Rethinking Finance for a Decentralized World

Transcript

so our next speaker King Warwick he's out of Sidney Sidney bred and born that correct has founded blueshift and a revolutionary company called now synthetics what Cain's going to talk to you about today is the mechanism behind these synthetic assets on top of aetherium please welcome to the stage stage Kane Warwick thank you okay I'm gonna walk you through the mechanism that we use to create synthetic assets on aetherium so to start off with this

is our contract suite I showed this only to make sure that you guys are actually awake to scare you awake after lunch and also shout out to the Sigma Prime guys up there for helping us to order this it was an experience for everyone I think so we have to sort of core elements in the synthetics system there's the synthetics Network token and then we have synthetic assets or sins that are backed by that token so similar to how maker works where you lock eight and you can then issue a tie against it we allow you to lock the snx token and issue synthetic debt against it so this debt goes both ways obviously you can

lock your collateral and issue debt and you can also wipe that debt to release your collateral so that is what allows us to kind of keep the system in sync the difference in our approach to some of the other synthetic asset platforms like um a and and other projects that are working on this is that we basically we pull all of the debt into a single pool and that has some interesting effects and and some interesting properties once you sort of see what you can do in terms of moving between different synthetic assets within the system so as you can see all of the SMX holders lock their collateral and they put their dead into

Paul we're also over collateralized we're over collateralized to the tune of 500% and the reason for this is the risk profile of synthetic assets and the snx token is higher than eath obviously so we need to have a bit more of a buffer than $4 omakr etc so the the thing about this is that when you have a synthetic asset that's backed by a single collateral pool it can track essentially any price so this is just a few of the assets that we have running on Maina right now so you've got Korean Won the yen Canadian dollars etc we've also got gold we've got silver and we've got PDC as

well and the way that that works is we've got an Oracle which at the moment is centralized and that pushes a price feed into an exchange rates contract which is what essentially determines the rate that any sense could be transferred between each other and that them as I said at the moment that Oracle is centralized but we are working with chain link and we're on tests and at the moment so looking to kind of migrate away from that centralized service into a decentralized oracle and you know that's obviously a pretty critical aspect of any system like this when you're pushing price feeds in the other thing I will say is that we have I think as I said about 24 different prices that are being fed into that contract so if you're looking to read prices for currencies and commodities you can

actually read them from that contract so you can see this is kind of a table of all of the various since and what's been issued as well as the rates against USD so you can see SBT see there there's I think about 240 thousand dollars worth of SBDC that's in circulation at the moment and the total value of all those synthetic assets is about 1.5 million right now so as I said the the benefit that you get from pooling your collateral and pulling the debt is that transferring between sins is very easy so in this example you can see you can get s USD you can convert it into si UD you can then take that into gold you can go to BTC etc and you just pay a fee

for each transfer so to kind of illustrate this for people after a we've got a bunch of vouchers for Saed so there's 50 Australian dollars and you can collect that from myself or one of the team and go to synthetics exchange and convert that into any asset that you want so the the interesting thing about this is that you know when you've issued debt in the system and you want to leave we need to wipe your debt so we need two inputs to know what your debt is because you've got this system of you know fluctuating exchange rates you've got people coming into the system leaving the system it's quite a dynamic system and it's impossible for us on chain to

track every single interaction for every single wallet so the way that we enable you know the tracking of this debt is we take the total debt pull size which has a showed before is about 1.5 million so we basically query the contract and find out from all the since what the total issued number of senses and the current exchange rate to determine what the value is the second property though which is your percentage of the debt is a little bit harder so you can see we you know again call that contract we say how much debt is there in each of these individuals synthetic asset contracts we then work out what the total debt is but when we get to your percentage we've got a bit of a problem so the solution that we came up with for this is to essentially create a debt register and

the way that the debt register works is in this example you've got Alice Bob and Carol so Alice issues 100 dollars worth of debt at t 0 right so at that point she's a hundred percent of the debt and there's no one else in the system so it would be very easy for us to determine what the total what her debt percentage was at that time then Bob comes in and he issues a hundred dollars worth of debt and so the total debt is $200 and her debt is now 50% of the total supply so again with only two people it's pretty easy it's fairly trivial for us to track this but the problem is when you start getting additional people the more people you add as people leave and enter the system you've got to track

everything that's happening within it so the next step is Carol comes in and she issues $200 worth of debt now the total debt is $400 and you can see again that this debt change is kind of happy throughout this period and then you've got accumulative that change and the way that this works is that essentially all we need to do now is track your entry point and we tracked that cumulative debt change as people enter and leave the system and we can then take that value and the product of it and we can work out what your debt is at any time so to illustrate this imagine everyone out here had issued random amounts of debt and there was about $100,000 worth of debt if I come in and issue another hundred thousand dollars with the debt I don't need to know individually what

that impact is what your debt is I just know that I've have all of your debt collectively right and so what that means is that we can track a single number throughout every issuance and and minting and burning event and as soon as you want to leave we just go and query your entry and exit point and we can tell what your debt percentages it doesn't require tracking individual debt percentages for each person which would obviously be impossible on chain so the question is why pull you know what's the advantage of pool collateral right there's all these disadvantages there's additional complexity and tracking debt the debt can fluctuate you don't necessarily have an exact idea when you issue debt into the system what

your debt might be when you try to leave but the advantage for people who are using the synthetic assets is that they can transfer seamlessly between them they don't need to find a counterparty to do a trade so if I'm holding s BTC I don't need to go out there and wait for someone who wants to convert that into Saed I can go to the contract and I can basically use all of the snx holders in that total debt pool as a counterparty so it's a little bit like uni swap in that way where you've got this pulled liquidity people you know come in they can sit there and they can add liquidity to the pool and then anyone can come and they get quoted a rate and they can convert at that rate they don't need to wait for an order book order matching

there's no slippage etc so that means essentially you have for you know all intents and purposes for the amount of debt that you're holding if you've got a hundred dollars you've got infinite liquidity you can convert that as many times as you want as long as you're willing to pay the fees into any other asset you don't again need to wait for a counterparty to turn up and match your order now why would someone issue debt into the system right there taking risk as an SN X holder and the reason is that people who are using the system pay fees so for the the benefit that you get in being able to convert these assets without needing to find a counterparty this this sort of seamless conversion you pay fee so you pay 30 basis points

every time you convert from s USD into si UD as an example and those fees are put into a fee pool and so again to use the example of if everyone out there has you know issued debt and system you're all holding s and X tokens and you've all issued debt you're going to get your percentage of that debt that you represented in fees for a given period so we have weekly fee periods and at the end of that fee period you can go and claim your fees so the more transactions that happen the more valuable your sort of contribution to the system is the other thing that we've done in the last few months is to implement an inflationary monetary policy because

what we found is that in bootstrapping this network the initial fees were quite low even though they're growing they're still probably insufficient to kind of get the incentive and behaviors that we're looking for and so we basically said we're going to take the supply and we're going to go from a hundred million tokens to 250 million tokens over about six years and the people who are staking will not just get fees from transactions they'll also get this inflationary reward and so it creates a much stronger incentive for you to do the action we want which is to stake the system and to issue debt into it and if you don't do that then obviously you're going to be inflate it out so there's this kind of you know punishment and reward system on top of that we also have a penalty system so we need to maintain for the

purposes of the system that buffer a 500% and if we're not maintaining and we're getting too close to the sort of liquidation ratio of the of the network then we've got problems so in order to make sure that we're maintaining that buffer every week when you go to claim your rewards the system will check your current collateralization ratio and it will say okay if you're below 500% we'll give you a little bit of buffer you can go down to 454 but below that you're gonna have 25% of your fee slashed and so you can fix that problem before you claim your fees but you need to fix it before you do if you don't fix it and you claim your fees then you'll be slashed you'll have your fees reduced and obviously the worse your collateralization ratio gets the

worse the slashing is so if you're participating the system and you're under collateralized again other people are going to get significantly more benefit and so they're incentivized to maintain that collateralization ratio to keep the buffer in the system and keep the stability in the system so at the moment as I said we've got commodities and we've got 4x and we also have s BTC but we've got some new cents that are coming so one thing that we're about to add is s 8th so synthetic a token and then the inverse of that so at the moment we've got BTC and we're gonna have synthetic ethers well we'll also have an inverse index to both 8th and BTC we're also going to be issuing stock

cents so you'll have s Tesla s Apple potentially indices like s P and all of these things are coming up fairly soon over the next couple of months now the last the the thing on the far right there is is probably I think from a training perspective the most interesting so we're going to allow leveraged trading of synthetic positions so you'll be able to take a long or a short position and have leverage on it and you'll be able to trade you know any one of sort of the top 50 tokens so let's say hypothetically you're Vitalik and you want to do a leveraged short on Tron you can do that now and that's synthetics exchange so that's our DAP as you can see you get you know quoted a

rate you can convert between them again there's no counterparty so you can just turn up and make any trade you want and that's also the trading volume that we've seen so the training volume over the last four months has grown considerably and that's mainly been as we've added s BTC so we have a pretty strong view that as we add additional cryptocurrencies we're going to see you know additional trading volume so I guess a big question in all of this is ok great we've got these synthetic assets we've got the ability to trade them you know people are speculating on crypto assets what's the kind of net benefit in creating this system and one thing is that you know people who are have access to the etherium ecosystem will be able to potentially get access to investment

opportunities that they wouldn't have access to like indices and stocks the other is that you know you end up with low-cost remittance because you've got the ability to convert between multiple currencies so you can send US dollars to someone in Australia they can receive AED and they pay you know 30 basis points instead of maybe three four five percent and then the final thing is that you end up with non-custodial stability so you've got the ability to hold assets on aetherium that are stable and you don't need to sort of worry about someone else maintaining that collateral pool for you in the form of feed in a bank or something like that so that's it thanks very much [Applause]