Latest / CRYPTO 101 / Ep. 680 The Future of Staking: Marinade Finance CCO on Solana, ETFs & MNDE Token

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Ep. 680 The Future of Staking: Marinade Finance CCO on Solana, ETFs & MNDE Token · CRYPTO 101

• 0:00
  [SPEAKER_01]: Welcome to the crypto 101 podcast presented by Gemini your bridge to the future of money
• 0:14
  [SPEAKER_01]: All right, welcome back.
• 0:15
  [SPEAKER_01]: We are joined by another great guest.
• 0:17
  [SPEAKER_01]: This is the chief commercial officer of Marinade Finance, Padley Stern.
• 0:22
  [SPEAKER_01]: Sir, thank you for joining us and how are you doing today?
• 0:25
  [SPEAKER_01]: I'm doing great.
• 0:26
  [SPEAKER_01]: Thank you very much, Faye, to be with you here today.
• 0:28
  [SPEAKER_01]: Yeah, I'm very, very pleased.
• 0:30
  [SPEAKER_01]: And full disclosure, you know, we run a hedge fund tower 18.
• 0:34
  [SPEAKER_01]: We are invested in Marinade tokens on the secondary.
• 0:37
  [SPEAKER_01]: We're really excited about what you guys are building.
• 0:40
  [SPEAKER_01]: And I'm not going to be the one to tell all about what you guys are up to, but that's why I've got you there.
• 0:46
  [SPEAKER_01]: So, Hadley, tell us high level what is Marinade Finance working on?
• 0:52
  [SPEAKER_00]: Great question, and thanks for being an investor, and thanks for having us us on today.
• 0:56
  [SPEAKER_00]: So, Marinate Finance, I like to say, is relatively interesting on podcasts, I'm kind of very boring at cocktail parties, because our con is Solana Staking.
• 1:09
  [SPEAKER_00]: So, let's unpack that a little.
• 1:11
  [SPEAKER_00]: We're crypto.
• 1:13
  [SPEAKER_00]: we're on one blockchain and within that blockchain, we are experts on everything to do with Solana staking.
• 1:19
  [SPEAKER_00]: And so what does that mean?
• 1:21
  [SPEAKER_00]: That means that we've been in existence for four plus years, I joined over a year ago.
• 1:27
  [SPEAKER_00]: And the company came out, if you know Solana history, Solana is not that old and bechained.
• 1:32
  [SPEAKER_00]: So four plus years is very early in the evolution of Solana.
• 1:36
  [SPEAKER_00]: Marinade started out of a Sloanahak thon and the problem the company solved is how to keep the Sloanahak network decentralized by offering people who want to stick Sloanah the highest yield.
• 1:47
  [SPEAKER_00]: What that means in normal speakers, we don't run any validators ourselves, instead we're kind of a validator marketplace.
• 1:55
  [SPEAKER_00]: So we have about two billion of total value locked up on our platform.
• 1:59
  [SPEAKER_00]: and people stake with us either through M-Songlar, liquid-staking token, or through Marinade native, which is native-staking, which we really died a lot into in the past 18 months, and I can talk a little bit more about why.
• 2:12
  [SPEAKER_01]: Yeah, no, we definitely want to dive into that.
• 2:14
  [SPEAKER_01]: But if we keep things 101 level first and then kind of go into the 201 level, so Staking, Staking is super important.
• 2:22
  [SPEAKER_01]: It's part of Ethereum.
• 2:23
  [SPEAKER_01]: You could stake your Ethereum.
• 2:24
  [SPEAKER_01]: You could earn yield.
• 2:25
  [SPEAKER_01]: It's part of Solana where you guys are focused.
• 2:27
  [SPEAKER_01]: You could stake your Solana earn a yield.
• 2:30
  [SPEAKER_01]: Where does Marinade come in, right?
• 2:32
  [SPEAKER_01]: Because am I able just to go and stake myself or do I need a provider like Marinade?
• 2:38
  [SPEAKER_00]: Great question.
• 2:38
  [SPEAKER_00]: And yes, you know, staking is it's great because you're in a reward, but it's actually existential to the proof of stake networks running.
• 2:47
  [SPEAKER_00]: So we have proof of stake work.
• 2:49
  [SPEAKER_00]: So the S word and you have proof of work, which is, you know, invented by Bitcoin and typified by Bitcoin.
• 2:57
  [SPEAKER_00]: and some other chains also are proof of work.
• 2:59
  [SPEAKER_00]: But after Bitcoin came out, there was this notion of a different way for validation and decentralized blockchains to work, and that is through proof of stake.
• 3:09
  [SPEAKER_00]: So using the underlying asset as kind of a lubricant, if you will, for the network to run.
• 3:15
  [SPEAKER_00]: So it's actually very important to the network that people can stake in on stake.
• 3:20
  [SPEAKER_00]: From a technical standpoint, you can absolutely stake through a command line interface.
• 3:25
  [SPEAKER_00]: You can find a validator address and do it through a command line interface and do it yourself.
• 3:32
  [SPEAKER_00]: But it requires some technical acuity.
• 3:36
  [SPEAKER_00]: So, staking providers like Marinade make it very easy.
• 3:40
  [SPEAKER_00]: Meaning you can come to our website.
• 3:43
  [SPEAKER_00]: We have a decentralized application or a DAP.
• 3:48
  [SPEAKER_00]: and stake through there.
• 3:49
  [SPEAKER_00]: You can also, if you're in institutions, stake through zodiac copper or bico, and we're expanding those ways to stake as well.
• 3:57
  [SPEAKER_00]: So you can either do it through our site or through a custodian.
• 4:00
  [SPEAKER_00]: So that enables staking to be done more easily for people.
• 4:04
  [SPEAKER_01]: That sounds awesome.
• 4:05
  [SPEAKER_01]: I'm curious.
• 4:06
  [SPEAKER_01]: I mean, I guess this is maybe a naive question.
• 4:09
  [SPEAKER_01]: Proof of stake is Solana, but you can't stake any other tokens that are Solana, but like the SPL 20 tokens or can you?
• 4:16
  [SPEAKER_00]: That's not a naive question, not to the Solana network.
• 4:19
  [SPEAKER_00]: There are some SPL tokens that may have their own
• 4:24
  [SPEAKER_00]: Staking process, I can think of one as Camino, for example, so Camino, which is a leading defy place on the Solani ecosystem, you can buy the Camino token and also stake it to the Camino network.
• 4:39
  [SPEAKER_00]: But no, you cannot stake anything but Solana to Solana networks, but one of the things that we're going to be releasing is something called marinade recipes, taking a little play on our word where we can, it's all and receive safe Bitcoin is the reward or USDC is the reward.
• 4:56
  [SPEAKER_00]: Wow tokenized stock is the reward.
• 4:58
  [SPEAKER_00]: Wow.
• 5:00
  [SPEAKER_00]: one of the things that we have in development right now to allow people to have more flexibility, but the underlying token that you need to stake to marinade or to the Sloan Annette where is the Sloan and token.
• 5:12
  [SPEAKER_01]: Okay, that makes sense.
• 5:13
  [SPEAKER_01]: And then, so there's the Sloan and token, but there's also the marinade token, M-N-D-E.
• 5:19
  [SPEAKER_01]: Can you speak to where this system, or where this coin comes into the system?
• 5:24
  [SPEAKER_00]: Sure, so marinade I mentioned launched about four years ago,
• 5:27
  [SPEAKER_00]: And it actually launched as a doubt, decentralized autonomous organization.
• 5:32
  [SPEAKER_00]: One of the unique things about Marinade is actually we've never done a token raise or an equity raise.
• 5:38
  [SPEAKER_00]: So even though we had a token generation event when Marinade originally launched, there was never any sale.
• 5:44
  [SPEAKER_00]: So it truly is a decentralized token.
• 5:47
  [SPEAKER_00]: And the Marinade token in terms of the total value of all tokens locked on unlocked,
• 5:54
  [SPEAKER_00]: is anywhere from 100 to 125 million dollars and we use that treasury strategically.
• 5:59
  [SPEAKER_00]: We put proposals to it and we use some of that M&D for some strategic partnerships and we're also working this quarter on making sure our revenue gets accrued back to the token because we are positive from an ARR standpoint.
• 6:15
  [SPEAKER_00]: So you can think about the marinade token as the, you know, the representative
• 6:22
  [SPEAKER_00]: It's not really a utility token tied up into the staking or unstaking process.
• 6:27
  [SPEAKER_01]: Awesome.
• 6:28
  [SPEAKER_01]: That sounds super interesting.
• 6:29
  [SPEAKER_01]: And as chief commercial officer, are you focused on like new partnerships getting other blockchains to be connected to marinade or are you looking for partnerships in, you know, the Fortune 500 world or the wealth advisory world getting them understanding, stake, or what is the the CCO focused on right?
• 6:47
  [SPEAKER_00]: So my primary focus is bringing this incredible retail key five product.
• 6:53
  [SPEAKER_00]: Again, what's very unique about Marinade in our core product is we don't run any validators.
• 6:58
  [SPEAKER_00]: We have hundreds of validators connect to us through a command line interface and we run something called the stake auction marketplace, every Solana e-pocker, every 48 hours.
• 7:09
  [SPEAKER_00]: And in that process, validators bid for the right to receive the Solana from our stakeers and they bid with various economic elements.
• 7:17
  [SPEAKER_00]: We built that product, it's working fantastically in retail.
• 7:21
  [SPEAKER_00]: We are now bringing that to institution.
• 7:23
  [SPEAKER_00]: So my chief commercial officer role is putting in the legal compliance framework, the operations framework.
• 7:29
  [SPEAKER_00]: So, but, and doing the business deals and integration deals with Zodian Copper, who we're integrated with and also Bicca.
• 7:36
  [SPEAKER_00]: bringing the product to the Bitwise ETP in Europe and we're also launching, and we were the first ETF application in the US for the Canary Marinade Solani ETF, which was filed with the SEC.
• 7:49
  [SPEAKER_00]: So the cheap commercial role is very much focused on institutional bringing Solana staking to the institutional market.
• 7:56
  [SPEAKER_01]: it's very uh... apropos that you brought up uh... canary capital because we just spoke with steven mcclerg uh... here at the grip stick here at the crypto hedge fund summit as well so uh... we're very excited about what he's doing and what you guys are doing particularly in that
• 8:12
  [SPEAKER_01]: ETF.
• 8:13
  [SPEAKER_01]: Tell us a little bit more about how you guys are, you know, playing the ETF world.
• 8:17
  [SPEAKER_01]: I know that SEC just kind of rescinded some really, really strict guidance on staking.
• 8:23
  [SPEAKER_01]: Saying that that sort of transaction is not as we've all known for years.
• 8:28
  [SPEAKER_01]: The SEC finally woke up to this is not a securities transaction, okay?
• 8:32
  [SPEAKER_01]: So tell us what they're waking up to and how this kind of comes to bear on something like marinade.
• 8:37
  [SPEAKER_00]: Sure, and great to hear you had Stephen on that his team has been fantastic to work with, and he's really an innovator in this space, and yes, that the large, and I'm down in DC quite a bit, where members of the proof of stake alliance, and a lot of conversation we have with regulators, we explained that
• 9:05
  [SPEAKER_00]: there's some kind of lending going on or something like that.
• 9:09
  [SPEAKER_00]: And so we go at pains to explain that staking is not a financial product.
• 9:14
  [SPEAKER_00]: It's an outcome or an output of a delegation that happens on a proof of stake network.
• 9:21
  [SPEAKER_00]: And so this is a lot of the focus that we have.
• 9:24
  [SPEAKER_00]: And then this plays into the ETF market as well.
• 9:26
  [SPEAKER_00]: When, if you look at the Canary Marinade ETF, when people buy that ETF,
• 9:31
  [SPEAKER_00]: they will, that those funds will go into something called Marinade Select, which is 30 KYC validators who, again, are just doing protocol level activity.
• 9:41
  [SPEAKER_00]: So a lot of our interaction with the ETF market is explaining that.
• 9:45
  [SPEAKER_00]: And then also, we're very concerned and focused on continuing support of decentralization for the ETF market.
• 9:51
  [SPEAKER_00]: If you look at why this happened in Bitcoin, 6% of Bitcoin is now custody by ETFs.
• 9:58
  [SPEAKER_00]: five plus percent of that is with one custodian.
• 10:01
  [SPEAKER_00]: So it's kind of amazing, like five percent just of ETFs, five percent of Bitcoin is all with Coinbase.
• 10:07
  [SPEAKER_00]: And that has an inherent security risk even though the Coinbase team is fantastic.
• 10:12
  [SPEAKER_00]: We are wanting to avoid the same thing on the ETF front where all of our competition are institutional validators that will run one
• 10:23
  [SPEAKER_00]: Our product takes that salana and decentralizes it automatically amongst 30 validators and is much more beneficial to the salana network.
• 10:34
  [SPEAKER_01]: Is the yield, I mean, this is kind of like a little bit of a pivot, but also, you know, secondary to this is the yield that's being generated by the validators by the network, is this something that's like sustainable over the long term, does it go down as TVL rises, like what, what are kind of the dynamics there about the yield that's being generated by man, it's less related to the TVL at marinade or across the whole network.
• 11:01
  [SPEAKER_00]: And it very much comes inherently from the blockchain network itself.
• 11:05
  [SPEAKER_00]: There's an inflation schedule.
• 11:07
  [SPEAKER_00]: As we saw in a couple of simdies, which are proposals within the Sloan ecosystem, one that passed on that didn't.
• 11:16
  [SPEAKER_00]: There have been attempts and continued attempts and thoughts around should inflation be reduced.
• 11:21
  [SPEAKER_00]: And therefore, the amount of rewards
• 11:25
  [SPEAKER_00]: Um, you know, this is not a bond or CD, uh, you're not buying into a 10 year locked, uh, reward here.
• 11:32
  [SPEAKER_00]: This is a very dynamic space, uh, the blockchain itself is very dynamic, the way the block space works, the way that, uh, proposals and technology changes.
• 11:42
  [SPEAKER_00]: So,
• 11:43
  [SPEAKER_00]: You know, I think the APY right now is around, is settled around 8%, I would as if I was an investor, I would say, you know, you can view that as like a six months to a year kind of out anything else is is really up for grabs a salon evolves and network changes.
• 12:00
  [SPEAKER_00]: interesting.
• 12:01
  [SPEAKER_01]: And then when, if we kind of go back to that question about native yield, or sorry, native staking versus the liquid stake in that y'all working on, tell us a little bit about how we should pair the two in our mind and what might be right for somebody who's watching this maybe more on the institutional side and somebody who's maybe more on the retail side.
• 12:18
  [SPEAKER_00]: Sure, so we started with a liquid stake in token with Amazon, which was basically the first
• 12:26
  [SPEAKER_00]: And a lot of that at the time was inspired by what LIDO had built very successfully on a variant.
• 12:32
  [SPEAKER_00]: But one of the realizations the team came to two plus years ago is if you look at the the need for LSTs on Solana, it's a very different decision framework than on Ethereum.
• 12:43
  [SPEAKER_00]: So on Solana, the unlock time for native staking is 40 good hours.
• 12:48
  [SPEAKER_00]: On Ethereum, it can be a week to a month.
• 12:51
  [SPEAKER_00]: on Solana, you can stake natively with as little as one soul, actually even less, on a theory, need 32 E. So the sort of need for NLST as much less, that the real utility in of NLST is that you can do other things with it in D5.
• 13:07
  [SPEAKER_00]: So I mentioned Camino,
• 13:09
  [SPEAKER_00]: You know, you can hop on Camino and you can loop your M-sol and it's called multiply where you it automatically wins it out by's more M-sol and suddenly your reward can be increased depending on the market you can't do that natively so when you get down to it if you're an institution or an ETF there's you need to have is never going to do anything and defy like that.
• 13:32
  [SPEAKER_00]: then one of the disadvantages of LST for an ETF, well, the disadvantages are more smart contract risk because you are just by the very fact, even though our MSOL has been rock solid for years, you're still taking on a greater risk by involving yourself.
• 13:50
  [SPEAKER_00]: in an LST and one of the benefits of native staking on salana that's very unique and very preferential for ETFs is when you natively stake in salana you retain custody of the salana in your wallet and this is a bit of a hard one for people to wrap their heads around but basically what that means is that price comes to marinade and stakes a thousand dollars US of salana to us if you look up your wallet in
• 14:16
  [SPEAKER_00]: You still have custody control.
• 14:18
  [SPEAKER_00]: You still have deposit in withdrawal control of that thousand salana.
• 14:22
  [SPEAKER_00]: You've just given marinate delegation authority to move to point that thousand dollars worth of soul to refer idea validators.
• 14:31
  [SPEAKER_00]: So this is very beneficial also to institutions because from a fiduciary standpoint,
• 14:37
  [SPEAKER_00]: you maintain control.
• 14:39
  [SPEAKER_00]: You don't have to worry about marinade.
• 14:41
  [SPEAKER_00]: No smart contract risk.
• 14:42
  [SPEAKER_00]: In fact, if we go away, you can still unstake your native stake without us being involved.
• 14:48
  [SPEAKER_01]: Wow.
• 14:49
  [SPEAKER_01]: That's fascinating.
• 14:51
  [SPEAKER_01]: And on the loop, and there's a million things I have questions of, but I know you are, we have set times, so I want to get through a couple.
• 14:57
  [SPEAKER_01]: But we're going to have you back, I promise.
• 14:59
  [SPEAKER_01]: We're happy to come back and take as much time as you want.
• 15:02
  [SPEAKER_01]: Awesome.
• 15:03
  [SPEAKER_01]: So I want to,
• 15:06
  [SPEAKER_01]: And my eyes always like go wide, I'm like, oh my gosh, this is rehypothication, this is leverage, this is what, you know, could potentially lead to that death spiral on wine.
• 15:15
  [SPEAKER_01]: What is like the sophisticated take on on looping and why.
• 15:20
  [SPEAKER_01]: How do you do it safely?
• 15:22
  [SPEAKER_00]: It's definitely leverage.
• 15:23
  [SPEAKER_00]: It's not re-hypothication.
• 15:25
  [SPEAKER_00]: So, you know, the one way that you can think about it is that, you know, you're, you're, say again, for ice takes that $1,000 and doesn't natively state, but you buy msol from us for $1,000.
• 15:52
  [SPEAKER_00]: borrow USD against it and pay us an interest rate of say three or four percent and then use that seven hundred dollars that you've lent to buy more msol.
• 16:03
  [SPEAKER_00]: So it's really a financial product.
• 16:05
  [SPEAKER_00]: There is you know leverage involved.
• 16:09
  [SPEAKER_00]: There is a liquidation, you know, a percentage that you have to be aware of and you have to manage, but it's all very transparent.
• 16:16
  [SPEAKER_00]: It's certainly not rehypothecation.
• 16:19
  [SPEAKER_00]: It's certainly not a conservative thing.
• 16:20
  [SPEAKER_00]: I'm not recommending it either way, of course, but that's basically how that particular type of product works and, you know, has shown some success in the marketplace, but it's obviously not something an ETF is going to do.
• 16:34
  [SPEAKER_01]: Yeah, interesting, very cool.
• 16:36
  [SPEAKER_01]: Well, two last questions.
• 16:38
  [SPEAKER_01]: One is in regards to the M&D token.
• 16:41
  [SPEAKER_01]: I think you said there was some value of cruel that you guys were doing towards, as I think it started in February.
• 16:47
  [SPEAKER_01]: Could you talk a little bit about how the M&D token is accruing value over time from some of the activities that are being operated?
• 16:55
  [SPEAKER_00]: Yeah, so this is something we're putting in place that it's always, you know, it's fun working, that work for big traffic companies, public companies.
• 17:02
  [SPEAKER_00]: It's fascinating working for a dow.
• 17:04
  [SPEAKER_00]: And the question is, how do you, you know, bring back value to that underlying token from your revenue?
• 17:11
  [SPEAKER_00]: And there are a few ways to do it.
• 17:13
  [SPEAKER_00]: One way is you can do buybacks.
• 17:15
  [SPEAKER_00]: So we can use our revenue to buy back, but we're also working on a programmatic way to connect better our TVL revenue to the M&D token, you know, our our desire of courses to have that token reflect as best as possible, you know, the value of the business and an accurate as way as possible.
• 17:34
  [SPEAKER_01]: Awesome.
• 17:35
  [SPEAKER_01]: And then the last question was surrounding your background, you know, I noticed that I was doing a little bit of research that you used to work at fidelity digital assets and and really run a large part of that division.
• 17:46
  [SPEAKER_01]: Can you tell us a little bit about some of the biggest learnings that you brought from traditional finance to us, you know us, you know kids who have never worked a day at a corporation ever we've just been doing our own thing here in crypto.
• 18:00
  [SPEAKER_00]: Yeah, I mean, I, I was very lucky to have my crypto journey startup fidelity.
• 18:04
  [SPEAKER_00]: So I was part of the very early team there in 2014, spun up the Bitcoin incubator.
• 18:09
  [SPEAKER_00]: Wow.
• 18:09
  [SPEAKER_00]: And the founding president helped launch F.D.s.
• 18:13
  [SPEAKER_00]: I think, you know, I kind of feel like defying tri-fi is the tale of two cities, both both worlds have a lot of expertise, and they don't really know how to talk to each other.
• 18:23
  [SPEAKER_00]: It was an asset times and the worst of times.
• 18:24
  [SPEAKER_01]: Yeah, exactly.
• 18:24
  [SPEAKER_00]: And I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I
• 18:27
  [SPEAKER_00]: You know, if I have one super power in life, which is a bit of a weird one, it's connecting those two worlds, and so I'd say on the track by side, it's really about helping defy understand the way that traffic looks at risk and operations, which is a very different way.
• 18:45
  [SPEAKER_00]: And there's also pieces on the defy side in terms of key storage key management that trap I doesn't know much about.
• 18:52
  [SPEAKER_00]: So that's why there's sort of a venn diagram of security and operations between the two worlds.
• 18:58
  [SPEAKER_00]: And then there's also the product development piece and what product looks like between these two worlds.
• 19:03
  [SPEAKER_00]: So it's a really fun spot to be in the middle of.
• 19:06
  [SPEAKER_00]: and help to try to translate.
• 19:08
  [SPEAKER_00]: I also don't know everything, so there's a lot to learn.
• 19:12
  [SPEAKER_00]: And there's so much innovation in the DFI side around around products.
• 19:15
  [SPEAKER_00]: I mentioned Camino.
• 19:17
  [SPEAKER_00]: There's a lot of historical innovation in TratFi around packaging and financial products.
• 19:22
  [SPEAKER_00]: There's a lot to teach, but there's also a lot to learn, which is a lot of fun.
• 19:27
  [SPEAKER_01]: Well, we're glad to have you as kind of the connective tissue between traditional finance and the traditional world and kind of this cutting edge world of crypto and AI and all that good stuff.
• 19:38
  [SPEAKER_01]: So until next time, Adley, thank you so much for joining us.
• 19:42
  [SPEAKER_01]: I know you got a jet, so I wish you could have these for longer, but everybody at home watching, hope you enjoyed, stick around.
• 19:47
  [SPEAKER_01]: We're going to be back with some more great guests.
• 19:50
  [SPEAKER_01]: Awesome.
• 19:50
  [SPEAKER_01]: Thank you, Price.
• 19:51
  [SPEAKER_01]: Take care.