Loi Luu I Building an Open Financial System with High Standards I Pragma Taipei 2025

[Music] want to get right into our second session and for this one I'd like to bring on Ly to tell you about how we can make D5 better. So please give Ly a massive round of applause. Thank you. Good morning everyone. Um before I start my talk uh I actually knew uh Sawe um I guess seven eight years ago when she just started from uh uh you know working at EUM Foundation.

I think she is probably like the best person who knows everything in and out from uh you know EUM Foundation and also like all the ETH design right. So I think uh quite pump that she's taking the new role at the EF. Um but yeah a little bit about myself. Uh let's me bring up the slide. Oh yeah.

So um I most of you know me as a founder of Kyber. Um you know uh started it back in 2017. One of the first decentralized trading protocol in the space. Um I think today Kyber is still doing 150 to 200 million every day. Um but I stepped out from Kyber 3 years ago mostly to uh start caliber which is a venture studio.

um focusing on uh helping new founders to build new use cases. Um and I think in the last six months um I basically started a new thing called OptimX. Um it's a crochet defy between Bitcoin and Ethereum allowing people to uh swap and lending uh between Bitcoin and Ethereum in a non-custodial way. Um but today I'm not going to talk about uh Optimx or Kyber or Caliber. I think um um I'm talking about a much bigger and more important topic which is how can we build an open financial system right um with high standards um and the reason why is I mean I think most of us started um in crypto because we have really high expectation for what crypto can do right uh or what the application on crypto will change the world like how we are different from all the traditional centralized uh fintech application for example um we have an open um infrastructures that Ethereum uh and all the Ethereum layer 2 enable.

Now what can we do right? Uh we want to build open system with permissionless access so that people from everywhere can use and can contribute to your uh protocol to your application. Right. Um we we rely on the decentralization of the blockchain and of all the um you know um to ensure the resilient and security of your protocol. So you don't want like you know uh one uh centralized server to control all the uh asset of the users or you don't want like someone to just like you know pluck the uh plug out the server and just like turn off uh all uh all of your data right uh but I think most importantly uh we want to create new values uh through this new infrastructures like what can we do right that otherwise couldn't be done with the old infrastructure right Um why this talk?

I think the reality is that uh I think in the last couple of years I think we have seen a lot more disturbing uh events and and and and news right um I think we have seen a lot more say uh short-term hype and trend and they are just like moving from uh one to another right um and I think uh for many of you who have been around I'm not sure sorry who are uh who's here uh were around in 2017 2018 15. Yay, we still have a uh many of you. Thanks for sticking around. But I think you know many people are quite jaded, right? And and seeing that you know there's no new things uh in in cryptos these days.

Um because like people just don't see the actual innovation. People just don't see the actual like you know value creation. Uh but we need to do more of that, right? We need to actually create new value. We need to actually like have actual innovation that serve uh people, right?

So this talk is really you know a call to refocus on the core ethos uh of crypto of D5 and um you know we need to build uh to make sure that transparency decentralization and real utility uh in every application that we build right um and I think why um why financial application right um I think the re the reality is that I think a lot of the application a lot of the activities on public blockchains are driven by financial activities like we have finance sorry we have defi we have payments we have I think even like all the memecoins and NFTs are driven by trading activities or like lendings right um so um I think we need to make this right uh to set up the right foundation moving forward and the current status quo you know we have a lot of I think we briefly mentioned earlier we have a lot of like you know short-term narrative uh with very little innovation or actual adoption, right? I think some of these are quite high profile like iggon layer and stuff but I mean I think like if you look into like a layer as I think not a lot of them are actually useful right um like what are the validators are being used for like we have like 10 million uh of it sticking uh lock up in agon layer but not many of them are actually useful um and many of the bitcoin layer tools for example I think you know if you look deeper they all like put the underlying BTC in some custodian right and issues a rap version of it on their layer too I mean we did that with rap bdc back in 2017 2018 2019 um so there's nothing new there um I mean this not to say about all the memecoin or the celebrity coins right that has been happening a lot on say uh Solana and some of the others um ecosystem yeah so I think people were saying like mecoy was supposed to be a fair launcher right? Like people get the same um you know opportunity with all the fair launch but it ended up like being benefiting all the insiders uh uh for example like in the Libra incident right um and most of most of the retails ended up losing money right um so the damage is actually quite significant um I think it's not just to the retails but also like to the serious um builders, right? I mean many of the many of the builders are like are confused because you know um why wasting our time like building honest and and and innovative application while a lot of other guys just like launching all the short-term stuff and and just like you know uh getting all the all the benefit right um and I think to the public they're like you know what's what's crypto doing right like is crypto all about like short-term stuff and like you know pump and dump kind of schemes um so we need to fix Um, so I mean my goal is to really like you know have a list of like you know dos and don'ts for people who build in crypto or especially in like any financial application right uh I mean this is not like you know a kind of um exhaustive list but I think this is the most practical way for you to look at and um yeah and try to follow. Um so I think the first one is the first do is always to focus on solving the real problem right um and I think the benefit of solving real problem is that you don't have to keep chasing hype you don't have to keep chasing trend um you can build I think all of these project like Ave and unis swap uh 1 in and kyber and many others right I think we are able to survive multiple cycles because we actually solve the problem that people need, right?

We actually like have sustainable revenue to survive the project u multiple cycles, right? Um it's not like, you know, hey, you know, let's just build something and then cash out in this cycle and and and be done with it, right? Um and um having a transparent um and auditable um onchain data and also like you know transparent kind of uh code base and all of that, right? I think that helps a lot with inviting other to uh to build with you, right? Like once you have um accessible data um and all of the code code base to the external world, then I think a lot of the builders will just come and build with you.

I think that's what I realized from like you know um like when you have everything accessible, people can actually build something that you don't even have the resources to build. And I think that's that's really like you know scaling up um um you know whatever you want to build with your project. Um and it's basically it's an open invitation to everyone who want to contribute to your project too. Um and I think another thing is that people can always monitor what is happening with your project and to identify the potential risks right um like we don't have um many issues like FTX or like BlockFi and all these centralized platform which basically like you have no way to figure out what's happening under the hood. Um, another important thing is you need to focus on your security and compliance, right?

Um, just do a lot of audits. Uh, just have like buck bounties. Uh, invite people like to five bucks and reward them with a, you know, buck bounty program. Um, I think this works well for many of the project. Um yeah, a couple of other things is uh I think um you really need to engage with your community and your users, right?

Uh and I think uh I think crypto really has the culture for this. um does you know have a public forum for people to participate in either like on Twitter on discord um you know or you know on your own forum right it has like many channels for you to participate in like you can go to all the EIP on GitHub you can go to like the developer calls right and there are a lot of like uh telegram groups that you can join and participate and voice your idea as well um I think there are a lot of other dows that are quite active too um like a and and and all these guys Um yeah so the last one is really to have a long-term aligned incentive uh between all the um players all the stakeholders in the protocol be it from the um core developers to the community to all the others uh like investor as well. I think this is quite important because if the incentive is not aligned I think people might not want to contribute might not want to be part of it because I mean I think end of the day is a lot of things are incentivedriven right and people need to be rewarded if they contribute healthy uh uh you know activities to your protocol so you need you need to sort it out um now there are a lot of don'ts right I mean which basically are the opposite of the dos um no hype for hype uh sake of bills. Um I mean wick is obvious. Um I think one important thing is you know I think a lot of people believe so the second point is no ponomic or no unsustainable yield.

I think this is very important in DeFi because and also in many crypto project because many of us think that the token can solve everything right like the token can actually like make the project sustainable but it's not like if your project is not solving a real problem if the project is not sustainable generating revenue by itself then having a token won't solve it right having the token might just like you know basically like amplify uh what whatever flaw that you're having in your in in your protocol and in your product and might make people like leave the project like faster, right? Um and I think like you know we we saw that with like Terra and Luna collapse basically all the inflation works well until you know it reached to the point that it cannot like you know uh sustain anymore right and the entire 60 billion was wiped out from from the market. Um yeah. So I mean we I think when when I shared this uh with a couple of people and they said like a lot of others um like you know succeed by utilizing uh the short-term trend and the hype right like they they they decided like you know pump fund and like Photon and all this guy that basically generated like hundreds of millions in their protocol right revenue uh or in the in their platform. Um so I think you know um I think the general advice that I gave to them is that you don't build your project based on short-term trend right but you can always utilize or leverage whatever is happening in the space to grow and to uh strengthen uh your protocol right like if the market is talking about memecoins maybe you know you should cater your product more towards the memecoin audience so that you can attract more flow you can attract more traffic right uh that you know your product should not just be like you know hey we're a memecoin product right um and if you know there's more and more people are launching Bitcoin layer 2 maybe your product should also like try to address that audience as well um yeah but you don't have like to keep like switching the direction or the core offering of the product every three months or every six months right because that's how fast the trends are going these days um I have a lot of like general sector specific dos and don'ts for like defy and like for like prediction markets uh but I'll probably just walk through uh each of them briefly.

Uh for defi I think there are there are two important dos that I think people should focus on. One is I think a lot of the modern defies focus on capital efficiency, right? I think we are way past the um the era that you know you can just launch a new um you know unis swap clone or new a clone, right? I think now innovation in DeFi really focuses on how we can make your capital more efficient, right? How we can basically like have a better settlement, right?

um making sure that capital can flow uh easier and faster and the same amount of capital we can provide a lot better uh uh liquidity for example. Um I think another thing is uh a lot of people are trying to improve the user experience on on DeFi as well like how can we really offer DeFi to to the masses right because I think so far most of the users of defies are still um you know crypton native users right how we can make sure that people on the street they can get like the a yield they can get exposure to like mofo yield um and they can use like you know unis swap or kyber or 1 in for uh their Forex exchanges, right? Um yeah. Uh I think one big important don't is uh actually two uh one is avoid the test in production. I think the the defy summer in 2022 really like popular popularize the test in production kind of approach.

I think it's it's harmful. It's dangerous and it might uh because we we're actually like handling people asset, right? So don't don't you know test it before you actually have um you know proper audits and security uh audit um no admin keys right uh for the obvious reasons I think a lot of the five protocols is you know uh rpool because they because they can right or sometimes you know they were forced to do uh you don't want to have that that that capability in your own protocol um some uh something related to infoy or like prediction market. Um I think recently we saw the uh the recent events on poly market in which uh in which uh you know uh some of the resolution mechanism was manipulated right um so I think just two things one we need to have a fair and transparent way to um to um basically strengthen the resolution mechanism in predation market. Um so currently poly market relies on UMA right uh but I think we should really try to uh broaden it up and and and invite more parties to be involved in this.

Um permissionless market creation is something that a lot of people are trying to do but I haven't seen a good um a good um competitors a poly market that can pull it off yet. Um, one of the don't for this basically just avoid um unethical markets or behaviors, right? Like you don't want to to have people to launch a kind of like hitman market on on your prediction market. That's really dangerous and un unethical. Um so even though you want permissionless market creation, I think they still need to have a mechanism to filter all the bad and illicit activities uh on your on your per uh on your prediction market.

um token launchpads. I think we have been talking about I mean token launchpad is always a big topic that people have been talking about since I think since the ICO day, right? But I think to date we still haven't um solve or we we haven't been able to build one that works for both investor and project builders and other tokens uh holders, right? Um I think I think we really need to sort it out. uh we don't want to have a pump fund kind of mechanism in which people just launch and just like you know gamble on it.

Uh we also don't want the ICO days in which people just like invest and then the project can just do whatever with the fund raise. Uh we have you know um we need to really like build a strong relationship right between the investors and the project uh uh um that that fund raise through the launchpad and also have some protect uh some protection for the investor as well. Um I think this is still a hard problem to date that I haven't seen uh anything that that that works well in practice. Um yeah so um with that I mean I think um end of the day you just need to build the right thing you just need to build the things that um you are personally um going to use right for your own um for your own daily uses. Um and I think the best way to do that is just to uh use a lot of um existing products and see what the constraint are um to talk to like you know existing builders uh project founders to see what they want to see um uh as an improvement of their own product right um so for me I built Kyber in 2017 when DeFi wasn't a thing right and in 2018 2019 we saw that um we needed Bitcoin liquidity in DeFi.

Back then, I think DeFi TV was like 50 million, 100 million, and we're like, you know, we need Bitcoin liquidity in this otherwise there is there isn't enough um liquidity for us to to to do DeFi, right? So, we work with Bitco project to launch WBDC. Um and now uh you know I just step in uh back step back in the arena and trying to build the croch bitcoin and ethereum really want to unlock the$ 1.6 trillion US dollars um of TVL on bitcoin and uh flush it to uh ecosystem. Yeah with that I uh want to conclude my talk and happy to chat with you separately.

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