Home » Business ‘We want to build Minterest as a fairer financial system,’ says CEO Josh Rogers Business Reading 9 min Views 8 In an exclusive interview with Cointelegraph, Rogers discussed the technology, tokenomics and outlook of the Minterest borrowing and lending protocol. Decentralized finance (DeFi) protocols have gained significant traction in the cryptocurrency sector, with a total value locked surpassing $271 billion, based on data from DefiLlama. One exceptionally popular category of DeFi services is that of decentralized borrowing and lending, where users can pledge their crypto as collateral and take out stablecoin loans (or vice versa) to pay for everyday expenses while their investment continues to grow. Total value locked in DeFi. Source: DefiLlama Such protocols typically charge a spread or difference between deposit and lending rates as a service fee. But then there are protocols like Minterest that seek to distribute a vast majority, if not all, of their profits back to users. Earlier this month, Minterest launched on Moonbeam, an Ethereum-compatible smart contract parachain on the Polkadot network. During an exclusive interview with Cointelegraph, Minterest CEO Josh Rogers further elaborated on the goals of building a user-oriented DeFi platform. We're proud to be the only @MoonbeamNetwork-native protocol on that list, as well as the only lending/borrowing protocol. #DeFiTwoPointOh let's go! Thank you ducky for your impressive work in collating and keeping up with these statistics! https://t.co/twn0xAyoDo — Minterest (@Minterest) November 17, 2021 Cointelegraph: Your firm claims to be the world’s first lending protocol that captures 100% of value from interest, flash loan and liquidation fees, which then get passed on to users. Would you care to elaborate on that? Josh Rogers: Traditionally, what happens is that when you look at models, when you look at value capture, what you notice is that there are different parties who are beneficiaries. So, you are looking at lending protocols where the owners/developers take profits out. You have external liquidators who act as the third party who extract liquidation fees. And the thing to especially know about is flash loan fees, which may be extremely [inaduible] to the community in some way. But the thing to know about is that, that value capture fee-income protocol, goes to all these different parties. The intention with Minterest is that we capture all of that fee income on-chain, on the protocol, then we distribute it around the community of users in a way in which we believe is much bigger and much more inclusive. One of the things that stand out in bringing out an auto-liquidation process is that the protocol fee income it captures is far more significant than anything else out there because that fee income is normally lost from the protocol. CT: So, what are some expected yields from passing off those revenues to users? JR: Well, what happens is, the answer is I don’t know [laughs]. It’s very difficult for me to forecast that kind of thing. But when you think about this very type of headline, if you are looking at some of the value captures of the sector, it’s measured in the hundreds of millions of dollars. But what’s interesting is that when you look at lending protocols, generally there is no correlation between the supply of liquidity and lending activity and the token price. So, the value of the token is not correlated with protocols’ performance. We do that when we capture all of this fee income. The protocol goes out on-market, and Minterest buys back its own tokens, and it distributes that token through to its users. Now, it’s not for me to say, and a big disclaimer is that I’m not trying to provide forecasts. But if you do headline numbers, if the protocols generate $100 million of fee income, which we should probably do when the borrowing is between $3 billion to $7 billion, that means the protocol is spending $8 million a month on its token. The protocol emits 820,000 tokens per month as part of its liquidity mod. So, if you’re spending $8 million a month and the token price is $10, then the protocol can supply all the tokens that it emits back, which is unrealistic. If the protocol is $8 million a month, then what is the token price? The answer is it’s more than $10. Now, at $40 a token, it’s buying back 50% of token emissions. At $80, it’s buying back 10%, which probably sounds more realistic. The answer to the question is somewhere in there, or maybe more. The intention here is, and the reason that is important for the protocol generally is that it can compete with others in terms of APY. The more the token prices increase, the greater the internal APY that is actually being caused for the borrowers and lenders. That means it can attract more liquidity, outcompete and gain more longevity and relevance. CT: Why choose Moonbeam, in particular, to launch your protocol? JR: Well, there are a couple of key things. One, there’s the question of why Polkadot first, and why Polkadot is much more than another Solana or Algorand. There are some very powerful things about Polkadot that we really like. Initially, Minterest was built on Substrate — it was built to have its own parachain. But what it really came down to was actually time. CT: One of the biggest barriers to entry for new DeFi users is probably high gas fees. What is Minterest doing to mitigate this? JR: Well, that’s one of the beauties of being on Polkadot, as well as being on Moonbeam. Gas fees literally go away as a concern. When you think of one coming out of Ethereum with different degrees of success, but at the end of the day, that’s what the Polkadot architecture is designed to do. It’s designed to enable vast numbers of transactions to occur while still retaining very, very low gas prices and very, very high latency. So, that’s one of the key benefits: We see gas prices as becoming a nominal concern, a concern that will disappear on Polkadot. The gas prices just become fairly insignificant, not just for a brief period of time but permanently. And that’s a very important consideration. CT: Has the platform been audited, financial- or programming-wise? JR: We are actually going through three audits. We’ve got auditors coming in next month, so we’ve got three very significant work firms coming, and the audit process really goes into [inaudible]. Again, we’ve got more than 10,000 lines of code. It’s the most significant kind of codebase of any lending protocol out there. So, that process takes time. But we obviously are not going to be doing anything until we get these things off. We’ve got internal security onboard on our team, but you don’t rely solely on auditors alone from our perspective. Auditors are really there to ensure that nothing gets missed. And we consider audit-team relations to be ongoing. We really want our relationships to be with very, very incredible audit firms. So, the idea lies with security and trust. CT: What are some steps Minterest is taking to protect users’ assets from malicious activities? JR: That’s actually part of building the protocol. One of the key things is that when it actually catches value like Minterest does, it’s not a very big step to self-insure, but to build out the fee income it captures. But at the end of the day, what this comes down to is that building out protocols is not simple. So, while there are hundreds of DeFi projects around, it’s really a small handful of significant lending protocols, and the reason why is they are expensive to do well. If you want to do them cheaply and quickly, five guys in a garage could do. We have a team of 30 to 40 full-time staff, and that is not an insignificant exercise. The reason why we do that is because that’s what it takes to do it at a level to ensure these sort of events you are seeing across smaller protocols don’t occur. And by the way, mistakes can get made. You saw recent issues happening with one of the leading protocols; it wasn’t an exploit, it was just a small mistake, and I regard their teams as extraordinary professionals. That’s the reason why we build some form of insurance into the system, so that people don’t lose their money. CT: What is your overall vision for Minterest? JR: We want to build Minterest as a fairer financial system. And the reason we think it’s fairer is because when you look at lending protocols, people get liquidated very significantly, and that money goes off-protocol. What this is about is how do the people that create the value of the protocol benefit. And the people who create the value of the protocol are a large ecosystem of users, not just a small subset. So, what Minterest is built out to do is to enable people to really benefit from the value they create from participation. We think bringing a new design and framework to the protocol is going to be a new piece of innovation inside this sector. One of the things to look at is that sector leaders in the space have all brought breakthrough innovation. You look at Maker, you look at Curve, you look at Aave — each of the three protocols has brought enormous innovation into the space, innovation that I deeply respect. We like to think Minterest is also a very new innovation to the space for the benefit of the people, and that’s really what the protocol is about.