Cesare Valitutto Chainlink Labs - TradFi meets DeFi and they hate each other

All right, welcome everyone. Very excited to be here and talk about this incredible story with these two main protagonists, traditional finance and defy belonging to two different worlds and you know the title is clearly provocative but really is the question do they really hate each other? But before starting the story, I want to tell you a bit more about the narrator about myself. I started this um journey in the blockchain for business 2016 with IBM. That was my first assignment with Ebian Amro um a very important bank in um the Netherlands.

And this blockchain project, the use case was related to real estate. Now you may wonder what's anything to do with bank with blockchain and real estate. This was exactly I think the beginning and the starting question that I also had in my mind when I started this journey. And then slowly um I had opportunity to work with many industries in the space uh from the financial institutions um financial space from um the healthcare energy sector um food chain you name it. Slowly moving in this direction, I joined consensus as a solution architect where I had the opportunity to dive deeper into the defy NFT space and finally landed on the chain labs chip uh where are now working with institutions to to reable assets.

Look a bit look looking a bit at the background of the story where it really begins. There was one important year that really changed completely the way in which we looking at traditional finance today and that was 2008. a white paper come out no more than 15 pages and describe a new way of um providing a solution for finance to send money from A to B without using intermediary in a secure way in a reliable way in a decentralized way. Bitcoin was born and slowly made it through um the media getting you know good and bad news uh of views from from the media. But 2014 was an interesting year after surpassing the thousand dollar US dollar.

Bitcoin landed on uh Microsoft Xbox platform and um where it was accepted as a payment method. However, wasn't all good story for Bitcoin back then. uh there was a lot of fear and connected to the technology mostly for the not understanding of what uh was really coming with. Uh so represented really like a threat for transitional finance and mostly for the points that we highlighted before is it this intermediation. They also bring with it the loss of control right like um traditional finance is used to control data manage uh information and uh paychecks etc.

So that was um definitely a big paradigm shift. Regulatory compliance. Um there were concerns there as Bitcoin as a start unfortunately was um tagged and attached to stigmatized to um malicious and um unfortunate event in you know in the dark web. And um of course there was also something positive about that and about the technology itself. But the media of um decided to ellight mostly these kind of use cases.

And finally the consumer shift. Traditional finance thought that uh blockchain and bitcoin could take away market shares could take away basically people users client and therefore value away from traditional finance. The next slides will show that was exactly the opposite but we will see in a minute. It was 2015 when blockchain 2.0 came out that it was um a really turning key uh part of this story.

July the 30, 2015, Ethereum, the world computer came out and Ethereum promised and delivered to cover not just one use case that it was traditional finance. was like sending money from A to B but actually for something more um on the substratum on the foundation. Why not using this technology to uh do something more complex, right? Having a machine that run globally in a distributed way to execute anything, anything could possibly come to our mind and I think a lot of industries and companies really take the word but the very interesting things was like Bitcoin was only one use case for the Ethereum co-ounders and they envision much more. Why could not do change ownership on a real estate of a car?

why we cannot like create digitalized tickets and sign ownership like the one that I signed for this conference. So 2016 was a great year for the industry because they started realizing that the technology was a great fit for what they wanted to do. And here it started the famous era blockchain for business or what I like to uh define uh with this quote I got a blockchain what's your problem. So this is was the famous and unfamous moment of the technology taking place in the industry. um a lot of good things come out.

There was a lot of experimentation but on the same time use cases were not real. We were not really solving a real problem. And what this image wanted to picture here a Ferrari brewing coffee is really putting two things together that not much relation. Um there are two amazing things but really don't work together right and this is kind of metaphor of many use cases that we've seen um in the industry back then. But something I want to highlight um these are I would say some of the partners and people that work to build the blockchain what we can call the blockchain for business and drive institutional adoption from the age of 2016.

uh Aleger, Fabric, Cordon were only few of the frameworks that played a role there and really all these industry, all these companies trying to um you know put together effort from competition to collaboration to work together to achieve the same goal drive adoption institutional adoption for masses and say blockchain to the next level. Now you may notice that in this group of um people um you may recognize some of these logos there are not just technical companies there are food industry distributors retailers banks and more right all these together um collaborated um to produce and increment for the industry of what we are today so we really contributed heavily trying to also solve some of the problem that blockchain chain came with uh and that it was not really matching the what business looking for like privacy for example. So they come out with solution like channels like sub network right private transaction to try to guarantee that um and then so say they also work a lot open source there is a lot of code available for people to work and this is al something singular in portion for these industries. These are some of the important um production releases and event that um came out from 2016 to 19. I work with some of these projects use cases and direct contact.

Um that was the is the age that we can call it the consorcia age or better like entities understood likely very early stage that they need to be together as a competitors to build up the use case to work together to achieve a goal um and that's what call consorcia consortium and singular so trade lens merk IBM IBM food trust connected many retailer distributor and really taking the provenence and safety of food from farm to table. And we trade a collaboration of 15 plus banks putting together to work on instant settlement. And then something happened. Someone pulled a flag. we start and see in 2022 that many of these um experiment production works fell apart and I really want to highlight look into the reasons I'm trying to find out retrospectively what happened I think if we look at the idea chart of how a high-tech usually work in the industry face for business.

We have a very big hype on expectations that get that curve very high. So then having getting into this period of true of disillusionment where we are at the reasons that identify about this falling I want to call it. One of the that we stressed before most of these use case were not real privacy and regulatory concerns. Even if the product went production, there was a problem of how can we make it pass the regulatory um scrutiny, governance, how all these company can come together to make a decision when it's very hard to put together couple of people. Imagine like thousands of people.

And finally, last not least, the eye complexity and cost. This is the big elephant in the room and this is something that a lot company didn't foreseen in the very beginning that this technology is not cheap. If you need to run in a cloud there is a big cost associated with that. There is resources cost time etc. But I really want to see this as a learning curve like a learning uh phase rather than a failure because as you can see from that diagram there is that slow point alignment where there is a recalibration to then get to a plateau productivity.

But what's really 2020 that makes a lot of sense for traditional finance and when we can really define and embracing between these two worlds a compound maker DAO um unis swap all came out um providing a big sign of what defy and the capabilities um of this new technology were uh coming with. So some of the important event that happened between 2020 2022 um really good event not just for Ethereum and space but for the industry of Bitcoin. Um one of these was El Salvador a country adopting Bitcoin as a legal tender. So we can see that the technology and bitcoin is as a technology um and lighted at being a value obviously for many company for a country right where they can deposit they can see value um as an asset and slowly um we see also like some bad events happening unfortunately in 2022 where we see business a lot of money flowing in unfortunately um there are also big risks is involved. Uh was the case in 2022 May the Teroluna collapse that wiped 40 billions of clients uh customers fund and even bigger FDX one of the biggest exchange in 2022 filed bankruptcy in November 2022.

The market capitalization went from three trillions of the previous year to 900 billions. You can imagine like a big hit. It was a catastrophe. People in the space were moving away. There was a lot of fear, scared, a very dark period for crypto and for all the industry, especially for people that build this infrastructure from the ground up.

Uh was uh a very very dark period. But something started emerging from the surface. something sucking starting um highlighting a light of hope and that's where we saw the phoenix reborning from the ashes that's where we saw in 2023 Black Rockck filing for spot ETF Ripple winning his first um partial victory with a sack people coming out with a stable coin sack approving 11 spot ETF and the change administration and US government allowing a crypto friendly environment. That's what drive surely massive adoption of crypto in these years. So we are back.

There are definitely like some learning from the wild west uh that we um that were left or given as a gift from uh DeFi. First of all showing that everyone can actually have an account can self custody be self custodian on some funds. This is really important. The asination ownership is one of the biggest things in business and so far a lot of people trading are still an owner on their own shares and this is fundamental requirement. Um and also regulating this part is a fundamental requirement for moving this to the next level.

If I also show the unprecedented level of using financial services and um moving and trading fractionalization instant settlement and finally and last not least I think the most important things that defy gifted uh the uh traditional finance was getting education educating people on using finance on the primitive using real market condition bringing retail to the to the table something that he was fearing before that defi will move people away and instead get people very close. Obviously there are challenges we are working on that but the future look very bright. We want to take whatever is on the top left sorry whatever is on the y side on the top left we want to tokenize one quadrillion on data and to do this we need interoperability. Chainlink have been working on this since the inception. We want to connect the offchain data to the onchain and this is the unevitable the only unique way to drive massive adoption of institutions connect these two worlds fundamentally and that's why we came out with chain link runtime environment that we announced last year as mark.

I recommend everyone to take a look of this composible new framework that combine all chain link products together to building blocks and allow you to build your own solution with ease. Thank you so much for listening.