Pratik: All right, Maxim, thanks for joining today. So the goal of this call is to answer a lot of the questions that people who are using Coinchange or about to use Coinchange might have.
Maxim: Thanks for having me, Pratik .
Pratik: Yes, you're welcome. Okay, so let's start off with the most biggest question right now with the whole FTX Alameda situation. What's your view on the current landscape of crypto?
Maxim: My take on FTX and all the debacle that happened, I mean, uh, has been tearing down since May. I think there's a lot of play. And leverage and arbitrage with the GBTC trade creating infinite machine based on the arbitrage. I think the other, the other foundational principle is, uh, not mixing the banking and the trading books.
So that's what pretty much the law in traditional finance. You cannot really trade on the customer assets, or rehypothecate them in any way without their consent. So since that's one of the things that happened, I mean, you can paint it in any direction. I mean, it was borrow, there was a margin position, you know, there was a FTT collateral.
But, uh, no matter what happened, I mean, it seems like there was no disclosure and it went against the terms not centralization components. Centralization is still there with Coinbase, with Kraken with Binance, with many other players. Right? I would say it's, uh, mismanagement and uh, miss-governance. Without any control systems and governance in place.
It sounds like that specific business FTX didn't have any board or had too many boards has been said. Right. So, but there was no oversight in the, in the, in the centralized entity that controlled a lot of subsidiaries and there was no arms lines transactions. The state of the market is bad. I mean, definitely the big figure, Sam, right.
Sam Bank run fraud, or, sorry, Bankman Fried. Right. Yeah, so the trust is eroded and the people who are not in the industry don't believe in the industry anymore. I mean, believers stay, builders stay, you know, there's still a lot of action underneath. I mean, uh, as you guys know, uh, polygon chain, you know, Ethereum chain, the developer counts just keeps increasing.
But Bitcoin chain keeps hammering out the blocks, you know, as. As the Swiss watch, everything is working perfectly so far, but uh, from the outside people look at it as a big fraud. big scam. We are all paying the price right now, unfortunately.
Pratik: So speaking of Trust Max, if we all were in this, uh, state that FTX is the lender of last resort, we had this image of FTX as the one crypto firm that's doing everything right because they have so much cash lying around. And that was purely based on trust and turns out that it, it was, it was all just made up. Yeah. So a lot of the people are just asking every centralized company, why the hell should we trust you? What makes you special?
Maxim: I mean, I, I will say, I will say I'm in, uh, not only, uh, trust, uh, social trust around FTX was not only because of the cash that they raised, it was also because of the names that put the cash in.
Right. So VCs did propel the race of the, of the business. Uh, and it's, uh, not everybody makes their own judgment, you know, all looks through their own due diligence. A lot of people just follow through, right? And especially with the FOMO and. Markets like, uh, run market that we had last couple of years. So I think that was also a big influence on overall trust in the market.
That if Sequoia came in, you know, pension fund came in, if Tesseract came in, it must be something special. So, right. Uh, but regard,
Pratik: so, so if I'm a new user and I'm asking why should I trust Coinchange, what would you say?
Maxim: Listen, I, I won't say trust, uh, verify. I mean, uh, I mean there's enough information online.
I mean, right now we're adding more and more and more every month. I mean, I mean there's gonna be a very detailed and, um, publicly oriented risk disclosure. I mean, gonna have 50 pages around it. You can read everything about our business. We've been, uh, working with the regulators and, you know, we abide to principles of transparency.
We write down everything we, we do with the customer assets. Eventually we'll show it as well. Cause everything is on chain. So we're gonna start open up. Part of our infrastructure right now, we're refactoring some of our smart contracts to open them up and make them open source. They are right now on chain.
They are right now in our GitHub, corporate, GitHub and on chain deployed on chain. But, uh, we haven't really opened them, right? Because if we wanna make sure that they're bulletproof and then we're gonna have everything auditable on chain. Eventually, in q1 this next year, we're also planning to launch a non-custodial product.
So right now the product custodial, even though it's all on chain, it says custodial product, right? So it's, it is a centralized product. You, we make your life easier, managing your wallets and managing your keys, right? Using, utilizing fire blocks infrastructure, still npc. It's like not. We have, we don't have your keys.
We have a full infrastructure. You have, you can rely on, right? So there is a 'C' component to the business and, uh, to put the money in or request the withdrawals. You can only request it, but not instructed in the next three, four months, it'll be a, a noncustodial product. So we're gonna have different, different types of customers servicing different types of products, right?
Uh, non-custodial one is definitely more relevant towards the crypto native meta mask users, you know, trust wallet users, people who manage their own wallets and their own keys. And they would have to be, they would be able to inspect and investigate and look through every wallet, every transaction, every vault, every smart contract that they interact in our ecosystem.
You know, while the other customers like institutional who want permission to access, who want to do the KYC and wanna make sure that. They are, uh, protected and all the liabilities on us rather than on them. In this case, they will have a CeDeFi uh, platform as it is right now. Some things are done off chain, like, uh, complex transactions has been pressed into a single block and then executed through proxies on chain.
Any app right now, by the way, like one, like, uh, 1-inch, you know, and many others are quasi on chain apps. So they have off chain components, especially for computation. For best out computation, let's say for the execution. So we are gonna be launching the protocol cause it was a very easy upgrade for us cause it's already 85% of the infrastructure is on chain.
So that protocol is gonna come to market probably within the next three, four months. And the people who are we're addressing likely are crypto native. So they would be very happy about the product and our institutional customers and B2B customers still gonna be, uh, growing our, uh, CeDeFi business. Where we do, by the way, have audits.
We're finalizing, audited right now, financial audit right now. We are finalizing our SOC II audit. I mean, we behave like a grown up financial business and uh, trying to abide to, uh, rigorous regulation that at least reporting regulation that's on the market. So we don't need to trust, you just need to verify.
So that's our approach.
Pratik: The other big question people have is because a lot of the failures are happening because of centralized lending, but it's all categorized as yield product and yield generation. Mm-hmm. . Mm-hmm. . So can you. Clarify or explain why Coinchange's yield is not the same as some of these yield products that Gemini Earn was earning or Celsius was earning.
Maxim: Yeah. You guys, you guys making a great point on, on the pods that, that you host every week. Uh, I mean, uh, it's a clear distinction to what we do. We've been doing it for over 18 months right now. I, I mean we build a platform for a couple of years before we took it to market. So it's a defi yield. I mean, it's a yield farming strategies, right?
We utilize our own yield farming strategies across different protocols and blockchains to maximize the risk managed yield for you across on chain. So the assets are always on chain. They're always under our control. We don't utilize a third party to generate yield for us. We don't push your assets to Gemini.
Sorry, to Genesis. To Alameda, right, to whoever, to, to, to, to any trader or any market maker or any Miner or any crypto business or any marginal trading facility to provide us yield. We do our own, we have our own strategies that are market neutral, right, that are risk managed and that compound daily. So you don't really expose to the market dynamics.
We don't bet on the direction of the token prices. It's all participation in the revenue of decentralized applications, but in a smart, automated way. So pretty much it's pure yield farming. So I won't conflict lending interest and yield from decentralized activities
Pratik: then what would be the risks involved in your product still?
Maxim: Yeah, so we should understand any yield comes with a risk. Any investment comes with the risk, not on the yield. Any investment comes with the risk. You're investing in the real estate, you're investing in the bond market, you're, I mean, the treasure market is probably the most risk free market. And we have a benchmark reports as well.
We publish every month. You guys can evaluate it. I mean, all the numbers are backed by the deep research of our team that where we stand on the yield market today. So we look at the TradFi markets. We look at the pure DeFi markets, we look at the lending markets, we look at the CeFi markets. So we, we, we check all the different markets and there's indexes that would benchmark ourself against, right?
So any risk from that benchmark report comes, any yield comes with the risk, right? So risk in our, in our business, I mean, first of all, I mean, we are the counterparty too. So there's a counterpart risk as us Coinchange then, then, then bankrupt or misappropriating the funds. Anything else, right? From our perspective, I mean, we don't have any counterparty risk cause we don't really lend your assets out, right?
So we don't really have another counterparty that we're gonna interface. But we have the centralized applications that can get hacked and have a cyber cyber risk, right? So we have a pretty well refined process to analyze risk of a token, of a blockchain, of a protocol before we're gonna connect that mechanics to our strategy.
Okay? So we do underwrite the risk behind those blockchains protocols and tokens, right? Um, before we're gonna connect it to our platforms. So that's the main risk. Main risk. Cause the hacking risk, right? In terms of when your assets are on chain, it's gonna get hacked. The pool of protocols gonna get drained, right?
And we're gonna lose the assets. So that's why we minimize the exposure to every instrument. Not more than 5%, but depending on the risk profile, it can be 1% of the allocation can be 5% of the allocation. But it's highly distributed system with, you know, about 40 pools, about 20 protocols on five blockchains.
And another risk. I would say it's a de-peg risk, right? So that's something that can happen. I mean, it's, it's a controllable risk that's under our control. We have a foolproof execution, right? In terms of there is a de-peg, the position winds down and everything goes back into the other stablecoin. So, There's definitely, uh, the risk of de-pegging, right?
There's a risk of a cyber risk of the protocol and, uh, there is a counterparty risk like us being a counterparty to you as a customer. But that's pretty much, there is no, there is no third party risk, and there is no human risk in terms of us lending the asset to a person or writing down a contract and then not reinforcing it.
So it's all based on DeFi yield. So it's all code based interactions. They're all transparent and on-chain and, uh, their risk is minimized that way. And overall, the market, I mean, the market has been very turbulent, right? The market has been stressed this year. Since May, and we're still paying out the yield daily, right?
So the system is working and, uh, the yield is generated. It's lower than it used to be. It can be different. Sometimes it's higher because the activity is higher, right? Or certain, certain, uh, categories of the strategies perform better. But overall, we have not really stopped paying out the yield. We don't really promise or guarantee any returns.
I mean, as they come every day because. When we aggregate the yield, we go back in kind on a daily basis, right into your wallet, into the asset that you deposited. So whatever it is, whatever has been harvested during the day, and, uh, re convert it into the in-kind asset, I mean, that's what you get. It might be zero, might be five bucks, might be 50, might be 2%, might be 5% right?
It's all annualized and it's all very well, uh, reported on the dashboard to the clients.
Pratik: Got it. Well, max, thanks. For spending time and joining today. Appreciate it.
Maxim: Thanks Pratik.. Okay. Thank you guys. Talk to you later. Have a good one. Take care. Bye.
In the world of cryptocurrencies, stablecoins have emerged as a digital medium of exchange with the stability of traditional fiat currencies.
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