Ermin Sharich on Bitcoin-backed stablecoins and DeFi's future

0:00I'm Ashan Addison from the Crypto Coin Show and today on blockchain interviews we have man Sherich co-founder of Aegis here to talk about stable coins and the need for them in DeFi and crypto overall a bit on Bitcoinbacked stable coins versus USD backed and much much more. So stick around. Thank you so much man for taking the time. Yeah, thank you for inviting me to the

0:26show. It's a pleasure to be here. Excited about our conversation. Yeah, I'm excited to learn more on stable coins. They are so important for crypto overall, for maintaining wealth, especially in the down markets, for DeFi, managing risk, and there's a lot that I think people don't know about stable coins and how they're actually backed and why that's important

0:50as well. I know your team is working on something special with regards to the backing of stable coins and I would love to hear more about that. So if we could kick off our conversation with a bit on what your team has built at Aegis, then we can dive into all those topics. Yeah. Sounds good. So we are Aegis. We are building a delta neutral

1:11stable coin that is backed by BTC. Essentially what we do, we are not like traditional centralized stable coins that have you know backing of fiat that they keep somewhere in the bank. So we create a synthetic asset that is essentially backed by BTC. We go long spot BTC. So we buy BTC on spot and we hedge it one to one with BTC

1:38margin per patch for shorts. That's kind of like the architecture and design we have right now. So what it enables us is it enables us to create a stable asset because our exposure to the market is not we don't have exposure to the market to the price movements of BTC or any other asset that we can you know accept as

2:03collateral and u on top of that we also provide yield on the stable coin because there is a funding rate on the short side so we short perpetuals they have this instrument that is built into into them called funding rate. It is distributed to the holders of our stable coin. So we solve two problems. I think the first one is creating a stable

2:30asset that then can be used for a means of exchange and the second one we also provide yield on top of that and it's a yield bearing instrument that users can basically put their funds in and earn earn some some return on that. So you can think of it as as a traditional bank deposit but in the crypto world. Yeah. No, I appreciate

2:57that explanation and the yield. It's nice that there's a rational explanation behind, you know, where's this yield coming from? Whereas in traditional banks, it's sort of like they're lending out your money to other people and it might not be there when when you get there. I would love to talk a little bit more about the differences in some of the mainstream

3:17stable coins that are fiatbacked or USDbacked and the Bitcoin backed on Aegis because, you know, a lot of people just see stable coin and they use it and they don't really know or it could be a big difference in what is actually backing the stable coin. And most people are probably using fiatbacked stable coins at the moment, which may not be backed onetoone on US

3:44dollars in a bank. They have different things that are backing some of the main stable coins. Can you talk about that traditional model of fiatbacked stable coins, the advantages and disadvantages? Yeah. So historically if you look at the at crypto the reason why centralized stable coins are so popular because it was the easiest way you know

4:10to enter from web 2 to web 3. So it was a gateway that provided you know easy access to crypto. So that's why they became so popular and historically they were the first ones and that's why I think they are the biggest ones right now in terms of capitalization and market cap and so on. So the way they work is essentially

4:36you provide a fiat collateral. So you do for example a transfer in US dollars to the companies like Circle Tether and then they issue a stable coin that is backed by this fiat that you provided this collateral. They issue this stable coin on chain and then you can use it in you know to trade on the exchanges or to provide the stable coin as collateral some somewhere in DeFi.

5:04And this is a very easy to use instrument you it's very cheap to do transactions in centralized stable coins and so on. But there is you know one particular thing that happened multiple times in the past and that you know many users got frustrated with is essentially the potential DAG of these stable coins because not not in

5:32all cases you are you know 100% sure that the issuer of the centralized stable coin keeps all of the collateral in the bank. So we know there was a lot of FUD around tether for years. Nothing you know proved to be you know true yet. But for example with cir circle and couple of years ago there was a banking crisis in US when Silicon Valley bank collapsed and

5:58basically circle kept some of their collateral in this in this bank and this triggered a dag of USDC. Although before before that event everybody thought that USDC is the safest centralized stable coin because they have you know all this audits from big four auditors they keep everything in place and yeah it triggered a lot of fear in the market and u that's

6:27actually when we came up with an idea of like why don't we launch a stable coin that would be fully cryptonative. and not you know exposed to this fiat banking world risk. So that's why we went that route and yeah now we are building this cryptonative stable coin and successfully launched and you know trying to get as many exporters

6:56as as we can in the crypto market. Yeah, appreciate that explanation, man. And I agree. If you're going to make a crypto stable coin, you should try and keep the backing and everything in crypto. Also, it brings more transparency because it's on the blockchain. You know, the fiatbacked stable coin. That's why there's been that FUD from from Tether over years.

7:19And like, well, you know, the fiat and the US dollar that's in the bank isn't on the blockchain. So, we're just trusting your word. there's counterparty risk there that it might not be what it says it is. But if we can keep everything on the blockchain, add more transparency, you can know for sure, you can see it on the chain that it's backed. And you know, I it

7:39does I think a lot of people are used to understanding fiatbacked but Bitcoinbacked and the fact that it's delta neutral and you're shorting perpetuals and all these extra little functions inside can make it a little confusing for how exactly it works. Could you explain a little further on h what is delta neutral and how exactly because bitcoins going up

8:07and down how does the stable coin stay stable through this method? Yeah, definitely. I think for the ordinary users yeah delta neutral sounds a little bit complicated. So we you know try to explain as much as we can about the delta neutrality and basically why we chose this the strategy and to build the stable coin. So essentially how it works from the

8:34beginning. So actually we accept other stable coins at the at at the beginning. So when when you mint the stable coin you provide for example USDT, USDC or die and then this collateral is transferred to the third party custodian. So currently we use copper but we also will use other custodians to keep our collateral safe. So I think this is the safest

8:58Technology that is right now in the crypto in terms of like keeping the collateral safe and we then through off exchange settlement. So we never move the collateral to the exchanges because we know what can happen in crypto in terms of like exchange failures and so on. So we never move the collateral to the exchanges. It's always kept within the custodian

9:21and then there is technology off exchange settlement. So we basically trade on the exchanges without moving the collateral there. So after that after we receive the collateral in stables what we do we buy bitcoin on spot. So we open the spot position on the exchange and then we open a short position on the coin margin perpetuals. So right now it's like BTC

9:48margin perpetuals. Further down the road if we open like for example Ethereum or Salana we could use also Ethereum margin or Salana margin contracts to hedge the exposure. So essentially when you do that you're creating this synthetic position that is that has no exposure to the price movement. So if Bitcoin goes up tomorrow I don't know

10:1350% or goes down 50%. It doesn't affect our position because we basically losing for example collateral on the spot but we are earning this as a profit unrealized profit on the short side. So we if it goes down if it goes up you know it happens vice versa. So basically we our spot collateral rises in value 50% but you know our unrealized loss on the short

10:41side is also offsetting this discrepancy. So that essentially how it works. It's you can think of it as a hedge fund strategy because you know basis rate in Fredfi and also in crypto. So it's a basis rate that historically was available only for you know investors at hedge funds or you know accredited investors. So right now

11:07crypto enables you to create you know to basically tokenize it. So we can think of a stable coin as as a tokenization of the strategy. So we tokenized it and offered it to the public with low cost or you know almost at no cost and on top of that we also distributing this yield that was you know earned by by hedge funds and so on we distributing

11:28to the public. So yeah essentially that's that's the core I think narrative that we have and then like the whole idea of the stable coin. Yeah. No, that makes a lot more sense when you explain it like that. So, I appreciate the extra explanation. And one thing I'm curious about as trying to compete and gain traction with stable coins that have been around for, you

11:55know, 7 to 10 years is what create what factors play into creating a successful stable coin because I know you need easy access to it liquidity or different blockchains, you know, how can you get more adoption when you're competing with sta other stable coins? options that are on all of the exchanges for many years already. So yeah u I think the competition is

12:24divided like into in components. The first one is basically competition with you know centralized stable coins that are already available on the exchanges and that are used as as a collateral for you know trading pairs. Like if you go to any exchange you will see that the most liquid pairs are denominated in USDT or USDC. So there is you know one

12:48source of competition is basically enabling this product for trading for exchange. This is I think the biggest use case currently for stable coins in crypto and in general. And the second one is basically being a collateral in D5. So D5 is growing fast and I think for the product like ours it's essential to be represented in DeFi in as

13:18many places as we can. So there is another source of competition and we are currently focusing on the DeFi because u that strategy will allow us to you know to grow organically to get this organic traction. So we already have 10 million in TVL and we have some other soft commitments down the road and we recently did an integration with BNB chain they kind

13:43of like pushing the partnerships partnership with us and will be you know promoting us within their ecosystem and I think that will allow us you know to integrate with as many D5 platforms money markets lending markets on BNB chain and on Ethereum as well because we launched on Ethereum initially so it will allow us to present our stable

14:07coin as collateral for these values. So you can take YUSD. So you're earning from 8 to 12% annualized yield on top of a stable coin. You put it as a collateral for example in lending markets. You borrow some other stable coin or any other asset and you do it you know this for example leveraging strategy or any other strategy that

14:34is available in DeFi. Basically providing your opportunity to earn even more. So I think this is also the beauty of our product that allows you to boost your returns and basically create different strategies within DeFi. And obviously it is not for a regular user. It's a more profound user in crypto. But still there is a huge use case for that. And if we are looking

15:01longterm obviously the goal for us is to become you know the medium of exchange. So basically that the users can use YUSD to you know to become their own bank. So you buy US buy USD you earn yield on top of your like idle cash and also you can use it to pay for goods or you know to exchange on like different assets with on the

15:29exchanges or in your wallet and so on. So I think there are two components. Short-term vision is DeFi. Long-term vision is basically going into Trefy and becoming a stable coin that can be used for you know payments. Yeah, I think I think that's a great path and the focus on DeFi is especially important with your experience in DeFi and watching it grow over the years.

15:57still needs to catch up quite a bit to centralized exchanges, but there is that shift in more people being interested in doing decentralized finance and permissionless and you know for YUSD not having to negotiate with the exchange. You can just create pairs on the pools and start staking or pooling with other crypto assets. Where do you see DeFi right now in its infancy and you

16:24know the growth over the past couple years in more people starting to use it that are you know regular users that maybe they're holding Bitcoin, Ethereum, Salana u but they haven't really got into staking or into DeFi swaps. Do you think that we're in a high growth trajectory right now or there needs to be a catalystic movement or event that happens for more people to come into

16:48DeFi? I think D5 has seen a huge boost over the past you know two years. Although in terms of TVL you cannot you know tell that but in terms of like user experience and also the possibilities that you can take advantage of within DeFi they rose significantly and this is partly due to the different stable coins that are launching. So

17:15obviously we're not know the first one delta neutral stable coin out there. So there are a lot of other folks folks that are building the stable coins and this gave a huge boost to DeFi because users found a new use case within within D5 and it's proven to deliver high returns. So, and why why not to you know to use that strategies with

17:44the new stable coins launching. I think the major problem with DeFi is because it's still complex from the UI perspective. So I think major protocols needs to need to fix this UI problem. And from the user experience there is also fragmentation of the liquidity because you have you know dozens of chains

18:12that are not interconnected. You have bridges obviously but bridges are not that safe as we have seen historically. So I think fragmentation of the liquidity and like user experience and the complexity of different tools that what prevents D5 from the like real real growth. But I think it will be fixed. There is a lot of innovation going on

18:41In D5 right now and a lot of you know protocols that are you know trying new things how to you know to fix that and I think D5 will be one of the instruments that will bring you know this 1 billion users to web 3 in the next couple of years. Yeah I'm looking forward to it. there just a few key pieces that need to be worked out and I have seen it get significantly

19:04easier in the past few years and I think that will continue but definitely the amount of new blockchains the interoperability whether it's bridges and focusing the liquidity between those chains is sort of fragmented at the moment that will help greatly but I think another factor that we haven't mentioned yet is the regulation and legislation towards

19:29stable coins which could bring in institutions and tradi partners into DeFi that are sort of waiting for a green light on regulation and maybe they could bring in billions and then more retail will also join seeing okay you know the big money's in to defy now a lot of them are still in ETFs and I think they're waiting for DeFi to get a green light what do you think about

19:55the regulation around stable coins and you know the positives of it, the negatives of it as well, you know. And do you think that will bring benefit to YUSD over the traditional stable coins? Yeah, thanks for this question. It's it's a very important question for stable coins. I think regulation of the stable coins is still early. And

20:21there hasn't been any any progress on that. Although we have seen like a draft of the stable coin act and in the US and also micro regulation on the on the stable coins in Europe. But the problem here is those regulations are trying to push you know forwards centralized stable coins that have you know a fiat back reserves. But I think the reason for that is quite

20:48obvious and u for example the new stable coin act it's kind of like limiting the possibilities of growth for delta neutral stable coins or stable coins that provide yield because if you look at the centralized stable coins they provide they don't provide yield although the issuers they use the collateral in fiat and put it to work for example in treasuries or they buy

21:13tether buys bitcoin for example So that's kind of like the issue with this regulation but we need to comply with it. So we cannot you know do our own things and cannot and do not comply with the regulations. So our strategy here is to be compliant from the day one and to try to get as many licenses as we can to be able to offer the product in every market

21:40that we are targeting. So currently we are kind of like limited with that because we just started the licensing pro process in many jurisdictions but you know in the future we hope that we will we will comply with everything. So yeah the regulation is very important. It's obviously limiting some areas of the stable coin market but I think it

22:05gives clarity to the investors and to the users as well. So when there is clarity around like regulation you know that you as as a protect as a as an investor or user you are protected then you know you can use that tool for your purposes or as as investment you feel safe and that's why for example I don't know everybody trusts

22:34banks and bank deposits because there is a huge regulation around banks and you and you know that your collateral is kind of kind of safe. But you know since there is regulation you trust it. So if there will be a good regulation around suco coins everybody will trust coins as well. Yeah two great points that you made there. First, you

22:57you mentioned about the yield that Tether and these other centralized issuers, you know, if they're buying Bitcoin or they're buying Treasury bills, they're it's sort of like the banks and how it used to be, how it is, but it shouldn't be, is that they're earning a yield and you're not really earning a the user is not earning a yield on Tether, whereas with Aegis,

23:20you are earning a yield when you're you're holding it and staking it. So I think that's one of the major differentiators that needs pe people need to have drilled in to understand that's a major difference. And one other point I saw in the news recently was in the European markets as you're mentioning about the different licenses for different jurisdictions can

23:42be harder. I saw some negative news on Tether. It actually was delisted. I think it was because, you know, unable to be proving the onetoone backing of different markets. Do you see that as a positive for Aegis in the fact that everything's on the chain? It's transparent. You won't have issues like that entering markets that are asking for the clarity that blockchain

24:08provides. Yeah, I think that is definitely some some you know positive news for ages because when definitely when when there is some unclarity and uncertainty around other stable coin issuers most of the investors and users they will move somewhere else and when they are choosing within you know products in the market they most

24:33probably will stay within crypto and they will choose some other product that provides more more clarity and that is a little bit safer. But regarding the tether case I think the problem there is also like whether they can prove their reserves or not and also with the micro regulation you need to keep your reserves within European Union in European bank and I don't

24:58think that you know they're very interested in doing that. We will not discuss the reasons but basically yeah that's that's kind of like the problem with tether and also there are there were other you know stable coins that have faced a little bit you know pressure from the regulators especially from the German baffin so and that's kind of like

25:23the pressure that is also understandable but I think yeah they're pushing they're trying to push their own narrative and we as a stable coin is issuer or issuers in the market we need to comply with that. So you cannot do anything with that. We can obviously lobby for some know positive things like enabling yield bearing stable coins. You made a good

25:50point on like st centralized issuers taking all of this yield to themselves instead of like distributing to the users. So we kind of like want to push this narrative that you can be your own bank and basically you earn this yield that you're entitled to. But you know obviously if regulation says that we cannot do that. So there is there is nothing much we can do

26:15around that. Yeah. Well that is the ethos of web 3. So I hope that gets put into the bill. It makes sense. And no. So, if I wanted to try out YUSD on these different DeFi platforms, is there a go-to place that has the most liquidity? Can I go to unis swap or are there other platforms where most of the staking and the pooling is happening right now?

26:42Yeah. You can you can go to unis swap curve pools and buy yd directly. In the future we will enable minting of the stable coin directly from our platform for any user. You'll just need to pass the KYC and that's it. So also in the future we will enable pools on pancake swap with this integration with BNB chain that we have and also you will be

27:11able to you know borrow or lend YUSD on different platforms like oiler you can also participate in the yield u bearing product on pendle so we'll have pools on pendle as well and many different other platforms that permission list like Moro and so on. So yeah. Yeah, that's great to know. I'm going to check it out right away because I'm interested to learn more

27:38and follow along with the progress. And speaking of the progress, what's up the sleeve for Aegis in the road map for the rest of 2025 in greater adoption functionality? What still needs to be built? Yeah. I think the our core limitation right now is basically the market. So the market hasn't been very very good in the past you know

28:05couple of weeks. Although we continue to build and we you know we think that we can succeed even in this market because when every everything is falling you this liquidity it seeks some safe heaven or place where it still can earn some some yield and we are at the place when where where you can do that. If you look at our dashboard right now,

28:30it so the yield that we had is around 7%. Annualized currently even even in this market. So I think for us right now the c the key goal in the short term is and for this year is to become available at many defy platforms for the users to have access for it. Also, we want to do some integrations with wallets and exchanges.

28:59And I think that will provide a huge boost for us and also will provide a smoother user experience for anyone who wants to hold YUSD. So, we will push our core product this year. We did this integration with BNB chain. I think there will be a huge boost from them and we will boost the BNB ecosystem as well and after we do

29:27all this DeFi stuff we're also launching a points program so users can you know participate in all of these things that will provide some additional yield for them because you know we want to reward early believers in ages and after that I think we will start focusing on more broader exposure integration ation with this all you know

29:50threadfi platforms. I think the end goal for us is to become available for example on revolute. So imagine what will happen with if we could offer this kind of like product for revolute users where you and click one button and you start receiving yield on your idle cash. Isn't that great? Yeah, definitely. Cool. Well, that's great. I'm

30:14looking forward to seeing more wallets, especially I think when people see it in the wallet, then they go, "Oh, what, you know, especially when there's a yield button beside it saying, you know, at the moment it's 7%." They're like, "Okay, that's cool." so I think that's great. I'd love to see more wallets. I'm going to check out the current pools on the DeFi

30:33platforms on Uniswap and Curve as well. in terms of these updates that the team is working on and moving into Tradfi a as the months pass, what's the best place to follow along with those updates and also just learn more about the backing of the coin and how to, you know, get figure out exactly the details behind Aegis as you guys keep

30:55growing. Yeah, I think for the general product updates, everybody can follow our X account. So we post regularly about you know our traction the developments that we have also like information regarding different pools on how how you can buy it buy the stable coin how to receive yield and so on. So there was a lot of you know good information about about ages there.

31:24In terms of like transparency we have a dashboard on our app. So if you visit app.pages.im you will basically see the button called transparency you click on it and you see all the information regarding the backing the you know historical information on the price and so on. So you can you can go into that and

31:53you know check everything that everybody needs regarding to make sure that we are doing great and that everything is safe and the collateral is safe. So funds funds are safe of our users. That's awesome. I love that a transparency button. Hit that and all will be revealed. It's all on the blockchain. So thank you so much for your insights man into stable

32:17coins. It's of such importance and I think everyone could learn more about stable coins and the difference in what they're actually using right now and what they could be using get with yield and transparency. I will also leave a link to the Aegis app as you mentioned and the X socials to keep up to date in the show notes. Wishing you and the team all the best on Aegis and

32:39revolutionizing stable coins moving forward and let's definitely follow up in the near future. Yeah, thank you. Thank you. enjoyed our conversation. I think it was a great interview.