guys have just been like, you know, building so much and you're just building faster and innovating faster than everyone else. I guess my question is, in the two years of the bear market, what the heck did you guys build to account for this seeming overnight success that we've seen in 2020? Yeah, I mean, we definitely didn't expect this kind of growth.

Like our idea was very, I mean, we always had ambitious goal to, to, to, to, to, achieve, but it wasn't like we, I wasn't expecting even the DeFi space to grow so much honestly. I mean, we would be happy if we had like 5 million block value and that would have been super awesome and then we will be thinking, okay,

what will be the next features we will build? But I kind of felt somehow that we put a lot of effort in the actual protocol launch. I mean, we built it for quite a long time. I I think it took us almost a year to deploy,

and we put a lot of effort in what we were building and trying to perfect ionize it. And having all these features like the A tokens that accumulate in user balances and having native flash loans and all of the stuff that we were implementing, I mean, it kind of paid off. And I guess one of the bigger things,

things is that it's quite developer-friendly protocol. And it's very easy to build on top. And we noticed that most of the liquidity comes from actually in transactions comes from different kinds of products that have been built on top. For example, we were, when we launched in January, we got quite a lot of deposits and borrowings. But no one actually was using flash loans. And that was actually interesting part of this kind of underdog story because our flash loan has a, this kind of like a reward fee to the depositor. So whenever there's a flash loan on particular block, it means that it gives a this kind of like a spike in their yields, depositors yields. So let's say if there's a die flash loan, typically now today they can be even like a 14 million worth of dieboard. it in a flash loan that gives a small spike in the all the the depositors yields and that's that's

pretty cool because it's it's arbitrary so so and what we noticed that kind of like the the Silicon Valley this perception was that actually you don't need to charge in the beginning you don't need fees and you know you're looking for market share and and and for us it was like a bit of bullshit in the sense that I mean if you're building products you can you can you can have fees you can you can because you're building value in that sense

and when you're building value you can definitely charge and how we are doing in the protocol and in the future is actually that the the fees goes to the stakers and and eventually to the token holders and

whatnot but kind of I think people were too shy on breaking things in a good way. You know, there's so many patterns, not just in DFI, but in product development. And those people who are actually going in and breaking those barriers, they're succeeding. I mean, that is the innovation and how we get further. And we promoted the flash loans and talked to different developers and showed them like how, what kind of cool things you could do.

I did a blog post on like seven different, eight different use cases of flash loans. And then some of the actually developers listened to me and kind of like they started to implement and I didn't even know about that. And then what happened, the Black Thursday came. And we see, you suddenly see this kind of a needle in the graph. You know, we have this kind of, if you go to Avey Watch, you have this graph of like the usage and we had this kind of huge needle that went up and that was basically flash loans and we were like wow where is it coming from and there was a project called like

defy server that allows you to liquidate your CDP before it goes to the liquidators and you lose your kind of like the incentive to them and I mean this kind of things and once people saw like the what kind of things you could do with flash loans it took forward Of course, there was a couple of flash-in-related hacks that gave a lot of publicity to the actual function. But I know. I mean, being close to developers and being part of it with them when you brainstorm adds a little value at it and helps others to actually use your product as well. And for those that aren't aware, this flash loan mechanism that you're describing was pretty innovative, right?

And I think Ava, did you guys, I don't know if you came up with the idea of a flash loads, but you certainly popularized it. And it's this idea, and jump in here, Stani, if, you know, if I don't recap it quite correctly, but it's this idea of in a single block. So in a just one short Ethereum block space of time, you can, in an instant, borrow some funds, use those funds to accomplish some purpose in, you know, kind of the DFI landscape. and then give the funds back and you're charged a rate for that. But it's the kind of thing that doesn't really exist in traditional finance.

Is that how you describe what a flash loan is? And who came up with this idea? Where did you guys, you know, figure this out? Yeah, I think it's kind of exactly. I mean, it's something that isn't in traditional finance in the same form. And the flash loans itself, I mean, it always existed in the in Ethereum because of the atomicity, how the Ethereum settles transactions. But I've seen a lot of flash-long implementations before us.

I see, like, I think even like multiple, but I never saw like actual main-net implementation utilization kind of like before us. So I think what happened is that we just made it fashion and somehow popular. it, but definitely I've seen before implementations, and I go a lot of code. I used to go a lot of code more than I do today, but I used to go like

repositories and search from different kinds of, like what kind of project people are building and and I definitely saw a couple of implementations, but didn't mind that much. I think one of our developers, Emilio,

basically started to, I mean, he was very into this atomicity and kind of came up with his own sort of implementation that we eventually used and still use. And we are coming with version 2 where we have

again completely a bit different kinds of a flash loan implementation. And I mean, yeah, it's one of those things that kind of like this this defy thing. Defy

existed for a few years. Nobody cared. and now everyone is caring because of the incentive. So, I mean, it's fascinating how the network effects work. Like they come and when they come, they come all together. Yeah, I guess another, I guess, way that Avey was an underdog is it's actually, you know, fuels in a way, almost like a second mover advantage type of product, right? So, you know, Google certainly wasn't the first search engine. Avey wasn't the first lending and borrowing protocol to do something in a kind of a peer-to-contract-type way.

Compound seemed to be first. Compound, a Silicon Valley company, you know, if coming out of that, the A16Z coming out of that whole zone, it seemed like at the beginning of the year that kind of compound had this space covered completely. But here you guys are, and you've now surpassed compound in terms of total lockdown. value. Is there something to that second mover advantage that you think accounts for your success? Yeah, I mean, it's always difficult to be the kind of like a tough dog. I mean, we were in D5 polls in like for a week and something as the most value locked. Even the metric is a bit not suitable for covering all the different kinds of financial protocols. But I mean, we felt bad in the

sense that like it's not cool to be there and it's way cooler to be below and and kind of like compete with with the with the innovation and not not not worrying about like what's your kind of rank in in that sense and uh i i think for us like our goal was always to to build a product that everyone uses and i mean everyone that that we have certain user base and and we're happy what we're doing. And I mean, we're always competitive. We love what others are doing in the space and really admire everyone's work. I mean, the stuff people are building these days is amazing.

There's some, and technical even technical implementations, there's a good amount of talent now. And I hope we get even more. So I guess like being an underdog is way better, at least for us. because we don't need to worry that much of a pressure. But of course, you get a bit of pressure when you're getting closer to someone that is above you. But I don't know, it's fun competition. And we work quite closely with everyone. And we try to be very approachable and kind of like be as collaborative as possible.

I still think that the defy ecosystem is like everyone works together in some way but we have like difficulties to reach upon coming up with standards best practices and and actually like embracing them even even though we have been already a while

and I don't know it might be because everyone is building heads down or or just kind of like we're still like looking too much on TVLs and and kind of like competing a bit. But I think that we will move forward from this space and interesting times will come. So, Stanley, what about the culture differences between a team like AVE and a team like Compound, where, like Ryan alluded to, Compound is the Silicon Valley-esque A16Z-backed startup that is a startup from a founder that has plenty of startup experience. And where Avey is like

this team out of Helsinki, very grassroots organization, very grassroots leadership, grassroots community funded by an ICO that and that the ICO ceded that community in a way that compound never really, compound earned their community to not to give credit to where credit is due, but the genesis of compound came as a venture capital type of investment, right? And Avey is just not, it's just a little bit of the opposite. And compound seems to kind of go along with this like very slow, very meticulous, never ever risk anything type of attitude where Avey is much more move fast and experiment quickly. Definitely not alluding to move fast and break things if any of the listeners just had that pop into their head. How do you credit like the

culture differences between these two organizations to like the differences in the resulting product? Yeah. I mean like of course like I'm from from Finland myself but actually when we look at the team, it's quite, like, quite global and in the sense, like, I mean, our headquarters is now in London. We have an office in Switzerland. We have so many nationalities. I think there's like 23 employees in Aubem, and most of them are developers. That's why we ship quickly. but what's interesting is that I think everyone has somewhat like a persona or media like social media presence and and participates in different kinds of communities. And I think that's very important for us. I can't speak much about like how compound is doing things.

Of course, like they have their own way of doing stuff. but we really want to be very open and innovative how we do things. And definitely, like, if we see an opportunity, we want to take it, and we want to take it as fast as we can and kind of like experiment how things go. And even in terms of like building, it's very challenging to build protocols that are holding a lot of funds because it requires so much procedures and effort in terms of security

and the way you develop the architecture and all the after works that you need to do. So in that sense, it's not easy, but I guess it's also about how you build and structure and architecture your offerings because you could always build products on top. And I think that we have done pretty well. But I think important stuff for us is that we don't want to be associated into one particular place.

I don't think we want to be European or we want to be like a scene more preferred in US. We want to be this kind of like a global thing in a way that we have brand exposure in US, Europe and Asia. And we try to get like as wide demographic as possible. And that is the key when you build something that is very decentralized and, like, autonomous protocols, because you succeed is actually that protocol is used globally in different parts of the wards. And not just, like, used, but, like, you have contributions that people are, like, contributing and building and, and helping out in the community. So when we achieve that thing, that's pretty important.

And I personally, like, I think V.C. is coming. into the space and it was like a couple of years ago and it was like a institution's our coming moment for defy when we saw like VEC's taking investments

I think in one way that was really good because we a lot of good projects were built now it's difficult to say when we are in this like a fair launch model give it straight to the community and how this VC

VAC part will play But I see benefits in both of them. And I think the community members at least have decisions to make what kind of community they want to belong. But definitely, like, our goal is to be as open community as possible. And yeah, I think maybe that's the difference. We want to be global. So I want to just harp on this a little bit more. So AVE has had their token out since 2017, right, since the ICO, since November.

And the AVE, like, number of addresses that hold the AVE token is over 100,000. Whereas Comp, and their brand new token, has only been out for a few months. And it did this fantastic job with kicking off this whole concept of yield farming and liquidity mining as a fair distribution mechanism. But as a coordination tool, comp is just behind. They are very recent, they're very new, and whereas Avese's token as a coordination mechanism, both as a coordination mechanism between the community and the team, has been going on for years now. Do you attribute any success to Aves' protocol as to the establishment of the token much earlier than compounds? Yeah, I think, honestly, mostly I think it just takes time to actually build this reliability of,

success. And I think it boils down to the discussion that we we saw the ups, we saw the down, and we're still here, we're building, we're shipping. So I think our community and in general, people understand somehow that like we are, we're serious on what we're doing and we keep building and like that there isn't like a, this isn't like a trial or this isn't something that we are trying to figure out whether this works or not. If we don't succeed in the first time, we will kind of like we will pivot and do something differently. If it doesn't succeed again, we will just redo.

I mean, we're not leaving anywhere on the opposite side. Like we want to expand and we want to grow the product offerings and improve our protocol and and kind of like get get community involved as much as possible. And I definitely agree that it takes time to build things. And I don't have like anything like bad to say about compound because I really respect what they're doing. And I kind of I like to have them as a competitor or like kind of like one market participant in the space because they're doing good job. so it keeps me even more active to do even better job and at least try to do better job

in that sense. But in terms of fair distribution models, I don't know, like, if you look at the yield farming, I don't see them that fair because this isn't generated to compound itself, but actually like what we see today, for example, where we have this liquidity mining purely in the sense that you generate, you print this token to the governance, to the liquidity providers

who are basically putting liquidity into whatever you're doing and farming the token. And what happens is that it's kind of like a free money in that sense. So liquidity providers come and the more you have money, the more you're farming, right? So you're getting more tokens. And then if you have a smaller amount of funds and you want the token, you actually, by farming it the same way, you are not getting as much as governance power. So you are kind of like forced to buy the token. So you see other people are printing with large amount of money and selling it to the smaller audience. And I see it actually the opposite as unfair distribution model.

And I think it will not end well. I mean, I definitely like, I've seen like very good models of this liquidity mining or in inflation, incentives, rewards, whatever you name it. For example, synthetics, which was one of the earliest models and their system seems to work quite well. But the stuff I see today is a bit quite of crazy. Yeah, things are certainly getting a little crazy. That's for sure. And so, you know, one of the things I think is super underrated is actually going through a bear market.

That's, you know, part of what distributes your token to the community and particularly to the holders, the true believers of that community. Bitcoiners have been saying this for a long time, actually. And I think they're right. You know, Bitcoin is probably the most widely distributed, probably ether after that. Both going through bare markets, going through a bare market can be the best. thing you can actually do counterintuitally to build up, build better distribution of your token and to build your community. I want to talk about one last area of, I think, success or something

that's unique about AVE before we talk about Roadmap and Avanomics and everything cool you guys have in the pipeline. And that's this. It feels like you have an uncanny ability, your team, the AVE protocol, of building up these unique partnerships, like these protocol partnerships, like bringing other defy tools and defy protocols together to build something cool. So, you know, partnership with open law to create this unsecured lending, almost like a credit primitive, partnership with realty. You've got real world assets coming into AVE. Even maybe I want to talk about this the most because Andre is somewhat from the Wi-Fi

project we have in the podcast a few episodes ago, WIRE and that is, he is a, he is a becoming kind of a DeFi celebrity, if you will. And I feel like, you know, is the case that you guys were working with or you were working with Andre many months ago on some of these projects? Like you saw the potential of the sorts of yield farming that he was doing and building. And it feels like there's a partnership there as well. Can you talk about some of those partnerships and maybe focus on your partnership with some of these developers like Andre? Yeah, I mean, in terms of like different projects.

And I think one of the interesting success usually is that we're trying to find a simple way to make things happen. When we discuss with different projects and we're trying to find something that we could do in common, to solve some efficiencies or provide value at it, they tend to become complex. That was my previous experience. But now I see that we are very good at finding something very, very easy and simple way of executing. And that is what has happened with the different projects. And we're doing really cool stuff with real tea and open law.

And just like showing the potential. Like the credit delegation, I mean, many missed kind of actually the bigger value proposition. So definitely like the open law and kind of like delegating your credit to someone you trust or someone you make a legal agreement, that just shows like how you can unlock liquidity from defy. But actually, like, what's the core part is that for me, who kind of is very like a crypto-native, is that and smart contract native is that you could delegate your credit

into a smart contract. And if you know the predefined functions, that what that smart contract can and can't do, you can assess the credit risk and say, okay, there's not much risk here because it just can borrow the funds, deposit them into somewhere else and farm some token and sell it, and then after period of time, return the funds. And if it's not returned, I can myself call the function and the funds will be returned and I get whatever proceeds there are. And this is like credit delegation, the actual potential, like from one smart contract, from the protocol, from the

depositors to smart contracts. And Andre is an interesting individual. I mean, we have worked for quite a while and like we always brainstorming things. And like what I like about Andre is that we build the things for AVE and we build, I mean, common stuff. And also we help each other in terms of brainstorming ideas. And I mean, it's also kind of like a mental support for each other in terms of like things are going quite hectic in Defi and it's not not easy, especially for Andre because I mean, he started to develop by himself now people are helping, which is amazing. But there's a lot of stress when you're building stuff on Defi.

I mean, he made a post once about like how building on Defi sucks. It really sucks in sense that people want to blame and point fingers and it's kind of like not always right. But yeah, I mean, the coolest part is about this relationship is that Andre has big of things like when you talk about ideas with someone like maybe this and that could be built like normally it never happens or you find only kind of like reason is not to build, but usually with Andre is kind of like, he builds it. And I mean, that's a cool thing to do. And there's like many of this kind of like developers that are shipping and some are like doing it in a different way. And but I really like what's happening in in the whole

ecosystem. And I really love how like under was using AVE already in a way that was, uh, uh, pretty cool before this whole Wi-Fi phenomenon. And that was like really, really amazing. And I'm really happy that he continued back in the days, I mean, continued to build. And yeah, and I mean, part of this relationship stuff with everyone, it also requires that your team is very active in the sense that your developers are happy to help other developers

who are not in, let's say, AVE, but are building something else, helping them contributing to their projects. For me, it's very important that I can actually help someone to build a better product and whether they utilize AVE or not, because they're in the ecosystem. And it's important, especially security-wise, that everyone, like, kind of like gets the resources that they need. Because you can build the whole reputation and lose it quite quickly, something goes wrong. You know, you almost get the sense with, you know, teams like AVE and developers like Andre that they're not just building for their own products. They're building for the entire defy ecosystem.

Is that right? Yeah, yeah, yeah. And I think we all are in the sense that and the defy is just one step. Like, it's a step one, you know. And it's funny, we started with defy because talking about the whole Ethereum ecosystem because it's just like finance makes sense to have financial backbone. But then there's going to be cooler stuff. There's going to be NFTs, collectibles,

tokenized different kinds of value and e-commerce on chain. There's plenty of stuff. Once we realized that actually those barriers that we had in our minds actually adjust restrictions for imagination. When we get that on the side, we will unlock the real capital. you know i mean if you can custody and and you can you can uh token as a dollar why can't you tokenize a tv or or a uh playstation and or a game and you know there's so many things you could actually do in the future and i'm bullish on on that side and defa will be this backbone that

will help help fuel more fire in these different spaces that we'll see in in interim. So, Stani, I want to turn to Avanomics. And I want to read a little excerpt from the Avanomics introduction, just a very first sentence. The goal of the AVE tokenomics, through its incentives and policies, is to create a shelling point where the protocol's growth, sustainability, and safety take priority over individual stakeholder objectives. Stani, can you kind of give us the too long didn't read on the, I mean,

to redo that. Stani, can you give us a summary of Abenomics and its ethos and role and importance of the future of the ABE protocol? Totally, totally. And that basically part of actually was Jordan from our team who basically led a bit the Avonomics project in ABE came up with. And I really like the quote. And what's interesting about Abenomics. Like, we, once we shipped the protocol back in January, like, that was like the very second thing we started to focus on the very next day. So we continued straight away to work with Ovenogics. We didn't rest at all. And our goal was just to figure out, like, how, like, how we could actually benefit our token holders.

So we never thought about, like, token itself. Like, it's just a commodity, like a token for actually. how the community can voice out, but how they could actually benefit from the protocol, but also contribute into it. And we were thinking, like, what is the most important thing for a financial protocol? Like, what's the most important thing?

And we were thinking that, like, if something goes down, let's say, if there is some sort of like a shortfall event, failed liquidation or security breach or whatnot, that will be very devastating, not just for AVE, but the whole space. And to some extent, we understood that these protocols will scale, especially if there's adoption.

I never knew that it will come more faster than I expected. But we know that, like, what we need to build in terms of, like, token economics has to also, like, taking into consideration the stale, scale that we can scale at some point. But we started to think that we really need to somehow get people to contribute to securing the protocol. And in essence, what the AVE token, it's basically a migrate token from the Lent to AVE,

that we have the migration coming up actually quite soon. And the idea is that when the token holders are making decisions, they fracturally are making decisions on risk parameters and risk-based decisions. So what kind of collaterals could be added into the protocol, what kind of markets could be created, and risk parameters. And on the return, they're taking the risk transfers. So they're taking the risk of what they're deciding. And because they're doing that, they basically get rewards.

So there's passive and active risk taking. So the active risk-taking is when you're staking into the protocol, you're staking your tokens. And what it means is that if there's some sort of like a short-fall event, let's say, failed decodation or a buck or smart-o jack hack, what happens there is that 30% of the staked amounts that you're risking and getting rewards. So you're basically earning ABE could be slashed, which basically means. that they could be sold. And the passive one is the version where if that state doesn't cover and the loss is more substantial,

then there's this maker-style minting facility. And then we added one additional function here is this built-in backstop module of stable points that are placing auction bits and buying that those slashed or minted tokens. And all of the reasoning why we came up, besides the safety, like,

why this type of mechanism, there was certain events during this year, like the Black Thursday, the flash loan attacks, the Deforce hack and BCX hacks as well. And what was interesting for us is actually to monitor, like, how was the aftermath handled?

And it proved some interesting parts, like the maker model worked in one way. I mean, they were able to use their token economics to cover a deficit. Then there was the, for that as well, there was this group of individuals and entities that went to this die backstop syndicate. And that kind of mimics are backstop module that is built in. And yeah, I mean, the idea is kind of like focus on the safety. but we have liquidity provider rewards, but they're not that substantial. And the idea is that when you get those rewards by providing liquidity,

you're incentivized to bridge them into this staking facility. And then your governance is kind of like in line towards making secure protocols. So you don't want to have this kind of governance war where you have on the one side, you have people who want safety and other side you have people who want like higher yields and just providing liquidity. So it's actually like even there's a lot of functions. The simplicity, we just want to use the market capitalization of AVE to recapitalize the protocol when needed.

That simple, that simple explanation of my complex explanation. So when I look at the ecosystem overview, and for the listeners, this will be in the show notes, it's docs.com slash avonomics, where there's this fantastic, well, A, explanation, just document of explanation, but also some really nice graphics, which are really helpful to understanding how this ecosystem works. And Stani, when I look at this, I see a lot of different protocols having their influence in these graphics, right? Like, I see components of synthetics and I see components of maker. I see like the compound governance module in here. Can you talk about the influences that have helped guide the architecture of the Avanomic system?

Yeah, I mean, I think for, in terms of like the kind of like having the token as a way to secure the protocol, like we looked quite a lot into the maker model when it comes to the new thing, the same. The staking is more of what we have in synthetics and this kind of like inflation. We were balancing between actually inflation and the reserve model. And we had an active discussion in our community forums. It's actually quite interesting. In terms of even more what influenced us is the Ethereum itself. So if you think about it, like people in Ethereum, like, they're not actually paying for transactions. Like, you're not paying that your transaction is like saved.

You're actually paying for security in the sense that you're basically paying that the transaction doesn't get somehow manipulated in one sense. and Ethereum as well, it has an inflation model. And so we tend to kind of look what's happening in DFI, but a lot of good stuff has been built already on the blockchain network level. And Ethereum was a very big inspiration. And then we had SNX, synthetic is very influential and the maker model. And we looked kind of like almost every major, protocol how how their token economics were built and we tried to find like what's suitable for us

for our community and what was the narrative and and also like we we look at the compound when when compound came with also with the liquidity uh mining and we we just were following like how that develops and and uh yeah i mean it's a combination of uh everything that's out there and picking like the pieces that fits well in what we're trying to achieve. And somehow I think we did quite a good job. But also I noticed that we spend six months, like, every day, a lot of time in designing. And like, it's kind of funny that how long it takes to design token economics. Like, it's not that easy that I usually have been thinking about, but it took a lot of time to design.

So I want to get into the backstop module a little bit more because I think that's one of the newest innovations that Avanomics brings. And so to add some context, if you decide to purchase MKR for Maker Dow, you are taking the risk of the Maker Dow system. because if a maker ever becomes under collateralized, it needs to mint MKR to fulfill that need, to fulfill that capital. And so as an MKR holder, you are therefore being diluted. So by buying MKR, you are buying access to the, you're buying exposure to the upside, and you're also buying exposure to the risk. Now, with the AVEA safety module and the backstop module, there is a more explicit way to have more

upside and more risk to AVE, separate from just holding the AVE token in your wallet. Can you explain that differentiation and maybe just elaborate on the backstop module and how it distills risk away from one part of the system and compartmentalizes it into another? Yeah, definitely. And actually, big thanks to you as well, David, because I read one of your posts where it explained very well the maker model and also some of the posts on kind of like what Ethereum is in I mean, ETER.

And what's interesting about this model is definitely like we want to make token holders to feel that they're participating. So many, if you buy a token,

if it's bearing just passive risk, it's less direct whereas you actually take that value and lock that value and actually you are subscribing to another risk level. And that also is a risk transfer

from the passive holders to the active ones, and also they get rewarded in that sense. So I think it's a kind of like an interesting combination. And of course, if this short power is substantial, that it doesn't cover the state doesn't cover the full amount, then there is the passive kind of like subscribing to the risk. So definitely I think as a model, this is more, it has more ladders, and I really like it because then you can decide to what kind of risk levels you want to subscribe into.

And it's interesting to see how it will play out. I don't know if there's any similar tokenomics actively been for a while. But yeah, I mean, I feel this is the right thing to do. And it's really, I mean, the good thing is that it's basically up to the governance to decide how to continue in the future and how to change token economics. And that's the cool part about decentralized protocols. but so far so good feedback. Well, one thing I'm particularly bullish on is the ability to give users choice, right? And that is definitely, I think one of the goals of Avanomics is giving the user the ability to choose their level of risk.

And that's definitely one thing that smart contracts really allow you to do if you harness their power correctly is to be able to, there's no such thing as eliminating risk. There's always risk. But if you can control and harness that risk in a particular way, that just means that the AVE protocol is going to be able to scale to more and more users, more and more capital, more and more entities using AVE. And so a line from Ryan is that safety makes DFI real world ready. So when you were building this safety module and this backstop module, were you thinking in the lines of just like scale and growth? Or were you just thinking in the lines of doing what you need to do to lock. down AVE to be as secure as possible. What was going through your head as you guys delivered the backstop module? Yeah. I mean, for us, for us what was interesting in the, so the backstop module is the

actual kind of like a backstop for the slashed or minted AVE tokens that you put stable coins and you can buy it. But the actual like safety module is the, so there's two things, but it's, they kind of like compensate each other. But in terms of like what we were thinking is that we somehow need to provide some sort of a value in case something happens. And the problem that we were facing is that let's say if you have one or one billion locked value in the protocol or more, how, what kind of ways we can have like to somehow ensure this amount?

And the token economics is a interesting way because you could incentivize people to stake and kind of like and use your market capitalization of your community who are actually making those risk decisions and putting skin on the game and adjust the incentives in a way that if the protocol grows, the incentives should actually grow as well to incentivize more staking. And you get this kind of like a value loop. And the more the protocol grows, the more actually you can adjust the incentives to incentivize more staking. And I think that is something we hope to achieve in a way. I mean, whether it will work or not, it really,

is something we need to see in practice. But at least we know that we are able to incentivize our community to provide this safety. And time will tell how it will play out. So, Stani, this safety module and many things we've been talking about, that, I mean, that's just one piece of what you guys are releasing with what I think you're calling AVEV2, like a whole version upgrade. I get, when is AVEV2 actually coming? And is there any other additional thing you'd highlight? I know it's shipping with so much and we're going to include a note to the roadmap in our show notes.

But when is it shipping and is there anything else that you'd want to highlight for folks? Yeah, I mean, version 2, we started to work quite a while ago. I mean, it's, it's, It's based on the version one in terms of like as a base layer, but what we worked quite a lot is on the gas optimization and to get rid of all this excess costs. And we were able to reduce like over half of the gas costs even more. And like we have a bunch of cool features. But like this is so important to mention because like you can. actually you can optimize quite a lot and by designing things in a right way and organizing. So that is something that I think is important because it allows smaller deposits to be utilized.

And that is like, because if you think about the gas, high gas price is actually a barrier to finance. So if you're spending in gas costs so similar amounts that you're earning interest, it doesn't make sense to deposit and take the risk. But besides that, I think what's important that we deploy with a lot of interesting features. So we're trying to help users to switch their positions. For example, what you can do in the Aweb version 2, you can swap your. collateral so you can you can if you're deposited for example eat and you you want to and you borrow die and you want to for example to get exposure to

lend you can swap your collateral in one click without returning your loan so you change your loan position and and it enables actually collateral trading so you can trade collateral at the same time that you have borrowed and we also have have a depth swap so you can swap your debt position so if you borrow let's say die at 5% and you already spend that die or converted to usd and and let's say us DC is a few percent cheaper for some reason you could actually with one click swap your depth to to USC so actually you are making debt currency swap and you're making also interest rate swap in the same transaction.

And you could perform all the three even like the collateral swap as well. And we're also having more trading functionality. There's going to be ability to trade on margin. We improved the A tokens. and then I mean, there's a lot of features. I think it's a long list that's coming up, but also like we improves quite a lot of debate structure as well.

And there's going to be some stuff that we haven't announced, but also like we are going to deploy as well, which will be pretty cool things. But something to leave a bit of in terms of excitement. Stani, you had me hooked on the 50% gas reduction, sir. That is definitely in these 400 way times, that is definitely something we are looking forward to. When, sir? When are we going to see some of this stuff?

Quite soon, actually, quite soon. Sir. Excellent. The sooner the better. And at the pace you guys are shipping, I think that I'm interpreting soon to mean actually soon. So very exciting, I think, for that. very exciting, I think, for the bankless community. Can we talk about that, though, really quick? I mean, we're talking about 50% reduction, right? So in gas fees, that's great. That's fantastic.

It feels like all protocols are trying to do that sort of thing right now in this high-eathe gas price world. You also talked about earlier about, like, you know, there's some competition sometimes between protocols, but sometimes there's not as much coordination as you. you'd like to see. We were talking to Kane from synthetics recently about this. Why isn't there a court, or maybe there's something we're not aware of, but is there a coordinated effort from defy protocols to work on some kind of a layer two solution? It seems like optimistic roll-ups are sort of the preferred solution, if everything we're hearing and reading about them are are true. Is there some kind of a defy roll-up that defy protocols can coordinate on and to start

building together? Any initiatives like that that could help solve this problem? Yeah, I mean, I definitely agree that there is like collaborations, but there isn't like actual like wider collaboration. like and and somehow if there would be like I feel that there's like a bit of like clicking in the sense you might have projects in Silicon Valley that are close together and and then you have other projects and that are somehow in connected together and and somehow like what I saw in previously in Define like happen is that like some some projects were working very closely together and like and and and trying to take the ownership of Defi, and that's something you can't do. I mean, belongs to everyone.

Every project there is in the space and every user and so forth. So maybe that is one of the kind of like issues that we are a bit selfish in that sense and need to coordinate a bit more. And of course, everyone has like are busy and focusing on their own communities and also like trying to build stuff. But I think we'll see some effort. I think, like, I truly believe optimism is quite interesting. Star queries is some quite cool. And Madik as well, Madik has some gaming activity. And Avegochi, a AVE ecosystem project that is launching this kind of like a funky cool NFD project where you unlock

this AVEGO NFTE NFTs by saving on AVE. So that's pretty fun. So they're looking into MATIC and I am seeing a lot of effort and coordination it usually happens in a way

that if the DFI community sees some success, then everyone else follows. And these multiple reasons I guess it's a bit of like also on coordination, like what could be the perfect solution. And also like many of the, for example,

I have an issue in the sense that I'm very good friends with many of this layer two solutions. And it's very hard to promise to everyone. Like we would deploy here and there and like, and you know, like you're trying to please everyone at the same time and be very, very friendly. and I don't know, I would see, like, when we see more tools that are able, allows you to, let's say, to transfer your funds from one layer two to another layer two, like we come more closer together, even this layer two solutions themselves. But I think now I've seen a couple of initiatives where projects have come together and try to make an ecosystem.

And I think this will draw. And once there's just a couple of projects or a few projects doing this, like, Chris will follow indeed. You know, some of the DeFi founders that we've talked to recently, like Antonio from D-YDX, they're developing something on Starkware, which you mentioned. Kane had an interesting approach from synthetics, where we kind of talked about Ethereum mainnet being like Manhattan, and it's overcrowded and busy and it's expensive. And he said, you know what I'm going to go do?

and synthetics is going to go do is go build a Brooklyn, go build an, you know, an OVM roll-up, and make that really nice, get kind of a tooling setup for D-Fi, and then hopefully other D-5 protocols will come move to Brooklyn. Is that kind of the approach that you're thinking will happen? It'll be a few pioneering D-Fi projects that kind of build it out for everyone else. And once they find some success, then everyone will sort of move over in quarter of. that way. Yeah, definitely. And I kind of like find similarities. Like, uh, we have a, like in, in London, uh, all the like financial action and all the traffic and everything is, is in the city. You know, that's the financial center. All the jobs are there. But then we have, uh, we have shortage, which is basically where the tech, tech industry is, and it used to be a rough area. But now you, you see more and more startups there and it's, it's getting like better in the ecosystem and grown there. and even Facebook and Google have offices there.

So I definitely like this is exactly what like I feel that actually you don't need to be in the very business place. And that the most business place might have certain types of transactions, which requires a lot of security. But then when you want to innovate and you could actually go, you know, a couple of steps on the side and build there and have this kind of like a clusters. So I definitely love what Kane is visioning. So you guys just announced that you guys got an electronic money institution license from the UK Financial Conduct Authority. So I don't know personally as a member of a citizen of the U.S. what that means. Can you kind of explain the significance of this license? Yeah.

I mean, the other protocol itself, it's decentralized autonomously running on Ethereum network. But one thing we noticed that actually, like, many people don't have access to this network and how, like, the steps to take and access into our protocol or, like, ABA ecosystem or Define General, there's still many steps. They're not that many as there used to be, but still, like, I think it's not as much as available as it should be. So what we decided to do, and we actually started this work a couple of years ago, in 2018, when everyone else were fleeing out of the space, is that we wanted to actually kind of ensure that once we build this protocols,

that actually there's access points. And one of the access points we wanted to have actually was our user interface as well. Like you can access the other protocol from I think there's like 50 different ways in wallets. I mean, my ether wallet, you can access and deposit and borrow and so forth. And there's a bunch of cool ways to access. And we wanted to ensure that we could widen the demographic that is using the defy. So we went and applied last year. We put our application in and we got our electronic money license last month.

And the idea there is what it means that this entity that we have in UK that is practically responsible of integrations and so forth can actually build a gateway for users to have a payments account where they can convert national currencies into stable coins, and then they can decide what to do with those stable coins. And for us, the most important thing is that they could actually then dive into this DFI world. So it's kind of like this idea of that protocols are the ocean, like their cells regulated and so forth, but then we have this kind of like ports that where we're dealing with the local currencies and so forth. we have their regulation. And that is something that we want to test out how it will work.

We'll bring new users and will bring a new adoption. And I'm really eager to see how things will move on that front. Yeah, it's super exciting. I mean, it's something we talk about where there's like this bridge from the traditional old FI system, right, the Fiat world and this new DFI system. and generally the groups that have kind of bridged that gap between these two worlds have been crypto banks have been exchanges like the coinbases or the binances of the world and Gemini's or the world and God bless them. But wouldn't it be great to have a direct point of entry and port of

entry and a direct bridge from the Fiat traditional banking system into a DFI protocol? that seems to be essentially what this new license is unlocking for Abe. Yeah. It's super exciting, particularly when we get into like, you know, layer two stuff too. And we can operate with the speed of centralized crypto exchanges as well. Yeah. And I mean, it's the very same license that Coinbase is operating in Europe. So it's really exciting, like how it will help, like, adoption in the future.

I'm really like I want new users like I want people who never use defy to actually use and that is that is something that is close to my heart. All right. So, you know, we usually at this stage, we're the bull markets, Donnie. So we usually ask about, you know, bull market price predictions because price predictions are always fun. But you know what I'm going to ask is actually number of user predictions and maybe amount of capital predictions locked up. So how soon, we've got, DFI's got about maybe 200,000 users right now for being generous. How soon until we hit 10 million? How soon until we hit 100 million? And how soon, this is something that Vance from Framework said, he thinks that there's the potential that we could get 500 billion in total locked value in DFI in this cycle.

Do you think that is possible? So give me user estimates and then give me total locked value in defy estimates, if you will. Yeah, I think we could easily have by end of the year, they could be definitely like a, it's hard to estimate. I usually get them wrong. That's why they're so funny. Everyone gets them wrong. So let's be optimistic. I think we'll have 1 million defy users by end of this year.

And we will have, let's think of something very realistic. We have 100 billion locked value by end of this year. So either of them, I might be right or both wrong. I mean, I'm really bad at predictions. Well, in the past, it sounds like when you were hoping, you know, the end of 2020, you'd have five million locked and now you've got $1.6 billion locked. If anything, you've been underestimating it so far. So we will see.

Those are bullish predictions. But, you know, we will be. Yeah, if you can go ahead and be as incorrect by an equal order of magnitude, I'll be down. Yeah. It's definitely very exciting. Stani, thanks so much. I guess the last question for you is, what can the bankless nation do to help Avey today? I think the most easiest way is to experience like how, I mean, just experience the possibility of having permission,

permission less global savings account by just holding A tokens. So getting a bunch of A tokens, let's say A-D-D-C and holding in the wallet and seeing the balance grow without any

transactions to see it update. That is fascinating. And what I really love and hope to see is that everyone spreads forward on what defaults. is someone who you might know might not know. I mean, tell about your, tell to your friends, family, and what is defy and like what do you see the value in? And that is something which brings more people here and the adoption.

It's it comes in a way that we kind of share it to others. And use A tokens, A-Di as an example. how the thing works and get people excited. I mean, that is something that you could help the whole ecosystem and also help AVE. Fantastic. Well, you heard Stani Bankless Nation. He wants you to tell your friends about bankless. Tell your friends about DFI.

Tell your friends about AVE, this A token, which is essentially a programmable savings account that you could just hold without a bank, all banklessly. Fantastic stuff. Stani, thank you so much for joining us today on the podcast. It's been a pleasure. Awesome. Awesome to be here. And thank you so much, David and Ryan. Cheers. All right, guys, action items. A few things for you today. The first is we've written up a delegated credit explainer. You heard Stani reference it during our conversation. We've written that up at Bankless. We'll include that in the show notes. Also, second action item is read about avonomics and the AVE roadmap. We will include some links in the show notes. Stani also mentioned an article that somewhat inspired their tokenomics that David wrote.

We'll include that in the show notes as well. Lastly, David, did you see we passed 100 stars, sir, on Apple iTunes? I just noticed that in the past week or two. So we hit our goal. What's our next goal? Next goal is 500. I think you, Ryan, told me you got an email saying that we broke the top 100 podcasts in the investing in finance category. And again, it's just at the beginning of the bull market. And I think, it's with well within reason that as this bull market continues, you can see bankless in the top 10 of the investing in finance podcast space. That's my personal goal. I want to do my best to get bankless there. And so I've gone and given my own podcast a five-star review. And you should too.

So by the time 20-21 rolls around, by the time there's 500 billion locked in defy, bankless is the top of the iTunes charts. And we are onboarding people into the bankless world as fast as possible. and you can help in that effort by giving us a five-star review wherever you listen to podcasts. All right, let's do it, guys. Finally, risks and disclaimers, of course, we always end with this. ETH is risky. AVE protocol is risky. Crypto is risky in general.

This is not financial advice. You could lose what you put in, but we are headed west. This is the frontier. It's not for everyone, but we are glad you are with us on the bankless journey. Thanks a lot.