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The Delphi Podcast Host and GP of Delphi Ventures Tom Shaughnessy sits down with Scott Stuart, Co-Founder and Chief Product Officer at Kava Labs, which builds composable DeFi apps and services that can be accessed by anyone, anywhere in the world.

Episode Highlights

The Delphi Podcast Host and GP of Delphi Ventures Tom Shaughnessy sits down with Scott Stuart, Co-Founder and Chief Product Officer at Kava Labs, which builds composable DeFi apps and services that can be accessed by anyone, anywhere in the world. The two discuss Kava’s focus on security, details around Kava Swap, bringing the next wave of users into crypto and much more.

We would like to thank our sponsors for making this podcast possible.

Kava: Kava connects the world’s largest cryptocurrencies on DeFi’s most trusted platform. Mint stablecoins, lend, borrow, earn and swap safely across the top crypto assets with a simple user experience and the confidence of institutional-grade security. To learn more visit kava.io

Celo: Celo is a mobile-first platform that makes financial dApps and crypto payments accessible to anyone with a mobile phone. Celo supports over 1000 projects who are everyday building applications and issuing digital currencies from 100+ countries around the world. Learn more at Celo.org. 

Every Delphi Podcast is dropped first as a video interview for Delphi Digital Subscribers. Our members also have access to full interview transcripts. Join today to get our interviews, first.

Show Notes:

(00:00:02) – Introduction.

(00:00:13) – First Question: When did Scott get into crypto.

(00:00:53) – Scott’s Background.

(00:02:20) – Kava overview.

(00:05:26) – What were the driving factors to build on Cosmos.

(00:07:32) – Kava’s products and offerings.

(00:16:59) – How do you go from 1,0000 apps to being curated on Kava.

(00:18:46) – How does the community curate.

(00:21:05) – Kava Swap overview.

(00:29:20) – How are funds protected in the cross-chain world.

(00:32:32) – Assets supported in Swap and what is Scott planning in the future.

(00:35:46) – Scott’s thoughts on DeFi.

(00:37:48) – What’s on the roadmap for Kava and how to get involved in Kava.

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Disclosures: This podcast is strictly informational and educational and is not investment advice or a solicitation to buy or sell any tokens or securities or to make any financial decisions. Do not trade or invest in any project, tokens, or securities based upon this podcast episode. The host may personally own tokens that are mentioned on the podcast. Our current show features paid sponsorships which may be featured at the start, middle, and/or the end of the episode. These sponsorships are for informational purposes only and are not a solicitation to use any product, service or token. Delphi’s transparency page can be viewed
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Interview Transcript:

Tom Shaughnessy (00:02):

Hey everyone. Welcome back to the podcast. I’m your host, Tom Shaughnessy, and I help lead Delphi Ventures. Today, I’m thrilled to have on Scott, who’s the founder of Kava. Scott how’s it going?

Scott Stuart (00:11):

Great. Thanks for having me on. 

Tom Shaughnessy (00:13):

Scott, when did you get into crypto? 

Scott Stuart (00:17):

I got into crypto professionally in 2017.

Tom Shaughnessy (00:22):

Nice. 

Scott Stuart (00:23):

Started early 2017. 

Tom Shaughnessy (00:25):

Is that a… I mean, I was around a similar time, were you like Bitcoin 20K around that time? Or that might’ve been 18, actually.

Scott Stuart (00:31):

Prior to that.

Tom Shaughnessy (00:33):

Okay.

Scott Stuart (00:33):

Earlier than that, come on. 

Tom Shaughnessy (00:35):

Yeah. I’m glad. 

Scott Stuart (00:37):

Yeah. I got into crypto, it’s something that I had been watching, for a while obviously. Yeah, then I decided to do that, as I was transitioning from a previous ad tech company that I built. 

Tom Shaughnessy (00:53):

That’s awesome. Tell me a bit about your background. What’d you do before you got into crypto? What drove you here? It’d be helpful. 

Scott Stuart (00:59):

Yeah. Professionally, I started off actually doing internet poker. I played internet poker professionally, in the early or in the mid to late zeros. I don’t know if people call it naughts. That was basically when that was starting to take off. That was a newer technology in the sense that, you could play this game internationally with people for money and I was, whatever, a teenager. So that was pretty great way to just wake up, manage your capital. Then it was in about 2011, April, 2011 or 2012, that Black Friday or whatever, when the US Justice Department basically cut off the financial rails to these different websites. So the pro players had to go out of the country, to do it, mostly. 

There was actually, I don’t know if you get familiar, but there was this introduction of Bitcoin into that ecosystem as a means of payment, basically getting around what? Justice Department had imposed, on the banking rails. So there are a number of early Bitcoin OGs who came from the poker scene, I think that way.

Tom Shaughnessy (02:20):

No, you’re totally right. I meet a ton of people in crypto from either poker, a lot of EDM artists, house music. It’s exciting who you meet. I mean, walk through a bit of the elevator pitch for Kava. I mean, we’re going to go through the whole walkthrough, all the products, but just to set the stage, what’s the elevator pitch for Kava? 

Scott Stuart (02:39):

Well, for Kava, the platform really it’s around safety. Kava itself as a platform is competing against Ethereum, Solana, Polkadot, Cardano, let’s say, Polygon. It’s not a secret that the main usage today is in this thing that we now call DeFi, and that Ethereum has the lion’s share of usage and money, and that there are currently some problems with that system. So you have this income, you have these competitors basically racing to steal as much users and money as they can, while that machine is somewhat not functioning at peak capacity. So different competitors will have their advantage, right? They’ll have basically their angle on how they’re going to win or compete and Kava is in safety and reliability. 

Tom Shaughnessy (03:49):

That’s awesome. Kava is its own chain built with the Cosmos’ chain? Sorry, on Kava’s chain, got confused with the Cosmos SDK there. 

Scott Stuart (04:00):

Yeah. It is, and it’s interesting when you look at the construction of these different competitors. Kava, if you look at Ethereum, right? Ethereum and any of these blockchains are basically a peer-to-peer layer. It’s a way to message in a decentralized capacity. Then there’s an application layer built on top. So for Ethereum, it’s the EBM. Kava uses Tendermint as its consensus machine, essentially, and then we use the Cosmos SDK as the “application layer” on top of it. If you look at, for instance, Polygon’s design, which I think is a really clever design, it uses the Tendermint machine for peer-to-peer communication with the EVM layer on top of it. You can contrast that to something like Binance’s smart chain, which uses the EBM, but underneath does not use Tendermint. 

They try to cobble Ethereum’s peer-to-peer machine, with their proof of authority set up. It’s interesting when you look at it because they were having some network issues around that. Tendermint’s pretty solid for that proof of stake model. 

Tom Shaughnessy (05:26):

Got it. I mean, so the decision to build on Cosmos, I guess, what were the driving factors there? Was it from the safety perspective or-

Scott Stuart (05:34):

Yes. This is back in 2017, actually. It was somewhat less clear back then what to use. I remember at the time we were talking to Charles and some of those guys at IOHK for what they were doing with dataless and the stuff around their proof of stake. We were talking to… Oh, blanking on the name, Casper guy. 

Tom Shaughnessy (05:56):

Vlad?

Scott Stuart (05:56):

Vlad, yeah, right. It’s 2017, right? So, what’s going to be the thing? We don’t know.

Tom Shaughnessy (06:02):

It’s different world back then, people didn’t know what to build on, where to build. It was very different.

Scott Stuart (06:06):

Yeah. Well, and going back just very briefly going, tying in the who is Scott? Thing. I mean, after the poker thing, I did an ad tech thing and then looked around and did this and what I would say that I’ve come to specialize in is trying to understand newer technologies and newer industries. That’s something that I like. Part of that process and investigation process of filtering noise, right? Because in new things, there is noise. So it’s figuring out and placing a bet on what’s the thing versus what’s not the thing. So a tactic that I’ve learned is, it’s that Toyota way, right? It’s go and look at it, meet it, see what Vlad is. What’s actually behind this thing, to effectively place a bet on what technology you’re going to go with. 

At the time Tendermint was basically the most proven out longest lasting thing. It made sense to us, we liked it. There was some pros and cons to using the Cosmos SDK and then now there’s definitely pro… I can talk more about pros and cons of using the SDK today, three years later, but those were the reasons. There was some stuff like the IBC vision around connecting blockchains, but really we were just looking for a nice piece of software that we didn’t have to reinvent from the ground up. 

Tom Shaughnessy (07:32):

Yeah, no, it’s interesting. I mean, back in 2017, I always thought of Polkadot and Cosmos as the competing bridges of the future and meanwhile, they turn into their own layer once in a way. I’d love to zoom, just take a step back and zoom out for a minute. You guys have a lot of, or several different products and offerings that I’d love to go through. I’ll let you go on from here and start where you’d like, but would love to go through each product and then we could kind of dive into Kava Swap. I want to spend a lot of time as well. 

Scott Stuart (08:01):

Yeah. I think it might just be useful to frame how we’re going about… How Kava the community is going about solving this problem of usage, as opposed to some of the other competitors. I mean, really Kava’s core positioning is going out there and say that safety and reliability is going to be the thing that’s going to take DeFi to the broader majority and that we have a community of individuals who are committed and know how to deliver on that. Think of crypto as it’s just an emerging technology, right? 

I mean, I love crypto, I’m in it every day, but if we zoom out and we look, it’s just an emerging technology, and so fortunately there’s already a playbook for the adoption of emerging technologies and I like to use like the Geoffrey Moore’s crossing the chasm type thing. I don’t know if you can display a image of that or whatever, but it’s basically this problem of, we have these early adopters who love getting their hands wet, in technology and using it. Then you have the majority and there’s this chasm, this difficult period where to traverse, in order to get from those early adopters to the majority.

What we’ve seen historically with other emerging technologies is the thing that in that maturity model, the thing that you need is stability, security and a streamlined UX. That’s basically what we’re focusing on. It’s not like through any brilliance, it’s just sort of looking at the history of adoption and saying, these are the things that matter. When we look at some of the competitors, often they’ll focus around speed and scale, speed and scale is important and you do need that, but what we haven’t heard a lot of and what we’re really going out there and driving is that it’s going to be this safety and reliability that is going to bring on money that’s sitting on the sideline, whether it’s in the form of institutional capital or the next generation’s deployment, the capital for financial services. 

Tom Shaughnessy (10:10):

Yeah, no, I understand the difference, I guess the question I have for you there is, and I guess a lot of people would have, is it safety and reliability in the sense of developers building, because they have a new set of tools or is it safety in the form of securing the network or a mix of both? 

Scott Stuart (10:25):

Yeah. Great question. Yeah. In my opinion, it’s both. This is safety and reliability in the sense… The technology, right? Then I think the reason that that gets a lot of attention is because actually building out this technology is very hard. When I go to the days of the ad tech companies and you think about dropping a piece of software, an SDK into a mobile application, what is that mobile application? Effectively that’s closed source software that is not money or financial in nature, right? So developing that, you still have to create security practices, but developing within that structure, as opposed to today, with something like Cava where it’s open source technology and it’s money.

It’s just literally the hardest. So technology, that technology part is definitely a large component of safety. But, when you start to peel that back process, I think is equally important. How are these applications being built? What quality assurance mechanisms are being applied for the release of the software? Then particularly for crypto, it’s financial. So, what protections are in place for users in the event that bad things happen and we can dive into each of those at some point, if you’d like. 

Tom Shaughnessy (11:44):

Yeah, no, I’d love to dive into those. Your last comment was particularly important. Let’s definitely dive in there. What would those productions be? 

Scott Stuart (11:53):

Well, yeah. I mean, let’s examine something that happened in this Ethereum space. Okay, I won’t pick on a particular project, but things happen, right? So there will be attacks, there will be things that happen and none of these developers or the initial people who develop protocols want to see their users lose money, right? That’s not what we get. That’s not what most of these… Really most of these folks got in to the business for, but it happens. So what do we do when it happens? For most of the stuff that we think that we observe, it’s an after the fact type calculation. It’s like, “Oh shoot, this thing happened. Some users lost money. How are we going to address that?” 

Kava community, in contrast takes a step to get ahead of it. A couple of months ago, we created a SAFU fund that has right now a little bit under a hundred million dollars in it and that is a general purpose insurance fund for if, and knock on wood, when bad things happen. Then we can talk about… So this is that safety… This is the infrastructure layer that we’re laying out when you build protocols with composability on top of it, not only does that increase usage and UX, but it also increases that reliability. So an example of that, which we can get into in the future is we just launched Kava Swap.

Well, we have this basket, we have this bucket of asset right now, this general purpose SAFU fund that has a little under a hundred million dollars in it, but it’s denominated in a volatile asset, right? Well obviously, things tend to go wrong when all prices are crashing. What we can do now with the Kava Swap, in a relatively short order is to be able to put up a proposal where some portion of that basket gets programmatically liquidated to a set of stable points, which would provide even further protection for users in the event that bad things happen. By the way, this is part of that Toyota way of going… We wanted to implement an insurance policy and we actually went around and talked to everyone that we could at the industry, and at best you could get insurance on the order of hundreds of thousands of dollars, and that’s not going to cut it when users have hundreds of millions of dollars, on the line. So it was effectively the COVID community that decided to underwrite the safety of the users of the platform. 

Tom Shaughnessy (14:31):

That’s really helpful. I guess my question for you is, let’s say we create an app on Kava and let’s say something goes wrong. Right? What’s the process like for figuring out whether the devs were malicious or whether you should really use the insurance fund to back users, what’s the give and take there?

Scott Stuart (14:52):

Governance. It comes down to the community deciding and boating. I think that, that’s what it has to be. So the final part that I’ll… We have a nice graphic, I don’t know if I’ll be able to show it, but basically it’s like this question of how do you find the intersection between something like Bitcoin, which is great and decentralized, but doesn’t really move or change very quickly and something centralized, like Coinbase, BlockFi whatever, which is great and can move nimbly, but is by virtue of its existence, not decentralized. How do you get somewhere in between? 

The model that we use, again, hearkening back to like the ad tech day for mobile apps is you can think of these things, Kava or the other platforms as financial operating systems, just like you can think of Android and iOS, as mobile application operating systems. We saw Apple take an approach of curation. So they went out and they said, as opposed to Android, and they said, so you can put apps onto this platform for users to consume, but they’re going to be curated. Now they’re going to be curated through apple, right? Because we’re a centralized organization, but we’re going to enforce that floor. We’re going to enforce that bar of UX and reliability to further the adoption of this platform and these applications in contrast to something like Android, which says, developer just throw it up and we’ll release in 24 hours. 

Kava is coming out and saying that, “We’re taking that approach for… The Kava community is taking that approach for financial operating systems. It’s a curated process. So no application can be deployed on the Kava blockchain that isn’t reviewed and voted in by the Kava token governance group. So, there’s trade offs there, right? We don’t have 17 protocols on Kava today, yet. It’s a slower process that way, but it’s a safer and more reliable process. It’s an interesting trade-off. 

Tom Shaughnessy (16:59):

I guess what would, if someone pushed back and said, “Hey Scott, you don’t have the creative ability to have 1,000 apps on here.” So you don’t have that Petri dish to build, but on the other hand, you have the curation, so users don’t get scammed. Is it hard though, to figure out what the most powerful apps are going to be without that creativity? How do you go from 1,0000 apps to being curated on Kava? Because you want the exploration phase, but you also want the curation to protect people, how do you do both?

Scott Stuart (17:31):

Yeah. This is going to be a little more Scott versus the Kava community, but Scott’s answer to that is I mean, you can’t have it all, right? You can’t have it all. So for us, for me, Kava is not about… You can’t both have wild exploration and safety, right? They’re not going to be… They don’t come together. I think that platforms like Ethereum are great places, as a playground for people to try different things and to have that risk profile of trying new things and Kava is a great platform for taking those open source pieces of protocols and applying them to a broader audience. That’s how I would see Kava positioning itself in the future is, when you look at the let’s call it hundreds, I don’t know, maybe it’s not thousands, let’s say hundreds of various protocols that have been deployed on to Ethereum, maybe one percent of them made it, to actual size. So Kava is about that two percent that actually make it and being able to apply that two percent to a broader audience.

Tom Shaughnessy (18:46):

How does the community curate. How do they decide? Are there smart contractors, auditors, security guys, saying yes or no? Or how does it all happen under the-

Scott Stuart (18:56):

Yeah. I mean, I would say it’s hindsights 2020, but I think that it was… There had to have been at least some portion of luck, in terms of how we got to where we are today. This is again, back in 2018 or whatever, when DeFi and times weren’t as they were now. So that generation process, the way that Kava got out there, the Kava Labs itself, had to offer a very large portion of the Kava tokens to external community, just get the thing going. So it did end up being this case where it was a wide range of folks who had exposure to the asset. Then a lot of them ended up being just some of the largest, most trusted organizations in the industry. 

Then I guess there, there is some component of luck, for us, being able to build up momentum and headway there. And now yeah, we’re at a spot where basically, it’s decentralized in the sense that even if Kava Labs wanted to, we don’t hold the majority of tokens, we don’t hold really close to the majority of tokens. There’s been that balance of participation with people, outside of Kava Labs. I think one part of that’s luck, I think another part of it was in the decision process, for the pros and cons of the Cosmos ecosystem. One thing that they did do, I think a really good job of is pushing [inaudible 00:20:37] that decentralized community nature. And so, being built on that application, being built on that software, we did inherit some of that as well. It’s hard to say exactly how it came together, it’s some combination, but pretty happy with where it’s at today. 

Tom Shaughnessy (20:56):

Yeah. I was going to ask you the differences between 2017 and today, but we can close out with that, in a bit. I’ll mark it down, because I want to get your thoughts there.

Scott Stuart (20:56):

Yeah.

Tom Shaughnessy (21:05):

But I want to make sure we have enough time to talk about what’s being built on Kava. Specifically, Kava Swap comes to mind. You guys launched recently. So the team, last 24 hours, was on 29th, launched on the 30th, you got your static audit. Can you dive into Kava Swap a bit, what it is? Approach. Why you’re so excited?

Scott Stuart (21:23):

Yeah, so Kava Swap is a constant product, AMM, built on the Kava platform. It’s live today and it’s swapping and it’s actually really… I mean, I love AMMs, they’re such a useful tool in composability. They’re actually a critical tool, in composability. We have Kava Mint, which allows users to supply assets and borrow right now, a stablecoin USDx. We have [inaudible 00:21:54] land, which is a programmatic money market, which allows people to supply assets and borrow assets. Then now we have Kava Swap. These to me are… This in an earn product, a robo-advisor product are basically the core ingredients needed, for users to be able to do 80, 90% of the DeFi financial services that they want to have access to. 

So yeah, I mean, what we really like about Kava Swap is this engine to be able to provide increased user experience and composability for the user. I mentioned that CaseWare, outside of users just transacting and being able to swap pay off their loans more, pay off their loans that are denominated in USDx more easily, not needing to go outside of the platform to adjust their portfolio, were able to leverage it for more general protocol concerns like the SAFU fund, being able to take a single risk asset and diversify it into a basket, that can then be programmatically used.

I mean, there’s other things that we can do too, right? I mean, one of the… This is getting out there a little bit more, but this just shows you the power of composability and a motivated community willing to push that forward is there’s no reason, you know, that we can’t have the protocol itself, be one of the large market makers in the AMM for a number of different tokens, right? Just like we have a community fund that’s there for general purpose insurance, you can do the same thing for provisioning liquidity, for assets on the network. 

Tom Shaughnessy (23:45):

That’s helpful overview. What’s the TLDR way to think about it? Is it similar to Uniswap V2’s pricing model or how do we think about slippage and pricing and liquidity provision and things like that?

Scott Stuart (23:57):

Yeah. It’s a constant product. The first version of it has shipped as a constant product AMM. It has a lot of the bells and whistles and features of Uniswap V2. One of the things that we’re leveraging there then is as we go, as the Kava platform now in Q3 and Q4 goes to allow deposits for the world’s largest assets, so we’ll be targeting USDC and tokens on Ethereum Bitcoin, and then going on to other networks, Kava Swap is going to be a place where you can trade in a decentralized manner, get the benefits of access anywhere in the world, 24/7, no KYC, the largest points in crypto, not just coins on the Ethereum network, not just coins that can be accessed through binance.com, on Binance Smart Chain. From that perspective, right? It’s somewhat similar to what THORChain’s trying to accomplish. But in this model, we’re not coupling the transaction, we’re not coupling the cross-chain transaction with the swapping, the Kava platform is a place to easily deposit coins from any of these large ecosystems and then you can swap them and do other financial services with them on the Kava platform. 

Tom Shaughnessy (25:20):

Got it. I mean, the cross-chain aspect is one of the most interesting ones to me here. I would love to kind of dive into that a bit, if we can. Just, I mean, securing assets on multiple chains is very hard. 

Scott Stuart (25:33):

Yeah. 

Tom Shaughnessy (25:33):

I mean, we’ve seen how centralized these bridges could be in the past. If you could dive a bit into the cross-chain aspect, I think that’d be really interesting, especially because, there’s no question anymore on multi-chain future. It’s clearly-

Scott Stuart (25:46):

Yeah. I guess, I don’t know, maybe little known fact, since June of last year, we’ve had a bridge up and running with the Binance chain. It’s one of the first ones actually in production, and that’s had over $1.5 billion move through it. No KYC, no limits, whatever and no hacks, again, knock on wood. It’s run pretty flawlessly. That took a Herculean effort and we learned a lot from that process. But, I mean, they’re hard, it’s hard. There’s no doubt about it. It’s harder than I would want it to be and that’s working between two, Binance chain is also a cosmos SDK chain. That’s doing it between two Cosmos SDK chance, which… The surface exposure to gotchas is at least an order of magnitude smaller, if not too, between two EBM layers. 

So it is tricky. Basically this comes down to that process, right? Of how, as an organization or how, as a community, do you think about deploying code? Again, I’m not going to point to any specific project, but we certainly look to other projects for inspiration and then the opposite, what not to do. You can tell that there are organizations that have process and when they ship stuff, you can tell by the cadence of them shipping it and by the quality of the code that is shipped that, that organization has stuff that you go look at some just spaghetti monsters, and you’re like, “I’m pretty sure something bad is going to happen there.” 

There’s the general process around that. We certainly invest a ton of time and money and effort into building that up and are continuously doing that, on the engineering side. Then I think that there’s just a matter of this good old fashion startup mentality, iterative thinking, right? So I love the Cosmos guys. I love IBC. IBC is working. It took them four years to deploy that. Taking four years to build something and deploy it, and then see if folks are going to use it is the biggest red flag in my opinion in startup, with a startup mentality. You want to be iterative. 

I think that when taking an iterative approach, you want to be able to release a feature like a quote bridge, that has a minimum set of features to get the job done and then roll out features on top of that pursuant to usage. Right? So with that in mind, I guess the other thing is, we tend to at least internally, and then throughout the community move away from this notion of this cross chain as being some really difficult and obscure thing, to thinking about it more akin to just deposits and withdrawals on exchanges, which is a cross-chain operation from Ethereum to Binance’s SQL database. 

We think about it more like that type of deposit and withdrawal feature, but the address that you’re interacting with is obviously not owned by a single entity. It’s owned by at least a multisig or in the case of the construction that we will roll out for the Ethereum bridge, in a second version, it’ll be like the validator set of Kava.

Tom Shaughnessy (29:18):

Got it.

Scott Stuart (29:18):

I can dig into that more too, if you want, but-

Tom Shaughnessy (29:20):

Yeah. I would love, I mean, any tidbits you can give on, I guess the technical security would be pretty interesting. I mean, the process that you guys run through is pretty clear, but I guess the one question most of you will have is how are funds actually protected in the cross-chain world, right? Is it, people dive into threshold signatures and all this stuff? And that might be a whole nother podcast in and of itself, but anything you could share there would be very helpful because the cross-chain value flow is obviously top of mind for most people right now, especially as they’re aping into farms and plays on different chains. 

Scott Stuart (29:53):

Yeah. Well, I mean, Poly is a great example of that, right. I don’t know if you dove… Literally, when we dove into the Poly hack, we were like, “That’s cool.” Obviously it’s bad that those people lost a lot of money, but, that was a pretty sweet hack and really showcases the got yous of Ethereum. Right? I’m not going to… Obviously, Ethereum is great and it is one of the main reasons why there’s so much attention in the space is a very, very difficult space to develop application safely. It’s just super hard. The bar is very high. The question was yeah, I mean, digging into that process, how are the funds secured, right? Yeah. Again, I think this is that practical sense of they should be secured both technically in process, to ensure that delivery of the software is done in a way that makes sense. Then also financially, what backings are there, right?

So even though we have not used it to date, there’s a fund of 100,000,000, roughly 100,000,000 sitting there in the event that something goes wrong with the hot wallet, cold wallet set up, on Binance chain. Right? That’s again, the community underwriting it. I think that yeah, at a high level, there’s basically in technology, there’s a couple of different models, we’re pretty interested in the hot wallet, cold wallet model that most exchanges employs like Coinbase. It’s a trade-off, it has a nice user experience. 

One of the things that I actually don’t like about the Binance bridge, and then in some cases with IBC, is it’s a specific transaction type. That means you need a specific wallet that can handle that transaction type. One of the things that we strive for in the UX of any of the future technologies that we employ to allow users to deposit funds on to Kava is that they can do it from their Coinbase account. You can just deposit funds onto the Kava platform from your Coinbase account as if you were depositing funds on the Binance or any other exchange. We think that’s important as opposed to like having to withdraw them on chain and doing a special type of transaction in a special wallet. 

I think that’s important again, reducing the variables or amount of things that can go wrong, and then scaling it out, once you find something that you like, and then if you can, try and apply some form of financial assurance or insurance around the process for users that are using it in the early days. 

Tom Shaughnessy (32:32):

No, that’s really helpful. I appreciate that. Just to run out the discussion here, what assets are supported today on Swap, and I guess what you planning in the future. 

Scott Stuart (32:40):

Yeah. So the assets that we’ve on… There’s the native Kava assets. There’s Kava token, hard token which powers the Kava land, then there’s the swap token, which powers Kava Swap, as well as USDx. Then the non-native tokens that we’ve onboarded through the Binance chain is BNB, BUSD, BTC and XRP. In the end if Q3 or really Q4, will be opening up deposits for USCC and Ethereum token. Then I don’t know if you’ve seen, but we were able to strike a deal, a partnership with circle to do a native USDC integration onto Kava, as well. So we’ll preempt that with allowing users to deposit USDC through the Ethereum blockchain, and then, the circle integration where users can deposit directly. Then I’m particularly excited about that because in my view, assets like USDC are the future of how to onboard dollars into crypto. 

So having that direct pipeline of dollars in the bank account into Kava to be earning is exactly what we’re focused on and to round out that usability thing, right? If we look about where’s DeFi going, where’s it going to be in the future? I think it looks a lot like what we saw with the centralized crypto offerings today, when you go back five years ago and you look at how do you get Bitcoin, right? You go to Mt. Gox, or you go hand-to-hand with local Bitcoins. Now you have a company in Coinbase that integrates its products seamlessly and provides a safe user experience. This is exactly what Kava’s going for, for DeFi in five years. Right now you have a fragmented set of offerings with varying degrees of reliability and safety. In the future, you’re going to see an offering in Kava that’s similar to what you see in Coinbase. 

There’s one place where you can go to easily deposit your funds and be able to interact with these products in a safe and easy way. In our opinion, that’s the better end game, right? If all crypto ends up being is a few large centralized players, effectively collecting rents on people trading these coins, that’s not going to get us to this new financial rails, which is actually going to open up broad adoption, not just for institutional capital, but for the next generation of wealth that can access financial services in a meaningfully different way. 

Tom Shaughnessy (35:14):

Yeah. I was going to ask, where do you think the future of DeFi is going? I mean, one of my more, I guess, timely questions for you on this is it feels to me like obviously NFT is in a craze right now, it’s getting adoption. People are understanding it and they’re loving it for the masses. But it’s wild because, when we were aping into crypto a couple of years ago, we had to understand and bridges and risks and liquidations and CDPs and keepers and stable coins and interest rates. Now people are going OpenSea, because they like a picture.

Scott Stuart (35:46):

Yeah. 

Tom Shaughnessy (35:46):

I’d love to hear your take on DeFi [crosstalk 00:35:48].

Scott Stuart (35:48):

Yeah. I’ll go back to, if we just put that lens of an emerging technology on, I think it fits very nicely into that model, that crossing the chasm model, you and I are early adopters. We’d like that. I mean, I am a weirdo. I’d like digging into that stuff and understanding what’s this, what’s that. But the average, they got other things on their mind, they don’t. They don’t have the time to do that, that average late majority, they just want the value proposition. I think for those people, it’s earning opportunity. That’s not to say that NFTs and that stuff might not have value, but for sure people want to earn more money faster, right? If they can and in a safe way. 

Being able to provide a user, not having to go and click a bunch of buttons and do all this stuff, but literally put their money into a single robo-advisor account that earns for them and converts the yield in kind back to them and they look at something like five, eight, 10% versus one percent, that’s I think the thing that’s going to really open up adoption and have more money come on, a thing that, again, what we’re pressing, I think the thing that really holds that back right now is that most people now, fortunately are aware of crypto.

They have an understanding globally of what Bitcoin is, but they don’t have a way to put that money in either that they feel is safe or they have access to, right? Coinbase and BlockFi are doing a great job of that right now, but I can’t borrow on Coinbase borrow, right? And people outside of the US have a difficult time using some of these services. So being able to deliver that on a rails that is truly open 24/7, no limits, no KYC, but in a way that COVID can be that custodian of their funds, for that next generation of wealth and presented to them with a UX that is as good or better than our centralized competitors. I think that’s what’s going to really open this thing up. 

Tom Shaughnessy (37:48):

Awesome. Yeah, no, I really appreciate that. I’d love to close out with two questions. I mean, the first one is Kava’s roadmap and we could take that however we want. The last thing is, I guess, intertwined with your roadmap, where you guys are going, I’d love for you to share how people can get involved, whether they’re developers, whether they’re users, traders, it would be helpful to tie that in with the roadmap itself too. 

Scott Stuart (38:12):

Yeah. We’re hiring, so if you are a developer or anything like that, kava.io/careers. We’d love to talk to you guys, we’re actively growing out the team and growing out the community so that we can move faster. Yeah. In terms of where we’re going, I mean, this is one thing that we do internally for the company, is setting that vision of where do we go? I really like using what SpaceX has done for their thing where you could say, “Hey, we’re going to go to Mars.” Our mission is to go to Mars, right? People can either be like, “Wow, that’s the coolest thing I’ve ever heard.” Or, “I can rent a van and go to Death Valley. Why would I want to go to Mars? That place is… That’s great.” 

You want to present something that either motivates people or it doesn’t. If it doesn’t motivate them fine, you don’t need to be a part of it. When I think that SpaceX did a particularly good job. They said, “We’re going to create a city that has a million people on it.” This is a state in the future that any employee can visualize that we’re going towards and implies success for the business. So similarly, internally at Kava, that motivating factor is to get 100,000,000 crypto native users into crypto. We hope with Kava platform, but just generally the ability to exist completely on this financial rails, this is what we’re building towards. This is the number that we’re trying to get to and just motivating the ability to get there in the future. 

Then how we get there, I mean, that’s the process of discovery, right? My current belief is the way that we get… We know that we get there through making sure that it is safe and reliable for those people to get on, and that it’s easy to use. But in particular, we love hacks like direct USDC integration, where a person now with their bank account can just send money to Coinbase and deposit it directly onto Kava without having to do anything fancy. Then with the release of a robo-advisor service that we’ll have in Q1, they can just click one of three buttons and they’re off to the races, earning at a rate that is way more competitive than anything that they can find in the traditional financial offerings. 

Tom Shaughnessy (40:29):

That’s awesome, Scott. I really appreciate you coming on man. Lot going on. You’ve been around for a while. I always like to hear people’s stories who are… It’s crazy how different podcasts are with people who were here for a while versus new people in the space. It’s an interesting viewpoint from somebody that’s been here for a long time. So I appreciate you coming on exciting times and we’ll share links in the show notes to everything you mentioned. 

Scott Stuart (40:53):

Yeah. There’s a lot more time, basically. I think we’re still… I mean, it’s obvious we’re still in the early days, but I hope in three years, well, I hope I talk to you before three years, but in three years, I hope we’re going to see stuff that’s actually quite a bit different than today. We’ll have a similar sentiment. 

Tom Shaughnessy (41:11):

No, I’m agreeing. I can’t wait till a couple of years from now, we’re going to be looking back and say, “Hey, we were there when NFTs, now we have magic [crosstalk 00:41:18].” Scott, thanks so much.

Scott Stuart (41:21):

Yeah, thank you.

Sep 6, 2021 | | Chain Reaction

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