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Clearpool AMA Recap: In the Deep End with LayerZero & Sino Global Capital

On Tues 30th Aug, Clearpool hosted the next ‘In the Deep End’, which featured a fascinating discussion with partner, LayerZero, and co-investor, Sino Global Capital.

Missed the AMA? You can listen to the recording here or check out the written highlights below.

Introduction

Ian Wittkopp
Sino Global Capital is most well known as a venture capital firm. We do pre-seed, seed, Series A, and early-stage deals, and we can also participate later. We have a $200 million fund that we run from our home base in the Bahamas. We have a global team with members in Singapore, India, Asia, Europe, and the United States. We primarily invest in blockchain-related projects, such as DeFi, metaverse, gaming, infrastructure layer projects, L1 and L2.

Aside from venture capital, we also have a gaming studio called Sino Global Games. So we have two web3 games, one similar to Tower Defense and the other similar to a dungeon crawler, that will be released on Polygon in late September. So that’s Sino in a nutshell. I’ve been with Sino since 2017 as the head of investment and COO. Before Sino, I worked as an economist for the Bureau of Labor Statistics and was rescued later on into the crypto world.

Ryan Zarick
I’m a co-founder and CTO of LayerZero Labs. LayerZero is an omnichain interoperability protocol that enables smart contracts on different blockchains to communicate with one another using generic messaging. The three co-founders, including myself, went to university together, graduated college, started our first company, sold it, and have been building companies together ever since. We began in the crypto space, working on trading strategies for hedge funds, arbitrage opportunity bots, and other projects in the space.

When Binance Smart Chain was launched around February 2021, we saw the potential for a competitor EVM that was gaining traction, and that’s when we came up with LayerZero. We decided to build a multichain application and began investigating all of the different bridges available, discovering that they all had the same basic security properties, which is called a middle chain. This chain in the middle is basically listening to one chain and then writing to the other, and the receiving chain has to trust that middle chain implicitly.

So that middle chain has all the security risks and, if corrupted, can forge messaging on all chains everywhere and steal all the funds, which we thought was extremely risky and would never be used. Nonetheless, that is the foundation of the majority of bridging applications or solutions today.

I started investigating different approaches for moving information between blockchains. One approach we liked a lot was what IBC does, where they run full light clients between chains. So, when Chain A wants to communicate with Chain B and vice versa, Chain A has light clients of Chain B, and Chain B has light clients of Chain A; you move a transaction proof, verify it on the other side of the chain, and then deliver messaging. The problem is that running a full on-chain light client on, say, ethereum would cost between $50 and $100 million per day per pair-wise chain attached to it. So it’s very expensive to run on the EVM, particularly Ethereum, which is why it’s mostly seen on cosmos chains.

So instead of moving each block header sequentially, we built an ultralight node/client that moves them on demand via an Oracle. Another entity, the Relayer, could validate a transaction proof on the destination chain on-chain by verifying it against the block header and then delivering the message on the other side. That is the foundational technology upon which LayerZero was built, eliminating the concept of a middle chain and this off-chain entity to which everyone subscribes and instead of creating a massive honey pot and moving message validation end-to-end.

So, I guess that’s the premise of what we started with LayerZero. We had initially built a bridge, which is now known as the Stargate. We realized that the underlying messaging technology was far more important, and we saw that there are L1 and L2, so something that connects them underneath is layer zero of crypto. That’s where the names came from, and we began with LayerZero, then built upon them is Stargate and all of the messaging that exists today.

Please tell us why you invested in both Clearpool and LayerZero at such an early stage and why you are excited about this partnership between Clearpool and LayerZero.

Ian Wittkopp
Sure, we’re super excited to be early investors in both Clearpool and LayerZero. I’ll walk you through my Clearpool thesis when we made our investment, and then I’ll link it to LayerZero and explain how that becomes our LayerZero investment thesis as well. So bear with me as I try to give you both in one go.

When we were thinking about this last year about Clearpool, we saw the crypto credit market has four main sources of crypto credit for institutional market makers.

  1. Centralized lenders, such as Celcius. They were largely powered by retail depositors.
  2. Centralized exchanges such as FTX, Coinbase, and so on. These lines of credit are usually not flexible and non-transportable, as they’re used on the exchange.
  3. Uncollateralized lenders, such as Clearpool. This was what we thought of as the infrastructure for DeFi lending. It is a DeFi credit marketplace where a network of lenders can aggregate small deposits and lend to the borrowers, such as market makers.
  4. Bespoke agreements between borrowers and lenders. So, for example, market maker A on the Sino side says, “Hey, we want to lend you X amount of capital, and in return, you will collateralize it with some equity or something.” We could do that, but this is probably the smallest of those sources of credit.

When you look at these credit sources, you’ll notice that centralized lenders like Celsius are unquestionably the largest credit providers in the market, but their business models are not sustainable for a variety of reasons. There is a principal-agent problem with retail customers depositing and having their rates capped, and then on the back end, there is an incentive for the company’s managers, for example, to get the highest rate possible. This creates a principal-agent problem, which leads to risk and treasury management issues.

So we can see right away that uncollateralized lenders like Clearpool have a really strong potential product market fit, but they needed a catalyst to increase their adoption. However, in the long run, it is an excellent alternative place for lenders to keep rates competitive. So we can end our thesis on Clearpool there and then fast forward to see what actually happened.

In the first half of this year, we saw centralized lenders fail or exit the market, bad debt from 3AC, and so on. There was a huge hole in the ability of market makers to access pure leverage, as evidenced by widening spreads on BTC/USD pairs on top exchanges. There is simply not enough leverage in the ecosystem, and there is far more demand for credit than supply.

This was actually the catalyst that allowed uncollateralized lenders like Clearpool to really take off because it allowed for the repricing of the loans that they’re providing. So, while the lender may not want to lend it at 6% when rates rose to 11 to 12% after centralized lenders exited the market, it became very appealing. As a result, this has been a really big catalyst for uncollateralized lending space or DeFi crypto credit.

And then it gets you to LayerZero. What does a protocol like Clearpool need? They need to be cross-chain in a frictionless way, and they don’t have to build that infrastructure themselves. So LayerZero is super cool here because there are two main things. One, CPOOL tokens can now live on multiple chains like Polygon and Ethereum and can be bridged back and forth in a very timely fashion. So you have the omnichain fungibility token (OFT) standard that LayerZero provides for the Clearpool token. And also in the future, when launching on other chains and, for example, going from Avalanche to Ethereum, or wherever it needs to go for Clearpool pools.

Then it takes you to LayerZero. What is required for a protocol like Clearpool? They need to be cross-chain in a frictionless way where they do not have to build that infrastructure themselves. LayerZero is super cool here because of two main things. One, CPOOL tokens can now exist on multiple chains, such as Polygon and Ethereum, and can be bridged back and forth in a very timely fashion. So you have the LayerZero omnichain fungibility token (OFT) standard for the CPOOL token. And this also can be applied when launching on other chains in the future.

So you can largely look at the thesis that we had on LayerZero being protocols are going to want to abstract the complexity of going cross-chain themselves away from their core research resources, and LayerZero is going to be this protocol that allows them to grow cross-chain and like a simple manner. So the intersection of Clearpool and LayerZero is super important because we should live in like a frictionless world. But at a high level, that’s the thesis for both.

To summarize our LayerZero thesis, protocols will want to abstract the complexity of going cross-chain away from their core research resources, and LayerZero will be this protocol that allows them to grow cross-chain in a simple manner. As a result, the intersection of Clearpool and LayerZero is very important because we should live in a frictionless world. So that concludes our thesis for both projects at a high level.

There are many L1 and L2 blockchains, so could you please elaborate on how LayerZero fits into that ecosystem?

Ryan Zarick
LayerZero allows developers or companies to not have to choose a home base. Before messaging was a thing, if you have a multi-chain strategy, you’re deploying the same project on multiple chains where each of them is not connected, don’t share information, can’t share liquidity, and so on. And now it allows your application to be omnichain, where you exist on every chain you wanna be on. You’re not dependent on the success of one single chain and are able to tap into communities, liquidity, and resources from all the chains that you deploy on. For example, with the OFT standard that you implemented right now, you exist on Polygon and Ethereum, but you could expand your token and technically exist natively everywhere.

Furthermore, Stargate is a composable bridge that has native token liquidity pools. Stargate is really just an additional infrastructure for your on-chain messaging, where instead of just being able to send a message between chains to pass data and information, you can now also move liquidity while still making a transaction. One of the methods is to swap on one side, bridge, and then swap on the other side, with only a single transaction and paying source gas, and then land on the other side.

Another thing Clearpool could do, is to provide liquidity from any chain and move that liquidity to a single pool of liquidity, such as Ethereum, yet you could tap all of the liquidity from every chain that Stargate and LayerZero were connected to. This allows Clearpool to access a much larger user base and allow people to participate on the chain where they have liquidity and feel comfortable while still pulling all liquidity together.

Aside from its use cases on DeFi, you can also apply it to NFT and gaming, such as minting NFT on one chain but playing the game on another or storing data on one chain but moving tokens to, say, Ethereum, where the marketplace is. Your application no longer lives on a single chain, where it could live everywhere and take advantage of the best of both worlds, such as on a fast chain for speed and a slower but more expensive chain, such as Ethereum, for security.

There are other projects similar to Clearpool and LayerZero. Are Clearpool and LayerZero currently leading the market, and what else are you seeing in this space?

Ian Wittkopp
I’ll start with Clearpool. One of Clearpool’s key insights was the use of single-borrower pools. These pools enabled lenders to narrow down their counterparty risk, where lenders have complete control over who they lend. This becomes interesting when one considers that Clearpool, in addition to being a market leader and intending to maintain that position, provides the ability to manage credit risk with derivatives. Clearpool can build a really cool derivatives layer on top of single-borrower pools, where people can manage their risk through these derivatives.

Then let’s link that to what happened in the last few months with the credit meltdown. Many centralized lenders lacked the necessary underwriting standards to avoid contagion or failed to recognize that all loans are highly correlated. That is one of the primary reasons why many of these centralized lenders went down. The future appeal of Clearpool is that it solves the exact problem that brought down a large portion of our industry in the previous cycle. So, not only are you guys the market leaders right now, but you’ll continue to build on that advantage in the future, and I couldn’t be more excited about those amazing derivatives layers.

Then, on the LayerZero side, we got to spend a lot of time discussing this with the team in the Bahamas. Their developer onboarding experience for Clearpool or any protocol coming on their platform is first-rate. The first thing I hear from all integrating teams is that it is a very seamless experience. Aside from the need for security and liquidity on both sides, one of the key success factors for cross-chain messaging protocols like LayerZero is a kick-ass developer experience. So that’s one thing LayerZero has absolutely nailed and will keep them as the market leader.

Single-borrower pools concept paves the way for the derivative layer and secondary market for the cpTokens. There’s a lot of exciting stuff coming ahead on that, and that level of product sophistication is what traditional financial institutions need to see in order to enter these markets. Do you agree with this?

Ian Wittkopp
Yeah, 100%. In general, Clearpool and DeFi crypto credit markets are critical for unlocking institutional participation because they provide leverage to market makers. Market makers keep the books open on major exchanges, tighten spreads, and deepen liquidity. Furthermore, they want their full suite of risk management tools, just like in traditional finance. One of those tools is the interest rate and credit derivatives which don’t exist yet, and are now being built by Clearpool. So agree, there are a few components of Clearpool paving the way towards institutional adoption, and that’s pretty exciting.

Is it important to be multi-chain from an investment standpoint? Is it still relevant today, especially with the introduction of LayerZero?

Ian Wittkopp
I would say it’s more relevant because when you look at what drives Clearpool for example, you would say largely it’s like the amount of TVL or the amount of lending capacity. Borrowing capacity is maybe something, but lending capacity is a limiting factor. If you just constrain yourself to one chain, like Ethereum, you reduce the universe of depositors that can use your protocol. As soon as you start going into Polygon or other chains using Stargate to be more native to more chains, you now increase the addressable universe of deposits and also the protocol’s value and utility. So it should be on every top team’s roadmap to do the integration and be able to appeal to customers on different chains.

Do you have a plan for the types of projects you want to integrate with? Do you have any particular criteria, or are you open to all types of projects?

Ryan Zarick
Yeah, we initially had a list of ideas, and most of them were DeFi based that could be built on LayerZero. But we’re not picky on who builds on LayerZero and to whom we provide support. Our company-wide mandate is to provide the best experience when building on top of LayerZero. So while we were designing it, improving the developer experience was a top concern. Simply put, to connect with LayerZero, only two operations need to be implemented — sending and receiving. There is no need to be worried because message delivery is guaranteed. From the user’s point of view, it feels like you’re interacting with the smart contract on the same chain as your existing smart contract. The process is intended to be as simple as possible so that a developer can live on multiple chains in a few hours of setup and minutes of coding.

Moreover, if you have any questions, everyone has dedicated developers/integration engineers who will jump in and answer those questions around the clock. We’re always available, and we see it as penance for not having good enough docs. So, whenever we answer a question that isn’t in the docs, we make a note of it, update the docs, and try to make them as simple as possible. And as time goes on, we’re finding newer projects that are building on LayerZero that we’ve never spoken to before because the docs made it possible. We’re excited to see all of the new and diverse projects that are emerging, with over 1000 smart contracts on mainnet, 5000 on testnet, and more on the way.

Even though we are in a bear market, there are a lot of new projects entering the space and being built. How have things changed, and what are your thoughts as an investor on this?

Ian Wittkopp
It’s a good question. The first thing that occurs in public markets whenever there is market turmoil is a fall in valuations. You may have noticed several private market projects being repriced over the last two to three months as teams made sure to optimize and likely had to drop the price to attract the right kinds of investors. But, I would not say there’s been a drop-off in the talent entering the industry. We don’t know what the future price of Bitcoin will be, but I do know that as long as the most talented people from traditional finance and adjacent fields enter the crypto space, crypto and blockchain will be in good shape, and we will continue to see many promising talents coming in.

Next week, I’ll fly to Bangalore, India, for a demo day hosted by Sino and FTX ventures, with help from Devfolio and Builders Tribe. We kept the application period open for ten days and received around 200 applications for that demo day. We then shortlisted 12 of those who will be presenting, and we are very excited about the calibre of builders who are entering this space. So that’s the North Star; if talent continues to flow in regardless of price, then I’m super happy and bullish about it.

Ryan Zarick
For LayerZero, a market downturn simply allows us to focus more on building, not that we weren’t already. But when the market goes down, we built mostly in stealth with our full focus on that. A large number of applications continue to reach out, and an increasing number of builders are joining and deciding on their next project using an omnichain approach. If we posted graphs, it would show that the number of applications running on testnet and mainnet is fairly consistent from Bull to Bear. We’re happy that there’s a constant flow of promising people wanting to build on LayerZero.

Could you please tell us what lies ahead for LayerZero?

Ryan Zarick
Sure. We are now expanding to other non-EVM chains. Our Solana is currently being audited and will soon be available on testnet. We’re currently in beta, and applications are already being developed. We’ll be going to Aptos and Sui, followed by Flow, Cosmos, and then Polkadot ecosystem. We’re going to include all EVMs, smart contracts, and chains beyond layer zero, allowing smart contracts and chains to communicate with one another directly via LayerZero.

We’re going to attend several upcoming conferences. My co-founder, Brian, will be at the Circle conference at the end of September, while I will be in Token 2049. We’ll also be in Bogota for the Devcon in October.

How many new borrowers are going to be on Clearpool?

Robert Alcorn
In the short term, the next permissioned pool could arrive as soon as next week. There are a few things to finalize, but things are looking good, so expect a new permissioned pool soon. Furthermore, three or four permissionless pools should come online in the coming weeks. Ultimately, as Ian mentioned earlier, there is no shortage of appetite for liquidity, so we have a really healthy pipeline of borrowers.

For obvious reasons, we have been cautious in scaling up on the borrower side over the last few months. We’ve been collaborating closely with our partners and the Credora team, and we are now at a point where we can begin to accelerate the launch of new pools. So keep an eye out for more new pools in the coming months.

When does the interest on USDC get paid? Is it daily, weekly, or monthly?

Robert Alcorn
Interest is generated and accrues on every block. From a borrower’s perspective, the interest accrues to the borrower’s utilization which, all else equal, will nudge up very slightly on every block. From a lender’s perspective, the USDC interest gets paid when you redeem liquidity, which you can theoretically withdraw whenever you want. When you do that, you will receive the principal amount you decide to remove, plus the interest accrued on that amount. On top of that, we have CPOOL rewards that can be claimed anytime.

How often is the buyback and burn program?

Robert Alcorn
We completed the first buyback and burn for Q3 last week. We’ll now do this quarterly so that the next one will be done sometime in Q4. You can see our schedule for buybacks by going to the website and looking in the documentation section.

After Polygon, which chain will be supported next?

Robert Alcorn
We’re now focusing on this integration with LayerZero and the ability to attract liquidity from other chains without actually existing on them. So that is where we will focus for now. It doesn’t mean we won’t support another chain in the future; we might, but for the time being, we’re focusing on this omnichain solution.

Will the staking on Kucoin be extended?

Robert Alcorn
Yes, it has just been extended today for another month, and we have reduced the APR for the single token staking on the exchanges, which is 9% APR now on Kucoin and AscendEX. The reason for that is because our native staking will be launched in September. I don’t have the date yet, but it’s definitely going to be in September, and we’ll announce it as soon as we can. I know everyone is super excited about this, and of course, this links in with the Oracle system that we’re introducing for pricing the interest rate curves for permissionless pools. And we’re pleased to say that Sino Global will be an Oracle. So there you go, the announcement of the first Oracle. Let’s bring Ian back in here and perhaps talk a little bit about that.

What are you looking forward to regarding Sino Global becoming an Oracle on Clearpool?

Ian Wittkopp
Yeah, this was, in fact, related to our previous thesis on why we wanted to be a Clearpool Oracle. When it comes to the catalyst for uncollateralized lenders, it was largely those centralized lenders who lacked good risk management and thus exited the market. As a result, there was less credit available, but there was still a high demand for it. So, it allowed Clearpool and other platforms to reprice their loans and raise the APY that customers receive.

This is where it gets interesting because the Oracles become the mechanism for actually doing the repricing. I’m not sure how frequently you guys do it, weekly/bi-weekly/monthly. However, as an Oracle, we believe that rates for this type of lending should be 10% this month and 15% the following month. And we believe it will fall back to 8% when we enter a period of risk-on when some of the headwinds have passed. As a result, interest rates can be dynamic and keep up with the market. This will open up a lot of lending opportunities because you can now determine it as where supply meets demand using this Oracle system. So that’s the innovation of Clearpool Oracles, and we’re pretty excited to be part of that.

Could you please explain more about Oracles and how they work?

Robert Alcorn
The Oracles will vote on the parameters that will shape the permissionless pool interest rate curves. This will be done over an epoch term of two weeks. The distribution of Oracle inputs is truncated, and a weighted average formula will provide the final outcome, which is used to price the interest rate curve for the following epoch.

Successful Oracles will earn a share of CPOOL emissions, but if an Oracle’s input falls within the tails of the distribution, they will not be rewarded for that epoch. When you stake CPOOL, you will delegate voting power to a selected Oracle. Oracles are incentivized to attract as many delegates as possible in order to earn more commissions. So, it really incentivizes Oracles to provide accurate and fair inputs on where they believe prices are in the market. As a result, the interest rates that borrowers pay and lenders receive will be accurately representative of current market conditions.

That is the concept of the Oracle system, which provides a real utility to CPOOL. Aside from that, we already have other utilities for the token, such as borrowers staking, and more utility will be added with the introduction of derivatives and secondary trading, among other things. Furthermore, as I mentioned before, there will be regular buybacks of CPOOL tokens. So CPOOL is a token with real utility, which is very important, and you don’t see it very often in the market.

Ian Wittkopp
Rob, someone asked me a question about the Clearpool Oracles yesterday as to why it has to be in this middle range and cut off the edges. So I answered it, but I’m curious if you would add anything to this. If the loan market rate is currently at 6%, but the market says it should be 10%, you don’t want it to jump from 6 to 10% in a single epoch. That will shock your borrowers or market makers in this case. You want the rate to move slowly towards that equilibrium level over time. By removing the tails, the transition can be made in a more gradual and measured manner. But I’m curious what else you’d add.

Robert Alcorn
The point is that if there is a market shock and rates move significantly by 3 or 4% or whatever, then all Oracles should see it, and their inputs should be within a similar range. If you have a few Oracles that are giving much higher or lower inputs, it appears that they are attempting to skew the market and will thus fall outside of that range and not receive any emission during that epoch.

If the market is moving quickly, you should be able to tell which Oracles are doing their job correctly. Everyone obviously has the option of deciding which Oracle to delegate to. So, if an Oracle is constantly falling outside of the truncated distribution, they are clearly not going to earn any rewards, and the related stakers are also not going to receive any yield. The stakers will then withdraw their voting power from that Oracle and give it to someone more successful.

How are the CPOOL bridging fees calculated?

Ryan Zarick
Sure. There are two parties that are moving individual information. The Oracle sends the block header, and the Relayer submits the transaction proof and pays the gas on the other side for you. You don’t need a gas token in the destination chain to claim anything. Instead, you pay for everything in a single transaction at the source chain.

From the user’s perspective, the UI is asking the selected Oracle and Relayer pairing how much gas I need to use in the destination chain and how much this will cost in the native token. So Oracle and Relayer are basically market-making gas on the destination chain, and the fee is simply the gas fee you’re paying on the other side with a 5% spread for gas volatility. The fee fluctuates based on the price of gas in the destination chain. As the price of ETH rises, so will the fee to travel there. So that’s how it currently works.

What security systems do you have in place to prevent malicious actors from exploiting your infrastructure and affecting multiple stakeholders who are connected to it?

Ryan Zarick
LayerZero is a permissionless and open system; anyone can participate as an Oracle or Relayer. The application must select their Oracle and Relayer pairing. Just because you’re an Oracle or Relayer doesn’t mean you’ll be used. This actually shards the risk because each application can have a different Oracle and Relayer pairing or even run its own.

As a result, if an Oracle and Relayer pairing is corrupted or attacked in some way, only applications that accept messages from that Oracle and Relayer pairing will be affected. In that case, anyone using a different Oracle or Relayer would be completely unaffected. Furthermore, security is our top priority. This year, we spent $3.5 million on audits. We outspent everyone else in this space, and we have the largest bug bounty in LayerZero and Stargate, each worth $15 million.

We also introduced Pre-crime in April and stealthily launched it in May. It’s been live and securing Stargate since May, and we’re making it available to all projects. Pre-crime is an additional level of security, knowing that most messaging hacks occur when a smart contract vulnerability exists. For instance, there is a vulnerability on chain A, and they are stealing assets from chain B. That message must pass through some off-chain entity. It was a smart contract bug in the wormhole hack. The message that stole the money on the other chain was approved by the 19 validators because it was a valid message despite a bug in the smart contract.

Before delivering any message, Pre-crime forks all the chains associated with that message and checks them against a set of invariants. For Stargate, the books are balanced so that if I put $5,000 on one side, I’m only taking $5,000 on the other, not a million. It ensures that fork chains are balanced before and after delivery. If it’s not balanced and the invariants don’t hold, the message won’t be delivered, and it will prevent a hack from ever happening.

Because LayerZero aims to be as secure as possible, this also protects applications built on top of it from themselves. So, even if you write smart contracts for your messaging layer, you could be hacked by your own software or a bug. As an example, instead of invariants, you could also provide LayerZero with a statement that there should never be more than 1 billion tokens. There is no way for someone to exploit it because when a message travels, it always checks to see if the total supply is still 1 billion across all chains. That’s one of the ways to use Pre-crime.

What kinds of credit derivative products do you think the crypto ecosystem will need as it matures?

Ian Wittkopp
The default swap is the first that comes to mind. For example, if you lend to borrower X and want to buy downside protection quickly and liquidly, you can use credit default swaps (CDS). I’m not a derivatives expert, but I know you can do some interesting things with things like interest rate derivatives. Rob, that’s more for you to go into. But the CDS is what I’m most interested in because it relates to our fund’s level and risk management.

Robert Alcorn
You’re absolutely right. The CDS product is going to be needed to accelerate the market’s maturation and growth. We’re actually working very hard on a product that does exactly that. So, keep an eye out for more information on that one later on.

Ian Wittkopp
At some point, the development of this derivatives market to manage credit risk becomes almost existential to the industry. To manage this risk at a certain scale, you must have a well-functioning system. Particularly in the ultimate bear case, you will need additional protection along the way to ensure that these hedges continue to withstand counterparty risk and do not cause the contagion that we’ve seen in recent months.

Which sectors are you bullish on, and how have your market views changed in the last few months?

Ian Wittkopp
As you can probably tell from this AMA, I’m very excited about the credit space. As previously mentioned, Clearpool is solving a critical problem. Business models must evolve, and those in the lending industry must begin to consider how to manage tail risk. There are also credit derivatives and strategies for managing them. There are also critical aspects of credit that we must fill, such as underwriting, which Credora provides. It allows you to analyze on-chain and CEX wallets and trades to create a credit score and borrower profile. So that’s a pretty cool credit-related innovation.

Aside from that, we see interesting developments in complex derivatives on-chain or structured products. So, when it comes to financialization, you can safely say Solana is at the tip of the spear. I also see this space evolving and beginning to resemble traditional finance, as well as the next few innovations in this space. I believe the options on-chain, in general, did not have the product market fit that people expected, but vaults are a way for a retail customer to gain access to structured products or similar options. So vaults are pretty cool, and there is a lot of innovation in that space. I’m also pretty excited about that as well.

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