Surf Lending: Simplifying DeFi Borrowing and Leverage on Cardano

00:00
All right, everyone, I’ve got a brand new protocol building here on blockchain. And this one is called surf. It’s a borrowing lending protocol built on Cardano. This one’s pretty interesting. I haven’t tapped into this one deeply just yet, but thankfully I have Phil here joining me on the episode to talk about the platform so we can learn a little bit more about it and how we can take advantage of this platform. But Phil, welcome to the podcast. Thanks, Pete. Thanks for having me. Yeah.

00:28
I’m looking forward to explaining all. So before we get into the platform itself, I’d love to learn a little bit about you and how you got into the blockchain space and then starting this particular project. Sure. Yeah, I’ve been in uh crypto in general since like 2017. So when I started buying, I think Bitcoin was around a thousand something dollars. um

00:58
Yeah, it’s been a long journey. uh I joined Cardano. Yeah. In that, in that cycle 2017 was the first ADA I bought. then I think over that bear market for four years, well, it wasn’t four years, but it was like two years of going down, maybe three. eh Yeah. I learned more and more about Cardano and basically went all in because I thought.

01:29
Basically that Cardano is like Bitcoin and Ethereum in one. So it’s got the security of Bitcoin, but then the programmability of Ethereum. um Yeah, then, so I was kind of just a passive investor for the longest while, but then when staking came along, uh I jumped on board because I’m a technical person. I still have a day job and there I’m a software developer.

01:59
Um, so I thought I could use my technical skills there. Uh, and yeah, basically I joined, um, the ITN, um, which was the incentivized test net for staking. Uh, so I had my first pool called Queen, uh, that was very successful. Then I had a second pool. Um, and then, uh, I think I registered it in like December, 2019. Um, so yeah, I’ve been.

02:26
uh, producing blocks on Cardano since then, obviously in the ITN, they weren’t real blocks, but then, yeah, when we had the main at six months after, uh, this was the real deal. think now we have like approaching 10, uh uh, 10,000 blocks that we created. So I’m very, very proud of that. Um, and the stake pool is doing super well. But yes, other than that, I’ve, I’ve been kind of on the sidelines, just, uh, and, and, and investor in many projects on Cardano. think I have.

02:57
30, 40, 50 different tokens, not including NFTs. like, yeah, I’ve just gone in everything and I’m a power user as well. Like I use all the apps. I try everything at least once. Some things don’t work out as, as it hope, but others are successful. So yeah, then that, as I say, yeah, I’m a power user. So I also use like,

03:27
centralized exchanges and centralized apps. So for example, in Binance we have Lending, which is I think a very cool product. So I’m a user there. So this is what I kind of brought into Surf. uh I’ve founded Surf. uh Yeah, it’s now four or five months ago. And I was brought into it uh by being an investor in Bodega, basically the Bodega founder, Monroe.

03:57
Uh, it kind of approached me and, and he had some people already working in the background on, on a new protocol, uh, but they needed somebody with more of a user perspective. Uh, and so, yeah, this is what I bring in is basically pushing for the best kind of user experience app, uh, possible. Uh, so, um, yeah, that’s, that’s my journey. And we had a.

04:27
crazy successful three months since launching. We obviously raised the money. One month later, we launched the app on mainnet. And since then, yeah, just constant improvements. And the latest one we’re working on is uh a new product that wasn’t even in the uh pipeline originally is this one-click leverage uh tool that basically allows you to

04:56
bypass looping, em borrow looping and just do it all in one click. I can explain that a little bit later. we’ll get into that. That sounds like quite an interesting feature. considering I don’t use borrowing and lending protocols that often, it’s probably something I’d like to be educated about. But I love this because you bring in a lot of experience from different ecosystems, like you mentioned, lending on Binance.

05:23
that’s absolutely massive and being a power user as you phrased it on that platform, bringing your experience from those types of platforms over to surf, I think is really crucial to help it stand out in the ecosystem. But can you tell me what’s the benefits here and what is the point of deviation between other Boeing platforms or lending platforms on Kadano or in crypto in general? Sure. So I mean, first of all, we’re

05:53
Obviously on Cardano. So it’s still kind of an island. We’re trying to get away from that, but eh yeah. So we are only focused, uh not only focused on Cardano, but for now it’s Cardano and hopefully soon Bitcoin as well. But so what makes us different from others? So just to give the context of where we started is about six months. Maybe it’s nine to 12 months now.

06:22
ago, Lenfie had a vulnerability that they found and they responsibly uh kind of released it the public, told the public that it’s no longer safe to please withdraw their supplies and close their loans. And then for, I don’t know, six months or so, there was no sign basically that they’re going to release a new version that’s patched up. And so that kind of

06:51
opened an opportunity for a similar product on Cardano, is an isolated pool lending platform. So what Liquid is doing, for example, is uh multi-collateral, but that means that they have to uh be risk-averse about the kind of assets that they allow on their platform.

07:19
because if let’s say they allow a new meme coin on their platform that can access all of the uh funds that all the other pools, all the other assets can access, uh can be very risky. eh Whereas with isolated pools, the risk is kind of isolated to that pool. So if you as a supplier supply uh ADA to a risky pool, that risk will be isolated to that pool.

07:48
Other proofs are not affected basically. And this is what Lend5 v2 was. eh And we did basically the same thing with, eh I mean, I think the same thing plus eh a little bit more because for example, Lend5 v2 didn’t allow you to add collateral to your positions, whereas we can. eh In fact, we can also do multi-collateral, but we just haven’t done that yet because I think

08:18
Yeah, our value is from the isolated pools. But we may do that at some point. And not at some point. In v2, we for sure will do it. But what I’m saying is already we could do it. And yeah, so far we’re just focusing on other things like this one-click leverage. This is sounding really good. And I know a lot of people in the ecosystem when LenFy went belly up, essentially, were really disappointed in that.

08:48
And to have something to take its place is I think really key here for the Kedana ecosystem specifically. you mentioned here, now I know there’s a lot of people that listen to this podcast that are absolute beginners and they’re just stepping into learning protocols at the moment. And the isolated pool, I think is quite a attractive feature because like you said, protects it from certain levels of risk.

09:13
But could you explain this extra feature here of adding an extra collateral and how the loans actually work? So from a beginner user point of view, coming into the platform and managing your loans, it’s probably something they need to understand. And being able to add collateral to this, I think is a really good feature. first of all, to what you said about beginner users, I think this is also something that our app is very much focused on.

09:42
is the simplicity. And I think if you use it, you will see it right away that just how simple things are. We’re not trying to overcomplicate things. We’re not giving you more options than you need. is very user centric. It’s very simple to use. this is the thinking about everything that we’re trying to do is to make it as simple as possible for the users and to make the user experience as smooth and good as possible. But for adding collateral,

10:11
So what happens is, the usual flow for borrowing is, so you will have an asset. So for example, a snack, you’ll have, let’s say, a million snack. And currently, if you just hold it in your wallet, that’s kind of the value of it. It’s just locked in that snack. But with our borrowing, what you can do is you can use that snack to borrow ADA against it. So you’ll put the million snack, and you can get about

10:40
to a half thousand or so ADA from it. So without selling the snack, can get, unlock some of the liquidity. Now what can happen is liquidations. So eh if the price of snack goes too low, you may get liquidated. eh And that doesn’t mean you lose all of your snack. I mean, depending on the price. So if it’s a crazy collapse, then you may lose all of it, but.

11:10
Typically it won’t be all, it will be a portion of it because the way we have set the parameters is to be extra safe for the suppliers. So we already had one liquidation event with Bodega and uh I think Bodega went down over 50%. uh And it was a massive liquidation event on our end. suppliers actually benefited from it because we have a liquidation fee.

11:39
So nobody lost more than they should have. uh So the borrowers, they got back some of the bodega position that they had in the collateral and the suppliers got uh more, not only did their interest get covered back, so the interest that the borrowers owed them. So that went back to them, but also the liquidation fee eh that they got back meant that their return on their investment is now way higher than

12:09
It would have been if people just paid off their loans. But now about adding collateral, this is how you can, if for example, the price goes too low, but not yet liquidated, you can eh add collateral to your position, to your borrowed position to make it a little bit safer. Of course, you can always repay your loan to reduce the risk entirely, but adding collateral is a key to yeah, risk management. eh

12:38
We currently don’t have a remove collateral. So if, for example, the price of snake goes up and your borrow is now the health is quite high and you want to actually maybe borrow even more currently, we don’t have this. uh So currently you would have to repay the loan and then open a new loan. If you want to maybe have more access uh to or unlock more liquidity using that same snack. So if, for example, snake is now 1 million is worth 10,000 ADA.

13:08
Maybe you want to have access to 5,000 ADA liquidity. So for that, yeah, you need to kind of close the loan and open a new one. But this will be coming in V2 as well. We want to have, give users full control basically to manage their positions. There’s a lot of cool features here. And I think the key thing here is that you’re putting your assets to work rather than just holding onto the SNAPE.

13:37
Sure. Some of the tokens might have a staking, um, smart contract or something that will allow you to earn some extra tokens there, but maybe you actually want to earn some extra ADA and then you use that to stake and earn some extra ADA rewards there. So there’s a lot of things that you could do here. And you know, I love that you guys are putting, uh, or putting out these features so that people can have these opportunities and play around DeFi. Now, what was this other feature that you’re talking about?

14:04
Uh, well, one thing to say is yes. One thing useful about our protocol is the borrowing. Yes. So to unlocking, unlock your, um, liquidity of your existing, uh, CNTs. So Cardano native assets, but from the supplier side, so let’s say you have a lot of ADA and by just staking, you would be earning, uh, typically two and a half percent. Now it’s gone way down.

14:33
in the last four years. mean, every four years, I think it halves and I think in the future, it will continue to have. So if you want to have a better ROI on your ADA, you can be a supplier on our platform. Some of the pools are earning something like seven, 8%, I think even 9%. So now this figure

15:01
The way it works is uh borrowers uh borrow the ADA. And the APY calculation is based on active loans. So it’s not an estimate. It is a real figure. But you only get those rewards when they actually pay the loans. So currently, this is the way it works. And that means sometimes you have to wait. So you won’t be getting that APY right away. So you might have to wait.

15:31
ah Eventually, they will have to pay or they will get liquidated, in which case you will get even more APY. So that’s the way it works now. But we hope to uh make it work even better in v2, which would be more like time-based. So the minute you supply uh your ADA into the protocol, it will start already accruing rewards. And then when you decide to withdraw, should

16:00
get the rewards or you should have and basically IOU tokens that when borrowers repay, you will have access to that. You can kind of exchange it for, uh, for the IOUs. So, uh, this will, this is one thing that’s, that we’ve learned since, since launching is this is what suppliers expect. This is what people expect. And what we want to do is, uh, give the people what they want and have the best kind of.

16:29
protocol working for our community. So now this other feature, you’re referring to the one click, is it? Yeah, the one click thing. Yeah. So m as I said, I’m a power user. And this is exactly what I do ah on Binance, for example. So I will borrow against, let’s say, my ADA. I will get USDT. Then I will typically.

16:59
exchange that USDT for ADA. I will put that ADA back into the loan or borrow more against it. I will use that USDT again to swap for ADA and I will continue doing that until basically it doesn’t make sense to do so. And you can do the same thing on Cardano on chain. So currently on surf, can, let’s say with the SNAC using 5,000 ADA worth of SNAC. uh

17:28
which is 1 million SNAC, you can borrow, let’s say, 2,500 ADA. You can swap that for SNAC. You can get a new loan for 1,200 ADA. Do the same thing, 600 ADA, and so on. So you would do this loop over and over until it doesn’t make sense to do so. Currently on uh Surf, uh that means you’ll be opening multiple borrow positions. And each one is individual. It will have a separate

17:58
uh, interest rate and on surf, the interest rate is fixed for your position. It’s dynamic when you take it, uh, depending on the utilization. So basically it will vary when you take out the loan, but for your individual position, it will be fixed. And so, uh, yeah, currently the way it works is you will have multiple borrow positions. If you do this, if you engage in this looping, well, with the one click leverage, uh, product.

18:28
Basically, you won’t need to do that. You can do the whole loop in one flow. So you will borrow uh more in one go than you would initially, than you would currently with the tools that you have now. um And all of the amount borrowed will get converted to the um collateral asset. So for example, in terms of SNAC,

18:58
Uh, again, if you before, uh, put in 1 million snack and then you would borrow, about, will approach, uh, the value of the initial collateral by engaging in this looping approach that. So in the end, could have 2 million snack from all this borrower looping. Well, now with this, uh, with this tool, you can do the same thing in, one go and

19:28
Depending on the asset, we have different parameters for risk. So some assets will allow you to borrow 3x your collateral, and others will allow you maybe 1.7x. And the cool thing about that is the interest is the same as in uh our isolated pools.

19:57
to like perpetuous, typically the interest is per, I don’t know if it’s second or minute or hour, and the interest tends to be quite high. Whereas here, we’re just re-utilizing our existing uh isolated pools. So the interest rate is actually very manageable, and it’s eh very good. Now currently, ah if you do this one click leverage,

20:24
all of the collateral will end up in the collateral position. So you will have, let’s say, you, again, eh borrow against your 1 million SNAC, you will borrow, let’s say, 4,800 ADA. eh So that will be the borrow amount. And that will be backed by all of the ADA converted to SNAC, again, plus your 1 million. So it will be backed by almost 2 million SNAC. But that will be your… eh

20:53
borrow position. So if you want to repay currently, I mean, it’s not yet released, but, uh, initially you will need to get more ADA from somewhere to repay it. But what we will, uh, introduce shortly after is repay with collateral, which means you don’t need to have some ADA on the sideline to repay the loan. You can just use the collateral to repay the loan itself. if snag goes to 10 K, uh, 1 million snag goes to 10 K.

21:23
then you can just repay with collateral. get back more SNAC than you started with. So that’s the one click. It’s very exciting. It’s another way to leverage your existing assets. If you’re bullish on them, you can go long. And we will have similar thing for short positions. So if you decide one asset is going to go down over time, you can do the same thing with shorting.

21:53
So that means you’ll be borrowing that asset. That asset, will get sold for you. And then when you’re happy, the mechanism will buy it back for you and repay the loan. So yeah, it’s very exciting. eh this was something I think that was talked about in community. And I just thought about how we can do it efficiently. And I think what we’re going to

22:20
release quite soon. could be this week, should be this week. In fact, yeah, I’m very excited about this is all very DJ territory for me. It’s, it sounds crazy. I’m being able to leverage and go through all those particular loops, uh borrow some assets, sell that asset, buy the same asset, again, get another loan, et cetera, et cetera. I’ve only heard a few people.

22:46
in real life that I know doing that and I thought was absolutely crazy. But I know they did with Bitcoin and they’re winning out at the moment. you know, it’d be really cool to see what comes out of this and see what hopefully there’s a lot of winners in the end, but we shall see. So it’s pretty exciting that you guys are having this new feature and upgrades launched very soon. And it’s also really good to hear that you guys had such a good

23:14
successful last few months with the launch as well. uh Who’s behind all this? I know you’re on the team. Who else is on the team? Who’s building all this? uh Have you guys been audited and all that? uh What’s the background with the tech side of things? Sure. So as I say, I’m a software developer in my day job, but I am not a Cardano developer. As I say, I have a stake pool, I have

23:43
some access to, to the way Cardano works, but yeah, not the smart contract side. So, on the smart contract side, we have a guy called Suzuki that’s a pseudonym and that’s not a real name. ah So he previously did the Bodega smart contracts. So if you’re familiar with the Bodega prediction market, ah so he did those. And before that, I think he was like an auditor for some firm.

24:13
also auditing Cardano smart contracts. So very experienced guy. yeah, very, very awesome. Like the way how fast we can achieve things is, yeah, I was super impressed. Then on the UI side, yes, we have another guy. um Also very quickly, the way they can build things from scratch. um I think he’s also involved

24:42
or was involved with Bodega. So all of these guys were introduced to me through the Bodega connection. And we are advised by both Bodega and Strike founders. And then I think we have overall like 10 developers now, but these are the core team kind of developers. But yeah, now we have like 10 and we’re constantly every day ah in the chat working on.

25:11
Currently it’s the one click leverage, also improving issues. Yeah. For example, in Suzuki’s case, I think he’s uh in a kind of a jurisdiction that’s not too friendly to crypto. So he’s not out there uh fully doxxed. And me as well, I’m not fully doxxed in terms of my name because I still have my day job, which I hope I can quit at some point. m

25:41
Uh, but, um, yeah, but also I’ve, mean, I’ve been to Cardano summits, um, with my real name. Um, you know, I’ve been in the community for a long while. Uh, I held my stake for, so it’s not like I’m completely unknown, but yeah, not, not fully docs with a full name. Yeah. Cool. Understood. Now.

26:04
I just want to touch back on the Bitcoin side of things. I know there’s a lot of talk about Kadano and Bitcoin DeFi, Kadano being the DeFi layer for Bitcoin. Are you guys looking into that? So we made a partnership with Sundial protocol, which I think is exploring that side. So I think we will basically do it when there are tools available. uh For sure, this is something that excites me. If we can… uh

26:34
If we can tap into the Bitcoin liquidity, uh that would be huge. Because currently we are like 14 million TVL. If even a tiny, tiny portion of Bitcoin can access our protocol, yeah, the TVL can really, really skyrocket. Yeah, just 1%. That’s will do, right? Yeah. But ah what I would like is to kind of

27:04
give the Bitcoiners security in not getting liquidated or getting extra assurance of not getting liquidated. eh Because I think if you hold Bitcoin, many Bitcoiners believe this is the most valuable asset in the world. And the worst thing that can happen is losing that Bitcoin. So if there’s something we can do uh to minimize or remove the risk of them losing,

27:34
to a liquidation. think this is something we will explore. I’ll keep an eye on Sundial and keep the community up to date with what’s happening there because I know you guys would probably be watching as well, but that’s a big one to watch. One of the bigger tool infrastructure developers out there making it all happen. right. Let’s wrap this one up. For anyone that’s listening, how can people join the community? How can they get to the platform?

28:01
playing around with it and where can they learn more about actually using it as well? Our Twitter handle is surfcardano. We originally launched this flow, if some of you may know. I remember that. That was a bit of a drama. Yeah. So we’ve had to rebrand and actually just yesterday we got our Twitter account back from flow. we’re currently thinking what to do with that. Yes, I think Twitter is the best place for communication.

28:31
On Twitter account, you will see our link for Discord. So please join that if you are interested at all in what we’re doing. The community is very active. We are very active there. And then just use the app. Just try it out. If you have any native assets, you can try to unlock the liquidity there. If you have just ADA, that’s kind of only getting staked.

29:02
you can earn ah way more by supplying to some of the pools that we have. em So yeah, engage with us. We are very open to feedback. I think this is something that also makes us different is we are good on communication and we are very open to feedback from everybody. eh Of course, we have our own ideas. eh

29:31
But yes, we always have our ears open for any positive or negative feedback. then, course, you can learn more uh from guys like yourself. Thank you so much for having me here, eh lending your platform to me to explain Surf. Now I do these videos on regular basis to keep you guys up to date with everything that’s happening. do all these interviews.

29:59
And I don’t get paid for any of this. All my revenue primarily comes from the YouTube ads and sale of NFTs. So if you want to support the channel, you can become a channel member. You can have a look here. These are all my fantastic channel members at the moment. You can subscribe if you have the means to do so. And it’s just a price of a cup of coffee. So it’s I’ve kept it as low as possible. So if you can, if you do have the means, if you do want to support

30:28
You can do so that way and it keeps me going, keeps me motivated and keeps me producing these videos for you guys. If you can’t afford that, that’s totally fine. You don’t need to. Don’t feel guilty that you can’t. But if you can at least hit that like and subscribe button. It helps with the algorithm and helps me get these videos out there for the community. Now with that out of the way, let’s get back to it. Not a problem. I’ll put links to everything down below in the show notes. So if you want to learn more about surf, join the community.

30:58
All of those links will be in the show notes and I’ll also post up a quick video tutorial about how to use the platform as well. So if it’s your first time, you can watch that video and get a good understanding of how to use the platform and how it all works. Now, just a reminder, everyone out there, this is not financial advice trading crypto assets playing around with the DeFi does carry various risks. So please make sure you educate yourself, get up to date with all the best.

31:24
security practices out there before you dive into any of these platforms and make sure you know exactly what you’re getting yourself into. But Phil, thank you so much for joining me on the episode and talking through everything, sir. And good luck with the future developments and looking forward to these brand new features that are coming out on the platform. Thank you so much, Pete. It’s been a pleasure. I’ve been a fan. Like you said, you are going to do a tutorial.

31:51
So thank you for what you’re doing and I’m happy that you’re back making videos. Awesome, Phil. Thanks for joining me. We’ll speak again soon. uh