The Future of Asset Management On-Chain | ETHSofia

[Music] Hello nice to nice to see you guys okay so today we're going to talk about how does the future of asset management looks on chain uh interesting topic several elements uh uh we're going to discuss several elements here um and I'm going to start with a controversial question first of all so I was was traveling last week on the highway here and I saw a billboard on the highway uh where a trat five pension fund was kind of like um advertising a double digits Roi so my question here is playing The Devil's Advocate if it's not broken why fix it we have double digit rois but it it kind of is broken though cuz it's like that double digit Roi is is based on trust technology right like when you're doing ass Management on chain whoever is like interesting Capital to you can see exactly where and how you're deploying that capital and can blog by block basically validate that they are getting the return that you're reporting to them right whereas you know conventional s uh like conventional Financial system you have 15 intermediaries between the person that takes your money and the person that actually makes the investment decisions and you have absolutely no idea like if what you see as a report is actually what happened and where that that yield came from so I think I think it's pretty broken when I when I started building because I actually come from traditional Asset Management I was working in an investment Bank uh and so I would say that yeah it is not broken uh I think that for example Pension funds in United States have been have been having like a very good performance for the past like 10 20 years for me it's more about like accessibility like who can actually uh access such uh investment schemes uh the second one is the fees uh majority of the time those private in investment vehicles those private Pension funds actually charge a lot of fees so the you as a end receiver you know you are really getting uh much smaller return than you would actually then you would actually do if you are investing by yourself in the same in the same markets and uh what Ivan said uh what what he started with it's a lot of it is like trust me bro bro yes it's like if something is going is going there which makes the fund like uh underperform you don't really have clear visibility of how and when that is happening yes you have one report uh at the end of the year that you're going to to read uh but in in crypto in in Asset Management in defi you know as soon as something happens everybody are already talking about it you have you have that transparency that is really missing from threat file um and yeah I would I would say another thing is that we really don't see a lot of the that is happening on traditional Finance we see everything that is happening in crypto simply because uh people see it on chain it's transparent and everybody start talking about it right away but I I got my debit card stolen literally like two months ago my bank did not even want to tell me that my debit card is stolen they just blocked it and said oh you need to fly to Bulgaria in order to get yourself another debit card yes obviously not not going to mention the the bank name but you can imagine the amount of stuff that is happening in trfi yeah transparency it's important you are mentioning 10% but from where it comes you can't know you have to trust the people who advertise those 10% and I wanted to add more about accessibility it's true that in Europe in America we may feel that okay I have access to investment vehicle why do I need defi but we have to think about other people you know defi doesn't have the same value for everyone me as a European maybe I like defy to generate s but if I was living in Africa or in some countries or you have not access to all those vehicle actually I will validify way way more okay awesome um so I'm hearing trust I'm hearing transparency I'm hearing access some some of you said fees which is something that we might get into a little bit later um and I think you need a new bank first of all so yeah just um I guess but yeah Okay cool so I want to I want to touch touch on one of those things which I think it's very interesting at least for me the uh access point of view so you know Pascal you're you're you're saying about how defi means different things for different people right and um there is this promise in defi that uh it will make Financial tools generally more accessible right um have we already seen this happening are we yet to see the accessibility Factor starting to play in or we see this massive wave of people come in and when are we going to see it if it hasn't happened already like this cycle in 5 years or how do you foresee the the the accessibility element playing in so for sure not this cycle maybe in 3 years 5 years but but then when we speak about the adoption we have to know which adoption we speak about do we speak about adoption of institutional companies or individuals so I think the adoption of individuals will come super mega late because as you all know defi it's all about self custody protocols I mean it's very complicated there is a lot of uh uh it's very complicated to to navigate within the D so we will need a lot of work within the uix also the security and the education so I think the first um uh real adoption that we're going to see not in this cycle but I guess maybe in the next three to five years will be from institutional uh mainly thanks to real world assets and and mainly from tokenized bonds I think this is where you have the biggest upsite for companies and one other things is um you know most of the yell now that you can get in in defi it's based on dollar here we live in Europe so we always have to think about the Forex risk and uh right now there is not a lot of solution for onchain Euro yield and the cool thing with real world asset is that you could toonize Euro depth either from countries or from companies and then you can work with a or Moro and you can put as collateral this tokenized depth so you keep your exposure to Euro but then you borrow usdc or whatever and then you go to generate your yield and because it's way scalable to generate 12 with dollar rather than with Euro and net alone Swiss frank and all the other currency this kind of of system where where you can borrow against national debt or corporate debts could unlock a new wave of adoption at least in Europe because European company will be able not to find a way to hedge their Forex risk which is quite expensive and they could have the tools to generate yeld on Chain by keeping an exposure to their local currency yeah defi defi adoption like from from retail is is definitely not very close there there is still a lot of thing that that needs to be done mainly with like how we are going to on board those people in the first place but I would say like stable coins for example already have shown a massive product Market fit yes and maybe in Europe and in United States not that important but in Africa in Southeast Asia you know there are people that receive their their salaries in stable coins they they transact they pay services in usdt so this is already there uh also like the onboarding has kind of been solved in a very decentralized you know P2P manner which um you know it's it's not as scalable as as being able to on board people uh via Banks yes like going to the bank and give your cash and they give you like usdc uh it's not that scalable but it's uh I think that for the current state of the industry it's sufficient enough to be able to allow us to continue on boarding millions of people into crypto uh and for defi to get to get there as for for that money to actually be plugged into the into the ecosystem we really need the service providers uh I don't expect that people are going to be defi users but by going there and doing it manually themselves they're always going to go through some you know asset manager curator uh they are going to get like a curated experience for earning money from like earning passive income from from the assets that they hold on chain yeah I I was going to disagree on the adoption but then you mentioned the stables and it's like God damn it you rugged my point but um speaking of rigging I think retail is probably going to not going to come soon because of of of CI right I I have a a good friend in the US he took out mortgage chucked the money into block fight because the yield was insane compared to the mortgage and now he doesn't have the money right and that experience sticks with you for years right like it's not going to be like oh it's three years later I'm going to like try it again right you've lost like six figures uh to a company that was laring as part of this ecosystem um and you know that stinks you tell your friends you tell your family like it's there there's there's going to be a lot of stigma because of past mistakes um and on the flip side when when when it comes to to to stable coins right like last year we were Dev connect in Istanbul and you know there was this like oh like be careful payments in crypto in Turkey are illegal blah blah blah and then you go to the to like the I don't know the name like the the massive market like the the Bazaar in in Istanbul and like like you can pay in tether for everything to everyone right like so it's not only that like adoption is not promoted it's actually actively hindered by a government and like still people use it because it solves a problem so I think we we we've proven that there is product Market fit for certain products ideally that Universe would be expanding as we add more abstracted or as you said curated experiences that you know are easier to click for for the everyday person and I I also agree like organizations coming on chain makes makes makes makes a ton of sense again across like Nob brain use cases like remittance FX yield yeah yeah yeah no I uh I I really want to talk a little bit more about the uh as as you said the product Market fit of of the stable coins and yes def def connect yeah I I I think I had the same experience there as well but um about the stable cones and I probably I'll get back to what you're saying about this being hindered by the government but stable coins 100% agree uh I'm on the same page there is a product Market fit there right um but there is this um bitter taste sometimes from situations like your friend um and then the conversation about regulation starts coming up right and how are we thinking about the regulation environment at this point because we can all agree that you know the uncertainty that we have in our space is there and we need to maintain a level of trust and liquidity while navigating that so generally my question probably I'll start with you um how are you thinking about the the the the general regulatory uncertainty that we have today I I prefer not to think about it if possible it's just being enforced on us um so I think generally um there are clear Bad actors in the space and the fact that they get away with just slap on the wrist right there is a famous project they raised like 4 billion a few years ago to to build an ethereum killer um and then they got a 25 million fine which is which is a joke right and then on one hand projects and teams that are trying to stay compliant struggle and at the same time if you're just like gunsling and do whatever you want even if you get caught nothing happens so I think the regulation in its current state actually punishes good actors and and like creates modes for those willing to step over the line which is quite problematic so hopefully we like you know there's coin Center there's UC there like a few a few initiatives trying to educate Regulators on on how to deal with this uh but I don't think they're going to come and save or help meaningfully because we we we've seen this with like digital media right like it like like adequate regulation came you know 10 years after everybody was on Facebook so I think unfortunately regulation is not going to meaningfully protect individuals in in in in the near future it might help onboard organizations because they would be feeling more comfortable touching and interacting with our ecosystem but you know you as a as a person you know you know self sovereignty comes at a at a with great power comes great responsibility and you know people should be looking out for themselves to a large unfortunately yeah so I'm very anti-regulation uh like like I said I come from traditional Finance uh I was working in an investment Bank uh why I left the industry was because of compliance and regulation was because I saw how people that you know work and live uh in different parts of the world basically do not have basic access to financial services you they come to you they they ask for services and you cannot provide to them simply because they are from a country like let's say they're from Peru and whatever you you do no matter how much documents they f up your compliance department is never going to approve them to become a client of the bank yeah so this is the reason why I was like okay I don't want to do crypto banking I want to do crypto crypto and one of the first things that I that I wanted to build actually was a derivatives exchange that allows you to trade uh you know Commodities gold stocks using crypto and the slogan was democratize access to speculation because really the the accessibility that crypto provides to financial services is for me what what makes it so special of course uh didn't didn't operate that exchange for obvious reasons I also don't want to go to jail yeah but um yeah uh regulation should not be like a Minority Report uh type of enforcement like where it's oh I think that in the future you might do something bad so I'm going to KNE upap you from now you know if something bad happens if if the protocol does something bad or if it works with terrorists okay welcome go chase them after them punish the back Bad actors but you cannot start hindering everybody from the start before they have even had the time to build something meaningful so for regulation first we have to remember why we have regulation we have regulation to protect people who don't know like if you don't have regulation everybody can do whatever they want and you can scam literally easily everyone but doesn't mean that you need a regulatory body in Switzerland you have self regulatory we can have self regulation I think in thei we are more I mean we are many mature people we know what we should do what we shouldn't do and we can all create a self-regulation you know system where we have guidelines not something as you say Ultra strict because yeah strict regulation kills everything but reg regulations should be guidelines like how to do good how to don't scam people how to make sure that the people who use your protocol uh know all the risks but literally all the risk it's what for example Ana has done they have done a very good job as um at displaying all the risk that you you can occur and regulation should be this just to teach your user hey if you do this this could happen uh and and and not too strict like we have in try and basically that's all and and something else about the uncertainty I don't think it's bad to have reg regulatory uncertainty like you say we first innovate and then we regulate but the cool thing with Defy is that unlike trfy if tomorrow you create a web to a startup and you do something and then regulation comes you're dead like like you're just bankrupt and you have to do something else in defi it's actually super flexible okay regulation comes let's do something else we change some stuff and we can easily adapt and I think this is why I'm not really afraid about the regulation uncertainty yeah there was this uh interesting talk a couple of months or maybe last year the regulation benefits the incumbent I don't remember where the talk was from it was it made some uh some waves there but that's that's that's an interesting take um and I I like what you're saying Pascal that you know it's it's about self-regulation it's about you know the level of maturity that we have uh within the space and I want to switch a little bit because I think we are talking about as as um dimiter said you know people from Peru accessibility um and I think Ian you mentioned about or I'm not sure about people coming in through service providers right so I want to link kind of those topics and I want to ask an interesting question which I'm interested in more um h what about asset managers how should asset managers think about the onchain world or should they think even think about this as as people who are guiding uh guiding us into into the world of uh of asset management in general you said the OG or the Legacy world like as in crypto ogs or like normies um who who should just to make sure I can answer the question correctly so my question was more about no normies I would say I would let's start there let's start there yeah it's it's you know well welcome on chain let me be your guide kind of situation um I think a lot of it is because we one of the things we love in this space is is creating new terminology so I think people like uh like you with experience across both traditional Financial systems and defi uh would serve as a bridge to translate con ceps that we have in a language that is comprehensible for someone that has to fit within a certain context and whatever mandate they have um ultimately bringing traditional asset managers on chain is beneficial for both ecosystems it provides the traditional world with an opportunity to to get exposure to the best performing asset class in the past 20 years or so um uh 15 whatever uh and um at the same time you know one of the one one one of the challenges that a lot of protocols have experienced is like oh you know like there's a lot of venture capital coming in the space and there's a lot of people that are willing to invest in a project at its earliest stages and then you know later on there is no support no activist investors no like liquid token investors so you know a team that is in the early Innings gets a lot of support support and then as and support I mean by like like actual professionals that make investment decisions for living and know how to direct the team towards returning value to people that have supported it financially so I think you know the like the inflow of not only Capital but also expertise that can help projects evolve and move further into their into their um development is is is is is a big net benefit for us as an ecosystem I I think that for for asset managers you know the first thing is like defi in general is a is really a a land of opportunity for them in traditional Finance everything is is already so efficient so for example if you are let's say if you're investing in a money market fund and I give you a list of 100 money market funds and you see their performance it's going to be maximum 10 bibs difference per year of the same class the same type of money market funds if we are talking about like a defi asset manager which is optimizing for E uh utilizing a spectrum of let's say credit markets uh on ethereum the difference between somebody that is just like oh I'm going to deposit all of money my money in a and somebody that actually understand has the data and intelligence of like okay which strategies are right now very popular where are borrowers willing to pay much higher borrowing rate which means that for me as a lender also means a lot higher e yes the difference between those two parties is not going to be 10 basis points it's going to be like a thousand basis points you know that that's massive so first it's a it's a land of opportunity uh second is uh for them to also get a little bit more you know supported by by Builders like us with with building more familiar tooling so right now you know asset managers come come into Defi and you cannot expect that those people are just going to to go there and do like go to the front end and click buttons with metamask and deposit and withdraw and leverage Loop yes you need to build the infrastructure that they are already familiar with you need to build aggregators you need to build data flows you need to build the compute so they can just come in they they are already very smart people you know they can they can read the data they have the the data anal analyst they can create complex strategies uh so it's now like how can we help them to actually be able to execute uh successfully those complex strategies and and of course with that uh be able to on board a lot of a lot of users in and new money flow into the def space we can also automates everything from the risk management point of view like if I want to give my money to an asset manager someone who is dealing with crypto I have to trust him that he doesn't run with the money but now we have onchain tools like smart contracts so of course we have the multi wallet but now there are better things you can put your money into a smart contract and you have to White list some strategies so for example you give your money to an asset manager and you say I just want you to do Arbitrage between two money markets so when a pays more I want you to put my money into a when it's more for you know I simplify a lot but you you can say I want this smart contract to can only send money to a or to Moro so for the risk risk management perspective it's it's way easier it's way it's it's streamline it's way more streamlined and so this can help a lot asset manager to actually do their strategy they can present the strategy to to their clients and is the clients agrees oh it is Whit listed and the asset manager can take the money and run and do whatever he wants with it so onchain asset manager they they start having and they will have more and more tools there is a problem of the accounting this it depends on the country where you are like I was speaking with someone just a few minutes ago he's in Bulgaria he would like I mean we're speaking about D5 strategy and I don't touch this not because it's not good but because from an accounting point of view it's a hell so it's not just defy what what's happening on chain but we also need a accounting solution and and the country also to recognize no what to do as transactions but yeah for onchain tools it's a dream for asset managers absolutely na calculation on the smart contract level is is is just a GameChanger but sometimes you can't calculate Z nav so now there are some project that use either claros or Uma and and they they calculate the nav eles and then they they ask Umar Clos to challenge like okay do you think the the nav it's to calculate the the value that your phones has at certain points like if someone gave you 10K and and you made money then the nav is is higher and it's important to know what's now yeah true uh if you want the money to go cross chain you would need some you know some type of oraco solution but but really just having having like an earn product where everybody can deposit their money and then all of that logic of like okay what is the performance how does the share price of that fund increase is happening in real time like block per block that vult vote knows exactly how much money it has and if uh if a user goes and they want to redeem their money it's not going to be like oh uh it's a TP plus one yes uh let me calculate it first and uh tomorrow I will send the money to your bank yes it happens instantly so also from comp possibility point of view you know for money to be able to flow with that speed you know at the cost of ethereum transaction and that's on on Main head it can be a little bit prohibitive yes but you also have like layer twos where for example we run a money market fund on arbit room which for one like one or two weeks it have already rebalanced itself 400 times because the cost of transaction there to move asset between the different credit markets is is very very cheap yes this is nowhere you're are going to see something like that in traditional so it's much more advanced so it comes with speed it comes with efficiency it comes with transparency and I would say security because the security is programmatic it's not based on trust me bro I'm not going to run with your money yes Al so you no go ahead something that Pascal mentioned around like like specifically on the topic of security right like we had this case where um regulatory pressure regulation pered say created problems for cicon Valley Bank right and but it was Friday so everybody was like freaking out for an entire weekend cuz like it's like oh like if I go there on Monday to withdraw my money will they be there right and and on chain like like on so for example we we we use the setup that you're describing where you know like the client wise list strategies and then we can only move assets between those strategies and then on top of that you have uh like a service provider that Det detects exploits and we can literally automate of like above a certain probability of an exploit just withd draw the capital and then you know make sure you're safe later on we can investigate and figure out and yeah sure you have the cost of like for goinging return for you know 20 minutes 2 hours two days or whatever but you have this automated security which in traditional in the traditional markets it's just not possible because traditional markets get closed on weekends public holidays true true I just want to so from a u point of view from all the said you the things you said we could also tokenize the investment of people so if you want to exit the funds instead of exiting you can also sell your token to someone else and this is very useful awesome okay um let's have some questions how about some questions um any questions in the audience if you have a questions there are two microphones so feel free to ask our lovely panel seems like it was very clear okay let me ask a final question then if there are no questions from oh there's a question please go ahead I'll I'll ask when I'm obviously biased so I'll ask something not related uh what do you guys think about AI automation for Asset Management strategies you you need to teach the AI uh so you you have to give the AI you know what to how to think and how to react but as an automation tool I think it's very useful I mean I'm using AI not for investment but for automating many things in my life I can't imagine a world where you can't do the same thing for risk or strategy automation yeah I don't I don't think that it's there yet I mean AI is quite stupid it's like it will it will give you it will give you good results if you give good inputs yeah so it really depends on like the input that you're giving it uh I don't think that AI can do automation uh you can you can write a very simple script yes if you have the data available already you can write a very simple script to do the Automation and it does not really require the use of of AI agents but I think it will get it will get there yes uh we just started with this probably in like 2 three years there are already going to be you know there is going to be enough data there are going to be enough uh reference points for AI to actually observe behavior of different markets different currencies to then be able to suggest what strategies should be used to maximize the profit and uh minimize the volatility of returns we we we we have the same friend uh who who who runs quite sophisticated strategies on option markets in in Shanghai and uh I've spoken with him about this topic at at length um say same feedback like like AI is not at a place where you can let it uh manage money autonomously like we've all seen this oh I I gave I gave chat GPT or whatever abstraction of it $100 and it made me 3,000 and and that's that's extremely heavy survivorship bias right because because we hear only about the the the good cases and especially from from from like a the perspective of someone who who has to manage capital for other organizations like like the AI up is not what I want to tell people that have given me Capital to manage so it's like we we are we are quite far from from allowing it to make decisions 100% it helps with Automation and you know like report generation Etc but like it's it's not there yet it could be useful for risk like you can give the AI two smart contracts and you can ask them okay this protocol claims it's a pure Fork can you see if the code has been changed or yesterday there was an issue with radiant and and uh the the computers of multi signature signers have been compromised if we have ai and and so whatever they were displaying on their navig web browser they were seeing something fake and and even the simulation given by uh safe the safe app was a fake if you have a separate you know AI instance and you say hey I'm about to sign this transaction can you can you give me the outcome thei could be able to say it yeah I'm using it sometimes for smart contract like can you read the smart contract tell me which features I should use or you can ask them okay what are the risk involved with this smart contract what are the admin rights and so on so in that sense AI could be useful not to take decision investment but to help uh measuring the risk of this or that protocol okay seems like it's not there yet but it it might be there in a few in a few years cool okay any other questions we have from the AUD yes please uh hello Valentina from hacking uh my question is about security uh Z mentioned that there are some automated tools which do onchain monitoring of transactions un usual unusual patterns on chain and my question is are this I think maybe to carpat are this tools developed inside the Enterprise or it's somewhere somewhere outsourced from security companies and when something bad happens who has control over this transactions like the fund manager or the asset manager or that uh company and people from security side so so the the service we are using is called hyper native uh I think it's probably one of the most adopted ones in the space um and the ultimately the action taken is just uh risk off mode so basically Capital gets withdrawn to to to the safe the multi where where the assets are held so it's not like proactively moving to a different place right so it's sort of so you know the action reduces risk it doesn't create new types of risk the the only risk with that automation is I'm going to lose on the yield right like it's not going to cause a transfer to a new address or a transfer to a different protocol where you know actually things can go wrong it just withdraws Capital back to a place that has been verifiably safe all right and with that I think we can end the panel thank you very much for uh the insightful conversation and if you have any questions afterwards feel free to find the Gentleman thank you thank thank you [Applause] [Music] going