Tim Swanson on synthetic stablecoins at TAU Protocol

0:01i'm ashton addison from event chain for investmentpitch media in the crypto coin show and today on blockchain interviews we have tim swanson the creator of tao protocol tim welcome to the show and thanks so much for taking the time to be here great to be here ashley thanks for having me you're very welcome i'm really excited for tau protocol i know your team is

0:19working on a lot of great things so i'd love to just kick it off with an overview and the focus of what is teleprotocol and what are the solutions that you're really providing right now great yeah so just to take a kind of step back uh there's a lot of ideas out there that have been implemented in the stabilization space in the last six to twelve months uh algorithmic

0:40stable coins as they're called um this idea basically started from a long paper or long long article i wrote a very beginning of the year on stablecoin specifically collateral-backed stable points and i was wondering to myself hey what if instead of trying to stabilize around us dollar or euro we tried to stabilize around the synthetic there's actually been several projects

1:03that have successfully done that one's called synthetics another's called mirror so this certainly don't have any monopoly to that kind of idea but what i would like but what i wanted to do was create a capital efficient stabilization mechanism because something like synthetics requires massive over collateralization you have to have like seven eight hundred percent of snx

1:25staked effectively in order to mint something and i was wondering just the opposite can you actually do less than 100 and maintain that that value so um the the idea crystallized in mid-january and i found a group that was already out there building out um basically the back end infrastructure unrelated to anything i was already doing i reached out to him and uh told them

1:49kind of what i'd like to build out um that would be i guess you could say public facing and uh they started putting together an implementation and it turned on just a couple days ago on friday wow congratulations and there's definitely been a lot of talk about stable coins uh more recently and there's a lot of different ways that people are starting

2:10to build out stable coins and you're talking about you know having synthetics uh to build that out can you just dive a little bit deeper into how specifically you are understanding that you're providing a stable asset that's being backed on the stablecoin using synthetics because i know you're doing something that not many others are doing yeah so for this first iteration

2:35and again there's that could be if this is successful i'm sure there's others who could implement it uh these the current group i'm working with to implement it btcst they don't have some kind of monopoly or exclusivity around it uh the idea is what would be a fairly um easy to identify asset that everyone knows about um that can be stabilized and so i chose

3:00bitcoin not because i'm no nobody knows me as being the big bitcoin bull but uh it's fairly well known uh and uh i felt that with working with the btcsd guys they already had figured out how to tokenize hash rate which would basically create this form of collateral to to stabilize to to act as a backstop to what would be called how bitcoin the synthetic bitcoin

3:23so uh the the implementation that they've put together uh i don't know the exact capital efficiency numbers but it's uh going to be uh about i guess 2 000 or so bitcoins or synthetic bitcoins you created and you have a smaller amount of actual bitcoins backing you but that's that's not the particularly important part it's the it's the uh having a credible shelling point um

3:48if you guys study economics or whatever showing point is the point in which we agree that something is is maybe that's what the market views is the actual value and if we look at the various synthetics out there they have tried um for example this completely without any collateral maintaining a peg has been several successful um effectively capital 100

4:09efficiency like if you don't have anything backing at all um that's that's probably the most uh um far out there um extreme version of that and i'm not saying that that's bad i'm just saying like to to get the market to believe that your uh the synthetic is is worth what the market is saying the fully backed synthetic or at least partially back synthetic is

4:29uh is a pretty impressive deal um so we uh for this tile protocol group there's just a loose association at this stage um we've been ideating on what could be what could come next what are some other interesting ways of uh generating synthetics and having it um effectively backed up by something so i don't want to say it's completely green fields there's some things i probably wouldn't

4:53touch including like maybe a usd itself um for for legal and regulatory reasons but um i think it's a good start and happy to follow up with you on what the what the future ones may be definitely and i'm excited to see how this plays out and so from what i understand it's not you're not just backing you know a wallet of bitcoin it's actually the hash rate

5:15and the mining and minting of new bitcoins and i know a lot of people that own bitcoin and even people that own other coins as well they're not too familiar you know to mining to some is like a whole other world and the hash rate you know they sort of stay out of it because there's hardware involved energy costs all these other factors and is that right that you're basing the

5:36synthetics on the hash rate and it's sort of like investing in bitcoin mining or investing in the miners that are doing bitcoin mining of new minted bitcoins so that would be a btcst specific question i don't work for them or anything but the uh well the way a hash rate token works at least in their case back in end of last year november december time frame

6:01um a group of uh five mining farms um came together to support um what what would become this open association called a standard hashrate group and they were trying to do exactly what you described they were trying to figure a way to say hey there's a fixed amount of hardware out there we'd like to create a token that represents that fixed amount of

6:23hardware and allow people uh retail people any actually any spectrum of folks i suppose um to effectively acquire those tokens and stake them and that would be equivalent of going out and mining itself so they're the way they kind of describe the btcst token as it were is as a way of actually mining without actually having to buy the hardware and since uh since they

6:46launched um there's actually been i think three or four other projects um large pools um to go out and try to do something similar uh although they did it on slightly different networks i think one did it on ethereum uh the btcs you guys did it on bsc i'm buying it smart chain and i've heard of a couple others but that's the that's the back end i would

7:05call uh for for this type of project um it's very helpful for for being able to try and stabilize this particular asset topic point because it creates that psychological awareness oh this this token this uh the synthetic is actually backed by real hash rate and technically it is um but um my point is is that that's separate like they were already working on that i

7:27wasn't something that i had any involvement on yep and in terms of algorithm algorithmically backed stable coins and just stable coins in general right now most people are using tether or usdc is tau protocols image to have you know the vision to have something similar to that where you're just having a stable version of your wealth and maybe holding you know in the case

7:50of a bear market you switch to uh an algorithmically backed stable coin rather than tether or is it really serving uh a different specific purpose yes it's really serving something different um the two that you just mentioned uscc and usd tether are uh what we call collateral backed uh tokens so they have in theory although the new york attorney general i

8:11believe has a different view um the the theory is that there's a set of bank accounts out there that holds customer deposits um one-to-one relative to the amount of tokens that have been issued um so if there's like 40 billion tether out there they've been minted that there should be 40 billion dollars worth of u.s dollar deposit somewhere in several

8:30different bank accounts um so they're they're trying to solve an issue or problem uh that i'm not at least not at this stage i i suppose i i could throw my weight behind some kind of collateral backed uh stable coin but that's just not something i'm particularly interested in i spent an entire hour talking about the last couple of companies i've worked on

8:50and essentially digital currency projects that they worked on so i'm very well aware of of of that arena but that's not something this is this is my part-time fun job as it were i have a day job um and the company i actually work for has did spearhead the cbdc arena movement in 2015. so uh very well well well aware of the the challenges of getting banks and central banks on board

9:15uh and that's just not something i want to do in my spare time for fun definitely uh that's great and tim you mentioned that you're fairly early on in the project can you give a snapshot of where you're at uh and a you know a brief road map of in the next six months or by q3 at the end of this year where you look where you're looking for a tau protocol to be

9:38um yeah so i hate uh kind of teasing too much because i don't want to get anyone's expectations up and again it's just a loose project at this stage i hope to keep it that way i'm not trying to turn it into a gigantic uh gigantic uh full-time deal at this stage but uh the the areas that i'm looking at doing um maybe for different types of synthetics are

10:05are areas that are lightly regulated um because i feel that once uh once there's enough traction and popularity uh dollar values stored in these types of products if you are if you're trying to for example there's a couple projects that have synthetically created like tesla shares or apple shares and i think that's a big no-no because you're

10:30giving off the um perception to the market that these things are tesla shares or apple shares and yet there's no voting rights to it there's no dividend um and you didn't get permission from those companies that actually issue those so i'm not saying i know what's going to happen to those companies i just feel like there's less risky areas um in particular in the commodity space

10:53so i'll that's all i'll say at this stage definitely and as you continue to grow the platform do you expect to have organic growth or will there be incentivization uh for early user adoption so yeah just to be clear though the protocol itself there's nothing but an idea anyone can go out and implement it so the first group to implement this idea yeah was uh btcsd

11:17and they'd already launched they already did their own thing was not involved in any of the creation of that token or the ecosystem that they've put together um i suppose there's ways i could do something similar to tile protocol itself but for right now we're trying to keep it fairly tight i don't want to call it just an academic project but um you know just a few few people at

11:36this stage um that are kind of volunteering their time and i don't want to cause all sorts of drama by adding a lot of things at once so it's a good question it's something i have i've given some thought to but no decisions made yet definitely and what do you think will be one of the key factors to success for these types of assets to become more mainstream and you know

11:58become as popular as collateralized stable coins so i'm not sure if they'll ever become as popular as collateral back stable coins um for a couple different reasons but the that's not the goal either um i i i think that if we could effectively build and stabilize a fused stable coin just a sorry stabilized station synthetics or whatever category we want

12:24and calling this um then that's that'd be a win in my book so if we take that and find some other particular assets that are again low touch low-key on the on the legal regulatory front and we kind of roll those out maybe over time the aggregate value of those is worth quite a bit but that's not again that's not the explicit goal here i just i want to make sure one works and

12:46then maybe try out number two three so baby steps right now definitely and do you foresee uh challenges overcoming you know the getting these types of assets and just having more awareness of these and having actually people use that kind of asset yeah i do um it's the education hockey stick right now it's very very hard to a week and a half ago there was a

13:11miscommunication on social media and unfortunately some people spread a inaccurate misinformed view of what this what this project is and i've had to spend a good last 10 days trying to effectively push back on what it is and isn't and it's been a little frustrating because i like to use that time doing other things i have a two-year-old daughter for example i'd like to spend time with

13:37um so just just from an education standpoint yeah i think it is going to be a good good path to slow you don't have to slog through but uh it's at the end of the day if it succeeds if one succeeds and the second one succeeds and i could just say hey it's the uh the common quip that's show don't tell and so i feel if i have a a couple projects that actually work and work live then it's

13:58much easier than having me write lots of tweets or blog posts or things like that definitely i completely agree tim and for the viewers that are looking to learn more about these types of assets learn more about tao protocol and follow along as the project continues to grow what's the best way for them to learn more sure so um i purposely made a very

14:19spartan website when this launched because i'm not trying to do anything um crazy at this stage so it's simply tau protocol.org all i had both put there was a very short paper i wrote on this topic um the other obviously twitter tau protocol um i also have my own website which i've been writing about these types of topics for years it's evnumbers.com of numbers.com and

14:44i think the very first post there is a kind of a background for what tao protocol is so i'm very interested in hearing people's feedback there's ways to improve or iterate i'm always ears thank you definitely thank you so much tim i will leave those links in the description box below as well for the viewers all the best moving forward with the project

15:02and we will definitely follow up in the near future thanks for your time ashton take care you