GRTiQ Podcast: 207 Aya Kantorovich

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Aya Kantorovich (00:00:18):

I actually want to give The Graph a big shout out because our team heavily uses The Graph products for a number of different things.

Nick (00:00:25):

Welcome to the GRTiQ Podcast. Today, I’m speaking with Aya Kantorovich, Co-founder and Co-CEO of August. Longtime listeners will recognize Aya’s name, this is her second appearance on the GRTiQ Podcast and I’m thrilled to welcome her back. Since her first appearance during Episode 66 in May 2022, Aya has launched two innovative platforms, August an institutional-grade DeFi platform, and Upshift, its retail counterpart. Both focused on providing transparent, real-yield opportunities in decentralized finance. Drawing from her extensive experience in institutional crypto markets, Aya has shaped August’s vision by bridging traditional finance with DeFi through robust infrastructure and risk management. The platform now supports over 300 million in TVL, and integrates with over a dozen blockchains, over 70 protocols, making institutional-grade DeFi more accessible than ever before.

(00:01:51):

During our conversation, Aya shares great insight on the ETF adoption, institutional DeFi infrastructure, and the evolution of crypto markets. She also discusses the critical role of transparency in DeFi, the challenges of cross-chain composability, and her vision for democratizing access to real yields. And for listeners enthusiastic about The Graph, Aya also shares her insights into being a long-time user of The Graph and talks about the importance of The Graph for the future of DeFi and institutional adoption.

(00:02:22):

I started the conversation with Aya by asking about her perspective on the Bitcoin ETF inflows, and the impact on institutional adoption.

Aya Kantorovich (00:02:33):

First off, thank you for having me on again. It’s such a pleasure to be on and love The Graph team and product, so excited to give a major shout out as well there.

(00:02:42):

Going back to your question, I would take a step back. Without a doubt, the Bitcoin ETF was the best performing ETF in the history of ETF launches, and I think if you dive into the numbers and the details, you’ll see that very much reflected. If we look at just the previous last week, CoinShares publishes a very great report on a weekly basis going through all of the volumes and inflows and outflows that go in. And so if you look at the last week, for example, we had roughly 2.2 billion come in, a lot of that was centered around the Trump inauguration euphoria. And so you saw the largest inflows so far this year come in around that date. And if you break down where that comes from, primarily a lot of that 2.2 billion is coming from the United States, but we’re also seeing some of that come from other geographies like Switzerland, Canada. And so it’s good to see that diversification.

(00:03:36):

What I’d like to talk about though is more broadly, CoinShares also talks about the total assets under management for these publicly traded products, and you’ve seen that hit roughly $171 billion. I just want to anchor on that, because that is a massive number, really massive number, and that’s hit a new all time high. And then trading volumes for these ETPs as well, these electronically traded products, has also remained at a large high, so that’s roughly around 21 billion, and that represents 34% of total Bitcoin trading volume.

(00:04:11):

So, if you think about the institutional adoption, we talked about this when we first connected over two years ago. When is that institutional adoption going to happen? When is this going to become more mainstream? But in my opinion, if you have 34% of all Bitcoin trading volume happening in these publicly traded products, to me that’s a sign that we’re definitely getting there and we’re one step closer. So, I’m really excited to see that progress. I think it’s only going to continue on the tailwinds of this presidential election and some of the narratives that Donald Trump has put out there, and also who’s in the cabinet that he’s bringing in as well.

Nick (00:04:50):

Obviously when we talk about ETF inflows, we could talk about Bitcoin, we could talk about Ethereum, and then there’s all these rumors and sort of, what’s the next big thing? But just staying focused a little bit on Bitcoin here, what do you make of this argument? And I would almost say sort of this criticism that what we’re seeing is like paper Bitcoin through these ETF inflows, meaning that we’re sort of reintroducing centralized financial structure into crypto and that we’re actually taking a step back maybe if you’re sort of a decentralization maxi and a DeFi maxi, I mean, you’ve had exposure to both sides of this argument. Where do you come in on something like this?

Aya Kantorovich (00:05:27):

First defining paper Bitcoin typically implies derivative contracts, so you’re not actually holding the underlying or maybe you’re posting a portion of margin in order to purchase a position, and so you’re not fully holding 100% of the Bitcoin that you’re purchasing.

(00:05:43):

And so I would actually disagree with that for a number of reasons. The first being is, if you look at traditional markets, the way that it functions is off of capital efficiency. And so for the institutions that are looking to get some sort of exposure, they’re looking to leverage the positions they already have, take a loan, and then go and buy Bitcoin, and all of that creates some level of capital efficiency for their overall portfolio. And so you have to think about it from that sense. If we think about, how do we create more access and adoption for other folks outside of the buy and hold DeFi native ecosystem players, I would say that’s definitely the maturation that we’re looking to go into.

(00:06:23):

Now, outside of capital efficiency, the other point that’s really important is for platforms like the CME, they still have to have a specific amount of Bitcoin reserve purchased and held in cold storage in order to support all of this trading. So the underlying Bitcoin is being purchased. And so when you see, for example, some of the numbers, and I mean, this has been a huge week for the CME as an example, with yesterday Tuesday hitting, I think it was the strongest bullish sentiment that we’ve seen since November 1st with Donald Trump’s election. When we see that happening, you typically see also a correlation with underlying Bitcoin price, and that’s because the underlying asset needs to be purchased as well. You see the same thing if you think about not just for example, the CME and some of these traditional platforms, but also Binance, on the perp market. And for example, in order to be Coinbase for the spot market, all of these platforms and exchanges, those centralized do have to have a reserve amount of spot balances in order to support that level of trading based off of regulation.

(00:07:28):

Now, I will say, obviously there’s really four main reasons that you want to continue to see this kind of paper Bitcoin happening. And the first is risk mitigation. So, even if you look at outside of, I’ve been kind of focusing on more traditional folks, but if you look at even operators, Dow Treasuries, you think about ways that they might hedge, for example, an upcoming unlock. So, maybe they’re worried about investors potentially selling a token at unlock and they’re holding the underlying asset and they want to hedge that risk. Being able to hedge that risk without posting 100% of the underlying is both very capital efficient for them, it also helps them risk mitigate their underlying treasuries. And so it really opens up a lot of options for some of these, I would call it less institutional, larger players in the space.

(00:08:19):

And then it’s continued price discovery, again, for other users who for example, maybe can’t access underlying spot positions, or at least can’t access it at the scale they’re looking to access it today.

Nick (00:08:31):

So if we continue this sort of exploration of some criticisms of things that we’re seeing associated with larger institutional type adoption, there’s this other criticism, and again, I’m not representing this as my own position. But I hear this on occasion where again, with greater institutional adoption, we’re going to see the introduction of more things like KYC and other policies that again, to permission-less decentralization maxis, looks like another step backwards. And so you’re building in the DeFi space, you understand that very well. How would you explain to somebody again, that sort of holds that firm position on total decentralization and the fact that greater institutional adoption might mean things like KYC and other types of policies?

Aya Kantorovich (00:09:20):

I hear you. I think there is a healthy middle ground whereby if you want complete adoption, in order to have mainstream adoption, you need liquidity, right? And in order for liquidity to come on chain, if a family office comes in and they want to buy $10 million worth of Bitcoin with minimal slippage, you need to have that liquidity on hand, on chain, readily available. And so as these sizes grow, as you get some of these, and it doesn’t necessarily have to be institutional, but as you get more affluent individuals who want to buy in size, you need that market maturation. And so, one can imagine that if you’re bringing that level of liquidity to the market, it’s fairly reasonable to assume that you wouldn’t want to be engaged with terrorists or anyone that’s financing proliferation of weapons of mass destruction.

(00:10:14):

And so I think this is where we kind of fall into a middle ground, where I’ve seen some very interesting solutions whereby you can KYC quickly within one day, you get an NFT in your wallet, and then NFT will basically say, okay, I’m KYC, KYB’d for X number of jurisdictions. That doesn’t necessarily need to have your identity on chain, but there’s some sort of area that holds your identification, but you have this NFT and now you can engage in some of these more permissioned settings. I think there’s very much a middle ground.

(00:10:46):

But I would say going back to your question, the most important thing that we as an industry need to be able to maintain is the user experience, the user journey. When you use DeFi today, it’s fast, it’s easy, it’s seamless. It’s one of the reasons, for example, Trump’s meme coin launched on Solana. Solana had at one point over eight million transactions per second, and that TPS just isn’t, it’s not going to happen if you have the banking KYC and KYB process bottlenecking it ahead of time. And so, how do we maintain that while also making sure that we don’t have North Korean hackers engaged in some of these, we don’t have other terrorist financing engaged with some of these protocols? And that’s for the safety of us as an ecosystem. I mean, we’ve all seen the hacks happen, and so I think there’s a middle ground that we can find.

(00:11:38):

But what I will say is today, Bitcoin’s correlation with the NASDAQ and the S&P 500 is at 0.5, and it has gone close to one at certain points, and so that correlation is going to continue to happen. We’re going to continue to see a lot of macro and Bitcoin correlate towards one over time as more of this liquidity comes on chain. And so there has to be some middle ground that we all kind of meet if we are looking for that mainstream adoption.

Nick (00:12:08):

Well, it’s a sensible answer, and anybody who really contemplates this realizes that that has to be the case, there has to be some middle ground here. So, I appreciate you fielding that.

(00:12:17):

I do want to ask you one sort of context setting question that’ll set up the remainder of our conversation today, which relates to how we should think about institutional clients or what we mean by institutions entering into the space. I’ve already used that term multiple times in the two questions I’ve asked, but can we reset the playing field a little bit here and just sort of wrap our minds around people like you who are sort of building and serving that segment, what is meant by institution or institutional clients?

Aya Kantorovich (00:12:42):

Yeah, I’m glad you asked because we’ve been talking about this word, at least I’ve used it in the past seven years. We keep saying the institutions are coming, they’re coming, and then we look around and we’re like, what institutions? Who are they? And it hasn’t really been defined, and I would say the institutions of today are very different than the institutions of five years ago. And we love nomenclature in crypto, and so it’s very important that we define what that means specifically, so I’m glad you asked.

(00:13:10):

Today, the institutions are still predominantly these 150 million average AUM, crypto native hedge funds. Now, I would say the difference though is not necessarily who those funds are and the structure of those funds, but I would say who the LPs are that are supporting these funds and investing into these fund structures. And at least for our clients, that’s changed significantly over time. So now these LPs consist of private retirement funds, private foundations, and institutional funds with over 10 billion in assets under management. I mean, when you think institutions, you think those are the folks that really kind of fit into that label that we like to toss around. Now, perhaps they’re not touching the underlying asset directly, but indirectly through these funds they are engaged in DeFi, and I think that’s something to really keep an eye on.

(00:14:04):

And the other thing that I would say the two other buckets is, we also have, I’ve seen a lot of these non-US banks spin up crypto desks, and those desks offshore are engaged in on-chain activity and that is very, very new. And so it’s been very interesting to see highly regulated organizations being able to fork, call it an Aave, a Uniswap, and really host it in a way that fits, for example, their backend operations, and start to really understand very deeply the both DeFi and the underlying tech.

(00:14:36):

And the third bucket I will say is very institutional, which is the United States. So obviously we’ve had, for example, President Trump talk about a strategic Bitcoin reserve, but we’ve also had 14 United States imply or mention or even approve a state Bitcoin strategic reserve. And so those in my mind are government agencies really fall under that institutional bucket, and that’s something we hadn’t seen before either previously.

Nick (00:15:06):

An amazing definition, and I hope listeners who are interested in learning more sort of about that institutional stuff will take the time to understand and synthesize everything you shared there, because it really is an important component of the evolution of the industry and sort of the work that people like you who are moving the needle on the topic, what you’re working on, is sort of where you’re focusing.

(00:15:24):

As you mentioned earlier, Aya, we met in May of 2022, Episode 66. Before I pushed record, I was thanking you for coming on at that time. I think I networked into you and was so impressed with that first interview. And I want to encourage any listeners that hadn’t listened to that, you can go back and listen to Episode 66 to get the full backstory, sort of the typical GRTiQ in-depth interview related to sort of your journey and how you found yourself working at crypto.

(00:15:49):

But picking up where we left off last time, and there’s been a lot of things that have happened since that time. You were working as Head of Institutional Coverage at FalconX when we spoke, and there’s been changes and you’ve sort of moved along and you’re working on different things. So, what’s the backstory from how you sort of went from FalconX to where you are today? Which again, for the sake of listeners, it’s August, right? You’re now a Co-founder at August.

Aya Kantorovich (00:16:13):

Correct, yeah. So Co-founder of August and Upshift, August is our institutional platform, Upshift is our retail platform. And the journey, I mean, so much has happened since May of ’22. So, I think we had spoken around the time when I had some initial concerns come up around Three Arrows Capital, and May 22 is when we saw the Luna collapse. And a lot of the issues that happened in that specific timeframe were very similar to the first job I had out of college, which was consulting for banks and financial organizations. And what we were seeing there is the same thing we are seeing here. So lack of proper processes, compliance, lack of good risk underwriting, and people issues. People and operational issues, which was the same thing we saw in traditional finance, now we’re seeing in CeFi, or centralized finance, just for a completely new asset class.

(00:17:10):

And so my concern was, look, it was, there’s no doubt at all that on-chain finance works and DeFi is the golden standard. We have seen that with the Bluechip products that have shown have great track record over the last over seven years. If you look at, for example, Aave as a wonderful example, and have consistently been able to perform under a lot of market volatility and stress tests. And so with that, the concern for me was if we’re really just going and rebuilding something that already exists, which is traditional finance but for a new asset class, that doesn’t really interest me. And how do we move prime services to what works, which is DeFi? And how do we move these services to an asset class that belongs on-chain? And that’s really our goal with August.

(00:18:00):

And so what we built was universal smart contract, exports prime services, so think, lending, borrowing, DeFi execution, OTC options, and spot. And we started getting clients who called us and said, “Hey, we really like this tech. Can we use this tech for retail products as well?” We said, “Absolutely,” and so that was the birth of Upshift and we’ve been excited to scale that as well. And Upshift is really democratizing access for real yield that’s available by institutions.

(00:18:30):

And so it’s been a really interesting journey last two plus years, and we’ve had a lot of success, and so there’s definitely demand for it. And we’re seeing way more on-chain activity happening now than we’ve seen at least in the last two, three years.

Nick (00:18:46):

I want to talk to you about then the problem set that you want to address, and you went through some of that there, so I’m sure there’ll be a little redundancy here, but it is a question I always ask the builders and I’m sure I asked you back in Episode 66 about the way you were approaching this question at FalconX. But the problem set you seek to address, and as you mentioned there, you’ve got this institutional offering through August, you’ve got this retail offering through Upshift. The DeFi space, for a guy like me, I’m not technical, admittedly I’m not way deep into DeFi, it seems like a crowded space and it seems like there’s a lot of competition. I’m all for it, I love it pushes the frontiers forward, but how would you describe to us sort of the decisions or the thinking you were making at the time of like, here, here’s the problem that we really want to come to with our unique capabilities and address in both a institutional and a retail offering?

Aya Kantorovich (00:19:38):

Yeah, I’m glad you asked, because at the time it was a very contrarian take to say that we were going to move institutional size and prime services on-chain, right? There’s a huge educational curve that happens as you mentioned, and DeFi is very complex. And when we were fundraising, a lot of funds that we spoke to said, “You know what? You’re out of your mind because of two things. Either one, you’re going to get completely regulated out of this industry, or two, DeFi is just not going to go mainstream. And so there’s no way that institutions move more and more on-chain.”

(00:20:14):

And taking a step back and just reflecting on that, we had the President of the United States launch a meme coin on Solana. And so I would never think that I would say something like that, but we had an organization use Solana as a means for capital formation. And then hyperliquid an on-chain exchange, listing it faster than any centralized exchange out there. And so we saw all of the volume for the first three days all happen on-chain, and that is just phenomenal. And I think it’s something that we were very excited to prove wrong. A lot of people in this space have been working tirelessly for far longer than I have to solve this problem set, but to your point, it’s still very complex and it’s still very not nascent.

(00:21:03):

And so for us it was, how do we build more towards that one click trade, right? And so in DeFi today, it’s very, very difficult if you want to trade on Ethereum, and then you want a position on Solana, and then you’d like to hedge it on Arbitrum, and then you want to trade options OTC. And for us it was like, how do we do all of this in one place? And we try to minimize the clicks from 15, sometimes 50, to two to three, and it’s a very, very tough problem. And I think we could talk about this separately, but I think sometimes the industry lacks patience in giving us time to solve that because so many new things get created every single day in the space. That was really the problem set for August that we were thinking. And so it’s really, how do we support all of that today as more and more assets continue to move on-chain? And clearly, the thesis of that is becoming more mature every day.

Nick (00:21:59):

And the names, I always ask this question to founders, but the name August, the name Upshift, where did you sort of arrive at those?

Aya Kantorovich (00:22:07):

For us, the name August, it means honorable and respected. And we thought for a company that was born out of the FTX crisis, it should be built on trust. And for Upshift, it signifies progress, improvement, forward momentum. And for us as one of the things that we struggle with DeFi, and I’m sure you probably have experienced this too, but we always talk about CeFi not being very nascent and transparent. DeFi sometimes isn’t very nascent and transparent either. Sometimes the yields you see on-chain are not necessarily the yields that you’ll get after you unwind a position. And a majority of the deals that we’ve seen happen on-chain are typically done behind closed doors with large funds in order to provision liquidity. And so for us, this idea was, how do we create a platform that creates that forward momentum and transparency for real DeFi yields? And that was where Upshift was really born from.

Nick (00:23:07):

I want to ask this question about, and it’s kind of a framing question. For a lot of listeners, they’re familiar with traditional finance and where it gets complicated is I have listeners all across the world, and so traditional finance in India or other parts of Asia might be far different than sort of what we experienced in North America and particular in the US. And so I want to kind of take account that everybody’s having a different experience here, but when you contrast centralized financial structures with the things that you’re sort of working on and the ambition of what you’re doing at Upshift, can you sort of talk about the failures of traditional finance and the ways that you sort of want to address those with something like Upshift?

Aya Kantorovich (00:23:47):

Absolutely. So, I would say one of the biggest failures was if you look at Archegos. And one question I always get quite a bit is. FTX collapsed and centralized or traditional finance have let that happen, but Archegos was a multi-billion dollar hedge fund that quite literally brought down Credit Suisse. So it brought down a international bank, highly regulated, and you consistently see these problems over and over again because of lack of transparency. And so what we’ve seen in terms of that centralized financial risk and the failures associated with it, are really around lack of transparency, and that has led to bankruptcies, significant bankruptcies. And the issue with these bankruptcies is, who holds the risk? And more often than not, the person who holds the risk is the retail user on the other side, they’re the ones holding the liability.

(00:24:46):

So for us, some of the lessons has been, how do we avoid some of these really risky underwriting decisions that have led to these bankruptcies, both in traditional finance like Archegos? How do we avoid bringing down a Credit Suisse or in the future UBS, of that scale? And in centralized finance in crypto, how do we avoid bringing down a Celsius, an FTX, a BlockFi, a Genesis? And the list goes on and on. And so if you look at, for example, Celsius depositors, they were depositing into a savings product, but they had no idea that that savings product was being used to make uncollateralized loans to not well-mitigated counterparties. And so they didn’t fully understand the counterparty risk that they were taking and the liability therefore they were taking.

(00:25:37):

The second point is, and I mention this again, but I really just want to hone in on this. There’s zero transparency on how funds are being used. That includes both when you have a savings account, you leave money at Bank of America, for example, in your checking or savings account. You have no idea if those funds are being rehypothecated and how, and that’s still true in CeFi. You can’t go and ask one of these exchanges, “Hey, what’s your liability? Who’s your biggest loan to? What’s your debt? How much is that debt? Are you behind interest payments? Are you a trustworthy counterparty?” They’re not going to answer that question for you. And so I think that’s the level of transparency that DeFi sees.

(00:26:24):

And the last one is outright fraud. And again, you saw that with Archegos when they lied to different banks. You saw that with FTX when they lied about how funds were used. And so really trying to solve those three main pieces, the bankruptcies, the lack of transparency, being able to really know how to underwrite risk, and then fraud.

Nick (00:26:45):

It’s going to be somewhat counterintuitive for listeners, it was for me for a very long time, to talk about public blockchains and open blockchains, permissionless data and transacting, and know that there’s still not full transparency because those things sort of imply full transparency. But as you’ve said a couple times now, we still have a long way to go or some things to sort of address when it comes to transparency in the crypto markets. And so, as you look back on your career though, as a starting point of saying baseline was my first kind of time in the space to present, is there progress being made? I mean, are we doing better? Are we going backwards? Have we kind of plateaued? How do you sort of see that?

Aya Kantorovich (00:27:25):

Yeah, I think there’s a lot more transparency, but we haven’t gotten there yet. And what I mean by that is, our products not only… A great example is the DeFi Bluechips work fantastic, but when you lend over collateralized to Aave, you don’t get to decide nor do you see always, how the loan proceeds are used.

(00:27:48):

So for example, if someone is using an asset to collateralize over collateralized the loan, but then they go and use those loan proceeds, USDC, to go buy a house. That is a highly illiquid asset. You would probably price that loan differently and also require additional collateral for that loan. And so the LTV, the loan to value ratio of that loan would be different. And so we still haven’t gone there with the DeFi Bluechips where you get that level of control and insight into the full flow funds that you do in the traditional finance sense, which is why risk underwriting in TradFi is still a little bit better or a lot better than what we’re seeing on-chain today.

(00:28:31):

And so we’re pushing to make that a reality. And one of the ways we do that is, today our depositors have full insight into exactly how funds are being used. Everything’s transparent, you trace everything on-chain. And then everyone always says, “Oh, but you can trace the asset on-chain.” That takes hours. And so for us, we build dashboards, those dashboards are exactly the allocation amounts into which assets and what protocols and exactly your counterparty risk and exposure to which assets, which protocols, and also which funds. And so you as a user, you have all the information at hand to say, “I feel comfortable with all the exposure that I’m taking right now and I’m making an educated decision.” And there shouldn’t be an instance where you would say, “Oh, I had no idea.” And I think that’s really what we’re hoping to solve, that even with over collateralized lending, even with some of these Bluechip assets, you still don’t know and you still don’t have those controls today.

Nick (00:29:27):

My brain says serious, big institutional clients or opportunities, will see this as a point of friction, but I don’t know if that’s true. I don’t know if they have sort of different visibility or if they have partners like yourself that creates greater transparency and visibility. But just a generic question, is that transparency in the crypto markets sort of a prerequisite or an unlock to see more institutional adoption?

Aya Kantorovich (00:29:54):

Yeah, absolutely. I mean, we have had the delight of being able to bring back users who haven’t touched crypto since Celsius and BlockFi and Genesis, because they didn’t feel comfortable with any of the other platforms that existed in the market. And we were the only ones, only ones where they could actually see exactly how their dollars were being spent, used, and sent on-chain, what protocols. And the other thing too with our technology is you can actually whitelist and restrict exactly what protocols they can use those funds with.

(00:30:27):

So if for example, you’re a large institution and you say, “Okay, here are the 10 protocols that I’ve done my due diligence on and I’m comfortable with you engaging with as a user,” we can actually go into the smart contract wallet that we’ve built and whitelist all of those specific protocols. We can do it on a protocol level, we can do it on a pool level, we could do it on asset by asset level, and so we can get as specific as an institution may want us to get. And they do want to get pretty specific. We’ve had fund of funds who use us where their onboarding a specific fund manager and they will have a full list of exactly what they want that fund manager to be treating. Nothing more, nothing less, and we have the ability to actually restrict that on-chain. And I think that level of the customization hasn’t really been available before that 100% exists in traditional finance.

(00:31:19):

And again, you want to make that switching point, the switching gap, or switching cost as minimal as possible. You want to make the experience as similar to what someone’s using before and you want to make that learning curve as minimal as possible. And so, how do we create institutional tech that these large folks who want the controls to use also in decentralized finance? And I think going back to your question around the permissioned or non-permissioned sense, I think we have to find that middle ground and we still haven’t found the middle ground yet, where we have a lot of these fantastic products being built but the bridge to usability hasn’t been built, and that’s kind of where we’re playing the catch-up.

Nick (00:32:08):

One of the reasons I did 66 Episodes when I had the opportunity to meet you, and here we are again just over 200 Episodes, and I have no intention of stopping. One of the reasons I enjoy it is I get to speak with experts that have a very sort of developed sensibility about really important topics. And so you ask sort of your normal person about DeFi infrastructure or institutional DeFi infrastructure and the things that need to be in place. They might be able to ballpark some things, but they don’t have that expert level insight. And because of your career and your background and the places you’ve worked and the things you’re working on now, you have that sort of expertise and that insight there. And so given all of that experience, how would you sort of define or sort of lay out the architecture of what institutional DeFi infrastructure really needs to look like to sort of catapult us forward?

Aya Kantorovich (00:32:57):

Yeah, of course, it’s a great question. I’ll take a step back and just talk about where the space was at every single moment in time for the different jobs I’ve had in the industry. When I was at Pantera Capital at the time, we were investing in local exchanges because liquidity was so fragmented and being able to even purchase a Bitcoin happened either through chats or peer to peer OTC trades. It was pretty clunky. And so at the time it was like, all right, how do we create these exchange platforms in localized markets that could focus on the specific geography and specific users in that space in order to onboard them into crypto? And so that was the first part, it was really just focused on localized liquidity.

(00:33:54):

Then at FalconX the question was, okay, we have all of these different segregated liquidity venues across the globe, but how do you actually aggregate all of that? And so the next stage of my career was in the aggregation phase. It was, all right, we need to aggregate that liquidity because if you as an institution wanted to access liquidity, you’re not going to create an account in Mexico and then Vietnam and Japan and Korea and Europe, and then the United States, and do the aggregation yourself. I mean, it’s really painful and also you take on FX risk. And so that was the aggregation stage, and I would say Falcon X did a fantastic job of being able to really be able to access that liquidity globally for major assets.

(00:34:42):

Now the next stage was, all right, we have the aggregation, we have the liquidity, how do we create the transparency? And I think the vision for me has still stayed the same throughout the three different jobs that I’ve had in crypto in my time in the industry. And the first is, we’ve kind of harped on transparency quite a bit, but the second is also the real time major of the blockchain. Everything in essence is printed on-chain, it’s transparent, everyone can access it. And so, how do you make that easier to read? How do you create a user interface that makes it, really translates it in a way that you can understand and you can apply it into whatever you might be doing with your portfolio? And so it’s really the real time data and making that fully accessible. Now what I mean by that too is also real time data across all of the operations that are happening, not just the on-chain trading piece, but also backend operations, counterparty risk, liabilities, debt/ all of that should really be on-chain with real time data.

(00:35:46):

And then the last piece, and I think this is the going back to the aggregation phase, now we have a number of blockchains that exist and the user doesn’t really care, to be honest. They just are very excited about the application or the product or the specific token or the community. And so, how do we create that composability? That’s the last piece, Composability across all of these different blockchains, whether the language is written in Rust for Solana or you’re migrating funds to Arbitrum, how do you take a receipt token and make it composable across a number of these different blockchains? And that’s where we spend a lot of our time doing. Our wallets today are cross chain, and so you can have positions across, we currently support 12 blockchains and we support over 70 protocols. And so, how do you have that composability across all of those chains, all of those protocols with real time data across everything that’s happening? How do you bring all of that together? That’s really kind of the vision.

(00:36:45):

And going back to your question on institutional ask. I mean, that is the ask, right? The ask is, you’ve given me the liquidity, you’ve given me the aggregation, now give me the composability. And that’s really where we’re focused.

Nick (00:36:58):

I love it, and that’s a really great complete picture of not only your journey, but the problem set and the value creation thesis that I think you’re pursuing there at August and Upshift. And so, you mentioned in your answer there, integration on the back side of things, the in-house side of things. You let me know, and I think it’s correct that August and Upshift integrate KYB and KYC and AML tools, while maintaining that on-chain transparency. That’s when you talk about the challenge of composability, I got to imagine the challenge of integrating these types of things on-chain was also a huge lift. What can you tell us about that?

Aya Kantorovich (00:37:35):

It is a massive lift, there’s no doubt about it. And I actually want to give The Graph a big shout out because our team heavily uses The Graph products for a number of different things. We currently use subgraphs across a number of different protocols. Again, we need to be able to read all of this data on-chain in a clear and timely manner, in order to be able to pull history of logs, in order to run liquidity concentration analyses, in order to be able to properly risk underwrite. And so that’s been a huge portion of it.

(00:38:07):

We currently have subgraphs deployed on all major chains using The Graph, and to index for all of our ERC 4626 volts for Upshift. We’re definitely power users, I would say/ the point that I would get to that and you know better than I do, is that if you don’t have the underlying infrastructure for you to be able to receive the data, parse the data, and then clearly translate the data for a user to be able to utilize in a simple and concise way, you’re still back at step one of the segregation phase. And so, that’s what we’ve been able to leverage The Graph quite a bit for.

(00:38:44):

On the KYB and KYC side, I would say today all of our institutional clients on the August side run through KYB, KYC. And then any wallet our user using any of our products runs through an email check. Again, our priority is just to make sure that we’re not supporting any banned wallet addresses, blacklisted wallet addresses, or potential terrorist accounts. And we do that both on behalf of us but also the partners who utilize us today.

Nick (00:39:12):

I want to double click on the use of The Graph. As you know, a lot of my listeners are enthusiastic about The Graph, but over the years I’ve picked up others that are just web3 interested and love this podcast as a way to sort of meet builders like yourself and kind of get the story of web3 through the story of people like yourself. But this follow-up question is just about that infrastructure that The Graph provides. I mean, in Episode 66, you talked about some of your conviction for the importance of something like The Graph to provide and feed that data. As you think about that institutional DeFi infrastructure that you talked about earlier, can something like that exist without that indexing and querying component of that blockchain data?

Aya Kantorovich (00:39:54):

It most certainly cannot, no. And because it’s transparent, because you get the data on a block by block basis, and because of how quickly some of these blockchains process their transactions, you are inundated with and overwhelmed with just the amount of data processing that’s required in order to run an institutional grade platform. And the one thing I would say these institutions complain about is, we don’t have institutional grade tooling and we don’t have institutional grade support. And I would say that’s something that The Graph addresses very head on. Our dev team, our developers and engineers, they have had a wonderful experience all the way from using SDK command line interfaces, to docs, customer service, being able to comparatively pull data within minutes versus couple hours, if you look at competitive products that exist out there. And so without a doubt, I would say The Graph is one of the core foundations of this entire industry. And I know speaking on behalf of our two products, really, the core foundations that we’ve been able to build these institutional grade user interfaces both for retail and for institutions to utilize at scale.

Nick (00:41:12):

We talked at the beginning what an institutional user or client looks like. I might have listeners that sort of fall into that bucket, but let’s assume I don’t, and we’re sort of talking about that retail side, which is Upshift. Who is the ideal user of that? And let’s assume for example, that there might be a listener out there that has interest, how can they get started and learn more?

Aya Kantorovich (00:41:34):

Yeah, absolutely. So, the reason we built Upshift is again, going back to the point that a lot of the deals that we saw happening in DeFi were happening behind closed doors with large institutional clients that we supported on the August side. And so we were able to have conversations with those same clients and say, “What if we opened up those same deals to retail users? What if we democratize and open that access? What would it look like?” And it’s had tremendous success, twofold. The first is, the yields are real in that whether it gets lent to institutional traders who are running basis trades, market neutral trades, highly systematic trades, these are all real yields. And so it’s the yield that you find on the platform is not fully created by incentives or token air drops, and that’s really important.

(00:42:24):

The second is for the institution if you think about, well, if I’m an institution, why would I open up my kind of secret sauce here to additional retail and have more folks come in? The upside that we’ve seen is the, for example, we have over 300 million currently in TVL on the Upshift side. And an institution can say, one of these funds can say, “Hey, look, LPs, I have been running this strategy in this vault, it’s been sustainable, it’s maintained over 25% yield for the past six months, and I’d love to raise more money in order to continue to run this strategy.” And nine times out of 10, those same clients have been able to raise funds on top of the public track record that they’ve been able to show on-chain with these vaults.

(00:43:08):

And so for anyone looking for yield, I think today we currently have, just thinking off the top of my head, we currently have some of the highest rates on USDC. If you know you’re active in the avalanche ecosystem, we currently have the highest base rate for AUSD for Avalanche, and as well the highest base rate for BTC, which is 4.5%. And so, that rate has been roughly around the same for I would say the last six months. And the reason I emphasize this is because in DeFi, very often you’ll see someone find an opportunity that’s perhaps 50, 60% APR, and then two weeks later it drops to 10, and the next week it’s down to five. And you get, we call it wrecked, on the way out because your slippage, your fee, it really dilutes the overall yield that you make.

(00:44:05):

And so for us, the goal is, again, going back to our name and why we chose it, we want it to be honest, we wanted to be respectable, and we wanted people to feel really comfortable with the products that we were servicing. And so if you are looking to get yield on your crypto, Upshift should be a really great place for you to find everything you need and deposit with just one click.

Nick (00:44:26):

And I’ll put links in the show notes for any listeners that want to click and learn more. I appreciate that overview and encourage anybody that’s interested to visit the show notes where you can find not only transcripts of this conversation but also links to all the things that we talked about.

(00:44:39):

I Want to just sort of wrap up this interview with a couple high level sort of reflective questions, if you will. The first one is, you’ve seen the crypto landscape shift and change since your time in the space. And of course, you’ve been focusing on institutional DeFi type of things, and so I know that’ll be your level or your level or insight of expertise as that has evolved. But as you zoom out and kind of look at where we’re at, you kind of place us in this cycle that I can’t really put my mind around and nor should I, I’m far from qualified to sort of talk about cycles, let alone what we’re at here, but how do you make sense of it all? The evolution of it and this cycle and where we’re at?

Aya Kantorovich (00:45:18):

It’s a great question, because I would say I also tend to have a very similar kind of pinch me moment when you’ve been heads down working on some of the technology in the space. Sometimes to have the agency to take a step back and reflect on how far we’ve come from, for example, the last conversation you and I had, it’s truly tremendous.

(00:45:39):

And I had the pleasure of attending the Crypto Ball in Washington DC last week, and the atmosphere there alone, you had many of the large crypto operators, crypto OGs, industry leaders, C-suite execs of all the exchanges there. And there we were celebrating with the incoming presidential cabinet, Congress people, administration. I mean, you have to take a second and say, “Wow, this is what we’ve been fighting towards. This is the acceptance and adoption that we’ve been looking for.” And without a question, the message that we came away from is, crypto in the United States is here to stay, crypto in the globe is here to stay. The United States wants to be a global leader for that, and we want to also have that composability worldwide for all geographies. Crypto of course is not a localized industry, and so it’s very exciting to see that acceptance happening in the US, but also globally. And I would say we just haven’t seen that kind of momentum in a very, very long time.

(00:46:46):

And so it’s always with technology, it’s twofold. You have to have, it’s similar to AI. AI is something, technology that’s been built 10 years ago, right? but you have to have that level of momentum, acceptance, but also the technology needs to be usable to a point where you can process, for example, eight million transactions per second. That’s I think where we finally reached a playing field where we’re getting there. And so it’s very exciting to see where this industry is going to continue to grow, but I think we’re just, again, it always feels like we’re at the tip of the iceberg and then we’ll talk in two or three years from now and we’ll look back and say, “I can’t believe we were there then.” And so it really feels much more optimistic than I’ve ever seen the space before.

Nick (00:47:32):

We started the conversation talking about the ETFs, I think there was a long period of time where people thought that would be the narrative that sort of supported the cycle. Things have changed, I’m not really sure anymore if the ETF is old news or pending news, I have no idea. But when you think about narratives that’ll drive the cycle or maybe even just 2025, what are you focusing on or what do you think it’ll be?

Aya Kantorovich (00:47:56):

I mean, look, I think you hit the nail on the head. The ETF is still the most easily traded product for some of these institutions to get through their investment committee. And I always tell people this, but in crypto we don’t really have patience, we’re an industry that lacks patience. And so our market cycle, they’re very, very short and they’re recurring quite often.

(00:48:17):

One thing I will say about this is, if you are a massive foundation, if you are a retirement fund and you are managing the retirement of an entire state or a geography, it will take you years to underwrite a specific product, even if it’s publicly traded. And over time though, you will get more people to say, “All right, I’m green lighting this, this is a good idea.” And so I agree with you 100%. I think ETFs will be that first entrant for these very, very large institutions who are currently having those discussions in their investment committees.

(00:48:52):

Now, in terms of retail, I think we’re still always driven by decentralized applications, or a, some sort of social guide. And this is where I meme coins fall in. If you feel like you want to be a part of something like the Trump or Melania token, you want to be a part of something that you see happening in this space, yes, there’s some monetary portion to it, but it’s also this kind of, “I want to feel something.” And the same reason that we have hobbies and we join social clubs, and I think that will be another driver again. And so what we’re keeping an eye on is all of these new dapps, we haven’t seen dapp investment happen in the last two years. I would say the last two years on the venture side it’s been very much infrastructure specific. We’re seeing that shift again now. So on the institutional side, just to summarize, I would say ETFs, on the retail side, it’s going to be dapps and meme coins, and anything else that has some social component to it.

(00:49:47):

And then the last thing I say that I’m super excited about is AI agents. I know that people talk about this a lot. It’s kind of this end-all, be-all nomenclature again, label. But we use agents today internally for a lot of our operations and back end. It is tremendous, the capabilities that some of these AI agents have. I highly recommend you follow AIXBT, it’s an AI Twitter agent, a fully automated Twitter for crypto market color. And that’s, just to see some of the capabilities of this technology and the amount of data it’s able to process a short amount of time into a very concise, consumable way.

Nick (00:50:33):

Well, I only want to ask you just three more quick questions before we jump into the GRTiQ 10. And you already answered the GRTiQ 10 during Episode 66, so it’s going to be fun to see if any of your answers have changed and maybe these couple years of separation might’ve changed your taste in books or movies or music. So, we’ll go through that, but the quick three are this. Is there a chance that if this web3 experiment sort of fails, and what I mean by web3, is a replacement to web2. Is there a chance that it fails, but like DeFi persists, that this blockchain, crypto renaissance, whatever you want to call it, in an event of web3 failure as a replacement to web2, the DeFi thing persists? People use it, it stands alongside traditional finance, and that is sort of what this industry boils down to? I mean, that’s a cynical view, but I’m curious if that’s one of the possible outcomes here.

Aya Kantorovich (00:51:27):

Without question, I would say, yes. And I would say that in my mind there’s always a hybrid of some sort of coexistence between the two. We’re never only going to be web2, and we will never only be web3, and there will always be this existence of DeFi. The question is, at what scale? And the areas of choke point for DeFi are of course, regulation and geographical pressures, which again is also driven by regulation. That was a big issue in the United States when you had Project Choke Point debanking a number of crypto operators, making it hard for them to continue to engage in the space. And so that’s why I think there’s so much excitement about this regulatory acceptance now, and I hopefully, clear framework.

(00:52:19):

But I think people perhaps are overly optimistic in thinking that you may go one or the other. In my mind, they will coexist. And what I mean by that is, it’s very similar to AI. There are very specific use cases that are simply easier on-chain, where DeFi simply makes more sense, or Solana just makes more sense for launching meme coin. And that’s very similar, or engaging in retail, because of the transactions per second they can manage. However, there are things that should remain within traditional finance where trillions of dollars are being processed at faster rates than any blockchain TPS can handle today. And so I think there’s going to continue to be a middle ground and coexistence.

(00:53:03):

What ideally we’d like to see though, is the way the appetite of folks working in traditional finance start to accept and integrate some of that technology into back end operations, in areas where we have clearly proven over the last seven, eight years that there’s a track record that this stuff really, really works. Perhaps not at trillions of dollars per second scale, but at least at minimal scale, and we’ll get there over time.

Nick (00:53:30):

Amazing take. How about this one as our second question here. What’s your elevator pitch to institutional clients, prospective clients about the benefits of DeFi? What’s that elevator pitch sound like?

Aya Kantorovich (00:53:42):

It’s very, very straightforward. Real, sustainable yield with full transparency, and the ability to properly mitigate risk, all seamlessly in one place.

Nick (00:53:53):

That’s dialed in, I love it. And how about this one then, turning the light on you and your journey. As a founder then as somebody who’s been around for a while, you’ve seen startups, you participate in startups, you’re doing it again on your own here with Uplift in August. What’s the lesson here? What’s the key lesson you can share with us? Insight about being a successful founder?

Aya Kantorovich (00:54:16):

I’ll give you two. We’ll see how you define, successful is in the eye of the beholder, so we’ll see if we get there yet, but I’ll give you two. The first is, delegation is a superpower. Empowering the people on your team to feel like they can execute without you managing them is really, really important. And I think that also goes into the nature of DeFi. You see a lot of these teams working in a decentralized manner, and that’s because they’re empowered to continue to work in the way they do, very differently than some of these larger organizations.

(00:54:46):

And the second one that I’ll say is, having emotional resilience. One thing that I’ve come to appreciate, I have listened to a number of Jared Kushner podcasts and one thing I think that he does very well is he faces every failure as an opportunity, and every unexpected challenge as a building block for himself to move into that next stage. And so you’re going to have to be able to adapt, to pivot, to move forward, to make mistakes. And I think what really changes or separates you between other builders and operators in the space is how you view and how you get up after every single fall back that you have, and you will have many, and how you view each one of those. And I will say that a lot of the opportunities that we’ve missed in the space have been a blessing in disguise. And so it was really our ability to view that as a learning opportunity, growth from it, and a challenge for us to improve better the next time, that has made us stronger each time.

Nick (00:55:50):

Well, I, as I mentioned a moment ago, I’m going to ask you the GRTiQ 10 again. This time, however, because you’ve answered them already during Episode 66, we’re just going to go through and see if any of your answers might’ve changed or evolved over the past couple of years. And so, Aya, are you ready to revisit the GRTiQ 10?

Aya Kantorovich (00:56:07):

I’m both excited and a little bit nervous. We’ll see if the market has made me softer or a little bit more skeptical though. So, let’s go for it.

Nick (00:56:28):

Last time we met, I asked you what book or articles had the most impact on your life, and you answered The Alchemist. And you said it was a book that probably had a lot of impact on your life. Has that answer changed?

Aya Kantorovich (00:56:40):

Yeah, I would say The Alchemist is still a fantastic book. Two books that I’ve read recently, which I think coming out of, not necessarily a bear market, but definitely a flat market, is a good reflection of where my headspace was at the time. The first is Nuclear War by Amy or Annie, excuse me, Jacobsen. Really fantastic book, very short book. It talks about what happens if there were to be a nuclear war around the globe and how much time everyone has. And I think that kind of gives you perspective when going about your day-to-day life. And the next is All The Worst Humans by Phil Elwood. Really fantastic book, just thinking more broadly about the relationship behind businesses, some of the things that happen behind closed doors. And it’s certainly not limited to traditional finance or finance at large, you see it in almost every single thing that happens. And so, highly recommend both of those.

Nick (00:57:33):

Last time we met, I asked you about a movie or TV show that you would recommend everybody should watch and you admitted you actually don’t watch a lot of movies or TV shows. But to satisfy that answer you said, “Hey, I recently saw Rocketman. I guess I could suggest that movie.” Has your answer changed on that? Any new TV or movies that you would recommend?

Aya Kantorovich (00:57:49):

I still do not watch a lot of movies or TVs, so that hasn’t changed, that hasn’t changed. But I am a big podcaster, I do listen to the All In quite often, as well as the Brad Gerstner podcast, which is more focused on financial markets. And the Joe Rogan podcast, more specifically the recent one with Mark Zuckerberg, which I think is really, really interesting and goes in line with the culture that I think this industry is really trying to impose, which is transparency. Again, harping on that over and over again, but those are kind of my three main podcast picks.

Nick (00:58:25):

If I had to guess on this next one, any music album you would have to listen to for the rest of your life, which one you would choose. You kind of went back to your southern roots and said hip hop would probably be what you went with. I got to assume that’s still the case?

Aya Kantorovich (00:58:38):

It is absolutely still the case, 100%, no change there.

Nick (00:58:42):

And how about this one, Aya, when we talk about the best advice we talked about last time, the best advice you ever received is that what you want today may not necessarily be what you want tomorrow. That’s great advice, I’m sure there’s more to it than my rephrasing of it. But any new advice or any new sort of things you’ve come across that constitutes some great advice you’ve received recently?

Aya Kantorovich (00:59:04):

That still very much holds true. I would say some new advice that’s someone gave me a few years back was the best decisions are typically the ones made for you. I would say that has stood very true in a number of things that have happened in my career, and it has helped me miss opportunities that in the moment I thought were missed opportunities, but really in the long run were completely new opportunities that elevated me and my career. And so, very fortunate to kind of think by those every time.

Nick (00:59:38):

When I asked you last time, what’s one thing you’ve learned in your life that you don’t think most other people have learned or know quite yet? You said that recognizing that we’re all humans still driven by similar wants, needs and affirmations. It’s a very important point. You still find that to be true? You still find that to be something that we don’t pay enough attention to?

Aya Kantorovich (00:59:57):

100%. And I think sometimes we forget that because so much of this space is anonymous and you don’t always get to see the person’s face or know the person’s full name. And I think that very much remains true, we are still humans, and AI agent in the mix, but trying to make our ends meet and would definitely still bide by that.

Nick (01:00:21):

When I asked you last time what the best life hack you discovered for yourself was, you said that you do quarterly reviews on yourself and you set targets every quarter and what you’re going to work on then and what you’re going to hit next quarter. So I got to ask, for that life hack, are you still doing that? Is that still an effective tool?

Aya Kantorovich (01:00:38):

I am still very type A, so yes, that has not changed. In the two and a half years that you haven’t seen me, I have maintained my quarterly updates on myself and I highly recommend it. It’s so great to just set these small targets for yourself and then it makes you feel so accomplished when you’re able to review and assess yourself, almost in the same way that you would at business or anything else in your life.

Nick (01:01:04):

And then of course, last time I asked you based on your own life experiences and observations, what do you think makes someone sort of successful in life or find success in life? And you gave a great answer about being self-reflection and goal setting as being core to it. I’m curious though, as a founder and sort of going through the last couple of years, there’s been a lot of personal growth and a lot of professional growth. Has your answer shifted on that at all?

Aya Kantorovich (01:01:29):

I would add to it. I would say goal setting is very, very important. However, you don’t always hit the goal because of things both in and out of your control. And I think the main difference is really having a positive mindset. And going back to something we spoke about earlier, it’s really approaching everything that feels like a failure as an opportunity, and every time a bad event happens, as a challenge, and being able to persevere through each and every one of those. So always putting one foot in front of the next and pushing through, that’s how you really are able to hit that goal setting. But it’s because you have that positive mindset pushing you through each one.

Nick (01:02:12):

And then, rather than audit your answers from the past, I’m going to ask you these three final questions, which are complete the sentence type questions again. And we’ll let listeners go out and see what you said for Episode 66 and what you said today. And who knows? Maybe they’ll be the same, but how about this, complete this sentence. The thing that most excites me about the future of web3 is?

Aya Kantorovich (01:02:31):

One click trading and we’ll get there.

Nick (01:02:34):

And if you’re on X, Twitter, whatever people call it, then you should be following?

Aya Kantorovich (01:02:40):

AIXBT, truly obsessed with the agentic wave that’s happening, and I think it’s really going to change the way we work.

Nick (01:02:48):

And then the final question. I’m happiest when?

Aya Kantorovich (01:02:53):

I’m learning more about new development in the space. Crypto is absolutely a rabbit hole, and I tend to fall into it very, very deep. And so I would highly recommend listening to all of these Episodes that you host, because that really helps you not only fall into the rabbit hole, but expand your mindset across all the new development happening in the space.

Nick (01:03:22):

Well, Aya, I always keep up to date with past guests that have come on the podcast, and I lose touch with them. Unfortunately, I release every Friday, and so it’s a whirlwind, but I’ve kept up on you, I’ve seen the transitions and the different things you’re working on. I was thrilled when we made contact again and that you were willing to come back on the podcast to share this update. I think it’s so fun for longtime listeners to track guests that have coming back and who have had multiple years of distance between what they shared the first time to where they are now. And it sort of tracks with what the intent of this podcast is, which is to share and tell the story of web3 through the people that are building it. And so, thank you so much for coming back on. If listeners want to stay in touch with you and continue to follow your journey, what’s the best way for them to stay in touch?

Aya Kantorovich (01:04:05):

Yeah, so Twitter is definitely the best way to stay in touch. My personal Twitter is @Aya_Kantor. For Upshift, it’s @Upshift_5, and then August, it’s @August_digital. But again, I just want to give you a huge shout-out. I mentioned this before we jumped on, but you do a fantastic job of curating these and so, very grateful to be on again. And thank you for creating the space to have these conversations.