Watch the full video of our conversation on the Spread Great Ideas YouTube channel.

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Full Transcript of Our Conversation

Introduction to Martin Krung and Curve Finance

00:31.65 – Brian David Crane

Please welcome Martin Krung. He’s a Swiss crypto active for over the past 12 years. He’s a full-stack developer with a background in art software and innovation engineering and most importantly, this is the key part. He is a key Curve Finance contributor when it comes to business development for the decentralized exchange.

Martin and I have been talking via Telegram. I am excited to be chatting with him here on the Podcast. Thanks for making time. For those who don’t know what Curve is, and why you say on Linkedin that it is the best decentralized exchange or Dex. What’s your quick elevator pitch for the curve?

01:11.58 – Martin Krung

Yeah, Curve has like the best technology for like known managed liquidity basically, because you don’t have to mention liquidity. It’s just 2 years AMM and then it is intensely liquid itself and it’s not like, all those to work like managed positions now, so you never have to manage your position basically, and the main different product of the best technology we have is for stable assets basically so and..

01:40.99 – Brian David Crane

Yeah, like kind.

Curve Finance’s Approach to Liquidity and Technology

01:42.61 – Martin Krung

If you pay like the coins are all like an ETH liquid staking, then it’s like the best technology out there, basically. That’s only one like product, this is like the first one.

01:57.27 – Brian David Crane

Now we’re going to get into Llama Land and CRV USD, the stablecoin later on the podcast. Let me ask you something before we get to that. So why is it that if you’re a liquidity provider you default to Uniswap as opposed to Curve? Why is it that? Is there a financial incentive for people who manage money on chain if you are like a VanEc.k.

02:19.69 – Martin Krung

On it..

02:34.26 – Brian David Crane

Or a crypto hedge fund in some form or fashion, do they make money? Do they get to charge a management fee or so is there some benefit to why they would park their excess liquidity or cash in a place like Uniswap as opposed to Curve?

02:54.59 – Martin Krung

Now I’m lost a little bit. You think, yes that’s not how I feel because I’m more like coming from retail, basically. So I think the benefit is that, you don’t have to manage your liquidity, basically – That’s the main benefit. It’s hard to manage completely right? If you see that adaption from Uniswap V3. It’s not that high, because people still open Uniswap V2 ports because you have to manage your positions all the time, basically.

03:11.82 – Brian David Crane

Yeah..

03:26.92 – Martin Krung

And that’s it’s like for Pros, so that’s not the answer to your question. But if you look more sideways and yes, I think it’s the same at the end because what we see now there are a lot of applications built on managing rapidity positions basically, and they all take a cut. So even if they’re more or less successful, some of them are more so less. They add complexity to the product, but they also extract value so you have to pay them in form. So this is like it’s a complex on top and it’s a competition out. There was like the most the best like Liquidity Management System for use of Uniswap V3 basically. And yeah, it’s like endless competition, basically.

04:25.14 – Brian David Crane

Yeah.

04:25.36 – Martin Krung

And you don’t have to do it with cap, so it’s much more simple to use, and also if you look at Mainnet, if you have to rebalance your position on Uniswap V3, you produce everytime, you need to pay for the rebalancing. And that’s not the case with Curve.

Challenges of Traditional vs. Decentralized Exchanges

04:47.91 – Brian David Crane

Yeah, so how did you get involved with Curve? Like what is your.. I kind of skipped right over this because we started talking about liquidity providing on these different Dexes, but what is your trajectory in terms of how you got into this business development role for Curve?

04:53.45 – Martin Krung

Yeah. I’ve been a very early Ethereum user so I had like cash on chain, and I had like to to deploy it, basically. It couldn’t be idle so I just tried out every product who was coming in a Defi built basically, very early on. It’s like I’ve been an early liquidity provider to Curve. So I got the Airdrop and since then I was always like some kind of Curve guy because it’s like this good technology. I got the Uniswap airdrop, but it’s not the same. Curve is very different. Like a very deep part of our product suite, basically.

05:42.78 – Brian David Crane

What can you do with it? yeah.

05:54.20 – Martin Krung

And it sounds like, it’s a token who has many properties and it’s mostly used to adjust the system and you get fees. So it’s like garment store but we are not like a government, we are not a DAO who does government like. we are like a parameter DAO, basically. We vote on terms, and I think that’s fine. Which is just that mostly it’s writing on parameters on protocol. It’s not about coordination who is making what kind of contributions or like payment of contributors. So it’s like we are part of DAO basically and I think this is like a good thing to be.

06:44.26 – Brian David Crane

Yeah, there’s a ring fence in a way around the dower. It’s limited in scope in terms of its decisions.

Martin’s Personal Journey to Curve Finance

06:50.94 – Martin Krung

It works. I was actually really proud, I’m playing around with all these protocols and so I got like a girl. I was like a gulf guy because I got the airdrop. If you like the product and use it early on then you and identify with the product and also locking up part works too. I’ve locked them up as veCurve because this time you couldn’t do like different thant, there was like no.. It makes you loyal too because then you have the token locked up for 4 years and then your long-term incentive to help or to look what’s going is high basically but then I faced today..

07:47.34 – Brian David Crane

Yeah, yeah, and.

07:53.41 – Martin Krung

And like hobbies for 10 years but then during the pandemic, and coincidentally, I left my former company and then I worked for different hours and then yeah ended up with Kafka right now.

08:07.91 – Brian David Crane

But you’re also involved with Aladdin DAO, is that right?

08:09.80 – Martin Krung

Yeah, I’ve been one of the first contributors and I’m not anymore with them. And in the past they had a very different idea to make a product and I tried to add at this time..

08:14.64 – Brian David Crane

Okay.

08:27.10 – Martin Krung

And then yet it didn’t work out this time. Their idea didn’t work but like the farmers they just made a period, basically. At this point, I say, you have a certain energy to start new things and at this part, the energy was not there anymore. So I left and was looking for different things, but I’m still very curious what they do and they connected somehow.

08:56.16 – Brian David Crane

And in your role for BD for Curve, are you going to conferences? and the reason I ask is because I know a fair number of people who work at centralized exchanges have big budgets.

Go out for nice meals, throw parties, do the auspices of a business development, right? Well I don’t know you but I don’t see you doing that. Let’s say, on behalf of the curve..

09:13.27 – Martin Krung

No. Curve has like a history of not showing up anywhere. And it’s okay so yeah. I think it’s all about we have like product market fit. And I just have been to the Ethereum Conference like the last two days

09:30.14 – Brian David Crane

Yeah.

09:45.19 – Martin Krung

And I didn’t have that time, a lot of conferences last time in my life, basically. And somehow you have to show up because it’s like they have to set a product. They don’t have users to go there and say yeah, it’s me. It’s my project. That’s what you’re doing. But Curve is like we innovate, it’s different. We found Product Market fit and we try to.. We talk to other protocols and try to help them to integrate us or how they can use us in space, basically. We have to advise them how they should best use Curve. So It’s much more business to business in a way. It’s not that we sell Curve to retail because most of the traffics anyway are over aggregate.

Technical Challenges and Innovations in DeFi

10:40.85 – Brian David Crane

Yeah, so let’s go on that because I’m curious if the volume or the traffic is coming from aggregators, and when we say aggregators, we mean somebody like Matcha, CoW Swap, like 1inch, I assume they hook into like an API and in the backend of Curve. How does an aggregator get tied in with curve? Or how does curve get tied in with one of these aggregators?

11:10.79 – Martin Krung

Yeah, I’m not too informed about the deep technical details, but we have like and somehow they call and registry that things show up.

11:24.49 – Brian David Crane

Okay.

11:26.32 – Martin Krung

And of course they can discover, it’s done differently. It depends on the technology they use. Some of them are like integrating them in, to just see them pop up and integrate them. There issue is in a way more if we iterate on the model and we do, from outside looks like every pool is like a StableSwap but we have different versions of StableSwap out there. And then it also changed internally how you can calculate the best rate or how what I tried to do, they tried to find out how the trade will be executed. If. It’s executed, what’s the price? Basically, so they need a pretty good model and how to calculate their price. And if you change a little bit, then this also changes so they need to write and you can see what’s going on.

12:18.65 – Brian David Crane

Yeah I was sorry I had seen, I think about Twitter several times.

12:20.10 – Martin Krung

Assault.

12:27.96 – Brian David Crane

Requesting some of these aggregators to change which contracts or which pools they were referencing because when Curve would iterate and release something new, the aggregators would still be hitting like either interfacing with old contracts or hitting old pools, and actually the Curve was losing volume relative to others.

12:35.80 – Martin Krung

Yeah, and..

12:46.90 – Brian David Crane

Dex is because these guys were using some kind of old tech. Let’s say, is that right?

12:48.79 – Martin Krung

Yeah. I think that’s like under the hood Curve is like a complex beast, and things changing, and so I guess it’s for every project who is like evolving the case that sometimes aka have like all the information use all the information. Maybe even not or like being incentivized to integrate to. I don’t know on some Layer 2, Curve is there, but we don’t have a lot of TVL. Yeah, so it’s like, that’s not my expertise, basically. But be broke on this like last few weeks, we check things and see which are included and which kind of aggregators, and it’s also this bank part other parties that you also need like arbitrage shares to, and this more like now the soft liquidation part of lending market.

13:31.66 – Brian David Crane

Can it..

13:43.32 – Martin Krung

Because this is done over arbitrage and this is like another market where we do work like in the background, basically, and that’s not very so..

The Role of Arbitrage in Curve’s Ecosystem

13:51.23 – Brian David Crane

Okay, yeah. Can you explain that and what I mean, why does the Curve need to arbitrage bots to enable or to substantiate the soft liquidation mechanism that’s in Llama, with 2 Ls like how does that work and why is it important? yeah.

14:12.78 – Martin Krung

Yeah. Okay now, maybe I have to explain a few things about the soft liquidation mechanism, in a way you can look at this. It’s used to Curve USD. So if you have a collateral, and need Curve USD, you can set your own risk factor. Basically, you can and give your collateral and then you can choose which is like the top, and you get into soft liquidation and what’s the lower bar you get into soft liquidation so you have a range, basically. And what you then do, it’s like their liquidity, it’s like in band, it’s like some bands and all the liquidities like in a place, basically. And it works like a stop loss. So this means if the price is going down, then these like bands are triggered or like open up for a trade, basically.

So people can then think to arbitrage about what they do, because you have a collateral like ETH in it, and you draw a Curve USD, now the ETH prices going down. But soft liquidation does, it says, one position who is on the water, basically. This position is sold to Curve USD, so you are collaterally slowly sold to the Curve USD. You lent out, basically. But it’s still old, you don’t get it. It’s still like your position is slowly changing. It’s selling your Eth to Curve USD internally, basically. And yeah, it starts backing it by itself.

The Role and Mechanics of Curve in the Crypto Market

15:52.17 – Brian David Crane

Sorry, let me say one thing on that real quick. So I’m a user I have wrapped bitcoin (WBTC) I come to Curve.

There’s a mint cap on there of let’s say 200 million. I don’t have it in front of me at the moment but that’s the maximum amount of.. I want to say this correctly. That’s the maximum amount of CRV USD that can be minted against that collateral if I understand?

16:27.50 – Martin Krung

Yes, yeah.

16:30.89 – Brian David Crane

Okay, so I pledged my wrapped BTC as collateral. I take out a loan against it in CRV USD, now that wrapped BTC sits as collateral in these bands that you’re describing and so when, sorry?

16:44.69 – Martin Krung

Yes.

16:50.19 – Brian David Crane

Yeah, and so when BTC or Wrapped BTC drops in price, Curve in the background goes and sells that band into a liquidity pool that’s also on the curve. What is that liquidity pool is it CRV USD, WBTC or?

17:06.73 – Martin Krung

Yeah, it’s not like it’s directly connected there, but the arbitrage shows come in, because it’s not that it flows directly to the other pool. The thing is, it’s a system where we say, it’s always with the blockchain.

17:09.40 – Brian David Crane

WBTC or what is the pool that holds it into?

17:25.89 – Martin Krung

Somebody has to make the trade. So we say now, okay, it’s underwater. So the position is like sold and there’s a discount on it, so somebody arbitrarily can then buy the position, basically. buys the WBTC and says it on the open market and sends Curve USD and then gets the WBTC. So it’s not like you have to use our other pools, you can just sell the WBTC to any place who takes it, basically. But you need to pay in Curve USD. Yeah, so it makes sense to use the AMM if they get the better price, but it’s possible to use your own chain, you get a better price for your WBTC then you switch to another and..

18:04.84 – Brian David Crane

Which..

18:22.38 – Martin Krung

Save the Curve and buy Curve USD. So this is like a pool..

18:24.16 – Brian David Crane

Because you have to buy the collateral in the Curve USD. It creates a demand side for CRV USD as well. Right? Yeah, interesting. Okay.

18:41.88 – Martin Krung

It’s like arbitraged away. So then if the price is going down, then you are in a softly liquidation position, but then it didn’t liquidate. So if otherwise the round price is going up, then things in all directions happen, basically. So you buy back WBTC with Curve USD, now your position is opened back, and you lose part of, you have to pay for it in the form that the arbitrage has to pay the cards and it needs to be incentivized to do it. So you lose a little bit of your collateral, basically. Then at the end you know if you really go all bands or sold, then there’s like a..

19:25.76 – Brian David Crane

Yeah.

19:32.23 – Martin Krung

How liquidation then your collateral is really gone up, but we didn’t see many liquidations, because like in up markets so it works quite well, you see positions going into soft liquidation.. Then you can draw.. But what you want to do at this point? So It’s like, it works quite well there a lot a lot of soft liquidation a half liquidation most are liquidations in the price cost.

Governance and Community in Curve Finance

20:01.12 – Brian David Crane

And I think what’s interesting to me that you said is that the protocol Curve at the end of the day, like it has its loan of CRV USD repaid. Whether it’s an arbitrage bot, or some other mechanism, it is repaid like every time. You’re going through these different bands. Curve as a protocol is getting CRV USD. It’s like it’s not getting paid in USDT, USDC, anything else is getting paid in CRV USD so at at the end of the day, it’s loan book is healthy and that it was like you can’t take out an over collateralized loan. Like the protocol, the risk I think to curve in making these loans if you want to talk about peg keepers as well. We can get into that but the value of CRV USD drops below $1 or that it breaks peg because that’s that’s second part, like yeah, it can get paid back in CRV USD? Yes, sorry, go ahead.

21:01.10 – Martin Krung

Yeah, that’s the same one. Yeah now you talk about how we stabilize the peg for Curve USD, basically.

21:10.30 – Brian David Crane

The peg. Yeah, so..

21:16.71 – Martin Krung

Yeah, it’s just too close that we now use the same mechanism. It’s now used also in the lending markets. The soft-ish mechanism is also used in the lending markets. It’s just the same mechanism used on Curve USD. This is also used in the lending markets. The Curve lending marked basically and.

21:24.23 – Brian David Crane

But..

21:35.50 – Martin Krung

Think it’s good but it’s a very good product. Basically, nobody wants to get liquidated, So you have more time to direct , that’s one side you can look at this, but you also can like set, can go quite close to the price who is there now and just say the assumption. You say if you want to drop below 2000 US dollars, you said you want this deep and then you don’t have to worry. Except, okay if like the market turns completely then maybe, you have the problem then but in a way in the cycle market crypto normally behaves so it’s quite yeah, it’s a good product for sure, an upcoming price going up and going down. Yeah, BTC it’s just the, it’s like we just started in the bear market, basically. And now we received its performance if price comes down this cycle down but that’s not the issue. It’s not to show performance. It just means you mind how people use it all.

How good it is for the average person to choose. So this is also made, if you won’t talk about Curve USD, it stabilizes itself because it’s like the demand, or it’s priced..

22:51.80 – Brian David Crane

Got it? Yeah, so..

23:09.77 – Martin Krung

So the fee on minting Curve USD is depending on the price of Curve USD, basically. So if there’s like an overpeg, then we’re going to raise the so there’s like too much supply. Then to make it like and..

People want to have more Curve USD.

23:30.42 – Brian David Crane

Yeah, go ahead. It’s above peg.

23:45.70 – Martin Krung

The fees adjusted on Curve, is too adjust downwards. Yeah now I’m not sure saying I’m always strange. It’s a very simple, basic, but I can just never have it in my mind like…

24:04.83 – Brian David Crane

Well I think the beauty of it from the outside looking in, is only that the mouse trap is such that the interest rates that are charged on the loan are dictated by demand for that asset. Like if you’re pledging WBTC, or if you pledge staked ETH StETH, you have different interest rates on a collateral by collateral basis from what I saw..

24:39.42 – Martin Krung

Yeah, but this is very I don’t know how they are checked, no it shouldn’t be. They should have the same more or less because what we do now if you make and if fees are going up, people are incentivized to buy back Curve USD. So I got if the price went down the Curve USD is getting too cheap then the rates going up on the collateral, basically.

25:12.50 – Brian David Crane

Okay.

25:18.45 – Martin Krung

Because then you’re incentivized to buy back Curve USD, because obviously it’s cheap. It’s under 1 dollar so you buy it back and pay back your loan. This is the mechanism and all the way around if there’s an unpeg then we generate and that’s that that the peg keeps comes into play, then we generate like Curve USD injected into the peg keepers, in a way like minting like Curve USD. I always say like it’s like unpegged, but it’s not unpegged. It’s not really unpegged, if you look at the size of the collateral Curve USD has or the BTC and all the things if you add it up. It’s not unpegged. It’s in the sense, unpegged that we open up the buffer and feel it. This Curve USD is just generated from the protocol, basically. And it fills into the pools and then it because we add Curve USD on one side and the Curve USD is like its over pegged to a tool like USDT as an example, you inject more Curve USD so you come back into balance and the price goes down on Curve USD.

26:27.74 – Brian David Crane

Relative to the USDT. Yeah, okay.

26:33.13 – Martin Krung

The beauty of this system is that on shrinking supply the yield on your collateral is going up is like so if the if the supply shrinks, you have a under peg, then the yield of the supply is going up, so we make more money. Strangely, if the supply is sinking. We are happy on the supply shrinking because we have raised the rate to people getting to buy the supply and payback debt, basically. And this is like that Michael’s idea. It’s very different than a normal economic system works. In normal economic system if there’s inflation, you raise the rate.

27:30.83 – Brian David Crane

To try to make the money more expensive. Let’s say yeah.

27:30.87 – Martin Krung

Yeah to trade the money not expensive and this is like switched, basically. So it’s very interesting to see. We tried to grow so the rate is going up, if we grow fast, the rate is going down.

27:39.46 – Brian David Crane

Yeah.

27:50.85 – Martin Krung

If this live Curve USD is growing fast, rate is going down, basically. Maybe you don’t see it because like the markets actually itself place into these two now, it’s just yeah, everyone wants to go along. So there’s a lot of demand, basically, but in theory..

27:51.26 – Brian David Crane

And

28:09.61 – Martin Krung

So if there’s a lot of demand then the rates are going down, sounds strange but that’s okay so we will see if you are able to grow a lot if we see how then yeah if you go in a scenario about the market shrinks again, we will see how much fees we can rake… But the interesting side of this is like, so it’s possible that we make a lot of fees if we go in a bear market, basically. Because the USD is less in demand we have to make..

We have to say keep the fees, we take high on the collateral, to pressure out, basically incentivize people to buy Curve USD from the market and pay back..

29:03.90 – Brian David Crane

Keep their loan healthy.

29:06.11 – Martin Krung

I think that it’s a very smart system because it’s like long term. It’s not just everything that Curve does like long term.

Gluing into the Curve, it’s also glued into tokenomics because you look at this tokenomics, there’s this halving of Curve and it’s like once a year, the supply’s going down, and it’s also like quite long term.

29:31.67 – Brian David Crane

Just like Bitcoin halving. Yeah I think it’s 300 year mint cycle or something. It’s like it’s pretty far out.

29:44.15 – Martin Krung

Yeah, you want to talk now we talk really about technology or like how folks but you had like other topics to bring the more like.

29:52.47 – Brian David Crane

Well there’s one thing I did want to say in what you were saying earlier. So I watched Michael on, I think it was the unStable Summit he was being interviewed for. We’re talking about Michael Egorov, the founder of Curve Finance, and the interviewer was asking him about Curve USD at these rates. And he said, what happens in the traditional finance sector is you have the borrow rate that the federal reserve dictates down to the member banks. And he said, in this lending market, what happens is you have actually the lending rate that these banks demand of Curve. So it actually goes and likes up for lack of better way. It’s not that Curve Finance is the Fed.

The market is setting the rate at which it will borrow from Curve, the CRV USD with respect to these different collateral types basically or like assets and whereas if it’s the federal reserve they say to the member banks, you need to raise or how do they dictate it? They set the federal funds rate like from a top-down perspective so he had flipped it. And it was a..

Curve’s Market Strategy and Business Development

31:24.67 – Martin Krung

Yes, and yeah.

31:29.30 – Brian David Crane

Yeah, so again it introduces market forces to allow that interest rate to actually be set at a natural, or let’s say equilibrium. Okay, anyways, we can nerd out shift something that is a little..

31:37.20 – Martin Krung

Yeah, exactly. It’s interesting. This is one of his intentions. It’s not seen by many people, in a way because many think it’s just about Curve USD and speculate and..

31:53.96 – Brian David Crane

Yeah.

32:02.16 – Martin Krung

Whatever you do, you don’t go long, but behind is like a bigger just a bigger experiment base.

32:04.82 – Brian David Crane

Yeah, when you and I spoke before the podcast like I had, I have always kind of marveled at Curves penchant for game theory in terms of figuring out how to get people’s incentives into alignment. I mean, ve-CRV is an example that Convex is an example that a lot of it is game theory, deep game theory in terms of trying to figure out. How do you convince and not coerce like legitimately convince somebody to take the outcome or take the action you would like them to take because it’s in their own best interest? But it’s a lot of different competitive parties, and you’re trying to bring them into a marketplace and have it be relatively harmonious.

When I say the marketplace, the market for Curve as a token $CRV and then out of that comes things like governance, things like cash flow, things like gauge weights and voting. So anyways, let’s shift briefly on this and go. You want to talk about veCurve as a governance model and some of the changes that have taken place following the launch of the Curve as you’ve seen it in the ecosystem in general?

33:22.17 – Martin Krung

We didn’t change anything. Maybe, I don’t know. It’s still the same now. It’s like that.

33:24.58 – Brian David Crane

No, I mean these iterations, the solidly forks, or the like Aerodrome or Velodrome or PancakeSwap has now adopted veCAKE..

33:44.25 – Martin Krung

Ah you mean the tokenomics model, has been copied many times, basically.

33:49.38 – Brian David Crane

Yes, because Curve, in my opinion, is the pioneer of this, and now like a lot of things in Defi. It gets copied very quickly and iterated on.

33:58.55 – Martin Krung

Yeah, Curve is clearly the pioneer but the funny thing is, that’s like my personal opinion. I think it’s not even.. I’m not sure if it’s really done on purpose. Maybe it’s just coincidence because in a way, one issue it solves, the naked token if you trade the naked token Curve, there’s no revenue share in Curve token. But only on veCurve, and it solves like an issue that so only untransferable veCurve is like a security in a way, because there’s a dividend at top. But veCurve itself, it has no governments, you don’t earn a fee for it. So It’s a very elegant solution to this problem. I guess that’s one of the drivers in behind. Okay, if you think it is switched, how can I make a token who doesn’t have this property? And then you come to this solution then you see, okay. There are many other properties who’s like beneficial of this because.

34:56.49 – Brian David Crane

Game theory.

Decentralized Governance and Curve’s DAO Structure

35:15.53 – Martin Krung

People who are more aligned with your value or with your vision. They are ready to lock it up for 4 years. All they just want so and you give them like the governance right? And you give them like revenue in space. And dollars don’t get revenue but it sort of like an issue, you make a token then it has all these characteristics and your legal blah blah. If you do it like this, I don’t know the legal standpoint to veCurve but at the end it’s like it changed the token in a way.

35:42.85 – Brian David Crane

It sidesteps it.

35:51.99 – Martin Krung

And of course resulting is the long-term incentive who’s like yeah you like that too. So it’s beneficial on several layers. So but.

35:59.37 – Brian David Crane

Yeah, it’s game theory twice in 2 different instances. One with veCurve versus CRV, and also with CRV versus other Stablecoins because a lot of the attack vectors for Stablecoins is a bank. They have taken deposits whether it’s a Tether circle. And now they have issued this almost like a deposit receipt onchain and Curve says, Well, what’s to me? I’m paraphrasing but Curve says, Okay. Cool, what’s the important part of the Stablecoin which is you actually want to know that it’s useful as a unit of measure or transfer of value and not that like okay, cool. They took other assets WBTC, Staked ETH, other things that there’s no bank that’s like going to say okay, cool. It’s like a way to get to the Stablecoin without necessarily needing to compete head-on with like Tether or a Circle, and need to swim in those regulatory waters.

37:04.59 – Martin Krung

Yeah, for me, this is like a side effect, basically. For me it’s much more that, if you look at money..

37:05.81 – Brian David Crane

Waters. Let’s say I don’t know how to put it, what I mean. Okay.

37:24.41 – Martin Krung

So if you make a Stablecoin, how do you get it adopted? And maybe I guess it’s like strangely, there’s another stage in crypto which I call, like it is a means of speculation. So in crypto you can have a Stablecoin and just to purely speculate on it. It’s like a cash which has speculative properties and every new Stablecoin, almost them if it’s not fully backed, goes to this stage of where people just buy to farm the tokens of your project I guess..

Prisma and it’s like a perfect example because you generate, and then you farm their Prisma token, and you sell it on the market, the crash is at some point.

38:11.72 – Brian David Crane

Yep.

38:20.50 – Martin Krung

What’s going to happen? If you lose the speculative part of it? I think that’s different in crypto than in other traditional market. Cash is not speculative but in crypto clearly, so this is like the first stage everyone makes a new Stablecoin, and then it’s like the stage of a speculative asset. Everyone uses it to farm and make money, but it ‘s completely fine because that’s how you get people interested in your project. But then you go to the second stage of money or quality of money, then you say it’s like a means of exchange. So you have like the dollar is like the best means of exchanging this advice to adopt it basically.

And if you are like a Dex like us, then it’s an exchange. So if we own our own dollar. We can make it the best means of exchange in our exchange. And then it gets a property. It’s not only the value, it has a premium on top basic. It’s usability and then the next stage you want to be a store of value. That’s like the anchor you know that’s like some currency store value.

39:28.10 – Brian David Crane

Yeah.

39:38.42 – Martin Krung

The best off value, I live in Switzerland is one of the best off values you can have. It’s better than that. Even like the US dollar risk so this is the property you’re going to have but the strange thing is you think about property store value. You can’t force say okay, the US maybe can force dominance to the world, but you can’t force it on money. It’s about the quality of the money or the quality of the state Bitcoin in our thing to months. Yeah, for me, the quality is in the pack. If it’s very stable, The collateralized dollar was very close to the bank. They smashed the quality of this dollar basically, so it’s a kind of design.

It’s the best store value, maybe is the one who can really keep the pack very close. Maybe if some people may be thinking in that direction for me it’s much more. Okay, you make a trade, and you use Curve USD, and you buy some assets, bears the point where you say now just hold Curve USD out like going to another Stablecoin, who’s fully backed or so and you achieved this by giving Curve USD the property that can be used and you can use it and buy all the Stablecoins if you need. So get some kind of reserve asset and I guess, Curve is like a unique position because you have now Curve USD, and if you see we clearly tried to open many pools with Curve USD because that’s our blood, and we make money on these tools.

You know if Curve USD is adopted., we make more fees on Curve USD and on trading fees. It’s quite a line. This is always the reason why you wanted the next goal, you want to achieve is like you want to slow down your Stablecoin. You don’t want that everyone can just throw it on the market and innovate.

41:32.48 – Brian David Crane

Right now. Yeah.

41:49.72 – Martin Krung

And this is like soft liquidation is like the perfect place to do it because in a soft liquidation mode, you’re kind of it’s like stuck. And even if you’re not stuck, it’s just slowed down the velocity of the curve. You still slow down and I think this is like it’s important because blockchains are very quick systems. It’s very fast basically and sometimes you see shocks, and if you see shocks, it’s always about how fast can I get the money out and create a background situation. People are like in panic and won’t go out, and many times the system stabilizes itself after some time. But if the time is very short and you have a bank run and then you’re done. So if you achieve to slow down your system by giving additional property to it.

Now Curve USD sees that you can’t flow out that fast, you stabilize the system. And the chance is relatively high if there is an incident, you don’t know it can be externally, whatever happens you never know, in case things can happen. Also, in government some of the governments fight and you have a problem you’re not able to act anymore, on then you have a crisis and if people are able to make the system fast, you collapsing your chance, collapsing getting damaged is high so it’s good if you are able to slow the velocity down of your Curve or your like basic fast, Curve USD. It’s not that we want to lock in people and not giving their back their the money but one of that is that.

Yeah, you slow it down because then it’s stuck basically in different places and then it doesn’t flow out so fast. So it stabilizes itself or that’s the one of the ideas that if there’s a shock, then things happen but I experience it many times if you I like on the Circle Depeg on the weekend, I was panicking too. Afterwards if they always have to feel why I’ve been so stupid? I didn’t lose money, basically. But maybe a little bit, but I also traded all this week I was affected by this even if I know that. If you think about Circle, it’s a serious business I guess nobody knows what’s the background, but it’s a high quality business. So the idea that it really just poof goes away. It’s like yeah, it’s irrational basically.

44:25.61 – Brian David Crane

Yeah.

44:36.73 – Martin Krung

But this weekend I panic too And then on Monday, it repegged but it shows exactly what’s happened sometime. He said people go in panic mode and it’s so kind of collective.

44:54.72 – Brian David Crane

Psychosis like it’s a madness of the crowds. Yeah.

44:55.51 – Martin Krung

Yeah, psychosis in a way. And if you get hit by this and some protocols have been hit in the past by this, or will maybe see few in the future protocol who get hit by this. Even if you have like you would say a product to call or like a product we dox. Well yeah, you have problems, you have reputation damage and on that space.

Curve’s Impact on the DeFi Ecosystem

45:16.55 – Brian David Crane

Yeah I also think with that soft liquidations which is the fact that the protocol in this case, Curve doesn’t have to go out and market sell it. The assets to be able to eat and like the market dump them. Let’s say in order to be able to cover the required collateral to make the loan hole, also helps slow down in a different way this sort of like cascading liquidations. Yeah, if it stops it stops a bear. well it stops a bank run and in a mathematical or at least in a a logical or a levered way.

45:57.20 – Martin Krung

Yes, exactly.

It’s on. But yeah I agree but it’s like that’s true. It’s just softened.

46:23.21 – Brian David Crane

Yeah, but it’s important because if that if wrapped Bitcoin was gold and all the central banks went out and said we need to sell our gold all at once and they were all selling at the same price like that market can go. Can dry up or go to zero, like there’s no buyers or the buyer pool is so limited that they just can’t handle the demand on the sell side. But anyways, we’re super in the weeds. Let me shift and just go okay, cool. So like one of the things on the Curve that’s being discussed you and I talked about before the call is shifting the fee token that’s paid to veCurve holders to CRV/USD and away from 3 Curve. Why would that be done or what’s the benefit to doing that?

47:05.45 – Martin Krung

But one thing it makes sense because it’s our own, US dollar if this as a feed is like the first thing. Secondly, it’s another supply sink because. I know I didn’t withdraw my fees. It’s like a half a year maybe, on veCurve locked up. So it’s not a lot so I don’t do it, just sitting here, basically. So that’s another supply sink and the other thing is that, I’m not sure right now. But I guess Curve USD is mostly, if you look at all the pools, maybe it’s the most easy token to use to sell to all the correct networks. Basically, so if you say every token I have has also like a Curve USD pool, most of them. It’s also from the selling converting to, it’s like an easier place to do because then you can do it like internally, but on the other hand it’s not easy to implement. You know it’s not because..

48:16.99 – Brian David Crane

But what is it?

48:21.45 – Martin Krung

How we collect fees. It’s like somehow, It’s not complicated but fee generation is different on different pools and we have to convert this to the Curve USD, on out of 3 pools and have to change things to do this. So this is why it’s not like I just can’t just turn it on. Basically, that’s why it takes time.

48:48.15 – Brian David Crane

Yeah, let’s explain that just a bit so let’s assume you’ve got an ETH and staked ETH in one pool. And somebody trades from ETH to staked ETH inside of that pool on a Curve. They pay the fee token. What would be the fee token in that pool? And then what does the Curve do with that fee token to then get it currently into three Curve? Like it has to sell that fee token and like how it gets from?

49:17.70 – Martin Krung

It’s different. I don’t know all the details but there’s like I do, but I know it’s stable for and we take one side of the trade, so you get the naked token basic as fee. I think it depends on how we get both but it depends on the side of the trade. Taken one side of fees accrued over not so it should be all time accrued on the same value on both sides. more or less, but we have the naked token then on. Although, I think on the fees are taken us as a liquidity pool token basically.

49:42.60 – Brian David Crane

Okay. All 3 yeah.

49:53.74 – Martin Krung

So you get a share of the liquidity pool now. Not 3, it depends on CryptoSwap, you get the liquidity pool token so you have to liquid put the token which you have to split up then and sell basic it just once that is more basic but then other polls, on StableSwap, you get the naked token and then somehow, I think you get cruise in the pool and then we can withdraw to the pool and convert it to 3-pool assets basically.

50:25.38 – Brian David Crane

And what would back as opposed to converting it to 3 CRV or 3-pool assets in order to pay out as ah for the fee? What backs that CRV USD like if it’s ah you know you’ve collected it.

50:35.57 – Martin Krung

Yeah again.

50:44.20 – Brian David Crane

It’s a fee that needs to be paid out to veCRV, but what backs that CRV USD as like how did it come into existence?

50:56.76 – Martin Krung

Yeah I guess we view, we hear you buy them, so you sell if you say the ETH, we have now this ETH, and then we..

51:03.18 – Brian David Crane

Okay. Yeah.

51:13.48 – Martin Krung

I don’t know how the trade looks but in a way it should work that you sell 3 parts of it, and to die one part to USDC then onto USDT, and then you add liquidity to the pool at the end of the process.

51:19.12 – Brian David Crane

Got it. Okay, so it’s always creating demand. Well it’s creating. It’s creating a demand side for CRV use in order to get the token to then pay it out to..

51:32.30 – Martin Krung

So it’s like.

Yeah, it’s in great demand. In a way, yes. That’s another benefit, beneficial point it creates demand side for Curve USD if he would use Curve USD, but now it creates demand sign for the free pool and..

51:54.53 – Brian David Crane

Yeah, okay, all right..

51:56.11 – Martin Krung

So if that the thing is more if you collect dust that the issue more an Eth is easy. But if you are like in a layer 2 chain tool chain and there somebody opens up. A quite illiquid token and comparing it to another token is not very liquid and it’s not so easy to do it because we never can touch the facts. We have to do it decentralized.

52:23.28 – Brian David Crane

Yeah, but then you’ve collected fees into illiquid tokens and the DAO has to sell both of those illiquid tokens to get them back to a well the 3 Curve let’s say even if it’s on a layer 2.

52:29.20 – Martin Krung

Yeah, 15. Yeah, it’s not a non brainer. It’s like some you need a good system beyond to be able to execute it in a good way and it needs coordination and you have to go to Mainnet at the end.

54:52.26 – Brian David Crane

One of the questions I’d asked you in the lead up to the show was you know. I’ve framed it as the challenges which Curve has faced in terms of educating the larger defi community about its offerings. and what Curve the liquidity providers and $CRV bag holders can do to help like how do how does.

How do you multiply Martin’s efforts on a hundred X? And let me frame this in a less esoteric way. So I see Curve as a group of very talented people.

55:25.47 – Martin Krung

Yeah.

55:37.44 – Brian David Crane

Engineers and sort of like the product speaks for itself as far as it being self-evident that it’s good, and it doesn’t have like a ton of marketing hype behind it actually like kind of it doesn’t want the hype and so you know.

How does somebody who wants Curve to succeed help it without pissing off or violating its core principles? Like first and foremost we are physicists and math wizards and like we build incredibly good software, and the market will recognize it at some point like it will get around to it.

56:24.58 – Martin Krung

Yeah, they’re just very engineering, that’s how I name it so we are very engineering in a way, and if you ask how I focus mostly on talking to all the protocols. So the questions. Yeah, very much.

56:42.39 – Martin Krung

Now you speak about small investors. Maybe you can name it, retail. How can they help us or what they can do? I think the best they can do is say our technology in a way if they’re able to.

56:44.39 – Brian David Crane

Yeah, Retail let’s say.

57:01.26 – Martin Krung

This means if they see some other projects who try to achieve things which either could be built on Curve or other way or they could use a good like place for Stable-ish asset, or they have a stable asset as which would be and benefit from Curve’s technology I guess, and most of these people you described are like they’re not like investors, they’re like part of the community. So they want to have.. Yeah so I guess this is the..

57:34.60 – Brian David Crane

They’re fans.

57:40.10 – Martin Krung

Best way, it’s not about, okay, we are not against people sharing our product approach, protocol or the project etc. because we like good products, because everyone wants to see more value or more recognition of the value in the token now and on the Curve. But somehow I guess it also has a bit to do with the market cycle or how these cycles work in a way like?? Yeah, all protocol and I say, we have a good story and we have a good product but it’s like the illusions people can have. It’s like being reduced by things. Yeah, that’s only one thing.

58:29.67 – Brian David Crane

The fact that it’s actually out in the marketplace. Sorry, yeah.

58:37.73 – Martin Krung

That’s the only thing basically because yeah, Cryptoism market was filled with narratives and stories people tell people. The communities tell each of these stories, and then you have like, you imagine like the next big thing and then you buy the token. And if fits yeah, then it’s like you make money, until the story doesn’t add up and then yeah, the price like gone off to talk but it’s an interesting force but we are not affected but it’s anymore in a way.

58:57.39 – Brian David Crane

You wrote about this in your blog. Yeah, that’s a lot of what.

59:15.86 – Martin Krung

In a way. Yeah, I think we may be too serious for this kind of thing. You can also calculate many things. If you see a just check about how much fees you get on the locked Curve in Stablecoin, and it’s like 30% like I don’t know. Which time scale may be last week so it’s a lot. It’s a really good share. Imagine if a share itself, in 3 years you can buy the same amount. So it’s like a..

59:51.30 – Brian David Crane

It’s a good investment. Yeah like and in the TradFi world it would be an excellent investment.

59:52.60 – Martin Krung

Yeah, it’s like 3 multiply you can have it back you invest and pay the price now that’s crazy low. You know van is really crazy basic and it’s ah yeah, but you see you know what? It’s just my perspective. You also have a limited amount of money to deploy or mindset. You know I’m part of this market too. So if you have a Stablecoin that you want to invest in, should you invest in something who may give you like a 5 fold or 2 fold in the next year? Or should you like invest in Curve and maybe, I guess it will make this jump too.

But then if you think this cash flow assets then you maybe think, okay, yeah I buy it as a regulated asset. It’s better because maybe it makes a 5x and I think it’s very possible that Curve makes a 5x too. But it’s just another way of thinking you know this. Why if you have a cash flow then people look much closer at this as like a stock band, basically.

01:01:03.18 – Brian David Crane

Yeah, but they apply traditional financial valuation or like they understand like there’s a certain amount of cash flow. So therefore, using discounted cash flow modeling I should be able to project the..

01:01:05.14 – Martin Krung

Yeah.

01:01:16.40 – Martin Krung

Yeah I think.

01:01:18.12 – Brian David Crane

What’s this asset’s worth to me, whereas with my meme coin. It’s skies the limit, and there is strictly narrative-based, and there’s nobody who can disagree with what I think it’s worth as a meme coin or as some of the tokens that just launched because nobody can say what the heck like, well you think it’s worth one. I think it’s worth 10 and the market will also decide on that but it’s not based around financial. Um. Calculations. It’s based around who can tell the story better or who can be the louder teller of the story on social media or on certain channels right? and so I think curve has decided just not to play that game which is part of the reason why I think people who get involved. In the ecosystem, understand what the product’s doing, understand how it works, and how it fits together. They tend to stick because they see the elegance of it and appreciate it from an engineering standpoint because you and I both have a software development background and you start to appreciate it. Yeah there’s a lot.

01:02:24.56 – Martin Krung

Yeah, that’s the underrated force of Curve because it is really stellar engineering in a way as an engineer, if you see this, you think okay this like a different piece.

01:02:26.70 – Brian David Crane

There’s a lot here and there’s also a lot of thought that’s gone into it and it’s very carefully constructed.

01:02:44.46 – Martin Krung

And you are unattracted by this, because it’s it’s It’s not like it’s as complicated as it has to be. It’s not over engineered or that’s how it should be, and if you think I did think a lot about how can you make Stablecoins? Also, these are funny things, but I could never implement this kind of money I have been thinking of. And if you look at the solutions, mostly the richest guy who was like, yeah..

01:03:23.54 – Brian David Crane

Karma.

01:03:23.94 – Martin Krung

I like the lead thinker of this and he’s able to implement this and really yeah, it’s a big motivation for myself. To be part of this because it’s not only thinking one thing is easy. You see, if you look at stabilizing stablecoin, if you say if you look at the fiat how we print like non-back graph USD and this answer is not like not not matching handedly but I think the best answer at this point of the problem basically and I don’t know. I’m not sure you can like iterate on this. But if you look at design space, you really are limited to design space sometimes. It’s some point design space. It’s just not. Yeah you can put a lot of effort into finishing it, but it doesn’t get any better.

It’s only a little bit and nobody cares and if you look now soft liquidation how this works for me, it’s like, yeah. If You understand how it works then it’s like okay this is obviously a solution for a problem that has existed for a long time and the solution itself. It’s the idea that you sell continuously you sell part of the collateral to the banking token. So It’s like soft sell, it’s not I don’t know if the idea is new, but who can implement this so you need someone who can think it and implement and it is the guy.

01:04:51.00 – Brian David Crane

Incredible. Yeah.

01:04:54.22 – Martin Krung

This is not very common in how you say if you look at innovations mostly driven by people. Well at some point and are able to achieve things which all people can do.

01:05:11.74 – Brian David Crane

Yep.

01:05:11.89 – Martin Krung

And of course you need the right timing and all things, but it’s like, it’s not that you need to be genius this like goes this direction. It’s not that you need to be changed but you need the right setting for your ideas, basically. From each crypto or exchange or all this technology, it’s like he fits his mindset on his way of thinking so he can manifest in this technology. I get maybe in other other times, it wouldn’t be that piece so the project now has manifested itself because then he would have another life but it’s like the perfect combination his mind did things about how he thinks about money or if you say he turns upside down.

01:06:00.45 – Brian David Crane

Sandbox.

01:06:07.82 – Martin Krung

Like it fits crypto in a way and I don’t know if there are many fans like it, basically.

01:06:16.18 – Brian David Crane

Maybe I have the last question to be respectful of your time. Do you worry about key man risk with Mitch?

01:06:27.57 – Martin Krung

I’m not, because we are in every team like to iterate on the, just cheap thumbs in on top basically on the innovation and be like the first more, and this is only one way to win for any product or market. So if you think you have this kind of risk, then I guess there’s so many that’s a beauty of having product market fit. You know if you have product market fit, then there are many ways you can develop your products. And it’s only now it’s very based on technology but Curve could also take different directions. So if he would have less engineering power or less like how we say like and this kind of insight and bring it to the world power mechs or..

01:07:14.95 – Brian David Crane

Defensibility.

01:07:20.21 – Martin Krung

Very good engineers of course, and some of them have other ideas who are also like variable, maybe not in Interaction. He is like thinking but in other directions. So It’s not. I don’t think it exists in the way because that the system itself is independent of. In this case, we are like a real dollar. It’s not that, it’s decentralized and somebody would just just change it, basically. But it has of course times.

01:07:43.86 – Brian David Crane

Yeah, it’s decentralized at that level.

Yeah, I would love to meet Michael one day. I admire him from afar what’s he’s been able to accomplish and also the talented people yourself included that he’s been able to gather into the Vortex that is Curved, right? and the ecosystem that’s developed around the Curve: The Flywheel, Convex, Stake DAO, Fracs, Klever, Aladdin DAO, these different abstractions on top of what the liquidity center that Curve offers.

01:08:30.10 – Martin Krung

Yeah, you’re also very open. People that should be like the possibility of the fine way I think we keep that up. You can build on us and we will try to help you, basically. I mean from a culture standpoint, if you look at how Uniswap, how they think their Dex, basically. Yeah, it’s different. They make their own frontend and take a cut in the fees as like a company, you can do this. That’s fine, but somehow, yeah we think differently. We think we meet very good partners outside who try to multiply us and I guess that’s much more collaborative. It’s just a different way of thinking I guess.

01:09:37.55 – Brian David Crane

Well I think there’s also again I’ll talk about this from like an attack vector but Uniswap, based on the US, US founders They’re subject to SCC regulation, you have Swiss stake. The holding company for the intellectual property of Curve, Michael’s Russian I think in terms of a passport, lives in Switzerland and I think that also goes ahead.

01:10:02.38 – Martin Krung

He’s Australian but he grew up in Russia.

01:10:13.45 – Brian David Crane

Oh okay, apologies. All right? yeah so I mean maybe there’s maybe there’s different attack vectors there being Australian as opposed to the US

01:10:20.41 – Martin Krung

Yeah, okay maybe, I don’t know sometimes, I don’t know it’s just.. if you talk about risky.

01:10:28.00 – Brian David Crane

Yeah.

01:10:38.47 – Martin Krung

I think Switzerland is a very good place not for myself. I am Swiss and I’m still stuck somewhere. Oh no, but it’s a good place to innovate because we are not very scared of the Swiss and it’s pretty conservative in a way.

01:10:44.86 – Brian David Crane

Yeah.

01:10:57.24 – Martin Krung

But the other way the government doesn’t regulate, everything was fresh and new. It was just we looked and saw what’s going to happen then maybe we should regulate..

01:08:33.00 – Brian David Crane

Hey folks, thanks for listening. As you’re probably aware, there was a complete internet and power outage here. The call got cut short unfortunately, so Martin and I wrapped the podcast up offline.

I just want to say, really enjoyed having him on and if you want to follow him or learn about what he’s up to, go to Cryptonative.ch for Swiss TLD for the domain. Or check him out at Twitter @MartinKrung and also check out what Curve Finance is doing. That’s Curve.fi.

Thanks for listening and I’ll see you on the next show.