DeFi in the real world: a new breed of DeFi applications

Transcript

[Music] foreign [Music] talk about a new iteration of defy in some way so a new Evolution a new kind of applications that are built upon the foundations of defy but they go much further than that and so that's why that's so that's why uh I would call like defy in the real world and so um just a

little bit of a disclaimer so everything I'm going to say here is a taken from our experience uh in building Atlantis protocols or attendance labs and so yeah we try to take kind of a step back and like look at what we've done in the last couple of years so let's go uh so a little bit of context so I'm the governor Institute of Berlin's Labs I've been in the space for like a little bit more than five years now I started as a user then I moved to being a developer I was in consensus for three years and then I found in the Atlantis labs uh so we started the company in 2021 and

so we launched the first version of our protocol so the V1 in June 2022 um yeah so this was the first iteration and it allowed us to like test things out and so we opened eight pools we learned a little bit more than seven million dollars over 30 loans we did not have any defaults which is a something in the current market conditions we had a little bit of more than 18 000 positions over 5000 users so all these metrics are great but what is that one is in fact so Atlantis it's a defy Landing protocol and the only the big difference compared

to like usual Landing in the blockchain is that we don't use any collateral so we do that because it allows us to like uh and block a whole new kind of use cases and also to land money to the real world and so that's the purpose of the talk right now so the first version without this Matrix allowed us to test things and to validate some points and we took all this and put it back into a second version of the protocol that we launched in June 2023 so we are slowly ramping up on this version of the protocol and so

um just taking a step back uh to when Atlantis was founded and like what happened at that time so we started the company in 2021 as I said so early 2021 and we were kind of like a wave of companies that were founded after the device summer and like all the things that happened during this period so it was an amazing time because the Innovation was incredible so we tested a lot of new models in defy that like had a lot of like new theories and new like products being made so Innovation was everywhere everything went to pollution really fast

which in some cases is not optimal but it allowed like to test things very quickly and so that's why I like to say that it was a real life game theory experiment like we we could like test things in finance that would not that would never have been possible before because everything went like so quick and so the market was kind of ecstatic there was a lot of hype and everything so everything went very fast and there was also like this kind of Hope of rebuilding Finance in uh on different um uh like ideas and so all these new models could be like the basis of the

new finance that could be rebuilt so it was all like the good aspects of what happened but in some way there were also some things that happened that were not so great and so there was a lot of speculation that brought us like to kind of where we are right now a clear limitation of defy at the time was that everything was fully Unchained and so the the tokens and the money stayed within the chain which like uh was not a bite pointing itself it's just that it blocked some use case from like happening and uh and I think it's pretty fair to say that also some instances for users were kind of misplaced and everything was the The Vision was

really short-term and so um if you put all this together we kind of have um like a period in time where a lot of innovation happened a lot of things were created it was very promising but in some way it was also pretty unsustainable so um it was like the context in which we started Atlantis and so our goal was to address some of the points the negative points that we saw during that period and like address them to take the fight to the next level so we wanted to address lending and so we went from the current state that the

market that was mainly over a collateral lending with Iva compound Etc and so there was this clear limit that was the collateral and so we wanted to kind of go around it and totally remove it actually so Atlanta started with a like the idea of being a defy protocol like actually Udell being like protocol platform and so that's what we did we focused on like developing this whole smart contract stack that worked in many aspects as any other Define protocol um at the difference that with the difference that there was no cholesterol involved

so obviously this was a great idea but it was like not enough to have like a functional product and we uh very quickly realized that there was some missing pieces that we did not have and that we needed to work on to actually have this Complete product that could unlock the potential for defy to go like over the collateral limit and so that's why we added all these layers of like legal contracts uh compliance anti-money laundering checks Etc and also financial analysis to like build this product and build where we are today and so in that regard I think we can say that we are kind of a hybrid product in

this High because we have like one to identify and the other like in the demonstration finance and so um is where we are today so Define the real world real world assets and stuff it's been an idea for quite some time actually and I think it's a very powerful idea in itself because like you can feel it that when we have money when we have all these like D5 Primitives that's like automate exchanges of value like the ultimate goal should be like to do stuff in the real world and so it was like a clear Evolution for defy but

um it's not so easy to build actually and so that's kind of the reason why I think that only now the projects are starting to be ready to go into production and to be tested at scale and so uh these are kind of our experience in building uh Atlantis so we started off with the building a decentralized application so in a lot of ways very regular decentralized application with like smart contracts uh smart contract stack um like ld5 protocol itself so the we like front and backend Etc but just like a complete T5 product so obviously when you build smart contracts the contracts have to be secure they have to be optimized they

have to be like deploy in the like good way Etc and easily accessible for users the only thing is that when we started there we could say that there was a clear vulnerability in our code because obviously when you don't have any collateral you have to like take care about and about who you authorize to borrow on the platform because in a way if you don't have any collateral what could like prevent the user from just like taking the fence and running away with them so we started off with the smart contracts that had like a clear vulnerability as well like as a very strong governance for the reasons I just described so this first part itself is already not that easy but we had as I said before to

add some other layers um so this this layer started off with like everything that makes a financial product and so that organizes actually loans so we had this legal contract stack that we had to develop to like make sure that the loans actually happened in a good way between all parties but also we had to build these legal contracts keeping in mind that we identify and that means like that regulation is not always ready no so it's not it's not always clear it's an everyday challenge to keep the link in that

in that industry so these two parts so the decision Search application part and the financial product parts were something that when made together would like give us a product that is usable but once again it's not um like enough to have a product that works and that is attractive to people you also have two like build your founded demand to actually like make people use your products and um begin building a Marketplace has its own uh challenges and in our case it was very clear that we had to build like a strong demand in order to have like the productioning

and so for the demand side so actually the uh into the bowels so our goal was to land to real world actors so they should be able to use the the the the crypto in the real world so this company is that we targeted and these borrowers were not necessarily crypto friendly um it's not like I'm not learning anything when I say that the onboarding part in crypto is pretty complicated um just a quick Glimpse on what it takes to onboard a borrower um when you are not crypto friendly you have to create a community signature with it you have to like buy gas give wallets to like all participants make

them sign transactions then you get the crypto you have to off-ramp it and then you have you can actually use it and so it's very challenging for borrowers that's not necessarily crypto friendly to put like in practice all these steps and additionally to that we built during a bear market and crypto not has not always a good reputation so that's also something to take into account and the last part so the offer side for lenders so crypto lenders that are really used to like using defy they don't necessarily work on kyc it's not something that is necessarily done every day and we are really used to like Commissioners permissionless design and

so it's also a challenge to uh like educate our users to like yes this product has like value and um is like Paving the way for new a new kind of applications and so in that sense it's attractive and and yeah so all these parts had to be done together at the same time and so that's why so this is our experience so it's really really related to Atlantis but I bet that it's the same thing for the competition and so that's why just right now with all these being built at the same time we are just really landing on like a market that is ready to actually have applications introduction

um so what's I described in the the last slides is kind of getting away uh from design right um I started by saying that we were building a defy protocol and then I added all these components and that made it like a product that is kind of different from what we are used to uh in permissions Define but I think that real world Defy is still defy actually it's just a different kind of device an evolution that had to adapt to be in between two worlds so real what is I real world assets and defy still has have their Roots within defy and so they use all the techniques all

like the products innovations that like were created into defy but they use it for like the purpose of being used in the real land so real world Defy is really defy but that speaks like several languages and to be adapted to being used in electrician Finance um so in a way real-world design is so it's the way for financial applications that leverage blockchain to interact with traditional finance and still keeping 35 roots and these these two kinds of products so traditionally fine somewhere and real world design they like can coexist I'm not saying that

reordify the the new kind of product that I'm describing is going to take over and replace totally defy I I think that both approaches obviously have the advantages and they will in the future coexist it's just that railroad defy has some constraints that they have to apply to make it choosable but still it's like really important for me to have this base layer of financial products that like will allow us to go quickly and to innovate quickly and to come up with these new products um so yeah these two words are compatible they will like keep coexisting and they both have values and so and so that's why this evolution is more like you're branching out than just like a plane replacement in my opinion

um so from all these points um I think we can like start and uh like explain the first definition of what real worldify is and what it is right now at least um so the first point would obviously be that it leverages blockchain technology and standards um so in our product alone so we use the RC 20s we use erc721 amm's learning protocols Etc yield providers we integrate with everything that is in defy and um so it's going to to be that way so it's obviously the first conditions for this kind of product the second one would be that these products

enforce rights and permissions both on chain and of chain and so that one is very interesting because we kind of have like two phases of the same coin in our product in the sense that the legal contracts they described everything that happens in the protocol they describe how all actors should behave and should interact and then this is so this is a based on which everyone agrees all the like regular entities agree and this is actually translated with smart contracts and so in some way smart contracts actually the execution layer of this legal contracts that organize everything and so we are kind of going full circle there because um it's like literally one of like the

reasons why smart contracts are called that way because they organize Some Like rules and automate automations that kind of represent an agreement between users of the this application the third point would be so being proactive and compliant with regulation um so this point is to be nuanced obviously so regression is uh something that is very important because we have to comply with like the standards of traditional finance and if we want to use the funds in the real world it's just something that we have to do it's just that regulation is taking a long time rigorous Regulators have to

like get up to speed with all the Innovation that's happening and as like builders in that space we have to clearly State our needs and what we what we want for regulation what we need and what we don't need so we need regulation to be safe and secure for all users but we don't want regulation that these two stuff and that would prevent Innovation from happening so that's why like compliance is really important but like it has to be done the right way and I think it's the case right now and the last point would be like real or defy we have to be like as good as a financial product as uh is usually happening in the traditional world and

so obviously that means analyzing deals making sure that traditional like the finances of the the opportunities we list are are good and so all these points in my opinion make for like a real world defy product and at least that's how Wetland this is built um so since the product is that different this kind of product is that different from what happens in uh like traditional design somewhere then it's not the same users that we are targeting and audible it's not the same advantages I would say so since we are between Both Worlds we kind of take some advantages from both worlds

um so what's in it for both worlds borrower so as I say we uh we target real world borrowers and uh real world they by using our product they get a new source of financing and access to global Capital because usually like a company is limited to like being funded like in its own place so because of the unique properties of smart contracts and Define in general the products is a generally cheaper and more performant there are less like delays and everything goes quicker and smoother and that's because like smart contracts are literally made to automate stuff so that's why for lenders they get sustainable sustainable yields

that are also pretty high compared to what done in Define right now the sources are like clear and you know where the funds are used you can actually track the fence and you know that they are being used in the real world and also which is a point that is which is pretty interesting is that the returns are not that Co that much correlated with crypto um so when you have friends in device protocol where you are kind of dependent on the state of the market while if you land the funds to like real world businesses not that much and so the last two points are in the middle so there are advantages for both actors

because of the unique properties of smart contracts and defy both get most responsive more flexibility and also like beta access um the deals that we are listing in Atlantis and overall in real world defy introduction Finance they are not really usually accessible to anyone and so we kind of broke this barrier to entry and so obviously then the regulation and an actual set of rules on which we can reply and you can rely on so that's interesting um yeah so I wanted to talk about the the parallel between fintech and so our kind of defies to the real world defy and just like

to pinpoint how the approach is kind of similar so this table is a kind of an exaggeration let's prove my point so sorry about that um but yeah so traditional Finance obviously they are well funded that does not mean that they do not leverage data or they don't want to be flexible or anything they just mean that these companies usually have been operated for like a long time and they kind of generate some inefficiencies and that fixing them like it's very hard and takes time and so that's why innovation has to come from the outside and it's last in this last few years innovation has come from fintechs and so fintechs are interested to be interesting because they leverage

data to better analyze deals and they like use a lot of data to like have the like the most granularity possible in deals the the point after that does not mean that fintechs do not need to be flexible on the contrary they want to make Finance like more accessible it's just that since they are built on traditional Finance they kind of inherit some of these inefficiencies so that's why and finally defy obviously this is kind of specialized in building the pipelines the pipes in like Financial reflex fluxes and so that's why we decide we

can like build the most flexible and customizable applications possible and so fintech and defy uh really have like the same goal in which they want to open opportunities to the greater number and they want like to make everything more efficient and so that's why building the two together makes a lot of sense because we want to like better Access Capital and like be more flexible and transparent overall so yeah and um so as kind of a conclusion real world Defy is an open engine starting we have just seen this kind of products emerge in the the recent months uh maybe years but that's that's because it takes a lot of

time to build this kind of product because there is so much more to it than smart contracts and usually centralized application um institutions are actually coming this time this one is kind of a chicken and neck problem because um institutions are coming so we are building this kind of products for them and we are building this kind of products for them to better like work on them so they are coming Etc and so this create it creates like a feedback loop um and I think that at some point we are going to arrive to a point where um like the market screen is going to be ready and we'll see like some very sizable deal seven um and then regulation is going the right way and but this is more like an

ongoing point so let's keep building in that and yeah so that's it for me um and so if you have any question let's go ahead thank you [Applause] yeah thanks uh Lucas from hyper Labs uh I'm just curious to know uh how do you handling this uh you know because you you're saying that you have contracts with your uh borrowers and does that mean that the contract the smart

contract and the deal that happens on the blockchain is enforceable in real life and how do you go about the reversibility of of the smart contract and is it like a jurisdiction by jurisdiction meaning oh you do it in France but you can't do it in say Czech Republic and so on um yeah so um so I'm the CTO so I'm not an expert on this subject but from what I understand uh our legal contracts are applicable in the French law right now and so everything complies with the French law and so when you are like actually opening a pool and having like starting a loan uh in attendance that means that you comply with French law yeah that does not mean that in the future we cannot have like another

implementation of those contracts uh legal contracts right but right now that's the way we do it yeah thanks hey I'm Charles from SNB um I'm curious about the lwa asset how do you evaluate the risk that they may have on solvency or just credit risk depending the asset so once again [Music] um and these two but still um so yeah yeah we kind of do it like as traditional Finance does it that means

that we analyze like the financials of the company and and like that's pretty much it so we rely on partners for that um that specialize in analyzing uh like crypto companies and deals but yeah any other question what are the assets is it you know stable coins is it Shiba Inu is it spawns is it commercial paper what are

we actually talk about um right now in Atlantis we our opportunities are in spell coins and we mainly use usdc for now we have also listed the opportunities in the angle Euro in the in the past but obviously because of the nature of what we do because the fans are meant to be upfront like to the real world we have kind of have to go with the stable coins things that can be turned into Fiat but like technically nothing prevents us from doing any other stuff if we if we want to like lend funds to like crypto companies we couldn't really make a pool in Chicago even though we are not really interested in that um just one more question I try to ask

more like a CTO type question then uh so how do you handle like multiple Tenors uh because I I presume that you can borrow at multiple Tenors uh right and also what's your interest rate model uh and how do you calculate that um so the the maturity of the loan is fixed and so our product right now is releving credit line which means that um Bowlers actually take loan they start alone and then after the maturity then it rolls over and you can like as many maturities in theory that that you want so that's one point and our interest model rate model is very interesting uh our G first research Charlotte Charlotte

made the talk yesterday about that and so since everything happens on chain and we want it to be as transparent as possible we implemented a new order book system that is fully Unchained and it's actually a make a rate lenders bid on rate and you have this rate of the book and like the rate is actually made on Chain by the market and so lenders decide the rates they will get and the bowler matches what they want so that's how the rate is uh like made fully engine book what do you mean

fixed maturity as you decide up front or yeah yeah you do yeah or it's like a month two weeks half a year a year what is it the post that we have in here opening they are typically between one month's maturity and six months maturity and since it's revolving that means that at the end of the maturity when the loan is repaid then defense stay there and the boa can take another loan so that's why it's revolving thank you [Music]