Wen RWA tokens? - Robby Greenfield

foreign [Music] thank you [Music] [Music] well everyone appreciate y'all coming out my name is Robbie Greenfield um a little bit of background on myself before we get into it because I uh I tend to have very uh polarizing views on things I'm interested to see what you all's thoughts are in terms of what we're going to talk about um so I'm the co-founder of a protocol named emoja Labs so it does FX perpetuals and fully secured loans to finance Emerging Market institutions mainly across East Africa so Goldfinch with collateral and multi-currency support in short um in terms of you know my experience and when I got into the space so previous to this I was the head of social impact at consensus and effectively we deployed dapps with U.N agencies World Bank U.S state Department major ngos all around the world to understand how the technology can like actually be used with real people and one of those kind of use cases was deploying the World's Fair crypto based humanitarian arid program otherwise Zacks a lot we want to talk about is Dallas okay so I don't know if you all know this um but right now approximately 12.3 billion dollars is um within the treasuries across most of the dials that exist today and the huge issue is and what we'll talk a lot about is that about each Dow and I'm talking about the major ones about 85 percent of that 12 billion dollars are in treasuries that custody 75 or more of their own governance tokens meaning that if I'm you know dial a 75 of my 100 million dollars is in Dow a tokens and we're going to talk about with oncoming regulation how that is a major issue and likely will not be sustainable so unfortunately it's only 12 billion last week it was 13 billion which kind of gets to the point that we're talking about if you have 75 reserves in your own governance token you are effectively at the whim of you know crypto Winters and we know that this most recent crypto winter has been the longest and likely uh the most bearish and unfortunately it looks like that's going to continue for the foreseeable future and I mean you already know this but we can even just talk to what's happened recently I think this has all happened within like a five month four month uh time frame so obviously paxil's burning 700 million uh dollars worth of uh USD right because the SEC sees busd as a potential security because there is exchange benefits in using it right o-fac compliance uh across ethereum more generally right after uh tornado cash uh was effectively put on a sanctions list it set a new president for a certain level of censorship and this is the antithesis of what you know the blockchain ecosystem is about so it's a huge issue um thankfully there's been some combating and that's dropped from about 80 percent in Q4 to like 40 uh now and then obviously the sanction of uh tornado cash itself and the collapses of Terra FTX and I put a half line through silvergate uh because it looks like it's it's not looking good and and for those who don't know what's happening with this half line business at the bottom here um silver date uh They delayed to submit their 10K report um and their stock is uh gone down about 97 percent uh since uh early last year um and likely that's due to FTX exposure um and so all these things aren't good all these things do have a huge bearing on the treasury of Dallas because they are going to have to you know strategize and survive what's going to happen after all of this um and I just want to make it very clear that uh regulatory overreaction to centralized exchanges and private Equity [ __ ] it up that's that's what we're experiencing the reason why I put private equity in here is because Sexes have rounds just like anyone else and if you don't do proper due diligence on the token economics of centralized exchanges particularly introducing governance tokens or stable coins into the ecosystem uh you're you're doing the whole ecosystem of disservice right because likely that's going to end in fraud it's ended in fraud nearly every time right Mount gox you know there's been issues with Kraken there's been issues with FTX it's it's a long-standing thing um and so PCS I'm going to lean into you a little bit because you do play a role in this otherwise we have transactional freedom and it's all damn Securities uh so transactional freedom one thing I don't think people realize is is that right now when it comes to transactional offic compliance we are having a battle of how free our transaction should be right so the outcome of regulatory you know changes in terms of how it Embraces or pushes away Defy is very much going to set a precedent for how freely we can we can transact right whether we should even be able to have private transactions at all and that matters a lot right because these are freedoms that we didn't really consider or nor had to consider um up until about maybe 10 years ago um and so that's going to be really really important and then it's all damn Securities if you're not already aware the SEC has uh is actually speed is tripping like for real um and the reason I say this is because there are traditional assets that exist that are not securities for and which for some reason there's tokenized equivalent is now in security right um and I actually think that the busd example is a is a really good example right there are advantages to using USD Fiat right in terms of cost exposure FX exchange cost is a perfect example right just because you get a discount at trading USD doesn't mean that USD is a security the same way that busd had you know exchange rate discounts on finance it's very very similar so oh appreciate it there you go it's back Maybe I think it takes a while there we go um and so that's the issue as well um and so really there's only going to be you know three things that happen here right um either governance tokens or securitized um this this would be bad right if the SEC gets to determine that effectively all tokens you know less Bitcoin are securities you are going to see a mass Exodus and defunct of a lot of governance tokens mind you a lot of governance tokens which again are being used as Assets in a lot of Dow treasuries meaning that uh you know certain assets are just going to not be valuable anymore that a lot of these dials have the second thing and the thing that I wish to happen is that governance tokens become a new asset type right this is where the SEC cftc web3 Community create new asset cat you know categories that governance tokens can fit in so that they're not all necessarily Securities right some still probably will be affected right um but it's not nearly as bad as I think the top scenario and of course the third is awkward regulatory Purgatory which is where we are now which is basically you know you're trying to do something good you think it's legal it may not be legal and you kind of want to push forward because it's your project um and that's not a healthy space to to say anyway or stay either so again 75 I I want to keep coming to this like I really like you see this graveyard behind the 75 this is a bad thing it should not be this way again 75 really bad should not have 75 exposure to your own governance token as a doubt um although you want to maintain governance and Equity the economic uh uh implications of doing this do put your protocol at systemic risk um and so you know I I don't tend to be too dramatic uh but you know Dallas must diversify the treasuries to sustain their economic existence because more and more as the assets that they hold are put under regulatory scrutiny they're going to find have to find more traditional Finance ways to diversify their treasuries so that they can not only outlive crypto Winters they can continue to build um You Know Rich protocol ecosystems like much like we're seeing what Ave is doing with lens protocol um and so again oncoming regulation treasury is a great risk and of course most on-chain native assets at risk and so those are the governance tokens so enter real world Assets Now I'm not going to sell you that this is like the Silver Bullet this is going to save D5 uh I I think that there are many the the best scandals are to come uh unfortunately and there's a few reasons why real world assets fits within that category as well as we'll discuss but first for those who are not familiar what even real world assets are right um it's effectively any you know physical thing that has value within the traditional Market this can be a mortgage this can be a contract it can be a loan uh normal loan and it also can be things like art uh as well so things that can be used as liquid collateral and so the total Global real world asset value is about 256 trillion dollars and real D5 so like real D5 protocols Goldfinch Maple Finance trufi right those that are providing D5 features for real world use cases um that TBL is about 200 million and this was a very hard number to get against um but let's just say at a maximum it's 200 million right now um that means there's about a 1 million x growth potential here right um and that's super super exciting but there are a lot of things that we need to do to get there right the first two is due diligent tokenization and backwards compatibility and you see this a lot with the lending protocols right now and I'll talk to what each of these is so due to those in tokenization just because there's a massive existing rwa Market does not mean that let's go we're just going to tokenize everything and everything's going to be great and we're going to have new forms of yield and everything solved that's not the case here's an example if you are tokenizing an off-chain physical asset like gold you need to have due diligent tokenization in terms of proving that that gold is custody somewhere in real life so that the protocol isn't um you know uh you know taken for granted or speculated to be cheating you know or using some fractional Reserve System right that's super important unfortunately we have seen this with tether right a few years ago I forget how many they were seen to be 75 percent cloud realize when they had been literally advertising full collateralization that is an issue that will continue to be an issue for all systems that have an off-chain part and an on-chain part backwards compatibility is the legal Frameworks in which your protocol can you know compliantly to it the extent that it can produce real world assets right so a perfect example of this is that when you look at Goldfinch loans or Maple Finance Loans there's a lot of debenture agreements outside of that so loan agreements outside of that that are signed in parallel to what's happening on chain right they're not just putting out those loans down chain and just assuming you know we don't need to do any legal work so those two things must exist for protocols not to get in trouble but again I think backwards compatibility has an upper limit and the upper limit is all of the you know uh loopholes that exist when it comes to an organization facilitating any Financial Service a perfect example you need a depository institution license in order to land in the United States but if you have a lending protocol and let's say it's truly decentralized right governance liquidity very much decentralized the depository institution is the protocol itself right and so that poses a question okay is the core development team of that protocol are they on the hook to get that license or does there need to be a new category of um compliance developed um and so the the best tokenized rwas are going to be ones that have transparent fungible and risk-averse and so this is where we get to three and four so let's say you've created some you know rwa transferred on chain let's say all the proof in the world that it's real and legitimate is on chain so it's transparent right it's fungible I mean it has a liquid secondary market and then lastly if there's low risk so let's you know say it's not alone let's say it's like a bar of gold keep it simple right these rwas are going to be the best investments for Dallas and transparency I cannot underline enough let's see an example of what's not transparent what's not transparent is having a lending protocol that has off chain collateral you can do all the due diligence and auditing in the world if you were leveraging off-chain collateral for on-chain liquidity position and debt that person who's the liquidity provider is not going to know what their exposure to risk is at any given time right that's going to be a lower quality rwa in contrast or protocol that uses on-chain you know uh proofs of that collateral right that's just facts right so it's those asymmetries and information that are going to determine which rwas are the highest quality and then thus which ones that Dows decide to invest in um and again you know we don't have to behoove the point but you know belabor the point but yes these things very important I'm actually thinking of creating like a risk framework for tokenized rwas so that people institutions whichever can understand which ones they're getting in bed with when purchasing them or providing liquidity to those protocols I'll also say that like the reason why this diversification is so important I'll give you an example maker has about 12 exposure to rwas now and that accounts for 60 of their annual recurring Revenue as a protocol they are one of the only profitable protocols that exist so it makes a huge difference right to diversify right and rwas specifically because outside of this in terms of things that might not be touched you're looking at yield generating stable coins at the most right um other assets likely are going to be under that security warning um threat that the SEC is uh you know putting out there another issue is um Dow KYB is a concern so there's existing legal Frameworks for most real world assets right so kyc or KYB on most of those institutions is like a real thing you can't just like oh it's on chain you know no way KYB like no that's not a thing unfortunately um as you all know for anyone who has gone through this process it is awful it's very slow I hope that there are decentralized you know KYB kyc protocols in the future those are going to be very difficult to build um and I will tell you they do not exist currently so if you look on Google and you see some that on somebody's website it doesn't exist yet they may be creating it but it does not exist yet um and so a really core question that I've heard from a lot of dows is like you know if I'm on the core development team am I doing kyc as a universal beneficial owner to the protocol when I don't own the protocol because there's no equity in the protocol but the way that these rounds financing rounds are you know structured is that you have equity and you have a token warrant that's typically Equity of the core development team so these These are really really interesting questions that uh I get asked um by Dows in the context of lending that we do um and so what I would say are what's the time scale right whole presentation is when rwa talking so you know when is that happening so um I would say over the next decade it's gonna take a while and it's also going to take courageous traditional financial institutions to do pilots with existing protocols there's there's no way to get around that right we can take pause and making sure that there's a regulatory framework much like Dows are doing in terms of their legal structure to get there but someone's gonna have to take those first steps I know that there are a few that have already done that but a lot of those have already been like web3 native type firms um so Debs building rdwa protocols the first place there's a million different types of markets within this you know 260 trillion dollar structure VC is investing not just Equity but also liquidity BC's if you want it is literally like like being able to be a customer to your portfolio company right it makes sense to invest liquidity along with Equity because if you are helping Finance any of these RW protocols you can literally increase their traction metrics by doing this right so that's important um and then also again trade five deploying Partnerships and this time scale is accelerated with climate change inflation of the USD and geopolitical instability right the need for debt increases as chaos does there's a lot of chaos unfortunately so that's kind of where things are at um and so again with a 1 million x growth potential we really should all make it right you know like I know that it's really interesting I think some people have this idea that there's going to be protocol monopolies right and we already kind of see that that is not something that's sustainable because each market requires different crypto economics there are very few crypto economic designs that sustain themselves over multiple use cases even in the context of financing right so likely not going to happen should invest um you know across many different protocols and uh yeah that's cool we got 20 seconds if there's any questions but I appreciate y'all let me talk to y'all let's go any questions 13 seconds you don't have to good all right cool go up up all right there you go testing how does emojo Labs help on ramp rwas into the ecosystem so what does Zoom merger Labs exactly do yeah well I appreciate you asking I usually do not try to chill during my talks but I appreciate you opening that door I'm gonna walk right through it right um so um uh is um a credit protocol that crowdsources both financing and collateral so the rwas that come from liquidity provision right those IOU tokens right they have full transparency um and this again is really really important the second Gap that we saw you know outside of the borrower Focus that we focus on Emerging Market institutions across Africa rather than hedge funds and trading you know firms which are typically financed by a lot of these real D5 protocols we see today is is that we found ways to eliminate FX devaluation risk for those who don't know what that is if I crowdsource alone in usdc and I deposit it you know in in Kenyan shillings right the interest rate of that increases because of the foreign exchange margin and the devaluation of that weaker currency to USD over the time that that is happening right so that can increase your interest rate from 10 to like 16 and what this allows is not only for us to support multi-currency denominated loans but it allows defy more generally to do that as well and so we use our perpetuals FX protocol for that side and then on the other side we've taken components from uh Maple from goldfinch and others to develop institutional lending on the the D5 side that's what we do excellent well I appreciate y'all guys we'd love to talk to y'all after and y'all have a great day all right wake up