Episode 07

[00:00:00] Hello. Hello. Hello. Dan. Hey. There he is. How are you, sir? Oh, uh, I don't know what happened there. I was on the wrong link, I guess. Were you in? Were yours working wherever you were? I'm, I'm here now, so I was on something else. Okay. Yeah. We'll take it. We'll take it. How was the holiday? It was alright. We got our Twitter hacked on Friday, so that put a little bit of a damper on the mood, but otherwise all good.

We got it back today, so. Did you? Yeah, I did read the, I did read the communications. It wasn't It's frustrating. Very frustrating. I wasn't sure how I can help. When they fired 80 percent of the staff, it turns out that impacts your ability to get your account back in a timely fashion. Yeah. Yeah, there's only so many, there's so many people working, [00:01:00] particularly the holiday shift.

Yeah, exactly. Hello Yossi. Hey Connor, how you doing? Doing well. Good, sorry I was on a different link for some reason. So last I saw Connor was in Miami. We were at the Watch Emporium. Uh, and I know that you guys have pivoted a bit. So, in terms of format. Yossi, you can, you can let me know if there's, uh, specific topics you want to cover, but I think the standard thing we want to do, Connor, is sort of have you take us through a little bit of the history of how MetaStreet came to be, your personal journey, and then even while MetaStreet has been in existence, what have been the different phases of its evolution.

expansion, pivots, et cetera. And then let's focus on where you are today. [00:02:00] Talk about liquidity pools, your latest thinking. Now that the NFT market is beginning to show signs of rebirth, should we be paying attention to something different? Are we headed down a path that we think is long term sustainable?

So all of that stuff, part education. And then let me ask Yossi if there's anything else I didn't cover in that terms of the agenda. And just then we're going to talk about where you are now, the GPU mining, the liquidity pools, why you see that as the big unlock for Metastreet, what does that mean for the world?

Um, and just, you know, kind of general insights that you're getting from trying to coordinate this capital into new kind of interesting ways. Um, how does that play out in the technology landscape? And, you know, general audience we have is some of our kind of investor community. Business communities, a couple of NFT followers.

So that's the kind of people we're talking to. And the theme of the podcast is all around re imagining ownership. [00:03:00] So it's about new models of ownership, what you can do with this type of technology. So it'd be very interesting to talk about, you know, the financialization of these potential assets and how Metastreet plays a part in all of that.

Great. Sounds good. Beautiful. Um, how is the audio? I suppose you can't really tell the audio quality, but am I sounding clear to you? We'll sound good. Give us a sound check. Give us a one, two, three, Connor. One, two, three. Check, check, check. Let me just see if my volume is down. Say that again. One, two, three.

Yeah. Okay. Good. Dan, give us a I'm feeling good. Ready to go. 7, 8, 9. Dan's a bit louder than Connor, but I suppose we can sort that out post, uh, production. Cool. Dan, why don't you kick us off and introduce us and get the show going. We'll give you the, the baton. Say when you're ready and I will press record and we can take it away.

Or are we already recording? I think she already hit it, but that's [00:04:00] fine. Well, then we'll just skip the first three minutes. I just wanted to see if where her, uh, intro packages. Where are you today, Dan? I'm up in Boca Raton. Nice. And headed to Miami. Huh? Are you gonna come down for our Basel? Yeah, I'm gonna come down tomorrow in the morning and then I'll be there till Wednesday evening, but I need to fly north on Thursday.

All right, I am ready to rock and roll. I'll do a quick intro description. We'll introduce you. And then, uh, we'll dive right in. Cool. Yossi, you're ready to rock? You can see me okay? All right. Robin, we're gonna start. It's 2. 15. East coast time. Three, two, one. This is the Reimagine Ownership Podcast, where each week we're diving into how blockchain [00:05:00] and Web3 technologies are transforming ownership.

We will explore how decentralization is shifting power from big corporations to individuals, making ownership more transparent, secure, and accessible. Join us as we uncover how these innovations are changing the game and paving the way for a fairer, more just society. More equitable future. Welcome back to the podcast and welcome back to Reimagine Ownership.

We're really fortunate to be joined today by Connor Moore, co-founder and COO of Meta Streett, kind of like me, universal, but has a street. Metastreet is revolutionizing the way we think about NFT backed loans, creating a platform that allows traders to leverage their digital assets. Conor's been at the forefront of this movement, leading Metastreet through massive milestones, including record breaking loan volumes and major [00:06:00] funding rounds to further expand their impact.

Conor, welcome to our show. We want to dive right in. So I'm going to go forward with the first question, then I'm going to hand it over to Yossi. Blockchain is all about decentralization and digital ownership, as you know. But how do you see it actually changing the way people own stuff? Online and where does meta street fit into all of this?

Yeah, so meta street's obviously a Debt product debt protocol my background and david and and i's background both is in traditional finance So we started out in investment banking private equity We're very familiar with using kind of debt products to access ownership of assets, right? Whether that's real estate or companies And so when we think about what Metastreet enables, it's sort of a democratized access to [00:07:00] ownership of otherwise expensive things.

And that was certainly, you know, and we'll get into kind of the whole background of the company and, and, you know, our, our path. But basically when you have robust and liquid debt markets, you access broader ownership of, of assets that wouldn't be available otherwise. Think about the American dream and homeownership in the United States is.

By and large accessible only because of a robust debt market and securitized debt market underneath the kind of primary market. And so that's kind of what Metastreet is enabling. And so when you think about high value assets and being able to access and own a part of that, generally the debt market.

Precludes or precedes, I guess I should say the kind of like fractionalized equity market and certainly what we've seen with NFTs high value art and collectible NFTs, but even moving now more into kind of like operational based NFT ownership, they're expensive. And so if you don't, if you have a debt [00:08:00] market, you have.

Broader ownership of those assets, um, that's kind of like where we sit in the capital stack. I, I hear you making an important distinction between accessing debt in order to purchase items and fractional ownership of perhaps those same items. Can you just double click on that and how, how you, because when you mentioned home ownership, right, which has been vital to the growth of America's middle class.

There isn't really fractional ownership of your house until very recently and even then these are You know small programs Really for vacation rentals that popped up over the last 20 plus years But when it comes to Main Street America people tend to own The the four corners of their property they put up a fence and they've accessed Mortgages often backed by Fannie Mae and Freddie Mac that allowed them to [00:09:00] pay it down over long periods of time Yeah, so I think this is actually really interesting because within crypto when you think about the user base of of blockchains It's a lot of traders And so when you think about the funnel of how people think about what they're participating in, they generally start with stocks and currencies as a comp to ERC 20 tokens.

And then think about financial primitives on top of that. So for a long time, you would have heard people talk about perpdexes and options and things like this. Um, Aave, the first, you know, Aave and Compound, the first kind of lending products. We're margin accounts, they were not traditional lending by any stretch of the imagination.

So then in kind of 2021, we have NFTs come heavily into the forefront and now we have sort of NFTs are just unique asset ownership as opposed to uniform asset ownership. ERC 20s are, you know, fractionalization of ownership in a network. [00:10:00] NFTs are just bulky individual assets, whether it's art and collectibles or property rights in any form or fashion.

And so the right foreign factor for those types of assets is, is actually more of a bank lending type of a product, less of a kind of a margin account. Right. Because these are fundamentally not fitting into sort of easily liquidatable loans, you know, kind of like margin call functionality, having like a very robust spot market, none of that is true for NFTs.

And so NFTs are actually more like digital representations of real assets. Like real estate, real estate is probably the best comp for it. And so all of the kind of products that people were familiar with. In crypto, we're predicated on, you have a base of builders and users who are familiar with liquid markets.

And so let's build liquid market representations. And so we actually saw the idea of fractionalized ownership and NFTs [00:11:00] happened before we had lending markets for NFTs. Because that's kind of what these users were familiar with. My background and David's background was all in kind of like structured credit products.

So we actually looked at NFTs and thought, this really looks a lot like what we do today in traditional finance, but, you know, we can actually reimagine all of this on chain, take advantage of the fact that these are permissionless markets, permissionless ownership rights, et cetera, and create, you know, the next generation of.

You know, securitize debt products and things like this without requiring a middleman and so on. And so that's why we've always thought that the debt layer was the right layer to actually introduce new liquidity and fractionalization of these assets. And so you mentioned. The idea of having, you know, fractionalized ownership in vacation rentals or something is a very new concept.

Whereas the concept of fractional ownership in debt itself, i. e. [00:12:00] trading mortgage backed securities or other debt products that had a liquid, uh, liquid secondary market. That's actually very common. And so when we think about the progression of, you know, how these markets should evolve, you start with primary market where people are buying and selling chunky assets.

You add a primary debt market where you get financing to buy those assets And then you securitize and split up and fractionalize The debt itself and allow people to trade that and you trade the debt as a proxy for the asset Because again, the spot market is illiquid, but we know it has credit worthiness We know there's a bid and so we can enable sort of like proxied liquidity By enabling trading of the secondary market for those assets for the debt.

So meta street today has done about 375 million dollars in volume and you guys raised 25 million dollars and metaversal is a prouder Investor in meta street. What does that what you just described? What does that translate? [00:13:00] That someone can do today that, you know, previously was very difficult to do or almost impossible to do that MetaStreet now enables.

Yeah. So let me kind of take you guys down memory lane a little bit. So we started MetaStreet in 2021. Before that, I was working at a private equity fund. We did, um, a big, uh, ag, aggregation strategy around buying. Single family homes, borrowing against them. We bought like 5 billion worth of houses, took them through the, um, the securitization market and were able to finance that.

It was a very successful trade. When we started Metastreet, David and I kind of, David's my co founder, David and I kind of looked at, um, the NFT market and said like this, this looks like. You know, it's ripe to do similar things that happen in these traditional financial markets. So before we even had a protocol, all we were doing was basically running a private credit strategy, lending against NFTs.

And at the [00:14:00] time, um, NFTs were, and even today are largely art and collectibles. And what I think people didn't realize is that in the traditional markets, art and collectibles are also very financeable and you can actually, you know, borrow against high value art very easily. But people looked at this and said, okay, this is a, you know, this is a new, new asset.

You know, I'm not going to touch this. So when we started, there were 10 million of cumulative loans ever against NFTs and NFTs were about a 20 billion asset class. And so we basically just started out by making loans against these things without even having a protocol at all. And I think one of the realizations was that operationally to go and make individual loans, you know, 20, at a time against individual assets is very cumbersome and slow and challenging and also not really how.

The traditional markets work today, right? You generally don't [00:15:00] have sort of a, you know, one by one issuance, or if you do, it's a very unscalable business. In fact, if you looked at one of the early FinTech products, Lending Club, which is a peer to peer lending product, they started out as peer to peer lending.

They then scaled, you know, to hundreds of thousands of users. And found out that the best product was to have all of the capital exist with a couple of hedge funds who were just bidding out these loans. So ultimately in debt markets, your, your best case, your best execution will always be aggregated capital because the more capital in one place, the lower you can push interest rates and the borrowers are just competing on the basis of rates.

I mean, there's no difference between your dollars and my dollars besides me offering them cheaper than, than you offer yours. So we ran this, this product, we ran sort of this internal credit fund. We realized how hard it was to scale. And so we kind of focus on building [00:16:00] out a protocol that would allow users to participate within this market and make loans without having to originate them one at a time, monitor their position all the time, or rely on sort of a third party or the protocol to ultimately like make decisions for them, because keep in mind, this is not.

You know, Aave style lending. So we don't have a liquid spot market. You have to take an opinion of value on the assets that you're lending against. So the way Metastory works today is you can think of it almost as a, uh, order book for loans. The users will deposit money into a pool. And they can basically indicate all of the parameters at which they're comfortable lending money.

So things like what their max LTV is, what their preferred interest rate is, how long of a loan they're willing to make. All those positions get stacked on top of each other. And then a borrower just sees one market offer. And that [00:17:00] market offer will combine all of these individual positions. And just spit out one best execution to the borrower.

And so in that way, the lenders can be fairly passive once they've set up kind of their preferred exposure, preferred kind of risk levels and so on. And the borrowers get what, what should be the best execution for them because. If, if it's not the best execution, a new lender can come in, sit on top of the order book and get, you know, the best interest rate for themselves.

And so that's the way that the protocol works today. Now we have sort of ancillary products. The debt positions are all then tradable on a secondary market. So we have AMMs that people can buy into and out of the debt positions themselves. And we have a couple of other kind of financial products, a Pendle like product that splits.

Yields from underlying assets and so on. But fundamentally the main offering is allowing for permissionless lending markets against illiquid assets. And so that's why, you know, it doesn't make sense [00:18:00] to have a sort of margin based liquidation methodology around. lending to things that, you know, there is no real spot market or not, not a very deep one.

Uh, basically Metastreet can support both art and collectibles, you know, today. And that's kind of what the majority of the NFT market is, but it also supports anything that fits into that ERC721 or 1155 token standard. And so as you think about kind of like what the end state is for the use of blockchains and financial markets and having digital ownership, digital property rights, this format is most likely going to be used for almost all asset based, um, tokenization and this lending market can support all of those.

So just in the last kind of six months, we've had, uh, a larger foray into sort of the RWA category of NFTs. So we now have. A tokenized watch pool, which is like basically a digital pawn [00:19:00] shop. People can borrow against watches. We have diamonds, gold, tokenized land. And then we are also starting to, you know, within the next probably three months, we'll have a GPU based lending product.

So lending against GPUs. Lending against nodes for deep end networks. So anything that's illiquid that's that generates cash flows or has some sort of a secondary value via, you know, luxury goods. So like there's always a spot market of some kind for them. We can basically support and we can lend money against.

So that's very interesting. It, I just want to touch on the, I mean, you know, you said lending against GPUs. Mechanically or technically, how does that work? So if I have some GPUs sitting in a farm somewhere in a server farm, talk me through the metastreet component that enables me to, um, either be a lender for someone to finance their GPUs or a borrower to be able to say, I can borrow against this pool of capital and prove that I'm using it.

In a GPU pool, and I'm not [00:20:00] just, you know, taking it in, going on holiday to Boca Raton. That's a visit to, yeah. Yeah. So, you know, basically all NFTs are, are this sort of representation, and if you look at any of the RWA projects, what they're doing is they have some kind of operating agreement where the NFT, you know, perfects a lean or in some way interacts with like a legal.

Uh, recourse, legal representation to what the underlying asset is. So it's like a deed for a house, you know? So the NFT in the case of the GPUs is actually the legal owner of. The assets themselves. So the way this works is it's called a sale lease back. It's basically you have a tokenization platform on the tokenization platform buys the GPUs from the data center and issues an NFT back to the data center.

So now the data center's ownership exists solely through the [00:21:00] relationship between the NFT and the tokenization platform. So they now are the owner through that platform, the data center itself. Maintains a operating agreement between the tokenization platform and the actual data center. And so now the data center is acting as an operator of these GPUs and has some profit split for that responsibility, but the actual ownership rights, which are held by the data center.

Are technically separate. And the reason that's important is if the data center then defaults on this loan in the future, someone else can buy that NFT and they're now the legal owner to that underlying GPU. It's just the same as, as any kind of RWA tokenization methodology. So the NFT is just saying, all right, this is now my legal rights to this asset, and because it's my legal rights, I can use this on chain because it is an on chain representation.

To access on chain capital markets. So now your, your [00:22:00] lenders are depositing money into this pool and what's being posted as collateral is this NFT. The NFT depreciates in value every month. So your borrower has to pay down their loan a little bit every month because. These things have useful lives, right?

So, your GPU's maybe three to five years useful life. The lenders can basically participate in this pool and mint a token that represents their exposure to this GPU lending product. And so, if you're familiar with Athena and the tokenized basis trade, this is basically the tokenized AI trade. So you're going to deposit USDC into the pool and you mint a token called USDAI.

USDAI can now trade anywhere on, you know, it could be borrowed against on Aave, it can trade on Uniswap, and it will always be accruing yield from the underlying borrower base that has, that is actually generating cash flows from their [00:23:00] GPUs. And so the idea is eventually you'll just have secondary spot trading of USDAI.

You won't even see the primary market redeemed from this pool at all. And you'll just have people basically buying and selling USDAI. And you can just hold that in your wallet and just accrue yield over time. And that yield is coming from an actual productive use case. I think that's the key is one of the real fundamental challenges with crypto is everything is reflexive.

Right. If Bitcoin moves up, things go up in price. If Bitcoin moves down, things go down in price. Athena, which is a fantastic product, is also tied to the, this movement of asset prices. Prices go up, more people are speculating on perps, your yields go up. Prices go down, your yields go down. And so everything, every single DeFi product revolves around this asset volatility.

The nice thing about this is Your GPUs are based on the value that they're creating out in the [00:24:00] real world. The GPUs, you know, for maybe listeners who aren't, haven't, you know, closely followed the AI craze, GPUs create compute. Compute is the commodity that LLMs consume when they're either being trained or being inferenced to spit out an answer in chat GPT.

So it's basically just a digital commodity, right? And your, your value of your machines is predicated on this operating business. So how large can that operating business be relative to kind of this, you know, more speculative. Blockchain based ecosystem that we, we all operate in today. Well, I mean, I know for a fact that CoreWeave did a 6 billion facility with Blackstone to, to borrow money to buy GPUs.

The whole, you know, ecosystem of large clusters of H100s and GB200s is, you know, in excess of a hundred billion dollars. So basically it's a much larger world already than what exists on chain. And so you can take [00:25:00] this type of collateral, tokenize it, and now you're introducing sort of unreflexive, non reflexive collateral to the rest of DeFi.

This is something that we've never seen in DeFi before. So now we can go and say, all right, we will give out 15 percent yields on your stable coins backed by this collateral that's generating money, totally unrelated from crypto. And everything else that you can possibly get in crypto is A variable rate yield, which may be 30 percent because there's a lot of appetite for perps today and then 5 percent or 0 percent tomorrow.

Or it's just completely inflationary and, you know, has a hundred or 200 percent yields that are based on some token emissions or something like, so we're super excited about this, obviously, as you can tell, because it sort of brings like a whole base of collateral into crypto that is not there today and had no reason to be there.

The reason that these borrowers would even want to do this in the first place [00:26:00] is because every loan offer that they will get from a private credit fund or from a pension fund, when they, you know, Get comfortable with this or a bank in five or 10 years. It's going to require recourse into the business.

It's going to require probably claims into the underlying real estate of the data center. And so it's really not that attractive as compared to being able to say, all right, I'm going to pledge my hardware and only my hardware. And if I default, I'll just forego ownership of this hardware. And the on chain markets by contrast would say, well, for a 15 percent yield, that's uncorrelated to crypto.

And is backed by actual real hard assets. This is quite compelling to me. And that's why we think there's like a huge opportunity here to kind of bridge two worlds that really haven't been able to interact much with each other yet. Mike drop. Where do we start? You're right to say that it's going to take some time for traditional investors to wrap their head around [00:27:00] this decentralized.

Mode of operating, but it's simply a variation on an existing theme. That's what Yossi and I have talked about since 2021, right? That we believe the big unlock for NFTs is not what is commonly put on the screen in the form of cartoon characters, PFPs, even art and collectibles. Although we obviously have great affinity for digital art and digital collectibles.

The real big unlock is precisely in what you're describing tangible utility form factor and utilizing NFTs as a vehicle to accelerate what otherwise Has taken mounds of paperwork, diligence and time for folks to get comfortable. And so I do think this is super exciting and really the next frontier, the next frontier, and I think it's fair to say it [00:28:00] will, it will play out over the next five to 10 years in the interim, there's sizable opportunity for those that understand it and can.

And can put it into action. And actually it's interesting because a lot of the GPU miners today have a, have a lot of overlap with Bitcoin miners. So, and in fact, some of the Bitcoin miners have done a complete 180 and are pivoting their entire business to operating GPUs. And that's really good because it means that they're already quite comfortable with the concepts of.

Blockchain and DeFi and so on, you know, you're not like trying to convince, you know, AWS or something. Right. And that that's actually really important to highlight is the hyperscalers have a really attractive cost of capital because they all can basically issue bonds at. You know, 3 percent against Amazon's overall corporate business, but the, the folks who just run data centers, they don't really [00:29:00] have access to that.

And because this is sort of a, a new market, it's really in earnest, only a couple of years old. The traditional debt markets have not gotten comfortable with it at all yet. But these are the same guys, you know, Bitdeer and Nydig and all of these guys, they're, they were running Bitcoin mining operations for a long time.

So actually we think that if, if the concept of DeFi and NFTs existed back when Bitcoin mining got going, probably they would have been accessing debt the same way, right? You know, the first deep end network is. Was really Bitcoin, you know, not any of the stuff that you think about today, that that is kind of what a deep end network is.

And all of these miners could totally have access, you know, defy rails to borrow money and totally would have, right. If, if that was around back then. And moving away from the GPU mining, just seeing on your site, you know, you've got these. Pooled watches, you know, NFT backed, uh, or, or, um, [00:30:00] watch backed loans.

And I see the 8%. Um, and there's been high volume of loans and transactions that have gone into, uh, that particular pool. Talk me through some of the risks, like what should someone think about if they're thinking they're coming to Metastreet, they're like, Ooh, 19. 8%. That looks attractive. Maybe I should put some money behind that and be a lender to that pool or the GPU pool or any of them.

Um, what, what. What are the risks that someone needs to think through in potentially bringing some capital to your markets? Sure. Yeah. So the first thing is Metastreet's contracts themselves, right? And is Metastreet going to be hacked or is there some problems with the contracts? I think we've hopefully mitigated that as much as you possibly can with audits and bug bounties and just candidly having been around for a few years and done hundreds of millions of dollars of volume starts to kind of de risk it, right?

You're not really thinking about that from Uniswap, even though technically it's [00:31:00] possible. There's, there's a bug there. The bigger risk is really understanding, okay, this collateral, which yes, if the borrower defaults, this NFT will go to auction and be sold. But what am I really buying when I'm buying that NFT?

And so that risk is understanding kind of this counterparty, right? This tokenization platform, whether it's watches or gold or, or the GPU tokenization business, you are inheriting the underwriting or the legal, you know, accuracy of this tokenization platform. And so what we've tried to do to help people understand that and get comfortable with it is first of all, we vet all of these guys ourselves.

Um, and. The only plat, the only platforms that are doing tokenization that have pools on our platform are people that we've gotten to know and trust and think that they're good actors. And then we also have on our platform kind of an overview page of [00:32:00] what exactly the legal relationship is between the NFT and the underlying asset.

You know, in the case of luxury goods, what is the custody structure? So where, where are these assets physically sitting? What's the insurance around those assets? You know, what is the, in the event that these businesses go belly up, what's your claim and so on. So we've really tried to. Understand for our own benefit, how these guys are operating and then help kind of distribute that information to the end users, to the lenders.

And then I think, again, the number one thing we can do to get people comfortable with these products is just exist for a while. And so the longer that this watch pool exists and is working correctly, the more people can be comfortable that, okay, you know, at this point, 10 million or a hundred million dollars or a billion dollars of volume has gone through this.

Without issue. And it seems like this is all kind of working correctly. [00:33:00] I think at the end of the day, anything that involves the real world sort of has this some level of trust assumption. And that trust assumption is something you have to make if we're going to kind of break into real world adoption and actual utility to the broader.

You know, public, but I think the good thing is that it seems like the legal system in the United States and sort of the Overton window shifting in the election with all these pro crypto candidates getting elected, it seems like we're also kind of on the same page now or getting closer to being. On the same page as the rest of the legal system.

And so you're just assuming that these representations on chain are moving the way they're supposed to, and it's not going to get hacked that way. But then also that when I go to a court, because you know, I now have this claim from a, basically a bankruptcy. Um, that that court will also honor that process.

And it seems like that's also kind of moving in the right direction for everyone. Um, so fundamentally you're [00:34:00] underwriting risk and you're, you know, making, uh, taking a position on value. Um, but I think our users at least have started to get comfortable because they've seen these products start to work for a while.

They understand that, you know, these counterparties are, are really being as robust as possible from their legal offering and everything to try to keep things You know, as straight and narrow as you possibly can. Tell me a little bit about adoption on the side of lenders. What are the typical characteristics of the lenders that you've been seeing?

You reference early days, things like lending club, very much peer to peer, may have been individuals, high net worth investors, family offices, et cetera. And then eventually it grows into what's become an enormous private credit market. Uh shadow banking system. What are you guys already seeing as tens of millions now hundreds of millions and more starting to move through?

Is it still the traditional profile [00:35:00] of web3 market participants or is that circle beginning to expand? Yeah, so certainly to date, the primary users are individuals, typically high net worth individuals actually, who are already crypto native because they like the yield profile. I think we, we occasionally will also get sort of the average retail participant.

I think our peak TVL was about a hundred million, maybe between 70 and a hundred million. Um, and that certainly had a lot, a lot more kind of retail participants. There are a few funds as well, um, that are crypto native funds that are, you know, yield oriented, uh, crypto native funds, but I think what I'm really excited about is.

When we started in 2021, the L2s didn't exist. Everything was on ETH main net. It was very expensive. The concept of a smart wallet didn't exist. Paymasters didn't exist. And right now [00:36:00] we have integrated Coinbase smart wallet. We're live on base and we're integrating Paymasters. And we're integrating Coinbase on ramp.

And so when you think about the total possible user base pre, uh, those, those features existing, you had to already be in crypto because it was very unlikely that I was going to convince you to set up a MetaMask onboard, you know, buy ETH, do all this stuff to go and earn, you know, 15 percent on your money, just.

Very unlikely. Most people who came into crypto were looking for a hundred X thousand X returns, you know, if they were coming into the space. Now you don't have to do that. You can open up your phone. You can connect on a smart wallet, Coinbase smart wallet. It's going to prompt you for an Apple pay. You can deposit 50 bucks in Apple pay.

We will pay for your gas fees with paymasters. So you can open up your phone, see that you can earn 50, you know, [00:37:00] 20%, um, lending against watches, you might like watches and you can deposit 50 bucks with Apple pay on your phone that, you know, almost everything's done now. Maybe in the next couple of weeks, that'll all be live.

So that's pretty fascinating because even when you think about just how we market, right, like to date, we have marketed our product with. Social media posts, you know, Twitter spaces, talking to other crypto users. And now we could actually run SEO campaigns, targeting people that are looking to earn passive yield, right?

I mean, it's, it's a order of magnitude shift in your possible user base. And all of that was really only possible in the last three months. And so I think in particular with this RWA stuff, where it doesn't look like crypto, you know, it's not ETH based. These are real, you know, assets, watches, land, domain names, gold.

You know, it's a very different profile of user. If they don't have to know they're using [00:38:00] crypto at all, you can really kind of open up the entire breadth of market coverage there. And that's where it starts to get really interesting because if you were to talk to any traditional credit vehicle, doing 300 million of volume is, is.

You know, it's not really material and that just shows you how small this is relative to what the rest of the world is used to for these types of products. And this is scale invariant. It's numbers on a screen, right? You don't need to add a hundred employees if you add a hundred million dollars of TVL.

So that's pretty exciting. And we, we think that will be like a big unlock for us going forward. Connor, I want to put up, pull up a screen from, from your site as we tap into, you know, as people hear that, I'm sure there's gonna be more and more people interested in potentially, you know, opening up their wallet and trying to get some yield.

Um, so I just want to talk through. One of the kind of one of the pools, not that this is the one that someone would go for, but let's just use this as an example. So you've got here wrapped crypto punks that could be. [00:39:00] Particularly this pool is about some NFTs, but it could be a real world asset. It could be GPU mining.

It could be watches, could be any of these, but you click on the pool. And then I see that there's different APRs that someone could earn goes for those who don't have a, you know, who are listening to us. It says, you know, fixed price, APR 16. 2%, loan limit 40, LTV 108%. And then it goes all the way down to from 13.

6 percent to 9. 7 percent APR, 3. 8 percent APR. Uh, and the 3. 8 percent has a loan limit of 15 and LTV of 40%. Can you explain or do you just help people understand what each of these different options means? And why one person may go for what seems to be a worse deal, this APR percent versus the kind of 16.

2%? Yeah, so click on the pool view there. Pool view, yeah. So basically what, what this pool is made up of is tranches. These tranches are the, the space between the [00:40:00] previous So in this case, there's a tranche between 30 and 40, between 20 and 30, between 15 and 20, and then zero and 15. So when you're participating in any of those tranches, your exposure, um, against the collateral is up to kind of whatever your loan limit is.

So the reason that someone might participate in that lowest tranche from zero to 15 is because they're going to take the least amount of risk. And that's why they're getting the lowest interest rate. If I'm in that zero to 15 tranche and the value of CryptoPunks drops by 50%, you're still going to be fine.

You're not going to lose any money. Whereas the guys above you will lose money. And so the reason that they get a higher interest rate is because they're taking on more risk. And that's kind of like the fundamental value proposition of this product is you can. Identify [00:41:00] exactly where you're comfortable taking risk and get, you know, your best possible return for that against the rest of the market.

So the other thing you can do is you don't have to just accept what these existing positions are and deposit into them. You could actually just create your own. If you scroll down a little bit in this table, you should see, yeah, create new tick so you can actually just create your own tick, identify the parameters that you're comfortable with, deposit money, and then you're basically now going to be participating.

Only up to those risk parameters that you're comfortable lending to. And I think, you know, one of the coolest things about this is this is actually completely permissionless. You know, we have no control over your funds and other users in the pool have no control over your funds. So everything that you're doing here is entirely within your control and your control only.

Um, and in fact, sometimes we've had problems with users who ask us to change things for them. And we have to say, [00:42:00] we actually can't do any, we cannot change anything here. This is. Entirely predicated on what you've decided for, for your money. And how does MetaStreet make money in that, in that entire equation?

So there's an admin fee that can be turned on to these. And we would just take a spread between the interest rate that the borrowers are paying and the interest rate that the lenders are making. We don't actually charge anything right now, but that's how the business would make money. So let me just replay that back.

Anyone can become a lender, anyone can become a borrower, um, as a lender, I can decide what level of risk within a specific pool. So let's use, you know, CryptoPunks or GPU mining, I could say I'm willing to loan up to 100, 000, uh, whatever that is today in ETH terms, you know, almost 30 ETH or ETH, um, with this level of collateralization.

On a kind of loan to value basis of whatever I define, I decide, and this is the rate that I'm willing to charge for that. And anyone can decide whether [00:43:00] they're willing to take that capital and other people could be more risky. They could say, well, I'm willing to lend more at a lower LTV value. And depending where you are on those, on that chart will dictate who gets, uh, kind of liquidated first, or who gets to the NFT asset itself, who that transfers to in the event of a default.

Is that right? And how I've thought about it. Yes, exactly. And I think something else that's very interesting with this type of a product is, you know, there is some kind of a spot price for CryptoPunks, right? But that spot price may maybe based on, you know, one or two trades a day. And so over the last six months, the spot price has dropped.

And some of those positions, those loan positions were technically underwater. Uh, you know, the 20 to 40 tranche was underwater, uh, a good amount. And because there's a secondary market, people could trade in and out of that position. And so if you trade it out of that position. When the price of CryptoPunks [00:44:00] was at 30 and you thought you had taken a 50 percent loss right between 20 and 40 If your position is between 20 and 40 and the price drops to 30 you've cut your value in half So you could trade out of that before the loan matures But then what happens on the other side of that could say well i'm long CryptoPunks I'm willing to accept that bet that CryptoPunks will turn around i'll buy your debt and take the other side of that position Exactly, and that's what happened And so even though the price of punks went from 30 to 40, you actually got a two X on your money.

If you were buying that on secondary, it's like, we like to joke when the Ukrainian bonds dropped by 90%, people were buying those bonds on secondary because they thought the U S isn't going to let this country default and whatever. Right. But the point is it's not like the primary market was liquidating Ukraine and forcing them to repay that.

That debt, right? The existence of the secondary [00:45:00] market is also allowing people to take that, take the other side of the trade there. And that's what we want to have happen for all of these positions. Such that your primary market ends up being very sticky and you have very little reason to ever redeem for the actual underlying currency that you deposited.

And instead you'll just trade on secondary. It's just like when Lido launched, uh, WrapStaked ETH or Staked ETH and there was no redemption yet for staking, but people could just trade out of it on Curve. And so your spread on that curve pool was just based on how much we trust Lido and how much we trust Ethereum being able to enable unstaking in the future.

And that people were happy to put tens of billions of dollars into that staking and just trade out of it on secondary. So the secondary market can be much smaller than the primary market and still give users the utmost comfort that what they're doing is going to be fine. Right? Like by maybe a million dollars of spot, uh, secondary liquidity.[00:46:00] 

is enough for a hundred million dollars of primary market. I love all of it. We're coming up to the end of our podcast. So, let me ask two final questions. A lot of people talk about blockchain making ownership more accessible. And we've spent time today talking about the new on ramps. We've talked about abstracting away the technology to make things as seamless and simple as folks have understood them pre Web3.

What do you think are the main hurdles going forward as we enter 2020? Getting my brother to getting regular people, those who may not be tech experts, on board with the idea, the very idea of Web3 ownership. So I think, first of all, I think that the infrastructure is almost there, even after people make the announcement of, you know, I think like just today, actually Coinbase announced, you know, partnering with Apple pay for on ramping and stuff, [00:47:00] even after the announcement happens, it's, it's never immediate, right?

It's like three to six months later. Um, but the name of the game is having reasons for people to come on chain in the first place. So part of this is like a chicken and egg thing, you know, the feature set for on ramping people isn't there. So then people don't build the things that would attract people in the first place.

Um, but I know for a fact that, uh, a few of these RWA tokenization platforms, when they raise their, their seed rounds, they actually reference the existence of Metastreet and other DeFi products as the reason for why someone even wants to do this in the first place. So like watches, like, okay, you have an NFT of a watch.

I mean, the whole point of a watch is to wear it, right? Like why would someone do this in the first place? Well, the thesis for the watches team is that there's actually a large part of the watch market. That's purely financial. And a lot of people are actually looking to just trade these as assets. And [00:48:00] so if you can do that more efficiently by buying and selling.

You know, this digital representation, but also barring against it, maybe fractionalizing it in the future. That's really attractive. That gives people reason to onboard besides just having hopefully seamless UX. And we've also seen this with the younger generation with kind of a 15 to 22 year olds trading meme coins.

And, you know, you can open up phantom and do everything super easily and fast. But ultimately the reason that they're coming on chain is because they want to play in this kind of digital virality game, right? I mean, trading meme coins is, can I identify viral trends and profit from it? And it turns out that that's really fun and young people like doing that.

So how do you get, you know, the rest of, how do you get kind of the fat side of the adoption curve? on chain? The answer is just having apps that people want to use that are on chain. Um, and I think that this is, this type of a [00:49:00] product is actually something that, you know, I could go and pitch my dad on making loans against land or gold or diamonds or GPUs or whatever, because it's just something they understand.

And now I don't have to scare you with. Seed phrases and gas fees and all this stuff. And then now I can, they can kind of start to see, well, actually, yeah, you know, compared to my, you know, half a percent on my savings account, this is a really compelling. Yield opportunity, right? So for the defy projects, it's all about that.

It's just about, can you introduce something to people that they're going to value enough that they'll kind of cross that chasm to, to play with. And then, you know, the on ramps making the chasm smaller. Um, and then also, you know, the, all the social five projects and all of this. Kind of attracting sort of maybe the younger group of users who, who might want to do that.

I think the finance stuff is also attractive to younger people, but yeah, I think that's the name of the game is just [00:50:00] building apps and experiences that people want to use. And then just the fact that it's on chain is maybe enabling that, but it's not sort of the prerequisite for it to be interesting to you in the, in the first place.

In light of all the discussion over the Thanksgiving holiday about Operation Choke Point 2. 0 and debanking across our industry, my friend Yossi, very happy to get half a percent at a registered bank, although most are paying him one 10th of a percent today. So this definitely is an interesting yield opportunity.

Last question for today. The earliest memory you have of the first thing you felt like you owned. What comes to mind if you roll back in time and think about that initial sense of ownership? What was it? When was it? What did it look like? I, I bought a, like the worst little [00:51:00] fishing boat when I was maybe in eighth grade.

It was like my life savings. I bought this crappy little fishing boat. It barely worked and the engine broke down all the time, but that was my, that was the first thing I really owned my myself, you know, maybe Xbox or something like this, but yeah, that was as a kid, that was my, my cherished and prized possession for sure.

Did it yield you any, any fish? Did you, did you catch anything in it? It yielded me a method of transportation, you know, before I was legally allowed to drive cars and it yielded me some freedom. Yeah. And some good memories and good times. Love that. Well, hopefully you can get some better yields on Metastreet by bringing some capital.

And for our listeners, where should they follow you, learn more, find out what's coming next, let them know. Yeah. So at Metastreet XYZ on Twitter, Metastreet. xyz is the domain name. Um, you get, you can follow us there, join our [00:52:00] discord. You can reach out to us directly on Twitter and yeah, I think for big announce, we have a lot of big announcements coming in the next kind of three months, a lot around the products that we talked about today.

Um, a lot of new kind of integrations and partnerships that will be really important for. Kind of enabling that stuff. So there's a lot to kind of keep an eye out for us for the next few months. Well, I'm sure people will start following and what I really love about what you, what you guys are building is we talk all the time about how NFTs are more than just digital JPEGs on the internet or pictures of apes and that they are going to tokenize real world assets, unlock new financial mechanisms and make these markets more efficient.

And we're seeing it play out in real time here. Uh, so do follow Metastreet, do see more of what's happening there. Uh, and I'm really excited about this, uh, GPU tokenization opportunity that you guys are opening up and think there is tremendous coordination and capital that can flow into that. So good luck for that launch and, uh, we'll be rooting for you.[00:53:00] 

Thanks guys. Thanks for having me. Thank you. I don't know if we can stop on the recording or Robin will stop the recording. Cool. Connor, tell me your schedule this week. You said you're in Miami? Yeah, I'm in Miami this week. I'll be around. So tomorrow evening, uh, I know that there is a coin fund event that's happening over at, uh, Biscayne.

I don't know, the Pure5 Market, but you have time to grab dinner with me towards the tail end of that? If I pick a spot nearby? Yeah. We'd love to dig into all of this further and get, and have a chance to tell you more about what we're focusing on and, uh, where those lines will intersect. Cause I do think there's some interesting opportunities.

Uh, having just come back from the DCG summit in California, where it was all about GPUs and BitTensor and Tau and things related to that. I really wanted to make that one. We were still in Bali for our, we, we did our offsite after, um, after [00:54:00] DevCon. But we were trying to go to that DCG event too. Yos, you need to sign off.

No, no. I was actually going to say, have you spoken to the, you know, on Dan's point, have you spoken to the BitTensor team at all and seen what's happening there? And I think that there may be, there's multiple opportunities that we should talk about, but one of them might be, you know, Incentivizing pools of capital for BitTensor miners in addition to the Tau rewards, is there.

Is there an additional funding mechanism that we can Yeah, so one thing that obviously I left out of the podcast, but we're announcing this, this joint venture with Aether and it'll be about 40 million to basically run compute farming strategies. And then that will be the primary or initial Borrower of this gpu pool.

And so they will be the borrower who will be the lender We'll raise capital raise, you know money from on [00:55:00] chain folks to basically, you know good Well, that's going to be the subject of part of our dinner tomorrow night. Okay, great. We're in the lending business Okay. Yeah, I mean I want to start bringing more capital to your platform.

Yeah well, I think this will be really really compelling because The unlevered yields are like 40%, so you can cover a 15 percent coupon all day. And I know that, you know, core weave and all these guys are doing that at the scale of billions of dollars. So I think we should be able to do it at the scale of hundreds of millions of dollars easily.

Yeah, we should, we should dig into it. Cause I think. Okay. So let's put a pin in it. If you'll pencil in, let's say 8 PM somewhere on the Miami Biscayne side. Um, I'll send you a calendar invite, but just hold that. Tomorrow and You know if you want to stop by the coin fund event I'll send you that info too so we can meet there Maybe we'll walk somewhere nearby, but i'll get us set up and yos.

I gotta hop but all right [00:56:00] guys

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