Hello everyone. Thank you for coming to the conversation. Thanks for the introduction, and I'm going to talk to you about some things that aren't necessarily ZK-related, but I think are still very interesting. Specifically, I want to talk a little bit about how we want to move institutional adoption from Wall adoption from Wall Street to blockchain, specifically Ethereum and the ecosystem we're in . So let's get to it.
I want to talk a little bit about the barriers that these institutions and Wall Wall Street users typically face when they actually want to use these services, and how we can use crypto solutions to overcome a lot of that and make it more accessible to everyone. So, why do we need this? I think this isn't necessarily a particularly new slide or, you know, background information, but I'll say it anyway to illustrate the specific challenges that we face. And that's because TradFi has a lot of pain points, right? That's good, but not necessarily great.
Hmm, there are some things we would all like to see for efficiency reasons, such as better calculations, but there are other things where there is a lack of transparency or information. Or if you go to a bank and start doing something with them , you don't really know who you're talking to. You can barely, you know, these days even talk to the same person over and over again. But when you start actually investing or doing something with the, uh, financial services they provide, it gets even worse, right? Uh, and when things get to a much larger scale, meaning when you're in the bank itself, the cost of doing that business and the complexity of it is also related to scale, right?
It's an old industry that, uh, isn't necessarily optimized for a whole bunch of new technologies that have been invented in the last 20 or 30 years, and we think that on the chain we can solve that. And with all this money, everything is very isolated. I think one of the previous speakers talked about how, you know, you can be one type of trader and not others, and now it all comes together. And I think this type of isolation is an old antique idea. With blockchain financing, we can solve almost all of these problems to some extent, if we are willing and able to do so.
Is n't that right? Calculations become very fast. Ethereum has a pretty good block time. He is getting better. There is a collection of funds.
There are things you can do. And you can be online and trading all the time, 24/7. It doesn't matter whether your bank is open or closed. You can also have a very good transparency set, which is something of a double- edged sword. Some of these blockchains don't necessarily have privacy by default, but you can track where assets are going and you can see what's going on behind the scenes.
In many cases, you can see the smart contract code. And if you're not necessarily dealing with just non-block products, it gives you the full picture, which is pretty great. You can also program this money. This means you can do things that your bank doesn't allow you to do. You can set up, you know, automated trading rules.
You can move them to different locations. You can use assets, you can do a whole bunch of things that traditional universal data exchange services don't seem to typically offer yet. Maybe I'm wrong, maybe there are a lot of them, but I don't know about many. So I think this is very new think this is very new . And what's also nice is that you can start to pool assets into different classes and you get a lot of liquidity from different places, which I would also call a double-edged sword, but it's, you know, essentially the direct opposite of almost all the complaints I make about traditional finance traditional finance .
So it seems like a pretty good idea to take some of that infrastructure and some of those financial use cases and move them to blockchain. So, the value proposition is real, it exists. We just need to figure out if, um, the implementation really lives up to that. I think when we started in this industry a few years ago, you know, it was this idea of banking for unbanked customers, and we never had a lot of common use cases for TradFi being completely on the blockchain. So maybe implementation will happen, but, um, it's been a slow process.
As we've evolved over the last few years, almost a decade in Ethereum, hmm, that's changed. We see implementation in specific cases very, very clearly. In particular, um, RWA and stablecoins have exploded, right? If you've talked to people outside of this room, almost all of them talk about stablecoins or RWA in some sense, right? And then other traditional financial services and products like currency exchange and, um, you know, other services that they provide, um, are also undergoing pilot testing, or, you know, there are certain decentralized applications or, um, you know, companies that are trying to take these things and put them on the blockchain so that they can match or take advantage of the adoption, um, that stablecoins, um, have enjoyed over the last few years.
And some of them are really cool. Uh, some of them cool. Uh, some of them , you know, are extremely unauthorized. In other cases, we see some, um, appropriate guidance about certain permissions required to perform certain actions, but I think that's fine. I think if we grow gradually, we will eventually reach a good state, and that will be good.
And we have to keep doing that, because we've really only begun to scratch the surface of it. Um, the blockchain market for a lot of these things doesn't match the non- blockchain market right now. We still have a lot to implement, so we should start doing it. We need to start building some products that will bring more of that capital into the chain, because ultimately, then we can change some of the features or problems that we still have as we do this. I think we need to start flexibly, you know, create something that works and create something better as we go .
So why can't we do this? Well, there are a few obstacles. The first obstacle, surprisingly, is regulatory uncertainty. I'm not a lawyer, so I don't know much about some of them, but certainly when you talk to people about how to bring banks and financial services together on blockchain, they start asking questions like, "What is this going to mean for my company's legal issues, you know , or my taxes , or my taxes , or any of that, right?" In some cases, assets do not even have a clear classification.
How you hold things, where you hold them, makes a big difference. If you work in one country and then invest in a fund in another country, what does that mean? And then there 's a whole new class of legal issues that arise because of the technical implementation of some of these things, right? In particular, smart In particular, smart contracts, unfortunately, are constantly exposed to exploits. I think the situation in the industry is improving, despite a particularly bad first quarter of this year.
There's, you know, a barrier that you can't just fix the code. It's not a centralized server, so...You'll have to overcome some of these things or factor that into your decisions. And if something goes wrong, even on the technical side, do you know who is responsible and how do you react to it? I think this is something that is still not talked about much still not talked about much , even though we have many examples of technical risk.
So they don't necessarily like institutions like institutions , and users avoid it not because they don't understand it, but because their lawyers don't sign off on it, right? There's a problem that they want to see this financial rail that looks efficient, that looks cheap, that looks easy to implement, but someone comes to the board meeting and says, "Wait a minute, what about all these problems?" " all these problems?" " So we need to figure out how to overcome some of these problems, and I think that's one big barrier that we're going to see slowly being eliminated over the next, you know, several months or a year, especially given the rise in popularity of stablecoins. If the lawyers do everything well, there are other things you still need to worry about need to worry about .
The infrastructure is quite good. I mean, Ethereum has definitely evolved into a very, you know, well- functioning system over the last few years, but it took some design decisions design decisions , or there were projects on it that really moved some assets to different places. Chain fragmentation is real, right? As of last October, there were something like 131 rollbacks. That's a lot of chains.
Some of them had great liquidity. Some of them didn't have much liquidity. There was just a lot going on . And if you start deploying a project or using funds, which chain do you choose? This is a really big question.
Other similar issues, such as standards, and in particular operational standards operational standards . So, for example, do we . So, for example, do we … really want composed DeFi to be the gold standard, or are we okay with some delays? Maybe we need to do this. And, you know, very fundamental service providers service providers , right?
If you use Oracle, which Oracle? Does it matter? If you use a bridge, which bridge? Does it matter? Do they have standards?
Are the standards compatible with what you want on a technical level? Are they compatible with what you want, on a legal level? There are a whole bunch of things that need to be included in the infrastructure you implement. And so, as we've fragmented a little bit, we need to figure out what that means and how to overcome some of these challenges, because essentially, you know, seven to five years ago it was pretty easy to do a lot of these tasks. There used to be a nice template for many dApps, but now it's not, is it?
Now, uh, we need new dApp designs that are reliable, secure, despite all this complexity, but also complexity, but also , you know, adapted for modern things. It's... It's not nice to build, uh, dApps that are focused on just one blockchain, or at least it might not be in terms of user growth, right? It may be easier, but you can lose a lot of capital, especially if the money is in other blockchains. This increases things This increases things like, uh, the surface area for technical risks, uh technical risks, uh , and also means you probably have to create provisions for other things, right other things, right ?
If you are using an oracle, you may need more than one oracle now, as there are several options and some of them have different trade-offs and you need to figure that out. But in short, the dApps that we saw, you know, in 2022 are probably not going to be the ones that we're going to see repeatedly in the future. The lack of permits is also a real obstacle. Uh, a lot of the legal issues that we have, uh, in the industry, uh, stem from the fact that there's, you know, this really nice property of censorship, uh, resilience and full transparency, but it's a double- edged sword. Uh, and what is it really...
It's a compromise, right? You want to choose which versions of no permissions are important to you, right? If you really like transparency, you build on that. Uh, if you need censorship resistance, that's great. But you might have to be willing to make some decisions, difficult decisions, about whether you want everyone to be able to use your product, or whether you want to raise some money and add a whitelist, or do something that might not be as idealistically optimal, but will help the ecosystem grow.
So it's a real compromise. Well , unfortunately, that's how it is. Luckily, we have a bunch of new solutions for this. Permissioned DeFi this. Permissioned DeFi is what I mentioned before, where you can whitelist people , you can KYC, you can do all of that.
Uh, you can also define better standards to come up with a lot of infrastructure fragmentation and risks. So ERCs like 3643 and 1400, which I don't think are talked about often, are standards for RWA tokens, which are... a RWA tokens, which are... a certain asset class that is quite important. You can also offer some really cool technologies, right?
We have ZK-based KYC, so you can scan your passport and just provide them with the necessary information without showing your passport to anyone. Hmm, that's really great. We need to see more of this. Uh, and you can use some of the infrastructure fragmentation to your advantage, right? If you look at a chain and it doesn't have the features you need , it's not private or, you know private or, you know , it's not owned by someone you like or something , you can create your own.
L2s in particular have this ability to be highly customizable. So if you're building a solution, you can create your own L2 to build that if you want. And finally, things like bridges have come a long way. They were, you know, particularly problematic in some cases from an exploit perspective, but they've come a long way and now we have different crypto token standards for them, whether it's OFT, CCIP or others. And there are...
Solutions to overcome all of these things, which are often created with these legal or other barriers in mind. So you have tokens that support whitelisting or suspension because they know that most of their users will want it. Now you need to do your due diligence to make sure this is something you want too, but it does exist. These solutions are being built for some clients, including Wall Street, you know, institutions and people who typically interact with Wall interact with Wall Street, which is great. For developers, this means, as I said, that all decentralized application designs will not be particularly adaptive these days.
You will have to design with modularity in mind. You will need to have a clear understanding of your trust model and will likely need to talk to regulators as early as possible. You have to build all of this with that in mind. But more importantly, what does this mean for users? Well, that means it actually gets very complicated it actually gets very complicated .
You may need to make many decisions. If you're just an average user, then before user, then before , if you only used one D5 exchange protocol , you would just...for that. There are probably hundreds, if not thousands, of them now, and you need to figure out which one is right for you. And you need to do all the due diligence necessary to understand the technical implementations, which have only become more complex due to the barriers I mentioned earlier.
And you may be offered something with truly unpredictable returns. Maybe good, maybe bad, depending on how high your risk tolerance is. Uh, and then you also might have to consider regulatory uncertainty. But in my opinion, uncertainty is a risk. I don't think that's a hot idea.
I think many people would agree with that. So I like the predictable D5. I don't want solutions that are too complicated for the sake of being too complicated. I want ones that actually make some of these design decisions to facilitate raising institutional capital. And for us, that meant building our product for that.
So really at Zircuit, which I'll share on the next slide, we want to build a product that has really good, uh, compatibility with Wall compatibility with Wall Street, but also safe, predictable profitability. So, I think that overcomes a lot of difficulties, um, by design, right? We built it this way, and I think others will build similar apps this way as well. Uh, we probably won't be the only solution. We will be among the best, we hope.
Uh, you know, what we created is Zircuit Finance, and we're targeting 8 to 11% returns on USDC and USDT deposits, which is great. No management fees and no minimum contributions. And it's built to work with Wall Street and institutional partners like some of these. So, this gives us a nice, transparent, predictable return in a way that you can get it without having to do too much due diligence, because the app is actually quite simple and the funds are all clearly defined. And I think you should check it out.
That's all my talk. So check it out, and if you have any other concerns about barriers to institutional implementation, please find me at the booth outside. I would like to hear your opinion on this matter opinion on this matter . Thank you.
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