Compiled & compiled by: TechFlow
In Empire’s recent show, Jason invited Rob Leshner, the former founder of Compound, to discuss his new venture Superstate.
The show explores the challenges and impact of putting real-world assets (RWAs) on-chain, Superstate’s listing strategy and competitive landscape, and the upcoming stablecoin battlefield.
Moderator: Jason, Empire
Speaker: Rob Leshner, Founder of Compound
Video attribution: Empire Podcast
Column: Links
Release time: July 11
Superstate's founding intention and opportunity
Rob said that when he entered the cryptocurrency industry in 2017, he believed that the tokenization of real-world assets and things was just around the corner; however, six years later, what we see is that there is little clear traction and proof of value in assets moving from traditional markets to blockchain.
He sees this as one of the biggest opportunities for the blockchain ecosystem, investors, developers, and builders, to assist in the process of bringing assets on-chain.
Rob points out that the long-term advantages of bringing assets to the blockchain are diverse, including composability with other on-chain systems, a significant increase in transparency, automation, speed and permanence of settlement, and more.
So he founded Superstate. The goal is to buy short-term government debt and mark it on the blockchain; in terms of specific business, Superstate mainly engages in investment management business and provides consulting for mutual funds.
Unlike other mutual funds, shareholders in Superstate funds can request that their ownership records be sent to a blockchain address they control, either in self-custody or with a qualified custodian.
The benefit of a superstate is that it allows you to be invested in a particular mutual fund and also be able to see your other investments at the custodian, or be able to track them in a single portfolio management approach and have a unified technology infrastructure to store, manage and monitor your investments.
The Challenge of Bringing RWAs (Real World Assets) On-Chain
Although there is a lot of interest in bringing traditional assets such as stocks and real estate to the blockchain, there is currently more interest in crypto-native assets in the market. Rob believes that this is because people can already access assets such as stocks off-chain, and they prefer new things that they have not yet accessed. However, he expects this trend to change as more things can be done on-chain.
Secondly, he mentioned the technical challenges. He explained that the process of bringing traditional assets to the chain is not simple. This requires the establishment of a fund that can exist on the chain, and whatever is in the fund can exist as a digital record on the chain.
Third, he mentioned the issue of market interest rates. He pointed out that if 5% treasury bills can be easily obtained on the chain, then people may not be willing to accept a return rate on the chain lower than this level. This may lead to an increase in interest rates in decentralized finance, which will have an impact on the market.
Finally, he mentioned the issue of competition. He believes that they are not the only team developing solutions, nor will they be the only one. He expects that there will be many excellent teams working hard to meet the needs of the market, that is, how to bring excellent investments from the traditional market to the chain.
The impact of trading RWA with Crypto
Rob first explained the risk-free rate of different currencies. He emphasized that a 5% return on Ethereum cannot be compared to a 5% return on USD, because USD is stable, while Ethereum may fluctuate up or down 3% every day when denominated in USD. Therefore, the risk-free rate is available in every currency. For Ethereum, it comes from staking income, and for USD, it comes from Treasury bills.
Then, they discussed the application of fixed-rate tools in the cryptocurrency market. Rob said that he was surprised that fixed-rate tools have not yet become popular in the cryptocurrency market. He himself has invested in 10 protocols that provide fixed rates, but has not seen any market or product achieve large-scale application of fixed rates in cryptocurrency.
They then discussed the possibility of companies borrowing on-chain. Rob argued that if companies were looking for a stable investment, they could go and buy a 10-year or 5-year treasury note, and they didn’t need any existing crypto products.
As more businesses, institutions, users, and investors are able to interact with blockchains and access blockchain-based markets and services, they may become more willing to borrow on-chain. This could have an impact on traditional borrowing markets.
Market structure and regulatory challenges faced by Superstate
Fundraising Strategy Optimization: Rob explained that they chose an optimization strategy to only raise funds from companies they already knew and believed would be ideal users and participants. Their goal was to ensure that there was enough capital to launch the project, rather than talking to a large number of investors.
Potential investors, especially large investment firms like BlackRock, Vanguard or Fidelity, want to invest in Superstate, which is beneficial to both parties as long as they do not bring restrictive actions, which may include additional management rights, information rights or product preview rights, which may have a negative impact on Superstate's operations and development.
Finally, they discussed the regulatory aspects. Rob explained that they needed to whitelist anyone who held their product. He argued that this was a necessary trade because they needed to verify if someone was a US investor.
He foresees that the future DeFi world will be a mix of permissioned and permissionless assets that will coexist on the same protocol, the same market, and the same entity.
The battle between stablecoins and RWA, and the exploration of new KYC models on the chain
Rob also mentioned the competition between stablecoins and investment products. He believes that over time, there will be competition between the two because they are both competing for users, capital, and usage scenarios.
He predicts that in the future, there may be a large number of stablecoins and on-chain investment products, and they will coexist in the same market.
They also discussed a potential product idea of creating a KYC/AML protocol where once a user passes KYC/AML, they are given a non-tradable NFT that lives in their wallet.
Then, when users make transactions on platforms such as Uniswap, the platform can check whether the user owns this NFT, and only users who own this NFT can trade Superstate's funds.
Views on business models and company operations
Rob said he likes to bring something that doesn't exist to life. He likes starting from 0, and he likes starting from 1, but he doesn't like starting from 10 or 100.
Finally, they discussed Compound’s new management. Rob praised Jason, who he believed was not only a product designer, but also a great product thinker.
He believes that user experience still has a lot of room for improvement in cryptocurrency, so they need more people to focus on users.
