Decentralized Custody 101 - Not Your Keys, Still Your Coins | European Blockchain Convention

foreign [Music] hello everyone good morning so I'm Clarice CEO of Defense defense is a cyber security company we provide web tree infrastructure or web free wallet infrastructure we are an API first company providing Key Management Services enabling secure and programmatic access to basically every blockchain and so at defense we're obsessed with the idea that our clients our organization should not need to trust us they should they should just use this and it should be easy for them to understand how we work and not to have to do a leap of faith to use this so we decided to look a bit at the history and how people had been managing their assets before how they've been securing their assets and interesting assets over the years yeah it works so the first banking system we actually find in history come from Sumeria it's 4 000 years before Christ and basically over there the the merchants were the trusted institution that offered the first loans it was actually grain loans collaterals collateralized stories in the barter system so people would exchange commodity and collateralize that with crane loans because of corruption because of conflict of interest the system collapse but before collapsing the king amurabi put in place the armor below to try to regulate it it's very interesting it's actually I think one of the first attempts to regulate banking system and there's a low the low 122 that basically asked for depositor to go see notary with all the assets they wanted to actually give in collateral to those Merchants to receive loans and only then would there be actually granted the fact that they did deposit these assets with Bankers so two thousand years before Christ we used a notary system that means a third party to make sure that people could be trusted so there was already the need to look at decentralizing Trust forward a few thousand centuries later so in in the Renaissance the church tried to actually be the bank to the people and it started early in the Renaissance in Italy the church found actually a loophole and managed to bypass the burn on usury and they actually started giving loans to poor people and loophole was that they couldn't charge any interest rate and with that they were actually paid in delays of payments they were paid in insurance from the loans so people started receiving loans from church that were basically backed by the gracious donations from Christians and this is how that system worked it worked until preachers in Florence started corrupting the system granted together more resources they actually called a palm day to encourage people to even give more offering to sustain their banking setup so it worked until it collapsed because the system became corrupted the new trusted party take advantage of the resources they had in management then pass forward about the same time actually about a few centuries later tried as well too control the baking system and for instance in the 17th century in Sweden the central bank was actually created in 1668 and at that time the king I then trust the founder of bangkodes.com sorry to manage to keep the depository banks for the state and so the keyget entrance Joan Pennhurst to actually completely manage how the banking system should work in Sweden with that Central Bank what happened is that it issued too much nodes which were not enough color realized all that sounds so familiar too many notes not collateralized and so the banking system collapsed and so poor U.N polymers was condemned to death even though it was the king that completely managed in his name that bench later the eae it was granted clemency but what happened then is that the authority went from the King to the parliament decentralizing Trust in 19th century we see the really first view of the the banking system as we know it today right so in France in 1888 under the Empire of Napoleon was created the first bank as we know it the deposit Bank Called Quest de Pano it's actually still active it even have the same logo so the case they ban was launched in 1888 to actually help people build savings and manage savings until then there's actually a a sentence that still exists in France we used to say that you cash in on the Badland which means you put your money into your stocks dirty sucks to avoid tips from actually taking them away from you should you know someone rob your house so thanks to the case dependent people no longer had to hide their savings into their socks it was the first bank that was really accessible to everyone not just to rich people not just to merchants not just to Christians but to everyone at the same time Napoleon had built actually strong infrastructure that still held in and and one of them is building a network of notary to be able to control what institutions were doing to be able to control private Enterprise right and so something that was asked to the quesde bank when they launched was to actually build what we called Libre which is really small Ledger and in these ledgers you would report you know I deposited this amount of money and you would see all the records of the transaction in these small letters right and so those ledgers were the guarantee for people should something go wrong with the bank they could go see notary and see hey this is what happened this was my money I didn't get it so that's use of a tool using something to actually help you build trust using a device to be able to claim your position was actually one of the the first time in history in modern banking that that happened then in this relation happened in 19th century with industrialization modern working had modern banking happen and with that the need to build welfare state happens in order to build a welfare state you need to collect tax collecting tax became something that was even more important with the words World War One World War II so there's a set of several acts in the US for instance in 1926 in 1942 that increased taxes and with the need to increase taxes and collect fast taxes the United States starting employee appointing the employers as the tax collector so the employers became the custodian of money of the wages that people needed to give to the tech to the states in order to pay their tax it's the first time in history employer actually had a political role of of collecting tax and so that's when that went well the States was actually able to collect faster taxes to collect more taxes so welfare state was built thanks to this employer taking this political role becoming the custodians for the states of the tax money and in 1961 President Kennedy actually made a law on pensions demanding that employer build more pensions for the employee and appointed employer to collect the pension money so not only now employer regulated taxes on wages they will they will also collecting the pensions two years later maybe you're familiar with the start baker auto manufacturer it was one of the biggest manufacturer at the time and two years later it went into financial difficulties in order to maintain its business issues pensions money and it bankrupt and with this bankruptcy seven thousand of people lost their pensions so employers failed at being custodians for the employees for people of their actual savings and money [Music] it took about 10 years for the United States to actually build new law around custody and in 1974 President Ford put in place the Ariza act that basically decentralized custody to custody Banks so employers add to interest trustee custody bank with the pension money they could no longer build pension plan in their treasury in their corporate treasury they had to appoint trusted banker and that's really when all Financial system as we know it was actually born developed grew grew until sorry grew until hey I skipped that one grew until something far too familiar happened in 2008 regulation being close to custody Bank became favorable in the 1990s and the 2000 and enabled them to increase their leverage with risky investment that led to 2008 financials crisis and we know it too well that led to 14 trillion dollars worth of wealth being lost that led to actually people losing their money people losing their home people losing their jobs and that led to actually the white paper of Bitcoin being launched in 2008 that same year the need and the willingness to build a decentralized monetary system so we do not need to trust trusted parties anymore then I'm sorry it doesn't work well I guess we won't see the slide here you go yeah then decentralization thank you decentralization was born but because it was far too complex to interact with blockchain technology directly decentralization was operated by centralized entities by centralized exchange by centralized trading platform and that led to mismanagement to hacks that's casted a lot of distress in the industry and to the failure of building a decentralized system as Satoshi had Envision it to start with right so we think that it's very interesting to look at this history because what it shows is that we've always tried to actually build decentralized trust we've seen that decentralized yesterday I'm really not managing to do that well I'm sorry all right can someone help me uh yes too much here we go so when we talk about decentralized yesterday spider the centralized custody protocol doesn't exist today spoiler 2 when we talk about decentralized custody there's a regulatory component that we have all no impact on right there's no way we can actually know whether The Regulators will prone or not a decentralized system to actually custody funds but what we know is that actually through technology we can try to start building a decentralized Key Management Services that will help you to actually store in a decentralized way your assets at defense we work a lot on that and and we work and our research team is really dedicated on this point and today we don't have the solution yet but we know what are the properties that you must look at when thinking about decentralized custody or when looking at providers that actually want to sell decentralized case study all right so security properties there should be no single point of failure first and foremost with very high filter larynx and very high attack local tolerance in order to provide the security they should be high geographic distribution to increase continuity and to make sure that people can keep on using the centralized custody system in terms of incentive a strong incentive should be put in people operating decentralized custody to maintain efficiency in the setup so it goes through a strong attack token economics but it goes also with the fact that you need entropic signal implementation to avoid the possibility of parties to collude this is a very important point there will be no decentralized custody if we're not able to actually meet the use cases that need efficiency in terms of signing speed in terms of volume of transaction right so the scalability of the key recovery mechanism is very important but also to put the segregation of public private keeper to make sure that even in a decentralized case study people cannot commingle funds these are a set of properties that we think are completely mandatory in order to build decentralized custody what history has shown us is that people I've been trying four years to try to build this A system that will prevent its its meaning corruption it's meaning Communications to lose their money and that will prevent themselves meaning loss meaning beings being robbed to lose their assets so the ideal decentralized custody system relies on the technology that is able to achieve both in order to guarantee that organization never have to actually do a leap of tape of Faith sorry to enters their assets thank you very much [Applause]