SPEAKER_00: 0:00

Hey, hey, hey, welcome to this week's episode of Blockhead's Blockcast. I'm your host, Takatoshi Shibayama. I'm also the head of APAC for Ledger. I aim to uncover the creative, intelligent, and radical minds who are shaping the crypto industry today. I'm as crypto curious as anybody that's tuning into this show. We're doing this together, guys. Let's go. Mr. Jacob Phillips, co-founder of Lombard. Welcome to the show. Thanks a lot for having me. This is going to be a very exciting rabbit hole we're going to go down to. We're going to be discussing BTC finance and especially around your product as well. But before we go into that, dude, you're really young, man. I looked at your LinkedIn profile. You were doing a couple of interns at CryptoVCs prior to COVID. And then it seems like you joined Polychain Capital in the midst of it. Tell us about your journey. Usually a lot of our guests had experience in TradFi or some other industry and then coming into crypto. Your first job was in crypto. Tell us crypto. Why do you want to get into it? It's not a typical industry to get into it from the get go.

SPEAKER_01: 1:10

Yeah, definitely. Well, appreciate you saying, you know, I'm still young. I'll be out with different crypto founders and I'll be like, hey, should we grab drinks or something? And they're like, oh, I'm not 21 yet. So I'm like, oh, geez, this space is crazy. It's so cool. I think how young people are able to get involved and start making a name for themselves. And I mean, that really is the whole way I ended up here. I was in school. I had gone down a couple of different routes of like research or debate type opportunities. First, I wanted to work at a think tank or be a political activist. And then I discovered stocks and wanted to be a stock analyst, go work at a hedge fund. I did a little bit of fixed income work in the meantime. So all throughout school, I was doing traditional finance. Grand plan was to go make my way into a hedge fund or private equity. Very late in the game, had so much time on my hands because I just locked down like a penultimate internship at a big New York bank. And I started CS major just to kind of like pass the time, do something creative and started digging into tech. All these guys were like, you know, my age starting companies working for themselves. thought to hell with it i should be doing that so i ended up trying to go get a gig at a small startup accelerator near the campus where i was at in cleveland cleveland has like zero tech scene but somehow was starting a crypto fund i didn't know this i was like pitching them crypto companies because this was mid to late 2018 you know crypto was hot at the time so i was sort of telling them what they want to hear effectively got the job got staffed on the crypto fund because i pitched the crypto company and the rest was history at that time they forced me to sit down and look at the tech and you know crypto was already being adopted by all the biggest banks all the silk good value tech firms. Every VC was investing in it or at least dabbling in it. So I think it was much easier for me to kind of make that leap of faith. I'd encountered crypto multiple times before. My roommate freshman year was an ICO investor and just annoyed me because of it. And then I went around telling people in high school that they should invest in Bitcoin just to be provocative. Never got in because I never really believed in it at the time. Think like back to 2018, my, the tables had turned. And now it's crazy in 2025. I sort of don't understand how people could be naysayers of crypto at this point. Like, every single catalyst that we could have possibly imagined has happened this cycle. It only makes me more bullish. But after I had decided I was going to go full-time in crypto, I interned at a fund. I did like a part-time unpaid internship that then helped me get a real crypto fund job for a woman, Ariana, who was a partner at A16C. She used to have her own fund. She tweeted she was looking for an intern. I was probably the only one to respond with a crypto internship in the resume before she took me in. And then after that, I ended up getting gig at Polychain. So I went out to work for Polychain beginning of 2020. I was there for And what got you into crypto in the

SPEAKER_00: 3:49

beginning? I mean, obviously, everybody has their own reasons. I'd love to learn about yours.

SPEAKER_01: 3:53

Yeah, you know, I wish I had a more principled reason. I was going to go into traditional finance. I then was like doing all this CS stuff, trying to get into tech. And of all areas that I could specialize in, I was going to go into traditional finance. tech, crypto seemed the most novel. The thing that got me hooked was programmatic trust. That idea, I think, is so big. One. Two, nobody knew anything about it. I mean, I basically went knowing nothing about crypto late 2018 to working at one of the biggest funds in the space in 12 months. That's kind of unheard of. So my options, I was sitting there either going back to do investment banking and spend two years working nonstop for someone and then to become an associate. I would have been 30, 35 or something like that before I actually have any degree of autonomy. This was like a pretty crazy opportunity to sort of front run everything that I was trying to do. I was trying to get to a VC fund eventually. Why take the extra steps? That was effectively the logic there. I tested it out for a little while. It was one of those things where it was like, I was doing it for a bit, really just trying to convinced myself that it was worth it. I had to do the same thing when I was starting Lombard and yeah, everything worked out. I ran at it. It was one of those things that basically became like my whole life, all of 2019 was almost exclusively focused on getting to a big crypto fund, learning everything I could about crypto, starting to write research myself and the rest is history.

SPEAKER_00: 5:09

Well, I mean, it speaks to your determination and also the industry is so young and new that, you know, there's no kind of like path there, right? Anybody can come in and then build their own business, go into some organization and get a good position in there. I think this is the beauty of the crypto industry because it's, yeah, again, so young.

SPEAKER_01: 5:28

Totally. I was young going into Polychain. I think I was like maybe 23 at the time. The guy who hired me, who was a partner at the firm, was 22. So, I mean, that just goes to show how

SPEAKER_00: 5:38

quickly things evolve. That's amazing. And then how was your experience at Polychain? I mean, I'm sure you've seen so many different projects, especially at that time. It was like DeFi summer, right, basically. So you must have seen tons of them. Maybe that's why it kind of led you to doing DeFi perps in the end.

SPEAKER_01: 5:54

Absolutely. Polychain was awesome. I got to work with some of the best thinkers and investors in the space for multiple years. I went in as one of those guys who had researched crypto a lot, thought he knew some stuff. I then got just... all of my ideas beat down by the best thinkers for quite some time, but it helped me form a good judgment, which I think is one of the most, or at least I think good judgment, which I think is one of the most valuable assets a person can have in building, investing, anything in between. I got to see everything that was cool happening in the space. I got to know what a good founder looks like, what a bad founder looks like, what good companies look like, what bad companies look like. I was in a very privileged position to see everything that was happening in the space. So there was very few things that I didn't kind of have the insider information on. So I sort of go back and forth on whether I would recommend starting at VC if I was doing it over again, or if I was recommending this to somebody younger, but it certainly was a cool experience for me and has shaped everything that I've done since then.

SPEAKER_00: 6:51

Yeah. I like to put a pin on that experience that you have, like looking at good founders, good companies, because I think a lot of people who are coming into this industry would probably want to know a little bit about that. You know, I have my prior experiences looking at distressed companies and then looking at companies that are bad, you of bad managers, bad business performance. And then I know like what to do, what not to do, right? So I think all those things kind of lead into what you're doing today. And then you worked at a DeFi perpetuals business. I mean, you know, from there, how did you come about thinking, okay, I want to jump into Bitcoin finance because it's quite different. And, you know, Bitcoin for my generation who came into it, like, you know, kind of 2016 or later is like generally the kind of what you call OGs that only looked at Bitcoin because that's, pretty much what there was but for guys coming in you know in 2020 or even a little bit before that you know you have a whole array of like different cryptocurrencies that people can look at i mean why did you start focusing on bitcoin

SPEAKER_01: 7:50

great question so the story dates back to when i was at polychain i spent most of my time having a little bit of a background in finance already i spent most of my time on defi plus when i just hopped in you know i spent like I don't know, three, four months just getting up to speed on everything happening in the crypto space and then immediately DeFi summer hit. So I was kind of like thrown into the weeds. There was all this brand new stuff popping up that I was now on par with everybody else in the space and researching. While that was happening, kind of later DeFi summer, Bitcoin DeFi made a little bit of run. Everybody looked and they were like, oh, hey, you know, DeFi TVL is X and there's this, you know, 10,000 X size assets over Bitcoin that just needs to come in. So I actually led an investment into a project called BadgerDAO. This was one of the first semi-successful attempts at integrating Bitcoin within existing DeFi primitives. Didn't quite work out for a number of reasons, but it was always sort of in the back of my mind. So when I was thinking about leaving Polychain, of course, I wanted to go do like the most complex, creative, cutting edge DeFi startup. At that point, composable perps with permissionless market creation was like one of the crazier things happening. And I still think is one of the most intellectually interesting categories of DeFi. And I hope that Lombard can continue to work with these types of projects. But after doing that for maybe two years, I sort of learned a lot in that time. In those two years, I was learning to be a builder. I had just gone from investor where all you have to do is think. Now it's like, you can think all you want, but the name of the game is, can you execute? So it's a very different kind of shift in mindset. And then we were building very complex things for a very small set of DeFi users that most DeFi native and DeFi degen. There was a whole world outside of that. I had went from knowing everything that happened to DeFi now to just knowing a very small space. I started talking with a couple of colleagues of mine back at Polychain. When we were there, I think right before I left, Polychain had just led the Eigen layer seed round. And then soon after I left, Polychain led the Babylon series A. So restaking and Bitcoin finance had always kind of been on my radar. But when we started talking with the Babylon team, just kind of exploring new ideas, everything kind of clicked for me. I wasn't like jumping out of bed thinking Bitcoin staking was going to revolutionize the world or something like that. It's like the second and third order knock on effects that made everything super compelling. So I mean, the timing for Bitcoin DeFi was just perfect. The infrastructure was in place. You had people testing out with mechanisms on chain, BRC20s, ordinals, inscriptions. Developer acceptance for Bitcoin DeFi was somewhere that was like leaps and bounds ahead of where it was when I was investing in BadgerDAO back in 2020, 2021. You had people talking talking about fully trustless mechanisms, like there's a path to actual real Bitcoin DeFi directly on L1, like verifying a Stark for EVM execution directly on Bitcoin main chain. Like these types of things all sort of form the pathway to a very material Bitcoin DeFi space. And maybe the last thing I forgot to mention was the momentum was just there. Centralized institutions had just let us down. You had the collapse of BlockFi and Genesis, which everybody had been loaning their Bitcoin to centralized financial institutions to earn yield. Now, once those opportunities evaporate, crypto native DeFi and protocols now had a layer up. Now they were the only place you could earn yield on your Bitcoin. The stars just sort of aligned for this to make sense. And with the launch of Babylon, now the catalyst for onboarding Bitcoin into DeFi, I think everything really clicked. Eigen layer, I think was a massive catalyst for adoption of yield bearing tokens within DeFi. And Babylon has kind of done the same thing with Bitcoin. The one other thing that I have come to understand, I would say it maybe wasn't in the original vision that we had set forth. But the other thing that's always been missing with Bitcoin DeFi, and I even said it earlier, it's like, oh, there is all this TVL that we don't have access to. Let's build a bridge to that TVL. That's Bitcoin DeFi. I don't even think that's Bitcoin DeFi anymore. That's thinking too small. The bigger picture is that nobody builds in the Bitcoin space. There's almost no innovation. When I was at Polychain, we invested in so many ETH ecosystem projects. Then we were investing in Solana. We were investing in Terra and move-based projects. But never were we like, oh, I'm excited because there's a really great developer building in the Bitcoin ecosystem that I want to fund. There's nothing net new. At best, there were forks and copycats of other primitives building in Bitcoin. However, Bitcoin is the most principled ecosystem. It's where we started. It's where the roots were. I think that there's so much innovation that can come out of this ecosystem if you give it the tools to do so. Bitcoin is the primary onboarding asset. It's the most institutionally adopted. And again, it has the most principled group of builders around it. I think there will be very big things, not just copycats and similar primitives. I think we'll see net new stuff pop out of the Bitcoin space if you give Bitcoin community the tools they need to permissionlessly innovate.

SPEAKER_00: 12:34

Now, I remember when I first saw Lightning Network, that was kind of like the first attempt to make Bitcoin a little bit more usable. And then after that, you had your VRC20s and your Ordinals, and then you came to Layer 2s and sidechains and all that kind of stuff. It didn't really seem to kind of really stick that much because, you know, I don't think people were really looking at Bitcoin network itself as a use case, rather that people were looking to use Bitcoin itself. And then there were no outlets. There was no way to, you know, For sure. I was just going to say,

SPEAKER_01: 13:17

I think that's exactly it. If you want to build something on Bitcoin today, you basically have to build a bank. You have to worry about custody risks and all this like red tape. It's a mess. I think that's why nobody does it. Why are there no great Bitcoin payment apps so far? It's kind of crazy. It's because it's really hard to build non-custodial Bitcoin tech. if you gave people the permissionless tools to go and do this and it was like as easy to spin up bitcoin payments application as it is for cadets on ethereum i think you'd see a whole suite of developers so i think there's a ton of competition that's going to come into space and hopefully improve all kinds of bitcoin products i think you're spot on there

SPEAKER_00: 13:50

yeah and also like financial institutions like Cantor Fitzgerald has recently announced that they're going to deploy$2 billion through Anchorage and Copper. Obviously, I was in that kind of discussion before when I was at Copper and I heard about it and I thought, wow, this is going to be huge, right? I mean, even centralized financial institutions are coming into this place. How do you think that kind of competition is going to play out?

SPEAKER_01: 14:12

I think institutions like Cantor Fitzgerald getting into the Bitcoin yield space effectively is a We think of them as separate, but they're sort of one in the same. DeFi has never won competing directly with centralized finance. That's just how that works. And in fact, all of these projects are just building some sort of fintech app. That's almost the way we need to think about it at a baseline. DeFi always wins when there's something net new that they bring to the table, when there's nowhere else to earn yield, when there are brand new DeFi native tokens or primitives or something that people want to use on chain that they can't get elsewhere, or when DeFi becomes more liquid than some other ecosystem. And what I will say is I think centralized lending primitives are a great sort of starter source of yield because it's a good onboarding mechanism. Credit risk is something that traditional financial institutions are comfortable with. People are used to analyzing these risks, but there's a lot of opportunity on chain that I think people are missing out. This is part of the reason Bitcoin staking was such a great place for us to start. It's a crypto native risk, totally uncorrelated to any other asset class. And It is maybe one of the most attractive risk return profiles out there. There's very few other places where whether or not you lose money is entirely dependent upon yourself, whether you run technology to a T and you can still earn pretty high yield. Anywhere else that sort of risk would get, or rather that opportunity would get arbed out really quickly. In crypto, staking has become a massive onboarding mechanism, I think, for bringing new people into the space. And then there's all these other opportunities. On-chain bar lend protocols have become some of the core places for or that even market makers are using to access capital. And then, you know, a whole suite of higher yield opportunities if you're interested in taking on a little bit of risk. But Bitcoin DeFi is always going to be competing with Bitcoin CeFi. And I think that's a good thing. And at the end of the day, there are two sort of extremes in the spectrum. We probably end up somewhere in the middle. I mean, I don't

SPEAKER_00: 16:09

think Hunter Fitzgerald is going to lend to retail or it's going to pick and choose its own institutional investor that they want to lend to, right? So it's not going to be like... spread across every player in this industry. And I also think that even if smaller banks start coming into it, it's not really for retail. I think DeFi is where retail activity is going to happen. And then more and more innovation is going to happen. DeFi is always going to be relatively plain vanilla. And, you know, you guys are leading the way for this kind of innovation. And how do you see like the take up of all these BTC finance projects? So, you know, obviously, you hear a lot about like Babylon, you know, solve and, you know, balance, etc. This is kind of particular in this APAC region, but how do you see it from your side?

SPEAKER_01: 16:53

Well, of course, you'll hear me be an endless shill for Bitcoin DeFi because I believe in the long-term future of it. But I also think I'm pretty good at approaching what Bitcoin DeFi is succeeding at and isn't succeeding at from a practical perspective. So if I had my investor cap on and I was looking out at the space, I would tell you that there's a lot of trash, to be honest. There always sort of is early in a sector that's sort of becoming hot, right? Like the Bitcoin narrative has... Bitcoin DeFi narratives popped up. So people are popping in to try and catch a quick buck. No doubt that's going to happen. But back to that original point I was making, there just hasn't been a lot of extremely high quality developers going into the space just yet. However, that's changing and changing very quickly. So part of the reason that I was able to get super excited about Bitcoin DeFi, I think back in April 2024, was because I started to see the initial seeds of that. The tide was turning. Beforehand, it was predominantly, you know, tier two teams who were not having a lot of success. I started to see some of the best developers in the space that I knew starting to hack on new mechanisms. And, you know, look, the Babylon team, I think, is a great example of this. That is a tier one team that could be building anything. And I think it would be of excellence. The fact that they've chosen Bitcoin to focus on, I think, is great. A couple other teams like Saflo guys are tier one DeFi guys in my mind, and they're building Bitcoin DeFi directly on L1. And the Alpen folks, I think, have taken Bitcoin DeFi by storm. They're working on BPM Mechanism and some other cool stuff that I'm not sure what all I'm allowed to share, but they're cooking up some cool stuff for sure. And again, great team. So I think maybe for the first time, you can look at the Bitcoin DeFi space and you could say, hey, there are two, maybe three handfuls of like really amazing teams that are building here. And these guys are going to set the foundation for the future. Now, if you look outside those teams, I think things kind of break down a lot, but that's how it is. I'd say people are building very different layers of the stack within Bitcoin DeFi, which is kind of cool. There are people trying to build Bitcoin DeFi. directly on Bitcoin. Like on Bitcoin L1, there are people trying to build sort of Bitcoin wrappers. This is like CBBTC, WBTC. This is FBTC. There are people trying to build Bitcoin bridges. This is part of where Lombard falls into the mix. We bridge Bitcoin into new ecosystems. There are Bitcoin L2s. Most of these, I think, are in a really tough place right now because they absorb the same amount, if not more trust than an ETH L2, but they don't do anything particularly new relative to I think this is one of the most exciting things. You can see the light at the end of the tunnel for Bitcoin DeFi. It's like most of what I described up to the trustless mechanisms, I think of as people building projects to front run a future of fully trustless tech. Of course, I think there'll be a lot of mechanisms that end up not fully trustless. That seems to have been the winning product in most other crypto categories. But I do think the fact that there eventually will become fully trustless technology paints a pretty good foundation for us to be building towards. The last thing, this I think always gets left out of any BTC DeFi landscape is everybody is always sort of building infrastructure or existing DeFi primitives kind of focused on Bitcoin. There's not a lot of like net new stuff happening in the Bitcoin space, but I will say it's coming. Like Eigen layer was a, totally net new primitive that came out of the ETH ecosystem, or Celestia was a totally net new DA primitive coming out of, I guess, the Cosmos ecosystem, sort of. I believe the same thing will happen in the Bitcoin space, where you'll start to see brand new crypto infrastructure and DeFi primitives built directly on Bitcoin instead of other places. But I think a lot of that is still to be seen.

SPEAKER_00: 20:35

Yeah. And I think the Bitcoin community in general are generally conservative about their Bitcoin. And I know that Lombard Protocol is kind of built on top of Babylon, right? And no doubt they're a tier one team. But, you know, it begs the question, like, is Bitcoin staking safe? You know, it's not like native staking like ETH or any of the POS tokens. So even I kind of like need to really go down that rabbit hole to understand, like, what is this like Bitcoin restaking? So can you kind of touch upon that a little bit?

SPEAKER_01: 21:05

Yeah. Okay. I have a couple of thoughts here and then I'd be keen to pass it back to you because you have, you know, having led APAC at Copper, probably have one of the best perspectives of this upon anyone. But anyway, one thing that was clear when we first started this project, we went out to Asia and we're talking to some of the biggest Bitcoin related institutions and wells there. It's very clear that there is, people do think about their Bitcoin a little bit differently. It's actually kind of cool. It's like the principles of self-custody are ever more true for Bitcoin than they are for other assets. I don't trust you. I don't trust some reputable team. I don't even trust many custodians. Most of the time, like some of these whales only trust themselves, which is pretty cool. So I think this is where people get a little bit stuck though. They think like that is all of Bitcoin. That is just a section of Bitcoin. You know, Bitcoin's a$2 trillion asset. there are plenty of other pockets. So I sort of think of it as like, there's different sections of the Bitcoin community that you can attack at different levels of size. So part of the reason I think Lombard has done so well, Lombard was maybe the fastest growing yield bearing primitive ever to a billion dollars. Well, I think it was like 78 days or something like that. Faster than Athena, faster than Ether5, faster than Lido was because we went into the market of Bitcoin and we didn't focus on the wrong market. Everybody else was focusing on just on Asian Bitcoin whales and miners. And to onboard that capital, you either have to do some weird kind of bespoke, risky self-custody deal that's not going to be a good thing for your protocol or play some TVL games or something like that. Or you have to just exclusively rely on some centralized custodian. Lombard was the first to sort of realize that there was this whole other section of the market, which was like, people who are DeFi native and or DeFi adjacent, who also just happen to have a big bag of Bitcoin. Turns out every institution who's staking ETH also has a Bitcoin bag that when you bring up Bitcoin staking, they're like, okay, I understand what that means. I'm interested in like exploring and you can start having those conversations. So, and of course, I mean, Everything happens in stages, right? So step one was starting with the DeFi natives, and then we went to DeFi adjacent, and we went to crypto adjacent. And now we're having a ton of success, I think, going out to some of the biggest institutions in Wales in the East. But we wouldn't have been able to have the conversations the way we're having them now if we weren't approaching them now with a fully built out ecosystem, a battle tested protocol, and$2 billion in capital to back all of our efforts. So it's a much different place to be talking to here. Okay, there was one other point I was going to make. However, I think in order to get to the next step, I think you sort of have to go back to the roots of everything, which is Bitcoin holders are pretty security conscious, especially when you get to big institutions. They want to hold onto this Bitcoin. And so if you're going to scale up to, like Lombard's at$2 billion, if we want to get to$100 billion, we're going to have to leverage infrastructure like Anchorage and Copper. And in my mind, it's just simply the most battle-tested infrastructure in the space. DeFi mechanisms are great, but it's all net new technology. New technology is scary. If you really care about your Bitcoin, you probably shouldn't be testing it out on experimental technology. Yeah. hurts me from a principal's perspective a little bit to come to that realization, but that's sort of how it is. Babylon's staking was a very interesting way to attack it. I mean, they went fully non-custodial out the gate, which I think was like a bit of a risk, but it paid off. Look, they hit really big parts of the market really quickly. I think it was probably the fastest that I've ever seen institutions adopt non-custodial finance, and now they're off to the races. So I definitely think they took a little bit of the harder path, but have had a ton of success doing it now. I mean, they're up to, I can't remember what the latest numbers are,$6 or$10 billion in TVL. And if they open the floodgates, they'd probably get to$20 or$30 really quickly. They had one individual user stake$1 billion in one transaction. So safety is always a nuanced... term and discussion, people view this differently. But the one thing that becomes objective is time without a hack. Effectively, if you have$10 billion in TVL and you last for a year or two, that is a pretty damn good bounty to say that that open source code is good to go. So I think Babylon's on a really good path.

SPEAKER_00: 25:20

Yeah. And I also think that self-custodial or I would say in this case, non-custodial nature of it actually kind of speaks more to that Bitcoin community. If you're institutional, obviously you have to go down the custodial path, but I think that's a different story. I think I could tease the audience long enough with this conversation, but let's go down into what you're building, right? What is Lombard? What is LBTC?

SPEAKER_01: 25:41

Yeah, great question. So I think of Lombard as two things. Lombard is a security primitive and a liquidity primitive for Bitcoin. So the security primitive is the Lombard consortium. We effectively built a Bitcoin bridge to build anything expressive on top of Bitcoin, I should say. You necessarily have to add an additional layer of trust. So in this case, users give Lombard Bitcoin We stake it into the Babylon protocol and then mint a liquid representation. This is the liquidity primitive LBTC in any of a number of ecosystems. In order to perform relatively simple, but logic that's too complex for Bitcoin, we have to introduce another sort of trust layer. So to do that, we gathered up some of the top institutions in the space. We basically tried to think back to Bitcoin. Okay, from all of our conversations with the biggest Bitcoin holders in the world, what are the types of characters that they would trust with their Bitcoin? And to do that, we crafted this consortium of some of the biggest players in space. So this is like, OK, X is a validator in the consortium, Winter Mute, DCG, Galaxy, characters like that. So we really think of this as developing into an objective security primitive. that in the absence of fully on-chain, trustless Bitcoin expressivity primitives will bridge the gap. So those mechanisms aren't going to be ready for institutions for probably two years in a battle-tested form. So in the meantime, Lombard is offering a perfect bridge, both literally and figuratively, for people to get involved. So LBTC is our core product right now. It's a Bitcoin liquid staking primitive. We'll have other forms of Bitcoin primitives built on top of the infrastructure we've built. LBTC is integrated within all of your favorite DeFi protocols Aave, EtherFi, Fluid, Uniswap, Curve. We're on purpose exchanges like Derive, soon we'll be on Drift, over on Solana. Yeah, you can use LBTC on ETH Mainnet, BearChain, Solana, SWE, anywhere you want to go, we'll find a way to get there. And I guess the next step for Lombard, the only place that you haven't been able to use your DeFi native Bitcoin primitive in LBTC is on centralized exchanges. We just announced native minting directly through Binance Wallet, and you can bet that we're working on getting centralized exchange integrations real soon.

SPEAKER_00: 27:45

And what other use case have you seen? I'm sure you talked to your users. What is something that they're really looking forward to on using LBTC? Yeah, Bitcoin

SPEAKER_01: 27:53

users, first and foremost, want to earn yield. I think that's been the catalyst for onboarding a lot of this capital. Most Bitcoin has been sitting deep, deep in the coldest of cold wallets for a long, long time. So for us to get them excited enough to start taking on risk, there has to be a juicy enough opportunity for them. So Babylon was the inception of this. Babylon was the first opportunity that I think had the best, you know, the right trade-off of risk and reward to get people excited. And we're all about fully focused on identifying new opportunities. So certainly we've got a lot of help from the market. You know, Barachain, Boico was a massive incentive program to onboard Bitcoin into their new ecosystem. Bitcoin being the biggest asset now in the Barachain ecosystem, I believe, you know, that was a huge catalyst. Aave has been highly, highly in demand. A simple borrow-lend protocol, but extremely battle-tested, institutional and friendly, allows people to not only earn a little bit of yield on their Bitcoin, but borrow, stay Thanks for watching. Like you're probably not going to see as wide of adoption for Bitcoin DeFi in like some cutting edge Ponzi, but you will see Bitcoin DeFi adoption and in a really big way on all of the simple primitives. So DEX is like on-chain trading, I think is going to become a really big Bitcoin use case. Osmosis has kicked this off in a fantastic way. Bar Lens, this is like comp of a... Euler Morpho stablecoin. So MakerDAO is just about to add LBTC, which would be sweet. There's a couple of Bitcoin native stablecoins that I think are awesome. You can even build a basis trade stablecoin. You could back Athena's USDE, buy LBTC or Bitcoin Primitive used in a basis trade. Where I think we're headed is more trading on-chain and more payments. So I sort of look at centralized exchanges as probably where we should end up. We've done a lot of things to get there, but You know, users want to lend their Bitcoin to earn yield. They want to, you know, do cross-border payments. They want to send people their Bitcoin. They use it as payments mechanism. And then they want to trade with it. There was one more thing I was going to say that they do there, but I'm drawing a blank on it. It'll come back to me here in just a sec.

SPEAKER_00: 30:00

And with this Bitcoin yield, I mean, obviously, you know, we've seen the use of, you know, StakeD used heavily by the likes of Athena to do their basis trade. I could totally see, you know, using LBTC because while I was at Copper, you know, we had the ClueLoop solution. I looked at all the tokens that were used for margins Bitcoin was actually the number one token that was used for margin, surprisingly. So I think there's a huge path for you to get that institutional adoption once the market feels like they battle tested it. So it's also on centralized exchanges. So good luck on that. And just going back to the yield part, with the yield that they can get from Babylon, how can they receive this yield and what form is it going to be in?

SPEAKER_01: 30:39

Sure. So I'll give you the current state of the yield and then the future state of the yield. Current state of the yield is users deposit Bitcoin into the Lombard protocol, Lombard sticks it to Babylon. So Babylon is the source of the yield. Right now, users are just earning Babylon points. In the future, that Bitcoin will be delegated to finality providers who will be securing third-party chains who are leveraging Bitcoin security. And then those chains that are sort of buying security in the form of Bitcoin collateral that is validating that chain will then receive rewards in a form of the native token. You can think of this as extremely similar to EigenLayer. Or if you think of any chain that has a staking mechanism, replace that staking mechanism, which is predominantly using a native token and insert Bitcoin. That's effectively what it is. You're staking Bitcoin to perform consensus mechanisms. So ultimately, that'll produce some yield. Bitcoin is the lowest cost of capital asset on the market. There's so much of an idol, so much looking for a simple yield. So my guess is that in all security markets across Babylon, EigenLayer, Symbiotic, Karak, I think all of these Bitcoin will eventually become the biggest asset within this. When you're going to a security market, you're probably looking for the cheapest rate. That seems to be a given. I don't know why you would pay more for security to have like a lower quality asset, but who knows? Maybe people would choose that. So that's the current state. So this is all LBTC is currently staked in Babylon. However, I think the Bitcoin DeFi space is expanding much broader. Even the concept of staking, I think in DeFi is becoming more nuanced where staking used to mean something very specific referring to staking and proof of stake consensus. Now we start to see staking mean, you know, more DeFi stuff. What it really just means to me is like, putting capital at risk in some sort of rehypothecated context. So I think that while risks are not entirely the same, I think over time, you're going to start to see lending Bitcoin, staking Bitcoin, putting Bitcoin as collateral to secure certain mechanisms, an eigen layer to provide insurance. I mean, all of these I think are ultimately going to become muffled into just one category that we're either going to call staking or collateralizing or something like that, which I think means fundamentally for Lombard that Lombard our job as both LBTC and as just a Bitcoin bridge. Our goal is to bridge Bitcoin in whatever form it wants to come to any ecosystem so that it can earn yield. You know, just a Bitcoin wrapper, a Bitcoin liquid staking token. We partnered with EtherFi to build a restaking token. There's all kinds of other stuff, Bitcoin stablecoin that can be built on top of Lombard infrastructure. All of that is to say, with LBTC specifically, I think our goal is actually just to target the risk-free rate for Bitcoin, whatever that may be. Right now it's Babylon. There's no question about this. In the future, if it were to become something else, I think Bitcoin Lombard would sort of take advantage of that opportunity. And I think that there's going to be all kinds of adjacent opportunities that are going to come from this. None probably as big as the staking opportunity, because I think that's arguably the most scalable form of yield that will develop for Bitcoin. But I do think there will be other mechanisms that will come up. I mean, think of any Bitcoin yield vault you see in the ecosystem and imagine if you productize that in a really big way. That's, I think, where we're headed.

SPEAKER_00: 33:38

Yeah, I hope that staking doesn't get jumbled up with all the other rest, because in the last cycle, all the regulators thought that staking is just some and borrow and lend. And they couldn't distinguish it between native staking and all that. So even in Singapore, a lot of countries in APAC, the regulators say no staking. So I can't stake any of my crypto in any regulated Singapore exchange. So hopefully you can find a new terminology for all the other rest and then kind of separate that from native staking.

SPEAKER_01: 34:07

What it kind of meant by that, just to clarify, is that I think eventually on-chain borrow-lend or depositing your Bitcoin into a DEX or any other other DeFi mechanism will become robust enough technically and economically to feel on a similar risk profile than staking. Right now, I think staking is like small order of magnitude lower than the risk of other DeFi mechanisms. It's just, I mean, nobody really gets slashed these days. You have to really, really mess up in order to get slashed. So I think staking is a great risk off onboarding mechanism for anybody entering the space and trying to start earning some yield with their crypto. But over time, I think everything will compress from a yield perspective so that the difference between two mechanisms might not be that different. Definitely. Yeah, man, this

SPEAKER_00: 34:47

is my last question. I mean, what's next for Lombard? You kind of drip fed us a little bit about what you guys are thinking for the next version of Lombard, but really love to hear so that the audience can kind of walk away from this episode.

SPEAKER_01: 35:16

pockets of Bitcoin holders that we are looking to approach. I think Lombard's up to about 21,000 Bitcoin at the moment. We'd probably be at 40 or 60 or 80,000 Bitcoin if we had the infrastructure for what we're building out right now. This is going to be the fastest way to onboard new Bitcoin. It's going to leverage centralized custodians and the most battle-tested infrastructure in the ecosystem, wherever that may be, with the end goal still being trustless mechanisms. But I think we recognize in the short term, the way to onboard more Bitcoin is to infrastructure people are asking for. We're sort of listening to the market on this front. And of course, in parallel, we're continuing to work with some of the best teams in the space to explore what a fully trustless version of Lombard looks like. So that's pretty exciting. Sitting above all of this, our North Star continues to be permissionless innovation on Bitcoin. I want to see people build cool stuff on top of Bitcoin and Lombard's going to build the tools to help you do that. Awesome.

SPEAKER_00: 36:09

Well, thank you very much for your time. If anybody wants to follow you or Lombard in the future, where can they go?

SPEAKER_01: 36:15

Shoot me a DM on Twitter or Telegram. My handle is Jacob P. Phillips on both. Happy to chat with anybody who wants to talk Bitcoin, Bitcoin DeFi, DeFi in general, anybody looking to get into the space in any way. You should be knowing I'm pretty friendly.

SPEAKER_00: 36:27

Thank you very much. You've been a very engaging and exciting guest.

SPEAKER_01: 36:30

Well, thank you very much. Appreciate you having me on.

SPEAKER_00: 36:32

Thanks for listening. If you like what you hear, give BlockCast a like and subscribe on your favorite podcast channels. And for all your juicy Web3 news, keep updated on blockhead.co. Catch you all in the next episode.

UNKNOWN: 36:48

Bye. Bye.