Name: Insights: Compound Aims to Create Interest Market For Crypto
Uploaded: 2020-03-10
Duration: 3 min 53 s
Description: Compound CEO Robert Leshner shares his vision for creating interest rate markets for tokenized real world assets. (November 2018)

[MUSIC PLAYING] SPEAKER 1: So let's kick it off. What is Compound? Tell us about your company. SPEAKER 2: So Compound is a protocol built on the Ethereum blockchain to create interest rate markets for Ethereum tokens. What I mean by that is we're creating a short term creditless spot interest rate that fluctuates in real time based on supply and demand. So a user can earn interest by supplying an asset to one of our markets, and similarly, a user can borrow an asset from one of our markets, assuming that they have enough collateral such that there's no credit risk that they expose the protocol to. SPEAKER 3: To simplify it for a sec though, the idea behind this is that you don't get any interest holding crypto, even savings accounts in real world are paying interest. But right now, if you have your crypto exchange and a wallet, you don't get it, right? SPEAKER 2: That's right. The interest rate on most crypto is zero, because you're not able to let other traders or individuals use your crypto. And so what we're trying to do is to create a marketplace where all cryptos are used and is interest generated. SPEAKER 1: And this is focusing on coins and tokens that are not the value-- they don't have the same value proposition of a bitcoin where you're not really seeking an interest rate on bitcoin, because it's a speculative bet that your expecting is going to appreciate in value given the deflationary aspects of the system. So this solves a separate problem. SPEAKER 2: It does. Although, I would love to point out that bitcoin, assuming it can be recognized at some point as a currency, should have an interest rate, because there should be demand for that currency from other individuals, traders, and funds. SPEAKER 3: And the interest rates you envision. They're almost like repos. This is very short term, right? SPEAKER 2: That's right. They're designed to be extremely short term and without credit risk. So the alternative approach to creating an interest bearing instrument is a loan to another trader or another fund. Our system, you're not interacting with other peers directly. You're simply supplying assets to a market, which is liquid. You can redeem your assets at any time. It's ultra short term. You could supply assets for five minutes, which is appealing to programmatic traders and arbitragers. And it allows there to be a lot more flexibility in locking up an asset in a loan. SPEAKER 1: We chatted before, and we've been catching up on some of your own views on crypto. And you're actually a skeptic of a lot of the crypto assets that are out there. Can you speak a little bit about your thoughts? SPEAKER 2: Yes. So I'm a little bit skeptical of crypto native assets in general, simply because a lot of them have been designed for capital formation and not for fulfilling a specific goal. An easy summary is a lot of the tokens have been created in the last two years are pretty much vaporware. I don't mean that for every single one. There's obviously some projects that are of extreme caliber and integrity. But for the most part, tokens have been used to raise capital, not because they're needed. And I think we're approaching an era in which eventually there is going to be a come to Jesus moment, where projects have to put up or shut up, and their token has to have value or create value or it will eventually become extinct. SPEAKER 3: So it's like the long game for you might not be a lot of these vaporware tokens, but you're talking about real currencies like yen and euros and sterling and dollars. Do you want to tell us a little more about that? SPEAKER 2: Yes. The overwhelming trend we see is the tokenization of real world assets. You're starting to see that with the US dollar in the creation of stable coins. The next step in this is the tokenization of other currencies, eventually other real world assets, and eventually securities. In a 10 to 20 year spectrum, we believe that most assets are going to be tokenized. And in that universe, all of the crypto native tokens that have been created over the last couple of years look a lot less appealing, and so what our vision is is that eventually, we'll be creating interest rate markets for the real world assets that happen to exist in crypto form. 

Insights:  Compound Aims to Create Interest Market For Crypto

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Compound CEO Robert Leshner shares his vision.

Compound Aims to Create Interest Market For Crypto

Compound CEO Robert Leshner shares his vision for creating interest rate markets for tokenized real world assets. (November 2018)

Let's kick it off. What is compound? Tell us about your company. So compound is a protocol built on the ethereum Blockchain to create interest rate markets for ethereum tokens. What I mean by that is we're creating a short term credit lis spot interest rate that fluctuates in real time based on supply and demand. So a user can earn interest by supplying an asset to one of our markets. And similarly, a user can borrow an asset from one of our markets, assuming that they have enough collateral such that there's no credit risk, that they expose the protocol to to simplify it. For a sec, though, the idea behind this is that you don't get any interest holding crypto. Even savings accounts in the world are paying interest. But right now, if you have your cryptic exchange in a wallet, you don't get it right. That's right. The interest rate on most crypto is zero because you're not able to let other traders or individuals use your krypton. And so what we're trying to do is to create a marketplace where all Kryptos used and is interest generated and focusing on coins and tokens that air not the value. They don't have the same value proposition of a Bitcoin where, you know, you're not really seeking an interest rate on Bitcoin because it's a speculative bet that you're expecting is going to appreciate in value, given the sort of deflationary aspect of the system. Um, so this kind of solve the separate problem? It does. Although, you know, I would love to point out that Bitcoin, you know, assuming it can be recognized at some point as a currency should have an interest rate because there should be demand for that currency from other individuals, traders and funds and the interest rates to envision this. Is there almost like repose this very short term, right? They're designed to be extremely short term and without credit risk. So the alternative approach toe creating an interest bearing instrument is alone to another trader or another fund. Our system. You're not interacting with other peers directly. You're simply supplying assets to a market which is liquid. You can redeem your assets at any time. It's ultra short term. You could supply assets for five minutes, which is appealing thio programmatic traders and arbitrageurs, and it allows her to be a lot more flexibility and locking up an asset in alone. We've chatted before, and we've been catching up on some of your own views on Krypton, and you're actually a skeptic of a lot of the crypto assets that are out there. Can you speak a little bit about your thoughts? Yeah. So, you know, I'm a little bit skeptical of Krypton native assets in general, simply because a lot of them have been designed for Capital Formacion and not for fulfilling a specific goal. You know, easy Summer is a lot of the tokens have been created last two years of pretty much vaporware. I don't mean that for every single one, there's obviously some projects that are extreme caliber and integrity. But for the most part, you know, tokens have been used to raise capital, not because they're needed. And I think we're approaching an error in which eventually there's going to be, you know, come to Jesus moment where you know, project have toe put up or shut up, and their token has to have value or create value, or it will eventually become extinct. Like the long game for you might not be a lot of these vaporware tokens. But you're talking about real currencies, like yen in euros, sterling and dollars total more about that. Yeah, The overwhelming trend we see is the token ization of real world asset. You're starting to see that with the U. S. Dollar in the creation of stable coins, the next step in it is the totalization of other currencies. Eventually other real world assets and eventually, securities. You know, in a 10 to 20 year spectrum, we believe that most assets are gonna be token ized. And in that universe, you know, all of the krypton native tokens have been created over the last couple years, look a lot less appealing. And so what our vision is that eventually will be creating interest rate markets for the real world assets that happen to exist in crypto form.