The Startup Voyage - Web3 Business Growth

Term Structure Unveils a New Era of Financial Stability in Crypto Markets

• Arthur G Lee • Episode 23

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Summary

In this episode, Arthur Lee interviews Jerry Li, one of the founders of TermStructure, a Taiwanese company that is redefining fixed income borrowing and lending protocols in DeFi. They discuss the challenges of introducing fixed income into the DeFi space and the unique features of TermStructure's platform. They also explore the opportunities for everyday users in DeFi and the challenges facing the industry in 2024. Jerry shares insights on building a zero-knowledge solution, improving user experience, and achieving mainstream adoption. They also discuss the impact of Bitcoin ETF approval, plans for seed funding, and the future of digital identity and real-world assets in DeFi. 

Also discussed are various aspects of the DeFi and crypto industry, with a focus on fixed income products. They explore the challenges of moving to real-world assets (RWA) and the need for hybrid models. They also discuss the future of DeFi and blockchain technology, emphasizing the importance of connecting blockchain to the real world and creating new use cases. Additionally, they highlight the relevance of blockchain for mainstream adoption and the potential of owning and monetizing personal data. The conversation concludes with a discussion on building a solid fixed income product.

Takeaways

  • TermStructure is redefining fixed income borrowing and lending protocols in DeFi.
  • The lack of fixed income in DeFi is a significant problem that TermStructure aims to solve.
  • Improving user experience and achieving mainstream adoption are key challenges for DeFi.
  • Regulatory considerations and security audits are important factors for the success of DeFi projects.
  • The future of DeFi includes the introduction of real-world assets and the development of a digital identity system.

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Arthur G Lee:

Hey everyone, welcome to the Startup Voyage podcast. In this episode we're going to uncover decentralized finance through the lens of term structure. It's a company that's redefining fixed income, or fixed rate, and fixed term borrowing and lending protocols in DeFi. The company has been founded by Jerry Lee and Vincent Lee of $4.25 million in seed fundraising rounds. This reflects a growing demand for these products in DeFi markets and shows the increasing maturity in the market sector. So today we explore term structures journey and the unique features of their platform, and we're going to discover what they're doing to bridge the gap between traditional finance and decentralized finance and essentially reshaping DeFi with structured interest rate system and comprehensive hedging instruments. So I'd like to welcome to the show Jerry Lee, one of the founders of term structure.

Jerry Lee:

Thank you. Thank you, arthur, thanks for your time and coming to us and arranging the whole thing. Thank you.

Arthur G Lee:

And I just wanted to let the audience know the one reason why I wanted to reach out to term structure because not only you guys raise money, but the market has been very tough. There are many projects in the past relied heavily on raising through a token sale listing on some venue to just get the capital to do what they need to do. You guys just focus on just building a quality product and actually DeFi was the DeFi summer of last year. It kind of came and went and there's been a lot of scrutiny across Web 3. In general, to be honest, whether it be NFTs, defi or any other place, I guess everyone's just focusing on just building and doing infrastructure stuff. But I want you to share, then, your background. How do you decide to build term structure and what inspired you to jump into the DeFi space?

Jerry Lee:

Okay, thank you. Actually it's quite interesting. So I've been working in the bank for 25 years. I've never thought of a living bank to do DeFi or crypto, and so I was running a fixed income currency trading for the bank and basically most of the time I was focusing on fixed income and I believe that it is a very important tool for people to manage their balance sheet and for people to manage their excellent liability. So I see that is a fundamental infrastructure for the financial ecosystem. And during COVID I actually have less time traveling and I spent time looking into DeFi and I was surprised. I found it very interesting and I found the efficiency of the blockchain and transparency and the whole infrastructure is just amazing and a lot of things that the financial system should use. And but I figure out there is no fixed income and I cannot believe any financial ecosystem without fixed income. So then I think through. I thought fixed income DeFi need me more than 25. So that's why I decided to voluntarily raise my hand, retire and jump into the space.

Arthur G Lee:

Okay.

Jerry Lee:

Okay.

Arthur G Lee:

So I guess, when you jump to the space and you've had a lengthy career in banking, what specific problems, especially in decision finance, are you deciding to solve, and how does your approach differ from some of the other solutions that are out there today?

Jerry Lee:

Yes, just like I said right. So in DeFi there is no fixed income, there is no year curve and that means there is no discount factor, there is no forwards, there is no way for people to do the valuation for any future cash flow. So if you look at like a real world, like 500, 600 years ago, there is no government bonds, there is no year curve and today we have a huge volume trading on like a simply US Treasury market. So can you imagine that if you wake up tomorrow the US Treasury market is gone? The whole financial system will collapse and this is where we are today in DeFi. But we don't know. Do you see that as a problem?

Jerry Lee:

So that's why this is what we are trying to build up and we look through the people who did that before. So most of people they use automatic market making and peer-to-peer process and we think through that in Trevi we find the most efficient way of fixing come is the older book is peer-to-peer, so if you want to stay with that, then we need to find a way. And which is like we don't see any what has been done before? Right? So we need to just win these.

Jerry Lee:

Some fixing come into the industry products into peer-to-peer on DeFi. So we wanted to build a full fixing come market that actually include farming markets through auction, second market order book trading and the repo market using order book and to take, like fixing come token as a collateral to borrowing lending, and these we wanted to stay on Ethereum level. So, because this is the most, tvl stays right and so we needed off-chain solution. We go with DKROUP, we develop in-house and we build like a fossil-straw evacuation, and all these are the high standards that we wanted to make sure the users are comfortable with their assets on-chain on our protocol. So this is something that we never think anyone has doing anything similar right. So this is the way we differentiate ourselves.

Arthur G Lee:

Okay, I do think it's a gap, because I think if you're in DeFi and you're trying to, whether or not finance is centralized, it's decentralized, but the product itself, fixing come, is a common. You know it's almost like you must have it. Is it because the underlying assets people are providing are not strong enough?

Jerry Lee:

It's more. Yes, I have a similar thought. I feel like most of the fixed income, we feel it's like a time deposit or like a certificate deposit kind of thing compared with the Trevi. So if you do that, we wanted to create something that people the lenders would be able to de-risk their lending position. Right, we want the borrowers would be able to choose their own collateral and fixed rates and fixed borrowing. If you are trading on your strategy, you want to fix rates. You don't want to float to the right.

Jerry Lee:

And sometimes you want six months or 12 months fixed rates, right, and then you want the certainty to manage your asset and liability to match your duration. But the current, the fixing protocol, they don't provide that and they don't provide the credit for this, a second market. So I will say this is a big gap and the constraint for them. I will say it's like they say, with the automatic market making and the peer to pool, then that's the only way, like you can do, right. So you have to jump out like a different, like like area to look into the scalable solution, right, where you also needed to find the scale of searching with like, the providing the like, the most comfort for the users.

Arthur G Lee:

So I know that in DeFi space a lot of market makers are the ones that actually went out big over the retail investors. Where do you see the opportunities are to? For you know, just a everyday, regular person looking at DeFi opportunities? When they look at your platform, what is the benefit to them?

Jerry Lee:

Okay, I will say the benefit to them will be. The key benefit is the certainty right. So for people to have a certainty in terms of borrowers they were concerned about about the cost of funds For lender, they were concerned of the return of their investment right, we provide certainty for both of them so and with that they will be able to do better financial planning right. They will have better to manage their future cash flow right. They will be able to manage the asset liability duration match and they will be able to find other use, new use case, like, for example, with the fixed rates on the on the on, like two different currencies or two different tokens. You will be able to provide the four rates for them to hedge Right. For current market makers, like you mentioned about, they are heavily trading on the stable coin pairs or some like a crypto pairs, but they can trade spot, but they cannot quote forward one to three months forward. Why? Because there is no forward curve, there is no year curve for those token pairs.

Arthur G Lee:

What do you think are the biggest challenges facing DeFi going into this year 2024?

Jerry Lee:

Oh, okay, I think the first challenge will be the regulation, right. So regulatory concern, I think, is one of the key things that people are thinking about, particularly for the newcomers when they want to get involved into crypto, right. So of course, we have some good news at the beginning of the year right, the US regulators approved the spot of each ETF. But still there's more things to do, right, because we have seen, like Mika rules in you, we have seen some like a virtual currency tax fairness act coming, all the like factor regulations that will affect the future development of crypto and DeFi right. So I think this is the key challenge that we face, right. Of course, there is some other technology challenges. There are some other like new use case challenges that we also needed to take care of, right Particularly. For example, I just picked one right. What is the service provider they spend a lot of effort on, like account extraction, right. So this is the key area that will improve the user experience and create the next adoption.

Arthur G Lee:

So what is your feelings about the Bitcoin ETF being passed? You know there's a lot of excitement saying oh, there are billions of dollars. We've fled into the market only for BTC. There's excitement that the ETF is going to come next. So now that the price of the ETF went up like I don't know 20% ever since, do you think it's really a big change? Because I think you know you're getting access to it, but not direct access. Sure, people don't have to worry about account extraction because they're going through the broker, right, and they don't really own it, so they don't have to do anything. They just say, oh, I own some Bitcoin, just like any other asset. Is it that big of a deal to you?

Jerry Lee:

Yes, I would say it is considered a big step forward, right, Because this will allow the general people to have access to Bitcoin without wallet, right, and then they can just use their current account with a security house, then just have the access of risk of the Bitcoin, right. Of course, this is a good thing, but we look at the other, the proof itself, right so there's one problem is that for the Bitcoin, like primary market redemption or subscription, that is not allowed, right, so this is still a problem. For a proper ETF existence, right, so current approval is just like allowing a Bitcoin fund to get listed, right, you have to purchase on your start, right? And then there's no so-called primary market, so there is no incentive for the market makers to come in, Right so, but I have to say it's already the big step forward and we're happy to see that.

Arthur G Lee:

Yeah, yeah, I guess, if you look at the big picture, it is accepting a cryptocurrency, you know, formerly accepting right. You can argue well, they only did it because their customers have been asking for it. Well, yeah, that's how it should be. If the customers wanted it, then you give it to them. And I don't know about these other assets that will come on board, because I thought you know the taxation side of things that would be quite interesting. Now, right, so on crypto side of things, anyway. So when you go back to talking about security, you said, basically you created your own zero-knowledge, I guess, solutions. Can you talk a little bit more about that? And how was that experience even because I think zero-knowledge has been around for a long time and you know, in applying it in what you guys are doing, is actually really important.

Jerry Lee:

Yes, so actually we started building this, the protocol, about a year and a half ago and at the time, right, because when we consider the proper model we wanted to go and we actually like look through all different kind of a layer-to-solution and we find it's like it's things we want to do fixing come right. So among the layer-to-solution, the DKRO has a high standard in terms of security, right. So there is, I think this is the only one direction for us. If you want to do fixing, come. And then, since we go with the peer-to-peer, we don't do this on-chain, right, we want a scalable solution, right, we go with DKRO and thinking about that, right, so by using DKRO, this is the user's essay will be like secured by the mathematics, cryptography, right, and then the user will need to sign their private key and actually they do the execution on their own.

Jerry Lee:

And so we look through some of the DK solutions and of course, at the time, a year and a half ago, there is no like the proper setup, right, and like what we see today. We see, like DK, seeing the star net, they are already well developed For the one and a half year ago. They are not there for us to build like full fixing come like a protocol. So we decided to build on our own right. So of course this is a challenge. So that's why some of the fixing come protocol. They start about the same time with us, whether they go faster, we go slower, but we will go with what we believe, what we should do right. So that's why we build our own DK rollout. So currently we are on testing now so we also build like a force withdrawal and the evacuation mode so that there is no way we can rock pool and then the user will always get back there.

Arthur G Lee:

Well, that's important to know. So how was experience finding talent for DK? Because I know there's, at least. I interviewed some and everyone seems to think there's only so many good people in the DK world. So how was that experience?

Jerry Lee:

Yeah, okay. So I will say luckily in Taiwan we have quite good pool of talent so we can find, and also that we have like a DK expert in India, we have a DK expert in France. We just find them like step by step and then they are really good and we have a good team in developing our current DK setup and of course we will continue to improve and we have a certain like research effort to prepare for the V2 version in our DK setup.

Arthur G Lee:

We all know that the friction from the user to platforms is still very high. And what else will help it go mainstream? Because I think fixed income in the DeFi space is very attractive for most retail investors when they look at their options right.

Jerry Lee:

So I would say, of course the user experience is very important. That's why, like we briefly mentioned about the wallet, and of course for the protocol itself, the effort we can do is to improve our protocol right so that people can like use that very easily. I say, for example, like the setup we have and to build our own DK route and to build this off-chain calculation so we can actually bring up our protocol like a centrax exchange on main name. So, like you find, a centrax exchange has a better user experience. We are trying to get there because we have a little solution and then we can bring that over right.

Jerry Lee:

So, and of course, a lot of education. We need to know right, if you wanted to bring the one of the like, mainstream adoption using fixed income concept on the trading right, but then we needed to do a lot of education because fixed income is the most complicated linear financial infrastructure. So fixed income is the term structure, it comes with a duration, it comes with convexity right, it's another simple product. So we need to do a lot of education and then we are preparing for some term structure academy and also we build this order book to allow people to place order, cancel order and use without gas fee and also they can use market order or limit order and you can put a small size. This is to help like a better, like a mainstream, like, like a mass adoption of the users Right right.

Arthur G Lee:

So you kind of mentioned about order book. Did you guys build that yourself? Because I know there's a lot of solutions, a lot of exchanges. They either bought, like a license or white label, some other person's technology to go to market very fast. So you know, tell me a little bit about how you guys developed your order book system.

Jerry Lee:

Yeah, Okay. So the other books, Okay. So the borrowers, I will say maybe I give you like a quick example, Right. So on the RVV2, I think things inception there are 47 of the borrowers for the five main street tokens. They actually repay after 30 days.

Arthur G Lee:

Right, so nice.

Jerry Lee:

About 50% of them, right. So these guys, they are basically borrowing for long term. It's not not going to be shorter.

Arthur G Lee:

Right, right.

Jerry Lee:

For the borrowers mainly coming from, I will say from the traders, right, and those who needed to, of course, some of the, the, the crypto service providers, right, and those who those traders, they the particular defect traders. They wanted to use leverage, right, they wanted to use like put a trading strategy Right. So they normally probably they do. They use like a having compound before, but because there's no fixed rate borrowing, right, but in the future they will be able to do to take like a fixed rate borrowing from here, right. So I will say, the traders, there's some of the crypto service providers that, even some of the, the miners, they all have an interest to borrow.

Arthur G Lee:

Okay, For the lending side of things, is it more of a trend for people wanting more long term rather than short term? You know what is the preference these days.

Jerry Lee:

Are you mean lenders?

Arthur G Lee:

Oh yeah, lenders.

Jerry Lee:

Okay, so I will say I will. I will say it is on the basically coming for the fixed interest rates and certainly, and in terms of a tenor, right now there's no crypto goes like more than one year, right, yeah, yeah, not even for like six months. Yeah, I will say it's gradually, we will. I don't think I don't think we will. We will have like a heavy 12 months, like a trading kind of thing, happening, but we will see what.

Jerry Lee:

One, two, three months, right, the people will gradually extend their duration. Right, and for those, like people, who have like idol tokens on chain they don't want to put just in the core wallet, they can just purchase a sound of the token and also this token will be able to use. So, like you can think of a deal, coupon bond in our real life, right? So when you go into a bank, right, your bank account officer may show you hundreds of different products, right, this hundred different products, more than 90 of them. They use Bitcoin curve to price right, to hedge, right. So this is some like a new use case that we will be able to provide.

Arthur G Lee:

Okay, okay. So I guess, with the new funding that you have which, by the way, congratulations, I know I mean, well, let's go back there. I always ask the founders, like, how many times did you have to pitch your company before you finally got the first yes, or was it easy for you because you had a good? You're working banking maybe you know a lot of people already.

Jerry Lee:

Yeah, Okay, actually, yes, that's the one of the the advantage I have, right, because I've been working for 25 years and but still I think I talk to maybe around 80 to 100 different guys in four months to four to five months time, yeah, and to secure all this funding. And, of course, I spend another two months time on the working other documentation with these VCs, right. So the VCs is very cultural in terms of documentation that I can understand, right. So that's why we spend more time on quite sometimes on that, but during this period I talk into like 80 to 100. And I will say it's not easy, right, as people think, I will say most of them they don't understand what is fixed income and they don't know, even they know, they don't understand the importance of fixed income.

Arthur G Lee:

And why?

Jerry Lee:

do we need that? Right so. And of course, some has challenged to me about you do you are doing this? You are doing too many things? Right, you want to build a landing protocol. You want to build a dex on certain markets, you want to build your own ZK? Right, but there is no shortcut. Right, because if you want to go with shortcuts, just like the other, like protocols I've done, I don't think we will be able to build like a schedule, like a substantial fixed income protocol.

Jerry Lee:

Right so, we put our heads down and continue to work for one and a half year, right so, and other challenges may come with that, right so. And then some of them say are you sure it's just no supply or no demand? Right so, it's just no, it can be no demand for the fixed income. Right? Sure, fixed trade volume landing right. But to me, and working in the bank for so long, I cannot believe any financial ecosystem has no demand for fixed income. Yeah, right, without fixed income, everything you do is value today, value thought, value right now. Right. And there's like, if you want to do anything, any like a financial planning, for one month later you don't find any tool, right, then, 100 years later, you will still like today, defy, right yeah.

Arthur G Lee:

Yeah, that's true, that's true. So 80 to 100 people that you talked to, did you like have to change your story quite often, or is it depending on who you talk to? And did you do research on their background? And you must have had to do a lot of education, I can imagine.

Jerry Lee:

Yes, yes, exactly. Your question brings me like so many funny stories, like back in my mind, yeah, sure, sure, yeah sure.

Jerry Lee:

So whenever I finish the pitch and I go back and I think and I redo my presentation, right, I change my slides and here and there, so like for every single meeting, I change it Because some of them I feel it's their problem, some of them I feel it's my problem. And even when I talk to the VCs, who are the representatives, they are just like the age of my daughter, but they understand more on D5. And I learned something from them too, right.

Arthur G Lee:

Okay.

Jerry Lee:

Of course some others, some of us just don't understand. But that's fine. We see a bunch of different persons like one. Yeah, that's fine. So I just keep changing. And then I change to some. Someday, like one of my colleagues, come back to me Jerry, am I not good, are you going to fire me? I say why? I say because you keep asking me changing your slides. And I say I'm not doing good. No, it's not your problem. We should keep changing, right. So the frequency is too high. Just keep changing every day. So that's why the last few I'm getting better and better and of course it's a learning process and I found it okay. It's good Because I have no experience on fundraising. Before. I was in a bank. I was on the set side. I don't need to pitch for the bank, but I don't need to pitch anything. Yeah.

Arthur G Lee:

Okay, okay. So what are your plans, then, for the seed money that you just received?

Jerry Lee:

Okay, so of course, the first thing to do is to focus on our core development, right, so the core development will cover like current, like immediate development and our future plan. Yeah, and then we will focus, spend our funds on the security, we will enhance our security, we do auditing and we do some like a penetration test, like all different kinds of like a preparation for that. Yeah. And the third is the community. Right, so we wanted to grow with community. We needed to, of course, spend some money with community in terms of the building, the activities or the education or the and just between the more people and both and the one people to understand what is income, what is so important.

Arthur G Lee:

Well, let me ask what are the things that I always hear from builders is around auditing, you know, auditing of smart contracts or auditing of code. Number one, to appease investors. You know that, that you know you've had some checks and balances on your build. Number two is also for security reasons, but many builders I talked to says oh, you know these companies, they charge so much money for these audits and how do you manage your audits? And, like you know, what process do you go through or who do you use?

Jerry Lee:

Okay, yes, correct, it's not you.

Jerry Lee:

That's why you're asking for more money. So we we have already done to to audit. One is done by ADVK and the other one is the HCR. We have them to audit us, our like a smart contract as well as our like DK sort of code, right. So I think we are just like this morning. Yesterday we are talking to the third holding company. I think this, we will continue to do that, and this is so important. It's not just to please our investors or users or the company, it is really something that we wanted to do, it right? Okay, so we just needed to continue to move on that and continue to make sure we are like we have a secure protocol, because at the end of the day, it's a fixing protocol and there's a lot of like a variable as it in the under smart contract that we will be capable.

Arthur G Lee:

Okay. So I guess, along those lines, you also have to worry about the change in regulatory frameworks and then being defi I was. It's one question I've always wanted to ask because I mean, you're setting up your system, you're decentralized, and so what rules do you follow on a regulatory, you know level, like, how do you manage that?

Jerry Lee:

Okay, right now in defi it is not really regulated focus, but gradually they will come over, I believe I like just look at my background. I am a believer of like governance and the regulatory is something that important that we need to be considered whenever, whatever we do, right, we are monitoring the progress of a regular regulatory like improvement on defi and also that we are considering to get a necessary license whenever, wherever right and just depends on where we are at that particular moment. I don't rule out that, and even for certain kinds of the, the un-chain AML, the un-chain compliance, there's a tool we are considering. We are looking into that too, right? Okay, this is something that we, I believe, like I should do and make sure that we provide like a comfort level or the institution adoption.

Arthur G Lee:

Right.

Jerry Lee:

Right yeah.

Arthur G Lee:

Well, that's the stuff that I was getting at. You know, at some point you're building this infrastructure for the future and you know how is that going to comply with the environment. But do you believe, like you know the concept or the technology behind creating sovereign identity? You know this digital DID digital identity that you can use anywhere in the world or you don't have to carry your passport and all the governments can access. You know who you are. Do you think that it'll ever get to that stage in our lifetime to basically have all countries participate, or even let even at least the major ones?

Jerry Lee:

I think it's possible when people, because we are using DK right, so right now, if you, if you look at all this, like like identity information right for each country and some countries they share, some countries they don't share with each other, right, and then for those who shared, of course, that you can like go public on that and to the other party but you don't share, you can use DK right to make sure that you can still have a certain like a comfort level about this guy. Is digital, not right Of course. I hope, like sometimes somewhere like a DK DID can be like, can be the prevailing, like a tools for any countries or authorities to use right and hopefully I don't know when, but if that can happen, I will say even for DeFi we can have a better governance right and then we can have a broader use for the adoption, for the DeFi use.

Arthur G Lee:

Okay, okay. So in previously you mentioned about you know you guys having primary and secondary markets on term structure and gave a little bit of detail on what users can do. Can you explain, I guess, the auction mechanism in your primary markets and how that works?

Jerry Lee:

Sure, yes, so. So maybe first let me start with the how to use the. The our like primary markets, right? So users is very easy. As a borrower, right? You just need to select your collateral token token type and amount, and then you select your intended to borrow token right and select the 1236. A month time to maturity we have a standard maturity date for people to choose, and then we can use that for you to input your preferred interest rate to participate in the auction to borrow, and for lenders, similarly. You just need to choose you want to lend and certain token amount and the interest rate. So the way we match is that. So we technically borrow orders and we match them one by one, the borrowers coming and depending on the timing of their orders, and then to match with the lenders. The lenders were coming with the level of their orders, so the lower the interest rate, the higher the priority for lenders.

Jerry Lee:

So that we do the match and the match will be a Dutch auction, so it's a uniform price auction. So that means the borrower may borrow at lower interest rates than his order if the demand is high, so the lender may lend at a higher interest rate, a better interest rate, so if the demand is not, it depends on how much the demand is, and then everybody will get the same price for each match, so that you don't need to worry about you buying something too expensive, right? More expensive than the other guys in the same match. So this is how we do the auction.

Arthur G Lee:

Okay, okay, yeah, so I'm showing on the screen here. So a lot of people use, like the underlying token, eth, route, btc, usdc, things like this right.

Jerry Lee:

Yes, yes.

Arthur G Lee:

Okay.

Jerry Lee:

And of course, we are adding two more collateral token eligible collateral token, that is, stai, and RAP-Stake ETH.

Arthur G Lee:

Okay, okay, that makes sense. And then it says here 75 to 90 percent LTV.

Jerry Lee:

Correct. It depends on which pair right it can be used to stablecoin or stablecoin to stablecoin.

Arthur G Lee:

Right, okay, okay, and then you can maybe explain the secondary market a little bit.

Jerry Lee:

Yeah, secondary markets. We use the older book for the secondary markets because it is the bunchable token, right? So as long as you are having the same maturity day, the same base token, then you trade on the secondary markets and you will be able to leave your limit order or the market order and then to trade, okay. So this is the. We also have like a small the Tiki size allowed for people to use, right, right, so people can easily to use this like a platform to manage their risk, to handle the risk.

Arthur G Lee:

Okay, and then you also have a repo market.

Jerry Lee:

Yeah, okay. So repo market we haven't, so it's not coming up under the main net. Initially, as we planned, we put the repo market at a later stage, so we wanted to focus first on the primary and the secondary market. Okay, so I know when talking to some of the traders they actually expect the repo market because it allows to get a better capital efficiency. Right, yes, yes, so we will do that, we will get there and the repo market best fit allowed the people to use those fund tokens as a collateral.

Arthur G Lee:

Yeah, right.

Jerry Lee:

So in the repo market we can have like a fixed date, like show that the seven days or three days, or we can think of the different ways of like a non-maturity day on chain. So it's possible. So we are still working on it now.

Arthur G Lee:

Yeah, I guess what your main point about investor? If they really don't understand, you know how finance works. They will look at your technology and says, oh, you're building this and you've got an order book, and then you're talking about ZK. It's too much, why so many things?

Jerry Lee:

There's no shortcuts. Yeah, exactly, okay, let's see.

Arthur G Lee:

I don't know what I was going to ask you. Maybe we can talk about. What other products do you have beyond fixed income? Do you have anything else planned in the pipeline at some point?

Jerry Lee:

Yes, like I said. So, with the fixed income curve, build up right, you can use this factor right. With this factor, you can build, you can price interest as well and with like these factors, you can use interest parity theory to price forward to price, some futures right, and currently we see some centralized exchanges.

Jerry Lee:

They have a term futures, so there's some forwards and that's something that you can find arbitrage or relative value to trade with. And, of course, with futures and term futures and forward build up right, then you can use that to hedge your option right. So currently there is option markets in crypto but they cannot hedge forward right. So I would say, with the forward market build up, the option trading value can we can make it like 10 pounds for bigger than today.

Arthur G Lee:

Okay, okay. So then, where does real world assets? That's like the big news that people are talking about these days. How does that fit into your plans? Are you going to use that as the underlying asset to some of these fixed income products?

Jerry Lee:

Right, okay. So before I talk about real world asset, I think that the one thing that we need to consider is, like in any financial ecosystem, you need to think about the money supply, like money circulation, right. You need to think about the equity supply, right, so okay, then look into the RWA. So if you have a problem, but no matter you're living or not, right what you want to do with this, if not selling it, you'll rent it, take a mortgage, you take a mortgage right.

Jerry Lee:

And then if you tokenize your apartment, what do you want to do, Steer? You want to do the mortgage right, Because this will have, like, a money circulation and a credit supply keep going on, right. So providing the multiple effect for the money supply, right. So this is something that is nature for any financial ecosystem to grow, that you need financing, right. So let's say, in Adelaide, we need to find a way to do financing for them, right?

Jerry Lee:

This is not the end of the token investments. It has to be just like a part of the circle, right. So we in the future right, Of course, this is one of the will be some of the Adelaide we are. We actually targeted and we talked to some of the service providers that we will take them as an eligible collateral here and then we will do the financing or through the auction or through the way of to provide the market for them and for both borrow and lenders. Of course, some of the collateral or custody handling that we need to consider, which is not purely defined, we have to go with like a partially defined right, Partially like a custodial or a NAO or regulatory consideration.

Arthur G Lee:

Yeah, yeah, for sure. I think if you're moving, I always thought if you're moving to RWA, it's gonna be a hybrid model. You're gonna have some traditional centralized processes and then obviously then some of it is digital. But I think that's the. That's always been one of the challenges, and people have been talking about RWAs for years. It's not easy.

Jerry Lee:

Yes, yeah. But if you, but if you think about it like the sound institution, they have a forecast like by 2030. Yeah, Like a trillion, so 10, more than 10 trillion of RWAs, Then I think the one thing fundamental infrastructure they need to have is the fixing car.

Arthur G Lee:

Yeah, yeah, for sure, for sure, All right. Well, last question I have before we in this podcast episode, I did wanna ask you, you know, what are your thoughts about the DeFi crypto industry in general. I mean, you've been in it long enough to see all the crazy stuff that happened and I don't know, maybe you're just focused on building, but what are your predictions?

Jerry Lee:

Yeah, okay, I will say the reason why I jumped into this, because I believe this is like the crypto, the DeFi will survive, like for 100 years, 20 years and a perpetual forever. So we need to think a way. This is for our next generation. How do we build up this infrastructure suitable for them? Because, you see, the blockchain technology is just keep improving, but we don't. But if you look around outside of your crypto events, how many people, what percentage of people they feel blockchain has impact on them? Right? Not much, right.

Jerry Lee:

So I think we this is one of the way we can think of that when and how we get the people feel like the blockchain is important.

Jerry Lee:

So we want to get there in the future and where the blockchain can really apply to people. So that's why, when we talk about like other way, there's one thing I can think of is that we really need to connect this, the blockchain technology, into real world. Right? So the banks are doing their blockchain technology for their like trading activities or custodian business, right? All these kind of all these like a transaction bank business, but these are in looking at the crypto world. How does the people to cross over? Right? So right now, I think regulators play the key roles, right, and to watch the gates and to make sure what can go through, what cannot, right. And we need to look into all those channels when is permission, when what kind of like a product or service or technology is permissionless, and where is the channel to bring this permission and permission, this stuff together, right? So I think once we find all those channels and we make through that, then our lives and will be really really connected with, like a blockchain technology, right.

Jerry Lee:

So, right now you say, okay, our lives are connected to internet technology, okay, everybody agree, right, and. But when you talk about the blockchain, not really. And we will talk about the AI yes, many, right. So that's why we need to think what is the channel that we should focus on? And I would say it's not. It's a really high level, like a thought. It's not like about the technology of a certain area or like a layer tool or what it also know, right. It's really really need to think aware and how we can get there, and that we wanted to create a new use cases. The key, like a key word, is new use cases. If we can find new use cases, then that's the way to bring this into the human life.

Arthur G Lee:

Yeah, yeah, I agree, I agree, I think our use cases, especially when it comes to blockchain and what makes it relevant for the mainstream, and that in itself. I always for me, I always go back to identity, right. So I think about that's something you have to worry about all the time. Sometimes I can call the bank sometimes and they verify who I am. They ask so many questions. All this information they actually shouldn't have to have. It's so personal sometimes. So then if you could avoid, protect your data more and actually own your data and even monetize it. If you wanna talk about internet, then people get excited. Oh, you know, you wanna use my data and I get a little bit of money or tokens, whatever it is. They get back in return. I really believe things like that. Then people will care. Otherwise, today that's underlying technology. Whether blockchain uses it, which one, which L2 is used, they don't care. Just as long as nothing bad happens to them, right, they don't get hacked, identity not stolen, then they're okay.

Jerry Lee:

Yeah, yeah, I would say that's also the key things that we needed to solve before we go, like my solution.

Arthur G Lee:

Yeah, that's true, that's true. Well, anyways, hey, jerry, thank you so much for your time and thank you for breaking down the product that you're building. I always wanna ask these type of questions I think my audience is quite always willing to learn about. New products are out there. Good luck with your expansion and, you know, taking that money and building more stuff for your platform, making it better. Thank you, hey. So that concludes this episode of the Startup Voyage Podcast. I would like to thank all of you for listening to this episode and I'd really appreciate it if you leave any type of comments that you'd like to share, because it helps to feedback on how I deliver these podcasts.

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Arthur G Lee

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