Bankless - Rari's March to $1 Billion | Jai Bhavnani (SotN)

Episode Date: October 13, 2021

Jai Bhavnani is the Co-Founder of Rari Capital, the DAO behind a quickly growing suite of DeFi protocols. Most popular is Fuse, the open interest rate protocol that allows users to lend and borrow digital assets. As Fuse approaches $1B total value locked, Rari recently announced permissionless Fuse pool creation. This means that anyone with liquidity can create a money market for their digital asset of choice. Rari finds itself at the center of what is being described as DeFi 2.0, a loose collection of newer DeFi protocols which orbit around novel tokenomics, game theory, and memes. Tune in to find out where Rari sits among resident DeFi blue chips, and the future of young people pioneering in the crypto space. ------ 🚀 SUBSCRIBE TO NEWSLETTER: https://newsletter.banklesshq.com/  🎙️ SUBSCRIBE TO PODCAST: http://podcast.banklesshq.com/  🎖 CLAIM YOUR BADGE: https://newsletter.banklesshq.com/p/-guide-2-using-the-bankless-badge  ------ 📣 ZERION | Your Gateway to the Metaverse! https://bankless.cc/Zerion  ------ BANKLESS SPONSOR TOOLS: 💰 GEMINI | FIAT & CRYPTO EXCHANGE https://bankless.cc/go-gemini​  💧LIDO | DECENTRALIZED STAKING https://bankless.cc/Lido  👻 AAVE | LEND & BORROW ASSETS https://bankless.cc/aave  🦄 UNISWAP | DECENTRALIZED FUNDING https://bankless.cc/UniGrants/dharma  ------ Topics Covered: 0:00 Intro 10:00 Jai Bhavnani 16:22 Rari Capital 20:47 The Long Tail & Risk 29:02 Assessing Risk & Yield 33:08 Total Value Locked 38:46 Roadmap 44:00 ZoomerFi, DeFi 2.0 52:47 Build Fast, Break Fast 58:19 Crossing $1B 1:00:51 Regulation & Zoomers 1:04:54 What's Left to Build? 1:08:12 Closing & Disclaimers ------ Resources: Jai on Twitter: https://twitter.com/jai_bhavnani?s=20  Rari Capital: https://rari.capital/  ----- Not financial or tax advice. This channel is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This video is not tax advice. Talk to your accountant. Do your own research. Disclosure. From time-to-time I may add links in this newsletter to products I use. I may receive commission if you make a purchase through one of these links. Additionally, the Bankless writers hold crypto assets. See our investment disclosures here: https://newsletter.banklesshq.com/p/bankless-disclosures 

Hey, Bankless Nation, welcome to another episode of State of the Nation. This is the episode where we go deep on a topic that is in the news. And today we're going deep on Rari Capital. This is maybe the uniswap of lending. They've just made their pools permissionless. We're going to talk about what that means. We're going to talk about what Rari is. I think the TLDR here, David, is that anybody can be their own compound. Anybody can open up their own pool and be their own Avey. But, again, Give us the quick rundown of what this is and why it's important, why we're talking to Jay from Rari today. Yeah, just like you said, Rari Capital is a modular lending market. I think it's an interesting way to explain it. And there's also a chance that during this stream, we watch Rari Capital cross $1 billion in TVL. Right now, it's clocking in at $986 million, creeping upwards, and the growth in Rari Capital because of their innovations. has just absolutely blossomed from just $100 million, about 90 days ago, to where it is now, perhaps crossing a billion dollars live on the stream.

So we're going to go into the details about how Rari Capital incentivized all this capital to become deposited into the Rari Smart contracts. There's also another story of that Rari Capital is a protocol generated by three very young individuals. At the time of... Teenagers when they started. We started, yeah, 19 and 20, not even able to drink. I think some of them might be 21 years old now. We're about to check in on those details as well. But really, overall, an astounding story in the world of Defi.

Look at this number tick up, David. We're viewing this on the Rari Capital website is 987 million right now creeping up towards a billion. Dude, like, I feel old. You want to feel old in Defi. I remember when all of Defi was less than a billion dollars. And now here's a single, protocol built by a bunch of like 18, 19, 20-year-olds getting ready to pass a billion dollars. My, my, how things have changed.

The banks are coming to us. But we are definitely going to be talking about this. I think it's a fantastic story. And that second piece, kind of that next generation of protocols that ZoomerFi is becoming a term that we want to investigate some more is going to be equally interesting. But David, before we get into some announcements, some other things, this is the part of the show where I get to show off your Fidenza Rock. Oh, my God.

And talk about Zirion, who is sponsoring bankless shows for the next little bit because they want you to know that they have some NFT features that they have added to Zirion, in particular, their mobile app is quite nice if you want to showcase some hot NFTs that Shabbat like these. Or your mistakes. In my case. Showcase your mistakes. But Enza Rock number 54, they'd be showing that out, flexing on the dates he's on, showing the NFTs he's on, showing the NFT. that he's rocking. Anyway, Zirion is adding these fantastic features. I love it.

It's kind of a trophy case. Not only can you track your DFI portfolio, but you can also track your NFTs, and you can check that out at zirion.io slash bankless for more info on that and to get started, plug in get started. David, let's talk about what's new in the world of bankless, because we got some stuff cooking. Guys, is we a hot,

six weeks for content. I mean, it's always hot for content. But, like, I feel like our lineup coming up is particularly hot. I think it's the best ever lineup we've ever had, for sure. Look, okay, after this show, Dave and I were just discussing our agenda for our episode with Andrew Yang. Andrew Yang. We've been trying to get him on the podcast for so long.

And he is now finally on his tour trying to spin up his third party, his forward party. and there's a lot of problems about society that both Andrew Yang and crypto are trying to solve. And so Andrew Yang is trying to solve those problems via reform. And we want to see if we can convince him that another way to solve these problems is just by building parallel solutions. Yeah, the title list of episode, guys, is crypto is the way forward. Is that the title? Forward with crypto. Forward with crypto.

Even better. Thank you, sir. We're coming up with the title as we go. By the way, are you wearing that to the Yang podcast? I don't know. Should I? Do you think, I think he'd like it? We haven't talked about this.

What are we wearing? Do we just wear this a t-shirt? Do we have to have like, I mean, just a major politician. Do we need a suit and tie? Definitely. He never wears a tie. He never wears a tie. That's his thing.

Well, I mean, we will talk about it afterwards. But I feel like you should just be you. Just wear that. Oh, that's what that's what Andrew Yang does. Andrew Yang is just Yang. So I think he would vibe with that for sure. All, let's do that. We also had an episode.

with Rune Christensen, Defi, OG. That came out on Monday. Definitely listened that episode. All about clean money. Also about Ethereum maximalism in a weird way, question mark, in an interesting way. David, you also had Peter Pan on Layer Zero. That is Peter, Peter's real name, right? It's Peter Pan.

Fun fact, that is Peter's real name. That is not a pseudonym, right? And Peter Pan was one of the early Genesis members of Meta-Cartel, and really the story of Peter Pan and how Meta-Cartel came to be is one of the most interesting anecdotes, like interesting subject matters to dissect, because I actually kind of think it's ground zero for a lot of culture that has been created after the fact. So really a fascinating story there. That's on layer zero, of course, where David has these in-depth interviews asking people personal questions. Like, it's about the people. It's about the cultural

layer of Ethereum rather than kind of the protocols and the tech that we speak about so often. So make sure you catch that as well. Absolutely. Yeah. So definitely, I love every single Layers-Zer episode we do. I do, but this one, I think, is, takes, yeah, that's kind of my favorite so far. They're all your children. They're all my children. You're all my children. Exactly right. All right. Well, to kick things off, David, I got to ask you the question I always ask on these episodes, and that is what is the state of the nation today, sir? State of the nation is boomered. Ryan, we are getting boomered because we have Jay, who's going to be our youngest guest ever on the bankless podcast coming to, tell us all about how three up, you know, starry-eyed Zoomer Dreamers created a $100 billion protocol on Ethereum.

And as we all say, every single weekly roll up, crypto moves so incredibly fast that, like, it feels like people who came into the, in class of 2017, like I was and Ron, I think you were a class of 2016. We feel like we're a whole generation of defy apps behind, right? Like our defy apps that we're familiar with are uniswap, compound maker. but the new entrance into crypto, into defy, are just familiar with a different set of applications. And so there's a new generation coming to town. And we want to tap into that energy and that knowledge.

And that's what we are going to do here today on the state of the nation. Lest we fall out of touch with what the kids are doing in the defy space, right, David? I do feel like there's this whole new generation of defy apps that is making waves. Now, NFTs have caught everyone's attention right now. but these defy apps are silently occurring massive amounts of attraction and a value inside of their protocols. And I think Rari Capital is one of them. So we are super excited to get into this conversation with Jay from Rari Capital. But before we do, we want to thank the sponsors that made this episode possible. Bankless is proud to be supported by Uniswap. Uniswap is a new paradigm in asset exchange

infrastructure. Instead of a cumbersome order book system where trades are matched with other humans, Uniswap is an autonomous piece of software on Ethereum, which is what Ryan and I call a money robot. No human counterparties or centralized intermediaries, just autonomous code on Ethereum. Input the token you want to sell and receive the token you want to buy. Something brand new in the Uniswop ecosystem is the Uniswap Grants program is now accepting applications for grants. We have been saying this for a while and we'll say it again. Dow's have money and they are in need of labor. If you think that you have something to contribute to the Uniswop Dow,

apply for a grant to Uniswap. Just look at the size of the Uniswap treasury. It's almost $3 billion. This mountain of capital is looking for labor. Do you have something of value to contribute to the Uniswap Dow? No matter how big or small your idea is, you can apply for a UniGrant at Unigrant.org and help steer Uniswap in the direction that you think it should go.

That's exactly what we did to get Uniswap to be a sponsor for bankless and you can do the same for your project. Thank you, Uniswap, for sponsoring bankless. The era of proof of stake is upon us. Proof of stake systems like Ethereum, Terra, and Solana, allow the industry to move away from the hot, loud, and wasteful proof of work systems, and return back to a cottage industry of individual stakers and individual validators. And that is what we need to make this industry stay decentralized. Individuals must play their part in crypto network validation. And that is what Lido is here to do. Lido makes a staking accessible to everyone at the click of a button. By delegating your stake to

Lido's network of nodes, you can access the yield offered by proof of stake systems and claim your share of the network transaction rewards. Do you have 32Eth and want to stake it to Ethereum, but running a node sounds intimidating? Or maybe you have less than 32Eth, and you need to pool your ETH with others so you can access staking yields. Lido offers a solution for both. Simply go to Lido.fI, choose which assets you want to stake, and deposit them to the Lido validating network. Lido is working to make sure proof of stake stays as decentralized as possible, and it's committed to decentralizing its own validating network to eventually become

a completely permissionless protocol. So if you want to stake your ETH, Tara, or Seoul, and get liquidity on your stake, go to Lido.fI to get started. All right, guys, we are back with J. Bob Nani. Pov Nani. Hey, Bob Nott. Sorry, Jay.

Rari, you guys have seen 10X in total. total locked value in the last 90 days. So you've gone from like 100 million. Let me look at the ticker. We are at 9,88 million at the time of speaking. We might hit a billion during this episode. So that's like pretty good for any defy app, right? Even an OG defy app.

But what's crazy is you guys are like 20, 21 years old, you know, and you started this thing from the ground up. So we want to hear the story first because I don't think David or myself or the bankless community has actually taken the time to hear the full story of Rari Capital. We published some articles on Rari,

like we've been following you guys for a while. But take us through the story. How did the three of you get together and decide to build a D5 protocol that's now worth a billion dollars? Tell us that story. Yeah, definitely. First of all, thank you guys

for having me here. To dive into the story, I guess it starts with like the start of my crypto journey, right? So got in late 2016, early 2017, right as the bull run was just beginning to start. And the crazy thing is that I was flipping all these shit coins on Bitrex and everybody else wanted to do that. So they couldn't do it because Coinbase only have three assets at the time. And then I wrote like an instruction book, right, on how to go from Coinbase to my Ether wallet at the time. and then to bitch wrecks so that everybody else could trade these shit coins. And of like 20 people I sent it to, only three of them were able to do it, right? That were actually able to go through all of these steps.

I was like, this is a problem, right? Like, let's do something about this. So it started work on a mobile wallet that made it super easy to interact with a decentralized exchange at the time of zero X, just pulling in orders from radar relay. And then basically pushed that out and had a bunch of defy integrations, right? Defi was just becoming a thing at the time. I think we were one of Compound Finance's first integrations, if not the first integration, outside of the compound website itself.

We were really excited about Defi, right? So one of somebody who I brought onto the team was this guy, Jack Lipsone, who I knew from school. We consulted with Bain together, Bain and company. And I was like, okay, you're a smart guy. Like, let's do this, right? You handle BD, I'll handle development and everything else. And we did it, and it was a lot of fun, right?

Just discovering Defi in its early. stages, interacting with all these protocols, and then the bare market hit. And we're like, okay, there goes a lot of our users, right? There goes the people who are looking for 100x, because they're all down in the red. So ended up being acquired by MyCripto, where we stuck around for about a year, right? So I was doing strategy, D-Fi stuff. Jack was doing B-D. And during our time at my crypto, we actually got introduced to this guy, David Lucid. Jack got introduced him through a mutual friend at a party, and we instantly get connected. And I'm like, holy crap, this is a smart guy. I was like, this is a guy that I know I'm going to work with at some point. And stayed in contact with David,

ended up leaving my crypto at the start of the pandemic. And I was like, I want to do something, right? Like, I want to play in defy. I was already obsessive about defy and it was consuming all my mental capacity. I was like, I need to do something in the space. And that's really how Rari Capital started is. we said, let's build a yield aggregator, right? We just, we sold the company. We're sitting on some cash. Let's find a place to go and earn yield and let's build our own product that can go earn us yield using the cash that we have on our, like in our bank accounts. So built out the product and as we were designing it, we called David, right, whose number we had was like, David, I have this cool idea. Let's go and build a yield aggregator. And David had been in crypto for a long time as well.

He actually built one of the first decentralized exchanges. And he was like, hell yeah, like, I'm in. So we built the first version together, had like $350 deposit limit. Now it costs more than $350 to deposit in. And we got up to like $10,000 in TVL and we're like, holy crap, this is so cool. Like we got $10,000 under our own system. And we've just been iterating since then. Jay, let me tell me what it's like.

to build a defy app, we're going to totally unpack everything about Rari. But my first question is, what is like to build in DFI while you're in college? What's that like? Yeah, honestly, I would say it's a lot of fun, right? What I think about a lot, honestly, is the DFI founder life cycle, right? Maybe it's because DFI founders want to be decentralized, but the unfortunate reality is that D5 founders don't last more than 18 months, right? I don't know what it is. Maybe it's burnout. Maybe it's that they get so much money that they don't have any more motivation, but a lot of them phase out after about 18 months. And me, Jack and David, and the rest of the team frequently talk about how do we not fall into this trap, right? How do we not burn out after 18 months?

How are we going to stay around for the next decade and iterate on this product? And a big piece of it is balance, right? And so, yeah, maybe I'm in school, don't really go to classes. But what's more important is that school provides me a balance so that I can outlive every other person in DFI today. So with you and all of your friends in college, are you like the crypto person that does the weird crypto stuff? Or like when you explain what you're up to with your friends, like do they get it? So they don't really get it. It's it's the weird person with the weird crypto stuff. But honestly, like when I'm with them, I want to just withdraw, right? Like I don't want to talk crypto. I'm on my computer like 18 hours a day just doing crypto shit. I want like two hours a day in a, in

a day where I can just like withdraw and be out of crypto because I think that's what will be key in in enabling this project to last longer than others. Okay, so going back to Rari, you said it's a yield aggregator, but it's also a money market like compound or Avey. How do you explain Rari with in relation to all the other DFI apps that listeners might be familiar with? Yeah, definitely. That's a great question.

So we started Rari as a yield aggregator, right? And we got up to $10,000 TVL within like a month, which was really cool, did like this guarded launch approach. And then in October of last year, we did a liquidity mining campaign, right? We're a fair launch project. We gave out 87 and a half percent of our tokens to depositors across a 60-day period, right? So we like the founding team has very few tokens relative to most projects. And it was after this liquidity mining period that actually we realized, okay, now that we've

stopped distributing our token, our TVL has collapsed, right? We're just another yield aggregator in a complete red ocean. We're in the middle of the stack in terms of people go from MetaMask to us and we go and deploy capital elsewhere. And looking at legacy finance and traditional finance, what we know is being in the middle of the stack is a race to zero with fees, right? And I just didn't want to compete in a landscape like that. I figured I don't want to be in a race we're at zero with fees. I want to do something actually cool here and not just be competing and iterating and competing for strategies. So we said, okay, what can we do? And we said, we want to control the entire stack, this entire capital funnel of the wallet to the yield aggregator

to wherever we deploy the yield aggregator. We said, okay, where do we start first? And it was on Christmas Day of last year that I came up with the idea for fuse. And basically the idea was, let's create this isolated, this isolated lending and borrowing protocol. And the idea was, not only because we said, okay, we want to control the entire stack, but alongside that, we actually wanted to be able to lever up on the interest rate tokens that we had from the yield aggregator. So you could have leverage yield aggregation. It wasn't possible to go on to compound and go and ask them to add our tokens

because we were still a new project at the time. So we said, this would be a really cool solution. So I remember that night, I called David Christmas night, and I'm like, David, I just came up with something that could be cool. What do you think about it? And we chat about it for two hours. And then right. Sorry, Christmas dinner wasn't entertaining enough for you.

So you were thinking about defy stuff you could do. Exactly. Unfortunately, I'm always thinking about defy stuff we can do. And then I call David and I explain it to him. We talk about it for like an hour. And then we don't really talk about it for a few days. And then David texts me like a week later and he's like, hey, I have a prototype. You want to play with it?

And I'm like, holy crap. Like, let's do it. And that was really the start. of fuse. And since then, obviously, been iterating on the fuse protocol, seeing how can we make this more capital-efficient? How can we make this support more assets? And how can we make this truly something special? And I mean, now when I think of Rari, I really think of us as this open interest rate protocol, right? The yield aggregator is now just used to supplement the fuse product. We're actively, like, iterating on all these products. But it all really centers around

fuse because fuses something special, right? It enables people to borrow and lend any assets. in a way that, like, quite honestly, you could never do before in human history, right? You'd always need some centralization, whether it be token holders, your bank, whoever it may be. The idea here is, like, let's enable individuals to do whatever the hell they want. Nobody should be telling anybody what they can and cannot do. Is this why, Jay, people are calling this, like, or maybe you guys are coined this term, the uniswap of lending, because it's that permissionless?

Because unlike with an AVE or a compound where it's sort of, you know, the pool is what it is, Maybe governance gets to side, token vote gets to decide which assets go into it or out. In this model, it's more like uniswap, right? So, like, anyone who has a token, you know, can create a uniswap market. Anyone who has a token or a set of tokens can create a fuse lending and borrowing market for this, right? Exactly. How I like to think about it is, like, for those who were around in like 2018, 2017, it was like you had dexes like radar relay, right, which had permission, permission to list.

things, right? It was the team that was adding to the order book. And now with Fuse, it's similar to how you went from Radar Relay into products like Unisw. Right. And now we're doing the same from compound in Avey into something like Fuse. So Uniswap famously is good at providing liquidity for, quote unquote, the long tail of assets. And this is something that actually Antonio Giuliano from D-Y-D-X kind of changed my mental model about things where I thought, you know, uniswap's where all the liquidity is, but his argument was

that, well, for the assets with the most trading volume, it's still going to be order book base exchanges, but uniswap can have all the long tail. It's that kind of the same model with like things like AVE and compound, where, you know, maybe Ether and WBT

might be the best assets to put inside of those money markets and then just borrowing USDC or die on the other end. Very basic stuff, but the long tail of borrowing and lending might be better served by Rari. Is that a fair take? So I think it'll be a little bit different for the lending and borrowing space than the exchange space, right? For something like compound, compound is a feature of the fuse protocol.

You can go and rebuild compound using our protocol. So I don't think like what what users of compound are using and why they're using it isn't for the protocol itself. they're using compound for the risk assessment that the compound labs and the compound token holders are doing to make sure that the pool is safe, maybe using some of the reserves to play a part in that decision making. But for us, there's no efficiency differences in terms of using fuse versus compound. There's a total world here where compound becomes a fused pool, right? Maybe we can create a fused pool that matches compound's exact same variables. And we can have a bot do that. And at that point, there becomes no reason not.

to use fuse. And this is in fuse's current state, right? What we're working on now is a bunch of different upgrades that's going to make fuse capitally efficient, right, more efficient than the current lending and borrowing markets that we offer and that compound and AVEA offer. And that's when it'll get really interesting. So if you can just like copy exactly compounds parameters and deploy it into fuse, why would you use fuse instead of compound?

What's the incentive there? It's more just like that that can happen, right? And what the consequences of that can be are really up to whoever the pool creator is. Maybe they want to get rid of reserve factors so that way they pay less to borrow, in which case somebody can do that if they think it's the right decision. But the end goal there is there shouldn't be anybody telling you what you can or cannot do. What you're saying is like basically fuse functionality is kind of a superset of compound and Ave, right, whereas compound and convey are just taking a subset.

But one of the reasons that compound or Avey is, in particular, a compound is maybe the more risk adverse, more conservative of the two protocols, right? You have kind of, you know, compound, which is like, you know, suit, buttoned up, tie, right? And then you have Ave, which is a little crazy, a little bit of party. And then you have fuse, which is, like, out there. You can do whatever you want on fuse. And the compound folks will say that that's because of risk, Jay, right? It's like some of these pools are downright dangerous.

Like, who knows the assets that might be backing? some of these pools. And you're really going to, you know, lend against them or, you know, borrow against them. You're going to use this as a collateral source. What happens when they go to zero? What about the risk overall to the system? How would you reply to those, I guess, criticisms or those questions? Yeah, I agree with all of that, right? But it's up to the pool crater at the end of the day, right? If you believe in compound risk model, you can copy that into fuse. But the real thing here is Fuse shouldn't just be the party on this side. Fuse covers the entire spectrum, and it's up to pull creators to decide where they want to fall on the risk spectrum. I totally see Fuse pool is

collapsing with bad debt, and I also see Fuse Pools thriving with great markets. And the idea here is let's let free markets really decide and let the pool creators dictate where they want to be on the spectrum. And I guess the key point, Jay, is that like one bad pool doesn't spoil the rest in a bunch. it's just kind of an isolated thing. Is that correct? Yep, exactly. So your take is like let a thousand pools bloom, and yeah, some of these will, you know, be... Let the market decide.

You know, some of these will actually be okay, and the market will price that risk in. And I presume for some of these pools, reward in terms of interest rates accordingly for the risk that an individual is taking, kind of lending some assets to this. Is that correct? Exactly. Yeah, like you see some pool as like Tetronode's own pool, right? You're, you're getting 76% LTV on your own, which is absolutely insane. But that's also reflected in interest rates being 40 plus percent on average for the past month on USDA and die. So Tetronode is paying 40% on his loans? I don't know if Tetronode himself is, but other people are inside of the pool, right? And most of them are just leveraging up on OM and becoming 9-9. It's super fascinating. And like you also on the on the website though, try to do some sort of maybe it's

rudimentary, maybe it's sophisticated, I don't know, some sort of risk assessment based on these pools. And you have the qualification of verified and unverified pools. And I'm assuming the verified pools mean it's been like previously, it's kind of whitelisted, like it's gone through your governance process. Now I believe you have removed the governance process like from that angle so anybody can create a pool. So they're kind of, I guess, one of the same.

But tell me about the grade letter risk assessment because Tetronode's pool. And it's not, you know, tetranode may have created it, maybe label, but anyone can deposit, anyone can borrow against it, just to clarify. But like, that gets an F score on the report card. So why does it get an F and what drives that risk assessment versus other pools that get closer to like a C or a B? Yeah, there are a lot of different things that go into the risk assessment. And it's something that we're also just evolving with.

time, right, as we learn more and more about how these markets work and as we learn more and more about risk and what that looks like in DFI. So really what's driving Tetronoan's pool score down is that there's so much oam in there, right? And there's almost getting to be too much oam in there, right? And what it's happening is it's outweighing the ome that is available for liquidity on sushi swap, right? So that means that for if for some reason there is cascading liquidations and you see $300, $400, $400 million of OM, there's a chance that not all of the OM can be liquidated in time at a good enough price to keep the lenders of the USDC solvent. So if there is a liquidation on OM, you're saying that there's so much OM in Rari that it would just wipe out all the liquidity in sushi swap, which is a risk. And so you have to price that risk into the safety score.

That's what's going on. Exactly. Yep. But like who determines that safety score? Is it sort of? No, so it's completely public. We have like an algorithm that it does it. If you Google Rari risk score, I believe it should come up or something like that. The Rari safety score is what we call it. And essentially, like what it's looking at so many different variables right now. And I don't even know if the latest one is up to date. But but it's it's really cool. And one thing that I will add is like this is our front end, right? This is this is Rari Capital's front end. But on the on the back end, right, risk scores don't affect anything. It's just something that we add on the front end. end. Same with verified versus unverified pools. So you go to another front end Ferrari, something like market.x, y, Z. And yeah, they borrowed our risk scores. But at the end of the day, the white listed

or verified versus unverified pools, these are all just things that we're adding to the front end. So all of these don't really mean anything on chain and they don't affect the lending and borrowing interactions itself. I am glad you add it, though, like at least as kind of a placeholder. And to your point, somebody else could create a different front end with a different risk score assessment that's more accurate. That's better, a better model and all of these things. But I am glad that you added at least as kind of a placeholder on your front end because what I find is the tricky thing about, I guess this is just human beings is we're really shitty at assessing risk. Like, I just can't do it. We see like juicy yield, like 70% yield.

And we want to ape into that, right? Like, oh, yeah, 70% yield. Like, what could go wrong? But what we don't look at is the true thing we should be looking at is risk-adjusted yield, right? So what is that yield after you factor in the risk of the pool and all of these things that can happen? Like, figuring out risk and doing risk assessment, that's the hard work. It's very easy to generate a yield number. The hard work is to actually do the assessment of risk.

And once you do that, you might find out that that pool is like negative. in terms of risk-adjusted reward, or maybe it's only 4% or 10%. But people don't do that, particularly when DFI is moving so fast, we're just like going from farm to farm to most attractive yield, most attractive yield. So I understand that your protocol is not a risk protocol, but at some level, if people in DFI are going to make good decisions, we need to factor in the risk side of the equation as well.

I don't know if you have anything to add to that. No, I think you got most of it, right? It's like, I think that most farms, just like in, during DFI summer, the risk to reward just doesn't make sense, right? And it's really scary to see people aping in, mortgaging their home to go and ape in. And unfortunately, one, or I guess fortunately, and unfortunately, is that our platform is now being used by real people who are using it for real world use cases, right? People are borrowing against their, their, their dollar, amount to go pay for mortgages on their home, right? That's really, really cool, but it's also really scary, right? So as the protocols creators and as the protocol's founder, you're right on it.

We need to inform users of the risks so that they understand so that it doesn't affect their real life. So I'm looking at the interest rates being offered by urine, compound, and AVE for USC right now. And urine's clocking in at 6.6.0 percent. compounds coming in at just below 3.3%, Avey's a little bit lower than that. DYDX, 4.75%. It's pretty good numbers when we compare them to TradFi. But if you compare them to Rari, Rari is clocking in from what I see on the U.S.EC pool at 23.2%, which is meaningfully different than all the other interest rates that I just listed off. Where is all of that interest coming from? Why is it so high on Rari? Yeah, so the interest rates are coming from us,

depositing into different fuse pools on the platform, right? We don't interact with any external, or at least we're rolling out an update that's going to remove us from interacting with any external protocols, right? I think it's too much risk to be interacting with them. And basically, we're going to keep our technical risk internally, right? We know our code-based best. We know how our product runs best instead of increasing our attack vectors to hundreds of different protocols. And the cool thing about this is fuse also offers the best interest rates, right? As you can see by what you listed, all that this USDC or die or whatever is doing is it's just being reallocated into various different fuse pools. And one interesting thing that we're actually just getting audited

right now, or at least starting next week, is we're going to create a vault factory contract, right? So what that means is any asset that's inside of the fuse platform, the fuse lending and barring platform, we're going to have a vault for, right? So that means if you're sitting on SNX, if you're sitting on MKR, whatever, and it's inside a fuse, we're going to have a vault that you can deposit into, which will enable you to, it'll automatically redirect between different yield sources, which gets really interesting because now our vault is not only delivering the highest interest rate, but we have a vault for every single asset. So, Jay, I want to ask this question, because as you were talking, I was looking at this chart

here from our friends at DefiPulse here, and this is a chart of a total locked value inside of Vrari Capital. And you could see as you guys started, I guess, you know, last year where this was just sort of a yield protocol at the time, I guess maybe the 24th of December where you called David and were like, hey, I got a new idea. You're at about 10 million in total locked value inside of Vrari, right? And then we kind of see, you know, some up and down, but, you know, no major moves until about, you know, the summer of this year where you're at 93 million total locked value.

very respectable. And then we see this. I have, I want to know what the hell happened on, on September 4th, we're in September in that, that time range, because you went from about like 180 million locked, uh, inside of Rari to, to now where we're on the, the, the precipice of going to one billion dollars. And this is in the past like 45 days, this, this like curve up, this spike up, this Mount Everest basically has been climbed. And so what happened in the last 45 days to add all of this capital and all of this liquidity inside of February capital? Usually when I see a chart like this, I'm like, oh, okay, they must have dialed up the yield farming. You know, something crazy is going on. What happened? Help explain this to us. Yeah. So there's three things

in my head that really explain this. The first thing I'll start with, this isn't one of the three points, is we don't have any liquidity incentives, right? We aren't paying for depositors. We aren't paying for borrowers. We might start doing that soon, but really how I view the product right now is we're still in search of product market fit, right? That chart kind of shows product market fit,

but I still think that there's work that can be done. And by adding liquidity incentives, it blurs our ability to really check how the product is doing. So the three things in my mind are first, home going up, right? We were the first and we were the first and really only place for a lot, long time that you could go and borrow and, yeah, borrow against your own, right? So that created the entire 9-9 meme. And people were, people were doing really cool stuff with their own inside of the

Fuse platform. The second thing is that we were pretty, we started about two months ago being really aggressive about onboarding other pools into the Fuse platform, right? Other assets that are long-tailed assets that you couldn't get anywhere else. Stuff like the Badger Pool, where you could borrow against your Badger positions or the Vesper pool, or the same with Vesper, or the NFTX pool where you could borrow against your punks or even short punks, right? All of these things we've been pretty aggressive about and onboarding capital as such. And one cool thing is, like, we're always talking about how do we get counterside liquidity? In addition, Faye and FRAX are minting from their, from their sources directly into different fuse pools. And then the last thing, in my opinion,

and this is a newer thing is the creation of permissionless pools, right? We just pushed that out. We've been sitting on that feature for a little bit now. We wanted to iterate with all of these different partners first, and now anybody can go and start their own pool. And I think that between these three different things, it's led to that massive Mount Everest, as you call it. Jay, you talked about collateralizing punks, which is the ERC-20 derivative out of NFTX that's

supposed to track the floor price of Cryptopunks. Have you guys thought about actually leveraging ERC 721s directly as collateral? Is this a subject matter you guys have discussed? Yes, we've discussed it at length. One thing that we actually haven't announced publicly, but I guess I'll say it now, is we're actually working on Uniswop v3 LP positions as collateral. I think that's going to be really exciting because nobody else can offer it in the way that we can, right?

if AVE or compound want to offer it, you'll need to go and get some standardized token to do, right? It's something like a gelato network, which automatically rebalances in uniswap v3. We already have a gelato pool, though, so they can go and do it if they want, but we already have it. What is even more interesting is that uniswap v3 positions, as you guys know, they're custom, right? It's, it's, you get a custom one for each position. So you can't go and add that to a general pool like compound. But here inside of the fuse platform, that's what fuse is. is meant for, these isolated markets where risk is created just for each of these pools.

So let's say somebody like Tetranode is going and supplying $5 million into the spell ETH pool on Uniswop v3 at a very tight range. He can go take that NFT, put it inside a fuse, borrow up, a barrow against it, maybe take out a levered position on that. And that's when things get really interesting and show off the power of these isolated markets in a way that really nobody else is even capable of doing right now. So things get very, very interesting at that point. Yeah, exactly.

And to me, as a punk holder, this might get interesting because once you start building out the infrastructure to have these customized ERC 721s, it's just a few more steps down the line before you can actually collateralize actual NFTs. And if there's one thing that, like, I will speculate on has product market fit. It's NFT DGens leveraging their NFT portfolios as collateral. Yep. David, you're going to get really cool. I would never risk my punk. I would never risk my punk. You would take your punk to the pawn shop and just, you know.

Only after it's $100 million, or excuse me, a million dollar floor. Then we can definitely talk. Real quick, before we get to sponsors and the next subject, you were talking a little bit about the road map, Jay. Anything else in the roadmap, like Layer 2 plans, multi-chain strategy, like you doing anything, other collaborations with other protocols, got to. us through some quick hits on the roadmap? Yeah, so there's a lot of stuff that's going to be coming out over the next few months. We have Market XYZ, which is like a sub-task force within the Rari community. They're going to be deploying on Polygon.

We'll be ourselves deploying on Arbitrum, Optimism, ZK Sync, we'll get it all. We'll be waiting a little bit because as I mentioned, we want to iterate on L1 Ethereum. It's what we know. It's what we do best, right? Really try and get product market fit. Then we'll turn on liquidity incentives, probably. sometime soon once it's really been cracked. And between liquidity incentives deploying everywhere, they'll get really interesting. Beyond that, obviously, we're going to do a V-E-R-G-T-style thing,

similar to what Curve does. And they're going to be directing gauges, which will direct liquidity mining rewards into each of the pools. What else are we working? We're working on a lot of different things right now. We have a new redesign coming up, which is going to be really, really cool. And then the thing that I'm most excited about is this mechanism called plug-ins. And basically what a plug-in enables is when you're starting a new fuse pool, the biggest issue is attracting lenders into the fuse pool, right? Because new lenders have a lost opportunity cost because they aren't getting paid anything to lend until somebody's borrowing.

Right. So if I'm sitting on a million dollars, I'm not going to go and lend into a new pool because I could be earning interest on my million dollars elsewhere. So what a plugin enables is unallocated capital from one place can be sent somewhere else. So it creates a connection between the different fuse pools because now if I'm starting new fuse pool, let's say 132, I can send all of the USC from fuse pool 132 into fuse pool six, right? And suddenly that that USDC that I'm onboarding into my pool is earning interest and then that sets a base rate for the pool itself, which I think is going to be really interesting

dynamic. When you think about it like that, it gets even more interesting when you think about it outside of the diffuse platform. So the first plugins will be for directing capital from fuse pulls to fuse pools, but you can do it with anything, right? You can have a fuse pool with a plugin that goes in directs capital to an AMM or to a staking mechanism on Vesper or even like home is technically the first use case of plugins, but it's not really like clear that it's a plugin on the back end. But when you start connecting the puzzle pieces, building on these Legos, it's going to get really, Yeah, I'm loving everything you're doing. And I just have to wonder how you have the time to do all of this as a part-time student as well.

And this is Jay and team like cranking it out while they're still in school. I can't wait until you're like full time on this. And this is, yeah, I guess the only thing you think about you guys are building so much so quickly. I think there's more to unpack here. And Jay, when we come back after the sponsor break, we want to talk about this new cohort, maybe. of defy applications, but some people are calling zoomer-five. But this is like the class of 2021, all of these new defy protocols that are emerging, the, the omes of the world, the Olympus Dow's of the world, maybe Alchemics, maybe we'd throw them in there, maybe this new abracadabra

protocol, we'd throw them in there. I want to talk about them because I think they have a lot of traits in common that defy investors and followers of the bankless program can all learn from and benefit from this new wave of defy. So guys, we will be right back. with Jay to talk about that. But before we do, we want to thank the sponsors that made this episode possible. When you shop for plane tickets, you probably use kayak, Expedia, or Google to compare ticket prices. So why would you limit yourself to just one exchange when you trade crypto? When you make your trades, you want to make sure that you're getting the best possible price on your trade and that you aren't paying high gas costs that you could have otherwise avoided. That's why you should be

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All right, everyone, we are back with Jay from Rari Capital. And we want to kick off the second half of the show, picking Jay's brain as somebody who is, I mean, we're all young people here in crypto and DFI largely, it definitely skews young. But Rory Capital also skews young inside of an industry that skews young. And especially when it comes to 2020, building in 2020, after we've gone through the bear market, After Defy Summer has set its precedent, we are now into the era of what some people are calling Defy Generation 2.0, or perhaps we're calling it ZoomerFi. We're actually trying to figure out what the hell this thing actually is that's happening, but there seems to be a new phenomenon

of Defy apps that are coming on to the scene. Rari Capital being one of them, Olympist Dow also being one of them as well. So Jay, what's your opinion on what this thing is? Is it Zumerify? Is it just DFI? What's going on here? Yeah. I think it's, I think it's DFI 2.

Right? It's like the, the people have understood DFI 1.0 and they've actually taken, I think DFI 1.0 didn't crack tokenomics properly. And how I think about DFI 2.0 is DFI 1.0 with interesting tokenomics, right? Some of them,

a lot of them probably aren't going to work. A lot of them are probably going to die with stupid emissions and stuff that just doesn't make sense. But what I find most interesting about this is that people are actually iterating on incentives in a very, very interesting way, right? And that's what crypto enables. That's what DeFi enables is these interesting incentive loops that we couldn't ever do in the traditional world. So I'm just excited to see what happens with this, with this idea of DeFi 2.0. I do think that it is hewing much to a younger age compared to DeFi 1.0, I guess. But nonetheless, it's interesting to see. Yeah, what's interesting is like,

Ben, one of our analysts, he's actually still a college kid, you know, graduates, you know, this summer. He is so into this defy 2.0 stuff. Like, like, he keeps us informed with what's going on because, like, David and I are in this industry all the time, but, like, there are these new protocols that are doing all of these great things. And these are the protocols like Olympus Dow and, like, Rari, that Ben gravitates towards, right? So it's also, it's not just necessarily about, like, age as in when you were born. It's also about like when did you enter crypto, right? What's your class? I feel like people who are entering defy now, class of 2020, class of 2021, they are very into these new protocols. But the one thing you mentioned, because I think there are a few, I guess,

patterns that we see in this new cohort, this zoomerifier, defy 2.0. The first thing to maybe talk about in some more depth is token economics, which you mentioned, right? And so, So I guess DFI summer of 2020 is when tokens for DFI actually got introduced, you know, most famously with compounds or the first yield farm ever and then gradually other tokens. What is this new, you know, I guess iteration on token economics? I think we understand in more detail Olympus Dow and maybe what they're doing with their token economics. Is that sort of a, like, is that a prime example of what you mean by token economics? And Rari Capital, it seems like you guys aren't doing very much yet with your token economics,

although you did do this fair launch, which is totally different than most D5 protocols in previous cohorts of like 87% out to your community, which is like, kudos for that. I also wonder if you, like, if you have any regrets about that or if you feel like that was the the total right move. But tell me about token economics. What is different in this new class? Yeah. I think that there's a lot of things, right?

It's, first of all, this idea of PCV was introduced, right? I think PCBV is a very, very groundbreaking change for defy in general. And that's protocol controlled value. Exactly, right? I think that the way that Faye uses it,

the way that Olympus style uses it, the way that projects are now accumulating their own LP. That's a whole new dynamic. That's a whole new primitive in it. at Olympus and, and I guess, Faye, to a certain extent, introduced with each other. Beyond that, I would say one of the more interesting trends that we noticed is in DFI summer, we saw the rise of Anon's, right? The rise of Anon's has led to the rise of innovative token models, right? Because it's scary, right? Somebody like compound labs can't do nearly as much

as somebody like Daniel from Spell, right? And it's going to be interesting to see what happens. it's going to be interesting to see if any of it's sustainable from a regulatory perspective, or if this out in paces whatever the regulation does do. So I think it's a combination of all these different things. This idea of all of these new concepts such as PCV floating around combined with the flexibility of being anon has just led to massive innovation in the space. And you're right, right? With Rari, we haven't been super aggressive about tokenomics.

I think VERGT is going to be our first time touching the token contract since our initial launch, besides for the move to on-chain governance. And I'm really excited about it. And I'm really excited to continue iterating on it. But at the same time, it's like we also live in the United States and we're doxed individuals. And what we can and cannot do is very different than most other projects that have run as an on-team. Yeah, that's interesting. You're not like Scoopy Triples, I guess, that is still kind of running in on there.

Back to that other question, do you think that 87% fair launch to the community was the right move? Do you have any regrets about that? Yeah, so I think we launched at a time when that was the norm, right? That was DFI summer. And I think that we just went with the, we went with the wins there. But now you look back at DFI summer of maybe 50 projects that launched during that time period, maybe five or six of them are still around. And of the five or six of them that are still around,

maybe three of them are actually like innovating. And it is worrisome. I think that in order to do a fair launch of that caliber, you need to have a team that really sees the long-term vision. And for us, looking back at 12.5%, what I think when I see it in, like if I saw another team, I was going to do the same, I was like, you guys need to have a plan. Right.

And quite honestly, we didn't have a plan when we did it. Right. This was more just like, let's see what happens, right? Like, let's have some fun with this. And if I could go back, yes, I would probably change it, right? I'd want to have more team incentives. I'd want to have longer-term incentive structures. But, like, that's easy to say.

What matters now is what we're doing to fix it, what we're doing to iterate on it. And what we're doing with the team to make sure that everybody's properly incentivized for the long-term. We have a lot of ideas here. We just minted more tokens, which is just being sat on by the Dow. I don't know what the future here holds, but what I can tell you is that the team we've committed them long term. They're all super excited about the protocol.

And for reasons beyond just financial gain, which is what's really important to me, right? When talking to new contributors and to the team, it's not just about, okay, what is the token worth right now? I hate it when people ask me that. I hate talking about token price or anything related to that. I want to know who's actually passionate about building a permissionless lending and borrowing system. And who's actually excited about getting rid of the power that the banks have and making it so that yeah, you can take out a loan if you're in Africa, if you have underprivileged needs or whatever the case may be. And that's the future that we're working towards.

Another thing about this Zoomify or Defi 2.0 cohort is you guys all tend to kind of work together a little bit and your successes are shared. Right. So you mentioned, hey, that huge increase in total locked value in Rari is partially due to our collaboration with the OMT token, right, from Olympus Dow, part of the same cohort. which I find really interesting. You know, something else, I suppose, that that's interesting is some of the ideas, I guess, and some of the concepts coming out of Defi 2.0 seem very risky to, like, the established Defi protocols, right?

And that's why I do think that this Zoomerfy category holds a little bit, because, like, you know, DeFi baby boomers, you know, they look at their maker and their compound and their AVE and we've taken years to get these models right. And like the risk is, you know, and we can't screw up because if we do, the entire like outside traditional finance world is going to say, see, we knew it would all break down. And here is zoomerfy. And they are out there and they are like, you know, making things happen, forging new, new territory, but also taking on more risk. It feels very out there and feels very risky to the established DFI protocols, the world. So there's also this characteristic. Do you think that's accurate? Are you guys like taking more risk? Are you guys more

bleeding edge? Or is that just what every generation always says about the next generation, right? You know, Bitcoiners said this about defy in the early days too. What's your take? Yeah, I agree with everything you said, right? In Defy 2.0, there is this mentality of build fast and break fast, right? But I think that's not a bad thing, right? I think that's what's going to lead to If everybody's holding back and not really pushing the barrier of what is allowed or what isn't allowed, we're not going to actually see cool shit being built. So to me, it's, yeah, maybe there will be some projects that collapse. And yes, people will inevitably lose money, which is an unfortunate reality. But it's at the, it's, it's a cost of building a better financial system.

And hypothetically, something even better, like even more than just a financial system than we have today. Jay, that is the argument, though, is more along the lines of, hey, we, we are in an industry that is more like medical devices, right? It's that important. You know, a smart contract bug, a mistake, $100 million could be wiped out in just like this. And that can affect and it can hurt a lot of people. So that has been the argument for not move fast and break things, but more like, make sure we get the shit right and like don't let bad things happen. And, you know, make sure all of our protocols are double audited and we're, you know, we're going to the nth degree to make sure that these things are stable and secure.

You kind of this new class sort of rejects that a little bit. And, you know, but do you think there's any merit there? Like Rari was hacked at one point in time earlier. I know this was earlier in the protocol's existence, but what did you learn from that experience? And do you still give some, I guess, credence to those that are urging caution in DFI in DFI protocols. Yeah.

It's interesting, right? So zooming out, I think that there's a spectrum again here, right, of this risk. And I think what's important is that consumers are aware of the risk, right? They know that compound has been around for longer and has achieved a longer Lindy than something like Rari's fuse today. But I think that there needs to be room for both. There needs to be like the people who are iterating fast, breaking fast, and there also needs to be room for the people who are taking the slower approach. And what's important is that

people are aware of both of these, right? People can choose which whatever that they're more comfortable with. I don't think anybody should be dictating, which or which shouldn't, like, should be existing. As for Rari specifically, and to touch on this idea of that the hack that happened earlier this year, it was really tough, right? Like, that was a really tough time for the Rari community. I think it was really cool, though, that we all came together, right? The day after the hack, we organized a town hall, to talk about solutions. Over 300 people came to that town hall, I believe, which is just like it highlights how powerful the Rari community really is,

how we all came together in this time of need. And I think that the protocol left that much stronger than it went into that, which is really, really interesting, right, in how the team actually responded and how contributors, even not part of the team and the community members responded to that event. It was really awesome. And what we learned is security is number one, right? That should always be the case, right?

Everything we ship is audited. What we did right after that is we went to Quant Stamp, who is our primary auditor, we said we want to get on a one-year retainer with you guys. We were the first protocol to do this. Now every single piece of code that we launch, we have a spreadsheet with Quant Stamp that tracks every single line of code that we've touched. They review it before we can even submit and push it live. And we've also committed with a few other.

independent auditors who are actively looking at our code base every single day, right? Because I never want to be in that position again when I wake up and I wake up to a bunch of calls. It's like, shit, something's happening right now, right? And that's my nightmare. And we're going to do everything we can to make sure that it doesn't happen again. So there is an interesting progression to discuss when we talk about defy apps, the development of defy apps and their relationship with risk.

And I do want to emphasize that what Jay just said. said here is that, you know, while maybe Rari might be more risky than the current DFI apps, let's really put things into perspective just because we are more risky doesn't mean that we aren't taking things seriously. Risk is still first and foremost. But, you know, we started this whole DFI thing back in like 2018 with Maker Dow. And Maker Dow had the most conservative culture when it came to development. And same thing with compound. And then Avey got a little bit more risky, but not really. And so really, to me, this whole ZumerFi slash DFI phenomenon is really just that, like,

we have these risk-averse protocols. We have this risk-averse foundation. And what would Rari be if it didn't really already have assets like Dye or other money markets out there, right? So it actually is the time towards leaning in towards, like, some of these riskier ventures because as of just a few minutes ago, Rari Capital crossed a billion dollars locked in DFI. So you know that something is working here. Wait, wait, wait, it did?

It did. Yeah. Ryan, you show on the screen? David, you have some sound effects for this? This is pretty momentous. Oh, gosh. I don't think I do. Oh, no, it's only music.

It's only music. I don't have the right sound effects. But, Jay, congratulations, my man, on crossing a billion dollars in DFI. So clearly the strategy is working out. How does it feel to have a billion dollars in the smart contracts? Scary. Good answer after we just discussed risk. Well, congrats to the team.

Very cool. So Jay, where does Rari go from here? Win 10 billion locked in DFI and locked in Rari. And how does that happen? Yeah. I think it's only a matter of time, right? What we're focused on right now is composability, supporting more assets, all of this, like, crazy stuff, right?

supporting being able to take your token MAC positions, put it inside a fuse, lever up on that, uniswap v3LP positions as collateral, all these crazy things, you should be able to put inside a fuse. And this is obviously just building for the day when we can support real world assets, where we can make a difference in the real world itself. That day is not here yet, right? That's going to take some time. So in the meantime, we're going to crack DFI. We're going to get all of DFI inside of fuse, and then we'll get the real world inside of fuse one day. Jay, I've got a question about how you guys approach regulation, because if I were in your position with my disposition back when I was 19 or 20, I wouldn't have even known about

regulation. I kind of would have just done what I wanted to do and then realize I got into trouble after the fact. When did regulation come on your guys' radar and how did you guys decide to navigate those waters? Yeah, all very good questions. So regulation's always been a discussion hour already, right? And I would say my personal philosophy here is that defy really has consumed my life at this point, right?

I spend so many hours behind my computer talking to people on Twitter, talking to people on telegram, right? Just thinking about defy in general, I'm always thinking about defy. Right. So it's like, defy's taken over my life. It's taken over my financial accounts, right? 99% of my net worth is probably in defy tokens right now, that whatever regulation is happening, I'm here to fight that fight, right?

because defy really is my life. So when you have people like the defy education fund, all of these political action committees that are being together, it's not like, oh yeah, the big guys got it. Now I feel that it's my responsibility to be participating in those discussions and to help construct the narrative in the regulation narrative to make sure that our interests are looked out for as a community and as an industry. So I would say regulation is top of mind and we're doing everything that we can to make sure that we're on the right side of history here. And then I have another question with regarding to the whole actual zoomer generation, actual Gen Z, not Zoomerfy. I want to draw a line in the sand, not talking about Zoomify anymore.

I want to talk about Zoomers in their relationship with crypto. What is that like? What's it like to be from Generation Z in crypto? And is it easier for you to explain crypto to your friends than it is for us because for me it's still really, really hard. So like, what's that like? What is the zoomer stance towards crypto? Not just for the people that are already in crypto, but for your friends who are still looking at it from the outside. Yeah, I think there are a couple different pieces. Obviously, you have all the people that go and trade Dogecoin on Robin Hood and call themselves deep into crypto because they study the charts every day. But the people who are wanting to understand Defi, there's a lot of them. Right. Now, now Defi is really,

getting into a very interesting place. Part of its speculation and financially driven, part of it's just driven out of pure curiosity. And one interesting thing that I've learned is just explaining it to them maybe it isn't harder or easier than anybody else outside of Gen Z, but it's a different type of explanation, right? And this was the same case for me as like working on Ambo, the mobile wallet, it was, we were in compound's office, right, showing Leshner the integration. And the button wasn't Lend, right? I didn't know what Lend meant at the time. It was earn interest, right? So rephrasing and redoing DFI from the perspective of somebody who maybe doesn't have traditional finance experience. It becomes a very, very interesting perspective to tailor the narrative to. And I think it's a massive market that's bound to, that's bound to enter into the crypto space. And it's already happening today.

Right. You walk around this campus and people are talking about NFTs. People are talking about DFI. And it's broken. It's, I think we've crossed, the chasm. And this is why I'm also hopeful on a regulation perspective is now 10% of American's own crypto, right? This is becoming something that is mainstream. It will only increase that percentage. And we're at the point where we just make up so much and it'll increase at an exponential rate. So when you were walking around campus, you at the start of the show, talks to how you are like the crazy crypto person that no one really understands. But do they know that there's a billion dollars locked in the application that you built? Like, do they understand the implications of that?

I think that there's some of them that know, but I try to be a kid when I'm on campus, if that makes sense. Fair enough. No, it definitely does. You can only do college once. Jay, Jay, well said, man, all of this, super insightful. I guess, I got to say, I'm pretty bullish on, you know, the second generation of DFI that's spinning up.

I'm pretty bullish, Zumerify. The energy you guys exude is phenomenal. and you guys are building new, more innovative things. As David said, we already have the more conservative defy protocols. So those are already a fallback for us. And it's great to see the energy, the experimentation. Like, I can feel from you that you are just like all in this industry and you're going to spend the next couple of decades here. And so there's also going to be future generations, right?

Rari is certainly not the last generation to come. There will be a third generation and a fourth generation and fifth generation. And I guess I'm curious for you is, what do you think we have left to build in DFI, right? We've got some of these basic money Lego primitives built, but what needs to come next and what are you looking forward to the most? That's a good question. I think that there's like, there's so much left to build, right? zooming out, Defi still caters to the 0.1 percenters, right? The defy users who may be gotten earlier, the Bitcoin users who somehow found their way

into defy. But at the end of the day, we're still catering towards a lot of speculative users. We're still catering towards people who just want leverage or to go and do stuff without selling, right, which is cool in all. But it's not the future that I want to be building. So I think the future that I look forward to is one where this trickles into the real world, one where our applications are actually being used for real life things and with real life consequences, right? Because at the end of the day, how I view it and how I think other

people in the industry view it and just from discussions with them is it's almost like defy right now as a game. Right. So when does this game really make its way into reality and start making a monumental difference there? We always talk about banking the unbanked. Really all we've done is just re-bank the banked. I'm looking forward to products, hopefully in the next cohort of users, and if not, we'll be actively iterating on this future, where we can actually deliver on that future of banking the unbanked. That's awesome. Jay, to close us out, what are some other, I guess, second generation D5 projects that you really like and that we should be taken a look at in the bankless community? Yeah, all of the usual suspects that we talked about on this show,

definitely. Obviously, the Olympus, down on the Omies inside of Fuse, love that. Alchemics, just super, super cool, the project, right? Just something that wasn't possible in traditional finance, taking a defy, a defy native approach to just everything. And it's stuff like that that gets me excited, just stuff that isn't possible in the real world, stuff that is built on composability and it's just exciting stuff. Do you like Abercadabra, are they in the cohort? Been hearing a lot of that spell recently.

Definitely. I am a big fan of Abercadabra. Obviously, there is some weird overlap between fuse and abracadabra, but holistically, I'm just excited about all of this new shit and just iterations and innovations in general. There we are, guys. This has been Jay talking about Rari Protocol. Jay, thanks so much for guiding us. You guys are doing some exciting things. Congrats on the one billion locked inside of Rari. That's absolutely massive. Give our congratulations. to the rest of the team at Rory 2 and to the entire community. Anything else you want to say before we head out here? I'll shout out my mom and dad.

Hi. Love you. But beyond that, no, thank you for having me. Are they into the D-Fi, by the way? Not really. I don't think they understand what I do to be completely honest. I'm still trying to explain it to them. I hear you on that one.

All right, guys, this has been Bankless State of the Nation. Of course, risk and disclaimers, none of this has been financing. financial advice, absolutely none of it. ETH is risky, defy is risky, Rari Capital is risky as well. You could definitely lose what you put in. But we are headed west. This is the frontier. It's not for everyone, but we're glad you're with us on the bankless journey. Thanks a lot. Hey, we hope you enjoyed the video. If you did, head over to Bankless HQ right now to develop your crypto investing skills and learn how to free yourself from banks and gain your financial independence. We recommend to joining our daily newsletter, podcast, and community as a bankless premium subscriber to get the most out of your bankless experience.

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