Bridging TradFi into DeFi

Transcript

hi everyone my name is Ruka and I'm a he institutional for karpi and I came here to talk about the different ways institutional uh investment firms have been accessing the digital asset uh market and also some ideas around briding some of those assets into defi hopefully let me first talk a little bit about what we do at katki so katki um is a definative organization is specializing in professional D finance and the the leading uh asset manager on chain so we've been dominating the active Dow treasury management by managing 1.7 billion plus uh in assets for the leading defi protocols out there

uh we've been doing so without any loss of um or hacked funds we've also been contributing directly to the protocol development through established delegate platforms and uh through um through industry leading research which basically provides us a lot of Alpha and gives us a lot of ideas in how to sort of deploy our assets so we've been operating in the core of VII right Dow um it's super you know chaotic um and super dense uh environment but in between what happened on the institutional side so essentially they've been accessing the digital uh asset space in four different Rats first

and foremost through Direct alping in Venture Capital firms second one is by establishing or deploying fund um funds into liquid funds through mostly hedge funds or whatever uh you know deploying quantitative uh strategies and Market neural strategies um then the Third Way was through direct exposure so directly acquiring um Bitcoin and other assets and or other correlated assets and having access to mutual funds and most recently uh to the Bitcoin ETFs and then tokenization the buz word du which just basically means you know acquiring U ownership Prides directly through tokens

deployed on on blockchains so let's look at each one of these categories and how they perform throughout the years so the first way uh institutions got access to digital uh assets Market was through Venture funds and the reason for that is because they could Shield themselves from volatility by deploying the funds directly into institutional quality uh ones and being able or avoiding having to Mark to Market on a monthly basis um unfortunately uh this environment has been deeply affected by macro conditions and wars and whatnot and in the increasing sort of fed rates also made that you know a bunch of these guys have been rotating the funds back to uh more

secure and and and um stable forms of of investment such as bonds and whatever um they're also being obviously exposed to uh the bad news and you know the terrist and the fdcs blowouts and whatnot and then these guys also started taking U advantage of the inefficient of the market uh so you know all of those um sort of volume and you know Market neutral sort of strategies started to take place um and it's it's curious to see how you know um hon thre is is not necessarily in netted from expenses not necessarily um overperformed you know direct exposure to BTC uh they decrease

the volatility but they they haven't overperformed um on the direct exposure side uh we've seen record um Investments and Al recently surpassed the 60 billion Mark um in investments in BTC and all other uh correlated sort of assets so there's been an massive expansion of the market mostly through uh the launch of the US ETFs uh but also um you know the increased sentiment and we can see this through the increase in volumes on centralized exchanges that the retail finally came back uh to the market and started trading heavily which you know pumped the market up um so you can see um in the beginning of the launch of of the Bitcoin ETF spot

ETF um you know not necessarily much happened because we were seeing a lot of outflows from the great s fund and you know there were uh basically shifting over to uh cheaper uh ETFs but then you know there was a massive expansion and actually this was the most successful launch ETF launch in history uh right now we're seeing a little bit of a coold Down which reflected on the prices of BTC so we're seeing you know the market cooled down a little bit and finally on the tokenization side mostly being leverage through stable coins and tether USD is by far um the most fam uh famous one here so we see a lot of network effects uh you know accounting for this it's not necessarily

all of institutional exposure because obviously especially in tether's case there's a lot of retail uh using these assets to to perform payments and remittances and whatever uh but you know it's been the single most successful use case for rwa so far and then you have you know small C such as you know private credit and and and money markets and all sorts of sort of trfy uh Financial assets just as you know insurance policies and real estate funds and whatever came out into the market um I think institutions are realizing that one thing is to tokenize right and to get those assets on chain the other thing is to find buyers for those so we're seeing a lot of challenges you

know finding the liquidity for this uh products and we can see here by the low tvl volumes so when we take this into perspective obviously you know taking into account the total addressable markets we still stretch scratching the surface right so there's still a long way to go um and in my opinion my personal opinion it'll be impossible to address the total addressable markets if not with the help of institutional right currently like 80% of the entire um wealth uh managed in the world uh is being managed and concentrated on the institutional side so we have to find a way to on board these guys in

there's no other way like I mean there's NE like we need to to bring volatility levels down and the only way to do this is to increase the the levels of liquidity so sorry but how like like how like what has been the defi ad option so far right one thing is to invest in those digital assets but are they being deployed in prols so let's look at how these Investments and have flowed into the market and starting by the ventor capital obviously the Advent of custodians was a massive um step in terms of regulatory approval uh these guys are now deploying funds and buying funds directly on centralized exchanges

and getting exposure to those assets through centralized exchanges the liquidity funds have a mix of exposure meaning that most of them are actually are carbing the defi pools out and that's the reason why we've been seeing a lot of correlation between Dy tvl and and centralized exchanges tvl it's because the single most used case for these guys is actually to uh extract value out of the market through the inefficiencies of both pools uh so they're both connected through custodians on centralized exchanges but they're also connected to multi smart contracts as safe uh to be able to access those D5 markets and then direct exposure obvious obviously is through custodians which by the way you know use CI to acquire the market and

tokenization is basically uh you know issuing the asset not necessarily deploying the asset on defi protocols so out of these all of these flows very little goes to Defi and that's the reason why we've seen almost a perfect correlation between uh CI and defi uh tvl right so we haven't Ned you know we haven't make any uh remarkable improvements in terms of market share which just following through right um so how do we Ard how do we Ard these guys into Dy um first and foremost let's just recognize that you know defi is complex right so the very single properties that make it so amazing you know

transparency uh composability um you know permissionless you know markets you know democratization of access to those financial markets they're all amazing right but they have they impose necessary trade offs in terms of ux and and execution and whatever right so we know that we have to evolve um and and especially and this one is the single most important thing in my personal opinion which is we have cultural classes here right because on the one hand it feels like D5 was built for retail right and and Retail likes risk exposure right because everybody wants to change sort of everybody wants to get rich right everybody wants to

trade the next mem coin right but that's not necessarily how institutions think right they're rational economic agents right so we got to address sort of that kind of mentality so how do you do this first and foremost we teach them right we educate them we we we use this this knowledge to address their value propositions and then we we don't go against regulation right we we play with regulation we shift regulation towards starting accepting Defi and then we show them yield right there's anything that IFI does well is know not only providing exposure to the assets but also you know adding productivity to the assets by having those deployed in those zi markets and then because it's complex we

let somebody that really understands the market take care of it right and then we use the very same execution infrastructure that it's been taken care of for the the longest right because L the effects so what will be Kat's contribution so we've been managing all of those uh you know big Dow treasuries out there using know a proven model that's comprised of pots that interact directly with each uh Dow's Treasury and they manage separately the portfolios right so what we're going to do is to create a separate pot that is going to take care of the institutional side right and we're Levering leveraging the exact same execution infrastructure

right so right now each Dow has their funds you know deployed on a safe it's a one out of one so we don't have direct access we have granular access through uh the Z zodiac Rose modifier which means that we can execute specific patterns pre-approved patterns of transactions um and we cannot remove the funds over there right so it's prly non-c consortial we plan to reuse the same infrastructure but this time adding a layer that is pretty much an ERC 4626 like uh smart contract which provides a share of the fund itself so and we're building a repper on top of that to allow us to manage all of that portfolio

allocation through a fully regulated and open-end fund for private placement so the first fund will will be def Alliance fund it's going to be a collection of the you know native tokens for the uh the leading D5 um protocols on each vertical and not only offering exposure to those um tokens but also we're deploying those tokens in battle tested defi strategies in defi protocols hence extracting an additional 4 to 8% APR on top of that and because we're leveraging existing infrastructure it will allow us to run at a fraction of a cost so in a sense it'll it'll be much more uh cheaper uh for you know those

institutions to be able to get exposure to these blue defi Blue Chip tokens and just to close the presentation up and open up for Q&A we're feel like we're really closing the circle because we're really the single you know entity out there that can Source these low liquidity assets and and do it at scale and then we can turn Capital back to the defi ecosystem allowing uh for them to be able to reinvest in the ecosystem and create a more resilient infrastructure to be able to onboard the next billion of dollars for the institutional side so thank you very much any questions okay if there is a question

please raise your hand no questions oh there is one mic's not working hello can you hear me yeah yeah perfect so I'm part of a liquidity provisioning platform called A51 Finance uh I wanted to kind of understand how you would work within the defi ecosystem with players like us who are building tooling right to essentially do active and passive liquidity provisioning so how would you know you guys work with someone like us you being a smaller player I mean as I've explained before we already have

our own execution infrastructure so we have a set of sort of you know our trading that's already exist it's already you know deploying this region on behalf of the Dows so that you know there's not many things that are going to change you know besides having those smart contract on top of that to provide sort of granular exposure to the portfolio allocation so I mean the infrastructure is pretty much out there right it's been working for the last three years or so and it's proven successful so you know we're not you know for now willing to to touch on that just because it's working right