Unchained - The Chopping Block w/ Guy Young: Lessons from USD0, Ethena's Bold Vision, and DeFi’s Future - Ep. 766

Episode Date: January 16, 2025

Welcome to The Chopping Block – where crypto insiders Haseeb Qureshi, Tom Schmidt, Tarun Chitra, and Robert Leshner chop it up about the latest in crypto. In this episode, we’re joined by Guy Young, CEO and founder of Ethena Labs, to break down the hard truths behind DeFi’s most recent chaos. We dive into the USD0++ depeg and its ripple effects across the ecosystem, exploring what went wrong and the critical lessons for the future of stable assets. Plus, we discuss Ethena’s meteoric rise, Guy’s vision for synthetic dollars, and how innovative yield strategies are reshaping DeFi. Stay tuned as we debate, analyze, and uncover the hidden forces shaping crypto today. Show highlights 🔹 USD0++ Depeg Drama: A deep dive into what caused the USD0++ depeg, the mechanics behind the chaos, and the broader implications for DeFi. 🔹 Lessons on Risk Transparency: Why sudden rule changes eroded trust and how protocols can improve communication to avoid similar fallout. 🔹 Ethena’s Rise and Vision: Guy Young shares the story of Ethena’s explosive growth, its innovative synthetic dollar model, and its role in DeFi’s evolution. 🔹 The Yield Dilemma: Exploring how Ethena’s yield model works, its appeal, and the risks it carries for users and the ecosystem. 🔹 DeFi’s Distribution Problem: Why centralized exchanges remain the key to scaling synthetic assets and stablecoins like Ethena’s USD. 🔹 Transparency vs. Overconfidence: Drawing lessons from Luna’s downfall and how Ethena’s approach to clear communication sets a new standard. 🔹 Athena’s 2025 Roadmap: From DeFi integrations to TradFi adoption, what’s next for Ethena as it scales synthetic dollars globally. 🔹 Reflections on Building in DeFi: Guy Young opens up about the challenges, surprises, and rewards of leading one of DeFi’s fastest-growing projects. 🔹 2025 Predictions: The crew debates who might become this year’s “main character” in crypto and what that could mean for the market. Hosts ⭐️Haseeb Qureshi, Managing Partner at Dragonfly ⭐️Robert Leshner, CEO & Co-founder of Superstate ⭐️Tom Schmidt, General Partner at Dragonfly  Guest ⭐️Guy Young, CEO & Founder of Ethena Labs Disclosures Timestamps  00:00 Intro 01:30 Changes to Usual Money’s Protocol 06:05 Reactions & Analysis 09:12 Lessons from USD0  18:35 Transparency vs. Miscommunication 22:42 Ethena: A DeFi Success Story 32:12 Demand for Stablecoins & Yield 36:40 Custody & Market Structure Post-FTX 43:58 Handling Negative Yields and Market Corrections 48:22 Ethena's Roadmap and Future Plans 55:53 Reflections on Building Ethena Learn more about your ad choices. Visit megaphone.fm/adchoices

If you are not fairly sophisticated with respect to understanding both finance and Defi, you should probably not be playing these games. These are really something that requires, as you can see, from the storytelling, that really requires quite a bit of financial sophistication to understand what these products even are, what their risks are, and what to do when the game changes. If you don't really understand what we were just talking about, about the cost of capital and the risk free rate and all this stuff, probably you are not going to win this game. Not a dividend.

It's a tale of two Kwan. Now, your losses are on someone else's balance. Generally speaking, air drops are kind of pointless anyways. Unnamed trading firms who are very involved. D5.8 is the ultimate pump. D5 protocols are the antidote to this problem. Hello, everybody. Welcome to the chopping block. Every couple weeks, the four of us get together and give the industry insiders perspective

on the crypto topics of the day. So quick intro, first you got Tom, the DeFite Maven, and Master of Memes. Hello, everyone. Next we've got Robert, the Cryptocarmes. and Tsar of Super State. Good evening. Joining us today, we've got Guy, Giga, Chad, and economic evangelist at Athena. Thanks all, man.

And I'm a sieve the headhive man at Dragonfly. We're early-stage investors in crypto, but I want to caveat that nothing we say here is investment advice, legal advice, or even life advice. Leasy chopping block that X, Y, Z from our disclosures. Guy, it's great to have you on. We've talked about you many times on the show, or talked about Athena, I should say, more broadly, many times in the show. But it's been amazing to see your guys' meteoric rise.

We'll be talking a lot about that on the show. But we first want to start with one piece of news that has been catalyzing a lot of conversation on Twitter, which is the DPEG of a stable coin called USD Zero, also known as usual money. So usual protocol or usual money. Tom, do you want to maybe just give the best way to describe what usual money is? Sure. high level? You can think of it as sort of a fiat-backed stable coin aggregator, then allows people to sort of speculate on the yield, and there's sort of a compensation of

usual token, which is sort of the governance token, that sort of also sits alongside the yield. So specifically, I think, you know, it's a spicy week for stables. Part of, you know, usual produces this actual stable coin USD0 that's intended to be a true one-to-one sort of dollar equivalent. It's backed by these other things. It also has USD-0 plus-plus. which is like this zero coupon bond that in theory should sort of trade as a proxy for people's expected interest rates over a four-year term. So you lock up your money for four years. And then at the end of those four years, USG zero plus plus. So that's specifically what sort of all this drama was about this week. It's a, you know, people, people love, you know, talking about

stables. So you get, so usual money gives you some RWA yield through treasuries. And they juice this yield by issuing their own token. Basically, you can yield farm usual token itself, the governance token for the whole protocol, by locking up your money into the zero coupon bond. But they had this mechanic that for some period of time, you could convert the zero coupon bond for a dollar and basically take almost no risk, right? The whole idea was that this was effectively riskless. And so naturally, what happens when you have this kind of no risk is you have people going crazy and doing some kind of looping. So they just get super levered,

and they try to juice their yield as much as they possibly can using the same amount of money. And then one day, usual money decided that, hey, it really doesn't make sense that this thing is convertible one to one at a dollar. There really shouldn't be a peg. Mechanically, this is supposed to be a zero coupon bond, which means that you lock up your money,

you're taking some principal risk, and you know, it's, or not principal risk, but you're taking some risk, and it's locked up there for four years until you can finally get all of your money out at the end at a dollar. And so one day, they kind of kicked the stool out and decided, hey, guess what, you can you can get this thing out, but you can get it out for 86 cents. I thought it was 87. 87. Okay, fine, 87 cents. Because 86 was the LTV on Morpho. And so it didn't instilliquidate

everybody. They said it to just above. Just above, just above. And so what that means, though, is that the people who were looping, who were repeatedly, you know, sort of borrowing against their own assets and getting super levered, those people actually couldn't unwind their positions because everybody was running for the exits and being like, oh, my God, I thought that this thing was super safe and I could get out whenever I wanted. Now, if I want to get out now, I take a massive haircut on this farming strategy that I've taken on. And this has just caused absolute pandemonium. So many people were stuck in their positions, some of those people who were stuck, they were effectively locked into bad debt because the interest rate they had

to pay on their loop positions was so high that basically this thing was almost certainly going to go to zero, just because they just couldn't get out from the massive, you know, they were sort of spun around a spindle with all the looping that they had done. And so this has just caused total panamonium. Many people criticize them for this very weird messaging in this 11th hour pulling the rug out, And so it's been, I think, something of a object-level lesson in the importance of being really fucking clear about your mechanics and not changing the rules very suddenly because crypto is kind of the home of moral hazard. If you even potentially aren't clear about what the rules of the game are, people are going

to go all the way up to the cliff's edge. And then, of course, as soon as the tectonic plates start shifting, people are going to just get swallowed up into the abyss and yell at you all along the way. So usual money, I think they've suffered quite a bit in terms of both the reputational damage and then also just the fact that their community has just been hurt so much from the fact that so many people were given inaccurate information about what to expect in the way in which they're supposed to be playing this asset and the game that was constructed around it. So we stop there, get reactions, Robert, as somebody working in the, you know, with Super State and your experience.

experience running, lending a protocol under compound. How do you perceive this whole situation? And then, Guy, I want to get your reaction as well. Yeah, I mean, there's a lot of things that have gone wrong here that have, you know, come together to make an extremely difficult situation. You know, if you've removed one or two of these ingredients, I don't think we'd have what amounted to be a somewhat small to medium crisis for a large number of users on, you know, morpho and usual and, you know, curve and all of these other defects. protocols that were tangentially affected. But at the end of the day, the root cause, in my opinion, is the fact that, you know,

there was not a clear set of rules about how the fundamental economics underlying an extremely leveraged strategy would change. I don't think anyone in the community expected them to change the floor price or implement a floor price. There was not a clear understanding that this is something that would go from a fixed conversion rate to a floating conversion rate. And this caught everyone off guard. They can say, oh, well, you should have known about this. But fundamentally, when the entire market is basing an economic strategy on what they think the rules are, to not say anything preemptively is a little bit

of a mistake. To change the rules without wording is an even bigger mistake. And And this all comes together with extremely leveraged users. And so, you know, this was bound to happen. It's not the end of the world. I think their users will recover from this. Not that many people were liquidated so they weren't like forced out of these positions. It's just a total bummer. And hopefully it's a really good learning lesson.

Usual balances back stronger. The users do too. Everybody learns from this and doesn't repeat the same mistakes in the future. Guy, what's your take here? Yeah, I think I have a small disclosure. I did do a small investment in usual before they came out this year. And I think Athena's also had plans to work directly with usual potentially making some part of the backing behind USD Zero. So just wanted to make that clear. I think, yeah, echoing the comments from everyone else, I think the communication here wasn't great.

Obviously, changing things pretty quickly without much warning. And I think there had been some mixed messaging around exactly how. hard that floor at $1 was, and I think there was some confusion. Both of the people who had been around the protocol was like private LPs for many months, and then obviously new retail users who came in later in the game. I think part of the issue here is a lot of the DFI applications where you start to embed dollars or their product almost has the implicit assumption that this is a dollar. So when you're levering something a morpho, it doesn't make sense to do that at 10x if you think that there is a real possibility that's going to trade below 90 cents in the next

couple of months. Another example is Pendle PTs. The APY that you see displayed on their website, again, assumes that the principle is going to be the principle and it's not going to lose a huge amount in the face value between the moment that you enter and the maturity. Curve pools assume that the two assets are stable and the values will sort of track each other. And so I think the issue in the most of the complaints I've seen is actually that there are huge amounts of incentives that are actually, you know, push towards these different applications where they're actually incentivizing you to provide liquidity on something that's going to de-peg eventually. They're incentivizing you to hold an asset that you think is going to be maturing with the full principle and isn't

in the end. And I think that that's just where people got banned. I think the maybe general advice for people is that maybe just take a step back and think about like at a system level, it's a stable coin backed with a bunch of T-bills that's paying 4%. And so when something's paying 60, all across the board, there has to be a zero-sum game that's going on somewhere, which is who's actually losing on the other side so that someone's earning 60 out of a system producing four. Yeah, so let me just reiterate that for those at home. So this is supposed to be a stable coin that's getting T-bill yield. T-bills are paying 4%. But people who are playing the game were making 60% annualized, right? Which should be the first red flag. Okay, something is probably unsustainable

about the situation. How can you be getting 60%? There's something that who's underlying assets are paying 4%. And the answer is probably you're taking a shitload of risk. Now, that being said, Guy, I want to ask you two questions about that explanation. So one, it's very common for stable coins or any project in crypto to start subsidizing things early, you know, trying to track more TVL. Like this is not just normal. It's basically universal across all startups.

It's not even just in crypto, is that you, you know, you do, you get some marketing spend, you give incentives, you try to get people in the door. What is it about the way in which they were spending money? You pointed to the fact that they were incentivizing people on Pendle. It's almost as though they were trying to get people to get super levered and to do some of this looping. What do you think they should have done in that regard to not have this gone off the rails to the extent that it did? Yeah, I just want to make sure. I don't think that they were doing this maliciously to, you know, push people into things that they knew. No, that's not what I'm, that's not what I'm flying. But I do think it's basically just not thinking through the second order implication of when

this starts to drift from a dollar, what starts to break further downstream from the core product. And these are permissional system. So someone could have always taken that asset, put it on Morpher and started to do things with it. I think it's just when you as a team decide to actually start streaming rewards to a certain type of activity. There's almost an implicit sort of endorsement of the fact that that idea makes sense. right? So I think if someone was doing something with USDE or SUSDE on our side, and we thought that this was fundamentally unsustainable or something was going to break further down the line, we as a team wouldn't be, you know, pointing incentives towards encouraging that activity.

And I think that that was just the piece which surprised people, which was if you had thought about these sort of downstream impacts before, you probably wouldn't have been incentivizing those types of activities. So where should have they been focusing the incentives? Like, I mean, it's very common for people to do this kind of thing of putting incentives onto morpho and onto Pendle and so on. I mean, Athena does it. Yeah, yeah, we obviously did a huge amount of that to start with. I think it's just trying to grow the whole product. I'm still not, I don't really fully understand why this zero coupon instrument needed to sort of exist. You know, it's a T-bill. It's supposed to be one of the most safe and, you know, easy to understand sort of assets that exist. I don't really understand why there needed to be so many layers to the different pieces of the capital structure within usual, because I think that.

that added complication here, just sort of compounded the issues. Okay. So then this idea that like, okay, they had this sort of redemption window that suddenly closed and they didn't really communicate when it was going to close or why it was going to close at the time that it did. Now, again, I want to rewind the clock a little bit because easy in hindsight to say, oh, they did this thing wrong. They did that thing wrong.

But I want to make sure that because there are a lot of founders who listen to this podcast. And I want to make sure we do something of a postmortem here, or not a postmortem because it's not dead, but, like, to try to understand how should this have been done. It's very common that projects will say, look, we're going to give extra rewards, we're going to give extra incentives, and we're also going to make it really easy and relatively low risk for early adopters to come in and say, look, you can get in and out of the yield-bearing asset in a way that you will not be able to eventually, right? So what do you think would have been the right way for them to have done this and kind of, you know,

sort of grease the inflows and outflows into the protocol. Would it have been for them to pre-announce the date of the removal of that floor price? Would have been never to have that floor price at all and use different mechanics? What do you think in retrospect if they could play it back they should have done to do this the right way? Yeah, I think you can incentivize obviously just the core product, which I understand to be USD Zero, which is just the basic RWA back to Stablecoin. I think that there's no issues throwing incentives there if you want to bootstrap that from

zero. I think it's actually just pushing the incentives on that secondary asset or like the secondary token that they have, which is the issue from my perspective. So, yeah, I don't really think that there was a problem, just pushing plain vanilla incentives on the core product. And, you know, they would have had a growth period and slowed down whenever those incentives slow down like any other product we've seen. I think it was really, it was that second sort of token that really caused the issue. You know, not to get inside their head because I'm not a member of their team. I haven't spoken to them about this. I'm just guessing here. I mean, My read of the situation as an outside observer is that this second product was really designed

very clearly to lock up capital for four years, to lock up users for four years, to build a moat or a base or whatever you want to call it of assets that wouldn't go away, right? It wasn't, you know, there's a reason why it's a four-year, you know, product. And I think in their minds most likely they were trying to establish permanence in response to a lot of the arguments about token incentives and yield farming and airdrops and all of this stuff and that it's mercenary capital that goes away. And so, you know, I assume that they thought this was just like a brilliant way to take the other side, which is, well, what if we just lock up the users for four years, then we don't have to worry about mercenary capital. Like, you know,

it allows us to change the incentives later. And I just think it was an experiment that went a little haywire. I think there is that component where in some respects reminds me a little bit of when Maker had that sort of emergency fee hike, I think maybe it was about a year ago and people complaining that was too much too soon. And it's kind of like, when you're a protocol and you, realize that the protocol is doing something uneconomic and it could kind of, you know, threaten the entire system, it's like, okay, do you take action immediately and eventually cause market chaos or do you do something gradually that, hey, maybe actually causes you to, you know, lose out net more than taking something immediately, but like ultimately allow sort of a,

a more gradual unwind of the process. I don't know if there's actually a clean answer or one is better than the other. It's either you're taking the loss or users are taking the loss. But if you know, you as a protocol take the loss, there's also risk that, hey, there is some sort of bank run, Minsky moment. Like something does collapse and then you have sort of a broader, you know, it's sort of like, do you do a total protocol freeze and then sort of give everyone some sort of haircut prorata? Or do you like let the protocol do its thing and let people just sort of withdraw? And if you're stuck, then, you know, you get a zero.

So I think doing some sort of haircoat effectively is probably a better option. I think the weird thing about this whole story is that the underlying for usual is actually a pretty boring product, right? It's supposed to be a boring product. It's fucking T-bills. So the financial alchemy requires to make T-bills this like crazy yield farming, I don't know, loop-de-loop like roller coaster, requires there to be a lot of risk and craziness somewhere, you know.

the fact that users were not able to really clearly perceive where that risk was coming from and the nature of that risk. Like, it's, you know, look, on some level, the whole spirit of crypto is caveat mTOR, right? As long as you put the smart contracts out there and the code is clear and the disclosures are there, then, you know, have at it. And if you end up getting hurt, like, look, at least you knew what you were getting into. The place where this all rubs people the wrong way, and I'd say it's true for me as well,

is when there's humans involved. And the humans are the ones that are ultimately making people get hurt. If it was in the rules, if it was like, hey, you know, this redemption window where you can convert USD0 plus, or sorry, USD0 to USC 0 plus plus, if that redemption window is going to be live for exactly, you know, 90 days. In the first 90 days of the protocol, you can get in and out and you can do whatever craziness you want. But then, like, as of this date, it closes.

then people can plan around that. People can actually foresee what's going to happen. But if it closes one day suddenly, then you are absolutely going to create these really just violent situations in a market. And those are the places where people, if people know the rules in advance and they get hurt,

they at least know, like, look, I'm an idiot. It was my fault. Or at least it was a dynamical system that, okay, maybe I should have foreseen what would happen. Maybe it wasn't obvious that people would run for the exits at this time. But if I had done my homework and I thought about it more deeply, maybe I could have anticipated it. But you can never anticipate a human coming in and pressing a button.

And that's, I think, the thing that really pisses people off. Yeah, I think that's right. I think one of the pieces of interesting commentary and interested in your views on this as well was people sort of trying to determine what is actually the flaw in this now going forward. I think there's a lot of commentary on there being a mathematical floor for this thing in the high 80s, because if you discount 4% back four years, that's sort of like the current value that you get. I think if you strip away all the tokens, though,

there's a very interesting question, which is how much would you actually have to get paid to lock up your money for four years in crypto? And most people's cost of capital is not 4%. I think that where that sits on this call, probably somewhere between 15 to 25. And when you run that math, that should actually be trading at like 40 to 50.

If you're assuming something that's as wide as that. So I think that's just one of the piece for people to think about, which is if you strip away these token incentives, this sort of idea that there's a hard floor at a 4% discount rate, I think is just something that people should think through. Yeah. This is the hard floor that they introduced, right? This is not the market quote unquote floor. Yeah, exactly.

Right. And, you know, not to get too bond math geeky on this conversation, but, you know, the formula to find the present value of it. the expected value is not based on the risk-free rate or the T-Bill rate, it's based on the required rate of return. And so, guys' point, in crypto, what do you require on a low-ish risk investment, right, to enter into it? And it's definitely not 4%, right?

It's probably closer to that 15% number. And, you know, what's interesting about this is that, like, we haven't seen the market understanding that are pricing it at all. even after the facts. Like when you go on Twitter, people are like, oh, like, here's the formula. I googled it. Like, you know, it's, you know, one over, you know,

one plus.04 to the fourth hour. So like, it should be 80 something sets, you know? And the widespread understanding is that, you know, the required. Yeah. The reality is that the, that interest rate arbitrage is only possible if people are on, if people with that cost of capital are on chain

doing that industry arbitrage. And they're obviously not. And the required rate of return is not. going to be the risk for rate because it's not a risk for investment. There's smart contract risks. There's rule change risk, you know, there's all sorts of. As we've already seen. As we've already seen, I would actually call it, you know, one and a half times, you know, no risk. So, you know, take for that what you will. Yeah. So very interesting situation. And it's another one of these examples in crypto. You know, I imagine many people who aren't in the

defy trenches every day. They hear about this and they're just like, oh, my God. another stable coin that depagged, aren't stable coins just, isn't there's just a, you know, just, I don't know, just like a fucking disaster all the time. Isn't that all I hear about in crypto? And so I guess it's worth to reiterate for one, USD Zero was a pretty small ledgling stable coin. It was obviously kind of in its first innings. And the second thing I'll say is that if you are not fairly sophisticated with respect to understanding both finance and defy, you should probably not be playing these games. These are really something that requires, as you can see from the storytelling, that really requires quite a bit of financial sophistication

to understand what these products even are, what their risks are, and what to do when the game changes. If you don't really understand what we were just talking about, about the cost of capital and the risk free rate and all this stuff, probably you are not going to win this game if these concepts are alien to you. This is the first thing that I want to say is that this is very much the deep end of the pool of defy insider mechanical stuff. Now, I want to do that. I want to to take that as a backdrop and come to Athena. Because Athena, of course, playing at a very different level of the game, playing, first of all, you guys have been around for much longer, but also you guys have been one of the massive success stories in Defi. Now, part of being a massive

success story means you also have your detractors, and we're going to talk about that too. And I also want to caveat that, of course, we being Dragonfly are investors in Athena. but we also want to understand the role that Athena plays in this D5 financial universe because it's a complex one. So first and foremost, I just want to give some high-level numbers on Athena. Athena is the second fastest protocol to hit $100 million in annualized revenue. It's the fastest U.S. dollar asset to hit $5 billion in supply ever. And it accounts for right now about 85% of all on-chain USDA growth outside of the big two,

which are USTT and USDC. So Athena has been a massive success story on chain. Now, you don't describe it as a stable coin. You describe it as a synthetic dollar. And we've talked about it on the show before, but I'd like for you, Guy, to explain mechanically, what is Athena and how does it work? And then we'll talk a little bit about the Athena roadmap. Yeah, sure. So the Genesis and real origin of like the story goes back to that article that Arthur Hayes put out at the beginning of 2023.

So it's his original idea. and I think we saw two similar projects actually to Athena that existed last cycle. But the basic idea here is that you're taking some form of crypto collateral and then using derivatives to hedge that collateral, which allows you to issue a synthetic dollar on the other side. And really the core idea here is that when you're using a future or perpetual swap to hedge out the delta of the actual asset, the movement in the price of the underlying doesn't actually affect your ability

to maintain the solvency of that dollar that you just issued. So yeah, at a very basic level, that's what's happening. And one of the interesting byproducts of what I just described there was that when you're short futures or perpetuals, there's a very interesting interest rate that's produced within crypto, which is known as the funding rate. And I think that that's really the core of what's driven the massive, I think, interest and growth within Athena, which was this was a relatively untapped piece of the market where really you can think of Athena as importing that really huge. basis market into D5, which it sort of enables other people to build new interesting financial products on top of that.

And then eventually trying to actually take that and export it out of crypto is the vision of what we're trying to do next year. Sure. So let me reiterate that for those in the back. So what Athena is doing is they're tokenizing what's known as the basis trade. The basis trade is one of the oldest trades in crypto. Literally, you know, people have built funds around just doing the basis trade. It's not a super complicated trade.

Basically, what you do is you go long and you go short. If you're both long and you're short in some asset, then that means that you're hedged. That means that, you know, whether the asset goes up or asset goes down, you don't really care, your position is going to be worth a dollar and it shouldn't move. Now, when there are more longs than shorts, as there are most of the time in crypto, because most time crypto wants to be long, then you get paid interest on being long, and that's known as the funding rate. And basically, Athena, what they do is they're long and short by being long the spot

and short the futures or short the perpetual swaps, and they collect a fine. funding rate in times when there's more, you know, long interest and short interest. And this funding rate is the yield. That's the quote yield. So where USD Zero was getting their yield from treasuries, Athena is getting their yield from basically the demand from crypto markets to be long. Or another way to put it is that it's the demand for capital. When crypto as an industry doesn't have enough money, essentially that's what they're doing

is they're bringing more capital into the crypto industry to do what crypto industry wants to do, which is to play the crypto. market. So that's a very high level representation. Now, one thing to understand, I think a lot of people are somewhat confused by, the funding rate is floating, right? It's not like Treasury. Treasury is always pay 4% or whatever. The funding rate goes up and down. Sometimes it's positive, sometimes it's negative. Talk to us about, okay, when should we expect the yield on that you're getting from the funding rate to be positive versus negative? And what are the mechanics there? Yeah, I think it's really linked to what you're describing there, which is the demandful leverage

within the system. So when the market wants to express a particularly bullish view, there's just generally a shortage of dollars to actually supply capital into people who want to express that on leverage. And so, yeah, all that number is really representing is how imbalanced the demand is for longs versus shorts. I think the moments that you've seen this peak the most, as you expect, is sort of peak froth within the bill market. So 2021, we saw those rates average like north of 30, 40%, consistently for months in the first sort of quarter and then in the back end of the year as well. And I think the two events which really drove high funding rates within the last sort of 12 to 18 months was really around that announcement of the PTC ETF where everyone realized I need a front

run these like real spot blows that are going to come. I need to get along more than one X my sort of position on PTC. And we saw the same thing around the period with Trump to a slightly less extent than than what you saw with the ETF at the beginning of the year. I think one of the interesting pieces, though, and sort of chatted to a few people around this was the funny thing about the funding rate is that it's actually, the moment you least want to be in dollars is actually when the funding rates are the highest, which is there is actually a reason for why the funding rate is so high is that there's such broad consensus that crypto assets are going up so much. And so it's actually a perfectly rational thing to do for people to pay, 30% interest.

If you have a very strong view that Bitcoin's going to double between now and the end of the quarter, And if you just sort of back to S three time, the periods when funding rates were the highest and Athena's product is like on paper as as attractive as a compost way be. That's actually when you want to hold no dollars and just be 100% long crypto. Right. So if you hold Athena's synthetic dollar, you're getting exposure to the funding rate. And so when the funding rate's high, you're getting a high yield, when the funding rate goes down, your yield goes down.

If it's state, right? Yes, correct. Yeah. So there's two token models. sorry, two tokens within the design for Athena, and that looks very similar to the way that dye and S-D-E-S-D-E-S-D-E-S is now constructed. The way we sort of thought about this is that you have two real use cases that you're trying to serve here.

One is sort of a unit of account, something that you're using for trading, and an instrument that's less of like a savings tool, and that's like USDA, which, you know, broadly approximates a dollar. And then S-U-S-D is where you're taking that to stake can actually capture all of what we've described there and a small amount of staking yield that comes from the Heath collateral. And really, we've just tried to bifurcate between what are the two use cases that we're trying to serve here, which is sort of trading and money and then more of the savings

tool that sits on the side. And I think where Robert's going to get to there is you've got the yield amplification stuff. Yield amplification, which is my favorite mechanism of 2024. Congratulations, Guy and Athena. I think it is an absolutely wonderful and brilliant mechanism. and I think it's going to be widely adopted by other projects. I think usual, in a sense, is also taking that mechanism.

But I think we're going to see that strategy get used as a basic building block of D5 over the coming years. Yeah. I think one of the interesting things there was that to make it out was actually doing that, not as explicitly as a sort of a strategy to boost up what they're doing. It was just more that the product construct drifted through time when they introduced S-Di. One of the most interesting stats that I actually heard about Maker, I'm going to misquote their absolute numbers here. It's somewhere between one to two billion dollars of dye is sitting in an E-O-A which hasn't actually moved for more than 24 months. So if you just

look at the analysis of the wallets that are actually holding die, there's a huge amount of this debt capital that's sitting within Maker. Because if you look at how much die is actually being staked within the stake version of Maker, I think last time I checked it's like sub 30, 40% of of the total. And you really ask, like, why is it that so many people aren't capturing this, you know, relatively low risk, 12% that they're paying at the moment? And the answer is that there's just huge amounts of capital that are stuck in, you know, old curb pools from 2020. There's like Uniswop pools from 2019. And just having existed for that amount of time, leaves all of this dead capital that's sitting there. Why that's so powerful for Maker is that

you don't, because you don't have to pay an interest rate on that. It's almost like, you know, zero percent deposit that's sitting with Maker that they can pick up and put into Athena and try and something that's north of 20 in some periods. And that's like really risk-free, or sorry, interest expense-free capital that they can sort of use to either generate more profit or choose their own product. So that was just an interesting fact that I didn't know about Maker. And it's a pretty powerful moat that they have going forward. Okay.

So I want to take a step back because we've gotten very deep into some of these wonkish defy, you know, sort of inner workings conversations. I want to ask the big question of like, okay, so what? So you guys are this way to get exposure to the basis trade. People like the basis trade yield. It goes up and down. Who gives a shit? Why is this such a big deal that, like, why is Athena so fucking big?

Why do people care that much about this asset? Yeah, I think the simple answer is that, you know, a dollar with some sort of return is really the most basic financial asset on earth that I think everyone could potentially want to use at some point in time. I have a pretty strong view that outside of Bitcoin, it's actually really a product like this that really only stands a chance to get in the hands of a billion people, which is like, if you just go around the world, what is the one financial asset or function that you're wanting to get out of the financial system?

And it's really you just want to hold a dollar in your bank account, get a yield, and then potentially spend that. So I really think that the demand for a product like this, if you can do it at scale and really produce a structurally higher return on capital is just orders of magnitude larger than where I think. is now. So I think that's the reason why people care, which is the demand for dollars, as we've seen with the success stories of stable coins in general, is huge. And I think if you can produce an interesting sort of return on those dollars, the market there is even bigger. And I think the question here is really, how much can the crypto market absorb in terms of demand rather than

what's the constraint? Yeah, exactly. Let me lightly challenge you on that one statement. I would posit that the demand for a stable transaction-based currency, one that's designed to be used in trade, used in settlement, used in all the different use cases of payment flow, people would prefer one that's backed by the simplest, most boring stuff possible, right? If it could be a dollar, not in T-bills, I think people would prefer that, you know, if the simpler, the better. So the question is, do you think that the dollar component, not the yield amplification? amazing, gets all the income from a really high yield strategy, that part I get, right? Like that part, I think there's a crazy amount of demand for out the wazoo. But the other side of it, the stable side, the transaction side, is the demand for the transaction side, do you think higher if it's backed by a high yield strategy or what Heather

and Circle are doing, which is, you know, a very low risk strategy? Yeah, no, I think you're exactly right. the demand and use case for that like dollar without that is definitely smaller. I do think the one piece I'd maybe just encourage people to think about, especially within like crypto market structure, is that often that decision is not made for you. It's made by distribution platforms like centralized exchanges. And so you don't actually make the decision of what stable coin you're using on those

exchanges. They make it for you and they allow you to sort of trade with it. And so the way of maybe sort of flip that around is saying, in an end state, if we assume that Athena can sort of grow from where it is now, is an exchange more incentivized to push Athena's product onto users rather than something that gives them no return. Tether is internalizing all of the sort of profits to themselves, or is something where they can actually make quite a lot of money embedding what we're doing

into their platform, actually something that more aligned with. I'm not saying that every user on Earth is going to abandon bits, stable coins for what we're doing, but I think the incentive structure here is much more aligned with what we're doing that in the United States, they might make that decision for users. Yeah. Speaking of risky backing, I mean, I also remember crypto capital and, you know, all the stuff about Tether holding a bunch of Chinese commercial paper that potentially was going to go up and smoke.

Yeah, exactly. So it's, I think it's a very good point and also a very apt history lesson that it wasn't always the case that people assume that Tether had robust backing. Obviously, it's a very different story today so many years later. But it underscores the point that distribution, distribution is so much in Griffith. Well, that was the primary argument against Heather, to be honest. Like, you know, I've been around for a while. Like, the primary argument against Heather was you don't really know what's backing it.

And it's higher risk than, you know, you might want. And I think most of the world didn't care because I think they had a distribution advantage, especially outside the U.S. And an adoption advantage. And at a certain point, people just said, like, well, it has more liquidity and more market share than any other stable coins. So that's the one I want. And they've been very fortunate with that. But I do think- Well, in Asia, a big part of the reason why people like Tether is because it's not American. Right.

It's because it stood very cleanly outside of the complex of the, you know, sort of American government, law enforcement, you know, asset seizure regime. Obviously, that's changed now. Tether's actually, if anything, more freeze-happy than Circle is, which many people don't know. Freeze-happy, yes. They'll stop frauds and hacks extremely quickly and aggressively, where Circle doesn't. Right. I mean, they do just not as quickly and not as frequently as Tyler does. So anyway, let me come back to Athena.

So let's talk a little bit about that constraint because I think once people understand the mechanics, they might say, okay, great financial product, totally understand why you want that. But, you know, if you think about, you know, understanding Athena, okay, Athena is long and short. They're long spot short the futures. You can be infinitely long the spot. You can be long spot. You can buy as much Bitcoin or ether and be super, super long.

but you cannot be infinitely short, right? There's just not enough liquidity on the market for you to be infinitely short. So how do you think about the growth potential given that constraint on the crypto market size? Yeah, I think this is actually one piece that I got wrong in our expectations, even from when we were chatting like 12, 18 months ago. I think the interesting piece that we've observed this cycle in last is actually that the derivative market tends to grow much quicker than actually underlying market caps. and prices. So what we've seen was actually that BTC, even just looking at this year, the open interest declined at roughly a ratio of like 1.5x versus the market cap itself.

And so as the market's actually growing and asset prices are expanding, the derivative market is actually growing at a quicker pace. The reason I'm giving that context is that actually, despite all of those figures that you've just put out around Athena, we shrunk relative to the market between April and the back end of this year. So we actually got smaller as a percentage of the market. and that's just because things were growing that much quicker. So I think where we stand now,

I think the funny thing was actually when I was pitching Athena to you guys, I sort of viewed $5 billion as like the crazy end state of how big this could get in five years' time and we sort of got there in a year. And sitting where I am now, I think that number is like 20 to $25 billion, even if we don't see like material growth in the size of the derivative market going forward. Really, I think just expressing it as a percentage of open interest as the way that we, think about things. We're roughly sitting at 7% of the market right now. I think we could represent 20 to 30 without fully distorting the market as it is right now. The other way I've sort of encouraged

people to think about this is actually less of around what is the dollar notional that Athena can get to, but more what is the clearing equilibrium interest rate that someone wants to hold the asset in an end state? So I'm sure we can jump into it, but I think the plan for what we're trying to do this year is actually trying to take the acid and push it into Tradfi, where the cost of capital is just that much lower than where it is within crypto right now. And I think the way that they're going to look at things is I'm willing to hold USDE at risk-free plus two, three, 400 basis points. And I have an unlimited amount of capital to push into it until funding rates go from where they are now to that spread, to risk-free rates. And that's actually kind of the

mechanism that I think people should think about Athena, which is we're trying to solve. for like an interest rate of what should be the cost of capital within crypto for this product. And actually the supply of USDA is just a balancing item that's getting us to solve for that. Okay. So before we get to the roadmap, one more question that I want to zoom in on is where the assets live. And so the custody as well as the venues. So you mentioned that there were a couple predecessors to Athena. So obviously, you know, Arthur Hayes wrote this piece, Crest on Dust, I think it was, where he described the mechanics behind this asset. But actually, there was some prior art.

And actually, one of them Tom invested into, called Lemma Finance, which was originally doing a version of this, but they were doing it all in D-Fy. And this, Tom, when was this? This is like 22? It's like 21, I think, even. But into 22, but even before Lema, there was value, V-A-L-I-U that was doing this in Latam before stable coins were really big and offering sort of a dollar savings account. So it's an idea that's been around in crypto for a while, but has struggled.

for one reason or another to really hit mainstream adoption. Right. And so the difference, and I think, you know, it's kind of one thing you guys correctly identified in that IDMAs of ways in which you could potentially build this is realizing that you had to go to CFI. You had to go to centralized exchanges. You couldn't just stay in DFI because the open interest was just way too small. And you couldn't really build anything that could get to the scale it needed to to be

potentially competitive with other dollar-denominated assets. So talk me through how do I understand the venues. and the custody of the assets that go into Athena. Yeah, so this is a pretty big change in like market structure versus last cycle, where we saw the emergence of this piece of infrastructure called off-exchange custody, where you could essentially house the actual collateral outside of the centralized exchanges themselves, and what that enabled was your ability to disaggregate custody from execution and settlement on the exchange. This is something that didn't actually exist last cycle.

This is like a post-FTX thing. Correct, yeah. And actually, post-FDX, I'd been designing the Athena product going into the FDX event. And then FDX happened. And I was like, okay, there's literally zero way that you can leave assets on essentialized exchange and crypto going forward. And how to go back. Good insight. I will give you props for that insight. Yeah. And so, yeah, I personally didn't feel comfortable putting things directly on exchanges. We saw the emergence of these off-exchange custodians. And I think that that was just very good timing as we're thinking about this product to come out where we could really leverage that. I hope it uses more comfortable on that particular risk. But yeah, I think the quick summary here is that there's not a single dollar of collateral

within Athena, which actually sits on the centralised exchange. That does not mean that the risk is zero facing these exchanges. So you still have the hedge that is sitting on the exchange. And to the extent that you have unrealised P&L on that venue and one of them were to go down, there is a risk that you wouldn't be able to recover that full unrealised PNL. What I would say, though, is that sometimes we owe the exchanges money rather than the other way around. And so it's not necessarily the case that if an exchange goes down, you're necessarily in the rate. But it's most likely going to be the case.

But yeah, I think that that was a huge piece for us to just try and address some of that concern around credit risk for exchanges. Yeah, I would posit that it's definitely going to happen when things are going off a cliff, right? It'll be the next FTX and everything's going to be blowing up. And, you know, exchanges go down in the bad times. They don't really go down in the good times. And so, you know, as a book that's long spot short perp, you know, the short side is the one that keeps you safe. And so, you know, I would say that it's probably not 50-50, you know, in terms of the outcome of that coin flip. I would assume the coin flip itself is very rare.

You know, I think it's unlikely that exchanges in this modern era are going to go down. I think we've come so far. The standards of users are higher. The standards of regulators are higher. The standards of people running businesses are higher. So I think the odds are actually what's gone down. We are proof of reserves and we have all that stuff now post-FTX that's become market standard. Yeah, I think, but if it does happen, I don't think it's a coin flip.

I think it's like 99.9% likely that, you know, it's the wrong way. Yeah. So let's then talk. One last thing is, you know, so there are many situations. That's obviously one of them, but that's, you know, more Black Swanee, because you guys aren't on a ton of venues. It's not like you guys are on, you know, every exchange. But what happens when the yield goes negative? So that, we know, happens with some regularity. It's not super common, but it does happen, right? Crypto has periods where people want to get the hell out and they're

running for the exits. When the yield goes negative, how does Athena stay solvent? Yeah. So again, I think this is another piece that I took on the market feedback that we had when we first came out and slightly redesigned the product from its original version. So I think the mistake I made in the beginning was trying to do a purely crypto-native backing, which was saying, like, in all circumstances, we'd be holding those positions of the cash and carry sitting in the backing. The much easier answer is that you close the positions and just sit in another form of a stable coin in the event that does happen.

And so I think that I read the market wrong where I thought that they wanted that crypto-native element to it more than they wanted, just a very simple answer. of like we're going to close the positions and sit in stable coins. But yeah, I think to answer your question more directly, even in the event that you're closing those positions to sit in the stable coins, we do have a reserve fund that's sitting behind it, which is roughly 1% of the total assets. And in the event that that isn't sort of sufficient,

there would be a pro rata sort of reduction in the collateral that's behind USDA. I think I just, well, I think the interesting piece about this one is that I've obviously spent many hours talking about this risk around the funding rates. And to me, it's the one I'm like the least concerned about, but I think the one that people speak about the most. And in the event that something truly disastrous did happen where you're sort of bleeding out, you can swap into stable coins for whatever reason, whatever it is, I would just mention that it's like an extremely slow attrition of principle rather than like you wake up and you've

lost 50% of your principal in a zero coupon bond the next day. and oh damn okay and so yeah I've just sort of contextualized the yeah just to add on to that yeah yeah just to add on to that I mean the correlation that works in your favor is if the funding flips it's because

you know the perps are trading at a discount to the spot and when you are closing out those positions you know you're doing it pretty favorably right you're literally you know actually making a small gain as you close them out. And, you know, as somebody who participates in this basis market, Superstate has a product that's a cousin of Athanas, which is USC, you know, I'm familiar with how that works. And I'm confident that Athena could, you know, you could very easily close positions out quite easily if perps are trading in a discount spot. Like, it's kind of the best time to be closing.

I think the one other element here is that all of this analysis sort of assumes a static response from the users as well. And we've seen this play out in real time with Athena, which was, you know, we grew from zero to roughly 3.6 billion in like four months. And then the market cooled off and we unwound about 30% of the supply to get down to 2.4. And that was exactly the mechanic as it described, which was when the rates start to come down, users start to decide, I don't want to hold this product and I want to go into something else. And it actually has like a self-correcting piece to that, which is when they're saying,

I want my money back and they're redeemed from Athena, you have to close the shorts, which actually helps to push funding rates back up. And so I think that this is one thing where people used to speak in comparison to lunar, which I obviously think is completely incorrect for a bunch of different reasons. But actually, Athena is like almost anti-reflexive, which is like the larger it grows, the less attractive the product becomes. And then on the way down, it actually helps to, you know, resolve itself as it sort of unwinds, which is it was literally in terms of like the design there, I think like, you know, very different.

to the reflexive pace that you saw within Luna? Right. Luna being a negative feedback loop, whereas Athena being the opposite loop, where it neutralizes itself. Yeah, sort of like equilibriumating. Whereas, yeah, Luna sort of can't contract, right? That was the problem with Luna. Is that once it got really big, there's no going back.

You have to be big for us. Inflate Luna. Sell Luna. Luna go down. Problem worse. Instantly class. Yeah. Exactly.

Exactly. Yeah. Okay. I think we've given a pretty fulsome picture of what. what Athena looks like and why it works and why people find it a compelling product to hold. Tell us with the roadmap. What are you guys planning to do with Athena? Okay, you've got this thing. It gives you yield. Okay. La-di-da. Where are we going? Yeah, I think on the core product itself, the way we've always tried to think about the three

different markets is sort of splitting in between D5, C5, tried five. I think we covered off D5 reasonably well when we came out. So integrated with most of the major protocols that you see on chain now. I do think there is some growth still left there. I don't think it's in the order of sort of like $10 billion for something that looks like Sky or Athena. But I do think like on the margin, you might have seen something that came out today where Sky is going to be allocating another billion dollars into Athena directly in terms of its backing. I think this general dynamic that you see of rates coming down in the real world, crypto rates picking up, just makes the product of Athena a lot more attractive to sort of sit within DeFi and a bunch of different applications.

and I think that that trend will continue through this year. I think other use cases that you've seen on Arveh, that's been very much constrained in terms of the size that it can get to. I think that that market could be north of $5 billion just by itself. And so I think that there is some growth within DFI, that's not going to be the sort of $10 billion opportunity going forward for us. I think one really interesting use case that we saw emerge was as collateral on centralized exchanges.

So I think to the discussion that we're having earlier around, you know, centralized exchanges are really the key. distribution avenue for dollar issuance within the space. And unless centralized exchanges want to push your product, you're not going to win like the game of being a stable coin or a dollar issuer. I think people also don't understand how big the market actually is for collateral trading derivatives within CFI. So, you know, tether roughly 30 to 40 billion, depending on when you look, of tether supply, is used exclusively to margin perpetuals on exchanges. So that's literally the size of USDC is just for that one use case that I just.

described there. I think for Athena, that's actually an extremely compelling area that we can actually compete with them, which is, do you want to get paid zero on your collateral or do you want to get paid something? And that capital inefficiency piece is just huge for the largest trading funds within the space, for them to, you know, if you're trading $100 million per book, to give up $10, $20 million of income on your collateral side, it's something that you can't really ignore, and it's a product that they sort of understand from a risk perspective. So we rolled out that with by bit, probably being the most successful example, we flipped USTC balances sitting on by bit within just a few weeks. And I think for us, there are still a few new venues that we

want to get onto and really push within CFI. And then I think the biggest opportunity of all is really thinking about this more as a product that we can start to push within tradfine. So I put out like a roadmap piece a couple of weeks ago, which just outlines how we think about, you know, potentially taking this product and actually wrapping it up in an institutional friendly, regulated wrapper that can actually go direct into TradFi. I think the interesting piece here, and we obviously touched on it earlier, is that because the cost of capital within TradFi is that much lower, you know, Athena's product looks kind of interesting relative to other things within

crypto. It's like, okay, high teams return, but I can go from whatever thing on chain. And oftentimes you can actually beat Athena with something else. But I think if you just compare, if you try and express it as like a sharp ratio or like the volatility of what Athena is doing relative to the return. It is, it almost looks like a scam to people who are sitting within Trapi. And I think that the next step for us is actually just plugging directly into those pools of capital where we can play out that sort of idea that I described, where they price it as a spread to risk-free rate.

Tell us about, so in your 2025 roadmap, you described sending and spending S-U-S-D-E, and you also talked about the way in which you want to see Athena, become more like B&B and sort of be the token of a broader ecosystem of products. Talk us through some of that. Yeah, I think more on the retail side and that telegram piece that I touched on, I think we also just wanted to, I think, diversify the user set that we have. So a lot of the people using Athena now are like mega-Eath whales like Robert sitting on chain doing these like loops on R-Va and stuff like that.

And I think that there is another user base that we want to touch, which is just low-balance users who are using this as their sort of like savings account. I think I gave you the whole thesis earlier around why I think that this is genuinely a product that can touch the hands of a billion people. And I think the reason that telegram is so interesting is that you have immediate distribution to those billion people like there. I think the DFI ecosystem and all those different pieces on Ton is definitely pretty early stages and quite nascent. But I think the most interesting opportunity there is that actually within their custodial centralized wallet, you basically only have the option of Tether and Ton at the moment as the assets that you can hold. and I just really think the idea of having a single token which almost represents a mini, you know, revoluted neobanking type experience within your app where you just hold a single asset

that's, you know, earning your yield, and then you can double click on your Apple pay and then spend it on the other side. That to me is like 95% of the things that I want to get out of finance as like an individual, and you can have it there sitting as a single token within your messaging app. So to me it's just a product that I'm excited about that I think can genuinely touch the hands of like many users, who exists outside of crypto. And I think, yeah, people are still underestimating how big that distribution from Telegram can be. It's five times the size of finance

in terms of the users that are sitting on there. So that piece I think is very interesting. And then, yeah, I think to your question around how we think about the ecosystem, this is just another piece that we wanted to try and evolve from our perspective into something that looks a bit more like a platform that other people can come build on. I think all the best protocols, projects within the space

always have to move at one point from we're just doing one product or a single asset issuer into something where you're trying to like breed more innovation on top of what you're doing. You know, whether that's an L1 or you know, I think actually Lido and Igenayer is like a really good example here where functionally it's kind of similar what they're doing, right? They're saying put ETH in the staking contract. But Lido had a single asset that did that, but Eigenlayer turned it into an idea that sort of had a lot more innovation and new builders wanting to come and build on that idea. I think the view that we have is that, you know, a dollar is sort of like the most important

asset that flows through all of these defy financial applications. And I think you can see that in the way that Thene has actually touched and influenced all of these defy apps, whether it's Pendle, Sky, Arve, whatever it is. It's really sort of become a core asset in the whole of Defi. And there's just a lot that has not been built on this new core asset that we want to see built. And so really what we're trying to do there is just incubate new applications that can help sort of drive growth of USDE going forward. I know we touched on the lunar comparisons before,

and I want to do that as little as possible. But I think one thing that they actually did pretty well, which I think was a good landing, was that actually they took a look at the asset and the core product and they said, how can we build an ecosystem around this? And what are the core app ideas that actually makes sense to try and grow the demand for this thing? And can we actually try and be a force that pushes that ahead?

And I think that that's one piece of we're just trying to, you know, push ahead on our side, outside of the core product. guys really aspire to be the next Luna if I can summarize what you said. Hasib is going to beam that into existence in this show. Okay. Amazing. Amazing. Maybe we go that out. No, there's no, no, no, no, no, no editing. That was perfect. That was perfect. No, I'm obviously talking shit. Let's, we're coming up on time. And so one aspect that I want to get to, guy, if I'm not mistaken, this is your first startup. Is that right? Yeah. First time founder. Okay. So I have to

imagine that actually just building something like this that the kind of takes the world by storm and grows at an absolutely fucking insane rate must have been incredibly bizarre and stressful. What was like for you, what kind of most surprised you about what it's like to see something go into hypergrowth like this and just become like the, you know, just the center of the spotlight for an industry? Yeah, the honest answer is I haven't actually had time to really pause and think about it deeply in terms of like what's happened in the last year. I think, well, here we are.

We're pausing right now. Do it on the shopping. Yeah. I think it was something I referenced earlier. I think I'm continuously surprised, especially within crypto, just how that sort of right tail of outcomes can be. And I think you can always sit down and think this is the upside and this is where I think we're going.

But you can always be surprised, I think, just how quickly and how, you know, fat and why that actual outcome can be. I think one of the interesting things about doing a startup is that it's almost one of the most like arrogant things you could ever do in your life, right? You sort of have a view of the world that is so fundamentally different to everyone else that you're saying, I'm going to change the way the world looks in some way and everyone else is wrong and I'm right to go and do that. So that's like a fundamentally very arrogant thing to do. But I think you almost have to have that sort of piece within you that's almost like naively bullish on the idea that you're doing and sort of, I think, you know, pushing back against people who don't believe. I think that was one piece that I individually, you know, had to come to terms with at the beginning of this year because it was extremely divisive product, I think when we first came out, like extreme amounts of criticism.

People call me a scammer, you know, next lunar. I probably didn't help that with the commentary I just gave them. I did I did try to throw some fire on top of that. But yeah, I think for me it was really just trying to come to terms where, you know, you're trying to do something that you're, you're trying to do something that you're, think is worthwhile and you're trying to do it in the right way and just have immense pushback all around. I think that was one piece that I just needed to sort of adjust to. I mean, I would say, look, from my perspective, I think you guys have been, like, you know, what was so interesting was that Athena really came of age, actually. I think it was in 22, right, that Tom, I think, and you end up meeting and he ended up leading the seed round. And that was not long after the collapse

of Luna. And in that time, it was a very vulnerable time for defy because most people assumed that defy was basically dead, that Luna was almost like a, what's the term, like an epitaph for, for defy. That like, okay, these ideas, this kind of, this almost like this overconfidence that you can create these new financial products. It just shows that it's all a fool's errand and you shouldn't do it. And it was a time now, obviously people think like, oh, Athena's amazing and it's so great. But at that time, nobody wanted to touch stable coins.

People assumed that like, oh, you know, after Luna, how could you know, you possibly, you know, wants to do something like this again. And I think to your guys credit, one of the things that you guys did very, very well, which was one of the cardinal sins behind Luna was that Luna was constantly obfuscating what exactly, like how the thing worked and what was risky about it. And one of the things I think to your, to your credit in particular, is that you have been always very, very clear from the beginning. There's no way to make yield without taking risk, period. If you're not getting the risk free rate, it's because you're taking risk. What is that risk? How do we quantify that risk and how do we absorb and minimize that risk

as much as possible? There is nothing in defy. There's nothing anywhere that is paying you meaningful yield that is not taking some risk. But as long as you understand that risk and you forecast that risk for people and make very clear to them, look, if you're not looking for this kind of risk, do not buy this product. That is one thing that you guys have done very, very well. And I commend you for because I think it's a great norm to show to other founders in the space, which, you know, obviously do it the first part of the show very much underscoring that. Tom, I also want to give you an opportunity to gas up Guy a little bit. Also, you know, you saw him. And do that every week. Yeah. Yeah, I know. You saw that in the show. Yeah. Yeah, that's just the service we provide to our,

you know, dragonfly founders. But no, I mean, I think I'm very impressed with just how Guy, I think, has navigated crypto as a someone who's newer to the space, building a very difficult product, really kind of creating a one of one that, again, people tried in the past. It didn't work. It's a kind of a very stressful, controversial, controversial category. And I think also just navigating with, I mean, you used to talk about arrogance, but I think actually you're very, like, low ego in the grand spectrum of all the, you know, crypto founders past and present. And, you know, I tell people sometimes it's like, there's no secret sauce. It's like, you just do the hard work and you put in all the effort and love that goes into building a great product.

And if it works, then I think ultimately the market rewards you. And I think you guys have really done that and done all the sort of, I think, you know, legwork required to make this thing happen. So, you know, props to you and the whole Athena team. Okay. Thanks a cheer to my eye. I'll just stand on. Guy, you're doing great work. I'm excited to see Athena continue to grow.

Yeah, well done. But I mean, look, it's crypto. And so, you know, the number one in position is do your own research. Make sure that you understand what you're buying and how it works. We try to give the best exposition that we can for Athena, but ultimately there's a lot more that we did not cover on the show. So not financial advice. Can't underscore that any more than I possibly could. But at least as far as founders go, I think you're, you've set an example for a lot of people. The cardinal sin of Luna in many ways was overconfidence and ego was really at the heart of what made Doquan Doquan. And so I think you've, in that regard as well, said an example for a lot of founders is that shut the fuck up, do the work, be really clear about what you're building,

and value integrity over anything else. And so obviously, we hope that Athena shows its metal. You guys have done a tremendous job so far, but there's so much more to do in just making it through the marathon that is building a long-standing product from crypto. But at least for now, very well done, and we hope to see more. Don't become the main character on Twitter. Yeah, that's the other big rule, has never become the main character. Usual has unfortunately committed that sin, and we hope that doesn't happen to Athena. Who do you think is the leading candidate for the cycle's main character? I mean, right now, I mean, it's sailor, in my opinion, as like the current market main character.

Yeah, yeah, that does not bode well for our Bitcoin bags. We'll see. Okay, on that very ominous note, we're going to wrap. Thanks, Guy, for coming on and sharing your wisdom. And we'll see you all next time. Thank you, guys.