Stablecoin Masterclass with Sam Kazemian founder of Frax Finance

Captions as YouTube publishes them, usually machine-generated, so product and people names can be misheard.

1. 0:00

   Nothing we say here is investment advice, legal advice, life advice or representative of the views of the organization we are part of or affiliated with. See chain abstract A.com for more information. Hi, everyone. this is all time from near ecosystem.

2. 0:13

   This is an abstracted one of the first sort of chain abstracted podcasts in crypto. yeah, it was great. We actually just, did a pod with, with Sam Cosima from Frax, who has just launched fractal. Right? Which is an L2. frax an interesting one, I think, like when you think about stablecoins and how they work, it was an amazing conversation with Sam as to the history of, stablecoins to, what is their roadmap, right?

3. 0:44

   I mean, like, they have this L2, which we talk about that was launched, but really asking the question of like, you know, what is the history of stablecoins, where we are now and where are we going into future? And we even touched upon, topics like, network states and, Frax kind of networks, day two, which was kind of interesting to see.

4. 1:04

   Yeah. Man, this was one of those, like, talks and conversations where, like, I thought I knew stablecoins, like. I mean, I'm used to everyone, but, man, learning the history and going into what's currently done, how frax works, how frax works on near.

5. 1:19

   yeah. It's just been the energy that Sam brings and the characteristics that he has. I think it's just it's just amazing to ask questions to him. And given he's easy on guy, I mean, like, he's not like, but that's being old in crypto means like being able to spend a lot of time and things and nice to have someone that, you know, in 2013, 2014, mining, mining, Dogecoin and other things that are quite, you know, nobody does that anymore for a hobby.

6. 1:44

   But it used to be in 2013, 2014 as a college hobby. Right. So, it is interesting. I mean, he's also a developer. He has a background in computer science. So, it was really nice to ask questions and, and, and really sort of ask questions being curious.

7. 2:00

   And, we just did a research and then the questions came, as, as, as we talked to Sam. So that was a bit of an actual podcast as well. thanks, everyone for listening. And, we hope you enjoy. well, welcome to the show, Sam. I'd love to love to have you here.

8. 2:18

   Hey, guys. It's, great to be on. Sam, founder of, frax. and now fractal as well. Modular roll up. And, really excited to talk about lots of cool stuff we're doing with, you know. So we did some research, actually, on your background. And you have you have amazing.

9. 2:34

   Sort of like, sort of getting into crypto, right? I think you're like, 2013, 2014 patch. love to love to hear a bit more like how how did you start? I guess, like stablecoins are not as the same as like, you know, it is. It is quite interesting in a sense that it touches everything like political science, economics, all that cool stuff. So I'd love to I'd love to hear more how you arrived in crypto.

10. 2:58

    Yeah, definitely. It's actually an interesting story. I was, college student at UCLA, long ago, these days. So I over a decade ago, discovered crypto when just a few friends were talking about bitcoin, and then they never, went into it, and I just went down the rabbit hole, like, 100 times more than than them.

11. 3:18

    I got into mining and back then it was the, the new script coins. Litecoin. Dogecoin. One of the earliest miners. and and everything. Then, what really interested me about crypto that got me into it was the fact that of decentralized money.

12. 3:37

    So, so money itself. And what got me into things that eventually became frax was that I actually had this, philosophical view. So I was a neuroscience and philosophy major at UCLA. I had never, you know, that course I self taught myself programing and all that.

13. 3:56

    but what really got me interested in cryptocurrency was the currency part combined with the crypto. And one of the main things was that the stability of cryptocurrency back then was like people were thinking that was the only possible reason why, for example, your coffee won't be denominated in BTC.

14. 4:16

    Back then there was, you know, only BTC and then these coins, right. and that really got me interested in stablecoins. And back then the word stablecoin, like the 20 1314 was not a thing, right? Like tether had not even come out yet.

15. 4:31

    and everything. And there was this one whitepaper proposed by, Robert Sams that now most people don't know any about this kind of history. I consider it the Bitcoin whitepaper of stablecoins and, the name of the the whitepaper was called sign or its shares.

16. 4:50

    people might know because some things were influenced by this is like the precursor to, any kind of algorithmic stablecoin design. And the idea was, what if you had a proof of work blockchain? And back then, because everything was proof of work? Again, this this was like published in 2014.

17. 5:07

    And instead of one token like Bitcoin or like Litecoin on the chain, you had two tokens, you had a share token and you had a stable token. And the the share token was really volatile. And so people would buy and, and you know, invest in it or whatever, like Bitcoin and the stable token had this monetary policy where if the price of that token was higher than, than the, you know, price for Oracle or whatever, then more of that, that stable token, more of the currency would just be minted.

18. 5:40

    And then the question was, well, who are you going to mint it to if you if you mint this second token, you know, it's a fully decentralized proof of work blockchain. How you don't want a human being to actually go and and distribute the currency. That's an anathema to the whole thing.

19. 5:54

    Well, what you would do is you would actually basically airdrop it to the share token holders or the token holders of this second token, and then the other side. Right. What if when the price of this stable token is below the target, it's below the the Oracle will you need to remove some of that stable, token from the market right, to, to make it scarcer and go back up to that, that oracle price. How do you do that?

20. 6:20

    Well, what you do is you mint some of the share token, that other token in, in the ecosystem and you auction it, you know, through the proof of work blockchain. You know, they'd have a special, you know, module there that people can send in their, you know, stable token for, for that share token.

21. 6:37

    And that basically makes it so that the price of the stable token, rises because more of it gets taken out from the market. And so this was the very first idea, obviously it doesn't work without collateral, right? Like, like now we know from Tara and and things like that.

22. 6:54

    And actually, one of the main things with Frax is that, it's inspired by, in fact, the governance token is called the Frax share token in reference to this this whitepaper called signer, it shares and people don't know this backgrounds as I kind of the lore and it's it's like the Bitcoin whitepaper of all decentralized stablecoins.

23. 7:18

    But then the premise with Frax is you can have some kind of, you know, algorithmic monetary policy, but you need the stablecoin to be fully collateralized. You know, you can have it collateralized with other assets. You can't have it collateralized with, the share token, which was the main thing that this concept got wrong.

24. 7:36

    But it was this revolutionary idea where it's like you can have the nascent, this was before smart contracts even, right? This, this stablecoin whitepaper was proposed before Ethereum. you know, before Vitalik, and Gavin Wood published the Ethereum yellow paper and all this stuff.

25. 7:54

    so, like, there was not even the concept of, you know, other tokens issued through smart contracts, you know, ERC 20 tokens or anything. I know a lot of people probably listening that are like newer than crypto, newer in crypto. That might be like, well, why didn't they just do it like this?

26. 8:09

    Like, well, this was in 2014. Yeah, exactly. And so that actually inspired me to be really interested in, stablecoin design or like, stable token design. and so that my views changed back then, which was like, I thought if anything was going to be used as a currency.

27. 8:31

    Right. Actually, used to denominate, you know, stuff in crypto itself and consumer, you know, things. It won't be that your, your coffee is like denominated like .0001 BTC or something. It would be in stable tokens, right. And stablecoins like, you know, Dai Frax, you know, now, you know, there was then tether came out and Usdc and stuff like that.

28. 8:56

    and so that's kind of the background here. And so Frax originally started as seven years later or like, you know, six years later after this, this, this white paper and a few others, they started a company for that, and the crypto space, called IK wiki.

29. 9:14

    It's like a decentralized knowledge base. it's actually up doing well. It's powered by an IQ token, and everything. But then when I really got down to making a, crypto cryptocurrency, I realized that crypto currency is a misnomer because a lot of these aren't actual currencies, right?

30. 9:32

    In order to be a currency, you need some actual price, stability. And that's how Frax was born. Frax basically took the idea and the motivation and inspiration of, like, the signer chairs model, which is what the governance token is, is it's named after, but with, actual collateralized, you stablecoin.

31. 9:55

    And so that's why obviously, like the Frax stablecoin has grown, it's been resilient. hasn't ever had any issues, thankfully. and everything like that. Okay, so I guess if we were. It's, That is an amazing context as to how forex came to be.

32. 10:13

    Do you know why? Why you guys picked forex as a name? Just. Just. I was just curious when I was thinking about it. is the original name for the project, and the Dow was actually Decentral Bank. That was the actual original name before. frax. Like the the name of the protocol was supposed to be the central bank.

33. 10:31

    And then the name of the stablecoin was supposed to be Frax. Same with, like, maker and Dai. and, back then, one of the, Ethereum co-founders. I think if I remember correctly, his name was like Anthony Diorio or something. He had a, accelerator VC called Decentral in Canada, and they asked us, nicely if we could change the name.

34. 10:56

    And so we had it launched yet. And so we said, well, why don't we just actually make it more consistent and name the protocol, on the asset itself, you know, just like Bitcoin and BTC, right? Like, you know, Frax finance and Frax, and we did that.

35. 11:12

    and so Frax itself stands for fractional algorithmic in terms of not part of it, being backed by forks, or anything anymore, but fully collateralized in terms of the equivalent of fractional reserve banking using smart contracts.

36. 11:31

    Right. Like fully collateralized by other things, exogenous assets over collateralized loans. recently, partly real world asset, partners and providers. Right. Like short term treasury bills. but yeah, the name comes from basically this, this hybrid design I see, I see.

37. 11:54

    So just. If we were to break down the, stablecoin, landscape, you have, like, 60, you have maker, you have you guys, and you have, like, I guess, can you break that down and then maybe potentially, like, we can dive deep, dive into a bit more on chain stuff and deep dive into the future, work.

38. 12:24

    now, like a historian of stablecoins from the beginning to the current, you know, era is like there was a, renaissance, if you will, of like, design and experimentation and a lot of obviously failures. The most famous one, Terra. Luna.

39. 12:41

    And so I think a lot of the designs that we now know objectively that don't work, like fully, algorithmic backing a stablecoin by its own token or like it, you know, something like that. I actually don't even consider it really, you know, even worth to actually put down in terms of the possible legitimate stablecoin designs, I actually only see things in, two, two designs now.

40. 13:10

    One is a fiat, stablecoin design. Everyone is familiar with this. It's basically Usdc tether, you know, newer fiat coins that are coming that are kind of competitors in this area. they're usually backed by just cash or short term treasury bills, which are very much equivalent to cash. Right. those are very simple to understand.

41. 13:29

    There's a bank, there's there's basically a way that you redeem them, and that's how the price is kept stable. And then there's everything else, which basically, in my opinion, is stablecoins that are not redeemable for cash because there's no bank behind them.

42. 13:44

    There's no corporation like circle or tether Inc or something. But things like maker, things like Frax. And the main distinction is there's no bank, right? There's no entity, there's no redemption for cash, but that they use smart contracts and collateral, whether they're over collateralized loans.

43. 14:05

    Right. Which people are probably familiar with. You lock up, a lot of cryptocurrency in a contract and you mint a smaller amount of stablecoin. So there's a lot of crypto that backs a small amount of, of stablecoins and then other things that we've actually developed called protocol on liquidity.

44. 14:20

    We have that kind of thing where smart contracts deploy, newly minted frax into arms. And then that Frax is backed by literally the liquidity of the other side. Right. And memes are two tokens. So like when Frax is minted into like a frax Usdc pool, for example, that newly minted Frax is 1 to 1 backed by that Usdc.

45. 14:41

    Right. And so if you know someone puts in Usdc, they get out one frax right. At that rate, the LP provider, which is the protocol, it has access to that one Usdc. So we developed a lot of new DeFi primitives for, for Frax. and I just look at stablecoin designs into too. Right. Is it redeemable for cash? Is there a centralized entity behind it?

46. 15:05

    and so most likely it's it's, regulated and, known, kind of like a New Age bank, so to speak. Right? Like, like if, if, it's a fiat coin. And then is that everything else, like a, a sound design where it all has to be collateralized right by external assets?

47. 15:24

    Crypto assets. Right. not its own token. Right. Just external crypto assets. And as long as that's the case, you can build smart contracts that, have the price of the stablecoin through an oracle. Right. And so if the price of the stablecoin is slightly below a dollar, you know, you might raise interest rates on some of these loans to get people to buy back the stablecoin and repay their loans because it's getting more expensive.

48. 15:51

    Or if the the price of the stablecoin is slightly above a dollar, you can, mint new stablecoins into protocol, own liquidity ampoules, right, and increase the supply of the stablecoin to have it backed by the other side of that. mempool.

49. 16:08

    Like Usdc or some, some other asset, and things like that. And so basically you have a stablecoin that doesn't have a bank, right? Like it's not a fiat, stablecoin with cash in it, but you have excellent stability, right? Stuff like Dai, stuff like Frax.

50. 16:23

    those are the main two buckets, because I usually think of when people make it more complicated than it is, they're like, oh, well, there's these algorithmic ones and there's these fiat ones. Then there's these like real world things or whatever.

51. 16:34

    It becomes super complex for people that aren't, you know, in the DeFi and stablecoin space. And then what happens is they just get focused on the details that don't necessarily matter. Yeah. Like, let me jump in, because I'm. This is awesome, man. Thanks.

52. 16:49

    When you hear stablecoins, I don't even know if people listen as the first 20 minutes of this. It's like, this is a really complex, but also simple and really thought out system. So real quick, let me just recap this because I think I'm understanding that.

53. 17:00

    So you've got like your Usdc, which is the value is anchored to a real world value of a previous currency. Then you have something like Frax, which is almost like decentral, like the value is created by the decentralization within the Web3 ecosystem.

54. 17:15

    Right? Like anything can almost add value to the other side of it with the AMM, right? that. That's valuable. And the value. Yeah. Like like that's a good way to put it because like Frax can't, you know, have a bank account. Right.

55. 17:34

    But what it can do is it can create credit right over collateralized loans. Right. of different assets that are, that are pristine, like eath, like near right, is a blue chip, very liquid, L1 token, like, BTC, right. Like like BTC on on different chains. Right. and then also eath, right? LSD is right.

56. 17:55

    In fact, Frax actually does issue its own, LSD frax ether that is frequently used as collateral to mint, frax stablecoin. So that's a good way to put it another way. Just as an aside that I like to, explain the stablecoins like like Frax and Dai compared to fiat coins is that they're actually closer to, central banking money then then, people might think because, for example, the dollar is not redeemable for anything, right?

57. 18:27

    If you hold a dollar bill. Right, like this piece of paper with pictures of dead presidents on it. Right. You can't go and and go to the Federal Reserve or some other thing that that's the issuer, right. Or even online on the Federal Reserve account or something.

58. 18:41

    And and say, hey, I want to redeem this dollar for anything. It used to be gold, not gold anymore. But now it's not anything at all. Right? You can't actually get, you know, a basket of CPI goods, right? The consumer price index goods or anything.

59. 18:56

    In fact, the only way that people are sure that the dollar has any kind of stability is that the fed has a mandate to keeping the dollar pegged to CPI, which is the consumer price index people want. Today is actually where we're talking on a Wednesday.

60. 19:12

    Today is the day, that happens to fall on every month where the CPI report is, is announced, right, which is the prices of consumer assets, like, things that people need to buy with their dollars oil, energy, rent, medical care, food, all of these things that, people need for a standard of living. Right.

61. 19:33

    And so the fed tries to keep the dollar priced to the CPI. plus minus some leeway that it gives itself. Right, 2.5%. And so the idea with, with central banking money is it's not redeemable for anything. Like you can't go to the fed or the US government and say, hey, I have a dollar.

62. 19:53

    You guys promised to redeem it. They did it. There's no there's no redeem ability to it. The only thing is a promise that says, hey, the federal Reserve has the ability to, increase interest rates or sell its balance sheet, and in mint dollars.

63. 20:09

    And it will do that into the secondary market to make sure that the price of a $1 stays relatively close to the price of critically needed consumer goods. Right. And the reason this is actually similar to Frax and Dai and these other stablecoins, we also don't have a bank yet.

64. 20:28

    You can't you can't come to to like the Frax protocol and say, hey, I have one Frax stablecoin, give me a $1 of cash because there's no bank, right? But there is verifiable, transparent, auditable, smart contract that conducts these market operations like increasing interest rates or like I was saying, minting new frax and and ampoules that that are passed by governance and these things and that those actions

65. 20:57

    keep the actual frax stablecoin pegged to its target, which is a dollar, right, that the fed has a different target because, pegging the dollar to itself wouldn't make any sense. The, the the peg of the dollar essentially is, CPI these days, this basket of consumer goods.

66. 21:14

    So one thing I usually like to say is, the dollar is a stablecoin. It does have a peg. It's just that the peg is the average sum of consumer goods. That's what the dollar's peg is when when the dollar is inflating. Right. Everyone knows the term inflation.

67. 21:29

    If you translate that to DeFi speak, it's basically saying this the fed stablecoin is pegged. If inflation is like, you know, 10%, that basically means if the dollar was a stablecoin, it'd be at like $0.90 or like 92.5 cents or something.

68. 21:46

    That's basically what it means. obviously the main thing here is frax, is predominantly like, asset issuer, it does now have its own chain fractal, modular rollup. And the cool thing is our goal is basically to issue frax currency in as many chains as possible, particularly with priority to, you know, blue chip mainstay chains, just like near and have the frax currency be, integral in and actually the DeFi ecosystem of these chains

69. 22:18

    and then also, build bridges, you know, metaphorically and literally in terms of, native currency issue. And so one thing we're working on is making sure frax assets are natively issued, on Nir and making sure that, you know, DeFi platforms on air that use Frax, they don't have to have third party bridge assumptions like, you know, wrapped, wrapped Frax tokens wrapped in this bridge and then brought over there and stuff because currency should only have the, risk of the, issuer. Right?

70. 22:51

    Like the the actual trust of the peg being kept right for dollars. It's the Fed's, you know, mandate for frax. That's the smart contracts keeping it to peg. So we have our currency issuance mandate. And we're also working with Nir in terms of making sure that, you know, fractal, daps and also al threes that build on fractal chain use near De as a solution in terms of their scaling.

71. 23:14

    So that's actually something we're super excited about the the way that we've kind of designed fractal like the chain where all of the collateral, for Frax and its LCDs and all of its currencies resides, as well as where the monetary policy happens, which is what I was kind of talking about, the interest rates rise on, on those loans or like the, new frax is minted into, protocol on liquidity.

72. 23:41

    what fractal is, is basically a central bank chain. So like, it's like a decentralized central bank, right. And it lives on fractal. And so for people that want to launch app chains or L3 is whether they're like, for example, perpetrating protocols or their like DeFi systems, or even if there's like social fi or game fi chains that want to be, have close access, right to currency yields and important things

73. 24:08

    like, dollar denominated yields, other things that frax actually, that maybe they want to be able to, you know, take out a native loan for their, you know, currency or their, like, perfect ex, you know, chain using collateral that, of their own token or something like that.

74. 24:25

    Right. They can do that from fractal the chain, right. Where the where the central bank is basically located. And then they can build, right under that, they can move the currency through the trustless bridge and, fractal and frax itself.

75. 24:40

    We're not, you know, technology providers. Right? We don't have like a competing Da or like a, you know, we're not here to say like, we have a new consensus method that, like, you know, out scales, Nir or Solana or something like that.

76. 24:53

    And so that's why we partner and work directly with, like you guys at Nir, which we're super excited for the nir de roll out as well as, for access support for native for access to. And so that's actually all the stuff that we have going, which is pretty cool. It's, kind of the full stack. It's asset issuance as well as blockchain technology.

77. 25:13

    so yeah. so we have all these stablecoins, right? Like we have Usdc, Usdc, Usdc just announced, I think last year it was KTP that wanted just like, mint tokens, like, is, for example, they have, like a, stable, you know, native stablecoin on year.

78. 25:32

    and I guess you guys, I know the maker MakerDAO all that like forum had an idea. I was like, are we going to fork Solana? Are we going to, you know, like have their own chain. So I guess seems like we have these two separate ways of minting a stablecoin. Right.

79. 25:47

    And then we have two different approaches where like how do you how do you think about this I guess, like how do you compare yourself in this, in this bucket with maker. And what was the main driver for you to have your own chain and what would it brings? I guess, like compare to Usdc and UST.

80. 26:06

    like our view is that the most important asset that is going to be cross-chain is, is a stable unit. So, like, that's why, obviously we think, like the, the dollar stablecoin or like a highly liquid asset that's has liquid on multiple liquidity on multiple chains is the thing that people will use to bridge their value across different places.

81. 26:31

    And so each large stablecoin will probably have its own, native bridging or minting solution, as you said, circle sec TP we actually have this thing called the Frax fairy. And the reason we call it a fairy is because it's not a bridge.

82. 26:44

    It's just natively issues and mints and redeems the frax tokens on different chains. so people don't have to think it has like bridge risk. and every one or, of the large stable coins will have their, their own like native system so that people can actually move between the native liabilities of these highly liquid assets.

83. 27:06

    Now, the next question is like which ones will have their own chain? And to be honest, we're very, chain, pro chain multi-chain world, world view, which is, I think the chains are the new smart contracts. So given sufficient time, all major, DeFi platforms will probably have their own chain where they're based in.

84. 27:27

    Not necessarily like a, you know, evergreen ecosystem type of network, like near or like Ethereum or something like that. But but the the bank, so to speak, again, will be based on in their chain. And we already know that maker is announced. You know maker chain.

85. 27:42

    you can kind of argue actually that base is Usdc is native place because it's by Coinbase and Coinbase, essentially owns circle or has a large, near majority stake in circle. And so I think all of the large stablecoin providers will have their own chain because they're native focused and have the bank, the monetary policy emanate from, from somewhere.

86. 28:07

    So, yeah. So this this podcast is an abstracted, I guess, we call it an abstraction because, I mean, Nir is working on chain abstraction. A lot of folks are working with chain abstraction. What does that mean for Frax? I guess, like, does that mean that I just get into one interface and, and all these, like, I think you said, fairy. Right.

87. 28:29

    For, for the like, I'm able to buy frax anywhere, and then I'm able to use that stablecoin to do anything. What would be your vision for sort of chain abstraction, definitely. I mean, I think chain abstraction is probably in terms of both narrative conceptual understanding and also just just memetics.

88. 28:47

    I think, probably, better than kind of the, like multichain like the multi-chain world and stuff because it properly conceptualizes both the end state and also the, the actual path to get there. Right, in order for there to be chain abstraction probably has to be many, many chains.

89. 29:07

    Otherwise, if there was just one chain, abstracting it away is not that interesting. Right? and so the final end state is that no matter which chain you're on or if you move between different chains, all of this stuff is abstracted away in a stateless, very, very clean flow.

90. 29:26

    And I think Nir has probably done the best job in articulating and owning this not just meme, but but this narrative that is probably one of the most powerful narratives in the, you know, industry. So how frax kind of goes into that and why we're very excited to work with Nir and, and continue to build out that vision is our goal is no matter what chain you're on, again, whether you even notice which chain it is or not, in the future,

91. 29:56

    there should be some frax asset that you are interacting with and able to make use of, whether it's like frax the dollar peg stablecoin so you can have stability or frax. It's actually the yielding version of the dollar peg stablecoins.

92. 30:10

    So if you are saving in dollar units or using it as collateral and lending markets, or let's say you are, doing LSD, you know, yield and, and, LSD DeFi, right? Like frax ether exists. We're exploring frax nir actually as also a potential, LSD issuance. Right.

93. 30:29

    And another way I usually like to call these LSD tokens is they're essentially stablecoins just pegged to a new unit instead of a dollar. Right? A stablecoin is just something that basically, again, means stability. and, and collateralization, but pegged to, a unit.

94. 30:47

    Right. And so like, these are just basically ether stablecoins or if it's near a near near peg stablecoin. And our goal is basically to make sure that these are everywhere on every chain and kind of abstract away, the bridging experience that people, have.

95. 31:02

    And to make sure that anywhere you are, you see basically the, the frax currencies or whatever is relevant to you. Bridging. not to sort of in in the area that like Covid insurers like alt workspace it's kind of similar to KTP of circle.

96. 31:37

    and the idea is basically, every 24 hours, which is the current speed. We're obviously working on making it safe and, making it faster, but every 24 hours, any frax asset across different chains that support the ferry can be brought back and forth in, 1 to 1, essentially minted or redeemed for the other asset on the other side.

97. 32:02

    And it's not a bridge, right? You can't put any other token through it other than than frax assets. And the way that it works is it works by signatures. So like as people deposit into the frax very contract, on one side, those signatures are basically hashed and there's a route committed on the other one.

98. 32:18

    Anyone can, dispute that. Like if there's, there's an issue or if there's like a fraudulent hash or something, but after a 24 hour period or some epoch period, the, tokens get 1 to 1, minted and redeem and essentially swap that, exact mint to redeem rate between the native versions on unlike for example, frax very on, you know, fractal you know, chain and then frax very on Ethereum, main net, for example.

99. 32:47

    And it's kind of similar to Cptpp. Cptpp is like circle's thing, which is, you know, you send Usdc into that contract on one layer and then the difference is just circle sees it. Once circle sees it, they will actually push their own signature on the other side, saying that, you know, we stand by this transfer and then like we're we're burning this Usdc and giving it to, the same address on the other side for various kind of a more decentralized version of that where it's, it's a hash and challenge.

100. 33:17

     And then, we're actually working to make it very fast and maybe even able to make it faster than even something, centralized like CCTV. But it's a very difficult thing when it comes to bridging, as I'm sure, people know, or just anything across chains.

101. 33:33

     because of reorg, risk, security and this kind of thing. So, ideally it'll be on the order of minutes, and maybe seconds, to and from, you know, fractal chain. but not all chains will be able to have as quickly as minutes, obviously because of reorg risk and their different security, you know, settings and profiles.

102. 34:09

     Of value. Closing value. Created in a name and you think it'll get to that point? Yeah, I think definitely. Right. Like we're just we're geeking out over the different modules and stuff. Right. And like three, four years, I don't even think people will know what Frax Fairy actually is, but it'll power the the actual underlying system.

103. 34:32

     What they'll see is again, like abstracted away, you know, things where on the DeFi layer they can, you know, use Frax, send it, you know, earn frax yield. They might not even know which parts are on near on, on fractal or on like Ethereum. they'll probably use these like aggregator front end applications.

104. 34:51

     And then there will be ways in which, you know, the fairy is abstracted out, the zip between chain transactions are abstracted. Now, I think actually near will probably be one of the frontiers there because of chain signatures. Right. So like a lot of the times, these tokens might not even have to leave in the air.

105. 35:07

     because of the chain signatures. Right? So, you know, once frax is natively issued, on near, there's like a good chance that, like, a lot of it will just live on nir, and that TVL will be on near as the chain signatures kind of, move out, you know, things on different chains and control different chains Yeah.

106. 35:42

     I have I have interesting sort of perspective here, which is essentially, Well, I grew up in Turkey, and, you know, my parents are still in Turkey, so stablecoins are actually an amazing way for me to send money across the borders.

107. 35:56

     so if you think about it. Right, like, I don't want to when you send through a bank, like, if you send it after 3 p.m. in the UK or 3 p.m. in Turkey or something, it arrives the next day, which like if I want to send the money, like right now, it's not as fast as like stablecoins.

108. 36:11

     And recently I made an sort of angel investment for the first time with Usdc to a non-native sort of like, non-native, crypto company, right? They just do food, food tech company. So have a question there. Like what's your I know you were doing the I think Fox nation state or any of these like like a network state. What do you think about this whole construction like.

109. 36:31

     Well, how do you think it being sort of actualized in the next, I don't know, 5 to 10 years. Yeah, definitely. It's a really interesting question, because I think Frax is probably one of the most long term oriented, protocols, like, we we plan to basically be in crypto, you know, the next ten, 20, you know, even more years.

110. 36:54

     And so, you know, Ethereum is closing in on like ten years. Bitcoin is like 15 years and stuff. I think Frax will have the same kind of longevity. And Lindy, we're we're definitely not, new on the block and we're definitely not, short term sighted in terms of, you know, fund me, me narratives.

111. 37:16

     We, we built for the very, very long term and it is a cool concept. So I think are you talking about kind of the network state stuff that you've, you've seen like, biology talk about and things like that. Yeah. So, I think actually fractal is the closest thing we've, come to, pushing forward that idea because you definitely do need your own chain if you're going to have a digital, country. Right. Like, people need identity that they can kind of associate with this.

112. 37:45

     And, you know, there will be, you know, frax, you know, usernames and things like that on track. So there's already, you know, nir and and stuff, just like the, the, identifiers that you need a digital economy. So one of the most important things for a network state, you know, which is this concept of, you know, instead of land or acquiring kind of a nation, you can build the, the essential ingredients of a country, distributed over the internet, due to crypto.

113. 38:13

     Right? Crypto is like, the state. Right. And because it actually gives the final ingredient to being able to have political agreements, economic agreements, financial agreements, between different parties that have an internet connection.

114. 38:29

     Right? So there's no reason why you can't have internet like nations, right? Which is kind of the idea that biology calls the network state is a network of, people, organizations, things that share, you know, common values, and they create, essentially what's de facto, functionally similar to what people know as, nation states.

115. 38:51

     They just might not have a continuous, you know, land. Right? The, the, the contiguous kind of like, like the US there's, there's not enough land for new countries and stuff. You can maybe buy them and things, but you don't need them in the 21st century.

116. 39:07

     I think frax is probably one of the closest things, actually, to being kind of this, network state because we're we have such advanced, like currency issuance, credit creation, financial, you know, layer in terms of it being sustainable, internal, you know, and people are using it.

117. 39:27

     And so with Frax still, you have the final ingredients of kind of, the, the network state of, you know, identifiers, places where people can build essentially digital land, not real contiguous, you know, land. Yeah. One thing, the new York community can expect is, natively issued frax and racks the yielding asset.

118. 40:08

     There's already some frax that's, I think, like flowing on under through like the official Rainbow bridge. But the thing we're working towards is making sure that as Frax grows, we do this native issuance that we were talking about and essentially teaming up to power both the the, the near, you know, financial DeFi ecosystem, the near nation state network state, so to speak.

119. 40:32

     Right. And then also using nearest technology, both in terms of chain signatures near de as much as possible in in the Frax style roadmap for either L3. so if you're an L3, and considering frax still to be the place you settle, there's obviously other ones. There's base, you know, base as L3 arbitral and all these things.

120. 40:53

     But, a lot of people have expressed interest in building, the, the first few L3 is that that will probably go online in the, in the next couple of weeks. If that's you would be really cool to explore near De. So reach out to us in that sense and tell us what you're building.

121. 41:10

     And additionally, it'll be really cool to get native Frax assets on Nir in the near future. no pun intended. Yeah. I think it yeah, that, that was, the first actually year, I think that Frax was live because it was, growing so fast.

122. 41:32

     So it was pretty cool. Indeed. that's basically kind of all I do. I basically work on frax, so I, I basically have this 24 over seven thing of if I'm not sleeping, I'm either working on Frax on, on telegram or, in meetings, or I am, lifting.

123. 41:57

     So I have like a garage gym and I still do, squat, bench and deadlifts. And I don't think I'll ever quit barring any injury. To those, like. They're good accessories, right? I mainly entirely, basically, do, accessories with, like, kettlebells and different kind of things.

124. 42:19

     But the main, powerlifting, compound lifts are irreplaceable, we've just like philosophically broke down stablecoins in a beautiful way. The origin how they differ. Now it's like you're a user in Web3. How do you actually use fracking? I want to go get some frax and I want to use it. Right.

125. 42:38

     So I think the best things are like knee bro. Right bro finance on on near and then also other defi platforms on near. The cool thing is so currently frax stablecoins are on there. And then there will be kind of a seamless transition to the, the native version of Frax and Frax.

126. 42:58

     And if you are a user, you don't have to do anything to like, you know, figure that out. You can just start using, fractions racks on Nir and liquidity pools start earning. there's also or bringing effects the governance token frax share and doing joint incentives with with Nir and DeFi protocols.

127. 43:15

     So that's sort of super important because I think that's how communities get kind have joint ownership, right? Of of both frax the protocol near the chain and then the other, you know, DeFi ecosystems. And it's kind of how you get, dual citizenship into the network state, so to speak. Right?

128. 43:32

     You you want to be a participant and owner kind of of frax, governance tokens as well as, you know, near tokens and things like that. So for now, you know, use frax stablecoins, as frax yield. and your DeFi. And then soon there will be places to earn FXS, tokens, as well as just a seamless transition to to native frax assets on your.

129. 43:56

     since I have Sam here, and, I have I have a big question, which is like, obviously, sort of like you understand if you understand sort of risk. Right? You understand security. These are the things that, like stablecoin manages risk really nicely. Right? You've been managing this for four years.

130. 44:13

     now there's this new paradigm rethinking. And I mean, this is kind of somebody that builds on I can layer myself. what do you think about risk taking and any, any opinions you have there? And, you know, like, given how would you design the system if you were to design it yourself? Yeah. That's a is a good question.

131. 44:32

     I'll be honest. At first I was pretty, pretty skeptical of of re staking. Not because the idea is and brilliant it really is. Right. But, the the fact that I was thinking, okay, well, where is the revenue going to come from all of these re staking services because, you know, there's, there's like 100 billion or some, some hundreds of billions of eath staked. Right?

132. 44:59

     If we're going to increase the API of like, you know, respective by like 1%, you need like, you know, billions of dollars of revenue, from, from re staking services, billions to just move it from like the 3% possible to like 4%.

133. 45:17

     And we know that doesn't really, you know, raise anyone's eyebrows. Right. It needs to be like, ten, 15, 20% or something to really move the markets and, and DeFi and stuff. Right. And, then I then I realized, okay, well, there's there's obviously going to be this, this ecosystem of tokens points that will bootstrap this for, for a few years, just like everything else in crypto, which again, doesn't mean it's bad.

134. 45:45

     It's just means people are discounting the fact that, for a few years there won't be that revenue, but that doesn't mean it's bearish. It actually means like, it's bullish. And then in a few years, you can you can actually envision billions of dollars of, of revenue. Right.

135. 46:01

     And so then it started to really make sense to me, that I think the main thing with re staking though, is to make sure that people know kind of the, the risks of hypothecated, but also, again, like I was saying, like these are like stablecoins, they are just pegged to a different unit once you kind of think about it like that.

136. 46:23

     and you see, this is just like crypto level decentralized banking, right? Then your, your opinion kind of changes from it because there's no actual, difference to like, for example, backing, a, you know, stablecoin like Frax or die with, over a collateralized loan that is originally like a loan of something else.

137. 46:49

     Right? That's basically like re staking. It's it's like a loan of a loan. Right. With, with the risk taking, you're basically first loaning the ETH to the, the Ethereum validator. Right. The, the raw validator. And then you're tokenizing that right loan. You're basically tokenizing the loan to the original validator. And you're taking that token.

138. 47:10

     And then you're using that as collateral, to loan to a Avs. Right. A risk taking service. and and then basically using the, the loan as a source of, collateral that is at stake. So, as long as people understand it like that, because that that's basically what it is, I think it's a really new, efficient and, really bullish thing in the industry.

139. 47:38

     And that's a really good breakdown of the I always think of what be. Where they go and like exponentially like time locked down. But it also gives way more like don't. You get a little bit of that there. Like you say like a little bit of a little bit. Yeah I love that movie.

140. 48:00

     The dream's on the lower level effect, the ones at the top, which is true, which is why it's dangerous if if, if a risk taker asset implodes, so does the, underlying system. Yeah. Well, yeah. We have five more minutes to go. Well, every latter is one of the best episodes we've done. I think it's because you have a deep.

141. 48:21

     You have a deep, deep experience in the industry. love stablecoins. I personally love them. I think are great. I have some facts on here. So that's it's good to have, and, yeah. So, any closing thoughts about, you know, what you've been working on could be related to near fractal facts as a stablecoin.

142. 48:43

     anything that you want to share. Yeah, definitely. I mean, just overall, looking very forward to both, like, the near community and the Frax community, joining forces. You know, I've, I've already seen a lot of people, come from the near community into, like, the Frax telegram channels or these places and say, you know, I'm, I'm from near checking out Frax, which is really awesome.

143. 49:09

     And then, you know, hopefully there's, a lot of stuff you guys see from people that know frax that are checking out in here, and then as people are able to earn, you know, FCS and near and then, you know, near DeFi tokens on, on the, ecosystem that that activity will just increase.

144. 49:27

     And I think that's how we create value together, whether it's on the, you know, DeFi layer or using the blockchain layer, it's basically new people discovering and working with, other people that are working hard on, on different things. Right?

145. 49:42

     Because at the end of the day, this is all technology, but it kind of is to serve people and to make people's lives better. And so the the main actually thing that I always look for is when we do big partnerships like, like Frax and near is like, do I see, cross community discovery?

146. 50:00

     And I do see that and I do see the Frax community talking about near, things that they didn't know that they've learned. And I'm sure that they're they're actively checking out. And then I obviously see newer people coming into, the Frax ecosystem, things that they've learned about stablecoins, DeFi, and then the ability for them to use that both on Nir and in fractal or in other places as well.

147. 50:24

     And then Frax leveraging the the near technology stack chain signatures, near de and everything to build out the fractal chain roadmap and L3 vision so that that's the best stuff, I think, to, on a high level to to really be excited about it.

148. 50:40

     As always, you know, if anyone, wants to contact me is super available. they want to join the Frax community. It's at Frax finance on Telegram. Same thing on Twitter. It's at frax finance. And, would, would love to see them there.

149. 50:55

     I'm always they're, you know, pretty accessible. I guess you guys probably know. so. Yeah. Thanks. Now, it's great to speak with Sam. Anything like using. Leveraging tech, leveraging near tech to. You know, if you if you're actually looking to build out the reason on on frax back still, we're happy to reach out to us as well.

150. 51:15

     and and we can we can set that up. And I know that there's some nice sort of, announcements coming from, from facts about this one as well. Yeah. definitely. And, there's been a lot of exciting stuff, coming out both on our end for incentives for for those L3 with nada.

151. 51:32

     And, keep an eye out. And thanks for having me, guys. It was a pleasure.