Lending with Jet Protocol with Wil Barnes

What is up everyone? Welcome back to another episode of the Divi Crypto Podcast. And today I am joined by Will Barnes, the co-founder and CEO of Jet Protocol. How's it going, Will? Going real well. I'm excited to be here. Cool, cool. So before we get into Jet Protocol and the state of the market, let's talk a little bit about your origin story. How did you get

into the crypto and Web 3 movement? In my career, I wanted to go work on Wall Street and I wanted to have those four, six, eight monitors in front of me and really liked the whole idea of being plugged into the markets and just reacting or trying to see what they're going to do, just like analyzing stuff and really like pull research driven approach to it.

And I never was able to get that job Wall Street was, I mean, I'm a product. Post GFC world. So Wall Street was really pretty muted thereafter. And I never was able to find a job down to quite exclusive. And you had to have the pedigree to get to get in and I ended up going to work in tech and consulting for a period of time.

And I found myself doing tech and consulting. You're not really part of the organization. You're just there for a job. So this is all around about 2016, 2017 and crypto just had exploded. And there was a lot of attention. And there's been a news. And I was like, well, this isn't exactly what I want to be. And so I took a longer look at crypto and

went previously. I had just sort of discounted it as like a scam or like, you know, by the time I get involved, it's going to be, it's going to go nowhere. And there's just my like, misinformation at the time. But when I hopped in, I was like, this is amazing. I, you know, it's like no KIC required. I could pretty much write code and get involved

at the bare metal level. And yeah, then I just, uh, yeah, I just jumped in like the deep end and love it. And that's, you know, when I went to work at consensus, this permanent James, my co founder and then then after it made her down and then yeah, sort of rolling all this experience I had. And crypto into, Hey, okay, I really feel like I've

kind of, you know, I've been a part of this thing for a while. I've been in the industry for a while. Like I really want to make an impact. So we formed yet. And, you know, in earnest for like, Hey, we're, we're putting together our, you know, all our video minds here for all the folks on you. And we just been moving. So yeah, it's the

sort of a nutshell for me. Yeah, I think a lot of the focus of what I wanted to chat about was kind of the state of the market. There's a lot of fear out there. And I think, especially with some of these custodial, you know, platforms like the Celsius of the world and things like that. Yeah. You know, there's so much controversy on the DeFi side

of it where, you know, in 2020, there was just so, I guess that would be classified as the DeFi summer. And it was so many of these were coming out. And I feel like some of these lending, you know, centralized platforms just didn't, didn't really, you know, slow down. Like they're just consistently or lending and doing all these things. So I'd love to get your take

because you have a really unique perspective on the market as a whole. And where we're at with all the kind of chaos that's going on right now. Yeah. For as long as I've been building in crypto, it's always been, hey, like you see these big exchanges, they have insane volume. And the DeFi side is always lagged. And that's not, I mean, that is, I believe it's

because these things take a lot of time to build. And you build under these very in focus open source environments where if you make a mistake, you're going to get someone's going to exploit it and maybe take the money and run. And, you know, you have this. And also you have computation limits on chain. So you know, you can't just build a back in service and

run it close source and operate all these business services that most people come to account for. And you know, you always look at like even comparing the biggest DeFi protocols with the big centralized lenders. It's like, you know, much, let's say like the volume is a higher, like substantially higher. And then the, you know, at the same time, these centralized lenders are using DeFi protocols. And

so, you know, from my perspective, it's like, hey, these things, these things work, you know, between a set of parameters, right? Like it makes a decision. You have, it doesn't, it doesn't like look at a potential bar or analyze them for their credit risk. It basically says like, this is an address. They have this much collateral. Like they can do this and like, it enforces that

rule. And then you saw when, when the, you know, centralized credit markets broke down that all the DeFi protocols like continued operating. There's no downtime. They liquidated who they needed to liquidate and, and yeah, they kept operational. Like in fact, they were operated just as they intended to. In a lot of cases, the governance, you know, the community during a governance process for a lot of

these protocols just, you know, they were able to respond to market conditions effectively. You saw that some of the top, you know, some of the top protocols. And I think that's like, you know, the moment for DeFi protocols and when I think of, you know, DeFi growth, it's like, this is the time for when it really will be able to say, hey, look, it's not complex.

Like it's actually, it's actually, it's actually less complex than the, than these centralized projects, right? You, you, uh, everything is open source. There's open data. You look at the top protocols. You know, there's, you look at any DeFi protocol or most of them and they have risk dashboards. So you can see the risk in the system blocked by block and almost instantly versus, you know, you

couldn't really see that, you know, it was very opaque and hindsight, right? The, the blow, you know, the breakdown and the collapse of all these funds, you know, no one saw it really coming, right? And, and no one knew that they're, you know, all these big lenders, like, had the same counterparties and there's all this free, I pot vacation. And it was just, yeah, it wasn't

transparent. You didn't have that on DeFi at all. So I think, you know, as it's been more apparent that like, you know, I say it is evidence that even the big lenders centralized lenders are using DeFi. So, like, I think that's the kind of thing that I've heard of causes is like, we'll start over time. People just be stepping more into this DeFi world where they

start to see that it's less risky. Like it's not without risks, but, you know, it forces this open source, open data, sort of parameters that everyone is subject to, which I think is interesting. I'm excited more so now in the bear market and I was in the, you know, the big, frothy full market. It seems like the use case is becoming more much more apparent now.

Yeah. Yeah. Yeah. I think it's a, it's a true test to the open source kind of concept around, you know, transparency, being the security of just allowing people to see everything that's going on. And just being able to see right through it is almost like a, a way to mitigate any, any sort of not all downside, but it's just protecting. Yeah. A lot of people don't,

they can't quite wrap their heads around that. Yeah. And I think it'll, it'll be more apparent over the next decade or so that that is what needs to happen as more of decentralized kind of powers that be just don't have to transparency. And all of a sudden, it's like, wait, what happened? All my all my funds. Yeah, right. Yeah. No idea. Just blindsided. So it is

it is like a power through transparency. And I wanted to talk about, the sort of choice of chain that you know, you guys went with Salana, which you know, I have a lot of friends that are very, very into Salana. I've met their team. I've talked to a lot of people that build on the, on the, the chain there. And I'm curious as to your take

as to why why you chose Salana as opposed to any other blockchain that's out there. Yeah. I started out on a Kerium, developing on Ethereum, doing security audits on Ethereum, yes, really smart contracts, research, everything for me was Ethereum. I worked at consensus, which is pretty much a, you know, 100% a, not 100% but like mostly a Ethereum, you know, dev shop and all these Ethereum

part of calls. And my co-founder James, you know, we met at consensus. And he got really interested in Cosmos. And I remember thinking like when I was just in my crypto infancy, figuring out that I was like, people really consider things other than, than Ethereum, but as time and along, there's just, I, I mean, I am the big fan of Ethereum. I, I still think like,

it's not going anywhere. But for specific use cases, I was starting to see a lot of value in other chains. And Salana was, was one. And when Salana was just really like coming to market, I mean, it didn't all market, but like when it really started getting a 10% attention, it was pretty empty. I mean, the only serum was on the chain at the time. And

I was really interested, I mean, it's always been super interested in debt markets or debt capital markets. And with these instruments, you have fixed rates, right? So, you know, you can't, like I just found it impossible to be able to fulfill the products that I wanted on Ethereum when the gas would just basically eat into the thin profit margins of fixed income instruments. And I was

like, I'm not sure if I'm going to be able to do that. And so I was just looking for, at the time, like, I mean, the, the gas prices are way down right now. But, you know, even in, in the food craze, like it was, is astronomical. You pay, you know, paid tons of money for transactions. And so it's just like, okay, we need, we need

a solution. We need to find something where we can actually build this. And it doesn't have to, you know, we don't have to be in like rival mode with Ethereum. It just, I was there. And I really liked the order book. And I was, I peed to my interest immediately because these are the kind of things that have typically been way too computationally costly on Ethereum.

So, yeah, the Slot team is super helpful, very welcoming. And I just really liked just this new challenge. And I think Slot is still is the right chain for this. And it's been exciting being a part of something from, you know, the very early days. And, you know, before anchor was a thing. And just, I was just seeing that the ecosystem probe, but, but yet, to

sort of like sum that up, it's, you know, I started to feel like even being around for a long time and like thinking about the product I wanted to build that I was just priced out of Ethereum. And you did think about an alternative. And then just, you know, fell, you know, found that I would like the ecosystem. And it was, you know, burgeoning it. It's

a lot. Nice. Yeah. I think that there is something to be said about the level of community that's so long. And I think that there is something to be said about the level of community that's so long. And I think that there is something that's so long and has nurtured so far. I think that there's beyond the actual tech itself. I think that just a lot

of people have kind of sought for a new home. After experiencing a lot of issues with Ethereum and, you know, waiting on L2s to really spin up. You know, I think that there's just, there's just room for everybody. And I think there's, there will be a day where everybody plays nicely together. There will be bridges and it'll be a lot more, more seamless for the users.

Because just like in the early 90s, you know, people were just so fixated on the technology of the internet that it was, it wasn't apparent that in the future, nobody cared what was going on in the background. They just wanted something that worked. And it just, it's hard to see that now, you know, it's very difficult. Because we're just, you know, I think that's the only

way to get that. We're just in the trenches of it. Totally. Yeah, totally. Well, cool. I'd love to talk about where you're at in the process. Because a lot of questions that I always get in general is just what the status of projects are. Like if it's live, are there users actually using the protocol and sort of if you could give us a high level as

to, you know, decentralized lending and borrowing and, and, and, and how that's going to be used? Is it businesses? Is it individuals? And just give us a, a good use case there. Yeah. We have a live MVP, which was deployed last year in October. And, yeah, we custom built it. We, we, you know, when we approached building jet and, you know, we had identified slimes the

chain we were building on. It was very desolate in the sense that, hey, there's not that much out here, right? Like if you look at Ethereum, which has, you know, five plus year head start and just a lot of mature developer tooling, a lot of this stuff wasn't, it just wasn't on Salana. And it's still not there yet. There's, there's better tooling than it was a

year ago, much better tooling. But this hamper and hinders and it slows down development. And when we approached this week, you know, we look at, you know, the, for the big, you know, the bull run that started in 2020 saw really the, the five applications. Like compound, which really thrust the five back in to, you know, I'd say the narrative, because when they were all brought

out, the greedy mining. It was, you know, everyone's like, wow, there's stuff here now, like back in 2018 there, there wasn't much there. So, you know, a lot of that, I think, like the green mining and lots of those, those products of sort of, they were very good. But we sort of exhausted the use of them now and in the market is looking for more innovation.

And that innovation is taking place on new chains like Salana, where there's just a big push for engineering innovation. And that's where we're at right now. We, we did deploy our MVP. We didn't incentivize it. We were thinking, we didn't come this a lot. It's a comfort Ethereum style lending protocols. So, Salana, we wanted to make it Salana specific, right? We were on the leverage D

in a virtual machine of Salana and in the, the, the pros that it offers. And so, you know, we bopped down and just went to pure engineering. And then we, we've, with the heavy focus on governance, because if you look at governance during over the past, you know, I could say month, it became super important for a big lending protocols. They needed to make decisions, not

a change risk parameters. So, sort of building a lot of this stuff. It is less like in the market, people don't, in the bull market, people are thinking, well, like, why are you building this? Because, you know, at some point, the market narrative is going to change. We need to be ready for that. So, we put a lot of effort into our governance system, which is

live. And we're actually rolling through votes right now, piece by piece on how we're building the protocol. And it's, I think, super exciting because that's how you get a community driven initiative. That's how you get people who feel like they're part of the thing and are growing it. And it's not just a bunch of devs behind the multi-stake, like making decisions, like we need to have

some methodology to make decisions. And that's what we built. So, you know, for now, we've, we actually releasing very shortly, the whole V2, the new V2 of our protocol, which just steps away from the pulled knitting model, which is pretty specific to Ethereum. And that pulled knitting model is utilization based. So, like, if someone comes in and just takes a big chunk of utilization, it really

throws the interest rate environment out of whack. And, if you're borrowing to fund things not other than speculative trades, like, you know, people don't want to borrow a house, borrow to buy a house, and then have that, like, be a variable interest rate. I mean, markets have collapsed because of that. You think of, just for rate mortgages. But, we were like, okay, well, in a more

steady state environment, what kind of borrowing kind of loans so people are going to need. So, we basically created bond markets in this margin account, which is which allows just much more powerful accounting. And that's really only made possible by Salana. Salana is VM and low cost transactions. And for us, it's taken us, you know, longer than usual to get there. We didn't just want to

have a commoditized knitting protocol. We wanted to think to have a lot more power. And we wanted to have more risk management tools. So the bond markets give us fixed rate, fixed term lending. And to me, this is exciting next step because you're not going to buy this part of DeFi where, you know, you can come borrow different tenors, one day, 30 day, 180 day debt.

And, you know, we start to see the innovation here being the introduction of term structure, which we never had before. And I think that is a very welcome and exciting, like shows maturity of DeFi. If we can start showing how debt of different tenors is priced, and that's what we're rolling out now. Like the code is done. It's open stores. And right now we're just sort

of getting all of our docs in a row to prepare for the deploy. And yeah, we're super excited because we, like I mentioned earlier, we have the governance system in place. And, you know, we really want to just kick this thing off with like strong governance posture. But yeah, that's where we're at. I think, you know, we have a lot of, we've spent the past six

months in full-time engineering nodes and built this be per protocol now. We're just getting prepared to kick it off. Cool. Very cool. And somebody that's, you know, in the mix with DeFi, you're seeing a lot of, a lot of projects, you know, launching, left and right. I think that, you know, when you're in the mix, you see a lot of things come across your radar. And

I'm always curious from builder to builder, you know, what, what you've seen that gets you really overly excited. Yeah. I really like the, uh, they've seen some things that are just more uncommon. I'd say like, you just see more market-based primitives, uh, cropping up like more order book. Based products showing up. And I think those are super interesting. Uh, because it, like, compared to things like,

you know, like compound or like some of the more like of the previous full market, like these things have a lot more intricacies in it. And so for one, like, I think Oracle's that update, like every block, that's super interesting. Uh, the ability to create a lot of, like products out of, you know, leveraging other products, other protocols, I think is going to be what really

gives us, like, it really takes us to the next leg up in terms of what DeFi can do. So I say the extensibility and the ability to have this products that are focused on settlement layers and, you know, rendering decisions down on that settlement layer is what is most exciting to me. So I'd say more infrastructure-based place because these are the things that end up being

you know, they're not so attractive on the short term because people don't see the, you know, readily available value out of it. But as they become adopted, they, they like just become like core pillars of what crypto DeFi ecosystem, uh, well, and how it will operate. Cool. Very cool. I'm always interested in getting people's takes on that. Yeah. Just because it's, it's important to share, I

think. Yeah. Because every time I get a new company, everybody's moving a million miles an hour in this space and unfortunately, you know, a lot of times really high quality builders don't get highlighted because of that movement. Fortunately, though, during a bear market, um, they get more recognition than, uh, you know, in bull markets. Yeah. In bulls, you have the, the loudest person in the room

may or may not have nothing built or done. They get the, you know, the most attention and, yeah, you know, the best builders often are, uh, disregarded in those types of highly, highly speculative spaces, uh, the space at times. So, yeah, I always appreciate those. Yeah. Who wanted to add one thing there is, is especially during a bull market. It's, you know, as a builder, you

know, there's a lot of, I think, you know, one of the things there's a very hard to deal with, I think it was just like, hey, like, god, this is, this is going to be a great thing. It's crazy. It's like just the amount of, you know, token emissions, just, uh, you know, fire tokens out there because people wanted them. It's like, well, of course, people

do want them, but like, you know, this just like doesn't seem like the smart play in the long term. Right. Um, you know, if you like think of douse is a, you know, is a project and they're deliver a business case. Like doing that just doesn't seem like the smartest movie seems like a race to the bottom. And I think that like, you would get some

like interesting responses to deciding against that, which was always just like interesting. But I think the attention that you get now in the people that are in discord now asking more pointed questions. Like, I think the dialogue is much more healthy now than it was just, you know, six months ago. So you just see like the people see like the people who are really aligned with

what you're building like stick around. And they start, you know, helping build the thing, which I think is amazing. And it's really like, you know, despite the bull market ending, like I have this like, you found confidence. Now that like people are actually taking a look at things and like, you know, assessing them on their merits. Yeah. Well said, well said. Well, those are all the

questions that I have for you. Got a good state of the market kind of overview. Got the things you're excited about a little bit about. What you're working on, but working people discover more about jet protocol. I would check our Twitter. So Twitter slash jet protocol will give you the most up to date stuff. And then of course, our website, you can get the gist of

it. And if you're technical and looking to get involved in governance decisions, then forum that jet protocol.io, you'll see probably the most technical stuff. But that's for folks who are looking to, you know, really get into the into the discourse. But yeah. So Twitter would give you the most up to date. You know, high level snapshot information stuff. Right on. All right. Well, thanks so much

for coming on and sharing your take on the market. And wherever you guys are listening on iTunes or Spotify, links that will mentioned will be in these show notes. And thanks for coming on. We'll thanks Steve.