Centrifuge - RWAs 2.0

all right and up next we have rwa 2.0 institutional defi we have Max and Assad from centrifuge is where I open with my comedy bit no go kidding good um all right so uh we trying to make a make up for a little bit of time we have 20 minutes um we're here to talk about obviously about real World assets that's the idea not about beards although we could I want to introduce myself real quick my name is Max I am one of the co-founders of centrifuge I'm here with usart um introduce yourself head of BD at centrifuge and uh so I'll have a few slides just talking a little about the history of well how we at cuge saw and see real world assets and then I hand over to Assad to talk about the future about rwa 2.0 and um to do that I want to talk real quick about the world before rwas so what was there before how the heck did we come up doing something like like cuge and uh cuge actually the idea came 2016 we incorporated 2017 so that is give or take eight years ago and so why why why why did we build cuge well got to start a little bit earlier at a company that we built before the same founding team that built cuge had a very boring traditional fintech before Calia and uh what is Talia still doing well tala is financing invoices so it's a specific type of real world asset and um we do that by going to the largest corporations of the planet think Walmart Home Depot pull the invoices from their Erp system most famously sap pull the invoices from there and then Finance those invoices right just uh very web toe very traditional and that all worked great and well until this system that I just mentioned sap this ecosystem this Erp system decided they don't want to play with us anymore so sap decided at one point after they spent 4 billion acquiring our main competitor that they want to change their licensing system a little bit they want to change their API a little bit so it was not that easy anymore for us for our business to help those small medium businesses those suppliers of the large corporations to get liquidity obviously we didn't like that um so good news is at the end sap fired us so there's a happy ending on that one but uh what we decided back then is like [ __ ] that the next company will not relying on the ecosystem anymore and uh if sap doesn't ring a bell I mean the same [ __ ] happened uh around the same time a little bit earlier with Twitter with Facebook so dozens hundreds of of startups build on top of Twitter on the Twitter API on Facebook and once they Chang their business model they got [ __ ] so little bit similar for us again happy ending I'm not complaining but uh we decided our next startup our next idea got to be unstoppable and so 20 201617 when we then came up with the idea came across ethereum and went into that uh Rabbit Hole I think is the world the word and U started to build centrifuge on on on the ethereum network um there was one reason so we want to build something where nobody actually can dictate whether we can uh run the system or not whether someone can change an API the second was on the financing side we want to build something where those invoices that we want to finance um they can be financed by Whoever likes them to finance them at Talia we always were restricted is the invoice large enough is it in a currency that we support is it in a country that is supported so that one we want to change as well so that's why the idea of ethereum came up in 201 well 16 we incorporated in 17 I'll let you later talk about the Jesus moment and if we're there yet but uh um let's go a little bit back again um this slide is not meant to brag maybe a little bit uh but the main the main message here is this is 201819 I'm not sure who was there stuff like Dharma was one of the Partnerships we had with maker we actually defined the defi Coalition or the defi I don't know I can't read it the Define community so the term defi actually came up 2018 two years before defi summer uh it was [ __ ] hard I mean 20189 there were like 10 people on blockchain there was our first bare market and so it was was really slow um so we build a lot of that infrastructure um and uh Luca just complained about the term real world assets that some of us started to use 201819 well I mean it's all relative right before that we used the term business nfts so that's a shitty name so real world asset is actually Improvement I'm not saying it's the best term yet so well there's a case to be made they are just assets obviously but I still think uh there there is worse options here so wasn't easy in 1819 and U but here's a little bit of the the history that we uh over the last 5 six years uh achieved again Incorporated 2017 as a actually pretty traditional company in the middle of the Ico C we decided not to do an Ico and um another thing where Luca just mentioned that we started cuge as a securitization Engine with the two uh with senior and Junior trch that's actually not true when we started centrifuge we had somewhat of a different idea first we want to bring all the transactions of the world all invoices purchase order all Commerce on a blockchain and net that [ __ ] like see Cycles there and just net it clear it and then do the financing yeah guess what 2017 there was no lot of single corporation that want to play with us so we had to do the second thing first the the financing before we could go to the clearing and the The netting and the other one uh so so few steps that are maybe important in the in the history of cuge um our first real transaction was in actually two years in with paperchain this is the music royalty thing that we that we just touched on really tiny transaction mainly retail investors put money into the pool um but uh music royalties we just Advanced pretty much the payments for artists that waited 60 90 80 day 180 days for their money from uh Spotify um a few years later our first pool together with maker um I think it was uh new silver real estate new silver was the first yes which is now one of our largest Ones Still um so that was 2021 we actually thought and wanted to work with maker early on 2018 already but yeah [ __ ] takes time so it took us three years to get there um and now we're actually there where we are the collateral for some of the stable coins so again not all of the collateral but parts of it for maker for fra I don't know if you can read that actually and and for a few others um yeah so I mean stuff started pretty simple when we had the idea right we thought about well we want to finance assets we want to bring assets on blockchain we want to finance them really early on want to put them in a little Vault a maker Vault get some die everybody's happy gets money as soon as the invoice is due we put it back back to die and you get your invoice back so assets right in between the last six seven years [ __ ] got complicated and again fortunately you can't read it I think I can't at least uh but I mean what are real world assets over the last six six seven years incredibly complicated um for viy of reasons tread fi came in and used their terminology regulations came in um dents messed up things to some extent as well so what what are real world assets for the last few years is it's a super messy super complex thing and where want to get to is actually to the Simplicity back again because what is it it's something that is out in the real world we want to bring on chain for all the attributes that a real world ID has on chain and um yeah I mean some learnings on the way or one Lear burning on the way uh again we tried that for eight years now um we tried it with retail the first pool that we had was a retail pool retail doesn't care about real world assets and it just moves too slow and it's not enough money there so it's it's about institutions we need the institutions to play with us that is one learning we need them to be on on board and um it's not about building just another infrastructure uh we had that experience when we competed in 17 and 18 with those nonsense what's it called Enterprise blockch blockchain World permission blockchain and Hyper [ __ ] and no it's about defi it's about collaborating it's about owning your assets um so at the end of the day it's about institutions about defi it's about institutional defi that's that's that's that's that's what we do you might ask I got to hurry a little bit um yeah why are we not there yet like eight years is quite some time we raised some money so why is this not solved yet why why we still talking about it why isn't there billions and billions of real world assets on chain well we we get we actually pretty close but still well I mean we made a couple of mistakes on the way we centrifuge but unfortunately the space uh uh uh itself as well I mean we like that headline here a lot like if you use collateral use some real collateral not some [ __ ] like Tera did and there's a lot of that stuffen as you guys know in 2022 and to some extent 23 so that pulled us back but me let's be honest the the excuse department is closed that's some faults that the the industry did um let's start looking forward and maybe look into the future yeah and I think um you know the old head to Young head transition right I think the the timing now has never been better for real world assets I joined centrifuge two years ago and when we when I started like no one wanted to talk to us no one wanted to talk about what we're doing real world asset still wasn't even really a term that was used it was debated all over the place you know tokenization Financial assets whatever you might want to call it at the time um two years later it's amazing the level of kind of conversation we're able to have the panel earlier was a pretty impressive group of people coming from a wide variety of backgrounds all talking about very nuanced complex subjects of the same thing right so it's a pretty amazing Evolution that we're on I think we're on the yellow brick road and really the the goal for us I think as an industry is to actually get there get to real world assets 2.0 which is the world of institutional defi Max is saying and I guess to share a little personal kind of anecdote is I'm very concerned we won't make it right I'm very concerned we will actually take a turn get off the yellow brick road and you know [ __ ] everything up to be quite honest it's kind of what we do as an industry I feel like in the crypto blockchain space um and you know why why is that right what is the actual like root problem why is it Cent's been building for eight years and others as well why are we still not there um I think it's this little guy right here right uh you know every year we tell ourselves the institutions are coming and and if you go back to 2017 right the Bitcoin price boomed everyone said it was amazing everyone was talking about Bitcoin if you worked in the space everyone finally wanted to know what you're doing 2018 it crashed and what did we see then the same exact tokenization story we're seeing today was the same narrative was taking place in 2018 I mean it wasn't Larry thinkink it was JP Morgan back then we had the Enterprise blockchain stuff everyone was talking about oh tokenization tokenization the institutions are coming I remember in 2018 at consensus going to a panel where they talked about looking at exchange transactions and it was they were asking the question are exchanges you know seeing institutional volume and they basically said that there was like 2% of institutional activity and the rest of it was all like was trading in retail right you could repeat that same exact experiment today and the margins would be much larger right maybe it was like a million bucks back then it' be 10 million bucks if not a billion today but the exact same story is true we we have way less institutions than we should have and for as much as you know the boy who cried wolf said the institutions are coming every year I you know I I'll just put it plainly I don't think they're here I don't think they're coming right so you know what's the fix I've I've come up with a 12-step guide I was asked to lower it to three because that would be too long of a panel but I think the reality is we have to build those institutions um you know an easy way of saying this is I don't think Black Rock anyone should expect Black Rock to bail us out and come in and just start transacting on chain and provide all the dollars and sophisticated investment capital I think we legitimately have to really build new institutions the the start today as not institutions and ultimately become the institutions of the future and I have these kind of three little like we call them again 12-step program this three-step program that I think I want to share with everybody and I I think it's you know it's good memes but I think it's a little bit controversial right and like the first is I think you know it says build not Biddle right I'll just say very simply I think degens are a [ __ ] crutch all right I I really really mean that I'm a d gen I I appreciate all the DG in the room but if you're trying to build something that you call institutional Defi and you're doing it for unsustainable boosted yields linked to nothing I mean what the [ __ ] are you doing right I really think that we have to build better structures better systems from the get-go and I think if you want to build institutional defi you have to start with quality and compliance and then kind of bacon utility and I'm not talking trash about permissionless systems or decentralized systems I actually think assets as an industry you could learn a lot from decentralized Maxis when it comes to building like ideologically pure systems but I mean I'll say it again I think DJ are crutch right um and then this one you know I was trying to play with a little bit and I'm not trying to talk [ __ ] about axi Infinity I'm a big axi guy myself come find me later we can talk about it but you know look play to earn was a thing right then we got to you know T bills 2023 rates were up everyone's like ah yeah I'm [ __ ] smart I'm investing in t- bills right I will go out in the limb here and I don't actually don't think it's that controversial and say that if you're building in the real well asset industry I don't think there's a single person in this room or in the industry that actually has a full view of everything they need to solve and every problem they can own I you know you might know about a lot about credit but you probably don't know a lot about crypto you might know a lot about crypto you definitely don't know a lot about credit you might know a lot about technology and products you probably don't know a lot about the business and commercialization these are really really complex stuff right I mean you know Max said it itself we we've complicated the industry I think too much ourselves I also think we've done a disservice to ourselves by not really investing in education and learning and I really do think that if if you really want to make it you want to get back to an investor in mindset or we're actually making real money and changing the world we have to invest in learning not only for ourselves but you know the investors that back us the participants in our market and our ecosystem the partners we work with and we have to educate each other to kind of get there and I really don't think that we honestly spend enough time doing this to be quite honest with you and then you know finally um there's a bit of like a sex ed joke in here right where it's like does everyone know what the defi condom is all right for those who don't know what the defi condom is I don't know where you've been the last five years on Twitter but essentially it's the idea of um you know you have a token and you wrap it with some Thin compliance layer and it's like you know there you go you're safe right I think that's a [ __ ] way of approaching the industry again you want to build institutional defi you shouldn't be talking about wrapping it up as the only simple way to do it you should really be building kind of fundamentally better ideas I put contraception here but you could put self-regulation whatever you want to do whatever your kind of sexed joke of choices um but really what I mean there is that we have to build kind of fundamentally improved systems and like there's no better way to kill Innovation and finance than losing other people's money and if we just experiment in ways that are kind of wild and dangerous and we know they'll explode we know mistakes will happen we know that this this will be kind of what what happens in finance it's part of the process but if we do it in ways that we allow these kind of Destruction to kind of overtake our industry recreate Luna recreate FX I mean you know the world of institutional def5 will never happen right so ultimately I think it's you know contraception not condom so just wrap it up we actually have to build fundamentally improved and better systems altogether all right so it's very preachy I'm the guy standing up in here and kind of sharing things with you and then oh there you go right um so like what does that actually look like and I think you know Max can help me kind of call out some of the people here but this is what I think really the future is and this is a super hypothetical example there is actually a press release with feno and centrifuge today you can read more about that but what I'm trying to do here is actually sketch out a picture which I think is very reasonable of what can be achieved right now with everybody that's in the room today you know and very simply I think it's you have kind of online kyc that's integrated on chain that actually solves really fundamental problems when it comes to compliance with AML and kyc laws we can debate later whether whether that's the right thing or not but I think that's the truth and that's someone like violet right and they're in the room with us those guys in mob they're a good friend of ours and then ultimately you have customers in fooa right and phoa customers are large institutional customers holding stable coins VC funds operators businesses who make money on chain hold their assets with a qualified custodian like phoa um those assets can now be connected into the world of defi into centrifuge that's the headline today and you can now start to use those to actually get yield on those stable coins right no longer you have to just hold them and take the risk of a stable coin you can actually invest in anomid treasury shares which inano is our issuer that offers treasury bills then taking that a step further and I'm not one to really you know bag speculation and leverage because I think those are kind of the fundamental properties of Finance you can go to an OTC desk like galaxy galaxy does this already today they offer Bitcoin per there was never a better time to speculate on the price of Bitcoin than right now or yesterday in my opinion and you could actually use your an shares this collateral you don't have to put up cash as collateral you don't have to put up eat this collateral anymore you can actually use a very Capital efficient collateral Source deposit that Galaxy and you can actually then you know execute the trade on bitcoin perps this is a world that isn't a year away it isn't two years away it's legitimately two to three months away if we want it and what I mean by if we want it we have to really kind of come to the point of building together and investing together and really collaborating and kind of getting us to the right point where we're focused on the right things and again not kind of just chasing short-term cyclical speculative opportunities I think that's the future of real world assets and we have to kind of get in that mindset and I think it's really incumbent on us as individuals and builders in the space to really Dominate and own that mindset rather than letting someone else tell you to do it I mean just to be clear that last example if we go on slide back yeah on the right side that's a little bit Visionary the left side is today this is not hypothetical if I'm using F today a custodian and I have my my usdc sitting there or my stable coins I can invest them into C fut pools from there which is kind of cool and there you go come come party with us or I mean build with [Applause] us