We're back with the next installment of the RUNEBase podcast - this week featuring Lukas Goetz.
Lukas is the CEO & Co-Founder of block42, the venture-driven blockchain development company behind Brokkr Finance. Since 2017, Block42 has been developing projects across some of the largest blockchain networks, and now, they're disrupting DeFi investing with Brokkr.
In this episode we covered:
- Lukas's backstory, how he got involved in crypto, and came to start Brokkr.
- How Brokkr Finance is bringing THORFi investing to the masses.
- What are THORSynths, how they work, and how they enable a better user experience for THORChain users.
- How interest-bearing synths will enable yields with single-asset exposure.
- What's to come on Brokkr Finance's roadmap.
- An exclusive first-look into the upcoming $BRO token.
Don't miss it!
PS - The RUNEBase podcast is now available on Spotify, Apple Podcasts, Stitcher, and more! Search for it wherever you listen to podcasts :)
Learn more about Brokkr Finance: https://brokkr.finance/
0xNguyen: It would be great if you could tell us about your background. Where'd you come from and how'd you get into crypto?
Lukas Goetz: My journey started in 2014 when I did my first investment in Bitcoin when the price of BTC went from $11,000 down to $400 and I thought that was the right moment to start investing. Two weeks after that, the price then dropped to $200. When the internet revolution became big, I was too young to realize what was going on. Once I realized the chance I missed, I said to myself this would never happen again. The next time that the opportunity came it was Bitcoin, it was Blockchain, I saw it was the next big thing and I said "let's do this."
0xNguyen: You started investing in Bitcoin, then did you start building in crypto soon after that? At what point did you make the transition from trader/investor to builder, developer, entrepreneur?
Lukas Goetz: More or less two years later when I started deep diving into crypto/blockchain, around 2016-17. I spend a lot of time understanding the space and what was the future. End of 2017 I decided to get with 3 of my partners and we quit our jobs and said "let's do this" and start a company. This was the start of our blockchain company, Block42. We were able to raise a few couple million euros and investing in the crypto space.
0xNguyen: Can you talk about how you first found THORChain and what was your first impressions of it, did it excite you, did you see it early on a something that had potential?
Lukas Goetz: During that time, there were lots of projects out there with promises and it wasn't easy to distinguish what could deliver and what was just hype. Down the road, we got more confident with THOR because they delivered and our confidence level increased over time. That was the starting point. Pretty early we invested in the space but built up our own Dev team. Now we have two teams - one that develops blockchain solutions and the other that invests in the space. We started out doing work for different networks like Phantom, Chainlink, and also started pretty early with THORChain.
0xNguyen: Can you tell us a bit about the team you are working with at Brokkr and Block42, who are the people behind the team?
Lukas Goetz: We are about 20 people right now, started a little more than 3 years ago. It wasn't always easy, lots of up and down with market up and down, I'm glad we have been able to build up the team and we are still here. More than 10 people are already working on protocol. Most of the team have soft dev background in the blockchain. We started in Austria with a team of 4 and now our team is spread around the world, in various countries. You just need a stable internet connection and motivated people to do some great things, which is really cool.
0xNguyen: So, Brokkr Finance is known for rolling out synthetic assents on test net, let's jump into that. Let's get a quick overview. First, what are THORChain synthetics and Brokkr's roles in a high-level overview?
Lukas Goetz: Synthetic assets are assets that are sold and living on the THORChain network. Why does anyone want to use them? It enables users to have much cheaper and faster transactions and swaps between assets. So right now if you want to swap between native Bitcoin to native ETH, you would need to go from the Bitcoin chain to THORChain to swap BTC to RUNE, then RUNE to ETH, and then the ETH to the destination wallet. This is a great innovation that THORChain provides us but you still need to pay twice the transaction fees - once on the BTC network and once on the ETH network, plus you need to pay the fees to do the swaps. What synthetics enable is that we can build an asset that solely lives on the THORChain network but still being fully backed by 50% RUNE 50% by the desired asset In the end, for the user, they still have the same menu in their hands, but can interact with an asset at a much faster and cheaper rate. If you swap between a synthetic Bitcoin and a synthetic ETH, it only happens on the Bitcoin network and you don't need to wait for transaction confirmation on the BTC and ETH network and you don't have to pay the transaction fees on those networks. Once this is live, we will be able to create usage in terms of swaps. This is just a starting point, but we will talk about it later.
0xNguyen: These synthetic assets are native to the THORChain ecosystem, they have minimized the number of transaction fees you have to pay, the amount of slippage that happens, the amount of time it takes to execute a transaction. That's the foundation, synthetics are a primitive that is enabled at the THORChain protocol layer, so what does Brokkr bring that is unique to that equation?
Lukas Goetz: I need to start from the beginning. We did development for various networks, one of them was THORChain and we were deeply connected with that network. So the THORChain team said they were looking for a team to build the first interface for THORChain synthetics, so we reached out and talked about the concept. At first, we thought it was just a job and then we would be done. But while we were working on the interface, we saw the huge opportunity for synthetics and thought about what else we could do with this. So we decided to use synthetics as a starting point but the long-term goal is to build an investment platform from optimized DeFi investing. That is the overall goal we are following. There are so many great protocols out there, we aren't lacking any innovation on the protocol in the space. But on the other hand, we see a gap between the DeFi space and the mass market. THORChain is still so little in quantity and this needs to be changed. It will only be really successful if we bring the masses to the DeFi space. Right now, this is much too hard for most people. It's so hard to understand at the start and people need a lot of knowledge to make use of these protocols. Second, it's time-consuming, if you want to stay up to date, you need to be reading about the space 24/7. And there are so many different chains out there so if you don't use it, you won't be able to keep up. So this is what Brokkr is trying to solve. We want to close the gap between the DeFi space and the mass market.
0xNguyen: Brokkr stands as a layer and you are taking all the different investment strategies in the THORChain ecosystem and more broadly, and you're abstracting them away and then more users that don't keep up to date with the market as a whole, what would a good analogy be for what Brokkr does and what this looks like in comparison to something the audience might be familiar with already?
Lukas Goetz: What we do completely differently is we don't put the network or the tactical features in the first place like many other applications do right now. For us, it's all about the user. The user is the starting point, we want to position Brokkr as the user's brother in DeFi. That's the picture we want to deliver to the user. Your good friend or your brother supports you and takes you by the hand and guiding you through this overwhelming DeFi space to take advantage that DeFi offers people. We have three main pillars we use to accomplish this:
- Automation: We want to automate tasks that the user doesn't want to take care of or don't know how to take care of. Optimize and automate actions for the user
- Recommending: As your brother, we want to give you advice on what you can do and to notify you when something important happens. Brokkr will notify you and recommend your options so you don't have to everything on your own.
- Education: Even when Brokkr is automating tasks for the users, we still want to educate users about what is happening in the DeFi space. You need to understand both finance and blockchain. We want to educate them to a certain level until they understand what is going on to help build up trust.
0xNguyen: So the education component, what will that look like? Guides, videos, and education portal or helpful nudges and widgets within the interface? How will you deliver that?
Lukas Goetz: We will start within the application to give advice and telling them what is going on, as well as educational content. There are already so many great resources and educational pieces out there. For Brokkr, we can take to some of these resources and lead the user to the right destination.
0xNguyen: Before the call, you sent me over a sneak peek of a white paper, and we have a few great things to look forward to. Could you give us an idea of what kind of products and features you have on the roadmap? Give us some context on what's to come next.
Lukas Goetz: User-facing products will have four major things coming in the next year to year and a half. Users can expect features like:
- The ability to make swaps or trades
- Access savings - low-risk stable yield
- Borrowing and lending
- Investing - we call it investing and it's all about higher risk but higher yield
That will be what the user sees. In the background, we will fully focus in the first on the thor services so starting with synthetic assets. The roadmap there will be THORFi lending and borrowing, which will be integrated by Brokkr.On the roadmap, there are composites, which is a gamechanger because you can have price exposure to different assets.
0xNguyen: Can we define a composite asset for folks who might not know? A composite asset could be, for example, could be a token that represents several other tokens, like, for example, the DeFi pulse index?
Lukas Goetz: That is a good picture, that works. So you will have different combos of these assets, high and low risk and high low yield, and that is what we will build out for the investing section in the future. But again, the user won't have to know how this system works in the background to use it. We will abstract the way and provide a simple user face for the user. Interest-bearing savings where the holder of the savings participates in the yield generation of the liquidity pools. So you as a BTC holder open up Brokkr finance and put your BTC in your interest-bearing savings, which means you are earning a stable yield on the asset you are putting in there. In a few weeks, you redeem your asset again and get back the asset plus the interest you earned at that time, which is great.
0xNguyen: Are there going to be two different types of synthetic assets? So for example, will all synthetic BTC be interest bearing, so when you unravel them, you will get the principle Bitcoin plus interest? Or will there be two different kinds of BTC, interest-bearing, and non-interest-bearing?
Lukas Goetz: The asset itself is the same, but the user can lock in the synth, and then it will get put into a volt and participate in the lead generation. There is a fixed rate the interest-bearing will get on your synth, and this is set by the protocol, so you will know that when you put your BTC in there, you will get for sure, for example, a 10% APR.
0xNguyen: Does that yield come from exposure to the liquidity pool and collecting exchange fees and block rewards as you would almost if you were an LP or is that yield coming from taking that asset and there is a lending asset. Where does the yield from interest-bearing synths come from?
Lukas Goetz: So basically, it's based on the system income, which means all the fees that are generated by THORChain. The synths holder can redeem their yield from the protocol reserve, but then you kind of have a deficit because the yield was paid back, and this deficit is paid back by the deficit income over time. So every time a new block is generated, the system income is calculated and a certain amount of the system income is then dedicated to filling up this deficit in the protocol reserve.
0xNguyen: So it sounds like this enables single asset exposure to yield inside of THORChain, right?
Lukas Goetz: Yes, exactly. On the tech level, if you start with BTC, the system is still going to convert your BTC to RUNE, put the RUNE into the liquidity pool, just the RUNE, and you will have your synth BTC. So once you want to redeem your synth BTC, it will go back to RUNE that will get swapped to BTC, so you get BTC + interest.
0xNguyen: So if I put in Bitcoin, you're saying that 100% of that is converted to RUNE and so it's not 50/50, it's not like half of it is converted?
Lukas Goetz: No, so it's converted 100% to RUNE, then 100% rune is put into the pool, but then it's backed by 50% RUNE and 50% asset.
0xNguyen: What is a timeline for synthetic assets to go live and then interest-bearing synthetics to go live after?
Lukas Goetz: In the next two to three weeks, we will see the transition to the main net for synthetics. After that, I guess a month or one and half months we will see interest-bearing synths. So I think the basic concepts are there, it just needs to go through the testing to see if the system really works as expected. Also in combination with the caps now on the liquidity pools. Of course, if you cant put in more RUNE because you're capped, this also means you can't mint another synth, these are tightly connected. Once caps are released and interest-bearing synths are on the main net, it will start to take off.
0xNguyen: Can you give us an idea of what sort of yield or APY we can expect for something like an interest-bearing BTC? Do we think it will be single-digit, double-digit?
Lukas Goetz: Pretty hard, it's based on what the system altogether can generate. I think right now it's about 30% overall, and from that yield, 10% for a stable yield rate. This will be set by the protocol. In the long run, it will be changed based on the market conditions but this will be the sort of, intro yield.
0xNguyen: So THORChain will be the start of the ecosystem that Brokkr can integrate with, what other ecosystems are you planning on integrating with in the future?
Lukas Goetz: The focus right now is fully on THOR services. If we get some traction in the future, on the roadmap we have plans to integrate with Mirror, and Anchor would be nice enhancements to Brokkr. The user wouldn't really see that we are adding more financial instruments and protocol in the background it's just that the user's yield is getting better and their options are getting better with Brokkr. Even if we add more protocols, THORChain will stay our core element.
0xNguyen: Do we have a mobile interface/app and fiat onramp services to look forward to?
Lukas Goetz: Yes, we are going to have an app that we are testing, we see this being available on mobile for sure. The same for fiat onramp. Once we have certain features in place, we will have fiat onramp services available. An easy onramp and easy interface will be the killer application for Brokkr
0xNguyen: We have a token to look forward to, correct? Can you tell us a bit about what's to come with the $BRO Token?
Lukas Goetz: We are planning to launch the $BRO Token next year once some of our features are live and we see some traction. The token itself will allow users to save some transaction fees. They can also allow token holders to participate in governance. All income Brokkr generates is channeled to a DAO, which most probably will live on the eth system, and this DAO will manage all of the funds. The governance token holders will essentially be deciding what's going to happen with the funds. We are going to do our public starter with THORStarter.
0xNguyen: What excites you about THORChain, to tie it all together, what excites you about its future?
Lukas Goetz: So, first and foremost, I'm not excited about the features, I'm excited about the team and the ecosystem. These guys started off with big promises a few years ago and now they're delivering, they have great execution and live up to their promises. Secondly, what I really like is the design of the system in community-defined roles, community-defined stakeholders and they are very transparent.