And one day I asked him, what was it that, you know, he was always reading or researching that, you know, caused him not to pay attention to lectures. And he introduced me to Bitcoin. He was like, well, I found out about this thing and I, you know, I'm just into this rabbit hole.I can't stop reading more and more content about it. And if I remember correctly, it was at a time where the reason why he was very excited, it was because Bitcoin was about to cross $100 for the first time, which was kind of a big deal, a big price point that, you know, made it not irrelevant anymore. And I think it was the first time that people started to write more broadly about it.

I have a technical background, I trained in computer science when I went to school or in my early days. And I actually, the first job that I had coming out of college had to do with cryptography. I was working in, you know, security for internal networks and things like that.

And so when I read about Bitcoin then in 2012, because of this friend of mine that introduced me to it, I felt like I could grasp, you know, from a technical standpoint, because I had been exposed to the technology behind it. I thought it was very sophisticated when I read about it. So I could see the technical innovation behind it.

And then also at that point, I had been working in financial services on and off in my career. I did a couple of different things, but I spent most of my time in my career so far in financial services, either in fintech or in big banks, both in Brazil, originally where I'm from, and then in Europe and then in the US. And so I felt that I could put together, you know, these two things, the technical innovation side and the potential application to financial services.

And that made me fascinated. But I didn't do anything professionally speaking. You know, I was in business school.

I needed to, you know, find a job quickly after business school and repay my debt and all that kind of stuff. But I kept following the crypto industry, and which was what led me to actually start to work for Circle in 2015. And it was one of these things, because I was following the crypto industry, I was attending crypto meetups in Dublin and Ireland at the time, and I ended up bumping into somebody from Circle who wanted to open a European office.

And that's how I ended up then professionally entering the industry.

Host: It's really interesting to learn about your motivations. Moving ahead, M^0 Labs aims to make stablecoins secure and programmable. So how do you envision this shaping the future of finance, specifically for normal users?

Joao: Yeah, that's a great question. It's at the core of what we are trying to do. I think we see stablecoins as this phenomenal piece of technology, even though it's fairly simple, but there's a lot of ramifications and there's a lot of new ways of implementing this concept that I think we are trying to introduce, but other companies are certainly going to try and evolve.

I think anything that we have seen to date in the stablecoin sector, it's mostly a V1 of a sector, and I think we'll see a lot more sophistication, innovation going forward. But our thesis is essentially that we, as in most countries in the world, we actually have lived and learned how to live with this idea of private versions of money. Most people don't think about it because why would they?

This is all implementation detail in terms of how these financial services get implemented around the world. But there's typically a vanilla version of money, which is the government issued version of money, and you have cash, obviously, that is the most concrete manifestation of that. But then governments also kind of permission certain types of companies, very predetermined types of companies to print and issue the money that we use more broadly, and those are the banks.

So, money issuance is a kind of capability that is constrained to banks in most countries around the world. And that is typically what we deem kind of the more public and open version of money. But then there's a huge long tail of what I would call the private version, private form factors of money.

And these are the fintechs typically. So if you go to Robinhood to trade stocks, or if you go to Starbucks to buy coffee, or if you go to Uber to take a ride, what most people don't realize is all these three examples have private form factors of money in how they deliver those products to consumers. So, if I go to Robinhood, I have to sort of top up or deposit funds into my account with Robinhood so that I can trade those stocks.

Once the money gets into Robinhood's product, it is a more private version of money. It's a balance. It's a dollar and a value that I have over there, but I can only use it in certain ways.

And typically, these companies have implemented that in a particular way. Similarly for Starbucks, if I top up my account, that money becomes a private version of money that I can only use to buy coffee and to buy Starbucks products. But again, it's value.

It's money over there that I have transported from somewhere away. And similarly for Uber, whether if I'm a rider or a driver, I will have a balance at some point in time in the way that I use those services. People don't think about those applications as necessarily private form factors of money.

It's stock trading and buying coffee and taking a ride. But many, many businesses in our lifetime, you know, day to day, I joke with people that if you go to your phone and you check how many apps you have, a dollar and a balance, you will realize it's a lot more than what people think. People usually think, oh yeah, it's my bank account.

But actually they have that across many different services on a day to day basis. And the way that those products typically get implemented is they get implemented in the way that FinTech does these things, which is that these companies have to find a banking partner. They have to take customers' funds and allocate with those banking partners.

They probably have to enter an integration in a deal with a payments processor of sorts to be able to move this money around when it has to be in transit. These are things that are very difficult to implement. They're very costly.

You know, there's a very high bar for entry for you as a business to build your own private form factor of money. But it allows you to have better products, deeper relationship with your customers. Our thesis is that with stablecoins, stablecoin is going to be the type of technology that will lower the barrier for entry for the development of this kind of product.

So, we believe it's going to be much easier to build FinTechs into the next five and 10 years and potentially better FinTechs. So, it will be quicker to build these things because you won't necessarily need a banking partner and a payments processor. You could build all of that stack on top of your own stablecoin perhaps on chain.

But also it will be better because stablecoins, they don't know borders in the same way that banks know borders. So, if I launch Uber on a country because I can take payments and hold balances for the drivers on that country, that doesn't transport very easily to another country. I have to go to that other country and do that all again and so on and so forth.

Uber has spent literally decades doing this. And most companies, if they want to be global, they have to spend a lot of time and money doing this. Stablecoins are money on the internet and the internet knows no border.

So, if I launch one of these services, all of a sudden I can be taking customers almost anywhere. So, we think stablecoins are going to be this layer that allows much more FinTechs to be invented and to be built. And we are trying, there are many things that these FinTechs are going to require, but one of them is to have their own private form factor of the dollar.

That's essentially what we are trying to facilitate at M^0. We have a platform that makes it super easy for a business to come in, configure their own dollar, add their own brand, customize their own features, say where it can be spent, where it cannot be spent, say how they're going to use maybe the yield that they are accruing in reserves and more easily integrate that with their business. That's essentially what we're trying to do.

Host: Stablecoins truly hold the potential to transform the future. Next up, what makes the M^0 protocol special and how does it differ from other stablecoin platforms?

Joao: Yeah, it's a number of things. As I mentioned before, I ended up joining crypto by joining Circle in 2015 and I spent eight years at Circle. For those who don't know Circle, Circle is the issuer of the second largest stablecoin in the market called USCC with $60 billion in circulating supply.

I led the build out of Circle and spent many, many years leading the product teams over there. The founders of M^0, Luca Prosperi and Greg DiPrisco, they spent a long part of their career in the maker ecosystem. So they're familiar with decentralized stablecoins, DAI, all of those products.

And so we put together all this experience that we have, which is very deep from the industry, from the sector. And we decided to redesign a platform from the ground up, really from first principles. And so there are many reasons why we think M^0 is better or advances the sector, to your point, compared to everything that exists.

Number one, at the very foundation of our platform, there is a network of issuers. Most stablecoins that people find in the market today, they're issued by a single company. We think that's a very bad model.

I mean, even if you compare that to commercial banking and how the dollar or the yen or pick your favorite currency, no currency is issued by a single entity, right? All of these currencies in the way that the issuance capability has been designed over the years by governments, but promoting an ecosystem around it, it's usually an open and federated model. So, it's the commercial banking in essence.

So, it's an open model because anybody can create a new bank, right? And they can apply to a regulator in a country to be licensed as a new bank. So, it's open, technically speaking, anybody can do it.

And it's federated, as I said, it's a federation. No one country, at least in the democratic side of the world, no one country has a single bank issuing all of their supply of currency, right? It's usually tens, hundreds.

In the US, tens of thousands of banks, right? So, and that's a better model because you distribute the risk, you distribute the allocation of these assets across a number of entities. Hopefully no one entity becomes too big to fail.

Although in reality, some of them are too big to fail, but we think a multi-issuer model is just much better. If we're going to believe that fintechs are going to be built on top of this model, they have to be built on a foundation that doesn't depend on a single entity changing their opinion on things or having regulators have a negative position towards what they do and creating a huge amount of risk for everything that is built on top. So the first thing that I would say in terms of how M^0 is better than other models is because it is a multi-issuer model at the bottom.

So, we also allow any business to join the network and become an issuer on the M^0 network. And obviously there's a standard and there's a long process to be able to achieve that in the same way that if you apply to be a bank, there's a long process to diligence your implementation of a bank, but at least it's an open and federated model. Then all of these issuers on the network, they mint one stablecoin building block that we call M that you referred to before.

So, this stablecoin building block, it's not supposed to be a stablecoin in and of itself that people are going to use, as I said, but it's just a building block. And then with this building block, we allow then on the top and the final part of the protocol or the infrastructure, we allow many businesses then, more like fintechs and folks who own use cases where money is important. And this can be like a coffee shop all the way to a financial services application.

They then can take this building block, this M component that gets issued by the network of issuers, and they can customize it. So, they can add their own flavor to it. So, if I'm a coffee shop, I can dictate that my extension of that stablecoin is going to be constrained to only be spent on my products.

So, I can implement that logic on chain. I can say that all the yield that I'm going to accrue on my portion of the assets that are backing that stablecoin are going to come to me as a revenue, right? Because I'm a coffee shop and my customers don't expect to be making yield on the balances that they have with my service.

They just want to buy coffee with it. So, it's 100% upside. I'm going to pocket all of that yield as revenue for the way that my product works.

Now, think of how that's different from maybe if I'm building a neobank in Singapore. Now the transfer behavior for that stablecoin, for my own stablecoin is going to be completely different. Maybe I'm going to let it be completely open because I want it to be spent anywhere in any use case.

And from a yield point of view, maybe I'm going to share half of the yield that I get on the reserves because I want customers to be incentivized to hold my dollar. And maybe by being in a pseudo savings account, I can get to attract some customers. So, these behaviors, they are different on a business by business nature.

And one of the things that we do at M^0 that I think we are really the only ones doing it right now is that we have a framework whereby these businesses can customize and super quickly create their own version of a digital dollar that is important for it, that is adhering to their use case. And so these are the main differences of what we do. It's a multi-issuer network at the bottom and allowing any business to build their own stablecoin, customizing the behavior on top.

Host: Moving on to the next question, you brought up interoperability among stablecoins. Can you tell us why this matters and how it helps developers and users?

Joao: Yeah, this is a very important point. Again, this is in the weeds of how money works today, but we like to nerd out about money. And I think this is particularly important for crypto because I think in crypto, we use the blockchains, crypto assets, all the technology available and invented in the last decade or so.

But we go in some routes and we don't pay attention to how things work today. And a lot of what happens today in financial services and how banking works is wrong. It's broken and it grew in a way because of technological inefficiencies.

But a lot of what is there is sound from a design point of view. If you have multiple versions of the dollar running on blockchains today, I would claim that they are not interoperable today. Some people actually claim that they are because you can convert one into the other.

But the way that you can convert these different stablecoins or different digital dollars running on blockchains today is by trading one for the other. So, imagine that you have 100 USDT and you want to send it to me, but I don't like it for some reason and I want it in USDT form, for example. So, you can go to a venue, whether it's centralized or decentralized, and you can trade your 100 USDT for some USDT.

Now, you're not going to get 100 on your destination. You're going to get something. And that something is determined by a price discovery mechanism, either by an algorithm that is describing, determining a price for your trade or by a free market, right?

Where you have somebody, as the markets used to be, and this is just automated, but that's literally the way it works. There's a seller shouting, hey, I have 100 of this to sell. And you have to find a buyer on the other side who says, hey, I'm going to buy it for this price.

And when the prices meet, when the seller and the buyer agree, that's where the transaction happens. This is like an awful way to make money interoperable. I'll just give an example so that people realize how this is awful.

Imagine if, let's say you have a bank account with Bank of America and I have a bank account with JPMorgan Chase, and I want to send $100 to you, right? Now, imagine you don't get $100 because there was a trade in between, right? And the way that my dollars get to you is Bank of America and JPMorgan, they get to trade these dollars one for the other.

And they say, well, you know what? I'm just going to pay you $98 for your 100 because, I don't know, your balance sheet is a little weird and you have some risks and I don't like your brand maybe, or I'm competing with you, so I'm not going to pay $100, I'm going to pay less than that. This is just crazy.

If this is the way financial services worked, we would be probably back in 200, 250 years ago. It doesn't make any sense. The way that this evolved in financial services is that we have things called central banks, we have things called clearinghouses.

And the way that actually money gets transferred across these venues in the traditional commercial banking world is that my bank in that case, JPMorgan, would have an account with a central bank. Your bank, Bank of America, would have an account with a central bank. And when we perform this transfer, the central bank behaves as an interoperability mechanism.

And they're saying, I will guarantee that these things are traded at par. So I will debit 100 from your account and I will credit 100 to his account. And that's how the transfer behaves.

There's no trading, there's no price discovery. And then there are clearinghouses and there are all these other mechanisms to guarantee interoperability. It's kind of crazy that we think that what we have in crypto is good.

What we have in crypto is awful, as I said, like trading price discovery as a way of interoperability. It's not going to work. It works at the scale of crypto, right, where I need to trade 100 bucks for 99.98 and nobody cares about losing those two cents. At scale, this does not work. This price discovery is very, very inefficient as a mechanism. So what we do with M^0 is we bring a lot of that thinking that has happened over decades to stablecoins running on blockchains.

So that's why we have this idea of a core building block for stablecoin, which is the M token that gets issued by the protocol. That guarantees the value component of a stablecoin for all of the network, right? So, if you issue your stablecoin on M^0 and I issue a different one, they all share this building block that guarantees that both of them are worth the same.

So, if I want to transfer funds from your use case to my use case on our M^0 network, what happens is we destroy your dollar, we go back to the building block, and then with that building block, we can create or mint versions of my dollar. This doesn't require price discovery. This is not a buyer and a seller trying to meet.

This is just systems destroying supply and recreating supply in that way. This guarantees that all this transfer of funds across all those use cases always happens without losing any value for any of the participants. So, this is true interoperability, right?

And it's possible. We are proving that it is possible. We just got to have better technology for that.

So, I think that's part of innovation to the stablecoin sector that we bring to the table. And that's why I mentioned that whatever we had up until now, it's probably a view one. And we will see these kinds of more sophisticated interoperability technologies now in this phase two of the sector.

Host: Right. So I can gather that interoperability amongst stablecoin, they surely offer new possibilities. Next up, M^0 Labs governance mechanism is really interesting.

Would you simplify how it works and why it matters for the community involved?

Joao: Yes. We have a governance mechanism that it looks more complicated than it has to be. But again, it was the product of many, many years engaging with governance systems.

As I said, our two co-founders, they spent a lot of time. And Maker, which is a big, large project, it involved large and complex governance for many, many years. But we all saw the opportunities for improvement, the types of governors, the types of actors that want to participate in governance, the things that they want to do versus the things that they don't want to do.

Because with crypto, you have this real innovation of effectively a voting instrument. Because that's what governance does, is they need to vote on the way that these platforms evolve. Well, do we want to build this new feature or not?

Do we want to onboard this new actor or not? So there's a lot of voting that happens. In the same way that is when you build a business, there are going to be some critical decisions that you're going to make that maybe you're a board of directors, maybe not through simple voting most of the time, but they will discuss these topics and they will steer the company in one direction or the other.

The same applies for a platform like M^0. We need to make decisions and some decisions are better made by the collective of all the actors involved. But what we have determined over time, and this is because crypto has this dual behavior where this token can become an instrument for voting, but the tokens can also become like a monetary instrument.

They can accrue value over time because it's literally as if you own a share of the platform, a share of the network. What we observed over time is that some governors, they want to be invested in governance tokens because they want to own a share of the network. They want the upside, but they don't want necessarily to participate in the day-to-day decision making.

In the same way that some investors in a company would also want to have a share of the business, but they actually don't want to participate in the day-to-day operational aspects of the company. While some investors might actually want both. They want to own a share of the company and they want to be really involved.

They want to know why you're expanding into this market. They want to know why you're hiring this other executive. They want to be involved, but different governors, different actors have different interests.

What we have done at M^0 is we designed two tokens. Again, as I said, it sounds like we're doing this just to make it more complicated, but it's not. One token represents actual ownership of the upside of the network.

You hold that token and if you hold that token into the future, you actually participate in value accrual and cash flows from the network and all those things. Then we have a separate token, which is more of an operational token, more of a voting token. What we allow our governors to do is that they can hold both and they can participate on both sides of governance.

They can own the upside and they can vote or they can just stick to the upside and do a process that we call delegates. They can delegate their voting tokens to somebody else. They can delegate it maybe to the team that runs the company.

They can delegate it to a professional company that does operational support and voting and strategizing for these projects, which there are many companies specializing in doing that for a living. So the separation of these dual behavior for the governance tokens has actually worked really well for us so far. We can clearly see the difference in the types of governors in these two buckets.

The other thing that is unique to the M^0 governance system is that it does enforce mandatory participation. Another thing that we observed over time studying our governance mechanisms is that most people don't vote. Most people don't care about what's really happening on a day-to-day for that platform.

They just want to hold the token for the upside. But also there are the large governors, the folks who own a significant amount of tokens, they end up owning the important decisions because nobody else votes. So they just keep on determining the future of the platform.

So we didn't think that that was good. So at M^0, the governance mechanism has an inflation mechanism built into it, which means that at every vote, your tokens get inflated in value a little bit. But you only participate in continuing to not lose money because of that inflation if you vote.

So the practical outcome is that if you don't vote on the voting cycles, you own less and less compared to your previous share of the network. So let's say I own 10% today. If I don't vote in the next cycle, there's going to be an inflation rate applied, and I'm going to own 9.

something percent, and then I'm going to own 9 and 8 and so on and so forth. So I get progressively diluted if I don't participate. I have to participate to kind of keep my stake all the time.

And so we can see, people can see this on dashboard.m0.org. You can see the voting participation there, and you can see that it's very close to 100%. And all governors are very active and very involved because of all these mechanisms that I have described.

Host: That is quite fascinating. Now let's move to the next question. Looking at the security concerns surrounding cryptocurrencies, how do you try to maintain the stability of stablecoins and user assets?

Joao: Yes, I spent many times at Circle studying that side of the world, and I think it actually is very different in different products. What we are building, because it is a platform, and because we support different businesses in building their own version of their digital dollars, what we are seeing is that actually, just as with fintech, I think, around the world, these use cases, they tend to be like fairly contained, right? So whatever is happening on one use case doesn't really have an impact on what's happening on another use case and so on and so forth.

So for us, funny enough, the price discovery of the M^0 stablecoins out in the wild, out in the market, is not that important a mechanism for maintaining stability of the network. Because usually for stablecoins that are general purpose, as I call them in nature, for something like Tether, for something like Circles USTC, these stablecoins are general purpose, meaning they're used on so many different use cases, but also they're very liquid across these use cases. One of the main uses for them is in fact moving between use cases, right?

Sometimes you're dealing with Bitcoin on a use case, and you want to go to Ethereum on some other use case, and you use a stablecoin as a way to traverse from one venue, from one chain, from one use case to another. M^0 doesn't really behave like that. M^0 is more of a platform supporting these individual use cases.

So, we haven't so far felt the need to optimize for price stability out in the wild, because there's very little price discovery across these use cases. What we have optimized so far that helps with the security of the network is really what we call solvency. So it's really the idea that if at any point end users or these businesses wanted to redeem all of these dollars, all the way down to zero, would they be able to?

And we always try to optimize for that. Again, we're not planning that that is something that will happen. Hopefully it doesn't happen at any point, but we are planning for solvency.

So, we want to make sure that the platform is solvent, right? So if it needs to redeem and give the money back to all the parties involved, that we will have the ability to do that. And so the way that we have designed for that is we have standards for what collateral is allowed on the network, and it's very stringent, it's very strict.

So, it's only short-term U.S. treasuries. Because short-term U.S. treasuries are fairly liquid and there's a huge market around the world to trade those and liquidate those if you need to, there's a big enough market that we are not going to be constrained from a liquidity point of view. But also it's very secure.

We don't allow cash to be eligible collateral off the network because cash held in a bank, it can vary depending on the bank in terms of the security, it varies in terms of the size of the bank, the exposure that they have and whether that cash is part of the fractional reserve part of the bank and stuff like that. So, by making sure that 100% of the collateral for M^0 is short-term U.S. treasuries, we know that it's very liquid and very secure and it doesn't depend on the balance sheet risk of any given bank. And then we also have an overcollateralization buffer on the network.

So, the network is required to be overcollateralized by 3% currently, it's a parameter, it can change. But currently there's an enforcement that the network is overcollateralized by 3%, meaning that all the circulating supply of M stablecoins that are out there, which is about 175 million today, the issuers on the bottom of the network, they have to be holding 175 million plus a 3% buffer. So that also guarantees that solvency that I mentioned, which is what we optimize for in terms of security.

Host: Absolutely. Moving ahead, what trends do you think will shape the future of decentralized finance landscape in the coming years?

Joao: I think the main thing that we will see is what I was describing before. I think blockchains, crypto, you know, we have spent the last part of the last 10 years sort of finding, you know, evolutions of the use cases for that technology. Typically, if you go with like the traditional way of thinking, people will say that, you know, you never start with the technology and try to find applications for that technology.

That's not a very easy way to find success. But I think crypto was essentially that. I think, you know, Bitcoin was the composition of a lot of really cool innovations.

And when you combined all of those, you know, it created this, what I think it's an amazing ability, which is, first of all, it was the first time that, you know, value could be intermediated on the internet without like a trusted intermediary, you know, really literally peer to peer in the way that digital assets like usually get transported, you know, if they were data or, you know, a piece of content or something like that.

So, I think that that innovation was super cool. But then we started to see a lot of technological innovation without a clear idea of what the use case, what the application of that was going to be. And we started to see, you know, things like Ethereum, which is, you know, a programmable platform where you can create your own smart contracts and embed digital assets onto them.

And from then on, we have seen a lot of innovation in the last few years. And a lot of venture capital was invested in those innovations. But I think now we're beginning to see the more clear application for those.

I think we experimented a lot, especially in, you know, in like the trading use case and speculative use cases for these assets. But I think that was all more of an experimentation kind of phase. And now we are seeing the beginning of the application of this technology into fintech.

And I think that is the part that will accelerate into the future. Now, as I said before, I think stable coins play a role, but it's actually it's a bit broader than stable coins. Decentralized finance, a lot of other things will play a role in that.

We will see. And that's my bet. I think that's the trend.

We will see a lot more fintechs coming into the market in the next five years that are built on top of this kind of technology. But the end user, they won't care. They won't see the details of this in the same way that you use Robinhood today and you can trade stocks and you don't know what is their banking partner, what is their payments processing partner, how do they implement these trades.

You don't see any of those details. You just create an account, send some money to them and start trading. It's a very delightful and simple end user experience.

I think we'll see that for fintechs that are built on top of decentralized finance and stable coins. So, I think Coinbase had a great user experience implemented on this the other day, where now on the Coinbase wallet, you can take a dollar based loan on top of your Bitcoin. And the way that they have implemented it is by connecting to Morpho, which is a decentralized finance like on-chain application that deals with the lockup of these assets and the issuance of these loans.

But for the end user, the experience is very simple. There's nothing to do with interacting with the protocol, there's nothing to do with complicated stuff. It's as simple as asking for a loan on your bank and configuring what the collateral is going to be.

So, I think that's the main trend that I see in the coming five years, is all this global breed of new fintechs that are going to come to market. And they're going to be global, as I said, because crypto and Internet knows no boundaries. So, they can launch and say, I'm going to take customers in India, in Brazil, in the US and to the extent that regulation permits that.

But they're going to be built on crypto protocols behind the scenes. I think that's the main thing that we'll see.

Host: So, I think the future of decentralized finance will experience a combination of today's prevalent trends and tomorrow's. Moving ahead, if you were not working in the finance and blockchain space, what other career paths do you think you might have pursued and why?

Joao: Yeah, I think a number of things interest me. I think, as I said, because I trained in computer science, I would like to think I'm still very interested in the technical side of products and how these products get implemented. I think today I'm very interested in AI and how AI as a core piece of technology will also be embedded on a number of different products and is going to disrupt, I think, a lot of types of jobs, a lot of types of careers.

So, I would love if I wasn't working on finance now to probably spend my time in AI. And if it wasn't for anything technologically related, I think when I decided to go into computer science, the other thing that I thought about doing was architecture. I just like building products, building things.

And I like architecture. I like thinking about the utility and the style of a house or a building and thinking about the taste that plays into deciding how that's going to look like as well. So, I would probably be doing something related to architecture or building in general.

Host: That is very interesting. Thank you, Joao, for joining us today. Insights that you've shared on Stablecoin's M^0 protocol and the future of decentralized finance are truly informative.

Joao: Thank you. Thanks for having me.

Host: Thank you, everyone, for tuning in to ExtraMile by WisdomPlexus. I'm your host, Divya, signing off for today. Stay tuned for more informative interviews with industry leaders and their wisdom on the latest technologies and trends.