Episode 1
TrueFi: The rise of uncollateralized lending

Our guest today is Ryan Rodenbaugh, who leads BD at TrueFi. Ryan and TrueFi have been scaling the vertical of uncollateralized lending within DeFi, allowing institutional borrowers to tap available on-chain liquidity. In this conversation we explore, how TrueFi works, what makes them unique, how this model differs from Aave/Compound given the use-case. We also dive into how Exponential is assessing the risks of uncollateralized lending. 


Awesome. Well, we have we have a crowd. Thanks for joining and welcome to Degen Responsibly, a series by Exponential where we are focused on bringing rationality to DeFi and making the space more accessible to everyone. In this series, we explore in-depth some of the best and latest projects in DeFi, what makes them unique, the risks, as well as how you investors can save time as you do your own research and make better informed decisions. Today we have Ryan from TruFi as our featured guest. Great to have you here, Ryan. Thank you very much for having me and thank you for supporting TruFi as well within Exponential. Awesome. Yeah, I mean, before we get started, I also like to introduce David from our team. David spent the first part of his career in Wall Street, but he's a true Degen at heart and that's why he leads our research efforts at Exponential. He's that way on Twitter if you want to follow him. Hey, David. Hey, guys. Nice to meet you guys. Awesome, awesome. So before we dive into TruFi, why don't you share with the audience a bit about yourself, Ryan. What led you to DeFi? When was the aha moment? Yeah, so everybody, my name's Ryan. I lead business development for TruFi and I guess my crypto moment was during college. I was planning to go into investment banking, like many people who study finance, basically have a summer internship with the worst boss imaginable and had spoken to enough people to understand that that was basically par for the course of banking. And kind of just asked myself this question of like, well, if I'm planning to do banking, to then go and get an MBA and to then go do something else, I wonder if I can just figure out what the something else is and jump right there. And so spent, you know, really my whole junior year of college exploring a bunch of different industries, stumbled upon a couple different tech podcasts. I mean, probably like listening to Naval or something first and then went down the Bitcoin rabbit hole starting in 2016 and really haven't ever looked back. Nice, amazing. For you, David, what was the aha moment that you said DeFi is the way to go? Yeah, it was, you know, I think shortly after March 2020, when COVID hit and prices started cratering. And that's when I think you started seeing a lot of these DeFi protocols started taking shape. You start seeing all these lending protocols, market making protocols, and all this innovation started popping up. And that's sort of the aha moment for me, because I sort of saw a lot of the parallels between, you know, Tratify and DeFi. Oh, yeah. And just just before DeFi summer. Yep. Awesome. So thanks for the intros. Before we dive into TruFi, Ryan, I want us to set the stage about lending in general and the state of lending in DeFi. You know, TruFi exists for a reason. So if you can share with us, what is the gap that TruFi is addressing in the market? And what and sort of a tangential question, what are the limitations of over collateralized lending as it exists right now? Yeah, so I guess even just kind of taking a step back, and sorry, my headphones disconnected there, but I caught the end of the question. Yep. I think coming off of the past six to nine months within on and under collateralized or like really just credit based lending within crypto, you know, we've seen that there's a general lack of transparency across what was happening at a bunch of the centralized lenders. And so I think the place that TruFi has kind of filled historically within lending to crypto firms has just been an additional and added bit of transparency so that folks who are lending to different portfolios on TruFi have a sense of who the end borrowers actually are. So like, you know, I guess one example I would make is let's just say we had a pool that was predominantly lending to Wintermute, who has been a large borrower of us. If you were going to come and lend to that pool, you are at least completely aware that Wintermute is a large borrower within that pool that you're lending to. And I think that that is in contrast to maybe what you've seen at centralized lenders, where, you know, some individuals may have still made the decision to lend to Three Arrows. But, you know, when you were deposited with some of the lenders now, or sorry, some of the previous lenders, you didn't know that that's who you were ultimately lending to. So really, it's just that additional bit of transparency that I think, you know, has really resonated with the market. And then there's a bunch of other things around just the extensibility and composability of how LP tokens work within a DeFi protocol that I think adds additional benefits for lenders that don't exist with, you know, centralized counterparty. In terms of shortcomings of over collateralized lending, you know, I wouldn't even call them shortcomings, I would just call them different design decisions, right? Aave and Compound arguably play a much bigger role in the market today than TruFi does, you know, by by a large extent, even even at both of our peaks, right? You know, so there certainly is pure demand for those products. I think it's just a different base than who we serve as our borrowers. Our borrowers are exclusively institutions who are looking for capital, whereas with Aave or Compound, anyone has access to it. And so it's I think it's really just different markets. Interesting. So just to recap, instead of, you know, some of the centralized lenders that, you know, some of them blew up fairly recently, where you didn't know where you were lending money to, TruFi is bringing transparency as to who the end borrower is, as well as just a different use case to Aave and Compound that are designed for a different use case, different uses. Yeah, and it's not to say that our loan book will be perfect. I mean, it hasn't been. I think it's just the case that the lenders at least have more insight into what they're actually participating in and, you know, why the rates are what they are, who the end borrowers are, and all that good stuff. Awesome. I think that's a great segue into explaining what TruFi is. If you can explain to us what it is, how it works, like we're five, that'd be interesting. Yes. And, you know, sorry for anyone in the audience who doesn't know, I probably should have started there. So TruFi is a credit-based lending protocol that gives what we call portfolio managers, but really, you know, underwriters of any kind, the ability to come on and launch a portfolio on our TruFi, where they can set lender restrictions, they can set portfolio size, strategy, and all of these different variables. And historically, the lending we've done has been to crypto native trading firms. So of the about 1.8 billion in originations we've done, that's predominantly been to the winter mutes, Alameda's, Jumps, and, you know, about 35 other individual borrowers who are generally market neutral trading firms, or taking some directional risk. And that's kind of historically been our bread and butter. Over the past six to nine months, we've been slowly bringing on managers focused on new strategies. So whether that's lending to emerging market fintechs, like with our manager Karas, whether those are managers looking to bring on commercial real estate opportunities, like with one manager, we're bringing on new silver, and many other flavors as well, so that we can offer a diverse set of lending opportunities to lenders. Awesome. So if I were to recap, I'm an institution, I'm a market making firm, I'm mostly involved in the crypto space for for my operations. If I live to get a new source of capital, I would come to you guys. Yes. And of course, there's some, you know, restrictions and such around that. But in general, yes. Great. What do you think makes TrueFi unique among among this new, like breadth of institutional lending platforms? So I guess I could take this a couple different directions. Yeah, there certainly is no shortage of firms that have expressed interest in lending to crypto trading firms. I think even just within the past kind of couple months, we've seen Ribbon launch a product, you know, along these lines and some other folks as well. As it stands today, I think there's kind of two things I'd highlight one kind of on the technical side, and then one on the strategy side. I'll start with second. On the strategy side, I think we have taken a much more horizontal approach than some of the other folks in the industry where we want to be the best portfolio infrastructure for people looking to originate credit of any type. So as I said, whether that's emerging markets, whether that's crypto lending, whether that's commercial real estate. And so I think on the design side, there's a number of decisions we have made and are making that create a lot of robustness in our smart contracts and introduce these things, whether it's withdrawal strategies, whether it's permissioning, kind of this KYC DeFi theme, integrating with different KYC passports, things of that nature. And I don't know if I'm able to share links in here at all, but maybe I can just drop a link to our recent roadmap as well. And if people would like to dig in deeper, they're welcome to. Oh, yeah. If you've replied to the main tweet, or we just posted after the conversation, so we save those. Yeah, awesome. So that was on the strategy side. And then on the technical side, I think you were about to elaborate. Yeah, so I was just touching on some of the items. So really, we're kind of working backwards from what both lenders and portfolio managers want. I think as we stand today, and just generally, as I think all credit protocols stand today, there is no shortage of borrowers by any means. And there's no shortage of portfolio managers, you know, looking to originate high quality credit either. The challenge today is just that liquidity has really left the market in a big way. And there is definitely this kind of general disconnect on the rates as well. And so as we're building, we're really trying to build for what lenders want. And there are two or three features, I guess I'd highlight here. One is for the perspective of portfolio managers, we're trying to give them as many robust controls as we can, so that the experience of originating credit on TrueFi feels similar to what they maybe get from like, you know, traditional lending tech that they buy from a normal SaaS vendor. And so we want to give them, you know, we want to build integrated on and off ramps. We want to have user permissioning, like I mentioned. And then the real big feature that we're working on at the moment is portfolio level tranching. And so a portfolio manager will be able to launch a portfolio with multiple tranches so that lenders can express different risk profiles within a single portfolio. So you can be. a junior tranche lender who is maybe getting yields in the 20% to 30% organic without any kind of token incentives, or you could be lending to a senior tranche that's maybe getting 6% to 8%. You're protected by two buffers of capital. So that's really the big feature that we're working on. It's probably the biggest upgrade we've made on the technical side in some time. Wow. So a bit of alpha leak. Yes, yes, yes. And I'll drop our roadmap as well in the chat when I can find that. Great. So you said you're working backwards from lenders or portfolio managers. So from the portfolio manager's perspective, what is it that they want that the current set of solutions is not addressing? So I think really it's two parts. On one level, portfolio managers really just want capital. And so if you told them, hey, you've got to go interact with EtherScan directly, we don't have a UI, blah, blah, blah, blah, blah. But on the other side of that process, there's $100 million sitting there. They're happy to kind of jump to those two. So that's the very obvious one to answer. Beyond that, though, I think there are a number of things they want in terms of, there's a lot of regulatory uncertainty. And so we're not able to productize regulatory clarity, but we can at least give them tools to be as compliant as possible. And so I mentioned earlier, we're integrating with a bunch of these different KYC passport solutions. So like Quadrata and their KYX product, or Verity from Circle, where we're one of the launch partners. We're integrating with all of these so that managers can say, we only want to take, for example, permission capital, and we're trying to make that as accessible as possible. Ah, right. Yeah. Yeah. It is important for them to stay compliant. So they want to know who their lenders are. Yes, absolutely. Amazing. And then on the lending side, what are some of the features or needs that you still see unaddressed? Good question. So I'll just speak openly, I guess, about the challenge. The challenge is, as we're trying to bring on more of these non-crypto borrowers. So let's just take an example of someone who wants to do commercial real estate loans. Let's just say they're relatively safe and they're paying a good yield. The challenge is that they're going to need to off-ramp it to fiat. And the duration on those loans is going to be longer than crypto borrowers, right? Crypto borrowers are willing to borrow for 30 days or 180 days. They're fairly indifferent. Someone originating commercial real estate loans will probably need loans for at least one year. And as it stands in crypto today, the appetite to lend to those kinds of opportunities is fairly limited. Liquidity is extremely important for the majority of lenders in crypto today. And so trying to originate fixed term loans for really even beyond three months is in general a challenge. Or you need to really pay a kind of ridiculous rate. Why do you think that is? Is it because people overestimate the risks? Because if you're willing to take a lower return for a shorter duration, that means the risk premium is really high. So in general, I'd say yes. But the challenge is actually something more like this. Where let's say a crypto market making firm is willing to borrow for 30 days or 180 days, they don't care. And the rate to lend to them just across the wider market is roughly 8 to 12 percent. Now, you can debate whether or not that risk is priced appropriately. And I think if you look back over the past six months, perhaps it's not. However, that's just what the rates are today for the most part. And I think you can see that across the board. So that's how that works, right? Let's just say crypto borrower, 10 percent, three months. Now, on the flip side, these other opportunities I'm talking about, like commercial real estate, for example, even though it is a one year loan, the rate on that is not necessarily higher than crypto market makers at 10 percent, right? It might be closer to six to eight because the risk is different. So that's I think where the disconnect is. And let me know if I explain that well. I feel like it is clearer in my head than it came out. Yeah. So I'll try to recap. I think it's a fairly complex issue with like pricing interest rates and different maturities and different risk profiles. But let's say that in general, there's not a good benchmark to know what would be a good deposit rate for lenders or a crypto market making firm versus a commercial real estate project. And so you see different rates for widely different risk profiles and maturities that do not necessarily make sense logically, but there's simply not enough maybe borrowers or lenders to to make a market at the moment. Yes, I think I think that makes sense. Yeah. Okay. Yeah. I mean, I'm happy to take some of the audience questions at the end. We want to save time for those. Yeah. Okay. But let's get back to TrueFi. So let's say, you know, there's a hot new firm wanting to borrow capital. They have all the tools. They can set up a portfolio and originate credit through TrueFi. What happens next? Yeah. So let's just say, you know, this new firm, you know, just had a Bloomberg article, you know, they raised 100 million dollars to go pursue market neutral trading strategies. We'll get in touch with them somehow, whether that's them getting in touch with us or me reaching out to them. And then we'll put them through our normal process, which is first going through institutional grade KYC, AML. Second is getting introduced to one of our underwriters to understand their credit profile. Do they have all the financials, things of that nature? What kind of reporting requirements we want to see? And then lastly, we'll have them sign our master loan agreement. And then from there, they'll have terms delivered and be able to borrow from one of our pools. So I would say it is actually not that different than what you would see in terms of what happens behind the scenes from a traditional CeFi lender, just that the entire process of funding, originating, deployment, repayment happens on chain via smart contracts. Yep. Yep. And does all of that capital stay on chain? With the crypto borrowers, I would say almost without fail, it stays in stablecoin. Many times it does get moved to centralized exchanges though, as that is where majority of our borrower trade activity happens. Oh, on centralized exchanges? Yes. And then for the lenders, what assets can lenders deposit? Is it only stablecoins? Is it a variety of crypto assets? So today we only support stablecoins with certainly USDC and Tether being the most dominant. We have had borrower demand for other assets and we can support any ERC20 token. That said, at least what I have seen is that there seems to be a fairly big mismatch in terms of what lenders want as a return and what borrowers are willing to pay. And so we kind of just haven't found a good opportunity to go live with any of those pools yet. Oh, interesting. Is it that lenders want higher rates? Correct. So just to put a pin on that, let's say for example that there is a crypto market making firm that's willing to borrow and they would like to pay 4 to 6%. When we go out, I don't know what ETH pays today, but let's say it's roughly that. Yeah, like 5%. And so that's also the equivalent of what a borrower is going to pay. Then when we go and talk to an institutional lender that wants to lend ETH, they're expecting something on top of that. They're looking for something in the 7% to 9% range. So there hasn't been a good match quite frankly there. Interesting. So there's a really hard anchor on what the return on ETH should be and the benchmark is currently Steve. I think that's very fair to say, yeah. Great. So we've talked about what makes TruFi unique, how it works, a bit about the institutions. Do you see any future for more types of institutions and roughly in what time frame? Like we know that crypto is gaining traction with other, like in converting real world assets into crypto. But from a personal perspective, what do you think is the timeline to have, let's say a commercial real estate borrower on TruFi? Well, so I guess I can say we do have these borrowers today, right? You can go to our forums at forum.trufi.io. And you can see introductions from some of these different firms. So even just, let me see, we've got NewSilver up there, we've got N Capital, we've got Procession Capital, right? Many managers that are interested in doing things within these different strategies. The thing that we're really still trying to figure out is what does the lender composition of some of these different pools look like? And so I guess one kind of alpha leak I can share here is, I think there's a lot of DAO lending activity that happens today where historically we've had many DAOs that lend to our crypto lending pools. And I think depending who you talk to, you could say that that's probably not an appropriate type of risk for a DAO treasury to take on. And that maybe some of these other products look like much better risk reward profiles, like where their goal is less on growing capital and more on capital preservation and funding different operations costs and such. So that's certainly something we've been thinking about, right? How do we better package some of these new opportunities for DAOs and some that we're working on? Hopefully we'll have some stuff to share there soon. Yeah. That's so interesting. Yeah, I guess if I were a Dow Treasury manager, I'd be more keen on paying the Dow members and, you know, making an investment vehicle out of the Dow. But I think that's a great segue into risks. I want to also bring it into the conversation, David, who is our research lead. And if we take a step back, David, can you, you know, walk through the exponential risk framework so that we can later talk about what like that risk reward relationship that Ryan was talking about? Yeah, so, you know, our risk ratings at exponential are focused on fundamental risk. So these are any risks that can lead to significant or total loss of principal. These are common across traditional finance as well as those unique to DeFi. And the way we assess these risks is by first assessing the underlying blockchain protocol and assets. We look at both technical factors like code quality, audits, oracle risks, as well as economic factors like chain design, reflexivity and tokenomics. So, for example, something like the UST Luna death spiral risk. That's something we would capture within our risk framework. And lastly, we do also consider the composability of DeFi since a failure at any level, whether that's the chain protocol or asset, can ultimately lead to massive losses. And, you know, we've talked about a lot internally how we had to, you know, add more criteria for uncollateralized, unsecured lenders. Can you talk a bit about how we score these type of protocols? Yeah, you know, when we first came across some of these uncollateralized lenders, our risk framework wasn't perfectly set up to score those protocols. And we sort of developed this risk framework within protocol design, where we look at the different types of lending markets, whether they're overcollateralized or undercollateralized, whether it's like an isolated lending market like RARI or cross collateral like a compound. And specifically for the uncollateralized lenders, we look at how many default mechanisms are in place and as well as how robust they are. In general, we're still a bit more cautious on the unsecured lending space, just given some of the things we've talked about around, you know, just limited recourse to recover bad debt in the case of defaults. We still have yet to see any DAOs or entities successfully recover investor losses through legal arbitration. And also just the information asymmetry where, you know, the average investor doesn't have too much purview into the borrower's credit risk. That's usually more of a confidential information for the credit assessor. Yeah, I think this is a great way to tie back to or go back to Ryan's point about the risk reward for DAOs. You know, feel free to correct us if we're wrong, but is that the type of risks that you were thinking when you made that comment that, you know, DAOs do not have, for instance, all the information about the borrower might just be, you know, aping into the pool rather than making a thorough evaluation of their options? Yeah, that's ultimately what it comes down to here as well, where, you know, anyone who's participating in one of our pools, we want to give them as much as we can and make sure that they fully understand the risks of uncollateralized lending, I think. Not I think, but very much, you know, we're not trying to misrepresent the fact that there is real risk in these different opportunities. And, you know, partially that's the reason why our rates are, I don't know, six times, five times today what Continental and Aave are, right? It's a completely different profile, and people should be compensated for that. I think the big thing that I'm also talking about in this DAO example is that, you know, as we bring on these other opportunities, say it's the commercial real estate one and it pays 8%, I hope that it will also get people to kind of think differently about the risk that is sometimes associated with crypto lending as well. And I think one of the things that's kind of, you know, been brought up recently, which is that as rates have increased in the traditional economy and have not increased in crypto, I think it maybe gets people to kind of question some of these things as well. And I do hope that as we bring more of these, quote unquote, real world asset opportunities on chain, that people will start to think differently about the risk associated and find some of these interesting. Yeah, yeah, totally. Like there's still some like arbitrage between real world U.S. treasury rates and what some of the rates you have in crypto, you know, maybe in the last two years, it was really profitable to like borrow through U.S. treasuries and then invest in crypto. Maybe now it's flipping. So, yeah, there's all these different dynamics happening in real time and affecting what lenders want, the rates that lenders want, the rates that borrowers are willing to pay. Such an interesting space to be at, you know, probably in the next, in the last six months and certainly in the next six months, one year. Very much, very much so. So I do think we're at an interesting point industry wide for some of these different opportunities coming on chain. I think Avalanche has done a good job of bringing some of these over to their chain as well in the recent KKR example and the Camelton Lane as well. So, you know, many of the same type of things that we're looking at. Yeah. David, why don't you also talk about some of the things and mechanisms that we've have assessed over at Exponential about lender protection and how there's some mechanisms to help lenders. Yeah. So I think in general, we've seen across some of the, you know, major uncollateralized lenders like Goldfinch, Maple, as well as TrueFi, there are a couple of mechanisms in place to act as first loss capital in the event of default. I think with Goldfinch, and I think that's something that you guys are also working on, you mentioned earlier, is the tranching of loans between the senior and junior tranche, where the junior will, you know, will protect the senior tranche to a certain degree for any defaults. And then with Maple and TrueFi, I think you guys both have a mechanism where you can stake the native token to act as first loss capital. With TrueFi, I believe it's up to 10% of funds are slashed from stakers and with any additional losses beyond that recouped by the Seifu Fund. Maybe you could elaborate a little bit more on that aspect and how the whole default mechanism works when it goes through with TrueFi. Yes. So as it stands today, we have two mechanisms in place. One is drawing some inspiration from how Aave has set up their STK Aave kind of insurance mechanism. We also went to market with an STK True mechanism, where token holders would be able to stake their True for a share of total interest generated, but would also stand to have up to 10% of that slashed in the case of a default. I think the thing that we have certainly learned over time is that that mechanism does not necessarily scale with the growth of the protocol. And so it is one of the reasons why we are moving full steam ahead in the direction of tranching. That obviously scales with the size of the portfolio. Managers will be able to set different restrictions around, well, if you're going to have a senior tranche of X, the junior needs to be at least Y. And the manager won't be able to draw down that capital until both of those requirements are met. And so really coming back to that point from earlier, we want to do the thing that is best by lenders in this case. And we see tranching as a huge step in that direction. Yeah, we're certainly also seeing this trend of tranching emerging across DeFi. You have protocols like IDLE that use tranching in a completely different way, but with the same reasoning that the junior tranche serves as first loss capital to the senior one. You know, Goldfinch has their own mechanism of their unique design for that. I think this can be a really powerful tool to both portfolio managers and lenders alike. Great to see that you're moving in that direction. Absolutely. And then you also have the SAFU fund, as we understand. Yeah, we have a SAFU fund as well, which is just kind of going back to my earlier point, right? It's a mechanism that we launched with and that just has not historically scaled with the growth of the protocol. And so, you know, going forward, I see tranching as replacing basically all of these mechanisms. Ah, so it's the same, the staking of the true tokens and the SAFU fund. They are two different things, but both suffer from the same set of challenges. Ah, understood. And then speaking about loss protection, what would happen if a borrower cannot repay or defaults? Yeah, so we actually just had our first default within the past month here. And in the case of this specific borrower, they were able to make a partial repayment on their loan. So I want to say partial repayment on their loan, but not in full. We declared a default on them maybe three weeks ago at this point, and that initiated slashing of the stakers. So they had 10% of their true reclaimed. That's currently sitting in our treasury wallet while we, you know, kind of figure out the best path to make lenders whole. But at this moment, the, you know, lenders are currently sitting on a slight deficit in that pool. And working through that process at the moment. But now on the other side of that, you know, we're also pursuing said borrower in court and hoping to recoup as much of that as possible in the, in the future. And so, you know, we're, we're, we're, we're, we're, we're working through that as possible in the, through the courts. Interesting. Is it TrueFi like a legal entity or is it a DAO? Who's taking action here? In this case, it is a legal entity that manages the credit in those pools that is pursuing the borrower. Is there a legal entity per pool or is it the umbrella TrueFi entity? Let's just take the example of some of these new independent managers that we're bringing on. Each of them are their own entity and if there were to be a default in any of their pools, they would be the responsible entity for going after said borrower. Interesting. So in a way, the risk is contained to that specific pool and then the legal actions are also on that, let's say, at the pool level. Yes, precisely. Have you noticed that in the documentation, David? Because all of our risk assessment stems from the documentation that the protocol provides. Sometimes we pop into the discourse and ask questions. Curious to know if you have heard more information first from Ryan than what you have read in the documentation. I think generally it's more or less what I've gathered from the documents. I think Ryan has probably provided a better overview of it. The TrueFi docs does get pretty in-depth with the different doubtfuls in capital markets and different types of lenders and borrowers. Yes. And if you ever have questions about the docs, feel free to let us know and we're happy to update with anything that's unclear. Great. I think our last question from our end is about the TrueToken. What is the purpose of the token? Where can I get it? Is it through yield farming? Is it airdropped through participation and either lending? Yes. In terms of where to get it, I'll take the easier question first. I think we're listed on most major exchanges at this point from Coinbase, Binance, Gemini, Kraken, FTX, and maybe one or two others. In terms of usage today, there are two core uses. One is around staking, which I alluded to earlier, and then also around governance. We have been in the slow process of progressive decentralization, and I'd say we're probably about 60% of the way there, where token holders today via governance own the majority of our protocol smart contracts and are able to influence a bunch of different decisions, such as which portfolio managers are onboarded. We are looking to add some additional functionality as well around maybe converting some of our DAO pools into more of a fund-to-fund type model, but we're not all the way there yet. What are some of the key decisions that governance has made to date? Historically, governance has been responsible for approving individual borrowers, which, again, is one of these design decisions that we went live with originally, and long-term is probably not the best way to go. Today, governance is in charge of onboarding individual portfolio managers, so people who underwrite credit on the protocol. Given the kind of quality of the management we have coming so far, most of those have been fairly favorable decisions, or perhaps entirely favorable decisions, but I have to imagine over time that maybe as we bring on different types of opportunities, the protocol may decide that these are less interesting in terms of what we'd like to do long-term. Does governance also decide when and how to pursue legal action? Or is that managed separately? Yeah, that's on the perspective of the manager. I think we've covered all of the major topics. David, do you want to chime in with something else? No, I think you covered everything. Nothing else on my end. Great. So I think let's give a chance to the audience to ask any questions. If someone wants to request a mic, happy to open the microphone. Okay. Shorai, welcome. I think you're connecting. Hello, guys. Can you hear me? Yes. Perfect. Well, first of all, thank you so much for the space. It was actually really interesting. I actually had a question for Ryan. So we're building an options protocol on Solana, right? But because of the way we're building it, we kind of have to build it in a fully collateralized manner. And I wanted to ask you, Ryan, because you've been with TrueFi, I think, since like four years, so you've really seen the space develop. Do you think, like, I feel like we've seen a trend that has been going kind of away from over or full collateralization in DeFi in general. Do you think that this is a trend that will kind of continue or you think ever since like the whole lunar fiasco, people are like both worlds will coexist? I think that certainly these will both continue to coexist. I mean, I think it's ultimately different use cases, right? It's different borrowers, it's different lenders, it's different portfolio managers, people looking to express different risk profiles. And so I do think that as you try to, like in your case, where you require full collateralization, that probably makes sense. If the set of users on your protocol is going to be wider than, say, you know, 40 of the top institutions in the States. And so absolutely, I think both these continue to exist. And, you know, it's tough to say. I mean, I think coming off of the past six months of lending, I think that there is, you know, natural hesitation towards some of the more uncollateralized stuff. And, you know, on our side, right, it is on us and it is our mandate to help educate the market and different lenders that we work with of why these are good risk adjusted opportunities. But I certainly think that over collateralization will always continue to play a role in crypto. Awesome. Thank you. And do you think it will also because our platform is very much like institutionally focused, right? Like we're not like when you look at our UI that we're building out, it has like all the different limit order types. It's not it's really retail unfriendly. And I think you in TrueFi have more experience with the more institutional side of DeFi. Is it do you see a difference in like between like retail and institutional lending and borrowing or is it more or less the same? Well, I haven't actually quantified this, but, you know, if you look at just the, you know, kind of absolute size of each transaction, even on our lender base, right, our lenders, I would say something maybe like 80 percent, you know, the majority of our lenders are lending over a million dollars at the time, historically. So, like, even there, I think we skew a bit more institutional high net worth rather than kind of pure retail. And on our borrower side, like, you know, in total of the 1.8 billion originations we've done, that's been across maybe like 150, 160 individual loans. Compare that to something like a compound or even where I imagine that they have done in the tens, if not hundreds of thousands of individual loans. And, you know, those have probably gotten very small, like in the sub thousand dollar range at some points as well. So, you know, I guess one way to put it is in some sense on the BD side, like the effort we do is to bring on these large firms and, you know, get a lot of volume and traction out of that. At the same time, like, there is something to be said about having that long tail of users that not a compound does and what that means in terms of network effects and growing that out long term. So a little bit of a rambling answer. I apologize for that, but that's kind of how I see that dichotomy. Oh, thank you very much. Feel free to reach out if you want to talk more. Interesting. So is it fair to say that TruFi is more like a B2B credit marketplace with, you know, DeFi components and DeFi infrastructure rather than like peer to pool lending market? Interesting. Based on the transaction size. You know, the average lender. I guess I have historically described it as peer to pool. I guess technically it kind of is still that. It's just that the peers are very big peers. Yeah. Yeah. So it's not kind of like, you know, true peer to peer lending in like a lending club or any of those kind of Chinese peer to peer lenders. But yeah. So maybe just big peers to pool. Yeah. Big peers to big pools. And then back to big peers that borrow. Exactly. Great. So does anyone else have any other questions? I'd love to learn a little bit more about, you know, exponential and I guess how you guys see the go to market of what you're doing as well. Oh, I think you have the perfect person to answer. Sorry, I didn't hear that. So I actually had a question about exponential. I'm kind of curious about the overall value of exponential. So I actually had a question about exponential. I, I'm kind of curious about the overall go to market for you guys. And so I guess you're offering access for users to all of these different depot opportunities. how do you kind of envision them sorting through the different opportunities? I guess, what do you see as their ultimate decision making process of like, we're gonna lend to TrueFi or we're gonna lend to X and how do they understand all the different risks involved in these given up opportunities? Yeah, thanks for asking. So my name is Mehdi, I'm co-founder of Exponential. And we started Exponential because we saw that there were, we wanted to make DeFi more accessible to everyone. Oscar, I think the mic is noisy. And so the objective to do that came from like, the idea that it is actually pretty hard for everyone to assess risk, see opportunities and invest in DeFi. And so to tackle all of this, we first realized that there is a lot of market inefficiency in DeFi. We would see like all of these investment opportunities that are amazing in decentralized finance that people were not getting access to. And so in order to do that, we basically realized that we need to bring more rationality to DeFi. And in order to do that, it meant to have a platform that had all these opportunities together that can be compared in a nice way. So that meant a lot of work in terms of the UX, a lot of work in terms of bringing the information together and making things comparable. That's why we have, for example, the strategies that can be compared one to the other. The vision for Exponential is to make all of assessing, discovering and trading easy. Today, we have been focusing on the first two parts, which is like we have a risk rating framework that make it easy to assess the risk of a pool. The second part is that we have more and more protocols, assets, pools that are on the platform. The objective in the next three months is to make it possible to one-click invest in the best investment opportunities in DeFi. And that means also that we will be handling the custody for the investors. So that's a full suite, basically. And that's the vision. Yeah, I mean, I think it's something that's very much needed in the space right now. I mean, I think even on our side, I mean, so much of what we are doing is trying to educate and work with institutions about how they can even kind of access some of these DeFi opportunities. And on our side, I think the idea of trying to do that with a bajillion retail participants is probably out of our scope and ability. But having a partner like you guys, who is doing a lot of that heavy lifting with easy to use interfaces is great for us. Awesome. And one of the reasons why we're happy to be integrated. Awesome. So I have a question actually for you as well, because we try to be a little bit purist in terms of like DeFi. And from what we have seen, uncollateralized lending protocols all have some level of centralization, at least in a few jobs, like assessing the borrowers or disbursing the loans or recovering the funds. These require almost centralization. And so my question to you, do you see a way that we have uncollateralized lending, but with a more pure decentralized finance, in the sense like, another way to ask the question is, once we have uncollateralized lending, does it require centralization? I think, yes. It does require some level of, there ultimately needs to be a responsible party who is underwriting the borrowers. And I think that the vision that I have seen some people pitch is around the idea of kind of on-chain credit scoring. And when we first launched, that was something that we played around with as well. We don't do it anymore, but we had developed a kind of credit score that we provided to different borrowers. And I think ultimately at the end of the day, I just don't see how that works without some kind of recourse. And ultimately it needs to be a central party that pursues recourse, in the case of a loan gone wrong. And also I think you need sophisticated underwriting that happens. And again, that also needs to be done by some sort of manager. If you just have an open pool where anyone could draw down on it without any sort of credit process, I think that that's extremely risky. And I don't think that's a great product for lenders. I think the other market that I follow, and I also think is challenging, is the lending on an uncollateralized basis to individuals slash retail. I see a lot of interesting approaches to kind of credit scoring or social scoring or using someone's on-chain history to be able to provide them uncollateralized loans. And I don't know. I mean, the recourse on that needs to be extremely strong. And I just kind of haven't seen that part of it sorted out yet. Yeah. That's very interesting because I think that this means that for investors in a pool, in a true lending pool, would need to assess both the credit worthiness of the borrower and also the ability for TruFi's team to assess and recover the funds. It's basically a lot of variables and any of these could give an edge to the lenders. Or are you just looking at this as like, oh, this is a financial instrument that is going to be, or an investment opportunity that is out there and that over time, people are going to start to feel more comfortable with it based on historical performance. How are you looking at this? How do you think the investors that want to invest rationally in TruFi assess the risk when they are going into a 12% return on USDC? Yeah, I think it kind of goes back to something I said earlier, which is even if they're not able to assess each borrower on an individual basis, they're at least able to get an understanding of who the end borrowers are in the pool. And there's some level of cursory research that they could do there. In reality, what lenders are assessing is the manager or the underwriter of each individual strategy. And so one of the things that we've introduced recently is that say you're going to lend to one of our, I don't know, let's pick a Caurus, who is one of our managers. Say you want them to lend to their portfolio in TruFi. You have the ability to access a data room that they've provided ahead of lending to the pool. You know, you have the opportunity to get in touch with them and learn more about their strategy. And really what a lender is doing in that case is assessing the manager. Not completely dissimilar to what you'd find if you were, you know, going to participate in a private credit fund or something along those lines. Awesome. I don't have any more questions. Thank you, Ryan. This was really great. I think we should do this more often. Yeah, this was really fun. It's great getting to learn a little bit more about you guys as well. All right. I think we're nearing to the end. I want to thank Ryan and the TruFi team for their time to joining. Thanks for this conversation. Really helps us enlighten our understanding about TruFi and also help potential investors in some of the lending pools and the opportunities you have there. Thanks a lot, Ryan. My great pleasure. And once again, thanks all for having me. And thanks everyone for joining. Yeah. And before we break out, we have a PoEp for anyone who's interested. If you go to the PoEp app on your phone, the secret code for minting the PoEp is safu-fund. It will be available to mint for the next 10 minutes or so. We have a few available. So if you want to mint yours, you know, please take it. Awesome. I'm going to do that right now. Yeah, safu-fund. S-A-F-U-dash-fund? Yes. All right, perfect. Thank you. Oh, okay. So how do you do that, actually? I don't think I've ever done it this way. Is it enter secret word? Yes, it's enter secret word. I think it becomes available. Yeah, it is available now at 25 past. So you enter secret word, safu-fund. Nice. Yeah, and you can mint it. Yeah, our first PoEp for our series, Be Generous Responsibly. Thanks, everyone, for joining. Have a great rest of your day. Awesome. Thanks, everybody. Thank you. Thanks, everyone. Bye.