Algorithmic Stablecoins

Mark: Hi, Nevin. Thanks for joining us today.

Nevin Freeman: Hi. Thanks for having me.

Mark: We have Nevin Freeman who's the CEO of Reserve Protocol. I'm really excited because we're going to talk about algorithmic stablecoins. So algorithmic stablecoin are a dream of crypto, right? We already have digital currency that's separated from the government, which is Bitcoin, but it's very volatile. Maybe one day it'll be stable, but for now it's pretty volatile. So the idea of something that's a little more stable or at least references a asset that is a relatively stable unit of account is a very, very appealing idea. It's probably key to helping crypto be a little bit separate from the traditional and resistant efforts to be isolated from the traditional financial and monetary world. So it's a really important topic, but it's also one a lot of people have tackled. So I'm very eager to hear about it today. Nevin, thanks so much for joining us.

Nevin Freeman:

Yeah, yeah. Thanks again for having me. Early on I referred to myself as CEO, but as these things grow, it's sort of silly to try to pretend to be the CEOc of a Protocol that ends up including so many people across different time zones and so on. So I think of myself as the co-founder.

Mark:

Okay, great. So co-founder, once CEO, now glorified janitor.

Nevin Freeman:

Exactly.

Mark:

Of Reserve Protocol. Great. Before we dig in, I often have a lot of... I'm excited to talk about this topic, but I don't want to be too prescriptive. So I wonder if from your perspective, there's a topic you think would be more interesting to talk about, that you've been focused on a lot recently, that you've been wanting to say and is contrarian, or if this topic sounds like something you want to dig into.

Nevin Freeman:

Yeah. Let's just jump in and talk about that dream, that idea of an algorithmic stablecoin. I can share sort of the perspective and conclusion we came to and see what you think of that. So early on at Reserve, we thought a lot about-

Mark:

Actually, right before we do, just because you'll be better at it than I will, can you help our audience understand why you're such a good guide and expert on this subject, and then we'll dig into it.

Nevin Freeman:

Sure. So I mean, in 2017, 2018, many people were thinking about how do you create a decentralized stablecoin. For the reasons that you alluded to, it's very alluring to have something that is stable but is totally independent, not connected to the prior financial system, et cetera. At a certain point, we evaluated many different possible designs of stablecoins before deciding how we wanted to go about it. We analyzed the idea of algorithmic stablecoins. There was a stablecoin called Basis that was an algorithmic design based on what's called senior shares. We can talk a little bit about that in detail if you're curious.

Mark:

I remember that in 2018.

Nevin Freeman:

Yeah, yeah. There was another stablecoin project called Terra, which obviously became pretty big and blew up. People know a lot more about that one than Basis. But we wrote a blog post in 2018 about the basic algorithmic stablecoin design wherein we predicted how it would fail, how it would unwind. That prediction turned out to pretty much be accurate. So even though Basis itself never launched, it turns out someone else anonymously launched a version of their protocol called Basis Cash. It fell apart pretty much the way that our blog post predicted. Then Terra ended up pivoting and becoming more like the original Basis design and then ended up falling apart in pretty much the same way that we predicted. So it was a blog post and a video from back in that time, 2018, 2019, that got a little bit of attention at the time, got more attention once UST blew up. So maybe that's one reason why you would think it was relevant to talk to me about algorithmic stablecoins. But yeah, so-

Mark:

Those blew up in a somewhat spectacular fashion, right? I mean, Basis raised 100 million plus and then ended up giving it back due to regulatory concerns. Terra, well, that was the beginning of crypto winter.

Nevin Freeman:

Yeah, yeah, that's right, yeah. Let me actually just lay out the initial idea behind algorithmic stablecoins for people to understand that. It's called senior shares. The idea is that you have two assets, one that the author called the coin and one that's the share, okay? There's two different tokens in the system. The basic idea is the coin is supposed to be worth say $1, and anytime it goes up and it's trading above $1, the protocol mints new coins and sells them into circulation to drive that price back dow and it sells them for share tokens. So it's buying the share token out of the market. So it's basically making the share token price go up and the coin price go down.

Then it's supposed to work the same way in reverse. So if the coin is trading below a dollar, it's buying back coins out of circulation to drive that price back up. It's doing that by selling shares into the market, which dilutes the price of the share. So you're supposed to be able to sort of move them back and forth however much you need to. As long as you can always do that, then anytime the coin is trading below the peg, you can always bring it back up to $1 or whatever it's supposed to be pegged to. Because the share is just this novel token that's controlled by your protocol, it's all completely out of control of anyone else. The idea is that it's, like you said, it's like Bitcoin, but stable.

Then the problem with this, of course, as we kind of now know from watching what happened with UST is that, well, what if the value of that share token goes to zero? Essentially, that can become a self-fulfilling prophecy because if you come to think, well, wait a minute, there's not enough value in the share token left to support the coin, therefore the coin is going to crash. The share token only got its value because of the use of the coin. You get this circularity and you can have what's been termed at the death spiral. The point that I always want to make here is that, yes, that's how it works, but also it was totally possible to just think that through beforehand. We didn't need to run the experiment of risking billions of dollars of people's money and having them lose that money in order to learn that that wasn't going to work.

It was obvious enough that we just thought about it and wrote a blog post and decided not to build something like that because we thought about it too. It's a very intriguing design. So I think that that's a good existence proof. It's a good sort of reminder that not everything is possible to think through in advance. Artificial intelligence, for instance, it's so complicated and there's so many different ways it can go. There aren't simple economic rules that you can use to reason about how things are going to go in the future and there's just an enormous amount of uncertainty. But some things like stablecoin designs tend to be much more analyzable. So I always encourage people to actually try to think about those things rather than just randomly doing them.

Mark:

I think back in 2018, when Basis returned all its investor money, I think it may have decided it knew that answer in advance.

Nevin Freeman:

Could be.

Mark:

Then partially used the regulatory concerns as an excuse.

Nevin Freeman:

Could be. Yeah.

Mark:

I have no actual inside knowledge, but I wouldn't be surprised if that were the case.

Nevin Freeman:

Yeah, yeah. [inaudible 00:08:02].

Mark:

So I'm with you. I think these things are much more predictable than people think. As many so-called black swans are, there's always people who look at them and say, "This just doesn't pass a sniff test." There's a very clear scenario in which it could go wrong, and that's against prevailing wisdom, but it don't make it wrong. So I'm with you.

Nevin Freeman:

Yeah, yeah, yeah. Totally. It seems like-

Mark:

It sounds like this was a little bit the inspiration for Reserve.

Nevin Freeman:

Yeah, yeah, that's right. Yeah. So basically having explored the space of possible options as best we could, we ended up concluding that if you want to have an asset that's not pegged to the dollar, that's not a direct tokenized dollar representation, but it still has some stable value, we ended up determining, well, you have to make some compromises. There's no way that we think is safe to do that in a totally decentralized way. So in a way, our solution is kind of very, very conservative. We're basically just saying, "Well, what if we just made something that was totally dependent on traditional financial assets? Something that basically mirrors the solution that people today have already individually figured out and use all the time to preserve their purchasing power over time which is your retirement portfolio." So if someone has a 401K or just a vanilla retirement portfolio, they tend to hold a bunch of stocks and bonds in the country that they're from.

Maybe if they're very cosmopolitan person, they have a more global retirement portfolio that bridges different countries. So the basic long-term idea with Reserve for having a currency that is not controlled by central banks, that is totally different from fiat money, but is stable and conservative is like, well, let's just take that same bundle of assets that you would hold as your retirement portfolio and put them all together on chain instead of in a brokerage account and have a token that represents that entire portfolio and then use that token as money. So you can use it as a store of value, you can directly spend it. That's the sort of simple dumb idea behind Reserve. It's very hard to implement because things aren't tokenized yet. So there's a whole lot of work that has to be done to get there.

But in the world where we do actually tokenize all existing financial assets, then it will actually be kind of easy in a way. So that was the solution that we ended up coming up with for something that would be kind of the most what many of us wished in the early days Bitcoin would become, where it would be a decentralized currency that can be used by anyone anywhere in the world just with a public-private key pair, but with a more stable value.

Mark:

I see. Okay. So let me just make sure I understand this. So essentially the idea is, hey, people are already doing something to preserve value in the face of inflation that is largely called a retirement account. So why don't we just use that as the collateral? So is the idea that people will give Reserve Protocol a dollar, that dollar will be put in these types of assets which grow, and that will gradually over collateralize the Reserve stable token more and more over time?

Nevin Freeman:

Sort of.

Mark:

Or am I misunderstanding that? In particular, does the stable asset, is that indexed to the value of the portfolio in the collateral, or is it stable with reference to some off-chain asset like the dollar?

Nevin Freeman:

Yeah. So we have this concept called an RToken. An RToken is the thing that you can build with the Reserve Protocol. The Protocol itself is actually a sort of factory contract, kind of like Uniswap, where anyone can deploy a Uniswap trading pair, and that deploys a new smart contract that implements that trading pair. Anyone can sort of go to the Reserve Protocol and deploy a new RToken, which sort of creates this copy of all the contracts and then you have your own RToken that you can manage however you like. With an Rtoken, to answer your second question, the value of the RToken is just pegged directly to the collective value of all of the assets in the basket. That's just because the RToken itself, the simple definition of it is it's a token that can be issued and redeemed for the entire set of assets in that basket.

So if there's an RToken that's let's say 50% USTC, 50% PAX Gold, just to make up a simple example, you could show up with that 50% USTC and 50% PAX Gold, you deposit them into the RToken smart contract, and you get the relevant number of RTokens back, and then you can send those to me and you can trade them around or whatever. Then I can go and redeem those RTokens and get the exact amount of collateral out of that contract. It's like a very simple basic idea. Then there's a bunch of different mechanisms where that collateral can generate yield if it's yield bearing, if they're yield bearing assets, and then that yield can be directed between RToken holders and the Reserve Rights stakers. Reserve Rights is the governance token in all of this. There's some other mechanisms, but that's the basic idea.

So to your first question of does someone put in a dollar and then we sort of take that dollar and buy these assets? Well, kind of but not really, because if you're someone who's actually minting the RTokens, you don't show up with dollars. You show up with those actual assets in order to mint it. But if you're an ordinary user, you probably won't participate in minting and redeeming of these assets. That's something that arbitragers would most likely do. You would just go buy them on an exchange or in a FinTech wallet or in a Dex or whatever. If the value of that token is at the market price is driven up high enough where there's a divergence between that market price and the value of the underlying assets, an arbitrager might go deposit more of those assets, mint more of the RToken and go sell that on the exchange that you've just bought it at in order to keep those prices in line.

Mark:

I see.

Nevin Freeman:

They profit a little bit by doing that.

Mark:

I see. So it is basically a fully collateralized and redeemable portfolio of assets represented by an index token.

Nevin Freeman:

That's right.

Mark:

You could create any that's right kind of index token you want, maybe it's a USD index token.

Nevin Freeman:

Exactly.

Mark:

Maybe it's a basket of commodities and currencies.

Nevin Freeman:

Exactly.

Mark:

[inaudible 00:14:41] token of that.

Nevin Freeman:

Yeah.

Mark:

Interesting. Okay. So just one more kind of clarifying question here. Let's take the idea, because I think this may put the difference in relief. Let's take the idea of a USD backed RToken. How is that different than Dai or is Reserve Protocol essentially enabled generalizations of the Maker Dai framework?

Nevin Freeman:

Well, yeah, it's a good question. So there is a difference. It's not that you can implement something that's equivalent to Dai with the Reserve Protocol because it's a little confusing to explain because Maker kind of has two different collateral types, at least the way I think about it. There's the original Maker design where you can deposit volatile collateral and borrow Dai against that. So you might deposit $2,000 worth of ETH in order to borrow $1,000 worth of Dai, for instance. Then with the PSM, I think it's the peg stability module, you can deposit one to one U.S. dollar stablecoins for Dai. So you could deposit 1,000 USDC and get 1,000 Dai.

That second part is actually more similar in a way to the Reserve Protocol because you're depositing one to one, but the part where you can deposit volatile collateral that has a different value from the stablecoin that you're then receiving from the protocol where you're kind of loaning the newly minted Dai, that's a little bit different. There isn't really a mechanism for that in the Reserve Protocol. The last caveat I would add though is that you can, and we've seen this start to happen already with the Protocol, you can deposit assets that are tokenized positions from other DeFi protocols. So let me give you an example of that and how that's relevant here.

You could have an RToken where in order to mint the RToken, you go deposit say USDC into Compound, and then that USDC can be lent out via Compound. When you deposit the USDC, you get CUSDC, right? It's like that little coat check token that anyone can then go back to compound and redeem that position. You can then go use CUSDC as one of the collateral assets for an RToken if the basket is defined to include that, which some of them are. So what that means is that in a way that RToken, when you redeem it, you redeem it directly for CUSDC, but then you could go redeem the CUSDC for USDC.

But the thing you have to keep in mind that's a little bit similar to Maker is that Compound doesn't keep all of that USDC, it lends it out. It may lend it out against collateral like ETH, right? So you have this position, which is in a way a little bit similar to Maker and Dai because it's actually the value of that ETH that is preserving the value of that CUSDC or whatever the collateral is in compound at that time.

Mark:

You can peel back to layers of the onion and you may still get to-

Nevin Freeman:

Exactly.

Mark:

Over collateralized and volatile.

Nevin Freeman:

You still get something that's a little bit similar.

Mark:

I see.

Nevin Freeman:

Right. Right.

Mark:

Got it. Interesting. I guess the idea is this also solves a little bit of the like, well, who would want to tie up their collateral question? Because you can still earn yield on your collateral and then you can post that. It's not necessarily that you're giving up a yield generating instrument for something that is either not a yield generating instrument or isn't as yield generating as your opportunity cost might be.

Nevin Freeman:

Yeah, yeah, totally. Does it work for me to share a screen and show a window here, or?

Mark:

We're on YouTube, so those in audio won't be able to see it, but we can post it in the show notes. This is great because it's important to sometimes jump out of the general and into the particular so that we actually know what we're talking about instead of using a bunch of buzzwords. So I'm excited to walk through this real quick.

Nevin Freeman:

Totally, totally, totally. So yeah, this is Register. It's the main interface where you can see the tokens that exist on the Reserve Protocol so far, which has only been out for a few months. So there's not a whole lot, but it's getting going. Incidentally, you can see the usage of RTokens here. This is mainly within an app called RPAY that's used in Latin America. So you can see people using a token called EUSD for ordinary transactions and you can see a lot of small value.

Mark:

Where inflation [inaudible 00:19:13].

Nevin Freeman:

Yep, exactly. Exactly. But yeah, following on our conversation there, I wanted to show there's this one called high USD, high yield USD that someone just deployed, which it's interesting because, so you can see if you hold this token, it's U.S. dollar denominated. It's based on U.S. dollar stablecoins. The current estimated yield is 8%. You can also stake your RSR and get 9.8%, but I'll skip that. That's not really what we're here to talk about. Like we were just talking about, you have these assets in the basket that you can see here, the different percentages, which themselves are based on other DeFi Protocols.

So here for instance, you have Dai that has been deposited in a protocol called Flux, which is kind of like Compound, but you're lending against tokenized treasuries, or FUSCC. Similarly, it's lent out via Flux with USDC. There's a couple others that are a little bit more complicated. So what's so cool about this is you can just go and purchase high USD and experience that DeFi type yield and not have to go interact with these complicated protocols. So you could just go buy this token on a Dex, or if it's eventually listed on centralized exchanges, you could do that there.

As you can see, it's small. It just got started. The bigger RToken so far is called EUSD. It's been going for another month and a half or something. Similarly, this has the backing of those different types of assets, but in this case, the yield isn't directed to the RToken holders, it's directed to the stakers. So anyway, we don't need to go into a ton of detail there, but just to give a little bit of a concrete taste, that's kind of how these RTokens work in practice.

Mark:

Interesting. Okay. Got it. So I understand, this can be used for wealth protection, right? Insofar it's an index token over something that might have yield or be protected from inflation, but it's also a stablecoin and a way for people to just pay permissionlessly in a token based system rather than through the fiat banking rails. So I'd like to dig in a little bit to where you see the stablecoin market going, because right now, crypto's $1.3 trillion in market cap, maybe like 50% of that is BTC, Bitcoin, and 20% is ETH, another 15% it's other competitors and maybe 10% stablecoins, right? The stablecoins are Tether, which has many tens of billions, USDC, which has many tens of billions, several smaller ones. So TrueUSD, ZUSD, which I'm on the board of the trust company that just uses it as a disclosure. These are fiat backed, right?

So Tether supposedly has a dollar and an account, they're out of I think The Bahamas, for every dollar of Tether that's issued. Then the others are more U.S. based, right? So USDC is a regulators monitoring transmitter business in the U.S., publishes accounting statements. Paxos, same. ZUSD, the same. They're regulated by NYDFS. Then Europe has passed micro regulation to provide a framework and clarity for how you can do euro-backed stablecoins and use stablecoins within Europe. But all of these are very tied into the traditional banking system. So I wonder how you think the stablecoin market, which again is 10% of total market cap and probably more percentage of actual usage of cryptocurrencies for payments, where do you think it's going in the next several years? What do you think the biggest problems are? What do you think the kind of biggest opportunities are for an on chain alternative?

Nevin Freeman:

Yeah. Well, I think that the current paradigm is obviously quite functional and that's why it's grown. I think it's going to continue to grow. I think that we'll just see more and more dollar stablecoin usage within crypto trading. We've certainly seen that in Latin America, and we've heard about this in other markets. There really is more and more ordinary financial activity happening with stablecoin, with USDT and USDC and so on. We see it in our markets with EUSD. I think the reason often is convenience, freedom, access. If you are let's say importing goods from another country and you're in Latin America and you want to pay your suppliers in China, a growing portion of those transactions happen in USDT. Incidentally, often, USDT on TRON turns out to be the thing that's gained in popularity because it's so simple and the gas fees are so low.

So yeah, we really do see quite a lot of usage outside of crypto trading. It's just that those numbers aren't published. So if there was a dashboard where you could see the total amount of real world stablecoin usage, I think people's minds would be blown. I think it's way higher than people realize, but you just don't see that. There's no coin market cap or exchange page where you can go and track those numbers because it's all just these on chain transactions that are happening back and forth between people in a way that's sort of under the radar. So I do think that that will continue to grow. I don't know if you've tried to send a bank wire lately, just often really annoying compared to you once you've had the experience of dealing with crypto and you're like, "Oh my gosh, I can't believe people deal with this all the time. Can I just send you a USDC?" I say that to people so frequently, "Can I please just send you USDC? It's so much easier."

Mark:

It's funny. You talk to a lot of [inaudible 00:25:14] people about why is crypto necessary and a lot of times they're from the U.S. or some financial capital, and they're like, "What's wrong with the banking system? It works fine. There's no problem here. You can send a wire. You can use your credit card, et cetera." It's like, well, it's hard to say no, that doesn't work, obviously it works, right? But the particulars actually matter a lot. I mean, wires get caught up internationally, they're pain in the butt. I always get nervous around whether I put wire information in correctly. It's like it's kind of a mess. Then you're right, probably the places where the Delta's biggest and the most are the places that the G7 seven aren't paying attention to.

Nevin Freeman:

Yeah, yeah, yeah, totally. Yeah. So basically in the near term, I mean, regulation could be the wild card there. If there are strict enough regulations that they really do make it impossible to operate in the way that we've been operating with U.S. dollar stablecoin, that could change the game board quite a lot. But unless that happens, and I don't think it will, I don't think that we will collectively outlaw those as a society. I just think it's going to continue to grow. In a way, what Reserve is doing is it's offering people a way to, in the short term, get yield on top of those dollar stablecoin assets in a simple way. But in the long term, it's really based around the idea that maybe at some point people will not want dollars anymore.

I don't wish that upon us. I think it'd be better if the dollar stayed strong and functional forever. I think it's a good overall monetary regime to be in, but it's hard to be confident in the very long term given all of the macroeconomic factors that are sort of stacking up against it. So basically, we think of it as a plan B of if we get to a point where people, maybe they become very comfortable transacting with crypto, they like the crypto functionality, but they no longer want dollar exposure. They want something that's going to be stable. So obviously you can switch to other fiat currencies, but you kind of have the same problem no matter which way you turn in the long run of history with fiat currencies.

So yeah. So basically, obviously our big long-term perspective is that it might be useful to have something that is based on hard assets. In a way, it's very similar to just using gold as money. It's just it's like using gold as money, but diversifying instead of having it just be a single asset. So yeah, I think that that could be basically the optimal form of money for the world in the long term, but it's not something that I think is going to happen next year or the year after. I think in the near term, we're just going to continue to see the current things that are working grow a whole lot more.

Mark:

That's one scenario. I think the counter is, well, today people tend not to actually use the dollars as store of value. I mean, they do to a certain extent, but for the bulk of their savings, they do put in retirement accounts. They do put in stocks and bonds, right?

Nevin Freeman:

That's true. Yeah, that's true.

Mark:

So I imagine the total market cap of all the stocks, equities in the world is larger than the money supply, I think. That seems intuitive to me.

Nevin Freeman:

I think so. I'm pretty sure.

Mark:

So yeah. Yeah, I'm pretty sure too. So there already is a little bit of that division, so it makes sense that that would be how crypto plays out as well. But I worry that actually what may happen as a result of stablecoin is that dollar dominance becomes further entrenched, right? Because now you have all these people in Latin America who are using the dollar, who actually probably had trouble using the dollar before and ends up marginalizing a lot of these other currencies, local currencies and ending up with just further dollar dominance. I mean, what's crazy about the current stablecoin market is it's like 99% USD-backed, right? Yet U.S. dollar does not have 99% dominance of currency globally, right?

Nevin Freeman:

Yeah.

Mark:

So for some reason, there seems to be this winner take all dynamic in stablecoins, and I wonder if that will actually lead to more dollar dominance and thus more reliance on an inflationary instrument until one day that breaks and the consequences are even worse.

Nevin Freeman:

Yeah, I think you make a very good point. I think it could. I think that the reason for that sort of 99% dollar dominance in stablecoins, I speculate that it's because exchanges don't want to divide up the liquidity on their trading pairs. So if you're a Binance and you already have a bunch of trading pairs against dollar stablecoin, and it's like, well, should we create euro pairs for everything, for the 500 plus however many tokens are traded on Binance? It's like, well, that's just going to divide the liquidity. To start that off, you have to get a market maker to make markets against all those different new pairs, and it just fractures the whole market.

So I think that basically people are willing to have that dollar exposure as their base asset, just enough, that it's like, okay, that's actually sort of the path of least resistance when it comes to building these things out now. Maybe if the crypto market gets 10 times or 100 times larger, maybe there's enough demand that it starts to make more sense to have euro pairs for everything, or even getting into having pairs for many long tail of different currencies in the crypto markets, and then maybe you start to see more stablecoins from many different countries emerging and actually getting usage within crypto trading. I don't know, but it seems plausible to me.

Mark:

Interesting. Makes sense. Well, if it's hard to observe all the retail usage of these stablecoins today in any currency, do you think there's a tipping point at which that becomes very obvious, it becomes large enough, and all of a sudden overnight we start paying attention to it and it starts changing the narratives?

Nevin Freeman:

That's a really good question. What would that be?

Mark:

What do you think would make people wake up and pay attention to what's happening in all these non-G7 markets?

Nevin Freeman:

Well, one thing that [inaudible 00:31:49]-

Mark:

Sometimes you can't predict the tipping point even if you know there is one.

Nevin Freeman:

Yeah. Okay, I don't know. But my speculation is that it might be when there's a single platform or app that's facilitating a huge amount of the usage and the usage that it's facilitating is on chain. The reason why I say that is because in our experience, we've seen an enormous amount from our perspective of retail usage of dollar stablecoin in Latin America, especially in Venezuela. That's the market that we reached the most saturation in, to the points like 300, $350 million in volume per month in ordinary transactions, not crypto speculation, tens of thousands of merchants accepting it as a form of payment, many people getting their payroll in it, things that we were very excited buy.

I personally went and pitched a bunch of journalists to be like, "Hey, this is really cool. Do you want to write about this? Check out these numbers. You can talk to one of our thousands of users and they'll tell you about it." Nobody wrote about it. Nobody cared. I was kind of shocked by that, honestly. I think part of it is maybe the numbers were still too small compared to the billions that we're used to in crypto trading. It's like, well, if it's not in the billions, it's not real. Maybe that's part of it. So maybe we need to reach the point where the numbers are in the billions. But another thing is that I think that because our application allows people to transact with these stablecoin off chain because of gas fees, we couldn't do it on Ethereum Layer 1, and we did it before L2s existed, I think people don't really believe us.

I think they think, "Yeah, maybe you're just lying about those numbers. We can't really tell if that's true." There's so many hoaxers in crypto. It's kind of fair to think that we could be lying even though we're not. So if those transactions were all happening on chain, I feel like people, they would believe us more and they would be more proud because they'd be like, "Look, it's the crypto transaction method. People are using that and actually doing ordinary commerce." Whereas it's like, "It's just in your database. It doesn't really count." So yeah, maybe the numbers need to reach the billions. The reason I say on a single platform is so that there's visibility into it. So you can sort of have a live dashboard of here's the real numbers, but I think maybe the transactions have to be happening on chain for people to really feel like it's real.

Mark:

Yeah. Either that or audited by some third party maybe.

Nevin Freeman:

Yeah. Yeah, maybe. Maybe.

Mark:

Interesting. Well, I'm excited for when that happens. People are going to wake up and start paying attention pretty soon.

Nevin Freeman:

Yeah. Yeah, I'm excited too. Yeah.

Mark:

Nevin, anything else you'd like to share with us that you just think are fun facts, absurd thoughts or contrarian views?

Nevin Freeman:

Well, I have one more thing that I think is cool, which is there's, going back to your original points about algorithmic stablecoins and the dangers, there's a stablecoin rating agency that's a nonprofit that's going to launch pretty soon. It's called Blue Chip. We're an early supporter, but it's not a project of ours. What's really cool about it is that it's basically it'll be a website you can go to kind of a coin market cap for stablecoins, but you can see ratings of the safety of these different mechanisms. The team is very dedicated to, if it's a fiat-backed stablecoin, trying to assess the details of how they keep the reserves and so on. Or if it's a crypto-backed stablecoin, looking at what are the governance methods or over collateralization ratios or all the details. They have a whole framework for assessing these things.

So I just want to basically promote that that's going to exist. I'm very excited by it because I think that if this had existed while UST was getting popular, it would've gotten a really bad grade and it would've been really clear to see, oh, this is way less safe than these other stablecoins. The fact that Do Kwon and others are making these bold claims or whatever, we shouldn't listen to that because these experts who are monetary economists and so on, they've looked at it and they're saying, they're sounding the alarm and saying, "This is a really dangerous thing." So I wish that it had existed beforehand so that we could have prevented that disaster. But I do think that this is a way for people to make sense of those economic questions that maybe they're obvious to people who think about it all day, but if you're just an ordinary consumer, it's very hard to tell. So I'm excited for Blue Chip and I'll look for that coming out soon.

Mark:

Awesome. Interesting. Better late than never. There's other cycles ahead.

Nevin Freeman:

Yeah, that's right. Absolutely there are.

Mark:

Awesome. Well, Nevin, thank you again so much for joining us. If people want to learn more about you or follow you, how can they do that?

Nevin Freeman:

Our website is reserve.org, and if they want to connect with me personally, I'm on Twitter, N-N-E-V-V-I-N-N.

Mark:

Excellent. Thanks so much.