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NOTE Open Interest — michael-egorov-curve-yieldbasis. Draft: automatic transcript (faster-whisper small.en) of the released edit, automatic speaker assignment (resemblyzer, 2 speakers), corrections applied from the editorial glossary and OCR of the burned-in captions. Not yet reviewed line by line.

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<v Kinsa Durst>Welcome to Panoramic Content Suite Singapore Edition alongside Token2049.

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<v Kinsa Durst>We have the godfather of StableSwap, Michael, the founder of Curve as well as co-founder of

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<v Kinsa Durst>Another project he'll talk about very soon. But yeah, excited to have you on. Thank you for

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<v Kinsa Durst>Joining us. Yeah, thank you. Yeah, we'll get into YieldBasis and Curve wanted to kind of hear

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<v Kinsa Durst>Your personal story in terms of how you ended up where you are today. So maybe you can kick us off

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<v Kinsa Durst>With a self-intro and a brief history. I know it's a long DeFi cycle, but a brief history would be

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<v Michael Egorov>Great for the audience. Right. Well, I mean, if you start really long ago, I would say,

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<v Michael Egorov>I don't know how long you want the history to be. Maybe like a condensed, condensed one. Yeah,

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<v Michael Egorov>Okay. So yeah, basically, I studied as a physicist and a PhD in physics. And then

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<v Michael Egorov>At some point, I went to, I don't know, went to the US to do some sort of startup, which I didn't

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<v Michael Egorov>Know. I didn't know which at the time, but I thought I would need to sort of get out of my

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<v Michael Egorov>Comfort zone essentially first. And over there, I well, I mean, at the time, I was discovering

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<v Michael Egorov>Crypto for myself. And then, well, probably, probably being around the crypto circles of

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<v Michael Egorov>The time and founded a co-founded NuCypher. It was before Curve. And well, it was great. And later,

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<v Michael Egorov>Well, one of the things that NuCypher was doing was essentially a stake token, right? So you had

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<v Michael Egorov>To stake into to run nodes, essentially something like that. And I realized that what will need to

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<v Michael Egorov>Be to happen is liquid staking. So I was thinking, oh, how do you do liquid staking before it was

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<v Michael Egorov>Called that, of course. And I figured out essentially, an algorithm for swapping stable

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<v Michael Egorov>Like pairs. And I thought, okay, well, at the same time, I was early user of early DeFi

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<v Michael Egorov>With MakerDAO. And, well, I didn't want to sell my ETH, so I borrowed DAI and sold it for

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<v Michael Egorov>USDC while having the ETH collateral so that I don't sell the precious ETH. And I had this

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<v Michael Egorov>Problem of swapping DAI because like, you know, your liquidity was pretty bad everywhere. So,

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<v Michael Egorov>And I thought, well, it looks like I actually with this same algorithm I was thinking of

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<v Michael Egorov>For liquid staking, I can do it for USD pairs. And it actually will work for me. So that's

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<v Michael Egorov>What I launched Curve with. And when it got launched, of course, well, that's what probably

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<v Michael Egorov>Some people remember. It's at some point, it came to liquid staking with staked Ether.

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<v Michael Egorov>And, yeah, so it actually worked for this purpose as well. So that's how Curve got started. And, you

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<v Michael Egorov>Know, multiple things were created at Curve. Apart from stablecoin swaps, there were like volatile

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<v Michael Egorov>Swaps with automatically managed concentrated degrees he appeared and Curve stablecoin

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<v Michael Egorov>And lending. And we have all of that running today over there. And later, I thought, well,

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<v Michael Egorov>Actually, looks like we can do, I could do single asset exposure using based on CryptoSwap,

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<v Michael Egorov>If you like, essentially, get rid of this nonlinearity of the payoff function of CryptoSwap.

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<v Michael Egorov>And I thought how to do it. And actually, when I was, the idea came to me when I was flying to

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<v Michael Egorov>Token2049, two years ago. So when I was boarding a plane, it occurred to me that actually,

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<v Michael Egorov>This is, that might work. While I was at the conference, I did some quick simulations,

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<v Michael Egorov>And it looked like it should work. And then, some time later, it was implemented as YieldBasis.

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<v Michael Egorov>And yeah, YieldBasis is running for, yeah, running on chain for about a year.

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<v Kinsa Durst>Amazing, amazing. Congratulations. I think sometimes ideas can come out of nowhere. And just moving

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<v Michael Egorov>Around sometimes can inspire you. Yeah, usually that happens to me when I fly air, I don't know

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<v Michael Egorov>When you're when you're like 10 kilometers above the ground, maybe ideas come from space.

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<v Kinsa Durst>I mean, thank you Starlink. I don't know. Yeah. But for me as well, flights is like this zen

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<v Kinsa Durst>Space where you're kind of disconnected from phone for a minute. Yeah, meditative almost in

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<v Kinsa Durst>A way. Cool. Yeah, happy to dive into YieldBasis, but very impressive background. I didn't know

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<v Kinsa Durst>You're a physicist, from dealing with molecules to ones and zeros, and financial infrastructure,

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<v Kinsa Durst>Which is super cool. Then Curve really unlocked this concentrated, hyper efficient swaps almost

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<v Kinsa Durst>With likewise assets expanding into other types of DeFi primitives, which is super helpful.

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<v Kinsa Durst>I just mostly remember you guys for, not mostly, but I really appreciated the UI that

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<v Kinsa Durst>I think you were the first ones to really launch with this like Windows

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<v Michael Egorov>Text. Oh, it was essentially, I would say, MS-DOS style. Yeah, right, right. And yeah,

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<v Michael Egorov>Yeah, I can tell a story about that. Yeah, yeah, actually, that I'd be curious,

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<v Michael Egorov>Because you guys are the person to do it. And yeah, yeah, yeah. So, basically, I wanted to

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<v Michael Egorov>Create some UI before I found anyone really quickly, because I want to get it up and running

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<v Michael Egorov>Quickly after creating smart contracts. And I thought, well, how would I do that to do it fast?

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<v Michael Egorov>I found some template, which looked interesting to me, which is like a Turbo Vision template,

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<v Michael Egorov>Right? So Turbo Vision is like a thing, a TUI thing, which was used for like Turbo Pascal,

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<v Michael Egorov>Turbo C, and whatever, like the old stuff, right? But it was made like for web, so you could

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<v Michael Egorov>See this same look and feel in the web. So I thought, oh, okay, that's kind of cool.

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<v Michael Egorov>What if I do that? So I coded it up in like pure HTML and JavaScript without like modern frameworks

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<v Michael Egorov>First. And yeah, I mean, deployed it, but it looks like some people really loved the UI,

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<v Michael Egorov>Some other people really hated the UI. And this polarized reception of it, it actually,

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<v Michael Egorov>Well, it actually kind of made it iconic, I would say.

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<v Kinsa Durst>Yeah, I think it almost helped with the adoption of...

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<v Michael Egorov>I think so. Yeah, because it was, yeah, essentially, this was doing marketing.

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<v Kinsa Durst>Yeah, yeah. So you're not only just a protocol designer, but also UI, UX designer.

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<v Michael Egorov>Well, I mean, I don't consider myself a UX designer. It was like, I don't know,

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<v Michael Egorov>A little bit, because I liked it. But actually, a logo was also kind of fun,

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<v Michael Egorov>Because, yeah, a logo was made in five minutes, actually.

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<v Michael Egorov>Oh, really?

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<v Michael Egorov>Yeah, it was like a standard Python library for plotting. Matplotlib had examples,

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<v Michael Egorov>And one of the examples was a Klein bottle, right? So I thought, okay, well,

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<v Michael Egorov>Maybe what we do in Curve, I was essentially doing any number of stablecoins, right? So it's

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<v Michael Egorov>Something multi-dimensional, and Klein bottle is like four-dimensional. So I thought, okay,

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<v Michael Egorov>Maybe I show multi-dimensionality here, and I ran this, I don't know, plotting library and rotated

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<v Michael Egorov>The Klein bottle in a way which looks kind of nice to me. And then, yeah, it was a logo.

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<v Kinsa Durst>Incredible. Awesome, awesome. Yeah, I didn't realize you used not just the whole project,

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<v Kinsa Durst>It seemed like it was really your baby.

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<v Michael Egorov>Yeah, yeah, yeah. So I was creating this, I mean, I've got people after that, of course,

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<v Michael Egorov>To work on this, but yeah.

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<v Kinsa Durst>Incredible. Yeah, those are really like the golden days of DeFi.

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<v Michael Egorov>I would say so, yeah.

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<v Kinsa Durst>Now the industry has evolved, and you've come up with new ideas as well. As you mentioned,

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<v Kinsa Durst>YieldBasis. I don't think YieldBasis takes on similar UI, UX, it's a new project.

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<v Michael Egorov>Yeah, it still has some sort of resemblance offers, you know, sort of old school UIs,

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<v Michael Egorov>But yeah, it's not quite that, but also you wanted to show, okay, on mobile and that old

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<v Michael Egorov>Style UI, it doesn't play well with mobile with all these window elements.

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<v Kinsa Durst>Yeah. But with YieldBasis, what are you, I guess, what is the goal that you're trying to achieve?

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<v Kinsa Durst>What sort of vision that you did you have with the project, maybe if you don't mind sharing?

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<v Michael Egorov>Yeah, well, there are two things to that. One is, you know, they're kind of solving

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<v Michael Egorov>Impermanent loss, one is considered to be a holy grail, but that slide from technical perspective.

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<v Michael Egorov>From user perspective, it makes your crypto earn something, so it makes your crypto yield bearing.

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<v Michael Egorov>And what crypto people want yield on is, I think, basically BTC. Coincidentally,

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<v Michael Egorov>The best performance you can get, I mean, the best compromise between risk and reward,

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<v Michael Egorov>Which you can get there, is probably with Bitcoin. And also Bitcoin is the asset which

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<v Michael Egorov>Kind of lacks yield. For Ethereum, at least you have staking, so some sort of yield.

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<v Michael Egorov>But for Bitcoin, you have no yield. And well, there are many Bitcoins where people

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<v Michael Egorov>Love to get some yield on those. And I thought, well, maybe doing that focusing on Bitcoin first

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<v Michael Egorov>Would be a really, really good one. Interesting. And I think, well, how many Bitcoins are there?

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<v Michael Egorov>Like not earning yield. I don't know, like a lot. And really, the maximum capacity of the

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<v Michael Egorov>Protocol is, well, it's probably a little bit less than the amount of Bitcoin not earning yield.

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<v Michael Egorov>So their vision for it would be, I guess, to first get to maximum capacity with Bitcoin and Ethereum.

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<v Michael Egorov>At that time, then all the kind of background liquidity for these assets will be

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<v Michael Egorov>YieldBasis. When you say capacity, you mean? Capacity, I mean, look, if you make liquidity,

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<v Michael Egorov>Then this liquidity starts affecting their volatility. If liquidity is small, it doesn't

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<v Michael Egorov>Affect anything. And even if you have like 100 million liquidity, it doesn't affect volatility

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<v Michael Egorov>Yet. Maybe a billion liquidity also doesn't yet. But maybe 10 billion, 50 billion already would

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<v Michael Egorov>Suppress volatility and will start reducing yields. So that's where the real capacity is.

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<v Michael Egorov>And of course, we would love to reach this capacity, because at that point, it means that

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<v Michael Egorov>You are dominating the world liquidity for these assets and basically capturing the market.

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<v Michael Egorov>But in principle, it can work for other assets which are not overly too volatile.

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<v Michael Egorov>Well, some people ask if it's possible to do with stocks. And well, maybe, but it's not that easy.

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<v Michael Egorov>So with stocks, you need to kind of to do different ideas, maybe, maybe, you know,

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<v Michael Egorov>Running multiple markets for different stocks at the same time, somehow interconnected,

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<v Michael Egorov>Because stocks, they have, they are sometimes more volatile. Honestly, Bitcoin is less volatile

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<v Michael Egorov>Than stocks. Yeah, yeah. Yeah, really, you think so. I mean, it depends on this output. Yes.

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<v Michael Egorov>I mean, volatility of Bitcoin is kind of better in some sense, because it's like, it's kind of

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<v Michael Egorov>Smooth, right? So Bitcoin doesn't, you know, that doesn't jump up or down too much instantly. And

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<v Michael Egorov>Stocks actually can, like, especially after weekends, overnight, they can just go up and down by a lot.

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<v Michael Egorov>So they have discontinuities and Bitcoin price is kind of more continuous because price discovery

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<v Michael Egorov>Is always happening 24 seven. Maybe when stocks start having 24 seven price discovery, they will

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<v Michael Egorov>Be more like Bitcoin in that sense. It's on the way, I hope. Yeah, but honestly, I think Bitcoin is

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<v Kinsa Durst>Priced a little bit more fair than stocks. Yeah, amazing. And yeah, YieldBasis. It seems like a

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<v Kinsa Durst>Product that people can, I didn't realize that you guys were focusing on Bitcoin first. I thought

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<v Michael Egorov>You guys would focus on like Ethereum ecosystem, given your own material. Well, it's only Ethereum,

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<v Michael Egorov>It's existing on Ethereum, right? But the asset which is early in yield is Bitcoin first, right? And

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<v Michael Egorov>That's, yeah, it's just because of the price properties of this asset. Interesting for the

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<v Michael Egorov>Price, right? Yeah, yeah. Ethereum is actually also not bad. Yeah. But Bitcoin price seems to

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<v Michael Egorov>Be a little better suited. So it's better to start with something which works better,

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<v Michael Egorov>Make it work better and expand to all others. I mean, also demand wise as well, as you said,

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<v Kinsa Durst>There's so many idle Bitcoin out there. Exactly. A lot of Bitcoin L2s were launched

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<v Kinsa Durst>A past couple of years to fix this problem, but I don't think any of them really have.

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<v Michael Egorov>Yeah, probably not. In theory, it's good. In theory, it's good. But also like,

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<v Michael Egorov>They were not fully trustless, right? And even when they are fully trustless,

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<v Michael Egorov>I think they can be made fully trustless. Then the question would be, why should people use those

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<v Michael Egorov>Rather than Ethereum L2s? And even Ethereum L2s have, I would say, challenges, right?

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<v Michael Egorov>So when L2 is branded with someone, it probably makes sense, like Base or Robinhood chain or

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<v Michael Egorov>Whatever, right? If there was a good Bitcoin L2, and if one of these players decided to make their

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<v Michael Egorov>L2 as Bitcoin L2, of course, that would work, I think. Right. Yeah, be curious. Also, you know,

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<v Kinsa Durst>There's a lot of different yield providers these days. Also, speaking of stocks, people are bringing

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<v Kinsa Durst>Yield bearing stocks on chain as well, like Strategy's STRC. It's quite crazy. But it seems

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<v Kinsa Durst>Like you guys have a pretty clear initial starting audience with me, Bitcoin holders,

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<v Kinsa Durst>A lot of blue chip crypto holders. Curious how you envision the future for YieldBasis? Would

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<v Kinsa Durst>Currently you guys have these pools and products where people can deposit and earn yield on it?

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<v Kinsa Durst>Where how do you envision the product growing into giving your future coming a few years?

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<v Kinsa Durst>What sort of market do you hope to capitalize on?

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<v Michael Egorov>Right, right. So yeah, I think, as I said, after more simultaneously with expending fully two

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<v Michael Egorov>Blue chips, we would probably want to look at more traditional assets and see what happens.

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<v Michael Egorov>I mean, whether it's, if it's possible with stocks, it probably makes sense to try it.

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<v Michael Egorov>If it's possible with gold, it also makes sense to try it. Like who knows, maybe,

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<v Michael Egorov>Maybe people like yield bearing gold. Yeah, yeah. Yeah. But it's, it's, it's almost like,

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<v Kinsa Durst>I think problem with yield is that people always ask where it's coming from.

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<v Michael Egorov>Here it's clear where it's coming from. Yeah, exactly. It's coming from volatility from people

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<v Michael Egorov>Trading these assets. And you're essentially market making there. But you're sort of

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<v Michael Egorov>Delta neutral, but delta neutral denominated in this asset rather than in dollar or whatever.

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<v Kinsa Durst>Yeah, so it's like a real yield that is generated.

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<v Michael Egorov>It's a real yield. But also, of course, that that comes with limitations like when, you know,

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<v Michael Egorov>When people are very interested in this asset, volatility is high. So it's, I don't know, they

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<v Michael Egorov>Could be interested to enter or to exit out of this asset or better if they have that at the

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<v Michael Egorov>Same time. But, you know, it can happen to be the opposite, like everyone who wanted to sell

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<v Michael Egorov>Already sold, and everyone who wants to buy are still scared. And at that time, volatility is low.

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<v Michael Egorov>So the yield is very low. So you, you have this seasonal, seasonal component to it. But yeah,

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<v Michael Egorov>At the same time, there are a few other strategies, right? So and this strategy seems to be earning

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<v Michael Egorov>When some other strategies don't. Right. So it's pretty, pretty good, I think.

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<v Kinsa Durst>Yeah, yeah. No, it's, we love real real yield. Yeah, I think too many governance token yields,

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<v Michael Egorov>Unsustainable yields have been. Yeah, yeah. Well, you know, like, when,

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<v Michael Egorov>When I think one of the first governance tokens YFI was launched, it was called

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<v Michael Egorov>A valueless governance token by Andre Cronje. Right. So I guess some of the governance tokens

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<v Michael Egorov>Really implement this valueless vision today. But I don't know, I guess it is the narrative

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<v Kinsa Durst>Game sometimes Andre Cronje made it made it work and drew liquidity from all across

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<v Kinsa Durst>Different protocols, provided yield and active, just active governance participants as well.

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<v Kinsa Durst>It was fun times. Fun time. Fun time. Absolutely. That's a, you know, given that you are so in

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<v Kinsa Durst>Depth in the trenches on, I feel like you have a deep understanding of things on a protocol level.

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<v Kinsa Durst>It's curious, you know, how you're seeing the current state of DeFi market ecosystem.

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<v Kinsa Durst>Do you think there's anything that needs to be fixed that you're looking for? What is the next

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<v Kinsa Durst>Holy grail? Do you think that if someone solves it, there'll be kind of like a new big player in

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<v Michael Egorov>The industry? Yeah, that's a very good question. I usually try to hunt holy grails. Yeah. Right,

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<v Michael Egorov>Right. You don't want to share the... Yeah, yeah. What's the... I mean, I guess Hyperliquid has been

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<v Michael Egorov>Like the... Yeah, yeah. You can say that because I think one of the things people really wanted is

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<v Michael Egorov>High leverage. Yeah. But I wouldn't say that Hyperliquid was the first one to do that because there was

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<v Michael Egorov>GMX, for example, before Hyperliquid. So it's kind of an evolution in this sense. Yeah. Right. So,

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<v Michael Egorov>But maybe a very well executed, but... Hype is more of also like a centralized,

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<v Michael Egorov>Semi-centralized. Yeah, yeah. And really, I don't know if it's fair to call something semi-centralized

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<v Michael Egorov>DeFi, right? Exactly. I think GMX was more of a decentralized perpetual. Absolutely. Yeah,

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<v Michael Egorov>Very innovative. Right, right. But really, like, if you think why DeFi at all, like why don't do

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<v Michael Egorov>Everything centralized? And I think the answer would be that, well, you have really many

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<v Michael Egorov>Cracks these days, right? And even when the regulatory climate permits to do something

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<v Michael Egorov>Semi-centralized. Decentralized has an edge with security. You don't have

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<v Michael Egorov>OPSEC issues in many places. If it's not possible for someone to take user funds,

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<v Michael Egorov>Like, not possible at all, then you don't, like, you don't have these issues of protocol

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<v Michael Egorov>Or losing money because someone, some key was not custodied well or whatever. Right. Some

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<v Kinsa Durst>Multisig got compromised or something like that. Yeah. Security is very scary. Maybe I'll

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<v Kinsa Durst>Tap on a quick question in that vertical. I was curious if you have a take on the recent

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<v Kinsa Durst>AI math craze that's going on. People are scared that private keys can potentially be

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<v Kinsa Durst>Compromised, especially the one that have made transactions. Some people are, Justin Drake from,

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<v Michael Egorov>Yeah. Yeah. So yeah, I actually noticed this, it was Matthew Green yesterday,

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<v Michael Egorov>Tweeted about this, like, you know, public key cryptography is doomed. Well, I mean,

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<v Michael Egorov>That's what he tweeted. And well, I think that he later clarified that he didn't mean exactly that.

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<v Michael Egorov>Maybe, maybe with AI or like we are, we would be able to find ways to, I don't know, to

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<v Michael Egorov>Essentially reduce effective security of the keys. Right. So maybe 128 bits ECC would be not safe,

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<v Michael Egorov>But 256 bit still safe, something like that. So that's, I think we are safe, honestly.

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<v Michael Egorov>So practically speaking, well, there was a better question that quantum computers, of course.

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<v Michael Egorov>That's, that's another, which is, which is not too far from what I worked on in laboratory.

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<v Michael Egorov>Oh, yeah. Yeah. Although it was not quantum computers, what I worked on, but the way you

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<v Michael Egorov>Get to this, like, physical system where you do quantum computing these days is very similar.

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<v Michael Egorov>So I was working on cooling atoms down to like a very, very, very cold state.

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<v Michael Egorov>Like when they're quantum states, essentially, you, when you want to make a quantum computer,

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<v Michael Egorov>Their current approach is, I think, the most favorite approach today is to do

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<v Michael Egorov>Neutral atoms in optical lattice. And you cool them down in exactly the same way. And then you

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<v Michael Egorov>Essentially catch them in a standing wave of like made by lasers. So that's, I think, how you do it.

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<v Michael Egorov>Well, at least that's what that's the most promising approach, I think. But at the same time,

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<v Michael Egorov>I'm not sure we will get crypto hacked by quantum computers anytime soon. Right.

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<v Michael Egorov>Suppose that these quantum resistant algorithms, but actually, this is what needs to be really

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<v Michael Egorov>Poked with, with AI, right, as much as possible, like these quantum resistant algorithms. What

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<v Michael Egorov>If there is something which we don't didn't find yet hiding in them? ECC is kind of very,

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<v Michael Egorov>Very well studied. But, you know, this lattice cryptography, for example, is it? Well,

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<v Michael Egorov>We probably really need to use all the AI power to find stuff in that. Right. But at the same

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<v Michael Egorov>Time, I don't think like ECC will be hacked too soon like quantum computers.

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<v Kinsa Durst>Hopefully not. I think Google is expecting timeline of like 2030 for practical or commercial

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<v Michael Egorov>Quantum computers. Yeah, I'm not sure about that, you know. Well, I mean, there is,

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<v Michael Egorov>Of course, there is number of qubits growing. Okay, fine. But you don't need just number of

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<v Michael Egorov>Qubits. You also need some, I don't know, some sort of precision of these qubits. Right.

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<v Michael Egorov>So some small level of noise, like the smaller, the better. And then you should have a quantum

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<v Michael Egorov>Error correction working. So there is some threshold below which you can apply that. And

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<v Michael Egorov>But when you apply it, then you need exponentially more like qubits. So I don't know. But anyway,

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<v Michael Egorov>We also might discover that, like, I mean, we don't really understand quantum mechanics that

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<v Michael Egorov>Well, I think. Right. So we don't really understand where this randomness is coming from. And

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<v Michael Egorov>Quantum computers probably would be some of the best devices, although quite expensive to

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<v Michael Egorov>Really find limits of quantum mechanics. And yeah, I mean, if, if someone

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<v Michael Egorov>Creates a quantum computer, they probably will, if it's like really good one, which can supposedly

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<v Michael Egorov>Hack Bitcoin, right? Well, hacks are just bitcoins, right? Then they probably will end up in one of

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<v Michael Egorov>Two states. One is yes, they have cryptography. So what everyone is scared of and everyone who

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<v Michael Egorov>Is investing is hoping for. But it's also very well possible that cryptography will not be hacked.

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<v Michael Egorov>But instead, some groundbreaking discoveries in quantum mechanics will be made. So I guess

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<v Michael Egorov>Investors would be a little bit disappointed that their money would be used to advance physics to

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<v Michael Egorov>The next level. But it's a possible outcome. Amazing. Yeah, super exciting. I think in a

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<v Kinsa Durst>Few years, I know right now YieldBasis, we're growing as a company, but we might need your help

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<v Kinsa Durst>With quantum cryptography in a few years. Either yes or not. So we'll see. Yeah. Yeah. Super fun

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<v Kinsa Durst>Chat. I think there's some deep rabbit holes we can dive into, but maybe that's for the next

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<v Kinsa Durst>Podcast. Absolutely. Meanwhile, thank you for hopping on. For the audience, if they are

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<v Kinsa Durst>Interested in YieldBasis or want to get involved, get in contact with the team,

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<v Michael Egorov>What's the best way to do it? Yeah, I think the best way is to go to YieldBasis Twitter or X.

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<v Michael Egorov>There are links to YieldBasis telegram. People can just go there and ask whatever questions they

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<v Kinsa Durst>Like. Cool. We'll add the links below. But thank you so much for your time. Thank you

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<v Kinsa Durst>For hopping on. Great chatting. Yeah, thank you.