DeFi (Finanzas Descentralizadas) - Romina Sejas

[Music] Okay, my talk is about Defy, and I included all this brainstorming or word cloud because, honestly, it's quite difficult, and on top of that, we're here in person, and also the people watching via streaming—we send them our greetings. It's quite challenging for our understanding to process all these concepts. We had a talk about Ethereum, we looked at cryptography, 256, and all of this for just one day. It's quite difficult to digest, and now we're coming back with more concepts. So I think that beyond these isolated concepts, we also have the challenge of understanding the why and the wherefore.

What is the paradigm behind all of this? We'll be discovering this throughout the presentation. [Music] Okay, in what aspects can we observe centralization? Because to understand what decentralized finance or open finance is, we have to understand where we come from, and I'm not going to give a full account of the history of finance or even the history of money. I'll leave that as homework or for another post, but we do have to Understanding that from the moment the first bill of exchange was issued, from the moment everything related to loans, interest, and all aspects of modern finance began to take shape, all of this evolved, just as it evolved after the internet, with banking utilizing computers.

And today, we see not only traditional banking but also fintex; we see much more sophisticated products for the user that allow us to pay instantly. But all of this, this history that unfolded over centuries, developed in a way that concentrated and centralized decision-making. We can see this not only in traditional banking, but also in capital markets and how they communicate and establish logic with governments. And the truth is, if we think about it, where is our leisure time? Where is our education?

Where are our work platforms? Where do we get around in terms of transportation? Everything is centralized, which has a reason for being, because otherwise it would be chaotic. But in certain aspects, Defy proposes an alternative, in the case of social networks, as I mentioned earlier. Pablo Sabatela, in the case of, I don't know, even the football tournaments that are organized, everything responds to structures where there is a core group that makes decisions and then cascades them down to everyone else, all the subordinates.

So where do we see this centralization? Well, in the way capital moves, in the decision-making about that capital, where the bank or financial institution we are using moves our money to then give us a return. What happens to the clients and stakeholders? Where is our data? Who is the person or institution that stores this data associated with the balance sheets we have?

And a point that for me is a very important point regarding concentration and centralization in traditional banking is the issue of the custody of our data, compliance. Yes, and even look up Ronald Paul on Twitter because this became very prominent after September 2001 when the attack on the Twin Towers occurred. Compliance requirements at the national level were tightened. And so now they probably have to do a Keeway, yes, to use any bank or any exchange. And this is different in Defy; it brings other challenges, other complexities, but currently, it does exist.

This is centralized. And at least I don't know how it is here, but in Argentina we've suffered hacks, even of the RENAPER, which is the National Registry of Persons, or of bank databases. So where does our data, all our information, reside, and who is responsible for its custody? It's a matter of trust. Just as Bitcoin and Ethereum revolutionized everything, bringing all these features, LED Permissions Defy also inherits these features and proposes an alternative.

What are the current problems? Briefly, they didn't ask me that, so I don't know how many. What are the current problems? Well, a high percentage of people don't have access to financial services. I did n't want to give a figure because it's very different depending on whether we're talking about Latin America, Europe, Argentina, or Peru, but there is a high rate of unbanked people.

When the pandemic and lockdown happened in Argentina, an emergency family income was introduced to help people who couldn't go out to work, to support the family economy, and so they could, I don't know, buy food or basic necessities. The idea was to prevent hoarding and shortages. Huge lines were forming because so many people didn't even have a bank account. This exposed an infrastructure problem in education, and a lot of people ended up being left out in the cold. Some people couldn't even get paid; they had to go to a payment center to collect their money.

Especially when you consider all the generational, cultural, and social gaps, access to financial services is quite complex. Well, the lack of access to financial services can affect people's employability or competitiveness. I'm not trying to be self-referential, but it's the reality we have to live with. In the case of freelancers, it's quite difficult in Argentina to get paid for work without losing a significant portion of your income, which is almost confiscatory due to the official exchange rate and the blue or alternative exchange rate, the black market dollar. So that's also a challenge, and financial services can prevent you from getting paid.

In what sense? Well, in situations like the one Pablo mentioned with the SWIFT transfers or the war with Ukraine, which seem like distant scenarios but are here in 2022. All that takeover and seizure of power. Decision-making remains in a centralized body, and what I was just saying is about how the data is handled and how it ends up being used against us. Another problem is that governments and centralized institutions can close markets at will.

We have to adjust to business hours, not suddenly. If it's a long weekend or holiday, or if I need to move my money or make an urgent transfer, I'll have to be patient and accept that the bank might not be able to process it, or even that something might go wrong. It happened to me personally. I had to do an event for a company that's a Peter platform, and I did n't want to receive Bitcoin because I wanted to make it as transparent as possible. So I told them to send me a transfer in dollars.

It took 40 days to get it unlocked. It was a really bad decision, and it was a taste of my own medicine. It would have been easier to receive BTC directly in my wallet. That's the point of point 6: money transfers can take days due to internal human processes and the exchange rate fluctuations and financial service fees. This is much more common in Argentina or in countries that have...

High levels of difference with the spread, meaning that in addition to the commission charged by the rival financial intermediary, you have to add the exchange rate and you have to accept it. So, while there are many alternatives or different options we can choose from, they tend to balance out and have a good price. Therefore, the bank is the safest place to leave my money. There's a generation before us that grew up with this savings account, leaving money in the bank. My mother, in the 80s, was caught up in the hyperinflation and lost several of those dollars in financial institutions all over the world.

We have a lot of examples of banks that went bankrupt. If we start counting from 1933 onwards, there are hundreds, more than 500 documented bank failures, not to mention all the somewhat opaque dealings of those who make decisions within these institutions. And I'm not saying they're the devil, but it does involve quite a big challenge to manage third-party funds. This, I think, is what traumatized us the most—and I'm going to use that word—as Argentine society. Not suddenly having dollars, trusting the bank, and then from one day to The other one, or in a series of days, I can no longer access it.

How is it that I can't access what is mine? How is it that I can't withdraw my funds, my savings, what I worked for my whole life? So, before going into what Tify is, I'm going to make a series of preliminary observations. There are only two, but they seem fundamental as a guideline to understand what Tify is and to put it in its proper place and not think that it's something that's going to solve all our problems. The first thing we have to understand is that decentralization is a spectrum.

No, no, I didn't find an image of the spectrum, but I think we have to understand that it's something that, depending on which protocol we look at, depending on which blockchain we look at, depending on which paradigm we look at, and from which perspective we stand, we're going to have issues built from the most centralized to the most open. Decentralization, for me, is a utopia that we are walking towards, but there's nothing that I would dare say is totally decentralized, not even Bitcoin, which is the most consolidated, oldest, most resilient, and most difficult and expensive network to attack. If tomorrow, suddenly, they became big If both state-owned and corporate players were to buy mining machines or, like MicroStrategy, millions of bitcoins, we would begin to have a dispute regarding how centralized the network is. Another preliminary observation is that Five's protocols are an experimental construct going through its first years of production and testing. Defy is very young.

So we need to start demystifying that it's the Fiat Killer or that it's the future. In fact, regarding the regulations that are coming, I would be much more pessimistic or more realistic depending on each person's perspective, because it's all really quite experimental and quite garage-based. Defy started to emerge in 2018 with groups of friends or groups of programmers who started coding, trying to figure out how they could generate and bring all these traditional financial services on-chain. But to this day, there are a lot of errors in the code, human errors that can create losses of millions. So we have to take it easy.

Well, finally, what are decentralized finance? Well, speaking very terminologically, Defy is an acronym for the English expression " decentralised life finance." In Spanish, it translates to decentralized finance, that 's basic, but in case someone is hearing it for the first time, that's why it comes from Tify. Now, here's the exam question: if I had to give a definition of Tify, I would say it's an ecosystem of financial applications and services without intermediaries, built on blockchain. And this is a fairly concise definition because some people add more details; it's not a longer definition.

If you go to the Hiring Foundation website and sirium.org, you'll see a two-paragraph definition, but for a first approach, this definition is very good. I've tried to summarize it as best I could. Where does this term come from? It comes from a group of developers who, in 2018—well, they were already working on it before, no—but starting in 2018, they began to see and identify a series of different protocols.

You have to remember that Bitcoin is a first-generation blockchain. Then sirium appeared with this general-purpose application, and then these "the Apps" or "central applications" started to be built, but it was still very embryonic in the early years. Let's not pretend that Sirius was born in Magnet. I mean, we have Habitat Buttering in 2013 presenting this Phillium white paper. Then in 2014, we have this Prisa, not this public sale, where you could buy ether.

It was an ISO, you could buy it with Bitcoin. And then we have the Amainer launch. That is, the blockchain as we know it today, Leyer One, running in 2015, and all those years 2016, 2017, and 2018. It was an ecosystem that, if we had held this meeting in those years, perhaps would have attracted far fewer people, and there were fewer developers, less Turing. I mean, now suddenly developers have a Turing battery to code with, but at that time it wasn't so much like that.

And here I put this chat screenshot because Defy has that problem, it's not a problem that comes with the territory of decentralized finance. It might have been more appropriate to think of names like Open Finance Protocols or Open Finance. But well, it ended up winning, and this guy from Token Sets Intercheo, who they were already seeing, explains it here. I wasn't saying this back in August 2018, before Defy was born. Blade Henderson from Ciro Webs, Brendan Foster from Darthma, and I had the feeling that there was a wave of financial products emerging on Web 3, creating the infrastructure for a globally accessible financial system outside the domain of the traditional banking world.

And here we see the imprint of someone just starting out, saying, "This is going to change the world." But little by little, it took the form we see today, and the way we see Defy today won't be the same as it was six years ago. This is a talk I give every now and then about Defy, and it's never the same. I always have to make a new slide; I can't even salvage some things. It always changes, a lot.

[Music] They're proposing decentralized finance. Well, let's think about a bank, or a money transfer company, or a lending company—I don't know what they call them here, they're called financial institutions— and we have a person who, if they want to make a payment or send money, has to send their money first; it has to go through a Keeway. Yes, no, or I don't know. In the case of some institutions, they have to check your bank credit score. You go to your bank, then it can happen.

I put PayPal because we don't use PayPal in Argentina due to all the limitations, but it goes through some kind of end. I have some payment gateway, from there it goes to the other person's bank, who only then receives it. In the case of Defy, and here I also tried to simplify it as much as possible, these intermediaries don't exist. So one of the main things that Defy comes to break or change is the elimination of the intermediary. Suddenly, between those two people, the only thing that exists is a Smart Contract.

It's the user in front of the computer with a goal plus a wallet of their choice, sending money to the other person. This is in the case of a money transfer. The other counterparty may not be there; it can simply be him with the Smart Contract or her with the Smart Contract, and be on a lending platform and not have a human counterpart. In that case, it would be the Human versus the Smart Contract versus Web 3. Another thing that Defy comes to propose is the issue of interoperability and composability.

I'm not really sure what the correct word is because it's an Anglicism. But anyway, it's about compostability, not traditional finance. We have to think that if we wanted to use the benefits or interest offered by bank A, we wouldn't be able to use them from bank B. Or maybe we could, but we wouldn't be able to accumulate them like when discounts accumulate and they tell you, "This discount is not cumulative." So we have to think of these institutions as parallel highways.

That is, they don't intersect unless they have a partnership, unless they've just launched something that, I don't know, just brings two together. But, as Pablo mentioned, they don't use event. If they wanted to do an integration, if they suddenly wanted to merge these two financial institutions, it would take months, it would take a very long time because of this decentralized decision-making. It's not about who manages the database, who has access to what part of the code, and of course, each institution protects and covers itself. In the case of decentralized finance, the paradigm from which it's built is interoperability and composability, and here I put these Legos because in Defy they're known as Manilegos.

Or these " money Legos" are how we can stack bits of code to create new products, improve them, or simplify them. We'll see examples of this right away. What kind of protocols can we find in Defy? Well, here I've listed some. Some people lump DAOs or TEXTIs together in Defy, which I think is a bit incorrect at this stage of the ecosystem because DAOs are transversal to several protocols.

And in the case of TEXTIs, which I included with a lot of doubt, they are standards, they are tools, but they are not a type of protocol, a vertical. In the case of TEXTIs, they are these decentralized exchanges. Perhaps Buen Bit, as a sponsor, isn't a centralized exchange. To operate on that platform, I have to go through a Keeway process. Yes, I have to send my money from a fiat gateway, not from a bank.

Or perhaps, if there's an option, I could make a deposit at, I don't know, an ATM. And from there, buy cryptocurrencies. The same applies in the reverse process: if I wanted to sell crypto assets, I would have to withdraw my profit through a bank. Well, I don't know if it's different in the case of Texis; we have to think about it differently because what these decentralized exchanges do is maintain liquidity based on the liquidity contributed by users. In an exchange or broker, you have to be subject to the bid and ask prices, and the spread is the exchange's profit.

In this case, let's suppose we all contribute; we are the liquidity providers of that decentralized exchange. Each one puts in a little, and those who use that pool to trade have to pay a fee, and that will be our profit. The providers get the proceeds from those operations. I put the Uniswap logo because it's perhaps the quintessential decentralized exchange. Some might disagree with me, but it was one of the first to launch its version 1 in 2019, then it launched E2, and currently it 's already on version 3.

It's becoming more and more complex. In its first version, we could only trade against Ethereum. If I wanted to... Buying DAI meant paying with Ethereum on a B2. We could already exchange different RC-20s, it's not the same, and in its v3 it's working on the concept of concentrated liquidity, which is very exciting but very complex.

In the case of loans, well, the trending protocols... How can we take out a loan or lend money? And how does it work in this case with loans, and if we don't go to a financial institution, we probably have to present our documentation, sign, and besides that, demonstrate... Who we are, they give us a loan, but here in this case, in the lending protocols, we have to leave collateral. Only now is work being done, very tentatively, very green, as I say, very initial.

In those protocols that could lend five against collateral, but here we encounter one of the limitations of blockchain, that is, doing that kind of thing, a change has to be well thought out to avoid an attack. In the case of payments, well, I put the Superfluid logo, which is a platform that allows you to stream payments. That is, if I work for Toño and he pays me a thousand dollars a month, he will probably pay me on the day of the month, or depending on the agreement we two make. But in the case of Superfluid, you can pay a Chain and you can drop payments, you can leave payments and you can withdraw that liquidity whenever you want. In the case of derivatives, we have Synthetics, which is one of the oldest and most consolidated, and I don't know if anyone here has traded with stocks or has traded with synthetics as well.

These on-chain platforms have also been set up in a decentralized way. We also have prediction markets. We have aggregators here, which at one time had a great The boom is because what we do when we join an aggregator is take full advantage of these Defy strategies and deposit our liquidity, which is why they offer an interest rate. I included marketplaces because it seemed difficult to ignore them, even though for me they aren't a financial service, but they do give us exposure to what I was just saying, in different services. And well, the issue of Estevelcoins, for me, isn't a type of protocol, but they are fundamental when operating in all these lending protocols.

In fact, I think it's the cornerstone of what Maker was, given that it was the first major protocol that started taking its first steps in 2016 and that today is one of the protocols with the highest volume in Defy, where we can see these protocols running. Well, when Defy was born, it was born on the Phillium blockchain. In fact, I showed you the emergence of the name in 2018. In 2019, work continued, and in 2020, they had a deficit. These protocols started As they launched, a lot of these Defy protocols started to be built, and there was a pretty bullish market.

Many protocols launched their governance tokens, many increased in value significantly, and then there was a pretty big correction. In that bullish stage, Defy grew a lot and made the Pyrium network more expensive. Why? Because everyone wanted to transact, everyone wanted to have the benefits of yield farming or gel farming, and that saturated the network a bit—not saturated it, but overloaded it—and raised the price of gas. That's where we started moving towards a multichain ecosystem.

Ethereum was doing quite well in that sense; everything worked, everything was set up there. But as it started to get so expensive, smartchain and a bunch of other GBM-compatible things suddenly appeared. What started to happen is that deep files were being ported— that is, copied code from a protocol that was on Pyrium—and brought to a cheaper chain, which brought several challenges. Because if there's an error in the original, the copy will also have it. It's going to drag things along, and that's where a whole multi-chain ecosystem started to develop.

DeFi no longer lived alone in Ejido; it lived across all these blockchains that ended up building these financial protocols. Currently, I've always said there are more than 120—I wanted to use a round number. But there are more than 120 public blockchains. Anyone here can go to defi.llama.

com, which is a free analytics platform that I love, and see the number of blockchains and the number of protocols built on them. In the case of Phillium, it continues to release new content; it's still the network, and that's why we're doing Etéreo in Lima. It continues to be the space with the most innovation, and as you saw in Sabatela's slide, it's where the highest concentration of developers is. Here I've included a very simple graph of the number of protocols on these blockchains. And when I say protocols, they can also be forces, so take it with a grain of salt.

It's just a criterion to help us visually see where we are. But think of this application as a fintech; we might have lending protocols, protocols of... These exchanges, these derivatives, in the case of Ethereum, we have more than 500. I'm referring to those built on that network that operate on that network. Benedetchain follows with more than 400.

Polygon also had a fairly large increase because it was a Saichain. Deterium had quite a bit of traction. Phantom is fourth in terms of all the protocols that exist, and well, Avalanche a little less. All these networks, unlike Ethereum, are all M&M compatible; they all have an architecture similar to what Ethereum will be, and so on. There are a lot, really.

I think the strength lies in everything they are going to propose later. All these are Layer One layers, they are first-layer layers, and Ethereum, being more mature with this system, is moving towards everything related to scalability. And why do I mention this? Because while in 2019, 2020, and 2020 we saw a big boom in all these protocols, today we are seeing the rise of Defy in the laws or these scalability solutions. These rolls, and we can see that...

It's not just Defy; there are several protocols. In fact, this image is from a year ago. They couldn't find the most up-to-date one, and it was very difficult to be certain due to the time constraints. But there you can see that there are Lenden and borrowing protocols. We have these Dexis or swaps, we have derivatives and synthetics, and this continues to grow day by day.

With so many networks and so many scalability solutions, we have to think about what Defy also needs to have. That is, it depends on having a series of oracles and also a series of bridges. How do I move between these different networks? If I suddenly want to move my liquidity from Polion or Benevet China Phantom, I have to do it through bridges, and this exposes me to another type of tool that we have to consider if we want to transact on Defy. Well, earlier I showed you that there are more than 100 public blocks and I showed you the number of protocols that are deployed, that is, that are working externally.

But that's one criterion, that's one metric. We can also look at metrics like TVL or the amount of money currently deposited. Each of those chains—you can look at this later, either at your leisure or on that page I mentioned. I chose Coin98 because it has good charts, but try sitting at home and going to desfijama.com and look at the amount of money and the charts to better understand everything I 'm saying.

I've included a slide near the bridges that connect all this liquidity in this ecosystem. Define multichain, and to finish, what kind of risks do these protocols bring? Well, rockpolls, what's this? Suddenly, Toño and I organize a protocol, launch it on unchain, you put in money, and we withdraw all the liquidity, go to the Bahamas, and everyone's left high and dry. Like today, what happened to the money?

Well, that's a Red Bull, to put it bluntly. Hello, a rug pulled out from under the rug. And this happens very often in Define, more than I'm a little embarrassed to admit. It happens almost weekly: exploits, economic attacks, code errors—all of this needs to be corrected, it needs to be tested. That's why I say that Define is kind of in a...

We have to treat early blockchains as an experiment, not as something already well-formed and firm, like Terra. It's the case we always use as an example, but suddenly it was a blockchain with a large community, a good volume, and a lot of protocols built on that network, and it ended up going to hell for several reasons, but mainly because of how the incentive system was designed. You can visit Red News, a platform that reports on all the deep web applications present here. Take advantage of this platform because it breaks down all the attacks, exploits, and Red Bulls, especially in an ecosystem so flooded with forks—it has 306 forks of code, with more than 60 PANs. So we have to be careful not to carry over these mistakes, and here's a practical example: I think it's reached the point where I want to use something, meaning it's not useful for something.

I gave the example of a friend, Diego, from Argentina, who is the creator of Defy for beginners. His phone broke, and he wanted to buy a new one, but he didn't want to spend money. To borrow fiat currency, what he did was use Defy, deposit his token into a lending protocol as collateral, issue DAI (a stevicoin), exchange it for USD because the buyer accepted that currency, and buy a new phone. Very simply. Here's an explanation of how this compostability works, this compostability of strategies, and everything we can achieve without having to sell our asset.

We can make a collateralized loan. Thank you very much. [ Applause] [Music]