Something better than USDC for your Ethereum?

**Friederike Ernst** (0:00)
Welcome to Epicenter, the show which talks about the technologies, projects and people driving decentralization and the blockchain revolution. I'm Friederike Ernst, and today I'm speaking with Michael Svoboda, who is the CEO of Liquity AG.

**Michael Svoboda** (0:12)
Banking is under pressure. Sablecoin is a much better product than having your dollars in your bank, because there you have the counterparty risk, and this bank, you know, in Germany, might lend the money to Banco. We had kind of this huge scandal, and you're not aware of it. We see these forces now playing out with Genius AG, with Clarity AG. Honestly, it's not about the users. Regulation is actually used to protect the banks or create the mold. Liquity just follows 100% of the borrower's fees to the stablecoin holders to facilitate that peer-to-peer credit market. It's very hard, it's a very competitive market, but that's why we tried with Liquity V2 and Boll to have a very clear and distinct value proposition, rather serve a niche, but be very clear.

**Friederike Ernst** (1:04)
Liquity, the protocol, is a governance-free Ethereum protocol that lets users borrow a decentralized dollar against ETH at self-set interest rates. Before I talk with Michael, let me tell you about our sponsors this week.

**SPEAKER_3** (1:21)
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**Friederike Ernst** (2:25)
Hi Michael, it's good to have you on the show.

**Michael Svoboda** (2:27)
Hi Friederike, thank you for having me.

**Friederike Ernst** (2:30)
Cool, before we dive in, who are you and what originally got you interested in all of this?

**Michael Svoboda** (2:39)
Yeah, so I'm Michael, I live in Switzerland and I was working in a normal corporate data communications in the digital space. And we were talking about disruption and I was talking to B2B clients about disruption and then I heard about blockchain and I realized this is really the only disruptive thing that is happening right now, like the internet, which took out intermediaries for comms media. This will take out intermediaries in finance. And that fascinated me and then I quit my job because it's not going to happen in this big corporate and I jumped into the crypto world. I think that was 2019 around the ICO craze.

**Friederike Ernst** (3:19)
Liquity itself was founded, I believe, a year or two earlier, right? By Robert, who is still with Liquity, but in a more research-y background role. Can you talk about the original rationale for the founding of Liquity? So what did Robert feel was fundamentally broken or missing in how on-chain credit and Sablecoins were being built at the time?

**Michael Svoboda** (3:43)
First, I think he was really fascinated by blockchain. So he was working before for Dfinity and consensus algorithms. And then I think the maker kind of sparked his interest. Being able to issue your own stablecoin, be your own national bank kind of, I think was a very cool concept. He saw that and he just immediately came up with ideas and said, hey, we have blockchain technologies. Why do we need governance? Can't we automate that? Maybe we can also make it interest free. Do we need to have interest? You can break with all these paradigms. And he also thought he can create a higher loan to value ratio. So with these propositions, he set out to create a more efficient, more autonomous borrowing protocol that was very similar, like a single collateral die. And that's what he did, what he set out. And it was launched in 2021 It has been running since then and had more, managed more than 5 billion in TVL. It has its own stablecoin, LUSD.

**Friederike Ernst** (4:45)
But what kind of talking about kind of like this early maker era, there were a couple of events that must have shaped kind of how Robert and then also you kind of thought about protocol design, right? Kind of like there was the infamous Black Thursday that kind of led to the rise of DPEG tools. So Meher still has the...