#7: Stablecoins, CBDCs and the evolution of Defi

What are stable coins? and why does an ecosystem so determined to achieve decentralisation still rely on them? In conversation with Nadia Alvarez from Maker Dao, and Nestor Palao from Sygnum Bank we dive into the role of stable coins in def and how the market is evolving, particularly with the rise of CBDCs and governments experimenting with crypto. 

1. What is the role of stable coins in the crypto market, particularly in defi-lending?
2. How does a DAO-driven stable coin differ from other more centralized players in the sector?
3. How does a decentralized coin that is independent survive against the upcoming CBDCs? 
4. Do stable coins offer a potential solution for markets where the economies are less stable?  

Disclaimer

Because Sygnum is a bank and some of the information in the podcast relates to financial and investment topics, we want you to understand that we do not create a bank client relationship with you when you listen to the podcast. By listening to the podcast, you agree that the information on this podcast does not constitute professional advice and no bank-client or other relationship is created between you and Sygnum. Do not consider the podcast to be a substitute for obtaining advice from a qualified investment advisor. The information in the podcast may be changed without notice and is not guaranteed to be complete, correct or up-to-date. All information you hear is never considered to be a solicitation for any purpose, in any form or content.

Read the disclaimer here: https://www.sygnum.com/disclaimer 

Transcript

Disclaimer

Because Sygnum is a bank and some of the information in the podcast relates to financial and investment topics, we want you to understand that we do not create a bank client relationship with you when you listen to the podcast. By listening to the podcast, you agree that the information on this podcast does not constitute professional advice and no bank-client or other relationship is created between you and Sygnum. Do not consider the podcast to be a substitute for obtaining advice from a qualified investment advisor. The information in the podcast may be changed without notice and is not guaranteed to be complete, correct or up-to-date. All information you hear is never considered to be a solicitation for any purpose, in any form or content.

Ep7_Stable Coins and CBDCs 

Aliya Das Gupta  00:07

Hello and welcome to the Crypto Explorer podcast by Sygnum Bank designed to bring you closer to the world of crypto and the future of finance. I'm your host Aliya Das Gupta. And today I am joined by Nadia Alvarez from Maker DAO and Nestor Palao from Sygnum bank. Thank you both so much for joining me. We're going to be talking about stable coins, centralized and decentralized, the growth of the CBDCs, how that's going to impact the crypto ecosystem, and also how we're going to see them evolve. But before we really dive into it, let's maybe start with a round of introductions. Nadia, would you like to go first?

Nadia Alvarez  00:45

So of course, thank you. Thank you for the invitation. Yes, I'm Nadia. I'm Head of Growth at Maker DAO. Yeah, I've been in crypto since I think 2016, some something like that, I don't know. My first job in crypto was at Maker, And I'm still at Maker, because I'm super passionate about what we're doing about how the protocol works, and I like the community in general. And yeah, yeah, that's me.

Aliya Das Gupta  01:17

Amazing. And maybe like a couple of sentences. You can tell us what does Maker DAO do? Who are they? What do they do?

Nadia Alvarez  01:24

Yeah, well, Maker DAO is a decentralized protocol on Ethereum. It works as a loan service. And with with. each loan, the protocol mints DAI, which is a stable coin, a decentralized stable coin, over collateralized with other assets. And the stable coin is pegged to the dollar.

Aliya Das Gupta  01:51

All right, cool. That's super interesting. And we're gonna dive more into this. But first, Nestor, tell us about you.

Nestor Palao  01:59

First of all, thanks for having me, Aliya. It's a pleasure, pleasure to participate with Nadia. So on my side, Nestor Palao, I joined Sygnum about two years ago working on the sales team as a head of DLT and corporate clients. Before Sygnum my background is in banking and finance that quite resonates well with what a bank is, despite we like to call ourselves more technology company more than bank, but I've spent my entire career in the crypto space basically joining the industry back in 2015 by participating in one of the first startups in the industry in Europe, joining the founding team and afterwards also doing research activities in the industry. I'm also quite excited to join the conversation with Maker and about stable coins in general.

Aliya Das Gupta  02:43

Super, awesome. Thanks, guys, again, for being here. And first, I think the most kind of starting question I would have about MakerDAO or even just the concept of stable coins, like why are they important? Why does the crypto ecosystem even need a stable coin? And maybe I ask Nadia?

Nadia Alvarez  03:04

Yeah, stable coins are important to develop any financial services. And I think that when Bitcoin started everything, it opened a lot of possibilities, but still having a token that represented a currency that wasn't stable. It makes things harder, in case you want to like pay for services or just like accept Bitcoin as a payment or like save your money on Bitcoin. It is good for - good to speculate, like to speculate on the future value, but it's hard like if you want to use it as you will use like any currency as money. So I think that that was like the first reason why the community in general decided that having a stable coin was important. So it started like that, I think USDT was the first one and the most used one until now, I guess. And it has different uses, like I think it started as a tool on trading. So anytime you needed like to stay in a stable currency, because you think that Bitcoin or like any other volatile token was going to flip or fluctuate in price. Well, you're using stable coins, same if you needed to, like send money for a transaction or things like that you were using stable coins. But I think like since that things have evolved a lot and now we can find a lot of uses of stable coins. So I think like it is also because the defi ecosystem has evolved and now created a lot of a new use cases. And I think it was because the stable coins were there. So you can think now about stable coins as the same as you think in any currency. So you have savings accounts, investment opportunities, investment accounts, of course, futures synthetics, insurance. I don't know, like, so many things that you can do with stable coins now. So, so yeah, that's like, my quick review. Yeah,

Aliya Das Gupta  05:40

Nestor, would you want to add to that?

Nestor Palao  05:42

I think it's obvious for all of us that the crypto space as we know, the industry emerged, first, with the innovations that Bitcoin brought to us, and that has an underlying, you know, monetary use case imprinted in it. So basically, this idea of the digital gold. Now, we realize at the earliest stages that the volatility of Bitcoin was quite high, to have it as medium of exchange more than a store of value. So the idea of stable coins resonated with the industry, and also facilitate certain use cases, as Nadia said, in the defi space and so on, first with the creation of USDT, and then other decentralized stable coins emerging in the space, such as the case of DAI, and UST and some others.

Aliya Das Gupta  06:30

I mean, that's a controversial question. And that is, isn't the concept of cryptocurrencies to kind of live in this decentralized ethos, and then by the very nature of being pegged to something that is centralized - How, how do you live with this sort of dissonance?

Nadia Alvarez  06:52

No. Yeah, no, I don't, I don't think that um, I mean, like, you can have a stable coin that is decentralized, like DAI. So you use the dollar as a reference and, and you use it not because the dollar represents something centralized. But because the dollar is still is like a reference in in the financial world. That's the only reason why respect to the dollar. But interesting, interestingly, fact is that right now, in in Web 3, there are a lot of projects thinking about a stable coin, pegged to a Web 3, something. So that's interesting, I think that the idea will evolve in the next years, but still is too new. Because Web 3, like the adoption of Crypto, Web 3 in general, is still starting. So we still need to have a reference in like in the traditional world, and that's the only reason why we use USD, like the dollar as a reference. So that's one thing. The other one is you can decide how you're going to back your stable coin. So in the case of USDT, or USDC, those are centralized stable coins that are using the dollar as a reference, but they are also using dollars like physical dollars backing the price of that stable coin. In the case of DAI, we are a centralized stable coin, although we are pegged to the dollar. But what is backing DAI is not like dollars in a bank account, what backs DAI are different collaterals that are locked into smart contracts. So that's why we say the DAI is decentralized, stable coin.

Nestor Palao  08:54

Right. Though I fully agreed to simplify things. I would say that the industry has not yet gone that far. To kind of question whether being pegged to USD or having USD as reference was the right decision. I mean, as Nadia also said, there are different conversations going on whether developing kind of a Web 3 index and having that as reference for the industry will allow us to de-peg from traditional, like nation states, as we know, but I said I think we haven't yet gone that far. At the end of the day, you know, the innovation that stablecoins brought to the table was these kind of disintermediation for the financial system. Basically, there we have now defi markets where billions and millions are interacted and under supply of stable coins now, I would say is around the 50 billion in total. So so, you know, we have been able to bring 50 billion in assets from a kind of traditional financial system into into a more disintermediated market in which interacting with each other and sending each other's stable coins is a matter of a second and super low cost, depending on the on the network as well. But this can be arguable, but but this is the for now, the main innovation of of of a stable coin, at the end of the day, you know, the reference currency we use in traditional kind of Web One or traditional world is a still USD. There is an important, you know, discussion there, whether there will be any stable coins pegged to Swiss C's or back to euros to other currencies to provide kind of more security to the entire ecosystem. Because now if there is a problem in the US probably also will highly impact the industry. There I think discussion is important on on negative interest rates. But, but I think we are going in the right direction. First we achieve mass adoption of stable coins, and many use cases as intermediate traditional financial services, such as lending, options, trading and so on. And now the, the next step will be to think how we can make these more secure and less dependent on the traditional financial systems. But for example, what DAI is doing and Maker in that direction by, you know, as Nadia mentioned, there are so many stable coins that are, are backed by real dollar in the bank account, there are others, such as DAI the innovation that Maker brought to the market that are decentralized in its nature, So that's probably the next step in this. Yep.

Aliya Das Gupta  11:33

And maybe, based on what you were saying, Actually, you said that a lot of the crypto ecosystem is somewhat based on the dollar and is denominated in the dollar. And that was probably a decision or kind of something that happened without thinking too much about it early on, and then sort of became the industry standard. But do you see really the shift moving into maybe a digital Swiss franc or the euro? And even Maker DAO thinking about something like this? How do you see this evolving?

Nadia Alvarez  12:06

Yes, of course, we always since the beginning, we thought about, like how, how this, how the Maker protocol will evolve. Because we think that okay, for now, we should use the dollar as a reference, but we don't know what will happen in the future. And for making it even easier than for other protocol, I guess, in the future, because for us, it's just like a reference. Now we use the dollar as a reference. But if we decide tomorrow, that DAI should be pegged to the Euro. That's like, well, it has to be approved by the DAO. But something that technically is possible. And in the back, you have all the collateral that is not just a dollars like in other stable coins, but are different tokens assets, like that's why actually the, the complete name of DAI is multi collateral DAI, because we use different collaterals to back the price of the DAI. So, in the end, it doesn't matter, like what is your reference? If it's the dollar, the euro or any other currency? What matters is the collateral that you have backing up the price of that stable coin. So yes, definitely, that that's something we have been thinking about. It's not something that is on there, and like something that we are going to do in the next few years. But although unless we see the urgency, but for now we have we have other priorities for the protocol. So yeah,

Nestor Palao  13:48

I think Nadia, that point you brought up about these MCD this multi collateral DAI to the moon, sorry, multi, multi asset collateral that you're bringing up? It's really interesting, because the other day we are going back in history, when fiat currencies were backed by gold, then the gold standard was over. And now we have the not the issue, but kind of the intermediation of the central bank's deciding how much money to print and so on. We are basically with this point of history, we are going back in history kind of rethinking what has to be what do we want to back a Fiat or our stable coins? And in your case, could you add more on this on what are the kind of assets that you're thinking whether... Can these be gold or Can these be even assets like real estate and so on? What's going on in there? What are the discussions that you were having?

Nadia Alvarez  14:41

Yes, well, well, they started as single collateral DAI. It was like the the first version of DAI and at that time, DAI was backed by Ethereum, by ether. But the idea always was to become to create a multicollaterized DAI, because if you have different assets backing the DAI, that will reduce the correlation between the assets and between the assets that are backing a DAI. So we started with that idea, but always thinking that okay, we have also to add something different than crypto collaterals. Because if you see how the price of crypto fluctuates, that they are all very correlated between them, so if the bitcoin price goes down, all the cryptocurrencies goes down. So, okay, like, it was good to have different crypto collaterals. But still, we needed different assets to reduce that correlation. And that's why we are doing great, great, great, great, great importance on, that's our priority one, now, in introducing real world assets as collateral. When we say real world assets, we are referring to real estate, our bonds, our invoices, things that exist in the traditional world, that could be tokenized, and use as a  collateral inside the Maker protocol to meet new DAI. That's super interesting, and also very challenging for the protocol. Because it is a mix between the Web 3 world and the traditional world. So the Web 3 worlds is defined by smart contracts, decentralization, total transparency, and the traditional finance world is told about agreements, lawyers, you can't be that transparent, because you have maybe NDAs to sign. So we are trying to create a bridge between those both worlds, to a to have this real world assets inside the Maker protocol. So that's, that's, that's what is the multi collateral DAI is about. For me, it's, it's, it's amazing, because actually, right now, we are thinking about, okay, we want to go a like, we want to think this like even better, and just not having any real world asset as collateral, but we want to like implement what we call clean money, and is trying to have a try to have projects that are doing something to improve the environmental conditions as collateral in the protocol. So in that way, they will be backed by these kind of projects, then solar farms, or carbon credits, offsets, things like that. That's like the next thing we want to bring to the protocol.

Aliya Das Gupta  18:07

Oh, yeah. I saw a headline last year about this.  That Maker was actually buying solar farms in the US or something like this?

Nadia Alvarez  18:13

 Well, we are not buying. Because yes, yes, we have two projects that are a doing something related to a to this.

Aliya Das Gupta  18:30

Wow, this is already quite far along, then all the things we're talking about this, that's super exciting, interesting. And also like just the concept of having money, that means something to custody, like you see the US just like printing out money, and it's in a promise. Yeah. And you're seeing like this crazy inflation that we were all threatened with last year that potentially is coming now. And now when you're talking about actually having a currency that has, that is backed by something that actually has value. That already sounds really exciting, even to a lay person,

Nestor Palao  19:04

while still maintaining the decentralized nature of being in the space and you know, being used to interact with each other within the industry.

Aliya Das Gupta  19:13

Yeah, yes. And having a DAO actually vote on different proposals that come up for... to accept this into the ecosystem rather than having five guys in the room somewhere. But as we're talking about sort of this, you know, the new currency, we've heard a lot of kind of pilot projects that have run out but also now that are actually being formally launched with digital CBDCs. So central bank digital currencies, and I was wondering how you think those would integrate with existing defi systems, and also what this could mean for our existing stable coins?

Nadia Alvarez  19:55

Well, I think it will be interesting because I think CBDC  what they do is they will bring crypto to mainstream in the end, that's how I see it. But depending on how they implement a how every country decides on how to implement this, these tokens, a well, that will, that decision will impact how you can interact with the defi ecosystem. And that's why, the reason of that is because defi, it's all about decentralization and transparency. And it's because like, all the different projects that are on Ethereum, they are all decentralized, super transparent, like you can track any transaction that happens there, you can see what's happening there. Like there's no secret. But if you create a defi ecosystem inside a private blockchain, where just like a few people have access to, then that will, like be another paradigm and a completely different situation. And I think, defi and crypto will, will be the same, even if they CBDCs are used by all the countries. Because what what crypto and defi are bringing is this transparency, decentralization. And be the completely owner of your funds, and making the decisions that you think are the best for your financial position. I think CBDC depending on how it's implemented, it could be like that or not, it could be more of the same, but with a lot of more control from the government to the how they issue their currencies and all the rules that they can apply to the to the currencies. So I think we have to wait, like we are speculating a lot about that. But I think we all agree that, in general terms, this is interesting for everyone, because CBDCs will bring crypto to mainstream, and that will initiate in you like, okay, so this exist, now I can decide I want to use a CBDC like more centralized with all these features, or I can look for a more decentralized solution, more transparent solution. So I think in the end, for me, I always love to have options. That when when people ask me, So what do you think about DAI versus USDC? I, for me, it's, it's it's great that you can you can choose between different options. I think that's, that's what we need more options.

Nestor Palao  23:05

So, in my opinion, first of all, I think we should be happy of seeing governments and raising crypto in this in the sense instead of us stopping or taking a more defensive approach, embracing the technology and jumping in by launching their stable coins, kind of CBDCs I agree with not that, I mean, given that this is something really, really new, we will need to see first what's the implementation whether they end up building something on a public network, like I would dream scene a digital Swiss franc issued by the Swiss National Bank on Ethereum or any other public blockchain I see some cases in which more or other governments will probably tend to launch their private blockchains and in such cases, you know, we all are not fans of private blockchains and these are just databases controlled by certain counterparties so we'll probably these type of CBDcs. We probably just serve as a way to control flows of capital as in the in the banking system. And you know, certainly I'm not against the central banks controlling the issuance of these coins, but when it happens on a public network so we can all monitor the first of all the issuance of the capital and secondly flows as well as Nadia said, how having the understanding that or you know, having the knowledge that we have control over our money by having my cbdc in my own wallet, and then I decide whether I want to interact with the Aave or with Maker with Compound with any defi platform that probably also launches a version for the CBDCs and then I participate of those as said by Nadia, this allows us to have even more capacity to decide whether I want to go with a super decentralized alternative like DAI that is probably near future backed by, by, by other assets different from the current ones. As I said, with real estate with solar panels with with many other different assets that we cannot envision at the moment, I can go also with other more centralized alternatives, or directly I can go with CBDCs, I think it will really harm those stable coins are currently backed by reserves, like in the case of USDC, or Tether, for CBDCs. Because at the end of the day, you know, you have much more protection, if in the case that there is a CBDC running on a public network, you have kind of more protection with that than having you know, your capital with a single counterparty with a single bank account, holding your, your USD that that, you know, proves the reserves of your stable coin. So, yeah.

Aliya Das Gupta  25:53

So I mean, both of you, I understand are talking about a potential future where you have a CBDC, potentially, that is running on a private blockchain, managed by a government, which would potentially have its own kind of defi ecosystem built within it. And then also a kind of Supra layer, where things are actually decentralized, and people are using some kind of representation of the CBDCs on a more decentralized, higher layer. Does that make sense? Is that what you're kind of envisioning?

Nestor Palao  26:30

Yes, I mean, I think that's exactly the case for at least what we dream for. I think at one point of the game, the governments or public institutions understood that crypto is here to stay and probably they kind of stop it in some ways, as for example, some governments did against mining and so on. But in many other applications is not a centralized counterparty controlling, you know, the, interface and so on. So anyone can go fork it and run , the code anywhere. Again, even if there is a centralized solution trying to stop it, I can go infinite times forking eth and running it again, so it's hard to stop. And then, you know, the only possibility for them is to launch the CBDC and try to imply certain control over the issuance, and also the flows. But at the end of the day, also embracing the development of crypto in the industry, and also defi as a way to limit the intermediary. So as part of the process, I think that's, I hope that that's where we had, and I really think it's where we go, these will, again, you know, the mass adoption that we are facing now in defi with 100 billion in assets locked in the defi in the different platforms, is just the beginning. But basically, we have a bright future ahead. If this really happens, because as Nadia said, these CBDCs will give the final confidence to those that have not yet jumped in the industry to have the sufficient confidence that okay, you know, while embracing public networks and decentralized technologies, I also have the backing of a CBDC that is issued by a government so I know that my reserves are protected, you know, by these governance not going bankrupt. I don't know what's your view, Nadia?

Nadia Alvarez  28:20

Well, I don't know I guess yes, definitely, we are seeing how multi chain universes start to emerge. So, it won’t be just Ethereum and Bitcoin and we are seeing that now it is Ethereum, Bitcoin, Solana, Avalanche, Polygon that the you name it, and I think CBDC's are going to be like one chain more with its own features and its own apps. So, like what at the end, we will be building our bridges between all these networks. So, what I assumed but this is just like speculating, because none of this exists yet but I assume that there will be some more controlled blockchains or networks where you have to whitelist your address, KYC yourself to be able to use the services that this network offers to you. So I guess that probably will be what the CBDCs will offer you so instead of having a bank account, with your local currency you will be able to have access to these, whitelisted defi ecosystems. And I think we are seeing now like a lot of these with institutions. Institutions have... of course they are super regulated. And they need these this kind of a closed environments where they all are going to interact with other whitelisted institutions. So I guess that's, the future, like different options, different networks, some networks more permissionless, and decentralized, some other more centralized. And that requires KYC. And, but also that's, good for some users. I mean, if you can have like a team that can assist you, in case you don't remember, like, your keys or you lose access to your wallet or whatever, that's also good. So indeed, if we want, yes, if we want more people like coming to crypto, I think we need different solutions for each profile.

Nestor Palao  30:50

So I think we are even seeing these nowadays, more and more, we have the case of Aave launching, Aave arc, we have Compound also launching a Compound Treasury, we have One Inch launching One Inch Pro, and an all decentralized finance protocol, kind of offering the alternatives for institutions, I think, even we have Sygnum, we see here our role a bit the serving as a front end into defi in a regulated manner, and ensuring like full peace of mind for our clients, knowing that when they interact into the, into the into these defi applications, they are doing so with full, you know, auditability and full, regulatory clarity, as you said, again, here is enabling the user to decide what's the what's the kind of service he wants, either going through their permissionless manner, perhaps through a channel that has already KYCed him, or her or directly going into the permissioned network where I can benefit of the of, you know, the features of, of decentralized finance, such as disintermediation, and so on, while also, you know, going through a through a fully regulated partner.

Aliya Das Gupta  32:09

Yeah, I mean, it’s interesting to see how we're going to see the centralized and decentralized world sort of coexist, because neither is I think, going away. And in some forms, you still always need the oversight and regulation of a government, like whether you're talking about, you know, losing keys, or having someone be able to help you if you lose all of your assets overnight, and so on, and so forth. So, as we're talking also about, you know, these lending use cases that you have, when bringing these different sorts of assets as collateral in DAI. One of the questions that we were sort of thinking about was, what sort of use cases do you primarily see emerging from this? So are these people mostly just looking for leverage in the market? Are these people kind of just storing their assets to earn a little bit of a return? Or is it also more people looking to kind of use this currency as their daily expenses and perhaps more emerging markets and economies where the governments or economies are not as stable? And yeah, Nadia ?

Nadia Alvarez  33:16

Now well, yeah, very interesting question. Because, yeah, I think well, I as I told you before, I have been in Maker like for the last four years, so I have seen it all and before before being the head of growth, I was more focused on Latin America, and Latin America has different use cases or I mean, the use cases are always the same, but depending on the region, do you you will see how a people from one place it uses defi and crypto different than people from another place. So in Latin America, yes, definitely. It is used as a currency not as a cryptocurrency and that means you will find people that prefers to have their salary in crypto in stable coins, you will find people that prefers to like instead of having a bank account, but I mean, you have to understand the context. We are talking about like people in Venezuela and Argentina, who have lost trust ion the financial system because of all the problems that they have in their countries. Hyperinflation devaluation, at the banks, not giving them a good response. So they prefer to like learn about crypto instead of having a bank account. So people are using crypto as their bank. They are saving money on crypto, they are investing in crypto. So that's why say, in Latin America, you can find a lot of people. That's why we talk about, like a higher adoption in Latin America, because they are using it as a currency. And what happens, they don't spend in stable coins, because you always are going to spend in the currency that A, that it is, it has less value for you. So they are always spending, they prefer to save money in DAI, for example, money, if they have to pay for a coffee, they won't, they won't spend their valued DAI, they prefer to do to the local currency and pay with the local local currency. So, that's what we are seeing in these countries. And of course, you can see also how, how people, they're starting to learn more about crypto and, and how that helped them to, like, become more, I don't know to like, start doing some different things. So in the beginning, they just like I don't know, started saving their money in a stable coin, and maybe earning some yield on it. So a very passive investor profile. But after four years of being exposed to crypto, you can see how they started to buy other tokens, Bitcoin, Ethereum and started to using that token as a reserve of value, use it as collateral, and get loans on a stable coin. Because again, you don't want do you prefer you always will prefer to spend the currency that for you has the lowest value, we mean,  the weakest one. So between Ethereum, Bitcoin or stable coin you prefer, like to belong on those tokens and take loans on a stable coin, and expand that expand that money. And that's the same thing that we see ion Europe and North America. So people who like are long into crypto, they use that as collateral, that take crypto loans... Two different things, it could be for their daily basics spending. So you can see a lot of crypto cards taking DAI, but that DAI really comes from the Maker protocol, they are like taking loans and are for leverage. So like just like accumulate more cryptocurrencies and be long into those. So I think it's it's just like part of the same puzzle, but depending on your exposure to crypto and the understanding you have about the different financial aspects you can be like, you can have like like be more like into the conservative a risk profile and just like earn passive yield on your on your crypto balance or go after leverage or loans or other things more riskier.

Nestor Palao  38:26

That is so I mean, we think how stable coins emerging was, as you mentioned, USDT was at first stable coin market probably there were a few experiments before but the  one that gained the most adoption was tether and tether was issued by a team related to BitFinex which is a crypto exchange. So the first use case for stable coins were moving capital easily between one place and other in the industry, basically sending sending money from one crypto address into other basically, these for for many crypto funds and for many traders is important. So they have the ability to move capital and take advantage of arbitrage opportunities in time. Now when when I send a wire from my bank account. On the Swift environment, it takes probably 24 to 48 hours to settle the loan and destination account. Well, if I send 10,000 USDC's or DAIs or USD T's over my from my Ethereum wallet to Nadia's wallet, it takes about 20 seconds on the Ethereum blockchain. So basically, this was the first use case that that brought up the idea or drove attention to this to the concept of stable coins. And afterwards, I think it was it was also really important, you know, many weak economies or economies that are less stable, sorts of they adopted for stable coins as a way for those that are unbanked to have an easy way to access US dollar, which is sometimes limited or even forbidden in their in their countries. Now, the emergence of defi and all these defi applications is just a wake up call for everyone. Now, if I put my US dollar in my bank account, my traditional bank I earn? Well, I even have to pay. In some cases, well, if I just go to Maker or if I go to Compound, if I go to Aave, I can start lending my my assets and earning four or five or  6%. On my holdings, it has been passively just keeping my my balance in my account, as you know, interest account and an interest account already in crypto.

Aliya Das Gupta  40:42

Exactly. I mean, there's, I think now, when we're seeing the focus off these sorts of stable coins, in one sense, as you're saying, there's the future where we have different sorts of collateral come in to really give this a more intrinsic value. But also, in the case of people today who don't have access to stable governments or stable economies, where they can trust that their hard earnings, hard earned earnings are going to continue to serve them into the future. In many of these ways. Stable coins actually offer quite a lot of support and comfort, I think, to to actors in the ecosystem. 

Nestor Palao  41:42

No, I would have a question for Nadia, what now see, what coins reach 50 billion in in total supply? What's next to turn this 50 billion into 5 trillion? Do you think is CBDCs? Or? Or is it? Is there any, you know, part in which for example, more centralized institutions that we are interacting with defi and that we are crypto native can play a major role?

Nadia Alvarez  42:07

Yeah, I think I think the next step is what we are living now is like having all this traditional companies a you seeing defi and start offering those defi services or service to their to the users, I think that will a will help the crypto ecosystem to even grow, to grow even more. And that's because like the money that is moved in the traditional finance world is like, huge compared to what we have in crypto, I think yes, for all crypto projects. And that's why we, I think we are we all are doing that effort is to a like, think about the next step and think about how to interact with institutions with traditional companies and how to start providing this this defi services to them. As I said, it's, it's it's very challenging, because we also are super committed with the ethos of the crypto community. So we have to be careful and to really think on how to how to do that next step without compromise all the decentralization transparency that we have reached until now. And and that's like, that's the key. And I think that that is also why a lot of people criticize, for example, Ethereum because they are they will say no, but you can see like more, maybe maybe other networks that can support more transactions, and that can it costs less money when you transfer when you make a transaction. And yes, that's true. But the term ecosystem has like this, this ethos like really, really alive and for us is super important to think about, yes, we want to offer services to everyone, but keeping this decentralization value alive. So yeah, I think that's, we have to that's a challenge for all of us.

Nestor Palao  44:28

I can imagine, I think whether whether he said that back model as in the case of DAI with Maker loans, whether it's a centralized stable coin being these one that keeps the collateral in the bank account or a CBDC whether is one of those that is algorithmically, you know, just as in the case of USD in the Terra system, we have so far proven adoption of stable coins. And now we have to take advantage of the yields that we see present in the defi ecosystem thanks to the basically the volatility of the industry and the demand there is for loans to trade and so on to kind of call those clients and what or institutional clients that are seeing their balances fiat balances in normal bank account going negative while having the opportunity to earn or you know, make four or 5% on their holdings, simply by by joining the defi ecosystem. So I think Maker will continue playing a major role in this and we are I mean, super excited to see all these new forms of collateral that you were planning to involve, we will be following the DAO.

Aliya Das Gupta  45:46

And it's been such a pleasure to speak to you both and to talk about slightly more conceptually, how stable coins are impacting our defi ecosystem and how we're going to see it grow in the future. Thank you both very much for coming on the show and to our listeners. If you have ideas about topics, we can cover guests who you think might have something interesting to share, please write into podcast@sygnum.com. Until next time, ciao!