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- [00:03]
A
Bankless Nation. I'm here once again with Ian Debode from Ondo. Ian, welcome back to the podcast.
- [00:08]
B
Thanks for having me.
- [00:10]
A
Ian. Real world assets, pretty hot right now. Ondo's been here building in real world assets for forever. Kind of feels like the rest of the crypto world is moving into your guys domain. How does it feel to just have already been in the space that now a lot of other companies are moving into?
- [00:29]
B
Yeah, it's definitely a surreal experience to see what you were saying almost three years ago now all come to life. So it's very nice. It's in a way flattering. There's definitely increased competition. I feel like every single week there is a large crypto exchange or brokerage platform launching their own version of tokenized equities. But it is very interesting and exciting to see everyone entering the space and really embracing RW it.
- [00:55]
A
Yeah, yeah. Especially with the rise of perps. Really the rise of perps in the first half of this year coincided with the rise of just like real world asset trading. It's like crypto volumes on crypto exchanges and also on perps is down, but real world asset trading is up. Yes, turns out, turns out people like real world assets. I want to talk about the one particular real world asset that has caught everyone's attention this week. That's SpaceX and tokenized SpaceX. SpaceX IPO'd on NASDAQ on June 12th. Ondo's tokenized SpaceX stock was minted on Ethereum that same day also on June 12th. How did that happen so fast?
- [01:35]
B
Yeah, great question. I think we were live with trading about five minutes after the real thing started trading. So clearly this was not our first rodeo. We've done an IPO before. That one went smooth, but not as smooth as this one. So we kind of knew what to do. You deploy the token ahead of time, you really make sure that all the market makers, etc already have it integrated into their systems. Our tokenized stock platform works best with intense based systems like think of your 1 inch Fusion Uniswap X Cow Swap, all those guys, we made sure that ahead of time all of those platforms had already integrated the token. And then the moment the thing becomes tradable, we just had to flip the switch in our system, get a, get a price feed essentially to make sure that we understand what the price is. And the moment that happens, anyone can buy it. So that basically only took about five minutes, which is why everyone more or less at IPO was able to buy SpaceX and those who did, quite frankly, I think are up 30% or so.
- [02:35]
A
Yeah, yeah, yeah, yeah. Or, or, I mean, even if they were down 30%, like you don't care because all you're doing is serving them the stock, right?
- [02:43]
B
That is correct. We are a big proponent of investor choice. It does make me happier when our investors are up versus down. But yes, in the end it is all about enabling access and people are free to do with their money what they choose.
- [02:55]
A
This might require just kind of a refresher on what an Ondo tokenized stock is and how it works. But did you guys have SpaceX shares ahead of IPO or how were you guys ready to flip the switch and have those tokens trade on Ethereum actually being backed by SpaceX? How did that, how does that work?
- [03:16]
B
Yeah, we did not do the pre IPO allocation this time. The problem with those pre IPO allocations is that you are entirely dependent on getting an allocation in the ipo and that really gets handed out to large institutions, big brokerage platforms. You know, Ondo is big, but not that big. Right. And I think if the risk of trying to promise pre IPO allocation to some of the partners is that you end up not getting it and people are very disappointed. And that is exactly what we saw, particularly with X stocks, quite frankly, who I think did not set expectations in the right way. So you had Bybit and Bitget and Binance Wallet, et cetera, all being quite disappointed because they did not get any of the allocation via X stocks that they wanted. So with that in mind, we did not actually try that in the first place. But down the line there are ways to do pre IPO stocks. I mean, there's a lot of excitement around OpenAI, anthropic, a couple of others. We are definitely considering offering pre IPO stocks as well. But right now our main focus is always the moment the IPO happens, the moment something is tradable on the NASDAQ or the New York Stock Exchange. That is when we can tokenize something very quickly with our model with the Wrapper forum so available to offshore users, offshore investors outside the US So that the moment something trades on one of the national exchanges in the US people can buy it in wrapped form via our platform and via our DEFI integrations.
- [04:45]
A
Maybe we can illustrate a little bit of like the Rube Goldberger machine where you have like different pieces all kind of connecting and then, you know, the SpaceX iPodOS, it trades on the NASDAQ and then everything like the wires all connect, the light bulb turns on the token starts trading. So what are these puzzle pieces?
- [05:03]
B
Yeah, there's an on chain bit and there's an off chain bit. So on chain you have essentially the platform where the end investor is and the wallet that they hold. This could be MetaMask wallet, Phantom wallet, a binary wallet, you name it, whatever, right? Some wallets have integrated an actual stock trading interface natively in the wallet, some have not. And then you can go to a Uniswap or a COW swap or one inch interface or Jupiter on Solana. Right? Kind of depends. You select the stock that you want to buy and typically most people buy it via stable coins. You need to have stablecoins in your wallet. You see a price that you like. That price is being streamed, typically fetched via our own APIs. It has a little bit of slippage tolerance, just like you would buy any crypto. The moment you see a price that you like, you say yes, I'd like to buy. At that point an RFQ is kicked off. So there are no dex pools on our tokens, right? I mean people can deploy them, but we definitely do not deploy them. The token that someone wants to buy typically is not on chain yet. The moment they click that button that says buy, what ends up happening is an RFQ is kicked off. That just means that market makers who are integrated into those defi and debt protocols, they get a ping that says hey, we have an inbound for whatever someone wants to buy $100,000 worth of SpaceX, right? They get, they get that ping, those market makers are onboarded with us and then ping our APIs that says, Hey, $100,000 worth of SpaceX. What's the price you got? We check exactly what is the price available on the New York Stock exchange or the NASDAQ and we add five bips. So.05% on top of that price, that is the price that we charge that market. We lock that price in for that market maker for a period of time so that that market maker can then go and compete in that auction process. They typically add a very small spread on top, 1 to 2 bips. Whichever market maker offers the best execution price to the end investor wins the auction. They then take that signed attestation that we gave them on chain, they take the user stablecoins, they submit that into our minting smart contract. Our minting smart contract recognizes that signed attestations and sees the stable coins, they mint them, the tokens and that market maker sends it over to the end investor. This entire process can take about a Second right, it's pretty quick. The moment we minted the tokens for SpaceX, that's when we have to collateralize and we have to actually go out and buy the underlying SpaceX stock to make sure that whatever we minted is fully backed. So within a couple hundred milliseconds that we have minted the token and it is finalized. That is when we buy the SpaceX on the open market. It is possible that the price of SpaceX has since moved a little bit since we locked in that price. That's why we charge that five bibs is basically to protect ourselves with a little bit of a volatility buffer. And at that point, you know, someone globally with a self custodial wallet has bought Space X fully collateralized, fully backed in wrapper form.
- [08:02]
A
What's the total time? What's the total round trip time that
- [08:04]
B
takes on the Binance chain or Solana? About a second.
- [08:08]
A
Okay, okay. And then in Ethereum, up up to 12 seconds. Well, 12 seconds, yeah, three blocks technically,
- [08:14]
B
if you buy it on cow swap. So 30.
- [08:16]
A
But you guys don't feel you have too much exposure to price volatility on your side of things? Because your side of things, once you receive the money, you guys are able
- [08:26]
B
to execute super quick.
- [08:27]
A
And so price volatility is very likely to stay within that 5 bip range that you guys pad for yourselves on.
- [08:34]
B
That is designed basically to have that padding on very volatile assets. It is possible that we charge slightly more, but by and large, yes, that five bits is enough.
- [08:44]
A
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- [09:32]
C
Some exciting news. We are launching a new podcast to Help people figure out the crypto cycle, how to navigate it. The best crypto cycle investor I know, his name is Michael Nadeau. He runs the Defi Report. This is the guy that sent me a sell alert before the 10:10 price drop happened. His cycle analysis has been absolutely on point. I've been following him for years, and this year we started recording weekly podcast episodes. Each one we get into his portfolio, what he's holding, the market structure, entry targets, fair market value of Bitcoin and ether. And where we are in the cycle, there's new episodes that are released every Wednesday. They're 30 minutes, they're short, they're punchy. I think this crypto cycle is harder to navigate than most. So let's do it together. Go subscribe to this podcast, search the Defi Report, Wherever you get your podcasts, YouTube, Apple, Spotify, or find a link in the show Notes, there's a new episode waiting for you.
- [10:19]
A
Now, where does the majority of buying. For example, we can just talk about the SpaceX token. Where does the majority of the buying happen? Does that happen on your guys's front end or is it just like users going to uniswap?
- [10:31]
B
Yeah, it's definitely, I'd say 80, 20, 80% is outside of our platform. 20% in the platform. We are integrated into a lot of the large crypto wallets and exchanges. Binance, Bitget, Gate, opx, Metamask, Phantom. So there's a lot of users, they have more users than us. So typically 80, 80 to 90% of our flow in TVL right now is coming from outside of our own beta.
- [10:54]
A
But it's still going through the intense route. Correct, because it would be silly to buy it on an AMM pool because the liquidity is not going to be as good as directly tapping into the market makers, because those people are directly tapped into you and you're directly tapped into the actual exchange.
- [11:11]
B
You nailed it. Right?
- [11:13]
A
Okay, that makes all pretty sense. As far as like a Rube Goldberg machine. That one's pretty, pretty simple, pretty easy to reason about.
- [11:18]
B
I mean, right? Yes, now in hindsight, but you know, a lot of our competitors launched with dex pools. They never figured out how to do that. Straight tapping into the liquidity that already exists in tradfi, which is why initially a lot of people were buying tokenized stocks that would depeg left and right. But the real way, the only way, quite frankly, to really do this, is to tap into that tradfi liquidity that already exists. And that way you can.
- [11:42]
A
There's no way pool is going to create anywhere near as much as liquidity as possible.
- [11:48]
B
But even right now like we saw a new competitor launch on Solana last week and then they screenshot this like oh my God, we have 6 million doll in a dex pool Liquidity come and buy it with us and then you literally just have to go on Jupiter and put in a $1 million order. Check the slippage. It would be 10% slippage on a dex pool and 0.1% slippage via us.
- [12:09]
A
I, I feel like on a $6 million pool much less than that will blow it out. Like it doesn't totally take much to like move an AMM pool.
- [12:18]
B
No. And don't get me wrong, I love AMM pools because they are required for weekend trading at this point. Right. So that's when an AMM pool becomes helpful. But yeah, doing just in time liquidity like we do it during 245 market hours and overnight is really the only way to do to do it. Right.
- [12:35]
A
What have been your guys most successful tokenized stocks? Who is buying what stock the most?
- [12:40]
B
Circle is surprisingly so the number one by a mile actually apparently there's like trader groups in China that think it's the next Nvidia is what I was told. It's very funny to me but you know people love, people love the stock so they buy it. Micron is very popular and then obviously
- [13:00]
A
that one makes more sense to me.
- [13:01]
B
Yeah, Micron really came up other semi stocks your you know Nvidia's Teslas of the world. It's a bunch of the max sevens. Now SpaceX is climbing very rapidly so know the usual suspect. Cool.
- [13:15]
A
Okay. Yeah they, they invog stonks.
- [13:18]
B
Yes, that's right.
- [13:20]
A
Okay, so say I have some of these things mu SpaceX circle. Say I have a portfolio of these things. Why are the tokens the tokenized versions of the equities better than holding them in my Robinhood for example what can I do with them on chain that you can't do in Robinhood?
- [13:40]
B
Yeah, increasingly you can use them as collateral wherever you want. So if you want to use them for margin purposes or collateral purposes on our own perks platform you can. I'd say the DEFI ecosystem around stocks is only just developing because defi wasn't really built to support hundreds of assets right off the bat. I think with crypto you could build a defi platform around 20 assets and you're fine. Right. You think about ABE markets more for markets tends to be okay. But with stocks before you know it you're in the hundreds of different stocks that all have market caps of 50 billion plus. Right. So DeFi wasn't really built to incorporate the size of that asset pool. But a lot of those integrations are getting built now. So we're starting to see some faults on Morpho, Kamino and the like. And there's also collateral use cases now on, on the perks itself. So you can use your actual tokenized stocks as collateral to open up a per on our platform.
- [14:38]
A
Okay, so yeah, let's just go into, onto a purpose because I think this is actually going to be the meat of this conversation and why I wanted to bring you on to understand a little bit more about the real world asset per world. Correct me if I'm wrong, but as I understand it, real world asset perps kind of started on hyper liquid earlier this year where First Trade XYZ listed the gold and silver assets right before they had the mania. So fantastic timing. But there was no underlying. They just quoted the price and there was no, no underlying. Which is a different environment, trading environment, market structure environment than if there was an underlying. Then oil markets came online, same thing. And now we're starting to get into the world of equity perps. We have Mike Selig from the CFTC talking very favorably about per platforms and the concept of equity perps. I don't know really where that goes because if we get into equity perps we start to talk about some incumbents and there's just so much more compliance about all that. But not really. Not really. Well, neither here nor there. What I'm really interested in is kind of like the offshore version of equity perps where there is an underlying token. And so rather the per instrument quoting an Oracle or not really quoting anything and it's just being synthetic. That's different than there being an actual underlying asset that is being traded in spot on chain that is accessible to that per instrument. That's kind of what I'm interested in. Maybe, maybe I'm getting a little bit ahead of myself but like talk to me about Ondo perps and like the specific market structure that you guys are building over there.
- [16:12]
B
You know, a per is a very elegant, beautiful instrument. To your point, it is. I mean it's a derivative contract, right? It's fully unbacked. It's synthetic exposure to an asset that you have an oracle for and you can figure out what the price is and then there's a funding rate depending on whether you know, go long or short. You're basically paying on an ongoing basis to have a position. But it's a beautifully simple prop product because it is synthetic exposure. You can open it just with a stable coin. You can keep it open 24, 7. It's got no rollovers, no expiry. That is why so many crypto traders really like the concept of a perpetual future. But the problem with the per market right now is that it's a pretty capital inefficient product. What I mean by that is, particularly for real world assets, what ends up happening is let's say someone wants to go long Tesla, right? So an investor comes in, the deposit stable coins, they go 10x long Tesla. For every long on these per platforms there's a short, right? So a market maker comes in, they deposit stable coins, they short Tesla. No market maker actually wants to be short. It's not what a market maker does. Market makers always wants to be hedged. So they have a brokerage account off chain where they buy the Tesla stock. Brokerage account is funded with whatever else they want. They buy the Tesla stock to offset the short on the per. Now they're hedged, but they're not hedged in the eyes of the per platform because the collateral is all off chain. So they need to have more stable coins available to top up their position in case the market moves against them. So you end up with an a system that is just not very capital efficient. At best probably 50%. Right. Bunch of stables here, Tesla stock there, more stables here. So the reason why that matters is because it ends up hurting the end liquidity that market makers are willing to put on chain because their cost of capital is very, very hot.
- [18:09]
C
Right.
- [18:09]
A
Because they have to suck up, they have to lock up dollars on one side and on another side.
- [18:14]
B
Correct. That is why when you typically look at the liquidity, particularly on single name equity perks, it's just not very good. In an ideal world, what ends up happening is user comes in, they go 10x long Tesla market maker comes in, they short Tesla, they deposit tokenize Tesla as collateral on the per platform itself. Now they're fully hedged and they can just collect the funding, Right?
- [18:37]
A
Right.
- [18:37]
B
Capital efficiency more or less 100%. And that really enhances the liquidity that any single market maker is willing to put on the platform because it is so much more capital efficient. And when you get more liquidity, you get more traders, the flywheel becomes real and that's when really the market gets into escape velocity. Now I don't mean to imply the trade XYZ and hyper liquid have not been successful, right? Clearly they have been. But when you look at single name equities in particular, even on trade xyz, the liquidity isn't that great. And it's primarily because of that dynamic that I just described. So we will be able to support the tokenized stocks as collateral on the ONO PER platform Hondo Finance built it on. The PER is a separate entity. It is offshore only available to offshore investors. But the technology is very similar to what we had built for on the global markets. Because we can tokenize these things at scale, because there's real liquidity on these tokenized stocks as collateral and because there's real liquidity in these tokenized stocks as collateral, you can also liquidate them in size. Right. This is ultimately then the next question of like why doesn't everybody just do this? Right? Why does it have to be on the finance? And I think the rationale there is if you as an exchange support collateral of any type of, you need to be able to liquidate it in size, otherwise as an exchange you're going to be saddled up with a bunch of bad debt. On the finance is the issuer of the tokenized stocks. We are literally sitting on the actual backing of the tokens as a result liquidating these things in size. The rails to do that have already been built straight into the New York Stock Exchange, the nasdaq. Right. That is why these things can be liquidated in size and why other PER platforms can't necessarily do that.
- [20:23]
A
Okay, let me, let me repeat back at you what I understood. And you can, you know, tell me I'm smart or tell me I didn't get it on a per platform that doesn't have an underlying. It's retail versus retail. Because perps are just a fundamentally like a retail instrument. And you know, if the retail going long doesn't offset the retail going short, well then the funding rate, you know, will counterbalance that. But it could get really dislocated because there's not a market maker in the middle. Maybe there is market makers on a PER platform that does not have an underlying. Because if retail is going against retail, then you know, there's retail flow to collect fees from. So it's going to attract some market maker, at least one. But attracting a scalable amount of market makers is hard to your point, because it's so capital intensive that because you have to be able to go short on the actual underlying, which requires putting up actual real dollars money in a brokerage somewhere to be able to go short. So what we're doing is we're solving that problem by we're bringing the asset on chain which allows market makers to go short or long as needed in the same venue. And rather than like locking up dollars, they're just using the actual underlying which is the capital that's, that's needed. And so there's like a resonance thing. Like the chakras are aligned with the, with the asset being on the same platform that they are going along and short on so they don't need to like lock up dollars. And so like multiple market makers can come into the same platform and make the whole thing much more liquid. Is that, that's what you were saying?
- [21:53]
B
Nailed it.
- [21:54]
A
Is there other things that can happen with this? Like just more financial building blocks about around like funding rates. And I, I feel like they like the idea of a perp that does not have an underlying. Like one dimensional perps is like one one dimensional and. But then you add the underlying there and it like blossoms into like, oh this whole like landscape of opportunity because this very important puzzle piece of the actual asset is there on chain. Where does this go from here?
- [22:25]
B
Oh, I think it's going to get very interesting because the moment you enable the asset as collateral on a perp, you just enable so many new use cases. I mean it adds liquidity. And that's the part that we've been focusing on because it makes the platform more capital efficient. But for your average trader, it's also a much more elegant way to build a portfolio. Like you can deposit gold, be long gold and short short silver, right? You can do these types of pair trades in a very different way. You can build towards proper portfolio margin that most institutions right now have access to, but retail globally typically does not. So you can go really capital efficient and really bring build towards proper prime brokerage for everyone involved. You could also think about, you know, just different type of trading strategies or different type of income streams depending on how you use these stocks. So one thing you could do is say, hey, I'm going to construct the equivalent of a Max 7 ETF, right? You just have your seven major stocks that you put in there. You put that in tokenized form in a wrapper so that people can buy the Max 7 ETF. But you could think about potentially juicing the return of that ETF equivalent by maybe over the weekend you take those single stocks and you deposit them on the per platform to actually then you know, use it as a short, collect the funding and do the carry trade. Right. So what does an ETF on the Max 7 look like where over the weekend you're doing the carry trade and collecting the funding, I don't know. But those are the types of things that people are going to start experimenting with pretty quickly. And that really opens up, I think, new types of strategies, both active and passive, that crypto native capital is going to be interested in. But if people really find a winning strategy or winning product strategy, I'm pretty sure that's going to get productized and be offered to even Trad5 brokerages pretty soon. Just like we saw with an ETF on a crypto product. And you built that into a tradfi brokerage. Before you know it, people are going to be able to construct different type of product portfolios on chain with a superior return of what you can normally get in traffi, productize that and distribute it to institutional capital.
- [24:36]
A
Kind of what I heard your answer was is I was asking like, you know, what happens next if like we have these two building blocks, these two particles, we smash them together? Like what particles come out of that? And I think what your answer is like, dude, what particles don't come out of that? I think if you go, go look in tradfi, you see all these different ETFs, you know, actively manage, passively manage, like this bundle, that bundle, these ratios, that amount of leverage and all of that is made possible by the fact that A, they literally have all the assets and B, they have the margin and the liquidity to be able to kind of formulate any sort of chemistry. And I think what you're saying is like, well, you, once you add the underlyings and you have the per platform, you do get this like blossoming of like, dude, there's all these opportunities out there. You just need somebody with creativity and motivation to like smash the right particles together that the consumers want to present.
- [25:25]
B
The next 12 to 18 months, once all these building blocks are in place, which is more or less happening right now, people are going to dramatically innovate in how asset management and even wealth management is done. Right. I think that really is the next frontier for all These tokenized stocks, ETFs, prediction markets, commodities, perks, platforms and the like. How does that feed into asset management, wealth management, product strategies?
- [25:48]
A
There's some people out there who are just fundamentally bullish. The perpetual. Are you bullish the perpetual as in like tradfi, Wall street, you know, I'm sure options are going to stick around. They've been here for forever, they're great. You know, some people love Them, they d. But the perpetual is coming in, and as an instrument, it's, it's entering the arena of financial instruments. You know, Maybe we're at 1% penetration of perpetual. Maybe we get to 4%, maybe 8%. Some people are like, no, no, no, no. We're going the majority. Like most things. Most things are getting perped. Like how, how bullish are you on the perp in just like penetrating the world. Not even about crypto because, like, the perp's done pretty well in crypto. Like we're at like 90% per volumes versus 10% in spot, depending on how you count it. But like, we have the rest of the world to like, talk about when it comes to finance. How bullish are you on the perp?
- [26:42]
B
I'm pretty bullish on the perp, to be honest. It depends a little bit on your time horizon. Right. Are we talking two years, five years, 10 years?
- [26:49]
A
But yeah, we're talking 10 years. We're talking 10 years, right?
- [26:52]
B
Yeah. As a, as a product category, I don't see why a perp wouldn't be able to grow into a same size as like the options market. I mean, it's just a very different way to get leverage on an instrument, on an actual stock. I mean, the benefit of an option is you're never going to get liquidated on it. Right. But options are very difficult to understand for the normal retail.
- [27:13]
A
Doesn't. Doesn't being out of the money count as a liquidation?
- [27:16]
B
I mean, you could argue that too. Yes. If you don't get your money, if
- [27:19]
A
you get $0 back on your investment, that's the liquidation.
- [27:24]
B
I mean, it's, it's a binary bet in a way.
- [27:26]
C
Right.
- [27:26]
B
But at least as the volatility in the market is, as you approach that expir, you're not going to get liquidated by volatility in the market, which you should on a perp. Fair, Fair. So, you know, in that sense, options are great. Perps are pretty great because they're just so simple. Right. And they're synthetic 24,7 already. Everyone can kind of understand it. Perps aren't perfect right now. The OLADL mechanism and the like is not great. But I'm pretty sure we're going to continue to find some better workarounds, better capital efficiency via tokenized stock as collateral, all these sorts of things. So I think perps can really grow into a pretty mature category. And then spot as a thing in and of itself is also interesting sometimes I see, you know, where, where I start to diverge from the per bulls is where they're like, you don't really need spot anymore. Just do a perp on everything and the perp is good enough.
- [28:15]
A
Oh no, no, that's, that's a.
- [28:18]
B
Funding rates like that's a mess.
- [28:21]
A
That's the financial crisis 2.0 right there.
- [28:25]
B
There.
- [28:26]
A
There's no reality. There's only Deri.
- [28:30]
B
No. So I don't, I don't go that far. But I think a perp is a very elegant instrument and will be really a product category in and of itself.
- [28:37]
A
Another big question I have about the perp, it's like I do believe that the perp is fundamentally a retail instrument. It's retail oriented, it's high leverage, just 24, 7, 365 and. But, but the rest of finance can come because retail is there. And so then it evolves beyond retail because retail kind of bootstrapped it. The other, the other big question I have is like, is the perp fundamentally an offshore instrument? Like, it just does better when it's not regulated and there aren't constraints on liquidity or what asset it can perp or what venue it can be on. Like the, you. The internal to the onshore version of perps is just not going to be as expressive and as powerful for better or for worse than the offshore perpetual. Do you agree with this?
- [29:22]
B
I mean there's. Yeah, there's going to be different regulations the moment you come into the US on any type of derivative contract, particularly if you offer it to retail as well. Right. The caps that are on retail leverage in the US are much lower than what is available offshore. Now you could argue that's both good and bad. Right. Try to stay away from those value judgment. But I do think as a result you'll continue to see an offshore market and you'll over time see an onshore market and they will be very different. The benefit of the onshore market is that it's fully regulated and that comes with different types of protections. Offshore it is more not regulated and as a result leverage can be higher and the like. Some people like that, some people don't. So both markets will coexist. And that in and of itself is good. I think as the, what the US needs to be mindful of though is that the, the rules and regulations are not too restrictive that they can't compete with the offshore market. It's a very similar dynamic that I'm starting to see just in tokenized stocks more broadly. Right. Right now all these spot wrappers that. Ando's the category leader in. They're all offshore. Right. And there are other jurisdictions where there is a full regulatory framework for these wrappers. But in the US the wrapper as a concept does not exist. Right. And there's even debate around allowing what they call third party custodial issuance, which is very similar to what we do with the wrapper. I think the US at times needs to make sure it spends enough time looking offshore and what is already available offshore and what is regulated offshore to better understand how far can they push their own frameworks that they do not become not competitive. Right. Because you can put all the rules in place in the US because of the dynamics with the incumbents. And the incumbents don't want too much innovation and they want to keep the system as it is right now. But to at some point you got to look around and say, well this market is already offshore. It is very much growing. Do you want to compete globally or not? And if you are, you're going to have to allow certain models that maybe are uncomfortable, but otherwise you can't compete.
- [31:31]
A
Yeah, yeah, yeah. Now all that makes sense. We do have some sensible regulators at this moment. Maybe we can take advantage of the opportunity. I want to pop up in the hood about Ondo Perps. What actually is it? How is it built? Is it on a blockchain? Like how does it work?
- [31:46]
B
Yeah, so it is the, the execution of on the perps lives entirely off chain. So there's a lot of trade offs to be made whether you build something fully on chain or off chain. The problem right now with most blockchains is that the execution speed, at least relative to what you can get in a centralized environment is just not there. Right. When you look at centralized environments 200 milliseconds and below, even on a blockchain, even on a hyper liquid, you're looking at 600 milliseconds. That's fine. Ish. But if you then want to do more complicated calculations, including margin, multi asset collateral and the like, you're starting to bump up to what a blockchain can handle. The other downside of going full public blockchain is the privacy that you know, it does not enable essentially. So finding the right balance between composability, which is where public blockchain shine, and the settlement finality as well as the performance of the thing and the privacy. There's a little bit, there's trade offs to be made. So Ondo Perps is going to allow deposit and withdrawals from multiple chains. The execution itself Lives off chain. So the deposit and withdrawals are fully on chain. The execution itself lives off chain, but the execution is decentralized via a tester model. So the code that we run the exchange on is hosted by multiple entities. You can always compare them to blockchain nodes, but only the, you know, execution component, not the settlement component. Because what you do also then want to be mindful of in the downside of the centralized exchange model is that you don't necessarily know what happens in the matching engine. You don't necessarily know who you're trading against.
- [33:29]
A
Right.
- [33:29]
B
And you're placing a lot issue 100%. So in order to account for that too, we are making our code available to multiple attesters to make sure that they can verify the actual code that is happening inside the execution engine. We also can't unilaterally change the code and as a result rug our users. Right. So it's not a custodial setup on the purposes of self custodial setup.
- [33:53]
A
That's really neat.
- [33:54]
B
Yeah. So there are, it's kind of a hybrid model, quite frankly, between a full centralized, centralized exchange type model and a full public permissionless blockchain. We try to like find that right intermediary in the middle where a user does not have to place their trust in us for the security of their funds and the security of the, and the integrity of the matching engine. But we do off chain execution in order to preserve privacy and get the best performance.
- [34:20]
A
Okay, how did you do that? Because this seems very overlapping, at least in the product that you were offering. With a layer two in that it's, you know, a centralized sequencer because you have centralized components, centralized matching, you're non custodial, just like a layer two. You're not a blockchain though. So how, how do you do this?
- [34:39]
B
We call it a secure enclave model. It's actually a technology that a startup called Enclave Markets had piloted. They've been around for a while running this for a while, but Ondo acquired them earlier this year basically.
- [34:52]
A
To do this.
- [34:53]
B
To do exactly this. To do exactly this.
- [34:56]
A
No, I have never heard of this before.
- [34:59]
B
Yeah, I mean it's no one. Yeah, it's pretty, it's a pretty unique blend between the two. Now over time, I think our, our philosophy has always been we want to do as much as possible on public blockchains, quite frankly, because we do believe in the composability of things. We always launch our, you know, assets on multiple blockchains. Really make. We, we do the wrappers to make sure. That we can integrate into DeFi. Right. We don't do the native model so we fundamentally believe in having everything be as permissionless as possible and composable as possible. But given the performance and privacy trade offs, we do believe that this current model with the secure enclave multiple attesters is kind of the best of both worlds. But over time we'll shift as much as we can onto public blockchains as the tech matures.
- [35:44]
A
Why not just become an Hip 3 deployer on hyper liquid using your own assets?
- [35:50]
B
Yeah, I think we've always believed in owning more of the stack quite frankly because you know, hip 3 is good. Hyper Liquid is very good, clearly given their volume and track record. But every single position is going to be fully public. Right. Not all funds, not all institutional funds want that the latency is at 600 millisecond. That's okay, but it's not as fast as say a binance and multi asset collateral. So this whole tokenized stock is collateral for the purpose. Integrating that into the margin engine we wouldn't be able to do on Hyper Liquid. Right. Hyper liquid supports multi asset collateral, but it's hype, Bitcoin and stables, they don't support tokenized stock. So we want to be able to control the actual margin engine to be able to list these tokenized stocks. But in order to do that we need to own the full stack intent.
- [36:37]
A
I see, I see. Hyperliquid can't have the same level of assurances of using Ondo stocks as collateral as Ondo can. Therefore Ondo as being his whole business model is its own product can have the assurances to offer, you know, collateral and margin using your guys own assets. And so there's some like synergies about just vertically integrating different parts of the stack.
- [37:00]
B
A hundred percent. We sit on the backing of the stocks, not Hyper liquid.
- [37:05]
A
Right? Yes. Okay, interesting. When does Ondo perps open up?
- [37:09]
B
We had public beta last week. The full general availability will come in the next couple of weeks. We've already seen quite frankly more demand on this than we had anticipated, if I'm being honest. So having those extra weeks to fully make sure the platform is robust is very helpful. But yeah, we'll open it up in the next couple of weeks for general availability so that everyone is going to be able to have all the liquidity you want to do. Perps on single name equities. So at launch the aspiration for on the perks for sure is to have better liquidity than Hyper Liquid and trade XYZ on Equities in particular, who are
- [37:45]
A
the customers that are using it, at least so far on the public beta. Is it like just retail speculators, funds? Who are your users?
- [37:53]
B
A little bit of everything. So the offshore retail really likes it because we can list a bunch of assets quite quickly given our model. So there's good markets with good liquidity. Market makers like it a lot because they, their capital efficiency is significantly better. And then same thing for really the institutional players. It's kind of like a combination of both. They can tap into these new types of strategies, the carry trade, whatever they want to do, as well as really have deep liquidity to, you know, go long, short, whatever it is.
- [38:21]
A
Hey, Bankless Nation, it's David. If you're hearing this, that's because you are listening to the free Bankless podcast feed. Did you know that there is a premium Bankless RSS feed? The premium feed has extra interviews that I do for my own personal research and just deeper questions that I want answered about the crypto industry. Questions that I want to answer so I can be more informed as an investor both at Bankless Ventures and also just in my own personal portfolio too. Also, there are no ads, which means if you listen to the premium feed instead of the free feed, you'll get about 20 hours of your life back every year because you choose to support Bankless directly. So if you're interested in getting extra content all while skipping the ads or you just appreciate what we do here and want us to keep doing it, we'd appreciate it if you signed up for Bankless Premium. And there is a link in the show notes to get started. Cheers to a good 2026. Ian, I want to ask you about a worry that I have. We have like these, these big markets that pre, you know, the pre existing markets, the nasdaq, the New York Stock Exchange, they're all dabbling in blockchain, crypto, tokenized, real world asset stuff. They see the potential. They are like, well, we're not going to let these crypto bros do our job. We're going to do our job. And so each one of them is kind of experimenting, dipping their toes, getting their feet wet with how to do tokenized stocks, how to like settle on a blockchain. What I'm worried about is that the people, the incumbents kind of just like run interference on the crypto native ecosystem. And the New York Stock Exchange is building its own internal blockchain. The NASDAQ is doing its own internal stock tokenization. I don't, I don't want them to win. Honestly, I want people like you guys to win. I want the stocks to come on Ethereum, not private New York Stock Exchange chain. I'm worried that they're doing the blockchain, not bitcoin thing. And while blockchain, not Bitcoin has died 10,000 deaths, the next death is not guaranteed. And so I'm kind of worried about the incumbents, kind of just like front running and running interference on some of the crypto native stuff. Do you worry about that or can you quell my fears here?
- [40:18]
B
Yeah, let me try to reframe because I'm not worried about this at all.
- [40:21]
C
Okay, cool.
- [40:22]
B
In fact, the more New York Stock Exchange and Nasdaq can move towards 24. Seven markets, the better for us. Because right now there's this weird. As an, as a tokenizer, as an issuer of these things, the main thing we have to worry about is liquidity mismatch, right between on chain and off chain because we have these tokenized stocks that are freely circulating on Ethereum and other public blockchains. Right now we can only support minting 24 5, not 24 7. Why? Because the New York Stock Exchange and the Nasdaq are closed over the weekend. But a bunch of traders on chain, particularly in defi, Right. If you want to do defi liquidations over the weekend, ideally you really want to be able to, you know, do that and do redemptions and minting over the weekend as well. So we need the New York Stock Exchange in the NASDAQ in order to turn on weekend markets. And they're doing that on private blockchain technology. But, you know, whether it's public or private, I mean, I understand why these guys are doing it on private blockchain technology. It's essentially just saying off chain because it's faster. Right, that's fine. But once they turn on their weekend trading, I think Onda will be one of the larger clients in that ecosystem because we these guys are not going to do offshore retail distribution in a rapid format. That's just not their model. They're going to focus on creating liquid markets over the weekend and then an Ondo can come in and say, thank you very much, I've got a buyer on Ethereum or I've got a defi protocol that needs to liquidate a position. Saturday, 2:00am I'm going to actually buy or sell the underlying on the Nasdaq. And I can do that now because they've built the tick. So I think this all quite frankly helps the ecosystem And Ondo as a client to them is quite interesting to them too, because we have a user base in an ecosystem that actually demands 24. Seven markets, contrary to most of their traffic clients.
- [42:22]
A
Okay, so my mental model was that, you know, they, they see all the value and they're like, well, let me go and build that value for myself and just do this natively. What? Your answer is like, oh, no, they're going to do the thing. They're going to tokenize stocks on the blockchain, whether it's public or private, whatever. But I me, Ondo, am the main target customer of that. And I'm going to leverage the value of whatever they're building. And that's actually synergistic, not competitive totally.
- [42:49]
B
They're just doing an infrastructure rebuild that is much needed for a 24.7world. We are building distribution reels and defi integrations via the wrapper. Two very different things, but very synergistic.
- [43:03]
A
All right, man. Ian, there's a lot out there to build, so maybe I need to let you get back to work. Before I let you go though, just like talk to me about what you guys, what Ondo say. Ondo achieves its wildest hopes and dreams for 2026. What does the end of 2026 look like for your you guys? What's your guys just like kind of outlook about Ondo and also where you hope the industry will be?
- [43:25]
B
Yeah, I think by the end of the year we want to have, you know, call it billion and a half, ideally 2 billion in tokenized stocks. Now I'm being really aspirational, right. But I think continuing to grow on the tokenized stock product, more defi integrations and the like, we want to have Ondo perps fully shipped, general availability with deep liquidity, and grow that platform and then in parallel also launch these, you know, Ondo strategies or portfolio products. Right. That third party asset managers can leverage our platform or we can launch our own strategies to really start going after broader asset management and wealth management use cases. I think if we can put those three big building blocks together, I'll be a very happy man by the end of 2026 and then 2027, it's going to be wild.
- [44:10]
A
I think 2027 is going to be wild. I hope 2027 is wild. It is pretty cool to see the infrastructure that we have been building in this industry for like over 15 years now actually doing the thing. And so that is, that is refreshing. That's pretty cool. You guys are there building on the frontier. So thank you for everything you're doing. Before I let you go, there is one last topic I want to talk to you about. The last time you were on the episode, on the show, you were joined with somebody who is missing from this episode. Nathan Allman. He unfortunately passed away. I, I, I don't know the details. I, I haven't looked into them, may, maybe they're private, but he was a great guest and maybe, maybe just talk a little bit about, about Nathan and what he meant for Ando and just Anything else you want to share about Nathan?
- [44:51]
B
Oh yeah. I mean it's a huge loss. Nathan was the guy who started it all. He was the one who also got me into the space where I, at least within Ando. But I remember meeting him about three years ago and everything that I'm talking about now, he had already laid out. He knew exactly where this space was going. So you will be dearly missed. He was an exceptional founder, yet the most, you know, his product vision of everything that could happen is happening. He was incredibly prescient, but the weirdest thing about him was that his brilliance was really only matched by his humility. He was incredibly humble because he also then realized that you never know what happens, particularly in crypto. So he always wanted to hear from others what they thought to make sure that his own assumptions were always pressure tested. So he will be very much missed. He was an exceptional person, not just an exceptional founder, but the benefit of him as a founder was that his vision was so crystal clear that our product roadmap is also crystal clear. So we know exactly what to focus on to make him proud. But it's been obviously pretty challenging. I had a conversation with his mother the week that he passed away. Obviously pretty emotional, but the, the one thing she also said to us and the entire team was Ian, two feet on the gas pedal. Because she understands there's no time to lose. Right? Everyone and their mother is getting into tokenized stocks and perps. So there really is no time to lose. So everyone at the team is extraordinarily motivated to make his vision come to life, to make him proud and to make Ondo the best it can be.
- [46:41]
A
Well, I'm sorry. Sorry for your guys loss. I know losing a founder, especially for you who's worked with him so closely, is something more than just losing a founder. It's, it's losing a brother or something closer to that. But I think maybe the best thing that we can all do is get stocks on chain.
- [46:56]
B
There you go.
- [46:57]
A
Because that's what he wanted. That's what he wanted.
- [46:59]
B
That's right. That is what he wanted.
- [47:00]
A
Ian, thanks for coming on the show today. I wish you guys the best in the second half of the year. And you guys have been early to real world assets on chain to stocks on chain, and now the world's coming to you. And so I wish you guys the best for the remainder of this year and onto a very exciting 2027.
- [47:13]
B
Thanks, David. Much appreciated.
- [47:15]
A
Bankless Asian, you guys know the deal. Crypto is risky. You can lose what you put in. But this is a frontier. It's not for everyone. And we're glad you are with us on the bankless journey. Thanks a lot.