"Intro to DeFi" - Mariano Conti

talking about our next talk and the next talk we have planned is actually a talk by our very own mariano conte who is going to be covering a very high level and also some depth about defy and what's going on right now in the space and he's going to just cover a handful of things about this and for those of you who don't know mariano was previously at maker dao and is overall a great guy so i'll let mariano take it from here welcome mariano hi thank you so much for having me okay let's get this started um i'm really really excited to be here um i'm a friend of youth global and uh i've been to a bunch of hackathons and uh participating in the last eighth online and uh really excited to be in this one as well so um this is intro to d5 and let me say a little bit about me um been around ethereum since 2015 um was in maker up until last month did everything from you know oracle smart contracts to helping out with the psy and dye i'm currently a retired farmer and d5 historian of sorts and maybe work on something new we'll we'll see about that uh today i want to talk about what is defy why we defy a brief history of it as i see it and as i've experienced it and also a little bit of what is next or what i hope comes next and it's gonna feel a little bit like this i'm i'm usually the the old guy surrounded by uh by young people i actually enjoy it all of you uh keep me young keep me curious so please continue to do that and if you uh enjoy this kind of conversations we can we can always have them i uh this is really why i'm in this space and why uh what i enjoy the most um so to me decentralized finance is in short taking control of your own financial destiny in a trustless and permissionless way um i've been living on d5 since 2015 2016. um it works across borders it's uh it's uncensorable and most importantly it's on ethereum i i am very adamant with this um what everybody has created on the ethereum blockchain is unparalleled and while we may end up seeing you know some bridges and some level two solutions uh i don't expect or i hope that the main financial system of the future decentralized is going to leave it's going to live on the ethereum blockchain let me tell you why we defy or why i d5 i've talked about this many times uh living in argentina it may be different than why you use decentralized finance but i use it to escape a crappy economy and lousy government and capital controls um i gave a talk at defcon last year october 2019 i just looked up the argentine peso was around 65 pesos to a dollar today it's 147 to 150 pesos to a dollar and you can see the uh mortal kombat image on the right the dollar just obliterating the 2 peso bill the 5 the 10 the 20 the 50 and now it's between the 100 and the 200 and this is akin to what uh you know our brothers and sisters in venezuela uh you know go through and in other places and decentralized finance gives a lot of people an edge to escape this kind of thing and the beautiful thing is that before it used to be mostly people in tech right um engineers those who got into bitcoin early then ethereum but slowly we've been building uh uis abstractions that allow a lot of people um to have access to the systems um you know for example here we have a restriction that nobody can buy more than 200 legally in banks per month this has been going on for a while and this also drove a lot of people in argentina to use dye and having to use dyes sometimes meant using uni-swap and a couple of weeks ago or last week when the uni-swap airdrop happened that was like a ubi for a year for a lot of people here i think it's truly absolutely magical what what is happening and you know there's a lot of things that that we can do and like i said it depends on where you are and what your uh what your economic status is but there are plenty of reasons to use decentralized finance the ones that i care about the most uh tend to be more to the you know equalizing societies it is not the only one and it is not the only valid one um i always say it is fine to make money to speculate i'm not against open markets it is not what interests me the most but if that's why you're in d5 then it's a total completely valid reason and i'm not going to say anything about that but some of the reasons about it that you know you can earn salaries in stable currencies that to me has been life-changing and too many people that i know um of course a big one attractive interest on your capital it's uh we've all seen those memes where uh banks say oh we've reduced your apy to point one percent point zero one and we laugh at that right uh of course there are risks involved we can get instant loans without uh going to a bank i i bought my my car with a with a cdp back in the day we get access to new financial services uh we can speculate on finance and much much more now i do want to talk this is a brief history of d5 from icos to yield farmers i i want to give an overview as i see it of what got us into where we are today and i want to start with 2016 because uh if you're a mainnet launched in 2015 but really if we want to talk about d5 proper i think we can start with 2015 aka 5 bc which is of course before crown year there wasn't much in 2016 this is uh i got this from a tweet today this was ether delta uh it was uh probably the first decentralized along with the maker market decentralized order book exchange and there wasn't much more that you could do there there were a few tokens you could uh buy them and sell them and and it looked like it was good enough for the time and truly it was uh of course we got the dow that can or cannot be uh characterized as uh sd5 maybe the early beginnings we had ether delta but there were hints of what was coming in the future so if we go to 2017 aka four bc we started seeing uh projects either released uh to testnet or to mainnet uh maker released uh the size stablecoin at the end of 2017. um you know we had digix auger was around of course not on maintenance and sure we got the age of uh icos right uh i wanted to share because i just saw it this morning as well this is the original uh psy dashboard it was crude but it showed you everything you needed to know about the system i took a while to load but there was there was no hand holding right it was this is this is default do you want to get uh a loan in a stable coin you need to put ether in there and figure out how to do it but if you managed to do it it was magical it was you could put in uh your ether the native token of ethereum and get a decentralized table coming back that was packed to the us dollar and there were markets around that it was uh you could easily start to trade this and with the launch of stable coins inside we saw the initial boom of um of decentralized finance because now we had a stable unit of exchange and to me at least and i'm extremely biased as you know but to me at least this was the the actual birth of uh and what what paved the way to the rest of uh of defy as we know it um so what did we get in in 2017 of course we got many many many many icos but we got maker cdps which were loans we got the site stable coins we got a few hints of of daos and i'm gonna miss a whole bunch of projects uh in this presentation i apologize this is uh this is a brief history if you wanna if you wanna know a lot more please uh read tammy's book she's gonna be on in a you know you know well uh we had a lot of projects on testnet and we did start to see some early adoption but what we didn't have yet was uh defy's biggest uh strength which was interoperability right the ability to take things from different projects and having them work together and that's what we got in 2018 or 3 bc we started seeing projects like dydx compound ave was ethelene back then uniswap at the end of 2018 uniswap is is not even two years old um but like this is uh what uni swap used to look like i couldn't find an earlier version i believe this is probably one of the first but uh we got the ability to long and short uh tokens with dydx we had the beginnings of uh money markets uh with compound we had token swaps but the best thing about everything is that we started seeing projects that used all of these things together to create new things and that is what gave birth in 2019 or to bc to a cambrian explosion of projects and also stable guns right but 2019 was when the community and i don't know if it was also uh what everybody called you know the crypto winter uh we were past that craze table and everybody went back to work but there was a lot of things to work on it was you didn't need to start from scratch anymore you needed a stable coin you could get it you needed a money market there were a couple available you needed to do anything you didn't need to reinvent the wheel you could just reuse permissionlessly other projects we started seeing more we saw the rise of synthetics and nexus mutual we saw other tokens from other blockchains starting to uh appear in ethereum wbtc we saw the initial uh money robots in in set protocol um this i think 2019 was the moment when we saw that defy at least for me could really be up to something we saw uh the rise of moloch february 2019 that gave birth to meta cartel and and and all of this uh investment vows uh designer dials personal dials any type of dial uh which to me are very much defy as well and now we get to early 2020 uh or or one before chronic and if 2019 was a explosion of projects 2020 was the cambrian explosion of total value locked right that was it's probably the three letters that i've seen the most this year it uh it's an obsession to see how much capital people can put into a project and just going oh there's 500 million uh dollars worth in d5 locked now there's a billion and then you know starting mid-year we saw that doubling uh every month or so or every couple of months we saw the rise of new project curb balancer year in finance open and others and most of this projects as you can see their main benefit is that they have a base layer but they also communicate a lot with other projects curve um of course being an amm of stable coins with the popular white tool that used avi in the background to earn yield um you know balancer if it's a it's a base protocol but there are smart pools running on top of it and of course yearn finance which uh created most of uh what we've seen for the past couple of months but uh so what did we get here we got better token swaps we got unit swap v2 uh we got smart token pools we got the ability to exercise options with open and we got the search for better yields and yield farming something that began with the synthetics mostly then compound with a calm token and it completely exploded with urine right so i think we also need to stop and talk about the past couple of months and the search for yield um yearn finance and the wi-fi token changed the game for good in my opinion it um not only created a radical new way of launching governance tokens it showed that you could have a project first revenue first and then a token later um it revolutionized the the concept of a fair launch which was a big thing for about three weeks and now i think we're back to uh some percent vc some percent uh uh team instead of a hundred percent fair launch i don't know which one is fair which one is not this is not the uh judging but it also shows how changing this ecosystem is after after wi-fi everything was a fair launch for three or four weeks and then it wasn't maybe next week it will be again um and it get it paved the way for a lot of experiments like some really good in my opinion like yam um which provided interesting aspects of you know governance elastic supply treasury but it also gave way to the food tokens right we got the kimchi the noodles the spring rolls we got many many many rock balls this past few months have been interesting to say the least uh they have been risky they have been a lot of fun uh if you manage to make some money they haven't been fun if you manage to lose money um but they have been sobering right i think we need to really reflect on what has happened and act accordingly uh we got the attack of the clones we got the sushi swaps the swerves the percents there are more to come there are some that were just blatant copies with no innovation and there are some that actually do seem to want to uh you know expand and not just say hey where x bought fair launch to the community so there's a lot of interesting things to to watch out for with the the clones that may end up not being clones at all so where are we now october 2nd uh 4 34 p.m argentina time i want to call today 180 if you will so one after degens we already lived through an intense period and let's let's try to commit if we can to a new era if you will this is the morning after as my friend david said last month d5 has been partying hard in the club for hours somebody just turned on the lights everybody's sweaty gross and drunk quick someone turn off the lights i propose something different i propose we turn on the lights we look at each other and we've realized that today now it's the perfect time to build we are also at the first day of a new global hackathon which is the perfect time uh to realize that uh to build something but um this is what i wanna this is what i wanna impress on you uh i think we should do it responsibly and well that's for uh that's for another slide let's not forget the reason why i think we're here defy is a way to con uh take control of your financial destiny in a trustless permissionless way i believe this should be our ultimate goal and that's why i want to stay five seconds on this live in case you share uh this mission with me look it's never been easier i was checking this morning uh moneylegos.studyd5.

com it's a few lines of code to get a flash loan from dydx instant liquidity a few lines of code to get a flash loan from ave same instant liquidity you can do it from uni swap as well it's a few lines of code to do a token swap using one inch or uh using uni swap it's extremely easy now the the foundations are all there uh this is getting uh maker dialogue you will uh forgive us the the taiwanese but it's still extremely easy and the protocol and the foundations are all there um 2020 is unlike anything we've ever seen the the kinds of projects that are already there you can do a lot just by taking all these pieces and putting them together into something new so my ask to everyone is uh i'm urging you to build but with this for tenants uh i want you to build responsibly you know disclose um try to get audits uh talk about risks this is uh still in its infancy it's a a nascent industry so please disclose as much as you can i want you to build intelligently that means you can reuse all of what people have built before but also build creatively innovate don't just copy everything there's plenty that you can reuse but there's plenty that you can add and finally i want you to build for scale and that means thinking about layer twos and if we want to give people financial independence we cannot expect them to pay five or ten dollars for a transaction that that may end up being half their salary or more we we need to get creative there and we need to use layer twos and that's the end of my talk i realized this ended up being a little bit of an intro to d5 then a little bit of history and then a lot of maybe just me pontificating about things but i think it is important that we talk about everything that that i mentioned and i want to thank uh youth global for the invitation and if we have time i'm around for questions thank you very very much mariano uh thank you so much for that amazing intro i think you kind of covered uh all the recent things that are happening and just kind of your perspective on it and uh particularly like the historical perspective you've taken so uh for the people who are watching this on the chat please ask any question on the chat and there's about a 25 second delay so we'll kind of get your questions back to mariano soon but we have a few questions that are up and coming already and i'll start kind of asking them um here directly so the first question we have is obviously you've been part of uh d5 from the start through through maker and most recently you have really kind of direct perspectives into what's happening um for the developers who are working in this space um what do you recommend they do for being able to test how things will work in this connected default world without testing in productions directly and uh and does that change is there a better solution and uh and kind of how do you think about that moving forward yeah it is it is complicated because um of course there are so many moving parts that you know the the eye testing prod thing ends up being a necessity sometimes because you know you you need to test what happens in the real world with many different protocols that may not have test nets you know test net deployments even on the same test net but there are certain things that you can do you can you can use ganache to fork the state of mainnet as it is up to the last block and then you can simulate transactions you can do god mode where you can impersonate any address or you can give yourself any amount of tokens or you can travel to the future you can advance a few blocks advance uh a few seconds see what happens um not only ganache gives you this um dapsis with hebm also allows you to to test certain things it's not going to be a hundred percent there are certain things that it cannot do i know the uh the biddler team nomic labs they're working on uh expanding some of this so i would say look into that try to test as much as you can with forks and then if you do need to test on mainnet try to do it from an account that's uh not tagged as probably the most uh watched account on ethereum subtle um that's great uh the the other question is so i i mean we we took a look at everybody who signed up for this event uh from not just the hackathon but also the summit side and uh there's lots of people from various backgrounds from kind of traditional enterprise side to startups to people who are not in crypto at all and just want to catch up with it and obviously the pace d5 is moving is super kind of fast and it's just not super easy to keep up so we're wondering if you were able to sort of just highlight a couple of your current d5 protocols not not that your favorites but just kind of give us an overview of how some of these protocols work and maybe we can start with uh with wi-fi and just kind of get everybody an overview of uh what it is how it works why it's unique or why it's interesting and maybe something else you would like to pick on yeah um of course so um so wi-fi at wiring finance it's mainly a money robot that looks for yield and tries to give you more money than you put in so they have this thing called and and that is uh that is one part but it has been the main part um let's say you have a stable coin either da ustc tether uh true usc or another or you have ether or uh you have a token and you uh supply it to one of the urine vaults and what this fault does it is it looks for ways to put your assets to work and earn you interest on them and the way they optimize is that instead of having 100 or a thousand people doing it individually with their money they pull it together and they act as one big fund and they save on gas and they say on management and that is the the basic idea it's a money robot that looks to make you more money and um the the token is just you know a way to capture governance and um some of the treasury that uh that you know this search for yield gives you and that is that is the the gist of urine finance other protocols that i use almost every day is i use maker avion compound which are maker compound and ave are money markets so you can borrow and supply assets and depending i use it a lot to you know i have different tokens and maybe i need one to put into another protocol but i don't want to buy it then i don't want to sell the ones that i have so either compound or avid support the token that i have so i can i can loan it i can supply it to the protocol and then i can borrow another token back and i can use that token in another project and maker is not exactly a money market but it's almost the same idea you supply a token and you create dye from it and then you can use that die to uh maybe put into one of these protocols to earn some interest uh on that those are the ones that i probably used almost great i think a lot of these are actually very kind of common especially as we look at our hackathon projects they are currently being uh utilized a lot uh in experimentation for dpi uh so maybe one other question and we've seen a couple on this theme from the chat but um it definitely merges with the l2 side of the equation here but right now aside from all the creative sort of outcomes you can get that beat the traditional financial markets whether it's better interest rates or just being able to have access to capital without a lot of prerequisites the gas costs are definitely not uh sustainable for anybody uh you kind of point to argentina being the perfect audience for this thing but if the gas cost exceeds someone's salary alone uh that doesn't help them uh kind of take advantage of these things fully so kind of what do you see is like a good way forward towards making these things more accessible or kind of at least amortizing these costs and what is the right way to think about thereto for d5 well i i don't want to presume to be an expert which i'm not but i've already seen layer two working right now um git con grants they use the secret rollups and and that worked great um you know you have lopering right now where you can you can fund your account once and then do uh standard token transfers for uh pennies that that exists now i don't think the problem is um i think the problem is just we need further adoption of this um we still don't have the inter connection of protocols uh on layer two that that we have on magnet but for certain things like token transfers that exists today and um you know i'm watching closely uh optimism and uh what synthetics has done and you know they've announced that that there's gonna be other uh projects testing as well and if they can they can get you know the projects and optimism uh talking to each other uh i think that that's gonna be a huge step forward but for now i would say just go straight to uh you know what loopering is doing uh what git coin did with the with their grants the the ability to trade tokens on a layer two are live today i hope that makes a lot of sense um i'm just reading over the the next questions that we have i think uh maybe one question i have for you personally is uh i guess what do you think is currently missing in the world of dpi i guess from the perspective of uh these lego blocks like we got money markets we got lending borrowing in general we now have investing in multiple forms of it but what do you think is sort of like a thing that's not easy to crack right now and and things i can get excited about um i think i would say and this is probably a boring answer but we don't have enough auditors around and security experts uh i i very much did not like you know this past couple of months projects uh going live and on twitter uh tagging different auditing firms going hey uh would you mind auditing my new project for five ether uh i think that was the wrong approach and and you know if we're gonna have so many projects fighting for people's attention and capital the the least that we can do is try to try to play it safe and um you know i would urge anybody with knowledge of solidity to if if they can i know that the security is is like a very specific thing it's not i'm a smart contract developer and i wouldn't qualify myself as a you know as a security expert or even an auditor i i can't do certain things but i will need some more time and expertise but if anybody wants to follow that path i think now and for the years to come it's going to be extremely lucrative because hopefully we've learned and new projects come out audited and i know that a lot want to but there's just not enough people right now to to do that absolutely i think anything we can do as developers to make it easy for everybody to write a bit more safer code is definitely a much needed step especially when you're letting others play with money and uh there's obviously legal implications of all these actions as well and it gets very honky super fast as you can scale this into multiple geographies instantly so kind of having just seen how the last few months have played out i agree with you on how important it is to keep security in mind because you are trusting other people and they're trusting you with their money and that's personal so um with that i want to thank mariano for being part of the q a and your amazing presentation i'm sure we'll see you on our discord collaborating with a lot of hackers and helping them out and so thanks again and