Prime Protocol enables multichain lending without bridges

0:00I'm Ashton Addison from blockwest capital for investment pitch media and today on the crypto coin show we have Colton Conley founder and CEO of prime protocol Colton welcome to the show and thank you for taking the time today thanks for having me thanks for having me Ashton it's good to be here you're very welcome excited to dive into prime a little bit on D5 bridging crypto

0:21assets and your insights into the industry I would love to start off our conversation with a little bit on yourself your background in blockchain and how that led to Prime protocol and then we'll dive into all the details sounds good so some background on myself I got started in crypto originally just as a retail Trader I was working in tradpy uh doing interest rate volatility

0:42trading at Citadel and I was spending basically all of my free time doing D5 uh I was managing a ton of different positions on different blockchains and I thought there was a real need for something that basically bridged the gap between all these different chains and ecosystems and the fact that I had to partition my portfolio into a ton of different chunks in order to be able to

1:06take out leveraged positions in different places and I was really frustrated with the bridging infrastructure that existed and I wanted something that was more similar to The tradify Experience where if you go to a prime broker uh the prime broker is just going to look at all of your positions it's going to aggregate them all together and then give you margin or

1:25allow you to take out leverage based on everything in Aggregate and so that was kind of the Genesis for the idea behind Prime uh was I wanted to bring something closer to that tradify experience to defy and so I decided to start the company and here we are now we're on uh mainnet we're on a bunch of different chains we're launching more soon and and

1:50it's been a great ride wow that's great it's a true entrepreneurial Journey you know you had the problem yourself so you know there's no solution set out to fix it yeah exactly very cool and maybe you can give a high level overview of you know I think you did a great explanation there of like comparing it to how think people are used to in tradify but a lot of the

2:13viewers you know they've done a little bit of single coin staking of their ether or I mean they might have been trading on dexes but not are all super familiar with uh the the borrowing and lending on D5 and liquidity provision things like that if they were to try and get started with print protocol could you explain exactly what they're capable of doing in their first steps

2:33store so first step is you just need to deposit some tokens you can do that on any of the chains that we support right now we're live on ethereum polygon BNB Moonbeam arbitrum Avalanche and optimism and a little bit of alpha for the viewers bass is coming very soon so we're constantly trying to expand to new ecosystems that we think people will find useful and so maybe in your example

3:02you've got some people who are holding like a liquid staking token like Lido steak teeth and maybe you've got that wrap steak that you're holding on optimism and what you want to do is get into a Trader Joe Pool that's yielding like 100 on Avalanche and yes they still exist uh what you can do is you can deposit that wrap stake teeth on optimism then without having to bridge

3:26anything without having to swap anything you can get immediate access to that liquidity on Avalanche so you can borrow the big coin you can borrow the usdc on Avalanche go deposit that into the Trader Joe Pool to start yield farming you're still earning all the yield on that Lido steak teeth that you deposited on another chain that's acting as all of

3:46the collateral for those borrow positions that you took out um and you didn't have to send any tokens to another chain you could even borrow the gas tokens on Avalanche from us or another chain if you don't have them yet because we allow you to initiate borrows from different chains so even if you're totally new to an ecosystem Prime gives you an alternate

4:10way to bridging to get value on a chain where you see an exciting opportunity but maybe you don't want to have to trust a sketchy bridge to get there you don't want to be holding a ton of wrapped assets maybe you don't want to pay the bridging fees or the swapping fees Prime allows you to get around all of that so the flow of using the app is you deposit then you borrow

4:33and then profit so it's very simple hopefully that's awesome um and that's a great alternative thinking outside the box it's like you know if there are security risks or some risks or even just tedious takes time and it's annoying to go through this bridging process of moving crypto to other blockchains it's like a workaround where it's like hey you don't really

4:56have to bridge the assets which I think is great and you have firsthand experience of the how annoying it is to try and move assets into different blockchains especially when you're looking for high returns in D5 and sometimes you have to move back and forth between different chains or as you mentioned you know bass comes out and all of a sudden there's

5:18new activity on there but then it might go back to a different chain and you have to go back and forth can you talk about your experience with the bridging and you know I think there's a lot of people that are afraid to move their assets off of ethereum or you know often because they just don't understand you know what are the risks that they could be taking and is it

5:39actually worth it to try and move them all back and forth I mean in the case of a lot of bridges the answer to that has been no it's not worth the risk and uh one of the bridges that I had the worst experience with um was multi-chain this was not before it uh got compromised this was actually back when everybody was trying to bridge over to Phantom because there were some

6:01really high yield opportunities there and there was no liquidity on the bridge and that meant that you could get stuck on the bridge for like a week I was I had like a good chunk of money that was stuck on that bridge for a while and I was like never again I I'm not doing this again I was too stressful um and you know it's it was like an anonymous team and that was back like

6:24when you know everybody was playing with their profits so I I was okay taking the risk but um after that experience I was like guys this is too sketchy and I looked into it more and you know it was an anonymous team based out of like somewhere in China um like people were just yellow into it but they had never looked at the contracts they didn't know what kind of

6:45permissions the admins had and I was like wow this is really scary that there's like this much value on there like I had at first assumed like maybe other people are doing due diligence but no there was none and obviously like you know as soon as those private Keys got compromised uh people lost billions of dollars and there were some other Bridges where

7:07uh they were hacked and um maybe like people don't know this as much I don't want to call out like individual projects but there were some teams that were basically like we don't need to do audits like we're better than the Auditors so why would we waste money on them and then people are like no you have to get nodded or we're not going to integrate with you so like fine we'll

7:27get like one audit done and then Rich gets hacked and you know it was a dumb like really simple mistake that just got overlooked and so I think the security practices for a lot of these Bridges um it's not the same uh it's not Apples to Apples some we think are much more secure than others so like one that we have been using for General message passing is axelar and we really think

7:53that that team is exceptional their security practices are very strong it's a very decentralized solution you're not putting any trust assumptions on the relayers and so I think that uh you know bridging can be safe if it's done the right way and so we're making sure that everything that's integrated into Prime we've already done all that research for

8:12you uh for our message passing and we're not even like bridging tokens when we move data from one chain to another uh which means we're not exposed to as much of the token Bridge risk which is usually where the exploit happens so um there's a lot of risk mitigation stuff that we've done as well even around the bridge to make sure that I give your message gets stuck we're able

8:35to resend it for you we've cached it on both ends to both prevent replay attacks but also make sure that if something did go wrong we can resend it over a different message passer in the future if we needed to so we have a lot of risk mitigation practices in place to make sure that it's as safe as possible so that's what I would say to people is uh if you're going to use Bridges you need

8:58to do your research or find somebody who's already done the research and rely on that because not all of these Solutions are created equal yeah now that's great insights into uh the bridges in the past experience and nice uh message there about axillar you know we have had them on the show and it seems like it's it's a pretty solid solution so far um yeah you know bridges are they're not

9:24perfect um but I think we're moving towards something that's getting better and better and more safer and see more seamless user experience that you know at least people are not that they have to go through as much of a process to bridge their assets and I think it's great for what it is right now but I feel like we're moving towards some kind of atomic swap cross

9:49chain compatibility you know what we're seeing with Cosmos ecosystem with the IBC inter blockchain communication do you think that's something that's viable in the near-term future and would that wipe out Bridges or they would transform into something that's more immediate immediately cross-chain asset available so I don't think bridges are going to

10:11necessarily get wiped out by that and the reason why is you're still going to have the evm ecosystem where you have eth and the eth l2s and then you're going to have separate ecosystems with Cosmos and polka dot and um those you do need a bridge to connect to them somehow and you can't use IBC and maybe they'll try like I know they're trying to work on it but that's

10:33basically what axillar is is an IBC Fork that's connecting the evm ecosystem and the cosmos ecosystem and so I think uh the like we already have some of the solutions um in protocols like axelr to connect these disparate ecosystems that aren't like natively connected I think that obviously IVC is a fantastic solution I think polka dots xcm uh is also a

10:59fantastic solution for moving assets between different pair chains or different zones if you're in Cosmos land uh but I do think there will still be a need for Bridges to connect to these different ecosystems because uh I don't think people want to just be constrained to Cosmos or the ethereum ecosystem it does take a really long time as well if you're operating in ethereum land and

11:23trying to use the native bridge to go to an L2 you have to wait uh quite a while and I don't think people want to be waiting for you know days to go over the native arbitrary Bridge they'd like to just zap their funds in and I think there are safe ways to do that with uh decentralized map message passers and so I do think there will still continue to

11:46be a need for bridges in the future great insights Colton and you know you being more of a defy Insider you know you're you're always on the lookout especially running Prime uh about good returns and and what's sort of available in in the D5 world that's you know there was a lot of recent articles that just came out I was asked to give my opinion on why the defy total

12:10value locked is very low um right now and of course it was it seemed a little bit unsustainable in November 2021 when all of the assets were going through the roof the API wise were also uh very high what's your perspective on you know the strength of defy currently as it sits with with Bitcoin and ethereum sort of in a sideways market and you know crypto

12:35Twitter sort of like a ghost land no one's really talking which is usually a good thing a good time to be paying attention yeah it's I think it's a good time to buy uh I'm obviously biased or I wouldn't be doing this if I didn't think so uh I think that goes for most of us but I think when you talk about it being unsustainable in 2021 the reason why it

12:57was unsustainable is everybody built their token models around the assumption that new money was going to keep coming in so you were able to sustain emissions off of the new money that was coming in to buy your token so that even though you're giving out tokens and those tokens are presumably being dumped from all the farming that was going on you still had new enough new money coming

13:18into crypto that everything was still going up and then there's sort of this virtuous cycle of then the token value goes up your emissions are worth more everybody looks like they're getting rich on paper and you have enough new uh influx of capital um because of the where we were at in the cycle and monetary policy and a lot of things that were a really great

13:37Confluence of events to send everything to the Moon uh obviously that's not going to last forever because you like there's no way to constantly have new money come in um in a monetary policy system that gets flipped on its head and we go from zero rates to over five percent relatively quickly and that happens globally not just in the US and because of that

14:02regime change that happened everywhere uh we obviously saw the effects of that in crypto the flywheel stopped working as token valuations fell then the apis were not as high even if you were emitting the same number of tokens and I think the way that we get ourselves out of that a obviously macro is a factor as money gets cheaper then a lot of those

14:24same mechanisms that drove the last Bull Run will drive the next one but there's also I think a really encouraging trend of people finding more sustainable sources of yields and rather than bringing new money into the ecosystem by having new retail investors buy tokens we're starting to bring new money into the ecosystem by having like real yielding assets uh be included in D5 so

14:49there's now firms that are working on tokenizing treasuries uh which I'm sure you've covered uh before like there's Maple there's ondo Fidelity put money markets on chain Franklin Templeton is putting money markets on chain like there's a lot of really promising developments here and those sources of yields you don't need to be diluting your governance token in order to offer

15:11those to people and like that's being funded by the US government which is a pretty reliable source of funding and so and and then you know you add on top of that in the future I think you're going to have like more corporates and real estate things on chain as well I think it's only going to expand and so I think that's really bullish for defy because

15:30defy has basically in the last Bull Run we built a ton of Primitives that gave us the rails to support uh these more like actual real and tangible Financial use cases and I think that's what everybody's really excited about the other thing is I think below D5 tvl people look at that and they're like oh that's terrible like defies collapsing but d5's actually become a

15:54lot more efficient uh like back when everybody was using the standard amm model you're spreading your liquidity evenly across a ton of different prices many of which will never be hit and that liquidity is just sitting there idly and it's not being productive now with things like univ3 we're moving closer to an order book model which is what traditional Finance converged upon for a

16:15reason it's much more Capital efficient and so you're able to handle much higher trading volumes you're still able to handle Liquidations in large size because everybody's taking their capital and concentrating it around current market prices and so the lower Defy tvl is actually still handling really high trading volume if you look at trading volume on decentralized exchanges versus

16:36centralized ones The decentralized Exchange trading volume isn't necessarily like going away like it's still there and I think it's only going to increase and part of that is due to Innovations in you know the order book training model and concentrated liquidity models of the newer amms and the uni V3 forks and so I think that's also a really positive development for

16:59Defy is basically allowing you to just use the capital that's in the system more efficiently and then the last that I would point out is obviously perps have gotten a lot of traction as as well and that's just another example of people being able to use their Capital more efficiently you're able to under collateralize to take out a trading position um I mean the purpose is something that

17:23we're actually working on now uh and we're going to add that to our product Suite because we want to offer everything uh all the financial tools we can in a cross-chain way and that seems like a logical next product uh in our line of offering so I think there's a lot of really exciting things happening in D5 I think the low tvl isn't necessarily what you should focus on I

17:46think you can see trading volume and revenue and fees are not doing as badly uh if you were just looking at the TBL chart and there's a lot of new sources of yields that are going to drive the ecosystem even more than just easier monetary policy would wow great insights and a great perspective about and the advancements in decentralized exchanges I I spoke to

18:12many uh CEOs of crypto exchanges this week and my question was what do you see the balance of you know centralized exchanges where we're at and and decentralized exchanges and are more people going to move to dex's and what are the reasons and I think you articulated it quite well about the advancements in uniswap and just making it more efficient I feel like having

18:32more functionality as well you know unit swap started out as like one button inefficiently just like buy or sell and hopefully it continues to grow and not just with one decentralized exchange but sort of the industry as a whole finds ways to bring more functionality more efficiency of the markets I feel like you also mentioned that is there any other Catalyst that you think will be a

18:55major player in making more people start trading on decentralized exchanges um I think people are going to go where uh it's most accessible to them and so getting more people just on chain in the first place I think will be a big Catalyst because once you have your money like in a metamask or in a wallet that's on chain moving it back into a

19:22centralized exchange is just a headache and I've noticed this for myself is the more money I have on chain the more I'm using decentralized exchanges rather than centralized ones um the other thing I think will be fees have to come down for a lot of decentralized exchanges and making the liquidity more concentrated is enabling that because before it made no sense to

19:45put your money in an amm unless you were earning token incentives and the fees were high I think going forward people are realizing you know if I make an amm with concentrated liquidity and slightly lower fees I'm going to get larger market share and that's still going to benefit my LPS because they're going to do more volume and so I think as fees come down as well once that is a bit

20:06more close to what we're seeing in centralized exchanges that'll be a catalyst in addition because then people will be looking at what's my actual price execution and that's what the larger players are looking at and as that gets better and better in defy it's just going to be a virtuous cycle if more volume comes into D5 we don't need the fees to be as high for it to be

20:25sustainable to put your capital in and you're going to have more people Market making and D5 and you know it's uh I think just going to improve the whole system and that will definitely be a catalyst so I think we're already moving in that direction I agree what's the point of sending it over to the centralized exchange and waiting for the confirmations uh if

20:45there's a you know a one or two click Solution on the decks when your money's already on chain if that user experience can become a little bit more efficient a little bit better uh I could easily see that sort of flipping and so on and said yep and I I would say the last thing is just around trust nobody trusts the centralized exchanges anymore the centralized exchanges can freeze your

21:05funds they can they can take them arbitrarily uh they can do what FTX did and just gamble them and there's nothing backing it uh like I think it the smart contract risk that we have now and decentralized exchanges is way lower than the risk of a bad actor gambling your funds in a centralized exchange I mean there have even been questions recently about how solvent binance is

21:31and I hope to God that finances like solvents and um I think they are right now but there's no a way to actually know and because regulatory bodies have decided to not cooperate and work with centralized exchanges and just be adversarial there is no incentive for them to actually uh try and comply with regulations that demonstrate solvency and the only exchange that I really like

21:59completely trust right now is coinbase and you know they're being put through the ringer by the US government by trying to be a good actor and all the other ones are like why would I even bother like look at how they're being treated and so I think if you're looking for just your counterparty risk that you're taking putting large amounts of crypto in one place it's better to have

22:20it in a wallet that you have the keys to uh that you own rather than trusting it with some third party great perspective Colton and you mentioned earlier about introducing perps into Prem protocol I'd love to hear what else is in the plan for the roadmap and in growing Prime and growing the D5 sector well like I mentioned we're looking at introducing perps it'll start on a small

22:45number of chains and then if it gets traction we'll expand it to more chains it will be cross margins um your deposits into the perps side of the protocol across all the different changes that we offer um true to the spirit of prime and uh the other things that we're working on there's obviously new chains coming out I mentioned bass earlier we're looking

23:06at a few other ones as well that we're going to be launching and adding to the ecosystem we're also looking at adding new lsts and interest bearing tokens so we've already added rocketpool e Lido eth and coinbase eth but I think one thing that we've noticed is we're sort of competing with Ave for a lot of that looping volume and because we are smaller you can't put as much volume

23:29through us than you could through Ave but there are a lot of smaller lsts that have really strong communities have great yields and other incentives for using them that aren't supported by larger lending protocols but we still think they're exceptional products and very safe and we're planning to add those to the protocol as well so you'll have more options for different lsts

23:51that you can Loop we think the yields will be better with us and there's also some like I mentioned the unchain treasuries there are some tokens see tokens that we can take that are basically deriving yield from those and I think that'll be really exciting as well offer people other sources of yields and ways to you know lever up their portfolio very exciting and and what is the best

24:14way for people to follow along with those updates and also just try out the platform right now uh well definitely follow us on Twitter uh our Twitter handle for the company is prime underscore protocol my Twitter is Colton F Conley we both uh tweet a lot about what's going on with Prime and so we'll keep you updated and you should also check out app.prime protocol.xyz

24:38that's our official app website make sure you check the URL that it's correct that's app.prime protocol.xyz that's how you go to deposit borrow uh do whatever you want and you can check out also we have a point system running right now to track early usage of the protocol and we have a leaderboard we also have a referral system so even if you don't have a ton

25:02of capital you can still earn points by referring people and uh that's all tracked and recorded and you can see how you're doing and it'll be useful for us to know who contributed to the protocol early on and made that very smart I'd love to hear that and I will leave those links to the socials and the platform in the notes below appreciate your insights

25:24greatly on D5 and where it's at Colton thank you so much for the time today and let's definitely follow up in the near future awesome thank you so much for having me Ashton this is great