The Next $10B in DeFi

Transcript

all right great we're making progress sorry almost ready all right good stuff are you ready yeah okay we're ready now first off just a brief introduction my name is Gustav and I manage the European business development for mega town and today I'm we're going to present a collaboration

we're doing with centrifuge so with me on stage is also yeah hey my name is Lucas I'm the cofounders of Senna food we bring debt and real world assets in to defy yeah okay so so today like the presentation is a dual presentation both of us book will be on stage and we will present a project we're doing together as well of kind of like why we are we seeing this is a great opportunity 45 and kind of like this states that we're at now and where we're moving in the future so I'm pretty sure a lot of you guys you know in these defy tracks have seen the the graphs you know how we we reach the the 1 billion number so kind

of like you could say that within the last year decent rise finance and have managed to capture a decent amount of assets but this is of course quite relative because in the grand scheme of things this is this is really not a lot but it kind of like we really kind of like documented and shown how this actually works right and how we actually can't do these things purely on the blockchain however the assets on the blockchain in the blockchain space is still relatively limited so you know at maker we we had up until almost 2 percent of all if they own capture in our smart contracts but it still put us at like a relatively small scale another problem that we see in in in defy today is that

we kind of like have a very very big correlation between the assets there so this figure here basically shows you how correlated that all the the assets are with each other where the more red they are the worse it is for some reason Tron is not correlated with the rest of the assets and this one but you know it's not really because we don't really want to you know diversify ourselves by adding tron to the collateral pool for experiment that kind of like to fire the purpose of what we're doing I believe so when we look at like the addressable markets like what is actually being used in traditional finance it's like good collateral looking at global trade is incredibly interesting right you have a lot of asset that is moving you have a lot of finance being done already so

what we're looking at now is like how can we then take and capture some of all of this value that transferred day to day and dislike already very very proven use case of financing within trade and kind of like use it as collateral on our system specifically one of the sections that we have been really taken a closer look at with centrifuge is within SME so small and medium enterprises in their financial possibilities the assets that is being used here US dollar staple or euro staple they are often very very uncorrelated because each of the assets is often tied to the balance sheet of that individual company and the yields in this space are very very high so it's quite attractive and it's a place where

we believe we can be very very competitive so you know today like you see a lot of the the SME factoring is being done with interest rates above 20 percent per year so it's quite expensive for the borrowers and at the same time quite profitable for for the lenders here so what we're then doing here is that we're moving towards like the path where we can really you know taking these real-world as it's used in as collateral specifically you know invoices or trade finance it will enable us to get these like very strong uncorrelated assets into the system as well as kind of like bridging maker and defy out to like a section when instead of being a purely crypto focused company then we will actually be sitting in like

the intersection between FinTech finance and crypto and kind of like enable us to bring value and add value to all of those three ecosystems and as you're probably familiar you know in in for example in second finance is where like the majority of the world uses are today right so we kind of like really want to bridge us into this with centrifuge we have already proven the use case we have done quite a lot of maintenance actions with them we currently have 270 thousand by transacted on may not so we approve in the use case but we haven't scaled it scaled it yet so this is what we are we're looking to do now okay last one sir so basically the project that Lucas is going to tell you a little bit more

about today is in the gig economy so basically in for example Southeast Asia the gig economy is very very big we see some major players such as like grab for example really having scaled up and this is something that people that use a lot the gig economy can be everything from you know like you know an uber driver to someone delivering groceries as the examiner we will go through with you today to people doing other kind of like tasks the thing like some of the the problems here is that it's it's very very cash based a lot of the the people providing these services so kind of like the workers of the gig economy companies they often come without bank account's around 80 percent of them come without bank account's grab which is probably

the biggest one in Southeast Asia they've also stated that since they started operations they've actually unbothered more than 2 million people into bank accounts they have limited access to finance they have very limited starting capital if you don't even have a bank account it might be very difficult to you know put up the front cost for like buying groceries for you know your Christmas dinner for like a hundred dollars so and then the last thing is that of course they have like no savings account so Lucas you'll go a little bit over the case that we have now with with a partner we work with in in Southeast Asia called shuttle one yeah so I'll talk about shuttle one which is one of them one of the partners

are working with goose I've already mentioned the 270,000 die that we did on maintenance so like those are our transactions preparing up for MCD launch instead of now going forward of like working with different asset originators to like get them to show how this works and so we've built built these asset classes in preparation for getting them into MCD sort of onboarding them to other lending protocols and sort of have establishing these somewhat very different assets in in defy and I'll try to do my best sort of in ten minutes to show just like what what this process looks like from being beginning to end with with this partner that we're going to talk about shuttle

one so there's the shuttle one is interesting for three big reasons we're landing essentially is the primary one where we want to enable gig economy workers to borrow in died to borrow from crypto but then actually sort of as we start to give them crypto of course they can also start thinking about Oh like maybe I should save some of that crypto and use the die savings rate for example they can use it for remittance and sending money around as Gustav mentioned like 80% of the users that start working in these geek economy jobs actually they first start with getting a bank account

because today like today they probably live like largely using cash and actually like shuttle ones one thing they already did like on on this as you can see here this is one of their co-founders zhang is um has been working on actually finding ways that you can onboard these users who are unbanked into crypto because well like how to even get them to buy by die and what they did is they stated they started partnering with telecom companies correct me if i'm wrong but to take your your prepaid credit card credit right one of a very common way to to send money around today in in these countries to like buy die and so so like by by

offering these lending products by expanding sort of defy to cover these users you can like bring a lot of these exciting new features and benefits that if i can offer to a whole new user base so what what do we do we want to bring these what we call real world assets in to defy so that means we want to create a way that maker can advance money on these assets it starts with one sort of as being the asset originator having having having disasters sort of to tokenize them so it what we use here is we create non-functional tokens for these

different moisés why non-tangible tokens because actually if you look at trade finance every invoice has an independent credit risk it's from one buyer to a different supplier you can't just chop it up it's not in the air see 20 token right so like you start with in an ft that represents this one item of collateral and in our example with shuttle 1 it would be actually the future revenue or like the the money that the credit card company is paying the the worker indirectly the worker first app' then the work in the end that the end user the customer that wants to get their food delivered paid using their credit card right so you have like the user who

pays a credit card company the credit card company holds on to that money for 90 days and then pays out and so you have this problem that in in those 90 days you have you're strapped for cash and so what shuttle 1 does is it so it created a season on fungible tokens that are then that we then put in sorry I put put into tin lake which is a set of smart contract allows you to create these portfolios for assets and mints in mint near sea 20 token against which can then use sort of as as collateral and maker and and other lenders so I'll go a little bit into detail what we're doing here so the first step is creating this invoice and so we're creating this as

nfg I'm sorry a when a company wants to borrow money I the first step is getting this asset on chain so you can think of this invoice existing as a legal contract somewhere that says there's a two thousand dollar payment from the credit card merchant to this supplier shop or Bob it's due in a certain on a certain date and and this is the buyer who's paying it what we do is we create an NFT the basically represents this claim on money so now you take you have by owning this n of t by moving this n ft around you can sort of determine who then who now should have the claim on on

that money once the invoice becomes due so I can pay this I can buy this n of T today and get the money on due date or I can log up this n F T and use it as collateral to borrow money against it the second step is actually using our 10 like smart contracts because so as I as I talked about before we have so we now have this all of these different NF T's one of the challenges is well like you have to have a way to price these assets to sort of bundle them to get them into maker to get them into other to sort of get other investors to on board and one of the challenges there is that well like if

you do it on invoice by noise level like it's it's quite a bit of a process so you want to create an asset class and so for so for example what shuttle one is doing here they're saying well we're gonna take this we're going to take these gig economy invoices and we're gonna create a pool of those and you can invest in a pool of those and you can actually like of those 10 million dollars of assets that you have we can put some amount into maker we can maybe offer it to other investors we will probably invest part of our own money into that sort of as a way to as a show of show of value and then sort of now you have the scalable product because now you have hundreds of assets on the on sort of the the borrower side where

you have you deposit these invoices you get your dye and on the investor side actually we have one feature that I want to go into in a bit more detail which is like we actually mint two tokens so those are the two years here 20 tokens that are used to represent sort of a share to use as a that the function as a share in in that collateral pool those who tokens functions slightly differently we have and if you're familiar with structured finance it this is essentially a structured product where the drop token is a senior tranche and the tin token is a junior tranche the drop token is actually the low yield but very stable acid that is insured by

the the tin token investors you can think of it if we have a million dollars in in invoices to invest in we raise $800,000 from drop token holders and $200,000 from Tinto olders that means that if there are any losses in in this overall portfolio the tin token holders eat those lot at losses first meaning they're the the senior token holders to drop token holders always gape get paid back first what the reason why those tin token holders do that as well because they get a higher yield so you promise to drop token holders a certain yield and you take the difference and the tin token holders essentially can make a much higher return if it goes well but also or have this leveraged exposure if it if

it goes badly and so so the the we see two different users for these assets right so like makers interested in stable collateral in like a very liquid sort of a larger a very liquid larger set collateral whereas that in the tin token is is like very high risk acid that you want to invest in if you understand it very well if you want to have these yield this yield and so it makes like it's in the ideal way to get like quote like very qualified like sort of expert investors in into into these assets as and like one of the so one of the key like tin token holder is actually the acid originator so a glass

originator invests along with the senior investors in that pool so if as a way to show that they have skin in the game right like they would buy buying tin they effectively say look like we trust that these assets are good so if we wouldn't then well we we take any losses that happen first I think one just one other point I want to make is like when when sort of designing tin like right like if you compare that to other security tokens or like projects where they try to tokenize a house I think key difference is that we start we start with the NFT we start with individual asset and have like all of this on chain because that's like long-term you want to have that transparency on chain you

want to like move move more and more on chain as this grows right like whereas like a lot of times these these asset classes on chain all they do is they have this very centralized issuing entity that just says oh there's some tokens and there's like something off chain that's related to it but we're not really gonna sher much so I think that's like one the two features that I wanted to highlight about tin leg instead of how shuttle one will be using it to now create an asset class it actually is interesting collateral for maker and I'm yeah already running way behind schedule so I'll try to speed up a little bit but I'm essentially like sort of bike by deploying tin lake they not you now have

a scalable asset class that can be put into MCD where you where you can advance money for these gig work or gig economy workers that can now borrow get get there get there die and and sort of grow their business yeah so so basically so the thing that we're doing with whichever one is actually so of course all of this is it sounds like a lot like concepts but actually we we're doing like the first minute transactions next week I believe so this is of course not using MCD fully because for us to actually use MCD as the the place where we actually at the finance from we need

we need to vote it through the community right so basically like the opportunity that is for us here is to view not only onboarding the company wheels onboarding the entire user base into the system and adding all of these new users to defy specifically which are the one the one the management side should be doing next week it's actually one of the the Baker kick economy platforms in Indonesia so we're actually taking not just shuttle one who is you know at pages whole like crypto company but we're actually on boarding a whole traditional institution that always does this already have they have hundreds of hundreds of thousands of users and like the the main go like over time is to unboard all of these into more and more more services that are using defy however as I'm sure you

guys are aware we kind of like need the community support also for this so even though we present this is something that you know we believe that has a very very strong opportunity for us here we still can like need the buy-in and the maker governance to support this this as well so of course we are preparing all of these things to make it you know as easy of abode as possible but essentially in the end we still need the community support which we hopefully will get I think that's why we're here today right so yeah that's one of the reasons we presented a and maybe that's a good a good segue into our last slide which is like questions we wanted we presented this or the concept because we want to we want the community to start thinking about real world assets so I think about

how that can be a potential for defy and how it can grow I'm not gonna go back to that slide that shows 180 trillion dollars of b2b spend but right like if we think of crypto today and where we can go like let's start grabbing like a small piece of that and bringing it into crypt and sort of showing what these advantages are but yeah I don't know how we have time we have but I think hopefully we have time for like one questions thank you so yeah is there like another way to assess like the risk of of let's say like the invoice you're going to make like an NF t out of other

than like how much the originator is invested in like the it was the tin Tolkien right the the second one like is there any other way to like kind of like assess the risk of the invoice or of default or other way then just like shake is that enough that's Mike okay so I mean we're what we're doing by sort of moving within this like moving less information on chain is like we're basically saying we can we're aiming for having the the most the best product process we have today for pricing these assets right like the invoices are being financed in the order of hundreds of

billions every year actually not the factoring market is a three trillion market right there are many different data providers that do this today by bringing this on train by sort of having these different underwriters Oracle products or the Oracle providers in crypto speakwrite that can give pricing signals into into this we can actually a Coakley create a more transparent way that these these these parties can price it and like long term have a way that we can measure them and say okay like you're doing good work you should be incentivized to do more you not doing good work is you should maybe like get kicked out of the the set that sort of determines these prices okay cool and so then yeah it's kind of like at this point like the more invested you

see like an originator in like the it's the junior trench right then the more you can trust it at this point right well the the lower the risk is for you right so like if you have a 30% junior tranche then like the senior is protected on up to a thirty percent loss of the entire portfolio so like if you have a hundred invoices 30 invoices go bust like you're probably still good percentage-wise if if it's only a 5% like you're less you're less protected but it's cool thank you you know I would also just mention there that I mean we already have all I mean this is based on

like revenue of the company right so like we actually already we know the revenue of the company we know the default rates we know everything behind the company right so like we're bringing it on chain and make me transparent in that sense but the same way today if you do invoice financing I mean if you have ten thousand invoices and you have all the payment data behind them I mean you can very very easily kind of like figure out what is the default rate what is the risk of this asset and so on so we take it and put it on chain make it transparent to to the public in that sense but it's something that is already now like relatively easy to to actually risk assess okay one more question if anyone has anything on mind no okay well then we want to thank you all for coming

and hopefully you'll you'll help support us but we want to move these things past the governance process and please give us feedback feedback on Twitter and you know telegram channels and so on yeah and on the mega forum - yeah so thank you all thanks for eating to us [Applause]