The Law of One Price Is Broken: Chris Kim on Axis, USDx and Arbitrage Yield On-Chain

0:00Josh Han Welcome back to the content suite. Today we have the co-founder and CEO of Axis. Chris, before we get into your Axis, I know you have a very extensive history within trading. Can you touch a little bit about what you were working on before Axis? Sure.

0:16Chris Kim My name is Chris Kim, I'm CEO and co-founder of Axis. I've been in the trading space for about 10 years. It's both an arbitrageur and market maker in a stablecoin and FX space. At Axis, we are building a liquidity provisioning business, primarily relies on DeFi for working capital formation. We build our own low latency infrastructure and high frequency trading, execution technologies to execute our delta neutral trading strategies spanning across crypto, FX, equities, And now tokenized markets. Very exciting.

0:52Josh Han Tell me a little bit about the history and why you co-founded Axis.

0:57Chris Kim I've been basically running a hedge fund that is focused on arbitrage strategies in the past six, seven years. The way how we see the stablecoin space and tokenization space evolving, We've realized that the arbitrage stack that we've been developing has higher potential in terms of use case that is tackling a lot of these Bottlenecks when it comes down to on-ramps, conversion needs, And secondary market liquidity provisioning for all these tokenized assets. Amazing.

1:30Josh Han You used to do get this yield by yourself and your fund, and now you're bringing it to the mass market. Tell me a little bit about how you guys are productizing this market making and arbitrage. Sure. Firstly,

1:44Chris Kim Not all hedge funds are arbitrageurs, but generally speaking, all liquidity providers are arbitrageurs. So there's a shift in business model when we were a licensed hedge fund out of Singapore versus right now as a protocol where we Rely on capital formation on chain, Basically opening up the Axis for balance sheet participation to the public. So it's a first of its kind, not just in terms of liquidity providers relying on chain for capital, but also the execution of the Reserves and the collateral of our synthetic assets being applied to low latency and HFT strategies.

2:26Josh Han How can one get exposure to this within the Axis ecosystem?

2:32Chris Kim We have an on-chain synthetic asset called USDx that can be attained through DEX on Curve. Participants can stake it to receive rewards, which is all coming down from two yield sources, dislocation in prices for market structure. There's a lot of opportunities in the space where one asset is being traded at multiple different prices, Different venues.

2:59Josh Han I'm going to lay out the question. So through your trading firm, you were doing arbitrage and gaining yield, and now you're bringing it to a bigger audience through this product. Tell me a little bit about how one can get involved or kind of tell me about the product experience. Sure.

3:16Chris Kim So in terms of DeFi users, very similar to a lot of the synthetic assets out there in the market today. You can attain the synthetic asset USDx, stake it, and you will receive the rewards that we generate from market structure yields. It recently has been doing about 20%, number one on DeFiLlama. Basically, we rely on volatility, volumes, and also liquidity in the space. So it can go down, and also it can go up depending on the market situations. Looking back three, four months ago, we were yielding about 12% to maybe 13%, But as there is more volume in liquidity coming in, and now in tokenization market, you have 10 different formats of [unclear] stocks.

4:07Chris Kim This is where liquidity providers and arbitrageurs have to step in to close up the gap. Interestingly, like I said, arbitrage yields are going to get compressed over the next five, 10 years, but I said that 10 years ago, so We'll see how it goes. Funnily, the opportunity set is increasing with all this [unclear] happening. Basically, the law of one price has been broken due to tokenization and all these crypto venues.

4:37Josh Han Amazing. So not only are you guys creating a stablecoin where I can get 12% to 20% yield based on volatility, but you Guys are also making the market more efficient, basically. I know that right now, basically, you're offering this through USD. Do you have future plans to onboard other assets? Yes, absolutely.

4:59Chris Kim So we're going to launch BTCx, BTC yield, their denomination. Same thing was for gold assets as well. We're looking into different currencies and also commodities.

5:13Josh Han What are you most excited about? I don't think it's been that long since you guys have released USDx. What kind of next product do you think will happen next?

5:24Chris Kim Yeah, I guess the next step for us is more integration with DeFi protocols. Composability is a big part of DeFi and also working with remittance operators, FinTech applications that are in need for conversion capabilities. The fact that we are able to generate arbitrage yield means that our underlying infrastructure is able to attain the best prices from one asset To another, one region to another. So yeah, I'm thinking of arbitrage stack is more than just a yield generator, but rather a very important part of future capital markets.

6:06Josh Han Since you guys have Axis to the best prices, I guess it's almost like working with you guys directly as a prop AMM, or is It similar to that? What might be the differences for that vision?

6:16Chris Kim This has to be served off-chain into remittance, FinTech platforms. So yeah, think of this as an on/off-ramp, multi-currency on/off-ramp. Interesting fact is that due to the adoption of stablecoins by all these FinTech players in the last three, four years, they started working with OTC desks. That is becoming an important part of, I would say, a new version of SWIFT, Where all these liquidity providers in different regions and markets are functioning as a node operator of a new network that you can potentially replace SWIFT. Very cool.

6:58Josh Han Who has been your primary customer when you guys created USDx that you want holding, and how do you imagine them interacting or thinking about Holding USDx?

7:10Chris Kim So yield seekers, obviously. We are playing the role of connecting yield seekers and liquidity seekers. I would say that it's a new introduction of yield source. So far, there has been a lot of market-neutral strategies out there in the market. But yeah, we've yet to see a low latency HFT execution-based strategy. So I'm looking forward to the advancement.

7:43Josh Han Are there any other product updates that you want to share or kind of talk about Future product things? What is the big goal for Axis?

7:55Chris Kim We aim to become a prominent market maker in the secondary market space that is connecting with different venues, Different issuers. And so as tokenization market grows, The demand for arbitrage and liquidity providers will increase. So looking forward to more partnerships, Whether that is the FinTech operator that is seeking liquidity for multi-currency settlements or different yield seekers in the DeFi market.

8:35Josh Han If an Axis user currently gets 10% to 20% APY through the arbitrage as well as liquidity provisioning that you guys are doing, How could that lead into different products that you're creating? I know you've talked about OTC and being able to provide size for OTC. Tell me a little bit about that.

8:55Chris Kim Sure. So utilizing our arbitrage infrastructure, We monitor and observe all the different combinations in the market. We are currently monitoring about 25 million different permutations and it's very capital intensive. So as there's more TVL, We are able to generate potentially higher returns to a certain extent because we are able to Spread out to more different venues, regional markets, Different issues, working with more issuers as market makers. And so we are looking at this market where the market structure has changed and we think that the dislocation price is going to be Pretty sustaining.

9:54Chris Kim It will take maybe five to ten years for these to collapse. But yeah, basically our role to make markets efficient is being now opened up to DeFi users.

10:07Josh Han If I'm in the market for a stablecoin as well as some yield, what would be the bull case or the reason I should hold USDx?

10:15Chris Kim Yeah, users will be participating in our ecosystem, contributing capital for us to utilize as working capital, Basically patching up dislocations and prices across different formats, venues and markets, whether that's CME or Hyperliquid or Binance or maybe bitFlyer in Japan. And so we are trying to be at the intersection of different asset classes. And yeah, the arbitrage yield that is based off low latency execution tech is very unique to us. And so DeFi users will be able to Axis these types of yield that was traditionally only allowed to be accessible by private LPs and no different OTC desk or liquidity providers.

11:11Chris Kim Right.

11:12Josh Han So yield that was only available to accredited investors are now available to anyone who holds your stablecoin and they can expect literally the number One yield according to DeFiLlama. Is that correct? Yes. Yeah. What is the current yield and do you expect it to ever go past 20%?

11:29Chris Kim Well, the average yields returns that we've made done in the past seven years was about 36%. Of course, that's not like the representation of future yields. It all depends on volume, volatility. Yeah. So yeah, it really depends on markets. Can range between 10 may go up to 30, you see. Another part is also the TVL, which is going to be impacting the outcome. So yeah, we are trying to strike a good balance between working capital and matching different opportunities.

12:08Josh Han Very nice. Well, thank you, Chris, for joining us. We've learned so much about Axis and the stablecoin that they're building. Thank you for democratizing this yield for everybody and appreciate you coming on. Thanks for having me. Thank you, sir.