Etherfuse Stablebonds as an Essential Blockchain Primitive, feat Dave Taylor, CEO of Etherfuse

Speaker A: A team of three people who are engineers, you can launch a regulated stablecoin in that currency. As an example, we went to the US and we talked with Brel. We said, brel, you're a stablecoin issuer. I want you to know that you can now issue Mexican pesos regulated in the US as a US Stablecoin, which without us, uh, is impossible. But now Brel uses stable bonds as collateral to issue mxne. MXNE is a Mexican peso. It carries that weight. They still have the yield as a revenue model. But since we have launched mxne, it has outcompeted anything in that space. It outcompetes tethers and outcompetes BITSO by like 200,000x daily in volume.

Speaker B: Welcome to another episode of the Sulfate podcast where we talk with builders and founders in the Solana ecosystem. Sol Today I think might be our first RWA episode. I think I'm fairly certain. And like that's, that's shameful of us. We should have had at least one before.

Speaker C: I mean, um, considering I was working on an RWA startup for a year.

Speaker B: Also true. Dang, dang, James.

Speaker C: Somehow we never talked about it.

Speaker B: Yeah, but like this was such a great conversation. Like I learned so much about how RWAs sort of work in general, especially on what Etherfuse is doing and how they're approaching a lot of these things and, and how these types of products can really help everyday people. And it's so fucking cool.

Speaker C: It is really cool. Uh, we talked with Dave from Etherfuse, he's their CEO. Uh, and one of the founders, Dave's a really cool dude. Like he's very straightforward. He just tell it like it is kind of guy. But uh, their solution for basically foreign exchange on chain, like they've built primitives they call stable bonds, which is basically government bonds from, from various countries that have been tokenized that he uh, sort of explains how that is a primitive for foreign exchange. And I honestly, I think it's going to be huge. Like I think they are same maybe close to this hockey stick type growth curve. Right. Like they've been a little bit more behind the scenes for three years now and they're starting to pick up some traction and I think what they offer is enormously valuable to the ecosystem and I think that's going to be, we're going to see that and it's going to take off here soon. So it's going to be pretty cool. Before we dive into the episode, I'm going to do a shameless plug For Unboxed, um, I run Unboxed. We are a dev shop that focuses mostly on 0 to 1 for founders who have ambitious ideas and need to figure out how to bring those into reality. So reach, uh, out@bunbox.com or hit me up on Twitter and uh, I'm happy to help you out.

Speaker B: All right, let's dive in.

Speaker C: Let's go.

Speaker B: Nothing in this podcast is or should be considered financial advice. Any opinions and thoughts expressed are solely those of the individual. They do not represent the opinions of any entity. Enjoy.

Speaker C: This sort of is an interesting launching pad for me asking the question like, what's the Mexico connection for you?

Speaker A: Um, well, back in the day, uh, there used to be this idea of, uh, choke point. And so what happened was, so I can get started to. This will lead into the genesis of Etherfuse. Um, so some of this may not make sense at first, but we would try to establish relationships with brokerages and finance. And any time it came up that I was a US person, all of a sudden that relationship would dissolve because people were afraid to do business with a U.S. person.

Speaker B: Interesting.

Speaker A: And so I, uh, was like, I have to get a non US ID and citizenship, you know, and I went to two places. We actually did Dominican Republic as well. Dominican Republics quicker. And um, but, you know, that's kind of resolved itself. But uh, you know, we are heavily invested now in Mexico and so I view it as like just, you know, another little tool in our toolbox that I will be end up having the ability to cross borders, no problem and work there and things like that. So that kind of leads you into what, who is Ether Fuse and what the heck are we talking about? Which I'm happy to go into.

Speaker B: Uh, yeah, let's, let's dig in. What the heck are you talking about? What is Ether Fuse? Let's go.

Speaker A: So I'll tell you about myself. Uh, you know, I, My background's computer science. My focus had been up until this point where I no longer longer code as a CEO. I just get, uh, frustrated about not having any insight into it. You know, um, I did cryptography. Uh, I did security. I did network security. Uh, I did like my career started at Boeing. I did PKI infrastructure on the airplanes to ensure that only sign software could load and run on the airplanes. Then I went to Apple and we did the standardization of security across the whole company. So making sure all the tools and all the products signed with the same infrastructure, the same certs or the same management of certs. And um, also network security was up to par. Did that for quite a long time. Um, after that I went back to business school with my eyes set on starting a company. Looking back now, that's probably the wrong approach to start a company is go to business school. I probably should have just joined a startup or something, but it's the path I took. Uh, I met a friend there, his name's Isaac Saldana. He started a company called Sendgrid. It did really well. And so we had capital to start other companies. We started a startup studio together called Joy Labs. And that brought me to Southern California. We came down here to work together. And, uh, one of the companies we started is called Neural Payments. And Neural payments was a P2P payment solution, like Zelle, but for credit unions. Credit unions don't like Zelle because Zelle is owned by the big banks. And so they wanted an alternative. And, uh, uh, Neural Payments is that alternative. They're doing well. They're raising a Series B right now. Um, but my current co founder and I were working on that and just realized how bloated payments was and how impossible it would be to fix. So when we started to hear about Solana and the speeds and the cost, it was like, this is the future. We just knew it. And it was like our Jeff Bezos moment where it's like, look at the growth in this space. Let's build something there. And so we approached it from that perspective. Well, what we thought other people weren't doing that we could do is we could just be very upfront and say, hey, we're going to put securities on chain. How do you do that? And looked in the US and just realized that was not going to happen. Which is really nice to talk about now because it feels like it could happen very soon. But back then it was not going to happen. And, uh, so we looked at. Our hypothesis was like, hey, let's get the biggest nation that, uh, has the most incentives to enable you to issue securities on chain. Because given those incentives, if we work with regulators, they're more likely to say yes then no. And so we looked at a bunch of different places, looked at China, India. We looked at it from the lens of where is cost of credit the highest? Because that's a crypto use case that we solve. Uh, where is remittances the highest? Uh, where is financial access lacking? And those were China, India and Mexico. And so China was no go. They're not going to let us come in and build something sophisticated. India, great country, but also very defensive. I did a lot of Work with them before. It's pretty hard. Mexico just stood out. So we literally just went to Mexico and looked for a lawyer and looked for a way to interface with the SEC there. And uh, we started three years ago, uh, we petitioned the SEC to uh, give us guidance on how to issue securities on chain. We said we want to tokenize assets and we wanna have a token that represents them. We think they're a security. How can we do it? Uh, a lot of back and forth took forever. It was pretty much a year of just um, I remember aj, he was building stuff like blind. But I was just doing like paperwork for a year, you know. And uh, they came back and said to us, hey, we don't think this is a security. Which means you can't enter the sandbox model. And we're like, what? You know, no, I've never heard this. You know, everyone is saying we're all going to jail. These things are securities. And uh, so we actually appealed twice more saying we think they are securities. Are you sure? And the outcome of that is we got fundamentally what's a no action letter from them describing why they don't believe our protocol constitutes a security and how we can operate legally and how we can be regulated. So from that point we've been able to tokenize or issue any asset we want, uh, in Mexico and offer uh, those to the blockchain, which is awesome.

Speaker B: That's incredibly cool.

Speaker A: Yeah, very cool. That's how we got to Mexico. Um, I have no family there or uh, no really background there. Um, but since then we have a company there. We have two companies in Mexico. One that issues the assets and one is that manages customers assets and their rights to these assets for account separation and bankruptcy remoteness. Um, from that point on we sat down AG and I and said, okay, now we can tokenize anything, gold, whatever. What do we really do that other people aren't doing? And so a year and a half ago that was, everyone was doing us stuff, kind of thinking about it. People have always talked about how Solana is going to be the nasdaq, so equities would come there. No one was talking about like foreign currencies or foreign debt. And that is, if you really think about it like this, the primary primitive to the biggest market in the world, which is foreign exchange. So we felt like, hey, we can win this space. So from that point our whole mission has been let's tokenize short term sovereign debt from every country around the world or their cash like equivalents, and let's provide them through the interface of an interest bearing Stablecoin. And so we have launched our first five, which is US Treasuries, Mexican Treasuries, British Treasuries, Brazilian Treasuries and European Treasuries. Um, I almost forgot where I was there. Um, and that is Etherfuse. Our whole product is to provide the primitive of cash like equivalents or the primitive of um, Stablecoins to users so that users can build stuff on top of that. And we only want to be an asset issuer. And so we do that from Mexico. And you know, the further step from a lot of feedback from people is right after we issue them, we register them so that they are registered and tokenized and regulated in Switzerland. So issue them from Mexico and then tokenize them in Switzerland. What is that?

Speaker C: So many questions. The registering in Switzerland. What's the distinction there?

Speaker A: Uh, the distinction is Switzerland has very clear laws on tokenization. So the DLT laws. And so you know where you stand. Where we have like an exception letter from Mexico where a lot of people like institutional players when, when we just had that, they'd go, I don't. What does the Mexican court system mean? Or like I don't know the laws here. So we actually tokenize and register them in Switzerland so that we adhere now to Swiss law. So if somebody has an issue with us, they could take us to the Swiss court system which has very clear guidelines on how, what their legal rights are.

Speaker C: Got it. So it effectively provides a measure of certainty for transparency players who maybe wouldn't buy your stuff normally because they're like, hey, if something goes wrong, I don't know the Mexican court system, I'm not taking you to court in Mexico. But because institutional players are familiar with Swiss law, they, you know, and they can, they can challenge you there. They feel much more comfortable buying your assets.

Speaker A: Yeah, they, they, they have some measure of like understanding how it operates there. And also it's a highly trusted court system. Mexico is a great country, but they do fall quite below, I'd say a normal scale on the corruption index due to narcotics and things like that. Yeah, their court system is actually pretty trustworthy. But so a lot of people just don't trust it for those reasons. And that became a roadblock cases for us. And so a solution to that is now we have two, two kind of not headquarters, but two, uh, companies in both countries. And so this is a common pattern at TradFi, by the way. So, um, UC ITS in the, in the European space where you can tokenize like Foreign debt and stuff like that.

Speaker C: So does, does Switzerland also like agree with the Mexican SEC equivalent? Where, where they basically saying like, hey, these aren't securities or are they viewed as securities in Switzerland? Does that matter since they're not issued there?

Speaker A: Yeah, um, so we have a whole letter on our site that you can look at from our Swiss lawyer describing this. But if we were to issue these in Switzerland, they would like assuredly be securities. So if, if as a Swiss issuer they would have to be securities. But this way of tokenizing foreign products or issuing foreign products, you basically adhere to the foreign interpretation of the law. So they are also tokenized in Switzerland, not as securities, which is an awesome loophole we have.

Speaker B: So this seems um, I don't want to say complicated is not the right word, but it seems very intentional. So I want to make sure I have the full understanding. So you have Etherfuse inside of Mexico, whatever the entity's name is, um, is actually basically gathering and say bonds, for example. You're gathering these, these bonds for Mexican bonds. You are um, holding them and then you're issuing tokens through a, ah, Swiss company that's also like Etherfuse Switzerland we'll call it. And because of the differences in the laws and the court standing between Mexico and Switzerland, the Mexican organization is holding the bonds effectively and holding the assets. And then the Swiss company is actually uh, putting them on chain. And because the differences in the laws of these nations, that's like, that's like how the system sort of works there.

Speaker A: Yeah, and it gets a teeny bit more complicated too. So I'll just correct one little spot. Is we actually hold, we hold the collateral or these cash like equivalents in the corresponding uh, nation. So our British, uh, their gilts, you know, short term treasuries, those are actually in Britain and our Brazilian. Okay, uh, short, they're, they're called LTNs. They're short term treasuries. Those are in Brazil. So those assets are in that corresponding country. But our issuer issues tokenized representations of those from Mexico and then they are registered in Switzerland.

Speaker B: Interesting, interesting.

Speaker A: Okay, this is three years of figuring out the uh, best way to issue these things freely according to like I would say the moat that we have to be able to put these things on chain in defi, um, while garnering as much trust and transparency as possible.

Speaker C: I don't want to lose all of our listeners just talking about regulatory stuff,

Speaker B: but yeah, I was just about to shift over a little bit onto the tech side of it.

Speaker C: I was going to say right. Before we do that, I do have one last regulatory question, which is how does the US Feel about this? Right. Because. Because like, my experience trying to navigate regulatory concerns with elements over, over the last year was like, basically taught me that regardless of where you issue the US Cares and. Right. Like the US SEC cares and could sort of come down on you kind of thing. So I'm curious, like, what are, what, I don't know. How do you manage that relationship? Is it just like, hey, we don't, we don't sell to us people and that's the end of it and, um, you don't have to worry about it.

Speaker A: Yeah. That complexity was in part why we didn't go with equities. But there are a lot of, like, I would say loopholes for sovereign debt. So that gives a lot of trust. But we do avoid everything by not issuing, minting or burning to US people.

Speaker C: Got it.

Speaker A: So we do, uh, according to our lawyer, who's awesome, Aaron Brogan in New York, rad lawyer. You know, um, we can, we can avoid, uh, being under the jurisdiction of the SEC by what we do is which block us people and we don't partner with them or anything like that.

Speaker C: Got it.

Speaker B: Okay.

Speaker C: But then people can still, you know, go trade on a dex and. Right. Like it's an anonymous peer to peer transaction. You don't have anything to do with it.

Speaker A: We don't have anything to do with that. So that might be possible, but I'm not sure.

Speaker B: Gotcha. Okay. I want to shift gears a little bit to the tech side. Uh, so we're developers here. Um, and most of our audiences are technical and our developers. Real World assets. What does that look like to actually put real world assets on chain? Most people in the salon ecosystem, especially developers, they're familiar with how to create a token, an SPL token. You can use token extensions, legacy token program. You can write a custom program, delegate authority to the minting, burning, and all the functionality that is like tokens on chain. How does all of that tech side work for something like real world assets? When you have basically these regulatory concerns in these different nations around the world and different regions of the world, what does that look like on the tech side and how does that work?

Speaker A: You guys gotta have AJ on here because he can go into depth. I can give you kind of like my high level. Since I started, this is the only time in my life I haven't developed at all. Like, I think in the beginning I helped a little bit, but then I was overwhelmed with Everything else. So I am paperwork, I'm a baby now. Um, but you know, aj, AJ and our team has written and James, you may even be able to understand this, explain this for me a little bit more because James has, you know, has some experience with us. Um, but we have this smart uh, contract that keeps track of every asset that's issued and also the rate at which it compounds versus the underlying assets. And so we adjust those, those rates, that compounding rate which is continual on chain according to the updated yields that we get from the central banks of each of these places. So okay, uh, we, we have a contract we used and maybe we want to get spicy here, but the worst decision company we ever made was using token extensions. Um, so we use token extensions on Solana to keep track of the yield and to present that yield to the

Speaker B: user using like the interest bearing extension.

Speaker A: I'm assuming the interest bearing extension. Yeah. And uh, you know, we did that. I think we're, I think right now we're the only company in production using interest bearing extensions like in any sophisticated way. I don't, maybe there's more, but everyone knows me because I'm the guy who complains about it I think. But that really set us back quite a bit. Um, um, but fundamentally how it works from a high level is we have these assets. You can come out like they're a basket. They're not really a basket but they're like a basket of assets all the same thing. And they earn about the same yield. So like 7% but we have an average yield that they earn. And then we update that yield on chain, uh using the interest bearing extension which promotes that. And uh, so you know, on chain they're continually compounding at the same rate, uh, where to the limit the real world assets and the on chain assets yield meet and those are updated weekly.

Speaker B: Okay. And that is that sort of like uh, almost like an Oracle system in a way that etherfuse runs where that's when you are posting whatever the updated yield percentage is that particular week to

Speaker A: chain we actually update the yield on the contract weekly when we do a new issuance weekly. Um, but we also do uh, we also will buy and sell these back to you at the price because the principle also changes price based on the price of that currency.

Speaker C: Right.

Speaker A: So through Oracles we push out our price feeds and our price feeds are basically our promotion of what we'll buy and sell these assets back for according to what the central bank is saying the currency is worth. Um, and okay, interesting. There's a few things and you guys should have AJ come on because he can go into detail. I'm uh, at this point

Speaker C: we can dig into the tech and like you said Dave, I've been doing contract work for, with Ether Fuse for the last month or so and have like some handle on, on the system. But there's, there's a lot there. You guys have been building for three years.

Speaker A: So I think, I don't know James, if you were surprised, I think that if people saw the like yes, this sounds easy right? Like oh, there's an asset build token. The sophistication of our engineering work is really high.

Speaker C: I can attest to that.

Speaker A: It's bigger and it's a lot more than you would think. So like uh, we have. This is now like we finally have headwinds in our direction. Like for the last three years everyone's been like you guys that are nobody. You know, I don't understand what you are. But like the world is starting to wake up and see the value that bringing sovereign debt on chain is bringing, which is nice for once.

Speaker C: You know, let's um, let's, let's dig into that because I, it's like uh, talked a little bit about the regulatory side of things, the tech, but I think probably the most important thing to potential users or anyone who's sort of interested is like what is the long term vision here? What you mentioned these stable bonds as like a necessary primitive for basically foreign exchange on chain. Like paint a picture for me of what can I actually do with this, um, or whoever the target user, like maybe not me personally, but how does this benefit our lives kind of thing.

Speaker A: So first let me talk about this as a primitive for stablecoins and then this is like a genesis for fx. Cool. So when I look at a stable coin, just high level, it's got two primitives. So I give and we'll use circle. I give circle a dollar, they take 75 cents and put it in treasuries and they keep the other quarter to manage volumes, daily volumes to keep liquidity for, for minting and burning. Well, stable bonds is that first primitive, which is the hardest part of stablecoins, which is managing the collateral and those assets in a sophisticated way. So when you buy a stable bond from us, we take whatever you used, we convert it to the fiat of that country and then we buy that asset and you get all that work for free. So behind that is auditors who are continually uh, checking our pathways. You get regulatory aml. So all this stuff that is super complex that you don't see or think about, you get for free. So if you're just a team of three people who are engineers, you can launch a uh, regulated stablecoin in that currency. So as an example to demonstrate this, because we hoped people would do this without us having to communicate it too much, but we did this ourselves where we went to the US and we talked with Braille, Braille XYZ and we said, brel, you're a stablecoin issuer. I want you to know that you can now issue Mexican pesos regulated in the US as a US Stablecoin, which without us is impossible. But now Braille uses stable bonds as collateral to issue mxne. And MXNE is a Mexican peso. It carries that weight and they still have the, the, the yield as the, a revenue model. Well, you know, it's a partnership so we, we share it both. But since we have launched mxne, it has outcompeted anything in that space. It outcompetes tethers and outcompetes BITSO by like 200,000x daily. And that's because there's reach there. So one of the biggest things we can do is we can give you a clear regulatory environment that you have. You're in Switzerland, you're in Dubai or wherever, but you can have well regulated assets and collateral for free. We don't charge you to mint or burn, but you get that out of the box. So in the future as stablecoins start to take off, people trying to find ways to solve this thing we've solved is like a waste of time. Our fees are so low that you might as well just use us and focus on your problem.

Speaker C: So theoretically virtually anyone, um, could create a stablecoin backed by one of the stable bonds that you offer. Right. So um, British backed stablecoin or Euro backed stablecoin, um, Brazilian tesoros backed stablecoin kind of, kind of thing. And they, and they wouldn't have to worry about the massive amounts of uh, regulatory burden and off chain work that say circle or tether does to manage assets. Right?

Speaker A: Yes.

Speaker C: Because it's like if you're based in uh, anywhere that's not Mexico and you want to make like a peso backed stablecoin, you would normally have to figure out, well, how do I buy the, the Mexican treasuries that are going to yield in denominated in pesos that make it so that I can feel comfortable, you know, providing the stable coin and doing the on and off ramp back and forth between them. And you're saying, look, we've solved that. Go build on top of this, the

Speaker A: on and off ramp for free. Yeah, so we've solved it, you know, and if you wanted to do that, like, we'll just go through it. Okay. For Mexico, because Mexico is our most proven use case. If you wanted to do this, you'd have to set up a subsidiary in Mexico. That would take years, all, all sorts of liability. Then you'd have to find, you'd have to tell them your business model. So anyone who wants to partner with you has to understand the legality behind your business model. So you got lawyers back and forth in both countries and then you have to get them to agree to it. So you have to have these huge volumes like the 5 million it takes to start a brokerage account in a sophisticated brokerage. The overhead's insane. And so for you to want to do that, to provide multi currency bank accounts for your users is not worth it. Or to provide a stablecoin that keeps track of distribution, it's just not worth it. And so that's the fundamental, like the first use case for stable bonds and like this ecosystem. So for you to create a wise app or wise, like experience on Solana, it's trivial. Now, uh, you can compete with it directly using stable bonds. The second use case is how do we make, how do we really make FX cheaper? Because FX is so bloated and full of like costly fees. Like the fees aren't justified, you know, is, is how we feel. And I didn't mean to cut you off if you have something to say, but, um, defi is the place I, I have this phrase, I say it's kitschy, but I say it's a moral imperative to bring FX on chain. And what I mean by yeah, yeah, put it on. Let's do it. Yeah. That's the new ibrl. That's my, that's my M. Ibrl. You know, it's a moral imperative, bring FX on chain. If you look at, and we'll use Mexico because we understand the most, but this applies to the whole world. Um, if you look at the pathway of the US to Mexico, it's one of the most sophisticated remittance pathways in the world, meaning it should be the most highly optimized. But if you're just like a person sending money to Mexico, it can cost you up to 700bps. That's like you're dumb about doing it. If you wanted to get smart, you could go to 300 bips using Web2 or traditional routes. If you use stable coins, you can go down to 100bps, uh, for FX and off ramping. If you use us, uh, on and off ramping is free. And so now we only have to worry about FX. Well why is FX so expensive? It's because you have uh, about 30 players who contribute to this network and they hold liquidity to facilitate this on both ends. This liquidity is dead, it's not earning yield. So they have to pass on the fee of holding that liquidity to the user. So it's got some costs. And when you have a pathway where it's not balanced either, you have all sorts of pressure where like from uh, the U.S. i end, I send dollars and I end up with pesos. Now I have a ton of pesos on one end, so I have to rebalance that out and rebalancing it cost fees, it makes things more pricey. And this, this dead money doesn't earn yield. So stable bonds are a synthetic representation of an interest bearing asset in the local economy. So if we move our usdtry, which is our US pair and our sates, which is our Mexican pair on chain, you have uh, def equals trade size over fee, right? So for me to get 10 bips, if I want to trade $10,000 I need a pool of 10 million. That's nothing, that's super small compared to what TRADFI is. So getting A pool of 10 million on Orca is very trivial given that I've now made the graph or the network size of remittances from 30 players to the world, 80 billion, 8 billion. And so I think that DEFI just is a better marketplace to serve users and uh, to reduce fees then. And it's a, it's a better technology for this. And so the second use case we are facilitating is by bringing FX on chain. So bringing stable bonds on chain. So FX can be cheap or near free and that'll make money movement across the world, uh, very, very awesome.

Speaker B: So you, yeah, that's a good sound bite too.

Speaker C: You're, you're basically saying that hey, if you're, you know, if instead of using fiat pesos and fiat US dollars, you use MXNE as an example, right? And um, USDC trading between those, there's enough liquidity on chain because we're crowdsourcing globally instead of just like oh, does this institution, I don't actually know how it works, but does Western Union have the liquidity depth for this to be low fee instead it's like, no, we've got Liquidity depth, uh, crowdsourced globally. And so we can basically have close to zero slippage converting between MX and usdc. And then the underlying between either of those for on and off ramp is, is effectively free because it's subsidized by the fact that these are backed by, by yield bearing, uh, assets.

Speaker A: Yeah, I don't have any like waste or dead money that I have to trade around.

Speaker B: Right.

Speaker A: I have an asset in a custody in that local area. So when you off ramp it, Etherfuse sells it and moves it to you. So there's no like I'm not paying anything to do that. There's no kind of supply curve of these fiat currencies I got to deal with. And so we're not there yet. Interesting. You can see how this is the answer. Right. And I've been like crying telling people this for three years, you know, but we're finally starting to see people get it and so you'll hear a lot from us here pretty soon, you know. So how close is it?

Speaker C: You say we're not there yet, but I happen to know that you guys have a very robust system in place and like. So how close is this eventual future?

Speaker A: Uh, I think within the next 18 months, uh, I think for the five assets we have within the next 12 months and we will demonstrate those capabilities and then add the rest of the world's assets and uh, we'll bring forex on chain so very, very soon. Um, and I think it's hard space for people to like even if you knew exactly what we've done or you knew more than us, for you to do it execute, you're five years out. So I think Etherfuse is going to bring this to defi within the next

Speaker B: because you guys have been doing it for the last three or so years, you said so you have that sort of emote in a way where it's like you've already gone through all of uh, this regulatory rigmarole, uh, bit of a mouthful there, uh, just to get to this point and now you're able to put all of these on chain. This is so cool.

Speaker A: Yeah, yeah. Uh, it's been fun, it's been tough. And one of the downsides though is crypto has this weird ecosystem where everyone hangs out at these Singapore, Dubai, New York. Well the problems exist in Mexico, in Argentina and so we're there and people there know us, but when we go to the events nobody knows who we are. And it's kind of, is just a weird set of irony, you know, like Dang, guys, we're really doing something cool. Like uh, yeah, uh, I wish we, I wish we could get a little more attention. But that's probably our fault because I'm not the best tweeter in the world. But I think that one of the

Speaker B: unfortunate things about the, the crypto world, like if you're not constantly beating the drum on, on crypto Twitter, then it's like, uh, what a slog. Build cool stuff. You have to keep talking about it on Twitter.

Speaker A: Yeah. And VCs don't like, I need to hire more so that I can tweet more. You know, it's not the best.

Speaker C: Like uh, that's not what interested VCs want to hear.

Speaker A: Why are you hiring ahead of BD? Well, I just need to tweet and yell at people more.

Speaker B: Well, okay, so uh, we're getting pretty close to time here. So like kind of on that note is like you've mentioned several times now that like sort of the mechanism of like how and why it can be so cheap for anyone to do basically on and off ramp, especially for um, something like pesos. How is it that um, RWAs in general and then Etherfuse specifically is able to actually make it that affordable? Is it purely just because of holding those interest bearing assets? It's not that dead liquidity you have, say Mexican bonds, they're earning whatever percentage and that percentage yield you're partially distributing to the holders of the bonds on chain, the tokenized assets on chain, and then Etherfuse keeps a portion of that. And anyone you partner with like you described, is it purely like that, straightforward?

Speaker A: I think part of it is just, it's the. So there's two reasons. One is what E3 is doing, which is part of it. But the other part is DEFI is a better technology for this than traditional means. And I'll explain. I have a small network size managing the remittance pathways between the US and Mexico today. And all this dead money requires a fee for me to be profitable. So big players in this space pay higher fees. So those with more money and more value and move bigger volumes, they actually pay smaller rates where smaller players pay higher rates. And so I would say this is inefficient in that it inversely solves according to needs. Right. So people with a lot of wealth pay less and people with less wealth

Speaker B: pay more because they're doing quote unquote in bulk. They have more volume.

Speaker A: In theory, yes. Well, the way DEFI works is the smaller your trade size, the less you affect the supply curve. So it's cheaper for you. And so part of the reason is most of the trades are small. And so if we just move it to Defi, it's depth, you know, depth size trade equals trade size over feed, right? And so if my trade size is smaller, I require a smaller depth size and my fee is also smaller too, you know, so if I, if, but uh, if my depth size is huge because everyone's using this pool, my trade size is still small. And so part of the design of defi is the reason this is cheaper for fx and it gets to the point where it goes to near zero. Right. The other side of that is stable bonds remove pressure. So an interest bearing Mexican treasury is comparable to an interest bearing US treasury because they compensate for that risk through higher yields over a 20 year period. I think safety is outperform US treasuries, they just have a lot of up and down in between. So you can imagine if I have to hold pesos, I have to charge for that risk. Well, if I'm holding state days I probably still have to charge for some risk, but it's a lot less. So we reduce that dead weight, right. And then there's no dead money. It's an interest bearing asset. I just sell it, I don't have to move. Um, there's no supply curve, there's just levels of buckets that I'm managing in each country. And so I can have zero, that's not a problem. Or I can have 100 million, it's not a problem on both sides. It doesn't matter if I have more US Treasuries than Mexican Treasuries where if I managing a supply curve to promote the liquidity needed for fx, that's a huge problem. And there's a lot of fees and I got to pass that on to the user. So we don't have that problem.

Speaker B: Gotcha.

Speaker A: And the blockchain solves it. It sounds cliche, but the blockchain solves.

Speaker B: Gotcha. Oh that's. Yeah, I'd never thought about like the, like the sort of traditional defi liquidity pool. Sounds like an odd statement to say. Um, like yeah, it definitely has that sort of balancing mechanism where especially if you have people that are doing a lot of low uh, ticket size, low value size at a time and it's like a large enough pool, you know, you have zero minimal slippage if, if any. Like.

Speaker A: Yeah, yeah. And, and that's a, that's better. That's a more efficient market in my opinion because it serves the needs more appropriately. Where when you have a smaller network size and you have like these gatekeepers, so to speak, or inefficiencies, that's the way you solve the problem is you collect a bargain big amounts with bigger players and you get your fees paid that way.

Speaker B: Amazing. So you guys are in uh, you said five markets right now. It was, what were the markets? It was Mexico, M. Brazil.

Speaker A: Yeah, Mexico, Brazil, Europe, Great Britain and the U.S. amazing. And so yeah, if you guys want to see us take off, buy some stable bonds, go to. Well, you guys, they are on Orca, not issued by us, you know, but they are there. There's liquidity there. And uh, uh, I think we're doing our best to integrate with some key players here. Um, maybe Camino will hear this and move a little quicker. But we're working with them and working with loop scale. Um, if you do looping with our products, you can, you can boost some awesome yields. So there's really cool things you can do with us.

Speaker C: Well, like, I mean you, you mentioned, right, that non, uh, U.S. governments usually will provide higher yield for, for their bonds to compensate for their um, currency risk.

Speaker A: Yes.

Speaker C: Right. So like, I haven't checked in a minute, but I think last time I was on the Ether Hughes site it's like cites were like 9% or something and, and, and the Brazilian one was like 12 or 13% which of course like you said, there's currency risk here where it's like if you're thinking in dollars, the underlying value of this currency is fluctuating against the dollar. And so it's not necessarily the equivalent of a 12% yield on a dollar. That being said, if you have a long enough time horizon, Right. That kind of evens uh, out and especially if, I don't know, there are people who are forex traders who are like trying to capitalize on this already. And if, if you're providing a, a, uh, more efficient pathway for them to go back and forth and capitalize on, on arbitrage opportunities between currencies like that. That seems huge. Not only because of, you know, you sort of talked about the moral imperative of bringing forex on chain where presumably what you mean by that is we're helping people who are transferring smaller amounts and shouldn't be paying more.

Speaker A: Yes.

Speaker C: But it also could be more effective for like the, the institutional traders who are trying to capitalize on arbitrage opportunities between these countries.

Speaker A: It's way cheaper. Yeah, yeah, it's way cheaper, uh, even for them. And part of that is because the network size of LPs is hot is bigger, you know and there's just, it doesn't require a lot to send $10,000. You know, you only need 10 million and so that's not at all how it works today. You need millions and millions sitting in banks, uh, uh, to be able to facilitate anything. And uh, I would um, yeah, I think it's a great solution. We do. There's a lot we have to do to succeed uh, effectively and um, um, like you said, uh, a lot of these, these are not denominated in US Currencies. Uh, right now the dollar isn't doing too well so the Mexican peso is actually outperforming the US dollars. So you are getting like 9% but you're also getting the uh, the performance. So I think M Satay is probably hitting like 18 to 20% right now based off the. So if you want to trade next time you hear Trump say Mexico's getting tariffed, you can make money off that on chain. That's a good strategy.

Speaker C: I like that.

Speaker B: So it's going to be, I don't know like every like five minutes then.

Speaker A: Exactly, exactly. We, we are seeing more activity on other chains I'm to. Unfortunately we're seeing a lot of arbing on uh, aerodrome, uh, on base right now. We're seeing a lot of lending on Stellar. We hope to see that here on Solana here pretty soon.

Speaker C: Cool, cool. Uh, any last minute things that you want to tell our listeners while you've got their attention?

Speaker A: Check us out. Look at our regulatory uh, structure uh, you'll see and use us. So I think if you're in the stablecoin space, we have a lot of value to add right away and uh, we solve a lot of problems for you. So we solved the stablecoin sandwich problem. So use us and let me know if you have any questions.

Speaker C: Nice. So people can just go to either if they want to get new issuances or go to a Dex if they're more comfortable with that.

Speaker A: Yeah, Yep, exactly.

Speaker C: Cool, cool, cool. Well thanks uh, so much for joining us Dave.

Speaker B: Yeah, thanks a lot Dave. This is awesome.

Speaker C: I think you guys have a ah, really cool solution. Right? Like um, I've been lucky enough to get a firsthand look at your system from an engineering side and like you said it is incredibly robust and there are a lot of moving pieces uh, that solve I think a lot of problems and uh, it's really cool.

Speaker A: Awesome. Thanks everybody. Thanks Solana Ecosystem.

Speaker C: All right, uh, to the listeners we'll see you all next time. Thanks for joining.

Speaker B: Bye. Bye. All right, thanks for joining us for this episode of the Sulfate podcast. I hope you liked it. I know we did. We always have a blast recording with our amazing guests. If you've got a moment, please leave us a review in your podcast app or subscribe on YouTube. And I guess it's, uh, time to get some more coffee and get back to work.