Translation: Plain Blockchain

Host Robbie: Welcome to The Rollup. I'm Robbie. Every day we talk with the top and smartest people in the digital finance field to help you beat the market. This is The Rollup's Tabled Up episode 47. Today, we are connecting with Robert Leshner, a true OG in this field. Robert, we have invited your co-founder several times before. We've been following you since the old Compound days. Only now have we brought you on, but I'm glad we finally made it.

Robert Leshner: Thank you. I tend to be more reserved.

Host Robbie: I'm glad we finally made this happen. Superstate is on a roll right now. We talked with Jim before, when Invesco took over the last fund, and your handover went very smoothly, very well done. Today's episode is focused on stablecoins and tokenization. You are providing Fund OS for Coinbase's stablecoin yield fund. Overall, you are the frontrunners and pioneers in the tokenization space. Let's start with the broad topic of tokenization. Let me throw out a viewpoint: we are in a tokenization supercycle. Industry leaders are shaking hands with the President of the United States and standing alongside heads of the CFTC and regulatory bodies, which is legalizing the entire industry. The biggest financial institutions are now feeling FOMO and are entering at a very fast pace. These tokenized assets will eventually spread across various blockchains, entering the DeFi protocols that have been building resilience systems from the start. Now, these protocols are starting to serve the largest asset classes in the world. I would love to hear your thoughts and your framework for thinking about the progress of the tokenization narrative.

Robert Leshner: That's a good point, and I largely agree. We are at the starting point of tokenized assets maturing. This represents not only industry leaders talking about crypto and tokenization but almost every bank and asset management company's leadership is starting to discuss tokenization publicly. We are probably at about the first chapter and a half. There are many pilots and proofs of concept out there. Everyone is working on products, and some have started to make tangible progress, but overall it is still very early. Almost every large bank has announced plans to offer tokenized deposits. Pick any of the biggest banks, and they are working on tokenized deposit businesses. They want to use this as a springboard to further tokenize securities and create products that are more complex than deposits. From BlackRock, Vanguard, Fidelity down, almost all asset management companies are highly interested in this.

So the question is no longer “who is interested,” but “who is not interested.” The list of institutions that are not interested is basically made up of dinosaurs that will be outcompeted and eventually go to zero. The truly important players in the finance field are all showing interest. The reason is that in the past eight years we've proven that on-chain programmable tokens are very powerful. They can achieve instant settlement, have high transferability, are fully programmable, can be directly integrated into DeFi protocols, and can completely open the gateway to global access. Of course, there are still some edge issues to resolve; the SEC and CFTC are clarifying these last gray areas. Soon we will enter a phase where “the logic has been fully proven, and everyone is sprinting ahead.” All institutions are currently on the starting line.

Bank Stablecoins' Entrance Path and Final Form

Host Robbie: I completely agree. Later, we will discuss Superstate's product stack and how you collaborate with these financial institutions, as well as how you anticipated and positioned for this. I want to add to what you just said about the degree of adoption. At the banking level, the path is from tokenized deposits to tokenized equities. Banks like Bank of America, Wells Fargo, Santander, and a dozen major banks are advancing plans to issue stablecoins. You know the internal situation better than we do: how will bank-led stablecoins enter the market, how will they collaborate, and how will they unfold? How do you view the entrance of bank stablecoins compared to the complex experiments of algorithmic stablecoins and decentralized stablecoins, leading to today’s duopoly of Circle and Tether?

Robert Leshner: That’s a good question. I don’t have all the answers, but I can use some historical analogies. If we zoom out a bit. In the 1990s, when the internet and the web were still new, no bank had its business online; the online proportion was 0%. Once the internet appeared, no bank CEO would denigrate the internet in their earnings calls. What they expressed was the desire to figure out how to leverage this technology. They started with portals and gradually developed foundational products like Zelle. Today, it is 100% adoption. No bank does not fully deliver banking services via the internet because it’s faster, cheaper, better, and operates nearly 24/7.

The crypto track is the next evolutionary step and is similarly transformative, especially for cash services, securities services, and any form of value transfer. So what might the endpoint look like in 20 years? It’s likely that every bank, every asset management company, nearly everyone on Wall Street, every advisor, every portfolio, and every mobile phone user will, at some level, use tokenized assets.

Back then, many had different thoughts about the "internet + money" portal, and it continues to evolve; every year there are slight improvements. I can’t look into a crystal ball and tell you exactly what the full picture after tokenization scales will look like. I don't believe the endpoint will involve 30 independent tokenized deposits—Bank of America doing its own, JPMorgan doing its own, Wells doing its own, with everyone succeeding and competing against each other isolatedly. That’s unlikely to be a steady state system. More likely, there will be some kind of federated deposit stablecoin, where 15 banks jointly create a mainstream product and win out; or maybe a single top-tier major bank, thanks to economies of scale, becomes the benchmark, like Bank of America or JPMorgan.

In the big basket of tokenized securities, we might evolve into hundreds of pathways: tokenized stocks, securities raised, real estate, alternative assets, and everything in between. What can actually run, be sticky, and truly effective in the long term has not been fully proven yet. Everyone is throwing wood on the fire, ramping up their investments, observing where the real product-market fit lies. From startups to the largest banks in the U.S., this process is being experienced universally.

Fund OS: The Underlying Architecture of Compliance and Programmability

Host Robbie: This does remind us: the industry is still very early. There is consensus on direction, acknowledging that this is the endpoint and we are moving towards it; but how exactly to get there and what will be the real driving forces and accelerators is still completely open. Many different roles will enter this market to provide the infrastructure for building the on-chain economy and tokenized world. But which are the primary cuts and which are secondary aspects are still far from being determined. The total addressable market after scaling is vast; we just don't yet know which directions will explode first. This is also why I want to delve into the Superstate product stack. You have already occupied a key position in the tokenized fund world, reflecting deeply on this narrative and making extensive preparations. What direction is your current focus in pushing forward? How is the adoption curve experience for these products?

Robert Leshner: At this stage, our biggest bet is a platform called Fund OS. Fund OS is the operating system for super-modern tokenized funds. These funds can be capital-raising funds, like hedge funds or venture capital funds targeting qualified purchasers; or public funds, like mutual funds or ETFs. Some of our partners have already submitted the first batch of prospectuses to the SEC, preparing to formally deploy public funds on Fund OS.

In the future, new asset structures will emerge: products that do not look like traditional ETFs or mutual funds will be tokenized into native on-chain securities, allowing people to freely buy, sell, subscribe, and redeem, and completely interact with DeFi in a composable way. There is very high market demand in this direction. A batch of top global asset management institutions are already collaborating with us to push their products towards tokenization. We still have a large pipeline of cooperative reserves; more excellent asset managers want to build their own tokenized products. We have already polished the platform into infrastructure that can operate at scale.

If we break down what the underlying securities are, the traditional financial system contains a lot of complex components. What we do is establish a complete software technology system around the underlying operation methods of funds, enabling them to become compliant tokens that operate smoothly on-chain. They still require strict compliance, clear accounting, and standardized handling of tax and other back-office affairs. But for end users, the experience is extremely intuitive: users hold a token that can be directly deposited into protocols like Aave Horizon, and the assets will operate normally according to the rules set by the smart contract.

Asset Layer Permission Mechanism: Decoupling DeFi Protocols and Compliance Constraints

Host Robbie: The underlying complexity is clearly very high, whether it be tokenized infrastructure or smart contract interaction design. I want to understand how you design the system to be general enough, as these securities and funds are incredibly complex themselves. But first, I want to explore regulatory issues. Regulatory bodies are now accelerating to clarify the rules. How do you build these essentially securities assets on-chain? How close and how important is the regulatory body as a key influencer in building this ecosystem?

Robert Leshner: Good question. Each team's chosen path is different. The entire industry has gone through a long regulatory pain, causing some to take a completely regulatory-avoidant extreme, while others have become relatively conservative. Superstate's path has always been cautious because we aim from the beginning to partner with the largest financial institutions globally. Therefore, we chose to tackle the most challenging task: how to ensure a fund continues to comply with all regulatory, compliance, and legal requirements while also becoming a token that can enter smart contracts and be freely programmed.

Our approach is to maintain absolute rigor in underlying compliance: the funds on the platform are either exempt from registration, in which case we strictly enforce, only targeting qualified investors and qualified purchasers, verifying all legal documents and executing the access process completely; or they go through the formal registration process directly. What regulators want to see is compliance teams registering new funds and attempting to bring never-before-seen new types of on-chain products into compliance. They are not stipulating that everything must rigidly resemble the shell of traditional mutual funds or traditional ETFs. I believe we will see the emergence of newly-formed registered vaults, registered native DeFi securities, registered tokens, etc., in the coming years.

Our principle is: everything must be completely legal and compliant. Within the compliance framework, product forms can innovate continuously, but we strive for the strictest compliance standards. We encapsulate these complex backend tasks at the underlying level while ensuring the tokens themselves maintain excellent usability.

Many people do not fully understand the core challenges we address from both a technical and process perspective. For example, for the tokenized products we issue, such as the USCC managed by Bitwise, a high-yield basis fund that has now been integrated into mainstream DeFi protocols like Aave Horizon and Morpho. The system strictly records each underlying holder. We maintain a whitelist in the backend; everyone’s wallet address is mapped on this whitelist: the backend understands this is Robbie’s wallet and corresponds to which specific addresses. As long as those wallets hold a token balance, the backend can real-time confirm them as compliant holders to meet all tax and compliance auditor requirements. At the same time, this system fully connects and collaborates with fund administration and custodians.

Typically, the industry stops exploring at this point: because once assets leave a user’s personal wallet and enter the DeFi liquidity pool, the traditional system loses traceability of holders. To address this pain point, we developed innovative penetrative tracking technology: as long as we can penetrate the underlying logic of DeFi protocols and precisely track each person's ownership and share changes continuously during the transfer and interaction of funds, we can safely allow tokens to leave wallets and enter protocols.

For lending protocols, we support systems like Morpho and Aave. The implementation approach is to conduct reverse engineering from a bottom accounting perspective. When users deposit tokens as collateral, the system records: the assets still belong to Robbie, with the status marked as collateralized. In the event of liquidation, the system will update the records in real-time: ownership transfers to the liquidator. We precisely track every log and event of the smart contract, ensuring that underlying legal records and on-chain status are strictly synchronized. Even when a thousand investors’ tokens merge in the borrowing pool, appearing on-chain as a single contract address, the backend will not simply view it as a single address, but will precisely parse it into each underlying beneficial owner. Every event is synced in real-time to accounting, bookkeeping, compliance, and tax systems.

The same logic applies to AMM liquidity pools. Although the assets are mixed together, the system performs penetrative analysis of every LP position, accurately calculating the real-time holdings of each LP, with every exchange transaction dynamically adjusting the records. This creates a high degree of collaboration between DeFi protocols and tokenized securities, allowing us to meet both strict compliance and native DeFi characteristics without sacrificing either side.

Host Robbie: From the completely permissionless geek DeFi of Compound back in the day to today’s world of regulated, tightly-knit accounting systems, a profound evolution has occurred. The core logic driving you is to abstract these complex systems to lower the threshold of understanding and utilization. You have actually found a very promising path: opening the previously closed on-chain channels for larger and more solid traditional assets.

Robert Leshner: I have seen the construction processes of almost all mainstream DeFi protocols. I personally do not advocate permissioned DeFi protocols and strongly oppose the practice of “creating a worse experience and fragmented liquidity tailored version of Compound, Aave, or Uniswap just for compliance.” That would lead to serious liquidity fragmentation.

My core design principle is: how to allow protocol developers to maintain an entirely open protocol architecture that runs seamlessly on fully decentralized public chains; while within these open protocols and underlying networks, they can freely use permissionless assets and seamlessly integrate with regulated tokenized securities—permissions and compliance controls occur at the asset layer, not the protocol layer.

Host Robbie: Permission control completely falls at the asset layer?

Robert Leshner: Yes, entirely at the asset layer. We uniformly execute compliance and accounting standards at the asset layer. We do not need to contact a DeFi founder and ask them to create a limited experience fork version for compliance. The value of Superstate's infrastructure lies in enabling developers to freely build protocols in their ideal ways without making any compromises; and when Superstate’s tokenized assets are accessed, all compliance and tracking logic has already been handled at the asset layer, allowing DeFi protocols to maintain their purest efficiency and openness.

From Treasury Building Blocks to Trillions in TAM Migration

Host Robbie: To help everyone understand more concretely, let's look at actual implemented cases. Sometimes infrastructure is too low-level, and it's difficult for people to establish a concrete understanding. I know you are deeply cooperating with Frax on multiple funds, such as the short-duration government securities fund. Frax uses Superstate’s treasury fund as core reserve support for its stablecoin, and both parties are also collaborating on arbitrage strategy funds. Can you take the collaboration between Superstate and Frax as an example to break down its specific operational logic?

Robert Leshner: The first tokenized product launched by Superstate is USTB. Initially, it was Superstate’s short-duration government securities fund holding U.S. treasuries, later managed by Invesco, which still allocates premium treasuries as the underlying. This is a fund that holds real U.S. treasuries while circulating in the form of native on-chain tokens.

Investors can use stablecoins to subscribe for new shares and can redeem fund shares for stablecoins at any time. This embodies the core mechanism of tokenized funds: when investors purchase shares, on-chain stablecoins are exchanged for fiat dollars, which are then used to buy real U.S. treasuries in the open market or work through bank channels; when investors apply for redemption, the real treasuries are sold to convert into dollars, which are then converted back into stablecoins and returned to investors.

The entire process of subscribing and redeeming fund shares can happen off-chain or trigger directly on-chain. We have deployed a highly automated smart contract system, and DeFi protocols can directly initiate programmatic subscriptions and redemptions. The protocols do not need to go through web interfaces for manual operation; they only need to submit stablecoins through contract instructions to mint new shares or burn shares to retrieve liquidity, all processes achieving almost instantaneous on-chain settlement at Ethereum block speeds.

Thus, Frax can directly use this tokenized treasury fund as its stablecoin's underlying reserve building block. It is fully programmable, and Frax can write smart contracts for automated interactions with it. While the underlying encompasses complex flows from USDC to physical treasuries, what is presented at the protocol level is merely a clear Solidity interface: subscription, redemption, oracle price quote integration. We abstract the cumbersome process of “sourcing real treasuries and injecting them into fund custody” into a single simple smart contract call. This allows the stablecoin protocol to have extremely high flexibility when dynamically adjusting reserve supplies, as the complex underlying settlement is all automatically handled by the fund operating system in the backend.

Host Robbie: This not only empowers stablecoin reserves but also enables on-chain money market funds. As tokenized deposits, stocks, and treasuries are fully migrated on-chain, how do you think the future of DeFi protocols will evolve? Is it merely an expansion of the total addressable market, with protocol trading volume and fee income increasing simultaneously, or will the entire industry's commercialization model be reshaped?

Robert Leshner: This is also the underlying thought that led me to establish Superstate. As an entrepreneur who experienced the early development of Compound, I deeply realized that the cap of native crypto assets is too narrow for financial applications when the market entered a deep bear phase in 2022. At that time, almost all assets performing within lending protocols and liquidity pools were limited to within native tokens.

However, looking at traditional finance, the scale of quality assets that can be integrated into the smart contract system is tens of thousands of times that of native crypto assets. Continuing to make minor incremental optimizations within the original narrow asset pool would simply be chiseling an extremely small corner of the iceberg. Therefore, Superstate's core mission is to break down barriers from the ground up, amplifying the total amount of assets that can connect to smart contracts by tens of thousands of times.

When every type of core traditional asset can seamlessly interact with smart contracts, the DeFi ecosystem will experience explosive growth. This will directly drive a complete prosperity of public chain infrastructure layers and decentralized application layers. We are building channels bit by bit to enable hundreds of billions of dollars of quality assets to undergo programmable transformations.

Currently, while the entire industry has reached several billion dollars in scale, it remains in the early stages of proof of concept. Just as internet technology did not stop at transforming 10% of banking business but ultimately became the foundational operating carrier for 100% of the modern financial system; future financial infrastructure will also fully migrate to tokenization at the foundational level. Tokenization is not only an upgrade of asset forms but also a comprehensive restructuring of global financial liquidity and settlement systems.

Host Robbie: When all non-standard assets and liquidity-constrained assets achieve interoperability through tokenization, the total size of the market may even surpass our current definitions of the total of traditional finance. Thank you very much, Robert, for your deep sharing today, and I look forward to seeing Superstate bring more trillions of assets into the on-chain world.

Robert Leshner: Thank you very much, Robbie. Thank you for the invitation.

Host Robbie: See you next time.

Article link: https://www.hellobtc.com/kp/du/08/6426.html

Source: https://www.youtube.com/watch?v=16FLs0j6AoY