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Why Morpho Thinks Open Credit Markets Beat Traditional Banks · The Stable Pulse

• 0:00
  Intro: Passage of the stable point legislation drafted by the Senate, dubbed the Genie Senate.
• 0:05
  Intro: Because analysts say a wave of competition can complicate things.
• 0:18
  Bam Azizi: We have Paul from Morpho, co-founder and CEO Morpho.
• 0:21
  Bam Azizi: Paul, welcome to the show.
• 0:23
  Bam Azizi: Hey, thanks for having me.
• 0:24
  Bam Azizi: Yeah, thank you for um taking the time.
• 0:28
  Bam Azizi: I know you're very busy.
• 0:29
  Bam Azizi: You guys have been crushing it recently with a massive, massive round.
• 0:33
  Bam Azizi: We'll get to that in a second, but we'd love to go a little bit back to your childhood.
• 0:39
  Bam Azizi: Tell us more, like where are you calling from?
• 0:42
  Bam Azizi: Where are you from?
• 0:42
  Bam Azizi: Where did you grow up?
• 0:44
  Bam Azizi: Like anything that you're willing to share with our audience.
• 0:47
  Paul Frambot: Sure.
• 0:48
  Paul Frambot: So I'm currently in Paris.
• 0:49
  Paul Frambot: I live in between New York and Paris.
• 0:51
  Paul Frambot: I do like half-half approximately.
• 0:53
  Paul Frambot: I'm French originally.
• 0:55
  Paul Frambot: I come from Normandy.
• 0:57
  Paul Frambot: And you know, my story is pretty short.
• 0:59
  Paul Frambot: I'm like 25.
• 1:00
  Paul Frambot: The only thing I've done in my life is studying in Morpho.
• 1:03
  Paul Frambot: So first part was like studying, you know, in Normandy, and then in Paris, studied like, you know, pirated and distributed systems.
• 1:11
  Paul Frambot: That was basically my way into blockchains, right?
• 1:14
  Paul Frambot: And distributed computing and consensus algorithms.
• 1:17
  Paul Frambot: So I studied that for a few years and and and yeah, and in the middle of my my studies, like ended up funding Morpho.
• 1:25
  Paul Frambot: In my second year at university, got funded, you know, 20 million, and and this is how it all started.
• 1:31
  Paul Frambot: But already know it was like a pretty you know standard like childhood and and start.
• 1:37
  Paul Frambot: Like um spent a lot of time doing two things.
• 1:41
  Paul Frambot: Um starting trying to start businesses and studying computer science and blockchains in general.
• 1:48
  Bam Azizi: So we're doing pretty much the same time.
• 1:50
  Bam Azizi: So it's a startup before Morpho, or like your thought about bus like starting a business.
• 1:56
  Bam Azizi: How did you get to this entrepreneurial journey?
• 1:58
  Paul Frambot: So it's funny because you know people usually assume this is my first venture because you know I started Morph at like 20, and and so they're like, hey, that that must be the first thing, right?
• 2:08
  Paul Frambot: But what usually they don't know is that I actually started like five or six years before that, uh trying a lot of different things, right?
• 2:16
  Paul Frambot: And so I tried things ranging from like, you know, different business models for real estate platforms, or at some point I was doing like caritative auction for streamers to be able to like sell and auction like experiences with them.
• 2:32
  Paul Frambot: Um I've done stuff around IP, I've done stuff around education, and like I I've really tried a lot of different things throughout many years.
• 2:40
  Paul Frambot: Some were incubated, some failed after like six, seven months of not finding product market fit.
• 2:46
  Paul Frambot: Um and and you know, each each of those came up with like very strong learnings and you know helped me like build stronger mental models about like what building a business actually means and what are the you know things you should do, should not do.
• 2:59
  Paul Frambot: And one of the things I've learned was uh building an unfair advantage, like something that you have that others don't.
• 3:06
  Paul Frambot: Um and so that was one.
• 3:09
  Paul Frambot: And the second one was like finding a market and uh foundational technology that that could, you know, you could get leverage from, right?
• 3:17
  Paul Frambot: And and I was uh as I was learning this, I realized that one good timing for me would be blockchains, right?
• 3:25
  Paul Frambot: Um and so I decided back then I should become the most knowledgeable person, you know, in Paris about blockchains.
• 3:31
  Paul Frambot: And and this is how it all started, is like as I was building, like trying those businesses, I started taking every single possible class about blockchain and computer science you could ever think of.
• 3:41
  Paul Frambot: So I had like probably eight or nine different ones in parallel that I was like attending, um purely like without even like being in the given university.
• 3:52
  Paul Frambot: Like I would just like email like the teacher and say, hey, like, you know, or the professor and say, Hey, like I'd love to join your course.
• 3:59
  Paul Frambot: Like, can you can I just like join?
• 4:01
  Paul Frambot: Um and yeah, and and and this is how I sort of kickstart two things is having a deep understanding about blockchains, which which by the way, I'm still learning a ton about this, like this technology is so mystical.
• 4:14
  Paul Frambot: Like every every year I found like new mental models about new ways of clarifying my understanding of what this technology even is and what it means and for for its usability.
• 4:24
  Paul Frambot: So that was one.
• 4:25
  Paul Frambot: And the second thing was actually building a network of like you know, academics, smart people that were thinking about those topics, right?
• 4:33
  Paul Frambot: And one day I decided to bring the two together and say, hey, you know, what about doing entrepreneurship?
• 4:38
  Paul Frambot: But with this knowledge that I've been building over like the few years.
• 4:42
  Bam Azizi: So what was the first day that you started poking around blockchain until like you started Morpho?
• 4:49
  Bam Azizi: Like how long this period took?
• 4:52
  Paul Frambot: Probably three, three years.
• 4:54
  Paul Frambot: Um so I I so I joined university.
• 4:59
  Paul Frambot: So in France, you you before joining university, you do two years in a preparatory school.
• 5:04
  Paul Frambot: So I did this between my 16 and 18 years old.
• 5:08
  Paul Frambot: Um and I started thinking about blockchain in my second year.
• 5:12
  Paul Frambot: So around 17 is is when I started.
• 5:16
  Paul Frambot: Um and so between 17 and 20, this is where I spent a lot of time, like, you know, uh learning computer systems.
• 5:22
  Bam Azizi: You're not a Gen Zier, you don't have instant gratification.
• 5:25
  Bam Azizi: It took you three years to hard work to study.
• 5:29
  Paul Frambot: Yeah, and you know, I I I I like to go deep on things and like build a very foundational understanding.
• 5:38
  Paul Frambot: And you know, it's just like it's especially utility around blockchain.
• 5:41
  Paul Frambot: Like, why why do you need blockchain?
• 5:43
  Paul Frambot: Like blockchains are super cool, but like what do they bring to the world?
• 5:46
  Paul Frambot: Like, what fundamental utility does this bring that is beyond speculation, you know?
• 5:51
  Paul Frambot: Um and and took me a lot of time, to be frank, to understand.
• 5:58
  Paul Frambot: Uh like and and and again, I'm still learning like every day, like what this means.
• 6:03
  Paul Frambot: But um, and I think you know, looking back, that was probably the most valuable journey.
• 6:08
  Paul Frambot: Like doing really putting in the efforts of like questioning like the utility uh for so many years uh is really like made a shaped a lot of the vision for for Morpho.
• 6:18
  Paul Frambot: Um and and funnily enough, like initially I the reason I did not start a project uh in in blockchain earlier is is I did not like finance at the time.
• 6:31
  Paul Frambot: I was like, hey, like finance is like it's not for me.
• 6:36
  Paul Frambot: Yeah, it's not for me.
• 6:37
  Paul Frambot: Like you know, I I wanted to, you know, I wanted to have a maximum impact for the world and and create value for everybody.
• 6:44
  Paul Frambot: And and finance felt like the only industry where you don't create value.
• 6:48
  Paul Frambot: You just move value around, right?
• 6:50
  Paul Frambot: And and yet you take a cut, right?
• 6:52
  Paul Frambot: And and you're like, damn, like that seems extractive, right?
• 6:56
  Paul Frambot: And and actually, you know, so for and then I realized that actually the the value prop is is connecting, right?
• 7:03
  Paul Frambot: It's actually about like you know, bringing capital, you know, in space and time across space-time and risk and like where where it's needed the most.
• 7:10
  Paul Frambot: And this in itself is an act of value creation.
• 7:13
  Paul Frambot: Um and and what I realized is that you know finance is not evil at all.
• 7:18
  Paul Frambot: It's actually extremely positive and and and like the bedrock of our civilization.
• 7:22
  Paul Frambot: But but the current infrastructure uh is what introduces the friction and and and and that basically makes it extractive, right?
• 7:32
  Paul Frambot: And so so when I put two and two together and realized that that blockchain was the opportunity to push all that value from the center of the infrastructure to the edges of the network, you know, in the end consumer.
• 7:44
  Paul Frambot: This was really this literally the same day I realized that I started working on Morph.
• 7:48
  Paul Frambot: I was like, oh damn, I actually need to work in DeFi.
• 7:51
  Paul Frambot: Like this is a necessity.
• 7:52
  Paul Frambot: Like I have to work in finance, I have to like disrupt that that that industry that's that could do immense good in general, uh, if I were to work on this.
• 8:02
  Paul Frambot: So that was the story, basically.
• 8:04
  Paul Frambot: And this is how I started.
• 8:05
  Paul Frambot: And the same day I was like, okay, DeFi, what's the most interesting to do in finance?
• 8:09
  Paul Frambot: Financing, for sure, is like, you know, the the and so and this is why I started working on the Morphone.
• 8:15
  Bam Azizi: And then this is like what year, 2022, did you start it?
• 8:19
  Bam Azizi: I started in 2021.
• 8:22
  Bam Azizi: We write it in 2022.
• 8:23
  Bam Azizi: What was the first half or second half?
• 8:25
  Paul Frambot: Because it matters.
• 8:34
  Bam Azizi: Yeah, like it crashed after.
• 8:36
  Bam Azizi: Yeah.
• 8:37
  Bam Azizi: Okay.
• 8:37
  Bam Azizi: So you started that like you were like second year in university.
• 8:42
  Bam Azizi: You said like, I want to start Morpho, and then you got 20 million dollars, maybe a year after that.
• 8:47
  Bam Azizi: And then you what what happened to your studies?
• 8:50
  Bam Azizi: You just drop out?
• 8:51
  Bam Azizi: I did not actually.
• 8:53
  Paul Frambot: Well, I actually never told investors at the time I was studying.
• 8:56
  Paul Frambot: You want to get your bachelor at least.
• 8:58
  Paul Frambot: Yeah.
• 8:58
  Paul Frambot: And you know, it's like it's maybe a very stupid French thing, like I you have to get your PhD at least.
• 9:05
  Paul Frambot: Yeah, I guess it was like it was probably a bit like this.
• 9:07
  Paul Frambot: You know, looking back, that was stupid.
• 9:10
  Paul Frambot: Uh I but I just loved learning at the same time.
• 9:13
  Paul Frambot: I I I just wanted to finish.
• 9:16
  Paul Frambot: And but but but so we had all this money, and and but we we still fin went all the way.
• 9:23
  Paul Frambot: Um and and my co-founders were also studying, by the way.
• 9:26
  Paul Frambot: Uh we were all at like at an university.
• 9:29
  Paul Frambot: And and and you know, like what's funny is that when we started raising, like I could tell a big contrast between European funds and and American funds and how they approach the fact that we were young.
• 9:43
  Paul Frambot: Like, one would be like, hey, just come back two years.
• 9:46
  Paul Frambot: Yeah, yeah, exactly.
• 9:48
  Paul Frambot: Whereas the other one had the opposite effect, right?
• 9:51
  Paul Frambot: It was like, oh Dave, you're like still so young, let's go.
• 9:54
  Paul Frambot: Like, you know, that gives you a 2x on your vowel, right?
• 9:57
  Paul Frambot: Yes.
• 9:57
  Paul Frambot: Um so that was fun.
• 10:00
  Paul Frambot: And you know, like European funds have their reasons, but like, yeah, that was a pretty sharp contrast at the time.
• 10:07
  Paul Frambot: Um and any, and so so we finished studies and and we hired a bunch from our university.
• 10:13
  Paul Frambot: So more for initially, like the average age was like 21 out of like 10 people.
• 10:17
  Paul Frambot: Um and and and that was fun.
• 10:22
  Paul Frambot: That was a very fun and chaotic time.
• 10:25
  Bam Azizi: Yeah, we were just building and hacking around.
• 10:27
  Paul Frambot: Yeah, I get it.
• 10:28
  Paul Frambot: Yeah, we just like I remember that the first like summer we sort of rented a house like for five weeks straight, and we just put everybody in there.
• 10:37
  Paul Frambot: That was your gross.
• 10:38
  Paul Frambot: Yeah.
• 10:39
  Paul Frambot: No, that was like uh an Airbnb we had rented in like the middle of nowhere.
• 10:43
  Paul Frambot: And during like five weeks straight, we would just work 24-7.
• 10:46
  Paul Frambot: And there was like that was just like another time.
• 10:50
  Paul Frambot: It was pretty crazy and and and awesome, to be frank.
• 10:53
  Paul Frambot: But yeah.
• 10:53
  Paul Frambot: Now we're much more borrowing, we're like 80 people, people have commitments, personal commitments.
• 10:59
  Bam Azizi: So we're like 40-year-olds as well, like more adults in the room, less chaotic.
• 11:04
  Bam Azizi: Yeah, exactly.
• 11:05
  Bam Azizi: Yeah, ready, ready for enterprises.
• 11:07
  Bam Azizi: So then you started Morpho, and then when we met, like I think a couple of years ago in Paris, you st you told me like I said, like, why should an institution trust like a bunch of young kids?
• 11:19
  Bam Azizi: Like you're you're like 21, 23, whatever.
• 11:22
  Bam Azizi: And you said something very interesting that still sticks to me.
• 11:25
  Bam Azizi: So like you're the most audited code on the planet.
• 11:29
  Bam Azizi: Like, tell us about like how you went from this chaotic to like enterprises like Coinbase and all these banks trusting you.
• 11:37
  Paul Frambot: I guess the whole point of our industry is to be such that we should not be trusted.
• 11:42
  Paul Frambot: Right.
• 11:43
  Paul Frambot: It's it's like it should be building infrastructure where the the we can entirely remove ourselves from the picture.
• 11:50
  Paul Frambot: Um and and the process to do that um is is non-trivial, right?
• 11:56
  Paul Frambot: Um so there's a few things.
• 11:58
  Paul Frambot: First, the financial operations that are going to be run is at the end of the day a piece of code, right?
• 12:04
  Paul Frambot: And the piece of code is not that crazy.
• 12:06
  Paul Frambot: It's pretty simple things.
• 12:08
  Paul Frambot: Like, you know, when you do a loan, you have what?
• 12:10
  Paul Frambot: Like the the amount that you want to lend, you have the interest rate, you have the maturity, you know, is there's a liquidation, maybe there's some stuff around the liquidation.
• 12:19
  Paul Frambot: It's pretty simple stuff, right?
• 12:20
  Paul Frambot: Credit is is the the base like obligation contract that two individuals are entering uh is is is pretty simple.
• 12:28
  Paul Frambot: Um and in Morpho, that's 600 lines of code, right?
• 12:31
  Paul Frambot: And so I think the first the first takeaway we had as we were building this is um this does not need to be complex.
• 12:38
  Paul Frambot: And obviously you have a lot of like comp complexity that you can build around and you can layer, but the core of the matching engine, where the core of the you know capital is going to be aggregated, this must be the safest, right?
• 12:50
  Paul Frambot: And so so we came up with this protocol that we took a lot of time to build, like a lot of time and effort, uh to come up with those 600 lines, which are the most like audited per line of code by quite far, I think, um, in in in EVM.
• 13:06
  Paul Frambot: I haven't checked in a long time, so maybe that that that changed.
• 13:10
  Paul Frambot: But um and the most important thing about this was the way we approach the like the coding paradigm is very different than traditional software engineer.
• 13:20
  Paul Frambot: Like Morphous code is immutable, right?
• 13:22
  Paul Frambot: We can't change it.
• 13:23
  Paul Frambot: It's it's there forever.
• 13:24
  Paul Frambot: What does that mean?
• 13:26
  Paul Frambot: It means that if it can be hacked, it will be hacked, right?
• 13:29
  Paul Frambot: And so you have to think because because you're you're gonna integrate that probability over an infinite period of time, right?
• 13:35
  Paul Frambot: So you have to think very differently about software engineering um than you would in like a traditional uh code base.
• 13:44
  Paul Frambot: You have to think about it like it has.
• 13:45
  Paul Frambot: Yeah, there is no continuous patching and okay.
• 13:49
  Paul Frambot: Exactly.
• 13:50
  Paul Frambot: You can't put like you know, just guard rells and iterate and have like alerts and everything.
• 13:55
  Paul Frambot: It's like a piece of code that anyone can use and like control, and people don't want us to be able to control it or change it.
• 14:02
  Paul Frambot: That's the feature, right?
• 14:03
  Paul Frambot: No, it's not about answering.
• 14:04
  Paul Frambot: Exactly.
• 14:05
  Paul Frambot: And so and so the the the the key answer to all of this and that we've I'm glad we figured pretty early on is formal verification.
• 14:14
  Paul Frambot: It's basically come up with a set of properties that you want to be true about the protocol and just mathematically prove them, right?
• 14:22
  Paul Frambot: And so in Morpho, we have a long list of like you know security properties about the code that you don't have to trust us.
• 14:28
  Paul Frambot: Like if you trust math, it's actually true.
• 14:30
  Paul Frambot: It's like literally true.
• 14:32
  Paul Frambot: Um and and and and so that is basically one of the key things that took a take a lot of time to do.
• 14:38
  Paul Frambot: It's surprisingly long and painful.
• 14:40
  Paul Frambot: Even and you can only do this on very simple pieces of code that are not too modular.
• 14:45
  Paul Frambot: Um and and and this is truly what gave the confidence of everybody to think, hey, I just don't even have to trust those guys because I have a proof, like mathematical proof, that it's gonna operate as as as intended.
• 14:57
  Paul Frambot: So that truly helped.
• 14:59
  Paul Frambot: That truly helped.
• 14:59
  Paul Frambot: And then obviously, like Lindy, the test of time and everything.
• 15:03
  Paul Frambot: You know, you have now tens of billions of dollars on the platform that are sitting in this smart contract uh over many years, and and and then people got confidence that this could be um you know uh used at scale, even if you're the you know, trillion dollar size like asset manager.
• 15:19
  Paul Frambot: And as people got to use it more, they they understood and and and any.
• 15:23
  Paul Frambot: And I think now we reach a point where basically anyone is trusting Morphous code as like core prime infra, whether that is the coinbases of the world or just like institutions or or banks to your point, etc.
• 15:34
  Paul Frambot: So yeah.
• 15:35
  Bam Azizi: Makes sense.
• 15:36
  Bam Azizi: And then what happened, like uh one big question for you.
• 15:41
  Bam Azizi: Why not another L1 or L2?
• 15:44
  Bam Azizi: Why you'd settle on protocol and token?
• 15:48
  Paul Frambot: You know, Morpho's goal in general at the high level is to connect ambition with capital, right?
• 15:55
  Paul Frambot: Which is like connecting people that want to do stuff that need financing with people that believe in them and that have capital to invest, right?
• 16:02
  Paul Frambot: And that is agnostic of the underlying technology.
• 16:05
  Paul Frambot: Uh our job is to foster this like open credit network where people get to connect and get to match with one with one another.
• 16:15
  Paul Frambot: And and we think the best way to do that uh at the current time is through blockchains, right?
• 16:24
  Paul Frambot: And and because blockchains provide like open infrastructure that fosters like connectivity and neutrality in a way that allows institutions that don't trust each other to actually still connect with one another.
• 16:37
  Paul Frambot: We felt like this was a commodity and was a given that we could leverage uh instead of building our own.
• 16:45
  Paul Frambot: So that's like the first take.
• 16:46
  Paul Frambot: And then there is more of a business take, which is like, hey, we'd rather be friends with every single layer one and every single layer two and partner with them and their distribution, you know, like you know, Robinhood as Robinhood chain, Shripe as tempo, Coinbase as base.
• 17:01
  Paul Frambot: I'd rather be friend with everybody than build my own that is competitive and introduce any conflict of interest.
• 17:08
  Paul Frambot: Like what I'm looking at is building the credit network.
• 17:11
  Paul Frambot: How this credit network is operated is kind of like agnostic to me.
• 17:15
  Paul Frambot: Like I just want to build, like use the base, the best infrastructure to do so that you know fosters the maximum amount of matching between lenders and borrowers.
• 17:24
  Bam Azizi: Makes sense.
• 17:24
  Bam Azizi: And how long did it take for you to go from like this is a good idea?
• 17:29
  Bam Azizi: I want to like you went from like I don't know anything about finance to now you're interested in finance.
• 17:34
  Bam Azizi: How long it took for you to go from like day one to the first dollar coming to the protocol as a lender?
• 17:41
  Paul Frambot: Yeah, I guess to the very first so Morpho had three versions in total.
• 17:46
  Paul Frambot: Uh second version is the most popular currently that is live, etc.
• 17:49
  Paul Frambot: And the third version is about to launch in in a few days, weeks.
• 17:53
  Paul Frambot: Um the first version of Morpho we built in like six to nine months.
• 17:59
  Paul Frambot: Still took a lot of time for a first version.
• 18:02
  Paul Frambot: Um we so so the way we approached it is like basically we looked at like existing you know, lending and borrowing protocols.
• 18:12
  Paul Frambot: And I just went on-chain and I looked at the depositors, right, and say, hey, who's depositing there?
• 18:17
  Paul Frambot: And then for each of those wallets, I built like a few like tracking algorithms to understand like who they were, trying to de-anonymize them and think like, hey, like do you have an ENS attached to this name?
• 18:28
  Paul Frambot: Like, oh, they interacted with this coin or this address, etc.
• 18:31
  Paul Frambot: And now once I de-anonymized them, I just reached out to them, right?
• 18:35
  Paul Frambot: And I found my way you know through investors, through connections, like to those addresses.
• 18:40
  Paul Frambot: And and then and and then I presented them with our protocol, which you know was was providing better yield and better rates for financing.
• 18:49
  Paul Frambot: Um that helped um a lot.
• 18:53
  Paul Frambot: Um and yeah, that so that was the initial like go-to-market strategy.
• 18:58
  Paul Frambot: Um that was like first dollars in, like the first few millions.
• 19:03
  Paul Frambot: And then what happened is that we started thinking about distribution and like more crypto native distribution, like all those DeFi apps, those wallets that we could get in.
• 19:12
  Paul Frambot: And this is what took us to like a few hundred dollars.
• 19:17
  Bam Azizi: So there are some people who want to lend, some people want to earn money.
• 19:20
  Bam Azizi: Like, how did you find both part of the equation?
• 19:25
  Paul Frambot: It's uh it's a great question.
• 19:26
  Paul Frambot: So Morpho is a marketplace.
• 19:27
  Paul Frambot: So so you have a cold start problem, right?
• 19:30
  Paul Frambot: And and for the first version of Morpho, we knew this was gonna be very tricky.
• 19:36
  Paul Frambot: Uh and so what we did is we actually piggybacked uh existing marketplaces.
• 19:42
  Paul Frambot: So at the time you had compound and and and Ave.
• 19:44
  Paul Frambot: And so what we would do is like if we would welcome any lender, any bar, if we have a match for them, we would match them through Morpho's matching engine at a good rate.
• 19:53
  Paul Frambot: If we don't have a match for them, we just fall back on compound, or we just fall back on Ave.
• 19:58
  Paul Frambot: And this way we had no cold start problem, right?
• 20:01
  Paul Frambot: The downside though of this model is that we weren't we were basically like leeching the existing liquidity of protocols, but we were not like independent, right?
• 20:09
  Paul Frambot: But it was a great go-to-market strategy because I could come to users and say, hey, you're gonna get as at least as good as compound or at least as good as Ave because we're just gonna in the worst case, you'll end up there.
• 20:20
  Paul Frambot: But in the best case, you'll be, you'll, you'll find a match and you'll be you know better better better off.
• 20:26
  Paul Frambot: And then we wanted more independence, and this is when we started building our own marketplace.
• 20:31
  Paul Frambot: And the the one of the most underrated things about blockchain and and and marketplaces that are on-chain in general, is that everything is programmable, as well as the incentives that you know you can use uh uh within marketplaces.
• 20:47
  Paul Frambot: So you can incentivize very specific behaviors uh on marketplaces to solve this cold star problem, which we did for the second protocol.
• 20:55
  Paul Frambot: It's like, hey, we had no lenders, we had no bars.
• 20:57
  Paul Frambot: So what we're gonna do is that we're gonna program incentives for people to join, even though there is no counterpart, and we're gonna give them ownership in the network as an incentive and and for a limited period of time.
• 21:08
  Paul Frambot: And and this way we bring in inorganic traffic.
• 21:12
  Paul Frambot: And by that time, we need to work, go to market, and find actual users to to to as and you know, basically you you stimulate the bootstrapping of the marketplace with those tokens.
• 21:24
  Paul Frambot: And and yeah, and obviously like incentives have been used in crazy ways in DeFi.
• 21:30
  Paul Frambot: Uh it's just like fire, you know, like if you don't like you could burn your house with it, or you could just like you know, do useful things uh and build rocket ships.
• 21:39
  Paul Frambot: Uh and so to me, this is like the the biggest power and curse of crypto is like the programmability of incentives is is is so incredible, but also so dangerous.
• 21:49
  Bam Azizi: Yeah, 100%.
• 21:50
  Bam Azizi: And you decided to like go and piggyback on top of Ave and compound.
• 21:58
  Bam Azizi: Now you're competing with them because you have.
• 21:59
  Bam Azizi: Your own marketplace.
• 22:01
  Bam Azizi: Why people who are like Web3 native and they understand differences, they should join Morpho versus Ovid Compound.
• 22:08
  Bam Azizi: What's why you're better?
• 22:09
  Bam Azizi: Other than like you're just the most audited code on the planet.
• 22:12
  Paul Frambot: Yeah, I guess like the positioning is very different now.
• 22:15
  Paul Frambot: Think of Compound and Ave as a bank, right?
• 22:18
  Paul Frambot: You deposit your crypto, they're gonna manage it for you, they're gonna invest it, uh, take risks, uh, you know, manage the code, change the code, etc.
• 22:26
  Paul Frambot: Whereas Morpho is not a bank.
• 22:28
  Paul Frambot: Morpho is infrastructure for a bank, right?
• 22:30
  Paul Frambot: So what does that mean?
• 22:31
  Paul Frambot: It means that if you want to build your own Aave, if you want to configure it the way you want and control it all the way, you can use Morpho for that.
• 22:38
  Paul Frambot: So we're not exactly directly competing with Ave, we're one layer below.
• 22:42
  Paul Frambot: Our builders, the people building on Morpho, are competing with Ave, right?
• 22:45
  Paul Frambot: Like, so for example, like Coinbase is building vaults on Morpho, right?
• 22:50
  Paul Frambot: So they have their own strategy that they you know, they have agency over, control over, they control the code, they can control you know through a curator, they can control the risk, etc.
• 22:59
  Paul Frambot: And that product is competitive with Ave.
• 23:02
  Paul Frambot: So Morpho is an infrastructure play.
• 23:04
  Paul Frambot: We're not finance people, we're computer science people that allow finance people to come on chain and have control over their their own strategy.
• 23:12
  Bam Azizi: Um and and I think this is, you know, people can see why we've basically on Morpho versus Aave and others, they are forced to just accept whatever they're putting on in front of them.
• 23:24
  Paul Frambot: I think this is the key differentiator, especially as we went towards enterprises.
• 23:27
  Paul Frambot: And the main reason why every exchange and fintechs have been choosing Morpho over the last like you know few months and and and years is they get to control, right?
• 23:35
  Paul Frambot: And and when you have something like Kelp you know, hack happening, like you know, all the fintechs on Morpho that were building on Morpho, they did not even call us because they knew what they were exposing themselves to because they chose, right?
• 23:46
  Paul Frambot: Um and and and that so that's like the key differentiator is like TratFi wants to control.
• 23:53
  Paul Frambot: Like they don't want to let like crypto native people invest on their behalf.
• 23:56
  Paul Frambot: This is their job, basically.
• 23:57
  Paul Frambot: This is asset management, right?
• 23:58
  Paul Frambot: So they know they know they know what to what to do, right?
• 24:01
  Paul Frambot: What they don't know how to do is how do you get the technology and how do you get global connectivity through on-chain rails?
• 24:07
  Paul Frambot: And this is the value they're looking for.
• 24:08
  Paul Frambot: They're not looking to reinvent underwriting.
• 24:11
  Paul Frambot: Like at the end of the day, the people that need financing are gonna be the same.
• 24:14
  Paul Frambot: What's gonna change is Rails and the openness of those Rails that's gonna foster more competition, more connectivity, better liquidity, better pricing, all that type of stuff, right?
• 24:23
  Paul Frambot: Um and and you know, I've always been like thinking about like you know, cryptos like PMF overall, is like obviously there is the speculation part, but but but the most true PMF will be when crypto becomes infrastructure.
• 24:36
  Paul Frambot: And I think about the same for for Morpho.
• 24:38
  Paul Frambot: Like I don't see our role as managing capital, I see our role as providing the rails for people to connect.
• 24:44
  Bam Azizi: Makes sense.
• 24:44
  Bam Azizi: And and I have two questions.
• 24:49
  Bam Azizi: Second one is more interesting, but I will learn from I learned from you to be patient.
• 24:53
  Bam Azizi: So the first question is like how these enterprises are going to trust you?
• 25:01
  Bam Azizi: Like, what's your pitch to black rock of the world?
• 25:04
  Bam Azizi: Like people like who are owning or managing trillions of dollars in assets, they are happy with their 4%, 5% they're getting from their banks.
• 25:13
  Bam Azizi: So why they should come on chain and and trust a bunch of computer science kids like me and you?
• 25:20
  Bam Azizi: It's a great question.
• 25:23
  Paul Frambot: Um I think there are four reasons.
• 25:25
  Paul Frambot: Um the first one I'll take an example is if you look at Coinbase and what they did, why did Coinbase move on-chain?
• 25:36
  Paul Frambot: Coinbase used to have a centralized lending product.
• 25:39
  Paul Frambot: They were like, you know, in the Coinbase app you could get loans, right?
• 25:42
  Paul Frambot: Um on on the back of your Bitcoin.
• 25:45
  Paul Frambot: But but getting those loans, they were financed through like, you know, a desk or I can I like basically in a centralized way, which means that they were limited in terms of the capital they would connect with, right?
• 25:56
  Paul Frambot: Which means the size of the loans they were offering were limited and the rate that they could get was also limited.
• 26:02
  Paul Frambot: Right.
• 26:03
  Paul Frambot: If you plug on on-chain rails, like Morpho, the difference now is that the infrastructure is open.
• 26:09
  Paul Frambot: And if the infrastructure is open, it means that anyone can compete.
• 26:13
  Paul Frambot: And so what happened when Coinbase started plugging onto BASE to settle their loans is that you had billions of dollars, literally, that came to BASE to compete to give the best possible rates to Coinbase users.
• 26:25
  Paul Frambot: And that that was to me like you know, DeFi first proof of PMF that we could offer a product that was the exact same parity with like a a web tube product.
• 26:36
  Paul Frambot: So you have the same feature parity.
• 26:38
  Paul Frambot: It looks the same, we have account abstraction, we have layer twos, like you don't know there is a wallet, you don't know there's a chain, you don't know, you don't pay for gas, like all that type of things.
• 26:46
  Paul Frambot: Yet the product was financially a better product with better interest rates, with better liquidity, because it was leveraging open Rails.
• 26:54
  Paul Frambot: And why was that better?
• 26:55
  Paul Frambot: Because openness fosters competition, right?
• 26:58
  Paul Frambot: And so lenders were bidding to death to basically provide the best possible rates to Coinbase users, which pushes value towards Coinbase users.
• 27:06
  Paul Frambot: And that was the key number one reason why people should move on-chain is because openness is gonna bring in more liquidity and better pricing discovery, right?
• 27:16
  Paul Frambot: That's just inevitable, right?
• 27:18
  Paul Frambot: And and and that there is maybe there's a timing question of for depending on the type of loans, it won't happen, like you know, existing infrastructure is already working well, etc.
• 27:27
  Paul Frambot: But but liquidity bags liquidity, and all those compounding effects are fostered by openness, right?
• 27:32
  Paul Frambot: So it's a snowball that is inevitable, right?
• 27:35
  Bam Azizi: Just faster, more efficient, more programmable type of lending.
• 27:40
  Paul Frambot: So that makes sense.
• 27:40
  Paul Frambot: I guess and and just sorry, just to just to add on this, is is really from a lending perspective, it's just the connect because it's open, it's more connected, and so it's more liquid, and it's more competitive, and so you get better prices, is is basically it.
• 27:54
  Bam Azizi: You get better prices, that means you get more capital, you get better, more efficient, and then at least more capital.
• 28:00
  Bam Azizi: So it's just a wireless loop.
• 28:02
  Bam Azizi: So that's great.
• 28:03
  Bam Azizi: And that leads to my second question: like, what does morpho mean for everyday people?
• 28:08
  Bam Azizi: I understand that if I want to get a loan today, I have to go to the bank, I have to stand in line, I need to say hi to a bunch of people I don't know, like a bunch of strangers, and like apply for a loan, submit a bunch of information, and then it probably takes me like three to five days at best.
• 28:28
  Bam Azizi: But with a protocol like Morpho, I can just get a loan right away against my asset.
• 28:35
  Bam Azizi: Like, and everything, like as you mentioned, there is no like document uploading, there is no wait in line, everything happens online, it happens fast.
• 28:43
  Bam Azizi: But I can get an unsecured loan from my bank because they know me.
• 28:50
  Bam Azizi: Um, but unchained everything like kind of anonymized.
• 28:54
  Bam Azizi: How do you solve that problem?
• 28:57
  Paul Frambot: A loan fundamentally is a promise of repayment.
• 28:59
  Paul Frambot: You're gonna promise that you're gonna come back with more money than you were given.
• 29:03
  Paul Frambot: Um and and the question is how do you back that promise?
• 29:07
  Paul Frambot: How can people trust you?
• 29:08
  Paul Frambot: One way to be trusted is to have a big stash of Bitcoin, right?
• 29:14
  Paul Frambot: And say, hey, if I don't come back, this is yours.
• 29:16
  Paul Frambot: It's not the only way.
• 29:17
  Paul Frambot: You can also provide identity, you can provide all the documents you mentioned that could foster trust uh in your in your promise of repayment.
• 29:25
  Paul Frambot: Morpho's role is uh basically to allow you to express why you should be trusted to the entire world.
• 29:34
  Paul Frambot: Right.
• 29:35
  Paul Frambot: Instead of going to a single bank that is gonna give you a loan and is gonna own the pricing, is gonna own you basically.
• 29:41
  Paul Frambot: Uh instead, you go to Morpho, you say, hey, here's why people should trust me.
• 29:45
  Paul Frambot: And Morpho is gonna connect you to thousands of banks and it's gonna have them compete for you.
• 29:50
  Paul Frambot: That's the thing.
• 29:51
  Paul Frambot: That's the main difference, is that we're gonna foster, like think of Morpho as like a visa for credit, where once when when you come to the Morpho network and you explain, here is my collateral, here is my identity, and you submit all the things that you think we should foster trust in your ability to repay, then then every single lender on the other side's side, whether that is a Vault Curator, whether that is BlackRock or an individual that is looking at your intent, they can just all compete to give you the best possible rate, right?
• 30:21
  Paul Frambot: And and this is basically what Morpho is, it's the machine to discover the price of what you know people should be trusted at.
• 30:27
  Paul Frambot: And and you know, I hope that in the future, Morpho is invisible to everybody, but they just have a way to obtain, like, you know, they can basically power their ambition with open access to capital, but truly open, one that is like competitive and that can price all of their trust guarantees, basically.
• 30:45
  Bam Azizi: Makes sense.
• 30:46
  Bam Azizi: And what what is the role of a stablecoin in the world of Morpho?
• 30:50
  Bam Azizi: Do you even care about a stable coin?
• 30:52
  Paul Frambot: Stable coins are important.
• 30:53
  Paul Frambot: Like uh stable coins are you know, one could think of them as the checking account, um and and morpho as like the savings account, or at least the vault as the savings account, like the non-custodial way.
• 31:05
  Paul Frambot: Um that that's one mental model.
• 31:07
  Paul Frambot: You know, stable coins at the end of the day are just a database, right?
• 31:11
  Paul Frambot: Um and and that accounts for like who owns what.
• 31:14
  Paul Frambot: And and and Morpho is like basically an auxiliary to that database that is basically explaining what are the obligations of people uh denominated in that stable coin.
• 31:25
  Paul Frambot: So for us, it's more like a technology uh that that that we use that is very convenient.
• 31:30
  Paul Frambot: Um yeah, it's it's a tool for us, but you know, we could settle, we could settle in any asset.
• 31:36
  Paul Frambot: Like if you want to do a Tesla loan or like tokenize like SpaceX, like whatever shares, uh you can lend them and do securities lending.
• 31:44
  Paul Frambot: Or if you want to lend your RWAs or like you know, your your credit funds, like you can do that on Morpho.
• 31:49
  Paul Frambot: We're pretty agnostic.
• 31:50
  Paul Frambot: Turns out stable coins is you know what is driving most of the loan settlement, because this is how people account for their obligations usually.
• 31:57
  Paul Frambot: But it's not the only way.
• 31:59
  Bam Azizi: Makes sense.
• 32:00
  Bam Azizi: And are you competing with staking protocols and vaults that they're giving like 20% return?
• 32:07
  Bam Azizi: Like how do you compete in that ward?
• 32:10
  Bam Azizi: That like high like higher interest and higher rates is always um incentivizing people to just move at least part of their assets there.
• 32:20
  Paul Frambot: Morpho is like risk agnostic.
• 32:22
  Paul Frambot: So you can have pretty crazy risky stuff on Morpho.
• 32:24
  Paul Frambot: It's a permissionless system.
• 32:26
  Paul Frambot: So you can anyone can come in and offer products that are very risky or that are very low risk, right?
• 32:32
  Paul Frambot: Like we don't have an opinion on that.
• 32:34
  Paul Frambot: Um then it's for the distributor to surface that to the user and you know properly explain the risk, of course.
• 32:40
  Paul Frambot: And if some products are illegal in certain jurisdictions, they don't show them, like all this type of stuff.
• 32:45
  Paul Frambot: We are generally complementary to any vault stack that exists.
• 32:49
  Paul Frambot: Like we have our own vault stack, but you have other people building their own vault stack, and they usually all end up depositing on Morpho and lending on Morpho.
• 32:56
  Paul Frambot: Um so so so that's one.
• 33:00
  Paul Frambot: For the staking specifically, we don't do blockchain staking like native asset staking, like e-staking or soul staking.
• 33:09
  Paul Frambot: Uh we think of this as like a separate business and we don't want like we don't want to unfocus.
• 33:14
  Paul Frambot: So yeah.
• 33:16
  Bam Azizi: So you but but can Morpho be used for vaults and people who are staking, or you're like going head-to-head and competing for the capital?
• 33:27
  Paul Frambot: So for native proof-of-stake staking, we don't compete, it's just like a different product.
• 33:33
  Paul Frambot: That you know, if you have ETH, you want to stake it to secure the Ethereum blockchain.
• 33:36
  Paul Frambot: That's a separate product from Morpho.
• 33:38
  Paul Frambot: The the ETH is not lent out, right?
• 33:41
  Paul Frambot: It's just staked in the proof-of-stake sense way.
• 33:44
  Paul Frambot: So we we don't compete with those.
• 33:46
  Paul Frambot: Um if this is a vault provider, which is investing the asset somewhere, usually we we so we have our own vaults, but for us, like our vaults are open source.
• 33:57
  Paul Frambot: It's like a commodity that we put out for anyone to deploy their own vault.
• 34:00
  Paul Frambot: Uh, but we're we also welcome other vaults to deposit on Morpho.
• 34:04
  Paul Frambot: And so the the lending, the credit markets of Morpho, like most vaults invest in them.
• 34:09
  Paul Frambot: Uh, so we don't see them as like a uh a competitor at all.
• 34:13
  Paul Frambot: We see them as like a complement uh to us, right?
• 34:16
  Paul Frambot: That basically allows us to get more distribution, more capital, etc.
• 34:19
  Paul Frambot: And we partner with all of them, by the way.
• 34:21
  Paul Frambot: So so yeah.
• 34:22
  Paul Frambot: And this is why we host Vault Summit in the first place.
• 34:24
  Paul Frambot: Like in Vault Summit, we we welcome a bunch of like Vault players uh and and they get to like you know deposit um in into more for markets.
• 34:33
  Bam Azizi: Makes sense.
• 34:34
  Bam Azizi: Um this this was an amazing conversation.
• 34:37
  Bam Azizi: I'm sure a lot of my audience learned a lot about staking and lending and on-chain protocols, but you did a massive round recently at $2 billion market cap.
• 34:48
  Bam Azizi: Uh and you want to tell us more about that and what's what's the plan for the next two to three years?
• 34:53
  Bam Azizi: How do you want to spend that money?
• 34:55
  Paul Frambot: Yeah, sure.
• 34:56
  Paul Frambot: I guess you know, crypto is at its turning point where the speculation part is dead, right?
• 35:04
  Paul Frambot: Like if I'm being honest, like there's no such thing anymore as like crypto native businesses that are and that said that part of crypto is dead, but we can like the one that is like thriving is definitely the infrastructure part, like crypto being, you know, crypto for payments, you know, uh stable coins uh and and credit uh in in general.
• 35:28
  Paul Frambot: And the reason why this is thriving is like you have massive interest from distributors, like very large distribution.
• 35:35
  Paul Frambot: And you know, just like you you guys know this even more than than than than we do because payments came in earlier in the time to market than than than loans.
• 35:44
  Paul Frambot: Uh but I can't think of a single fintech now that does not have a roadmap to fully move on chain in the next two to three years.
• 35:50
  Paul Frambot: Like literally everybody.
• 35:52
  Paul Frambot: Like uh and and everybody's integrating self-custodial accounts, everybody's integrating yield, everybody's integrating loans, stable coins, payments, uh stablecoin cards, like uh uh everything.
• 36:02
  Paul Frambot: That's just the future of the infrastructure of every single fintech out there.
• 36:07
  Paul Frambot: Um and and then the question for Morpho is like how do you build the network?
• 36:12
  Paul Frambot: Like how do you build, how do you effectively build, like um uh go to market and and go for each of those those uh institutions that have capital that is moving on chain, and how do you connect them to the network?
• 36:26
  Paul Frambot: And that takes a lot of resources to build the engine, the team, that is gonna effectively bootstrap the market, right?
• 36:32
  Paul Frambot: So one should think of this raise and the reason why we raised the same way Visa made like massive investment as they were bootstrapping the network like you know 60 years ago.
• 36:42
  Paul Frambot: That's the same idea.
• 36:43
  Paul Frambot: It's like network businesses like Morpho require an immense amount of activation energy to go after every single partner, distribution partner, and and get them into the network, right?
• 36:56
  Bam Azizi: Makes sense.
• 36:56
  Bam Azizi: And so like what what are the sneak peek that you can tell our audience about things that will happen soon, other than like version three that's coming up?
• 37:07
  Paul Frambot: Yeah, so so this version three, you know, obviously quick quick note on that is that we're just gonna introduce like fixed-rate fixed term loans, um, which come in over cloud transform, but also in under cloud transforms.
• 37:18
  Paul Frambot: And that's gonna unlock a lot, right?
• 37:19
  Paul Frambot: So that's that's the first one.
• 37:20
  Paul Frambot: That's huge.
• 37:21
  Paul Frambot: Um with this comes two types of players FinTechs and TratFi.
• 37:27
  Paul Frambot: Um TratFi wants to operate the Rails, FinTechs wants to distribute the Rails, right?
• 37:33
  Paul Frambot: And you know, we we disclosed that you know very large partnership that we're having with Apollo, that is like a one trillion dollar size fund that is you know moving on chain uh for their credit with Morpho.
• 37:44
  Paul Frambot: Uh but one has to think that every single like large asset manager or large bank has now a roadmap to to operate like their financial services on-chain.
• 37:56
  Paul Frambot: And and with that, the reason why they're interested is that they see AUM coming in you know six to eighteen months through those like fintechs, right?
• 38:06
  Paul Frambot: And they don't want to miss out on all this AUM that is coming.
• 38:08
  Paul Frambot: Um Yeah, and so I think you know, if I were to shape what the the following few months are gonna look like is basically gonna be fintech in the front, you know, try to find the back, operated on on-chain rails.
• 38:19
  Bam Azizi: That's awesome.
• 38:19
  Bam Azizi: Yeah, I think the future will be on-chain.
• 38:22
  Bam Azizi: Um you're like building the payment version of Morpho and uh on-chain uh the network, you're building the network for lenders and uh lending in general.
• 38:33
  Bam Azizi: So I'm really glad that we had this conversation.
• 38:36
  Bam Azizi: There is a lot of uh mutuality and a lot of things in common, but uh I learned a lot myself.
• 38:41
  Bam Azizi: I'm sure like our audience will also enjoy it.
• 38:44
  Bam Azizi: Uh I have like a couple of like fun questions to ask to wrap up the conversation.
• 38:48
  Bam Azizi: One is like what is in the water in France?
• 38:51
  Bam Azizi: Like you have a lot of French blockchain companies from Ledger, Bastion, Preview, and you like is it is it a big thing in in Paris?
• 39:01
  Bam Azizi: Like you have a big community of blockchain engineers?
• 39:04
  Paul Frambot: Yeah, I guess.
• 39:05
  Paul Frambot: You know, I think historically France has done pretty well when it came to finance.
• 39:09
  Paul Frambot: Like, I think fundamentally it comes from like education being very math-oriented.
• 39:14
  Paul Frambot: Um, so if you look at like trading desk, like in the US, like all the exotic options traders, they're they're all French, right?
• 39:21
  Paul Frambot: Like for whatever reason.
• 39:23
  Paul Frambot: Uh so I think just part of the educational system has a bias towards this type of of technology and and applications.
• 39:30
  Paul Frambot: So I think that's one.
• 39:31
  Paul Frambot: I will say though we're not entrepreneurs entrepreneurs at heart, you know.
• 39:36
  Paul Frambot: So we've even though there's a lot of like engineers, uh it's pretty rare to find founders.
• 39:42
  Paul Frambot: Um and and usually they would go to the US, right?
• 39:47
  Paul Frambot: Like to fund companies.
• 39:48
  Paul Frambot: And I think that's the case of NAS or or or or Henry from Privy.
• 39:52
  Paul Frambot: Um and um anyhow, so you know, I I think that's probably the fundamental reason why we see a little uptake.
• 40:01
  Paul Frambot: I will say though the ecosystem um um has lost a little bit of momentum uh uh in general, but I think this is probably true for all crypto uh uh overall.
• 40:11
  Paul Frambot: Um just the market concentrating around fewer companies uh and as as the ecosystem matures.
• 40:17
  Bam Azizi: But you're not coming to US or staying in French, France, right?
• 40:21
  Paul Frambot: I I am in between the two, actually.
• 40:22
  Paul Frambot: So I am you know still waiting for visa approval.
• 40:25
  Paul Frambot: But uh I'm like 40% in New York, 40% in Paris, and then 20% wherever Morpho needs me to close someone, uh which means a lot of trips.
• 40:35
  Bam Azizi: I know, I know.
• 40:36
  Bam Azizi: Um my last question, which is the tradition of this podcast, is what's your favorite restaurant?
• 40:41
  Bam Azizi: What's your go-to restaurant in Paris?
• 40:45
  Paul Frambot: Well, you know, I'm tempted to not answer that for security reasons because we just a good restaurant in Paris.
• 40:53
  Paul Frambot: Yeah, I I guess I guess you know I I like Chinese food in in Paris.
• 40:58
  Paul Frambot: I think I I think Paris is amazing, Chinese food.
• 41:01
  Paul Frambot: Overall, not super good Asian food, but Chinese specifically, whether that's you know Sichuanese or Shaangxi food is is is pretty amazing here.
• 41:09
  Paul Frambot: Um so yeah, I think I would go for that.
• 41:12
  Bam Azizi: Okay, sounds good.
• 41:13
  Bam Azizi: Thank you, Paul, again, for your time.
• 41:15
  Bam Azizi: I really enjoyed the conversation.
• 41:17
  Bam Azizi: Thank you.
• 41:17
  Bam Azizi: Thanks for having me.