The Future of DeFi Christine Lee mod; Windra Thio; Andrei Anisimov SIREN; Nikita Buzov Solace; Franc

hi the future of d5 panel all right i like just i i'm christine lee from coindesk um we have a show cdtv first mover 9 a.m and on weekdays eastern time as well as all about bitcoin three o'clock at 3 p.m so check us out live and i want everyone on the panel to say your name and introduce yourself and and tell us a bit about your project hello everyone i'm francesco i'm one of the founders of superfluid we are in uh an asset streaming protocol so using superfluid you can create streams of any erc20 token and a lot of teams in the space are using us to pay their contributors to pay subscriptions and to do other funky defy stuff where streams seem to make sense yeah thanks for coming guys hi everyone again i'm nikita the founder of solas we're an insurance protocol basically we cover you from exploits hacks any technical failures one policy covers entire d5 activity two clicks um yeah i think that covers it all hi everyone my name is vanessa grellay i'm the head of portfolio growth at coin fund we are a multi-strategy asset manager we invest in early stage d5 projects and other projects and we also have a hedge fund where we trade tokens and digital assets my name is andre anisimov i'm a core contributor to siren this is a protocol for decentralized options options is a financial derivatives that is getting a lot of traction lately in defy and we are building a protocol that allows anyone to launch market on any options market on any erc20 token hi everyone i'm wendra i lead strategy and growth at element we're a high fixed income protocol we essentially create like fixed rate marketplace for users to buy fixed income in various different assets awesome thank you so much all right i'm just i'm just curious out there how how many of you are newbies to d5 to ethereum to crypto any hands no okay so you who are at the project level developers and advanced and you know building and who's in between okay okay so we we see where we're at all right so the future of d5 i would say i mean we had d5 summer in 2020 2021 was a year of nfts they say this year 2022 is going to be the year of the dows so but going to d5 since we're talking about d5 i would say some of the challenges that have been confronted are accessibility not everyone out there in the mainstream world really knows how to use and gets lost in the jargon of what decentralized finances it's not so inviting or you know easy to grasp for a new person to use um liquidity issues on certain indexes and and exploits so i guess there's defy 2.0 and so i wonder when we talk about the future of defy what does that look like to you and i i would start with you actually because nikita yeah because because uh you addressed the insurance part uh with all the exploits i was just looking just this morning the top three exploits in d5 are all interoperability exploits such as wormhole over 300 million dollars hacked polygon or poly network uh also hundreds of millions of dollars and you're supposed to try to find a way to insure them so yeah so um the ones that you named are actually where the bridges they got exploited so that is like one of the hotter topics right now because obviously you know we build a bunch of chains now we want interoperability we want to create like this one environment where you can use chains it's like interfaces for all the protocols so users can you know get a choose uh with chain they want to use but then it introduces like a compounding risk um the bridges so right now it is uh very tough because like if you want to cover back something you need the underwriting capital right so that's kind of the topic i touched on my um my talk on wednesday but then i think the the whole issue we all want to interoperability we all want um to create kind of these um the environment that it's like safe and for example like solas is a cross-chain protocol we really use chains as like an interface where like the settlement happens uh but then to hedge the risk of the bridges we have to like develop a other piece of infrastructure where basically after like bridging token you have to like unwrap and swap it for the native token um so that what we did to hatch the wrist so basically if the any of the bridges that we use get hacked our protocol is not affected even if you stole like some of our bridge tokens because those are just kind of like a mechanism to transport but i think like right now the main challenge with the whole like coverage exploits it's just getting underwriting capital and efficiently pull all the risk across all the chains all the protocol because that can give you the capital efficiency needed and so like that's what we like largely focus on make sure we pull the risk inside each and every policy we pull the risk on the chain across the protocols but we also pull all that risk across chain um so that just gives better efficiency and more protection for everyone in the ecosystem because yeah i mean this is kind of like a plague i think nobody likes like exploits and getting wrecked and it's so complex we want the users to have good experience okay so you're the guy to address that issue when that comes along you've got your work cut out for you francesco you're doing something really super interesting in terms of giving employers a way to give a daily income stream to to people and maybe in talking about the future of d5 how do you see that changing the workplace yeah so as i said with superfluid you can send streams of money right and the main use case for us at the moment is basically contributor payouts for crypto native companies and dials and when we talk about the future of defy i think a lot of people imagine even more sophisticated ponzis and what i like to think will do is get more of those real cash flows on chain right so salaries contributor payments but even subscriptions b2b payments and once we get all of this stuff on chain we can start building commercial financial products right like cash advances invoice financing and this is the kind of stuff that's to be honest is more interesting for me because that actually helps a lot of people to solve real business problems and that in my opinion will bring the next billion people into d5 so that's what we are mostly focused on so who are what's that we could really use that yeah like this is a very nice tool because you know even us like i think all the protocols are having like a hard time uh you know like paying salaries and just like doing all the finance on the chain so francesco who are the people that are using your service and how do you extend this to more mainstream adoption well i'm not going to dox them but uh it's it is crypto native companies i mean if you are at the main stage you would have seen probably a few people that already have their salaries and streams it is fairly far out right so it's mostly kind of the crypto pioneers who don't mind trying something new but the way we expand it uh beyond crypto i think is by expanding crypto beyond crypto right so as i was saying for me the moment we can give people advances on their salaries the moment we can give them mortgages on chain then it becomes a no-brainer to actually use crypto to make those everyday payments that you currently wouldn't even dream of doing but until the experience on chain is 10x better than the experience with your local bank you're not going to do it all right we have uh so i actually have a very similar opinion in terms of i'm super excited to see more real world use cases that actually impact economic activity in crypto instead of you know ponzi farms and printing money out of thin air and all these things and so one of the things we're excited to build is because options is essentially a very efficient risk transfer mechanism so it allows real financial institutions to earn yield by selling risk real risk not just printing tokens and and selling them and so i also know that you guys are working on what you work in uh there are also lending on protocols that lend to real businesses uh in real countries and these are use cases that i think are going to explode soon and makes me very excited richard do you want to yeah that's actually super interesting because we've been thinking about risk the same way especially in regards to the fixed income market i think the transfer of risk in terms of yields is going to be something that really takes up the next couple of months not just options but also if you think about credit lending you know there's a risk of default and someone's going to have to price that properly and that is room for yields for somebody to kind of underwrite that risk and essentially just create a new form of markets for these interesting you know risk you know essentially and when we think about it from a fixed income perspective how do we still guarantee that the principal is protected you know what what type of a basket do we have to create to kind of mitigate some of these risks but still make the yields enticing for users to be able to participate in d5 i'm just curious how how many users are you seeing on your platforms and you know how is that adoption so you know we've been fortunate to have pretty pretty good traction on element in terms of fixed income but most of our users are fairly especially the ones that buy fixed income they're fairly risk averse i would say maybe about 60 to 70 percent of our users are not defined native they're mostly either some form of an institution or a really risk-averse dao that wants to kind of approach treasury management in a really safe way or they're effectively d5 prime brokers that are interested in creating a product but just experimenting with some of these primitives to see how how to price things how to construct you know what the returns are and so forth so so i think those are kind of like our users at the moment vanessa so you're from coin fund a very well-known uh venture firm so tell me a bit about how when you're making investments and what you see in terms of growth in the space what are you looking at so we see a lot of really interesting trends i think you know most of the people here alluded to them one bringing real world assets into d5 to managing the risk and i think risk management is going to be the big theme this year because people are going to try to fix the issues that we see whether in terms of liquidity whether it's terms of aggregating the risk and exposure whether it's leverage trying to find solutions so i was talking earlier on with a project that's looking at how to manage liquidation risks for stablecoin so i think that's going to be quick fixes and and things that are going to enable the space to grow a lot because it brings in a lot of comfort for traditional finance intermediaries that are coming into d5 trying to assess the overall risk that they're taking when they're engaging with these protocols so i think that's pretty exciting the other trend that we are looking at is really the financialization of nfts and how daos also manage could be you know leveraging defy so financialization of nfts we see a lot of new primitives and replication of existing you know real world primitives whether it's borrow and land whether it's indices or other types of management of collateralized pools of nfts i think that's pretty exciting because we think the nft space is going to be even larger than uh the current cryptocurrency space because you're going to be able to replicate world real-world assets and represent them with nfts and really create structured products and other types of products on top of it i wonder you know there there's kind of this debate going on in the transition from web 2 to web 3.0 about whether or not the current tech incumbents will just carry on their uh ways of centralization and and bring that ethos into web 3 and when you're making investments but you're a vc as well so the vcs have been criticized for you know having all the money and uh putting in and having perhaps undue influence on the space according to jack dorsey i wonder your perspective i think it really depends on your perspective as as a vc we've been investing since 2015 so we're pretty crypto native and we're really focused on decentralization i think you know we understand the value we understand that it might be costly at first but on the security and the sustainability that decentralization brings and creates is what is world changing and so now we see a lot of you know vcs that are more traditional vcs or more traditional asset allocators coming in and maybe not having that perspective so it's really important for us to support the project from the get go we're very early stage investors we you know provide the initial funding for founders and teams to create decentralized protocols and you know for us to just be sort of uh initiating that that movement andre i'm curious about adoption on your platform where are you seeing that happening regionally and how do you expect to make this more adaptable to mainstream audiences yeah so in our case because the market is so young pretty much a year ago nobody almost knew about options and and so the the main the main challenges to to grow this market is is the the infrastructure itself which is all we all um you know dependent on that is underlying uh networks that to make transactions cheap cheaper and make it easier to interact the wallet infrastructure all this stuff but in terms of specifically um our protocol is liquidity so it's more institutions willing to participate in this market inject more liquidity making this markets more uh available with better pricing and we see a lot of really good trends in that in that regard um on our protocol uh some institutions already systematically buying options and they're constantly growing the volumes um and another thing is users just the the end users who simply traders who want to take risks and trade options and there i think we are it's still very very early there because it's a derivative it's a bit of a complex instrument so it takes some time for people to catch up but we know that in traditional finance options are very popular and it's just a matter of time on you know building out the infrastructure to to enable that here just uh hitting off that i want to add i think also like options are like generally like complex and inaccessible to like a wider population because then yeah like how many trade options in the traditional finance like very few and then the crypto crowd is um smaller and i think uh what we've been thinking a bit is wrapping like a bunch of options into like these easy to use strategies for the people because we build these like cool defy tools for anyone to use right in open fashion but then with the lack of education people might not know how to like properly utilize them and i think it's our kind of responsibility since we're giving them access to it also like help them to use that um because then we were looking maybe how to like hedge in permanent loss and like with a bunch of different options you can actually hatch certain price ranges of the tokens like fairly well it tracks uh even though options are linear tools but impermanent loss is like a quadratic thing uh but i think there's like a lot of opportunity to build these kind of like packaged uh products uh that utilize options there i don't know if you guys like have thought about it yeah i'm just going to quickly add on that that i think that's the most exciting thing is like once we build the base protocols the next is composability it's like what are the all these exciting things that people can balance up because in traditional finance it's not that easy to build on top of other financial institutions but defy is all about that so totally agree with that yeah i know i'm in this exciting world winter you want to add to that in terms of yeah yeah i'll add a little bit onto that i think they talked about automated option strategies quite a bit kind of just goes back into the the pricing of risk situation in terms of what's going on in d5 right now if you see automated vault option for option strategies at the moment they yield anywhere between 20 to 30 percent apy and you think that's extremely attractive but the people that really make money on those specific balls are people counter trading against it because the risks aren't actually priced very efficiently so now you're starting to see false automated vaults counter trading against the option bots because they're making more money but also like another situation or scenario of arbitrage is if you participate in some of these auctions to purchase the options like for example last friday ribbon had an options auction each option was going for nine dollars each and on their bit they're 40 so there's like this massive arbitrage between decentralized options protocols and the way they're selling options to some of the centralized more liquid ones so there's so many different opportunities for yields on the option side i think it's going to take some time but when people start to really optimize the risk you're going to see some really really efficient markets and i am curious though regionally where are you seeing the most activity do you have a sense of where your users are for us on element it's mostly well since we have a lot more institutions probably in the us that's where we get a lot of interest from they are relatively larger size of purchases for fixed income but you know we're always looking to explore on the product side you know how we can kind of make our products a lot more appealing removing layers of you know abstract abstract away layers of complexity to like i said you know encourage distribution to be a lot simpler and for people to understand what we do a little bit better yeah in terms of like geographic distribution it's a bit harder to track in crypto because some of the projects they have geographic restrictions on their user interfaces for example like like us and um you know we we don't really have a good way to to track people and it's defy all you know is their address and you don't know if they use vpn or anything anything like that right and is it the same for issue for for you guys i mean we're open for anyone or any country to use but um but yeah i think we've seen the most users from like western world like europe and the us um and that's where like kind of like the most team is spread out so i think maybe that that affects it but we do have users like in africa and asia i think we covered every single country with at least one user right now which is kind of fun to see the map but uh but yeah most most of the people coming from the us and europe i ask because because d5 is in a bit of a regulatory gray area in the united states we have the sec chair gary genzer looking at crypt at defy investigating unit swap and trying to figure out you know how decentralized are these entities and so what are your thoughts on on regulation he wants to need some smart like regulation i think i mean right now we all operate kind of like in a grey area we try to like hedge our own risk the risk of like our protocols from you know regulatory scrutiny i don't think like any of us here trying to like screw anyone over uh we're just like innovating and building and i think um like regulators should just listen to us a little more sometimes um because like we we're not really we don't want to be in adversary position like we're not there i mean obviously there are tons of scams uh in like these like rug pools and all that uh but i think we also need to focus as protocols on being like self-regulatory because i don't think we can really like you can you cannot put one single protocol in like a box of a single country's jurisdiction anymore really and the world is way more intertwined nowadays um so so i think we have like a very unique chance as a new industry to establish uh what is you know what's good what's bad how we are operating and uh we should be like proactive with like regulators and like helping them out because you know like they're also good people like they're not really there to you know us over or anything so vanessa you wanted to add to that yeah i think for some players to engage with d5 and defy protocols which are really just open source you know protocols um there is an amount of regulatory constraints that they have so you see projects like ave metamask paraswap starting to offer sort of gated access for institutions where they have access to pools of liquidity that are kyced and that give comfort to larger institutions that they can trade in those indus pools um i would say that most of the you know the projects we work with are very diligent um in terms of regulation there they want to they want to do the right thing and they are you know creating access or limiting access you sell that one inch for example limited access to u.

s citizens accelerators to make sure that they they take all the measures that are necessary to ensure that they don't have um us citizens trading on their platform that being said you know people are using vpns there's there's things that they cannot control and that's that's something i think the the regulators should focus on the bad actors and there are plenty um and you know and work with the industry to to find some solutions and and some maybe self-regulated solutions or at least some workable solutions for these projects all right um yeah i guess another subject i wanted to touch on was anonymity in d5 and and your thoughts on that because on the one hand we have something like wonderland dow where one of the co-founders was doxxed and was revealed to be a serial khan man who was also co-founder of quadrica cx michael patrin also known as omar patrin also known as omar kanani and and so that kind of you know was disturbing to everyone and kind of made everyone pause to think about you know the you know the benefits and non-benefits of anonymity and d5 but then you also have um you know nft projects like um the board 8 yacht club and and the co-founders were docs and everyone just thought that was totally wrong so i guess in thinking of anonymity in its role it plays in d5 what what are some of your thoughts on that who instead i think that kind of like also hits like the regulations a little bit but like my personal belief is that like anonymity and privacy is extremely important because like when we give out our like passports like information to all these companies and all that like most don't really know how to manage i think we need to like create efficient like tools and like fallback mechanisms uh but then at the same time with like regulations and you know as vanessa said um we we also need to create these like frameworks for you know governments to operate with defy and crypto uh kind of like interfaces you know like ava arc for example because i think a lot of like institutions like also want to start using all these tools and at that layer i think it's okay to maybe have like kyc or like aml measures but i think generally if if you want to preserve your privacy i think it's like a very fundamental right that um i think we have to preserve on like a protocol layer at least um so it is like more interoperable composable and kind of like creates a more united world because uh you know every country has like their laws uh their restrictions all that but i think it creates a more efficient world and just like happier place for everyone to be when um you know we can work together without all these like restrictions yeah yeah [Music] [Laughter] finally in terms of the anonymity of the founding teams um it's it's a very interesting creates very interesting dynamic because it allows right individuals who are who are known to to be you know not not not very honest people to repeatedly uh start new new companies under different identities and like how do we how we're going to solve it and i think one of the solution is economic solution is something like insurance if if it's if it becomes common for lps to purchase insurance to protect their accounts then the insurance providers will be able to create lists of trusted protocols and that based on their research and due diligence into the founders identities et cetera and will provide sort of this economic incentive for uh sort of the self-curation mechanism that will let regular people access only the filtered subset of defy that is safe to interact with so i believe more in solutions like that versus some kind of regulatory especially based on the single country of the us defy is a global phenomena you us alone cannot regulate it so we actually do look um yeah like when we put like all the data in like a risk pipeline and evaluate like protocols or the ecosystem like we do look whether it's like pure in on teams or like they're actually like people behind the project because then how do you play that how do you weigh that um i mean there are multiple like ways technically but like the simplest way is just to create like a flag a variable like if the team is docs or no it's gonna be binary now that's already like if you agree a lot of this can um help you to like gauge the risk but yeah i mean that's why like you know i'm doxxed vanessa you want to you know when you're investing in projects is that something you take into consideration totally and i think it's something we should as a as a collective think about in in terms of the context of governance of of uh projects and control because you know you can have anonymous contributors but when you have a founder that controls a majority of the tokens or the votes in the governance that's where you get into trouble and so we should think about as an industry about how to like approach this and what what could be like best practices to maintain this anonymity and privacy and make it possible but also have some some you know safeguards around it so at element you know some of our protocol partners are fully anonymous but i think what's really really cool about d5 and just web3 in general is that code is law so you're able to kind of look at the code on chain and see where the points of failures are and kind of assess it yourself and you mentioned wonderland and danielle and sifu and everything and [Music] the due diligence didn't happen until he was doxed but you could have seen on chain that there was one guy that had control to 400 million dollars and nobody looked into it until it was kind of brought into the spotlight so i think you know imagine if you wanted to do your due diligence on wonderland at the beginning you would have seen that this one guy had controlled 400 million dollars and you would want to know who he is so you know when we do our due diligence in terms of working with partners even if they're anonymous you know we look at the code we look at who can make decisions on moving funds you know how our strategy is created and so forth and you know so far i think if you approach you know due diligence in that way i think it's you know regardless of who you work with i think the code kind of speaks for itself yeah i think that's that's the beauty of the whole d5 like when we're like work with other protocols to like open like any like partnership or like vaults or like whether like farms or like lp pools uh there are always ways like even though we sometimes maybe have to like send tokens there and there uh we checked the code and like it's always like we we're 100 certain that even if let's say we did we just had a farm with like trisolaris on aurora um they did all the infrastructure but they have no access to it um so like when we like deposit like the rewards or like do all these kinds of things there's no um trust involved so um i think that that's very important like the whole defy is composable is beautiful all right i'm being told we gotta end it there but really cool panel a really great discussion it's really great to see guys in the flesh and really flesh out through these challenges and you're the good actors trying to figure it all out so it's great to see you and talk to everyone at the best thank you