Leo Cheng, Co-Founder at C.R.E.A.M. Finance Explains the Iron Bank in C.R.E.A.M. V2 – Ep. 25

Welcome to the CoinGecko Podcast. For today’s episode, we have the honour
of welcoming Leo Cheng, co-founder and project lead at C.R.E.A.M. Finance. I first met Leo from a DAO that both of us
are in – the Metacartel Venture DAO. Leo is super deep into crypto, DeFi, DAO and
has great insights and I am very glad that Leo is able to join us here today. One interesting fact that I learned about
Leo prior to this podcast was that Leo is also an electronica DJ who performed in Burning
Man. I actually listened to his Burning Man playlist
when preparing questions for this podcast. So, without further ado, welcome to the CoinGecko
Podcast, Leo! Yeah. Thank you very much. Thanks for having me. I've been a big fan of the work you guys have
done here in CoinGecko and it's an honor to be here. Yeah. To kick things off Leo, maybe let's start
with a simple explanation of what is Cream Finance and when do you guys start working
on Cream? So Cream is a peer-to-peer lending protocol,
started off as a peer-to-peer lending protocol.

We worked on this, started in about July or
so. So it's been little over six months now and
it's been a fascinating ride. I think we've gone full circle from lending
protocol, useful DeFi Legos to other explorations and now back to purely focusing on lending. So, I mean, you guys started out as a lending
and borrowing protocol, right? I think the go-to market strategy was Compound
was kind of the leader in the space, and then Aave, but the kind of assets they were accepted
on Compound are very limited. Aave is a little bit more broad but I guess
you guys were thinking of trying to be more broad with the kind of asset that you guys
accept on Cream, right? You guys started out by forking the code base
Compound, I suppose.

Why not Aave instead? Yeah. So I think very similar to you guys at CoinGecko,
you move very quickly to, you know, through the DeFi summer, the needs of the DeFi users. We took a very similar approach, right? Look, if you're in DeFi, what do you need? Much the same as if you're in DeFi, you probably
need a bunch of tokens listed quickly and not have a real formalized like, well, X,
Y, and Z takes some amount of time to get on because users need to know. From the same way we started off thinking
about what are the kinds of things that DeFi users need as a bunch of DeGen farmers ourselves
and the team.

You know, we look at this and we go, "Hey,
we now have these tokens. Why don't these things exist?" And it really all started with why can't you
yield and leverage these coins. And, you know, and then we started thinking
like, "Wait, why not like if you're sitting on a bunch of, you know, XRP, LTC, et cetera
coins, I can't participate." Why can't you? We looked into this a bit. we looked into this a bit We thought, "Hey look, Binance Smart Chain
is an interesting place. They prepared a bunch of tokens and let's
do something about that." So really some of the idea originated around
Binance Smart Chain, where we could do with the some of the things that are there. And then we started thinking Compound's a
very useful battle-tested protocol. I mean, so is Aave now but I think back then,
six months ago, we took a look at this and thought, well, Compound's been around much
longer relatively speaking. I don't know that DeFi is all very young,
but billions of dollars have had transited through Compounds.

We have a lot of respect for those people,
those team over there, Robert, Compound labs, Calvin and that whole crew. And we thought that in the battle-tested smart
contracts never really had any problems, billions of dollars flow through it. Like that's the one that works. So that's what we went with. Yeah. It makes sense. Kind of forgot like, I mean, it seems like
Aave and Compound existed for a long time, but if you think about it, Aave is like only
one year old now. I mean, after its rebrand from ETHLend, right? Yeah. And new launch was roughly six months. So yeah, it makes sense why you guys chose
Compound now. And how many tokens do you guys accept as
collateral these days on Cream and how do you decide which collateral gets added? And also, I remember like a few months ago
there was kind of like an FTX related token that was kind of added onto Cream, but with
very low liquidity, but turning out that it could be a systemic risk to the whole Cream
ecosystem.

Maybe you can talk a bit more about that as
well. Yeah. So the strategy overall is to be on the V1
now. And I guess we could talk about V2 a bit later
since the merger with Ethereum. But V1 has always been, our colleagues over
in the United States in the crypto space are very much hampered by the lack of regulatory
clarity, which is the reason why I moved out of San Francisco here to Taipei in the first
place. And without that impediment, you could say,
we're more like a, like a Binance to a Coinbase, where we could be a little bit more liberal
with how we think about token listings. We don't need to worry as much. And that's the approach we took. We wanted to be the long tail of tokens that
are useful. And when we thought about initially, when
you think about this whole thing, like, you know, I guess a history of our thinking here,
other than saying, "why can't we borrow and lend these tokens?" You know, we also thought about LP positions
like yCRV and now yUSD.

Why can't we then build these things that
people want to use? And we kept building on the things we want
to use but as it relates to token listing, initially we had, before we spun up the governance
process, we basically listed very aggressively, very quickly, tokens that needed to be listed. Sushi came very quickly for example, top of
mind. That was like, look, it's highly relevant,
people want to use it, let's open the market. And we did that for the stablecoin LP positions. And so that's how we thought about it. And then, so after we established the governance
process allowing Cream token holders to vote, then the current process is that you need
to go through governance to vote. The specific thing about FTX's FTT token,
it's controversial from the standpoint that there's not as much on-chain liquidity as
what may be optimal for the amount of tokens are on there. So the risk is one where, should FTX token
holders deposit a bunch of FTT tokens and they borrow out a bunch of the other assets.

And then they basically, you know, you can
see a scenario where the token gets taken out and the FTT, if it becomes worthless,
then that's a risk of the system. That is a systemic risk. I don't think that's a wrong argument, but
the other side of it too, is like, I think this is where the credit analysis portion
is interesting and necessary and that, we get that FTT token holders and Sam and that
group, there's a lot of fun around this stuff. And they're after billions of dollars, practically
speaking. They're not here to rug Cream for a few hundred
million dollars. Come on. Like they got better things to do. With that said though, on-chain liquidity
and lack of on-chain liquidity liquidate is a risk and we want to fix that. So we've actually recently added a supply
cap function onto a smart contract, so that tokens can be limited as to how much can be
used as collateral.

And we're also looking at other ways to provide
safety valves. In this long tail of token listings, we've
built past what Compound is designed to do. They never intended to list that much tokens,
as far as I know. And that we needed to kind of adjust this
fork in order to do that, which is why we come up with ideas like the supply cap. And now we're working on a collateral cap
to further the safety piece. In addition, we're also building Tokenomics
to help backstop some of those potential risks. We're working with Cover to, I just got off
the call with them this morning to think about ways where we can provide beyond just smart
contract coverage, what else we could do to provide better coverage for those that have
interest generally.

Oh, very interesting. Yeah. I'm looking at the list. There's so many tokens. I think that's like close to 40 tokens right
now, on Cream. Wow. That's a lot indeed, like, probably like the
most diverse lending and boring protocol around. And you mentioned earlier just now, that you
guys, kind of the idea came about because of the Binance Smart Chain ecosystem. Do you guys launched on BSC or Ethereum was
the one that you guys launched first? What's the story here? Yeah. So we've launched on BSC as soon as they're
ready. And we launched on Ethereum as soon as we
were ready. So we launched on Ethereum before BSC because
by the time we launched in Ethereum, our contracts were ready to go. And we were DeGen farming on Ethereum or like,
you know, we want to launch this on BSC, yes. But we can certainly use it on Ethereum as
well.

So that's why we launched first on Ethereum
and as soon as BSC is ready, we launched there as well. Definitely the, I think when we think about
alternatives or, well actually a little bit interesting thought process there. We still think about, I guess, layer two options
or alternatives of the Ethereum based on the amount of available assets. Look, if you have a very fast chain and very
good capable technology but you have no assets on there, it's not that useful right now. So we look at BSC, the use case, even as EVM
compatible, you know, if you're on app.cream.finance and you have the custom RPC set up for BSC,
you can easily switch from Ethereum to BSC and pay a lot lower gas, but certainly the
amount of liquidity is not as deep on BSC or anywhere else compared to Ethereum.

And that's kind of the trade-off. And what do you think about Polkadot and Serum? I mean, Sam is pushing Serum heavily. And this is kind of like, I would say the
year where it's interesting to monitor whether it takes of or not, there's some professional
market makers in the space. Polkadot, we got the parachain launching this
year. Probably going to be interesting year as well. Are you guys thinking of launching on these
chains as well or any other chains? It's something that, we love Ethereum, we
have a lot of backers in Ethereum and that the ecosystem work are Ethereum heavy. That said, we're also not very much "Ethereum
only" as you can see with BSC.

We're evaluating other chains for sure. But our current focus is on specifically on
lending and how to evolve lending on Ethereum while looking at how to, at some point, once
these other products we're building can be leveraged on the other chains, we will do
that. But I think right now, focusing on lending,
making sure lending is more secure and it's more efficient, more capital efficient, generally
speaking, across the various things we're doing. And then we'll continue to deploy to other
chains where it makes sense, sufficient amount of assets, sufficient amount of liquidity
that we can go. So currently expansion beyond BSC is sort
of a wait and see at this point. Yeah. I agree with you. I think for all the other Layer 1 chains,
I think Ethereum has got enough users. There is some network effect on Ethereum but
every other layer 1 chain, be it BSC, Polkadot or Serum like, it's kind of a wait and see
thing like, if they can attract users, then yeah, everyone's going to move their liquidity
or whatever but it's going to be tough, like tough competing with Ethereum.

Yeah. Right. Definitely. Let's get back to the lending and borrowing
protocol category, sector. So let's talk about how competitive this landscape
is. It seems like Compound and Aave has completely
dominated this sector. Do you think that, I mean, you guys came in
like trying to compete, I suppose you guys are number three in this space? Yeah. Do you think that it's possible for another
player to give Aave or Compound some real competition in 2021 or do you think that these
two guys have pretty much firmed up the market and no one else can compete against them and
it would just solidify their lead further and dominate things further and so on? I think that's a very interesting question
in that crypto moves very quickly.

So it's very hard to predict and say anyone
is particularly the solid winner. I think that right now, Aave and Compound
are clearly way ahead in the space but at the same time, the competition is interesting
in DeFi generally and specifically within the lending space. I think it's actually great and very encouraging
that both Stani and Robert had been nothing but just encouraging and helpful to us. Despite the clear overlap and some competition
here, I think that in the near future, I think that Compound and Aave, they will continue
to dominate this peer-to-peer lending piece for sure. But as we shift our focus into more of a protocol-to-protocol
lending in the Iron Bank in the V2, I think that positions us slightly differently and
not as directly competitive to these two protocols.

But I, I think that the lead that these two
teams have; the knowledge, the liquidity because liquidity type thing, the fact that they've
been around for a long time, welllong time relative crypto and not really seen any serious
failures, I think that credibility will help them a long way. Yeah. I think Stani's interesting in that he positioned
Aave in such a way where it started out as a, like literally peer-to-peer lending protocol
where, it's kinda like a local Bitcoin but for lending and borrowing but he kind of transition
it into a liquidity pool once he saw that model would gain more traction based on what
Compound is seeing. And then he can kind of innovated and kind
of put in place, Flash Loans. Yes, very innovative. Do you guys have Flash Loans on Cream? We do not, but I think it's a good innovation. We have used Flash Loans for liquidations
through Keeper. I think that Flash Loan is a key piece of
innovation in DeFi.

And I know a lot of people don't like it because
of the kind of economic exploits they can do, but just like any tool it could be used
for good or evil. You know, when I think about lending and where
the various players are, I know that given that crypto is very borderless, generally
speaking, I also, I was having a conversation with a friend yesterday about this. And it does seem like Compound has that North
America based Silicon Valley thing. And then, you know, Aave has that UK, European
thing with Stani also being European. And then I guess that puts Cream too as like
the Asia lending play here. And we're okay with that. We do have an extensive community within the
Mandarin speaking and the Korean speaking community. We're expanding on that bit. We think we've got some of our supporters
are building more stuff out in the Japanese market. I just did a recording recently for the Japanese
market too. As it relates to that part too, I do wonder
if the peer-to-peer lending side, is kind of like culture, language communications,
would play any part to do with this.

It's possible. But I think for now people just, smart contracts
talk to smart contracts. Things get localized. And languages, maybe not so much. It's interesting analogy you brought out about
how Compound's very, I mean it's based in the US so they get alot more American mindshare. Then Aave has the European mindshare and Cream
is like quite well-positioned for the Asian mindshare. Yep. Makes sense. And I know that we were talking before this,
that there's a lot of collaboration that takes place between you guys at Cream and Compound. This is quite in stark contrast with what
we're seeing with the Sushi versus Uniswap, where there's quite a lot of angry debates
on Twitter between Aiden and the SushiSwap devs. So maybe you want to share a little bit more
about some of the collaborations that you guys do with Compound and the team? Yeah.

Yeah. So I think this is a very interesting story
to share is that what really happened here. Some people say, "Wow, you know, you guys
work with Compound and that's great!" We weren't the first fork of Compound, but
certainly we were the fork that, my understanding is that we communicated more. And that initially when we had our conversations
with Robert, it was about like, "Look, we should be attributing Compound's code." And we've no problems with that. So we never forked it and said, "Nah, this
is all ours." We've very explicitly said in the, even our
first blog post "this is a, you know, the work came from Compound and team". We, we never once took credit for the code. When they notified us or like, "Hey, look,
you guys should be attributing us.", we did. Then we got on the call and then the position
was like, "Look, you guys built this thing.

You should have some of these tokens." So we offered up basically at that time, 25%
of the team tokens to them like, "Look, you guys were the original builders of the thing. You deserve this." Like, we want to give tribute back to the
people who built this thing. And they said, "Look, we're not going to take
it for free." Like, "Okay, well you want to give stuff back
to us? Great!" Well, what do we need from Compound is we
need them to make sure that we're doing this safely.

So there are security technical advisors. And so now they have, you know, they, the
team have taken, we've given them, their share of the tokens, but what's really cool here
is that when we had this one, two, three, four years staking pool for long-term Cream
staking, they went ahead and dumped up the first two tranches of what we sent them into
those pools. So over the long period of time, they're going
to be, my estimates, like roughly 10% of the token ownership, which is huge. But the collaboration though, we have ongoing
conversations with them.

We have a channel on the Discord. We talked about like, "Hey, what do you guys
think of this? Here's this thing. And you know, what are the risks of adding
stuff that rebates this, et cetera?" Like we have technical conversations with
them. Recently, one of their devs helped us when
we implemented the supply cap. Our dev team last week, fix this and just
this week submitted a pull request to the Compound code. So, you know, whether they accept it or not,
whether they find it useful or not, it's okay. We're proud that we, A, shared in the upside
with the team that originate the code and B, we contributed back to the original code
base where we forked from.

And I think that's actually a much better
model where value is shared both in terms of the token, the governance that they care
for us, and then may any kind of monetary upside. And two the technology, the pull request upgrades
of the protocol, I mean, I think that's a great way to collaborate. Wow. I didn't know that you guys took 25% of your
team token and share with the Compound team. That's a big thing to do, like very generous
of you guys and not many forks do that. They all very stingy and they want to keep
everything for themselves. Well, I, I would also say that we probably
wouldn't be where we are today without their help.

So even without the original code base, but
even with the original code base with, or without their consent, obviously that's within
fair use, of course. But beyond that, I mean, you know, I think
this is where being giving is helpful in this space and they too, they too were being super
giving, you know, and that you will find zero smack talking between the two protocols and
Robert has been supportive all the way and his team.

And I can't praise them enough for what happened
here. You guys gave it to the Compound foundation
or to the individual developers in Compound? Is it vested, like this 25%? It's structured in a way that's basically
given to the Compound Labs, the developers that built this thing, but ultimately it's
up to the discretion of that team, what they do with it. I certainly welcomed them into our governance
discussions and that they have been helpful, less overtly. I think that they've been super helpful with
just the advice they've been given.

Very appreciate it. Yeah. I mean, I've never, I never really hear of
like forks giving, like some of their tokens to the original team. Like, they always very like, take all the
work that the earlier guys have done, put a token in it, keep all the tokens for themselves
and then kind of compete against the original one, right? So this is the first time I've heard of forks
giving out tokens. So, I mean, kudos on you guys to do that. And I see how you guys did that, the incentives
are align now. There are things that you can do that the
Compound team couldn't do and they also want to push things so, but I see where things
are coming because they are hampered by a lot of the regulations in the US, I supposed. Right, and you know, as far as we know, they've
not sold anything, They've just been supportive, they helped. And from their perspective, my thinking here
is that they're probably looking at us going like, "wow, these are things that we kind
of want to try out and good on you guys to see where this protocol can go." And we're hitting, you know, design challenges
that I said earlier, not meant to be used this way, but that's okay.

And then with the help now of Andre and the
Yearn team, we're expanding beyond the original scope of what Compound code is doing and certainly
happy to continue to contribute to the original Compound code base. Yeah. You brought out Andre and the Yearn team,
right? So in November, 2020, you guys announced sort
of a merger with the Yearn. To me, I mean, "merger" seems like kind of
a too big a word to use. I mean, partnership is probably a better word
to use, but maybe you might have a different perspective on things but there was no token
swap and all those things.

So, but tell us more about this "merger" as
you call it with the Yearn team and there was a bunch of other mergers in the YFI ecosystem
so, share a little bit more with us. It all happened very quickly. And I think that it's been a very positive
thing. So Akropolis, Pickle, Sushi, Cover, us all
in there. I think the story that's not told enough is
just how much elaboration there's been within the teams. The teams are super helpful.

We have a Discord within the ecosystem. That's specific to access only for the people
in the ecosystem. There are countless Telegram working groups
between the ecosystem partners and that together, we have a bunch of the pieces, where I did
publish a thing on a tweet called DeFi Voltron and that whole idea that we've got all the
pieces in and then create an automation robot that is now more powerful than the parts by
themselves. And allows for focus and allows for specializations. For example, one of the things we're talking
about recently is, well, it's already there, we're trying to figure out how to deploy it
better. It's like, we're listing something like LP
positions. So actually this might be the first time we're
disclosing this publicly, but yeah, we're, we're listing LP positions on SushiSwap and
Uniswap because they're valuable collateral. They have liquidity and people want to be
able to do things them. And, um, in that way we debated inside the
team like, and we've built this out, actually the ability for a user to stake the LP position
and then perhaps automate the farming of Sushi and then turning it back on the xSushi.

So as a depositor, as a supplier, you might
put in a Sushi-ETH LP position deposited and then you might go ahead and leverage on other
things, Bitcoin, Ethereum, stablecoins, what have you. And then when you do withdrawal your tokens
from the LP positions, you're going to get with you xSushi. But now the question is, what are we, are
we a lending protocol? Are we a yield optimizer. So it's like, no, no. We might want to leave that for our colleagues
at Yearn to do this. The specialization is that we can specialize
on the lending part and we're pushing all the AMM stuff we built from forking Balancer
code into SushiSwap.

Here, take all that liquidity. We don't want that TVL because we want to
focus on lending TVL and you guys are the AMM of the group. You guys go do that. Now, I think the debate about merger versus
partnership, I don't think protocols would easily give it up this fast if it were "a
partnership". But in this merger scenario, we're constantly
talking with the various different partners within the ecosystem, as well as, like Alpha,
they work really closely with us. They're not officially part of the Yearn ecosystem
merger, but they're definitely a strong partner. But within the ecosystem members, we talk
all the time. We have calls within the ecosystem partners. We ping each other within the ecosystem. For example, when the Iron Bank came out,
you know, the question came from some of the communities, "Well, so is insurance going
to cover Iron Bank?" And we just went to that part of the discord,
ping the team, "Hey, just want to clarify.

This is covered, right?" So, "Yes, it is. Go ahead." Like, great. So the merger, though there's no real like
stated within the treasury of the token goes here in a traditional sense, what you're seeing
now, there's some of that going on. For example, we've given two grants to Yearn
strategists and then there are other discussions as to how to tie the Tokenomics together. So back to the merger versus partnership piece,
I think just because the Tokenomics haven't been sorted out fully yet doesn't mean that
it won't be in the future. Okay. I see where things are going now. It's kind of announcement and figure things
out as you go along, right? Yeah. Yeah. And the ecosystem's already collaborating
like a whole fully functional team. And that's true. In your previous answer, you mentioned a little
bit about LP tokens, right? So one of the things that I think will happen
this year is that at this point time, lending and borrowing protocol is like Yield, like
you guys Cream, Compund, Aave, you only accept tokens.

You guys don't accept LP token. But if you think about it, if you accept WBTC,
if you accept ETH, there's no reason why you can't accept the WBTC-ETH LP token. That's right. Because it is the same thing. It's just wrapped in the LP token. And then you can kind of locked it. So are you guys planning to kind of do LP
tokens? Yes. Yes. We're launching LP tokens in probably another
week, two weeks maximum. The thinking here is that, going back to the
original kind of design principle, we are DeFi DeGen people ourselves. And I look at these LP positions I have and
I think it's great that I can, well, I am biased for Sushi over Uniswap, for clearly
they're part of our team now, so, but besides that, you know, whether it's Uniswap or SushiSwap
tokens, you have this liquidity, that's sitting, for lack of a better term, idle.

Now of course, when you do put it into the
Cream contract, you have an additional smart contract risks associated every time you put
it [inaudible] in somewhere else. Uh, but it's no different than putting your
ETH or USDC or whatever it is into Compound. So I think from that standpoint, yeah, capital
efficiency, right? That is a very good collateral, which is why
in our design, we're launching with LP tokens of the top liquidity pairs. So what you're going to see are the top few
liquidity pairs within Uniswap and SushiSwap enabled on our platform, as we are going through
a very much needed redesign right now of our UI. We're going to make it much easier to use. When it's like five or ten tokens, it's okay. When it's like 40, then all of a sudden you
need to redesign, especially for dropping in another over 10 LP positions in there people
could use.

Yeah, I think you're right about the redesign. I mean, when I first saw Cream, I don't know,
six months ago, I was pretty confused on what you guys do, to be honest. I mean, it's still the same design now, but
I kind of get what it is, because when I first saw Cream, I was like, "This looks like Compound,
why would I want to use Cream?" But I didn't realize kind of the vision that
you guys had was sort of to add the long tail of tokens.

If I knew back then what I knew now, then
I probably would understood things better. But, but yeah, I see the point, a lot of beginners
or those who are not so into DeFi like they'll find it a bit confusing. And when you add LP token, I think that's
going to be a game changer. I thought of projects wanting to launch LP
tokens. And I've tried to sell this idea to the Alpha
team, right? "Guys, you should totally launch like LP tokens." Right? And then I can draw loan from my LP. So yeah, I think that will be useful. And I think what would be useful as well,
to kind of like one-click convert between like, the different LP tokens from a different
AMM. So like, I know you can easily swap Uniswap
LP tokens into SushiSwap, but can we do the vice versa, and then also on 1inch, now that
1inch has, so I kind of moved my ETH-WBTC liquidity from Uniswap to SushiSwap and now
to 1inch because you can now do like the liquidity mining there, so maybe that's on SushiSwap
now because the AMM like you mentioned.

Yeah. Yeah. And also beyond that LP position thing too,
one thing we haven't covered today is the fact that we have ETH2 staking. Again, it's like, "Hey, I really want to do
ETH2 staking, but I don't want to have my 32 ETH locked. I don't want to not be able to move it. I don't want to run the servers and run it
wrong and gets slashed. I want capital efficiency. I don't want to go to a staking service where
I can't then use it as a collateral because I currently use my ETH as collateral, so why
not use my stake ETH position as collateral?" So the combination of all that quickly culminated
into a, we should launch a ETH2 staking service and let people put money on here. So we have collected to date over 25,000 Ethereum,
ETH tokens on here, which is anywhere, I think we're number six on the Genesis block on there. We're proud of that fact. And then, you know, we're just passing today,
the ability for users to use stake ETH positions on Cream as a 75% collateral ratio.

So now we're not aware of any places today
where you can take a 'stake ETH position' with the fee, we take 8% of the total proceeds
from that, not 8% of the total value but 8% of the total return you get from the staking
returns as a fee, which I think is very reasonable. Cause I sure as hell can't run it myself for
that amount of money, correctly. And then in addition to that, if people borrow
the crETH position, then you get an interest on that. And then most importantly, users can use that
as collateral to leverage or borrow anything else. So do guys run like the node to accept, I
mean with this ETH 2.0, anyone can contribute like one ETH or two ETH into this pool right? And then every 32, you sort of like, put together
a node, you run, you spin up a node.

Is it someone from your team spinning up a
note and then issuing like CRE? That's correct. So the benefit here is we don't set a maximum
or minimum. So if you don't have enough for 32, Welcome. Put it in 0.05, whatever, gas is low, great
go do it. If you have like 2000 ETH, you don't want
to split it up in a bunch of tranches and manage yourself, great! Put a thousand ETH there and we have seen
those size deposits as well. And yeah, now you have this crETH too and
you know, it's liquid, you can trade in and out of it on SushiSwap or working on getting
something on curve that would make a lot of sense for us as well. And then ultimately, you know, when ETH2 launches,
you can then redeem those for ETH2 tokens. Yeah. I think it's interesting that you guys were
so quick in launching this. Couple of other guys, I think Lido guys have
this stETH and Stake now has also the stake ETH I think.

Not so sure how well they are doing. Yeah. Rocket pool and their rETH, I think that they
were testing last I heard, I haven't tracked them too much lately, but to give those guys
credit too like, they're working on something different, right? They're trying to be a lot more decentralized. I give them credit for that. Definitely the different kinds of technical
challenges based on what you're trying to achieve. And I think the innovation across the various
different stake, you know, ETH2 pools are useful and good.

Let's talk about what's coming up next week
with Cream V2. You guys made an announcement one week ago. So about this Iron Bank thing that you guys
have. So, tell us more about what's in V2, what
is Iron Bank, everything that we need to know about Cream V2. Right. V2, Iron Bank, super exciting. I very appreciative of the Yearn team support
on this. So Andre worked on the prototype for the V2
and then our team executed on it.

And now, now is the deployed. And so the Yearn V2 UI still coming up. You can go to, I think, v1.yearn.finance/lending. And you can see the current iteration there. So it's basically Cream V1 or you could think
of it as a Compound setup except that the, we'll call it zero collateral. So zero collateral between protocols. So imagine if, I'll give you an example of
Alpha Homora V2. So they no longer have to run their own money
market.

They can focus on building on their leverage
positions and that the money market that they would draw from would be from the Iron Bank. So it's zero collateral. And so far as Alpha Homora didn't come on
Iron Bank or Cream V2 to deposit their assets so that they can borrow assets and do it leveraging,
in fact, they just treat us as their money market pool. So protocol-to-protocol.

But that's not to say there's zero collateral
at all, that you could just run off with the money, but that the collateral still exists
as a user. So when you think about Alpha Homora V1 versus
V2, in V1 you know, you put up some number of EH, let's call it, I put 1 ETH and I want
1 ETH leverage, and then I pay the lending fees for the extra ETH I got, but then I got
2 ETH now with farming power on some kind of LP position. That is useful. And I put up 1 ETH as collateral. Now, instead of that 1 ETH extra that I borrow
coming from Alpha Homora, the ibETH that they've done, instead now it comes out of Iron Bank.

So zero collateral, and so far as between
protocols allows for capital efficiency, but it also doesn't mean that it's zero in that
it has a high chance of not getting paid back so that when you think about the capital efficiency
game, then this allows for that example, that to work. But on the other side, when you think about
our other launch partner, which is the Yearn Vaults, so the Yearn strategists have done
a lot of different thinking around this and one particular vault, Sam Priestley's done
this thing on DAI and evolution on DAI Vault that's leveraged. So imagine if for every dollar of DAI that's
in there, then they can borrow an under-collateralized position or uncollateralized, of something
less than $1, $1 of loan. And now you have a large farming position
that is greater than the deposit itself. The safety vault there is that the strategies,
we ensure that these strategies and any of our partners, when they do borrow, we white-list
them based on the fact that they're audited, that they're credible and that the contract
will pay back and we are the senior debtor in this scenario.

And that, that becomes more capital efficient. You don't need to over collateralize anymore. And that, since we know exactly what it is
that the strategies are doing and what it is, the Alpha Homora is doing, we've seen
the contract, we've audited it, then we know with full confidence, we can give them under
collateralized loan. So how much can they borrow? I mean, I contribute to Alpha Homora's ibETH
pool. So I, instead of lending my ETH on Cream,
I sort of put it on Alpha Homora. I think [inaudible] paying 8%, 10%. I don't know if it changed. That's great. It's good. I mean, it's quite good, but so I guess that
will play a lesser role in Alpha Homora moving forward, I suppose, because they are going
to tap onto Cream's money market, moving forward? But on the other side, when you think about
our other launch partner, which is the Yearn Vaults, so the Yearn strategists have done
a lot of different thinking around this and one particular vault, Sam Priestley's done
this thing on DAI and evolution on DAI Vault that's leveraged.

So imagine if for every dollar of DAI that's
in there, then they can borrow an under-collateralized position or uncollateralized, of something
less than $1, $1 of loan. And now you have a large farming position
that is greater than the deposit itself. The safety vault there is that the strategies,
we ensure that these strategies and any of our partners, when they do borrow, we white-list
them based on the fact that they're audited, that they're credible and that the contract
will pay back and we are the senior debtor in this scenario. And that, that becomes more capital efficient. You don't need to over collateralize anymore. And that, since we know exactly what it is
that the strategies are doing and what it is, the Alpha Homora is doing, we've seen
the contract, we've audited it, then we know with full confidence, we can give them under
collateralized loan. So how much can they borrow? I mean, I contribute to Alpha Homora's ibETH
pool. So I, instead of lending my ETH on Cream,
I sort of put it on Alpha Homora.

I think [inaudible] paying 8%, 10%. I don't know if it changed. That's great. It's good. I mean, it's quite good, but so I guess that
will play a lesser role in Alpha Homora moving forward, I suppose, because they are going
to tap onto Cream's money market, moving forward? That's right. And we want to encourage all of the Alpha
Homora ibETH takers from V1 to migrate to Iron Bank because that's where the utilization
will come from. But yeah, exactly. So that becomes, you could think of it as
that money market has shifted over to the Iron Bank. But that allows for Alpha Homora to focus
on their core competence, which is really kicking butt on that leverage thing.

I, myself am a depositor on the ibETH as well
as a user on the leverage protocol and I think it's fantastic. The capital efficiency thing here too, is
the way of the future. The easiest way to think about this is when
I explain to some of my friends, I said, "You know, the ETH contract knows no borders. They don't care that you went from Alpha Homora
deposit to borrow on the Iron Bank." Like the smart contracts just talk to each
other and the conditions are met and they execute.

So there's no need for, I have to put assets
on Cream to borrow from Cream. It could be that I put assets on Alpha Homora
and borrow from Cream and to the end-user it all feels and looks the same and that the
smart contract executes and ensures credit insolvency. And I think that's a huge innovation as we
in V2, get closer to a protocol, the protocol vision that Andre talked about and then achieve
the capital efficiency and effectively become the B2B enterprise liquidity backbone for
DeFi.

How much ETH can like Alpha Homora borrow
from the Iron Bank, for example? I mean, it's under collateralized, so like
there must be a limit before, I mean, in case something blows up entirely on Alpha Homora. Yes. Yes. So, so there's a notion of a credit limit. So each, as the process of how the Iron Bank
works, there's a white-list process. So once a protocol is audited, reviewed and
accepted, then that protocol is then white-listed. And through the white-list process, we'll
sign a US dollar denominated credit limit. And it's US dollar denominated because in
Alpha Homora V2, one of the gripes I had about V1 was that, you know, I'm short ETH and so
like, I wish I was short USD instead because my returns would be higher. But the V2 design that to me that's most useful
is that you can then be borrowing stablecoins instead of purely ETH or you could still borrow
ETH.

So from that standpoint, we have a US dollar
based credit limit because we don't know if you're borrowing just ETH or you're borrowing
ETH plus stablecoins or something like that. And we don't want to be specific about, you
can borrow X amount of ETH and Y amount of USDT, et cetera. So it's a dollar value based thing. So as protocols come and get white-listed,
we'll start with some low amount of credit limit. And then as credit worthiness improves, you
can think of it that way, then the limit goes up. But so far in V1, I think they've moved, at
least if I remember this correctly, a hundred thousand ETH. So that number is going to be huge. Ok, cool. Cool. And so you guys will start Iron Bank, like
when is V2 launching, when is Iron Bank taking place? It's up and running now, actually.

We haven't, we haven't really pushed a bunch
of capital that way immediately because the utilization is based on the protocols borrowing. And that's where we're in the process of finalizing
some audit and reviews of this stuff. But, you know, whatever it is that Alpha Homora
launches, I think soon. They said January, I believe. So soon once that goes, utilization rate will
go up. So that's when we're going to start pushing
for more liquidity in there. But for any of your listeners here on the
podcast, I think it's worth checking out the interest rates there.

It's sort of a chicken and egg thing, right? Like if you have a bunch of people borrowing
and nobody lending, then it doesn't work. And if you do a bunch of lending and nobody
borrowing that also doesn't work, cause there's the lending rates and the balance rates need
to adjust and be profitable and useful for everybody. So this Cream V2 is kind of like more, a lot
of back-end like protocol-to-protocol improvement. As a human user, like will I see any changes
on the app.cream.finance or pretty much not many changes on that site? Right.

The V1 continues to live on app.cream.finance. The V2, the Iron Bank lives on the yearn.finance. So that will continue. The best way to think about this is they're
basically two different lending protocols. And one is like A tranche that, so on Yearn,
it's like the blue chip DeFi A tranche debt with much lower risk and on app.cream.finance
that's the V1, that will continue to accept and list a long tail of assets.

So it becomes like a B tranche debt with a
little bit more risk, but of course more risk comes possibly more returns. So, so far the plan is to allow for A tranche,
B tranche debt concept, but certainly we're looking to further integrate automation across
protocols. So we're evaluating the possibility of V1
going with the Iron Bank based design so that we can start white-listing protocols there
as well.

That's the latest thing we've been discussing
so that we continue to focus on lending, but our other ecosystem partners like Yearn Vaults
and Yearn Strategists can start pulling from liquidity from the Iron Bank first, and then
secondarily, if they want to do some kind of other Vault and with direct capital efficiency
via a credit limit, rather than having to deposit a collateral on V1, that would be
another way that would increase utilization, increase capital efficiency and then make
the whole thing a lot more impressive.

And then, you know, hopefully that makes everybody
happy, cheaper borrowing costs as well as better supply rates. Yeah. And then you guys planning to open it up to
like non-machines, for example like Alameda? I think Alameda was borrowing uncollateralized
loan on was it Aave, sometime late last year, something like that. So that's interesting, I think with protocols
and strategies, we could look at the contract and you know exactly what they're doing. Like you're only doing this DAI Vault. You're only going to go take this DAI and
do X, Y, and Z on Compound, on Maker, et cetera. Great. We get that. If we start opening up credit lines to humans,
unless we lock them down to specifically where this money can be spent, it's really hard
to tell where humans are going to do.

And, you know, I don't want people taking
the under collateralized loans and buying Lambos with it, let's say, but look, if there's
a way we can control for that safely, we are open to that idea. But for now we're focusing on machine-to-machine
enterprise type of automation. We want to stay away as much as possible from
needing humans to look at these processes. But for now, humans are super necessary to
evaluate smart contracts, et cetera. But the vision continues to be that we want
to automate the hell out of this thing and that the efficiency can be gained. Interesting stuff. Interesting stuff. Anything else that is coming in Cream that
we haven't really talked about today yet? The funny thing about that is that I could
ask myself that very same question. And the Leo from four weeks out would be like,
"Check it out. We've got this new thing. It's super cool. It's going to be more capital efficient, be
more automated.

This latest craze and blank requires this,
you know, other functional tool or asset, and we're going to beat the hell out of that." So unless I can channel the future Leo to
tell you this, I won't be able to know the answer to that, but certainly stay tuned where
we're always reading and discussing, and you can join us across our discord or forums and
talk about how else ideas may be helpful to DeFi. All right. Cool. Yeah. I think we spoke a lot about Cream today. So yeah, the best place to follow about Cream
I suppose would be your Discord, is that right? Uh, Discord, Medium, we post all the relevant
things on Medium and Twitter, for sure. So we love constructive criticism. Feel free to come and let us know how we can
do better. And yeah. Thank you for having me and thanks for the
support generally, and from the community, we can't wait to keep making DeFi more capital
efficient.

Thanks. Thanks a lot for taking the time to explain
all about Cream today, Leo. Great honour to talk to you..

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