Upgrading DeFi from Dial-up to Broadband - William Harborne (DeversiFi) - TOKEN2049 London

hi i'm will i'm the founder of diversify and uh wait for my slides to come on and so i'm going to be speaking about the what i think is the most exciting thing happening in crypto right now pretty much the biggest thing that's happened since ethereum first launched and this is a transition that's taking place at the moment where decentralized finance is going from having been in dial-up mode where it was expensive to use clunky slow to broadband which will mean that suddenly it will be accessible to a lot more people and able to be used in a but by mainstream users and how um i'm going to speak specifically about diversify and how we've used that to be kind of the first wave of applications in d5 upgrading but also about the overall context of how other how the rest of the industry is making that that jump and i'm going to talk about layer 2 technology which is kind of the the real revolution that's underpinning that upgrade so i'll start off with an example of layer 2 and how diversifiers used it to completely transform the user experience for people who use diversify and then i'm going to zoom out and talk about the overall context of this technology the revolution that's happening and what we can expect in the next few years and finally come back and talk about what diversifies places and what we see as being our role in the industry to help bring adoption of d5 to mainstream users so diverse space started off two years ago as a simple application running on ethereum which looked like an exchange people could connect wallets and trade buy and sell different tokens and behind the scenes every single transaction that happened went onto ethereum and we used a settlement mechanism called xerox protocol which allowed us to demonstrate this technology the fact that anyone could bring their funds deposit and trade uh without having to trust any centralized counterparty um and this got sort of great adoption at the time but it was clear even from the beginning that this was certainly kind of in dial-up mode so a a settlement would cost even at the start about a dollar and towards the end of uh kind of mid-2019 it was costing 20 to do a trade settlement what that meant for the user experience was we had to have a very high uh minimum order size and it wasn't an enjoyable trading experience on top of that because of the blockchain uh block speeds took about three minutes for a settlement to take place and so early on we started thinking how can we solve that if we want this to be used by many more people and there are a few different options to consider one and i think now still a popular option might be to consider moving to a different blockchain instead of ethereum there are many others out there like solana polygon um which present viable alternatives for d5 and we're starting to see ecosystems grow up there but the real draw of ethereum is that it's still by far the biggest developer community the biggest community of users who for example have metamask wallets and there's a real ecosystem of innovation that's still driven largely from ethereum and so we wanted to find a solution that could solve this we first of all started developing something based on plasma which was back then considered to be one of the most promising scaling options for ethereum but in mid 2019 we met the starkware team who are one of the kind of pioneers of layer 2 technology and really zero knowledge proofs and so the way that starkware solution works is that you can take thousands of transactions and in a single cryptographic proof batch them together into something called a validity proof or a stark proof which keeps the same size no matter how many trans or pretty much no matter how many transactions you put in and so this is a game changer cryptographically but on the um 4d5 it also is going to enable a huge amount more scale and better user experience and the goal we were trying to achieve was up to 100 transactions per second and a potential settlement cost of just one cent compared to if you use many sort of applications on d5 today 50 or 60 and um we were the first team to ever work with starkware we agreed to be essentially the guinea pig working with them to bring this technology for the first time into real production with real assets and we and we launched that after nine months working with them in mid of last year since then uh this new version of diverse spy has been live said over half a billion dollars of trading go through it and 660 000 transactions and the cost per transaction at that scale on on mainnet ethereum with the full security of ethereum behind it in full self-custody we never touch any user's funds and it's just 25 cents and that cost comes down really rapidly the bigger we grow eventually approaching that one cent per transaction and so the experience that we can then offer is very much more similar to what you'd expect from a big centralized exchange and allows us to completely change the audience that we're able to offer this set of d5 products to and so the other sort of big benefit of the huge amount of extra flexibility coming from that technology is that we could go then from just trading initially to now also allow people to send funds swap them and yield from all sorts of other d5 protocols without ever needing to deal with the frustrations and cost of blockchain so that's just sort of one example of what's live today on ethereum there aren't many applications that have already taken that jump from kind of layer one to layer two in ethereum but if we zoom out a bit this overall wave is now starting to happen and over the next year or two will happen to everything that's going on currently in d5 um and allow the audience to grow so the the kind of context that we're within is this overall crypto revolution the biggest revolution in money this century and we're now looking at we kind of started from bitcoin where it kicked off with this headline from the times chancellor and brink of second bailouts for banks and bitcoin was a reaction to what was considered the centralized power of governments and banks over money and the lack of transparency and so as a mathematical money for the internet bitcoin served a primary purpose of payments and store of wealth and that was a good start until we had the kind of next wave that came along of of d5 driven to start with from ethereum where you could then have transaction settlement without a middleman you could build all sorts of other protocols for borrowing and lending really recreating the entire financial system but without any uh any of the frictions that might be introduced by middlemen and and full transparency over everything and so really a revolution in what was possible but the problem with both of these things is that cryptocurrencies on their own as they were first launched don't scale so bitcoin as a maximum can do seven transactions per second ethereum 12 transactions per second but we've got to balance that with the fact that d5 keeps growing the demand for these products that's been created is looking close to infinite if we and if we're really going to replace the existing financial system that's going to keep growing even faster so already 180 billion dollars of assets and up getting close to millions of users who are using this all the time so if the demand is growing but the supply of transactions is fixed the problem that we of course have is that the cost rockets and so today for most people it becomes almost untenable to use ethereum um and it's very much in this slow expensive dial-up mode and so ultimately it's only a playground for wales some people who already have huge amounts of money are willing to play around with these applications it demonstrates the potential but it's not accessible but layer 2 technology is the answer to that that issue so we want to be able to include more transactions on chain by doing more work off chain and make d5 fast cheap frustration free with the end goal and this is clearly like very early on layer 2 has only been around and and being used with real money for a year and a half at a maximum is to have complete financial inclusion so to make all of the tools all the innovation that's happening in d5 available for seven billion people so where are we on that journey of trying to achieve that at the moment layered two technologies are all coming online and that's happened really since january it's not maybe so visible to those who are outside the industry but there are now 15 to 20 different ways of scaling ethereum using in production um with real with real assets some of the top ones are stockwear who we diversifies using but also arbitrary and optimism and loop ring and several others you can see on this list and all of these have taken slightly different approaches to how to achieve scaling so one of the beautiful things about the ethereum ecosystem is that it's not scripted by a higher power but very much organic in that all of these teams independently started building different solutions with different trade-offs now if you're a builder in d5 who's creating an application that's a real strength because you don't need to choose just one way of scaling up you can select the best solution for the particular use case that you want to do so in the case of diversify we wanted to focus on trading and therefore we needed relatively fast finality and very low cost in order to facilitate that and chose one solution but others might optimize for flexibility in terms of the types of smart contracts they can deploy and at the moment these solutions are in different levels of maturity with different risks but we're getting to a point now where there are enough really strong solutions available that it's becoming realistic for most default applications to start to think about how they will move uh to this broadband layer two mode so largely if we want to look at kind of categorize some of these solutions there are many ways you could do it but one of the clearest ways is to compare those that are offering evm scaling universal scaling where they're trying to provide developer flexibility to launch new applications and actually if some of the ones here on the left optimism and arbitrarium um focus on deploying any smart contract that you could deploy on ethereum in exactly the same way and so that's a very easy transition for builders but what it means is you're essentially getting something that's maybe less well optimized for that particular use case and then the other side we have some other uh scaling and layer two solutions which have gone for more application specific solutions so tailoring the exact scaling for whatever the user wants to be able to do that's the case with diversified it's optimized for trading um with aztec that's optimized for private transactions uh and several others and we've see we're seeing now also a bunch of solutions that's kind of in the middle there where you may get some benefits of the flexible open solution but also tailor it for the most common actions that users might want to do so with that with that context what diversify really wants to do in this industry is to help to make the most of d5 make it accessible for those seven billion people who eventually should be able to access all of the innovation in terms of open transparent finance managing your assets from within a self-custodial wallet without permission from anyone else borrowing at the click of a button swapping at the click of a button and we're backed by many of the top supporters in the industry including some of the biggest centralized exchanges many other partners many vcs and funds but really what we see as being kind of our role is to sit in the heart of these different waves that's happening so first of all there's the overall crypto revolution at least that we've spoken about but within that this defy revolution and the layer two sort of technologies that are really transforming what's possible to put onto a blockchain and diversify wants to really be the kind of hub to enable all of those components to make decentralized finance open to as many people as possible and right now the challenges that we're trying to tackle specifically that are stopping most people getting involved in d5 are the frustrations that most people will have encountered if they've used any on-chain deep applications one of which is cost but another of which is failed transactions um a very fragmented user experience today if you want to try and explore some of the cutting edge of decentralized finance products you need to hop around multiple different blockchains multiple user interfaces try and connect your wallet and it becomes easily something which most people would give up on there's big educational gaps lack of wallet standardization and one of the sort of most important ones is the the number of steps needed to get in so you have to kind of dive down step by step into these different layers and explore them and this becomes completely alien to most people within within a few seconds um going down that rabbit hole and so what we've what we've built and what we're trying to offer now is this defy hub where you can do everything or really not everything but 95 percent of what anyone would want to do on ethereum with defy without having to deal with that that frustration without having to deal with that gas cost and and the real sort of underpinning of that was this core technology layer of layer two but now the kind of user experience possibilities that are enabled through that without having to compromise a tool on security at all on self-custody is that we can offer really fast swaps um fast and frictionless access to other things in d5 for example earning yield in compound finance without needing to deposit and withdraw directly on ethereum and aggregate liquidity from lots of other sources and so that's where we sort of are now uh that's been live for a year and is growing fast in terms of numbers of users and liquidity but in three years from now where we see the potential for both us and actually d5 as a whole is to really replace bank accounts for most people and so for d5 to become the primary way that many people especially young people or people in developing nations will be able to manage their finances instead of opening your bank account and withdrawing when you want to do other actions like switch it to another currency or paper services you could manage everything from your own wallet use a platform like diversify whether that's on mobile or desktop to do nearly all of the things you want to do and be earning interest throughout that process and whilst that looks unlikely from today's like experience of d5 we're really not that close and that's because of these technologies that are moving at such fast rate of uh rate of change and so i think in summary what i really want to say is i don't underestimate how fast the the kind of layer two ecosystem in uh ethereum is moving um do please come and try diversify and you'll get a taste for what that uh what layer two scaling will look like for this whole industry within a shorter time than we can expect and our goal is really to unleash the kind of potential of this for everyone and make it open so thank you very much for listening david excellent uh thank you so much uh for that excellent presentation uh it's great to see you guys go from strength to strength and we really are actually big fans at svk of what you do but maybe i'll just open up to the floor for any questions that anyone might have just stick up yourself don't be shy come on guys let's make it happen yeah so do you have apis like can we interact with you yeah so primarily the main interface is web-based but there's you can interact both on-chain um and via api to trade so uh longer term actually part of diversify zone strategy is that now that we've built this with our own users we're packaging the same uh technology stack so that others can build on top of it so people who may not want to spend as much time as we did building that layer to sort of core technology can then jump a step by building on top of what we order of the infrastructure we yes lady how are you good to see you today hi um so for for people who are not familiar or like not on boarded on to defy yet how do they do it via diversify like what are like some first steps for people to like yeah get get on d5 yeah so for decentralized finance to today the biggest sort of first step you have to take is creating your own wallet so you're responsible for your own funds and the most common one is metamask but we also support several others but once you've done that you can start to play around in the ecosystem many people might have tried for example one or two other basic d5 apps but coming to diversify you would just connect your wallet and instantly be able to then start to buy and sell an interest on usdt for example and other stablecoins um and start to actually transfer to others without having to pay any any other fees or interact directly with the blockchain what you always have the guarantee of is that for example if we went offline you have access to your funds and they're still actually in your wallet excellent we have any more questions maybe one more lady here hi talk me through wasn't it diversify that recently had this big error transaction yeah so what was that uh so diversify was actually covered in the news last week quite a bit um in that uh one of our users um had it was using the platform and made a large transaction which was an error where actually the the fee paid was very high um this was due to a series of series of errors uh and we were very lucky that the funds were able to be returned to that user um but this comes from kind of the range of technologies that's being sort of used and the really great thing i think about this sort of technology stack and the platform is that um all is very transparent that all users funds are like completely safe even when that sort of thing happens to one person interacting um which you wouldn't get for example with many like centralized alternatives where if we if we were holding for example customer funds um you you have the kind of issue that uh that kind of thing can spill over and we've seen that in traditional finance very often um when like a company could have uh issues with some sort of transaction it can affect other users but that's not the case in in decentralized finance will thank you so much for that excellent presentation uh that's a big round of applause for will and great to support such a project thank you so much really appreciate it