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- [00:00]
Unknown
Foreign.
- [00:10]
Bryce
Everybody. Welcome back to another episode of the Crypto 101 podcast. I am your co host, Bryce, as always, joined by my good buddy across the. Across the good old country of ours, Brendan. How you doing, man?
- [00:23]
Brendan
You know, I'm doing good. Here we are 2025. Another year in crypto has gone by and, man, I'm excited. In today's podcast, we get to talk about two topics that we really like over here, and that is the defi space. We're excited to be able to present a whole lot of new information from an expert in the industries.
- [00:44]
Bryce
Yeah, I couldn't agree more. I am so excited to introduce our guest for the day, Sam McPherson, who is the CEO at Phoenix Labs, as well as a contributor to Spark. Sam, how are you doing? And Happy New Year.
- [00:58]
Sam McPherson
I'm doing great. Happy New Year. It's good to be here.
- [01:01]
Bryce
Yeah, we're really excited to. To kind of kick off the new year with really some, you know, discussion about a protocol that we're really excited about, which is the sky protocol and everything you're working on at Phoenix Labs. Sky, formerly known as Maker. We'll get into all that. But, but Sam, real quick, let's just get acquainted with our audience here at Crypto101. Tell us a little bit about you and your background and what got you building a company in the crypto space.
- [01:28]
Sam McPherson
Yeah, so my. I've been involved with Maker for quite a while now. I joined in first in. I came into crypto in the 2017 bull cycle. Hobbyist, investor. I was working on video games at the time. Then I switched full time into crypto, specifically working on Maker right around when the dao was taking control from the Maker Foundation. This was about May of 2021, so I joined the core engineering team there. And this was operating under. Under the dao. So I worked there for two years, you know, building out the protocol, securing it, all these kinds of things. And about two years later, one year later, 2022, during the bear market, the endgame proposal was made. And this was to restructure MakerDAO into subdaos, which are called stars. And so the reasoning behind this was that as one of the first daos, there were a lot of learnings and so not everything worked perfectly. Having a very flat structure. There were lots of issues with this in governance, political issues like just. It wasn't working quite as well as it could have. So the proposal for the end game was made in 2022 to simplify the core protocol. There was a rebrand involved with this as well. But the governance restructuring was also part of this. So the protocol gets simplified into doing wholesale lending out to the subdaos or stars. And then so my team that I formed in May of 2023 that we launched a Spark subdao, this is the first subdao, this is a more user facing arm of the now sky protocol, previously maker protocol. Sorry, there's a lot of terms and we can go over all this in more detail if you want. And so our job with Spark is to be able to. So we have a lending market called sparklend but now more increasingly we're doing lending to other protocols such as aave Morpho and stuff like that. And my company Phoenix Labs is a smart contract development and like development shop in general. So we work on front end websites as well as the smart contracts.
- [03:58]
Bryce
Awesome. And so when you kind of think about what was the main draw factor or really the main pull factor into crypto, into building Defi, kind of where do you come at it from? Are you kind of from the school of thought that you know we're going to replace the entire banking industry and that's kind of why you're building these tools and resources or are you just trying to maybe attack it from a different mindset?
- [04:26]
Sam McPherson
No, absolutely. I'm a big believer that we're, I don't even think it's a question of if but when we're going to move the entire traditional finance on chain. And the reason is because there's just like the economics behind it, like things are just much more capital efficient when they move on chain. The whole traditional finance industry, like some of it even operates on like spreadsheets, it's just ancient technology and so the amount of waste that comes with that means that the better the more capital efficient solution. I have no doubt in my mind that it's going to win out in the long run.
- [05:06]
Bryce
And, and just before we get too in the weeds of, of everything you're doing at Phoenix Labs, do you view the world as kind of moving into like multi chain but mostly built on public blockchains or you know, and having the Solanas of the world and interoperable with all the EVM kind of things or do you kind of view most of the capital going, getting siphoned into you know, these permissioned JP Morgan chains and you know, I don't know, any future sort of State street chain or whatever? Do you think the public blockchains will win out in the long run?
- [05:41]
Sam McPherson
I think all of these things will exist and there's use cases for all of them. But I do think that the public blockchains have already proven out that they're a much better central hub for for assets. We see this like. Still, most of the TVL is on like Ethereum. You know, Solana is starting to gain some traction. So I do think there's going to be multiple chains, public chains as well as private chains, and they'll all have their niche. And, you know, whether there's like one major chain, two, you know, that remains to be seen. But it probably will be something like a power law distribution where there's like one or a couple big ones and then this long tail which serves different niches.
- [06:28]
Bryce
Wow.
- [06:29]
Sam McPherson
What's up?
- [06:30]
Bryce
I just bought and financed a car through Carvana in minutes.
- [06:33]
Sam McPherson
You, the person who agonized four weeks over whether to paint your walls eggshell or off white bought and financed a car in minutes.
- [06:40]
Bryce
They made it easy, transparent terms, customizable, down and monthly. Didn't even have to do any paperwork.
- [06:45]
Sam McPherson
Wow. Mm.
- [06:47]
Bryce
Hey, have you checked out that spreadsheet I sent you for our dinner?
- [06:50]
Sam McPherson
Options Finance your car with Carvana and.
- [06:53]
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- [07:57]
Brendan
So Spark is essentially the first of the subdaos. And just to clarify all the terms for everyone, we have Makerdao, which is now Sky. We have subdaos which are now being referred to as stars. Is that correct?
- [08:10]
Sam McPherson
Yes, that's correct.
- [08:12]
Brendan
And Spark is essentially the first of what could be just a series of stars, right?
- [08:19]
Sam McPherson
Yeah, that's correct.
- [08:21]
Brendan
Awesome. And so, you know, man, you guys are off to a strong start. I was looking the other day and I saw that you injected about $100 million in stablecoin liquidity over to the base ecosystem and now the USDS which is your native stablecoin, is now over 1.2 billion in market cap. So it sounds like things are heating up quite fast.
- [08:45]
Sam McPherson
Yeah, for sure. I mean, yeah, we're very excited about this development that we've just started rolling out as of novemb, which is called the Spark Liquidity layer. So this is the generalization of what we've been doing in the past. So our first product that we launched was sparklend, which is a lending market. And so the way. And that's now the number two lending market by TVL and it reached that position very quickly precisely because of the relationship with Sky. And so sky is able to via Spark is able to inject DAI Liquidity now USDS into the lending market. And this is a way for users to get access to huge amounts of capital right off the bat. So like you turbocharged the growth cycle. So the Spark Liquidity layer is the generalization of this and also making it multi chain. So with the initial launch on base we're basically going to be everywhere. We have initial support on Solana through Sky's programs, but Spark is sort of really doing this liquidity injection turbocharging thing and base is just the first of. Yeah, we'll be supporting all major chains. So this 100 million stablecoin injection, again like these numbers, we can just ramp it up to like, you know, 100 million a billion, like it's very quick because of our size. And so now users are able to access the first product on base, they're able to get the savings rate on USDs. This is our flagship product where users can enjoy, which is currently 12.5% APY. And this is a very scalable APY. So you can deposit 10 million in there, 50 million on base and the APY is still 12.5%. It does change, but through a more slower governance process. But this is the most scalable yield in DeFi and we get it from a wide variety of sources. And so this is, this is what we've got live now, but we're, we're hitting the ground running and so like this year is going to be jam packed with more launches.
- [10:50]
Bryce
Yeah, and just to kind of follow on with the yield stuff because that's super interesting, I mean, you know, 12% and I think if you go to a bank and you lock it up for six months right now maybe you get 4 or 5% somewhere in that. So, so where does the, the yield come from? It's kind of that age old question, are you Going out and looking for deals and lending, you know, user money to places, you know, manually. Is there some sort of algorithmic process that happens where maker Dao is kind of doing some kind of credit underwriting and lending large swaths of money to businesses or to lending pools? Where does kind of that yield come from in general? And I know it's probably many sources, you don't need to go too in the weeds, but at a high level, yeah, for sure.
- [11:36]
Sam McPherson
I mean this is like, this is the next question you ask, right? You know, great yield, where's it come from? You know, we should be very skeptical, skeptical about this kind of stuff. So there is a number of sources, but I'll go over the major ones and maybe historically how, how maker has sourced its yield. So the original yield source was over collateralized crypto lending and that still remains the flagship yield source today. This is people, you know, average users who want to get some leverage on eth or Bitcoin, this is usually the use case. And so what they'll do is they'll lock up their eth and then they can mint DAI now USD s against their collateral and then buy more collateral. And that's, that's how they get leveraged. So this, this is by far the dominant use case. And during, so this, this yield is not always high. During bear cycles it actually in 2022 it dropped pretty close to zero. So it's not always the highest yield source, but as of right now it's a, it's a very high yield source because precisely because we're in a bull market. So this was the historic yield source for maker primarily. But more recently 2022, with the rising interest rates, we saw a huge, huge growth in real world assets, in particular tokenized treasury bills. And in a high interest rate environment, this provides a floor on the interest you can provide to users. So once the interest rates from the Fed go up to 4 or 5%, if the DeFi rates start dropping below that, then you want to change the investment into treasury bills. And so this is the two main yield sources that have been historic. More recently, last year with the launch of Athena, we were able to get access to the basis trade which is, this is like a common trading strategy where someone will hold spot eth or you know, wrapstaked eth if they want the yield on top of it. And then they'll have a hedge position that's short. And so this is a delta neutral position. You're able to extract good yield. Fundamentally what the users are doing on these Perps exchanges is that they're also going leverage long on crypto assets. But on centralized exchanges the scale is just much larger and these users are paying a large amount. So for whatever reason, sometimes these users have been paying 60% to borrow or to go long on these crypto assets. And so via Athena, Spark has been able to tap into that yield as well and that's been fairly significant returns. And so it's able to combine all these yield sources, readjust them automatically and with the Spark liquidity layer. So previously this was done during a, with a manual process. The Spark liquidity layer is the transition where this whole thing will be transparent, automated and open to everybody. So, so it's not a bank, but you can think of it similar to a bank where you can see the entire balance sheet, all the assets that are in complete real time and then know the rules of allocation so that you can feel confident that this 12.5% is coming from relatively safe sources. Now on top of this, what Spark and Sky can provide is insurance. So keeping USDS holders at the very end of a senior position in all these layers of insurance is a very important thing because as a stablecoin, liquidity and confidence in the system is the most important thing to optimize for. So sky maintains a 25% cash reserve target in USDC to ensure that people can always enter and exit whenever they want. So in absolute terms maybe it's not always the highest yield, but it is the most liquid and, and risk adjusted, it is the best yield in defi.
- [15:34]
Bryce
Yeah, and that's super important. I mean having stable yield but having secure yield. And I like kind of that junior tranche, senior tranche kind of, you know, structuring to, to the sort of, I don't know, to the capital that you guys are all working with. And so it sounds really cool and it sounds like you guys took a lot of learnings from, you know, other platforms in the past that have offered yield that have failed and, and so on and so forth and SO and also MakerDAO as a protocol or sky, let's call it, has been around since I think what, 2014 or or so. I mean they've been really, they've got some lindy effect I would say. And so and still only I think the Sky Token and Sky plus maker market cap I think is only around a billion or a billion and a half dollars. So to me, you know, not financial advice. But when you have this much, you know, total value locked and this much staying power and this much, you know, excitement in a protocol and it's only a billion dollars and it has the total sort of addressable market of like you know, trillions. It just seems like such a lopsided asymmetric bet. So full disclosure, I'm long maker and Sky Tokens and I have been for a long time but it just seems like it's, it's got a really good thing going. A lot of smart people but I, I get, I get this question a lot from just people. They say hey, like I'm looking at maker, I'm looking at aave, I' at, you know, Liquidy, I'm looking at frax. There's all these different lending facilities if you will compound. How do you kind of like differentiate them? And like maybe you could talk about from a, from like a, a high level, like I differentiate them like you know, the way that they lend money and earn yield and all that stuff but also like the valuation, like why are they all valued so differently and is that maybe just like speculative markets? But would kind of love to hear you your riff on like differentiating between some of the lending facilities.
- [17:30]
Sam McPherson
Yeah, I mean there are some like subtle differences but largely a lot of the products are similar. You know there's, they're lending out usually US dollars and then they're getting a return on that and they're forwarding it to the users who deposited their protocol. What the main differentiating Factors are size USDs is you know about, about the largest right now. We're about the same size as USD at the moment and then collateral composition. So like all lending, you know it's, it's important to have a robust and diverse marketplace. So users are empowered to put their capital where they think they can get the best risk, adjusted yield as well as other factors that like you know, lockup duration, this kind of stuff. But then like evaluating where those, where, where those dollars are going is, is incredibly important and it is mean it is a big differentiator. So right now primarily the loans are issued as I mentioned before for people going leverage long on, on crypto usually mainly Ethan Bitcoin and then in centralized exchanges as well through perps. But this is like, you know we're just at the beginning of like this huge orders of magnitude increase in market size as Tradfi gets, continues to get moved on chain. So the amount of asset classes is fairly small. Like we have the first RWA which is US dollars, we now have T bills and then crypto assets. But that's like three things. So we don't have any equities. We like, you know, corporate debt. Like there's, there's many, many different types of commodities, there's many different types of assets. And it's going to be a slow process. I know there's attempts to getting these on chain, but it's just, it's an ongoing process where you need to move people in bits at a time, wait for the regulation to catch up, this kind of stuff. But I'm confident we'll get there. And once that happens, then like there's all kinds of different ways protocols can be differentiated by the collateral composition that they keep. And so that, that's going to be a huge differentiator on our end. We think our one of our, like beyond our size. Our biggest strength is we are at the forefront of automating the entire balance sheet. And so we want to change the status quo of the traditional finance system where, you know, opaque bank ledgers and you know, corrupt ratings agencies, stuff like that led to the global financial crisis of 2008. And so we have Bitcoin as this first case of like sort of a hedge against this system. But we also want to improve on it. So as we move these systems on chain, we want to do them better. So no more opaque balance sheets. Everything is auditable. The entire loan supply chain should be entirely on chain and auditable in real time so that we get no surprises about where the, where this money is going to and people can make informed choices.
- [20:45]
Brendan
You know, when we look at, you know, I guess how all this stuff is happening, I think the next part has to do with the actual SPK token because USDS is live, it's going, it's had a really successful launch so far as we've talked about. And the question that we've gotten from the community because people are excited about this is when are we going to get the release of the SPK Token? And is that something that we can hopefully see this year when token when.
- [21:18]
Bryce
We had to ask.
- [21:19]
Brendan
Yeah, I mean we're excited for it and I guess when it does come out, we're going to have to have you back on here so we can talk more about it. But you know, can, can you share it all again? We don't want to get you in trouble, but can you share it all about like the role that the SPK token would contribute to the ecosystem as opposed to the USDS token?
- [21:38]
Sam McPherson
Yeah, for sure. I mean these are two entirely different types of tokens. So USDS is dollars. So this is, can be your savings, your cash, you Know that's, that's the use case there's and for spark there'll be governance and so governing the SPARK dao, where to invest capital, stuff like that. That will be one utility there'll also be staking so that you'll be able to stake the token and earn an extra yield. What the details of that are tbd. We'll be coming out with that fairly soon.
- [22:17]
Brendan
Awesome.
- [22:17]
Bryce
Okay. And then was there any timetable for SPK soon?
- [22:24]
Sam McPherson
Tm.
- [22:25]
Bryce
Dang it. I can't get anything. He's a tough nut to crack. Tried to pull a quick one. Okay, no worries. Well, I got a question about, about mev. Does that come to bear on, on any part of the, of the stack for you guys? Is that something you think about of maximal extractable value or minor extractable value? Kind of where users get a little ripped off by sandwich attacks and front running? It's a, it's a big issue on Solana, but I'm not sure if that comes to bear on sort of your. Your system.
- [22:56]
Sam McPherson
Yeah, I mean this is a great question. So like mev is. There's two main parts of DeFi. There's the lending side and the deck side. MEV is a much, much stronger piece on the, on the deck side. And these two camps are like, they have very different like technical and user profile. So like DEXS people are trading quite frequently. They're subject to mev, this kind of stuff. And it's like it's. Most of the gas usage on any chain is going towards Dexs, whereas lending, I mean if you think about it as a user, you're not taking out a loan like multiple times a day. Usually like you'll take out a loan and go away for a month and then you know, maybe do an adjustment after a month. So doesn't use much gas. There's no MEV opportunity on the loan itself. Where MEV does come into play a little bit is with liquidations. Although we don't really see large liquidations anymore. So the people who are taking loans are much, much better than they used to be back in the day. I remember like 2022, 2021, when there's large crashes, like one of the bigger ones, I think January 2022 we had like a $60 million liquidation on Maker and this guy had a 600 million dollar position open. So this was like getting throttled. So that was one of the bigger liquidations I've seen. Anyways, with the context of mev, to do a liquidation you require somebody to take the Collateral, sell it through a market somehow and then repay the loan to re collateralize the system. And so that there you can do that by having capital on hand. But more often we see people using what's called flash loans to do this all without requiring any, any capital on hand to do this with the smaller sizes they can use. Lean on Dex liquidity. So there's an MEV element in there in that the, we have to set fairly conservative penalties on the users in order to ensure that the protocol is safe such that we can be very, very confident that we'll be able to liquidate this position. The downside is that for the users getting liquidated, you know, this is already a very unpleasant experience. We don't want to make it any worse. So, you know, by improving on these numbers, you can reduce the amount of penalty that goes into the user so they can get more of their capital back in the end. And I've been, it's been very interesting to see some of the solutions coming online. I see Oracle solutions that are taking MEV into account. You know, chain link. UMA does this. So this is something we're interested in looking at.
- [25:35]
Bryce
I love it. And if we kind of zoom in here on, on Phoenix Labs, what is the, the pipeline look like for what projects you're taking on? How do you kind of determine, you know, where you're working, you know, what are some of the main, you know, implementations you're, you're undertaking right now?
- [25:55]
Sam McPherson
Yeah, so as Phoenix Labs, like, we're, we're focused on Spark. So Spark is our primary client and there's a lot of work to do. We're like, we're just operating at warp, warp 10 right now. Making getting the Spark liquidity layer out is the top priority for us. And what, what we're aiming to solve here is a big problem with DeFi historically even now is liquidity fragmentation. So if somebody spins up a new lending market with some new innovation, that's awesome. The users like it, they want to use it to borrow it, but they need capital providers to come in and seed, seed liquidity into it. With the Spark liquidity layer, we can have Spark do this on behalf of the protocol so it can leverage the 5.8 billion dollar balance sheet of sky to then just programmatically inject liquidity at, you know, hundreds of millions in size right away. And then once this liquidity is deployed across DeFi and you know, all your favorite lending protocols, a morpho, etc. Etc. Then it will automatically rebalance every block. So that if somebody borrows on aave, even on another chain, say, base, the liquidity will automatically rebalance, maybe pulling some more from mainnet, such that the interest rates for users are roughly the same. Of course, there's differences based on the collateral composition, but if the collateral is fairly safe, then the interest rates should be largely the same. So as a user previously, you might have to hunt around, and this has been a bit of a hindrance with L2 adoption, is that you have to hunt around to find a lending market that has sufficient liquidity if you want to borrow $10 million. Like borrowing $10 million on any L2 right now is going to make the borrow rates skyrocket. And so you're kind of sitting around waiting, oh, when's the liquidity going to come back? Maybe eventually it will come, but maybe it takes an hour, maybe it takes a day, like, who knows? So with the Spark liquidity layer, if the protocol is hooked up to this, you have knowledge that this will arrive within the finality of ethereum, so about 20 minutes.
- [28:15]
Bryce
Wow. And. And in you're able to kind of facilitate those large loans. I mean, because that's one of the critiques that I've heard from, like when I'll go out to conferences and I'll speak with, you know, big hedge fund guys or big institutional guys. Like, yeah, like the whole defi stuff is cool, but I mean, it doesn't work for like, you know, large institutions yet, or large size. And you gave the example of $10 million and, you know, you won't even be able to get like a loan manager for like, you know, an investment bank, you know, really, really large, you know, off the couch for, you know, a couple million dollars? They. They move in large size. And so would you say that the Spark protocol has a plan to get to that stage where it could, you know, facilitate billions of dollars of loans in a single day? And what would it take to get there?
- [29:02]
Sam McPherson
Absolutely. So, like, where we're at right now, Spark, sky as a whole is about the size. Defi is, you know, tens of billions of dollars. It's about that size. And Spark can facilitate this because of sky size, the $5.8 billion in total deposits. But there will reach a point where we hit capacity. And so the space as a whole is actually, we're not quite fully capital constrained. But as the bull market progresses, capital constraints become a huge issue. This is why you see like huge interest rates for leverage as bull markets are raging. So as for the industry as a whole, we need to source New capital. And where do we go for this? It's TradFi. So this is something we're actively pursuing, looking at S. USDS as ETF product, getting more institutional players involved from tradfi because we believe we have a very compelling product, which is people see these high yields, they want access to them. And we think maker's been around for almost 10 years, eight years. It's been around for a while. And running these crypto over collateralized loans on chain, there's been almost no defaults on any of them. So this is tried and true. It's one of the safest ways to get access to this crypto mania that's going on. And we believe that traditional players are taking notice of this and we want to give them access.
- [30:34]
Brendan
Yeah, it's exciting. When it comes to Phoenix Labs, I think the cool part about it is that you all are quite versatile in what you have the potential to do. You all are a research and development company that specializes in these smart contracts and development, especially when it comes to defi. So do you think that Phoenix Labs could potentially work with other stars down the road? And, you know, what will these potential stars look to accomplish?
- [31:07]
Sam McPherson
Yeah, we definitely will. So the dynamic that maybe I'll describe the dynamic a little bit. So we have Sky Core, which is the core protocol, which does wholesale lending to each of the stars. So these stars, in order, these stars are basically, you can like, they'll be run however the community chooses. So they can go off in all kinds of different directions to within the constraints that Sky Core protocol dictates for safety reasons, for the protocol as a whole. So the idea is that this system is decentralized on the whole because these stars are going to compete with each other to a certain degree. So you can throw your eggs in with one basket in one or like multiple or whatever. But like any competitive market, there is like a collaborative, competitive dynamic that always emerges. It doesn't make sense. You know, we're not in a zero sum environment. We're at the nascent stage of a. Of what's going to be a huge industry. So yeah, it makes sense to be more collaborative at this stage and have a positive mindset. Mindset because we'll all grow the pie together. So this much, I think you can just look at it like the, the, like the free market at large. There is this other mechanism in that everything is anchored on sky, so there's positive feedback loops where maybe every star isn't successful. Probably a lot of them are just going to blow up and do a terrible job. Right. Just like the free market. But we want the ones that like hit that, you know, 100x of growth and innovation to then feed back to the core system and then this system can then seed and subsidize new, new stars to form and then compete in this marketplace. So this like synergistic feedback system is how the end game is designed to grow the whole protocol.
- [32:59]
Brendan
Do you have any ideas for potential stars that, that could form here in the next couple of years that you're like, man, this would be a really good idea. This would help the ecosystem or this would help contribution or you know, this is possible now through the, the sky kind of migration and upgrade that maybe weren't previously possible before.
- [33:21]
Sam McPherson
Yeah, I mean there's. The sky's the limit. I think eventually it's going to be covering lots of different niches. The model is designed to really scale up to like, you know, very, very large size. Spark is the first and we're very focused on, on chain, this automated, on chain aspect. My team is tooled up for smart contract development but you know, when you're getting more into like tradfi stuff like that, like that's more like lawyers and you know, these types of positions. So another team specializing in that may be better for like a more traditional finance focused subdao, but there could be one like even entirely focused on gaming for example. So like it's really all about what the community wants to do. But the superpower of the subdao is always this wholesale, this access to this wholesale credit from Sky. So everybody gets the same deal so everybody can compete and deploy this capital into and get the best risk adjusted return for the protocol.
- [34:28]
Brendan
Yeah, I mean that it's a cool idea to say that there can be other niches even outside of potentially Defi like you mentioned because historically sky, which was previously maker, was really zoned in on dominating the area of defi and they did a really, really good job of it. But now what it seems like there's the idea and correct me if I'm wrong here, but there's the potential to expand even beyond that into other verticals, into other niches.
- [34:56]
Sam McPherson
Yeah, I mean, yeah, there's, there's definitely like as I said before, I think the industry is so small right now. So like I don't even know what's gonna look like in even five years. Like it's gonna be entirely like alien to what we know now and so.
- [35:11]
Brendan
Which is exciting.
- [35:13]
Sam McPherson
Yeah, it's like it's, it seems like A futile effort, even iterate. What I think is potential. Yeah, new.
- [35:18]
Bryce
Well, what about here? Here's one for the near term in terms of. I don't know if you want to go forecasty or anything, but what do you kind of think of what the regulatory changes that might come here in the states will look like for Defi? And again, if you want to pass, because you're not a legal kind of guy, I get that. But I know that a lot of the applications for sky, for instance, you can't use them in the United States because they have lending and yield. And this is all something that Gary Gensler has really tried to, you know, excommunicate pretty much in the Biden administration, make sure it's not available in the United States. But now we have like Trump and Paul Atkins and like all these guys, you know, Paul Besant or Scott Besant, like, you know, who are running now the US Government, like Trump has a. Has world fi. Liberty, like some, you know, defi protocol. Like, I think there is a very short future in which regulations get overhauled and products like sky or make or Spark, you know, all this stuff will be accessible by Americans. It just would, would make sense for that to happen within the next year or two. Do you guys see the ball breaking that way, or are you just saying, you know, put your hands up in the air and we'll just wait till that cross the bridge when it comes to it?
- [36:38]
Sam McPherson
No, I've been like, very, like, personally, I've been very heartened by what I've seen in the U.S. to me, it's like that old adage. It's like first they stop you or then they fight you, and I forget exactly what it is.
- [36:52]
Unknown
Yeah, yeah.
- [36:52]
Bryce
First they ignore you, then they laugh at you, then they fight you, then you win.
- [36:58]
Sam McPherson
So it feels like we just passed that then they fight you phase, and now we're at the then they win. Because politically, being anti crypto seems like a losing position to be in. And I think that's just been proven out over the American election in particular. So, yeah, very optimistic about getting some regulatory clarity. This is all we've ever wanted. Just what are the rules of the road? Give them to us so we can follow them and, you know, build a better society.
- [37:27]
Bryce
And I'm pretty optimistic that, that things are going to move pretty quickly. I saw an interview with the incoming CEO for Charles Schwab, and he said, he goes, yeah, I feel really silly for not having bought crypto. And, you know, our clients are asking us for, for Direct exposure. And so we're probably going to get in the game as soon as the regulatory landscape changes, which I foresee happening in short order. I'm kind of summarizing there, but that short order regulatory change was something that he saw. So I'm like, you know, it could come, you know, a lot quicker than, you know, with some executive actions or like, you know, a, a very cohesive Congress that could get stuff through. And then if you think about the implications for crypto when you have now not only just these tokens that are being tradable, that are, you know, quote unquote, valueless governance tokens that are trading on, you know, Coinbase or Kraken, but then you could actually have these applications. It brings so much more reality to these tokens. And then you have, you know, people actually being able to earn yield here in the America. Like it's going to go from, you know, whatever the, the what is the market cap of crypto today? Call it 3 trillion, 2, 30 trillion. It would like these are the capital markets that the world is, you know, you know, wants to access. And it's going to be great for the US Economy. It's going to be great for the crypto economy. I think it's going to have wealth effects all over the world and I think it's going to happen. I think we're going to open up the floodgates. There's going to be a whole new universe of participants. It's going to be the, the American consumer finally, which I think is kind of the holy grail. But do you, do you kind of see that, you know, the, the total value of the market increasing? Like if, you know, Americans could actually use Spark, for instance.
- [39:12]
Sam McPherson
Yeah, for sure. I mean the industry has been growing despite the previous, I guess the current soon to be previous administration trying to stamp it out with things like operation choke point 2.0. So stablecoins have just been up and to the right even in these conditions. I think stablecoins are going to be one of the biggest growth sectors in the next couple years. Like we're talking like order of magnitude increasing in size precisely because we can get this, like get people what they want, which is they want access to these yields. So we've had success with the ETFs of Bitcoin ETH. That was great. But we still don't have any stablecoin ETFs. And I think that would be, that seems like the next logical thing to give people access to.
- [40:01]
Bryce
Wow. Yeah, there's a lot there's a lot.
- [40:05]
Brendan
There is a lot. And the good news here, gentlemen, is that, you know, at the time of recording this, it's. It's January 7th, which means that there's less than two weeks left of Gary Gensler over the SEC, and then he's booted out. I know. Hopefully we can add in some. Some cheering noises or something. But, yeah, the future really is looking bright. And there's all these. These positive potential catalysts that we're looking towards. And, you know, we all thought crypto was going to be explosive with a lot without a lot of these catalysts. And I think once you start adding them in the sky, pun intended, there really is the limit. So hold off on any more puns. But, you know, we got one final question for you, Sam. You know, outside of anything that you're working on, what do you think that 2025 holds in store for crypto and what will be those, like, big themes? Maybe outside of Defi?
- [40:58]
Sam McPherson
No, outside of crypto.
- [41:00]
Brendan
Outside of Defi.
- [41:02]
Sam McPherson
Outside of Defi. Okay.
- [41:03]
Bryce
What other themes interest you outside of anything maybe you're directly working on?
- [41:08]
Sam McPherson
Oh, this is an interesting question. I mean, my head is in Defi all the time. Outside of Defi. Like, I guess there's a lot of interesting technologies. AI, I think, is the obvious answer. Yeah, yeah, that's just continuing to blow me away. Like. Like, it's like this thing where, you know, you get used to stuff as it trickles out, but then you, like, look back one year, like, you know, videos that looked like that were being generated by AI that looked terrible one year ago, and now they're like, almost. You can't tell. So, like, totally. Just the exponential trend of how AI is going is, like, I really think we're in this, like, phase change there. And I'm like, I'm really, really, you know, I'm a technologist. I'm an optimist. I'm really excited to see what happens there. And the connection with crypto, well, the.
- [41:59]
Brendan
Cool part about that is that I think the better that AI gets, the more it can help all these other verticals and industries, right? Because the better that AI gets, it can complement all these different fields, all the people working on those. It can speed up efficiency, increase security, make things more effective. And I think that's the real benefit of AI is people look at it and say, oh, you know, hey, that's a cool vertical. It can do well. But what I think a lot of people fail to understand is the ripple effect that AI becoming better has on just about everything else that we do to a day to day life.
- [42:33]
Sam McPherson
Absolutely. I mean my team uses AI and it's just like, it's not like, oh, now we're using AI, it just sort of creeps its way into all the tools we're already using and just, oh yeah, you know, almost passively just enhances them and improves productivity.
- [42:48]
Bryce
Yeah, it's, it's. I remember back in, back in high school, one of my teachers or somebody said like, you know, goo, so many people are scared of Google, right? It was right when Google was coming out. But like I think that Google's an augmentation. It's almost making you, you know, cybernetic in a sense. Like use your intelligence, your natural intelligence, but know how to use Google to increase your intelligence. And she goes, I think one of the, the hallmarks of a, of a, you know, a 4.0 student, you know, 10 years in the future will be who knows how to use Google the best. And I think, you know, looking back, I think it was so, so completely accurate and so completely right. And I now think that there's probably a whole new host of teachers that are out there. Like, you know, don't rely on ChatGPT to do your homework, but use it to help you with a discussion board or a brainstorming session or get your research outline. And whoever could use AI the best I think is definitely, you know, definitely going to win out. I do have actually. I know Brandon, you, you said one final question. I had one other question that I wanted to ask, but just at a high level. What's the one big learning experience or one big takeaway that you would want to share with the community from the, the maker rebrand to Sky, Would you have, you know, posited anything different? Would you have said, you know, things went smoothly? If they went smoothly, then that's that if they didn't, what would you have done differently to kind of make it go smooth?
- [44:18]
Sam McPherson
Yeah. So me, I'm a, I'm a product person and the metrics I'm always focused on is are we growing USDs previously die supply? And the answer is yes. And for the spark side, are we, are the products that we're putting out there being used? And again the answer is yes. So we see lots of growth. Having put out the spark liquidity layer supporting base, we see more and more like the deposits going in there are just going up into the right. So these are the things I'm focused on. I think the rebrand was very important because the brand of dai. There's this constant overhead of having to explain what DAI is and just having US dollar in the name. I think that's a huge win. And so, you know, maybe things are a little bit rough sometimes, but the products are working. Revenue is at all time highs. I think we're posting like half a billion a year in ARR and wow, the profits are 200 million per year. So the protocol. Yes, the protocol is highly profitable and the core metrics are going up. So this is, this is the important part.
- [45:27]
Bryce
I love it. Hey, don't. What was the thing that we said one of our our New Year's resolutions was going to be? Never listen to the FUDsters. Right. You know, people just want to FUD and say this and that, but look at the numbers, look at the data, look at the KPIs, track them on chain. I love it. Sam, thank you so much for coming. Talking all about Sky Phoenix Labs and everything that you're working on. We really do hope to have you come back again later this year. Join us for an online summit. Whatever you want. I know there's a lot that you guys are going to be building and crypto moves fast. So we want to hear from you guys and stay in touch and. Yeah, carry on, man. Hope you keep crushing it at the, at the sky protocol.
- [46:07]
Sam McPherson
Yeah, thanks for having me.
- [46:09]
Bryce
You bet. All right, everybody listening at home. Thank you for joining us. We'll see you back same time, same place next week.
- [46:26]
Unknown
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