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A
This episode is brought to you by Indeed. Stop waiting around for the perfect candidate. Instead, use Indeed Sponsored Jobs to find the right people with the right skills fast. It's a simple way to make sure your listing is the first candidate. C According to Indeed data, Sponsored Jobs have four times more applicants than non sponsored jobs. So go build your dream team today with Indeed. Get a $75 sponsored job credit@ Indeed.com podcast. Terms and conditions apply. Hi everyone. Welcome to Unchained, your no Hype resource for all things crypto. I'm your host Laura Shin. Thanks for joining this live stream. Before we get started, a quick reminder. Nothing you hear on Unchained is investment advice. This show is for informational and entertainment purposes only and my guest and I may hold assets discussed on the show. For more disclosures, visit unchained crypto.com introducing Nexo, the premier digital wealth platform. Receive interest on your digital assets. Borrow against them without selling. Trade a variety of cryptocurrencies all in one platform now available in the U.S. get started today at Nexo.com Unchained quick note before we get into today's episode, Bits and Bits now has its dedicated feed. We're spinning up from the Unchained feed and moving to a new podcast and YouTube channel. So if you want to keep up with our weekly live streams and macro meets crypto breakdowns, make sure to subscribe to Bits and Bits directly. We won't publish there until March, but subscribe today so you can be ready for launch. Be sure to subscribe to the new feeds at unchained. Crypto.com bitsanddips Today's guest is Adani Aviodan, co founder and CPO of Mistin Labs. Welcome Adonis.
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B
Thank you for having me on the show. It's a pleasure.
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A
Mistin Labs, which is behind the Sui blockchain, has big news today about Hashi, a new decentralized and trustless, smart, contract based way to unlock defi for native Bitcoin. And you'll be launching that later this year. Tell us about Hashi.
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B
Yeah, so a bit of background look, 2026 is going to be a year where Bitcoin truly becomes collateral instrument, especially in defi. So in 2024, what we really had was a year where we had a bunch of Bitcoin ETFs launched. None of that could actually earn any yield. All of it was pretty much locked into custodians like Bitcoin. You name it. Most of crypto never actually benefited from from any of this. Nearly 60% or so of crypto market cap never cross proliferated into the rest. And it never saw the huge wave we expected in 2425. Right. There's a lot of this Bitcoin L2 mantra that was going on. We never really saw that transition into real growth in defi. So Bitcoin proved it was a strong store value. It had not been great for payments. But Bitcoin as collateral instrument creates liquidity without selling. So defi lending is going to be the way to really unlock Bitcoin. And what is Hashi? Hashi is a means of enabling native Bitcoin without any form of wrappers or any form of second or third order trust assumptions enable you to actually formally lend Bitcoin without having a tax event. It uses a decentralized network to power the borrow and lending. And you can now start using formally verified smart contracts back with actual insurance to now create Bitcoin generated bonds or enable and facilitate loans for Bitcoin for the first time ever. So this is going to be the first time ever in history where you have a fully decentralized piece of infrastructure with minimal trust assumptions required, backed by actual institutional insurance to enable folks to institutions specifically to start lending Bitcoin directly in defi. So we announced today over 2024 partners who are going to be going live, which includes custodians, hardware, wallet providers, exchange partners, financial institutions that are going to enable you to effectively start putting your Bitcoin to work using decentralized infrastructure for the first time.
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A
And as you mentioned, you were saying that this is the first time that there will be such a trust minimized way to use Bitcoin in a smart contract. I saw the press release was saying that hashiquote takes an entirely different approach than an existing wrapped Bitcoin offerings. So explain how you're able to achieve all of that on the back end.
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B
Sure. So if you look at wbtc, as you just mentioned, wrapped btc, the multiple variants of it, right. WBTC was a brilliant step forward, but only gained 1% of the Bitcoin in existence. That's in part due to the taxable nature of wrapping wbtc. So the process of doing the wrapping actually creates a taxable event which is absolutely going to restrict the amount of Bitcoin that can go into proliferation. Because if I want to borrow against my Bitcoin, being hit by attacks does not make it something that's absolutely viable. Our approach is very, very different with Hashi. Now with Hashi, what we have is a trust minimized way of actually Taking Bitcoin on the existing Bitcoin network, you lock it into an NPC wallet on chain in an existing network, never leaving the Bitcoin network itself. You don't create any derivative assets of any form. And then that allows you effectively to originate loans directly on a suite blockchain instantaneously. So you can without mint wbt, you can mint with that USDC usdt, you have to mint sweet dollar as well. But ultimately you can now have direct borrowing using the Bitcoin network to gain access to stable coins. In the same vein, we're having partners who are going to be minting Bitcoin denominated bonds as a way to fund the balance sheet by leveraging Bitcoin without having to also hit another tax event. So who's going to want to use this? Imagine ETFs who previously had Bitcoin just idle, had minimal ways to make that Bitcoin work for them. Now they can leveraging this mechanism and it's using the same security primitives that govern billions of dollars on the Bitcoin network and the formal verification of smart contracts. And what that means is these contracts have gone through a mathematical proof to ensure true safety of borrowing and lending. And at the same time it's going to be backed by insurance at the same time. So if there's part of defi, Right. If there's some event that causes loss in defi, you are backed by the insurance as well. So it's a new approach. Namely we saw in a previous where centralized lending mechanisms ultimately saw issues. Celsius is only a couple of years ago. Now you can have a trust minimized way of doing it fully decentralized and not having a tax event and making Bitcoin available. We think we can go way beyond the 1% that WBC is offered because one, it's trust minimized with decentralization fundamentally verified. And then at the same time it's backed by insurance.
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A
Okay, this is really interesting. So give us some of the details on the MPC wallet, like how many signers, how many keys, you know, because the details around how it's set up really matter. For people who might remember, I think it was, was it the wormhole one where they had. Yeah, yeah. So yeah. So the details around this matter because you know, just splitting it up and making multiple people responsible does not mean that it's secure.
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B
Yeah, so the way it works is very different. Right. So every single validator on the SWE Network, over 125 validators are all part of the signatory on the multisig account. So the same protocol that governs billions of dollars in the SW network, ensuring the safety of the SWE network that can process hundreds of thousands of transactions per second, is effectually using the same cryptographic primitives that secures the SWE network to secure that NPC network on a Bitcoin network directly. So you have three blockchain validators directly engaging with the Bitcoin network and independently directly ensuring that security of the MPC wallet. So it is a majority required to actually move funds. And even as a backstop, in a scenario where there's even collusion on a bitcoin network, sorry, collusion between validators on screen network, there's an additional layer with a, with a guardianship that happens on top of that as well. So you've got a fallback in the Guardian model. And then also the methodology that's leveraging the Swede network today for security, it's effectively the strongest mechanism you can have for security. You have partners like Filon X Bullish, Erba bank who are going to effectively using this same decentralized mechanism to supply Bitcoin or stablecoin liquidity for lending markets on Hashi directly.
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A
Okay, wait, and so I'm sorry, you said it was the Sui validators, which is like it's about a little over 100.
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B
It's about 125 today and growing. Yeah.
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A
Okay, okay. So they're the ones that are kind of collectively managing this. Got it. Okay.
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B
Correct.
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A
Well, so you started to dive into this, but let's just discuss it further. I've been interviewing multiple people over the years, multiple projects that have talked about their attempts to unlock the $1.4 trillion in Bitcoin by creating these different L2s. But because of the issues around centralization, plus frankly just other technical issues around liquidity and other things, it just has felt like Defi on Ethereum has been more appealing. So what do you think it like, you know, it's one thing to kind of have the technological breakthrough or like a novel setup, but how are you going to kind of, you know, get past the hurdle of people like trusting it and getting actual activity on Hashi?
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B
It's a very good question. In fact, the rationale behind Hashi was actually product driven. So we had a ton of partners and clients who were looking to leverage swathes, billions of hundreds of billions of dollars worth of Bitcoin and make it available in defi. But when it came to, when it came to due diligence, they always got stuck when it came to not understanding fully the end to end trust assumptions that needed to be made. So as you mentioned before, there are a number of L2 solutions out there and none of the folks we're talking to, we're talking about large banks, sovereign wealth funds, nation states who have a large bitcoin treasury, who are effectively trying to make that treasury available and borrowing from it using decentralized finance. Of course they were unable to get past the due diligence stage and we went through a lot of reviews with them to try them comfortable with existing solutions and they never were able to get past that line. And they actually asked us, could you come up with a minimal trust requirements? They didn't want to have to trust many different protocols to make it happen. They wanted the minimal amount of steps to get their bitcoin available. And then the tax element was actually very central to this as well. They wanted ability to mint stablecoins easily using Bitcoin backed assets, ability to generate yield off stable coins directly as well, to minimize the cost of a loan, insurance to allow them to actually expand the offering to their clients. And then we built Hashi specifically for institutions. So it took a lot of institutional input for us to come up with the ideology to solve that problem. So it actually is birthed from a problem with sovereign wealth funds that we're engaged with, financial institutions were engaged with, and a lot of hedge funds that we're also engaged with. So it had to be built because that gap was there. That's why we've not seen this mass liberation of B2C and DeFi. So you can look at the list of partners that we announced today that are going to be supporting Hashi. We're talking about Alpha Len, Big Go Bullish. We have Wave digital, Navi ledger first Digital, it goes on, Herbal bank, even Bitgo. These are large institutions who control billions of dollars, hundreds of billions of dollars worth of btc. So given the size of these partners, we came together and tried to greatly understand their requirements to build this specifically for them. So in a lot of these custodians, what you're going to be able to do with Ashi is click a button and instantly start minting stablecoins without having to go through centralized entities and having these centralized trust guarantees that you're going to ultimately need. And then you couple that with insurance is going to be required as well. So you can actually buy bitcoin denominated insurance. You pay for the insurance in bitcoin and insurance pays out in bitcoin. So you have this full element where amazingly liquid but also efficient market backed by form of verification. Also insurance is something that institution can now trust rather than, you know, spaghetti nest of different technologies that it's very hard to understand.
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A
Okay, and just to make sure I understood, so you said something like without it having to be centralized. But as far as I understand this works for both people who self custody as well as people who custody elsewhere. So like for instance, if I'm like, let's say that I'm using an RIA that's custodying at Bitgo, then they can, they can access this. So even though they're a centralized entity. Okay, right. So that's correct.
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B
That's correct.
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A
So some people will use it in like a pure Defi way and other people will use it in like a coinbase morpho or basically just like defi mullet type of way.
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B
Exactly, that's exactly the way it works. Right. So if you imagine today, if you are with, you know, any one of these providers today, they're going to have to go and source liquidity from any third party. And these third parties have a balance sheet, have a risk element that they take. And we've seen it before with Celsius. When Celsius went bankrupt, people lost a ton of capital, but Defi was inherently strong. Right. So this is giving you that same platform where traditional centralized issue entities like Bitgo can leverage the decentralized nature of what Sui offers to originate loans for their clients. So you can be using a fully self custodial ledger device and generate yield from your Bitcoin. You can be any kind of financial institution that's sitting on Bitcoin for the clients, leverage the same infrastructure as well. So we built it for the highest amount of, to cover the broadest amount of Bitcoin possible, not for just a small amount of users or just purely retail. So that allows us to really go after a broader sense of just beyond this 1%. Bitcoin is covered today by WBTC. We really want this to be the home of where Bitcoin based yields is going to be generated.
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A
Okay, so in a moment we'll talk a little bit about the products and services that will be enabled by this. But first a quick word from the sponsors who make this show possible. Step into a new era of wealth. Discover Nexo, the premier digital wealth platform. Manage your crypto portfolio with confidence and control. Receive interest on your digital assets. Borrow against them without selling. Trade a wide range of cryptocurrencies all in one platform, now available in the US with 30 days of exclusive privileges for new clients experience Wealth Club Premier access, enhanced interest rates, reduced borrowing costs, and crypto cashback on swaps. Get started today@nexo.com Unchained Quick note before we continue with today's episode. Bits and Bips now has its own dedicated home. We're spinning off from Unchained and launching a standalone podcast and YouTube channel focused on the Fed macro, AI and how it all collides with crypto. If you want to keep up with our weekly livestreams and Macro meets Crypto breakdowns, make sure you're following Bits and bips directly. We won't start publishing until March, but getting set up now means you'll be ready on day one. You can find the new Bits and Bits channels at unchained crypto.com bitsandbips. You can also find us by searching Bits and bits on YouTube, Apple Podcasts, Spotify or wherever you listen. Back to my conversation with Adenee. So you started to get into this a little bit before, but just tell us a little bit more about the different types of products and services that people will be able to access when their Bitcoin is deployed on Hashi.
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B
Yeah, so one prime example is Wave Digital. Wave Digital is going to issue the first secured actual rated bond that's fully collateralized by Bitcoin is going to be powered by Hashi. So these bonds will provide effectively a new mechanism for issuers to raise low cost capital. Backed by BTC directly on chain is going to enable institutional basically instantaneous issuance of bonds, instantaneous trading. And also all the settlement for this will be done entirely on chain. So it's going to give institutions new access points for hedge funds, for venture capital firms to leverage Bitcoin in a stable and holdings entirely. And of course there's integrations directly with DEFI protocols on sui like Navi Scallop, Sweeland Alpha Lend. It's fully integrated into the lending protocols for su, so you'd be able to access Bitcoin based loans directly using those protocols. It's important to note that Hashi is an actual primitive on sui, so it's meant to be, it's composable. It's something that builders can build on so they can build assets, they can build protocols based on the Hashi protocol, effectively leveraging that for the customers without having to rely on, you know, second or third order effects of trust guarantees that are required for other systems as well. So this, this element of I can issue a Bitcoin based bond by way digital and basically have this something as a rated bond is, is going to be the industry first and we're very, very proud about that.
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A
That and like so earlier we talked about, you know, some of the ways that you were able to make this decentralized and to reduce the single points of failure. But you know, I'd love to hear you spell out what the actual risks are to the bitcoin that people put on Hashi.
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B
Yeah. So the, the risk for, for Bitcoin against, for those leveraging Hashi is going to be of course, Bitcoin network. Right. If Bitcoin network has issues, it loses this 51% guarantees that we expect everyone has an issue there. Let's assume that's not going to happen. Let's talk about its connectivity with suite. So the way in which Hashi communicates with Bitcoin network is via effectively creating a multi sig account on the bitcoin network. So the suite network is effectively engaging and validating the bitcoin blockchain at the same time. So if you were to have validators collude on a bitcoin network, sorry, on a SWE network, then there's a carried risk there. And then the way you solve that, this is something that's never happened. But the way you solve that is by having a guardian model, a multisig between the three validators. In a scenario where there's collusion, there's a guardian model that sits on top of that that can protect everyone against loss. And then the other risk will be smart contracts. So smart contract, let's say there's a bug in the smart contracts that facilitates the minting of stablecoins between what exists on the bitcoin network and the sweet blockchain. That is another vector of failure. But what we do there is we do something called formal verification. And this form of verification is not something all chains can do, but it's a mathematical proof that you look at the smart contract code and you run a number of mathematical simulations and generate proofs that this contract does exactly what it says and it doesn't have any side effects outside of what's been programmed to do. That is a very, very strong guarantee. It's actually the strongest guarantee you can get in computer science for smart contracts. You get that with a sweet blockch and smart contracts that engage between the three blockchain and also the bitcoin network. And then the other element to secure against that is insurance. So let's say all the mathematical models fail. Let's say that the Validators all collude. Let's say the Guardian models actually fails as well. Right. So a lot of things have to fail for this to happen. Ultimately increasing the likelihood of this happening is very, very low. There's also institutional insurance provided. Right. So sorry. So to Insure is going to introduce a first native BTC denominated insurance designated effective to, to protect BTC collateral on Hashi. So the premiums and claims are settled in native Bitcoin. So you, you pay for your insurance in Bitcoin, you claim your, you claim your insurance directly in Bitcoin as well. So I think that's a, it's a first that's been done in the crypto space as well. In regards to the.
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A
Yeah, I mean that insurance bit is really interesting. Can, can you explain a little bit more about how it works? Because you know, like what was novel to me is that this is done in kind in Bitcoin. So. Yeah, I don't know. Did they have to like, I don't know if it's a traditional insurer or you know, what they had to do to be able to do that.
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B
Yeah. So the way it works is you've got to convince a large insurance company that the security guarantees are given that are effectively built by our teams reduces loss significantly to the point where they can put their name behind it and back it with a premium that's very, very low. Because it's all great to say you have insurance, but if it's very expensive, then what's the point? Our goal is to have insurance as low as humanly possible. And you get that by being able to show that formal verification is very strong. That's something they absolutely are going to want. And that the Guardian model, in addition to the validation collusion model, something that we've designed significantly against as well. So these are the elements showing that loss is minimized by having strong smart contracts. Loss is minimized by having the validators control the multisig, not individuals. And then a Guardian model that sits on top of that, that allows them to wrap an insurance product and price that on chain directly. So at the point of locking Bitcoin on the Bitcoin network in a Bitcoin address, you can make a payment in Bitcoin at the same time for generating yield or for borrowing. So your assets are effectively secured against that kind of loss. In addition to, let's say you want to also have insurance against the borrowed lend protocols on Sui as well, you could also purchase insurance for that as well. So that can come in the form of reduced yield that you get from a Stablecoin, they can come in the form of just paying basis points on top of whatever you're borrowing against or whatever collateral you're providing. So this is all fully on chain. There's no contract to sign elsewhere. You at the point of minting and the point of depositing funds, you can make insurance payments automatically entirely.
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A
Okay. And then one thing that I was wondering is just because of how the Bitcoin price fluctuates in dollars, they they must be buying Bitcoin as like new Bitcoin is being deployed in Hashi, Is that correct?
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B
So the Bitcoin, the Bitcoin premium, the great thing is the Bitcoin premium itself is paid in btc. So they would have assets backing the Bitcoin directly to be able to make the payment. So yes, they are for insurance fund to do that. They're long Bitcoin themselves. So in that sense you're going to want to be denominated in Bitcoin.
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A
Okay. Okay.
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B
Yeah.
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A
And actually I meant to ask you earlier, you might have mentioned this. Which type of Stablecoins will users be able to access?
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B
So Sui has a number of stablecoins today. We have usdc, we have First Digital USD, we have Agora USD. There are a number of Stablecoins that exist today. And we just recently announced Su's native stablecoin which is SWE$. SWE$, is different in the sense of the yield from SWE$, the Treasury yield from Sweden which is one to one, backed by US Treasuries. It's actually through a partnership we have with Stripe and Bridged. This Stablecoin pays a yield back to the Swede network directly. So you can actually get reduced borrowing rates because the yield you're getting from a Bitcoin can go to lower your cost of borrowing as well. So it's going to be an economically feasible way of generating Bitcoin denominator yield, but also lowering your cost of borrowing as well.
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A
Okay, and then you briefly mentioned the bonds, but can you explain a little bit more about how that works?
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B
So we have a partner in the space that effectively has built a model where they can issue Bitcoin denominated bonds directly. They're called Wave digital. So these bonds are actually rated by the ratings agency. So top leading rating agencies will actually issue rating against these bonds that are issued on chain and you can trade those in real time on chain. You'll be able to trade that on Deepak, which is our decentralized order book. You have to trade that on AMMs across the suite ecosystem. You'll be able to also leverage these in perps and other other venues as well on suite. But for the first time you're going to have professional firms who can trust the bonds issued on chain because they have traditional ratings applied to them that you get from high, you know, highly reputable financial institutions as well. So if you want to go and raise capital and you have a balance sheet of Bitcoin, you can issue those bonds on chain directly and have that rated by a highly reputable ratings agency. So I think you now see in a world where CEFI is highly leveraging DeFi and doing that with the same kind of guarantees and even stronger trust assumptions that you get from traditional finance as well.
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A
Okay, yeah. And then as you mentioned earlier, there will be a number of different defi protocols for earning yield. There will be vaults. One other piece of this is I saw you're using CF benchmarks, a crypto index provider, basically as an oracle. So can you explain how they will be used?
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B
Yeah. So the important thing is ensuring that you can get true pricing of what, Bitcoin? Well, the true price of Bitcoin on a Bitcoin network. Let's say you want to borrow against your btc. Well, what is the price of Bitcoin? Where do we get the price of Bitcoin from? So we are going to rely on very strong Oracle providers and CF benchmarks is one of the leading Cubase and CF benchmarks are going to effectively support pricing data. It's going to enable collateral to be even more efficient and BTC asset movement to be seamless ultimately. So having strong Oracles, not just one but a number of Oracles, is going to ensure that one, you can get the best possible loan or the max amount of loans from a Bitcoin you have issued. And also for any kind of defi risk management, you have a solid source of pricing data to make decisions on as well.
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A
Okay, so as I mentioned earlier, there's a number of attempts at these Bitcoin L2s and there's actually one that launched today, Opnet, I also know Citraya is another one. But how would you differentiate Hashi from its competitors?
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B
So I would say traditional means of launching protocols that are going to generate yield for Bitcoin normally have a number of problems. One, they're very, very difficult for institutions to understand. So the, I would say technology is one thing, but we need to explain the technology, especially the finance people, is very critical. So I think Hashi wins there. It's a very easy model to understand. What you're trusting is minimized to a very small number of factors. So that's the first thing. Secondly, it's differentiated because it's not a wrapped asset. So there is no tax element from leveraging Hashi versus other primitives. Other when you're using L2S and other schemes, they effectively are creating a form of a derivative asset that effectuates a need to pay a tax. So we've got actual legal opinion showing that Hashi does not constitute a tax event, especially in many jurisdictions in the US for example. So that's in the design, also the security. Right. We're talking about the fastest network encryption crypto, namely Sui that we've been building from our days of getting Meta to launch Libra. We have a team of the world leading cryptographers in the world. So something like this is built with a lot of research and development. We're formally verified smart contracts with a team that effectively has been entrusted to launch search at Google some of the world's most advanced protocols that exist in traditional tech and also traditional finance today. So it's coming with a team with a very strong pet degree in finance and also technology. So the differentiator is going to be obviously the team that's building it. Differentiator is going to be the technology assumptions or the safety assumptions you need to make in order to make a deposit and something that's easily explainable and backed by insurance, especially something that is insured on chain, it's fully transparent. So these are the things that back Hashi and I think it sets it apart from other offerings that exist in the market today.
- [29:14]
A
All right, well I'm excited to see how all this plays out. I mean I think, you know, whoever does manage to unlock that $1.4 trillion in Bitcoin on Defi, that's that's going to be huge. So yeah, thanks for sharing about Hashi.
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B
It's a pleasure.
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A
Thank you very much and thanks to everyone who joined this live stream. We will catch you next week by.
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B
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