The Element Airdrop & DAO Launch | Will Villanueva & Jonny Rhea

Hey Bankless Nation, welcome to another episode of State of the Nation. We're super excited to talk to you guys a little bit about the Element Airdrop. Element, this is a DeFi protocol, Default DeFi primitive. We've talked about them before on Bankless, basically fixed interest rates, a new sort of DeFi primitive. Uh, and there's actually a lot to unpack with this element story. So, David, I know you've got three things that you think are super going to be super valuable alpha in this conversation that we're gonna cover. Can you talk about those and the guests that we have on today?

Yeah, yeah, this is not your typical DAO launch. While that is where the conversation begins, it is certainly not where the conversation ends. Element with the launch of Element DAO is bringing a lot to the table. First, they have a brand new money Lego governance primitive that all DAOs are freely able to use and plug into. Uh they explained it to me yesterday, and I'm already pretty well convinced that this is going to become the new standard when it comes to DAO governance tokens. Uh it's called a voting vault, uh, and allows you, Ryan, to have your cake and eat it too, at least when it comes to yeah, cake's great. Uh so we're gonna take, we're gonna uh unpack what a voting vault is and why we think, at least why I've I've been convinced that basically every single DAO is going to adopt a voting vault structure. Second, they are also pioneering a DAO governance model, a new governance structure, which they think is faster and more effective and more efficient at governance, which is something that all DAOs need to improve and iterate on. But lastly, Ryan, and most importantly and most excitedly, they're gonna show us how we can get exposure to the merge. Like you said, it's a fixed interest year.

Upside exposure, yeah. Uh or or maybe the the inverse. If you so I don't know what the inverse? Why would any

inverse? Yeah, right. But okay, as you said, like uh element is a fixed yield interest rate protocol, but with that tool, with this money lego, you can express bullishness as to the APY, the yield rate of Ethereum. And so if you think that yield rate is going to go up, I don't know why someone would, Ryan. Maybe they're expecting the burst to happen. Yeah.

I do think maybe it's someone who's listened to a few bankless podcasts might think this.

Yeah, so Element as a tool allows you to get exposure to the merge. So that is what we are talking about today. The new governance primitive, uh, the new governance structure, but then also how element is going to be useful going into the merge. We are bringing on the CEO and CTO of Element, uh Will Villanueva and Johnny Ray. Uh they have been in the Ethereum ecosystem for a long time now. They are both ex consensus uh before they uh went off and built off their own thing with Element. Uh so they have been around for a long time and they are uh fantastic community members and now builders building out a DeFi app that is actually a little bit closer to the actual protocol of Ethereum rather than uh just in the application layer, which is another topic that we will get into.

Yeah, that's super cool. And by the way, we'll we'll start this whole conversation talking about the eligibility criteria for the airdrop. And of course, element, I think, was an airdrop that we uh had predicted would happen, that probably would happen when we put out our big beefy airdrop guide, like all the way back in November of last year. So if you were listening, if you were checking those boxes, you might want to see if you were eligible for this airdrop as well. So we're gonna talk about that. David, before we do, man, we got an announcement uh super important. So it is National Youth HIV AIDS Awareness Day on April 10th. And uh a new NFT collection has been just been launched. This is powered by Consensus NFT. And I think this is a fantastic opportunity for first time NFT buyers because it's an opportunity to support a really great cause with the NFT. Could you tell them a bit about this NFT and um you know how the proceeds from this, where the proceeds from this go, David?

Yeah, this is from MAC Cosmetics. Um maybe, maybe the the men in the channel don't know what that is, but the but the women in the channel certainly probably do. A makeup makeup uh company making a bunch of cosmetic products. They are working on an NFT project with consensus, where 100% of the revenue of the incoming money is being donated to uh AIDS Awareness, Youth HIV AIDS Awareness Day, which is on April 10th. There are three tiers of rarity. You got red uh red tier, blue tier, and yellow tier. Uh and so if you have never participated in an NFT drop, maybe you just don't know which one is for you. This one might be a nice one to start with. Uh $25 for the minimum tier for the red tier, uh, 250 blue tiers for at $150 each, and then only 25 yellow tiers at $1,000 each. And again, 100% of the money goes to youth HIV and AIDS awareness.

Yeah, I'm going to be participating definitely because this is a good cause. The art is by Keith Herring, by the way. So to get more details on that, click the link in the show notes. It's bankless.cc slash M-A-C. David, let

me ask you the question before these episodes right start with what is the state of the nation today?

Ryan, the state of the nation is yielding. We are yielding. Our crops are yielding. Not only, like I said, Element is bringing to the table some brand new technology for all DAOs to be able to use, regardless of plugging into Element or not. Brand new governance primitive that's going to allow us to have our cake and eat it too. We're going to talk all about that. Some new tooling in the Discord space allowing Discord users to discreetly and privately claim tokens without doxing themselves. That's also coming. So all these technologies that Element is bringing is being yielded by the rest of the Dow ecosystem because of the nature of open source protocol. When somebody builds something, we all benefit. But of course, Ryan, it's also we are yielding from the merge, which Element is also going to help us with.

Look, man, uh, three words cake, uh, yield, and merge. All right. And they all go really well together. We'll all unpack all of those things in this episode. Really excited to get to it. Before we do, we want to thank the sponsors that made this episode possible.

Hey guys, we are back on the podcast with Will Villanueva and Johnny Ray. Super excited. The CEO and CTO of Element, respectively. I think they both did some time. I make it sound like a jail sentence. They both worked at consensus previously. Will on Ethereum sharding.

Which is pretty cool. And uh Johnny on the Ethereum client. So both like protocol layer devs that moved up the stack into DeFi. That's a conversation in and of itself. But Will and Johnny, we are here to talk about Element. How are you guys doing today? Welcome to Bankless and welcome back, Will.

Yeah, thanks for thanks for having us. Really excited to be here. Really excited to jam out and talk about

uh everything. And uh yeah, always fun to be here.

Well, let's jam out. Let's talk about everything, guys.

Thanks for having us. I'm hungry with all this talk of cake.

So

We're gonna get to the cake, all right? But first we gotta eat our veggies as we do on Bankless. And uh give us the quick speed run. The 101 of Element for people who haven't caught up on uh what element actually is. We talked about yield, uh, we talked about cake, of course. Uh but tell us about yield. What is the 101 on element? What does uh the protocol do?

Yeah, so Elements pretty simple at the most like fundamental layer. So

what we do is our set of contracts basically allow you to

um put uh go for any yield position in the market. Currently, we're wrapping the positions on yarn,

and it lets you split that position, that yield position into two uh basic components. So

There's the principal and there's the interest. So to give you like a really, really simple example,

um, if I put down a million dollars on the USDC vault in uh Urine, and let's say it's going for 10% APY,

the principal is $1 million at the end of a year.

The interest that I can redeem for is $100,000, that 10%.

And so what we do is we create a market around both um both those components, the principal side and the uh yield side.

And allows for some really interesting things. And particularly the one that's really interesting

is the uh the markets around principal tokens. So uh we use something called yield space, shout out to Allen over at yield protocol.

Um it's the constant uh power product uh invariant. And uh

essentially what we uh what we do in this case is it's sort of this concept of I give you 90 cents for a dollar. So, Ryan, I'm gonna give you a dollar. How much is it worth it to you? But you can't use it for a year.

So you might say, okay, I'll give you 90 cents for that because I sort of, you know, miss out on the opportunity costs of money, right? I'm not able to stake it on different positions in the space. And this is sort of what creates that market, which sort of tracks the uh going variable yield rates in the space. And so when you make that deal,

um, it's it's safe, it's conservative, you know exactly what you're gonna get up front, and it's sort of fueled by people who are going long and variable interests and using our platform to do that and sort of degen a little bit as well. So

And Will, this is this is super common, right, in the traditional finance world. What is this subset of assets called and like w what happens in traditional finance?

Yeah. So there's this, there's this pretty like, you know, basic concept, you know, of the opportunity cost of money. If you give someone, you know, a certain amount of funds and it's locked for a certain period of time,

um, that sort of accrues that differential in interest. One way you can see it is the person who's buying these principal tokens or getting that fixed rate. You can almost see it as a really, really high

uh interest rate CD that they're locking in.

Um, but those rates are, you know.

Significantly higher than what you see in traditional finance. Also, yeah, the splitting of variable interest from uh from the principal is also a pretty common thing in that space as well.

So this allows somebody who uh is particularly bullish on an asset to be able that and that asset has a yield associated with it, it allows people to buy that asset at a discount. So like if uh Ether is like uh $3,500 and it's got a certain amount of yield, I could buy it for like $3,200 at a discount, but the only thing is I just am locked up for a certain amount of time. But if you're already bullish, you're and you're already gonna hold it anyways, you could buy it today at a discount. Uh and that's like probably like the most basic way to uh leverage element, but then things can get really uh a lot more creative. Uh the splitting of a yield bearing asset into a principal and its interest into two different tokens, the principal token and the interest token, allows for a lot more of expressivity, a lot more creativity. And that's where we're going to get into the section later on in the show about how one can gain exposure to the merge. Um anything to add on that, or should we get into some of the uh the DAO launch uh subjects as well?

Yeah, let's get to the Dow launch.

Okay, cool. Because of course, like we said, gotta eat the veggies before we uh eat the cake. And so veggies first. Uh congratulations, guys, on the launch of Element DAO and the Element uh token Airdrop. Uh let's go a little bit into the details about the the dynamics behind the the airdrop and the DAO launch. Um uh the snapshot was taken March 1st, so anyone that has interacted with uh with the element protocol since then, uh sorry, you're you're out of luck. But if you're before then, you probably got some of the airdrop. How did you guys uh determine how much of the airdrop to give out and who of the uh element protocol users actually got the airdrop?

Yeah, so I'll I'll actually let like Johnny, I think Johnny can you know describe uh a lot of this in in more depth as well.

But basically, we sort of broke it out into a few components. So, one, we wanted to reward the users of the protocol. These are people who um traded principal tokens.

These are locked in a fixed rate. These are people who LP'd in the protocol.

We also wanted to reward active community. So this are these are people who are active and actually had engaging discussions in our Discord.

And then also we were, you know, pretty passionate about

rewarding both ecosystem developers. So these are core Ethereum developers.

There's a number of reasons why I think Johnny can articulate that really well. We're both, you know, really passionate about that. But also other sister protocols. So we also rewarded.

People uh basically protocols we built on, and then other protocols that we felt were like uh good for the space, good for the DeFi ecosystem that we

that we really appreciated. And the way we did that, right,

um, is we actually had scripts that analyzed um GitHub contributions and

based on your GitHub contributions, that you know allows for your eligibility on you know some of those repos. But I'll go ahead and pass like this one off to Johnny. I know he has a lot to say. Or yeah.

Yeah, Johnny, help us uh just understand this a little bit more. What what are the unique elements of the element airdrop that is uh that isn't really found in other airdrops or other DAO launches?

yeah, I would say just like high level, like the main takeaways. It's like, you know, on the user side, like

we provide like uh, you know, like three and a half percent to liquidity providers, you know, three and a half percent to traders, and then like half a percent to mentors.

And and and really what we did is we decided early on to do it in a proportional manner,

um, which is like, you know, it's good and bad. Like uh proportional is nice because it's basically like.