DappCon 2023: Why The Wheel Of Finance Must Be Reinvented - Steve Fau

Transcript

hello everyone first of all thank you so much for uh being here at this hour because I know it's almost lunchtime and you all must be super hungry so kudos to your you for sticking around also I see some of you kind of squinting like hey who's this guy there was supposed to be Joseph on stage the other co-founder of Pawn and uh and and and last time I remember seeing him he was kind of taller and slightly more handsome so Joseph couldn't make it so I'm I'm a last replacement um he was supposed to talk about the um Crypton native economy report that we produce at Pawn uh so I'm not going to go go through the numbers for him because that's his content but

I'm going to touch on some topics that in a way relate to being a a a crypto native um also yeah my my slides are my slides are are fairly hideous compared to what I saw here previously so apologies for that but uh I think import the the important thing is the message anyways let's get let's get into that Reinventing the wheel of Finance why does even stuff need to be re reinvented um I want to start with on a on a on a maybe like a slightly uh bad notes because my thesis is that there is a lot of not so great things in the world but I also want to sprinkle in some hopium

uh because I want to uh make the argument that web 3 our our ecosystem our our industry is uh very well positioned to uh fix many of the things and so hopefully that's going to give a little bit of motivation to to to a lot of the folks either here in the room or or maybe watching the stream who are looking at the numbers that are going down you know this time of the year and I want to I want to remind everybody that what we build here is actually uh meaningful meaningful stuff so yeah chapter one uh shit's um if you look anywhere in the world you see a ton of problem it's the there is this huge stockpile of problems you know

from on one side the cultural Wars in America on the other side the actual war in Ukraine you know you see poverty you see Hunger you see Rising uh cost of living all this kind of stuff which it's kind of weird because if we look at uh what we were supposed to have by now we were supposed to have flying cars and unlimited free uh clean you know energy to power uh you know all our all our inventions and that's clearly not the case even though you know we might have made some marginal progress it's still not the case now why would that be a thing like we've we've made we've landed on moon more than like 50 years ago so you know clearly there's this there is this

progress and we should be we should be much closer to this or this sorry than uh where we are today well my thesis for this is that we are collectively only using maybe like 20% and it's like my estimate but we're we're using only maybe like 20% of our Collective brain power as a society uh maybe our our maybe like 20% of our Collective creative potential and the reason for that is that you know more likely than not there is you know somebody who otherwise might have been the next Albert Einstein or Mari Kiri and today they are you know working on a on a

scrapyard looking for uh rare metals or maybe they are suing together you know the next collection of Nike shoes in a in in a sweat shop um but you know in order to build my argument further I don't even need to go to those extremes because even if you look at you know developed countries middle class society and you look at how many people actually get the opportunity to you know shoot their shot when it comes to um you know developing their idea developing their uh their genius and and potentially sharing the Innovation with the world you realize that you know vast majority of the middle class kids don't really get to shoot their shot at all these

days and of those who do of the small minority who do um vast majority actually ends up you know failing within the first year you all know the saying that of all startups 90% of them fail uh within the first year now the reason why the middle class cats middle class kids get only one shot or zero shots and and the the the the kids in poorer regions get absolutely zero shots at potentially developing their potential in my opinion is due to access to Capital now again sorry for the Hideous slide now the capital in General could be divided into three main sections in my opinion especially in relation to the

problem that I'm outlining here it's the cultural capital it's the social capital and it finally it's the financial Capital so cultural capital among other things includes stuff such as education I don't need to explain to you that if you want to make a dent in certain industry you probably need some specific knowledge in that industry Social Capital again the well-known saying that your network is your netork that's pretty self-explanatory and then finally the financial Capital no no explanation needed and the good news is though that the part of access to financial capital is exactly what web 3 is very uniquely positioned to solve and I could make the argument that the

financial Capital out of these three is actually probably the most important one of course you know they they they kind of uh uh have a relationship with each other so that once you once you boost one the others also go up but um uh the the financial capital is what we want to be solving in in web 3 and I don't need to I don't I probably don't need to remind you about this because you've all been building in this space or using the apps in this space uh so it's pretty clear however there is this concept of Reinventing the wheel that needs to be Revisited in my opinion because um as we all know tread fi is you know not the

direction in which we want to go yet I've seen so many Builders so many talented Builders and and and inventors in this space kind of like focused on copy pasting what we seem to know from from trefi and putting it on chain so we're kind of stuck in this situation where web 3 is kind of becoming just a trefi on chain which in my opinion would be a huge loss if that ends up being the thing that we've developed here let's talk about the concept itself do not reinvent the wheel I mean you've you all have probably heard this a couple times in your life I mean I personally frankly I'm guilty of using

this phrase a couple of time in my couple of times in my life but uh lately I've come to a conclusion that it is it is just um and not just that it's a garbage advice it's something that we should we should actively try to reinvent every single wheel that we can put our hands on just think about it the the the quote or the advice kind of disprove itself if we didn't ever reinvent the wheel the only feasible way to drive a car today would be to become a Flintstone uh a Flintstones character which you know I'm not so uh uh it's

it's not it's not a it's not a a great situation so do reinvent stuff how does this tie into you know what we're building how does this tie into the Global Financial system so again I'm going to go back to something that I don't I don't need to convince you about this like probably everybody or majority of people in this room would agree with me on this statement that tread fi is broken now you could say you could lay out the argument that maybe it's broken because it's a corrupt system maybe you could lay out the ARG arent that it's rigged in favor of the rich who you know are the only ones getting richer at the expense of everyone else but there is one more aspect that I would like you to think about when you

when you when you you know discover the the the the idea that trefi is broken and why it's broken and that is that a lot of the pillars a lot of the fundamental cornerstones on which trefi is actually built are completely arbitrary they are are completely made up I made a presentation about this about 3 months ago during epra where I talked about so I'm going to just give you like tldr version um where I talked about the fact that for example the inflation Target which as as as a lot of you know in most developed economies is is set at

2% um is something that's been considered immutable it's been considered a gos it's something that influences the life of every single one of us because you know the inflation Target essentially dictates you know the monetary policy of the central bank which uh in in in turn results in you know more or less money circulating in economy in a nutshell and so therefore it influences the individuals in the economy it influences the businesses in the economy it influences the government as well so directly or indirectly this inflation Target which is set at 2% touches every single one of us but if you spend just a little bit of digging and by that I

don't mean I don't need you to go to CI CIA archives and like dig through some secret you know resources you can you can Google for 15 minutes and you will find out that the 2% inflation Target which drives you know the the the the economical properties of most developed economies is completely made up a politician in New Zealand needed to put down some number and so they said let's make it 2% it's about it sounds about reasonable and then somehow magically everybody kind of uh involuntarily adopted it uh after after the US also adopted it etc etc so and that's not the

only so that's like first of all that sounds absolutely ridiculous second of all that's not the only only property so not only that the system is riged the system is corrupt the system is based on essentially what you could call a lies and now we're kind of like driving inspiration from it when we're developing in this in this in this like ultimate Financial sandbox that we have in front of us so essentially what I'm trying to say here is if you are a builder if you are an investor who funds builders in this space if you are a user if you are commity commity member just try weird and every time you're building something every time you're

you're trying to invent something try to start with a completely clean slate of paper um try to try to see uh what is the most fundamental piece on on top of which you've been uh building whatever you're building and try to like completely redefine it there is no such thing as impossible in the web 3 space in such a degree that even if you build something that may seem economically unfeasible you can literally print imaginary money and subsidize the activity un until the actual Network effect kicks in so again if you're if you're a builder let me see how much time we have we have we have seven seven

uh seven more minutes roughly so uh you can look up you can look up on Twitter there's been this video circulating uh by by David saak famous technology VC who uh essentially said that whenever he's evaluating an idea that he considers for funding he looks for something that's called Product hook and he looks at that over looking at actual Market fundamentals so David suak is not somebody who's primarily focused on on on crypto uh Investments and he already says this that a product hook which essentially means um uh uh uh you know some for example like some UI element or some some product aspect that

forms habits of users to essentially regularly come back even if you don't have the actual Market fundamentals nailed down that's still more valuable than the other way around if you have this like multi-billion dollars Market available but you don't necessarily know how to capture it which I feel like is the issue with with a lot of with a lot of crypto startups in web3 it's super easy to say if we Bank the unbanked it's going to be like 30 illion dollars per year of Revenue or whatever uh but you need to have a clear way of of uh of of of capturing the audience so if I if I take this um to a specific conclusion you can look at for example friends Tech currently as

something that a lot of people have dismissed that as like the next Ponzi you know as as something that doesn't have a clear use case as something that doesn't have a fundamental value as a fat etc etc and so why while I'm not endorsing it I'm using it as an example of something that you should instead of like immediately dismiss it because in your mind the market fundamentals might not be there but then again I just few moments back laid out the idea that the market fundamentals are actually fake so what are you even looking at or or like what are you even looking for if you look at for if you look for Market fundamentals you should proactively explore it see how you know you can dig

some data about user Behavior some lessons about what people are interested in doing in the space you know what works what doesn't try to sprinkle in a little bit of you know experimentation again take this back to the fact that we are in this sandbox Playbook and so if you're a builder build weird if you're investor I would also invite you to invest into stuff that might not fundamentally make sense but has this you know you know for example interesting uh uh uh user interaction built in it if you're a user obviously you probably do want to try weird at this point in the market because you know if you look at the previous Cycles

this is exactly when you know the the the the the big narratives have been built like when nfts nfts didn't uh you know happened during the during the bll market the previous bll Market they happened exactly at this moment when everything went down when everything seemed to be you know hopeless when everybody was starting to lose uh the sense of the narrative like why are we even here and the next big thing usually came out of that so as a user you will be able to uh probably find the diamonds at this at this very moment and as a community of course let's support those those uh crazy ideas so yeah um my conclusion is let's

build weird let let's fund weird let's try weird because we are morally obliged to do that you know for for the kids at the very beginning of the of the presentation it's it's kind of like a selfish altruism if you think about it um because we help them we help onboard their IQ points if you want to get as fundamental as as this we can onboard their IQ points into the global economy and we all benefit of that and we all can have flying cars and unlimited free energy and we three by giving by providing them with access to financial Capital to to fully realize their potential Capital uh their their their creative potential is uh you know

the the most important thing right now thank you very much what a capturing talk thank you so much we have time for questions from the audience do we have some I realized it was not as as as technical as uh some of the previous speakers but uh I was hoping to sprinkle a little bit of opium at this point uh where ethereum is like $1,500 today or something I was totally captured really eloquently spoken do we yeah we have a question over there waving than uh so let's uh think about one thing and maybe it's not a good

example but uh we have a molecules in this uh uh in the air correct and they go to different directions they go to uh yeah and also with different speed so but the C contribution of the air in this room is actually zero so they don't go anywhere uh what I want to say is that if you want to give uh Financial Capital to everyone and they go to different directions then the average contribution will be zero uh how do you solve this problem well you you're talking about two different things in my opinion because you're talking about essentially um creating new cap new Financial

Capital versus enabling uh you know access to financial Capital so as a as a society I would say uh once we stopped becoming just kind of like groups of hunters and gathers we've made a we've made a social pack that we will essentially enable anybody who joins our Society in in in a nutshell this would be probably like a uh much uh deeper talk if we want to get into that uh so I think it's our Our obligation to ensure that everybody um has their shot at you know producing I guess manifesting their best self and in that way also producing uh uh producing uh for the society value

for the society and if you think about it there are 8 billion 8 billion people out there right now and you know all the Elon musks and you know um other inventors Albert Einstein that I've that I've mentioned Mary Kiri you know some of them alive some of there are dead are only a result of the fact that just a small percentage of the overall Society actually got to uh shoot their shot and you could argue that of course even from the poorest of regions sometimes there is somebody who somehow makes it through but those are exceptions rather than rather than uh uh you know the the rule and so uh my thesis is that we right now the people in this room and on this

conference and and majority of people in this in this city and in this country uh are actually you know in a way privileged uh we are wealthy people compared to the rest of the rest of the uh Society but we are not as wealthy as we could be if you know everybody actually produced their full potential so that's the whole idea right now the what we have here is a result of only a small percentage of people being fully fully uh enabled in the productive uh in in in the productive uh activities and my thesis is that we should work very proactively to um get the rest on board as

well increase their wealth and therefore increase our wealth as well do we have another question um hi it's um all a little bit new to me but my question would be um because you're saying you want to or we should reinvent the wheel do you think that um your goals would be um able to be achieved without the trfi um I mean yeah getting getting um Financial giving the people who don't have banking financial support without without the traditional way of uh exactly traditional monetary

way so yeah I I mean I I see your point it's kind of like a stepping stone which is absolutely I would absolutely 100% agree with that but the point is that the stepping stone is is uh is flawed in a way that doesn't allow to use it to build the whole world in a in a sense right so my thesis is that uh we must come you know to to to different conclusions since we must build the new generation of financial Tools in a very very different way unless we want just straty on chain which would essentially still just continue the game of like wealthy getting wealthier but you know if you think about if you really think about it the fact that the weal just the wealthy are getting wealthier it's

actually also disservice to the wealthy themselves because again if I come back to my original thesis is that we're just using a small percentage of all the truly productive capacity in the world world than uh uh uh uh than then like the overall wealth of the global Society is smaller than what it could be if I don't know maybe the wealth was more equally distributed and and and that enabled the fact that everybody on world in the world could essentially you know build to their full potential no but I mean wealth is represented by um our financial means currently the traditional ones and um my question is do you think we can completely separate from it and say okay we need a new one

we need a new wheel and um exact for that you need a new way of um financing the poor people or the people who don't have the wealth basically right so is it um I mean for every new crypto uh company that is developed or cryptocurrency you need um traditional Finance to support the initial output right so that's why question can you do it without it I can you separate yeah yeah yeah I I think I would I would disagree with the with the statement that wealth is represented by money I'm paraphrasing here but the wealth is represented by what you can buy with the money and that's the whole point right because uh I I think that

ties into the previous question which is in a way if we just print you know more money and just give it to other people but there is still the same same amount of goods that you can buy for the for the money that wouldn't change anything nobody would get wealthier what I mean but when I say I mean the amount of goods and services and the quality and the quantity of them that uh you can buy with the money and the only way how to make the global Society wealthier is if you produce more solutions to the problems that people have which is by you know taking the the people the the people who undoubtedly are capable of doing much more but are for some reasons bound to suing shoes in a in a in a Nike

sweat job thank you so much um I actually have a question which is not prepared but you were talking about weird um that should be built and it's really a call for Action can you give us one or two examples of what you have in mind of we should to be bu yeah absolutely well I mean so the point is I I mentioned for example the uh I mentioned for example the friends Tech so just to give you I didn't mean to sh my my my my here but what we are building is a lending protocol where you can use literally anything as collateral and so what we did yesterday is uh and we're going to be tweeting about it so you can read about it on our Twitter if you're

interested in learning more is that we're taking um Alex mme uh and his his Alex token which is essentially if you think about it on a deep enough level it is a uh Financial representation of his of his social capital in a way at least in the web 3 space and he's he's using this as collateral so he's using his Social Capital as collateral for for financial transaction uh he's going to be taking out a loan and essentially arbitraging the money that he gets from the credit from the from the from this uh transaction to Arbitrage that to buy up his apparently currently undervalued shares on on on on friend Tech does it sound ridiculous on one on one hand yes

does it sound like trying weird uh also 100% yes so so uh do I see everybody in the world doing something like this and and that enabling the global wealth no do I see that as experiment that's hopefully going to produce a lot of learning uh absolutely absolutely yes but it is not that important what I think the the the the main um idea here is that whenever you guys because you are absolutely Brilliant Minds uh when you think about new product new feature new anything or suggestion to your favorite you know protocol out there try starting from completely clean slate and try imagining that anything is possible because again I believe that in this current sandbox

where we are anything indeed is possible thank you so much I love the call for Action be experimental thank you Steve for concluding the morning thank you um