Crypto Loans And New Financial Models With Michael Gasiorek

NTE 76 | Crypto Loans

 

Crypto loans and other similar financial instruments are mostly uncharted territory for cryptocurrency. Headway is being made, however, with different iterations coming out. In this episode, Monika Proffitt interviews the head of growth for TrustToken, Michael Gasiorek and they discuss this exciting new product in the land of crypto. Listen in as Michael shares his insights on the growth of crypto loans, the rise of the DAO and why crypto and blockchain is the future of financial instruments. Tune in for more dynamic insights on the crypto and blockchain space here.

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Crypto Loans And New Financial Models With Michael Gasiorek

I’m here with my very special guest, Michael Gasiorek, the Head of Marketing at TrustToken and CEO of Truth Cartel. Welcome, Michael. Thank you so much for making it.

Thanks for having me. It’s going to be a fun time.

I had taken some notes about all the things I would ask you and all of the stories you’ve got and you’re like, “You can ask me anything.” I’m like, “Are you sure about that?”

Ask me anything. Let’s get on the record.

Some people are confessors and some people are not confessors. When you find another confessor, you can keep going. We’ll try not to make this too crazy long. We looked at the metrics and been like, “People like to see podcasts that meet with their commute,” but we’re also like, “That’s about 25 minutes.” We’ve also seen this massive wave of people working from home, not commuting anymore or not working at all. I’m not sure if 25 minutes isn’t a target anymore. Is that data all from the pre-COVID times? I don’t know.

You get those top podcasts that go for two and a half hours too. You can make examples of one or the other.

From the stories that you’ve already told me, I have a feeling it’s not going to be boring. You were like, “You can go through my immigrant story.” I’m like, “I fully appreciate your personality.” I’m thinking to myself, “This is where we begin.” Since I did TrustToken from the beginning, can you give me the blurb of what Trust Token is? Also, how do you juggle this thing when you also do Truth Cartel at the same time?

I’ll explain what TrustToken and Truth Cartel are and how those two integrate. The TLDR in what TrustToken is we’re a company that makes assets and rails for the new financial economy. We’re known for making stablecoins or dollar-backed assets. Stablecoins are dollars that move faster, more quickly and without a third party, so there are no banks.

You and I could make a deal right here. Before the sentence is finished, it has probably cleared that transaction for pennies on the dollar. We were the first-ever stablecoin after Tether and are now moving a few billion dollars around the world per month. We’re also one of the first companies to do stablecoins in other currencies like Hong Kong dollars and British pounds.

TrustToken is a company that makes assets and rails for a new financial economy. It is known for making stablecoins or dollar-backed assets Click To Tweet

In 2020, we were looking at those coins and thinking, “We got to give those coins more utility. We got to figure out better ways to make those coins useful for people. What does the crypto market need? What are the things that we saw was there’s a good opportunity to bring something that we’re very good at? Compliance, regulation, legal and all that to the stuff that the market was already hyping about, which was decentralization, new financial products and on-chain lending?” We found an opportunity that was the best of centralized and decentralized finance. It’s something called CeDeFi.

We were the first protocol to launch an on-chain, unsecured lending platform. Unsecured, meaning dollars do not back these loans. This is not like a loan for your car or house backed by collateral but much more like a student loan or a credit card loan. Except the credit card loans that we make are in the millions or tens of millions of dollars and we make it from business-to-business.

We crowdsource a bunch of money from retail users like you and me to put in $1,000 or $10,000. We lump that together into a pool and then that pool out to big crypto funds. In the future, we plan to be lending that kind of money out to everyone, from people who have debt financing to real estate brokers. We’ll see where the market wants to go.

That’s my day-to-day. I lead our marketing there. Coincidentally, I still have my 9:00 to 5:00 there but also my 5:00 to 9:00 as the CEO of Truth Cartel, which is a marketing agency specifically oriented on crypto. How do we run those two things together? One of the things I did was that when I was getting hired, I stipulated, “I love this company. I want to work here, but you got to let me run this agency too.” My pitch was, “At the end of the day, you think about the agency as another source of talent and resources for my marketing efforts.” That went over well and so I can then run that day-by-day.

I’m mostly consulting for pretty sizeable and also a few up-and-coming crypto projects around content, social media, influencer marketing and PR. I couldn’t do that with a bunch of partners. I have a great suite of account managers and a great team of contractors who do a lot of delivery. A lot of times, TrustToken loves some of the talents that we bring to bear too. I got my 9:00 to 5:00, 5:00 to 9:00, and a great team on both sides that can be both honest and productive.

That is a lot. I personally love to have more than one job all the time. When you’re completely a CEO as well as a CMO, that’s two C-Suites at the same time. That’s a Steve Jobs move right there. I hope it works out well. Stay hydrated.

We’ve got the Elon Musks and Jack Dorseys of the world running two public companies or at least closed public companies. I’m just sitting here moving my little bits and bobs and ideas across the board, but they do it with teams of thousands. I do it with a team of maybe 4 to 5 on one side and maybe 20 or 30 on the other. That seems to do the job. I’m privileged to have the public flexibility but also smart people who own stuff. I don’t have to worry so much about micro-managing. If I did, I would go crazy.

I know this is a little off-topic from the DeFi part. You said your immigrant story. I noticed this about myself when I moved to New York several years ago that I made all new friends because I moved to a new city. I was in my late 30s. I noticed that most of my friends were immigrants. Granted New York is a city of immigrants, but I realized I was gravitating towards certain types of people because it aligned with who I am.

I am not an immigrant. My parents were not immigrants. My family has been here a long time, but I noticed that my work ethic and work style and my friends were hyper-hustler like 1st and 2nd-generation folks. We were similar and it was a new thing to discover. Does that resonate for you? Do you think that that’s part of it? It could be correlated, but I can’t help but think like, “The hustling attitude of an immigrant regardless of where they’re from is pretty obvious.”

NTE 76 | Crypto Loans
Crypto Loans: Instead of putting up ETH to get DAI, they’re putting up nothing. It’s just their credit score reputation to get the same amount of money and then they can use their ETH or DAI to trade as well.

This whole concept of making it goes in the minds of a lot of immigrants, but I’ll also say it goes in the minds of a lot of New Yorkers. It’s something about the city, but it’s also about the lifestyle of the immigrants. We came from an upper-middle-class family in Poland. We had a good life there, but my family was still young. I was born to a young family. It’s still pre-established and then we started over. We started from scratch in New Jersey and New York. We were below the poverty line, maybe $35,000 to less $1,000 for a family of three in New Jersey in a dingy neighborhood. When you come here from there, you want to make it.

How old were you when you came?

I was 6 or 7. You can say I’ve lived most of my life in America, but I would never say I’m quite American. I’m something on the knife’s edge there. The reality of it is you start there. I didn’t have a lot of friends. We didn’t have a lot of money for even healthy food, so I gained a fair amount of weight. It was not an easy time period. I didn’t know the language. You grew up like that and you want to make it. You don’t want to go back there.

For a long time until maybe by age 23, there was a big success and a big humbling moment immediately thereafter. You’re driven by almost like this relentlessness, maybe even some fear of you never want to go back there again. It took me past age 23. After 23 or 24, it’s when I started to figure out like, “I don’t want to be motivated by the fear of not making anymore. I’ve been motivated by the love of the game.”

That’s what opened up my mind to take on slightly more fun and risky projects, but you’re getting into crypto and emphasizing my quality of life and my community beyond just my hustle and bustle. For example, being in New York, which we are both in now, you can have the best of both worlds. You can have that amazing community and you can be surrounded by real hustlers. You can be in the depths of tech, crypto, content and media and still have a beautiful time with these folks on the weekends. At the end of the day, I’m like, “Why not both?” I recognized where you’re coming from.

I have to put this through. I don’t want to lead you there astray. I’ve lived in New York for many years. Earlier in 2021, crypto has exploded and lots of reasons to do this. I came down. I was like, “I’ve got to get to a beach after sitting like a good little girl in my COVID bubble for almost thirteen months.” I came down to Puerto Rico.

I realized, “Everybody from every conference I’ve been after the previous years is here. It’s a conference that never ends. I’ve got to come down.” I now spend half the year in Puerto Rico and I’m here in San Juan. We’re getting a big storm. If we lose internet, we’re going to have to maybe do some of those over and then we might splice it.

That’s okay. I’ll slide down to Puerto Rico too next time. I might be there in a little bit. With a crypto seed, do you do a circuit? Besides the conference circuit, it’s like New York and Miami. Sometimes, San Francisco and LA. Some people end up doing a Puerto Rico on a rotating basis. There are a few spots in Europe, like Lisbon being a new hub and Paris for EthCC. I know what you’re talking about and then Hong Kong for a lot of the crypto stuff there too. Maybe it’s a little bit of Vegas. Folks, too, are coming to crypto from being professional poker players.

CoinAgenda wrapped up in Vegas. My friend, Adryenn, was speaking there. She was like, “Do you want to come to speak?” I was like, “No, I’m done.” I’m at a conference that never ends. I live at the conference now. I have conference rules. One of my conference rules is, “Never leave the house without your bikini in your purse because you never know when you’re going to end up at a hot tub because it’s a conference.” I always have a bikini in my purse because conference rules exist all the time now. If ever I’ve been caught without it, it’s exactly where everyone is like, “Let’s get in the hot tub.” I’m like, “I have conference rules for a reason.”

The big trend in DeFi generally is bringing more of the sophisticated financial products from traditional finance on-chain. Click To Tweet

This is what it’s like to be full-time in crypto.

I’ll be coming back to New York. When I come back, we’ve got to hang out.

Let’s do that. I know what’s in me for winter. I’m scoping on Mexico City as the next stop for winter.

Mexico City is no bad place. That’s for sure. Before COVID, I was invited down to attend the Stellar Meridian Conference down in Mexico City. It’s an amazing and beautiful venue in this old, open-air with tons of plants. It’s like, “How do you have such a beautiful conference?” It’s Mexico City. That’s how. We have a topic here coming soon. You got stuff coming up. TrueFi has some cool stuff happening and we have to announce it. Please help me move this along.

This is going to be cool because we haven’t talked too much about this stuff publicly yet. Some of these pieces, a little bit, but the things that we’ll end on at least are considered coming soon and it would be brand new. I’ll share it not just as an announcement but as an invitation. We’re figuring this stuff out and looking for partners outside.

What TrueFi does is we do unsecured lending. We do move close to $50 million to $150 million a month to different lenders and borrowers. You’ve already heard me say that on the lender side, you put money in, whatever amount of money you want and mostly to stablecoins because that’s what people want to borrow. You’re getting a nice rate of return at 10% to 30%. It’s safe in terms of the layers of assurance on top of it. It’s very transparent, high-yield and has been very well-assured.

On the demand side, we’ve got these borrowers. They’re coming in and trying to borrow $10 million, $20 million, $30 million, $50 million, maybe even $100 million. It’s the best of the best, the cream of the crop across crypto. Folks like your Alameda, Celsius, Wintermute and Nibbio. I could go on and on, but these are the best of the best in terms of funds, trading firms, etc. They pay these high rates of return because they’re not putting up any collateral so they can maximize their efficiency.

Instead of putting up ETH to get DAI, they’re putting up nothing. It’s just their credit score reputation to get the same amount of money and then they can use their ETH or DAI to trade as well. Everyone seems to be happy with it. We have the true holders who approve new borrowers and govern the platform. That’s the protocol now.

I’m a user. For easy numbers, let’s say I have $1,000. I’m going to go onto TrueFi and set up an account. I have to give you my KYC stuff, but then I’ll give you my credit score. I put my money in and you guys will say, “Okay, cool.” It can borrow, but if I want to lend out my money, I could be like, “I’ll lock this up. You guys are going to give me 10% to 30%.” If I locked up for a year, I would get between $100 and $300 off my $1,000?

NTE 76 | Crypto Loans
Crypto Loans: When you describe putting your money in, you don’t lock it up. You can exit your position at any time very cheaply.

Let’s dig into that a little bit more. You put in $1,000. You’re going to get over $300 for the end of that year on the basis of interest, which is coming in around 8% to 12% on the basis of incentives paid out in TRU. In aggregate, you’re going to get 30% or 40% returns on your $1,000. As a smart investor, you will have considered your gas costs going in and out. You want to make sure that those gas costs don’t eat your profit, but with $1,000, you would be looking at about $300 to $400 in return for the year.

Is it all on ETH?

Yes, both on ETH, but we are looking at other layer 2 solutions, including scaling solutions. We’re not announcing anything about that yet, but you can be rest assured that probably close to January 2022 onwards, we’ll be looking at announcing something in that regard. I want to share two other big things with you as a lender that is very interesting to lenders reading. That’s the great part about it. Anyone at all in the world can lend.

The first part is there is no KYC and account. Give them a MetaMask. If you have a self-custody wallet, your sales user is not Nexo, Crypto.com, Gemini or Coinbase. You click to connect your wallet and then you lend. There is no permissioning. There are no hoops to jump through. We’re there in a few clicks. If you approve these transactions, you’re lending and earning returns. That’s the first thing of all.

Are these incentives in this return based on the bull market that we’re in or is this something that someone can lock up and even in a bear market, those returns are going to be pretty predictably consistent?

Let’s break it down into two parts. Those returns, let’s call it 30%. There’s a portion paid out in your base currency. Let’s say I’m lending out in a stablecoin. I’ll be earning it back in that same stablecoin for 7% to 12%. The way to think about that is that your bank pays you interest on your savings account. They’ll pay you 0.03% or something. They’re going to pay you jack on that savings, but it will be in the base currency. You’re getting paid out in dollars and it will be stable, but it also depends on the market rate.

The market rate is set by the fed and how much money they can get on that money. In the same way, that base rate is set by borrowers. Borrowers are typically borrowing for as cheap as 7% and for as expensive as maybe 18%. That base rate is going to fluctuate. Let’s call it an average rate of 10% to 12%. Your base rate, I wouldn’t say guaranteed, but based on statistical averages, you’re probably getting that 10% stably.

Let’s talk about the other side of that. What about that 20%? That 20% comes in these token incentives. We’re generous with our token incentives. Those token incentives are coming in the order of 20%, 30%, 40% or 50% of your investment and based on two things. Firstly, what are the people running the protocol that are our users think we should be rewarding people who are lending to us so they can set the rate? I can’t promise you that they will go up or down because it’s up to all of us. People use the protocol to do it. Right now, the protocol incentives are generous.

What about harvesting those returns? Let’s say after about a year’s worth of working with us, you’ve got $200 of that $300 in these tokens. The token price can go up, so the rest can go down. Although it has gone up in price, those rates are pretty stable, which is good for everybody using us. Let’s say you get $200 in our token. If we crashed by 50%, that’s, unfortunately, going to only be worth $100 the day that you harvest it. Unless you want to hold on to it, then it might go back up.

When you're trying to tokenize real-world assets, it creates some additional layers of complexity. Click To Tweet

If the token price increases, which it has been doing alongside the Bitcoin ETF and the market gets a little frothy, then you’re up to over 200%. Those token incentives are subject to the market conditions, but that base layer interest return is subject to demand. It’s an interesting blend. Let me give one last point about lending. When you describe putting your money in, you don’t lock it up. You can exit your position at any time very cheaply so that if you get bored of us, you find a better opportunity elsewhere. You feel like you need that money to pay your new down payment on a house because things are going well for you. You can take the money out now without any penalties, fees or costs besides the gas exit. There’s a lockup, which is nice too.

Thank you for answering that question. I’m sorry to have jumped in but I was like, “I want the user to see what would happen if they go right to TrueFi.io.” Is that correct?

Yes. That’s us. That’s how it works for the lenders. Borrowers do go through a much more rigorous process. Those guys who do KYC have to get approved by the community and submit loans to get approval on a case-by-case basis. That ends up leading to the best possible borrowers to the best possible safety of those borrowers because, ultimately, we’re not just bringing anyone on board. It also leads to good rates because people are not going to approve rates that are below market demand or market standard. The borrower side is very rigorous and the lender side is open to all, both exiting and entering at any time.

There are going to be more and more types of lending and lines of credit available that are coming up.

Let’s talk about that. I don’t know how it works now. You’re crowdfunding loans. Those loans are unsecured. They’re not backed by anything. That gets you better returns, but it gives you a tiny bit more risks than secured loans. That’s why we have all these assurance layers on top. So far, 100% repayment and $600 million cleared in less than a year. It’s a lot. I didn’t even realize how fast DeFi could move.

We ended up locking up over $1 billion in protocol in about nine months. Think about what that takes in traditional finance, raising a $1 billion fund. We got there at about 6 to 8 months. We’re super privileged and we’re trying to put that money to work. We’re always very eager to get more borrowers too. With all that said, the thing to think about is, “What comes next?” We’re already in this weird space of being centralized and decentralized, leading on compliance and legal, and doing some interesting stuff there but also trying to create cool financial products for DeFi users.

The big opportunity earlier was to put credit on the blockchain and that opens up the next great product in DeFi, in my opinion. The big trend in DeFi generally is bringing more of the sophisticated financial products from traditional finance on-chain. We talked about credit ratings. Now, we’re talking about unsecured lending, but we’re going to be looking beyond our protocol in the future. Generally speaking, structured financial products like folks at Ribbon or Olympus DAO. There’s a bunch of cool things happening in this space and the products are getting more and more sophisticated and eating up the track by markets.

Real estate is my passion. Tokens and crypto, in general, can be impacting real estate in a very basic way. On top of that, there are so many layers. If you are talking about opening up potential new products that could take the place of a mortgage, what does that look like? What are you guys thinking through? What are some of the questions and answers? Maybe you don’t have the product completely outlined, but what are some of the issues that come into play when you do have something that could be secured, like a piece of real estate with a crypto-lending platform?

I’ve been sitting with the whole idea of crypto and real estate for a little bit. I know some cool real estate brokers and managers here in Brooklyn. Toby Moskowitz of The Williamsburg Hotel wanted to tokenize her hotels in crypto. I’ve been talking to top people in real estate about this for a little while. We spoke about real estate and crypto at this major real estate club. Four of us on the panel were thinking about how this is going to work. There were a bunch of different issues that we still think exist in bringing real estate to crypto.

NTE 76 | Crypto Loans
Crypto Loans: The legal overhead of bringing a piece of real estate on-chain is extremely difficult and expensive. There are only so many lawyers who have the faculties to tokenize an asset.

There are a handful of points in the right direction. One of the first things is that the legal overhead of bringing a piece of real estate on-chain is extremely difficult and expensive. There are only so many lawyers who have the faculties to tokenize an asset. Forget the protection side of this. It’s the legal side of this. It can cost close to $400,000, depending on the property.

When you think about the profit margin on real estate, that eats up a lot of the return to get that on the blockchain, realistically, it hits on the second problem, which is, “Where’s the demand? Are crypto people putting a lot of money in real estate?” Crypto people are putting more money in crypto. Real estate people are putting more money into real estate.

These sectors, unfortunately, don’t cross over very much. Unfortunately, you look at companies like Harbor, which I kept my eye on for a while, who is trying to tokenize real estate. They had a reasonable exit, but, ultimately, they were all too early. We were too early on tokenizing all the things staking, which is why we ended up tokenizing more so debt-type products, real estate cars, etc. That was the original thesis.

The other two concerns that I have are when you move from tokenizing bits, you can tokenize virtual real estate, virtual art and a financial product. That’s pretty easy to manage because it all exists in the same universe. When you’re trying to tokenize real-world assets, it creates some additional layers of complexity. For us, in doing unsecured lending, it means we have to think about collections. We have to go from the world of bits, which is very comfortable to navigate because we know that world well, to the world of atoms, namely a company sitting in a particular office staffed by people who now owe money.

You have to go through traditional legal rails and financial rails to go after that money. That is a non-trivial problem. When you make that problem around a piece of real estate, the levels of complexity are exponential. That’s probably the biggest one, in my opinion, personally. The move from atoms to bits is still not one that blockchain has solved very well. You have to think about collections, jurisdiction, contract law, who is going to manage collections and management.

What happens, for example, if the ownership claim on a house is on the blockchain and someone loses the wallet? Is that house effectively derelict? There are these unprecedented questions that crypto plus real estate have not yet grokked, which is why I’m more bullish. As a partner in TrueFi decides to go down this route, we’re most interested from a real estate perspective, not in funding mortgages per se. Not in funding commercial or residential real estate, but in funding the closest thing to financial assets representing a claim to real estate.

That might be your REITs or another financial asset representing the real estate. The hardest thing about logistics is the last mile, getting something from warehouse to port, then port to the next port, and then port to delivery. The hardest part is about landing port down to the user’s house. If we can avoid doing that last mile where we have to go and manage and own the atoms-to-bits relationship, then we want to do everything we can to avoid that.

That makes a lot of sense. I can see how it’s going to be a pretty complicated beast to take apart. Starting with a REIT is a very smart thing to do, especially if you want to keep this all in the same general realm of bits and bytes like that.

It will be a very valuable result. There’s this estimate where when you add extra liquidity to an ecosystem. It ups the value of that asset by upwards of 20%. Real estate is a slow-moving asset at the end of the day. You’re not necessarily selling a building multiple times per day, but in crypto, these transactions happen regularly where you could sell a piece of art multiple times per day. You’re not moving your Picasso multiple times per day in the traditional art world. If you can tokenize an asset or create a cool ecosystem for the trade of real estate that allows more entrance and a little bit of liquidity, you can increase the asset’s net value. There are many steps and obstructions to get there. Whoever cracks this is going to unlock a crap ton of value. It’s going to be huge.

Lending money without collateral is a very new model in crypto. Click To Tweet

The last time I was thinking about the total global real estate market, it was $217 trillion. It’s now at $248 trillion or $260 trillion. It keeps getting bigger and bigger. I’m like, “How on earth?” but it’s true. It’s a big one to crack and I’m glad that you guys are at least thinking about it. Maybe we’ll follow up after this show to talk a little bit about that.

I also want to tell you about the credit line stuff and how we are thinking about it if we can go there.

I was going to ask you about it. In the world of DeFi, what you guys are bringing into the market and working on in terms of credit, structured trades and what that means to somebody who is structured. What is structured like? Does it have a dollar amount? What does that mean?

The big thing that we’ve been working on is creating a model where you can lend money without collateral. That’s very new in crypto, largely because it is usually anonymous. We’re not. Our borrowers are docks. People know who they are, so that they also know who we’ll be going after if they default. All the loans are fixed term and fixed rate. There’s not a crypto credit card per se. It’s great that you have the folks that you can use your crypto credit card and have it take out your Bitcoin, but at the end of the day, you’re converting that Bitcoin to dollars at the time of payment.

The thing that’s going to be exciting and a big opportunity are when you can do lines of credit. What is a line of credit? Instead of a lump sum of cash you get in the box, you get to give the box back full plus interest. At the end of the term, in 30 days, you have a spigot. You, as a borrower, get access to a firehose that you can turn on and off. When you use the water, that is to say, the capital from this line of credit, that water rate goes on your utility bill. At the end of the month, you pay for the water you used plus a premium for access to the utility.

Moving from boxes of cash to a spigot that is available to a borrower is a huge change. It allows the price of that capital to be dynamically adjusted based on the will of the market and the credit model. It allows loans without collateral to go and be lent down for as much as 365 days. It allows people to not have to be more passive in their investing because they’re investing into a pool that allocates capital freely. It makes it so simple for borrowers to take money out because all they have to do is withdraw it.

At the end of the day, back to this idea, when you make things more liquid, you make them more valuable. We’re making money that’s more liquid and that increases the value. It makes the capital loaned out more valuable, more profitable to lenders and easier to use for borrowers. We’ll be launching something in November 2021. That will be the world’s first line of credit in crypto. It’s pretty exciting stuff.

Ultimately, we expect that unsecured lending is an $11 trillion market, but much of it is not in the structured 30-day, 9-day term. Much of it is a line of credit. We’re already chipping away $600 million worth anyway at credit on-chain. Now, we’re going after the prime meat on the bones of this thing. It’s going to make this platform explode.

Also, talk to me about puts and calls. We haven’t had a lot of opportunities to even use puts and calls on too many different platforms in DeFi and crypto yet, but this is coming up and I’m excited. Take it away.

NTE 76 | Crypto Loans
Crypto Loans: At the end of the day, when you make things more liquid, you make them more valuable.

We are with the experts at puts and calls and other structured financial products, but I am personally a big fan of a friend and partner to our protocol, Ribbon. Ribbon Finance is trying to bring some of these sophisticated TradFi products to the crypto market. That might be covered puts on Ethereum or covered calls on USCC. To try to explain a little bit of my understanding of this stuff, when you’re treating a put or call, you’re paying for the privilege or right to purchase or sell an asset later on.

These are more sophisticated derivatives. We’re playing with derivatives and certain kinds of options. We’re playing with a structured bet that the company that’s offering this bet to you is both managing from the perspective of making the bet but also covering the bet and insurance, so you never get burned too hard. You can take advantage of all that with a few clicks.

You don’t have to put in the order and cover it to move your money around and re-collateralize your call or have to fold your interest back in. It’s all managed for you. I’m super impressed. I’m using these things myself. You’re seeing returns as high as 50% plus on Ethereum or USCC. We use a reasonably high-risk adjusted return. It’s cool. I’m bullish on these guys. What Ribbon is doing is robust. They are smart guys.

You mentioned that you guys had made all of these different tokens tied to various traditional fiat or government-issued currencies. I’ve wondered if someone couldn’t potentially take their forex trading knowledge and find themselves onto the right platform to be able to do some forex trading using crypto rather than fiat. Is that possible? Is that something that’s done? Do you enable that? Is it common?

It’s an exciting opportunity. We are going to bridge these currencies to lower gas fee platforms so that you don’t find yourself eating up your profits with the gas fees. We have five different fiat-backed stablecoins. One is backed by the British pound, Australian dollar, Hong Kong dollar, Canadian dollar, and US dollar. There are a lot of cool opportunities for what you can do with these assets.

It’s not just Forex trading between assets so that you can get exposure from one currency to another and take advantage of the change relative to the other, but also you can allow greater accessibility. We have a lot of users in Great Britain, Australia and Hong Kong. They don’t want to be trading in dollars as their backend currency. They want to be trading in Hong Kong dollars or British pounds. They don’t want to expose themselves to forex risks on top of crypto risks. In principle, you’re also increasing accessibility and financial opportunity in that regard.

Perhaps one of my favorites and one of the most interesting things you can do is create the stablest possible coin. If you go back to the era of Facebook Libra, now called Diem, I don’t know whether that’s going to happen at all. One of the great thesis was that they were going to create an asset-backed by a blend of different fiat currencies. We did that early on. We called it TrueFX. It’s a stablecoin backed by all five of our stablecoins. It maintains a dollar value of somewhere between $1 to $1.26. I forget the number exactly, but it retains its value very well.

It’s the first-ever that I know of, stablecoin basket backed by not crypto, but backed by five different fiat currencies. We haven’t found a term or a use case yet, but we created something as a proof of concept that exists now and can now trade freely. That token also allows you to do one other interesting thing. You can come in with dollars by holding that token and come out into Canadian dollars right there. The coring itself is a Forex exchange blended into the dollar. It’s a pretty cool opportunity.

We’ve covered a lot. Beyond even what I asked, you kept going into all these realms. I was like, “You checked out that one.” Is there anything else that I forgot to ask you that we need to make sure people know that’s coming down the pike? November 2021 is going to be a big month, especially in this bull market.

TrueFi is going to be an infrastructure play. It's going to be the place where money goes to find yields at the end of the day. Click To Tweet

Hopefully, in December 2021 or January 2022, we can announce something else that we can jump in on. The big thing for TrueFi and any other big financial product that people are working on is that you don’t want to be the marketplace for one thing. Let’s say you start to venture products or for crypto-backed loans. You want to be the market for as many positive things as possible and you want the infrastructure to shine versus the assets you’re sending out.

The thing that we hope to announce probably in January or December, depending on what partners we can find, is that TrueFi is going to be an infrastructure play at the end of the day. It’s going to be the place where the money goes to find yields at the end of the day. Now, there are only crypto companies. The thing that we see in the future is us looking a lot more like the financial products department of a major bank. We’re not going to be a bank. We’re not going to do financial products and sell ourselves, but let’s take an analogy the way that we spoke about earlier.

If you’re a JPMorgan and you’re going to buy an index fund, JPMorgan will sell you their proprietary index fund alongside the Vanguard index fund, S&P 500 and whatever else you might be able to find in the market. JPMorgan is playing two roles there. They sell the product and the service of helping you find the product. TrueFi wants to be the latter. We don’t want to sell you a single product, “Lend crypto-to-crypto companies.”

We want to be the place where you go and say, “I want to get a good risk-adjusted yield. I want to do this across real estate but also maybe some crypto companies. Maybe let’s try this whole debt financing thing too.” You mix and match your portfolio. Maybe you allocate $100,000 and you want to do $30,000 each and tend to put in the most speculative asset type. Each of those arenas, let’s say debt financing versus entertainment financing, is going to be managed by a major partner, a true investment manager type like a broker, venture fund or some other financial entity.

TrueFi will be serving as the infrastructure. We’ll be delivering access to these different financial products in different categories. Maybe some will be those REITs like we talked about. Some of those would be debt financing for startup companies. Some of our bread and butter will remain lending out to crypto companies giving people the greatest possible breadth of investments in a single place and doing it all in a few clicks without making you go through a bank that eats up all your profits and protecting you against loss with layers of protection. That’s the dream, to help money move most quickly to wherever it can find the best possible yield. That’s what’s coming soon in early 2022 to TrueFi.

There is also something else coming in early 2022, which is you guys are going to be becoming a complete and total DAO. You’re moving from a centralized model to a decentralized model. First of all, can you explain what a DAO is for anybody who doesn’t know? Talk to me like I’m five and then we’ll go into how you guys are adopting that model and how that movement is going to go.

Think of a DAO as a companion and competitor to the traditional corporate model. A traditional corporate model is hierarchical and centralized. Typically, there’s a clear in-group and out-group. What is a DAO? DAO is the opposite in many ways. A DAO is much more flat-purpose and it is very meritocratic. People who lead are the ones that are contributing the most, not the ones who have been there the longest who have been promoted by a particular entity.

DAO also has a flowing range of participants. Some people who are there spending 95-plus on their project and some that come in do a single project on a one-off basis. Finally, a DAO is ideally moving towards the idea of decentralization. It may not start fully decentralized, but a DAO is always moving in the direction of decentralized. Meaning, putting the power in the hands of those that contribute and use the product versus in the hands of those who work their 9:00 to 5:00 and get a salary but may never touch your product in the end.

This is so important because, ultimately, TrueFi is not a product per se, but it’s a protocol. It’s a little bit like a coding language. When you might try to pick up coding, you might play with Python or JavaScript. There’s no per se Python company or JavaScript company. It’s an open-source model. At the end of the day, we want to make sure that the open-source model, the ownership, incentives and value alignment goes to the hands of the people who are using that coding language, open-source software and this protocol.

NTE 76 | Crypto Loans
Crypto Loans: It’s not just forex trading between assets so that you can get exposure from currency to another and take advantage of the change relative to the other, but also you can allow greater accessibility.

It’s ultimately going to be overtime ever more up to them about what they want to build, how they’re going to build it, how they’re going to explain it to the world from a marketing perspective, what they might do to audit it and so on. This is a model of progressive decentralization popularized by Compound and MakerDAO. It’s written up extensively by Andreessen Horowitz, an incredible investment company and also one of our investors.

It’s a path that we’ve been following. We have an amazing legal team and a compliance team. They’re making sure that we follow every possible guidance from the legal entities in the US and check every possible box with the grand-culminating moment soon. We’re going to announce a formal DAO entity, a nonprofit foundation acting in the best interest of TRU holders and the protocol.

The foundation is going to have a few responsibilities, namely, managing a treasury, helping governance, maybe going after defaulted debtors. The people who default on loans, amongst a few other things. It’s going to be located in a jurisdiction that’s very friendly and mature in terms of its data legislation. It will also be the beholder of a lot of the TrueFi IP. It’s going to become the steward of this project. That will also mean that maybe my employment will change. Maybe some of our team moves to become contractors of the DAO.

It’s an interesting thing because I can’t tell you all yet of what’s going to happen because we’re so early into this ecosystem shift of companies going from decentralized glass buildings in New York and San Francisco to a bunch of nomads around the world, working off laptops like us. When not doing podcasts, we’re helping build the financial future and getting tokens as compensation versus a salary and health benefits. I can’t tell you what it will look like yet, but I can tell you it’s exciting. In many ways, for some companies, it will be the future.

I love that summary. I know it was long, but it was in-depth and fantastic. I feel like I want to write that down and be like, “Here you, guys. This is the future. Here we go.” It’s very important. It’s so exciting. You’re like, “We’re not doing podcasts. We’re changing the way we govern ourselves as human beings. It’s no big deal.” It’s what you do during the day.

You guys are doing some amazing things at TrustToken and TrueFi. I’m totally thrilled to hear about it and to know what’s coming down the pike. If people wanted to get involved, what would be the first baby step a user would take to get involved in what TrueFi is doing? Is it like, “I learned about this cool platform. They have a utility token and I buy that. I get to sit in the background and see what happens?”

I look at it like if I make an investment, even like a $100 investment in something, it’s like I paid $100 for a class, but I might not end up having to pay for it because I keep it and I didn’t have to pay for it. It gives me skin in the game and makes me think, “I need to know about this.” It gets me invested enough in myself to learn more. I paid $100 as an investment, but it’s an investment in this education that if I lose it all, I still learned a bunch. It’s the same as a class. It can come up better than a class anyway.

It’s the classic saying, “You throw your hat over the fence, then you have to climb the dang fence.”

Of all the things people could do, what would be the first baby step a person could do? They go to TrueFi.io and do what?

DAO is meritocratic. People who lead are the ones that are contributing the most, not the ones who have been there the longest who have been promoted by a particular entity. Click To Tweet

Getting involved in any of these projects is first you learn and then you join the community, put your skin in the game, participate and offer value. As the first possible step, I would recommend folks to go to TrueFi.io. Skim the paper or maybe watch a YouTube video. If they like what they see, I would join our Discord and follow our Twitter. If they like what they hear there, then I recommend making a smart financial investment of their own in the token if they see it fit and doing their own research. Don’t take my financial advice and use that as an opportunity to learn.

If that all feels great to them and if they want to keep going, then we’re always looking for folks to help us, for the bottom-up, tell the world to create better content, bring you, borrowers, to the platform and help us also become a partner or even a borrower so that we can launch new financial products on TrueFi. Maybe they want to lead a REIT-oriented investment vehicle. That’s going to be one of the most exciting things.

The more and more people that can, in a way, almost employ themselves by doing something to bring your project to the platform is fantastic. This is in the early stages when you say from the bottom-up to get the word out, but I’ve been approached by a company. We’re still working on the details. I won’t say, but I would start an ambassador program to strategically try to reach out to get more women involved in crypto.

We’re seeing the biggest transfer of wealth in modern history and the history of human beings. It’s still totally male-dominated. We need to see gender balance getting into that soon because that’s part of how this world is going to change. Trying to do that and have aggressive outreach programs is something that I’ve been tapped on the shoulder to architect.

If you guys are interested at all, if that’s something that you guys are doing, I would love to hear how you’re doing it. If you’re interested in pursuing that, I would love to share with you whatever it is that I end up architecting. Hopefully, it’s quite effective to get the word out to as many diverse users as possible. Not just women but people from all marginalized communities. We need to get more diversity in crypto. That’s my soapbox.

We’re proud of the work we’re doing there in hiring. You have a nice ratio there, but that ratio and the community makeup both need to improve. I would be very keen to see how we can collaborate. We’re interested in at the very least putting some grants out for community participants, especially when it’s a unique voice.

NTE 76 | Crypto Loans
Crypto Loans: A DAO is ideally moving towards the idea of decentralization. It may not start fully decentralized, but a DAO is always moving in the direction of decentralized.

We should follow up on that and talk about it. Hopefully, our next part two conversation will be about Truth Cartel, marketing, getting the word out, and bringing more diversity to this space because we need it. People all remember me. Why? Because I’m 1 of about 3 women in blockchain and then I’m like, “Another guy, nice to meet you. I know we met. You blend right in with so many of them though.” I don’t mean to be rude but I’m like, “I totally remember it.” It has been an absolute pleasure talking with you. Thank you so much, Michael. Is there anything else you want to leave people with? As you depart, do you have any last tweetable words of wisdom or is that putting you on the spot?

For a lot of these, like DeFi hot takes, speculative bets, NFT mints and stuff like that, TrueFi is going to be sharing a lot of that. You can follow me on Twitter, @GasiorekM. I put a little bit more of this degenerate stuff in there. Fun parties in New York having to do with crypto, cool routings to visit Mexico City or live, and what have you for crypto shenanigans or cool stuff having in the NFT world. That’s where that stuff goes. It’s distinct from all the TrueFi and DeFi stuff. Thank you so much for all your time. I appreciate you diving in with me on all the fun routes we took in this conversation. Can we do it again soon?

Yes, me too. Thank you so much. I’m here with Michael Gasiorek from TrustToken and TrueFi. He is the Head of Marketing and a chatty dude. I’ve got to say, this has been such an awesome conversation. I appreciate it. I will catch you on the next episode. Thanks so much for reading.

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About Michael Gasiorek

NTE 76 | Crypto LoansI’m a founder, writer, and community builder. I’m obsessed with how ideas spread – through stories, people, and products. I’ve made my life’s work distributing the best ones.

By day, I lead all marketing & comms at TrustToken, known for building the world’s most transparent stablecoin TUSD, now moving billions of dollars around the world every month, and TrueFi, the definitive DeFi protocol for uncollateralized lending. TrueFi has originated almost $1B in unsecured on-chain loans and just crossed $1B in total value locked in October 2021.

By night, I own and operate Truth Cartel, a “belief distribution agency” working with emerging technology companies like Algorand, Republic, SOS Ventures and BCG Digital Ventures. We pride ourselves on combining content marketing, audience growth, influencer partnerships, and public relations. When the client work is done, we incubate our own projects in media, education, and fintech, including Medium’s largest blockchain publication, The Crypto. Ask about our crypto cereal.

I’ve written on Startup Grind, Fortune, Bankless, and Inc on emerging technology and its effects on our culture and behavior, and published two books on life and work in Asia alongside Derek Sivers. I hold mentor roles at dLab.vc and IndieBio, helping deep tech companies with their story and marketing strategy. I’ve helped run Startup Grind – the world’s largest entrepreneurship community – in San Francisco and Shenzhen, and co-organize OneSalon to connect smart, open-minded people – called a “weekly gathering for thoughtful conversations” by KQED.

My values openly guide my actions: an adherence to integrity, contribution to impact, connection nurtured with people of character, growth of body and mind, and an insatiable taste for adventure. For some of these shenanigans, Entrepreneur.com named me among the “Top 50 Inspirational Entrepreneurs to Watch,” which was nice of them.

That’s plenty about me: what would help you right now?

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