[00:00:00] Luke: From privacy concerns to limitless potential, AI is rapidly impacting our evolving society. In this new season of the Brave Technologist podcast, we’re demystifying artificial intelligence, challenging the status quo, and empowering everyday people to embrace the digital revolution. I’m your host, Luke Maltz, VP of Business Operations at Brave Software, makers of the privacy respecting Brave browser and search engine, now powering AI with the Brave Search API.

[00:00:29] You’re listening to a new episode of the Brave Technologist. And this one features Greg Jesmazian, who is a co founder and CTO at Exponential, an investment platform dedicated to unlocking financial freedom for all. Prior to Exponential, Greg led engineering at IFTTT, the leading connectivity platform powering the digital transformation of products integrated services, and before that, Greg led grocery for the Alexa shopping team at Amazon, where he was responsible for mobiles and systems engineering, product management, and operations.

[00:00:57] In this episode, we unpack why [00:01:00] DeFi is important and how to use it safely, how they’re leaning into public criticism, and understanding whose opinions they can actually change and help innovate versus people who will never change. We also talked about the importance of asset diversification along with the challenges of transaction costs on the blockchain.

[00:01:15] And now for this week’s episode of the Brave Technologist, Greg, welcome to the Brave Technologist podcast. How are you doing today? I’m doing great. Excited to be here. Thanks Why don’t we set the table a bit for the listeners here? can you give us a little bit of background of how you ended up doing what you’re doing and kind of getting into DeFi?

[00:01:35] Greg: Yeah, I have a very sort of diverse, distinct background. So I always hesitate on that question because I feel like I’ll talk too long and that’s not what people want to hear about this shortest version is. I have a long history in startups, was always really interested in how things work and how to make things work and feel like anything is figureoutable and have some previous success in terms of startups.

[00:01:59] [00:02:00] So led a mobile payments company that was acquired by Amazon, spent a couple of years working in finance for Amazon, and then a couple of years working on the Alexa grocery shopping experience, leading that experience. And then getting back into startups ended up back in the kind of fintech space in terms of had a conversation with one of my co founders about at the time he was running for sort of friends and family 100 million dollar defy fund and getting into sort of all the good all the bad.

[00:02:31] And just recognizing the power of what was possible and what people didn’t realize was sort of out there. And then all of the hurdles, both technical knowledge UX that were sort of preventing that lead us to saying, okay, this is the thing that we should kind of go build and do next.

[00:02:46] Luke: That’s awesome. We love diverse backgrounds too.

[00:02:48] I think it’s the most interesting thing talking to people here is having people that have got a good array of things. And, and one thing that’s really stood out to me your background is usability. Sounds like kind of a big focus of what you’ve done in the past, like having to work on [00:03:00] products that actual people are using, I feel like in the crypto space, it gets, it’s left behind as kind of an afterthought a lot of the times where people say, Oh, you can just say, The word abstraction a bunch of times, and it’ll magically come into a product that people will use.

[00:03:12] But having that experience, it sounds like we’re going with payments for Amazon and then for the Alexa shopping is like really kind of novel and glad to have that the space from your point of view. When you see what’s possible here with DeFi, like why is it important? And what’s the big thing that kind of stands out to you as like, why this is something where that you really want to dedicate your life and time to right now?

[00:03:31] Greg: Yeah. I think it starts from, if you think about. JPMorgan Chase, to pick an example, not to pick on them per se, but they’re kind of a big bank that everybody’s familiar with, made close to 50 billion last year. And the vast, vast majority of that money came from making money off of your money. Right. Like not specifically Luke your money, but like the combination of all of our monies, they put that to work and they’ve made a huge fortune of money off of that.[00:04:00]

[00:04:00] And the question is like, why did they get to make money off of your money? Why don’t you get to make money off of your money? And I think that at like a very core level is the problem that defy is trying to solve, which is. How do you take all these jobs that banks are doing that inherently take a lot of money to do, and we can get into those details if you think it’ll be interesting to the audience, and Make it possible for you to do that without the middleman.

[00:04:27] And so the like inevitable first step is like, well, you have a huge trust problem, right? If I came to you and I was like, Luke, give me the vast majority of your money. I’m going to go invest it for you. And I’ll give you all the profits you go. I don’t know, Greg, we’ve only been talking for a few minutes now.

[00:04:41] Like you seem trustworthy, but like How do I know you’re not going to run away with the money? How do I know I’m going to get my share of the profits? And so the, from a technology perspective, that is what defy and blockchain technology and smart contracts allow it to happen. And then the question is now, how do we make it actually usable?

[00:04:58] Right. You talked about [00:05:00] that probably from a usability perspective, like the funnest thing that I’ve worked on was all of the Alexa stuff in terms of. You know, when someone asks for example, for a, for Coca Cola, they don’t want the whole foods variation of Coca Cola, which is some Stevia product, right?

[00:05:19] Like they’re going to be annoyed when they get that home. On the other hand, when someone asks for fish, it turns out that I can suggest just about any fish and as long as it’s reasonable, you’ll accept that option. And so like understanding where you can like make. An educated guess and where you need to punt if you can’t give the customer exactly what they want It was like a really interesting complicated problem.

[00:05:40] And I think that it dovetails to defy in terms of one of the major UX challenges is most people are not particularly financially literate. Right. They understand that they have a checking account. They may understand like stocks bonds, but when you get into the jobs that banks are doing with your money, lending, market making, insuring, really [00:06:00] understanding like what are the risks, what are the potential benefits, how is your money making money, how does that actually happen?

[00:06:07] And then like making an informed decision, how do you distill all of that information and all of the risks that are sort of both inherit in those financial investments and unfortunately part of the current crypto ecosystem and convey that in a way that’s like readable, easy to use and gives people enough information to make an informed investment decision without getting to the like, trust me, bro, Simplicity, right?

[00:06:34] And so like, that’s the complicated balance that we thought was one of the complicated portions of what we’re working on. That’s a lot of fun. And you know, it was a lot of trial and error.

[00:06:44] Luke: Yeah. It’s interesting. You’ve got this financial literacy problem and then also just the complexity of all of that too.

[00:06:51] You start getting into these acronyms and like all these different financial and investment vehicles and all of that. And really you’re just like, I’m looking for a place to park my money. [00:07:00] How do we get it there? And I think. From your point of view, like with exponential too, maybe you can give us a little bit of, a breakdown of what you guys are doing too, just so that people know what the product is and, and then how we can kind of dig into a bit on how, what you guys are doing is going to be different on that usability front.

[00:07:16] Greg: Yeah, there’s sort of two halves to what we do. The first half is really around how do we help people make that informed investment decision? And if we take a step back to kind of defy at large, and we say like, the theory is that you have democratized this such that anyone can make money with their money, like a bank would make money with their money.

[00:07:36] And the theory is you don’t have to trust the central actor because you have this smart contract For those who are not familiar with that technology, you have code, the idea that it is open source, so anyone can read it and it’s executed decentralized, which is important because that means at least in theory, I can’t control it.

[00:07:51] I can’t change it after it has been deployed out there. And so that means I can’t change the inputs and the outputs. I can’t change the code. [00:08:00] If you can read and understand the code, you can then actually understand what’s going to happen in the future. And you know, Hey. I know that I am going to get my share of the profits.

[00:08:08] And so that’s the like starting place of how do you replace the central? And the problem is, okay, but in reality, how many people can read software, think the U S is probably statistically on the higher end of software engineers, and it’s 2. 5 percent of the workforce. And then understanding the software is only part of the problem.

[00:08:28] You have, second of all, the, the pieces of code are not independent. They relate to other pieces of code. For those in the more non Web3 space, you can think of it as like software libraries, but you can sort of think of it as like building blocks, right? Like Lego blocks stacking on top of each other. And so if you just read the top one, and you’re missing all the things underneath, well, if there’s a problem with one of the things underneath, the whole thing can fall apart.

[00:08:52] And so you really need to be able to read all of those. And then you not only need to understand the software side, you need to understand the finance side in terms [00:09:00] of what happens in the event of a liquidation preference. Like what collateral is someone putting up? Is this efficiently collateralized?

[00:09:06] People probably maybe don’t fully understand those terms, but like are familiar with a fallout of those, right? Like the housing crisis was because there were loans that were under collateralized. And then when you had a liquidation event, there wasn’t enough money. In the house, no one wanted to buy the house because it was now undervalued on this housing crisis.

[00:09:23] And then you had banks that didn’t have the money like they had loaned out the money, but they couldn’t get it back. Right? And so all of that financial instrument exists in the defy space as well. And so being able to understand all of the complications around that, how this particular protocol has structured it, how they’re doing collateralization, what that looks like, how does it actually execute on chain, what happens in the event of a large swing in market, how that might actually happen in practice.

[00:09:51] And so you need not just a software engineer, but one who can understand this to then fully remove this trust factor. And I don’t know what percentage of software [00:10:00] engineers are, That financially literate, but I’m assuming we’re going to multiply it like a single digit percent by a single digit percent.

[00:10:06] So we’re now in the less than 1 percent of the world can actually do this thing. Which means like the theory, which I think is great in terms of, if you understand, I hate the buzzword, but like the power of compound interest, and we can get into sort of what that looks like in practice and how powerful it is versus how maybe overstated is that you can take all of that to people, but you need.

[00:10:27] To be able to understand the risk, to do it intelligently. And how do you do that? If you don’t have the fundamental skills to both like understand the financial literacy and understand the code. And so that’s the first problem that we’ve tried to solve. And what we did is we built a risk model where we identified 60 different risk characteristics for smart contracts and the sort of DeFi ecosystem, both financial risk, code risk.

[00:10:53] Architectural risk. There’s obviously there’s a whole bunch of different categories of things. And then we mapped out how all of these contracts relate [00:11:00] to each other, right? How all those building blocks stack and connect such that the idea being we can change the, any individual risk characteristic on any individual contract, and it will propagate in near real time to affect the scores on all the things that are connected and related to it.

[00:11:15] And we did all of that to then provide a, if people are familiar with like Moody’s and bond ratings, a like ABCD, here’s what the risk is of this. And then where we’re really, you know, trying to find the right balances. How do we convey that information to you in the right amount of depth, right? If I gave you, if you say the average DeFi investment has maybe seven dependencies.

[00:11:38] And so you’re now talking seven times 60. So 420 different points. Of data that’s probably more noise than signal and not helpful. And so, like, how do we show just the pieces of the data that are useful to you without over simplifying? So that’s what we’ve tried to do with the first half of our product is it’s an informational product.

[00:11:59] [00:12:00] You can go, it’s free. You can go look up any DeFi investment that has significant traction in the market. You can get information about what the risks are. We do like an editor’s take of why we think this is good or bad. And we let you dig into some of those details. We aren’t currently exposing all 420 data points in my example, because we.

[00:12:18] Haven’t found a good UX way to do that, but we try and let you dig in so that you can get to some level of, okay, at least I understand why they have made this decision and some of that detail. And so that’s the first half of the product. And the idea there is we think that you shouldn’t be investing in DeFi if you aren’t able to make a rational investment decision.

[00:12:36] And so we’re trying to give you enough information on which to make that decision.

[00:12:40] Luke: Yeah, I think it’s really important to you because I think there’s another risk factor here, too That I mean these kind of roll up into the table stakes around risk right where you’ve got like, okay Is the contract code audited or is it susceptible or are they using something that has known issues?

[00:12:55] But also like this notion of like, okay, everybody says decentralized but a [00:13:00] lot of these Dapps are like, you know, held by like a multi state admin, which for people that don’t know, I mean, it’s basically like a few different keys control the fund in the wallet in different ways. and could be if everybody’s in the same country and then, you know, an authority decides to crack down on this and then put all of them in prison, then there goes all the access, right.

[00:13:17] Or, or if they get exploited or whatever. it’s a really complicated area right now, but I think it’s even getting more complicated too, when you start looking at like. L2 solutions on like on Ethereum, which are also kind of like adding more complexity to it. Like, so I think it’s really good that you all are doing this whole risk analysis and getting the information out there because I think aside from like L2 beat, I don’t see a lot of these things out there that are helping to inform.

[00:13:41] And I think you need to have several of them, right? Like, so that you can make sure that you’re making a wise decision with your money. but I think it’s something, there’s a big void in the market. That’s one of the reasons why I really wanted to talk to you guys today was to just like, make sure that people are aware of these things.

[00:13:53] And how much do you see this as a challenge? How much do you see people actually caring about the risk on these things from what you’re able to [00:14:00] glean from users? It changed a lot

[00:14:02] Greg: post the crash in terms of pre Luna, we were building it and putting stuff out there and people were sort of going, Oh, that’s interesting.

[00:14:11] But you know, everything goes up to the right. Don’t worry about it. And then we, among others, had been calling out the reflexivity problem in Luna. And then it actually happened. And I think that was for us the first moment where we saw people really go, Oh, like there is something to this. And then we had a couple of smaller ones where we had rated things pretty poorly, somewhat controversially.

[00:14:32] And then those protocols ended up having problems. And that got us a lot of sort of. Street cred in the DeFi space of like, Oh, these guys actually know what they’re talking about. Now I can tell you that like, some of that is luck in that at the end of the day, like a risk model is what is the probability of failure?

[00:14:48] And just because something is an a doesn’t mean it won’t fail. It just means the probability that it’s going to fail is lower than the probability of something else. And so like, you know, we’ve got enough time now that we have some data to show that, Hey, we’re doing a good [00:15:00] job of the things that we rate poorly are failing and the things that we.

[00:15:03] Have rated highly, haven’t failed or have had much smaller instances, but you won’t really know to your point around like multiple sources around this for a decade in terms of you need to backtest over 10 years and go, okay, the failure rates are aligning with our ratings. We have enough data to, I think, definitively say that we are directionally correct.

[00:15:21] But like, are we correct on the margin at the end of the day? There is, while we try and do everything objectively, there is some subjectivity to like, where do you draw these lines and how much do you wait one factor over another factor? Like you talked about for us, one of the biggest things is that control piece, right?

[00:15:38] In terms of if one person has control over the wallet, at the end of the day, that is a huge red flag. There are government risks that you, like you talked about, there are hacker risks. That’s something that we look at a lot, both like in designing our system and in rating these systems, right? A lot of these companies that end up having problems, whether it’s crypto companies or outside crypto companies, is you have [00:16:00] one employee who has access to stuff, who gets phished, hacked, What have you gives up keys and then everything is accessible because they haven’t divided the information and they’ve made it possible for one employee to make large scale changes or, you know, take control of her wallet.

[00:16:19] And so that’s something we like we Explicitly, it requires both like the user, like cryptographically requires the user for us to move any money. We haven’t talked about that side of our products yet. And like several employees signing off on things for that to actually happen. But the idea being that basically for me to sleep at night, I want to know that like, if someone stole my computer in the middle of the night, They could not move money despite having at the end of the day, the AWS root password, right?

[00:16:46] To all of our code. And I think that’s how you expect these DeFi applications to be built. But in practice. And I understand why, you know, 20 years in startups, like you take shortcuts in terms of, you’re trying to brand that line of like [00:17:00] developing quickly and safety and all of those things, but they take shortcuts that I think people should at least be aware of when making that investment decision and, you know, knowingly going, okay, I am okay with this risk and I see where they’re trying to get there.

[00:17:13] And then the surprising thing to us more than anything is. Sometimes when we publish this stuff, the protocols themselves aren’t even aware. They come back to us like, why did you give us this terrible rating? You’re like, well, because you have these like four major issues. And they go, Oh, Generally they go, you’re right.

[00:17:28] And they actually will try and again, get some guidance to how they can fix those issues. Occasionally they argue with us about the methodology. Thankfully, none of that affects the rating. You know, this is a still a nascent space. And so like arguing about the methodology helps us think about like, okay, are we waiting some of these things properly?

[00:17:45] What is the right trade off? counterpoints. I don’t think we have changed any of that from those conversations. We have like an internal risk council. That we have to go through to make any changes to our risk model and it does lead to then conversations in that council of like, how should we be [00:18:00] thinking about these things, which is a lot of fun from a philosophical conversation perspective.

[00:18:05] Luke: Well, I mean, and I think to just to kind of drill down on that a little bit. I mean, mentioned the protocols will get back to you about the ratings too. can imagine. I mean, just from what I’ve observed. Directly. and from seeing people like, advocates, like, I wouldn’t say consumer advocates, cause I don’t think there’s anything formalized there, but they’re basically consumer advocates, right.

[00:18:21] That will call out risk. You see a lot of times, things are so tribal in this space that people that are pointing out a very legitimate risk that you don’t realize is a real big risk until something happens, right? Like people will go after the people that are reporting it because the communities are so tribal and loyal, like fanatically loyal in some cases.

[00:18:41] Do you all deal with that a lot when you, because I would imagine, because you guys put some editorial commentary along with this, how often do you guys get flack from communities that don’t like what you have to say versus the protocol? Or is it even noticeable?

[00:18:55] Greg: I would say the community flack happens, but we take that as sort of part of our [00:19:00] job.

[00:19:00] We actually have like a series that we’re coming out with where we’re leaning into that more and specifically highlighting what are the 10 worst things out there and sort of going through that, because we think that that’s, Both like helpful to those communities and you’re never going to convince the tribal person, right?

[00:19:15] But what you want is the non tribal person to go, Oh, I didn’t know that. Let me look into that more at like a bare minimum. The hope would be because I would think obviously we’re fans of this space. We want it to succeed. We’re not calling something out because we are a hater or we have some sort of power thing.

[00:19:35] It’s really important to me that we, we don’t have a protocol. we don’t care who wins in this space. We just want to make. The winners, the ones that are, have done the best job of making trade off decisions, because at the end of the day, like there’s not going to be a perfect protocol, there was no perfect piece of code that was a sort of a running joke among some of the principal engineers of the Amazon, right?

[00:19:54] The perfect piece of code is one that has no lines because like the minute that you’ve written a single line, you have made [00:20:00] some set of trade off decisions that are going to work well in some situations and not well in other situations, and so like, there is no perfect thing. But you want to reward the ones who are doing the best job of making those trade off decisions, where they’re taking into account all of the potential risks and what the potential benefits are.

[00:20:16] You can make something considerably more safe. Rewards is a really interesting one. 99 percent of rewards out there, to my knowledge, are basically off chain. At the end of the day, they’re controlled by the protocol. They have full control over whether they get paid, how they get paid. There are sometimes, there’s often access through a chain mechanism.

[00:20:38] But you’re just sort of have to trust them. And on one hand, that seems like a very antithetical to the concept of defy and this concept of decentralized and like the whole idea. On the other hand, you can say, I understand why they made that because the idea is you’re sending these rewards in theory, sort of per transaction that’s happening on the chain.

[00:20:59] And [00:21:00] if you were to think about the gas costs of doing that on Ethereum, it would be so expensive that it would be impossible to actually. Execute rewards, right? I think in time with L2s and cheaper networks, there is potential that you’re going to see some of this migrate to on chain and not be the trust, but there’s a reason that they took that approach.

[00:21:21] And then the question is, you know, sort of getting back to, okay, if you are investing in one of these contracts because it has high rewards, at least understanding what is the risk associated with those rewards and know that like that portion of your investment potential is riskier than the rest.

[00:21:37] Luke: No, I think, I think that’s fair and reasonable.

[00:21:39] I mean, one other thing too, and I’m not sure if you all are working on this now, but it seems like an interesting area that could maybe be explored if you’re not doing it already. I mean, one thing I’ve noticed too, is that to touch on your point about having no code is perfection, right? Like I think one of the really big things people should probably look at when they’re assessing risks is like.

[00:21:58] What’s the incident response [00:22:00] like when by a project, when things do happen, how do they handle it? Because if it’s inevitable, right? Like you’re still going to want to have to use them for a thing. Probably if they’re responsible about how they handle that thing and they, they act like adults or whatever.

[00:22:11] Have you guys thought about this at all? Like kind of doing any like assessments or, I don’t want to say like a post mortem, but some kind of look back in this might be something that happens years down the road, just because we’re not. There with adoption yet with some of these things, they take some time to play out and not to add more points to your 420 of many points of having to look at.

[00:22:29] But it’s just something that always kind of like really interesting for me because so much of these things when I see risk assessments made a lot of this evaluation is also of how the protocol handles those reports. Are they doing what you’re saying? And are they asking? Oh, wow, I didn’t know about that.

[00:22:45] Let’s get in here and solve this problem. Or are they getting super defensive? Like they’ve got something to hide, right? Like the maturity kind of like I have seen this happen in a bunch of cases where most of the time people really want to get to the root of the problem and fix it because it’s in their interest to do it.

[00:22:59] But [00:23:00] then occasionally you get these weird ones where for some reason they just are really resistant to admitting that there’s a problem. But I think so much of this is also how like the teams manage it. Right. Like, and it’s got to be a hard thing to quantify, I would imagine.

[00:23:10] Greg: Yeah, I think the subjective part we 100 percent notice and see and that affects some of there are investments that we are making available through our site to sort of on the UX side.

[00:23:20] Like how do we make define more accessible? And there we are pickier on the subjective stuff on the objective stuff. How we’ve tried to quantify some of that is to look at it. How many audits have they had? What is the quality of the auditors? So we have like a ranking of auditor quality based on how much stuff they find, what have they audited that then ended up having exploits later that they didn’t catch, and then we look at how did the team mitigate Any exploits that happened or the things found in audits.

[00:23:49] And so like, and the time that it took to do that, as well as the versions that they’ve done since then, and like what the audit rates are. And so those are the ways that we have tried to sort of quantify this subjectively is instead of [00:24:00] looking at like, Oh, their discord channel didn’t respond to this thing for X amount of time is, is really hard to plug into the model at the moment, maybe with AI, that will get easier, but it’s Now it’s a little bit more focused on, okay, we have these objective data points around audits.

[00:24:16] We have these objective data points around like what was found. We have these objective data points around exploits, and we have like, how quickly did they actually patch and fix it and do those things? And so that’s how we, we try and build that into the model, but you know, hopefully it’s a continuously improving model, right?

[00:24:29] We’re always looking for what are the more data points and how can we bring more of those data points at scale into this system?

[00:24:37] Luke: Makes sense. We didn’t really touch on the second half of the coin of the business you wanted to get into. Well, why don’t we dig in a bit there?

[00:24:43] Greg: Yeah, if we again go back to the idea of being that we’re gonna at some level replace Chase, right, you’re putting money into Chase or DeFi, I shouldn’t say we, you’re putting money into Chase, chasing money off of your money.

[00:24:55] I think it gets back to if at the end of the day you had two options. Where you could put money into some [00:25:00] place where it’s going to get historically, you know, between like zero and 3 percent interest, or let’s say five to 15 percent interest. If all of the things are equal, I think just about anybody, no matter how financially literate, it’s going to pick the five to 15 percent over the zero to 3%.

[00:25:14] Right. But that becomes, okay. Is the UX the same? Is the security the same? What is the like ease and access of all of this? And so that’s the second half of our business is okay. Now that you have enough information in theory to make an informed investment decision, how do we enable you to get into defy with the same level of ease or hopefully better?

[00:25:34] Cause baking apps aren’t that great. Although they are, have gotten better in recent years than, you know, the current defy ecosystem we were talking and you mentioned that you’ve done a number of defy transactions. I think if you’re starting from. Money in a bank account. It takes, on average, seven steps to get from there into a DeFi transaction.

[00:25:56] And those seven steps are terrible. UX [00:26:00] is, they are risky, both in terms of like, do you understand what you’re doing and, you know, you are copying large 16 character things. Are you, you know, mistyping anything? Do you actually understand? If you go into something like market making that you need, you know, equal proportions of these assets to then put into some of these investments.

[00:26:20] And so, and you can get into sort of like that seven steps can quickly become like 14 20 steps and each one of those steps. Oftentimes, I shouldn’t say a lot of those steps cost you money, right? Whether how much money they cost you depends on what network you’re doing on, which providers you use and all of that.

[00:26:35] And so it can both be complicated and expensive. And we got it. I think we can simplify all of this and sort of make it like a one, two step process. And in theory, do it cheaper than it would cost you to do it yourself. And so there’s both one in terms of optimizing, like what are those seven steps and picking the most optimal seven steps at that period of time behind the scenes, right?

[00:26:55] Like you take one step, we’ll take the seven steps on your behalf and we will do them optimally given [00:27:00] prices. At that given moment, and then to probably most folks on this podcast are familiar, but at the end of the day, the transaction costs in blockchains are per transaction. It doesn’t matter whether you’re moving one cent or a billion dollars.

[00:27:17] And so the other thing that we can do is we can bulk some of these transactions together and thereby spread that cost across more users. And so provide that service at a lower cost than it would cost the user to do it themselves. And so that’s the second half of our business. We opened up. In the fall of beta around being able to invest through us.

[00:27:34] We got a bunch of feedback that was mostly expected around like, Hey, you need to have more pools available. ‘cause we started with only a very small number, more funding assets available. We’ve been working on that and we’re, we’re starting to see more traction as we’ve added a number of those features that we, sort of knew, but we’re hoping that, you know, the minimum viable product would get us some good feedback.

[00:27:53] Luke: Awesome. I can relate definitely to a lot of those steps in the process, the points there and the cost involved. I think people in the crypto space [00:28:00] really underestimate is just how confusing a lot of this can be for people that are out. Like if you, especially as they’re become more layers to it, right?

[00:28:07] Like you’ve got like, how many different wrap variations of the same token are there and the fact that they’re not interoperable, right? Like, and people don’t realize that, or they picked the wrong one. Like I was using this example to my younger brother who I started to get into crypto, he bought Litecoin cause he thought it was a cheaper version of something for some reason.

[00:28:24] And it’s like all these little things people don’t realize that, yeah, not everybody’s like this, you know, super into this, the way that, early adopters are. And I think needs to be a lot more of what you’re talking about around the simplification of things, because a lot of times too, I think, you know, the marketing is so loud in this space around percentage of yields and all these things that people often move into pretty risky things and they’ll miss steps along the way and get lost in that complexity too, or just not realize that there are things There that can cause them to turn out early or whatever.

[00:28:52] And if you lose them there, it’s harder to get them back because it’s their money.

[00:28:56] Greg: Yeah.

[00:28:57] Luke: Yeah.

[00:28:57] Greg: Yeah. I mean, one of [00:29:00] our investors was, we were demoing the product to him. And one of the features that we have is a rate by wallet feature where you can put in your wallet address and it goes through and to the degree that we can rate the things that you have in there, it rates them.

[00:29:13] We were showing him that and he put it in his wallet and he sees like D Next to one of the things and he had. As you can imagine, investor, he had a sizable amount of money and a sizable amount of money in this thing. And he looks at it and goes, D D’s bad, right? Like, yeah, D is bad. It’s like, I thought that was, he’s like, and like real bad.

[00:29:33] I’m like, yeah. He’s like, I thought that was really safe. We’re like, no. And we like sort of explain why he’s like, all right, I got to go. And like immediately hung up, like got out of that, put it into something else and then like got back on the phone with us to your point. Like there are just things where like, you understood this thing to be good or you understood this thing to be different.

[00:29:51] One of the ways we’ve tried to simplify it is, you know, also on chain, right? If you have USDC on four different chains and you want to invest in something that’s on [00:30:00] one of those chains or on a different chain, like we could do all of that for you where like, you don’t even have to worry about the fact that there are four different chains.

[00:30:06] We will just take care of that for you. And so like a lot of ways of like, how do you simplify that? And that’s, The simple case, because USDC is easy. It’s not the wrapped ETH or something that’s not actually ETH, but you thought it was ETH because ETH was in the title. And so like being able to, you know, simplify this, make it easy and also show people what the actual performance is.

[00:30:26] That’s one of the things that’s also been very surprising is the amount that the performance numbers that the protocols put out there are oftentimes like incredibly overstated and being able to run. So we do sort of both a mix of like actuals on our trades. And then we do simulations. We use simulations to actually measure what the yield has been over a given period of time.

[00:30:47] And we can go, well, the protocol was average, was advertising, but it was 50%. But in practice, we’re actually seeing like 12. 8%. And I’ve purposely picked a relatively small deviation, because that’s where most of them are. But there are some that are like miles apart. [00:31:00] And we’re trying to figure out what the right way to sort of raise that to the audiences and sort of showcase like, Advertised yield versus actual yield or some marketing branding term that we’ll come up with in terms of like how that is.

[00:31:12] Yeah. But showcasing, you know, you think that you’re doing this, how do you know how much money you’re actually making? And is this worthwhile? And is it worthwhile given the risk? Because, you know, while there is a ton of potential in DeFi and there is this power over time to this interest, you need to be taking that into account of, okay, what is the risk that there is a problem?

[00:31:32] How much might I, I lose? And then being, spreading your Assets appropriately, right? Just as. In the traditional world, people tell you you should be in stocks and bonds and potentially real estate. You should be spread across different protocols. You don’t want to have everything in one basket because it’s the highest interest today, may not exist tomorrow, and then you lost everything.

[00:31:54] Versus if you spread it across five things, you’re The interest is actually enough that over time that’s going to [00:32:00] pay off, even if one thing does fail. And that’s at the end of the day what banks are doing. Banks are investing in thousands of mortgages, right? Mortgage is a great thing. You get the Fed rate plus a percent or two, and they basically go, how do we, well, more depending on your credit score, how do we get the group of people such that we know in large numbers somebody’s going to fail?

[00:32:21] But I personally don’t have enough money to give the mortgage to more than like one person. And I could pick the lowest risk person in the world, right? Person has a great job. It’s a perfect house. It’s in a safe neighborhood. There is no problem. And that doesn’t mean that a fire is not going to start tomorrow, burn their house down.

[00:32:41] Like that house is just not worth 80 percent of what it was the day before. Right. And so like you have that single point of failure, banks are able to spread that out the same way DeFi is able to spread that out, but you also want to spread that out, not just using DeFi, but across multiple DeFi protocols.

[00:32:58] Luke: Looking longer term, do you [00:33:00] see eventually more traditional finance just kind of incorporating a lot of these DeFi products or tools or technology into traditional banking, or do you see them kind of staying isolated?

[00:33:11] Greg: As someone who’s been in startups for a long time and read a fair bit on sort of future, I think the quote is like technology goes either way further in 10 years or way less far in 10 years than you think that it’s going to.

[00:33:25] Without making any particular things, what I think it. Is likely to happen is that one, you’re going to see more real world assets on chain. There are a number of projects that are working on that, that will increase the useful of it relative to the average person. Whereas now a lot of the jobs that defy protocols are doing are within crypto.

[00:33:44] And we’re starting to see some of that chase as much as Jamie diamond appears to not like crypto has done several crypto trades. They’re using it to do some things because it is places where it’s more efficient than the traditional market already. And that’s what all the sort of downside that we’ve already talked about.

[00:33:58] The other thing [00:34:00] is from a regulatory perspective at the end of the day, at least my understanding of what regulators also ought to be doing is it’s about transparency, right? Like you want consumers to be able to make informed decisions. And in that sense, you know, blockchain and defy are these great tools where you have full transparency and I think it’s a, it is a step level compared to current regulation in terms of, okay, right now we have regulators.

[00:34:29] So there is information that’s available to a small set of people. And they’re using that to regulate and whether they are the most well meaning people, you know, like ignore regulatory capture and all the things that people scream about, they’re still not perfect. They’re going to make mistakes. They’re going to miss things, right?

[00:34:45] Bernie Madoff was a regulated space, stole a lot of money. Lost more of it than S S B F did, even though S B F did all the terrible things. And in theory, crypto solves a lot of [00:35:00] that problems with blockchains, because you have a, it’s available to anyone to your point, like who watches the watchers? The answer is everyone can.

[00:35:06] And so anyone can find a problem and then point it out and show the information, show their work such that other people go, Oh, that is a problem. I see that. And so I think in that sense, Both like existing financial institutions and regulators should be moving that way. Now, what happens in the U. S. given politics and bureaucracy and, and all of that is, it’s hard to say what happens when, but I think you’re seeing a lot of movement in legislatures outside the U.

[00:35:33] S. where people are becoming more accepting of this. They’re trying to strike sane balances of regulation, trying to You know, balance the terrorist risk from the consumer risk and understanding like, where does that transparency and all the things actually help them? You know, if I’m guessing, I’m saying, I think the, the on ramp and off ramp to FIO will continue to be the most regulated piece of the whole thing.

[00:35:57] But in general, the rest of it, I think there’s going to be [00:36:00] more movement there because you’re going to have more use cases, you’re going to have the things that regulators want around transparency, trackability, like a public record that lasts forever. And at the end of the day, it’s better for consumers, right?

[00:36:11] It is better for you if you have both one more options. In terms of where your investments are, regardless of whether you use it or not, just the fact that you have more options and to an option for you to make money off of your money rather than the bank. Again, JP Morgan made 50 billion last year and the vast, vast majority of that came off of us.

[00:36:30] Right.

[00:36:31] Luke: It’s massive. I mean, people, people are unaware. It’s such a game around the capture. I mean, you’ve been really gracious with your time here today. And we really appreciate it. People want to learn more about you guys and what you’re doing and find you online. Where would you recommend they go?

[00:36:45] Greg: Exponential. fi is our website. It’s got all the free informational stuff on there. We’ve got a weekly news roundup where we dig into some of the things in detail and try and educate. That’s a great source. I am most active to the degree that I’m active on anything [00:37:00] on Twitter slash X. People can check me out there and us out there.

[00:37:04] That being said, I think all of these things. Hopefully people listening to this podcast already understand, like, it’s hard to sum up any of this in 140, 160 characters. And so, you know, I think that the long form stuff is the way to really learn. There’s some great podcasts out there. You guys are one of them where they can dig in and get more detail on this or read long form blog posts.

[00:37:23] Luke: Awesome. Thanks again for coming today, Greg. Really appreciate it. Love to have you back to, to kind of reassess things as we can move forward. Thanks so much for joining today. Of course. Thanks for listening to the Brave Technologist podcast. To never miss an episode, make sure you hit follow in your podcast app.

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