DeFi by Design EP#3: DeFiner x DeFi 2020

Transcript

welcome to d5 by design where we talk all things blockchain and cryptocurrency while striving to educate empower and enrich hey guys welcome back to d5 by design i'm really excited to have our next guest on the podcast his name is jason wu he works over at d finer which is a really innovative new lending protocol and they contribute to the d5 space in a less traditional kind of way they're not a traditional dex or decentralized exchange and at the same time they're not a centralized exchange so they operate kind of in the middle and they help facilitate uh the

interactions between uh centralized finance and decentralized finance so i'm really excited to have jason on uh we also have andrew on today how's it going andrew what's up guys i'm doing well just hanging out staying alive and excited to talk about some defy stuff same here all right well are you looking for anything in particular here from jason andrew hey jason if you'd like to give our audience a quick intro about you kind of what you do at definer your background that would be great hey guys yes absolutely um it's really nice to be here and let's talk about diva and

what we are doing so at definer as job introduced we can find a balance between centralized and decentralized service because we believe you know there's a necessity to do like kyc and know more about your clients this kind of thing the reason for that is we cannot really bring the device solution to the real economy without this because you know in the future you will have the regulation concerns so that's kind of unique side for the definer and the definer is decentralized we still decentralized right all the transactions loans lendings all happen on the

smart contract-based lending system so we are decentralized lending protocol and currently we have two services one is specific for business and that's the one i just talked we have the kyc and have you the customer know more about who are the borrowers another side we have the device savings account which is totally you know without kyc and it's very similar to other like d5 protocol but we did a lot upgrade and to improve the capital utilization rate so that's the generally two product we are offering to the market and i'm so happy to be here and to talk

more about the d5 and what's going on to help you answer any questions you have andrew awesome awesome yeah man we're excited to have you in and i i don't think there's a better or more interesting challenge to uh talk about the ethereum gas prices so recently we've seen a big uptick in the price of ethereum overall and with that has come some insane prices in gas so with you and the team overall what are you guys attempting to do to push that and solve that for your users and overall for the the usability of your platform how are you guys working on the gas rates yeah yeah the the gas is insane uh high that's all because you know we are all looking for the ethereum 2.0

and improve the throughput of the blockchain however right now you know the d5 protocol is so popular and a lot of users on the theme right now and let's drive the gas price go very high and crazy high and how are we going to solve this problem uh if you hear about meta transaction and which means you know uh the project itself can pay the gas for their users and that's something defender is working on how it typically works so usually you need to have a proxy smart contract and this proxy smart contract can interact with every layer and in the relayer it will pay the gas

for the user whoever sends the execution orders to the proxy contract so it's very safe and because it's still a 100 percent owner by the user but it gives the project that definer a way to pay or compensate some portion of the gas for the users i see this is very important for a lot new users for example if you don't know ethereum right like whenever you want to use d5 you need to have ether first that can cause a lot of trouble for a lot of people who are new to this field so this meta transaction and it's very helpful to solve these

problems then it give the project a way to control the price of the guests and then the user they just don't need to worry about that so that's how uh definer is going to solve this problem that's really interesting and it kind of brings up a question in my mind um you know for people that are a little bit newer to ethereum and d5 you know they they come to definer and they're asked to enter their email address which is a little bit different from a lot of other d5 protocols and you know it seems like these additional customer departments allow you to do some interesting things you know like pay the gas and provide some customer service

you know what was the thought behind providing that customer service rather than a fully decentralized program where you know you connect your meta mask and you're operating with the blockchain not so much with a individual a group of people yeah that's good questions and the first we we still have the fully decentralized uh product and which is the base layer it's the trust layer and another layer we are adding on is the user management referral program and that's there is kind of typical uh from uh for a centralized word right like google twitter they all have that so the reason why

defender want to bring that is we do believe it's always about community and we think the blockchain the most useful way is build the trust between lender and borrower for the financial transactions however besides light the users still need to figure out a way how can they get connected with each other because it's a community i will just give you an example right if you have a loan like uh it's going to either expire or it's going to uh trigger uh liquidation and but you know you are so busy there may be like a thousand two thousand you don't don't care about that that much and uh in if it is truly

decentralized i mean uh without any you know the user management system you probably will lose money or cause loss right so in definer review send you the notification email to remind you hey uh you know andrew uh rob you have a loan you know you better reveal some collateral or you better to you know pay more attention about that in this way it can avoid the loss of the user so in definer we put the user experience at the also very high priority so we believe to protect the user's fund the security is the most important one so with this like user management system and the user can have a better

experience to use the service also uh we are going to make it as optional so which means for the typical d5 users if they don't like this if they you know just don't want to sign up don't want to submit this that they not have to so it's optional but for other users and if they want to you know keep get more service from different like get notification participate our referral program you know we recently we have the token they can participate token liquidity mining by contributing lending borrowing but in definer's mind the community the user can do more right

if they love your service they can promote your service so those people also should be incentivized which you know other protocol they cannot do that so in definer they can also achieve that a goal like mining some coins from defender by referring to the friends right and then friends refer to other friends so if they is optional if they want to participate the community and earn more tokens they definitely can set up the information and participate in the referral program also get notification all this add-on service so we think it will

help user to better use the product so that's just the one angle another angle is in defender we are also going to provide like a little bit long-term loans because right now if you see the defined loans it's very short-term there's no long-term loan but if you see the overall financial system uh the traditional one the majority loans are long-term loans right over a year over 10 years and the current setup in d5 they just cannot do that because the price volatility is so high and they just cannot predict the risk so they cannot provide loan over a year in definer we always

think defy is not only for the blockchain and cryptocurrency but it should also bring this device solution to the traditional financial industry so which means we want to do have the small meters as business uh some businesses like defender they are in a state-run series a or csb their stock equity is very valuable but a lot of time they cannot get a loan very easily right so we want to provide a service you know have those business customers to do the kyc to present themselves just like the republic and uh they can present themselves they can uh use their equity our own issue you know the equity as a

collateral and then we can have to verify that and use that as a clutter and issue the token against that collateral and then they can do the crowd funding through the you know the note uh in a little bit longer you know between one year like typically two years uh notes they can issue the notes and uh very easily through the defined platform so that's another angle why we are going to have this kind of user management system the major reason is first you know it's kind of uh help the community to grow together and more connected with each other second we want to provide more business solutions

and to provide uh you know crypto crud uh boring platform and for business then you need to verify the business profile all these things so that's the major reason behind it and uh but at the same time you know it's optional and it's still truly decentralized because the transactions there is all the underlying layer is all decentralized and but we just on top of that offer an option for the users yeah that's the major reason yeah and i really like that as a concept just because over the past few months and years so the whole space of defined yield farming lending and borrowing um it's all really come to a hole and come to fruition but the one thing

that's stopping anything from really getting you know mainstream is just like the overall level of competence that one needs to be able to go into these protocols and use metamask and pay gas fees and transfer among wallets and lend and borrow and not get liquidated and understand what you're doing and and why you're doing it and how you're doing it it's it's not exactly easy for the common folks so that's one thing that we're really excited about as far as the whole ethereum community goes is uh bringing the concept of yield farming and uh and lending and borrowing into the masses in the easiest way possible a kind of like a bridge from the normal world to the defense yes yes that's exactly what we want to

do so because you know the like the normal world right they are familiar with all these user logins system management all these things and uh but they define they don't they just don't have that that's why we find a middle level solution to just want to expand the user base for the d5 and even for the yield farming is very popular recently right i think it's majorly also drive by the craziest yield right the uh apr or apy it has like 100 30 it's very crazy however like if now we're talking about yield

farming one thing i think everyone should pay more attention is what's the interest rate you borrow money right if you borrow usdc on compound or die what's the interest rate right now right it's still very low like for usdc like two percent die like five percent usdt around that range think about that why people you know from another side they keep telling you the yield farming is like a hundred percent ap why but you know the usdc you can borrow two uh two percent it doesn't make sense at all because in the financial system it's all connected together if there's a real real uh high yield the money people will borrow money from

the low-cost capital and invest in the you know high returns right but i didn't see that happen and in this youth farming right now the majority returns came from the operation of the token the government token or the yield farming token itself and that's model it's not just not very sustainable it's kind of more close to you know the earlier adopters of participating and they will gains from people who are going to you know come later and buy those tokens and it all depends on the appreciation for the token itself so it's not a sustainable

model and maybe it only you know exist for a new product for several months or even shorter but it's definitely not sustainable otherwise you will see a lot of capital you know from the low cost like compound maker will be borrowed to do that so but i didn't say that so it's uh in my opinion it's just not very uh sustainable sustainable if you realize on the yield or return slowly because of this token because you know the token price can go very crazy right like whenever people want to buy the token you cannot predict the price so that's what i'm thinking about this youth farming yeah and a lot of these tokens are governance

tokens you know obviously with the idea to be able to vote on proposals especially with the urine finance but the one thing that a lot of people are holding out for and you know i would say that is to be expected from these tokens is eventual sort of a dividend payout in terms of cash flows from fees that are accrued on the network so this would be a super super interesting growth phase of the development of these tokens that are just a simple governance token right now but yeah it's most definitely you know these high api yields it's going to be tough to sustain them over time like i remember when compound was fresh out with adding bat to the protocol there was a 25 apr or apy on and that quickly dwindled down to like one percent

within a few weeks so the opportunities come and then they go you know but the concepts still lie strong which is super important yes yeah i i think like yield farming uh if we compare it to the traditional financial world it's more like a fund manager or a hedge fund manager like they kind of just you know overall the whole market and looking for the high yield opportunity yeah but from technology side the coding you know requirement is not that high so which means they don't have technology barrier but it's a definite innovation so the first player come become very popular but it's easy to replicate also you see

the yield from phase two right and by the chinese community yeah it's just not that sustained but it's very good uh innovation because i compare it to the more likely fundamental level work for this the eu farming so jason you mentioned how um this you know rally looks like it it isn't the most sustainable and that that's a popular comparison people are comparing these really large interest rates to some of the gains that we saw in 2013 and then also in 2017 with icos and not just the interest rates like you mentioned the token prices really multiplying in value and you know something

definer is doing is offering those longer term loans um you know maybe to to make d5 and crypto a little bit more sustainable so you know you mentioned longer term loans but we also talked a little bit about under collateralized loans you know those are two things that are really important in this current system of credit because you know people have a credit score normally what they're looking for is some sort of under collateralized loan where they don't have to provide too much collateral but it sounds like definer is kind of changing the game by allowing companies to collateralize their equity and get a d5 loan that way so could you explain that process a

little bit that's really where finder is starting to mix centralized finance with d5 so does that loan still exist on the blockchain kind of how does that process work yeah yeah for sure so uh for undercollateralized loans it's definitely more risky but higher returns but in my opinion all alone has a collateral either the collateral is a asset right which is required over collateralized loan because the asset can be easily liquidated and sold on the market another side is the asset like not that easy to be liquidated let's kind of sit in the middle between uh over-collateralized and

under-clientelized and for that though the current market is like a 15 percent like that that's the apr because i know there's a lot of mining companies they are borrowing money against their mining machines you know that's kind of the mining machines is not that uh liquidity is not that good compared like a bitcoin ethereum so that's read already being like 15 so if we talk about saudi uh credit loan right that less means based on your personal credit so that's in the another end it's less kind of the under uh collateralized loan we are talking about in defining we believe is we can

tokenize a person's reputation just right if you remember the news like nba players he tokenized you know his uh career income and use that issue the token and to raise the debt right the idea is yeah yeah the idea is very similar like uh let's see uh andrew so he's uh successfully you know the defy in the community twitter all these things that's actually his asset and he can you know he's a key opinion leader he come to the defender platform he said hey uh you know the defense he submitted the application i'm andrew you know this is my credibility and people know me and i have asset

which is the you know the social media account i am currently running then after we assess all that possibilities all this uh information yeah andrew this is the real andrew and do this that then we can issue tokens against this person right just andrew and andrew said i want to borrow like hundred thousand dollars and this is you know the asset i have right now you cannot sell it right like uh but that's really your asset and if you know you default you that will uh damage your reputation probably uh you don't want to do that so in this way we see the default rate will be also very low and if android default you know uh the asset

can bring on the table which is all you know the social media all these social assets can be claimed by the community so that's kind of give you an idea how we want to approach the other collateralized though it's not truly undercollateralized and because if you know someone do not have anything and to use that collateral and they have no incentives to pay back the money right even uh the traditional word the credit card right all these things like if you default you will have bad recording credit history you you cannot get another load i think we want to apply the similar

idea to d5 like can we bring the real world the use case to the d5 world because in my opinion the most valuable for device is a handler transaction and built in the blockchain like no one can alter it but then based on that that's a car and based on that we need to extend to the real world and non-collateralized loan uh is definitely uh is is necessary uh for a lot of people and also that will boost the you know the total valves or assets under managed for deploy a lot and that's the reason why at the beginning we start to collect

uh like uh some user information and but it's optional so that's all tangled together that's really interesting and you mentioned reputation and you know bringing in that idea from centralized finance or a lot of uh or pretty much any system where you want to disincentivize that bad behavior of defaulting on alone right you know that that brings in this concept of reputation something that comes to mind right away also because andrew mentioned sharing fees is the idea of prediction markets and i'm not sure if you have much or any experience with prediction markets but i think it ties into ideas that we're saying is

incorporating kind of a fee sharing program on these protocols and then you know disincentivizing bad behavior with that measure of reputation and you know prediction markets don't have a lot of activity right now but it seems like they could encompass a lot of this activity in finance especially it might be around betting more than lending and borrowing but you know what's your take on prediction markets do you see them as viable for any period of time coming up for the prediction market i believe there's a big you know the use case in the future but in the near term i think there's still a lot of difficulty for the prediction market become very popular

and you you see the project augur right like they've been in this field for very long time and raised a lot money and trying to build the prediction market but it's not a very popular even now the reason behind that in my opinion is because we do not have enough data and enough participants to let market to make it become very usable for the prediction and because prediction actually is not prediction it's about a calculated probability based on the fact and if you have enough database and can acquire real world data and you

can get a very precise results but right now you know like device more blockchain is small and there's not enough data example examples or not enough participants to that market so i i think it will take out well to attract people to that field and you know people always follow the money right d5 even early this year is not that popular and why it becomes so popular recently i think it's because you know people see the token press go crazy up and there's a lot if you add them over there

eventually this is all good thing it will help to have more capital in the field and uh that that's why i think that's the pro why uh the reason uh d5 become more popular because it's really bring a lot of capital to different products they start to manage the capital the people see it's a very stable market to make profit and they will come but if you see the prediction market i still didn't see that happening right now there is not enough capital to attract people and uh there's not enough that's why there's also not enough participants but if you consider option and the future i mean especially option as a prediction

market i think that may be the first step for the prediction market because there's a demand for the option to cover the risk either for cover the risk for people who borrow money because you know they have their collateral and all people you know the miners right they they are mining and they manage their risk for the cost and the money in the future so you see the popularity of the option market right now and i i think if you classify you know option as the financial instrument for prediction market i think that will start from there first and but for a lot of others it's just so difficult because uh there's no profitability

right now there so that that's my take about this particular market there certainly is a lack of capital which leads to a lack of liquidity and that's going to hinder people's ability to make profit so um yeah no i think overall like the education too like the awareness of uh of prediction markets or even like options trading on open.co or you know just being able to get these ideas and um overall spread them to more people who would be interested is going to be huge but yeah overall it's a liquidity thing i mean as we get more more people in the space more things you know more money over all these protocols are going to be stronger you know and everything is is going to grow um as a as a whole

and i mean that's part of all these new tokens popping up i mean all the governance tokens and all that so on that concept um and on that note there is a private token sale ongoing uh correct me if i'm wrong jason for the protocol of finer so what's going on there if our audience is interested in that you know how can they look to invest or get more information kind of what's going on with the fin sale right now oh thank you very much so andrews yeah fn is defender governance token and uh there's everything you know people already familiar with the government token of compound and uh and etcetera other product the difference for defender government token is first you can also you know have

anything you have for the compound like you can participate the voting control the configurations of the protocol that's called governance right uh another side is you know the profit so for the compound uh i don't think they return you know their uh gainings to the community but we do believe that's also part of the you know the value of the token so defender fin token people who owns it they will also automatically share the profit gains from the protocol itself that's our unique site which other protocol they still don't have right now and also we believe go ahead i was going to say that's what

i was saying earlier the the concept of paying out the token holders not only for governance but a cash flow of the fees that are accrued on the platform is going to be huge for the overall appreciation of tokens as well as maintaining the network uh because it gives people in and holders an incentive to continue to hold on to the token so for anybody who has the fin token again they will be paid out some sort of fee based schedule off of what is generated on the protocol correct yes yes so uh in my believer there's a three pillar why is this uh profit sharing because you know all the community create value but eventually who gathered the value

that's the most important thing right and uh eventually if we are going to achieve truly decentralized there are three things uh you you need to be very decent right one is this profit sharing second this is governance uh controlled protocol configurations third also is about these participant incentives which is the liquidity mining compounds only have liquidity mining have governance but they still do not share any profit to the community but we do believe in order to achieve yeah truly decentralize uh that's also a necessity for the community and also we believe uh you know we

cannot sell product based on the promise that's why uh the token sale process is also along with our product development and our product right now is being through auditing and we selected three uh the top three you know the auditing firms to complete the auditing uh to make sure our protocol is very safe we are in terms of your in terms of your smart contracts right is this what you're referring to yes okay so okay yeah right in in terms of the smart contract auditing so right now we have uh completed the first smart contract auditing and the uh end of august we have the

second one then like september we have the third one when when we uh complete the first one uh mid of august we start to you know release the protocol and the product to the limited the public and at that time we also want to kick off this private cell of the token and we believe the early participant or early adopter should are sharing the gains of this protocol and they will be you know uh people who have early access to the platform live the platform and the promoter platform

so they will you know have the right to participate in the private sale and at a lower price and then you know uh the plan is you know once we reach uh it's all measured by the asset under management on the asset locked in the protocol right so uh mid of august we are going to launch the product and before it hit half meeting uh asset under management and we are going to close the first private sale and just for the people who already participate in the protocol you know be before they hit the first half mean so after they first hit the first half meaning as that locked we will start the second round uh the target is to

boost it because you know the more people participate and they will contribute capital and gain the profit gain the tokens unless also part of their returns be between path meaning to fight meaning and we will close the second round and from five meaning up to 10 million then we start to list it on the either using swab or balancers then but make it public so that's kind of the journey and the logic behind that because we believe it's a process right people you know cannot slowly rely on promise but they need to see the product if they love the product they will participate that and become of the part of the community and then they

enjoy the games if the community keep growing so that's kind of our philosophy and the end of the plan awesome and so where can we go to learn more or to sign up for the private sale is it it's on the website right yes yes so uh it's easy uh just go definer d e f i n e r dot org and uh you can find it in the community section so that's where you can offend the token itself awesome awesome that's yeah that's really solid stuff um and i appreciate the explanation of how the sale is going to work in the transparency obviously there's there's a lot of different opinions on how tokens should

be created and minted amongst the first investors and then everybody else who's involved on the main market so we do appreciate the transparency on that and i believe rob has one more more economic um and technical question here uh that we'd love to hear you speak about so i'm gonna let him grab the floor for this one yeah jason so you you mentioned uh how definer handles some of the risks that we've seen in the past with d5 you know you mentioned uh the audits on your code that helps solidify smart contracts and then you know we we've also seen how liquidations can be a big risk and you help customers handle that by sending out emails one other risk that

seems to be floating around and maybe not a risk but more of a concern in d5 how could we see negative interest rates impact some of the interest rates that are happening in cryptocurrency and d5 specifically does definer have any you know safe holds because they are a little bit more centralized than some of these decentralized protocols or is there any plan to handle negative interest rates in the future uh the negative interest rate i think is determined by the market right like in europe and there's a lot more money printed out and uh to understand this i think it's simple like

if there's no i call it fake money which is you don't need to work you don't need to contribute to this world and society but you can print out the money as a debt uh that's i call it just kind of fake money i mean if the central bank they do not print you know uh too much this kind of freak money or usual debt there's not going to be a negative interest because like negative what is negative interest this means like the money has zero value i lend you something i need to pay you which means it doesn't have too much value in that and which means at least the people who

borrow it they cannot use it very well is the natural interest rate is not in this way because money still has its value it's just because people can control the printing money you know the mechanism all the power and they want to you know the boost economy and and that that's how it happened right now so because think about like a in u.s like the government issue like uh twelve hundred dollars to people right you don't need to work i mean if that's the real thing really have people like why don't everyday everyone that's stop work and just wait to the government issue the money then uh and you'd be surprised there

there's so many people in america that have been offered their jobs back but choose not to go back to work because they're making so much money these checks are from unemployment and then they're you know trading their unemployment checks and there there's a lot of you know crazy stuff when you start giving out free money like you're saying yes yeah that's really crazy but i will see uh several thing can happen if people can keep doing this because it's always about supply and demand think about like people work is actually supplied right they supply the product or service and people consume which they spend which is money and if we keep do not keep supply

which do not work but keep the demand side which government issue your money uh there's going to have like a inflation risk so which means that you keep printing printing but there's not enough product and the inflation will come so at that point then the central government and they are just down they have no way to to to solve that problem but i think then go back to the d5 i think the the d5 right decentralized finance the idea of decentralized finance is to avoid to have this kind of central party to printing out the money i think if d5 eventually success there's no negative interest

and otherwise you know you just screw up again because uh for the money itself if the supply and demand you know it's kind of balanced out between each other the the negative interest is impossible and the only reason why there's a negative interest because you know people mention people's demand and they can print out the money and then there's the negative interest because think about they print out money they have uh no cost at all so they can manage that to meet their purpose and that's the reason why we need d5 and and i think that's the reason for the burn of d5 because the thing about the defect is only like two years old and the why we want divide at the

beginning because like maker doll is very successful issue the die and it's kind of first you know not mentioned by the central organization money issuing process people very excited about that then they start to use that i think uh if they are going to successfully see the defect developing that will solve the problem which created by the central uh last organization like essential bank right now and uh that's the reason uh why in this search pandemic right now uh define is so important for the future of the finance and uh because you know the financial world didn't change too much for the past centuries

and the power still concentrated to the people who are close to the people who can print out the money and in the d5 we just want to redesign that whole process make it as decentralized as possible the the layer defender add-on is just kind of improve the user you know experience but not necessarily change the basic principle we didn't change the basic principle which is return the power of the finance uh eventually back to the people who created the value not to the people who are printing the money so so that's my take about this kind of negative interest rate yeah yeah we're trying to make the money

more real we're trying to make it as real as possible yeah well jason it was a pleasure talking to you i think we are running out of time here but uh andrew is there anything else that you had uh before he wrapped up um nah that's about all i've got as well it was a pleasure jason i agree um thank you so much for all the information that you shared i hope everyone who's listening got a ton of value about this and we'll check out the definer protocol i learned a lot i'm excited for what's to come um and just a quick little disclaimer guys obviously you know we're here to help to educate you know we are not our financial advisors you know this is not advice please invest in crypto at your own risk and do everything

and do all your own research on your own again this is jason wu from definer we are signing off and we appreciate you jason thank you very much uh andrew and rob is my great pleasure to be here and talk to the device late community i will sure like you guys will keep growing because we i believe you know further believe we are all doing the right thing and we are creating the value and make people's lives easier so let's you know do it together there it is alrighty guys thank you bye thanks for listening to the d5 by design podcast until next time d5 slate team [Music]