ETH Rio 24 - The Future of DeFi | Sofia Duesberg, Marwan Kawadri, Cristopher Andrade, Antonio Neto

Transcript

um now well we have been discussing about interoperability EVMS and now where do we use this right so I would like to invite here uh some people to talk about uh defi um but not only defi what is Hello what is hybrid Finance what what is going on in the market between the two uh universes um so I would like to invite here Sophia from fireblocks hi Sophie um I would like to invite Maran from uh BNB build and

build and Christopher from dydx as well cool um Sophie um let me bring up the questions here I'll be mediating this one is it is it working no not up hello you don't have a chair sorry a chair you want a chair oh yeah yeah yeah I need a chair I'm just going to get one hello hello can you help me with a chair maybe I would just get this one here oh there we go

there we [Music] go all sorted well first of all thank you all for being here for accepting the invitation to to discuss this um for me it's a very interesting topic because it's just what we were talking at the opening in regards to um at the end of the day how does these transactions will happen What will be the main um systems will we have a a defi system that is completely disconnected from trfi or are we having some kind of bridge a custodian in the middle or some sort of

that so we invited these participants because they are in both words um so I would like to ask you guys to introduce yourselves uh what you're doing and then we get into um this interesting topic of uh where we heading in terms of Def and trading and uh moving money around sure you can can start hey everyone I'm Maran uh it's amazing to be here so thank you for organizing to the team uh so I lead our defi team at B&B chain uh which is one of the largest layer one chains uh in the market uh by tvl and number of active users uh and also lead our European uh efforts as

well hi everyone thank you so much much for being here it's a pleasure as well always nice to come to Rio and I work so my name is Sophia duberg I work at fire blocks in our Latin America team and fire blocks for the ones who don't know were infrastructure and custody provider for companies they are building on digital assets so very diverse set of clients from Banks exchanges custodians and even um companies that are doing things with real world assets tokenization so a very robust platform for to expand the ecosystem okay uh hello everybody my

name is Christopher I'm currently working for DX Foundation which is a foundation that support the idx protocol uh our mission that is support the governance in the protocol and also try to support uh and promote the the protocol uh specif specifically in Latin America and uh yeah thanks for having me and excited for this conversation nice pretty cool thank you all for the the introduction um I think the the first thing I would like to discuss is where do we come from and where are we heading what I mean by that is well back in the day we had like simplistic models for LPS uh for we still have the auto

automated Market making uh we have the protocols being built in in defi uh some of these protocols will be sort of commoditized when we think about Landing protocols trading and stuff like that um and then uh on the other hand we have always been let's say against the traditional system and now we are moving towards that so my question is uh where it's not that where did it go wrong but um where did it change because back in the day we were like completely against um the traditional Finance

markets getting into crypto now we are very excited with ETFs and all of that so i' would like to take your input um from your from your first experience with Defi and then where um you guys are seeing we heading to uh I can start on this topic and this question uh I think uh everything started after the the crypto sentiment uh around the world started after 2008 suprime crisis uh you know if you see uh the the very first block you have the the newspaper uh headline talking about that governments will rescue Banks traditional Banks and

uh that kind of I wouldn't say hate but the that kind of rejection of try started there and uh this kind of things this kind of new technologies takes time and uh we are kind of starting to get more mature but still very early we're still very early in this kind of uh Market but uh I think started there and uh after Cambridge analytic scandal with Facebook kind of impacted a lot too so there's some you know events that you know produ it the moment we have right now so yeah that's would be my take on that so I think I'll even go a step back so I my background I come from traditional Finance I used to work at

Goldman Sachs for six years so when I first read about defi for me it was really like a shock of amaz right especially when you work inside a bank and and you see you know the inefficiencies the cost and times that sometimes a client would send a wire and could take many days and very costly and with no visibility right so when you first thing about defi it's really like amazing right you're solving so many issues H taking out intermediaries that perhaps shouldn't be there but then when you start actually getting to it and creating things you realize that okay but in order to scale to the masses to our grandmothers right like start to use

it you need to make it secure you need to make it efficient you need to make it interoperable so I think to answer your question we're getting to that point right now where you're seeing a little bit the the Bridge of both of these worlds right and specifically at fire blocks our our mission is to bring security at the same time as efficiency right so then the result will be scalability and and mass use of these amazing amazing um new products so we we really believe that you know you still we still believe in a world that where if there's an inefficient imary it should be taken away but with a secure you know altern ative where anyone that

will use it they will not need to think about the blockchain or what or what not but they will be able to use it in a safe way and in a smart way so I think I'm going to add to some of the points I already agree with fully um so I think the first point is like where do we where did this technology stack come from I think that the big pain point and I'm sure you're all very familiar with it but the financial infrastructure that most people have access to today has notoriously been associated with the disin frag franchisement of many customers many users many communities that haven't had Equitable access or Equitable Financial inclusion um or at least haven't reaped the rewards and haven't had control of course uh or custody of their funds right so I think

that's that was the Genesis kind of as an antithesis to uh the o08 crisis and then we had the second wave I think which is something that we maybe over look to some degree that has dominated the 2010s which was an era of cheap money right people will look looking for the best yield uh and as Chris Dixon you know mentions right crypto is a great computer but is also whether we like it or not a big Casino some parts of it uh and that was huge for adoption right for people chasing yields people chasing um uh Financial reward that wasn't uh readily uh and easily available by traditional Financial instructure but now where are we now 20124 um maybe it looks a little bit different to what

we're expecting at 08 and as you mentioned so one um the irony is that we're moving a little bit more closer towards traditional finance and I think the big reason for that uh and I spent a lot of time meeting with defi uh protocols Founders investors is that we're building a trustless economy and the Paradox of a trustless economy is that you need trusted Brands you need trusted protocols uh as you mentioned you need your family to be able to use it you need the everyday user to be able to enjoy it right um and so I think that for me that's where we're heading right like we have this trust this infr infrastructure that people can enjoy the freedom of money but it has to be simple reliable and safe uh for people to actually trust it and put there to use

it as their everyday um uh kind of uh Financial uh Gateway yeah I'm really glad uh on your questions because you all came to a point that is we at the end of the day most people don't understand how banking Works they're not interested in knowing that so it all comes back to the uax and Trust right because people don't have this time or I don't know the Curiosity maybe to go on and download a wallet you know save their memonic words and so on so well since we are now moving towards this um this more traditional Finance how do you

um Define web 2.5 well there are many people that are many ways but how do you see it and what I what I want to discuss here more specifically or talk about is hybrid Finance right um this not only because I know what fire Block's doing but also I believe it's a good solution for some of these uh current uh um exchanges um I I don't know if many people know here but I use it to be at FTX so I know how traumatic it is to be inside uh somewhere where people have your money in and you don't know what they're doing with it so um this hybri hybridization and use of the technology

in itself to make better processes make better products give more access as you said um I think it all boils down to that to the use of the technology but how do you see this transition the web 2.5 how would you define this okay uh I think in the short term there's space for everybody there's space for web three projects there's space for web 2.5 projects and maybe in short middle term midterm but uh I believe that in the future I'm pretty much aligned with Co former CEO uh Antonio Juliano that he says that in the future people will be more prone to use

100% decentralized uh Solutions but I definitely believe that in the short term midterm we will have tons of projects that serve our needs well but I think in the long-term Vision uh pretty much like Antonio says we all going to reach the common understanding that we need 100% security safety so yeah thanks um yeah so I think when we think about 2 point web 2.5 or or as you said hybrid Finance right so you're kind of combining these both worlds on one hand decentralization on the other hand security Mass use so how do you make

these two effective right in a way that you still have the ethos of of crypto and and you know everything that it started this whole Revolution but at the same time where we can see the our grandma and really Mass use using it without thinking about it so at fire block specifically you mentioned we this is our goal there right so for example on the decentralization and the ethos fire blocks for maybe a lot of some people don't know but we're actually not custodians right we're same 100% Tech provider that provide a type of custody that it's called Auto custody or direct custody in the perspective of our clients which means that you know at

fireblocks we're not in the money flow if tomorrow something happens every client can move their funds to another wallet at any moment right so again keeping on this side of the world the decentralization you own you own your your keys you own your assets and so and then on the other hand okay but how do we make things from the financial World finan traditional Financial world like transfers um in a in a way that you're keeping this side right so we've developed many many products to deliver it you know this this combination of hybrid Finance one example is is uh it's called off exchange right so the ability for clients to tra trade on exchanges

without having to actually send the assets to The Exchange because at the end of the day when you send the assets to The Exchange you are you know kind of believing that these assets will be safe which hopefully you know they are but as we saw with FTX it could be that they aren't so with this new product because you have your own custody right um with with the fire block set of of multiparty computation which is the key security but at the same time you're able to trade and do your operations in an effective manner in an exchange but without having to actually send the the assets there then some other products that we have such as automic swap smart transfers and so on again to kind of

bring this you know traditional world of finance of things that we need to get it done in the crypto world but still keeping the ethos of decentralization so that's kind of how I Define this hybrid finance and we hope to get more and more uh products in this line to really be able to bring the US um being said I always feel like the good points already been mentioned but I will I'll ask a question to audience right um because we're talking about hybrid finance and and what does that middle ground look like so uh how much in assets are in US bank accounts today right if anyone takes a while guess it's 2

trillion how much of that is actually insured readily available in cash under the US federal government it's only 40 billion so 40 billion is the insurance Coffer of the US government to protect $2 trillion in assets exactly more or less right so of course worst case happens uh the US government will do probably what it does best is my own point of view they'll just print the money um but you know not good for to Bren value right um so then we go well maybe that's like the full centralization model what for full decentralization model I won't speak to that but on the question hybrid Finance agree with everything that's been mentioned maybe more from uh where we

sit uh as an well as a blockchain that was incepted by a very large exchange um For Us hybrid Finance means um you know how do we give access uh in a safe uh quality trusted environment to users who are I would say kind of the crypto curious right uh and we know this model is working B&B started it off in 2020 and it's the new playbook now there's bass uh there is uh there are other other exchanges okx they're all following this Playbook uh because we're seeing that people still want that ux they want that product they want that brand uh they want something easy to use that their friend referred to them uh maybe over dinner but they also want some of those benefits of that control

uh and finding that middle ground and for me it's just it's a product right it's like these new uh decentralized wallets that you get through um today okx or binance or coinbase but maybe one day it will be through a regular like new bank or a regular retail bank I think that's what hybrid Finance to me in Phase One uh this year and the years to come looks like um and Beyond nice um now we well this is again something that fascinates me because at the end of the day we are rebuilding what we know as the financial the financial system right so um I want to get into the we were just talking about it but it's such an important um point

right now that is interoperability right so in Brazil we are going through the Drax we are going through the the whole um tokenization of the economy and for those who don't know yet this this Drax is a liquidity uh layer settled by this so sorry Sat by the C Central Bank where all transactions between um Central Bank the central bank and Commercial Banks and other financial institutions are are settled on the blockchain right so the central bank has designed it so that the other layers of such tokenized economy should be built by the private sector right this is other four layers on

interoperability protocol and assets um business services and so on so we have uh right now in Brazil a moment where many players are working with many blockchains so looking into web 2.5 and going into try what are the learnings we can get from Defi and interoperability um to bring in on to this and I would like to take this on each one's perspective um marun as a a blockchain a fully decentral ized uh service how do you guys see the bridging especially um exchanges being have having always been uh the the bridge for

Choice like everyone that was back in 2015 16 until 2021 maybe you had to go to an exchange to go to another chain so that's how you would Bridge um sopia from the perspective of a service provider as well it would be great to to see what we can learn from that and from you guys well you have been on l2s you then decided to have your own app chain um how do you guys see liquidity how does that connect to others because liquidity is a a pretty much fragmented in crypto overall so what are the learnings we can take from that and bring to just tokenize the economy to

DRS and so on I can start um great so yeah I mean and so a bit tying together right when we think about where we're going interoperability if I can say that so it's so hard um for me too cry for all of us sorry yeah like okay great U no judgment but yeah so interoperability it's it's really a necessity right for us to create this world where we we hope to see everybody's using it and so at fire blocks given we're Tech provider we actually have different ways that that

we try to to improve this right and so when we think about blockchains we really you know are constantly adding new blockchains and the way that we connect that them we have um integration with wallet connect where our clients can use daps that then can you know um connect different chains to Bridges and so on so that's kind of like one example of how we make that happen also in terms of you know kind of connecting different um counterparties right so actually fire blocks again were we're born by a custody uh providing custody but actually a lot of clients they say they

stay because of the fire blocks Network right so what is a fire blocks Network it's basically where all clients can connect in a very seamless and secure way um through these rails where then you know you're able to do your operations with your counterparties in a very um seamless way without having to copy address and so on so really again make it more fluid everything right so I think these will be like the main the main things but again really trying to bring the whole point here is bringing Security in the interruptable results that we're trying to create here um I'll just quickly chime in uh in

terms of the interoperability question I don't have much visibility on how to interact as much with the CI world because a lot of them thinking about is really chain to chain uh I think we're still figuring out the learnings in real time the reality is like this year has been dominated by the explosion of layer 2 Chains and we're going to see in more and more uh most protocols want to capture value in that way um and you have your own chain as well like this is the new um kind of motor supp around you for for building remote uh and the reality is as you said liquidity is being fragmented the users are fragmented and it actually creates quite a sub optimal experience for everyone um so I think we're still figuring out uh how do we um build that seamless like

fluid experience so that to be honest at the end of the day you don't even see the chain and I think we've been talking about that for years that one day we'll be using these Services enjoying the benefits and for most people not having to worry about the underlying infrastructure or the underlying chain so I think that's the direction we're heading in um but in terms of building that interoperability it's it's a challenge my my own very personal prediction I think liquidity will be Consolidated on a on a few chains there will be liquidity hubs um and the ones that win that race first will dominate uh and the others will have to build their own niches to to have that use case those users and and kind of be here for the long term well uh my take on that is uh

interoperability uh I think the whole essence of that it's the idea of try to escape from some particular chain or uh institution using synthetics and uh the idea of uh one blockchain that's completely different from uh A blockchain to B blockchain uh I think that helps in order to make the the market grow uh I I don't see uh this idea of interoperability working in uh large scale in some points but in the other hand I see that can pretty much work because we don't we cannot uh kind of forget what happened 2008 in the super

PR uh crisis was tons of stics that was traded by another synthetics and some somehow kind of uh generates a domino effect and kind of crush everybody uh so uh do idx have some initiatives with IBC uh that's idea of Comm unicate from one blockchain to another uh ether I know there some initiatives like Picasso and polymer this idea of you know projects inside the etheron communicating with blockchain and projects inside Cosmos which is great but uh yeah uh I'm kind of really trying to figure it out at the

moment this is can work in a large scale so yeah definitely would be my P that yeah I guess uh we're going to have a few challenges on that to to come up with still cooking it up basically the yeah exactly and we see a lot of again people are just discussing these and you can see a lot of uh Solutions coming out you know Bridges like fullblown um centralized Bridges and like all the types so I would like to take this last five minutes and well we talked about where it came from where are we going where we at sorry and now i' would like to take your take on where we heading to like is f

decentralization possible is it like will we have like a good majority of adoption in in regards to food decentralization or will we need um this intermediaries or other stuff that helps the uxx like can we what what are your take on this like i' would like to take your vision on all yeah uh I Believe full decentralization is possible and do idx doing right now with V4 and Cosmos so uh I think uh will be the future because third party Bad actors will come after you we're seeing with another uh decentralized players as well so if you

not prepare they will come for you and not just in institutional public and private Bad actors can be a hacker can be anyone so you need to be prepared for this kind of scenario so definitely as I said in the beginning there is space for everybody in this industry but in the long term everybody collectively will understand that we need to be 100% secure no more kind of uh uh lose uh hypothesis we need to know make sure that our funds are safe and the Cod is Law and not third party saying that you're secure so even I I believe definitely believe that there's a very

nice private institutions like say hey we are working fine we we are serious institutions but uh for example one of the main reasons that DX uh left uh L2 the Stark net uh Initiative for zero ler rollup is that even Stark net you know trying to work uh as a independent uh L2 provider uh they have a central uh sequencer I I think that's the term Central sequencer so that's kind of make the L2 in a jail party so but if you ask starnet and say hey man we are trying to do our best to provide a serious very

nice uh L2 so uh we definitely will reach that this common understanding the long term that uh we need a code saying saying the things we definitely have to do not just a third party but in the short term the midterm I think there is space for everybody definitely yeah just one quick point there um at the end of the day like Maran said in the beginning um financial services are this um way is this way to find out the best uses and and how to find these Solutions um so I I agree with you but uh I do see a lot of challenges on

these on this way to get into a food decentralization yeah I agree and I I mean my personal and just quick point is not that I don't want to I would love not to have anyone overseeing what we do but um sometimes it's hard to yeah and especially when again we're here right the small community that we've been exposed to to crypto blockchain for a while or or whatnot but this is like still a very very minority right I don't know about you guys but whenever I go out with friends family there's still so so much you know L of knowledge nerdy

stuff exactly nerdy and and scary and they don't understand even sub judgment but less now now you're starting to see some friends asking how they can invest so but you still have so much like so you know a big big ocean to for us first to swim in and specifically when I think of the mass use I really see it difficult for decentralization right and and we've seen it like when and you ask someone to download the metamask or or what or any type of these wallets where you have to memorize and just like these are you know barriers to entry and so um if you we really want that kind of like

future that everybody's using it seemlessly um and I I really see it more as this kind of hybrid world but again continue keeping the ethos and taking out things that are unnecessary and intermediaries that un necessary because that's for sure it's something like why do you need to pay high fees for a crossborder transfer I don't think it's really a necessity right like those are just you know monopolies of Institutions I've been doing this in for for a long way for a long time uh excuse me and so so when you make those kind of use cases more efficient and take those players out but at the same time uh make it secure and and that's when you know you

really going to see the mass usage so answering to your question Antonio I really see it more in a decentralized together with you know like efficient ways and kind of like this hybrid world at the end uh echoing not possible in the immediate future uh I think uh there are a lot of challenges to that but I am hopeful that decentralized finance will pay a much greater role right there is that opportunity for for greater freedom and greater prosperity and people see that and I think my own very personal view I think there is no shortage of political instability in the world that will act as an exogenous push for people to adopt I mean for example even Jamie Diamond

last week I me he openly acknowledge that the real estate debt crisis in the US could very easily lead to the Meltdown of a few Banks and the Federal Reserve have already said this and if you're one of those bank account C banking customers um you may want to uh make that migration um and politically we have seen how like uh US Financial infrastructure can be weaponized in different parts of the world and I suspect that there will be many maybe entities around the world that will try to adopt some of that decentralized Financial infrastructure um so I I think the it will be a very long-term Journey but I agree I think it's uh there'll be a hybrid for a while uh but I think that hybrid will be our best bet on boarding the next million or a billion users nice

I agree with you all uh I think the one of the most important messages here is what Sophia just said that we don't forget the ethos that we keep um well people self Sovereign um and uh free to be able to transact um do you guys have questions uh we have a quick uh Q&A here don't be shy fire around the questions you're burning to ask one in the back hi uh good morning you talk about

uh code is low and self- custody that's something that really uh take care here in in web three word uh and how do you see the tradeoff between self- custody and web 2.5 uh I think because I mentioned Cod is law of go force uh I think we have all kinds of clients I completely agree with sopia and Maran uh for some people some people don't care about what happened behind the curtains don't care all this nerdy stuff that we are presenting here and uh some people just want push a button and see the magic happens so in the shortterm midterm I think this all kinds of people will be

satisfied by this kind of solutions but in the long raw in a long run in a longterm Vision I think uh we I just mentioned two main events that happened with 2008 subcribe Prim crisis and Cambridge analytica but I I think this kind of events will happen more and more often so we'll collectively we'll reach that understanding that we cannot deal with their uh with this kind of decisions and let third party people Define what we're going to do with our funds so I think in the short term uh repeating again in midterm think there is space for everybody every single kind of project but in the long term I think

we're going to get this realization alog together um my question is actually on the adoption side so how are you guys tackling on each of your different solutions right or or Tex TXS how are you guys tackling the desirability of how users or onboarding users might interact with the system because the moment you don't actually get what it is you want out of the system you're interacting with you're just not going to use the tool whether that be the greatest blockchain in the world the thing that's going to bring me the most impact if I don't know if I can't figure

out how to use it and I'm not consistently getting what I want out of it I'm just not going to use it yeah I can I can start um yeah so I think that goes together a little bit with like this barriers of Entry right and so one thing that even Antonio mentioned it's like ux right so at the end of the day you can have the as you said the best blockchain the best um D5 protocol out there but if the user tries to go and and use it and they can't that really makes it creates this barrier of Entry right so specifically um at fireblocks we try to Al create a lot of ways that our clients can leverage to make this barrier of Entry as low as

possible and hopefully remove it and so for example H with like an easy sign up right so rather than you know going to app that you're going to interact with a defi protocol and having to add the wallet we created what we call non-custodial wallets so basically the user of our client of our the companies that leverage fire blocks they can go they can go put their email and automatically through apis you'll create the wallet in the back end that they're going to you know have their Assets in a safe way but they just only use to to add their email right so I think for me like the US is a big big part of it to make this um process more seamless and easier for them to actually do what's

important which interact with the actual product um for me it's it's very simple um how do we find the best Founders building delightful products web 2 has introduced the highest standard for product experiences and if you're not there you're not going to be your product is not going to be used and we have to remind ourselves we're super early in this room we might use these protocols because you're Nimble you know how to find the best yield but if we want the next few million people to use it it has to be a delightful product so we're aggressively looking for those opportunities whether it's and and that has like real utility like you want to make a crossborder payment we're we're working on that um or you want an easy way to uh well not

just send money it's interact with these tokens where you don't even care if it's usdt or usdc or B&B or this train you just see digital USD we're speaking to teams that are doing that as well so it's all about how do you continuously and aggressively abstract the complexity so you're at least at parity with web 2 in traditional finance and then we can make that next leap but still a way to go yeah uh I have to mention that dox is number one in user experience for Divi defy uh platform everybody kind of have this acknowledgement inside this industry uh but I I have to also add that uh maybe it doesn't matter if you're in a safe place with very nice

institutions that just want let you do whatever you want but uh in places you don't have it I start to matter start to you know really matter a have access to uh web tree fully decentralized uh applications so yeah uh I think uh defi uh web tree can have uh very nice user interface and user experience and do idx already showing that you know 4.5 $5 billion in trading volume per day that's a lot of money tons of money heck loads of money so yeah the uh thex are showing right now to the world that it's possible to have a very nice and

friendly interface and user experience and be 100% decentralized uh let's just take one last question back there if you can directed to someone likeu oh no no problem okay cool um so yeah if you can direct it to someone so uh the talk was about uh folder decentralization or web to. five um what do you guys think about uh the change in the theor protocol to from proof of work to proof of stake and can it uh like uh be a bad thing for decentralization and you guys talked

about subprime in 2008 uh governments are gonna have a stake in the protocol so what do you guys think about that any uh I think uh it depends for the asset that holds every single thing happening in the world of crypto which is Bitcoin I wish that for will be forever proof of work but for other things other applications there's no necessity to be proof of work so it really depends on if the asset protocol I I really see I just see Bitcoin using proof of work forever and

other protocols being able to use a proof of stake uh with no problem I will be very short in this kind of matter I don't see too much depth on that I just say there is product Mark Market fit for it right like ethereum reaking has accumulated tens of billions of dollars this year alone that's like the greatest growth in capital being locked in the industry in a long time so whether we like it or not it seems to be well adopted and accepted by the community yeah just to finish I think exactly I agree with you um that I mean Bitcoin is its own use case right so when you think of really like you know

compare it to a traditional asset like gold where you want to have it like in a safe um you know 100 decentralized way that's kind of where you really see proof of work but then the other everything else I think proof of sake makes sense well thank you guys for for the discussion we went a bit over uh now we're going to have an online session with Manu from polygon so uh still around and we'll be live very soon thank you