Bringing Transparency to DeFi Analytics

Transcript

hi good afternoon everyone I hope you all had a good lunch and are enjoying the event so far my name is Braden abbick I am the co-founder and CTO of blockbore and for my talk today I'm going to be going over bringing transparency to defy analytics uh the title is a little bit of a clickbait but basically I'm going to be going over some of the benefits of defy some of the problems with defy in some ways us as a community and us as an industry could bring more transparency into decentralized Finance and so the first question and the question that we're going to try to answer throughout this this keynote is how much transparency is there in defy uh in D5 data and analytics so I guess as kind of a preface we could use a

recent event that had occurred in the blockchain space which was the unfortunate downfall and collapse of FTX for those of you who are unfamiliar FTX is one of the largest centralized exchanges in the space they recently declared bankruptcy and there's been a lot of I guess bad PR some interesting PR I guess some news articles and the big question has been how does the FTX collapse affect blockchain um you know is it a good thing is it a bad thing I think the obvious answer is it's obviously a net negative for the space but I think certain segments certain areas in blockchain such as defy could actually get something net positive out of something like this I think it really outlines the importance of decentralized finance and kind of

highlight some of the issues that centralized providers in centralized changes have and so with the centralized exchange like FTX or like a binance you as a user are depositing your funds into their exchange you could then trade those assets and then hopefully if all goes well you'll be able to withdraw them at the end if we look at D5 Defy is decentralized alternative and one segment in Defy is decentralized exchanges so with a decentralized exchange you could basically trade assets in a peer-to-peer way and you don't have to have a counterparty and you're always in control of your assets of your tokens you don't need to trust a centralized third party so we can go over some comparisons of D5 versus uh centralized Finance since

we've already been talking about exchanges like FTX we can look at two examples so on the left hand side we have a sample trade that occurred on a centralized exchange which was binance and on the right hand side we can see a sample trade that occurred on a decentralized exchange and for this this example this exchange was was uniswab so on the left hand side we can see a couple basic object properties we can see the price of the trade the quantity of the trade and then a couple Boolean Fields below and this data came from binance this was a recent trade that occurred on binance and so we can get a couple pieces of information here we could obviously see the quantity of tokens being traded with 0.52 at a price of Thirteen hundred and forty nine dollars

but this information is is very sparse um we don't know who this Trader was we don't even know if it was binance themselves trading against their users we don't know if it was a market maker if it was Alameda if it was a regular user and so there's a lot of unanswered questions when you're looking at centralized exchange data whereas on the right hand side we can actually look at a decentralized exchange uniswap so we could see some similar properties um we could see obviously the amount that was being traded the quantity the price but we also get some other information such as the block number that this trade occurred on the TX or the transaction hash and we also know who this Trader actually was and so with this information there's some pretty big benefits the first being the transaction hash so anybody including anybody in

this room could actually copy that transaction hash go to an ethereum block Explorer like etherscan and verify this information themselves without trusting me that I copy and pasted this right so anybody could see this at any point in time we also have the block number as well the block number that this trade happened on and so the ethereum network acts as immutable proof of this trade occurring and so we'll always have this this this data here even in the future whereas on the left-hand side with Finance we are completely dependent on binance as a provider for hosting this information so if the binance API were to go out or were to crash we would no longer be able to access this information and we're also trusting binance that this information is actually accurate

um since they are the provider of the data if you look at another really quick snippet this will be a little bit quicker but we could see very similar data again left hand side being binance right hand side being uniswap on the left hand side we could see a sample order book and so on centralized exchanges you have order books for liquidity whereas with decentralized exchanges you have liquidity pools and so on the left hand side we can see some bids right so somebody is willing to buy 431 of token X for a price of four dollars and somebody is willing to sell 12 of token X for a price of four you know 20 or 200.

um again there's a lot of missing information here we actually don't know if this is the same person um we don't know who these people are we don't know if it's a market maker whereas on the right hand side we could see somebody adding liquidity to uniswap right so similar to the previous slide we get a lot more information we know who this Trader is we know the sender we know the owner we know the transaction hash and we have this immutable proof or this immutable record uh that this liquidity action had taken place and so I think at this point it's pretty clear that decentralized exchanges are obviously a winner when it comes to transparency and what people are doing with their trades um but there are also some pretty big issues with D5 and I think we're still in the pretty early stages of defy

um but I think us as an industry there's obviously ways that we could help Drive adoption into this space and so one of one of the biggest issues at least in my opinion with with Defy is around liquidity fragmentation um and so what is liquidity fragmentation so we have this screenshot here which is taken from from uniswab um we could see the tvl is two billion dollars which means there's two billion dollars worth of liquidity on uniswab we could also see the volume is is one billion dollars and this was over a 24 hour period when the screenshot was taken and if you compare this data to uniswap's centralized counterparties like a binance or like a coinbase these volumes are actually very significant right so for those of you who are

unaware of decentralized exchanges there is some actual activity happening on on these on these decentralized applications and these statistics might look very good one of the issues with decentralized exchanges are there are several of them right so this is uniswap there's other exchanges like sushi swap quick swap pancake swap Etc they all seem to have funny names but they all have different different levels of liquidity in them right so Sushi swap might have 500 million dollars of liquidity whereas uniswap obviously has two billion dollars of liquidity and you kind of get into the situation where all these different decentralized Protocols are competing against each other for market share right for users they want to be the best protocol they want to have the most users on them um but this is ultimately bad for the

end user because as a user who is getting into D5 you have to ask yourself you know which decks do I pick right do I trade on Sushi swap do I trade on pancake swap where will I get that best price and so all these all these questions come up because of liquidity fragmentation right if all the liquidity was in one place um you as a user know exactly where to go and where to get the best price and so we can look at a real life example of this exact problem um so on the left hand side there's a screenshot on the right hand side there's another screenshot both of these screenshots were taken at the exact same time but there's different different values in them so the left hand side is on unit Swap and so if I was a user and I wanted to trade 10 ethereum and I

wanted to buy the synapse token as an example on uniswap I would receive 17 221 synapse tokens which is great right so as a user I may just execute that trade get my synapse tokens and be happy um but if I had looked at other avenues or other sources of data um I would actually be getting a better price had I traded some routes for this particular example um so on the right hand side we could see the same 10 ethereum but this time the user would have gotten 18 615 tokens so obviously there is a benefit with trading on the right hand side which was through a trade aggregator than just using uniswap and so as an end user I think it's important for these these types of things to be well communicated

I think that Defy is a relatively new and complex place and so I think if we want to get adoption and users into the space I think it's really important that we make these things clear we make it easy for the user to understand and also easy to gain access to liquidity okay so why is it important to bring more transparency to to defy so there's there's three reasons here the first reason why it's important to bring more transparency into D5 is to have a better understanding of risk right so as a user who's just getting into defy there are certain liquidity pools there are certain tokens there are a lot of scams out there it's very hard to identify and quantify risk when you're dealing with

decentralized assets and so I think us as an industry could do a better job at showing some risk factors whether that's health of liquidity pools whether that's how many people are providing liquidity into a pool um one small example of this is if you were trading assets in a pool that has 10 million dollars worth of liquidity if that 10 million dollars of liquidity was provided by one person how safe is that pool right these are types of metrics that we don't currently have or it's very hard to access them I think that one thing that we could do to bring more transparency into the space is you just have a better understanding of overall risk when you're interacting with these decentralized protocols the second point is a bit generic I think it's a better you know having a better user experience um I think most most people in here

would agree that web3 is pretty notorious for having a relatively bad user experience um a lot of the applications are very nice but it's just very complex to navigate um if you are a new user in this space you'd have to explain how to use metamask you'd have to explain a bridge you'd have to explain you know Sushi swap unit swap pancake swap Etc so I think having an overall better user experience is important there isn't necessarily a direct answer here I just think overall there's ways that we could improve the overall experience to help drive people into defy and finally I think the third point is um one reason why it's important to bring more transparency to Defy is to ultimately accelerate broader defy adoption um I think that there's a lot of Institutions there's a lot of hedge funds there's a lot of people that are

now hearing about defy you know things like the FTX collapse I think really highlight defy and the benefits of defy and so I think bringing more transparency into the space would actually help us accelerate as an industry to bring D5 to a lot more people and to open up more opportunities for for people so that we've outlined some of the importance of more transparency how can data sources providers and users actually bring more transparency into D5 so how can we solve these problems um so the first point I have here is unbiased data irrigation um I think that this is this is uh this is an interesting point I think that there's a lot of data providers there's a lot of uh crypto news websites crypto magazines and some of them clearly pick winners right there are some some hedge

funds um some websites that openly admit to favoring certain chains certain networks I think unbiased data irrigation is in is incredibly important um I think that if we're trying to pick winners in this space I think it's ultimately bad for the end user I think uh trying to acknowledge and embrace the multi-chain aspect of crypto is probably the the best path forward to to help drive better user adoption um the second Point here is user-centric liquidity aggregation so early on I showed a screenshot of one inch which is one trade aggregator there's also others like Xerox Metra Etc I think overall us as an industry need to encourage trade aggregators and make it easier to access them easier to use them and easier to understand and so as a user you don't need to know if

uniswap is the best place instead you can go to a trade aggregator and they will tell you where the best place is to actually execute your trade and the third Point here is to provide easier access to cross-chain liquidity this kind of ties into into trade aggregators in the sense that as a user who's on ethereum or might only be familiar with ethereum there could actually be better sources of liquidity on other blockchains so if you were to bridge to polygon and use Quick swap you might have a better price execution than uniswap on ethereum and so again I think this kind of ties into the second point with liquidity aggregators or trade aggregators making it a little bit easier for people to access cross-chain opportunities and easier to understand what's actually going on in this phase so I think overall we're in a we're in a

very interesting time I think in D5 I think there's a lot of things pointing towards D5 being a a very good option for a lot of people to get rid of I guess centralized risk factors um I think that there's a few things that we could do to make these to make these things a little bit easier so it kind of wraps up um what I have here um hopefully it shines some light on some of the some of the issues some of the benefits and kind of where where I think that that we're headed and how we could do a little bit better um overall so I appreciate uh everybody being here and listening um yeah thank you very much [Applause]