Speaker 1: The black rocks of the world don't make bad bets,
Speaker 1: like they understand, they do an incredible amount of due diligence.
Speaker 1: So it's nice to kind of see them endorsing the
Speaker 1: technology in this way, like it will just get to
Speaker 1: a point where I go to my brokerage account, I
Speaker 1: buy eth and in the background it's automatically staken and
Speaker 1: it's a given.
Speaker 2: So do you see eight continuing to hold that mantle
Speaker 2: of being let's say, the top enterprise blockchain. Oh?
Speaker 3: Absolutely, I think there's no doubt.
Speaker 1: Etherium has kind of two key selling points like security
Speaker 1: one hundred percent of time, and then like you mentioned, liquidity.
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Speaker 2: visit the link in the description. Hey, folks, welcome into
Speaker 2: the Thinking Crypto Podcast. I'm your host, Tony Edward and
Speaker 2: joining me today is Keen Gilbert, who is the head
Speaker 2: of institutional Relations at the Loto Ecosystem Foundation. Keen, great
Speaker 2: to have.
Speaker 3: You, Ay, thanks so much for having me. It's great
Speaker 3: to connect.
Speaker 2: Absolutely, Keen. I think it's very timely that we're speaking.
Speaker 2: There's a lot of demand for etherorem, a lot of
Speaker 2: demand for etherorem staking and Loto is playing a big
Speaker 2: part in the staking aspect for etherorem. And then recently
Speaker 2: the SEC gave some clarity around liquid staking. So I
Speaker 2: got a lot of questions for you, But let's kick
Speaker 2: it off with your background. Tell us a bit about
Speaker 2: yourself and your professional background.
Speaker 3: Sure, yeah so ours boy.
Speaker 1: I kind of grew up in Dublin like business background,
Speaker 1: did marketing management consultancy. From a professional point of view,
Speaker 1: I started my career in Deloitte doing like FS capital
Speaker 1: markets consulting on crypto so I did that for around
Speaker 1: a year. After my time time in Deloitte, I joined Consensus.
Speaker 1: I was in Consensus for around five and a half years,
Speaker 1: mainly working on like meta mask institutional and fur staking tokenization,
Speaker 1: like a number of different products, so I kind of
Speaker 1: got good exposure there. After my time in Consensus, I
Speaker 1: joined a small startup for a while that was doing
Speaker 1: like portfolio and risk management for crypto funds. And now
Speaker 1: currently I'm at Liido for just over a year, so
Speaker 1: I'm head of institutional relations and I would look after
Speaker 1: and a lot of institutional clients. So by that I
Speaker 1: mean different crypto funds, asset managers, hedge funds, like really
Speaker 1: anyone who has a significant mental eat and we had
Speaker 1: obviously encouraged them to take it with a love for
Speaker 1: the added benefits of liquidity and capital efficiency.
Speaker 2: Very cool and at your time at Deloitte, what was
Speaker 2: your first encounter with crypto. Was it Deloitte? You know,
Speaker 2: were they researching this technology and then you kind of
Speaker 2: got into it or did you find out about it
Speaker 2: outside while at Deloitte?
Speaker 1: Yeah, it was kind of an interesting one. So in
Speaker 1: college when I was doing my master's in consultancy, we
Speaker 1: had to do a consulting project and my client was Deloitte,
Speaker 1: So that was kind of my first I suppose aha
Speaker 1: a moment for crypto and blockchain. So we did the
Speaker 1: consulting project for deloittte and this would have been I
Speaker 1: think twenty seventeen, so the technology would have been quite nascent,
Speaker 1: So all the work that Deloitte was doing at that
Speaker 1: time was very educational based, like just getting people to
Speaker 1: understand that like blockchain and bitcoin wasn't the same thing.
Speaker 1: One is the technology and the other's use case. So yeah,
Speaker 1: college would have been the main dip to kind of
Speaker 1: getting into that kind of crypto part. After that, a
Speaker 1: lot of the proof of concept based, so nothing was
Speaker 1: really going into production at that point. You were doing
Speaker 1: a lot of use cases around like trade finance, which
Speaker 1: is quite popular, and eating from a process and improvement
Speaker 1: point of view around smart contracts and fast forward kind
Speaker 1: of ten years later, nothing really goes down that proof
Speaker 1: of concept rabbit hole. It's all straight into productions with
Speaker 1: people that bought into the idea.
Speaker 2: It's amazing to see the amount of adoption taking place
Speaker 2: of blockchain technology and the crypto acid class. You have
Speaker 2: almost all of tradify here, the banks, the stock exchanges,
Speaker 2: the payment companies, they're all here. What does it mean
Speaker 2: to you or you know, how do you see that
Speaker 2: with all these folks coming in? Is it just you
Speaker 2: can't ignore this technology? This is the future pretty much?
Speaker 1: Yeah, Like it's just been insane that it's kind of
Speaker 1: been this almost light switch moment. I felt like for
Speaker 1: a long time we were talking about institutions coming and
Speaker 1: regulations coming, and now it finally feels like it's arrived.
Speaker 1: And so the starting pistol has sounded in my mind, like,
Speaker 1: by no means do I think we're kind of nearing
Speaker 1: the end of the race. It just feels like the
Speaker 1: race is starting, and I'm quite fortunate I'm in New
Speaker 1: York this week, like the financial powerhouse of the world.
Speaker 1: And when you meet with the likes of black Rock, Fidelity,
Speaker 1: Franklin Templeton, like you understand that they're taking this technology
Speaker 1: incredibly seriously and they're making these big investments. And my
Speaker 1: view in these things is like the black Rocks of
Speaker 1: the world don't make bad bets, like they understand, they
Speaker 1: do an incredible amount of due diligence. So it's nice
Speaker 1: to kind of see them endorsing the technology in this way.
Speaker 2: Yeah. Absolutely, So give us an overview of lido. What islido,
Speaker 2: your mission, your services, and much.
Speaker 3: More for your listeners.
Speaker 1: You can think of Lido as a liquid staking protocol,
Speaker 1: and there's effectively kind of different levels. I would say
Speaker 1: the one that's most common are the one that gets
Speaker 1: the most amount of attention right now is native staking,
Speaker 1: so effectively with ethereum as the proof of state blockchain.
Speaker 1: So what that means is you take your eath, you
Speaker 1: secure it in the network, and as a reward for
Speaker 1: taking your eath securing in the network, you're given rewards.
Speaker 1: So I believe the rewards rate right now is around
Speaker 1: three percent. The issue with native staking is that you're
Speaker 1: basically taking your capital in the form of eath, you're
Speaker 1: locking it away, So from a capital efficiency perspective, that's
Speaker 1: not terrific or it's not ideal. I suppose then the
Speaker 1: whole selling point of LIDO and liquid staking is we're
Speaker 1: solving that problem. So the whole process with LIDO is
Speaker 1: basically you would take your eth, you would go to
Speaker 1: the DApp take your eath, stake it, and in return
Speaker 1: you're giving steeth or st eth in return. And you
Speaker 1: can think of Steith as a certificate of deposit, and
Speaker 1: that certificate basically represents two things, the east you've just
Speaker 1: staked and your staking rewards. What's really cool about Steith
Speaker 1: is effectively the network effects of it. So you can
Speaker 1: take Steith, use it as collateral, deployed into defied generally yield.
Speaker 1: But added benefit is that instant liquidity, so you can
Speaker 1: take that steeth and swap it into stables and that's
Speaker 1: the key selling point. For a lot of institutions. They
Speaker 1: don't want to be beholden to the withdraw queue. So
Speaker 1: I think the withdrawal queue right now from a native
Speaker 1: staking perspective is around two weeks, so it's only like,
Speaker 1: you know, like the market can change quite a lot
Speaker 1: in an hour, let alone two weeks. So for a
Speaker 1: lot of institutions, they don't really want that exposure to time.
Speaker 1: So again from liquids taking point of view. The ability
Speaker 1: to take steeth and go into stables is a tremendous
Speaker 1: selling point for what Loido is and what Steeth is.
Speaker 2: Yeah. Absolutely, and you can put your capital to work
Speaker 2: and it's great to have that liquidity that you said
Speaker 2: in soil liquidity. So talk to us about the mechanics
Speaker 2: of how this is all set up. I'm assuming it's
Speaker 2: using smart contracts. How's the custody done and security and
Speaker 2: all these things, because that's going to be a big
Speaker 2: question for a lot of folks.
Speaker 1: Yeah, so I should say, Likelido is adeo so to
Speaker 1: centralized autonomous organization. So one of the cool things about
Speaker 1: loido is that really practice what it preaches. So it's
Speaker 1: all around decentralization. Solido is effectively a middleware. Nothing is
Speaker 1: actually staked with Laider directly. So there's over six hundred
Speaker 1: different note operators and operating with LODO today or true
Speaker 1: that's to middleware. So there's a couple of different elements
Speaker 1: to that, Like you would have what's called the curated set,
Speaker 1: so this is like professional note operators, so that would
Speaker 1: be the p tops of the world, figments, kills, course ones.
Speaker 1: Then we also have a community staking module to again
Speaker 1: driving that decentralized element, Like there's a big focus WITHINLIDO
Speaker 1: and all the contributors that you want to make Etherium
Speaker 1: as decentralized as possible, because ultimately that was the goal
Speaker 1: of the technology from the very beginning. Again at a
Speaker 1: high level on like the setup and then from the
Speaker 1: custody point of view, this would come up quite a
Speaker 1: lot with the institutions that we deal with, so the
Speaker 1: asset managers, liquid funds, metfissuers. From custody point of view,
Speaker 1: we've quite good coverage. So that would be the likes
Speaker 1: of fire Blocks, Copper, cefu x Trust and the one
Speaker 1: that's most recently been announced is with Bitco. So I
Speaker 1: would say like when we go and speak to these
Speaker 1: different asset managers, like unless you have custody support, they're
Speaker 1: very unlikely to go touch the asset because ultimately the
Speaker 1: custodium provides a terrific service, especially on the of the
Speaker 1: structure side. So a big priority for me is making
Speaker 1: sure that steeth this institutional ecosystem added thindational level is
Speaker 1: supported with many different custodians, NPC, water providers and tech
Speaker 1: partners possible.
Speaker 2: Yeah, that definitely makes sense. And custody is such a
Speaker 2: big aspect for trust and making sure assets are secure.
Speaker 2: It's great to hear you're using some of the biggest
Speaker 2: names in the industry like Bidgo and so forth. So
Speaker 2: on that note, you know, in pitching liquid staking and
Speaker 2: your services to institutions like black Rock, many of them
Speaker 2: are bullish on etherorem They have it in ETF format
Speaker 2: there some our companies are holding it as a corporate
Speaker 2: treasury and then they want to earn that yield right
Speaker 2: from the staking rewards and so forth. How are you
Speaker 2: pitching this to them? Are they open mind? Are they
Speaker 2: being open to the idea? I know some folks it's
Speaker 2: a matter of education, right and getting familiar with all
Speaker 2: these things. But how has it been pitching this service
Speaker 2: to those institutions. It's been quite good, Like you said,
Speaker 2: like education is a big part of this. Like at
Speaker 2: the end of the day, people are not going to
Speaker 2: engage with the technology or ease any the service unless
Speaker 2: they're comfortable with it. But maybe the kind of taking
Speaker 2: example you mentioned there, so like the ETF issuers, like
Speaker 2: there's obviously a huge amount of work happening behind the
Speaker 2: scenes with these issuers to get staking added to these products.
Speaker 2: One of the key things that comes up quite a
Speaker 2: lot in the conversations that we're having is that what
Speaker 2: will the staking rate be of these ETFs. So if
Speaker 2: you take kind of Europe as an example, so Europe
Speaker 2: has had staking in these products for quite a long time,
Speaker 2: and there's a number of quite successful ones like twenty
Speaker 2: one shares a bit wise to etc. Group, but the
Speaker 2: staking rate of these products tends to be at fifty percent,
Speaker 2: and the reason for that is again liquidity. So when
Speaker 2: a client wants to take money out of their ETP
Speaker 2: or ETF, it's typically operated on like a TA plus
Speaker 2: two basis, so they want to get their money backward
Speaker 2: in two days. The issue when you have a natively
Speaker 2: staked ETP or an ETF is that it typically could
Speaker 2: take around two weeks. So from the issuers point of view,
Speaker 2: that's why they have to have a certain amount liquidity.
Speaker 2: And by liquidity, I mean unstaked eath. Back to your
Speaker 2: point around like what's the sales pitch. The sales pitch
Speaker 2: for most would be.
Speaker 1: You could actually launch a one hundred percent stake product.
Speaker 1: You can have a product that's now one hundred percent staked,
Speaker 1: which means you're getting the full three percent yield compared
Speaker 1: to say a fifty percent stake product where it's only
Speaker 1: getting one point five percent. So from the issuer's point
Speaker 1: of view, that's obviously quite attractive. You can launch a
Speaker 1: better product, and then from the investor's point of view,
Speaker 1: you're getting higher returns and you're again getting a better product.
Speaker 2: Is totality, that's really great and a huge incentive to
Speaker 2: your point. And then I'm assuming it would be very
Speaker 2: similar for if your treasury companies as well, if they
Speaker 2: want to do the same thing exactly.
Speaker 3: Yeah.
Speaker 1: So I think one of the big reasons why the
Speaker 1: treasury companies have been such a popular topic right now
Speaker 1: is again because ETS still has staking yet. So I
Speaker 1: think you have the likes of sharp Link Gaming and
Speaker 1: the trust Machine and the eath machine, like they're seeing
Speaker 1: a significant amount of attention because ETS don stake, and
Speaker 1: I do think there is a world where both will
Speaker 1: kind of sit in parma low like these treasury codes
Speaker 1: can be a lot more aggressive in terms of the
Speaker 1: strategies they deploy. They might have a defied strategy, they
Speaker 1: might have a liquid staking strategy, they might have a
Speaker 1: loop link strategy, and whereas the ETFs, for staking, it
Speaker 1: will be relatively straightforward. It will just be wholly staked,
Speaker 1: so from returns perspective, it probably will be lower compared
Speaker 1: to say a treasury co who could be a little
Speaker 1: bit more aggressive depending on the strategy that they want
Speaker 1: to deploy.
Speaker 2: So that's interesting, and I can see why the etherom
Speaker 2: treasury companies there's kind of a race to get as
Speaker 2: much eath as possible because if the ETFs are not
Speaker 2: offering this yet and we're still waiting for the SEC
Speaker 2: to actually do something and you know, tell us if
Speaker 2: they're going to. But also the eat treasury companies seem
Speaker 2: to have more play so to speak, or more wiggle
Speaker 2: room to do more versus the ETFs.
Speaker 1: Yeah, exactly. So, like I think Sharplink gaming is probably
Speaker 1: the best example. I want to again, the largest in
Speaker 1: space right now. I think that just is giving an
Speaker 1: opportunity for investors to get the exposure they want right
Speaker 1: now instead of waiting for the SEC. At clarity around
Speaker 1: staking and ETFs and at the end of the day,
Speaker 1: liquid funds, asset managers they do act as kind of
Speaker 1: mercenary capital. They want to go and get exposure to
Speaker 1: the market, especially since now is quite a good time
Speaker 1: for eth. It does feel like the narrative has really
Speaker 1: changed compared to say, the beginning of the year, where
Speaker 1: I always quite honestly say I don't think Eath was
Speaker 1: getting enough load. Now things have really changed where we're
Speaker 1: in nearly the end of August and it's getting the
Speaker 1: attention it deserves. And a big part of that is
Speaker 1: obviously regulars are clarity coming out of the US and
Speaker 1: again what these Treasury codes are doing and how aggressively
Speaker 1: they're buying Eath like it is a terrific endorsement that, look,
Speaker 1: this is now a strategy that's being deployed so actively.
Speaker 2: You know, one of the things I was curious about,
Speaker 2: and I don't know if you can speak to this
Speaker 2: is because it depends on the companies. But you know,
Speaker 2: could they offer the treasury companies the stake and rewards
Speaker 2: as a dividend to the shareholders or maybe just simply
Speaker 2: reinvest the amount to drive more value on the stock side.
Speaker 2: What do you think about that?
Speaker 1: I know this goes more into the companies themselves. Yeah,
Speaker 1: I think you're right at the end there, Like it
Speaker 1: ultimately depends on the company. So in the strategy they
Speaker 1: want to have. Like, it was quite interesting listening to
Speaker 1: the different investor calls for these e treasury companies. And again,
Speaker 1: this is kind of a green field space, like nothing
Speaker 1: has been around for twenty years and there's no real
Speaker 1: standards yet everyone is still trying to find what works
Speaker 1: and what doesn't work. So I would say there's no
Speaker 1: real right answer, there's no real rom answer. I would
Speaker 1: say from the investor's point of view, the right answer
Speaker 1: is the one that makes the most amount of money
Speaker 1: or the highest return.
Speaker 2: Now, the SEC recently gave some guidance on liquid stakings
Speaker 2: saying some of these activities are not securities. What does
Speaker 2: that mean for your business and even the future of
Speaker 2: liquid staking.
Speaker 1: Yeah, well, at a high level, it's terrific because this
Speaker 1: has again been something that comes up quite frequently. So
Speaker 1: like when you speak to these big asset managers or issuers,
Speaker 1: they want one thing and that is clarity. They want
Speaker 1: to know what the rules of the game are. Like
Speaker 1: it's very easy for me to go and have all
Speaker 1: these different conversations, but if there's any kind of regulatory
Speaker 1: doubt in the background, they're very hesitant to get involved.
Speaker 1: And that's quite fair and like these are big institutions
Speaker 1: Tier one have probably been around hundreds of years. They
Speaker 1: have quite a low risk appetite and they don't want
Speaker 1: to offend the regulator. So when this news came out
Speaker 1: around clarity around liquid saking, it was terrific because now
Speaker 1: we know what we can do and what we can't do.
Speaker 1: So liquid staking not falling under securities law is a
Speaker 1: big part of that.
Speaker 2: Yeah. Absolutely, And I know there's still more that they
Speaker 2: need to provide, but this was a good start, and
Speaker 2: you know, hopefully maybe with the Clarity Bill, the Market
Speaker 2: Structure Bill that's coming to be passed by Congress, maybe
Speaker 2: there's some additional language there, or maybe not, maybe the
Speaker 2: SEC provides the full guidance later this year. Yeah.
Speaker 3: Absolutely, like that's what everyone wants.
Speaker 1: Like again, kind of going back to my Deloitte days,
Speaker 1: Like it was funny, no one really wanted like regulation.
Speaker 1: They didn't want like the government to come in and
Speaker 1: like dampen innovation. But I think people soon realize that, look,
Speaker 1: like regulation is not a bad word, it's a good thing.
Speaker 1: Everyone just wants to know what you can and can't do.
Speaker 1: And ultimately the structure is the foundation of how big
Speaker 1: things happen, and I think if there wasn't this regulatory
Speaker 1: clarity and less will be happening in the market today.
Speaker 1: And like it's again kind of going back to the
Speaker 1: beginning of the year. I was here in January, the
Speaker 1: week of the inauguration, and it did feel like there's
Speaker 1: this like terrific energy in New York where Okay, things
Speaker 1: are opening up, innovation is happening, whereas I think maybe
Speaker 1: two or three years ago that energy wasn't there. And
Speaker 1: a big part of this new energy is obviously new administrations.
Speaker 1: And again that regulatory clarity that's now starting to CAMA
Speaker 1: or is at least quite close to being kind of
Speaker 1: launched their live.
Speaker 2: Yeah, for sure. And I think, you know, I think
Speaker 2: people sometimes think that if there's regulation is coming in,
Speaker 2: that it's going to stifle innovation. But it's just a balance.
Speaker 2: I think if you get the balance right where you're
Speaker 2: not stifling innovation but you're protecting consumers and users, that's fine, right.
Speaker 2: You allow the entrepreneurs to build, the innovators to do
Speaker 2: their thing, and there's protections for consumers. And I think
Speaker 2: that's the balance we just have to strite. But I know,
Speaker 2: to your point. Some people think, oh, you let the
Speaker 2: government come take over, we won't be able to do anything,
Speaker 2: But it's not true as long as you are able
Speaker 2: to get balance regulations.
Speaker 1: Yeah, and I think like once the regulators are actually
Speaker 1: listening to the market, like it would be quite bad
Speaker 1: if the regulators went into a black box. They did
Speaker 1: all their research and they didn't engage with people on
Speaker 1: the front line. I think that's when you have big issues,
Speaker 1: whereas like what the SEC is doing with the crypto
Speaker 1: daask force, speaking to as many different people on the
Speaker 1: front line as possible, that's where you start getting meaningful regulation.
Speaker 1: And that's where again that confidence starts to grow that Okay,
Speaker 1: this is a serious technology and serious players will want
Speaker 1: to get avolved.
Speaker 2: You know, you mentioned engaging with regulators. I don't know
Speaker 2: if you're able to talk about this, but have you
Speaker 2: and and poks on your team spoken to the SEC
Speaker 2: about your services and you know, giving them feedback and
Speaker 2: things like that.
Speaker 1: Yeah, there's definitely conversations and there's engagement there. Like there's
Speaker 1: a number of different kind of liquid staking groups and
Speaker 1: staking groups, where as effectively, collective we would go and
Speaker 1: we would speak to say the task force or if
Speaker 1: there's kind of open questions and given that Lido is
Speaker 1: the largest liquid staking protocol, like our guidance would hopefully
Speaker 1: have some weight, and we just give feedback on what
Speaker 1: we think is the most appropriate.
Speaker 2: Will Liido expand beyond Etherorem? There are other proof of
Speaker 2: steak blockchains out there, other services that offer or other
Speaker 2: blockchains that have staking integrated, like Solona for example. Are
Speaker 2: you just going to stay with Etherorem in the ecosystem
Speaker 2: around Etherorem?
Speaker 1: I think, like my view on this is like, if
Speaker 1: you want to do something incredibly well, you have to
Speaker 1: focus on doing that one thing incredibly well, and for us,
Speaker 1: that's Ethereum is taking So in the past there was
Speaker 1: some liquid staking and offerings Withinlido, but that was effective.
Speaker 1: Is sunsash again kind of based on that decision you
Speaker 1: want to do something well, you just focus on doing that.
Speaker 1: And again kind of my own personal opinion on this,
Speaker 1: like Etherium is probably one of the only kind of
Speaker 1: institutional grade blockchains out there today, so like why not
Speaker 1: focus on the one that's getting the most attention on
Speaker 1: that is Ethereum.
Speaker 2: Yeah, that's a great point because and we could talk
Speaker 2: a bit about this Etherorem usually seems to be the
Speaker 2: first platform or blockchain that it's being used for tokenization,
Speaker 2: and there's the majority of stable coins out there are
Speaker 2: on Etherorem. When black Rock and some of these other
Speaker 2: funds launched their tokenized money market funds, it was on Etherorem,
Speaker 2: and yes they branched out, but eth seems to be
Speaker 2: the starting point that it's the most trusted the ecosystem
Speaker 2: with maybe the most liquidity, a lot of network effects
Speaker 2: obviously and things like that. So do you see ETH
Speaker 2: continuing to hold that mantle of being let's say, the
Speaker 2: top enterprise blockchain.
Speaker 3: Oh, absolutely, I think there's no doubt.
Speaker 1: Like obviously, Ethereum secus second larger blockchain after Bitcoin, like
Speaker 1: Etherium has kind of two key selling points like security
Speaker 1: one hundred percent of time, and then like you mentioned, liquidity,
Speaker 1: Like the type of conversations aren't dealing with conversations I'm
Speaker 1: having with people, they really do care about those two
Speaker 1: things quite a lot. Like institutions, they're not going to
Speaker 1: engage unless they feel it's secure. And then a liquidity
Speaker 1: point of view, they're not dealing in hundreds of millions,
Speaker 1: they're dealing in billions, so they want to know how
Speaker 1: much they can sell, how long it takes to sell,
Speaker 1: and there's really no one else kind of operating at
Speaker 1: that scale or that size where big institutions can get evolved.
Speaker 1: And then on the final point around network effects, like
Speaker 1: again you have Visa and MasterCard, black Rock, Fidelity. These
Speaker 1: are all big players and for me, I think they
Speaker 1: place big long term bets. It's never about a quick win.
Speaker 1: And I think again, depending on the strategy of like
Speaker 1: the firm you're dealing with, quick wins can be quite good,
Speaker 1: whereas if you want to make meaningful changes, that long
Speaker 1: term bet is far more important. And Etherium has been
Speaker 1: around for quite a long time now. It's proven that
Speaker 1: it's battle tested, it can handle a lot. It's changing
Speaker 1: with the times, like the move from proof of work
Speaker 1: to proof stake Like these are all endorsements that look,
Speaker 1: this is a very future focused technology.
Speaker 2: Usually there's I see these comments online on social media,
Speaker 2: people criticize, oh, gas fees are high, But I would
Speaker 2: love to get your perspective on the institutions kind of
Speaker 2: look past that, because to your point, they look at security,
Speaker 2: network effects, liquidity. Is it that or is there more
Speaker 2: to it?
Speaker 1: Yeah, it's funny, like the gas fees, I would say,
Speaker 1: comes up more from a retail point of view, which
Speaker 1: is incredibly fair. Like if there's a high amount of
Speaker 1: congestion on the network, paying thirty dollars to process the
Speaker 1: transaction not exactly ideal, and I think we all know that,
Speaker 1: and the YEF is doing a significant amount of work
Speaker 1: to make those changes. So yeah, I would say from
Speaker 1: an institutional side, it doesn't come up along conversation and
Speaker 1: like if you look at kind of traditional finance world,
Speaker 1: thirty dollars transaction on a couple of million, and it
Speaker 1: would be incredible, be cheap, yeah, Whereas it's so yeah,
Speaker 1: you're not really comparing Apple to apples in that sense
Speaker 1: or apples.
Speaker 2: Okay, that's a great perspective because I think to your point,
Speaker 2: retail just thinks about their little mini transaction, which I
Speaker 2: get right, But if you're a black Rock and these
Speaker 2: other institutions, you're moving billions or millions and you pay
Speaker 2: even one hundred dollars in fees, that's nothing.
Speaker 1: Yeah, no, exactly, And like it's it's peer to peer
Speaker 1: and whereas compared to like traditional kind of payments model,
Speaker 1: like if I want to send money from Dublin to
Speaker 1: New York. It probably has to go through two or
Speaker 1: three different banks before it gets there, and it takes
Speaker 1: four or five days. Whereas again the efficiency provement and
Speaker 1: with etherium, again we all acknowledge it can be expensive.
Speaker 1: With that efficiency I provement where it happens in minutes
Speaker 1: not days, it's terrific and it will only get better
Speaker 1: as more and more people join the ecosystem and they
Speaker 1: build kind of different technologies on top of ether or ethereum.
Speaker 2: So speaking of that, the technology is on top of you,
Speaker 2: you've got a lot of roll ups, right, get lt
Speaker 2: u's and we're seeing adoption of L two is like
Speaker 2: I just spoke to a vlat Tina at Robinhood and
Speaker 2: they're using Arbitrum you know, to base their blockchain and
Speaker 2: tokenization effort. And you have a whole bunch of other
Speaker 2: layer twos right that are getting adoption in different ways,
Speaker 2: even by institutions. But maybe those could serve the retail
Speaker 2: who are worried about the high fees. Go to a
Speaker 2: layer two that is still using the security from the
Speaker 2: base layer of eth and that would be the you know,
Speaker 2: the nice fit so to speak.
Speaker 1: Yeah, of course, and then, especially like when you have
Speaker 1: the big exchange is like coin base, I think has
Speaker 1: the base L two, crack In has their own L two,
Speaker 1: and consensus is linear, Like a big part of the
Speaker 1: success for L two's and like my opinion is distribution.
Speaker 1: So when you're a coin baser, when you crack in
Speaker 1: and you have a new L two that you launched,
Speaker 1: and you already have excellent distribution, like, it really is
Speaker 1: set up for success right from the very beginning. Let's
Speaker 1: talk about the future of staking, right, I know it's
Speaker 1: still early. I know a lot we're still getting clarity, right,
Speaker 1: We're still waiting on certain alority from like the SEC
Speaker 1: and so forth. But let's say ten years from now,
Speaker 1: what does staking look like. Is it just simply built
Speaker 1: in and if I'm whether I'm a retail or I'm
Speaker 1: an institution, I'm earning these passive rewards if I hold
Speaker 1: the respective token.
Speaker 3: Yeah, So I would.
Speaker 1: Say future of staking like big kind of idea right now,
Speaker 1: or at least from our point of view, is institutional
Speaker 1: adoption is only going to increase, like once we get
Speaker 1: more regulatory charity mons, there's a maturity of infrastructure and
Speaker 1: education of course is a big part of that, like,
Speaker 1: I think it's going to only increase, and that is
Speaker 1: going to go up other big elements, I would say decentralization.
Speaker 1: So again that's something light I was doing a trimific
Speaker 1: amount of work on to make sure that Aterium remains decentralized.
Speaker 1: There's been a lot of concern where you have big
Speaker 1: centralized exchanges, they have a tremendous amount of control, so
Speaker 1: may say too much, they may not be the most transferrent,
Speaker 1: whereas if you were to use say someone like Glido
Speaker 1: and it's middleware, it's incredibly transparent because it's the dough
Speaker 1: where everyone can make a vote if they want to
Speaker 1: bring changes to the doll And again around having six
Speaker 1: hundred plus different note operators like really none is doing
Speaker 1: and anything compared to Lido in terms of making Materium
Speaker 1: stronger and more decentralized.
Speaker 2: Yeah, that makes sense. And then I wonder if with
Speaker 2: all these institutions like banks and so forth adopting eth
Speaker 2: and doing liquid staking, using Blido and whatever, it may
Speaker 2: be that the average user, the average Joe and Jane,
Speaker 2: they don't necessarily go buy crypto on coinbase and hold
Speaker 2: it directly. They're going through the banks, and the banks
Speaker 2: are giving them some of these staking rewards and it's
Speaker 2: better than the traditional interest that's being paid out and
Speaker 2: checking and savings accounts, right, so it gives more opportunity
Speaker 2: to earn higher yield and better returns, and institutions can
Speaker 2: share some.
Speaker 3: Of that absolutely.
Speaker 1: Like for me, think real adoption and like mainstream will
Speaker 1: happen when you're not gonna be talking about staking your
Speaker 1: decentralization or where the nodes are located, Like it will
Speaker 1: just get to a point where I go to my
Speaker 1: brokerage account, I buy ether and in the background it's
Speaker 1: automatically staken and it's a given. And I think that's
Speaker 1: probably what like black Rock seeds like based on an
Speaker 1: Ether product, like, they're not gonna launch a second ETF.
Speaker 1: They're not gonna have one that's staked versus unstaked, like
Speaker 1: based on the filing that I've seen, and it's just
Speaker 1: gonna be one product with staking. Like so for me,
Speaker 1: that just makes sense, Like why would you want to
Speaker 1: leave all those rewards on the table. It's just again
Speaker 1: that capital efficiency element is just critical.
Speaker 2: Yeah, that makes sense, And I know some people had talked, well,
Speaker 2: we're putting the idea out there that maybe there's a
Speaker 2: separate ETF, but to your point, doesn't really make sense.
Speaker 2: And then it's better just keep it in that same
Speaker 2: ETF and then you can either pay it out in
Speaker 2: some sort of reward or dividen or just keep it
Speaker 2: keeps reinvesting in compounding.
Speaker 1: Yeah, and of course then it's obviously a case of
Speaker 1: like how much of it is staked. So again back
Speaker 1: to that analogy of like in Europe, like only fifty
Speaker 1: percent of the the au n estaked. When we go
Speaker 1: only speak to different ASCID managers, we're really leaning on that. Look, Okay,
Speaker 1: fifty percent is good, one hundred percent is far better.
Speaker 1: So you could almost have potentially a combination. You could
Speaker 1: have fifty percent natively staked, fifty percent liquid staked, or
Speaker 1: you could have one hundred percent liquid state product. So
Speaker 1: again you're kind of offering customization, and that's a big
Speaker 1: part of what these institutions want. They want to have flexibility.
Speaker 1: And one of the new products that lied Up is
Speaker 1: working on is st vaults and like lighter V three
Speaker 1: and part of that is offering that customization where different
Speaker 1: asset managers can pick the custodian they work will pick
Speaker 1: the note operator and choose if and when they mintsteeth.
Speaker 1: So again, this kind of goes back to the future
Speaker 1: of staking. That's why I really believe that institutional adoption
Speaker 1: is only going to grow.
Speaker 2: I love that customization so they can shoes what they
Speaker 2: want to do. That's really great. Are there any criticisms
Speaker 2: out there or things people have said that maybe this
Speaker 2: is risky that you would want to address, or are
Speaker 2: there common themes you know people put us on social media.
Speaker 2: What it may be is saying, hey, this is risky.
Speaker 2: You know, I know you mentioned like you're trying to
Speaker 2: be more decentralized, avoid centralization. So how would you address
Speaker 2: some of the critics and about certain risks and things
Speaker 2: they may have highlighted.
Speaker 1: I would say, like the biggest criticism that comes up,
Speaker 1: and again I think this is just more from like
Speaker 1: a lack of knowledge, is that like Lido has too
Speaker 1: much control and like there's a centralization risk from Lido,
Speaker 1: And I think like Glido's market share is around twenty
Speaker 1: five percent right now. But one of the key things
Speaker 1: that people forget is that Lodo is a middleware. Nothing
Speaker 1: has actually staked with Lido. When you go on the
Speaker 1: DAT you take your each you stake it. It's distributed
Speaker 1: across six hundred different note operators. So yes, the headline
Speaker 1: Lido has twenty five percent market good share is terrific
Speaker 1: and that sells clicks.
Speaker 3: That's true.
Speaker 1: But in reality, when you start looking at it, like
Speaker 1: Ido is doing a terrific amount of work to make
Speaker 1: sure it's being distributed as much as it possibly can.
Speaker 1: So I think the curated set, like I mentioned professional
Speaker 1: note operators, we have community staking module, we have solo stakers.
Speaker 1: We're trying to remove those barriers for community sakers and
Speaker 1: solo stakers to get involved and making it as easy
Speaker 1: as possible then for them to run notes. So I
Speaker 1: would say that's the criticism that comes up quite a lot,
Speaker 1: but it's not founded on any real merriage. It's more
Speaker 1: someone has seen a headline and they haven't decided to
Speaker 1: read the actual article.
Speaker 2: That's a good one. Yeah, I've seen that one. So
Speaker 2: I appreciate your addressing that. Are you able to share
Speaker 2: the names of any institutions that are using your service?
Speaker 2: You know, TRADFI institutions. It's okay if you can't, but
Speaker 2: I got to ask, no.
Speaker 1: It's fair question, but my answer will be quite high level.
Speaker 1: So the usual kind of tier one asset managers' funds.
Speaker 1: We have a number of different liquid funds that use
Speaker 1: us every day, and I would say on the collateral
Speaker 1: side of things, you would see Steith used as collateral
Speaker 1: by these major kind of liquid funds. But unfortunately my
Speaker 1: answer is going to have to be quite high level.
Speaker 2: On that one. Totally understand what's on your road map.
Speaker 2: I know you mentioned some things that you're working on,
Speaker 2: customization so forth, anything else you want to highlight.
Speaker 1: Yeah, the big one for us right now is kind
Speaker 1: of light of E three and st vaults. So, like, again,
Speaker 1: I feel like it's kind of beating the drum on this.
Speaker 1: Like the whole decentralization narrative for Lido or Liido Core
Speaker 1: is terrific. But one of the big pieces of feedback
Speaker 1: we've gotten from asset managers is that, look, we love
Speaker 1: what you're doing supporting decentralization. We love the liquidity you
Speaker 1: w get for Steeth, but for our internal risk department,
Speaker 1: that's a bit of a challenge to kind of get
Speaker 1: them over that hump. So the whole idea what sc
Speaker 1: vaults is that customization piece. So again, the idea that
Speaker 1: you can choose the custodian that you work with, whether
Speaker 1: it's bit Go, copper, fire blocks, you can choose a
Speaker 1: note operator that you work with figmunt Kill and Course
Speaker 1: one or whatever it may be. And then the final
Speaker 1: part that's really attractive is that you can side if
Speaker 1: and when you miss teeth, so you could have a
Speaker 1: one hundred percent natively state vault. Maybe your attempation quest
Speaker 1: comes in. That's when you decide to mince teeth and
Speaker 1: get out of your position. What I would say, the
Speaker 1: customization part is amazing, Like I kind of look at
Speaker 1: it as I have an extra tool in the toolbox
Speaker 1: when I go and speak to these asset managers where
Speaker 1: I can say, look, if you're comfortable using lider Core,
Speaker 1: get all the benefits there, go down that route like
Speaker 1: that as terrific. Whereas if we speak to kind of
Speaker 1: institutions where they're more risk adverse, we can say, look,
Speaker 1: here's a custom setup.
Speaker 3: You can work with the.
Speaker 1: Custodian you've been dealing with for the past ten to
Speaker 1: fifteen years. Here is the node operator that you're already
Speaker 1: on boarded, you have an SLA with, you have an
Speaker 1: insurance policy in place, and then we come along with
Speaker 1: the added benefit of liquidity.
Speaker 2: I wanted to get your thoughts on the general crypto
Speaker 2: market at large. You know, there's a lot happening with
Speaker 2: tokenization and stable coins. Obviously we got the Genius Act pass,
Speaker 2: and it seems like everyone's going to launch a stable coin,
Speaker 2: banks and much more. Let's start with stable coins. What
Speaker 2: are your thoughts on that market and do you expect
Speaker 2: a massive boom?
Speaker 1: I think yeah, at a high level, Like anyone who
Speaker 1: says different, like where there's not going to be a
Speaker 1: big boom is probably just crazy. Like again going back
Speaker 1: to the point of like regulatory clarity is the terrific thing,
Speaker 1: Like people know the rules of the game, and once
Speaker 1: you get to a point where you're not expecting kind
Speaker 1: of negative regulation or penalties in place, innovation will usually follow.
Speaker 1: And I think, like what USDC is doing circle all
Speaker 1: these huge successful IPOs, it does highlight that to a
Speaker 1: significant demand for the capital markets to actually get involved
Speaker 1: in these type of use cases. So I would be
Speaker 1: very surprised if, like stable coins is not the next
Speaker 1: killer use case for blockchain.
Speaker 2: On the lines of stable coins, you get the tokenization
Speaker 2: we were talking about black rocks and money market fun.
Speaker 2: There's tokenization of real world assets happening. That market is
Speaker 2: growing as well. What are your thoughts on that. Do
Speaker 2: you see a lot of traditional asset stocks, real estate
Speaker 2: and so forth being tokenized on the blockchain?
Speaker 1: I think so, like black Rocks, biddle phone, it has
Speaker 1: been hugely successful. Like real world assets, Again, tokenizing makes
Speaker 1: a huge amount of sense from a liquidity point of view,
Speaker 1: Like everyone wants liquidity. So when you especially take an
Speaker 1: asset like property a liquid for centuries and suddenly a
Speaker 1: technology has come along with blockchain and tokenization where you
Speaker 1: can make it liquid. Fractionalized ownership like these just make
Speaker 1: a huge amount of sense. And then I'm neither side
Speaker 1: of that around like bonds and commodities, like the trading
Speaker 1: of that automating with Smern contracts making more efficient, like
Speaker 1: it kind of sells itself.
Speaker 2: Yeah, absolutely, Yeah, It's exciting. A lot happening in the industry,
Speaker 2: and I think as we get the Clarity Act in
Speaker 2: place passed by Congress here in the United States, I
Speaker 2: think the innovation is just gonna surge. It's gonna be
Speaker 2: a lot of building keen, great stuff. Love what Leto
Speaker 2: is doing and you know, I might eat holder and
Speaker 2: a steaker myself. Sell This is really really great stuff.
Speaker 2: But I got some wrap up questions here for you. First,
Speaker 2: If you could create your own metaverse, what would the
Speaker 2: theme be.
Speaker 1: I'm a big golfer, so probably golf related.
Speaker 2: Rapid fire questions, favorite food steak, favorite musician or band.
Speaker 1: Beatles, favorite movie Interstellar, favorite book, how to make friends
Speaker 1: and influence people?
Speaker 2: And when you're not working at Lighter, what are you
Speaker 2: doing for fun.
Speaker 3: Golf when I can? Yeah, that makes sense.
Speaker 2: Keen, great stuff, man. I love again what you guys
Speaker 2: are doing, and I absolutely believe in it. I'm looking
Speaker 2: forward to hearing some big announcements of your service being
Speaker 2: used by some of the biggest firms in the world
Speaker 2: and would love to have you back on in the future.
Speaker 2: But thank you so much for joining me.