Wil Barnes on Jet Protocol’s fixed-rate DeFi borrowing

0:00i'm ashton addison from block west capital for investmentpitch media and the cryptocoin show and today on blockchain interviews we have will barnes the ceo of jet protocol will welcome to the show and thank you for taking the time today yeah absolutely thanks for having me looking forward to chatting very welcome there's a lot going on especially in the last uh few weeks here

0:23in cryptocurrency and it's getting volatile and wild and and at the same time um still so many new people are hearing about uh crypto d5 and jumping in for the first time i know you have a little bit of experience in in blockchain in the past um so i'd love to dive into that but first let's just kick off our conversation with an overview of jet protocol what you and your team are

0:47working on there those solutions and then and then we'll dive into everything yeah absolutely my name's will barnes i'm the ceo of jet jet is a non-custodial borrowing lending protocol focused on fixed rate for fixed term borrowing we use well we use solana and uh central and order books to create a market for debt which is uncommon in

1:15d5 you see you mostly see a bunch of um interest rate curves uh use the price debt we felt that we could offer a more market-based approach so we put together this new protocol which we'll be releasing over the next several months and yeah looking forward to seeing how our users use these new risk management tools very cool i love it and i know you have

1:41some experience in blockchain you know maybe you can talk a little bit about how you got into blockchain what you've been working on and how that led into starting jet yeah so my entry into crypto started uh way back when i pretty much left college i wanted to get a job in wall street i really loved just uh you know i always wanted to be like one of those traders with the four monitors

2:05you know and you know responding and trying to get ahead of market events and you know at the time you know i was you know i spoke in nerd college and in the workforce act after the you know great financial collect crisis the gfc and it was really hard to get a job i came from a state school you know no one was you know yet i was kind of like jokes like well you

2:29know you had that the pedigree from harvard all the elite schools to get in and it was like oh you know this is kind of this is exactly you know i'm not really making any progress here so eventually um you know i i i got a tech consulting job at pwc and i was actually doing tech implementations on sales and training floors so i was like pretty close to you

2:50know i was getting closer to where i wanted to be and i got to interact with the traders and this is all around about the time when you know this is like 2016 2017 you start to see you know the crypto markets pick up and you know when i previously dismissed it and this time i was like okay i'm going to take a look and yeah i was like okay well no one's really like kyc here like there's

3:13no barrier to entry you just like show up write some code you can do write some algobots to trade i was all right like you know done with this whole tradify thing and i got you know i like markets but like i really like the openness of uh of this so you know my full time well i went to work consensus since 2017 where james my co-founder and yeah did security auditing write

3:38code building protocols you know everything under the sun at that time then i went uh to work at maker dao where i worked for this uh during which was a very pivotal year for d5 you had march you know 2020 where the markets just completely uh broke down and maker like didn't really manage it well there's liquidation issues so i saw all these issues like firsthand you know i was

4:00like a first responder fixing these protocols under pressure and and yeah you know i wanted to roll this experience a long story short i want to draw this experience you know my desire to go into a debt capital markets role uh college like finally seeing the opportunity arise yeah okay like good new new tech coming out solana like opportunity to build a debt market

4:23right like you know like let's you know talk to james my co-founder like we just went for it and yeah we've been um yeah you know both of us have been in the space for a while like really leveraging the things we saw and past bear markets and like you know bull bear cycles to like build a resilient protocol that will you know in you know you know the next

4:49six months to a year really like emerges you know something that can you know it can be counter cycle it can also you know lend money at a fixed rate fix terms of people which is you know loan is a very common product everyone understands that and um yeah really starting to slowly you know tap into institutional business that's great great backstory will and

5:15now i want to look at the defy industry and how you were looking at it and you know working with maker dow um i feel like you'd have firsthand in seeing you know at early d5 protocols can you talk about how fixed rate borrowing you know is the norm in d5 and how it works and then how jet improves on that and makes it better yeah so fixed rate is definitely not the norm and uh it's

5:42like uh you see if you see you know you look at like the big protocols compounds they like they have a dynamic interest rate curve so it you know the utilization of the pool if people are borrowing if there's a big pool of usdc say there's like 10 million dollars in it if people are borrowing like 9 million the interest rate from that debt is going to be you know really

6:03high and you know you really have no control over that you can borrow a certain amount of money and you just forget about it you know you're subject to that fluctuating interest rate which works it does like it's you know for ethereum where compensation is very expensive it works slanted is actually a different situation compensation is cheaper so you can afford to do more

6:25stuff and that's what our protocol does does more stuff and you know you can buy debt of different tenors you know from an hour a day 30 days six months but say you know you know when you repay that debt you only have to repay this fixed rate and that's helpful because as crypto moves into a steady state people are going to want to lock in interest rates and like have very

6:49specific borrowing needs so they say i will only want to borrow for a week because i have this trade i want to put on i'm going to borrow for a week and fix their interest rate so they have that one leg of the trade is is like you know static it's not going to change it removes some uncertainty so that's the you know big market advantage we offer with jet v2

7:11which is rolling out over the next couple months and yeah i i think you know i really believe strongly as you know crypto news native hedge funds have these more intricate risk management needs they will very much use a product like this yeah it's interesting that you mentioned that about hedge funds and institutions i feel like they you know despite what the spot

7:36prices are of some of these major digital assets they continue to roll in and they continue to see uh buying opportunities when there's other fear in the market that's when you know you buy blood in the streets um so i'm guessing you know just with the the crypto market crashing in the last couple days here there's probably even more institutions coming in and looking

7:56to leverage their capital as well yeah are you seeing jet as primary uh institutionals that'll be borrowing it or do you think it'll be a mix of retail traders and people that have just been in d5 initially we focused on retail traders d5 power users they are very loyal they get involved they use your protocol they offer

8:23feedback on discord telegram they're just you know generally very helpful people very helpful users so you know initially we're built for them and it was anything we know you want to scale we want to be useful to more than just d5 power users right d5 power users are very you know they know the market they're you know it's like you know you can't take them

8:45using the protocol for granted but like with anything you want to start accessing your customers and finding out what products they want and then building those products and letting them use it so the next step is you know moving up to crypto crypto native hedge funds and then yeah even you know starting to talk to you know traditional financial funds or

9:09you know firms who want to park capital and then giving them the conduit to do that right and certain funds have certain requirements jet we're going to offer them the ability to you know be compliant with those requirements and that's a you know that also takes time the tech has to be built to you know facilitate that so that's a you know if anything it's a it's a process

9:33uh start with the people with the users who you know are loyal to you get feedback from them start you know reaching out to more folks and then you know i like to sort of go back to my you know my story how i got into it i'd like to move this into i very much intend on moving this into you know talking to you know debt capital markets institutions and making our solution

9:58beneficial to them as well definitely and with people borrowing at fixed rates that capital has to come from somewhere maybe we can talk about the other side of the table and you know what's the advantage for uh people that have capital to put it up uh on jet as opposed to some of these other lending protocols is it just a fixed rate and the certainty of of

10:24interest or are there other advantages in storing your capital in jet so we want to incentivize borrowing so you the borrowers will be paying borrowers basically someone comes to the protocol and say i want to borrow this rate and if there's no one there to take the rate then uh there's no there's no bar that's going to happen right so traditionally you see people you see a

10:50lot of protocols do boss leading strategies right just to get that user base and to get users familiar with using the protocol because these are you know this is frontier technologies building edge tech it's hard without some incentive in place initially it's really hard to get cash there because you can get yoda myriad of different ways in crypto so

11:13we do are looking to you know find specific types of firms and individuals to deposit for a long term so there is capital for people to bar from and you know we we do plan on rap but we feel that's only necessary once we have product market fit and a product that

11:40is you know indistinguishable or that is distinguishable in the market something that the market hasn't seen we feel that will give you know a program like that more value definitely and you mentioned at the beginning will about the protocol being built on solana technology and how that uh lower cost and faster allows you to uh not have to have the interest rates

12:05so variable and just more advantages um yeah can you talk about the assets you know does that have to do with actually borrowing solana itself or does the protocol just focus on stable coins or what's the variability of assets which can be borrowed so for our v1 we launched with just the blue chip assets uh soul e bitcoin usdc

12:32and for v2 we we took a very you know very strictly on the down right if you look at centralized exchanges they have very opaque listing processes you don't actually know what they yeah you don't really know the thought process decision process to list an asset so jet which even you know today we have a jet government program our dow

13:01which is how people vote on listing new assets we have a we have a collateral listing process where if you want to list an asset you have to go through this process and it's you know formally defined and for you know you see this at maker dial which did a very good job with that they they formalize the process if you want to add a collateral type you have to

13:19check all these boxes and prove that it's secure and the protocol can manage the risk and we have the same thing you know learning on like drawing on lessons learned maker and we'll be having our first votes on collateral type soon and i wanted to say that that's very important to us because we want everyone to you know if you can prove that this pro this collateral type

13:40is secure and you go through the process it'll be added to the protocol for anyone to trade so that's that's an approach we've taken that no one else has done uh or you know not to a great extent this is being very transparent and very open about how to get things done on the protocol which i think is really exciting the whole dial space is you know it's very

14:05there's a lot many different ways to structure it down and we put a lot of thought into how we've structured our doubt yeah that's good to know will and especially because of the centralized exchange listing process of assets as you mentioned you have no idea you know it's so opaque on are they getting paid are are they friends you know who knows how

14:26the assets get listed and when and is the exchange buying the assets before they list it um so to have a dow that's more transparent and democratic is great and i'm guessing that ties into you know the jet uh governance token and those holders and maybe you can just talk about the the jet token and is that the main functionality or does it also just

14:49work within the ecosystem for lending and borrowing as well yes so right now the token is you stake it and you're backstopping the protocol essentially so if there's any losses that you know could be the first loss uh capital used to uh recapitalize folks who lost monies in protocol because of that dude they do earn uh yield on that it's you know it's not

15:15like a it's not a selfless thing and not altruistic thing like there's very much uh a need for that insurance fund level functionality but when you state you also have the right to vote and voting is you we've set the protocol up for it's you know for where it is right now to be able to start voting on collateral types and adding them and with the voting with the doubt in place

15:42and the ability to vote people can start tailoring the tokenomics how they like and you know we have many ideas internally a jet it's also not entirely up to us we you know one idea we have is fee rebates for people who borrow and stake a certain amount of jet uh and if you're a long-term barber that's very attractive to you as well so that and there's many different ideas we have

16:10but it was entirely up to voters to drive that floor going forward so it's actually exciting i think you know having a it's not a it's not a clean slate or blank slate it's you know there's there's a little bit added on to it but it's there's many different ways to take the token office going forward with feedback that's great thought process i'm looking

16:35forward to seeing how that all plays out as you move towards uh v2 as you mentioned earlier maybe you can talk about the upcoming roadmap for chat and you know what's coming next in the next version and if there's any timelines surrounding that so for what's on the immediate roadmap in june we have uh where we've been working over the past six months on this

16:58new protocol it's much more powerful it allows us to collateralize many different assets typically one pinpoint you ran into developing rp1 was that there's a lot of constraints around transaction sizes so we addressed that with a new protocol now we can collateralize many different assets and you know use the governance process to start listing those assets

17:24and in addition to that it has this concept of adapters so you can do more complex uh you could do more complex actions so for example if you have uh assets listed on serum those will count as collateral in your margin account and so you can borrow and um you borrow against those assets and we you know that's the initial

17:53that we plan to use and we have some interesting ideas we'll be talking about shortly about more more esoteric adapters to do really cool stuff that the market will like and then uh shortly then after the fixed rate fixed term lending will go live the order book for that will be after that new program is deployed and that will give that'll give users uh retail and

18:20institutional light to borrow at a fixed rate fixed term and that is you know our summer statement we're really looking to make a huge splash uh and yeah be a cruising altitude with that come july so that's uh that's immediate road map and then beyond that it's uh it's introducing unsecured lending we know in the space there's a lot of institutional

18:45borrowers who you want to borrow unsecured and we have a solution there where people any any kind of user can also can can be the you can collect a credit risk premium for borrowers by pledging collateral to backstop a unsecured borrower's borrowings there it's technically secured it's not secured by the borrower in the case of a default and that will

19:12be built on our bond program and that is super exciting i really like this idea because we've talked to many firms out there they they want to borrow and they don't want to pledge collateral we we're looking forward to all of that product for them very cool i'm looking forward to that and yeah a lot on the immediate roadmap um all the best with with everything

19:34there will for the viewers that are looking to learn more about just fixed rate borrowing on jet and and the updates that are coming out and just getting involved with the protocol what is the best way for them to learn more and to get involved so for those up-to-date stuff check twitter jet protocol and uh jetpartical.io's our website app.jet protocol is our

19:59app you can find all the information there including a link to our blog where we have more long-form stuff but for the most you know for in-flight reading i would say check twitter sounds great well thank you so much i will leave the twitter the protocol website and the other links in the description box below as well for the viewers all the best with everything in

20:21this fixed term borrowing everything on jet protocol let's follow up in the near future when all these updates are coming into the market absolutely thanks for having me ashley you