Neobanking: DeFi's secret weapon

Transcript

by changing the distribution if you look at entering six for example the biggest challenge Bank in Europe they have the same old banking infrastructure underneath but then a wonderful delivery the brand the customer service the UI but ultimately it's just painting lipstick on a pig for lack of a better word and that is what fin deck has done so far and it's already done a pretty good job right fin type of category because it would quite disruptive quite successful in the VC scene um whereas with defy and the protocols that we see I think for the first time ever we really have a chance to change the infrastructure so why why do we have a chance to change the infrastructure with defy and not for fin tech I think this is because of the the stack so the depth

of the stack and the composability at the spec so with traditional finance you have international banking law then you have local banking law then you have implementations of that law with core banking systems for example and then you can eventually use the API is and then build something creative it's really really difficult to switch out part of that stack because it's so slow moving it's so heavily regulated and it's so centralized whereas on the block train side of things well the stack is extremely small and extremely young right so we're building defy applications using the ethereum blockchain theoretically we could change block chains if you want to do though I hope we won't have to and the ethereum blockchain is constantly evolving it's

constantly changing it's constantly improving yourself and it's only been around for what eight years now so the reason that if I can do something that FinTech never can is because it's able to change the infrastructure because it's not based on a very slow moving legacy stack yeah and what we wall are trying to do is to offer you the best of both worlds and I think this is what creates the best the greatest amount of good people in the long run yeah so why does centralize finance need decentralized finance well there's still lots of problem to solve so even if neo banks and I'm revolutes and transferwise have made things better it's still the

case that remittances are extremely high and then we have one seven billion unbanked but that's just in the developing world when we talk about problems of finance are happening here in the West as well so we are currently getting paid zero percent interest on my European bank account holdings sometimes even - interest rates we've had a financial crisis in the last decade and we might have another one because now interest rates are as low as they can go and they can't really lower them any more so traditional finance has failed us to a certain degree and FinTech has made it a bit better but it can't solve the fundamental problems so likewise why does define need a CFA well I would argue that defy has a distribution problem so we are now in an extremely

experimental phase we're in the innovative phase so you shouldn't even be go at tried trying to go to mass market right now but ultimately it's a question of adoption being value - friction I would argue that DF is creating a lot of value for example like now you can get 9% APR if you deposit into a savings rate but why isn't everyone doing this well the friction is too high it's either too complicated or people don't really know what's going on people don't trust the smart contracts and so I think the deeper community is going to improve the value side but we need to solve the friction side if he everyone defy to actually go into the pockets of mainstream users so yeah I would ask you what if in the killer apps

of blockchain since it was launched I'm the first is cryptocurrencies so for the first time we can transfer value and a peer-to-peer way or without using a centralized party the second killer app that really drove adoption was I SEOs so maybe not for the best reasons but we had this ability to launch a project and to receive support and capital for that project from anywhere in the world so that was a really cool way of just decentralizing investment opportunities even if it was yeah we went a little bit wrong at times and then our bet is that a decentralized finance application is going to be the next killer app of blockchain that really drives mainstream users to sign up and to do something new yeah and I would argue that

fundamentally if the users is mainly been about investment so if we if we read the original Bitcoin paper it's about and peer-to-peer cash it's about a form of payment but most people in the West are pretty happy with the currency they're using for right or wrong reasons um in countries like Argentina or Venezuela where you have really bad monetary policy then the killer use of Bitcoin is maybe as payment but I would argue the in the West people look at cryptocurrency look at defy protocols invest their money because they want to get a return later so it's about accumulating wealth yeah and what is the holy grail for defy so if we're going to talk about every person in a country using a default

application then we have to get to an extremely awesome level of user experience and this is something that we call one-click defy and we believe and popular opinion that this is going to go hand in hand with the comforts of centralized organizations so customer support if you look at any kind of service you use online as soon as you start paying money for that service you expect there to be some kind of customer support service or having a counterparty and so being able to look at reviews of something we want to see what your peers have done knowing that there's a legal entity behind it and whether this is something that we can change I hope it isn't in the long run I'm at least in the medium term people's mindset is very much based around interacting with some kind of centralized organization and

then of course as the owner on the off-ramp I'm even if you don't agree me agree with me on the secondary points there are solutions for doing customer service in a decentralized way for example we have 99.999% of the world's wealth in traditional finance and even if it's just a one-way street we're gonna have to move it over into decentralized finance and Inter cryptocurrencies at one point in the future so yeah I'm gonna tell you a little bit about what we do this isn't a shameless plug but it's just kind of yeah how we've got to where we are today I'm so we started off back in 2013 as a consultancy and he went to the biggest companies in Germany and we said hey you should use cryptocurrencies because they're awesome you can move money instantly anywhere in

the world and they said ok that's nice but of course nothing happened the big companies are going to disrupt themselves then we started a company builder and we were always trying to connect the traditional financial world where the new financial world and we made very simple products we let people buy anything with cryptocurrency so on the top right you see over BDC send us a link on Amazon pay us the Bitcoin or the etherium and we will buy it for you and people started asking ok that's cool but I want to be able to pay my bills with Bitcoin I wanna be able to pay my my rent my phone bill and so we evolved into Bill Walla which was offering financial services and we had a bank transfers fueled by cryptocurrency we had prepaid debit cards and there may seem many advantages to centralized

finance but it's actually extremely difficult so we were offline for an entire year we were offering debit cards through a centralized provider who received their Monday from Visa Visa cut them off so we no log had a service and our company was pretty much killed so we were like we were start up with like 13 15 people and we had to survive a whole year with zero traction zero revenue so I think there's challenges on both sides there's definitely challenges on the d5 side of things but there's also challenges inside of FinTech I think yeah with with defy you have the opportunity to kind of ignore regulation at the start and then maybe deal with it later whereas with traditional finance you don't have the opportunity you just have

to have to be regulated right from the start so we launched a new product recently that was the world's first cryptocurrency bank account so we offer a full euro bank account with integrated Bitcoin and ethereum trading it's non-custodial wallets so you can actually hold your own private keys and then move very quickly within one hour between between euros and between cryptocurrency uhm so fundamentally the trend that you see is always us being the bridge our hypothesis was never that decentralized financed a blockchain was going to replace the tradition in the world it was it was going to be an upgrade for it and we've always tried to be I think a very regulated regulated pragmatic route to combine these two worlds and to bring about the best for

everyone so yeah this is kind of our product vision and we see ourselves in the middle you have the traditional finance on the left you have your bank account and your card I think these are here to stay and on the right you see some various applications of the and we wanted to make it extremely easy for users to go back and forth so for example rather than having to go to a centralized exchange and by aetherium and then moving the ethereum to a wallet where you can start performing dfa operations imagine doing that in one click immersion if you can just go straight from your euro account to euro savings account in the background you've actually opened MTD or euro die but the user doesn't even have to know

that potentially in fact I would argue that what right now it's really important for people who invest in decentralized finance and notice it's decentralized that's almost part of the value proposition but in the future I don't think it's gonna be the case the reason that we're talking about decentralized financed and centralized finance is because it's so early on in the future that will just be financed and for the user they might not need to know or they might not even care if it's decentralized or not like if you go to someone on the street and you say hey I'm give me ten dollars for ten died oh why oh because it's decentralized well they're gonna say well I don't I don't know what that means or why it's important to me but if you say to them oh well you can deposit it you can get

you know an interest rate of nine percent that's a reason so right now as a community we are we away we extremely tech focused I think that's fine because it's extremely early days but in the future we'll have to realize that properties like decentralization don't offer a clear USP to users in 2020 that might change but if you look at something like the Facebook data hack we see that even really bad things happening to users personal data doesn't really change the mainstream attitude and people are still willing to use decentralized services so I'd have to ask myself well what kind of massive shift would have to happen for us to suddenly say okay I'm gonna start using decentralized finance above centralized

finance because it's decentralized and this is why it's important to me yeah so ultimately we see ourselves becoming a neo bank that combines itself with investment and we see a defy we see cryptocurrencies as being the go-to market and this is a really good asset class for younger people so you have people who grow up during the financial crisis who were sick of traditional finance and actually Millennials have a preference but digital over other traditional forms like stocks and ETFs yeah so I talked about the holy grail of defy and that is the one click from Fiat balance into a defy protocol back and forth and we are a regulated company so we work with a German partner

Bank or white label bank called Solaris and we offer our users and accounts so everything we do we have to get it approved by the buff in more or less so we've gone an extremely kind of slow and steady regulated way and there's fourth ways that we're looking at implementing this on the left you have on-ramp and look away do you guys know the weird policy in the US Army for a while well you couldn't ask if they were gay or not that's kind of what we're doing here if I users use Wallet connect and then start interfacing with a compound for example that's fine but we don't know that that is happening and we can't help them do it that's to avoid being classified as a brokerage and then it's about you've just come in the room I see you out on the board on ramp and

integrate so this is still doing it in a noncustodial way but you're offering a user interface and you're guiding them through the steps and and then helping tune them to eventually make make the smart contract cause this can be considered brokerage so even though it's non-custodial and you're not moving the money on the user's behalf I'm in Germany if you're translating the will of the customer into a financial decision then that's that's technically brokerage in some ways so this is something we're looking at with our lawyers we obviously want to be as aggressive as possible but I want to make the point that even noncustodial can be problematic when you're enabling users to make transactions inside of your app then we move to the custodial side I'm so broker defy this pretty much means you say you want to invest some

money at the compound and we do it for you in a in a custodial way so and we're managing this more contracts on on your behalf everything stays in the custodial wallet that's definitely a brokerage and then finally it would be defy derivatives or defy funds um will the user even care about using maked our vs. compound what are they just bought into a fund that was hedging defy risks on their behalf for example a stable coin a person a PR firm and it for you and then you would get the returns directly and so these are the four possibilities we're looking at we're definitely going to start with the left one because it's most easy and then

we have to have very long conversations with our lawyers to find out what is possible what isn't possible and then I want to end by by talking about different ways of doing things um so we have we have this term defy bank or crypto bank and yeah I'm trying to be a little bit controversial because a lot of these conferences everyone is agreeing with each other the whole time so I'm not trying to say that there's a right way in a wrong way I'm just trying to have a comparison yeah so if we look at the DFA banks who are focusing on the on the non-custodial wallet aspect I would call them focusing on on deeper into interfaces and versus voila which is focusing very much run

like the regulated way yeah there's some there's a lot of differences so we are doing regulation first we've chosen to be regulated in Germany of all places which is extremely extremely difficult whereas other solutions are trying to get regulation light and maybe delay regulatory decisions for us we're going for a custody non cost custodian mix so wallets are currently non custodian but our long term vision is using custodian wallets unless non custody solutions improved by a lot availability this is something that really hurts us we can only accept customers from who are living in the European Economic Area whereas other solutions can be much more global in their approach I'm customer relationship yeah we have to have a

banking relationship with our customer so it's pretty intrusive if anyone tries to sign up you'll have to do a video call for example which is really really unpleasant so yeah we pretty much know as much about our customer as yeah as we can not because we want to but we have to and then the I would also argue that target customer is yeah more mainstream versus multi defy pioneer like we probably wouldn't say hey do this because it's dfi worse the other solutions and advertising themselves actively as a defy bank and yeah so that was a summary and if you want to Treiber wala you can sign up and you get 15 euros to buy some ether yeah so thank you very much any questions which there are jurisdictions to your support so

currently we have a German company and we can accept customers who are resident in the EE ei EE ei is including restaurant