Signals of Trust | Cap

Hey everyone, Marcin here, co-founder of Redstone and Credora. Today I have a very special guest with me, Vesso, CTO of Cap. Hey Vesso, great to have you here.

Hey, how's it going? I'm Wesso, the CTO and founding member at Cap. It's a three-sided marketplace for private credit and also is a stable coin.

Beautiful. That's like a great one-liner to open.

So, uh, we are entering spring slowly but steadily, hopefully towards the summer, the market and ecosystem is going to get only better and better, but stable coins are very stable, above $300 billion in market cap.

Before you founded Cap, you were one of the founding members of Beefy, which grew past a billion dollar in TVL. Cap has already crossed 300 million mark, but the interesting thing is you went architecturally different into a stable coin realm. What made you go with a completely different direction for your next protocol, Vesso?

Yeah, so originally, actually, I wasn't a founder of Beefy, but I was one of the lead developers and started a few months after its, uh, protocol itself launched. Um, Beefy was really fun. It was born during that like crazy food coin DeFi Summer sort of vibe where everything was super exciting. So, like, you get there, 1,000% interest, million percent interest.

Uh, I was a user of Beefy, and I was really excited to like, I don't know, you know, make strategies and and learn how to develop, um, you know, on the blockchain side.

So, uh, I started just kind of shipping things and then ended up, uh, taking over as like lead developer and then helped grow it to the one, I think it the top, we were $1.4 billion, uh, in TVL. Um, Beefy's unique in the way of that it's like a a yield aggregator, right?

So it's built on top of pretty much every protocol you can think of, whether it's a lending protocol like Aave, or it's a decentralized exchange like Uniswap, um, or Balancer. It finds the different yield sources, compounds it, makes it simple, easy, uh, for everybody.

And that was like sort of our goal, right? That and then obviously keeping things as secure as possible. Uh, I was doing that for about five years.

And throughout those five years, I met Ben, um, Ben was at, uh, Chedao, and we had a good working relationship.

Uh, we did a lot of things with Chedao over the many years. Uh, we were all like two of the most, I think, cross-chain protocols you can think of. Uh, Beefy is on 37 chains, I think, you know, uh, Chedao was definitely on 20 plus chains. Um, so we just had a lot of synergy between the two, like as a working relationship.

Uh, and then when, you know, Ben came up with the idea for Cap, uh, and he kind of pitched me to join the team, uh, I just thought it was like super interesting.

It was a piece of innovation. It was pushing, uh, the industry forward. So it wasn't just a stable coin, right?

It's it's now, uh, interacting with shared security systems, uh, using them as like sort of, uh, surety bonds against, you know, private credit loans.

And onboarding institutions to participate in DeFi, and to me that was like super exciting, invigorating, and something fresh.

And so I wanted to jump on the opportunity to build something new and to push the industry forward.

Brilliant.

So it's like a proper, uh, builder journey over five years of seeing like how the ecosystem has been developing.

And one thing that is, uh, really great from my perspective is that Beefy was very much crypto native from the early days and has been mainly focused around the assets that are, uh, in that ecosystem.

Whereas Cap is very much about, uh, expanding within the institutional realm as well, but also being a stable coin, so on the blockchain realm.

So that's a great composition.

Yeah.

I mean, we have like the deep understanding of how DeFi functions.

And how every sort of protocol runs, right?

So when I was at Beefy, you know, we're building on top of all the protocols, so essentially you're very familiar with all the different types of code bases, how you interact.

And so when I came over to Cap, it was very easy for us to, uh, you know, integrate easily.

Uh, we had partnerships throughout all the different, uh, chains and ecosystems, we knew everybody.

So on the DeFi side, it was very much, uh, an easy to like, you know, get started, get running.

Uh, and then it really was building up our institutional, um, base, you know, knowledge.

Like going and talking to the institutions, making those connections, uh, and growing that side of the business.

Um, which has been about two years of now work, uh, and we're finally seeing that start to come to fruition.

As we're seeing huge names now come in and borrow from Cap.

Brilliant.

I do remember when we first met in person at ETH Denver 2022.

So, it's great to also see like you guys like progress over time.

Congrats.

Yeah, same with Redstone, right?

Hey.

Like we're watching all of us kind of grow up in real time.

Yeah, definitely, and it's so great to, you know, keep building with, uh, people that do care about the technology.

And the implementations that push the frontier forward.

Now, talking about the core promise of Cap is that CUSD, your stable coin, is always redeemable one to one with a dollar.

In theory, it's simple on paper, but behind the scenes, collateral is constantly being deployed into yield strategies.

Can you tell me a bit more how you actually keep the guarantee honest when the asset underneath are always in motion and not always worth exactly one dollar?

Yeah, Cap is more like a stable basket than a stable coin.

Uh, so essentially you can mint and redeem Cap with multiple different, uh, stable, uh, like assets.

Uh, currently that means USDC and also WTGXX, which is the Wisdom Tree Money Market Fund.

Uh, so and we'll keep expanding our footprint on permissioned assets, like Wisdom Tree's Fund.

Uh, you know, that'll include Biddle, Benji from Franklin Templeton.

Um, these permissioned asset flows are super important for the borrow side of the business, the private credit side, because there are institutions who want like the full, uh, stream of wherever that borrow funds are coming from to be completely KYC'd.

So being able to mint CUSD with a permissioned asset, having that asset available, uh, to be borrowed by the private credit, uh, institutions is important.

And so the most important thing to make sure that, you know, you're actually getting, uh, the dollar value is to make sure you have proper Oracle systems in place.

So if we can't properly price USDC or CUSD as itself and the other tokens, um, then we can have obviously, uh, big problems on the mint and redeem side.

Uh, so we put a lot of protections into place to make sure that one, if we do have like an underlying yield strategy, uh, it's going to be very risk averse.

So I think right now, uh, beyond the borrow side, uh, we have deployments into Morpho and Aave, just supply only, uh, easily, uh, liquidable, uh, liquid funds.

So basically like, you know, there's high liquidity in Aave, high liquidity in Morpho, uh, making sure we're very risk averse.

And we can get in and out of those pretty easily.

And it's all atomic.

With the minting and burning.

Uh, and then obviously making sure we have proper Oracle in place.

And so from day one, uh, Redstone worked with us to come up with the CUSD Oracle.

Uh, which was, uh, you know, a necessity for us on the go to market side.

Uh, and it was, uh, you know, Cap was a different way to approach how stable coins sort of function.

And so pricing CUSD meant it's going to be a custom integration.

And, uh, you guys worked like hand in hand to make sure that we could facilitate that and be ready for all of our go to market partners.

Yeah, thank you.

I mean, I remember the day you guys reached out and we were very happy to, uh, do something more custom for the builders.

We've known over the years and have like high respect, that also leads me to an interesting observation, especially now in 26.

That conferences and everything that is happening in crypto is drifting strongly towards institution.

And I believe we are not going to go back from here.

So whenever you go, I've been to, uh, consensus in Hong Kong and every second conversation was actually with like a banker or like a financial institution representative.

So you guys captured that momentum perfectly.

I do believe Cap and CUSD three years ago wouldn't made so much sense as it is doing right now.

I mean, look, the borrow, the borrow rates, right?

Like our borrow rates on Cap on the private credit side are like 4, 5%, you know, plus whatever you're going to pay the delegators.

You can't find that, I mean, the borrow premiums inside traditional finance are more like 10, 12% if you're lucky.

You know, it could be upwards of 15% and even seeing looking at some of the private credit, uh, platforms that are on the blockchain now.

Are offering 15% loans and stuff like that, so you come to Cap, you can borrow on the private credit side.

Under collateralized at, you know, 5%, negotiate your terms with your, uh, delegating partner.

So the one whoever's, you know, basically placing the surety bond on that loan, um, and you can get yourself a really good, you know, private credit deal.

And so that's why we're starting to see the demand side of the borrows like really start to pick up.

Because, you know, there's a lot of opportunity out there and people who can like make a ton of money.

Especially if you're cutting down their borrow costs, so, uh, I think it's super important.

And obviously now it's starting to, I think, snowball a little bit on the borrows.

So I think we'll see more and more demand come, but institutionalized, yeah, they were all like, they're waiting.

They were just looking for their opportunity and I think obviously the regulatory environment to sort of give them a little bit more clarity on how to interact with DeFi.

Beautiful.

Interesting.

And talking about, uh, rates, as you already mentioned, can you walk me through a little bit about, uh, the mechanism of the minting fee and how you essentially decide on it in Cap protocol?

Yeah, so when during our Cap's been audited seven times.

But early on in the auditing process when you're doing the minting and redeeming, um, you know, you need the USDC Oracle to be updated and to be updated quickly.

Uh, in order to, uh, make sure that you're, uh, you're getting the proper price, uh, for minting and redeeming CUSD.

Because because CUSD is a basket and it's not one to one with USDC, that means that it has to kind of price all the assets in its basket.

In order to understand how what the value of CUSD is when it's going to mint and redeem for you, like let's say USDC as an example.

Um, and during the auditing process, we found that there was a, uh, unique bug when it comes to, uh, I guess push Oracles.

Is it push?

Push.

Push is the one that we're using.

Yeah, and it's essentially like, uh, when the update's getting pushed down, right?

And it's inside the mempool, uh, that somebody could notice that that update's happening.

And can kind of arbitrage away the value difference between whatever CUSD is and whatever the update is on now the stable coin that's there.

So, uh, with Ethereum being the dark force it is, we have to assume that MEV's always going to find these arbitrage opportunities and take advantage of them.

And what we needed was a, uh, deviation threshold on an Oracle.

Uh, to be updated quicker and as quick as possible.

And if we can get a deviation threshold of, you know, 0.05%.

Then we can kind of like lower our minting fee to double whatever the deviation threshold is.

And at the time, there was just no Oracle solutions that had a deviation threshold that was like economically viable for us.

So we had, you know, I think the the most at the time was like 0.25%, which means that we had to charge 0.5% in a minting fee.

To just like get rid of that arbitrage issue.

Uh, so then we came to Redstone, we said, hey, here's our problem.

Uh, we really need to like, uh, a faster USDC Oracle solution because we want to reduce the minting fees.

Um, just because like, especially when you're bootstrapping, you know, CUSD liquidity.

You know, 0.5% is a lot of fee to like basically get charged up front in order to go in.

You know, we're talking about stable coins, right? So they're earning like 5 to 8% interest, you know, 0.5% right off the bat.

Means you have to make that up over the, you know, the next month.

So we went to Redstone and said, hey, like, we really need a quick, uh, deviation threshold.

So that if it if it deviates 0.0, you know, 5%.

You know, that reduces our minting fee by a lot, helps us on the go to market side.

Makes the cost to our users a lot less.

Uh, and so we're able to work with you, lower that by 0.4% and it was an, I mean, like million dollar reduction in fees to our users.

So, uh, it was it was great.

I mean, you guys have always been great partners, but I mean, we were really sort of needed that.

It would really stimulate our growth rate at the beginning and, you know, if we didn't have you guys, I don't know how we would have grown so fast.

Really great.

Thank you, Vesso, for walking me through.

To be honest, I wasn't aware that you found that, uh, edge case in the security audit, which also showcases you guys treat the security and reliability aspect of the protocol very, very highly.

Seven audits, I can only wonder how many you're going to have by the end of the year.

Um, so what is the minting fee right now?

It's 0.1%.

All right, so it's 0.1%, so diminished like, uh, pretty significantly.

Great to hear.

Yeah, originally it's supposed to be 0.5%.

So, uh, it's like a tremendous reduction in minting fees.

All right.

Uh, brilliant.

Yeah, so Oracles is, uh, you know, always, uh, an interesting concept for people to unpack.

I usually think of them a bit like a referee in a high-stake match, nobody notices them when they're doing their job perfectly, but then there is this one bad call at the wrong moment.

Everyone is hating them and remembers, right?

So, it is not, uh, the the best, uh, job to be delivered.

But it's very important and it is needed, right?

Um, now talking about Cap's, uh, future, like, what do you guys plan to achieve throughout 2026?

And in general, what are your upcoming milestones?

Yeah, so Cap Cap's flywheel is all focused on the borrow side.

The way Cap is built is essentially we get the stable coins in, so USDC, money market funds.

Uh, as, you know, the minting of the CUSD token, right?

That can be used within DeFi, so it's there's Pendle markets, um, we have Pendle tokens bridged over to Uniswap.

Uh, CUSD's on Mega Mainnet, uh, we have a whole bunch of utilities you could, uh, on Morpho.

Uh, we have STCUSD looping that's available, so there is utilization for the CUSD and STCUSD tokens.

Uh, all that liquidity goes into a bucket of funds that is able to be borrowed by private credit.

So under collateralized loans, institutions, we're working on, this is where we're working on, I think, most intensely.

Is, you know, closing all of these different deals, uh, with different, uh, institutions for different use cases.

Making sure that we're doing the matchmaking between them and the delegation side, who is our covering these loans.

And then we have this third side, right, which is the delegators.

These are the, uh, bedrocks, the EtherFies, the Renzos of the world.

Who have assets in shared security systems.

And essentially you're saying, hey, uh, I'll put up $100 million of Bitcoin.

And I'll guarantee this loan from Susquehanna, $50 million.

So it's essentially now creating an over collateralized loan.

Uh, if for some reason the loan defaults, then the delegator gets slashed.

So it's for the CUSD side, full safety, right?

Like you're fully covered on the private credit loan, you're not taking the risk on the private credit side.

Instead, it's being, uh, over collateralized by the delegation side.

Uh, for that, uh, they get paid a little bit of interest from the borrowers.

Uh, and the borrow premiums on like, you know, Bitcoin or ETH are much lower than the dollar.

And so there, you know, they get 3% or 2% interest on Bitcoin.

That's more than they can get anywhere else and they're securing loans with some of the, you know, largest, uh, most infamous public, you know, trading companies in the world.

So, um, we're really focused on growing the borrow side.

Because our flywheel is the more borrow demand, uh, the more interest that goes and flows into stake CUSD.

Which makes the interest of stake CUSD, uh, very competitive in the stable coin interest bearing marketplace.

Uh, and then we find more people enter into stake CUSD to generate more interest.

Which gives us more liquidity for the borrow side, keep, you know, uh, you know, scaling up the borrows even more.

And so we're really working on making sure that that flywheel, um, gets executed.

And we have a whole bunch of different ideas and improvements like, uh, fixed term loans.

And, um, you know, we're we're looking to do the stable drop that's coming up in the next, uh, you know, hopefully month or so.

Uh, so we have a lot of things to accomplish in 2026, but really focusing on the fundamentals of the business.

Which means increasing the borrow size, then in turn increasing the amount of liquidity.

Uh, and really get that flywheel going is is the most focus. And I think, um, what's a little bit misunderstood is that the parties that are on the, uh, borrow side are, you know, trusted institutions.

And I know that like trusted only goes so far, right? Because we've already seen, I think, like, you know, on the private credit market in traditional finance, some people are already blowing up.

It can always happen, um, and there's a risk associated with that, but it's essentially when your counterparty is, you know, somebody on like the, uh, you know, is a publicly traded company.

Your your risk level, uh, can decrease a little bit because you can enter into a formal agreement with them.

And have some sort of retribution in case of like a slashing event.

So I think that there was a little bit of a, hey, they're going to be able to execute on on the delegation side.

Um, and, you know, we're already kind of showing that we've had some pretty large scale delegations come.

Some really, uh, massive partnership announcements, uh, in the last couple weeks.

We actually have more coming in the next few weeks, uh, and I think it's really kind of showcasing the power of what Cap can be.

And, you know, starting to like, you know, close any worries that we can't scale on that side of the business.

Really good.

Nice.

Now, when we as Redstone look at Cap, it's interesting because, uh, we categorize you into two buckets of our clients.

One is the consumer of the data feeds, as you mentioned on the stable coin side to ensure lowest minting fees.

But it's also about asset issuer side, like CUSD and expansion on right now at least Ethereum and Mega ETH.

And, uh, I assume in the future more and more into other like DeFi protocols on those markets.

Are there any DeFi plans or expansion to any other markets you can tell us or tease us or any other alpha you could give to the listeners?

No, I mean, we're in talk with any stable coin related new blockchains.

I mean, uh, honestly, we want to be part of all the emerging technology space.

So, uh, there's a lot of really cool things that are like launching this year, uh, that we're very much in touch with.

And want to be a part of, um, obviously Mega ETH is something personally I'm super bullish on.

Uh, they launched, but their their main attractions, right, the main core killer applications aren't 100% live yet.

So I'd really, uh, am excited to see, you know, once those applications are live.

Uh, the growth of how the Mega ETH ecosystem is going to be and hopefully, you know, we can play a huge role in that.

Um, I also just think the space has, you know, it's like I said, it's a builder's market right now.

So we're seeing people sort of push the boundaries, come up with new ideas.

It's the time to kind of like, you know, block out all external price action and to just kind of focus on coding.

And, um, yeah, like building, honestly, it's what we're doing at Cap.

You know, kind of blocking everything out and, uh, focusing on building out our fundamentals and improving the protocol.

And I think we're seeing a lot of our counterparts in the, uh, the industry sort of do the exact same thing.

Excellent.

Well, so I have two last questions.

Uh, first being, you've been in the space for quite a long time, especially on the with the builder hat or builder cap, right?

It's rather better things to say.

Yeah.

Uh, what's the one thing you tell a founder today about getting infrastructure right before they actually need it?

And do you have anything else you would say to builders that are building in the space?

Yeah, I'd say it's a scary time to be a builder.

Because as easy as it is and like, you know, when I started doing Solidity and stuff like that.

We didn't really have the AI tools that we have today.

Um, and I I think a lot of people maybe think that they can, uh, build quickly and build fast with AI.

And, uh, kind of vibe code things a little bit.

And with smart contracts, uh, you have to think that you're going to be exploited at all times.

Like you have to essentially come with that builder hat on that like I have to look at every line of code.

Uh, every angle that somebody can attack me.

And you can't just build things without knowing 100% how they work and how they function.

And how they interact with other protocols and then ship them live that are going to hold value.

So I would say for any new builders that are out there, um, you know, that's great that you used AI as a tool.

To build something, build it quickly, but making sure that you're, you know, really understanding all the functions of your contracts.

Where you can kind of get hurt, that you're getting audits done, you're thinking security first.

Um, you may have a really great idea, but you're going to be dead on arrival if you have a security incident.

And so it should always be, uh, the most important part of your process.

Is thinking about, you know, where you can sort of get hurt.

And then how you're going to use third-party systems to, um, review your code.

Uh, watch your code.

Making sure that you have proper bug bounties in place.

So that you have all the security researchers that are so good in this industry.

You know, looking at your code at all times.

And, uh, yeah, I would say like my number one piece of advice is to always think security first.

And it's okay to not ship things if you want to go back and get, you know, one extra audit.

Or you want to look one more extra time.

And I would focus on that more than being quick and, um, just shipping things.

Yeah, that's a brilliant commentary.

Because many of the times in startup world, you are taught, hey, ship fast, break things and then repair.

Whereas in crypto, you never, maybe not always have the second chance, right?

Like you can have this one blow up and it's done.

The blockchain, the blockchain space is just not not that way.

You can't you can't just ship fast.

Like you have to make sure that what you're shipping, um, you know, is fully tested.

It has, um, you know, not just a full test suite, but it's gone through an invariant audit.

Like you're looking at all the edge cases.

You're just you have so much value that could be taken at any second that you can't just, you know, ship and go, oh, there's a bug.

Like it just can't you can't have bugs.

That's it.

Yeah.

I mean, that's it is scary, but it's also very interesting space to be building in.

Uh, all right, and then the last very short question, what is one metric you want to nail by end of 2026 with Cap?

Is it TVL or is it something else and what are you aiming?

Yeah, I'd like to have by the end of 2026, I'd like to see a billion dollars of borrows.

All right.

So with that, I also hope it's going to be over a billion, maybe two billion, we'll see.

I have very little doubt that guys are not going to deliver.

Thank you very much, Vesso, for listeners, make sure to follow Vesso on Twitter.

And follow Cap, uh, all the great stuff they're doing.

Uh, hope to see you soon at ECC and Can and all the other conferences and it's been beautiful to host you.

Thank you.

Thanks for having me on.

Cheers.

Cheers.

Okay, now if you can, I will stop the recording.