Why DeFi Asset Management Is Increasingly Important for DAOs and CeFi Players

Transcript

[Music] thank you [Music] hello everyone and welcome back to the

forest stage here at East Barcelona it's my pleasure to introduce to you Luca messini from both enzyme and avant-garde come on up and give me a hand okay thank you thanks God Mike hi um I was actually listening to the record stock earlier and she was I'm very happy that I can use my uh my hands I don't have to hold a mic well I'm Italian so you know expect a lot of body body language and gesture because we are genetically designed to do that um so I'm Luca from enzyme slash avant-garde being the core developer of the enzyme protocol we're one of the OG protocols in D5 actually defy before

D5 was even a thing and today I'm going to talk about um defy Asset Management which is increasingly important for both for Dao's and I would argue also for for uh C5 um let's let's uh let's unpack those things because there's uh first I would like to talk about dows that was as a few a set of challenges the first one being like I guess an obvious one the lack of a treasury uh diversification which becomes very very obvious to during bear markets um second one is the cumbersome decision making there's lots of people shouting at each other it's very difficult to make decision and it becomes very clear

if you spend enough time on on Dow forums and uh there's little decentralization and accountability uh some Dows uh don't really deserve a d uh not not all of them of course but uh sometimes they're still like very centralized structures uh with very little transparency on what's going on behind the scenes reasons are pretty obvious or pretty clear to me uh there's priority on building products and Building Solutions rather than managing treasury which is more like a financial background background type of thing um Dow governance is very cumbersome and very chaotic at times and also yeah there's also a lack of tooling and

treasury management expertise most of the Dow funders Founders are typically technically minded or from a technical background so there's still not many people from financial backgrounds or treasury management skill sets that can actually do this job uh the effects of this lack of management uh massive drawdowns you see treasuries wallets going down 80 90 95 percent years like during the year so that's uh that's pretty crazy to see uh four sell-offs uh dollars realize that they need some cash Runway so I need to sell tokens so they need to sell Blue Chip like assets like ethereum or Bitcoin at the worst possible time um and in extreme situations we also see

violation of the very ethos of crypto like uh you know like I'll mention any names but like things like taking over like the collateral of like uh users in the protocol so that's uh it's pretty uh it's pretty uh extreme um I like to close this every section with a sort of tweet closing thought and in this case we'll be like it's about time that Dows really start to manage uh their treasury in a more professional way uh let's go to C5 because I would like to include them in the conversation as well here um there's yield generation which is totally opaque uh we've seen that in many different cases uh users don't control their assets so not their keys not their coins uh and management uh we

see that happening all the time management hiding issues over and over like tranquilizing the market say everything is okay until it's very you know it's I don't think it's too late again the reason here are understandable uh most users let's be honest they just want higher apis and so how do you get higher apis using higher leverage and more and more leverage so my competitors using leverage then I have to do the same in order to match that and most of these C5 players I would say they use opacity or they consider opacity as a sort of competitive Advantage so there's really no incentive to to uh to be more transparent but of course when things come crashing down then we have panic because of

course users don't know what's going on so if you don't know if you don't know what's going on as soon as you you know if you smell something then you just run and so there's like sometimes insolvencies are the result of like a self-fulfilling prophecy because everybody starts uh rushing away um and of course you also have these pauses with withdrawal pauses I I think it's funny that they call it like we positive withdrawals like they think they won't resume it at some point uh my father used to say there is nothing more permanent than a temporary solution so yeah this creates like Domino effects as we can see you know bankruptcy is one after the other because they're all sort of connected with each other so I guess the big question is

what can we do to prevent this type of systemic failure systemic failures our CEO Mona Eliza who you probably know she should have been here I couldn't be uh and she actually wrote uh an article about this a couple of weeks ago and she actually goes into much uh details about like what the solution could be and her point or main point is that the answer is mortify some say like is the fight dead or like maybe we should like do less defy I think we are like very much against this uh this uh trending idea uh we're actually way more into the idea of like we need more and more and more D5

and the reason is like simple reasons actually first of all like you have with D5 you have 100 transparency and real-time reporting on all on all the on-chain activities user finally in control of their assets which is the probably the most important thing and last but not least uh you have higher accountability and certainly like a lot more Market scrutiny like so bad apples can be pointed out much quicker right um I gotta say that it's not just about C5 players taking responsibility and trying to be more transparent it's also us as users or as let's say Educators in the space to actually to become more

demanding towards these type of players because we need to ask this type of question how much Leverage are you using to boost your apis or how are you giving out loans without asking for collateral to your counterparties and is there any mismatch between your short-term liabilities and uh and you're like uh long-term capital commitments this is the case you know some cases for example in Celsius so modify means these three things users are way more informed they know what's going on they see the the city accounts on chain and therefore they're much less likely to panic because they see a

reality what what the reality is and there's no more Shenanigans no more shady deals no more like you know things be behind closed doors so there's much less likelihood of systemic risks and of course the market becomes much smarter so you have a sort of self-recular Regulation we could actually argue that like the uh the transparency that D5 can bring is much better than any type of Regulation so that's uh one of the the points that I want to bring home and it's actually also about time that C5 considers on-chain transparency as the ultimate marketing tool I think transparency will become much more important

and uh uh many many more players will use transparency as a way to say hey we're here we're here for the long term we're sustainable and our business models on chain is here to prove it so uh very very excited to see what can happen without chain defy Asset Management um a few best practices for dials and C5 from our own experience first like I said I'm gonna you know really like push on this point a lot be more transparent so like control the asset uh uh with multi-signature wallets uh or non-costalia contract communicate your processes very clearly so that you know portfolio management how you allocate how you you know like

what kind of strategy you're employing are very clear and document the key decision making like governance like what's how how you're going to react in terms in in times of Crisis try to anticipate like what possible you know like what the possible worst and worst case scenario could be and how you would react in that case and make it very clear for your stakeholders and second tip is go on chain you know keep funds Unchained and use Smart contract to enforce rules and to prohibit any type of deviation from those rules and provide stakeholders with real-time and historical tracking which is very much possible with D5

some of the things we are actually most excited about and this is probably mostly for Dao's but I would I would argue also for like some some more centralized players a typical setup in a Dao would be having funds in a multi-signature wallet like noses now one of the issues that using that tool is not very practical for treasury management because you have a lot of signatures and for everything for every decision you have to sign seven or 14 you know something like that so what what you can do with enzyme is actually to create a vault which is stolen on custodial which is owned created and owned by diagnosis safe and uh you can actually then delegate to one single wallet or like n wallets that have the

same permissions and you define those permissions which can be like which asset can they invest in which protocols integration they can use and even like how much sleep it's tolerance they can they can take and so they can Implement a D5 strategy which is very restricted which is very controlled and they can then use all like the you know like the like the basic value proposition of enzyme which is the integration you know with 20 more 20 protocols on ethereum four or five on polygon and they can really do like a lot of things in there under the same hood and to as a feedback loop then they can report back to the dial or to all the Dow members with the unautomated

real-time uh track record that is uh so you have a bit of like in a nutshell you have decentralized control you have risk management in place uh you have speed and efficiency of implementation in and out and you also have the full transparency of having the reporting in place so I think that's that's a very neat setup for for a dow that wants to delegate Treasury and it's not actually necessary to delegate it because like uh the uh this this one person that I actually operates the Vault could actually well be a member of the same treasury Committee of the Dao so it doesn't have to be somebody outside the organization it can be perfectly

somebody inside but with the ability to act more independently it could also be a contract so that delegation could also go to a contract or to a bot so that can be developed to run a certain strategy going from for example a snapshot decision that goes into like a safe snap I think and then go into goes to go through steps of automation that can implements those those things on on chain on an enzyme Bolt and of course option option three will be uh delegate the asset management to avant-garde Finance which is a company that I belong to and that provides services on top of the enzyme protocol so actually just to make it very clear

so like you know I want to clarify the distinction between the two so you can actually do uh do it yourself right out right out of the box so use enzyme totally in a way you know like totally permissionless everybody can uh can can use it create vaults and run strategies you can use it yourself but with premium services like for example creating like a contract that runs a strategy for a certain type of user or like all the way to the other end of the Spectrum which is like handling like the management through Avant and also one of the things that one of the other cool things that you can do now and like we're actually about to launch this we're in beta testing for this thing you can actually put your own

UI on top of enzyme that means that you can do stuff like this so this is under on the left is uh our interface and on the right you have your logo your colors your user experience so basically you can use enzyme as just a just a technology provider and your user doesn't don't even need to know that there's actually an enzyme wall running in the background you just use the basic uh layer of technology which is very secure as being battle tested for the last five years all right uh a few other things we're going to be in Paris uh on the on the on the 20th we're gonna run a side event uh with cryptio and grenoji safe about

on-chain infrastructure for custody asset management and Reporting so if you guys are first if anybody is in Paris and is interested in uh taking part of this it's an invite-only event so uh you know feel free to talk to me and I'll get you hooked up for for the event I'm happy to see you there actually yeah I'm uh excited to take some of the people here from Barcelona and bring them to Paris as well all right uh last tweet is Dao's C5 and refi which actually I learned yesterday what it was and I am very happy to have learned it because I think it's a very cool idea uh so refi as well I think uh there's there's gonna be more and more discussion around this topic and definitely we want to be part of it uh

because it's uh probably like one of the next waves of the option for for like Define and make it more useful and more are socially impactful so it's about time to be to build something together so feel free and come to come to talk to me I'm uh Luca I'm Italian and I hablo espanol and yeah this is my presentation so yeah we have five minutes left so I was actually very quick so if you have any questions I'm happy to take them [Applause] yeah

yeah I guess we need a mic um so first of all can you make the presentation available for yeah okay great so my question is although I and I imagine most people here agreed that the solution is more defined not less D5 do you think that organizations are scared that the fact that all of the information is on chain might constitute an attack Vector that they might want to defend themselves in regards to yeah I think it's a good point and I think one of the yeah it's one of the main concerns for for like centralized entities and I think there might be ways

like uh to of course like if you go on chain then like things are like on etherscan will be uh you know like that that'll be ways to identify your activity um so like very very uh um elaborated uh or sophisticated attackers might actually take advantage of this of this um um they will have to be very sophisticated for for us for example with the wide label solution uh we can uh first of all we can make uh the vaults not visible for the rest of the community we can also hide the the whole activity uh log so that can be like completely only for the stakeholders that you want to show them I imagine

that is in regards to the interface not obviously to the chain activity itself right yeah okay yeah hi Luca hi um how does this work the curation of the D5 protocols that are available uh on end time is this permissionless or do you uh gate what kind of Protocols are available yeah uh well we have a we have a very highly skilled uh protocol uh development team and we have a roadmap of uh now we have around 20 protocols in

integrating on ethereum and we have a roadmap where we integrate like three or four like two or three protocols per quarter um and so like typically we would do research uh so you can consider enzyme also as a pre-selection of the best of D5 because we don't integrate just any protocol we really do our research we speak to the protocol team of the other of the other protocols and we do we actually do do develop uh um adapters for every single integration uh so it's a smart contract level that they are integrated and that goes then to an audit typically audits are like one of the most important bottlenecks because then uh because everything has

to be audited very thoroughly before it can be deployed to our users we are super concerned about security that's probably probably the first and foremost concern because like especially for an asset management protocol like that's that's you know all you got I mean that's the most important thing uh can you see it uh can tell see sorry here um seat individual spending limits for or investment limits so could you say uh the fund manager is entitled to invest into element but only up to 15 of the total portfolio sorry I'm not sure I understand the question you could authorize a Dao to say invest in element Finance could you specify

that the fund manager can only buy up to 15 of the total portfolio in One Fund or in a particular fund um well you can now at the moment you can Define like what assets uh the the asset manager can go into and what protocols they can use in terms like you act on and off this like this the integration or or that one so at the moment you cannot like specify this um uh like maximum percentage allocated here or there but it's a good feedback so I'll take that out 48 seconds [Music] all right

good thank you very much guys [Applause] I'm great