On Ep. 40 of Tokenized, Cuy Sheffield, Head of Crypto @ Visa, is joined by Ethan Chan, Co-Founder and CEO @ Allium and Noah Levine, Data and Strategy @ Visa to discuss Visa's approach to on-chain data and analytics, the future of crypto applications built on self-custodial wallets and more!
On Ep. 40 of Tokenized, Cuy Sheffield, Head of Crypto @ Visa, is joined by Ethan Chan, Co-Founder and CEO @ Allium and Noah Levine, Data and Strategy @ Visa to discuss Visa's approach to on-chain data and analytics, the future of crypto applications built on self-custodial wallets and more!
Timestamps:
This episode is brought to you by Visa
A world leader in digital payments, Visa is bridging the gap between traditional financial institutions and innovative blockchain networks, helping players in the payments ecosystem navigate the ever-evolving world of tokenized fiat currencies with confidence and ease. Learn more at visa.com/crypto.
Tokenized is also presented by Avalanche.
With Avalanche’s purpose-built Layer 1s, institutions can tailor digital asset strategies to their exact needs—while still tapping into the power of public blockchain innovation, developer communities, and seamless interoperability. Learn more at avax.network
***
We’d also like to remind you that the views or opinions of our contributors today are their own and do not necessarily reflect those of the companies they are representing. Nothing we say should be taken as tax, financial, investment or legal advice, do your own research!
Music by Henry McLean
Cuy Sheffield 0:00
What if you have a tokenized deposit that is actually part of the reserve of a stable coin. And so what if you can go in and out where, if you're inside of a large bank, you can move back and forth in a tokenized deposit, but then you can send it to a stable coin issuer and be able to mint 24/7, a stable coin that then leaves the bank and goes outside and circulates. And so I think we're going to see those worlds come together a lot more.
Cuy Sheffield 0:33
Welcome to tokenized. The show focused on stable coins and the institutional adoption of real world assets. I'm Kai Sheffield, head of crypto at Pisa. I am once again in the host seat in person with some incredible guests. We are missing Simon while he's away. If you haven't already, please check out the show he just did with President of stripe. Will gay brick really excited with all the new content coming out on tokenized but today I am joined in our Mission Bay office with Ethan Chan, co founder and CEO of Allium, as well as Noah Levine, who leads all of our on chain analytics, data and a lot of our strategy work here at visa. Welcome Ethan. How are you doing today? Doing great. Thanks for having me here. Awesome and Noah, great to have you on the show. We spend so much time together on all these topics. Just one last bit before we get into the content, I need to remind you that the views or opinions of our contributors today are their own and do not necessarily reflect those of the companies they're representing. Nothing we say should be taken as tax, financial investment or legal advice. Do your own research. Noah, to kick off. Can you give some more context on how have we approached on chain data? How did we get into this space, and more about some of the work we've been doing with Allium?
Speaker 1 1:50
Yeah, for sure, our journey with on chain data really started about a year ago when we were seeing on X all of these posts and sort of memes saying that stable coin volume was quickly approaching, if not surpassing, Visa volume. And so at this time, there really was no centralized source of truth around what was going on with stable coins, what the charts were, what the insights were. And so, you know, with this in mind, this was really the primary motivation, why we felt the need to partner with a premier data analytics company like Allium and create the visa on chain analytics dashboard, which is a publicly available, free to use, tool for banks, regulators, financial institutions to access key stable coin insights in one place. And so really early on in this journey, one of the things we recognized was that over the last year, there was over $30 trillion of stable coin volume, if you were to just sum it all up. But the reality is, is that stable coins run on public blockchains, which are really general purpose payment networks that can initiate a transaction as small as one cents and as much as a billion dollars in one transaction. And so there are just a lot of activities that happen on a public blockchain that are just not seen in traditional payment networks, like a visa for example. One of the things we see is there's a ton of volume related to high frequency trading, and crypto traders moving billions of dollars between different exchanges, creating positions. And we also see that there's activity where you have centralized exchanges, like a coin base that's just rebalancing their internal positions and your treasury management. And that's another thing we don't see. And then lastly, we see that because of the way that smart contracts work, there are these like redundant operations and repeated transactions. And the example I like to give is, you know, if I go and take my Visa card right now to a coffee shop and I buy a cup of coffee for $5 from a visa payment volume perspective, this is a $5 transaction. But if we were to actually go through the entire settlement flow, you would see that there's $5 moving from the issuing bank to visa, visa to the acquiring bank, and maybe even the acquiring bank to another bank for the merchant. And so this $5 transaction on chain would start to look like a $20 transaction. And so with all this in mind, we knew that we needed to come together and create this new methodology that really strips a lot of this noise and some of these things that we don't typically see in payment networks. And so we created this new adjusted volume methodology, where we remove wallets that have done more than 1000 transactions, or 10 million of volume in a month. We remove situations where a Coinbase wallet is sending to another coin based Treasury wallet, and then also we get rid of those internal smart contract transactions that we see that I just mentioned in the coffee example. And so after we made these adjustments, what we saw is that over the last 12 months, there's over $6.8 trillion in adjusted volume, which is still a massive figure, but obviously much smaller than that 30 trillion figure that everyone likes to talk about on x. And so you know that, in of itself, was really interesting. But then we looked even closer, and we saw that if you look at this adjusted volume, the average transaction size is still over $4,500 and at visa, we know over the last year, the average transaction on our network is around $45 and so it just was clear that there's a big difference between what the most common transactions you see on chain are and what we're seeing in a payment network like Visa. And so what we did recently is. Created this new retail size methodology where we took the same exact adjusted methodology and we just said, let's look at transactions that are between zero and $250 and from that, what we can see is that over the last 12 months, there's 48 and a half billion dollars of volume, which is less than 1% of the overall adjusted transaction volume. So yeah, Ethan, love to hear your insights on this.
Cuy Sheffield 5:21
Yeah, thanks for sharing the history. So I think, just to recap, I remember meeting Kai and nowhere a year plus ago, and we're just chatting right before this podcast going to Foster City. And I'm very happy of how far we've come since then, and really educating industry more on like, how to basically, like, get from like, unnormalized data to normalize data to meet the different needs there, I think, to your point, just getting off your point. So right now, based on the retail size transactions, only point 6% of the adjusted transaction volume falls within zero to $250 of transaction size. And the interesting thing is that if you look at the transaction counts, right, the percentage of transaction counts, so actually 40% 40% of the adjusted methodology falls under $250 what does this mean? It kind of tracks that retail payments fall probably within zero to 250 because, you know, it's, I mean, like Noah gave the coffee example, probably there are more people buying coffee, and that's, therefore it's way more number of transactions, but the actual volume is much less. So I think that's the first point. Here is the data tracks, right? And then if we dive a little bit deeper when we actually filter the retail size between usdt and USDC. So for usdt, one thing that we saw is that 80% of the retail size transactions happen in usdt. And I think that also matches up our intuition, right? Because it's generally known that retail payments is used more emerging markets, and we know usdt is also used more in emerging markets, and we know it's usually used as a unit of account and also store value. And also, I think it really does give some sort of credibility to this very simple but elegant methodology. Anything below $250 we can count it as retail size. And one of the interesting things as we play through the original filter, so maybe for the audience there, I think now, on the visa dashboard, on the website, we have three filters. We have retail size, anything below $250 we have the adjusted volume that everybody's very familiar with, and unadjusted, which is everything. Unadjusted which is everything. Well, if you just look at retail size, 80% of the volume happens on usdt. And then as we go to adjusted volume, it actually drops to around 65% and then when you do everything goes to 40% and so what does this mean? This means that usdt is probably used more for retail and usdt used more for enterprise use cases. That's the hypothesis that we have. I mean, it's probably backed up and it tracks, because a lot of USDC is used by different institutions. It's used for Coinbase, for example, and more of these bigger enterprise use cases. So it makes sense to see the percentage drop from 8065 and then finally, to about 40% and then the last piece I want to talk about is also more on the third point about the new retail size transactions is that if we look at what chains usdt is transacting on and what chains USDC is trading on, so for usdt, the top two chains, no surprise there, they all transact on binance and Tron, right about 70% give or take. And again, it tracks, because we all know that BSC is used more in emerging markets and also usdt. But then when we look at USDC, about 50% of it is transacted on Solana, and bases Solana of 30% and based with 25% and so we can see that I think the underlying commonality between usdt and USDC, in terms of like which chains they're on for the retail size, is that they all use high throughput and low gas fee chains, right? It makes sense, right? Because I still remember any NFT days when trying to buy NFT, I was paying like 100 plus paying like, 100 plus dollars in gas fees, right? And it doesn't make sense to pay $100 to buy a cup of coffee. That costs five bucks. I mean, it's also known that the USDC is more on chains like Solana and base, and then usdt is on BSc and Tron. It's fascinating to me that when we started working together in partnering to create the visa on chain analytics dashboard, part of the motivation was, at the time, everyone thought stable coins were 100% crypto. They were like, the only thing that stable coins are used it's crypto trading. And so we're trying to say, no, like, there are these real pockets of real payment use cases that are starting to come out. And so we're trying to separate out, how do you use all this publicly available on chain data to show that this activity looks like it's not just of high frequency trading. Now I feel like we're in this world where we're in the stable coin hype cycle, and you almost have the shift is all the way over the other side, where you have people that are thinking that maybe stable coins are being used for consumer to merchant payments, and maybe this is going to be this new retail payment method all of a sudden, and then we're saying, wait a minute, that's not the case either. And so what we're finding is it's actually somewhere in the middle. There's still a lot of activity on crypto. There's a lot of activity that is payments, but they're not the payments that you think about in buying your coffee. They're the payments that are $4,500 that are a cross border Small Business paying an exporter using usdt on Tron. And so it's been really interesting to see, how do you take that starting set of data and find different ways to cut it, to just put more facts around many of the narratives that are out there? But I'm curious what no you've been in a bunch of these discussions of, how do you see traditional. Institutions starting to look at on chain data. And I think we found that the dashboard has been a starting point. But what advice do you have if someone is listening and they're like, I don't know any place where to start with on chain data, why is it important? How should they start looking at it?
Speaker 1 10:13
Yeah, absolutely. I think it's a great question. And from a starting point, if you're just looking at on chain data for the first time, it's very overwhelming for one thing, one stable coin can be issued on 20 different blockchains, and each blockchain has different data and different nuances for different use cases. And so I think the first step is really understanding that to do this properly, you need to work with a partner like an Allium or another data provider that can help break that up and distill it. And then I think from there, also it's really investing the resources and the time to get the right people who could really specialize and focus on on chain data and distill those insights. And so I think the combination of, to our point earlier that you can't just look at blockchain data and assume that that's what you're seeing, is what's actually happening, and then also making sure that you're partnering with the right people so that you can get the right expertise and actually distill into clear Insights is really important.
Cuy Sheffield 10:56
Completely agree. And thanks for the shout out. Me being a good partner, and it's always been. I think I do like to say, actually, my title, my official title, is Chief Data plumber, right? So we like to be the data plumbers of this industry. And I think that the fundamental reason why blockchain data is really hard is because it's very fragmented. Like Noah said, there's like, 20 plus blockchains, many different tokens, many different standards. People can change standards and upgrade contracts all the time, and it's a full time job to just like, keep up to date with all of that, and then map that to the business needs for an institution like visa to be like, Hey, how much of it is actually retail payments? And even then, we both know we're not 100% correct, right? It's like, more of like, how can we keep building up the confidence and, like, basically making assumptions to make sure that we can make the best decision off that? Yeah, awesome. So let's get into a few stories of the week. I think one of the biggest ones Coinbase announced that Coinbase wallet is now the base app with updates around social media, payments and Mini Apps. Maybe Ethan, starting with you. How do you think about the evolution of Coinbase and base and now what this means with the introduction of base app? Yeah. So I managed to get the beta access yesterday, so I was actually playing a bit. That's pretty cool. Thank you, base team for letting us have it. What I really like about the base app and what they're trying to do here is that they're trying to bring non crypto native folks into crypto. And I think I'm always a fan of anyone trying to grow the pie. So for the viewers out there, at least from what I've played and what I've seen online, is that they're trying to combine the social layer the Mini Apps layer. I was playing some of these fun mini games last night. Actually, it's called matcha jump. I was just trying to play it out a wallet payments, your chat as well. There's even AI agents you can chat with within the app. So I think one thing that I really like about base is they're trying to bring a lot of these different use cases onto the crypto side. And I think on top of that, one of the things that very relevant for you guys is also that they're starting to introduce base pay, right? Pay anything with base using USDC and so on, the retail size transaction base consists of 11% of USDC transactions today. Maybe after this launch, over the next six months, we can actually track that number on the dashboard for the audience there as well. You can track that number and see how much more adoption base is getting in the retail size transactions as well. Yeah.
Speaker 1 12:58
Super interesting. I mean, I think there's really two key takeaways I had because, you know, I guess starting out, I actually went last night, and I watched the full announcement, and I was looking at what people were saying on x and, you know, one of the funny things that they were saying was that it's unbelievable that in the past, when there was a product drop around crypto, you know, it's just an ex post or a blog, and now you have full production grade setups, yes, and it's these big events. And so it just really shows how much the crypto space has adopted and evolved over time. So that's, I guess, a starting point. But for me, there's really, like, two key takeaways I have from it. I think the first one is, it's very clear to me that the future of crypto applications, and even really financial applications more generally, are going to be built on self custodial wallet infrastructure. And you know, I think this is seen in the fact that stripe obviously made a big acquisition of privy, which is one of the leading wallet as a service self custodial wallet infrastructure. Wallet infrastructure companies. And then now you see Coinbase very heavily investing in their self custodial wallet. It's clear that the value proposition of a self custodial wallet is that if you have consumers and corporates holding their own keys, then as the wallet creator, I don't need to go and spend a bunch of time and resources going market by market, getting licenses, FBO partner, bank structures, I can really just focus my time and energy and resources on just creating products that consumers like. And then if you're a smaller company, you also have a much lower barrier to entry to create a new financial application. So I think that's one thing that I took away from their announcement. And then I think the second takeaway is that specifically on Coinbase and what they're doing, it's very clear that their strategy and their aspiration is to create sort of this global Super App where a single consumer can do everything from shopping to saving and earning to trading to playing games, all these things in one application. And as the kind of the on chain data side of me can't help but think about what an amazing opportunity this is for merchants that really invest in on chain data, so that they can go and see based on the activities that a consumer is doing, whether it's how much money they have in their wallet, or what merchants or applications they're interacting with, you can create a really expansive and in depth user persona based on all of these things, connecting on chain and off chain data. And so you know, as I think about like the way that E commerce works today. Today, it's very much about where are people going and interacting, and it's about what is the customer acquisition cost? What's the cheapest possible way that I can acquire a customer? And what I think this does is, when you have this extra level of attribution data, what you can do is you can no longer ask the question of, what is the cheapest way to acquire a customer, but what is the cost to actually acquire the right customer. And then you can focus more on key metrics, such as, what is the expected lifetime value of a consumer just based on all their interactions and what they're engaging with? So I think that is really important. And for people out there that are listening and thinking about, maybe you're a merchant, you're thinking about, what's the feature of my advertising and discounting and loyalty business? This is an area that I would pay attention to.
Cuy Sheffield 15:35
It's fascinating to me. It brings me back to 2020, 2021, where, like, you had this narrative of web, three social, and you had a big part of crypto was trying to build a new creator economy, yeah, and it was, that's what nfts were. And I got really excited. I got really into nfts. I'm still a fan of nfts today. And so it was this promise that being able to mint an asset on a blockchain could enable a creator to distribute some type of content and be able to monetize that content. Now we've seen nfts have not been anywhere near as successful or adopted as they were in the hype cycle in 2021 and now it feels like base in Coinbase, they're trying to create this new concept of content coins, and coining your content. And so it's more about they're creating a social app and a social network and trying to have this creator focused narrative. I think it's super ambitious and huge shout out to Jesse Pollock, who's been an amazing leader, building base from the ground up. And I think it's different, and it's a fresh take of I think you've seen a very speculative element of a concept with some of the meme coins that have been out there the past few years. They're trying to take some of those properties from an infrastructure standpoint, and apply it into a social feed where a creator puts some content out there. The content is coined, it can then be purchased and shared. And so I don't know if it's gonna work. I think it's still very, very early. I don't think you have a mass market customer base that is familiar with that type of behavior, but they're trying. And I think that the other big takeaway is that blockchain infrastructure is getting good enough now that base is able to process transactions under one second, under one cent point two seconds, you can start to actually experiment with some of these things. And then I think, like you said, adding messaging in there, and being able to chat with AI agents, it's just a different type of product that, when you say crypto and you think a crypto wallet, you don't necessarily think about this kind of full featured Super App messaging platform. And so I'm really excited to see how it goes. I don't have access yet. I gotta play around with it. And, like, if you could get me access, I can. Actually, just last night, you talked about the content coins, I decided to post a picture of my team playing severance. Actually, we posted a picture in Zora minted a coin, and I think some of my teammates bought the coin, and I think it's a $1,000 market cap already. Yeah, it's kind of interesting, because I think the underlying problem, I know you said 21 I was just going to talk about that, about the Creator economy. And then I think it was also like the passion economy at some point. And like taking the properties of tokenization and allowing creators to, like, get empowered and money from it, like, quote, unquote tips. I'm not sure what you want to call that, and get everybody to share the success of the Creator. I think that that is a very interesting concept. And what is more, for me, that the statement that base has made by hosting that conference in LA, right? It's not in New York, it's not an SF, it's not in any of the quote, unquote, crypto hubs they do it in LA. To me, I find it a bullish signal, because I generally, like, as I mentioned in the beginning, like teams going in to bring in the next, like, million, billion people in that don't even know what crypto is and don't even care, and they just want the benefits of it. And like, for me, that that's the ultimate goal. No, you were an NFT guy. How is a content coin different from an NFT? Because it seems like you mentioned that you took a picture, you coined it, yeah, and now it has $1,000 market cap. Like, what does that mean? Like, an NFT, I think the whole point was it supposed to be unique, and it's a one of one. Do you understand the content coin versus NFT? Yeah. How do you think about
Speaker 1 19:01
for sure? So for context, before being at bees, I was sort of leading on chain data analytics at a company called artifacts, which was an NFT subsidiary of Nike, was very popular at the time. Made it made a ton of money for them. And I think when I think about content, coins versus nfts, with nfts, I think it's much more of a an artistic like you spend multiple months building and preparing this, and it was a lot slower between when you would have a drop and, you know, when the next one would be and what I think we've seen with meme coins, and now they're trying to create with content coins, is if you can increase the velocity at which you release content, you know, it's a lot easier to keep people engaged because their attention is focused on that more. So I think that's like the really, the key difference for me is that with nfts, it was much more. There was, like a rarity aspect to it. It it was a luxury aspect to it. It was only really accessible to people that had a ton of money and can spend 1000s of dollars on an NFT. And what I think the narrative and the rhetoric when they talk about content coins is this is really trying to democratize access to ownership of a community in a way where you don't need to have 1000s of dollars to buy that asset. Furthermore, like one of the other points that they made is they're now giving you the. Capability where you can, like, a piece of content, and then that will automatically initiate a micro transaction. It was, you know, I think stable coins are well poised to do and so I think it's just a lot of it's about, how do we get more people involved in this? And it's less of a luxury thing and more of just a social community, community thing. So there's not this
Cuy Sheffield 20:16
element of, like, scarcity, where I own this NFT, I'm the only one that owns it. It's more of a community. I want to show appreciation for a creator, and I'm willing to pay some small amount. And I feel like people have been talking about tipping and micro transactions on the internet forever, forever, but it has never actually become a thing. And you could argue, okay, maybe it was a infrastructure challenge of most payment systems weren't built to do a fraction of a penny and a type of transaction. I'm curious of, even if you have the infrastructure and the technology, how do you get people to change that behavior right now, most people are used to they like something doesn't cost them anything to like. Then you have like, the Patreon, like subscriber model. If I really want to support a creator. I might pay $10 a month. Is there going to be this new mass market behavior that's in between where I have a wallet that I'm willing to when I like, pay a penny or pay a 10th of a penny, like Ethan, do you see that catching on it coming? I think maybe we'll see if it'll catch on in the instant, in the way base is doing it today or on base together, but the underlying human need is there. I am pretty sure, in the in the audience as well. How many times have you encountered an article you really want to read online, and then it's just pay wall, but you're like, I'm actually willing to pay a price of a coffee for that one article, but I don't want to, like, sign up my credit card subscription. So I do think that's an underlying need there. And so hopefully this infrastructure will just open up more creative use ways to kind of pay for these types of content, for specific content, specific created
Speaker 1 21:45
as well. All I know is, if I post, you guys better be liking a fraction of a penny. Yeah. Not Yeah. I have the four people to like my posts. You know, who's your real friends are when they want to be a 10th of a penny to dollar chief, the other plumbers, dollar sign, yeah.
Cuy Sheffield 21:57
It's fascinating. We have to take a quick break to hear from the sponsors who make the show possible.
Sy Taylor 22:04
This episode, if it's not obvious, is brought to you by our friends at visa, a global leader in payments. Visa's tokenized assets platform vtap uses smart contracts and cryptography to help banks bring fiat currencies on chain. Vtap allows financial institutions to issue Fiat backed tokens, improving financial efficiency and enabling programmable finance. You can check out the links in this episode's description to express your interest in vtap tokenized is also brought to you by avalanche major banks, FinTech challenges and industry leaders are using avalanche to create new business models on a fully customizable blockchain infrastructure. Think of it as more than a blockchain. Think of it as an entire network built for financial institutions to innovate with purpose built layer ones institutions can tailor digital asset strategies to their exact needs while still tapping into the power of a public blockchain innovation developer communities and seamless interoperability join the institutions shaping the future of finance on avalanche, And you can learn more at avax dot network.
Speaker 1 23:24
All right, for our next story, Citi, CEO announced in their recent earnings call they're going to be focused on tokenized deposits versus stable coins and offering Fiat services to stable coin issuers. It feels like earnings call season every day. You know, there's a story about a bank being asked about stable coins that's just now the common question that they're getting. Know, what's your reaction to some of the comments and and how do you think about the distinction between tokenized deposits and stable coins and what they mean for banks? Yeah, for sure. So I think to start out like it is not surprising at all that we're seeing some of these large, US global banks like a city or, you know, recently, Chase, announced that they're doing a tokenized deposit on base, really leaning into tokenized deposits versus stable coins. And I think it kind of comes back to the fact that if you're a bank really, your primary goal is, how do I retain, or ideally expand my my deposit base, and how do I retain that relationship with the primary customer? And so I think while we haven't really seen significant amount of demand for consumers or corporates in the US to move money out of their bank account and into stable coins, I think that these banks do recognize that there is value if you can create 24/7, intra bank money movement that's sort of always on and always works, and it doesn't take away from their deposit base. And so I think that's something that these banks really want to create and mix their products competitive. And then I also think this becomes increasingly interested. If you imagine a world where these tokenized deposits are actually being issued on public blockchains, and now you can actually start to initiate loans into defi and on chain lending protocols in the tokenized deposit and with the potential that you could reduce some of the overhead expenses. But. Reduce the delays and settlement between these loans. And so I think that's a really interesting opportunity. And then additionally, one of the things I think, from this earnings call that people probably missed is how the CEO highlights that they're really going to also focus on providing Fiat services to existing stable coin issuers, things like I think they mentioned, on and off ramps and FX and reserve management. And to me, this makes a ton of sense, given the fact that, as a bank, they have a real value proposition core competency around these Fiat services. And so given the fact that stable coins, again, are primarily getting adoption in emerging markets where either they don't have any business or they have a much smaller percentage of their overall business there, I think this becomes really nitocritive. And so just to focus on those services for these issuers. And so I can definitely see a playbook playing out where you see banks issuing tokenized deposits on public blockchains so that they can service their primary customers, and then using their Fiat service capabilities to help these stable coin issuers, where we're seeing a lot more velocity and where money moves, and it's actually an opportunity for them to grow their their revenue base. So yeah, curious what your thoughts are on this.
Cuy Sheffield 26:00
Yeah, so from my perspective, so I mean Allium elements headquarter New York, you know, American company, but we also have subsidiaries overseas, right? For example, with Office in Singapore. So for me, like the first thing when I when I read the announcement about Citi Fraser mentioning that they're going to focus on tokenized deposits and also stable coins, is is exciting. Because for us, whenever you need to transfer money between different banks to make payroll, for example, right? Like that takes a couple of business days. And so I think tokenized deposits will be like the first step to almost, quote, unquote, make it instant. And also, you can send money over the weekend, which is also very important, right? So I do things to step in the right direction. So for me, I even see, even as the co founder of aliment, actually benefits me, right, from a business level. And then also, I think one thing to note about that is that for these tokenized deposits is that it's, I think, right now, you have to be specific to the bank itself, right? You have to be at a client a bank. You have to be within the ecosystem. And so for me, interoperability is key. I think where it gets really exciting is that, like, hey, when you put it on public blockchain, like, how do you make it interoperable with all the other different tokenized deposits? How do you connect it to, like, different lending protocols and all that. And I think that's where it gets really exciting. And I think it's a bit reminiscent of, I actually just learned this recently, of, I think, in the 1800s when every single is it, state could issue their own note, right? Their own money, right? And then everybody was just, like, issuing their own money. And then, like, I think, as in 1863 everything, like, the biggest bank just crashed, right? So basically, like, that's a every state had their own note. Imagine every state had their own dollar, right? It's actually pretty cool. You can go and look at it, at so many different dollar bills before the Federal Reserve came in. And so I think one thing we just to note is that, like, if you want to make things interoperable, I think it complexity on the other side as well. Like, how do you manage how do you standardize it? How can all the banks come together and agree? Like, what is interoperable? And I think that is going to be a fun conversation for everybody to kind of solve. And I think on our side, from Alan's perspective, is that, like, there's so much data to parse and standardize as well, so that's a small way for us. Yeah, well,
Speaker 1 27:45
it's also interesting too. I think open question is, if they're going to be releasing these on public blockchains. I think there's also an open question of, how do banks feel about privacy? Like, if you can go and see every single time your deposits are moving and who holds what like? I think it's a big open question of, from a data perspective, as much as we love having access to accessing data, there are, I think, open questions around, what does this mean from a privacy standpoint and Consumer Protection standpoint, if you know that a certain address has a certain amount of deposits? So I think that's
Cuy Sheffield 28:12
something that needs to get addressed. I think there was this narrative for a while that was like stable coins versus tokenized deposits, and that they were competing with each other. I think now it's evolving in a way where people are realizing maybe these are more complimentary, that tokenized deposits are really, at least today, from what we've seen, have all been internal between a bank's customers for intrabank transfers. Yes, I don't think we've really seen an example of a tokenized deposit. It's not really clear from a regulatory perspective, can you offer a tokenized deposit that could freely flow outside of the bank and be used by anyone across the world, circulate freely on exchanges? That hasn't happened? And I think that there are generally legal definitions of what a deposit is, that it's a relationship, a liability, that you have of a bank that you're a customer of. And so I think that there's innovation that banks can do to improve their core ledger systems, using blockchains as modern core ledgers, and be able to do more efficient payments. To me, it was always kind of silly. Of you're telling me, if I want to send money to another customer of the same bank, it doesn't work. 24/7, and then you realize, well, a lot of large banks, they operate in many markets. Many of them had a bunch of acquisitions. They might have multiple core ledgers under the hood. And so it is useful to have this abstraction of if you could represent deposits on this modern core ledger and transfer them across the world in real time, and then I think you get this really interesting combination. And Simon talked about this on x the other day, what if you have a tokenized deposit that is actually part of the reserve of a stable coin. And so what if you can go in and out where, if you're inside of a large bank, you can move back and forth in a tokenized deposit, but then you can send it to a stable coin issuer and be able to mint 24/7, a stable coin that then leaves the bank and goes outside and circulates. And so I think we're gonna see those. Worlds come together a lot more, and I think we're finally starting to see some level of clarity around what the differences are, rather than it being lumped together that a tokenized deposit is the same thing as a stable coin, where they're very different legal definitions. Any other thoughts on particularly the question Noah had of when jpmd launched on base, I thought it was a really big deal. You had a the first bank launching a tokenized deposit on a public chain. And so my first question was, okay, how does the bank see the utility of that chain? There are clear trade offs of now it is publicly visible. You could see what the balance of jpmd is. You could see how many transfers it has. But how do you think about the benefit of a public chain versus a permission chain, if it's a tokenized deposit running inside of a bank anyway. So for me, I think the benefit is that it just unlocks more possibilities. And what those possibilities are like, I think what no one mentioned is that if you can connect to defi protocols. So I think there's always be a trade off between, like, letting people see more what's happening, versus, like, the net new use cases it could unlock and and for me, the fact that they did it on public blockchain is the first step to like, if everybody launches their tokenized deposit or their coins on a public blockchain, to me that now everybody has a seat at the table to talk like, how do you want to standardize it? What can we do with it? And to me, it's just that first step in the right direction.
Speaker 1 31:15
Yeah, totally agree. And I think also like another area to think about is within a bank today, the core ledger for how deposits work is different than, say, within the wealth management side of how you buy securities and all these other things. And so I think there's going to be this convergence where, whether it's stable coins and tokenized deposits or also other tokenized assets, whether it's equities, which we've seen a lot of news about recently, or bonds or Treasury bills, the fact that you can get that all on the same ledger, you can create a lot of interesting efficiencies, where, say, a bank partners with an asset manager, and now all of a sudden you can use your tokenized deposits, 24/7 to buy securities or other forms of equities. And so I think that is also a really interesting opportunity, where today, if I want to go and buy a stock, even through a wealth manager that's connected to the bank, it takes a long time for it to clear, and it feels like you're having different conversations with different sides of the company. So I think that's a huge opportunity where there's everything coming on chain, and then now that's all becoming interoperable, and that's only really possible when you have a public blockchain versus a permissioned blockchain.
Cuy Sheffield 32:10
I wonder if it changes the end consumer interface of how deposits and banking products are accessed. So if you think about it, if you have jpmd issued on the base chain, then theoretically, that means any wallet or any infrastructure now, you have to be allow listed into the smart contract, you have to be a customer of jpm. But does that mean that I could see my jpm de balance through Coinbase institutional wallet or through my fire blocks wallet? And so is it almost taking and saying, normally, if you want to access a jpm deposit, you're doing that through your jpm app or your jpm interface. Now are you unbundling and saying a jpm deposit can now be accessed through hundreds of other interfaces if you've been allowed listed into the smart contract. It feels like that's kind of what stable coins are doing, in general, is that they are enabling all of these wallets, all these new products, to be the interfaces that consumers can choose to hold money where the money itself is really there's a single underlying bank where the funds are being held at, or Reserve Banks behind the scenes. But it just gives more choice. I think it's cool to see that like you could have more choice for consumers around how they access their money, even if the money is the same format as it was before.
Speaker 1 33:25
Yeah, for sure, I think it's very much a sign of the financial stack kind of unbundling itself together, and seeing that there's a core infrastructure base stack where there's the blockchain and maybe the assets that are tokenized on it, but from a consumer perspective, if you can put any wallet on top of that, it creates a lot of opportunity to create really custom and unique experiences. And again, to my point earlier, with self custody, you now don't have to always focus on creating the actual underlying infrastructure and the consumer facing application. You can sort of have different special purpose built applications for each
Cuy Sheffield 33:53
so I think that's about all the time that we have today. Thank you for joining us in person. Ethan, if folks are interested in learning more about yourself and Allium. Where can they find you? So a website's allium.so Allium is an onion, for those who don't know, it's not a metal, it's an onion and garlic. You do all the all the data, all the layers, few the layers of the onion, to understand what's actually happening in the blockchain. Noah, what
Speaker 1 34:13
about you? And Levine 19 on x, and then please check out the visa on chain analytics dashboard at visa on chain analytics.com
Cuy Sheffield 34:19
and I'm at Kai Sheffield on x in visa comm slash crypto. Thanks for listening. Please leave a review. Send us feedback. We want to continue to bring new content around this rapidly evolving space of tokenized assets and stable coins. Thanks you.