In this episode, Bobby Ong, co-founder of CoinGecko is joined by Leo Cheng, co-founder at C.R.E.A.M. Finance. Bobby interviewed Leo on the background of C.R.E.A.M., the collaboration between C.R.E.A.M. and Compound, the merge with the Yearn team as well as the Iron Bank in C.R.E.A.M. V2.
[00:01:19] Introduction of C.R.E.A.M.
[00:04:16] FTX related token on C.R.E.A.M. ecosystem
[00:09:11] Thoughts on Polkadot and Serum
[00:10:44] Competition for Aave and Compound
[00:14:15] Collaboration with Compound
[00:19:16] Merger with Yearn
[00:23:01] Plans on accepting LP tokens
[00:28:57] Iron Bank in C.R.E.A.M. V2
Quotes from the episode:
“I think that in the near future, I think that Compound and Aave, they will continue to dominate this peer-to-peer lending piece for sure. But as we shift our focus into more of a protocol-to-protocol lending in the Iron Bank in the V2, I think that positions us slightly differently and not as directly competitive to these two protocols.” [00:11:46]
“So actually this might be the first time we're disclosing this publicly, but yeah, we're listing LP positions on SushiSwap and Uniswap because they're valuable collateral.” [00:20:35]
“We have collected to date over 25,000 Ethereum, ETH tokens on here, which is anywhere, I think we're number six on the Genesis block on there.” [00:26:40]
C.R.E.A.M. Finance - https://cream.finance/
CoinGecko - https://www.coingecko.com/
C.R.E.A.M. (CREAM) on CoinGecko - https://www.coingecko.com/en/coins/cream
C.R.E.A.M. ETH 2 (CRETH2) on CoinGecko - https://www.coingecko.com/en/coins/cream-eth2
Bobby Ong (00:02):
Welcome to the CoinGecko podcast. I'm your host Bobby Ong. Each week we will be interviewing someone from the blockchain industry to learn more about this fast moving crypto currency economy. If this is your first time listening, then thanks for coming. The CoinGecko podcast is produced each week to help you stay ahead of the curve. Show notes can be found at podcast.coingecko.com. I highly encourage you to join our newsletter where we send out top news in the crypto industry every Monday to Friday. Come back often and feel free to add the podcast to your favorite RSS feed or iTunes. You can also follow us on Twitter and Telegram at @CoinGecko.
Bobby Ong (00:40):
Welcome to the CoinGecko Podcast. For today’s episode, we have the honour of welcoming Leo Cheng, co-founder and project lead at C.R.E.A.M. Finance. I first met Leo from a DAO that both of us are in - the Metacartel Venture DAO. Leo is super deep into crypto, DeFi, DAO and has great insights and I am very glad that Leo is able to join us here today. One interesting fact that I learned about Leo prior to this podcast was that Leo is also an electronica DJ who performed in Burning Man. I actually listened to his Burning Man playlist when preparing questions for this podcast. So, without further ado, welcome to the CoinGecko Podcast, Leo!
Leo Cheng (01:13):
Yeah. Thank you very much. Thanks for having me. I've been a big fan of the work you guys have done here in CoinGecko and it's an honor to be here.
Bobby Ong (01:19):
Yeah. To kick things off Leo, maybe let's start with a simple explanation of what is Cream Finance and when do you guys start working on Cream?
Leo Cheng (01:28):
So Cream is a peer-to-peer lending protocol, started off as a peer-to-peer lending protocol. We worked on this, started in about July or so. So it's been little over six months now and it's been a fascinating ride. I think we've gone full circle from lending protocol, useful DeFi Legos to other explorations and now back to purely focusing on lending.
Bobby Ong (01:52):
So, I mean, you guys started out as a lending and borrowing protocol, right? I think the go-to market strategy was Compound was kind of the leader in the space, and then Aave, but the kind of assets they were accepted on Compound are very limited. Aave is a little bit more broad but I guess you guys were thinking of trying to be more broad with the kind of asset that you guys accept on Cream, right? You guys started out by forking the code base Compound, I suppose. Why not Aave instead?
Leo Cheng (02:19):
Yeah. So I think very similar to you guys at CoinGecko, you move very quickly to, you know, through the DeFi summer, the needs of the DeFi users. We took a very similar approach, right? Look, if you're in DeFi, what do you need? Much the same as if you're in DeFi, you probably need a bunch of tokens listed quickly and not have a real formalized like, well, X, Y, and Z takes some amount of time to get on because users need to know. From the same way we started off thinking about what are the kinds of things that DeFi users need as a bunch of DeGen farmers ourselves and the team. You know, we look at this and we go, "Hey, we now have these tokens. Why don't these things exist?" And it really all started with why can't you yield and leverage these coins. And, you know, and then we started thinking like, "Wait, why not like if you're sitting on a bunch of, you know, XRP, LTC, et cetera coins, I can't participate." Why can't you? We looked into this a bit.
Leo Cheng (03:11):
We thought, "Hey look, Binance Smart Chain is an interesting place. They prepared a bunch of tokens and let's do something about that." So really some of the idea originated around Binance Smart Chain, where we could do with the some of the things that are there. And then we started thinking Compound's a very useful battle-tested protocol. I mean, so is Aave now but I think back then, six months ago, we took a look at this and thought, well, Compound's been around much longer relatively speaking. I don't know that DeFi is all very young, but billions of dollars have had transited through Compounds. We have a lot of respect for those people, those team over there, Robert, Compound labs, Calvin and that whole crew. And we thought that in the battle-tested smart contracts never really had any problems, billions of dollars flow through it. Like that's the one that works. So that's what we went with.
Bobby Ong (03:54):
Yeah. It makes sense. Kind of forgot like, I mean, it seems like Aave and Compound existed for a long time, but if you think about it, Aave is like only one year old now. I mean, after its rebrand from ETHLend, right?
Leo Cheng (04:04):
Bobby Ong (04:04):
And new launch was roughly six months. So yeah, it makes sense why you guys chose Compound now. And how many tokens do you guys accept as collateral these days on Cream and how do you decide which collateral gets added? And also, I remember like a few months ago there was kind of like an FTX related token that was kind of added onto Cream, but with very low liquidity, but turning out that it could be a systemic risk to the whole Cream ecosystem. Maybe you can talk a bit more about that as well.
Leo Cheng (04:30):
Yeah. So the strategy overall is to be on the V1 now. And I guess we could talk about V2 a bit later since the merger with Ethereum. But V1 has always been, our colleagues over in the United States in the crypto space are very much hampered by the lack of regulatory clarity, which is the reason why I moved out of San Francisco here to Taipei in the first place. And without that impediment, you could say, we're more like a, like a Binance to a Coinbase, where we could be a little bit more liberal with how we think about token listings. We don't need to worry as much. And that's the approach we took. We wanted to be the long tail of tokens that are useful. And when we thought about initially, when you think about this whole thing, like, you know, I guess a history of our thinking here, other than saying, "why can't we borrow and lend these tokens?"
Leo Cheng (05:15):
You know, we also thought about LP positions like yCRV and now yUSD. Why can't we then build these things that people want to use? And we kept building on the things we want to use but as it relates to token listing, initially we had, before we spun up the governance process, we basically listed very aggressively, very quickly, tokens that needed to be listed. Sushi came very quickly for example, top of mind. That was like, look, it's highly relevant, people want to use it, let's open the market. And we did that for the stablecoin LP positions. And so that's how we thought about it. And then, so after we established the governance process allowing Cream token holders to vote, then the current process is that you need to go through governance to vote. The specific thing about FTX's FTT token, it's controversial from the standpoint that there's not as much on-chain liquidity as what may be optimal for the amount of tokens are on there.
Leo Cheng (06:05):
So the risk is one where, should FTX token holders deposit a bunch of FTT tokens and they borrow out a bunch of the other assets. And then they basically, you know, you can see a scenario where the token gets taken out and the FTT, if it becomes worthless, then that's a risk of the system. That is a systemic risk. I don't think that's a wrong argument, but the other side of it too, is like, I think this is where the credit analysis portion is interesting and necessary and that, we get that FTT token holders and Sam and that group, there's a lot of fun around this stuff. And they're after billions of dollars, practically speaking. They're not here to rug Cream for a few hundred million dollars. Come on. Like they got better things to do. With that said though, on-chain liquidity and lack of on-chain liquidity liquidate is a risk and we want to fix that.
Leo Cheng (06:54):
So we've actually recently added a supply cap function onto a smart contract, so that tokens can be limited as to how much can be used as collateral. And we're also looking at other ways to provide safety valves. In this long tail of token listings, we've built past what Compound is designed to do. They never intended to list that much tokens, as far as I know. And that we needed to kind of adjust this fork in order to do that, which is why we come up with ideas like the supply cap. And now we're working on a collateral cap to further the safety piece. In addition, we're also building Tokenomics to help backstop some of those potential risks. We're working with Cover to, I just got off the call with them this morning to think about ways where we can provide beyond just smart contract coverage, what else we could do to provide better coverage for those that have interest generally.
Bobby Ong (07:41):
Oh, very interesting. Yeah. I'm looking at the list. There's so many tokens. I think that's like close to 40 tokens right now, on Cream. Wow. That's a lot indeed, like, probably like the most diverse lending and boring protocol around. And you mentioned earlier just now, that you guys, kind of the idea came about because of the Binance Smart Chain ecosystem. Do you guys launched on BSC or Ethereum was the one that you guys launched first? What's the story here?
Leo Cheng (08:06):
Yeah. So we've launched on BSC as soon as they're ready. And we launched on Ethereum as soon as we were ready. So we launched on Ethereum before BSC because by the time we launched in Ethereum, our contracts were ready to go. And we were DeGen farming on Ethereum or like, you know, we want to launch this on BSC, yes. But we can certainly use it on Ethereum as well. So that's why we launched first on Ethereum and as soon as BSC is ready, we launched there as well. Definitely the, I think when we think about alternatives or, well actually a little bit interesting thought process there. We still think about, I guess, layer two options or alternatives of the Ethereum based on the amount of available assets.
Leo Cheng (08:41):
Look, if you have a very fast chain and very good capable technology but you have no assets on there, it's not that useful right now. So we look at BSC, the use case, even as EVM compatible, you know, if you're on app.cream.finance and you have the custom RPC set up for BSC, you can easily switch from Ethereum to BSC and pay a lot lower gas, but certainly the amount of liquidity is not as deep on BSC or anywhere else compared to Ethereum. And that's kind of the trade-off.
Bobby Ong (09:11):
And what do you think about Polkadot and Serum? I mean, Sam is pushing Serum heavily. And this is kind of like, I would say the year where it's interesting to monitor whether it takes of or not, there's some professional market makers in the space. Polkadot, we got the parachain launching this year. Probably going to be interesting year as well. Are you guys thinking of launching on these chains as well or any other chains?
Leo Cheng (09:31):
It's something that, we love Ethereum, we have a lot of backers in Ethereum and that the ecosystem work are Ethereum heavy. That said, we're also not very much "Ethereum only" as you can see with BSC. We're evaluating other chains for sure. But our current focus is on specifically on lending and how to evolve lending on Ethereum while looking at how to, at some point, once these other products we're building can be leveraged on the other chains, we will do that. But I think right now, focusing on lending, making sure lending is more secure and it's more efficient, more capital efficient, generally speaking, across the various things we're doing. And then we'll continue to deploy to other chains where it makes sense, sufficient amount of assets, sufficient amount of liquidity that we can go. So currently expansion beyond BSC is sort of a wait and see at this point.
Bobby Ong (10:18):
Yeah. I agree with you. I think for all the other Layer 1 chains, I think Ethereum has got enough users. There is some network effect on Ethereum but every other layer 1 chain, be it BSC, Polkadot or Serum like, it's kind of a wait and see thing like, if they can attract users, then yeah, everyone's going to move their liquidity or whatever but it's going to be tough, like tough competing with Ethereum. Yeah.
Leo Cheng (10:38):
Bobby Ong (10:40):
Let's get back to the lending and borrowing protocol category, sector. So let's talk about how competitive this landscape is. It seems like Compound and Aave has completely dominated this sector. Do you think that, I mean, you guys came in like trying to compete, I suppose you guys are number three in this space?
Leo Cheng (10:56):
Bobby Ong (10:57):
Do you think that it's possible for another player to give Aave or Compound some real competition in 2021 or do you think that these two guys have pretty much firmed up the market and no one else can compete against them and it would just solidify their lead further and dominate things further and so on?
Leo Cheng (11:13):
I think that's a very interesting question in that crypto moves very quickly. So it's very hard to predict and say anyone is particularly the solid winner. I think that right now, Aave and Compound are clearly way ahead in the space but at the same time, the competition is interesting in DeFi generally and specifically within the lending space. I think it's actually great and very encouraging that both Stani and Robert had been nothing but just encouraging and helpful to us. Despite the clear overlap and some competition here, I think that in the near future, I think that Compound and Aave, they will continue to dominate this peer-to-peer lending piece for sure. But as we shift our focus into more of a protocol-to-protocol lending in the Iron Bank in the V2, I think that positions us slightly differently and not as directly competitive to these two protocols. But I, I think that the lead that these two teams have; the knowledge, the liquidity because liquidity type thing, the fact that they've been around for a long time, welllong time relative crypto and not really seen any serious failures, I think that credibility will help them a long way.
Bobby Ong (12:20):
Yeah. I think Stani's interesting in that he positioned Aave in such a way where it started out as a, like literally peer-to-peer lending protocol where, it's kinda like a local Bitcoin but for lending and borrowing but he kind of transition it into a liquidity pool once he saw that model would gain more traction based on what Compound is seeing. And then he can kind of innovated and kind of put in place, Flash Loans.
Leo Cheng (12:47):
Yes, very innovative.
Bobby Ong (12:47):
Do you guys have Flash Loans on Cream?
Leo Cheng (12:49):
We do not, but I think it's a good innovation. We have used Flash Loans for liquidations through Keeper. I think that Flash Loan is a key piece of innovation in DeFi. And I know a lot of people don't like it because of the kind of economic exploits they can do, but just like any tool it could be used for good or evil. You know, when I think about lending and where the various players are, I know that given that crypto is very borderless, generally speaking, I also, I was having a conversation with a friend yesterday about this. And it does seem like Compound has that North America based Silicon Valley thing. And then, you know, Aave has that UK, European thing with Stani also being European. And then I guess that puts Cream too as like the Asia lending play here. And we're okay with that.
Leo Cheng (13:31):
We do have an extensive community within the Mandarin speaking and the Korean speaking community. We're expanding on that bit. We think we've got some of our supporters are building more stuff out in the Japanese market. I just did a recording recently for the Japanese market too. As it relates to that part too, I do wonder if the peer-to-peer lending side, is kind of like culture, language communications, would play any part to do with this. It's possible. But I think for now people just, smart contracts talk to smart contracts. Things get localized. And languages, maybe not so much.
Bobby Ong (14:02):
It's interesting analogy you brought out about how Compound's very, I mean it's based in the US so they get alot more American mindshare. Then Aave has the European mindshare and Cream is like quite well-positioned for the Asian mindshare.
Leo Cheng (14:13):
Bobby Ong (14:14):
Makes sense. And I know that we were talking before this, that there's a lot of collaboration that takes place between you guys at Cream and Compound. This is quite in stark contrast with what we're seeing with the Sushi versus Uniswap, where there's quite a lot of angry debates on Twitter between Aiden and the SushiSwap devs. So maybe you want to share a little bit more about some of the collaborations that you guys do with Compound and the team? Yeah.
Leo Cheng (14:37):
Yeah. So I think this is a very interesting story to share is that what really happened here. Some people say, "Wow, you know, you guys work with Compound and that's great!" We weren't the first fork of Compound, but certainly we were the fork that, my understanding is that we communicated more. And that initially when we had our conversations with Robert, it was about like, "Look, we should be attributing Compound's code." And we've no problems with that. So we never forked it and said, "Nah, this is all ours." We've very explicitly said in the, even our first blog post "this is a, you know, the work came from Compound and team". We, we never once took credit for the code. When they notified us or like, "Hey, look, you guys should be attributing us.", we did. Then we got on the call and then the position was like, "Look, you guys built this thing. You should have some of these tokens."
Leo Cheng (15:23):
So we offered up basically at that time, 25% of the team tokens to them like, "Look, you guys were the original builders of the thing. You deserve this." Like, we want to give tribute back to the people who built this thing. And they said, "Look, we're not going to take it for free." Like, "Okay, well you want to give stuff back to us? Great!" Well, what do we need from Compound is we need them to make sure that we're doing this safely. So there are security technical advisors. And so now they have, you know, they, the team have taken, we've given them, their share of the tokens, but what's really cool here is that when we had this one, two, three, four years staking pool for long-term Cream staking, they went ahead and dumped up the first two tranches of what we sent them into those pools.
Leo Cheng (16:03):
So over the long period of time, they're going to be, my estimates, like roughly 10% of the token ownership, which is huge. But the collaboration though, we have ongoing conversations with them. We have a channel on the Discord. We talked about like, "Hey, what do you guys think of this? Here's this thing. And you know, what are the risks of adding stuff that rebates this, et cetera?" Like we have technical conversations with them. Recently, one of their devs helped us when we implemented the supply cap. Our dev team last week, fix this and just this week submitted a pull request to the Compound code. So, you know, whether they accept it or not, whether they find it useful or not, it's okay. We're proud that we, A, shared in the upside with the team that originate the code and B, we contributed back to the original code base where we forked from. And I think that's actually a much better model where value is shared both in terms of the token, the governance that they care for us, and then may any kind of monetary upside. And two the technology, the pull request upgrades of the protocol, I mean, I think that's a great way to collaborate.
Bobby Ong (16:59):
Wow. I didn't know that you guys took 25% of your team token and share with the Compound team. That's a big thing to do, like very generous of you guys and not many forks do that. They all very stingy and they want to keep everything for themselves.
Leo Cheng (17:12):
Well, I, I would also say that we probably wouldn't be where we are today without their help. So even without the original code base, but even with the original code base with, or without their consent, obviously that's within fair use, of course. But beyond that, I mean, you know, I think this is where being giving is helpful in this space and they too, they too were being super giving, you know, and that you will find zero smack talking between the two protocols and Robert has been supportive all the way and his team. And I can't praise them enough for what happened here.
Bobby Ong (17:41):
You guys gave it to the Compound foundation or to the individual developers in Compound? Is it vested, like this 25%?
Leo Cheng (17:48):
It's structured in a way that's basically given to the Compound Labs, the developers that built this thing, but ultimately it's up to the discretion of that team, what they do with it. I certainly welcomed them into our governance discussions and that they have been helpful, less overtly. I think that they've been super helpful with just the advice they've been given. Very appreciate it.
Bobby Ong (18:09):
Yeah. I mean, I've never, I never really hear of like forks giving, like some of their tokens to the original team. Like, they always very like, take all the work that the earlier guys have done, put a token in it, keep all the tokens for themselves and then kind of compete against the original one, right? So this is the first time I've heard of forks giving out tokens. So, I mean, kudos on you guys to do that. And I see how you guys did that, the incentives are align now. There are things that you can do that the Compound team couldn't do and they also want to push things so, but I see where things are coming because they are hampered by a lot of the regulations in the US, I supposed.
Leo Cheng (18:43):
Right, and you know, as far as we know, they've not sold anything, They've just been supportive, they helped. And from their perspective, my thinking here is that they're probably looking at us going like, "wow, these are things that we kind of want to try out and good on you guys to see where this protocol can go." And we're hitting, you know, design challenges that I said earlier, not meant to be used this way, but that's okay. And then with the help now of Andre and the Yearn team, we're expanding beyond the original scope of what Compound code is doing and certainly happy to continue to contribute to the original Compound code base.
Bobby Ong (19:16):
Yeah. You brought out Andre and the Yearn team, right? So in November, 2020, you guys announced sort of a merger with the Yearn. To me, I mean, "merger" seems like kind of a too big a word to use. I mean, partnership is probably a better word to use, but maybe you might have a different perspective on things but there was no token swap and all those things. So, but tell us more about this "merger" as you call it with the Yearn team and there was a bunch of other mergers in the YFI ecosystem so, share a little bit more with us.
Leo Cheng (19:43):
It all happened very quickly. And I think that it's been a very positive thing. So Akropolis, Pickle, Sushi, Cover, us all in there. I think the story that's not told enough is just how much elaboration there's been within the teams. The teams are super helpful. We have a Discord within the ecosystem. That's specific to access only for the people in the ecosystem. There are countless Telegram working groups between the ecosystem partners and that together, we have a bunch of the pieces, where I did publish a thing on a tweet called DeFi Voltron and that whole idea that we've got all the pieces in and then create an automation robot that is now more powerful than the parts by themselves. And allows for focus and allows for specializations. For example, one of the things we're talking about recently is, well, it's already there, we're trying to figure out how to deploy it better.
Leo Cheng (20:33):
It's like, we're listing something like LP positions. So actually this might be the first time we're disclosing this publicly, but yeah, we're, we're listing LP positions on SushiSwap and Uniswap because they're valuable collateral. They have liquidity and people want to be able to do things them. And, um, in that way we debated inside the team like, and we've built this out, actually the ability for a user to stake the LP position and then perhaps automate the farming of Sushi and then turning it back on the xSushi. So as a depositor, as a supplier, you might put in a Sushi-ETH LP position deposited and then you might go ahead and leverage on other things, Bitcoin, Ethereum, stablecoins, what have you. And then when you do withdrawal your tokens from the LP positions, you're going to get with you xSushi.
Leo Cheng (21:16):
But now the question is, what are we, are we a lending protocol? Are we a yield optimizer. So it's like, no, no. We might want to leave that for our colleagues at Yearn to do this. The specialization is that we can specialize on the lending part and we're pushing all the AMM stuff we built from forking Balancer code into SushiSwap. Here, take all that liquidity. We don't want that TVL because we want to focus on lending TVL and you guys are the AMM of the group. You guys go do that. Now, I think the debate about merger versus partnership, I don't think protocols would easily give it up this fast if it were "a partnership". But in this merger scenario, we're constantly talking with the various different partners within the ecosystem, as well as, like Alpha, they work really closely with us.
Leo Cheng (22:00):
They're not officially part of the Yearn ecosystem merger, but they're definitely a strong partner. But within the ecosystem members, we talk all the time. We have calls within the ecosystem partners. We ping each other within the ecosystem. For example, when the Iron Bank came out, you know, the question came from some of the communities, "Well, so is insurance going to cover Iron Bank?" And we just went to that part of the discord, ping the team, "Hey, just want to clarify. This is covered, right?" So, "Yes, it is. Go ahead." Like, great. So the merger, though there's no real like stated within the treasury of the token goes here in a traditional sense, what you're seeing now, there's some of that going on. For example, we've given two grants to Yearn strategists and then there are other discussions as to how to tie the Tokenomics together. So back to the merger versus partnership piece, I think just because the Tokenomics haven't been sorted out fully yet doesn't mean that it won't be in the future.
Bobby Ong (22:50):
Okay. I see where things are going now. It's kind of announcement and figure things out as you go along, right?
Leo Cheng (22:56):
Yeah. Yeah. And the ecosystem's already collaborating like a whole fully functional team. And that's true.
Bobby Ong (23:01):
In your previous answer, you mentioned a little bit about LP tokens, right? So one of the things that I think will happen this year is that at this point time, lending and borrowing protocol is like Yield, like you guys Cream, Compund, Aave, you only accept tokens. You guys don't accept LP token. But if you think about it, if you accept WBTC, if you accept ETH, there's no reason why you can't accept the WBTC-ETH LP token.
Leo Cheng (23:21):
Bobby Ong (23:21):
Because it is the same thing. It's just wrapped in the LP token. And then you can kind of locked it. So are you guys planning to kind of do LP tokens?
Leo Cheng (23:30):
Yes. Yes. We're launching LP tokens in probably another week, two weeks maximum. The thinking here is that, going back to the original kind of design principle, we are DeFi DeGen people ourselves. And I look at these LP positions I have and I think it's great that I can, well, I am biased for Sushi over Uniswap, for clearly they're part of our team now, so, but besides that, you know, whether it's Uniswap or SushiSwap tokens, you have this liquidity, that's sitting, for lack of a better term, idle. Now of course, when you do put it into the Cream contract, you have an additional smart contract risks associated every time you put it [inaudible] in somewhere else. Uh, but it's no different than putting your ETH or USDC or whatever it is into Compound. So I think from that standpoint, yeah, capital efficiency, right?
Leo Cheng (24:18):
That is a very good collateral, which is why in our design, we're launching with LP tokens of the top liquidity pairs. So what you're going to see are the top few liquidity pairs within Uniswap and SushiSwap enabled on our platform, as we are going through a very much needed redesign right now of our UI. We're going to make it much easier to use. When it's like five or ten tokens, it's okay. When it's like 40, then all of a sudden you need to redesign, especially for dropping in another over 10 LP positions in there people could use.
Bobby Ong (24:47):
Yeah, I think you're right about the redesign. I mean, when I first saw Cream, I don't know, six months ago, I was pretty confused on what you guys do, to be honest. I mean, it's still the same design now, but I kind of get what it is, because when I first saw Cream, I was like, "This looks like Compound, why would I want to use Cream?" But I didn't realize kind of the vision that you guys had was sort of to add the long tail of tokens. If I knew back then what I knew now, then I probably would understood things better. But, but yeah, I see the point, a lot of beginners or those who are not so into DeFi like they'll find it a bit confusing. And when you add LP token, I think that's going to be a game changer.
Bobby Ong (25:23):
I thought of projects wanting to launch LP tokens. And I've tried to sell this idea to the Alpha team, right? "Guys, you should totally launch like LP tokens." Right? And then I can draw loan from my LP. So yeah, I think that will be useful. And I think what would be useful as well, to kind of like one-click convert between like, the different LP tokens from a different AMM. So like, I know you can easily swap Uniswap LP tokens into SushiSwap, but can we do the vice versa, and then also on 1inch, now that 1inch has, so I kind of moved my ETH-WBTC liquidity from Uniswap to SushiSwap and now to 1inch because you can now do like the liquidity mining there, so maybe that's on SushiSwap now because the AMM like you mentioned. Yeah.
Leo Cheng (26:02):
Yeah. And also beyond that LP position thing too, one thing we haven't covered today is the fact that we have ETH2 staking. Again, it's like, "Hey, I really want to do ETH2 staking, but I don't want to have my 32 ETH locked. I don't want to not be able to move it. I don't want to run the servers and run it wrong and gets slashed. I want capital efficiency. I don't want to go to a staking service where I can't then use it as a collateral because I currently use my ETH as collateral, so why not use my stake ETH position as collateral?" So the combination of all that quickly culminated into a, we should launch a ETH2 staking service and let people put money on here. So we have collected to date over 25,000 Ethereum, ETH tokens on here, which is anywhere, I think we're number six on the Genesis block on there. We're proud of that fact.
Leo Cheng (26:50):
And then, you know, we're just passing today, the ability for users to use stake ETH positions on Cream as a 75% collateral ratio. So now we're not aware of any places today where you can take a 'stake ETH position' with the fee, we take 8% of the total proceeds from that, not 8% of the total value but 8% of the total return you get from the staking returns as a fee, which I think is very reasonable. Cause I sure as hell can't run it myself for that amount of money, correctly. And then in addition to that, if people borrow the crETH position, then you get an interest on that. And then most importantly, users can use that as collateral to leverage or borrow anything else.
Bobby Ong (27:30):
So do guys run like the node to accept, I mean with this ETH 2.0, anyone can contribute like one ETH or two ETH into this pool right? And then every 32, you sort of like, put together a node, you run, you spin up a node. Is it someone from your team spinning up a note and then issuing like CRE?
Leo Cheng (27:47):
That's correct. So the benefit here is we don't set a maximum or minimum. So if you don't have enough for 32, Welcome. Put it in 0.05, whatever, gas is low, great go do it. If you have like 2000 ETH, you don't want to split it up in a bunch of tranches and manage yourself, great! Put a thousand ETH there and we have seen those size deposits as well. And yeah, now you have this crETH too and you know, it's liquid, you can trade in and out of it on SushiSwap or working on getting something on curve that would make a lot of sense for us as well. And then ultimately, you know, when ETH2 launches, you can then redeem those for ETH2 tokens.
Bobby Ong (28:21):
Yeah. I think it's interesting that you guys were so quick in launching this. Couple of other guys, I think Lido guys have this stETH and Stake now has also the stake ETH I think. Not so sure how well they are doing.
Leo Cheng (28:32):
Yeah. Rocket pool and their rETH, I think that they were testing last I heard, I haven't tracked them too much lately, but to give those guys credit too like, they're working on something different, right? They're trying to be a lot more decentralized. I give them credit for that. Definitely the different kinds of technical challenges based on what you're trying to achieve. And I think the innovation across the various different stake, you know, ETH2 pools are useful and good.
Bobby Ong (28:57):
Let's talk about what's coming up next week with Cream V2. You guys made an announcement one week ago. So about this Iron Bank thing that you guys have. So, tell us more about what's in V2, what is Iron Bank, everything that we need to know about Cream V2.
Leo Cheng (29:12):
Right. V2, Iron Bank, super exciting. I very appreciative of the Yearn team support on this. So Andre worked on the prototype for the V2 and then our team executed on it. And now, now is the deployed. And so the Yearn V2 UI still coming up. You can go to, I think, v1.yearn.finance/lending. And you can see the current iteration there. So it's basically Cream V1 or you could think of it as a Compound setup except that the, we'll call it zero collateral. So zero collateral between protocols. So imagine if, I'll give you an example of Alpha Homora V2. So they no longer have to run their own money market. They can focus on building on their leverage positions and that the money market that they would draw from would be from the Iron Bank. So it's zero collateral. And so far as Alpha Homora didn't come on Iron Bank or Cream V2 to deposit their assets so that they can borrow assets and do it leveraging, in fact, they just treat us as their money market pool.
Leo Cheng (30:13):
So protocol-to-protocol. But that's not to say there's zero collateral at all, that you could just run off with the money, but that the collateral still exists as a user. So when you think about Alpha Homora V1 versus V2, in V1 you know, you put up some number of EH, let's call it, I put 1 ETH and I want 1 ETH leverage, and then I pay the lending fees for the extra ETH I got, but then I got 2 ETH now with farming power on some kind of LP position. That is useful. And I put up 1 ETH as collateral. Now, instead of that 1 ETH extra that I borrow coming from Alpha Homora, the ibETH that they've done, instead now it comes out of Iron Bank. So zero collateral, and so far as between protocols allows for capital efficiency, but it also doesn't mean that it's zero in that it has a high chance of not getting paid back so that when you think about the capital efficiency game, then this allows for that example, that to work.
Leo Cheng (31:02):
But on the other side, when you think about our other launch partner, which is the Yearn Vaults, so the Yearn strategists have done a lot of different thinking around this and one particular vault, Sam Priestley's done this thing on DAI and evolution on DAI Vault that's leveraged. So imagine if for every dollar of DAI that's in there, then they can borrow an under-collateralized position or uncollateralized, of something less than $1, $1 of loan. And now you have a large farming position that is greater than the deposit itself. The safety vault there is that the strategies, we ensure that these strategies and any of our partners, when they do borrow, we white-list them based on the fact that they're audited, that they're credible and that the contract will pay back and we are the senior debtor in this scenario. And that, that becomes more capital efficient. You don't need to over collateralize anymore. And that, since we know exactly what it is that the strategies are doing and what it is, the Alpha Homora is doing, we've seen the contract, we've audited it, then we know with full confidence, we can give them under collateralized loan.
Bobby Ong (32:04):
So how much can they borrow? I mean, I contribute to Alpha Homora's ibETH pool. So I, instead of lending my ETH on Cream, I sort of put it on Alpha Homora. I think [inaudible] paying 8%, 10%. I don't know if it changed.
Leo Cheng (32:16):
Bobby Ong (32:17):
It's good. I mean, it's quite good, but so I guess that will play a lesser role in Alpha Homora moving forward, I suppose, because they are going to tap onto Cream's money market, moving forward?
Leo Cheng (32:28):
That's right. And we want to encourage all of the Alpha Homora ibETH takers from V1 to migrate to Iron Bank because that's where the utilization will come from. But yeah, exactly. So that becomes, you could think of it as that money market has shifted over to the Iron Bank. But that allows for Alpha Homora to focus on their core competence, which is really kicking butt on that leverage thing. I, myself am a depositor on the ibETH as well as a user on the leverage protocol and I think it's fantastic. The capital efficiency thing here too, is the way of the future. The easiest way to think about this is when I explain to some of my friends, I said, "You know, the ETH contract knows no borders. They don't care that you went from Alpha Homora deposit to borrow on the Iron Bank."
Leo Cheng (33:10):
Like the smart contracts just talk to each other and the conditions are met and they execute. So there's no need for, I have to put assets on Cream to borrow from Cream. It could be that I put assets on Alpha Homora and borrow from Cream and to the end-user it all feels and looks the same and that the smart contract executes and ensures credit insolvency. And I think that's a huge innovation as we in V2, get closer to a protocol, the protocol vision that Andre talked about and then achieve the capital efficiency and effectively become the B2B enterprise liquidity backbone for DeFi.
Bobby Ong (33:44):
How much ETH can like Alpha Homora borrow from the Iron Bank, for example? I mean, it's under collateralized, so like there must be a limit before, I mean, in case something blows up entirely on Alpha Homora.
Leo Cheng (33:55):
Yes. Yes. So, so there's a notion of a credit limit. So each, as the process of how the Iron Bank works, there's a white-list process. So once a protocol is audited, reviewed and accepted, then that protocol is then white-listed. And through the white-list process, we'll sign a US dollar denominated credit limit. And it's US dollar denominated because in Alpha Homora V2, one of the gripes I had about V1 was that, you know, I'm short ETH and so like, I wish I was short USD instead because my returns would be higher. But the V2 design that to me that's most useful is that you can then be borrowing stablecoins instead of purely ETH or you could still borrow ETH. So from that standpoint, we have a US dollar based credit limit because we don't know if you're borrowing just ETH or you're borrowing ETH plus stablecoins or something like that. And we don't want to be specific about, you can borrow X amount of ETH and Y amount of USDT, et cetera. So it's a dollar value based thing. So as protocols come and get white-listed, we'll start with some low amount of credit limit. And then as credit worthiness improves, you can think of it that way, then the limit goes up. But so far in V1, I think they've moved, at least if I remember this correctly, a hundred thousand ETH. So that number is going to be huge.
Bobby Ong (35:13):
Ok, cool. Cool. And so you guys will start Iron Bank, like when is V2 launching, when is Iron Bank taking place?
Leo Cheng (35:19):
It's up and running now, actually. We haven't, we haven't really pushed a bunch of capital that way immediately because the utilization is based on the protocols borrowing. And that's where we're in the process of finalizing some audit and reviews of this stuff. But, you know, whatever it is that Alpha Homora launches, I think soon. They said January, I believe. So soon once that goes, utilization rate will go up. So that's when we're going to start pushing for more liquidity in there. But for any of your listeners here on the podcast, I think it's worth checking out the interest rates there. It's sort of a chicken and egg thing, right? Like if you have a bunch of people borrowing and nobody lending, then it doesn't work. And if you do a bunch of lending and nobody borrowing that also doesn't work, cause there's the lending rates and the balance rates need to adjust and be profitable and useful for everybody.
Bobby Ong (35:59):
So this Cream V2 is kind of like more, a lot of back-end like protocol-to-protocol improvement. As a human user, like will I see any changes on the app.cream.finance or pretty much not many changes on that site?
Leo Cheng (36:17):
Right. The V1 continues to live on app.cream.finance. The V2, the Iron Bank lives on the yearn.finance. So that will continue. The best way to think about this is they're basically two different lending protocols. And one is like A tranche that, so on Yearn, it's like the blue chip DeFi A tranche debt with much lower risk and on app.cream.finance that's the V1, that will continue to accept and list a long tail of assets. So it becomes like a B tranche debt with a little bit more risk, but of course more risk comes possibly more returns. So, so far the plan is to allow for A tranche, B tranche debt concept, but certainly we're looking to further integrate automation across protocols. So we're evaluating the possibility of V1 going with the Iron Bank based design so that we can start white-listing protocols there as well. That's the latest thing we've been discussing so that we continue to focus on lending, but our other ecosystem partners like Yearn Vaults and Yearn Strategists can start pulling from liquidity from the Iron Bank first, and then secondarily, if they want to do some kind of other Vault and with direct capital efficiency via a credit limit, rather than having to deposit a collateral on V1, that would be another way that would increase utilization, increase capital efficiency and then make the whole thing a lot more impressive. And then, you know, hopefully that makes everybody happy, cheaper borrowing costs as well as better supply rates.
Bobby Ong (37:40):
Yeah. And then you guys planning to open it up to like non-machines, for example like Alameda? I think Alameda was borrowing uncollateralized loan on was it Aave, sometime late last year, something like that.
Leo Cheng (37:51):
So that's interesting, I think with protocols and strategies, we could look at the contract and you know exactly what they're doing. Like you're only doing this DAI Vault. You're only going to go take this DAI and do X, Y, and Z on Compound, on Maker, et cetera. Great. We get that. If we start opening up credit lines to humans, unless we lock them down to specifically where this money can be spent, it's really hard to tell where humans are going to do. And, you know, I don't want people taking the under collateralized loans and buying Lambos with it, let's say, but look, if there's a way we can control for that safely, we are open to that idea. But for now we're focusing on machine-to-machine enterprise type of automation. We want to stay away as much as possible from needing humans to look at these processes.
Leo Cheng (38:33):
But for now, humans are super necessary to evaluate smart contracts, et cetera. But the vision continues to be that we want to automate the hell out of this thing and that the efficiency can be gained.
Bobby Ong (38:44):
Interesting stuff. Interesting stuff. Anything else that is coming in Cream that we haven't really talked about today yet?
Leo Cheng (38:52):
The funny thing about that is that I could ask myself that very same question. And the Leo from four weeks out would be like, "Check it out. We've got this new thing. It's super cool. It's going to be more capital efficient, be more automated. This latest craze and blank requires this, you know, other functional tool or asset, and we're going to beat the hell out of that." So unless I can channel the future Leo to tell you this, I won't be able to know the answer to that, but certainly stay tuned where we're always reading and discussing, and you can join us across our discord or forums and talk about how else ideas may be helpful to DeFi.
Bobby Ong (39:27):
All right. Cool. Yeah. I think we spoke a lot about Cream today. So yeah, the best place to follow about Cream I suppose would be your Discord, is that right?
Leo Cheng (39:36):
Uh, Discord, Medium, we post all the relevant things on Medium and Twitter, for sure. So we love constructive criticism. Feel free to come and let us know how we can do better. And yeah. Thank you for having me and thanks for the support generally, and from the community, we can't wait to keep making DeFi more capital efficient.
Bobby Ong (39:52):
Thanks. Thanks a lot for taking the time to explain all about Cream today, Leo. Great honour to talk to you.
Bobby Ong (39:58):
All right, that wraps up the show. Thank you for listening to the CoinGecko podcast with Bobby. If you like our show and want to know more, check out podcasts.coingecko.com or please leave us a review on iTunes. If you have any feedback, do drop us an email at email@example.com. Join us for more next week. See ya.
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