Hi everyone. Uh my name is Ivon. I am head of Defi Reserve. Reserve is a is a platform that allows anyone to create tokenized index products. Now um we like to call these products decentralized token folios or DTFS.
Um Reserve has about 400 million TVL currently and is the largest index protocol in DeFi. And I'm here today to talk about the future stable coins and the path to achieve truly stable currency. So, as everyone knows here, stable coins are the talk of the town. Uh, and if you didn't know, well, you're in definitely in the right room. And the headlines speak for themselves.
From major companies making marquee acquisitions in the stable coin space to large multinational banks and companies announcing their plans to launch new stable coins to you know global distribution partnerships between key stable coin players and companies in the fintech and e-commerce space and not la last but not least the Senate passing the Genius bill which is the first major legislative win for our industry and stable coins, the potential for stable coins to disrupt major areas of the economy is finally being recognized. And it seems like everyone wants a piece of the pie. And they're not wrong, right? I mean, the numbers speak for themselves. Stable coin supply is at all-time highs with about $250 billion in in TBL.
Um well, not TVL, uh in in market cap and explosive growth in nearly all metrics. There's today there's hundreds of stable coins and the number is only continue going to continue to grow from here. So despite all this, despite the innovation and the emergence of new designs built on top of previous designs, um stable coins today are still far from far from perfect. In fact, um yeah, about over 95% of all stable coins in of this total stable coin supply is fiatbacked. And not only that, but over 99% is denominated in US dollars.
Now, if we truly want to build currency that is reliable, that is secure, that is and that is stable, this might not be the right idea because no, this is not a chart from like one of Jamaat's packs from 2020 or or like a random memecoin. Uh this is a down only chart that shows the purchasing power of the US dollar from like a 100 years ago to today or to 2020 I guess. Um, so the problem is, um, yeah, and it's not just the US dollar, right? It's every other fiat currency out there. This chart shows straight lines that represent price increases in 30 countries since 1960.
Uh, inflation is a real pandemic. Um and the problem is that so today as we can we can all see and experience every day uh something is broken with the need for safe stable money has never been greater. Turns out that even those considered to be the best fiat currencies like the US dollar are far from stable. Right? Uh their value and their purchasing power is constantly being eroded with no end in sight.
The thing is the same the same is true for uh curren for stable coins that are fiatbacked though. Um and that is the key distinction that I wanted to make here today. A stable coin isn't necessarily a stable currency. And but this is this shouldn't be surprising, right? And if you think about it, how can we build better money by using the same building blocks that brought us here today?
The reality is that a new generation of stable coins should be assetbacked and not just fiat backed like the like the ones today. We need currency that will hold its value for centuries and that will grow alongside the economy. Imagine if you could have a currency that is backed by a basket of diversified basket of representative of all the assets in the world. You could suddenly be paying and transacting with a tiny share of the world's GDP. Uh, how cool would that be?
So, it's clear that we need new Legos in order to build this. And this is where DTFS or decentralized token folios come in. So, DTFS are baskets of tokenized assets. It's basically like ETFs but fully onchain and permissionless. They blend they blend the features from traditional ETFs and index products with the powers of DeFi.
DTFS are one to one asset backed and fully transparent meaning that the the underlying assets that are part of the DTF can be audited full on chain at any time. DTFS can be instantly minted and redeemed in a fully permissionless manner without delays with no intermediaries and no gatekeepers. But why do DTFS matter for stable currency? Well, DTFS well DTFS introduced three key elements for the creation of truly stable currency. The first one is diversification.
Diversification allows us to reduce the reliance on single on single assets or issuers, right? So why would I want to hold a single ETH LSD if I can instead hold a basket of LSDs of blue chip LSDs that will eliminate single points of failure? The next one is experimentation. Uh we built an open platform so that everyone can experiment and that it's open for anyone to create basket of assets to discover the optimal combinations. And lastly, evolution.
As more assets are tokenized, we'll be able to experiment with novel designs for currencies that are floating peg and that are assetbacked instead of just pecked to inflationary fiat currencies. DTFS are really an open playground for combining different asset classes in one basket. You might have a DTF that combines DeFi yields from yield bearing stable coins from, you know, yield bearing strategies on denominator on ETH or Bitcoin and combine this with any other asset class that you want. You might want to you might want to you might want to include real estate or treasuries or private credit or stocks uh in any and in in any form really that you can imagine from active strategies to structured products to market indexes. So DTFS are a step beyond current stable coins and traditional ETFs.
On the stable coin side, most stable coins today are centralized, are centralized and fiatbacked. This introduces single issuer risk and regulatory dependency similar to what we see today with USDC and USDT. Now, on the decentralized stable coin side, um they're a huge step forward in the right direction, but they they still have some flaws, right? So while they introduce great features like being being uh censorship resistant and transparent in both their backing and their mechanisms, they also come with downsides and limitations. Namely, for one, most stable co decentralized stable coins today rely on overcorrealization which makes them not very capital efficient.
Then some other some other decentralized stable coins introduce some centralization risk indirectly. um is stemming from exposure to centralized asset with assets within their collateral set. DTFS try to go a step beyond that and build on on top of the centralization concept that decentralized stable coins introduce baskets. DTF baskets can be governed fully by Dows and they also but while while introducing diversification uh to provide greater control and visibility over what assets the DTF holder is exposed to. DTFS are also extremely adaptable because baskets can be are mutable and can new assets can be modified, introduced or removed from the basket via this governance process.
Um DTFS are also introduced transparency in both basket change mechanisms where everything is voted on and done onchain in a fully public way and proofs of reserves can be audited at any time. Now moving on to the comparison with traditional ETFs. ETFs supercharge the features that traditional ETFs already have um by by leveraging blockchain rail. So, one immediate consequence of this is improved access and speed. Instead of having to wait months or years for a new thematic ETF to be created, or instead of having to rely on market hours of operation to trade ETFs, the ETFs are are instantly created, minted, and redeemed on chain without having 247 without having to rely on market hours.
Um now DTFS are also extremely composable and this might be the most important concept here. Um because they instead of working in a siloed system like ETFs, they operate and are fully integrated into the DeFi ecosystem having access to any tokenized asset that you want. And this is extremely important because the perfect storm is brewing for ETFs for ETFs. Index products are a huge success in traditional markets since the launch of the first mutual index funds to continuing with actively actively managed ETFs to passive ETFs. Um even though mutual funds came way early um ETFs uh quickly close the gap to make up combined about 50% of the total US stock market today.
Now if we compare that to crypto only about 0.03% 03% of all tokens are in indexes today. With tens of thousands of tokens being launched every day, it's clear that the natural step for crypto is to adopt index investing as more predominant and for index investing in crypto to grow significantly in the coming years. Separately, we've seen an explosion for tokenization of assets. As as we're we're all aware, recent reports from leading banks and research institutions forecast RWAS to grow exponentially in the coming years, reaching mark market sizes between single trillions to tens of trillions by 2030.
And if this is a huge step up compared to the size of the RWA market today, which is well under 100 million. So how does this translate into real world impact and use cases for ETFs? Well, today DTFS enable access to broad market indexes and sector indexes within crypto, to decentralized USD backed stable coins, and to tokenized yieldbearing indexes denominating USD, ETH, or whatever other denomination. As more assets are tokenized, tomorrow we'll be able to experiment with different currency designs touching virtually all asset classes available. In the long term, experimentation with optimal baskets designs will fuel the evolution from fiat dominant currency to currencies with baskets representing the GDP of the world.
It can hold value, its value for centuries to come. Now, to close it off, I'd like to stand an open invitations to everyone in this room. We might not know what the next world reserve currency might look like. And honestly, it would be too arrogant for me to say that we that we know what it would look like. Uh but what we know is that the current system is broken and that the next generation of currencies needs to be asset back, needs to hold its value for centuries and needs to grow alongside the economy.
We're creating an open platform so that as more assets are tokenized, anyone can go and play with different asset combinations and different baskets for creating new currency designs. I invite I invite everyone in this room to work together to experiment to innovate upon current designs and with different asset baskets. H because while I might not know what the next world reserve currency will look like, if I had to bet I'd say that the people in this room will play an instrumental role in creating it. Nope. Thank you.
Automatic transcript — names and jargon may be misspelled.