Entropy - Trustless Decentralized Asset Custody - Tux Pacific

Transcript

the founder and ceo of entropy um we're going to be starting and discussing what decentralized asset custody is so i before i get into it i just want to ask everybody who here already uses a crypto custodian or a multi-sig or like a hardware wallet of some kind just raise your hand if you do cool cool anybody like coordinate with many different people to sign transactions maybe use fire blocks or something for this keep them up anybody else okay cool any i see some down participants i see who the real dow participants are all right um so i'll get into it what is an asset custodian uh so generally an asset custodian is a trusted individual or an

organization um they hold assets on behalf of another individual organization they usually store crypto assets in cold storage mechanisms or they leverage you know advanced threshold cryptography to essentially like just keep this fund safe and require coordination between a bunch of different parties um additionally and like a lot of these uh existing products like firebox allow users to actually engage with d5 and wider crypto ecosystems uh like or through staking but this is a bit more technical and not everybody does it um generally though the most important thing to take from this is that usually the the users of these asset custodians

are uh high net worth individuals slash large institutions so we're talking about like hundreds of millions of dollars if not billions of dollars custody on these things so these protocols and platforms generally only work for people who are you know custody such large amounts of money but they get such novel security features that are extremely important for generally the entire ecosystem so up until now these things really haven't been attainable for most uh consumers um and that and also these people are not exactly crypto native entities like dows cannot generally enter crypto custodians there's no way for a dow to say just join with coinbase custody for

example so introducing decentralized asset custodians which is what entropy is oh uh so a decentralized asset custodian in contrast to this is a trustless protocol for securely storing crypto assets so notice that it's trustless compared to that trustless trusted one um and we can think of this as a crypto native analog for cold storage mechanisms specifically we're building on top of threshold signature algorithms already so now we can use these advanced cryptography to actually customize these funds in a trustless manner built on a decentralized network um i said they're transparent

decentralized and community-owned uh entities these are not like you know owned by the shareholders slash investors of these large companies like coinbase custody or fire blocks for example these are built upon you know crypto native primitives like dowels um so basically like a general way you can think about how uh something like entropy is pioneering the spaces what amms did decentralized exchanges decentralized asset custodians will do to centralized custodians so entropy please clap [Music] [Applause] um so entropy is the first ever trust entirely trustless decentralized

custodian protocol um like a really simple way you can think of it is essentially it's like multi-factor authentication for your private keys except decentralized so it's you can like think of it as like google authenticator except built on a decentralized network for your private keys um it's kind of like it sounds cheesy to say but it is an entirely new paradigm for blockchain interaction it actually standardizes the secure user experience for how you interact with not just ethereum but for any blockchain um it's built on top of what we use a t of t threshold signature algorithms which i'll get into here in a little bit later and because of this if the network is ever hacked there is no risk to funds this is why it's entirely trustless

it works again it works on pretty much any blockchain the prime reason being because they all share the same cryptography more or less and if it doesn't share well we can like add in something to make it work so basically what entropy is going to be is a simple signing api to integrate in your wallet your adap or your dow or whatever your product is and i'll get more into that in a bit so what does it do we can do really awesome stuff like address whitelisting as an example spending limits you know you can say hey look i want to spend only three eth per week and if i try to sign a transaction that exceeds that spending limit it's not going to sign it um time lock transactions very similar to like a

cold storage mechanism where you say hey i want to spend whenever i want to sign a transaction from this wallet it's going to take a week for that transaction to go through so you can say have like a super cold wallet that just sits elsewhere that is still accessible but it still takes a long time for it to happen and likewise if it would ever get compromised you can see that happening and stop that from happening and like revoke access to it if you need um again multi-factor authentication so you could have a share for example if we were to integrate into meta mask you could see someone try to sign a transaction in metamask and then you get a pop-up on your phone so then you pull out your phone you'll get a little pop-up and it says exactly what you're trying to sign able to review what the

transaction is and you can either approve or do or deny it and so that's you know just basic decentralized mfa more or less on this we also want to build a way to do arbitrary programmable rules so what we want to use is basically like wasm you deploy a wasm blob to the entropy network and based on that input based on some inputs from transactions you're able to our network is able to execute those rules and if the rules are valid then it signs a transaction if it's not it's denied so there's a whole programmable method for everyone to actually use this also dow controlled signing rules and like i said works natively on pretty much any blockchain and again all of this is decentralized i'm not kidding

about it it's all on a decentralized network which is really cool so as like a little use case study staking providers you know so right now we have folks like uh you know coinbase where you can delegate staking or even like larger staking providers like staked basically what you can what you do there is you delegate them funds to them they promise to stake them and they run nodes for you now a lot of people say look we want to be able to separate voting rights from staking rights so that's something you can do with entropy you can generate a share that is only useful for staking providers so they can only do staking and unstaking functionality and while you yourself can retain you know your voting share so you can retain voting rights or maybe even spending if

you want on top of this you know let's say we have dante over here who steals a share from say you know the staking provider well the only worst case thing that can happen from there if you don't notice it beforehand is they would just be able to try to stake and unstake they would never be able to actually steal funds right so it's permissions and roles for your private key um likewise we can eliminate the stolen share issue if we also use 2fa as well which is you know obviously as i pointed out um so as you can see like a little flowchart like we check to see if the share actually has permissions and if it does we sign the transaction if it's not the entropy's network doesn't sign it um so getting more into depth on the cryptography here we use tft threshold

ecdsa in the beginning we have plans for expanding this to eddsa schnorr and bls signatures but the reason we use t of t signing is so that we can have consensus between all the parties so all parties must agree on signing the same message and if none of them if any of them disagree then no message will get signed this is how we make it trustless that way alice can retain a share and she distributes some other shares to the network and maybe she hands out some shares to other people who are permissioned and if in any time something tries to like actually like sign something wrong it's the network just will refuse to sign it so again if the network gets hacked there's never enough shares to actually compromise the funds or the whole private key functionally as again if the network is

hacked no loss of funds only denial of service is at risk here which you may say well hold on denial of service to my key is effectively loss of funds but in the beginning for us we hate seed phrases to put this up front we hate seed prices but in the beginning we actually have to we'll have you retain your full master seed phrase which you can retain and keep control of so that's you get to retain full custody of your key and we're going to expand on this by adding social recovery and things like that to actually improve and eliminate the entire risk of having a master seed phrase all together and expanding this to dowse as well so dows can now use social recovery as a means to custody their funds um so you can imagine this is a

multi-chain world now so we can all interact with the same ux from ngb with any chain it's set entropy sets the bar as a standard way to interact with the multi-chain world again a blockchain agnostic signing api you can interact with most any layer one blockchain unless they use some exotic cryptography but we all know that those protocols don't make it they're all in gmi anyway um so in a multichain world entropy closes the ux gap enabling a comfortable secure standard ux across any chain so the same 2fa device you're going to use to interact with ethereum is going to be the same one that you use to interact with cosmos right um so a big benefit for using entropy for this is that traditional custodians are very slow and or entirely resistant

to just integrating basic functionalities like staking and like voting and instead entropy just supports this natively and trustlessly so this is the power of using a crypto native entity and a crypto native kind of protocol on top of this and replacing sort of these web 2 based primitives so here's what we're going to expect within the next year in three months we're going to try to get a pink paper out we have a pretty ambitious timeline so we're all moving extremely fast just this past week we did a team off site we got about a month's worth of work done in about a week so pretty wild we're moving extremely fast so here's what we're trying to do three months pink paper in six months we're going to try to have an incentivized

test net out with a developer sdk so people can start integrating this and testing it and building on it nine months we want to reach main and in a year we want to have multi-factor authentication via a mobile app and we want to really standardize that ux and be like the first team that actually sort of tries to eliminate this issue of private keys on generally on generally any blockchain again i said i hate seed phrases and i don't think you'll hear a lot of cryptographers say this but we're really trying to get rid of them later we want to go after dao custody and add in social recovery and a whole lot more so here's our team me i'm the founder ceo uh we have me schwang as our product engineer luis reyes head of vibes

and as well as our awesome engineering team uh jesse abramovitz david fonson and thor camp hefner we also have jarrell james who just recently joined us as our head of growth and jordan pacific as operations so that's it for me i'd be happy to take questions now if anybody has any hello hi um just curious a lot of these features i feel like i've heard also on what it's like arjun's and i was curious how do you differentiate yourself from them what's the difference so arjun is smart contract based we're cryptography based we're built entirely on threshold site

signatures and built on top of a decentralized network so you can really just imagine this more as like a layer one for sort of this kind of uh off these kinds of operations so on top of that we also have like threshold signing with social recovery as i pointed out i know argent has social recovery too but now what we're doing is bringing social recovery to pretty much any blockchain right and standardizing the ux in that way for it in fact the way we actually see this is not competitive so folks like argent we would love to actually integrate with those people and even this even goes to like folks like firebox and coinbase custody and we would want to get these integrations into everywhere we can and just improve and standardize the user experience i have a question uh you mentioned a lot of different use cases which one do you

think will have the greatest impact on the crypto ecosystem i think some of the biggest impact ones are going to be integrations into wallets when people are able to actually leverage using entropy just like they would you know a hardware wallet like a trezor or a ledger the moment they actually start using entropy they're going to be able to say wow not only can i use this just in my standard ux and you and user flow i can also interact with this blockchain and that blockchain just in the exact same way and so when people see how easy it is to onboard a key and grant those shares and securely access their funds that way i think it's going to make a big difference going from there as well i think the biggest thing is we're going to see dows able to deploy capital a lot more efficiently so

they're able to be like you know coordinate and actually spin funds at a very quick rate if they need to so this is something that we've not seen we've seen a lot of dows actually try to use you know treasury councils to spend funds and like uh you know do active trading and active management but it's really complicated so generally they try to make larger interests and it's or they delegate funds to one person but now it's like well now we can just get general counsels of a bunch of different people and they're able to actually effectively deploy that so we want to see a lot of integrations with dow tooling coming up too and so that way it seems like payroll and things like that we're going to see more a movement for more web 2 based kind of uh applications and we're going

to start seeing a lot more crypto native stuff and because entropy is so um generic and abstract and we can actually just build so much stuff on top of it i actually really imagine seeing just a lot of our ecosystems building just some absolutely wild that we've not even thought of yet so i'm really excited about that hey um with entropy it it sounds like you can delegate spending off of a single address is that correct that is correct so you can delegate spending from a single address but not only that you can like we can take those permissions from that single address and say hey look you can spend three hey you can spend five ethan this guy can spend all the ether something like that so it's really great for things like funds and family offices who have trading desks but they don't have a way to actually like

efficiently allocate and keep keep track of everything so now they can say like oh new employee new employee alice joins the fund we don't trust alice a whole lot maybe we want to give her like a fund limit of you know 100 000 usdc a month or something like that and she can come in and do that and we can actually make keep track of that while still using the same address for bob who's been at the fund for three years and actively trades you know a million dollars every month or something and makes 30 apy or something do you have a pricing model and how do you approach liveness with tft so can you repeat that do you have a pricing model for entropy network and how do you

a pricing model yeah like is it transaction fee because most custodians go off to aum but how do you guys do it sure so this is kind of the fun thing about entropy and i think it's very critical for us is it's exciting because we're actually intending to offer this product entirely for free and the way we're going to get around this too is we're actually going to subsidize the network initially with the token moving on from that what we're going to do is work with our community and ecosystem to actually develop a business model that we can actually develop to bring both revenue and value to both the validators and the users itself so at the beginning we're trying to emphasize network effect and growth on that network by just offering it for free and then we just

want to work with those people who are most interested in using entropy and most actually innovating on top of it we want to find a business model that works for them um so with that said we hate the web 2 crypto uh business models for uh crypto asset custody they're really bad like coinbase custody costs like twenty thousand dollars to use plus you have to pay transaction basis points and i think even withholding basis points forever much you put in and that's such a web two way of thinking about this business model you have to fund insurance and all these things so it is intrinsically extremely expensive but the great thing about blockchains is that we can actually bring that cost down phenomenally and we can actually eliminate a lot of the issues with it

with custody in general so for us it's going to be about maximizing network effect and growth and working with the same user to say like hey look how do you want to make money on the network how do you want to do how are you using this and where can we actually fit and because we're like the standard platform that kind of goes between different like all these different blockchains we see huge avenues of where we can drive revenue but right now we're just mostly focusing on product and usability and then we're going to focus on revenue going into your second question you said about liveness right so when you talk about liveness you're referring to like how do we incentivize the notes to stay online i think i answered that with our um staking model as well so we're built on substrate um we're not gonna we don't have any plans

to be a pair of chain quite yet but uh basically we're using the consensus mechanism there to encourage liveness and reward it so if anybody goes offline or disappears our cryptography can recover it and we can make sure new nodes have the same shares and they're able to actually like we're able to like drop in a new node and replace them if they need to as well as uh slash them if they go offline for too long thanks okay five minutes is there any other q a uh why are you so hot what can i say i mean

that's what happens when you join finboy capital i'm not gonna lie guys any other questions no oh is there one more okay how were you able to raise some capital uh for the project if you still don't have a business model um our venture partners know what we're building when we when we pitch like i'll be honest like right when i pitched these funds when i pitched other angels and stuff and i see a lot of our angels here in the audience as well we pitch them they immediately understand the problem we're solving and they understand exactly how yeah exactly

you do everyone does everyone knows it it's a huge problem and nobody's and everyone's afraid to actually go after it but i'm not let's do it um anyway but what actually what i would like to say there is uh you know our venture partners are really smart they see the issue and they know exactly where the money can come from so it's not quite a matter of like oh how we're gonna do it it's more of like we get the users we get the network effect network effect we work with our partners the revenue will come it's not a it's not a complex issue there's you'll see so many different products that are already subsidizing things but i think there's an issue of trying to like shoehorn like a business model early and if it doesn't work everyone is so incentivized to stay in

that one business model even though it's not working they think they can try and fix it instead we work with the smartest people we have available and we figure out something that just does it and it kills it and that's what we want to do cool thank you