Why You NEVER Have to Sell Your Crypto

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By Connor
Estimated reading: 56mins

Liquid Loans’ Head of Media Matt Cho recently sat down with Jesse The Pit Boss to discuss how the Liquid Loans protocol can help Pulse holders to never have to sell their most appreciating asset. Check it out!


Matt: What’s going on, guys?  It’s your boy, Miyamoto. Hello to everyone watching live on YouTube.  Happy Thanksgiving to everyone, especially to our American brothers and sisters.  In this video, in this stream, I’ve got a really special one, a very very interesting one, much anticipated.  I’ve been seeing it on Telegram, on Twitter.  I’m going to be talking with Jesse the Pit Boss on Liquid Loans.  So, let me pull Jesse up.

Jesse: Hello.

Matt: How’s it going, man?

Jesse: Yeah, doing great.

Matt: Great to have you on the show.  Liquid Loans has been making a buzz in the Hex and Pulse community now for a couple of months, I think, right?

Jesse: Yeah, just a couple of months now.

Matt: Couple of months.  And I want to try something new, because people watching this video, some people might know a little bit, some people might know a lot, but let’s come at it from a different approach, and imagine that we met at a party, or a Thanksgiving party, mutual friends, the conversation turns to crypto.  And I tell you that I just threw a couple of thousand bucks into this crazy thing called the sacrifice.  I don’t know what it’s going to do.  My friend got me in.  We’re now six months, or even a year down the line.  I checked my MetaMask, and I’ve got 500,000 bucks sitting in there.  And I’m over the moon, I think I’m a genius, and I’m going to go through Coinbase tomorrow, cash out, get myself a Lambo, get myself a new apartment.  What would you say to that?

Jesse: I’d say, “So, do you no longer believe that PulseChain is a good product?”

Matt: I think it’s great.  I made money off it.

Jesse: Okay, would you like to be able to repeat that process of buying your Lambo, or paying your bills with that appreciating asset over and over and over again?

Matt: Of course, yeah, but I made a lot of money.

Jesse: Because I’ll tell you, once you sell that, once you sell, it’s gone, it’s gone forever.  You’ll have to buy back, likely at a higher price.  You start the process all over again, and wait for six months, wait for a year.  But you’ve already let it go the first time.  You do realize there’s other ways, right? There’s other ways to extract value, and get those things that you want or need.  So, it’s really not that confusing.

So, HELOC is a home equity line of credit, right?  Let’s say you own a home.  It appreciates in value.  You got a couple of options. You could say, well, I want to sell my home.  You’ll lose your home forever.  It will be gone, because you sold it.  And then you have a big pile of money.  You can go do something else with that money, but you’ve lost your appreciating asset.  Crypto is no different.  If you believe the Pulse coin will continue to just go up in price forever, why would you let go of it?  Why would you not do what people do with home equity lines of credit, or with other appreciating assets, what the wealthiest do with their assets.  They never let them go.  Take a loan against the value of your Pulse coin, right?

So, you’ve 500,000 worth of Pulse, I’d say don’t let go of that 500,000, because it will be gone.  It will no longer be working for you.  It will be working for somebody else.  And those Pulse coins are better in your hands, so that you can extract value from them, than just giving them away for some value, right?  Take a loan against your Pulse.  Take a loan against your Pulse.  Go get that Lambo you wanted.  Go do the things that you wanted to, but hold onto your Pulse.

Matt: Okay, so how do I do that?

Jesse: Well, it’s quite simple.  So, you enter into a smart contract.  Liquid Loan is an immutable, zero counterparty smart contract that allows you to put in some Pulse, and then take a loan out against it.  And you set your collateralization levels.  The parameters are huge.  You can do whatever parameters you’d like, as long as at least 110% of what you’ve extracted in the form of a different crypto currency, USDL stablecoin, but you mint those, as long as at least 110% of that value is put into the smart contract, you’re good to go.

Now, just like any other speculative asset, Pulse goes down and up in value.  So, 110%, that’s a minimum.  You wouldn’t want to put in 110%.  You say you have 500,000.  You could put in 500,000, and collateralize it at a level where if the price goes down, you’re likely not going to lose your Pulse.  You’re not going to hit any liquidation levels, where anybody can push the button and take your Pulse away.  Put in 500,000, take $100,000 loan.  Put in 500,000, take out a $50,000 loan, okay, something like that.

And as the value continues to go up and continues to climb and climb and climb, you can either withdraw excess collateral that you put in, or you can mint the additional stablecoins right behind that appreciating value, and just forever in all time, for the rest of the eternity, continue to extract value by minting stablecoins, and going to do the things that you want to do with those stablecoins.

We have quite a few videos that explain the whole process from start to finish.  I know you have some graphics.  Going to hold until the end.  We could show them now if you wanted to.

Matt: Well, let’s just talk a little bit more about it, just so we get into it.  So, I can use my Pulse as collateral to extract value in a form of a stablecoin.

Jesse: Correct.

Matt: I have to have 110% minimum.

Jesse: Right, that’s the bare minimum.  You’ll see most people will put in probably between 300% and 400% to protect from—

Matt: So, even if there was any violent movement in the market, I wouldn’t be liquidated.  Well, I could be, but it will have to drop something crazy like 70%, maybe 80%.  Is that what you would say for overcollateralizing in that way?

Jesse: Yeah.  It’s always safe to overcollateralize.  There are people in the community who say, “Well, I could lose all my Pulse.”  And I’d like people to imagine this as a stop loss, okay.  Because what you put in in the value of Pulse is almost equal to the amount that you draw out in stablecoin, regardless of what your collateralization level is, if the value of that Pulse falls to almost the value of what you’ve already minted through that liquidation point.  Now, you had all the time in the world to top up your collateral, to withdraw the excess collateral, to pay back some loans, to do whatever you want.  But if you sat and did nothing while you just stared at the price of Pulse going down and down and down, to the point of 110% of what you’ve already been minted in the form of stablecoin, you have to consider it as like a stop loss.

Let’s assume that the value is just going to stop right there at 110%, liquidate you, and then rock it back up again, or something, the odds of that is fairly low, okay.  Everyone’s going to have all different sorts of collateral ratio, okay.  And if your value of collateral falls, if Pulse is declining in value, because everyone is just selling it, because remember, the price goes down, more sellers than buyers.  So, if people are just dumping Pulse continuously, and the price is going down, and it gets to the point of you’ve already got your value out in the form of stablecoin, then it’s a stoploss.  It’s no different than a stoploss.  It just protected you from further downside.

Matt: And I guess if I’m still holding the stablecoin, I could just go back and buy more Pulse.  Is that correct?

Jesse: Absolutely.  So, there’s a good example that I’d like to give people, because I want to compare it to two scenarios.  On one hand, you have $100,000 worth of Pulse, and you do nothing.  You don’t use the protocol at all.  You say you don’t like Liquid Loans.  You think it’s risky.  You’d rather just hold Pulse.  So, you have $100,000 worth of Pulse, okay.

Now, I have $100,000 worth of Pulse, and I say, “Well, I’m going to use this protocol because I think it could protect me.”  And I’d like to spend some of my money in the meanwhile, while I’m holding Pulse.  I don’t necessarily want to wait 10 or 15 years to get some value out, okay.  So, I take my $100,000 worth of Pulse, and I put it into a vault, and let’s say I mint myself $70,000 worth of stablecoin, right?  Pretty low collateral level there, right?  30% difference there, okay.  And the markets can turn 30% relatively easily.  I could have chosen to put in more.  I could have chosen to put or take a $10,000 loan on my 100,000, but I chose, you know what, I want to get $70,000.  That’s my choice.

Now, the markets started turning.  The imaginary – well, it’s not always imaginary, but the horse everyone talks about.  What happens when the market goes down?  You lose all your Pulse.  Well, here’s where it gets interesting.  Here’s what people don’t understand.  The market dumps 50%, and I call you, and I say, “Hey, the market just dumped 50%, how much Pulse do you have.”  And you said, “Well, I had $100,000 worth, but now I have $50,000 worth.”  And I say, “Well, that’s funny.  I thought you didn’t want to use Liquid Loans, because I used Liquid Loans, and I put in $100,000, and I drew out $70,000 worth of stablecoin.”  It just so happens, my Pulse was liquidated at the $70,000 mark, or real close, but I’m holding $70,000 worth of stablecoin.” And I’ve already put that stablecoin to work for me elsewhere in the protocol, farming some major tokens.  I’ve taken those, and I’m earning the fees and such.

So, not only do I have 70,000, but maybe I even have 80,000, because I’ve been using that money for other things that entire time.  You have 50,000.  I have 80,000.  I just turn right around, and I go buy off the dip.  It’s literally a stoploss.  People have to realize, yes, there are points.  If you set your liquidation point too low, you could lose your Pulse, but you already have your stablecoin working for you, or maybe you’ve already put it to work.  Maybe you bought Hex with it.  Maybe you bought SHIB with it, or whatever you choose to go buy with it.

Matt: Hopefully not.

Jesse: You’ve already put it to work for you elsewhere, making money.  And this is what some people are having a hard time understanding.  Like there’s overwhelming amount of people that understand that get it right away.  There’s a handful of people that it would help for them to read the whitepaper.  This is literally a stoploss.

Matt: I think a lot of people have got that negative connotation with liquidation, right, the term, and it comes with leverage trading.  It comes with there’s a violent went down, and now, all my money is gone, and everything is gone.  Correct me if I’m wrong, but in this protocol, you got your stablecoin on the frontend, and like you said, if a price drops, you’ll have more than your friend all being that you start at the same place, and you could just go back in, and pick up more on the dip, so that’s what makes this really exciting, and obviously not a normal liquidation process when you think of leverage exchange trading platform.

Jesse: Right, absolutely.  Now, there are other lending platforms on Ethereum and other blockchains. The minimum collateral level is like 150% for one of them, 130% for the other.  What’s interesting is that the value of your collateral falls to 130%, they take it off.  They’re not just taking what they’ve already given you, what you’ve already minted.  They’re taking way more.  So, just to protect yourself, you have to go in with an absurd amount of money.  And if the value does fall, you’ll lose way more than what you’ve already gotten out on the frontend.

Matt: And where is this?  Is this on the Ethereum blockchain you say?

Jesse: Yeah.  And I’d like to discuss some differences between.  There had been questions.  What’s the difference between this protocol and like MakerDAO, or Compound, or Aave, or some of those other protocols?  Let’s talk about that.

Liquid Loans has algorithmic governance.  Other protocols have human governance.  They have tokens and voting, and the biggest bag holders have the say in what happens in those protocols.  But proven time and time again, there’s usually just a small percentage of the whales that have the majority of those tokens, so your say doesn’t mean anything at all with those governance tokens.

Matt: So, they’re not really decentralized.

Jesse: No, they’re not really decentralized at all.  So, those protocols can be voted and manipulated to what suits them the best, right?

Matt: Sure.

Jesse: This protocol here is completely algorithmic, and there’s no governance.  The code, once it’s released, that’s it.  It’s immutable.  It’s out there.  It cannot be changed.

All right, some of these other protocols use what’s called multi-collateral, meaning they don’t just accept one asset like Ethereum.  They accept all sorts of other tokens into it.  Now, there’s risk that comes with that, because a lot ERC-20 token projects, they have their own form of governance.  They have manipulation that can occur inside of those tokens.  Maybe their tokenomics are broken.  They’re not the most stable compared to Ethereum.

When you see Ethereum go up in price 10%, and you see an ERC-20 go up on price by 30%, 40%, there’s a reason for that, right?  And on the downside as well, right?  So, when you start introducing a lot baskets of assets being allowed to be collateralized, it’s extremely volatile.  It’s unnecessary volatility inside of a protocol that’s designed to mint stablecoins, okay.  So, single collateral, in our opinion at Liquid Loans, is always best.  Not a basketed bucket of assets that could be collateralized, single collateral.

Matt: And the only collateral is Pulse, right, in this protocol?

Jesse: That’s correct.  That’s correct.

Matt: Okay.

Jesse: Liquid Loans has decentralized finance.  Some of these other protocols have centrally hosted interfaces.  Everything about this protocol is completely decentralized.  In fact, after we launched the smart contract, users will be able to build their own frontend if they choose to, okay.  Completely decentralized.

USDL, the stablecoin in this protocol is directly redeemable for a dollar’s worth of Pulse inside of the protocol.  This tends to lead to a better peg.  So, on the Ethereum chain and some of these other stablecoin protocols back in May, you saw stablecoins trading at 75 cents, and it was crazy.  It’s like, how does that happen?  Well, it’s because the markets were so volatile, and the only place to arbitrage was outside of the protocol itself.  But in this protocol, built into the code, regardless of the volatility, anyone can take a dollar, a stablecoin, a USDL, and trade it for a dollar’s worth of Pulse, or redeem for a dollar’s worth of Pulse right inside of the protocol, regardless of what’s happening on any of the DEXes or any of the automated market makers or exchanges. That leads to near-instant stability of the stablecoin, because it all happens in-house, regardless what the market’s black-swan events or anything else that’s happening outside of the protocol.

Matt: So, just to go back, because compared to other blockchain protocols like this, they’re using a multitude of coins for collateral, and all of those are going in different directions.  Because you guys are only using Pulse, that’s going to be a lot more stable.  Is that correct?

Jesse: Yeah, that’s quite a bit more stable.  That, combined with the fact that you can redeem a stablecoin for a dollar’s worth of Pulse at any time right inside of the protocol.  So, if the stablecoin starts trading a t99.5 cents, which could happen, if somebody goes and dumps a bunch of them on an automated market maker somewhere, it will move the price a little bit, but it will only be for a brief period of time, because even inside the protocol, people can trade it for a dollar’s worth of Pulse immediately.

Matt: Okay.

Jesse: This protocol has no interest, zero interest at all.  There’s other protocols that have recurring interest payments that you have to make.

Matt: True.

Jesse: Even some of the newer ones that you hear about, Abracadabra, Magic Internet Money, they have interest.  You can take a loan, but if you held that loan for eternity, you would have an eternity worth of payments that you have to make just to sustain that loan.

Matt: So, their protocol is still very similar to the centralized finance, like going to bank, right, and getting a loan, and paying 5% or 10% on that loan.  Is that the way they approach?

Jesse: I would say that, absolutely.

Matt: Okay.

Jesse: So, there’s no interest payments on this, right?  There’s a small fee that you have to pay at the beginning.  And you can consider it a fee that’s fluctuating.  It’s typically going to be 0.5%, a  half of a percent.  And that fee comes right out the USDL that you’re minting.

Matt: Okay.

Jesse: And that fee doesn’t go to us.  It goes straight to the stakers inside of the protocol.

Matt: Okay.

Jesse: But once you take a loan, and that fee goes straight to the stakers, that’s it.  There’s no interest payments.  The other protocols, they have a recurring payment.  You have to keep making that.

What are some other differences?  I talked about how the collateral.  The very minimum is 110%.  And I’m not saying that because I’m suggesting that people take a loan, and only collateralize 110%.  It’s likely you’ll lose your Pulse.  Although, you did get your stablecoin on the frontend.  The reason why it’s important that the minimum collateral is only 110% is because those other protocols, where the minimum collateral is 130% or 150%, you have to realize if the value of your collateral falls to 150%, you’re going to lose 150% of what you minted to yourself.  So, if you took a loan of $100,000, and your minimum collateral level was $150,000 worth of Ethereum, if the value of Ethereum falls, you’re going to lose $150,000 for what you’ve already gotten on the frontend of 100 grand.  You just threw away 50 grand.  That’s ridiculous.  It’s absolutely ridiculous that they would even have it programmed in that you need that much collateral.

Matt: Sure.

Jesse: That’s a way for them to take a lot of money away from you.

Matt: So, the most you’d ever pay on Liquid Loans is 10%, is that correct?

Jesse: Correct.  However, most people – and this is proven in the Liquity contract. Liquid Loans is a direct fork of Liquity.  You can go see what are people doing with their stablecoin after they mint it.  They’re putting it to work for them.  They’re putting it into the stability pool, and they’re earning tokens.  They’re taking those tokens.  They’re going to stake them for the fees.

You said the most you can lose is 10%.  If you did nothing good with your USDL, that’s true.  But if you put that USDL to work for you that entire time, it’s very possible that you don’t lose a thing, right, because you’re gaining with your USDL.  You’ve already put it to work for you.

Matt: So, in this protocol, we have Pulse, we have USDL, and there’s a third token, correct?

Jesse: There is a third token, correct.

Matt: And that is the loan token, is that right?

Jesse: That’s the loan token, yup.  And it’s not just duck taped on.  It has a very important use case.  It’s essential to the protocol.  It incentivizes certain behaviors inside of the protocol.

Matt: So, you get that token from being a stability provider, is that correct?

Jesse: That’s correct.  So, if you put USDL into the stability pool, which is designed to be there to buy any Pulse in the event of any liquidations, and burn that stablecoin.

Matt: Yeah.

Jesse: And just to recap, anyone can pay back their loan.  You just bring back your stablecoin.  It burns, and it releases the equivalent value, plus 10% of Pulse.  That’s how you payback a loan.  Just bring back stablecoin, it burns, poof, gone.  It releases the equivalent value of Pulse.

Matt: Well, that answers that question here, because someone was paying back the loan question mark, but there you go.  You pay it back, and then you release back what you deposited before.

Jesse: Right.  Now, we’re not talking coin count though.  We’re talking value.  So, any appreciated value that you deposited, that’s always you.

Matt: Okay.

Jesse: The most you get ever lose is 110%.  That’s correct.  So, if you’ve taken a loan of $100,000, but you’ve got $1 million worth of Pulse inside the protocol, you can essentially withdraw 900,000 at any time.  You don’t have to pay anything.  Just draw it out if you wanted to, or mint additional stablecoins if you wanted to.

Matt: Got you.

Jesse: Okay.  Now, what’s the stability pool for?  That’s for picking up any liquidations that might happen.  So, you’ve got a big pool of stablecoin.  Those stablecoins are just sitting there ready to burn.  In event that there’s a liquidation, some of those stablecoins burn, and the stability providers, thousands of people participating in there, they pick up the Pulse.

They’re incentivized to do this.  They’re incentivized to be there ready to go by farming this thing called the loan token.  So, they’re all earning this thing, loan token.

What do you do with the loan token?  It’s very simple.  You take it, and you go put it in the staking pool, and you earn the fees from the loan—

Matt: I think this will be good time to pull up, unless you’re on a roll on anything else, but we pull up the graphic, and just chat through that.

Jesse: Yeah, let’s do that.  All right, so here we see you got some Pulse, you got your wallet.  You decide you’re going to take some of that Pulse, and you’re going to put it into a vault.  Now, out of that vault, you can mint yourself some stablecoins and USDL.

At that point, you have a couple of choices. You can go ahead and spend it.  You can go up.  You can go spend on that castle in that picture, okay, or you can say, “Well, I want to go put it into the stability pool, because I want to put this money to work for me.”  So, you drop it into the stability pool.  Now, while you’re participating in that, if there’s any liquidations, you’re going to lose some of that stablecoin, but you’re going to be earning Pulse the entire time.  You’re going to be earning Pulse while it’s in a dip, and at a 10% discount, okay.

Matt: Okay.

Jesse: Now, out of that, that tells us, look, at any point, you can withdraw your USDLs.  You see there’s some USDL coming out of it.

Matt: Yep.

Jesse: You’re not earning USDL in there, but you can withdraw it, what you put in.  It’s not locked.  Just go in there, and withdraw it.  And now you can go spend it, or whatever, okay.

You’re also earning Pulse.  You see.  While you’re being a stability provider, you’re earning Pulse, and you can go put that back in your wallet, and repeat the cycle.  Or you see, you’re also earning loan token, because you’re farming that while you’re in there.  Now, you can take that loan token.  You could see, it says you can go spend it.  That basically means you can take it to Pulse Swap if you want, and trade it for whatever you want.  Go sell it or whatever.

Matt: Sure.

Jesse: Or you can do what would be the smart thing to do, and you can go stake it.  When you stake the loan token, you collect the fees, the fees that everyone has to pay when they take a loan, and that’s USDL.  You also collect Pulse.  You see that down at the bottom.  You collect the Pulse from the arbitrage that I talked about earlier.

Matt: Yeah.

Jesse: So, you’re collecting USDL and Pulse while you’re staking the loan token.  There’s no staking length.  There’s no term length or anything.  You can unstake at any point in time.  You can withdraw your loan tokens, go spend any of these.  And what I’ve heard a lot of people will do is they’ll stake the loan token to earn USDL, which they’ll add to the stability pool.  And they’ll also be earning the Pulse coins, which they’ll use to top off their collateral, or they’ll use the USDL to pay down their loan.

So, if you use the USDL to obtain loan token, so that you can earn more USDL, you can actually pay back your loan using other people’s money, okay.  It’s just a way for you to earn.  Listen, this is no different than a bank.  This is a community bank where the community earns the fees from each other.

Matt: Amazing.  And one thing I liked, having looked at the whitepaper, was completely decentralized, immutable, no admin keys.  That’s correct, right?

Jesse: That’s correct.

Matt: Also, with staking the loan token, do you know what the APY on that will be, or is that up in the air at the moment?

Jesse: It’s impossible to tell.  Okay, these are some interesting facts.  So, on the Ethereum chain, the Liquity protocol has maybe 1,300 open loans, and the APY for those stakers is 22%.  Okay, 1,300 loans, 22%, okay.  We are coming up on 5,000 people on our Telegram.  Probably by the time we start this thing, 10,000 people are going to be using this protocol.  We have no idea what the APY is going to be.  I imagine it might be better than what it is on the Ethereum chain by far, but there’s literally no way to tell until—

Matt: Sure, time will tell, but that’s promising.

Jesse: And the Avalanche chain, there’s a version of it, same code, 62% APY.

Matt: Wow.  And is that constant, or is it fluctuating, depending on—

Jesse: It fluctuates.  It literally depends on how many people are taking loans, and how big those loans are.

Matt: Got you.  I got a question here.

Jesse: In the health of the system, right?  Because the fees fluctuate kind of base on the health of the system.

Matt: Okay, interesting.  A question here from Hex Turbo.  I don’t know if you can see this.  I’m going to sacrifice for Liquid Loans.  I’m mostly likely going to lock up my sacrifice points for two years.  Can Jesse explain how this might be better than staking loan token at a launch for two years?

Jesse: Yeah.  So, we always hear that term stake it until you make it, or delayed gratification is always the best.  Imagine this.  Let’s say you had a pocket full of money, and you decided not to participate in sacrifice.  Where are you going to write loan token?

Well, first off, the only way to get them is from people who already own them, or from the stability pool farming, which could take some time to farm them, right?  Because you’re earning just a little bit every day.

Matt: Sure.

Jesse: Okay.  So, you’re going to be buying from people who are likely in the genesis addresses.  Then you buy in price, you would assume, would be much higher, because those people would prefer to be staking them, okay.

Matt: Sure.

Jesse: That’s just one example.  Now, if you took that dollar value, and you’re able to obtain some, let’s say you bought them, and then you stake them, let’s say you’re getting at 22% APY like they are in Ethereum chain, but your token quantity is five times less than the token quantity that you could have had, had you participated in a different way.  Is that 22% worth it to you, or would you have more enjoyed to have maybe a 5X on your token count, or maybe a 10X on your token count, depending on the prices that people are willing to sell them for and such, right?  What I’ll say is, history has shown that delayed gratification and staking or locking things up is normally better in the long run for somebody.

Now, you can do a ladder.  You don’t have to choose two years for all of them.  So, if you come into the sacrifice, and you say, “Well, I want some of my points from my political sacrifice to be available immediately, and I want others to be locked for six months or locked for two years,” okay, you can make that choice, so that you do have some of them available immediately.  But any multipliers on those are – the ones that locked up the longest will have the biggest multipliers.  So, just bear that in mind.  You might want to do some sort of ladder.

Matt: So, is that people that are only participating in a sacrifice phase are going to have that kind of way to lock things up for a certain amount of time?

Jesse: Yeah, because everyone else will have to wait until they can find these on the open market, or they can become a stability provider to obtain these things.

Matt: Got you.  Red Squirrel asked, “When we repay the loan, can any amount be added, or will it be a set amount?”

Jesse: So, the minimum loan is $2,000.  So, if you’re thinking of $50,000 loan, yes, you can pay back a dollar, you can pay back $10.  But once you get down to the last $2,000, that has to be paid in one lumpsum, but [crosstalk 00:34:45] loan amount is $2,000.

Matt: Got you.  So, anything down to 2,000, could be a dollar, could be 10,000, could be a million, but after that last 2,000, they’ll say it has to be closed out pretty much.

Jesse: Correct.

Matt: Okay, good.  So, let’s just see.  Well, let me go to one of the questions I had.  What do you think this will do for the price of the PulseChain, for the Pulse coin obviously?

Jesse: Well, I think it’s going to be interesting.  So, I said we’re almost to 5,000 people.  It’s 5,000 people who aren’t going to be selling, who are likely never to sell their Pulse, very very high price appreciation.  The more people that use us, the higher the price goes.

We could get into a situation where the only trading of Pulse that happens is when people want to trade it for other PRC-20s, or at the point of where people sell to try and get out.  What if that never happened?  What if nobody sold to try and get out.   There’s still swapping that occurs for PRC-20s, but if nobody sold to exit, to get value out, the price can only go up, because all that price cares about is more buyers and sellers, and inside of this protocol, there’s no selling.

Matt: Super bullish.  Basically, supply and demand obviously, right?  And there’s going to be a lot of demand and little supply.

Jesse: Absolutely.  It’s all these people that are just locking up Pulse, locking up Pulse continuously, because they’re still attracting value.  Listen, you have a choice.  If you want to get value out of any crypto currency, we’ll say Pulse, right, you’re going to take it Uniswap, and you’re going to dump it.  You’re going to have some slippage, and you’re going to pay the tax man probably 36% or 40% or whatever it is in taxes.  That’s getting pretty close to 50% of your value.  So, whatever you decide to sell, if you’re doing what you should be doing with your taxes, you’re losing half of your money.  It’s ridiculous.

Now, you’re staring at a protocol right on your screen right now that allows you to avoid that.  You could take all of your value, put it into the protocol, and guess what, in most jurisdictions, all of them that we’ve ever heard of, loans are not taxed.  So, you can get your money out without paying 40% to some tax guys.

Matt: Amazing.  Actually, that leads onto another question, because I dropped this in the UK Hexican chat, and someone dropped me this question for me to ask you.  They say, “I’m curious as to whether there’ll be a possible loan document, collateral agreement, loan agreement, or a similar document to be used to prove the source of the funds,” I guess for tax reasons or some other stuff like that.

Jesse: Yup.  You can print the smart contract.

Matt: Okay.

Jesse: You can grab that from the blockchain explorer.  You can go to the frontend.  You could take some screenshots.  Crypto loans aren’t necessarily a new thing, right?  I mentioned Compound, Aave, Maker, others.  And then there’s some centralized versions, Celsius and some others, right?  There’s nothing new about crypto loans.  It’s just how we’re going about doing it.  We do believe this is better than the others.  You can get money all the way back to your bank, and typically, they won’t ask.  If you’ve ever sold crypto before and sent tens of thousands or hundreds of thousands to your back account, typically, your bank doesn’t care. They’re going to deposit, and you go about your business.

Now, if for some reason, your tax people want to know, it is very easy to show them.  Look, Liquid Loans, I have collateralized assets right here.  I’ve withdrawn a loan.  Here’s the smart contract.  Here’s the screenshots.  Here’s my agreement with the contract, and it’s a done deal.  But most jurisdictions, people don’t even report loaned assets.  Like if you got a loan from a bank right now, or you go swipe a credit card, you don’t put that on any documentation anywhere, because it’s not your money.

Typically, we’ll pay taxes on capital gains.  There’s no capital gains here.  You haven’t sold anything.  You’ve taken a loan.

Matt: Got you.  Red Squirrel asked, “If you lock up the loan for two years – I’m assuming loan token – will the USDL rewards also be locked up?”

Jesse: So, while your points are locked up, you’re not earning any USDL rewards.

Matt: What are you earning, more loan token?

Jesse: You’re earning a larger multiplier bonus and your points, which could equate to loan token.

Matt: Okay.  Let’s have a look here.  HEXiCAT asked, so the USDL and the loan will lock up for – we just answered that.  It’s not going to be.  It’s just going to be the loan token that’s locked up for two years.  Giving you more points, correct?  It’s not staked.

Jesse: It’s not staked for the rewards during that lockup period.

Matt: Sure.  Another question—

Jesse: A much larger bag of them.  When they are unlocked, you should be further ahead than you would have been.

Matt: Okay, another question.  When will we see the updated website, and what can we expect to see on there?

Jesse: I’d say the updated website within two weeks.

Matt: Okay.

Jesse: There’s going to be a lot of learning materials on there.  There’s going to be used cases, how do you use this protocol for what type of person you are.  So, maybe you’re in the real estate, or maybe you’re just heavy into crypto.  There’s going to be all sorts of different use cases for how this protocol can benefit you.  There’s going to be some instructional videos how to use the protocol.  You’re going to see the team.  You’re going to see me and all our – we’re docs down there.  You’ll see our history or our resume, so to speak.  It’s good.  I’m telling you, it looks really really good.  There’s a lot of materials to dig through and read in the website.  And I’d say maybe another two weeks, it will be updated.

Matt: Okay, great.  Well, I look forward to seeing that.  I mean, when I first heard about the project, I did my own research, and I’ve watched you on a few different things.  I think it seems really bullish.  And one thing that I’ve heard you mentioned this before, when you’re utilizing Liquid Loans to the best way you can, you’re using money and collateral like the rich do, is that correct?

Jesse: Yeah, absolutely.  So, there’s a few different types of people who might borrow money, or not borrow money, right?  So, you have people who don’t have any money.  They don’t have any resources to begin with.  So, the financial bar, the comfort level is right here, and they’re below the bar.  They’re not comfortable.  They’re not at that comfort bar.  So, they have to borrow money to feel comfortable for a short period of time.  And then they had to pay it back.  And then it’s just a never-ending cycle. They have to keep borrowing money just to feel comfortable for a short period of time.  And it sucks to be in that situation, right?  A lot of people here have probably been in that before, cycle of borrowing assets when you don’t have your own assets.

Maybe people who don’t even take loans, they don’t even borrow.  They just work, or maybe they have some money.  They feel comfortable for a period of time.  They make money, but then they spend it, okay.  They make money, and then they spend it.  So, they’re always right there at the bar.

So, how do you go above the bar?  Well, you could have a ton of money already, right?  So, you’re already up here, but if all you’re doing is spending your appreciating assets, you’re just spending away, spending away.  And there could come a point where you’re just comfortable again.  You’re just spending the things that should be making you money.

So, what the wealthy do is they’re already above that bar.  They already have plenty of money.  And they say, “Well, we want to retain these assets that are appreciating in value,” whether it’s real estate or crypto, or some stocks, or whatever the case may be, and they just borrow against those, okay.  So, they already have a whole bunch of comfort level above here.  They borrow and repay, and borrow and repay, and borrow and repay.  And that financial comfort bar keeps getting further and further and further.  They just start accumulating wealth above that bar, because they’re using other money while they’re still holding onto their most appreciating assets.  This is what the wealthiest people in the world do.  Now, we have that option here in crypto with a smart contract to do that ourselves.  To bring what used to only be available to the wealthiest of the wealthy, and now we can all do it too.

Don’t let go of your Pulse.  You will regret it.  I’m telling you, you sell Pulse, even if it 100Xs, you’re going to sell it, and you’re going to be happy for a period of time, until you forgot where you spent that money on.  And then two years after that, three years after that, you’d look back, and it’s at 10,000X, you will look back and say, “Oh my gosh, if only I would have held it.”  There’s not a single person who sold Bitcoin between zero and $50,000 who didn’t say, “Oh my gosh, if only I would have held.”  Yeah, maybe they made money.  Maybe they sold 10X or 100X, but if they had just held on, they could have enjoyed that right all the way up to a million-X or more, right?  Don’t be that guy or gal.  Don’t sell your most appreciating asset.  It’s ridiculous.

Matt: So, I guess to sum this up, it’s kind of like just I hear a lot of the time in crypto, follow the smart money, right?  Do what the smart people do.

Jesse: Yes.

Matt: Okay.  Is there anything else you want to talk about?  There’s a few questions here about sacrificing.  Did I interrupt you on any of the topics?

Jesse: Yeah, just a couple things.  So, some of those other protocols, the Maker, Aave, Compound, any of the liquidations that might occur, their collateralized assets go to Uniswap, and they get sold, and it further dumps the price.  That’s not good.  Or they have options, okay.

In this protocol, that doesn’t happen.  First off, most people will be collateralized safely. The protocol forces the average users to have safe collateralization levels.  But for any of the liquidations that do occur, it doesn’t further dump the price, because the stability of depositors have already put the stablecoin into the stability pool, ready to buy.  So, there’s no dumping that occurs.  Nothing ever goes to the Uniswap inside of the protocol.

Two more differences.  One more difference.  I’ll tell you about one more difference.

Matt: Sure, go for it.

Jesse: This protocol has a mechanism called recovery mode, where if for some reason, there’s some sort of black-swan event, out of the control of the protocol, this protocol goes into what’s called a recovery mode to fix itself.  Other protocols literally have what’s called like an emergency shutdown.  Stops all activity altogether, everything shuts down, which is not good.  You want a system that’s algorithmically always steering towards a better health of the network and all the users, not something that, oh, there’s a black-swan event, turn it off, flip the switch.  That’s ridiculous.  We’ve seen a blockchain that did that.

Matt: Solana, right?

Jesse: Solana did that.  They said, “Oh, no, flip the switch, turn it off, turn the blockchain off.”  That’s ridiculous.

Matt: Doesn’t sound very DeFi to me, but yeah.  Tom asked, “Does Jesse think sacrificing for loan will be more profitable than buying Pulse?”  I mean, I guess it’s all speculation, but any ideas on that one?

Jesse: So, remember what you’re sacrificing for.

Matt: No expectation from the work of others.

Jesse: Right.  So, let me read this straight from the website, the Sacrifice.io by the way.  In an act of free speech, likeminded community members may show their disapproval and rejection of corporate owned censorable centralized stablecoins by sacrificing them, in the hope that a different community own trust this algorithmic stablecoins will merge on the PulseChain network.  The sacrifice adheres to a premise of absolutely no promises from the work of others, and only a hope that something better will materialize on PulseChain.  Also, the sacrifice is modeled after the key Richard Heart principles of delayed gratification, fairness, and community commitment.

So, in the hopes that loan tokens will materialize on the other side, as far as profitability, the markets always decide what any token is worth.

Matt: Sure.  The market will decide, yeah.

Jesse: I can’t speculate it on price of any of the loan token.  I can’t do that.

Matt: Sure.  Hex Turbo asked, “How does the locking mechanism work for the sacrifice?  Do you have the option to unlock any time, or is it locked for the date you set?”

Jesse: That’s something we’ve discussed, okay.  As of now, when you lock, that’s it.  You’ve made that decision.  You’re locked in for that amount.  We have been spitballing the idea of an emergency end stake sort of function, where you could lose some of your bonus, and that bonus would be distributed to the others who are sticking to their commitment.  We’re just spitballing that idea, okay.  Don’t take that, and say, “Oh, Jesse said emergency end stake are lock.”  Don’t say that.

Matt: Okay, so still is unknown.

Jesse: It is unknown, correct.

Matt: Okay.  [Inaudible 00:50:13] asked, and I think we already answered this, but I think some people are probably thinking this, who are watching this video.  When loan start to get liquidated, that’s very different to liquidations on leverage trading sites, right?  It’s not going to cause a cascading effect, is it?

Jesse: Yeah.  So, what happens on leverage rate, first off, you put in a little bit, you get a lot.

Matt: Sure.

Jesse: So, if the price moves a little bit, you lose your little bit that you put in.

Matt: Sure.

Jesse: In this protocol, you put in a little, and you get a little, or you put in a lot and you get a lot.  And if the price moves against you, you still have a lot.  You’ll get all your value on the frontend in this protocol.

Matt: It’s a reverse.

Jesse: It’s like a reverse, yeah, absolutely.  And if there’s any liquidation, first up, you already got your money upfront, and the collateral doesn’t go to Uniswap and further down with the price.  It simply migrates over to the stability providers who are waiting.

Matt: Got you.  Moomin Man asked, “Do you intend to have a Pulse-USD pair in Pulse Swap or equivalent on launch date?”

Jesse: Yes, and stability or liquidity providing will be incentivized as well.  So, liquidity providers will get paid in the loan token for being liquidity providers of those tokens.

Matt: Obviously, PulseChain isn’t even out yet, so this protocol won’t go live until PulseChain is out.  How long after PulseChain goes live?  Is there any ideas of when you guys will go live?

Jesse: We keep thinking it’s probably going to be around a month.  There’s going to be a whole bunch of weird volatility in that first couple of few weeks.  And we don’t want to subject everyone to all that volatility.

Matt: There always is sort of the launches of stuff, isn’t there?

Jesse: Right.

Matt: Sure.  BallietBran asked, “Adam Stokes, the other day, interviewed the CEO, Crypto Crazy I believe.  He mentioned Liquid Loans wasn’t an exact fork, but some slight changes were made.  Do you know what those changes are/were?”

Jesse: Yup.  So, built into the code, first off, there’s all sorts of PRC settings that have to be changed, so it can communicate with any blockchain.  But then there’s subgraph and there’s Oracle.  There’s things that are searching for prices elsewhere, or things that are doing calculations on Ethereum chain, but we’re not on Ethereum chain anymore.  We’re on PulseChain, right?

Matt: Sure.

Jesse: You have changed subgraph stuff.  You have to changed Oracle stuff, and then also PRC settings.  That’s just a few of the things that you have to change.  It’s not a whole lot that you change.  Just enough to make it communicate and run smoothly on the new blockchain.

Matt: Okay, great.  So, is there any other points that you want to talk over?

Jesse: No, not unless there’s any questions.

Matt: Let’s have a look at that video.

Jesse: Yeah, let’s do that.  People are always curious to see.  Well, what does that even look like?

Matt: Exactly.  So, let me just get rid of this comment, and then we can see this properly.  So, let me just go back to the beginning here. What are we looking at here?

Jesse: So, when you log into protocol, right now you’re in the vault tab, and you could see that you click deposit, and you can deposit some Pulse.  And then it’ll tell you how much you’re able to borrow, and then you could just type the amount that you would like to borrow.  It’ll also tell you what your collateralization level is, like what health you’re at.  It shows you all the protocol stats, what are other people collateralizing at.  You can see, like if you were the back up, total collateralization ratio, for example, it shows that other people collateralized at 258%, all right.  So, if you’re like, ah, I don’t want to be on the lower end of the collateral level.  I see everyone else’s average at 258.  Let me put myself at 400, okay.  I mean, you can make that choice.  You can see what the supply is, how much is in the stability pool.  You could see how much is staked.

Matt: And you can come back any time, and you can top up, or you can withdraw more, right, depending on what’s going on with the protocol, and obviously, the price of Pulse.

Jesse: Yup.  So, you can see deposit and there’s a withdraw button there.  So, any excess value, so if Pulse just continues to go up in value, and you want to withdraw some of it to go do something else with it, just hit the withdraw button.

Now, the protocol will keep inside of it whatever you have already minted in the form of stablecoin.  It’s going to retain that much Pulse to cover that value, plus 10%.  So, you can’t withdraw all of your Pulse if you have taken a loan.  It’s going to retain some Pulse, unless you pay back that loan.

Matt: Got you.  I mean, it looks like a frontend that we’re pretty much used to.  Kind of like a Uniswap or a Match or something like that.

Jesse: Right.

Matt: It looks nice and clean.  So, summing it up, and correct me if I’m wrong, you’re branching what was being done on legacy finance for a long time, collateralizing something, maybe a house or some property to then borrow money against, but this time, we’re using our crypto.

Jesse: Yeah, absolutely.  Imagine buying a house.  People are going to buy houses using this protocol.  Imagine all the ridiculous paperwork you have to go through when you take a mortgage from a bank.

Matt: Yeah.

Jesse: And if you’re to walk into a bank, they’ll say, “Well, what’s your collateral?”  You say, “Well, I have all this crypto,” and they’ll likely laugh at you, and say, “Well, crypto doesn’t mean anything to us.”  You have to fill up a bunch of paperwork.  They won’t care a bit about any of your crypto.  Well, here, if you got a million bucks, and you want to buy $200,000 house, whatever, you simply hit a few buttons on your computer.  You got USDL, which you can then swap through a bridge, and however you want to, and literally have the money in your bank account within minutes, and go buy your house with cash.  And essentially, you have just taken a loan without ever going through a bank.  You’ve just collateralized your own asset.

Matt: Sure.

Jesse: Bought a house with no mortgage payment.  That house is forever yours to live in for the rest of your life with no payment.  And you just did that—

Matt: No interest.

Jesse: No interest with collateral that you just simply minted a loan off of your own collateral.

Matt: I mean, yeah, it’s kind of staggering, and the more I hear about it, the more bullish I am on it.  I’ve heard you say this a few times, right?  You always advise to be overcollateralized.  We talked about this already.  Obviously, no one wants to be liquidated, obviously.  What kind of ratio would you say will be the ideal?

Jesse: You’re going to see that most people collateralize between 300% and 400%, as an average.  I would say, most people will not want to be under 150%.  There’s other mechanisms that come into play in black-swan events that could affect people that are under 150%.  I will add though that the most you could ever lose is 110% of the value of what you’ve already minted at that moment in time.  But stay above 150 or be like the rest, and at least be a 300% or 400%.  If you’re just super scared, well, 1,000%.

Matt: Hyper overcollateralize.

Jesse: Right.

Matt: So, a thing just popped into my head.  I guess this will be plausible, right?  You take double what you actually need, and let’s say you need $100,000 for something, you take $200,000, overcollateralize.  Obviously, you have to have the Pulse for that.  The 100,000 goes to what you need to do, and the other 100,000 can be for stability provider, and incoming loan, and staking that, and then paying back the original loan.  That could be done quite easily, correct?

Jesse: Absolutely.  There’s something else I want to talk about.

Matt: Sure.

Jesse: How about borrowing versus selling?  Let’s say that you don’t want to use the protocol.  Borrowing versus selling, do you have that picture or no?

Matt: Is that on your Twitter?  I can find it.

Jesse: I can Telegram it to you.

Matt: Sure.  You Telegram it to me, and then I can follow up.  Let’s have a look here.  Hold on, guys.  Jesse is just Telegramming.  Okay, here we have it.

Jesse: There we go.

Matt: Hang on.  Sorry.  Let me just download this quickly, and give me one second.  I just need to pull this up from my downloads.  Sorry, guys, give me one sec.  If you just talk through this.  What is borrowing versus?

Jesse: Yup.  So, this is a chart that was made by a community member.  It shows the differences if you were to sell on every double versus borrowing on every double.

So, let’s say you had an investment of $2,000.  Price doubles, you take out.  You invested $2,000, let’s see.  Your total profit $1,000.  Price doubles.  You still have $2,000.  Every time the price doubles, you take out half.  It puts you right back at $2,000 with what you have invested.  So, if $2,000 doubles, you have 4,000, you take out 2.  You still only have $2,000 invested.  You extract value in every doubling, your investment never changes.  It stays the same. You always only have $2,000 invested.

Matt: Sure.

Jesse: So, if you have $2,000, price doubles, you have 4,000.  You take out 2,000.  You still only have $2,000 invested.  Price doubles again, you take out 2,000.  You still only have $2,000 invested. This can go on for eternity, and you’re just scraping off appreciated value.  As the price appreciates, you’re just scraping off the excess value to go buy your groceries, buy your Lambo, do whatever you want, okay.  That’s selling.  That’s what selling is.  Selling is just scraping off appreciated value.

Matt: Yes.  Sorry, carry on.

Jesse: There’s a big difference between that and borrowing on every doubling, or taking a loan out, all right.  So, if the price is $2,000, and you take a loan for $1,000, the price doubles, you have $4,000.  There you go.  Look at the left side.

Matt: Yeah, here we go.

Jesse: Let’s look at the right side.  This was made by a community member, by the way.  All right, on the right side, you see what the sellers do.  They are literally just scraping off their appreciated value.  Any time the value goes above $2,000, if that was their initial investment, they’re just scraping that off, okay.

Matt: Taking back initial investment.

Jesse: The price can go through – let’s see.  How many doublings?  One, two, three, four, five, six, seven, eight, nine, 10 doublings, and they only have $10,000.

Matt: Yup.

Jesse: That’s what you gain when you just scrape off appreciated value, okay.  Look at the left side.  You start with 2,000.  You take a loan out of 1.  The price doubles.  Now, you have 4,000.  You take out a loan of 2.  Price doubles, you take out a loan of 4. Price doubles, and it doubles 10 times, look how much you scraped off in the form of a loan, $512,000, because you decided to hold your appreciating asset, instead of just scrape it off and go sell it.  There is a huge difference.  People need to understand, this is what rich people do.  This is what the wealthiest people in the world do.

Look at how that appreciating asset.  Why would you ever let that go?  Why would you ever dump it like the guy in the right, the seller?

Matt: Yeah.

Jesse: You’re just scraping off all the appreciated value, so all he ever had is $2,000 worth of investment.  It’s ridiculous.

Matt: I mean, it’s a no brainer when you look at it like this.  It’s night and day, isn’t it?  And I think, yeah, you’re right, I think a lot of us need to rewire our brain, right, and stop thinking short-term, and start seeing how the smart money are using money to make more money, and using the assets to make more money.

Jesse: So, that’s all I have, unless people have any more questions.

Matt: Let’s have quick look at the questions.  No, it pretty much looks like we’ve got to all the questions in there.  Quick comment here.  Look how much Eth pumped with gas fees for using liquidity too high.  Now, imagine how much PulseChain can pump with Liquid Loans actually being useable, because the gas fees are affordable.  And I guess that’s going to be a big thing as well.  It’s going to be pennies, right, to use the vault for the gas fees.

Jesse: Yeah, that is a really good point.  So, the Liquity protocol is doing very very well.  This contract that we’re launching is not new.  It runs on other blockchains.  Yes, we put it for PulseChain. There’s a lot of work that goes into that, but it’s proven itself.  History has shown that this is an amazing protocol that works.  There’s actually not a ton of liquidations, because people tend to do the right thing.  The system steers them towards safe collateral levels.

Matt: Yup.

Jesse: And it’s working with ridiculous gas fees.  So, the people on Eth that are using it, imagine paying a hundred-some-dollar of fee just for creating a vault, and then you mint some stablecoin, and it’s like, oh, there’s $200 gas fee.  And then you want to participate in the stake.  You can lose hundreds of dollars for the gas fee.  All these mechanisms, the gas fees are just crushing people, and they’re still using it.  Yes, and PulseChain should be pennies, or fractions of a penny to do the same thing.  I think it’s going to be very very successful.

Matt: I mean, a lot of people looked at it, and there seem so many upsides.  It’s just crazy.  So, obviously, there’s a lot of speculations what’s going to happen, but I can’t see how this is not going to be a massive asset to anyone with the correct mindset, who’s not going to be a degen who wants to take a loan, use their Pulse, and then use that money to make more money, like you said, do how the rich do.

This has been super interesting, Jesse.  I really appreciate you coming on here.  Where can people find more about you, Liquid Loans, all this stuff.

Jesse: Yep.  So, our website will be update very soon.  That’s Liquidloans.io.  The most up-to-date information releases in the Telegram page first, and that’s T.me/liquidloans.

Matt: That’s all in the description, by the way, as well, yeah.

Jesse: All questions are answered in there.

Matt: Fantastic.

Jesse: I don’t think there’s a single question we haven’t answered.  People have come in there with the wildest of imaginary horribles, and walked away saying, “Wow, this is neat.”  There’s a whitepaper in there.  There’s documents in there.  There’s plenty of admins answering questions.  I come in there, and do AMAs occasionally with ToshiFlo or with Abra.  So, yeah, join the Telegram, T.me/liquidloans.

Matt: And the links are in the description, guys.  And also, go in there, ask the admins questions, or maybe go straight to the pinned messages.  I’m sure there’s lots of information in the pinned messages, right?

Jesse: Yes, yep, absolutely, tons of information.

Matt: Fantastic.  Well, this has been great, guys.  And guys, if you enjoy the video, do your part.  If you want to pump your own bags, Hex, Pulse, soon to be the loan token protocol, like this video, share it, subscribe.  Help pump the channel.  Thanks again, Jesse.  And we’ll see, hopefully, on another video at some point, because this is really exciting.

Jesse: Thank you.

Matt: Take care, guys. Peace.


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Disclaimer:Please note that nothing on this website constitutes financial advice. Whilst every effort has been made to ensure that the information provided on this website is accurate, individuals must not rely on this information to make a financial or investment decision. Before making any decision, we strongly recommend you consult a qualified professional who should take into account your specific investment objectives, financial situation and individual needs.

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Connor is a US-based digital marketer and writer. He has a diverse military and academic background, but developed a passion over the years for blockchain and DeFi because of their potential to provide censorship resistance and financial freedom. Connor is dedicated to educating and inspiring others in the space, and is an active member and investor in the Ethereum, Hex, and PulseChain communities.

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