Beyond Ponsizomics -- Leveraging Defi for Real Businesses by Jessica Salomon and Jacob Shiach

up the chill hiphop ambient music we have going on here. Um my name is Jess Solomon. This is Jacob Sheay. This Jacob Sheay. Um we're super excited to be chatting here.

This is going to be a little bit of a change of pace. Um I know that all y'all are busy beetling. We're going to have a bit of a conversation. thoughtful, we hope, or as thoughtful as it can be given that I tore my calf about 36 hours ago and um I'm on some pain medication, but we're doing pretty well. Um so yeah, the title of this fireside chat is Beyond Ponzenomics, leveraging DeFi for real biz.

Um just to give a little bit of a background about myself, u my name is Jess Solomon. I started out my journey in web 3 as the first community manager at makerdo. So starting at the launch of single collateral die in December 2017. Um since then I moved around a bit uh between maker between like marketing biz like BD stuff like that. Um and then started working on an array of fun web 3 stuff.

As we can see the space has really grown here. ETH Denver was actually the first hackathon I ever went to in 2018. Um like including NFTTS and uh some Cosmos stuff too like who knows. Um but Jacob on the other hand uh do you want to give a little bit of background about yourself and your awesome journey? Yeah, sure.

Um so I've been working on this project called Union for about three years now. Uh we're trying to solve well we kind of have solved uh basically credit so unsecured credit um which if anyone's familiar with unsecured credit it's about as like highly leveraged as you can get um but it's also kind of a useful tool uh in kind of actual business. Um so you either have like a very important tool for like ensuring like operating leverage or you have a tool that can just like enable infinite leverage. Uh so we're trying to not go the infinite leverage for speculation route. Um which has caused us to kind of do a lot of research and like focus in on like what are the actual like real economy use cases of like DeFi.

Um and that's kind of where we we are right now. Yeah. Super awesome stuff. So um just to sort of start out Jacob um because you are the brainiac here, how would we define ponzomics in this situation and what are like some examples and maybe real world versus web 3 world. Yeah.

So just to bring out the webster dictionary. So you have real economy which is like not a judgment on like finance isn't real economy. It's just a like they're just terms. So you have real economy which is anything where it's like buying and selling uh like uh so it's like the consumption and production of goods and services. Uh so if you don't have a consumption or a production of a good um you're probably in the financial economy which is just kind of buying and selling things.

Uh it doesn't really matter what the thing is uh because you're just all that you really care about is like being able to sell it off. Um and so this can kind of like if you have the you need the financial economy to kind of have like a liquid and like highly efficient real economy. Um but sometimes the financial economy get kind of gets ahead of its skis. Uh and this is where you end up with things like my favorite example is uh the recent uh issue with like the West Texas uh index where oil ended up trading negative. Uh it's because a lot of people basically like demand for oil dropped.

So much so that a lot of people who are just kind of trading these oil futures uh kind of got a very hard lesson that oh you have to actually take delivery of the oil uh and like you have to show up in Oklahoma at the like the end of the pipeline with like a like a truck. Um right. So there can really only be so much speculation because in the end of the day if um there should be a real product underneath um these oil futures. Yeah. And like crypto is kind of an interesting space because uh we kind of started with so like most of the real world started with like real economy and kind of learned how to develop like these financial tools.

Uh and crypto has kind of been the exact opposite. uh where that's interesting. But yeah, no, totally agree. Um yeah, right. So maybe um another way we could think of real economy versus financial economy would be say Main Street versus Wall Street.

Yeah. Um that's a pretty good one. Um, and so one of the things I did want to kind of like get up here and like maybe spark some ideas with people building is like what are what is like web 3 main street look like? Uh, like so in a normal main street you have small businesses. Um, and like these are things like coffee shops, like small restaurants, hair salons.

uh all very very like physical tangible things. So you don't really get like the you don't get a really nice parallel like that kind of like translates into web 3. Um although we might have some examples here at ETH Denver because I hear that um one of the brewing companies that will soon be providing us beer um at some point is actually leveraging DeFi in some way to receive credit to start the brewing process and all. But yeah, totally agree. We have not seen a ton of that go on, although we would love it.

So web 3 for the most part is a more efficient Wall Street in your opinion, but it's somewhat interesting that we started out with this more efficient Wall Street, people trading, doing a lot of different fun things, but not so much underlying native business economy to always like keep people there. Yeah. And this is kind of important because like um how do I explain it? So like if you have a like a growing economy or like a upstart economy, usually like a nation state will kind of get started by like either doing imports or exports and it's very highly dependent on some other like state or other economy. Um and this is kind of a it's a good bootstrapping mechanism until like the native economy can kind of grow in an organic way.

Um and crypto is kind of like at that stage. Uh it's like it depends very heavily on like more and more US like dollars being invested in the space. Uh and that's kind of like what a lot of people's salaries are based off of. Um and so but there is kind of this like uh how to explain it as uh starting to come out where like you do have like these service Dows who like their main form of revenue is kind of servicing these like largei like DeFi Dows, right? So they're like real economy.

They're not just speculating. It's like a true good and service um to which someone has value other than just reselling. Yeah. And there's a few good examples like uh Llamas uh is a good example. Gauntlet like Fire Eyes Dow.

Um and so like these are kind of good examples. Um actually buying block space. So there is demand for block space. Um like that would count cuz it doesn't really matter what the price of Ethereum is. uh like whether ETH is like 16,000 or 1,600 like the actual like buying and selling of like block space uh would count kind of count as business.

Um yeah, I wish I could like see all y'all and ask you all questions and have y'all kind of contribute cuz I'm more just curious like like I would love like if if you come up after and like tell me here's a good example or like here's an idea. Uh like I would love that or Yeah. Well, we um can have all your hopes and dreams fulfilled right now. Does anyone have an idea or a question that they would like to voice? I would love to run over, but all right, that this plan is hampered.

Otherwise, I'd walk around, but um you know, we've got uh some disabilities that we're dealing with. Um, however, so it sounds like for the most part, um, union finance, which is a credit mechanism, could essentially be a cool tool to give people credit to build out interesting products that maybe aren't just speculation related or even DeFi related. Yeah. So, I don't want to talk book too much. Um, but credit, so like all union is is like like I can vouch for you.

Uh, and then I'm basically underwriting you and that's you now have a credit line. Um, and this is just how credit works. Uh, like there's really no secret. Um, the thing that union does well is kind of enables kind of like the network of credit. So like if both of us vouch for like one person, that person doesn't have to go to two people.

Uh, and so there's some efficiencies uh there. But it really depends on like like what is the thing being underwritten. Uh a lot of what we've seen so far is like just it's basically just trust uh like on the the actual relationship. So you have a lot of like friends vouching for friends uh and then the friends now have a credit line at like a cheaper rate. Um and that's what we've seen so far.

Um, in order for it to kind of grow, we really need like it needs to be underwritten by like an actual business. Um, yeah, pretty much. Yeah. No, that totally makes sense. So, it's like very much a social primitive.

Yeah. What's up? Oh, wait. Do you want to come up here? [Music] Um I was just wanted to ask you guys about the let's just say the replacement of um certain national currencies with uh cryptocurrencies.

So one that comes to mind is like Bitcoin Cash in St. Kits and Neas in the Caribbean. It seems like it's a very groundup approach. So as opposed to like El Salvador which was I would say pretty like centralized ex of that. And from my experience with that community, it seems that the organic growth right now starting in the islands is spilling over into places like India with the remittances which is like a huge um driver of adoption in like other far-flung communities around the world that are all connected to this like decentralized currency, right?

So, when I hear about Main Street versus Wall Street backing with real goods and services, that's what I saw firsthand when I go to these places that are starting to implement like smart contracts um and also uh points of sale mechanisms that aren't really dependent on, you know, Visa, Mastercard and stuff like that. So, maybe speak a little bit about that. Thanks. Totally. Thank you so much.

Cool. Yeah. So there are there are some kind of like u like if you get outside of like the United States or like a modern economy, you do have these systems. Um they're generally kind of all under this like header of like Rosa, which is like rotating savings credit associations. Um and that's kind of what we've like I'm a big fan of these things because they are they do kind of like just build from the ground up.

um where it's literally just you take like 10 people, everyone puts in a hundred bucks uh and then one person gets to borrow a,000 bucks every month. Um and so like and then you just kind of take turns. Um and this is just kind of a very very simple kind of way to build like banking uh in these kind of local places. Um, so you do have people who are already kind of I guess have somewhat of a native cryptocurrency based economy like if they're receiving remittances through Yeah. different options.

So there are these kind of like pre-existing like forms that you can kind of translate. So like the big problem with a lot of these things like the second you leave like the village you no longer have credit. Um, so we have been looking at kind of how do we how do we basically just map that uh and bring it like online so that you then have like this local credit uh that you can kind of like take with you as you go. Um, yeah, that's something I'm pretty excited about. Yeah, definitely.

Um, in terms of, and that was a great example, by the way, in terms of other examples within web 3 that could be defined as say real business, um, are there projects besides say like just validators or um, rollups like figuring out block space and service dows like for example, what do we think of maker dow and the use of the PSM? Uh yeah. Um so Maker Maker is kind of leveraging I guess it's a bit of a different case because Maker is like it's an actual stable coin. Uh and it is it's kind of leveraging DeFi to kind of go back the opposite direction um and fund like things in the real world. So you're taking like this demand for stability.

Um, so like there's there's generally more demand for a die than like they can mint. So they are able to kind of leverage this to kind of print a little bit more dollars to then kind of hand that back to kind of um what is a good example like so they are buying like small bond ETFs um or like corporate bond ETFs um I think a lot of like mortgages from Huntington Bank. So you do, it is kind of an interesting case because they are like that's DeFi that is uh funding like Tradfi. Um so it's not exactly like a cryptonative uh main street use case. Um but it is kind of real because like at the end of the day it they are funding like or improving the efficiency of like mortgages basically, right?

Yeah, I think that makes sense. Like for example, if someone was to buy something like Amazon stock, Amazon actually is a product. So in the end, like there's an underlying business actually there as opposed to something that could be but if you're buying the stock in order simply to resell it as opposed to receiving dividends for the business to make more money um then we can say that what makers doing with the PSM buying corporate bonds sort of makes sense and kind of hybrid example of fueling through business. Maybe not. Maybe I Yeah.

What would you say be the coolest thing um someone could build with Union Finance right now? Like are there things um because we've got this awesome group of beers here. Are there things besides them just like actually using the product to give credit to one another to start out their next crypto adventure or is there something um somewhat more directive? Yeah, with credit um there's kind of two interesting use cases um that are like specifically uh one is like uh cool. Um, one is kind of this kind of so like I can vouch for you and I know that like you're going to pay it back uh if I know you because you don't want to like lose that relationship.

Um, so I do have this idea that like I'd love someone to build it. Uh, which is basically you have a smart contract uh, and like the smart contract is basically a hamster. Uh, and if you default on the smart contract, you make the hamster sad. Um, and this is just kind of a kind of a very like silly idea, but like and then if this hamster smart contract gives out like a 100 credit lines, how many of those 100 people are going to default on like basically this just imaginary like character. Um, so that's kind of one kind of use case and that's kind of just a fun like playing with idea of like trust and contracts and like how much people value that.

Um, and the other more kind of like straightforward one is you just have a kind of a nouns dow and then it's the nouns dow that is providing credit um rather than like any of the people in the nouns dow and so you kind of just the kind of the the trust relationship there is with like the group like mediated by like the timelapse contract uh or something like that. Nice. That makes sense. Um, yeah. So, I think we only have one minute left here.

Uh, we have what? We have no minutes left. Well, anyway, um, if any of you guys are looking for credit on Union Finance, you should talk to Jacob here and he'll do a vibe check and maybe if he thinks you'll pay it back, you'll get some credit with a very nonpredatory interest rate. Well, thank you y'all. [Applause]