The Future Backbone of Modern Finance is onchain: Swiss Franc Stablecoins and Bitcoin

Research suggests that there are only two crypto assets that can protect you from geopolitical risk - Swiss Franc (CHF) and Bitcoin (BTC). Now, you find both onchain for DeFi, thanks to Frankencoin.

This is a conversation with Johannes (MD of Frankencoin Association), where we discuss the Swiss Franc stable coin called Frankencoin, its decentralized nature, and the role the Swiss franc should play in the DeFi ecosystem. 

Johannes explains why Frankencoin is the best stablecoin alternative to the US dollar, emphasizing its unique features, governance structure, and potential for growth in the market. The discussion also covers community engagement, upcoming events, and the technical aspects of the Frankencoin protocol, including live demo and governance aspects.

Chapters
00:00 Introduction to Frankencoin and Its Structure
01:49 The Role of the Swiss Franc in DeFi
04:44 Frankencoin's Unique Positioning and Market Potential
07:32 Practical Use Cases for Frankencoin
10:06 Challenges and Regulatory Landscape for Swiss Franc Stablecoins
12:18 Building a Decentralized Future with Frankencoin
15:13 Cultural Elements: Swiss Identity and Community Engagement
17:36 Future Plans and Market Goals for Frankencoin
24:07 The Rise of Stablecoins
25:57 Challenges of Swiss Franc Integration
28:28 Navigating Regulatory Complexities
29:42 Pitching Franccoin
31:03 Comparing Stablecoins and Bitcoin
31:54 Decentralized Stablecoin Landscape
32:11 Skepticism Towards High Yield Offers
33:01 Technical Insights into Franccoin
38:53 Governance and Community Involvement
43:11 The Future of Swiss Franc in DeFi

MY GUEST's LINKs:
Frankencoin on X: https://x.com/frankencoinzchf
Johannes on X: https://x.com/jonk93
https://frankencoin.com/

Transcript

Johannes (00:00)
Swiss franc plays an outsized role as a currency in the global economy, not necessarily as transactional currency, but as a store of value. And over the last 20 years, the US dollar lost about 35 % against the Swiss franc. Over the last 50 years, it's more like 80%.

Pete (aka BFG) (00:15)
Really? Didn't know.

everybody. So we are live now. We start with Johannes actually correcting me that he's not managing director of Frankencoin, but he's managing director for Frankencoin Association.

And I have to let you explain what's the difference again, because it's always confusing here.

Johannes (00:36)
Yeah, basically, Frankencoin is a completely decentralized protocol, right? No one owns it. No one manages it. While the Franken Association is a nonprofit association based in Switzerland that is supporting the development of the protocol, but we don't control it. We are not the owners of Frankencoin. We're just merely a bunch of people who are excited about

Pete (aka BFG) (00:45)
Good job.

Johannes (01:03)
project and who are really supporting and building it out.

Pete (aka BFG) (01:06)
Okay, so basically there is no allocation of Frankencoins for association. You're not going to dump on anybody. I know it's totally.

Johannes (01:14)
Unfortunately, well, no, not unfortunately, but

no, there's not no

Pete (aka BFG) (01:18)
Okay, gotcha. So how are you guys funded?

Johannes (01:22)
So we are funded by membership fees. Really, my salary and everything we do is paid by the members of the association who believe that this is a great project and they might or might not be token holders, but that is completely separate from each other.

And I'm super, super excited to having joined this project. I actually joined the Frankencoin Association.

at the end of last year in December. And it's been a wild ride so far. It's been really exciting and big times ahead. Next week I will be in Denver and that's actually going to be the first time I will be talking about Frankencoin and the Frankencoin Association towards an international kind of public. And I'm very curious to see what the...

Pete (aka BFG) (02:16)
Great. I remember you

talked about it on like ETH Zurich, right?

Johannes (02:22)
Yes, you know, Zurich

is a great conference by the way, but we're Swiss, it's in Switzerland. So for me, this is kind of a home turf. So now I'm going out into a fremdige Wester, as you would say in German.

Pete (aka BFG) (02:28)
you

Right, right. The big world. There you go. Okay. I think we should point out the merch. Everybody in Denver will love

Johannes (02:38)
exactly the big world.

I actually brought some more. So basically, look, here we have our hat. That's the Frankencoin logo. It's obviously inspired by Swiss mountains. Then down here for the ones who don't speak German and who are probably more associating Frankencoin with Frankenstein instead of the Swiss Frank, we have the Frankencow. We also have here, look at that, we have the, let me open it up. This is the curve.

Pete (aka BFG) (02:48)
Okay.

You crossed my mind, yeah?

No.

it's almost like a unicorn.

Johannes (03:12)
This is the Curve Frankencow. You see, we launched on Curve recently and we actually created to celebrate that. We created this very limited edition of the, you can't get that online. like, it's already, we did a giveaway. It's gone, yeah. So for the Curve Frankencow, and then, wait, wait, wait, wait, And then also, because we're Swiss, right? We have the Frankencoin sweater, which is actually turned out.

Pete (aka BFG) (03:15)
Lovely.

It's gone, sure.

Huh, sweater.

Johannes (03:39)
to be quite successful for people going skiing because it's, you like you can wear that every day, right? No one will suspect you being a crypto bro.

Pete (aka BFG) (03:48)
That's true, that's true. want to talk about the connection between like the mountains and the cow?

Johannes (03:54)
Yeah, well,

okay. know, Switzerland, what do we have in Switzerland? We have chocolate, we have cheese, we have mountains, and we have a very stable currency. And that is really what it is all about. Frankencoin coin in its core is a Swiss franc stablecoin. And if you look at the stablecoin market currently, it is about 99. something.

dominated by US dollar. And we want to change that. Actually, if you look at traditional market, and I have some pretty cool numbers on that. If you look at traditional market and compare the M2, so the monetary base, to the GDP of a country, you will find that the Swiss franc is actually almost double size relatively to the Swiss economy.

the US dollar. And the US dollar is already a very, very strong store of value. what that means is that the Swiss franc plays an outsized role as a currency in the global economy, not necessarily as transactional currency, but as a store of value. And we're thinking back, I think over the last 20 years, the US dollar lost about 35 % against the Swiss franc. Over the last 50 years, it's more like 80%.

Pete (aka BFG) (05:08)
Really? Didn't know.

Okay.

Johannes (05:13)
And there's a lot of research how you can really use the Swiss franc as a hedge against geopolitical risk. I can share some of that research with you if you're interested. But the very recent study, for example, from France, they found out that the best hedge is basically Bitcoin and Swiss francs. And that kind of makes my heart open up as a native Swiss, exactly as a Swiss guy.

Pete (aka BFG) (05:25)
Absolutely.

Okay.

As a Swiss guy, sure!

Johannes (05:40)
But that is what Frankcoin is about. We want to put the Swiss franc on the map in DeFi as a stablecoin. Unfortunately, the list is a bit broken on DeFi llama because it's not displaying all currencies properly. But shout out to DeFi llama. We've actually submitted a bug fix for that. It just has not been merged yet for some reason. But I think the Frankcoin is one of the...

probably top five or top 10 non-USD denominated stablecoins in the world. So it's quite small still, but it is sizable in the non-USD space. And we believe it's just a start.

Pete (aka BFG) (06:21)
OK,

you have to choose your niche for the comparison.

Johannes (06:25)
Exactly. mean, you know, it's pretty, it's pretty, it's pretty, it's, it's,

it's a bit like looking at the crypto market without Bitcoin. It's already the same thing, right? Isn't it? Because if you, if you compare yourself to Bitcoin, it's

Pete (aka BFG) (06:32)
right, yeah, yeah, absolutely.

Okay. Yeah.

I see. So the main play for the Swiss franc basically in DeFi would be sort of derisking the correlations in your portfolio basically.

Johannes (06:40)
So yeah.

There's bunch of plays. Why do you hold stable coins? Obviously, that is a big one. De-risking is a big one. We always say, hey, you should not use USD to de-risk. You better move into Swiss franc if you actually want to hold some stable currencies. The franc coin is a CDP, meaning it's a lending protocol similar to liquidity.

However, it has some very different properties, how the liquidation mechanism works, which make it behave better under certain market circumstances. And it also allows it to have a different set of collateral. We can dive into that a bit later if you want to. But you can also use the Frankencoin coin to get quite cheap loans, actually.

Pete (aka BFG) (07:32)
Okay, yeah, sure.

Johannes (07:40)
Because obviously, if you look at the Swiss franc interest rate, is think at 0.1 % percent compared to the USDs. Not sure where it is now, probably 4.4 and half, something that region, right? And that translates. So you can come to Frankencoin and borrow a lot cheaper. Obviously, in the long term, if you believe in economic theory, you will not have any advantage of that because it

Pete (aka BFG) (07:51)
Okay.

Johannes (08:07)
It's the...

Pete (aka BFG) (08:09)
Yeah, it

will serve balance itself, sure.

Johannes (08:11)
The Swiss franc will go up in value, balance it out, but it allows you to, if you're interested in paying less interest rates, can use it to borrow. On the other side, if you want to hold a stable currency, you get yield, right? It's a yield bearing stablecoin, native yield bearing stablecoin.

go down probably a bit because there was a new proposal pending, but it will be at 4%. You'll get 4 % interest rate on your Swiss franc. Compare that to what you would get if you hold Swiss franc in a traditional account. That is because you have, it's comparable to the USD, right? You have the kind of the risk-free rate plus this, like four and a half percent, 4 % of crypto premium on top.

Pete (aka BFG) (08:59)
Got you. So what, what chain are you guys, where did you guys start it?

Johannes (09:04)
We're EVM lovers. Now, Francoin has initially been built and deployed on Ethereum mainnet. However, there's also a bridges to Polygon and Arbitrum. There's bridges to BASE. There's a bridge to Gnosis chain, which is quite interesting because what we have in Europe, and I'm a big fan of, is Gnosis pay

Pete (aka BFG) (09:06)
Okay.

Mm-hmm.

Johannes (09:33)
So you

have a non-custodial way of paying in a store with your credit card. And you can actually use the Frankencoin. And basically, because you have it on Gnosis chain, you can very, very cheaply exchange it into a Monarium Euro. Unfortunately, Gnosis card or Gnosis Pay is not yet available natively in SwissRank. That is a regulatory topic more than anything. But you can use that to directly pay in store.

Pete (aka BFG) (10:02)
So for anybody who would like practically want to use it,

if a portfolio is larger, you sort of de-risk and you typically would go for like USDC, USDT, things like that. And then you would probably want to park them somewhere. So, so if I want to de-risk 50,000 from my 100,000 portfolio, where do I go and what do I do?

Johannes (10:14)
Of course.

Pete (aka BFG) (10:24)
if I don't want to get USD.

Johannes (10:26)
Well, you go very simple. You go to Uniswap or to Cowswap or to your DEX of choice, and there's plenty of liquidity. And you move into the... Actually, there's two ways, depending what you want to If you want to de-risk, just go to any of those DEX and we're actually onboarding with some centralized exchanges very soon as well. You go there. We already are. mean, if you're based in Switzerland or Europe, can use dfx.swiss and you actually get a...

Pete (aka BFG) (10:31)
Okay.

Chorin Bass.

Johannes (10:53)
free on and off ramp, which is pretty cool. So you can move between the Swiss franc and the SID CHF. So that's the Frankencoin coins with frank at no fees. But if you, let's say you are a crypto guy, right? You have a bunch of ETH or a bunch of whatever token, right? You want to de-risk. You go in into a unit opening the extension to the Swiss franc, to the CCHF. And then what you would do as well, if you're smart,

Pete (aka BFG) (11:05)
Awesome.

Johannes (11:20)
is that you put them into the savings module. So you actually get a 4 % return savings rate on your Swiss francs. Now, you can also do the opposite, right? If you believe, hey, I want to leverage my market, but I need to pay, let's say, your taxes or your whatever, you go to Frankencoin, you put in some of your ETH as a collateral and you just mint new Frankencoin and use those Frankencoin to pay off your expenses you have.

Pete (aka BFG) (11:31)
Okay.

Johannes (11:49)
without having to sell your underlying.

Pete (aka BFG) (11:52)
yeah, works.

Johannes (11:54)
Pretty I

say our mission is basically I tell the people that they should have Swiss francs. I that's the bigger one. And then B, my job as part of the Frankencoin association is to make sure that you can actually get this decentralized Swiss This is not trivial. You might have been wondering like why is there no centralized...

Pete (aka BFG) (12:02)
Yeah, that's the bigger one.

Johannes (12:18)
Swiss franc stablecoin, I mean, you have the euro, you have the USD, you have Hong Kong dollar, you have Argentine pesos. Why is there no Swiss franc? And the reason is actually our dear Finma, our dear regulator in Switzerland, it's two reasons. Really one reason and probably the bigger one actually is that economically speaking, how does Tether work? You give a dollar to Tether, they give you one dollar worth of stablecoin.

Tether then uses that dollar and they put it or part of it, for example, into government, into treasuries, right? And they get four or 5 % on that, but they don't have to pay you that 4 5%. So it's a money making machine. In Switzerland, because we had negative interest rates for a very, very long time, and now it's still like it's 0.1%. That doesn't work.

So you can't really make money by using that model. At the same time, the Swiss Financial Market Authority, they still in a bunch of issuers, they tried that, they did a bunch of Swiss franc stablecoins. They never really promoted them too much because of that problem that they were actually basically paying for that. Because if you have negative interest rates, you don't really earn money on it.

Pete (aka BFG) (13:16)
That model doesn't work.

Johannes (13:40)
But the Finma then issued also this circular mid July, I think it was June, July last year where they said, well, you know, if you do that, if you basically take money from someone and put it onto your bank account, you're a bank. You need a bank license. Good. You you can solve that problem. It's all right. And then they went on and basically said, well, anyone who holds that token is your client.

Pete (aka BFG) (13:56)
Okay.

Johannes (14:04)
and needs to be onboarded onto your bank, including the whole paper trail, AML, and so on. And that effectively shut down because it doesn't work. It makes stablecoin non-transferable.

Pete (aka BFG) (14:08)
All right, KYC's, AML's, okay.

Yeah, pretty much.

Johannes (14:17)
So that shut down all centralized projects. And that is, I think, one or the big reason why there is no stablecoin or Swiss franc stablecoins in the world. And franc coins solve the problem by really being completely decentralized and not having a problem. It's really cool.

Pete (aka BFG) (14:25)
Mm-hmm.

Okay, that's

yeah, might be a blessing in disguise. You will have the only, nice sounding stablecoin which is really decentralized out there.

Johannes (14:48)
So now the question is, let's put it out there. Let's get the DeFi community to appreciate this value that Swiss Frank really adds to their portfolio. And let's build cool stuff with it. Obviously, at the same time, for the domestic market, in Switzerland, there's also the whole payments side of things. Our partner of

Pete (aka BFG) (15:01)
Mm-hmm.

Johannes (15:13)
of ours, DFX Swiss, they're very strong on that side. Actually, they're currently launching a payments strategy with a very, very large Swiss brand. And that's actually, it's already live, will be announced very soon. So there's a lot of really, really cool stuff happening in that space as well.

Pete (aka BFG) (15:34)
I can imagine it would sound cool for a of people if they could have payment card, with the decentralized Swiss franc.

Johannes (15:42)
I mean, well, the payment, mean,

look, today I'm here to show and tell, So yeah, payment card is here. I'm using it daily, It knows it's paid. So this is a reality now. another project we're having is that we're actually trying to work towards being able to have a company in Switzerland.

Pete (aka BFG) (15:46)
Yeah.

Yeah, good.

Johannes (16:04)
which just need a bank account where you can pay your salary payments is not a problem, then taxes, depending where you are, is also not a problem because you can actually pay your taxes in Zug for example, in crypto. like, know, stuff like social insurance, pension funds, all that kind of stuff.

Pete (aka BFG) (16:17)
Mm-hmm. Didn't know that. Cool.

huh.

Johannes (16:27)
that administrative stuff that you can have this onchain as well. then basically, you know, yeah, don't need a bank account.

Pete (aka BFG) (16:35)
So first company without a bank account in Switzerland. It's coming 2025.

Johannes (16:39)
I think there's

a bunch of them. There's a bunch of them actually already. Smaller crypto native companies. I mean, we as the association also doesn't have a bank account, for example. It's all on chain. Works reasonably well so far.

Pete (aka BFG) (16:50)
there too many workarounds to go through? No? Okay.

Johannes (16:53)
No, mean, you know,

the infrastructure is there. have SAFE, which works tremendously well. You have, know, good multi-constructure. Obviously it's an advantage to have the CCHF, which is just Swiss francs. So we are thinking in Swiss francs and so it's, we have all our costs for the association are in Swiss francs and we don't need to, you know, there's no ethics risk there really. If you

Pete (aka BFG) (17:15)
cool. now you are on a mission to tell the world about the Frankencoin. By the way, is the name like, is that going to stay Frankencoin? Because it's a really weird name.

Johannes (17:20)
Correct.

The

issue with the name, and it's not really an issue, is that once you deploy your smart contract, the name is hard-coded on your smart contract. It's not a thing you can change, right? No, it's not an updatable contract.

Pete (aka BFG) (17:33)
shit.

You can always update the contract. Come on.

Okay, so we are stuck with this.

Johannes (17:42)
But

I mean, if you would speak German, the Frankenkorn is, it is literally in German, it's the Schweizer Franken. That is the name of the Swiss currency.

Pete (aka BFG) (17:47)
It wouldn't sound that bad.

Yeah, okay.

Johannes (17:56)
Just the English have for some reason adopted the French spelling, the franc, right? Frank. And I think, you know, for us, we are using this to our advantage by, you know, just creating cool stuff around it, like the Frankencow and playing in this double entendre with the, know, the Frankenstein, Dr. Frankenstein and Frankenstein's monster. You know, once again, that's where we have the Frankencow, right?

Pete (aka BFG) (17:56)
Yeah.

Okay.

Yeah, okay.

Johannes (18:23)
And so

we're embracing it. We're embracing from the association, this whole notion of, we're Swiss, we're boring, we like chocolate. like, by the way, for everyone who's going to be in Denver next week, we'll do something really cool. Like, what do you think? What are we going to do?

Pete (aka BFG) (18:41)
Everybody gets chocolate. Chocolate fondue. No. Wait a minute. So you always did tacos, chocolate tacos.

Johannes (18:43)
That was the initial idea, but no, no, it's even crazier.

No, man.

We're doing a cheese tasting. We've basically rounded up like the biggest cheese assortment we could find in Denver and there's going to be huge cheese tasting. It's like imagine Willy Wonka's chocolate factory, but it's not Willy Wonka's cheese factory.

Pete (aka BFG) (18:57)
All right.

That's gonna be cool. Okay. I can't imagine that. Yeah. Yeah.

Johannes (19:11)
Yeah, see? So like,

you know, we embrace this, hey, Switzerland has, we have chocolate cheese in the stable currency.

Pete (aka BFG) (19:17)
Yeah, yeah, pretty cool.

Johannes (19:20)
And actually, know,

just running the risk by offending every American here, your chocolate just sucks. Like the problem with chocolate is that even if you go find, try to find like some artisanal chocolatier, it's just, ugh. And I say this, you know, I'm Swiss, I'm allowed to say that. So that's why we switch to cheese. Yeah, we wanted to do chocolate initially, but it's just there's no good chocolate factory in Denver for some reason.

Pete (aka BFG) (19:35)
Hmm, it's not like the Swiss chocolate, right? Shit, my connection dropped again.

Johannes (19:47)
let me know because I would love to also do a chocolate event in Denver at some point.

Let me shell Switzerland. So if you've never been here, you should really come because we have really, really nice nature. We have lakes, mountains. You can go skiing in winter. You can go hike in summer. We have cheese, we chocolate.

We have very nice watches. know, the Swiss are a bit weird. We like our order. So if you like that, that's the place you should go to. If not, you're also welcome. Tourists are always welcome. We have this weird thinking of, if you bring money into the country, the Swiss tend to be very open-minded.

Pete (aka BFG) (20:19)
Fuck me.

I

Johannes (20:28)
Let me see I want to show you something

whole idea of the role of the Swiss franc in DeFi. And I said that compared to the size of the economy, the Swiss franc is about double. Now, that's the numbers behind that really. And if you actually continue that

Pete (aka BFG) (20:39)
And I can't see here. Fuck it.

Johannes (20:56)
that thought process and say, well, okay, now let's look at stablecoins. Currently, the USD stablecoin market has about the size of roughly 1 % of the money supply. So there's a $250 billion in stable USD stablecoins versus this 21.4 trillion money supply you have. That's about roughly 1%.

In the Swiss francs, that is significantly lower. if we now make that thought, okay, well, let's look at it, fair comparison. And let's assume that this 1 % is the market stage we're in. The market, the potential the Swiss franc right now has, so if you take 1 % of this 1.77 trillion, there should be more than 10 billion USD worth of Swiss franc stablecoins in the market.

And that is the of the market size we believe is a fair market size for Swiss franc stablecoin right now. I mean, we're nowhere close. We're at about 15 with the Swiss franc, like, but in total about 26 million.

as of now, so there's a lot of upside. And that what makes me really, really excited in building that stuff. And just being going out and saying, hey guys, well, should hold some francs

Pete (aka BFG) (22:21)
Yeah.

Well, I definitely wanted to ask you about the numbers which you just shown because they seem relatively conservative. I guess it's the Swiss nature.

Johannes (22:40)
We're even more conservative, right? We have this one big goal at the franccoin association and that is we want to reach 100 million Swiss francs in market capitalization of the franccoin Swiss franc by the end of this year. That's the big goal we're going after.

Pete (aka BFG) (22:56)
Okay, right now the number is what, 15?

Johannes (22:57)
And it's

still a way to go. Yeah, exactly. It's roughly 15 million. Now, just yesterday, the GHO stablecoin, which is also used over stablecoin, reached 200 million. And I'm trying to get in touch with Stani actually for him to tell me what I should do to get that number up quicker. Number go up.

What I'm working on right now is really just going out there, hey, people don't know about Swiss franc and more important, people don't know about Frankencoin It's just a huge, huge, huge potential

Pete (aka BFG) (23:30)
well, I definitely will. Everybody should.

after Denver, what's going to happen? You're going to go through like the whole conference circuit and do the cheese tastings everywhere.

Johannes (23:42)
love to, but to be very honest, think cheese tasting is a bit more difficult than tacos. For the ones who don't know, I've been running taco events around the world. the problem with cheese tasting more so than with tacos is sourcing because you don't want to have a shitty quality cheese tasting. But no, mean, in all seriousness, I will be on the circuit.

most likely Denver and then think the next on the menu is Dubai token 2049 I hope to come to Prague as well, even though I think at the same weekend, I think 28th of May, if I'm mistaken, is The Prague blockchain week is a large stablecoin conference in New York. Because stablecoins as a topic are picking up

Pete (aka BFG) (24:22)
The ETHPrague Probably.

Johannes (24:35)
a lot of speed in the DeFi world. We have quite a bit of interest also from traditional players, banks, neobanks, emerging markets. say, hey, well, we want to give our users a way to save, which is decoupled from the local banking system. And that is decoupled from the local currency, which is very high inflation. So we're very much interested in stablecoins.

So the whole stablecoin narrative is running quite hot at the moment. And we're in there tapping in that and going to the narrative. We also have this pretty simple statement where we're there's so many foundations and associations and entities of very large crypto projects based in Switzerland.

They all have cost in Swiss franc, right? So they should very, very much have a part of their treasury in Swiss francs. For me, it's a no-brainer. But to do that, as I said before, right? As I said before, I think we have this very, very strong case with the Swiss franc. We just, our job as association is to make sure that the franc coins Swiss franc is

Pete (aka BFG) (25:32)
True.

Yeah, it should be legally requirement.

Johannes (25:57)
available on all those platforms and all those integrations where DeFi needs them. Talking about earning platforms, centralized exchanges, OTC desks, large liquidity pools. That's our job and that's what we're working on.

Pete (aka BFG) (26:13)
Yeah, is there any like a direct, plan to get, projects which are now coming up with cards like, you know, Binance card in for Asia, Gnosis for Europe, mostly MetaMask, I think is now available in Europe to

collaborate in a way that they would allow me to spend in Swiss francs if I own them.

Johannes (26:35)
Yeah, to be very honest, this is a bit of a non-trivial problem. And the reason for that is that Switzerland is not part of the European Economic Area.

It's a part of the European Union.

And no, wait, no, it's not part of the EAA. Always mix those up. And there's different regulation. you can't, if you are in the European Union, you can very easily passport, right? You can have the euro and it's all quite simple to do and you have a relatively large access. In Switzerland, you need to a separate setup.

And the problem lies with how cards work. In the backend, you have basically this bin holder, is kind of I could say a license with a MasterCard. Then you have an acquirer, you have an issuer. And those are all regulated and centralized entities, which have to basically in the Swiss case, sit in Switzerland. That makes it very complex and very expensive. And then you also have to convince them to accept. It's not, it's not like, it's not a tech problem. It is.

Pete (aka BFG) (27:41)
great

Johannes (27:42)
As usual

Pete (aka BFG) (27:42)
basically.

Johannes (27:43)
in our space, it's a lot more regulation, legal and compliance problem you have, which you have to solve. Now, obviously if the market becomes large enough, that changes. actually those whole Kraken and Binance they they set up entities in Switzerland.

Pete (aka BFG) (27:50)
Okay.

Johannes (28:01)
couple of years ago, but I think most of them, even all of them, have shut them down again because the regulatory environment is... The legal base is very good in Switzerland, however, the implementation is sometimes a bit challenging.

Pete (aka BFG) (28:14)
All right.

Johannes (28:16)
So there's

not that much legal presence of those kind of it's many centralized exchanges, right? In Switzerland, unfortunately.

Pete (aka BFG) (28:24)
Mm-hmm.

Okay. Well, yeah, got you.

Johannes (28:28)
So that's

just the reality on how we're getting Swiss franc cards. Now GnosisPay, because they're an open system, that is a bit of a different case. But like, if you look at someone like Binance or Metamask, are in fact, they're centralized companies, right? They're not open systems. are traditional, somewhat regulated, large enterprises. And that's how they work. that's, you know...

Pete (aka BFG) (28:50)
Mm-hmm.

Yep, true. So two things. Where should guys go if they want to do the cheese tasting in Denver?

Johannes (29:05)
yes, They should follow us on Twitter. It's frankincorin.chf on Twitter and they will find the link for the Luma event. And that's how you can get cheese.

Pete (aka BFG) (29:17)
Wow, there you go.

Johannes (29:21)
the event is going to be 28th because we believe that if you are at the conference or the whole day after that conference, you might want to relax a bit and have some cheese instead of staying until nine o'clock at the conference.

Pete (aka BFG) (29:35)
So you heard it guys?

Check out the Frankencoin.

X account and get Luma.

Johannes (29:38)
Hello?

Pete (aka BFG) (29:41)
notifications on.

Johannes (29:43)
Notifications on.

Pete (aka BFG) (29:44)
so if I want to leave the podcast and have like 30 seconds pitch, why should people go check Frankencoin? What should I leave with? what was the shortest possible pitch?

Johannes (29:56)
So the Swiss franc is the best asset to hedge against Chile political risk. With Frankencoin you can get that on chain and you even get some yield on top.

different to Bitcoin. Bitcoin is a great hedge. That's actually that same analysis was identified both Bitcoin and the Swiss franc as the best hedges. I think it's question of volatility. There's two questions. A question of volatility and a question of yield. Bitcoin doesn't give you yield and it's highly volatile. So depending on when

you might want to use that money, you might be down 80 % or up to 100%.

So definitely hold Bitcoin, but I wouldn't hold Bitcoin for the money I would want to spend at some point. It's like the gold, right? You keep it and you just keep it. The Swiss franc is different. The Swiss franc is just very slightly going up every year compared to the dollar, for example. So that's where the mix comes in, right? It's a question of volatility and yield.

Pete (aka BFG) (30:56)
Mm-hmm.

Check the charts.

Okay.

Johannes (31:03)
No yield

on Bitcoin, high volatility, obviously lower growth, lower potential growth with the Swiss franc, no volatility or very low volatility depending on what you compare it to and a bit of yield.

Pete (aka BFG) (31:18)
What are other decentralized stablecoins which are out there?

Johannes (31:29)
I would say the biggest projects are MakerDAO or Sky. And then you have Liquity. We're actually pretty close to the Liquity team. They're also Swiss talking about that. And the whole way the Frankencoin works has been inspired quite a bit by Liquity. So I would say the two most relevant decentralized stablecoin projects out there.

Pete (aka BFG) (31:33)
it's kind of, okay.

Johannes (31:54)
There is now a lot of smaller ones popping up, offering a very, very high yield. Now I'm personally always trying to understand where does the yield come from? You know, where does it come from? If you can't explain to me in simple terms where the yield comes from, I'm very skeptical.

Pete (aka BFG) (32:10)
You must be Swiss.

Johannes (32:11)
and

Maybe that's why, you know, we're supposed to, we're boring.

Pete (aka BFG) (32:12)
Or maybe just careful. Yeah, I totally

agree.

Johannes (32:15)
No, I think it's not careful. I want to understand if you can give me good reason why something has a very high yield or very high growth, I'm the first one to come in. But I want to understand it. I want to be mentally able to follow the way this yield is generated. And that's why I'm very skeptical of all those like yield boost programs, because in fact, what you're taking on is you're taking

a market risk. you say, you subsidizing your yield with your own token, yeah, after the market risk of that token, yes, well, the token might go up, but it also might go down. And it's not a very sustainable system, right?

So we're just

here like slow and steady, right? We're growing up, we're building good products. Yeah.

also to be honest, if you look back in 10 years, the projects who are around now and very successful, those were the ones that learned that it wins the race. Bitcoin is a very good example of that. Bitcoin never did any weird funky things. Ethereum, now comparing Ethereum to Solana. Don't lynch me for it. We'll see where that goes. We'll see where that goes.

Pete (aka BFG) (33:23)
let me ask you, what is the question I was supposed to ask and didn't?

Johannes (33:29)
you didn't ask very much about how the technical setup of Frankencoin is, I can do a quick demo. I can quickly walk you guys and girls through how it actually looks like and how it works if you want to. Let me do that. Let me do that then. Okey-dokey.

Pete (aka BFG) (33:39)
That would be lovely. yeah. Please. Absolutely. You can share your screen, right? You did it

before.

Johannes (33:47)
I will share my screen.

So how does Framicon work? We're here on the landing page and it's pretty straightforward, right? So I can do two things really. I can either borrow money or I can put money into savings. Now, if I'm on the borrow page, what you can see here is the different collaterals I can use. I can use Bitcoin, I can use Curve. That's actually where the t-shirt comes from I showed before.

You can use liquid state. This is actually a really cool one. So you can do staked if to to borrow money and that means that a part of your your your Interest you pay to get that money is actually offset by the staking income So depending where the staking income lies, you can actually have free money like free free Borrow free money here because you have Bitcoin wrapped Eve and

It's as easy as, let's take an example here. I'm going in here. I say I want to mint, let's say 10,000 Swiss francs. I would then have to add 0.25 Bitcoin or CB Bitcoin as collateral. And that's it. Bam. Approve mint. It would pay an effective annual interest of 6.75%.

And I would receive out of this 0.256 Bitcoin, I would receive a loan of 7,000 Swiss francs. A further 2K are going into a reserve, which is I will get back when I repay the loan and I pay the interest upfront. So this is for one year. can also basically say I wanna only do it for, know, does this for two years, sorry, for one year. Then.

the interest goes down and I actually receive a larger payout directly. Cool. Then I have my CCHF, right? They can do whatever I want. On the other side, sorry, have to, so this part here, this is for managing existing collateral, existing positions and monitoring them and auctions is the liquidation mechanism. I can then, you know, go here and I plop my 5,000. don't have any...

Pete (aka BFG) (35:36)
Okay.

Okay.

Johannes (35:57)
connected wallet and I would receive a 5 % interest rate. As easy as that, can withdraw whenever I want to. It's all fully liquid.

Pete (aka BFG) (36:04)
Mm-hmm.

Awesome. You mentioned before that there is... Yeah, sorry. GHO ahead. You mentioned before that there is some interesting liquidation procedure, which is, let's say, more favorable than others in certain occasions. So what does it mean?

Johannes (36:07)
Now third part. Yes? No, no, you were saying?

Mm-hmm.

Yeah,

exactly. Okay, now if you look at MakerDao, right? MakerDao, how the liquidation mechanism works is there's an oracle, which is an on-chain price feed, you could say. And let go here to the monitoring. And as soon as your collateralization drops below a certain limit, I think it's 112%.

with Kerf, we're approaching that. You're automatically liquidated. Meaning there's an on-chain, basically it's sold on-chain, an auction of on-chain.

Now liquidations work if you're the first one. The problem with many of the corrections and flash crashes or crashes in crypto or also in traditional market is that they look something like this. They go down a lot, very quickly, and then they go up again. So the risk if you're the first one, if you're up here, you're fine. The problem is if you liquidate in that downward slope, often you end up

at a very, very low point. So you liquidate at a very bad price. If then a day later, which actually what happened two weeks ago, if you remember, there's a rebound that the market recovers a bit, you would be a lot better off by not liquidating, but or only liquidating a day later or two days later. And that is exactly what Frontcoin does. Now by removing this need for speed,

You remove two dependencies. You remove first the Oracle. So you don't need an Oracle to do that because you can have a price finding mechanism built into the system in form of a reverse-dodge auction, which is what Frankencoin does. Now by removing that, you remove certain liquidity prerequisites. You don't necessarily have to have a highly liquid market, which also becomes illiquid in such a, you know,

extreme situation by in a sudden makes it basically going quick, you go slow. And that allows you to have different sets of collateral. You can have less liquid. They still need to be very mature and substantial projects, tokens as collateral. Now, why is this interesting? Because that once again allows you to go into the realm of RWAs. So you can suddenly have RWAs

Pete (aka BFG) (38:39)
Mm-hmm.

Johannes (38:39)
as

collateral for such a stable coin and you're not only dependent on crypto only. And that allows you to build a lot more of a secure because a widely a de-correlated system.

Pete (aka BFG) (38:46)
Okay.

That sounds interesting.

Johannes (38:53)
Now

that's now we've gone quite technical here, but that is how the liquidation mechanism is different. But if we continue here, so I was talking about the borrower, you can borrow money, you can save money. And the third part we have is the equity. Okay, I mentioned at the beginning that Frankencoin is completely decentralized. What does that mean?

Frankencoin is governed by the so-called FPS, the Frankencoin pool shares, which you can mint and buy directly here on the page. if I have my CCHF, right, I can use them and I could mint, you know, I invest a thousand CCHF and I would receive 0.5 of those pool shares. Okay, now it's getting interesting.

Those pool shares that money invested goes into the equity capital. That is the capital, is, you know, this 15 million. So it's CCHF. They are obviously collateralized, but should a collateral fail, then other backstop would then be the equity capital, which is absorbing, absorbing the losses and making sure that the Frankencoin doesn't lose its peg

Pete (aka BFG) (40:03)
Okay.

Johannes (40:03)
At the same time, all of the interest I pay to Mint goes into that equity capital as well as the net income. over the last year, the franc coin actually made a profit of 500,000 Swiss francs, is in return on equity of 1.8%. And you can trade against that. So that's where your liquidity also comes from with the FPS.

So can always go in out of you're not stuck with the Frankencoin-end pool shares. There's a liquid market.

Pete (aka BFG) (40:32)
Mm-hmm.

Johannes (40:32)
Now those FPS are also used as governance. Anyone could come. say I have a lot of tokens in Ripple. Ripple is a very bad example here. But let's say I'm a big whale of Maker. And I believe that Maker is it. I want to borrow against my Maker. I can go here and just go in here and I propose a new collateral. It cost me 1000.

Pete (aka BFG) (40:56)
Mm-hmm.

Johannes (40:59)
use a CCHF. So there's a fee for that. But anyone can do that. We don't need to hold any tokens for it. And then there's like a seven day period during which all FPS holders, can veto that position. So you can see down here, right? Those are right now there's actually one open proposal, which is the base rate change. So the base rate is currently at 5%.

Pete (aka BFG) (41:02)
Okay.

Mm-hmm.

Johannes (41:24)
It will be changed to 4 % in 91 hours. But during this time, I can go and if I, least me or me and some, the combined community represent 2 % of the voting power of the FPS, which is time-weighted, I can deny and basically veto any decision. So there's, in a sense that it's a negative governance system. You don't need majorities to change things. It's completely veto-based.

Pete (aka BFG) (41:48)
Mm-hmm.

Johannes (41:50)
And that also goes to, know, like more smart contract changes. For example, in November, there was a new minting hub, like new minting with the introduction of the savings module was implemented and so on. it's a living system with a very well functioning governance and a very decentralized governance system on top.

Pete (aka BFG) (42:15)
What did you say was the limit for veto? Just 2 %?

Johannes (42:19)
2%.

Just 2%.

Okay, now there's some more to it though. You can veto vetoes.

Pete (aka BFG) (42:24)
ok, how does that work? Do I need 4 %?

Johannes (42:28)
So basically,

no, if someone goes in and says, veto this, you can use your tokens. If you have 2%, I have 2%. I can use my 2 % to neutralize your 2%.

Pete (aka BFG) (42:40)
okay, okay. Now I get it.

Johannes (42:45)
to block those trolling attempts where you don't need the majority votes, which is, if you look at any of the projects out there, it's always only a tiny fraction of the tokens actually voting. Here we basically turn it on its head and say, well, you don't need the participation of the majority of...

the ecosystem or the community. However, if there's a big topic which is, that

agitating, to everyone, then you have that potential to because in the end, it ends up with, it's a 51 % vote rate. If everyone would, you know, either veto or not veto that, you know what I mean?

Pete (aka BFG) (43:29)
Yeah,

yeah, I know. out of curiosity, are there any other projects which are doing it the same way that you you basically have like a negative vote?

Johannes (43:38)
I am

not aware of it, to be honest. I would have to ask Lutzius who's... So a bit of backstory here actually, maybe. So, Frankencoin came out of a PhD thesis where Lutzius Meisser, he's one of probably the best, most well-known crypto entrepreneurs in Switzerland, early investors. He's a computer scientist by trade, but he...

Pete (aka BFG) (43:41)
Okay, me neither, me neither, but...

Mm-hmm.

Johannes (44:03)
He's been in Bitcoin and Ethereum for a long, long time. He founded the Bitcoin Association in for example, in 2013, I think that was. And he decided to go back to university because he felt that crypto is about tech, but it's also about economics. So he did a PhD in economics at the University of Zurich. And his PhD thesis, I'm also happy to share that. It's also on our website.

Pete (aka BFG) (44:25)
Mm-hmm.

Johannes (44:31)
is about Frankencoin and designing those systems. So there's four years of research has gone actually into designing these whole systems. So he would be able to tell you all about where that voting system came from and so on.

Pete (aka BFG) (44:47)
Nice, okay, impressive. I'll check the PhD study

Johannes (44:52)
So yeah, but that is really what Francona is, what the system is, right? You can go in here, can mint, can borrow. Obviously, our goal is to make this available on all those other platforms. I believe very much in composability of DeFi. And that's what we're working for. So there's actually a pretty large list. It's also on our GitHub.

Pete (aka BFG) (44:51)
Okay.

Mm-hmm.

Johannes (45:15)
Where should we bring or integrate Frankencoin? Because it should be part of the ecosystem. And Swiss Franc should... I don't like talking about Frankencoin as Francorn. For me, it's just the Swiss Franc on chain.

Pete (aka BFG) (45:31)
Sounds much better.

Johannes (45:32)
in a bit, if you know what I mean, right?

And that's really the, like we're just, the providers of the infrastructure. We make it work. But you as a user for you, if you want to have exposure to SwissFranc or if you want to basically borrow money, that's one protocol where you can do that. And if you want to get SwissFranc, that is,

largest and if not dominating version of the Swiss rank on ChainLad. A bit like USDT is the largest and most dominating stablecoin on the US dollar.

Pete (aka BFG) (46:07)
So when are we going to see streaming on superfluid into Swiss francs?

Johannes (46:14)
Now you can do it, it's compatible. I mean, I wouldn't know why not because it's it's an ERC-20. If not, I got to talk to Fran about that, but no, I haven't tried it, but I, it's it's a very normal ERC-20. So you should just be able to go in there and natively stream it.

Pete (aka BFG) (46:16)
can I? OK. awesome.

have to check it out.

okay, cool. Look, no more questions, I like the idea of Swiss franc, Probably even more than stable euro.

Johannes (46:45)
For me, the Euro is an important currency, globally speaking. However, it is a transactional currency. have not yet met a person who is not, if you're like the Euro is your standard and you're basically thinking you're at one thing, but I have not yet met a person that actively says, yes, the Euro is a good place to put my money in and to, as it has a store of value.

have not yet come across this person.

Yeah, for me, is transactional currency versus in the Swiss franc, it is also a store of value. And it has very different regulatory environment, right? In the EU, you have regulated stablecoins,

Pete (aka BFG) (47:17)
Mm-hmm.

Johannes (47:25)
But that is because

Well, I mean, this is a regulated euro. It is fully regulated under EU law. And that's why also there is, you know, getting back to this, there is the Gnosis Paycard, which is backed by the Monarium.

Pete (aka BFG) (47:42)
Bye.

Yeah. Okay. Nice. Anything else? You want to shout out before we end

Johannes (47:51)
Thank you. No, I mean, thank you so much for having me as usual, Peter. And I would love to see you again sometime soon in real life. And it's always a pleasure. If I give you one of the shout out, just say, guys, try out, girls, try out the Franqcoin and make the Swiss franc part of your derisked portfolio.

Pete (aka BFG) (48:13)
You heard it everybody. Make it part of your derisked portfolio. Thank you Johannes. Everybody this was all for today. This Johannes and sound money. Ciao.

Johannes (48:20)
Cool. Hey.