AUTOfinance: Automating DeFi Liquidity with Autopools

0:00 Welcome back to the permissionless podcast. As always, brought to you by the team at Guardian. And of course, we're going deep with DeFi builders. We're getting to know what are the deepest problems that keep them up at night. What are the hardest problems to break through? And also, what does it feel like to have great success in the space?

0:17 And perhaps most interestingly, where do they see the DeFi space and the web 3 industry going over the next handful of years? Today we got to have a wonderful conversation with the team at Tokemak and we got to dive into their auto pools and really what it means to build the UX of a really sustainable product in crypto and be able to attract users with a powerful offer.

0:41 And then we got to dive into a little bit of what makes building in DeFi hard and what is it that really takes to build and start to scale a DeFi team and where is web 3 going over the next handful of years. some of the market trends that the Tokemak team is seeing now and how they are capitalizing on these at the moment.

1:01 But of course, before we get into all of that in just a few seconds, my name is Owen and I'm a co-founder here at Guardian. We've been doing security reviews in the web 3 blockchain DeFi space for almost 4 years at this point. And really we set out based on the premise that DeFi would encapsulate the global financial system and many teams and institutions would be building and shipping with billions, tens of billions or perhaps even hundreds of billions of dollars at risk.

1:28 And that the security solutions available on the market were simply not up to par to be able to ship consistently and confidently in that environment. And today I'm happy to share that at Guardian we have reached the standard necessary to consistently confidently ship with a multi-phased approach to our audits. We use an initial phase where we have not just one but multiple teams reviewing and verifying code and performing a typical audit.

1:56 But this is followed up with a complete other phase where we have a public bounty contest that is paid for by the team at Guardian to ensure that nothing's been missed. And even if there are issues that have been missed in the first phase of the audit, we have this second public bounty contest phase to catch anything as a last barrier before moving on to production.

2:17 And to date, the Guardian team has secured over $10 billion. And so at this point really it's just a matter of time for DeFi to catch up. And now without further ado, let us dive into this episode with the Tokemak team.

2:37 Awesome. Well, Carson Manuel, thanks so much for hopping on the podcast. really excited, you know, to get to learn more about you guys and and everything you're building with Tokemak. But yeah, welcome.

2:46 Thanks for having us, Brendan.

2:47 Thank you, Brendan. Yeah. So I guess to start things off would love to learn more about you know both your backgrounds in the space kind of how you found about crypto and DeFi and the kind of the journey into it.

2:58 Yeah I'm happy to start. So I've been in the space since 2017 2018. My original background is technology. did a PhD in physics. Came from an engineering background. Following kind of academia, worked a number of years at McKinsey, mostly in the banking, fintech, financial services space. And there kind of saw a lot of the things that work well in traditional finance, a lot of things that don't work well in traditional finance.

3:18 Beginning of 2018, I left McKinsey to pursue full-time opportunities in crypto. I started on the market making prop trading side, which really was a precursor to what we've built and are building at tokome. But that opportunity I really saw a lot of the issues in the space, the challenges and the fragmentation of liquidity that exists not only in DeFi but also in CeFi.

3:38 And so from that as we get into it that led to the need to build Tokemak and along the way also have built membrane which is really improving the lending ecosystem across credit margin management and and even booking of of loans and marketplaces in the space. on my side I have a background in electrical and computer engineering and I got introduced to the space by one of my best friends who's a real in the space piggy dev.

4:04 And eventually when I left college I went straight to an investment fund exclusively focused in crypto and later on defy. and then in 2022 I believe I joined Carson at Tokemak and now we're building autopilot.

4:22 Awesome. Yeah. So I mean really interesting backgrounds. I think what would be really interesting to get into maybe on your side Carson is the signs that you saw you mentioned you know liquidity provision is broken not only in in DeFi but also CeFi. and maybe you know how some of those learnings kind of helped inspire what you're building at at Tokemak.

4:38 Yeah. so I think the space has evolved a lot obviously since I started in in 2018. when I first started it was predominantly CeFi based. but then kind of in the 2019 2020 time frame even pre-unis swap there's some really interesting things happening predominantly on ethere in the ethereum ecosystem. So zerox and various protocols that were experimenting with new models of of decentralized marketplaces and liquidities were were beginning to take off as we kind of watched that develop and then eventually develop into the unis swap and sushi swap and amm we saw that things improved in some ways but some things got actually more challenging.

5:14 So I would say the advent of AMMs let individuals sort of be LPs which in the past was something very cha like challenging. You needed a whole tech stack and very technical team in order to be a liquidity provider, a market maker in order book models. but then with these AMMs you now had a very while you simplified some things.

5:32 There were all there was all this disperate ecosystem with multiple venues out there, multiple dexes and it meant that there was this very manual process for individuals and as incentives and various trading fees and and yield possibilities began to arrive across the LP space it meant that it was very challenging to keep up to speed on all these things not only for new things launching but also just where the trading volumes were.

5:55 So it became a very laborious process in order to be kind of an LP that is is trying to maximize the returns.

6:02 Yeah, 100%. And I guess it's a good you know segue into maybe what Tokemak is, how you founded it and also you know how it's evolved over time.

6:11 Yeah. So in the in the very early days and I think some of this still is in place today with the the launch of our autopilot platform, we were seeing sort of the move from a web 2 model into web 3 where data is being replaced with tokens. And in a tokenized world, our thesis was and is that liquidity is effectively bandwidth in that ecosystem.

6:30 And so we built the first version of Tokemak really to to manage kind of a decentralized LPing or decentralized market maker that could manage all of that liquidity liquidity bandwidth sort of across the space. At that point we started with governance tokens. there was obviously a ton of liquidity and opportunities in governance tokens in that time period.

6:48 And then as the space went through its let's call it learning curve and and difficulties over the years we decided hey we need to build something with a much larger addressable market that is less volatile than just supporting governance tokens and something that solves a solution or something that gives a solution for two different users on the one side LPS and then on the other side the actual issuers of these assets whether stable coins various ETH LSTs etc.

7:13 And that's really how autopilot was born. And we'll get into it shortly kind of on what it actually does. But the core thesis still remains that liquidity is really bandwidth in these decentralized web 3 ecosystems. And Tokemak is there to enable users to in a very easy easy manner participate in that ecosystem provide LPing in an automated fashion in a in a very simple manner and also kind of optimize their yields.

7:36 Right. Definitely. And and one thing you mentioned is kind of starting with governance tokens which you know back in the day in DeFi was kind of everything but I think we've seen a shift lately. I know you mentioned stables. I think RWA has grown a lot as well. So where do you kind of see the DeFi space right now and how to you know fits in with the way things work now versus maybe you know in those yield maxing days?

7:55 Yeah it's a good question. I think the stable coins are are very hot right now and I don't think that's going away anytime soon. Definitely

8:02 As more and more groups are launching stable coins, it means that opportunities for sort of an automated LP experience that can kind of optimize yield and just really aggregate LPing is a very powerful concept. so we're seeing a ton of demand for our stable coinbased product. When we first launched back in September of last year, the autopilot platform, we had solution for the various ETH flavors, so LSTs, LRTs, etc.

8:25 And while that had nice uptick, it was really when we launched kind of beginning of this year the stable coinbased vaults or auto pools where we've really seen things taken off and and I think that's not going away. As as you said, RWAs I think are finally here. I think for any of us that have been in crypto a long time, that's always sort of been we've always heard that it's kind of time for that, but now I'm seeing a lot of things that actually mean it probably is time.

8:47 And I think any of these that have various flavors in the even the world between kind of stable coins into yieldbearing stable coins and then ultimately RWAS that might be tokenized money markets and treasuries and things. All of these I think is just a massive opportunity anytime you have near fungeable assets. There's just a really big available solution set I guess to deploy LPing or aggregate LPing across.

9:08 Yeah. And we still see, you know, huge spreads across asset classes that have very similar risk profiles. And all of these spreads and inefficiencies that can exist either across the same asset class or different chains are just a symptom of the fact that people are still manually providing liquidity and we're really focused on changing that and just introducing automated liquidity provision.

9:31 Definitely. And when it when it comes to the I think another thing besides tokens that has evolved is the DeFi user themselves and I I think you know we're seeing a lot more institutional involvement. So I I guess from a a customer or user perspective what's your your thesis on that where you're trying to capture?

9:47 Yeah that's a a great question. Manuel and I were actually just chatting about that a little bit ago. obviously mo most DeFi products or platforms first cater to DeFi users and I think you always need to kind of build concent concentric rings around those. So while we always want to build products for people that understand and and use DeFi, it's really important to kind of go to broader the broader addressable markets that sit outside of that.

10:11 So we're really going across that sorry we're really going after that in two different ways. One is to find a way to get to a broader user base that might not be as DeFi native or DeFi savvy. So this even gets to can we offer an autopilot solution for someone that is not used to holding stable coins on chain and and we're making significant strides there.

10:31 And then on the other hand it's how do you actually reach institutions which I think you mentioned Brendan a lot of them now are not only getting into crypto but they're also even if they don't use the words DeFi and smart contract they're really kind of going into this on these onchain concepts and onchain yields. And so I think having this be a kind of high yield savings account that can optimize or aggregate over multiple modalities of yield is a really compelling product almost like a cash sweep opportunity for a lot of these desks especially given that autopilot people can enter and exit instantly.

11:00 So if they have idle stable coins or cash it's a great product for people to earn attractive yield. Yeah, definitely. I think something that that we're seeing now is kind of the fintech and crypto being symbiotic and just becoming one one space, especially with things like Robin Hood, what they're what they're launching lately. It's pretty insane. But yeah, I guess from the user perspective, if you're using Autopool, I think you kind of covered it, Carson, but I guess end to end, what does that look like and what are some of the benefits you know that autopilot solving?

11:27 You want to take that one, Manuel?

11:28 Yeah, for sure. I'll start just by mentioning kind of the problem statement that we identified for this on autopilot. There there were issues that we previously identified for manual LPS such as yield volatility very large option set in terms of both the X LP positions markets and so on and overall each time that you make a decision to enter or exit for example a pool you're always incurring in switching costs in the form of gas slippage and trading fees.

11:57 So what we decided was well let's just fully replace this manual decision making process and let's automate it and the system that we created to do so it's autopilot autopilot is basically a onchain autonomous capital allocator right and the way that the system is structured and it's architecture as essentially auto pools at the center and these auto pools they are ERC walts are going to point to different destinations are destinations that are allegible for liquidity deployments across these different sets of autopools.

12:31 You always have an onchain strategy that is essentially going to dictate what are the constraints that must be met for a rebalance to occur. And then you have an offchain component for the system which is the solver that is going to propose rebalances to this autopool contract. And then these rebalances in order to be valid and occur they need to meet these onchain constraints that are associated with each strategy that is paired with every single auto move and you have a very complicated stat system that provides you all the required information to make those decisions.

13:05 Okay, very interesting. So I guess on the the contract side, you know, you mentioned the ERC model you're using. It definitely get complex, you know, building a system like this. So I guess what are some unique design challenges maybe you faced or problems or you know I guess unique difficulties with building you know a complex system like this?

13:21 Yeah, there are definitely a lot of challenges and in order to remain competitive your edge really depends on integrations. How quickly can you integrate new protocols? How quickly can you roll out new auto pools that are focused just on streamlining liquidity for example across a new chain and so on. So this involves an approach to security that is very focused for example on fork testing new integrations isolate those components and make sure that the system as a whole still behaves as expected and I would say that you know when it comes to fast rollouts this testing process and making sure that every single new integration is audited with one of our security partners is definitely highly ranked there as one of those obstacles.

14:07 Yeah, definitely. And I guess when it comes to risk modeling, what's kind of your your thesis there? Because there's also the the financial security side to to a system like this.

14:14 Yeah, so there are two sides to this. So there is the portfolio management itself in terms of the curation of the integrated destinations into an auto pool and there's a null framework on that side and then there are the actual you know security mechanisms that can be triggered to enter or exit some of these positions. on the actual mechanisms that we have in place.

14:36 We have tools such as destination shutdowns where we basically signal to the solver that this position has to be exited and there are also components that are more associated with the strategy that start to trim positions once you start to see for example discounts that go above a predefined band. So in between the financial modeling and the actual tools that we have at our disposal, u you need to have these sides of the actual risk frameworks and then the tools to execute those risk frameworks,

15:06 Right? Very interesting. Yeah, totally makes sense. I guess zooming out a little bit from there, when it comes to, you know, gaining market share for a protocol like this, what do you think is most important to people? You know, like integrations, the overall performance is obviously important and then, you know, the UX as well. So UX, we've really invested a lot on UX.

15:24 Our front- end team, they did a long process for user research, and I'm very happy with the current state that we're in. They're always looking to improve, so you'll see some changes pretty soon. When it comes to new integrations and getting market share, what we've seen that works really well, it's partnering, for example, with chains or partnering with asset issuers and making sure that we provide a new value offering by streamlining liquidity exclusively to their own ecosystem.

15:52 So, I've mentioned previously the curation of auto pools and we largely define two groups of autopools. There are our tok pools which are curated by ourselves. There are ecosystem auto pools where we partner with for example a specific chain or an asset issuer like we've done recently with inverse finance and we'll curate destinations that they wish to see included in order to just allow them to on board their own users with a solution that not only provides them better returns but it's just a much easier UX.

16:23 One of the things that for me it's still a huge pain point is that each time that I'm participating in a airdrop farming campaign for a stable coin, I need to pick between LPing on Pendle providing liquidity to one of their money markets or just participating in one of their endless LP positions. What we're focused as of now and with the upcoming Pendle integration that we're going to have very soon is to provide to asset issuers a value offering where if they include all of these different destinations into their single auto pool they have a single entry point that also solves a lot of issues that they have like for example migrating their pendle LP markets to new maturities which is always a period where they lose a lot of users.

17:05 All of these things I think that they really highlight that while thinking about this automated liquidity product autopilot, you have these two sides of the LP focused side that is really trying to maximize these returns. But then autopools become a more utilitarian tool when they're focused on the project side. And for that purpose, I think that streamlining liquidity while remaining composable because as Carson said, we have a lot of design choices to make sure that users can always withdraw their liquidity at any given moment in time.

17:35 So no waiting periods, you know, no withdraw to use or anything. And all of these decisions were very well thought in order to just maximize composibility. and yeah, I think that covers it. Anything to add?

17:47 Yeah, just building on that a little bit. Fully agree with everything that Manuel just said. I think like the adding new integrations and adding integrations quickly as well as kind of the yield component which you mentioned Brendan those two things obviously are related as you get more integrations you're able to unlock more yield sources and yield sources as they come online which is very important but I think right

18:04 For us and probably for me at the moment the the most important thing really is the ease of use point that you brought up or the UX and as Manuel said it's those two different groups there's kind of the that use autopilot there's the LP side which is kind of the obvious side you'd first think of if you see or use use Tokemak Autopilot and that's very attractive Right now you can earn 10 up to 10 10 to 11% right now at the moment on stable coins within the system.

18:26 But then you also have the asset and you know LPS are looking to maximize their returns as generally as you would expect but they also are looking for a simple easy to use platform. Asset issuer side they really want to decrease their cost of liquidity as Manuel said. So that's really interesting and those kind of dovetail back into integrations because when you find partnerships with those that generally opens you up to a new user base.

18:46 So you find a stable coin issuer or a new chain or a new platform and then you launch an autopool dedicated to that ecosystem and then you can get sort of joint distribution or joint marketing to their end users. I think keeping everything very easy to use, very composable with everything, which of course is a tenant of of DeFi, is critical.

19:02 And in my opinion, kind of hitting that UX or delivering autopilot to people where and how they exist today is probably the most one of the most important things that we can do going forward, not only from a chainbychain basis, but also as we mentioned earlier, how do you serve people that aren't using DeFi day-to-day today? How are you serving?

19:18 How can you deliver autopilot to a group that isn't using DeFi dayto-day today, which is a mouthful or how do you go to institutions by way of kind of a B2B model often where we can partner with another platform that already has institutional capital and stable coins in it and then distribute there. That's going to be some of the ways that we really expand our TVL and market share next.

19:37 Yeah, 100%. And it like back to the UX point, it seems like there's a lot of advantages to both sides. but I I think what's really cool about this product is definitely maximizing composability. I think for me that was like the most interesting thing about DeFi in the beginning and sometimes it gets lost because yeah like you're saying for the user you shouldn't have to do all those things manually.

19:55 You should be able to go to one place and have a you know a strategy executed for you. That's kind of the benefit of having DeFi in the first place. But yeah and it sounds like the yields are good too. So I guess what's kind of the process behind picking which protocols to to integrate with and picking the best yield routes for the user?

20:10 Yeah. So I think that I can take that one while defining for example new protocols to integrate or new auto pools to set up. One of the key pieces of criteria it's really the addressable market right and the way that we calculate this addressable market is by looking at the capacity that that auto can serve. So how much AUM can it intake at a given target rate.

20:33 In addition to that we also take into account a lot of growth aspects. our first L2 to be on boarded. It was B. It was far before B and add any kind of activity. This was one year before we even launched autopilot. And it turns out that BUSD, for example, right now it's the best way to put your USD to work on B.

20:54 And we noticed that picking different chains also has a lot of implications in terms of the velocity of money on that specific chain. For instance, Base has a lot of active capital. It was very easy to bootstrap this product organically even though our bootstrapping campaign had way less incentives than in some of our previous efforts. so looking also at the idiosyncrasies of different chains understanding how capital itself behaves on that chain and what those users are looking for is also part of the user and then it's a learning process of learning what works what doesn't work staying up to speed with vi to seeing what are the new features that users demand like for example integrating now long duration options on some of our auto pools all of that is also taken into account.

21:41 Okay. And so you mentioned building on base. What chains are you are you live on right now? And are there any more in the in the pipeline that are priority?

21:48 As of now we are live on on three chains. So Ethereum mainet base and sonic and we have ch plans like maybe I'll turn it over to Manuel of whether we want to announce details or not but we have plans of course to go to more chains quite quickly I think. But Manuel maybe I'll hand it over to you.

22:03 Yeah for sure. So again I high growth bets and then integrations based on capacity. the high growth chains are always u a question mark, right? But I think that in between the most interesting ecosystems that I'm excited to try out, plasma, given our focus on stable coins, it's definitely one of them. And you know, having discussed with the plasma team, I really like their approach.

22:27 Instead of trying to incubate their own D5 ecosystem, that comes with a lot of risks. Like if you want to incubate your own D5 protocols, the risk of exploits etc. just increases a lot. Plasma has a different approach. They're trying to onboard D5 blue ships in terms of all the different D5 primitives and for us that became an obvious choice of where to be present on their day one launch on mainet.

22:51 So that's definitely going to be one of our focuses plasma USD. Then I can also openly mentioned the other chains that I have on my spreadsheets with autopool lists and that's Hyperliquid monad and obviously Arbitrum. Arbitrum was always going to happen. It's just a matter of prioritizing again entering a high growth chain versus something that is already very well established and yeah arbitr as of now they're unrivaled when it comes to quality defy.

23:19 Yeah totally and one thing you mentioned a bit earlier Manuel was incentives so I think you guys have a a protocol token TOKE so yeah I would be curious to learn about you know how it works maybe what makes it unique and you know incentives that are that are happening with it. Sure, I can I can kick off on that side.

23:35 Toke, as you mentioned, our native governance token. it can be staked at tokemak.xyz. and what we're doing today is is revenue sharing. So, depending on how you lock or stake your token, right now you can earn up to 24% APR on that token and that all comes from effectively revenues that are being generated within the platform and then buybacks of the token that is that is then distributed.

23:57 We're going to be doing more very soon to further kind of add utility as well as align incentives between TOKE holders in the platform. So, we're going to enable the ability to sort of utilize TOKE votes in order to align where the net emissions or kind of the the bootstrapping potential of autopilot goes. And what I mean by that is if you look at our pools today, most of the yield is actually generated natively in the pool.

24:21 This isn't something like back in the day in DeFi where people are emitting crazy amounts of token tokens in order to bootstrap pools. At the moment when we're adding more and more chains quickly that's still managed at the protocol level but soon we'll be outsourcing that to the TOKE holders as well so that they can kind of determine where we need a little extra juice and emissions and where we should attract more TVL.

24:41 Manuel anything to add to that?

24:42 I'll say that you know we're at the early stage of bootstrapping these new products. We had a very long phase. We launched our initial MVP autopools which are our legacy autopools focused on ETH denominated assets and a few months ago we launched our new generation autopools that now include all of the different stable coins that we have integrated and throughout this process we've learned very well how to do the bootstrapping steps for different auto pools and it's always with minimal incentives because at the end of the day autopilot can work without any incentives that's the beauty of it.

25:18 So tokens should catalyze growth. They should not be necessary for growth to occur. And it's interesting that when we plot for example our NAV on our oldest auto pools like for example autoETH you see an exponential curve at the start due to the rewarder in terms of the net emissions and then as we unwind those incentives you'll see a plateau and then organic growth.

25:42 And this is what a very successful bootstrapping looks like. now mimicking that kind of success for different stable coin pools like for example autoUSD which has around $20 million and baseUSD which also has around $20 million what we've seen it was a very similar behavior of users entering during that exponential phase but then the retention is very solid because the real ill that comes from the base rates it's also there and this might be a small nuance but I think that it's a very interesting part of the system that most users might not immediately understand.

26:18 It's not intuitive because I get this question a lot of times. And what I mean here is that once you turn a new autopool online, you have high yield from the rewarder, right? And some of these initial inflows, they go to a deployment queue and they are deployed by the solver proposing rebalances to the autopool as I mentioned and allocating those funds.

26:38 Now these deployments they don't always happen to the highest yielding destination because autopilot also takes into account deployment costs. So you will see often that the first deployments look at first glance suboptimal because they're picking no sleepage or low slippage routes to for example markets. But then over time once this initial high influx of TVL is done what you actually see is that the rebalances then happen from these low slippage routes to the higher yielding destinations but in smaller tranches so that you don't take such a big hit in app per share.

27:12 What this implies from a bootstrapping perspective is that as the incentives are unwind the base rate is actually increasing over time. So it actually compensates that decrease and this is how we like to do our organic bootstrapping processes. Yeah, that's that's great to hear about organic growth. I think yeah, I mean anyone can incentivize a pool, but what matters is that the liquidity stays around and ideally grows, you know, after those end, but also getting that in front of people can be a challenge, too, because there's a lot of, you know, protocols out there.

27:41 So, I guess what are what are your thoughts or approach or thesis on go to market and, you know, letting users know what's available?

27:47 Yeah, I might just add one thing to the previous one and then jump to the answer to that question. So I think I think what Manuel mentioned brings up a really interesting kind of trade-off that the auto pools trade-off and and design or a trade-off and decision tree that the auto pools make kind of through the space.

28:01 So as you know they're selecting through a large solution set of destinations to deploy, but they're also looking at the volatility of yield and then the slip slipage or switching cost of jumping into those destinations. the yield the yield volatility is an important point to note because what the auto the auto pools do not see a higher yield someplace and then just jump over there because obviously it costs something to rebalance the portfolio and and jump over provide liquidity someplace else.

28:24 So they'll actually look at volatility of the yield historically and say, "Hey, if I if I take the hit and have the slippage and other trading fees, loss of jumping over to a pool, how quickly will I be paid back based on like do I anticipate this is a blip in the yield and what is my sort of payback period for going over there?"

28:39 So it's actually a very intelligent algorithm that is managing the LP aggregation here. And I think that's worth mentioning because kind of to Manuel's point about how the yields can actually improve over time. not only with the amassing of more TVL when you go to a new chain or new destination there's also often the case that a new chain will launch and they won't have you know they don't have the massive list of potential destinations that we can integrate with that say Ethereum mainet does you have this interesting thing where this interesting kind of mode of liquidity movement where at first there might be very high incentives but there's only a few places to deploy and then new things come online on the chain and and then it becomes like and then it autopilot really

29:14 Starts to shine because it's able to more directly optimize over the solution and kind of move to a state where someone just manually managing this couldn't couldn't keep track of everything.

29:25 Those are good points. When it comes to the long-term sustainability and you know obviously you've optimized the protocol for this, how do you communicate that to the user?

29:34 That is a great question. I think the well one of the ways and we kind of did this even as we first launched the ETH-based version of the of the platform late last year is you kind of have to before we launched we had to rely on back testing. So you had to show people, you had to kind of show this concept of yields are over all over the place and the actual detrimental effects of chasing yield.

29:54 So if you just go after wherever the highest yield is, you eat away your your principle by always taking the the game

30:01 Theory there.

30:02 Yep. Exactly. So I think so that's part of it. The short answer, by the way, is we're always looking for better ways to show this because it is a very complex system and to the you to the user it's incredibly simple. But in order to show them why this is better than why it's different than anything else that's out there in yield, even though it leverages as building blocks all these underlying components, I think showing showing individuals that hey, you can pick any individual destination for yield or even any single modality, but why not go into into a Tokemak autopilot pool auto pool that is optimizing over all of these things.

30:31 So, we didn't get into this a lot, but this optimizes not if you take stable coins for example, it's looking not only at LPing and the trading fees and incentives you can make there, but it's also looking at say the basis trade via Ethena. It's looking at money markets. It's looking at treasury yields and various Dowo governance enabled or driven sources of yield for capital.

30:50 So, it's optimizing over all those things. So you can pick an individual source or an individual destination if you're a user and you might perform at the same level of an auto pool or maybe even outperform in a very short period but then as soon as the yield the state of yield across DeFi and really across the economy changes you're going to start losing and and then you're going to be chasing it with slippage.

31:10 Whereas when when we probably should mention this too when capital is sort of aggregated at the level like right now there's around $85 million in TVL and growing within Tokemak and so when you have larger pool like larger amounts that that different or that minimal amount of slippage becomes smaller and smaller for a large pool of capital when you're rebalancing versus an individual say retail user who's trying to chase these things and the fees and slippage are really eating away all the principle in a much more aggressive way.

31:37 Yeah, absolutely. And getting back to my other question then I think on the framing side makes sense but for getting the word out and kind of the go to market for you guys what are what's your perspective on that? What are some things that you're you know you're doing that that you've tried?

31:49 So I think when and I'll throw it over to Manuel too but I think when we launch with a new partner whether it's a platform on an existing chain that we're on or a new chain or a different asset issuer. It's all about engaging directly with their their community and their ecosystem. So these are people these are groups that not only already bought into a different ecosystem they probably don't know about Tokemak autopilot so we have to go there and whether that's sort of jumping into discords or jumping on podcast and things like that with them ask me anything etc trying to engage those communities and then I think more broadly a lot of my time right now is spent talking to institutions to try to get that user base into the tok and that

32:25 Also is often by how where can we find where the institutions hold their capital today whether that's custodians or staking providers etc where we can build an integration there. and then last, we the one that we're currently working a lot on is how do we we kind of go out to these user bases that aren't a DeFi native at the moment and we've got more work to do on that.

32:41 Manuel, anything on your side to add?

32:43 Yeah, definitely. Like you've already touched on a really important point which is co-arketing is definitely the most important tool when you're targeting a DeFi native crowd. A lot of people ask, you know, for growth acts, etc. It's really co-arketing. you're just entering a cross check section of communities and you're engaging with new LPS and we found that to be you know super helpful for our front but then in addition to that like Carson was mentioning we're also exploring new ways to onboard different types of users one of those ways it's a secondary project let's call it making autopilot more fintech like where we're trying to fully abstract the word crypto and let people directly on board with wire transfers and so on and I do think that you know within a very recent future.

33:29 If you're not trying to capture users with this this different distribution funnels that are more focused on this fintech kind of reality that just uses DeFi on the back end, you're going to be missing out on the largest part of the market share that we should expect in the future. So make a very simple USD based savings account.

33:49 Allow users to realize part of that interest so that this feels tangible because to a lot of people crypto is still seen as this black box that is magic internet money. So realizing that promise and making DeFi tangible. It's also definitely part of our user focus for the next few months.

34:06 Yeah, definitely. I think there's there's a massive opportunity and it's been a long time coming of you know DeFi and fintech kind of becoming one especially on the stable coin side there's just I mean as we've talked about just so much you can do there more than just a simple you know savings account or something I guess when it comes to to onboarding institutions you mentioned Carson what's the framing there what what are they because I think a defi den you can tell them we have 10,000% APY and you know they're they're they're good with it they don't even blink but I'm sure institutions the framing is is probably quite different there.

34:37 So, what's what have you kind of seen on on your side of where where they're at when it comes to looking at the crypto space?

34:43 Yeah. so I think stable coins are ultimately so for example, I was at a Goldman Sachs conference last week in London and I think the stable coins were definitely the talk of the conference more so than Bitcoin. interesting interestingly Ethereum did come up and there was some some pushes for ETH even at a Bitcoin based panel. but I would say stable coins were far and away the most talked about thing.

35:03 I think that's what's really onboarding institutions in into this space. Even DeFi came up, not always called DeFi, but really this onchain finance concept kind of as you said Brendan, the line of fintech and DeFi sort of gets blurred and I think that's by way of of stable coins. That's kind of where they're entering. So I think the biggest open question for them I think you have obviously traditional finance players.

35:26 There's a huge spectrum of those and the banks at a very different spot than a principal hedge fund or something like that that's already holding some crypto assets. but really it depends on whether they can wrap their head around smart contract risk. Not specifically to took autopilot but just broadly within DeFi. And as soon as they can get their handle on how they can sort of risk rate that there's just a massive opportunity.

35:47 Some of the groups are already going into that. some of them are are further back and they it's hard for them to think beyond counterparty risk and more of the risks that are available and plentiful in traditional finance. In my opinion, that's sort of the final the final gate that's waiting to be lifted is just getting them comfortable with with smart how smart contracts work and smart contract risk because and how smart contract risk works because they they love the concept.

36:10 They're sort of fully bought in. I'm talking broadly now, but fully brought into the stable coinbased world. I think they see that the 247 nature. This is another thing that came up a lot is the 247 nature of crypto assets and stable coins and and they even talked about bringing in intraday yield and and those kind of things.

36:26 So there's still a few steps back but even you know something like like Tokemak autopilot where you can enter it in real time in and out and block byblock or basically in a real-time basis generate this yield that's really compelling to them and so it's really just getting comfortable with with smart contract which all this is built on.

36:42 Yeah 100% that makes a ton of sense. So I think right now you know stable coins definitely like you said huge focus on the institutional side and I think USDC is kind of the driving you know coin on the stable side but I've seen things like you know JP Morgan working on you know a stable their own stable in the background so I guess what's your guys perspective on stables as an asset will it be one main leader or do you think we'll see a lot of different you know entities owning their own you know version of a stable

37:07 I personally think there's going to be quite a few at least for the foreseeable future and I think you can even see that if you look at the large market cap players today where I think if you rewind probably to the previous administration there's a lot of reasons you would have thought well maybe circle wins wins the day but I think now in the current administration you have circles IPOed and then also with current administration tether has very solid tendrils in so I think you have both of those have sort of been enshrined in a way in the space but I think you're going to have a lot a lot broader choices out there for for consumers as well you'll have some that are proper stable coins following you know the guidance of genius act

37:44 Etc. And then I think you'll have these other things that are maybe not technically stable coins by way of what in the US anyway they're they're calling them but still some interesting opportunities and for us we really want to be you know these these savings account or the accounts or kind of yield accounts that can operable with a lot of these different stable coins.

38:01 So for us I think that's helpful what what do you think for the multi-stable coin future? Well, I'll say that in the two different categories of either payment stable coins, which is the focus of USDC, USDT, etc., and yield bearing stable coins, we're still just in the cusp of the explosion on the yield bearing stable coin side.

38:21 We have yet to agree as an industry on the correct nomature but you know looking at the current percentage I think that it's around 4% or so of the total stable coin supply in eel bank stables I see a lot of parallels with money market funds in the 70s that grew to a trillion dollar industry you know so if there is something that I'm very very bullish on it's the increasing nature of new yield sources coming into the space and just more and more competition on the yield bearing stable coin side and I think that by now each single yield bearing stable coin as a issuer already understood that there is no single yield source that can scale to global demand.

38:59 You see that with the basis trade like they have to start also entering you know coordinations with maker to be able to sustain periods when fund went down and I think that this poses interesting question for us at autopilot which is we're not opinionated on a single yield source creating all of them so you don't rely on different market cycles you're just acknowledging that the market for yield on dollars is always going to see volatility and we're just automating your liquidity in order to capture those cycles.

39:37 So yeah, very excited about that part of the explosion.

39:40 Definitely. And yeah, I totally agree that the yieldbearing stable is going to grow and it's kind of untapped right now. I mean, obviously we had a huge market correction at one point with Luna, but that being said, I don't think we need to throw out the entire concept. I guess just curious, man, where do you think there's opportunities like to build something like that?

39:58 Where should what do you think the right way to build something like that would be and where where the yield would come from?

40:03 You mean specifically new forms of yield bearing stables?

40:06 Yes.

40:07 Well, I think that there is still a lot of alpha to capture and having something more similar to structured finance. Something that brings on chain ras that are not just boring USS, but you also start to see, you know, corporate depth. You start to see munis, you start to see interval funds coming on chain. And I do think that soon enough we'll see the tools just have structured books like you'd have for example in a normal bank or structured product.

40:35 So yeah, I think that we're still in the very early innings, not on the onchain yield sources. That part I think that it's already pretty mature, but we're in the very early innings of seeing RWA being integrated into eelbearing stable coins. And if there's one thing to be very excited about, it's that side of onchain finance and tokenization.

40:56 And I'm glad that we're now accepting not to call this DeFi, but rather onchain finance.

41:01 Totally agree. Yeah, I think that the RWA and stables can definitely work hand inand provide like more sustainable yield. but yeah, I guess so getting back to Tokemak overall, what do you guys think is the number one challenge or limiter to growth to get to the, you know, another 10x level from where you're at right now?

41:18 I'll start. I think the biggest biggest thing that can expand our addressable market is really just getting outside of DeFi or really going into as as Manuel I think was just saying kind of onchain finance. So how do you tap into that much broader market and it you always need to first be able to engage the hardcore the the most savvy DeFi users and and so up to today with autopilot that's who we've we've engaged and now our next big phase here of this is to make sure that we can engage institutions and then a broader user base that that isn't cryptosavvy.

41:46 I think that's the the biggest growth opportunity in addition to being able to move really fast with integrations and and kind of go to new ecosystems for probably the more hardcore as they advance. That's how we make sure we stay relevant within the DeFi community. as new chains and new new platforms roll out.

42:03 Carson touch on a point that is super important to me and I see a lot of you know web two approaches that fail because they forget about prioritizing DeFi users. DeFi users are still the first ones to show up and bootstrap. I internally we have a goal that I hope that we're going to achieve very very soon of crossing the $100 million mark.

42:26 But you need to show that your product has traction. You need to show that there was meaningful organic adoption without fancy points campaigns or new tokens. We've already demonstrated that in my opinion and this was only possible due to a very definitive crowd where we know that there's still a lot of growth to expect but as Carson said like if you're looking for multipliers in growth the way to go is definitely expanding beyond itly speaking you know if I'm trying to onboard my grandparents or my parents I would never advise them you know to have their own hardware wallets and interact with DeFi it's a minefield right so there's a lot of improvements that we need to have on that front and we're working on that on providing easier ways for people to access funchain

43:11 Capital and build products.

43:13 Definitely. So yeah, you know, capture the existing DeFi user and then expand the pie beyond there, which is great because I think in DeFi, you know, rising tide definitely lifts all ships. Any movement to bring liquidity on chain is good good for all of us. So in in terms of your team, what's kind of the the structure like right now?

43:27 And are you hiring for any roles looking to expand it at all? I was just going to mention that we've just hired a new engineer front end dev for this effort that I was mentioning in a not too clear way but Carson feel free to touch on the rest.

43:43 Yeah and I would say just generally we're a very flat organization. We try to be able to move very quickly be very a agile in some level. We're always hiring and that we always want to talk to the the best and brightest in the space. and I and I think at the moment is a an interesting moment I think for hiring because I think those internal to the space see a lot of opportunities out there.

44:05 But then also you have this big group of sort of outsiders that I think for the last 24 months or so haven't been interested in coming in the space and now all of a sudden they're very interested again. So I think it's an it's an interesting moment right now for hiring and and yeah we always want to talk to talk to good people.

44:21 Awesome. And yeah so earlier you mentioned TOKE holders you know they have the ability to get involved and kind of make some protocol level decisions. So if anyone's interested in doing that you know where should they go to to get involved and you know be in part of the community.

44:34 So they can should definitely join our discord but then in terms of actually using the token they can go to tokemak.xyz XYZ and then they can go to the stake tok S tok tab and and there that's where they can stake their token and earn protocol revenue. At the moment I mentioned I think at at this date in time it's at about 24% APR they can learn all from TOKE buybacks from from the actual protocol revenue.

45:01 And then in the near future, we're going to be turning on more functionality for that where they'll also be able to help determine where emissions go and also some some other interesting things that we're yet to announce. but, the easiest way is come, you know, if they have to, just come to the Tokemak website, stake, and then jump into our discord and and of course follow us on Twitter.

45:18 Awesome. Well, all right guys, I think we covered a lot. Was there anything else that that you wanted to get to?

45:22 No, this was pretty good. I will just mention that as kind of a final remark. When you think about autopilot like we're what we're really trying to do is introduce LP aggregation this early thesis was one in for traders autopilot for liquidity providers you need something somewhat analogous that allows you to be able to aggregate liquidity across multiple different source and I think that one metric to watch out for it's the volume in automated liquidity that autopilot is creating so there's already you know a lot of bots trading on chain that's for sure but in terms of actual capital allocation for liquidity provision just with Ethereum focused auto pools that have a much lower frequency.

46:04 Autopilot has already done almost half a billion dollars in volume and this is with the really low frequency type of pools. So I'm very excited to just see this metric grow over time because it just shows that more and more autonomous onchain capital allocators are stepping in and overall markets are just becoming more efficient which is better for us as users protocols and the industry as a whole.

46:28 Awesome. Yeah, that's huge. I mean I'm I'm a huge fan of what you guys are building. I'm bullish and definitely wish you guys the best and congrats on all the growth so far and yeah, thanks for hopping on the pod.

46:36 Thank you so much.

46:36 Thank you so much. Appreciate it, Brendan. I might say one last thing if that's okay that

46:40 Yeah go for it.

46:41 So the other thing I'd like to say to everyone is if they have any stable coins and they're looking for yield go to tokemak.xyz. I just pulled it up and right now the APY is between 9 and 18% depending on whether your stable coins are on Ethereum mainet or base or sonic and so explore that. I think you'll enjoy the experience

46:59 And a lot of new launches coming soon on a lot of new chains.

47:03 Awesome. Lots to come.