DeFi: The Future of Finance

[Music] thank you very much daniel thank you everybody for tuning in um as i mentioned the topic of the panels defy the future of finance i'm joined today by three extraordinary gentlemen all busy in the field of finance and decentralized finance so i have with me laurent from society general head of innovation there um sergey who is the co-founder of one inch network they're most well known i would say for their aggregator protocol and don who is co-founder of the hbar foundation who are a multiplier that plan to help builders and creators grow and overcome the challenges they face and bring their ideas to market specifically on the hedera ecosystem so i want to start the panel right away get right into it and begin with sergey and then move around with the question kind of for you what is the most exciting aspect or or promise of decentralized finance right now that you are working or dreaming towards so from our point of view defy is opening doors for everyone to get access to a financial system um so right now around the globe not everyone has can can can open an account and to transfer money to somewhere so in africa you you can use mobile phone and vrs like mobile provider you can send the money but it can be much be easier and more safe and by using a decentralized finances by using um the funeral virtual machine and the ethereum network uh which ensures that uh that you own you own your money if you keep it on your wallet yeah that's it's uh most really exciting and promising so in the future i guess we if you do grow this uh space you'll see also more uh more spaces where cryptocurrencies in use for example we pay some something in the shops uh right now here in germany i cannot pay everywhere with this visa or mastercard it's also like stupid 2021 and it's it's it's easier to pay right now with crypto than with mastercard potentially uh from the technology perspective because there are no no middle mass in the middle where you have also pay additional fees and that's why no one is surviving visa payments right now in the shops um yeah there's a lot of potential for for digitalized finances uh yeah perfect yeah understood lots to unravel there i guess the overarching vision of opening the markets and and finance and banking for everybody um one of the driving factors behind decentralized finance um iran anything to add from your side what is it for you that makes decentralized finance so alluring yeah so good afternoon to two of you so i'm very pleased to be with you uh today so i will represent the traditional finance i'm not the decentralized finance or i'm part of the not the old world but the old world that are going to move in the new world yes i see a lot of uh very exciting uh project in the world of the decentralized finance but i'm i would say that i'm i'm also impressed about the different aspects and especially the the promise of automation because automation was a key topic for for the for the traditional finance and now we can see that with a smart contract we can execute a lot of interesting things within the decentralized finance and it takes some time seconds instead of hours or days in the compared to the other world so one aspect is the automation and the second aspect is innovation because with uh the zodify you have the possibility to create new products and also to innovate also in terms of um in terms of products so uh but yes it we we have to link the world of blockchain and the traditional finance now so we're definitely yes very impressed by the project and the aspect of automation and innovation fantastic yeah very important part and something that we'll certainly come back to in this panel is is bridging this gap moving from the old world to the new world and seeing what what benefits it does or doesn't have um don what about you yeah i mean i i love that intro because that's pretty much our square focus is bridging that gap with the foot in both worlds from both a traditional finance perspective and d5 perspective i i think for me the excitement centers around two of the features of d5 and crypto in general one as composability and the second as portability so i think from a composability perspective what continues to amaze me is the amount of innovation you see by different services plugging in uh two different services so you've got one concentrated on lending another concentrated on exchange and other concentrated on price feeds and i think that theme of composability is what's going to start to bring in more and more users more and more institutions as they pick and choose those pieces that are most relevant to them to incorporate so shinhan bank for instance uh is leveraging a korean won back stablecoin in some of their testing on hedera it's a good choice or showcase of how they can take that asset and start to leverage it within their broader system without needing to you know fully re-architect their bank um but second and i think most importantly is portability sergey mentioned um you know you you go where your keys go or your assets go where your keys go is probably what i should say um and that centering on the the user and the owner of assets as the the primary you know financial actor i i think is one of the coolest things about the space because it shows how they can move across services across institutions uh you know profit seeking or really optimizing to their needs as as first and foremost so those two for me are most exciting around composability and portability uh and continue to innovate and show things that you know previously i i didn't think and i think many thought weren't possible fantastic sure you mentioned uh also a bit of picking and choosing also something i want to talk about later is how far a transition should go but for now i want to go focus on bridging the gap like you said because i think it's important to think about how how these banks can actually bridge the gap um how can tradition or centralized traditional banks continue to compete in a more and more decentralized world or at least in the sense of finance um decentralized words so um i think i can give the word again to don you were on a nice roll there um and then go out from there what do you think um what is the future looking like for for banks that we have today i'd say it's it's much like the the history we saw over the last two years um i'll credit i think it was multi-coin has a great kind of graphic on this you know it starts with the unit of account at the base layer moving up to oracle's moving up to markets so on and so forth and you saw the d5 space go through that you know we had initial icos and token launches and you now see more and more complex more and more advanced aggregators yield programs etc banks themselves like the broader space are starting at that base layer with the unit of account how do i hold tokens on a balance sheet how do i leverage them for more efficient payments but i think we'll continue to see them move up the stack in their usage over time so for me it's all about beginning at that base layer with the asset and token onboarding and that opens the door for all of the innovation we've seen in the d5 space coming to the traditional finance space absolutely absolutely and laurent you were nodding your head a lot yes so for me for me for me defy is that uh he's at the early stage for for the moment and you when you were talking about competition for me it's like at the beginning of 20 20 28 18 16 we were talking about competition between fintech and banks and now we are talking about competition it's uh it's the same for uh from d5 it's not a competition between traditional finance and uh decentralized finance so there is a there is place for device there is place for for c5 there is place for traditional finance and d5 will not replace the traditional finance so in the traditional finance you are regulated it's another word i'm working for traditional finance but as head of innovation i know what's happening in the centralized finance and in the decentralized finance it's two different world we are regulated we have a lot of constraint uh we we need to deal with the investor protection and from i will take my personal example i have been at two times it was four or five years ago with my credit card and you know with a bank i have received the cash uh two weeks after if it was the same uh with my wallet yeah you you don't have a client uh service department you will call the decentralized finance hey i have been asked can you give me my uh my son box please or can you give me my uh my bitcoin right there no it's not possible so we we need to find the bridge we are regulated the drugs is not yet regulated maybe one day and we need just to find the use cases where it makes sense to to bridge to bridge the gap and atrocities general without subsidiary associated general forge we we have an interesting track record of tokenization of financial assets we have already tokenized bonds certificate products and so on in a public blockchain and we we believe that it makes sense to to bridge the gap by bringing our tokenized bonds as a collateral in the protocol demo maker and we have made a submission for collaboration to the to the forum so the idea is to bring the collateral uh we have zero percent but we give the collateral and we will receive back the the die as a stable coin so definitely it's an example of bridging the gap between the traditional finance and the decentralized finance yeah it's i mean it's fantastic to see traditional centralized fan finance pushing the envelope like that and and trying to move forward into the space um let's let's jump across i guess across the pond and uh sergey someone who is certainly with both feet fully in the decentralized finance space at least i would expect what are your thoughts on it about bridging the gap do you see space for both do you think there will be competition cooperation so i see g5 as a next step for traditional finance finance system so uh in defy we have uh no i already mentioned middlemen brokers who humans yeah who are not that efficient compared to maybe a program yeah which can run fully fully uh autonomously on a blockchain and it's just doing what it should do and right now like when a bank uh transfer yeah would like to exchange for example last dollar to euro they need they need to work with someone else with third parties yeah maybe for other banks and and so on then it takes time maybe to transfer money and getting uh the the euros or they have to maybe buy a option or whatever and uh it is really complicated uh how i know i'm not from from from traditional financial space but what i heard there's a lot of pain uh it works it works from our point of view it's slow to compare to defy and defy solves these problems can just easily exchange on a mmm or through an aggregator on chain from one of you in the first stages it could be maybe a private network uh for the banks just for the banks like just look on the telecommunications space you have ss7 around the globe it's a very old protocol what they use but still they communicate somehow through the same protocol yeah of course on traditional finance there there there also there are also standards but defy like blockchain ethereum in the first place is more efficient from our point of view and it takes it's easier it's easier to make an exchange it's fully transparent every everyone understands who what's up what and and why and i don't think so that if i will compete with traditional finances i see banks and other institutions as a gatekeeper for defy so they can aggregate own customers and uh open the doors to defy by by using it in compliant manner and from open view is possible it should come the next years it's regarding the regulation of texas and whatever else there like planning protocols yeah it's already almost there i was started to offer a kind of institutional products and uh also consensus working on that and also make it though has already some some candidates and are more coming right now and yeah it's it's evolution it's not a revolution it's the evolution of the financial system from our point of view yeah i i think just to jump in that that last point for me is what's really compelling about traditional finance entering the space you know d5 showed that you could have people as markets infrastructure providing liquidity with direct direct access to those markets and i think traditional finance represents how we can expand access to that set of services and so when it's you know usage and onboarding and regulation in the interest of enabling access versus restricting access i think it's it's very powerful and very exciting as that's where the majority of the world still engages with their financial assets and so we should be eager for that access to defy two tokens to crypto to be broadened through those institutions i think seeing it as an evolution is probably really the best approach and the correct approach um in that sense i do want to speak about making sure that nobody's left behind because we have this vision of d5 as established earlier as kind of opening it to the people opening the market to the people being banking for everybody but how do we ensure that people are not left behind be it for a lack of digitalization in their area or lack of education in this regard or in the case of traditional banks maybe as we see maybe their customers becoming older do we want these p these older generations to join d5 as well or do we kind of say well it's not relevant for them what are your thoughts on on that and making sure everybody can make the transition maybe yes if you want i can stop it's a depends on question i i believe that it's uh it's a very important to look to the segmentation of the clients you have the individuals you have the corporate and you have the financial institution and the answer will be different depending on the type of client for for the retail i i believe that if you don't want to be left behind the defy it's a question of education access and simplicity because yes i can if i because i'm working in the financial institution and in the blockchain since a long time ago but yes it will not be the case for everybody so education is very important when you are talking about retail and of course protection uh is also very important when you are talking about corporate and when you are talking about financial institution for me the most important would be the clarity and the regulation um for me it's uh it's a very uh valid point because if i want to enter tomorrow in the world of defy i will need to have the agreement from uh from the regulator and to ensure that what i'm doing is in line with the regulation with the requirement and also that i can i can do it on behalf of my clients so well for me uh regulation is definitely a valid point for for zodify education and also simplicity sometimes it's not always easy to understand of course sergey would you like to like to jump on that um yeah this is like defects like uh from our point of view uh it's like internet from from the early stage of internet yeah so everyone didn't expect that like internet would be like that useful and that uh uh open for everyone actually yeah um and it's from upon me at the same t5 and we need little bit time to to to have better better tools better uh kind of user-friendly access to d5 and some regulation for sure and then we will see it growing uh maybe to the main financial system not around the globe maybe beyond the earth [Laughter] that really wants to help and these builders and creators reach reach the people what do you think is one of the challenges that they face that that you want to help solve i i mean i think just on that question of how to make sure nobody gets left behind what we see this in this market is is similar to what happened in payments and digital identity you saw emerging markets like estonia with digital identity or m-pesa from a payments perspective that really leap frog traditional infrastructure uh to give a direct user experience for this new innovative technology and i think with with defy and crypto especially in emerging markets we're seeing a similar pattern where some of the most active banks in central bank digital currency for instance or embracing uh you know tokens i think it was a a group in cambodia today just said tethers their their new currency you you see them you know pursuing that same leapfrog strategy which i think is a good indication that there's going to be a way to bring you know the the a broader community uh into this technology into this marketplace which is is quite exciting okay certainly certainly very exciting so um i have an audience question as well that i want to ask you um and i think maybe laurent it might be one that you've answered before but i would like to take it to you anyways um the question is how long will it take until most assets from the traditional financial market are tokenized and available for d5 and in that sense to add another question on it do you think we will see a full death of the order book and everything will be using liquidity pools okay so i will take my crystal ball and i will just tell you that it will not be for tomorrow because uh yes there will be a new acceleration in uh yes in 2022 i believe that there will be a strong acceleration in the tokenization of assets this is the first step the second step will be the rise of circlebox digital currency stablecoin mostly balcony in europe because the financial model is not okay because 98 of the the stablecoin are in us so if you want to move because i'm i will i will have my threats my pension i will be paid in europe i have my salary in europe so it should take time of course we need to wait the sort of digital currency uh of course and yes it will take time it's like for the q2 i believe that in 2030 we will have a first the first adoption adoption phase for me in terms of defy and pure digital pure digital bank but it will take time of course because i'm i can tell you that i'm working with the blockchain since 2020 2010 so it's already 11 years so uh yes i was talking like that in 2014 15 already so yes it will take time yeah i know it is a bit of a crystal ball questions would anybody else you like to read their their omens add something to it so from my point of view it can take like 20 years you can't tell that for you the thing is like it's not that easy to migrate from something what is working and working for really 100 hundreds of years yeah and also this topic digitally uh to move to a digital uh uh environment in the companies like for example in germany a lot of companies are still in the process to to move this um uh everything what they have to kind of digital uh company and uh like it takes already 20 years almost and it can also take the same for the defy but new companies are coming um new projects are coming so in our case i and anton we just came to an idea on a hackathon because like i don't know we had a pain and we saw it and this is this is what is possible with defy you can just jump in build something you solve a problem and new something new uh is growing and and would also replace something what is already existing also if you are looking back to amazon for example when amazon started to to to grow and google and everything yeah like similar like apple facebook they replace they replace some of the companies uh in in multiple countries and uh the same we will see also and in defy defy is like more more transparent and also easier to participate i i'd just say that especially as an ecosystem fund you know that that's our bread and butter and we see everybody from hackathon teams and individual developers all the way up to the world's largest institutions that you know are looking for that support to be building in the space and starting to leverage this technology and i think what's most exciting to lauren's point is there's very few institutions which have not been looking at this for by this point for for years and so when they're making steps when they're doing proof of concepts onboarding different applications it's with a lot more intentionality to scale than i think it was previously um in a former life you know i was i was helping institutions with those proof of concepts and all kinds of use cases you know supply chain this that and the other and just how much more concentrated it is uh now is i think indicating that it's really going to be accelerating in the in the coming year for usage fantastic and as we kind of see this acceleration and you know growth prove different proof of concepts possibly also done on on different chains um i want to take take up this concept of the future is multi-chain is it uh is it not what do you guys think where do you see potential in this regard and maybe then also how would how would banks work with with this kind of idea that they have to be not only on one chain but uh multiple chains and be able to kind of bridge effectively yeah so uh if so if you if you talk about banks i i can i can answer yes uh we have made more than 40 experimentation at society general since 2014 we have made experimentation with ethereum public terra with hyperledger with h3 so with autozone of blockchain i believe that there will be a still a different blockchain of course interoperability will be key and of course our role will will change in the future we will have also to integrate all the different strain from uh to to answer the request of the client so for me we will not have only one chain and the role of the different stakeholder will change the future a lot of integration and integrator a bank can be an integrator of blockchain in the future yeah happy to go next on this one i mean so it admittedly biased we we primarily support deployment and usage of the hedera network we think it's got those differentiators from a governance perspective a performance and cost perspective and a sustainability perspective that make it very accessible for mainstream institutional and d5 use cases but that being said the world is absolutely a multi-chain world we we know that liquidity is portable between networks within networks and driven by yield seeking and profit seeking opportunities by users and that's a very good thing and so we believe absolutely that network should be connected to one another so that markets can form based on communities of interest where they're best built so we might have you know a specialty in sustainability markets as an example or bond tokenization and that should be easily interoperable with another market in a different place for something like collectibles so we 100 believe in in an interoperable world and want to see networks connected to one another as part of that i would like to add so regarding multi-chain so we have seen a lot of we are projects growing in this space and this year like one smart change started on chain polygon and and from our point of view it was just because of this high high demand a lot of people would want to to to to use blockchain but like it's too expensive on ethereum ethereum is the most i would say stable and uh secure blockchain because of a lot of uh miners and so on and so on yeah it's difficult to to attack this network and and other networks who just copy ethereum and introduce actually like proof of stake but it's just proof of authority what is existing since years and and say okay it's cheap but at the end they they actually didn't solve any problem they just show us what's happening with ethereum if you don't change the theorem in the next years and what we see is uh reorganizations between the uh nodes and uh we have also some aggregation services which we provide uh from our site and it's it's it's really difficult to to maintain like polygon and minus one chain because they actually didn't solve the problem yeah and the the the problem could be solved by introducing like layer two we have already like optimism and arbitrary but ck sync is coming for example with real proofs uh so you can interact directly and really fast with layer two from ethereum and we and my co-founder we were talking with vitalik would talk about that uh how he see it and what i got from him that he see like more um kind of potential potential um a use case of layer 2 above ethereum because ethereum is really stable yeah really secure and later with proof of stake um yeah it would be like green [Laughter] so and layer two above uh actually we've done what you said that you can have like nft market one network it was actually like the idea of um book a lot to have multiple chains but it's it's difficult they are technically difficult but it's easy to use just math cryptographic and have a layer two for additional markets of course you have to know you don't have such a composibility you need kind of layer two and all the projects deploying like on layer two and then you have decomposability and the benefits of d5 but it's still possible to just say okay this nft market should run on layer two and it commits just to the really stable secure manner this could be a good solution from my point of view and other not efficient solutions and just copies and uh really really not solving problems uh chains um they don't have any any future like the state of binary smart chains exploded and it's it's really it's really difficult to run a full mode right now that's i mean very interesting so so there's kind of the division that maybe the future isn't so super multi-chain at all after all or well i mean as all of us probably we just really don't know yet what is going to happen right we're all taking educated guesses um i on that i mean we'll absolutely see consolidation and by no means are all all networks equal whether that's from a leader based and proof of authority consensus model you know making things very risky you know all the way to more novel consensus which which can be more secure but i think that idea of composability as a means to connecting those networks whether it's using evm and solidity-based smart contracts across multiple networks or having unique governance models uh on different networks is a real opportunity for valuable differentiation in those networks um ethereum absolutely you know is the most proven one of the longest running smart contract platforms and canon should always be a core place of innovation um but i think that other networks can be you know the mechanism by which you onboard an institution through a bond to organization platform uh of course lauren i know has has experimented on ethereum but it is still in that i think multi-chain world that uh we'll see growth continue uh and innovation continue as well uh the layer two space as a great example of that as well or certainly they are quite quite interesting and we'll with well the maturing it is hard it's hard to speak of the maturing of a market when we're so early still but i guess that's that's really what we're trying to get at here um i i do have two more audience questions that i want to go into and one of them is about about risks and defi and i think we kind of mentioned it earlier where you were saying well if i have a problem with my credit card i call my bank what do i do in d5 and the question specifically is how do we manage systematic risks in d5 so like in traditional finance there are central banks that can kind of be like a lender of last resort private banks that can act somewhat as shock absorbers but in d5 there's a lot of interconnection it's quite complex there's a lot of leverage that could then create systematic risk so how can we manage and reduce this what happens if something goes something big goes bust okay so uh maybe i can start so the biggest twist in defy i see uh so i see the cyborg security uh of course because you have a risk of failure especially in the smart contract design and i have seen a lot of hacking in in the d5 mainly to the access of smart contract i see a second risk is i'm sorry for that i have to tell because i have a lot of compliance department so you don't have any kyc in in the world of d5 so yes it can be served for bad reason and there's a way to tell that but it can be a big a big break for the future of defy especially if you have a bad story if you have the regulator behind and the last point is linked to what you said regarding the financial stability for the moment there is still a big volatility of of the crypto and it can be a risk to the system if if it's growing it's okay if it's not growing if it's decreasing uh you will have some problem with the collateral so definitely there is a problem of financial stability for the moment the the amount in the dfi is about 100 billion i believe so it's still a big problem in terms of financial stability but if it's going to one trillion yes it will be because i remember the story of the crypto it was four or five years ago the market capitalization was at 100 billion everybody was telling that it was not the financial stability now it's three trillion so uh it's it's maybe two spot five today but uh it's it is a poem of financial stability now and uh yes uh it's a bit different so for the moment we we need to understand more uh the word of defy and how to solve the financial stability in case of quizzes something new for me i would like also to add about cyber security yeah it's one of two very important things so there are a lot of people who are like working on project releasing replacing implementations by using from our point of view wrong patterns like proxy patterns or something like that uh and introducing like security risks and we have seen already a lot of hacks hundreds of millions of dollars of stone and because because like no one cares about security audits like in our case i guess we we have like at least 10 security guards from different companies around the globe and i wish more so you can never know and for sure you can mitigate some risks like by introducing insurance use next commercial or something like that or open uh but still uh yeah from our point of view people who release something and production should first maybe like at least five security auditor companies uh i know it's expensive it's really expensive and we had also a period of time where we had no money we worked for three and a half years and um yeah but we were self security experts give yourself white hacking attacking some projects and reporting uh yeah um yeah and uh the kyc thing i i see it like that so you need the entry point you need to exit point on on the entry point in crypto you you have a kyc proof and also next point you have to prove to the bank that you might you got this money from specific source and i think it works yeah but still not that good what it should be and maybe additional compliance there should be introduced for e5 itself completely agreed on all of those i i would just add that there there needs to be still a continued support for that open innovation in the space and whatever kind of regulation and frameworks come with that which can absolutely help improve from a security perspective a risk perspective these markets i think that always needs to be with how to support continued innovation top of mind we need the next hackathon projects you know that create a new lending model to come out we need the next wall of projects uh to onboard new users so that's that's my other risk uh is how to make sure we continue to to drive that innovation so we are we are slowly but surely coming up to the end of the panel so i want to end on a lighter note maybe something more positive so i want to ask each of you since we are getting to the end of the year what you would say what is your your christmas wish maybe maybe your new year's resolution that you want to get done or that you want to see happen in decentralized finance and sergey feel free to start yeah i can start um so for me personally i i would love to keep building keep innovating building new things improving the space morning new people um let the institutions come into defy these are kind of my personal goals right now here and yeah and have great time with with these great people um yeah we have a really great team we we were like growing from like hackathon guys and uh most of our guys also hackers and i i personally would love to travel again around the globe and also participating in the hackathons as a hacker again because i missed this very very well that's i think i wish all of us have is getting traveling again lauren what about you so sergey you are welcome in luxembourg if you want to travel uh so for for me uh yes i would love to have more projects of the famous bridge between financial institution and defy to create potentially new products and so on and i just saw that i have a question in the chat just to say that if a bank wants to create products for retail it will take a lot of time because the regulator will not authorize us to create product for uh for retail right now it's uh yes it's too early from a regulation perspective so so my wish is more project for uh for banks in the world of d5 for new products it's very i think that's a good vision i think that's what we all want a little bit yeah i'll say my my mission for the new year is simply going to be supporting any projects across the globe that we can whether that's financially technically from a marketing and awareness perspective so that's what we're most eager to do i think maybe lastly i'll just add that we're also starting to see these d5 primitives now be applied to new markets whether that's payments sustainability collectibles loyalty points and for me that's also an exciting growth area coming into the new year as we'll start to see these new industries transformed by what we've seen happen in d5 over the last few years fantastic so thank all three of you um i think it was quite quite an interesting panel at least for me i took some things away from it i hope everybody listening did as well and i see danielle is already sitting here waiting thank you very much for the discussion it was a very nice discussion i hope we managed to i think we managed to answer some of the questions that the audience had we went all things defy from security to customer service to the business side of defy regulation even some christmas wishes for defy for next year so thanks a lot for sharing your insights and to the audience just uh i hope you can stay for three sessions more and just be as active as you've been on the chat so you can go to schedule and click on the next session thank you very much thank you lovely thank you