EN | From Blockchains to Deployment to Compliance The Infrastructure Institutions Need | MERGE SP

Okay, our next session is from blockchain to deployment to compliancy, the infrastructure institution need. Um please welcome to the stage Thiago Hojer, CSO at Global QLI Labs. So Thiago, you can introduce the other speaker. Thank just had the the news that we don't have the full hour as we we thought we would have. So, let's try to be in express mode here.

So, thank you guys for joining us today. So, I think we're going to have a very interesting panel. Um I think we have here representatives from very interesting infrastructure projects and these guys are doing the whole magic behind uh every transaction and every all the things that we see when we use crypto. So, I think a good way to start this is you guys should uh could please give a quick intro. Uh Luca, I think you know, OpenZeppelin is very known about audit, but you know, you guys do a lot more.

Rodrigo, what's an indexer? I think it's great to to to explain what's that. And so, you guys also like you are very known about the Oracle services, but what else is Chainlink cooking? So, feel free to just follow Maybe ladies first, right, Sol? And then uh we we do the reverse order.

Okay, let's start. Uh so, um in Chainlink Labs, yes, we take care of Oracles, the connections between everything that you have outside blockchains and the how you can bring this information in a safe way, in a way that cannot be compromised and use that inside of smart contracts, but also we have the interoperability between blockchains and the new launch that I made another talk today tentatively. It was about the CL that it's a new mindset related to workflows where you are not thinking only about the blockchain itself, but about all the others um like infrastructures not only, but all the other systems that we would like to connect with smart contracts. So, with this, I think this is a really change of mindset because you don't think more Before that, we think about the smart contract and then ah now, how can I connect? Now is the opposite.

I think about the full workflow and where you be the smart contract inside this workflow to have security. Is this. It's super interesting. Yeah. Where's your company?

Yes, so I'm a CEO of Edge & Node, which is the company that developed the Graph Protocol. And for those that aren't familiar, the Graph sort of invented um this notion of indexing, which is extracting data off of blockchains and organizing it and making it available for applications to use that data. Um blockchains themselves are not They're databases at the end of the day, but they're not um stored in a format that we're used to. So, when you think of like a spreadsheet format and you have columns of information and rows of information, blockchains don't store the data that way. They store data transactions.

You could think of it like um pages in a book and you have transactions in each page and you turn the page and that's one block. And so, if you're trying to build an application that is say uh like a social application that's using blockchain data at the end of the day and you want to create a list of your friends for example, you have to go through the entire history of the blockchain to then make a list of who your friends. You need to see throughout time where did I add a friend in a in a particular transaction? And so that was a really complicated problem back in 2018 and the founders of the graph I was the first employee there back then and uh worked to solve that problem and they did that doing it in a decentralized way. So we launched uh and a token in 2021.

It's still existing today. It's served trillions of queries. It's the backbone for major um DeFi applications and uh many applications that are utilized today. And uh what it does is it essentially and oh creates a copy of the underlying blockchain data but sorted and stored in a database. I mean and at the end of the day when we look around and we see all these applications and banks, stablecoin applications, they all need data at the end of the day and they're reading data off of blockchains.

And what they're doing is they're storing it in a cloud database to be able to run and do reports and do everything else. So uh that's what the graph does. Um Edge & Node is the core team that built it. And to give just another quick analogy um it with relation to Chainlink, Chainlink is taking real-world data and bringing that into the blockchain. So it's writing data to the blockchains and the graph is sort of complementary in the sense that we read that data out.

Yeah, that's super cool. So is it uh an accurate statement to say that the graph is maybe the Google of blockchains? Yes, that was a term that was thrown around for quite a while. It's still still utilized. So if you think of Google, it crawls the web um and what makes its searches so fast is it creates that called an index.

and if you think of an index in a book, say you want to find a particular word, you would go back to the index in the you know, back in when we had paper books and you would go and find the uh location of that particular word or concept and then you'd jump to that page. So, it makes it really fast to find any information or even a table of contents like with the organization of the book. So, that's kind of what Google does for the web. So, we do that for blockchain data. Super cool.

Lucas, you. Yeah, well, great great to be here with friends and and and uh you know, partners that we work with. Uh OpenZeppelin, uh maybe to give you a bit of a story in case you don't know us. Uh Ethereum went to mainnet back in 2015 and in 2016 there was a major hack that led to a fork of the network. Uh and a month after that hack happened, you know, we realized how important, you know, good smart contract design security would be for building on-chain applications and so we created a a library called OpenZeppelin Contracts.

I don't know if anyone here Have you used OpenZeppelin Contracts before? Okay, nice. We have a few people that that know the library. Um and and and so we built, you know, templates that basically help people uh build on-chain systems. It started with very simple contracts like how how do you do a fungible token, a non-fungible token.

Uh and today we have things like access control, governance systems. Uh and and throughout the years we built also a security company on the side. We did the first ever smart contract uh audit of back then it was Augur, the the first prediction market. Today you might be familiar with Polymarket or or Kalshi. Um and today we've we've crossed, you know, 35 trillion in total value transferred for the library, you know, depending on on the price of of ETH we have 150 billion dollars in TVL that that use these contracts uh that are, you know, mainly in the Ethereum world and and and EVM networks, uh but we've started expanding across of other a lot of other chains.

So, if you're building on, let's say, Stellar, uh you'll also find, you know, OpenZeppelin contracts there and a lot of our developer tools. Um and, you know, we're here connecting with a lot of Brazilian institutions. You know, we're we have more and more institutional customers, uh you know, like DTCC, WisdomTree, and Fidelity. So, it's it's great to see the Brazilian market kind of moving quickly. There's there's clarity.

So, yeah, it's great to be here. Super cool. So, uh all of this is very interesting for us, uh because we are crypto nerds, and that's what we like to talk about. But, uh this is all infrastructure, right? And infrastructure is not super tangible many times.

So, I'd like to talk about tangible use cases, right? So, what are you guys seeing or eventually in Brazil, like if you're more involved in Brazil, uh that would be great or in LatAm. So, what are you guys seeing as a more tangible use cases these days, and what what's more exciting for each and every one of you guys? Uh yes, so let's start with a Brazilian use case, uh that started on Drex, but it it's more than this. Uh that's the delivery versus payment between the interbank and another banking institution in another side of the world.

So, they are doing this exactly using the CLR because it's not enough to only have the on-chain part, but all the business rules to when you can attest that some parts is delivered, and then the payment can be moved. And this is a cross-border uh movement of payment. So, this is a a use case that's so interesting that I can talk a bit more. I think you, Luca, you can talk about the other one that we are together in other uh use cases well. Uh you'd you to?

Yeah, I I mean, you know, I I think my uh my mental model for like real things going on chain and especially on the institutional side, you know, I I'd say there's issuance and that's moving very quickly and I can I can cover some of that. There's payments and then DeFi and and a lot of, you know, OpenZeppelin contracts and and tooling is getting integrated with with Chainlink and it's used for CCIP, CRE, and a lot of the the the tools there. And obviously, we also have like Subgraph for or for OpenZeppelin contracts that leverage the graph. I think for issuance in terms of like real use cases and DTCC is both one of our uh customers. You know, they process I think 87 trillion uh annually in in securities.

So, you know, 35 trillion in 10 years of OpenZeppelin contracts is like nothing compared to 87 trillion annually. Um and you know, they're moving very quickly on chain. They're bringing their tokenization solution. Uh they're, you know, making it easier to bridge between, you know, the TradFi systems and on chain, you know, settlement of these securities. Uh and and we've been working with them, you know, we started with one-off audits of a lot of their EVM contracts.

You know, that's a relationship now that's grown where we're doing continuous security, we're doing advisory, executive workshops, you know, upskilling their entire uh engineering security teams. So, yeah, I I think to me issuance and also like talking to Brazilian companies is like one that is moving very quickly. Uh I think payments on chain effects happening is also something we're we're seeing, you know, if you take any of the nine of the 10 largest stablecoins, they're using OpenZeppelin contracts and you know, volume is is growing a lot. We've done some work in Brazil auditing uh auditing work for Bitso Pactuado and Crown uh this year. And then I think in D5, what's real, as I think as we see issuance happening on chain, you want to, you know, make those assets useful and plug them into existing, uh, D5 protocols.

So, Morpho, Aave, uh, and so, you know, we're starting to do some work there as well, actually together with with with Chainlink. Uh, there's a protocol coming that is called Ascend, uh, which will enable like permission lending. And so, you'll be able to take, uh, a real-world asset, a T-bond, a security, and and and use it as collateral, and that will plug and be integrated across D5. So, uh, I think those are the three areas I'm seeing like, okay, this is real. It's going into, you know, fully compliant like deployments, and yeah.

Yeah, exactly. Before you, uh, talking about compliancy, exactly we have something together with the DTCC. Uh, exactly the A's that it's, uh, service for Chainlink as well related to all the private part and how you can know your a customer and the companies behind that. That is so interesting together as well. And, um, before Rodrigo, like, for us on Chainlink, I use the graph a lot.

Yeah. Exactly because it's so important, especially the concept of events, that when you have a smart contract and you emit these events, this is what The Graph, including, uh, take care of these, and for us it's so important to, uh, have these events to be triggered to other stuff that we can do on chain. Yeah, I would mirror, um, everything that was said here. Um, basically, we we've got stablecoin transactions, we've got settlements, we've got, um, and a major area they mentioned is compliance, so that's where we're seeing a lot of, um, traction in the sense that all all of this activity happening on chain needs to to output and produced into like a report or some kind of dashboard or output so regulators can then view and ensure that everything's being handled under the proper regulations. And so that's where we're seeing the the major interest and utilization in in our technology.

That's super cool. And I guess this is a natural evolution for institutions, right? We are seeing the last I would say especially in the last 12 months like more and more crypto becoming institutionalized. And then of course with you know all these institutions it comes the proceeds processes and governance and and compliance a big chunk of that. Look, I would love to hear more about what you guys are doing in this in this field as well like on chain governance or governance and compliance overall.

What's what's being cooked? Yeah. Well, when it comes to compliance, I think we're like we have a big problem in front of us as we have a lot of issuance happening. They're mostly happening on these tokenization platforms. So you have like securitize you know, centrifuge tokeny and you know, real world assets are more complicated.

There's a lot of permissioning of rules regulatory different jurisdictions that need to be catered for and so everyone's been you know, implementing their own logic. And it's leading to a a lot of fragmentation. I think of the identity of how these interfaces are built into smart contracts. And so if we want like what I would want is for what you know, how D5 happened, right? We had ERC-20.

It was very easy for protocols to kind of you know, import these tokens, right? And and and it could easily just flow everywhere and and we had these amazing network effects. And I think if we want the same for um for real world assets, uh you know, especially like plugging them into DeFi, you know, every time a DeFi protocol wants to integrate like, you know, uh one of these funds, it's like one-off work. So, yeah, there's a lot of work that we're doing to give the market like a standard like you had for ERC-20, but for different, you know, compliance interfaces and permission tokens. So, you know, ERC-3643 is is an example of that.

Um and and I know there's a lot of work, you know, on both the the Chainlink and The Graph side to make sure that, you know, that as well gets, you know, built into your tools and your your your infrastructure so that people can use it, yeah. Yeah. Yeah, exactly. If it is ERC, uh that we are together in the ace and the compliance part, because we use that and we have a good interface and a good partner um to to offer this to the clients to have this in a better way and easy way and try to have the same kind of communication, because this is the problem. Sounds good.

And um there is a uh famous tweet from Chamath recently. He mentioned that on chain uh on on premise the new cloud, right? So, and I think uh that that has a lot packed in. And um yeah, I'd love to hear from you guys if you agree like is crypto moving from cloud to on premise, right? Given the resources that are required by and the regulatory compliance requirements.

Um Rodrigo, maybe if you can start like you guys developed it Amp recently, so I'd love to hear more about that. We need to be uh brief because of the time, but yeah, I'd love to take to hear a take about this. Yeah. Um so, yeah, like you mentioned, we developed Amp, which is uh a similar data indexing extraction tool, but it can be run on premise. And just to be clear um in the olden days we used to say on premise was literally running in like a closet in the building of the actual bank for example but that's not necessarily the case today.

Today running on cloud might be uh or running on premise might mean it's sitting in a data center um in a Yeah, you have on prem cloud right today.

prem cloud. So that's really what we're meaning. It's still running in a data center but it's entirely controlled by that client and user and so yes, we're seeing that tremendously in our discussions as these new regulations come out. Um there's requirements around data sovereignty, travel rule, uh privacy of data that has to remain within the the control and confines of that enterprise and so really Amp was designed um for this uh need that is now happening uh that we're seeing from regulators and institutions sort of demanding this. That's super cool.

Guys, I think we are getting out of time and so I'd love to hear your close remarks. Uh what's what's next? What's coming? What are you guys cooking and uh what are you excited about in the next stages of chaining the graph and and and open Zeppelin? Yeah, like for those uh including talking a bit about the on prem part like the theory is the moment that I comment before this change of mindset to talking about workflows and this is the way that you can use the all the systems that you have in now and connecting with all the systems and bringing your use of some information that you need to have on blockchain but you are not trying to destroy the systems anymore.

You are not telling any uh to the people, "Oh, you cannot use your old system um and now you must build a new one." No, now you can use your system and connect this with blockchain and this can make the difference. And um if you'd like to know more about this, I you do a boot camp in April. You can get this on my Twitter. Yes, so I think what we're seeing now and uh is a big topic of discussion is privacy.

So, how you know, institutions want to interact um cross-border with other institutions, for example, and they don't want to reveal the entire contents of their wallet balance or transaction history. So, this is something that's obviously on um top of mind. There's different solutions going towards it um between different chains, like Canton has one method of doing it. Ethereum has that on their road map. So, I think we're going to see that in institutional use cases because we're we're finding out that that really is the the next unlock for major adoption.

Um so, yeah, really excited about that. And just obviously we're excited about um seeing this wave of institutions coming on on to blockchain rails with the regulatory clarity happening and um it's really being embraced and adopted finally after, you know, almost uh over a decade of being working uh proving out the underlying technology. So, very excited about all that's happening in the space. Very cool. Luca.

Okay, I have 20 seconds. Well, given we didn't talk about AI, I do have to talk about AI. Um we are launching on the 1st of April our continuous security platform. You know, we've been working on AI security for a while, securing smart contracts. We're really moving away from points in time security, and I think this is going to help with a lot of the institutional adoption.

There are requirements for a lot of the banks in Brazil in terms of security audits and and ongoing monitoring. So, we'll be, you know, launching this platform on on the 1st of April. So, if you want to know more about that, you know, follow our Twitter or you can ask me. Um and, you know, it's it's really uh yeah, leveraging many of the best models. A lot of work has gone into it over the last few years in the company.

We've been leveraging it internally, but it's now you know, going to to general access and I think it's going to help with a lot of the, you know, bringing on institutional players into, you know, on on blockchain. Very cool. Guys, thanks for listening and thanks for the speakers to participating. It was great honor to moderate the panel. Thank you guys.

Thank you. Thank you.