Why Open Source is the Future of Finance?

Transcript

switch to plane mode thanks want to up to you but the answers you have to

say will appear on the screen I just shall we get started shall we get

started let's do it okay ladies and gentlemen jelly bean it's wrong so first off I'd like to do a quick introduction of jelly bean and maybe you can do an introduction of consensus after I had the honor to work with this gentleman for the past few years and when I'm very proud that this hearing my need you to come to HCC so we have to eat Ihram founders in the conference this year and when I when I get asked who is jelly bean and what is his story the answer I usually give is to do being studied

robotics in the 80s he then worked at Goldman Sachs in the 90s many doing investment in tech and he got out of the dot-com bubble with champagne he settled in Jamaica in the year 2000 where he got back into business by achieving quasi monopolistic position in the North America for reggae music production and eventually he learned about Bitcoin in 2010 and he loved the tech and soon after this he met vitalik baturin on the trip to Canada at this time the each room was returned blockchain was merely a white paper and he immediately thought

that it was the next big thing and soon after he founded consensus 2014 and then we had the lunch of the ETM maenette in July 2015 and I think the rest is history so first question how how hockey rate is the story accurate so you found one or two facts and wove a narrative fiction around it so see if I can deconstruct it so in the in the 90s so I graduated as an electrical engineering computer scientist in 87 in the 90s I was doing but ten years of robotics machine vision

neural nets research I never drank any dot-com champagne I was more nerdy and what wasn't doing the the e-commerce comm stuff I worked at Goldman for a little while early 2000s early knots and [Music] then ended up in the so I was more on the IT side but then ended up in the world of finance building trading systems and ran a hedge fund and I did live in Jamaica but I did not monopolistically dominate the the reggae

music scene I was hanging out with a friend and helped her attempt to launch a music career and got involved just obsessively reading about everything in blockchain in very early 2011 and then it was lucky enough to meet Vitalik Khan we established it was January first we were talking about this on stage last week in in London I was January 1st 2014 met vitalik about a month after he wrote the white paper describing the etherion platform and I and a whole bunch of people started trying to organize the

etherion project roughly around Vitalik and launched it about a month later a year after that started consensus to try to build decentralized applications on this new platform that wasn't quite released yet and turned out it was really hard to build decentralized applications and so we ended up building things like add app store and a little accounting system and from that emerged essentially infrastructure and developer tools things like travel suite and in fira and meta masks and other pieces so now it seems like consensus is focusing

on finance services is it is it the case and why consensus does the financial services as a big opportunity Durham based systems so I think we have a significant focus on FinTech and financial services but I wouldn't say we focus on financial services we do things like supply chain track and trace and there's a significant financial component to that like ma de T trade finance etc but we build in a theorem client it's the third aetherium client that we've built over the years we built the first java client roman mandalas project and we built the first Haskell client

now we're building another Java client in Firoz not financial services madam asked is not financial services truffles not financial services yet we do work with financial institutions to help them on board to the blockchain ecosystem to help them build blockchain systems that they care about for their businesses we have been heavily involved in digital assets and continue to be heavily involved in digital assets and so whether that's Matt a capital project organized by consensus in in France or whether it's projects like gnosis from

way back or new projects like scale Network we are heavily involved in digital assets and if there m2 staking soon and others taking another staking platform that we're releasing so I guess the reason it feels like we're heavily into financial services is because the there's a financial component and in so much of what we do in society and so much of what we do with our technology the way I like to think of it is that we're building so we probably spend 60% or more of our attention on public main

things and we use that exact same technology in private permission systems and we built some some multi-million dollar production systems for projects like Congo and another one Kove antis that's going to be just as big but all of that infrastructure I guess our main focus is is public maenette and trying to bring the rest of the world in that direction whether in layer 2 solutions that link into main net or or just on main net whether it's a theorem one or soon a theorem 2 and so we think of that as building a

foundation of trust for the planet moving the planet from subjective trust to automated objective trust and what that enables is the building of a new financial layer for the planet so it's open decentralized financed it's the the money Legos its protocols essentially that will enable the world to to reaaargh attacked all of its systems and draw legacy businesses and enable new businesses to essentially build at the emerging decentralized economy so we recently seen the emergence of passive

income on decentralized protocol is this something that consensus is looking particularly at or is it an opportunity something a you wanna take it at some points here so I think passive income as some people are calling it is incredibly important for our ecosystem for a decentralized protocol the decentralized protocol ecosystem I expect it to be the most intensely active passive income ecosystem that we've ever experienced I mean this stuff is very raw the technology is very immature the people who are attracted to a theorem right now our technologists far sight

entrepreneurs who are just building stuff either for each other or for the occasional in consumer or for enterprises or or consortium the people who are now attracted to this decentralized finance layer have been the technologists again building stuff for each other but now we're starting to build stuff for financial nerds and so in a world of low interest rates or negative interest rates financial nerds are getting very interested in that and will get increasingly interested in that and they're going to entrepreneurs are gonna start building things that are easy to use to enable less sophisticated

potential users to to have interest bearing savings accounts so things like that whether they're built into existing systems and they make use of open decentralized finance on a theorem or whether new systems are built that sort of yield is going to be incredibly compelling and it's gonna be very active it's not going to be passive income anytime soon I don't think we we may create some some smart Robo advisors that did move our money around between different protocols yielding different yields but it is still a pretty dangerous place to play

I wouldn't recommend a retiree put money into into these systems and it it's gonna be a place where effectively I think it's going to be the first major not killer application or it is sort of if you take all the different money lego protocols and understand that you can wire them together then that's probably going to be that and or gaming is going to be the first killer app that draws lots of normal human beings to the platform and when that happens

so David Hoffman I think was the first person that called ether a permissionless collateral that enables the bandwidth of decentralized finance and so as more and more value comes in to the decentralized finance ecosystem it's gonna raise the value of that permissionless collateral token which is going to increase the bandwidth for open decentralized finance so the more money that comes on to this platform the more activity and attention that drives and the more bandwidth that that creates because essentially there will be more ether collateral available to to do more

lending and to drive more liquidity through these protocols right so you mentioned boats and I guess that's the way that the the part where open-source can really help on this to make sure that every everybody can benefit from being passively or passively also involved with the protocol or lose really badly yeah but as you said also the technology is still very raw and transaction gets included one blocks at a time with the orders being the ordering of the transactions being decided by the very detours and we've seen some exploit of this kind of

problems of limitation recently so since blockchain is bound by the block time limitation how do you think we can bring the classic financial assurance the legacy finish of instruments to the blockchain despite those limitations so much I understand the question because validators can choose the sequencing of transactions because there are things like flash loans that can sort of do a whole bunch of steps and either create economic value for somebody or not exist in the problem of doing older book manager

on the blockchain yeah so I agree that there are some serious dangers in these immature protocols especially as they start to get wired together and interact with one another and so I think we're gonna see continued progress but I think we're gonna need to have very careful prudent maybe slow movement forward as new features are introduced into a protocol you're not any longer only impacted by your own protocol it's no

longer sufficient to take it to consensus diligence or some other smart contract auditing group and say is this safe please validate this because you are now embedded in a whole ecosystem and the potential side-effects are are going to be interesting and in in some cases dangerous and so the the defy protocols are gonna have to get together and maybe maybe it's a case of creating smart agent simulators who are doing a bunch of things across a bunch of different protocols and maybe we need to introduce time delays and and other

things and not not forever but just so that we can harden these systems and make sure that we're not just introducing a whole bunch of pitfalls yeah so if the formal proof or the formal proofing of the smart contract is not protecting anyone against a social behavior of the protocol itself right and I'm I think we all we are all looking ahead to each room to and I'm very impatient to see this happening because it's gonna bring proof of stake and with proof of stake we're gonna have a sort of a yield house of income for you passive income passive income on the ether which I see as a sort of an interest rate

from some kind of a central bank and that interest rate that director rate which fuel already centralized applications already sponsored a finance application I think it's a view that you share or if you don't tell us tell us why and what do you think a term to is gonna bring so what if I what you're saying is you you cease taking as a risk-free rate basically the the base rate in in a yield ecosystem yeah new new yfir that you can trade yes it worked in song yeah so I like that idea a lot I think so if you look at nation

states and central banks and in their Treasury Department's and how they issue bonds because they can print as much money as they want they can pretty much guarantee that they can pay off the the bonds that they sell to financial institutions or to people and so that's why it's called a risk free rate but it's not really risk-free because nation states don't last forever so I think what will be interesting is whether the risk-free rate in Japan or the EU or the United States how that compares because a system of laws is basically a set of

protocols and if an ecosystem like a theorem and a protocol like a theorem gets really really big global incredibly well utilized it'll be interesting to see if the risk-free rate of that protocol of that set of rules is more risk-free than the risk-free rate of nation states going forward but absolutely I think I think thinking of the the base protocol the permissionless collateral as as the you know related to the risk-free rate is a really interesting way to think about it so I would say it's a risk-free rate as long as you

consider prices in our prices can overreact but it's still the rate it's still yeah it doesn't matter how that compares to some other token like the US dollar or or a commodity like gold you still get the same rate will be interesting to see how the price of executing a particular operation on Nerium will change with the emission of new e fur I'm sorry the price of what the price of executing operations like transferred okay no transfer sir yes I I feel like decentralized protocols are gonna get very very inexpensive to use so right from the start of the etherium project I

think most of us thought we didn't think like the Bitcoin core people that it should be really expensive to run a transaction we thought that there would be so much activity on these networks and and just so many ways to achieve scalability that running computations would get as as cheap as air and this the fact that he's cheap also came out from standardization the fact that we have now a near c22 again that is multi tested with different implementation and so on so where where does consensus stand on this movement of standardization do we need a better standard for security better stuff for

Oracle's better yeah we need I need standardization all over the place whether it's de-facto standardization I think one of the main reasons that a theorem got so popular was because we de facto standardized on on e rc 20s making it easy for anybody to issue these tokens making it easy for exchanges in wallets to deal with them and for people who issued them to know that exchanges in wallets would would deal with them and so we need to see so much more of that and we do through the EIP process it's it's not a perfect process but it's a pretty great process for achieving

standardization certainly requires lots of debate and maybe more mature processes going forward the a theorem Foundation and the enterprise a theorem like Alliance has engaged the Oasis group it's a foundation similar to the Linux Foundation the Apache foundation to perhaps help out in formalizing those processes a little bit better we we at the enterprise they're Millian Civ tried to put together an enterprise standard for a theorem clients so that we have the base of theorem clients that are subject to a IPS but there are some

things that don't that are Enterprise related roles based access control things like that that really don't belong there and so need to standardize on those things we put together a token taxonomy initiative we're actually looking at something for the music industry here we go over to the reggae music so yeah the reggae music is back reggae music goes back yeah it's around tokenization and music so we need and especially for interlayer so we're gonna need to figure out ways that essentially messages and tokens can be fired across different Ledger's and

transactions can be invoked on different Ledger's and messages pasts with return values and so yeah I mean just you and I talking is all about standardization the fact that we can even remotely understand each other let there be money legos so what would you say to someone that would argue well those money Legos are cool it's for kids being in the room but nobody would build a house out of those small bricks nobody would build a house on toys so I think money Legos is a really cute name for it I think it was more about the fact that they can be attached to one

another and that you can build more sophisticated structures from the diff pieces than somebody trying to call it a useless kids toy but also if you look at all the architects and engineers and computer scientists for a long time we all built with when we were kids we all started our careers building with Legos and Mindstorms and wood blocks and stuff like that so there I don't mind calling these things toys for now but they're gonna become extremely sophisticated instruments essentially the world has lots of financial protocols and they're

really crappy the financial world consists of a lot of institutions that that specialize in reconciliation of different data bases they also when they get the reconciliation right they provide financial services to lending and stuff to companies and to people and all that reconciliation can basically go away if you're if you're on one shared ledger one source of truth there is no reconciliation clearing and settlement happens in the instant of the transaction you don't have databases getting out of sync that need to be fixed or if you have two letters and you have a standard then reconciliation

happens in real time so you're just doing that automatically and so we're emerging from a world where the systems were pretty remarkable but incredibly inefficient compared to to what we can do now with replicated state machines so Legos definitely shaped our way of thinking about problems of bidding problems so it's not about reinventing the wheel but actually inventing a wheel that roll properly so we came around her wheel yes yeah so we were supposed to talk more about open source and the future of finance I can I think we can agree that open sourcing has been a tremendous help to better in turn based

services with open sources of code you had a better battle testing better better standards better in and before you said that sophisticated finance people are gonna start to look at this and start to play a run with it and eventually it will bring it to the masses but do you see also the lame and the average developer getting into finance wave et realm or with blockchain is this something that we can help here oh we can make it arrive meet me in the middle instead of just the finance people jumping on each ear iam having more average developer jumping and Finance takes it is sure yeah I think

that's gonna happen so a long time ago there weren't any programmers and then programming languages computers were developed and there were some programmers Along Came the internet which connected more academic people that led to certainly exponential explosion of that space and and the World Wide Web or the Internet of information and suddenly we have a large percentage of the globe who are technologists or even if they don't think of themselves as programmers they're still doing things that are very

technical you know building websites etc you're not a really a programmer necessarily if you're using certain tools to build websites but the tools facilitate people moving into this information economy and we're moving now from this information economy which is based on tcp/ip and HTTP in HTML and SMTP to an internet of value economy which invents a new form of trust and that's gonna be based on different protocols it's it imbues strings of digits with actual value because we've

invented something called digital scarcity and so this becomes the new language the new you sort of base understanding of so many people in the economy we're just on the precipice of that starting to happen but essentially we have democratized access to the financial infrastructure so the financial plumbing of the world used to be owned by and operated by the financial priests people in the churches of the central banks or in the churches of the major commercial and investment banks and and now your bank is in your pocket and you can totally program your

bank and so it's not quite there yet but absolutely everybody is going to be able to operate the machine the way they want to talking about accumulative you said before the constancy started with building different clients so I remember a TMJ I don't know what happened to a champ if you have a user but what is roaming out there some yeah where's Roman I don't know so you know that that the etherium jteem recently just rejoined consensus so the harmony team used to be Romans team but now they're there helping build a theorem - and you also

mentioned interim age from Haskell so building building a client in in a language this formally provable and you can audit and so on we read in the press that consensus might absorbed the the team of Church of the central bank actor JP Morgan which has built a client gets and a layer of SQL so it seems like the two dots are connecting would you like to share something about this so I can't share too much so we have been working

really closely with JP Morgan's quorum team for quite a long time they were one of the founders of the etherium enterprise aetherium alliance with us and other groups Accenture and Microsoft etc and so our teams have been working very closely together for for quite a while and like each other and respect each other they so we built a client called Basu which is an aetherium client it's a Java based client it's Apache - it connects operates on main net but it also has a confidentiality overlay called Orion that enables mostly in private permissioned situations but

soon on public maintenance confidential transactions to be done and essentially logged to to the blockchain so you can have this set of counterparties doing something that nobody can can read and so we use those in consortium networks and enterprise networks that we built quorum built by JP Morgan does the same thing they built it on the go client death and they built their own confidentiality transaction manager so we have been essentially I believe this story is that JP Morgan

wants to be a bank they want to build lots of systems on blockchain they actually started building block chain systems at POC five of a theorem so like way back more than five years ago they've been really on top of this their CEO may not have been totally aware of what they were doing at the time but there's a lot of people there that are building a lot of systems on blockchain they're all building on quorum and they just they want people to use the quorum technology they want people to use their systems but I think there's been been some resistance amongst other financial institutions and just other kinds of

institutions to make use of this technology that's effectively owned by a big bank and so they decided that they wanted to externalize that project and they've been looking at different groups they've been talking to different groups about who would take on that project and we are now in deep discussions with them yes so it seems like consensus is poised to be the one that will bring the balance to the finance world so bring balance I would say bring integration the vision has always been to move the world from top-down command and control centralized systems subjective trust

systems to automated objective trusts on massively decentralized protocols it started out with enterprise needing to do its own thing in more circumscribed private systems that's the way enterprise adopted the web technologies too they just need to move slowly and get comfortable with respect to privacy and confidentiality and scalability and tomorrow March 4th consensus and two major global companies are going to announce a new protocol that enables organizations to interact with one another share private information interoperate with business processes and

do all that with full confidentiality on main net and so that's always been the vision and maybe tomorrow will be an inflection point and you are dancing that's eight cc in your I don't think this is it it's actually being announced in New York City okay so hello New York if you're listening we're waiting for this to go we'll hear about it here thank you Joe Thanks out of time