DeFi Needs Antifragility – Vignesh Sundaresan & Vii Sundaram

I'm big nish and this is V we are from the land ID protocol we've been working on define now for three years and we published various papers or last couple of years on how like how to approach defy crypto lending and and different different formats to to see how we can make this more reliable stable and today if you look at the define land space itself right so it's it's not very stable it's there is a lot of ad hoc declaration happening and I don't know how much of you know about the prey 4 3 2 to 8 meme it was it was something that happened a year ago and actually we we made a video on how it would have felt to be that person right I'll just play this video and we'll continue this is this is something this is an imaginary piece right like with various things that happen into fire and things that happen to our friends also centralized world wide web is hundreds or thousands of decentralized protocols some of them will be like a theorem and a theorem has is or its orders of magnitude bigger than anything else and it's growing faster than everything else so only significant going forward [Music] either could touch hundred my to the end I could come see everything we could lose the house we could lose everything but Dora it can't go below hon I'll sit I'll call you [Music] [Applause] [Laughter] [Music] this imaginary video right but this is a combination of stories of a lot of people who's who used to fight today like you borrow and you don't know what's going to happen tomorrow and usually that's that's not the case in the real world right like you you you can have a term loan and and you can you can sleep well at night and that's that's what we are going to be imagine with lender at this time so we will talk about how how we are designing this protocol so that it it can handle these kind of like jokes in the price of the underlying collateral so how do we solve this are we need to enable transfer and more transferring risk transfers today if you go on one of the decentralized lending protocols you'd be like oh I can earn an interest of 7% but are you earning a risk-free interest Europe that's not true like you're also risking the the fact that there could be a black Sun even tomorrow and that if the loss could be passed on to the lenders and this is not being transparently advertised to people later so that's one thing and we need to introduce strict loan cycles so that the liabilities of the loans can be solved within every every loan cycle and it does not carry on to the whole system and we achieve these by tokenizing so that we can create secondary markets around them so that we can we can bring in and converge liquidity around certain strike prices certain certain terms so we are how are we doing this we are we are introducing a new token standard it's called be calling it the multifunctional token or or an MFT so today there is there is the we have a fungible token which is a year c20 and and a year C 721 which is a non fungible token so imagine a non fungible token to have various parameters that that are different all across right so if there are two non fungible tokens that share all the parameters then they become fungible and today we don't have a specific token standard there we can do that so this this is important and this can be used in use cases like financial derivatives so we take financial derivatives and and like something like a put option the put option has the same same payoff formula across the board but depending on its parameter like the strike price the underlying price the the term it's going to be in fungible or non fungible and with the introduction of the M of T's what's happening here is we we get to we get to just deploy one token contract while we allow any kind of say a put option under and under each collateral so that it can support different kind of loads different kind of collateral ratios for each loan so we will take a look at the with B we build the whole protocol based on these tokens and we have a short demo so I will explain through the demo so that we can take a glimpse of how how these tokens work together to create these zones so what you're seeing here is we are creating two accounts one of the accounts is going to function as the underwriter account and the other one is going to function as the borrower account what we are trying to demonstrate here is that the underwriter can create these MFDs and transfer them to the to the borrower and so the borrower can use them as a combination in order to create a new loan so you start with the underwriter so we will start with the underwriter right now like we are taking the die and wrapping it so that it can be accessed by the system and then once we do that we are able to split this die no wrapping sorry so we've grabbed the Dinos and and right now we are going to split this dye it on on a specific a price feed and and a specific graph so you can choose how much dye you want to split and then you choose the underlying asset in this case it's just going to be at and you also say what is what is the strike price that's going to be there so this this way you what you're trying to create here is that the underwriter is going to underwrite a loan where if the price of the collateral is going to go down below $100 the underwriter starts paying out to compensate for the for the loss in the price of the collateral and this is going to exist until you can also choose the term or how long this contract is going to be live right so in this case we are choosing 26th of March 2020 queue so once you do that you would see that the balances are going to change yeah so if you see the balances on the Sufi tokens they are going to reflect that that there are s tokens in the system now and also I took and then you can go ahead as a borrower so as the borrower now so this is the underrated part right so the other side is the borrower so as the borrower there is an interesting idea here so because these are all fixed terms and for the length of the loan you're going to lock up your collateral so what you're going to do first is that you can split your collateral you can split your collateral into an S and an eye token where the F token functions like a future spoken out of frozen token and I token functions as an interest token so since you are not going to be accessing as a borrower the collateral for the period of the loan you are able to actually have a freely tradable eye token which you can further sell it to other people who would like who have the option to use the I token to get a loan or which which would be a s loan instead of a dialog so so you would see that the balances of the borrower has been updated right so now what what we are going to do is because we don't have a market running yet we are going to let the underwriter transfer his s tokens and I tokens to the to the borrower now usually this is going to happen for a price but we are skipping that part and so the the underwriter is just sending his tokens across to the borrower cool so he send the s token straight eye token okay and he's going to send the S tokens now nice so so you can go back on the borrower okay so the borrower now if you take take a look at the account you can see that it's updated with the S tokens the AI tokens and also the w8 so let's go ahead and and and try to take a loan now good job okay so it's you're creating a pool on the background but we don't want to go into the details right now because again this already it's complex enough I guess I'll just keep it simple stuff so now the borrower goes to the borrow screen and chain the account okay let's go to the borrow screen and with all these complexity right just a minute so with all this complexity even though it looks like oh what's happening with this token what's what's happening with ie token for an end user they end borrower it's going to be quite simple he's going to choose the lone currency the term of the loan and he is going to choose what his underlying collateral is going to be right and what how what is the amount of loan he's requiring to access and you can change like 200 yeah and then click on the loan and cool that's it right okay so yeah so that's it so at this point the borrower now has a new loan and he does not have to worry about it until the end of the term that's going to be 26th of March so by by using these new token economics we've we've achieved something where you got fixed interest rates and and 6at terms and this is this can get complex so we're going to stop the demo here and go back to the slides whoo so what is what all this means is that now the cost of the loan right now is based on his loan currency so if you want to die alone today you pay a flat fee of like 7% 8 or 10% days or whatever right but actually like depending on the collateral the the amount of collateral you can place and and the type of collateral you can place by in this model the cost of the loan is going to vary so that that's more like what's in the real world and loan maintenance so you don't have to worry about your loan until the end of the term so you can you can go on and and you can go on sleep well come back have an alarm probably and and just make sure that you repay the loan before the end of the term and what are the other opportunities so today you you in in defy you can participate as a lender and and you're going to put your capital into a into a pool where people people can use it to borrow but in this case you can be a borrower but you can also be an underwriter where you enable these loans so for example you can you can create a s token which is which which is a put option on a tedium and for a strike for example $50 for for 31st of March and sell it for $1 right so depending on your risk appetite all these new kinds of tokens now are possible so that's going to create a lot more of business opportunities and decisioning so we want to move away from governance in in adding new collateral in adding new terms or or whatever and we are letting the market dynamic so and because anyone can create these tokens wherever the liquidity is going to assemble is what is going to be the the markets that that are being supported so as as as a loan market and as the protocol there are no prescriptions on what collateral is being supported or what terms are being supported everything is market driven so because of the way this protocol is defined it's it has these beautiful things these money blocks right like Legos that that come together and and fall in place in order to create this product which is lending but you could also take this up and and do various other things so we are looking for people who can actually make make markets around it who can who can build their own businesses around it you can run your own risk pools you can you can run run your own UI and there are a lot of opportunities just using those tokens that you can build on so come talk to us we have a booth in the in the in the in the floor above we are also looking for feedback on on the model itself so if you are going to come to the booth we will also like if you have an email id you can leave it with us so that will send you the information and it'll be nice to hear from you and a big shout out to Kwan stamp and and be primarily work with the Viper core devs Bryant and Jackie's and we also use earth brownie Ben Ben Hauser is a person who who who actually maintains that so these are the tools without which we could not do what we are doing today and if you go on developers or lynda.com you could download the UI the same UI you saw here and you can you can try it out I know it's a little complex but it's just like it's it's just getting started so I we would really appreciate the thoughts you have yeah that's it thanks a lot [Music] you [Music]