SPEAKER_01: 0:00

Hey, hey, hey, welcome to this week's episode of Blockheads 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. Kathy Zhu, welcome to the show.

SPEAKER_00: 0:34

Thanks, Taka, for inviting me. Happy to be here. And hello to the audiences of Blogcast.

SPEAKER_01: 0:40

Yeah, Kathy, thank you. And you are the APAC lead for Mezzo Network. I'd love to discuss a lot about your product, but let's start by discussing your crypto journey, because I think everybody has a story behind it. I'd love to hear about yours.

SPEAKER_00: 0:55

Sure. So my name is Kathy. I am a crypto class member. 2018. This is where I joined the crypto industry. I followed the ICO hypes basically in late 2017, early 2018. And then officially joined the industry because back then I was a journalist. So covering stories and news about the crypto industry. That's how I really jumped into the crypto rabbit hole. And the more I learned and wrote about what's happening out there, I was completely wild. And every day there are a lot of exciting entrepreneurs entrepreneurial stories in the industry. And I'm actually really drawn to this. I think by nature, I'm also an adventurer type of person. And I love what's happening there. So you know, because I started as a journalist, and I got the chance to really connect with all the people in this industry. That's how I also built a network and also kept myself updated about what's going on. Mid-2018, I joined Binance. Back then, Binance is a company of less than 200 people. It was really a fresh startup, and I was there working on the global marketing for Binance, so basically really to... grow its market share and also bring awareness across different markets. It was a wild ride and it was a very exciting one. I was lucky enough to work directly with E, the co-founder of Binance and also CZ and also with the bigger team. So I was in this rocket ship, that crazy journey, seeing how Binance grew tremendously over the, I think 2018 to 2021 cycle and became the largest ever crypto exchange in the world. My first two years At Binance, I was working on global marketing, PR and comms, and then later on transitioned into the Binance P2P team and led growth and operations in that business. So Binance P2P was basically a fiat to crypto peer-to-peer marketplace, allowing users to buy and sell crypto with their local currencies. And it was actually very large in the emerging markets. And again, I felt very lucky to be part of that and really drive the adoption of crypto across the world. I left Binance in late 2021 because I was at the biggest centralized exchange and I was excited for a new journey, getting involved in the on-chain world. So I joined a venture fund and then started investing in early startups in crypto. So my focus back then was actually Bitcoin. So after five, six years in crypto, I finally, in 2023, jumped into the Bitcoin rabbit hole because of the ordinal type. So I still remember the time when I stayed up really late, like 2, 3 a.m. to inscribe ordinals and BRC20 assets on chain. And that's how I For the first time, I really got to install a Bitcoin wallet and then understanding, okay, different, you know, meta protocols on the Bitcoin network. And then also got to connect it to a lot of like Bitcoin OGs in the industry. Back at my previous venture fund, I invested in Uniset and Xverse. I was also pretty proud of these two portfolios because they are the critical player in the Bitcoin space and they're still doing very, very well to date. So along the way, I did a lot of research, basically technological innovation on top of the Bitcoin network, it could be a critical chance to really scale up the Bitcoin network and also making Bitcoin a productive asset. So in 2024, I joined Thesis. You know, that's how everything brought me to my current position as the APAC lead. And then basically, I'm right now leading business development for Thesis in the APAC market. So my My current job is really to grow the Mazzo ecosystem. So Mazzo is a port code of Thesis. It is a Bitcoin EVM-compatible sidechain powered by TPTC, which is one of the earliest and most decentralized wrapped Bitcoin assets built. by another thesis portfolio named Threshold Network. So yeah, that's basically my crypto journey.

SPEAKER_01: 5:18

Thank you for that. I don't get to speak to a lot of people who were in crypto nowadays that came from like the 2017, 18 batch. And it's really kind of reminds me of the time that I went to Shanghai or Shenzhen, you know, speaking to a lot of the Chinese communities back then. But you were in the media space. I mean, you must have heard like a lot of, you know, wild stories back in those days. I mean, do you have anything that you can share with us?

SPEAKER_00: 5:44

Well, I still remember back in 2018, right? People that hit the headline back then was Roger Ver. Jihan Wu, the miners, and also I think Craig Wright as well. So back then, you know, there was this hard fork of the Bitcoin network, right? So where Bitcoin split into Bitcoin Core and BCH and then later BSV as well. So the fights and drama are really on, you know, scaling up the block space for Bitcoin. I still remember back then, if we look at token price, right? One BCH is one fifth of the Bitcoin price. But nowadays, I think it's like probably 120 the East but Bitcoin is still Bitcoin Bitcoin is you know more than what it was now because it's part of the US strategic reserve and also I think state reserve of some other countries yeah it's super different and I still remember momentum back in 2018 is the EOS block producer like the block producer election right that was the end of a phenomenal ICO and the EOS network there was this massive global block producer election ahead of the EOS mainnet launch. And now I didn't actually follow much about the EOS network. The network is obviously there, but I guess the builders on top of it are gone.

SPEAKER_01: 7:08

I do remember that very well. I mean, I did invest in EOS back in the days, but now nobody has heard of them anymore. I guess they stopped building. I think they're rich by now, the founders, and they probably don't really need to do anything. But it's kind of those times when you actually were able to make such wealth by doing ICOs. It's a lot different in this industry now.

SPEAKER_00: 7:32

And also when you look back, at least for me, when I look back, and I was also at the EOS I It was a year-long ICO. I would be pretty surprised. How could I join the ICO? It looks kind of like a scam, right? It is a scam. you're still there. So it's very interesting as well. And also quite funny to see how sentiments really, you know, drive the whole market.

SPEAKER_01: 7:56

Yeah, I think now, even with traditional finance as well, I feel like it's all about narrative. And it's not really about fundamental value anymore. And that's kind of a little bit of a nihilistic view of the financial market these days. But that speaks to, you know, your NFT hypes, your meme coin hypes, you know, it's quite different from, you know, when we first started in the crypto industry, there was a lot more full philosophy behind it. You know, they were trying to build an alternative financial system. Nowadays, it's more about like price action narratives, very different.

SPEAKER_00: 8:27

And much more institutional adoption, I think.

SPEAKER_01: 8:29

Yes, and absolutely. But in your career, like it feels like you've discovered Bitcoin much later than most. I mean, usually you start off with Bitcoin, but it seems like you've, you know, moved on from Binance and then you kind of got into the Bitcoin rabbit hole. But tell us about the Bitcoin ecosystem, because I assume a lot of the early adopters of crypto, especially in China or in this region, are mainly Bitcoin holders. And you interacted with a lot of the whales that you mentioned as well. What are their thinking? Because usually I would think like Bitcoin holders, like long term holders like myself, those whales usually don't really want to touch Bitcoin, right? I mean, you don't want to lose Bitcoin. You want to keep it there. But you started to build on these layer twos where you can actually start bringing liquidity into Bitcoin. So tell us about the community of Bitcoin holders and how you interact with them?

SPEAKER_00: 9:23

So I think there are a few key stakeholders about the Bitcoin network, miners, and also those OG wells that mine Bitcoin from, I think, more than 10 years ago. And we have institutions as well. So asset management firms, and even, you know, listed companies, public companies in the US that put Bitcoin assets in this treasury. So MicroStrategy is definitely a real And then retail users like me that would accumulate Bitcoin over the years and, you know, put it as a store of value. And then also Bitcoin maxis are usually also Bitcoin core devs who actually develop the code on the Bitcoin network, but they just want Bitcoin to be Bitcoin. They don't want any changes. So they will be against, you know, any of those crazy updates about the Bitcoin network. Usually they're very reserved, honestly. On top of that, that a centralized exchange is also a key players because this is where most of the Bitcoins are stored. So these are the five group of players in the Bitcoin space. As you mentioned, right? A lot of like early Bitcoin wells or miners, they're still mining Bitcoins. They're actually probably the key players, the most important part of the Bitcoin network because they are the validators, right? They run the Bitcoin nodes, but then also they play an important part of, you know, verifying transactions and also maintaining the Bitcoin network. So they mine a lot of Bitcoins and then gradually, you know, you have developed a mining pool business where they can actually rent the mining rigs, right? And then integrate into the so-called mining pool and then contribute the hash rates. So then they can also like earn Bitcoins. I think those mining business group also developed this asset managed firm business. So basically running or managing assets. So mainly Bitcoin assets for all those high net worth Bitcoin individuals or wealth. So you can see, for example, I think Antalpha and then Steakfish and also Antalpha should be the example of this. So for those asset management firms, they're actually degen, so they're sophisticated yield farmers on chain as well. Bitcoin OGs or Bitcoin wells are not so degen. They're pretty chill, put their bitcoins in their cold wallets. But then for all those asset management firms, they are very sophisticated traders or they're very sophisticated yield farmers, so they can help manage bitcoins or their assets. For those financially retired OGs, that's what they live for. They would manage a fund, get returns, and then share part of the yields to their clients, to their LP. These days, when it comes to, as we said, Bitcoin L2 or Bitcoin staking protocols, there are some protocols, say, I think Solve would be a pretty good example of it. So Solve would actually, they are the on-chain player. They are Bitcoin staking protocols, but at the same time, they also sort of like bridge the native Bitcoin assets on-chain onto different networks. In some way, they also play a role of, you know, like mass assets manager. on-chain for the LPs. So this is basically how this whole industry or how this whole business develops from an upstream to downstream on-chain or even like on CeFi, where some hedge funds or trading teams would also manage the Bitcoin assets and trades and then make out of those transaction fees or investments and then share part of their earnings to the LP. It's kind of Also similar to traditional finance, as it develops, you know, some parts of it are on chain, some parts of it are what we call in C-Fi, or there's a combination of C-Defi outside of it. For Bitcoin miners or for the Bitcoin communities, right? If you look at Bitcoin holders, miners or institutions, their ticket size are way different or their Bitcoin holdings are way larger. So what they really care about is security. They don't want to risk losing their Bitcoins that has happened before. before, right? Mt. Gox, or even Celsius, BlockFi, and FTX as well. So through cycles of loss and scams, I think they've become way more cautious. They care about security, and they want their Bitcoins to be securely stored in their wallets. They want it to securely stay in the multisig, controlled by them or their fund manager. Their risk prevalence is actually really low. So when it comes to returns and investment returns. They're not really aggressive DeFi yield farmers. Their expectation for yields or their ROI expectation is actually really low. They just wanted to hatch against the volatility of the market and then get very safe, stable returns out of their own assets. On the other side, for retails who hold probably less than five Bitcoins, they'll be more aggressive. or their risk appetite is definitely higher than the institutional players. So if you look at all the nodes of BRC20, so the active players are usually those retail users, right? Who are either driven by this idea of, you know, inscribing content on top of the Bitcoin network on stats and speculating. They are more active. Basically, I think all the nodes or BRC20 or SRC20, all these active players on those new assets, they are the retailers. It's just like trading memes. In my opinion, and trading Orinodes, trading Runes or BRC20. You know, all these assets are denominated in Bitcoin. So for those high risk tolerant people, retail users, it's actually a good chance for them to actually get more Bitcoins as through speculation. You know, this is my view about the whole current Bitcoin ecosystem.

SPEAKER_01: 15:08

Yeah. And Mezzo Network is trying to use that Bitcoin as collateral and then mint them MUSD, which is our stable coins, right? So are you addressing that retail market with the high risk tolerance that they want to utilize their Bitcoin for trading?

SPEAKER_00: 15:22

So Mezzo is designed for all the Bitcoin holders, whether they're retail users or institutions. Before I dive deeper into MUSD, I would like to give you guys a brief intro about Mezzo. So Mezzo is an EVM-compatible network making Bitcoin more productive with BitcoinFi. So we have a mission of building a Bitcoin economic layer to introduce more use cases for Bitcoin and then helping Bitcoin holders to utilize their capital also eventually you know get yields out of it so that's how you know they make their bitcoin more productive to be more specific so mezzo enables productive bitcoin usage through borrowing spending and earning and that's why we came up with this initiative of building a Bitcoin-backed stablecoin named MUSD. So for MUSD, users can collateralize their existing Bitcoin assets and then borrow out MUSD, which is a stablecoin one-to-one pack to US dollars at an extremely low interest rate. From the beginning, the interest rate will be set below 3%, which is significantly lower than other stable coins borrow out interest rates in the market. The reason is that we would like to resolve the pain points of getting working capital for Bitcoin holders. So nobody wants to lose their Bitcoins, even for whether it's institutions and retails, right? Most people actually would just hold their Bitcoin. They don't want to lose it. But in the current market, it's actually quite expensive to get working capital out of Bitcoin. And MUSD addressed these issues. So basically, for say, for normal users, they can deposit their Bitcoin assets at the Metapod and then mint out the MUSD at a very low interest rate and then further utilize their MUSD for either their daily usage by swapping back to US dollars or they can stay on chain and And we're partnering up with some of the smart vault managers and also different DeFi protocols to bringing more on-chain adoptions for MUSD holders to lend or to farm yields on top of using MUSD across different chains. In that sense, Mezzo is a very good solution for all the Bitcoin holders, no matter it's retails or institutions, to really improve their capital efficiency in a risk-minimal way. So the loan-to-value ratio for MUSD, there'll be a range. So around 70% to 60% to 90%, actually. So it's all over-collateralized. And users can also redeem their money you know, MUSD and pay back the interest to redeem the underlying Bitcoins. So it's two way and the UI UX is actually very intuitive and MUSC will be launched in around a month, you know, upon the mainnet launch of Mezzo. So we're actually really excited about that.

SPEAKER_01: 18:48

Yeah, totally makes sense. I mean, the BitcoinFi landscape has been growing a lot. And I think there is actual demand for people to utilize their Bitcoin. I'm an infrastructure guy, so I have to ask this question. I mean, obviously, Bitcoin doesn't like swing 30% generally these days, but you mentioned about 90%. Let's say there was a day that, you know, it dipped down 15%. I mean, how would the users... be able to top up their Bitcoins in time? So is there like a timeframe that they get margin called and they have to top up their collateral? How does that work?

SPEAKER_00: 19:18

MUSC actually work in two modes. So one is what we call a normal mode where the system collateral stays above 150% and the loans below 110% collateral face liquidation. So under the normal mode, the users can keep the remaining assets after that payment. So yes, if Bitcoin drops, say 15 percent right a day there is chance that you know the underlying bitcoin will get liquidated for sure because the system design for normal users the way is that still trying to set their over collateralization rate higher just to be safe and then there was also a recovery mode out there so the recovery mode triggers when the system collateral drops below 150 percent so For example, a 10,000 MUSD loan, right? That's backed by 149,000 MUSD worth of Bitcoin collateral. So at liquidation, that 1,100 worth of Bitcoin will be used to repay that. But so the users will retain the remaining 39,000. worth of Bitcoin. So basically, if you know, liquidation happen, it will also be, you know, liquidated partially not 100% for your original collateral. I think that's a case where people really want to avoid. So Just to be safe, still try to set a collateralization rate higher so then you won't get liquidated.

SPEAKER_01: 20:56

Absolutely. Makes sense. And then if I pledge my collateral, my Bitcoin in that sense, where does the Bitcoin go to? So is this going to be like a non-custodial way or it's going to be a custodial way of pledging collateral?

SPEAKER_00: 21:09

This... It's all written in a smart contract. It's completely transparent. You know, even if a liquidation happened, that would be like automatically executed via the smart contract. And then the underlying Bitcoin assets will go to, say, a smart contract address correspondingly.

SPEAKER_01: 21:27

Got it. And what's in store for Mezzo now? So if I have this MUSD, where can I take it? I'm sure you're still building out the roadmap and would love to hear what you have in mind.

SPEAKER_00: 21:37

Actually, stablecoin is a very competitive landscape. And I think for crypto users, especially, you know, crypto native users, the stablecoin actually serves for two use cases. Number one, you know, it serves for the trading purpose. That's why, you know, the key things about growing the MUSC is really about bringing the adoption by introducing more use cases. When it comes to go to market, our first target, step it's really to create on one hand that creates all these different smart vaults right for users to easily deploy their MUSD onto those vaults and then let those vaults further you know allocate the funds onto different liquidity pools or DeFi protocols to cure yields right out of the MUSD usage across different chains so that's one case it's more like earning right it's an on-chain earning product the second use cases will be through lending. So as I mentioned previously, the MUSD bro interest rates will be lower than 3%. So that actually generates, you know, arbitrage opportunities for some players, especially, you know, from other USDT or USDC lenders, right, in the markets. So then they can deploy this like lending loops to collateralize or lend out MUSD and then get a USDT or USDC and then further deploy their USDT, USDC to different difference. DeFi protocols to optimize the yields. This is through LaVirge as well. And it's actually pretty common to grow a volume, right, for any asset these days on chain. And then the third approach will be getting MUSD integrated into centralized exchange. So then, you know, market makers can not just like improve or work on the liquidity, but also generate yields from CeFi through all those trading activities. That's one direction that we're working very hard on. And when it comes to payment, we are also aiming to get fiat on off ramp for MUSD. So then I think normal users who holds Bitcoin, that actually gives them a chance to basically get MUSD cash out into, you know, staples like cash for their daily usage, say, you know, buying a properties, getting a mortgage, et cetera. In the long term, this is what we really want. So bringing like even like real life adoption, right, for MUSD. and then giving all these Bitcoin holders, especially long-term Bitcoin holders, basically an asset to change their life.

SPEAKER_01: 24:12

It seems like there's a big roadmap up ahead and a lot of work for you to do in this space. I mean, as you mentioned, there's a lot of stablecoin projects out there. There's a lot of lending that are happening in the stables as well. When I was at Copper, there was a big financial institution that came to us and said they wanted to lend fiat against Bitcoin collateral. And this is from a traditional financial institution. There's a big demand for that. I mean, obviously, a lot of the stablecoin projects are doing that as well. So, you know, hope all goes well. And where can people continue to learn about your project and what you're doing?

SPEAKER_00: 24:43

Follow us on Twitter at Mezzo Network. This is the official Twitter account. And then you can also join our Discord server where you can find on our Twitter page, join the Mezzo community. We have weekly community calls. And then at the Mezzo Discord server, there are plenty of interesting things that you can play around already for the Mezzo testnet. For example, you can actually get our testnet token in sets, even launch the meme coins on the testnet and then trade meme coins. And even you can actually swap your sets into like real life merch on the Mazzo website as well.

SPEAKER_01: 25:21

Awesome. Thank you very much for your time, Cathy Zhu. And stay tuned for our next episode.