Cefi vs Defi: Hacks & Scandals -Diana Bogdanova Chistopher Hughes Pol Lanski Gleb Sychev Matt Wright

foreign [Music] Christmas [Music] music [Music] foreign okay [Music] thank you mike check Mike's check all right okay yeah hello everybody how are we doing there we go good good look alive fantastic we are in a day 672 of East Denver this feels like an eternity I I really gotta appreciate the fact that you guys are here that you've made it today I hope the parties have been great and I hope that your app for a excellent Hot Seat panel so maybe I should introduce what the concept of the hot seat is about so my name is Lansky Paul Lansky and I'm a member at diorg the org is a Services Dao basically a Dev shop that is natively a dow the first Dao ever registered as an LLC and we have an all hands meeting where our members mostly technical members get to grill some of our uh some of our guests in our and we call that the diorc hot seat so the Dior cut seat is definitely a place for spicy questions this is not going to be a complacent panel this is going to be a panel where they're looking at me like uh no actually this is not really true I'm actually very nice um but I'm hoping that you won't I do have a reputation and I want to do business with these guys at some point in my life but if you don't it is the time for you to ask the spicy question so I'm going to start with some questions that I'm going to ask to these people and then I'm gonna pass the mic to the public and I'm hoping you guys will have very spicy questions does that sound good to you give me a yeah give me a louder yeah fantastic okay so um we've introduced myself and diorc and d and how the panel is going to go it's a good time for the speakers to introduce themselves maybe we can start from the opposite corner over there thank you uh hello everyone my name is gleb uh I'm running marketing for one inch I'm the cement of the project and I've been with the project for more than two years and obviously I'm from the decentralized finance side but we as a project we are in the bed of a centralized exchange users right so yeah that's in short about me thank you hey everyone I'm Chris Hughes a former CEO of each trust but uh chairman emeritus I guess I've been working at the intersection of traditional finance and crypto for the better part of the last four and a half years figuring out how the on-ramps for traditional Finance basically how do we make Dao's compliant how do we make uh fractionalized Securities like how how do we actually you know participate with the larger Finance community at large so yeah I've been working very hard on it and uh it's slow but it's but it's happening everybody I'm Matt Wright with consensus I lead a lot of our Dow initiatives uh we're looking to build out tools and infrastructure for Dao's in the ecosystem I've been in ethereum since 2016 2017 and um yeah looking to uh explore decentralization uh in the ecosystem hi guys my name is Diana I'm the business development side of the BNB chain the largest layer one out there and I've been encrypted for the last four years and representing the defy site as well excellent okay we got uh we got a good mix we got dripple from truck fire we got people from defy um I think uh I think this is going to be an interesting panel are those metamask institutional socks that's awesome nice we got we got ogs definitely we've got ogs in on stage um so I want to start with a question 2022 2022 was the year of the grifter the year where all of the centralized exchanges not all of them but all of the centralized players demonstrated the fact that trusts you don't have to trust you have to verify right um FTX dcg Gemini block fi uh three hours Capital Celsius what how can we how can we ever trust any centralized service ever again and I think this question would be for uh for Chris okay let's let's be honest here okay that this is a real it's been a tough like 2022 was terrible for all of the 12 rounds of mean but uh so the question becomes like how do we trust the people uh in the centralized positions I think it's less about figuring out how we trust them and have more of them you know this was systemic compli collapse a very large players okay if there were hundreds of them if there were thousands of them if they were If This Were easier to do there would be less Collective risk in a [ __ ] bag like we're talking about decentralizing centralized places like but wouldn't it be wouldn't it be nice like like wouldn't it be nice like it uh yeah definitely like so so Distributing the risk Distributing the risk um so I I Envision a world where uh custodial trusts will one day like if you're a fund you shouldn't have all your money in uh FTX like how many funds went completely bankrupt trading like [ __ ] animals on FTX how many how many of them like are completely Mega wrecked so so let's think about this and you kept your entire balance on one centralized exchange are you like come on so I Envision a world where you know uh someone like uh players like coinbase or maybe even binance or they're gonna use more than one Trust Company State Street Prime trust someone else like they'll probably be like ways to snark this across multiple Central meet spaces that's how I think it'll work yeah fantastic let's not let's not bring all the blame though to the to the depositors who got sold certain assurances that they that maybe they didn't have in the end though but has had some problems in 2022 but honestly there was more than one billion dollars hacked in 2022 from decentralized protocols so uh that's that's a lot of money as well like jump Capital just did it last week right like uh but rehack rehacked the hacker right hack the hacker which is uh yeah something that happened again like but Diana what do you think what do you think the um the D5 space or the decentralized change layer ones whatever the protocols is can can offer some sort of security some sort of assurance some sort of to users what can they do to protect the users actually a lot um I just want to mention that on the decentralized side we recently launched the Community Driven security monitoring of the smart contracts it's called The Avenger Dao it's a passive API so anyone before sending any transaction on chain can scan and you'll see like a red alert a green alert you know yellow alert and it's a sort of like you know you can do your research kind of checking that before sending your funds in the defy that's one thing and for the security as well as you know from the chain perspective it makes sense to make sure you monitor the code and your code is up to date and you partner with you know with the um the best players out there because uh we all I hear you know don't trust verify self-custody kind of Maxis so um yeah from the D5 perspective the Community Driven security could be you know the answers for that right so binens smart chain or or binance chain or BNB chain now sorry um BNB chain got hacked bad their Bridge got hacked bad and there was so I would like to hear more about what happened when binance chain or BNB change is stopped and uh for a while I'm I just want to say that we are so grateful to the validators that we had who and to the security initiative actually who managed to see that something is going wrong in the real time and for everyone super quick reaction so that hack was basically stopped um I know we halted the network for a short period of time and I was the only in the first time that that ever happened so you know we um we improved the security measures and as I mentioned earlier uh BNB chain is based on the tender mint so um you know working on the code base uh improving and driving the community security initiative that's important and by the way we reimburse the funds to the users who got hacked that that was the most interesting thing that happened for sure was that there was a like a bit of a bailout but you know uh so I'm a nerd and I know what happened like like deeply what happened and um like BNB chain or binance Beacon chain wasn't the only one like polygon had similar concerns that immediately after the hack they too were in a position of potential compromise so there was a proof signature that was able to get forged I mean this is the stuff that like really hard not smooth brain math right like very very very hard math to create these fraud proofs or you create these uh you know deposit proofs or create these Bridge proofs and then this person was able to forge them and then what was very interesting is that the binance chain or the BNB chain had a bunch of like of kind of like a I don't know like uh circuit breakers maybe for the want of a better word like things that when value was moving too aggressively too quickly there was something that the you know the the validators could step in and and intervene now that's a that's a design question right like more so than anything like and undoubtedly humans are better off because they didn't get boned you know it started out at 500 million and it was only 70 by the time it was done so like you know they're through coordination in the industry they were able to go to tether they were able to go to other folks say hey these addresses that are attempting to bridge out do nefarious things like don't do it like and and that's exactly what happened with Oasis Finance like that is more Preposterous to me okay if we're talking about reality and [ __ ] and [ __ ] that is more Preposterous jump Capital [ __ ] hacking Oasis Finance to go get that money back is garbage like I can't even believe that's allowed like and seriously like jump Capital the the chicago-based trading firm like sat there and racked up like are you [ __ ] me bro like how [ __ ] djin is that so so we were speaking about regulation should dare be allowed should there be allowed to do something like that but um what is the what is the liability that that they would have or like how how can their how both parties here uh what how guilty or were they allowed to do something like that what's your opinion on that I that's not my area of expertise um and what they're allowed to do I'm not I'm not a Securities lawyer um or or you know working institutional trading but I think what I'm more interested in is seeing how D5 protocols um are leaning more on on Dows and seeing how we can decentralize decision-making process and the diversification of funds and risk um you know de-risking by um you know mapping up more strong proposals of the community backs uh what I don't think is appropriate is having uh institutions or sorry um you know regulatory agencies that are coming in and setting the rules on something they have zero context on um I'd love these three letter agencies to get a little more context but I do want to see the Dows that are managing these D5 protocols um you know allow us to feel more safe putting more weight into the software infrastructure and smart contract layer versus relying on humans which we keep trying to do uh we get lazy we don't want to you know manage our own Keys we want to you know give it give that to a custodian or you know pass off the liability but the reality is is we need to lean more into the code and we need to program that into uh these organizational decision making processes absolutely yeah very hard to disagree with that um on the um under customer on the customer side most people uh start on D5 through by swaps by swaps uh doing something very very simple and one inch is the platform that most people interact with in the first time uh what is one inch doing to protect the users from scam tokens from attack vectors uh so that's a good one so we have like a support team that we can unleash tokens yeah we're always looking closely at what's happening out there uh uh also we can delete tokens by requests from authorities right like and also we're looking like not to have any toxic assets yeah right but like we are still a defy project so anyone can input a custom token I can trade it like whatever like if there are pools if there are liquidity pools out there with the tokens you want against the token you want to trade so then yeah uh it's all the risk on the end user but that's like that's the difference between like Sapphire and defy like the amount of knowledge the amount that you need to consume in order to fill yourself comfortable like being like a day trader on a centralized exchange right if you just enter the space or being a Trader in the device space is like it's really different right so we first we expect users to educate themselves and we help to educate those users uh about like where they are actually it's like what are the risks from the product side we uh like I think that one inch like our smart contracts they have the most audits out there in the Divine industry so like our like technical teams really love all this like we work like with a lot of Auditors so like we invest in security a lot so like making sure that the smart contracts the safe and secure to operate with so and uh there are some like other cases like for example where there are like some like user got sandwiched bed they were like oh like the transaction was not uh executed properly right like in certain cases we can refund users if they like got lost like some money yeah right like training on a platform but like in most cases like if the user uh made his own mistake right we can't help him of course like I said the five project but like we expect him to learn next time yeah so kicking kicking the responsibility down to the user is a lot of the times maybe the best we can do because we are dealing with protocols that are decentralized and permissionless so and we we probably want to keep them that way we probably want to keep people able to add their tokens into a liquidity pool even though what we get is a lot of liquidity Bulls fluff [ __ ] tokens and scams and rock pools but in terms of the regulation side um like uniswap didn't go down you know Unison did not go down because that's the thing it's like I agree yeah that's why I didn't go one inch didn't go down didn't go down if I didn't go down I mean like price okay but like definitely the the plumbing was there and I think that that's one of the things that we can look and rely on and say that is an example to The Regulators like to those that cared as [ __ ] on this sort of stuff it's like there was good work done there like there weren't you know and and I would say as an industry we do not do a good job of self-advocacy like traditional Finance has you know like lobbyists and and and we do too but we don't do enough of it and we clearly like I can say this but I talked to the regular like being a C5 player in a crypto world is just not being liked by anyone like all the crypto degens are like narc and then all the Trad five folks are like long hair hippie and then The Regulators are just like [ __ ] you man I don't even understand and so in this space where you're just like okay now I choose this is a life and a job like like I hate myself like it's really what uh like probably more than the outside world does and for that reason I can go ahead and you know Brave this awful [ __ ] show but we need to interact more we need to Advocate more we need to demonstrate our wins more we need to we need to we need to self-promote like we promote well within our industry we have great events we throw [ __ ] amazing parties but like we really should probably be talking to Regulators a bit more you know right so right like and with bad people out in the world you know so regulation um the fact that the fact that C5 is heavily regulated and Defy is not regulated doesn't seem to have a correlation with the with people losing their money what's a good approach what's a good approach to who can protect them is a proof of reserves for for C5 will protect anybody will will they maybe um the fact that we but we because we have them on chain that the reserves are there you can look at it but projects get hacked all the time and I know that life is very broad but Genesis can re-hypothecate it even on balance sheets so it's like you get these things where it's like yeah it's there but it's also being lent to someone else in the meat space and then you can't do that so until we can get into like absolute like isolates that guarantee that there's no rehypothecation in the meat world I I don't know you don't know okay so but we need to you said that we need to Lobby more we need to um what are we lobbying for what anybody so what do elaming for that's a great question um but uh I had a so answer the question about who can protect users right so I think that um carefully built products that has this like in its car I can um if you're talking about the fire ecosystems yeah the right they're complex uh uh like reverse like a post uh to decentralized exchange right so centralized exchange like like everything is under its Hood like no one's no nobody knows what's happening there and the fact on contrera they are really complex stuff you know like right so like in order like to do leverage trade you should know like how to like use like several radicals right and what to do with them like and how not to screw up like while doing all this stuff right but it also brings you a lot of opportunities out there for example like if you would go for like sir like to bank and say hey I would love to get a loan from you it's like just to use this in a position like somewhere else like an event everything goes wrong I'll just pay you like one dollar commission like if it just fails like like it like you know the the like everyone knows like the guy would be like do like crazy like no one would work like this for them so I think um and there's also other thing about this one so like Safari and the fight like in different space because like why Sapphire has been so regulated because there is no innovation happening there actually there's like a 25 business right there and uh talking about the fight the whole Innovation is happening there you can't regulate something that that like that don't exist yet and like any Checkers on here we hear we see new new use cases and you like new approaches the financial products that we have out there so I think that uh once we like we need to think about building like a secure products for end users right so we need to think of these products uh like to really like to rely on themselves not to like on some other like uh entities out there whether it's regulator some other funds and stuff so like I think uh that's the only thing and so we if we answer the question what would we love before uh it's for uh maybe like a clearer like I would lie before like the the clear guidance of how to prevent like a destroyed Finance business right so here because like there are so many um unclear unclear and like unclear things in the whole in the whole space and like regulator about itself so that's my take on it yeah I just want to add from you know decentralized perspective regulation actually helps us all to bring a billion users on chain because imagine like people who are cautious about using D5 protocols once the we have more or less regulation in space we open up a lot of opportunities for them and I'm always you know curious why everyone positions C5 versus D5 when we can you know find a balance with the cdfi such as for example tokenizing the real world assets one stocks carbon credits and having that efficiency the operational efficiency the capital efficiency and I don't know if you guys um heard these stories when a broker actually calls you like oh my God you will have a margin call soon you know we could definitely make it way more efficient so regulation is good cd5 is good we see the future in the tokenizing real world assets and trading them on chain so could be you know something very interesting for our industry as well yeah I feel like we need to enable whatever this regulation framework looks like if it requires a new new agency altogether but we need to enable um smart contracts to eat Financial Services in the financial world and capital markets we need to you know protect developers so that they can freely have regulatory sandboxes to feel safe deploying tokens or streaming structures but if you have you know custodians or exchanges that are taking on this role of C5 and whether it's an on-ramp or off-ramp to the C5 scenario um yeah they have customers to protect investors to protect they have a fiduciary duty and you know in that sense I think we're we're building more and more context around C5 and D5 but if we don't you know work with those two together and push more towards the defy route so that we rely more on Smart contracts um it's you know we're never going to find a nice balance excellent so I think it's time to open it to the public anybody has any questions for our panelists I'm gonna go around and give you the mic any hands any hands no no questions here we go what about putting debt on chain you can't lend out unless you have uh on-chained debt in any formal format so so debt is awesome I I think in fact if there's going to be an interface to the meat world and the crypto world it is going to be through senior age and debt like it's probably not through direct tokenization but instead through just having a claim against the asset I think that that's probably the way that this is going to express itself and it's probably the way it makes the most sense to do it from a from a regulatory standpoint [ __ ] you could trade debt all day long like all udgens can but like when I think about this it's like there are still centralizing factors in our industry that keep me up at night like if if Gary Gensler calls up Circle and says these 15 maker vaults should just like suspend like all transfers like for the like that would cause a collateralization Contagion on dye that we could not [ __ ] unwind and like that is [ __ ] we need to do better than that like we have centralized too hard to the point where we have a Byzantine General's problem like that's [ __ ] we're we're ethereum for [ __ ] sake how did that happen anyhow like this level of stuff like it's just it's because it was easy guys and that's how this works we [ __ ] need an easier stable Peg against the dollar so let's just go have a bunch of them in a New York bank at Goldman Sachs and then we wonder like why we get a face punch by Wall Street like you know two years later [ __ ] sake come on now well we had it coming very good questions any other um I wonder in your view how do you implement The Inheritance service in the in the defy inheritance service in the defy um oh maybe I can address that one so actually you probably heard about the EAP 4337 and there are a lot of smart wallets right now where you can have your self-custody in the smart wallet and you can add actually a guardian so your key will be split into multiple parts and you can assign someone else to have a part of your key share so in in a very unfortunate event if something happens to you these people will have an access to the funds they trust the people that you trust and the MPC and TSS technology actually enables that and that's the beauty of the you know the D5 we have like the best cryptographic proofs which can make that happen we don't we don't need these custodians to manage these anymore right we have time for one more question if it's a very quick one more question one more question over there what's your opinion about protecting users on uh decentralized exchanges like unicep or one inch using insurances so like you said if the protocol fails who's who can protect them but like if the users by Insurance what's your thought in that uh possibly I can answer this so um if I gotta write the question about insurance protocols that are there like on top of the file so as I said like it's about uh building the products right now because like it's all fragmented in a way so uh right now as I think the users uh like I like I know that several protocols out there they're like researching this opportunities like of working with the insurance protocols But I me personally have nuts in any case so far that works in this case so right now I think it does not work all right so we're out of time uh thank you very much everybody uh to we've put this incredible panelists in the hot seat and they look as cool as a breeze a big round of applause for them they know what they're talking about and you can find them on the side if you want to ask more questions thank you very much guys thank you [Music]