ETHMilan26 - DeFi Trends what's ahead for decentralized finance

Transcript

Okay guys, so we are going to talk about Defi at a conference called it Milan. Uh we started everything a thing years ago where DI was almost everything that we were doing in Milan and uh institutions came slowly but steadily and now we are surrounded also the conference. Um I will let uh the panelists now introduce themselves so you can all figure out why they are cool profiles to be able to talk about defi idea.

>> I start okay uh I'm then co-founder of risk. Risk is um defy options protocol focusing on volatility strategies and structure product. We are currently live on IPVM. Um the number one product on IPVM options product by TVL. We had yesterday about 70 mil. Today it's about 40 because Friday's option expert and we sell all the position. So it's like you know what always an exciting day to see TVL going down 30 mil. But we make it back by next Friday I guess. Um yeah that's pretty much.

>> Hi I'm Connor, one of the co-founders of Eno. Um been building crypto full-time for the last 10 years. Enso really is a D5 middle layer that allows any application developer to easily quickly integrate the onchain protocols within our application. We've enabled over 11 billion so far. Our record was 3.1 billion for beer chain in 3 days for the boy launch and we have over 300 plus large B2B clients. >> Nice. I've been working on boy as well. I remember you bro. I'm Alberto now with my real name this year. Uh basically my past is started in trfy then I move in defi building a option protocol like DAN that had been sold like one year and a

half ago and recently I just joined Krok which is like a digital investment firm with the aim of improving and increasing capital efficiency alongside like TRFI and DeFi. So we look at anything that is cryptoreated. So DeFi uh to support traditional finance to leverage it to increase capital efficiency and make like you know this transition towards this new world especially now that everything is getting tokenized. Hello, I'm Federico. I'm a bit of a outsider here as I work for a bit Phoenix very much centralized exchange and yeah one of the oldest still alive since 2012 and uh yeah I mean I work mostly on the derivative side but I also

manage an internal research and development team that uh uh is working on some uh uh def experiment on bitcoin layer 2s uh so yeah [clears throat] looking forward to to have a nice discussion And I'm David Dei. Besides being a co-founder with Milan, I'm also the general manager at LFJ, previously called Trader Joe, the centralized exchange on Avalanche, Harbit Room, and Monat. And uh today I would like to start with something that has been one of the topics I've heard the most uh over the past year which is uh people say that traditional yield farming is over in DeFi and DeFi has changed shaped

uh what do you think has changed and what's the direction now that is working and why has it changed? >> I can sort of a bit spicy. I mean, DeFi was meant to some degree replace the traditional financial industry, and it seems now that we're all bending over backwards to work with these types of people. Um, so much so that the same 5,000 users that work in DeFi and are using these applications are just being cycled around from one app to the other. It's all the same kind of user set, right? So I think some people have getting getting rid of their cyberpunk ideologies or where they want this ecosystem to go because we need to get more users. Right.

>> Got to read or had to give up >> to get rid or give up. >> Yes. >> I think sadly we've had to give it up. Um you know even this conference right there's a lot of people in suits. A couple of years ago you would you wouldn't have people in suits in crypto conferences [snorts] right? Um, but I think the reality is we need more users and we're going to need to enter that different part of the industry. So, you know, it's not food coins anymore sadly, right? Good APY, you know, a even the risk on AY for, you know, putting your money there getting two 2 and a half%. I can put it in an offchain fund for 12%. Um, that has 4.6 billion AUM will cover the losses.

Whereas in DeFi, you know, the EF should have also stepped in, right? the community saved DeFi essentially and but yeah I see it changing quite a lot and start spicy you know it totally makes sense to me to be honest it's a swift uh shift that is as of today needed I was I mean coming from trfy I was fine to join D5 to help them out to innovate the trfy markets then when I joined D5 I was having this philosophical mission of defi going to replace thy was fine until I just discovered that then DeFi and most of the crypto people was focusing on things that were having not real let me say market feed and not real adoption. So we said like why don't we start building

something that at least institutional are using it and are leveraging out for increase their like capital efficiency. I was saying before which is good but I think that we are in a moment in historical moment in which we need to drive the the shift to help them out crypto people to not be scared or just move out but just like be more conscious of what they're the risk that they are taking and that's why they need that specific he rather than another because as of today we are having like one of the lowest yield on chain which are lower than trady but the risk is still higher compared to trady because and D5 people is still perceiving that trfy risk are higher than smart contract discerned protocols. So they are like oh why I should like buy some credit from a

fund for from a tokenized fund. uh it's risky because I don't have atomic redemp redemption say like okay maybe this is a gap is another building block that we need to build to let's to move to do this bridge properly but still like you know credit risk when you have like behind the scene like an institutional company would drive due diligence who make a rating I mean they know what they are doing so yes there is that this kind of risk but is somehow as predictable as smart contract risk even if or maybe sometimes even lower because as you we have seen so far. I mean, yeah, 3% healed and then you got you got like your funds got wrecked by some weird things happening on the smart contract side that you cannot control and you

cannot come back which philosophically is super good for transparency. On the other side is exposing us to new kind of risk we were not expecting. >> Dan, you said so many times risk that I think you have to follow up. >> Yeah, that's a good name, right? Like everyone is using your good branding. [snorts] Um, I mean my view on this is I mean I do agree but I also think that yield is not the product. Like I would say that we're not building defy for the yield. We're building defy for the infrastructure. We're building defy for certain you know better products in terms of you know transparency and all of that. The yield is a use case of that. But like I would say that none of

us has been building into this industry just because we were able to offer better yields. But we were building to build a better infrastructure with all the transparency the you know global access uh all of this benefits out of it. And the first use case that we figured it out it was the yield and obviously like you know when you think about D5 summer and so on like because of like lot of you know tokens emissions and so on the yield was good was exciting the risk reward was there and it was probably one of the biggest acquisition out there. So I would say yes, but at the same time like if you talk to any you know D5 project out here it's like I'm not building to offer a better yield. I'm building to make a product um with a better infrastructure and so on. And like even for risk like

yeah at the end of the game you can see risk as a you know volatility structure product. Yield is what we offer and it's also the probably the innovation that we made into the space but the at the end of the game we are there to build an infrastructure for volatility products and yeah again the yield is the way we onboarded some of our users um but at the end of the game is not the mission is not the the final reason why we're building so yeah this is kind of like my my take about like yield farming like yeah it's a use case um right now at the end of the game yield is also a function of demand right? Um why the yield is so low right now? Like yeah, we can all argue that the yield is low, but it's it's purely based on demand. Um so why

it's completely like there are people that are probably like assessing there is reward. They're different from us. Maybe there is an over supply like at the end of the game that's how we should see yield as well. So there's not much we can do. It's like we don't we cannot wake up tomorrow morning and be like oh now the yield is like 10x better. But as a builder I can wake up and make a 10x better infrastructure. Yes. So that's the kind of way I'm thinking about defi. like we should not over focus into yield because then we lose the focus of why we're building this. >> Yeah. I mean like uh the thing is like defy uh should offer something that try is not able to offer. So uh not just to have a better yield or likely just to to compete on the on the financial metrics

and yeah what what he can offer is distribution towards a certain class of user that do not have easy access to thy or yeah better control on the on the collateral so to uh avoid certain risk. Also the fire is a role to keep kind of the the wall uh centralized size of the industry in check because uh yeah if people can uh migrate to a defy solution he also pushed the centralized venue to to to offer better guarantees on the on the collateral to to avoid that something like FTX or MTO can uh can happen again. Um but uh I think also on the product side it shouldn't just

replicate the stratify product in the file because then the target user is a bit different so you also need to adjust the product and in a way it's already happening mean like in uh in general in crypto per is is king which is not the case in infi so we already have some product differentiation from from other markets from stratify market also uh you see on the derivative side while in thrfy the the option market is dominant in in crypto is is the opposite is mostly the future mostly the burp so this show that the the audience that the the target user for for defy is also a different preference also on the product

side shouldn't just replicate stratify but in EVM smart contract but yeah also innovate and yeah project like risk show that you can produce an innovative product that is not there in in Stratfi and and have success of distribution >> and does liquidity thinning as retail users are not liquidity providing as much as in the past. Now there is a probably an over reliance on market makers to fill the gap that during with the D5 dream well that become the centralized distributed liquidity. So how is this relationship with DeFi and market makers uh looking like right now

and uh do [clears throat] you see it becoming more decentralized in the future or are we heading towards a more dependent future? Well, maybe uh yeah, I think there we yeah, depends a little bit also the ecosystem evolves because uh we can have more uh decentralization of liquidity providing if there is more fragmentation of of uh of venues where people trade rather than concentration as you create more smaller opportunities that big guys don't care about because they're too small for them. So you can have smaller market makers that take on on this opportunity and so you can have more distribution of that. Well, if the market end up consolidating all around a

few big venues, then they are more likely to be dominated by a few big uh liquidity provider that can have economy of scale and better latency and better infrastructure. So it's also a bit uh depends on how the the taker flow decide to to to play into the market. So if I may add as a market maker I think that tradfi is rotate is always working alongside market makers which are the most important player there more on the trading side rather than the liquidity side for sure but in defi market makers are jumping into liquidity provisioning and helping them them out this the overall industry

because maybe as of today there are some hidden risks and things that are difficult to understand age as a retailer and market maker has the spe the the expertisees to do it that for doing that and it can help out like retailers to have like a smoother experience and more efficiency into the into the sector as a as a wall in my personal opinion maybe retailer in defi are like retailers in trfy there are two type of retailers maybe the super risk adverse one we just buy like super simple stuff super low yield and that's it for him just to park the money in avoid inflation and then there is the one who is looking for asmetric return.

So for that kind of retailers maybe having a market maker which improves efficiency help them out to try to find a way to asmmetic returns on trading on the liquidity side maybe they are helped because they can have a layer on top of that and avoid some hidden risk inside that the strategy that on liquidity provisioning that was unexpected. So for example in 2022 most of the people were providing liquidity into pools on dexes which was convenient because you were getting a lot of incentives. You were getting like a lot of things and everything was going up. So basically we're not noticing that there was an an risk into the pro the liquidity provisioning which was the impermanent loss. Once everyone got educated about

the impermanent loss they didn't try to leverage it up to edge it and make money out of it. things that maybe market maker were already able to do it and they did it while retailer just escaped from there and tried to find other re other sources of providing liquidity. Maybe they jumped from dexes to lending protocol just because it was easier for them to understand the payoff that they were taking. So in the end I do believe that market maker are trying to help the ecosystem to grow up like on a more like secure way. Let me say to be to let retailers be safer when they are doing things on chain. So it's not a matter of we are like taking the role we are just supporting them to have like something

which is like more efficient as a whole industry decentralized solvers maybe a solution no more centralized the better ironically um completely agree with you I think to go back like five steps what inherently users want simply experience they want the fastest experience and they want the best outcome I the highest amount of tokens does Does a user care if it's decentralized? Maybe we talk about it, but if a user is saying, "Hey, to buy, you know, one ETH, I'll give you 2K, but if it's decentralized, I'll only give you 1.9." They're obviously going to take the 2K, right? Um, and like you were saying on the solvers, you know, we were like one of the top solvers of Intense and we're like top three on cow

swap and, you know, we paused that. We actually found the more centralization you have, the better quotes you can give and more control. Um and also for example if you look at relay right like relay the crosschain bridge you know it's an EOA it's a pure one address managing all of these funds um and users just want the best outcome right so I think if market makers are able to provide value to the users make the experience very simple I think it's all fair game and I think these market makers are supporting this ecosystem a lot more than probably we even know right the market makers aren't going to publicly say we do this and this and this all the time, but if it's a flash

crash, people are keeping it alive are the market makers. Um, so yeah, I think they're they're good for the ecosystem. We can probably move on into what's a success in DeFi actually. Um I would like I would have liked to ask uh Dan uh what has seen to be uh working as a driver of success for D5 users. When people ask me if people still use DeFi, I actually point out at risk as one of the true use case of retail uh real people actually using a D5 protocol and loving it. So what do you think uh is working out to have this DI5 users to

be passionate about the product? >> Yeah. Um well first of all thanks for you know pointing out risk. Um that's probably one of the reason it's working like our users like it and you know refer others. Um so in the case of risk we I think we went pretty bold on on a thesis right our thesis we started doing options a couple of years ago didn't work you know lot of I made a whole speech yesterday about it for 45 minutes so I can talk about it forever but like it didn't work as a product um and the problem we had back then was that we were targeting traders options traders and options traders were so sophisticated they were looking for like you know better spread and better

product and your market making and all of that. What we've done is like we do actually believe in to make this accessible and our thesis was can we actually make the option in a way that they're accessible to anyone not options traders by focusing on a product which is simple to understand and tells you exactly what happens and when. So we redesigned everything in terms of like you know UX and and the interface and we converted the product from one thing about options like they are so general that you can do anything and what we've done is the opposite. We only let you do one thing with option which is like one strategy to generate income out of the asset that you hold. So the reason why I think it's working is a good definitely

good product and you know I'm I'm bold to say that. Um but also like the timing was good and the thing about what we're doing is that you make at the end of the game like you you generate income out of volatility. The market right now is volatile um you know there are wars there is Trump waking up and attacking countries like so there is volatility out there and there is no yield from other sources. So our users are like wait this product gives I can get APR income out of this product is real because it's coming from you know selling options from selling volatility.

So it's not based on rewards or something like that. It's easy to use. I know exactly what happens and when. And to give an example you know a lot of our users that were you know positions on cover call on IP which means if the price of IP moon you might sell cheaper potentially which is you know not a deal. And that's exactly what happened this week. And not a single user complained because it's on the user to decide what they've done it. They have the power to choose. So again, back to your question and to make it simple, it's like I think we went very bold on a thesis to be like defy should be accessible. We made that accessible. We offer a product that is based on real yield from a yield source that is volatility and there is volatility in

the market. So this is pretty much it. And a year ago, everyone was like, "Oh, options don't work. No one wants option. No one wants, you know, options in crypto." And we just basically decided to be okay. I think it's different. It's not that people don't want options. Is that we are selling options as a product and I'm selling you the benefit of it, which is income. So I think there is space in DeFi. And the other thing I'm, you know, I'm I'm going to stop about it. We also went on ecosystem that was exciting for DeFi, which is hyperl. Um you know I I didn't want to say but like hyperlid was definitely also success because people you know users were happy about the ecosystem they wanted to invest into other new product into the

ecosystem. Risk was a new product we got users out of it so it was very good at the beginning when you need to bootstrap the first users and hyperlquid is a success case in you know in defy right now. So you know it's worth to mention that also you know being at the right place at the right time with the right product basically that was the that was the function. May I do a spicy question to Dan and do you think market maker impacted positively or you you you would prefer to go fully decentralized. So basically because hyperl is a successful case but is behind the scene there are a lot of market making like doing the order book.

>> Yeah. So I mean the thing about hyperlid is back to the market making right actually limit is a very good example in my opinion. They started with the HLP. So they were like we're not going to on board market makers now because you know you're a new exchange and you need to pay market makers blah blah blah. So they were like we're going to build our own market makers and it's going to be decentralized which it was the HLP is doing right. So you deposit you get users. HP helped them to boost up the initial liquidity and he helped to make the market more competitive because the problem with with market makers is like they are very short-term thinkers. If a market maker can make one cent today is going to make it and it doesn't care about making zero tomorrow like tomorrow

is a new day and tomorrow I'll make you know I'll figure that out to make the next 1 cent. So you cannot really build a product in my opinion just relying purely on market makers. So you need to figure that out way that you want them to compete. you want them to, you know, integrate and so on. And that's what Hyperlid, I think they've done properly. It was like the HLP was the market maker and then it grew so much that other market makers wanted to get in. One thing that Apple liquid they've done it and I respect that is like actually the top market makers on Liquid. They're not crypto market makers. They have a few market makers from Dreadfi that they figure it out. Those guys have flow.

Those guys have, you know, very interesting volume. We integrate into that. and they basically stole you know some market share from crypto market makers that I think that's also like a very good example on why the product was successful in the case of risk um we had the same problem like if you know market makers are short terms they're going to not always price the best uh quite the opposite especially if you have anq system with an auction like they tend to go down on the auction and not on the way up right so we built for example we just announced last week a system that we use the fees generated from the protocol to actually market make when the quotes are not competitive or there is not enough demand. So we basically reinvest in all the fees that the protocol is generating into make the market maker

compete. The the thing is you don't want the market makers to be too relaxed. You want them to compete all the time and that that's what I learned from hyperlquid and that's what we're trying to do as well similarly at risk. So you need market maker especially when it comes to option but you don't want to rely 100% on them. >> Yes. I think like the the set reality is that to bootstrap both in defy and also in if you are bootstrapping a new project, you need you need to to have a kind of your internal liquidity providing to bootstrap because to solely rely on external market maker than it's hard because yet there going to be a moment when maybe they they all disappear

because they are going somewhere else where is more profitable or they want to avoid like moment of volatility. they they want to provide their service maybe when the the user needed the most. So yeah, I think that the certain reality is to bootstrap you you need a little bit of internal market making and then like as you as you scale then you can have external one that at that point they're competing between each other. So you don't need to pay crazy money and incentive to to to make them do their their job. And as today today the the market changed a lot also in our projects launched as we are talking about this topic. Um 202021 the defi summer and uh and the bull run

every project had their token and the token was the product. Uh today most of the projects do not have a token. Uh they're focusing on revenue generation. They might never read a token and the token conversation has shifted for the majority of the surviving defa product and even see a product they might not consider in anymore a token uh until the top of the next bull cycle but um besides this where do you think we're heading around tokens is the future looking more tokenless uh than what we dream about >> I think this trend is great because I think the token is the product was yeah terrible model because then the the if

the product if that is the product that is also the focus of the team. So instead of actually uh trying to to improve the the real product and offer a good user experience they only care about uh keeping up the the price of the token. So I think it was very bad for the incentive of any project. So uh yeah the fact that token model is dying I think is great for the industry and uh this seems to be the direction also because yeah like like anyway that the market is too fragmented to support like many yeah you can have a few success story like in the case of vaper liquid but it's it there are very few of them in the past few years. Uh so yeah if we can have like people focusing on uh on

revenue uh rather than trying to to create a million token then we we will have uh yeah as a industry like we will have better uh better products to to offer to the end user and as a industry we we can uh we can all uh grow better. So I think yeah the future should be tokenless and it's a great thing. Yeah, I agree. There's going to go more tokenless. I just don't think tokens are going to evaporate, right? I mean, like for example, Eno, we've been around for six years. We only launched a token like 5 months ago. Most teams launch within the first two years. What I find is really interesting about this ecosystem,

it would talk about revenue as if it's like a magical thing. That's like what any business should do. um the incentives were wrongly designed from the beginning, right? You can get some sketchy founders, some VCs, launch a token, get it listed and just dump it, right? And we still see that going forward as of today. I do think there's a network effect of launching a token, right? For us was hey, we wanted to expand to have more onchain actions all within one place. We need a incentive mechanism and a coordination layer for that and a token is really really good for that. um traditional payment rails aren't able to function that particular way. So if you're using a token to expand the network, build more community

and more awareness, I think it's extremely valuable. I think the memes or let's say culture coins as such, I hope to that they get they go because it's just a waste my language. Um but I think network effect tokens are incredibly valuable and will stay around. Yeah, in my opinion it was a natural shift because in the end like you you build business and then you find a way to let others have access to the benefit of the business you created which is what ENSO did. They build infrastructure, they build like product useful products and then they launch the token. And I think this is also I suppose a risk finance strategy that is find out like product market fit is scaling up and then it will come which

is like what every business does in TRFI. You build your company, you sell your shares to VC private investors, you grow up and then you list it on and do IPO and and go to public which is natural one point of view for any kind of business. Even though I'm not I mean I I'm not sure that we just need to consider token as securities because the culture should stay a bit like alive in in the ecosystem which is part of the fun. So on one side is super needed on the other side this culture and fun is is moving from DeFi to TRI because if you see as of today everyone wants to have like space spacics shares even before pay they can pay like crazy money

out of it without even understanding what will be like the target PE out of that does it make sense I don't know but some culture and some speculative trade is needed everywhere >> you've all been very early um as co-founders or super mega ges in the sector. So you have seen what it means to raise uh you have seen what it means to run a company from zero to one and I've seen many companies go from zero to one. If you all had to give a suggestion to a NEO founder of a D5 projects in how to succeed tomorrow like one great advice that they will remember in one year as was amazing to hear it because

help them survive and help their project to actually scale. What would you give them? One suggestion each. >> Just don't quit. Don't quit and adapt. the market changes if you're so stuck in your own reality. That's not the world's reality. You're building a product for other people to use. It's not for your own ego. Um so yeah, don't quit and adapt. >> I would say don't just copy success story. I mean, you're not going to be successful just by copying do the new upper league or the new whatever. I mean, you you need to innovate. You need to find something new, a new product market fit. Uh otherwise, yeah, it's going to be very tough.

>> Yeah. uh always build something that someone needs to use it basically. So it's like yeah build it not for the purpose of building it as Connor was saying do it because you know that there is people who need it and try always to iterate and pursue your let me say goal alongside that and pivot and don't be scared about market conditions. >> Yeah know agree with all of them definitely with corner like you know we were about to quit we didn't and then it turned out on the on the positive so definitely agree with that. >> Same here. Yeah, like this this you know every success story like there's a moment that you're like should we quit and that's where you know things happen.

But back to that when we were about to quit it was the time that we had no money three months of runaway um most of the people left or we had them to you know go because of like not having run away and that's the time where even as a builder you start to be extremely pragmatic. It's like I only have three months after that it's over. So the decision that you make, everything that you make is like absolutely pragmatic. So the other thing to me if you start today be pragmatic like you don't need to fund raise millions out there. You need to build an edge. That's way more important. You need to be smart on the way you're doing. You need to be like again flexible, lean. Um so yeah, I guess don't quit. But even before that, make sure you have an edge. Make sure

you build into the edge and be pragmatic about it. I think he says something really interesting um about how much the money to raise. So we've seen some people in the space raise like 50 mil 60 mil haven't released a product in five six years because they feel comfy. They don't feel the need to release or they're they're not creating artificial pressure on themselves. Right. Yeah. also to add to that like I don't know I don't know about you and I would love to hear that but like when you start you have an idea right and you race for that idea >> and then you start going to the market and you start to talk to market makers you start to talk you know to the users and so on and that idea is start to evolve and your edge start to build over there so you're basically raising for

something that might be completely opposite what you ended up doing so even raising so much money because you think you need them for that in reality you might not even need them right >> I completely agree Ironically we start to dissolve options >> options and asset management they pivoted into social trading the D5 super app and now infra you know it's just change over time >> yeah say fundraiser has the same problem of the token if equity becomes the product then the real product is not not going to be built as well so yeah if you focused much of raising 50 million then uh yeah then become good at doing that and not serving your users >> yeah and do believe that VC made like some very bad decision in the past in crypto because they were just jumping

into the hottest narrative without even thinking what was their thesis. So if someone was successful on that, everyone was copycatting and everyone was jumping there and putting like a lot of investment that much amount of fundraising that then you say like I raised that much money that my pro my product will never do this kind amount of money. How how can I how can I handle it? Mhm. >> So I think this is something that as you were saying before don't don't copy the others because maybe there is just one successful story on one specific business and then you can have also like 300 million raising but maybe if you if you are not convinced on what you are doing then you just enjoy the money and then it's over >> as we are having in the other room uh tit Milan an entire institutional day

and um it's clear that in the US And in Europe, this is uh one of the narratives that is growing. How can DeFi, let's say, survive without getting absorbed or acquired entirely uh from the institutions and central exchanges that are becoming way more um uh way more the center of whatever is left in the industry. If I may start it thanks to these guys which are like building things which make like even for institutional like are willing to use it because it's more convenient for them.

They just look at how much money I can save how much money more money I can do I can have and so builders are the one that are bringing institutional and are creating a new need for them. So it's not like we are going to get cannibalized by them but we are welcoming them to let them understand that even finance can be innovated. Yeah, I mean just add on that. I think a lot of these people want compliance. They want ease of access, right? If they need to spend three, four years building a P to even test something, right? Whereas if they integrate ENSO, they can get all this compliance regulation and access over 220 onchain protocols kind of overnight, right? Um to kind of answer your question directly, [sighs] I think we need to have a bit more of a backbone. um like we're all it

feels like we're all growling and begging the institutions to work with them and it's like yeah we built this industry you didn't so we can choose how we work with you whereas all these protocols and projects are like institutions please please please let me work with you and it's like have a bit of a backbone you know um the industry has changed and evolved so much into how to do this is these are our philosophies this is how we like to build. This is our community and you actually have to adapt to us as well. There needs to be some middle ground. Whereas right now it just feels like hey we'll change everything we've done for 10 15 years all all for these random guys and suits that have never been around before right

um and it's [clears throat] like yeah let's let's find a middle ground not us do everything for them. So yeah again have a bit of a backbone. I think there is this temptation to yeah uh focus on working with institution because it maybe feels easier to work with one big guy rather than trying to have distribution with a million retail but yeah I think like the edge of the of this industry is in serving people that the thr market was not able to serve and those people are not the institution the institution can already very well operate infy so yeah it's tempting to say yeah I just will work with institution ution. So you need to just sell to a couple of big guys and I'm done. But uh yeah, in this way then it's

hard to to maintain an edge long term. >> And you only build a product for them at the end of the day. It's all customized for each person, right? You're not building a product that can be used by many different people. If you're working with UBS or credites, they don't exist anymore. Ironically, Trifi doesn't exist. Um you will build customized solutions just for them. They can't be replicated that much for everyone else. >> Yeah. In my opinion, they should adapt to what has been built so far. >> Spot on. >> It's difficult. But uh is there is stratey that should evolve to go into defy and not just defy get focusing on attracting institution and this is how we should innovate the entire financial ecosystem.

>> We are at our five minutes uh left. So I would like to give you free mic to say whatever you feel about defi. Uh there's so many things to say. come up with one. Any one of you can start. >> I mean, you're killing it. You should start. [snorts] >> Hyper liquid. No, I'm joking. Mostly joking. Um, no, I mean there are so many like so I think back to all we said now like the the thing about DeFi is it is still a massive playground. Um, we are all year still playing. I love it now way more than it used to be because

right now there is no Um or the is like is very easy to spot. There's still a lot of things going wrong. Don't but at least you know the purely is like out of the game. Um so I think this is the best time I think even in the way of like the institutional access. I mean the fact that we are sitting with those institutions and trying to get them to use you know the infrastructure that we building is is crazy. like a few years ago I wouldn't even think about this obviously we need to now it's critical time to do it properly because it's everything like we can do it in the bad way or in a good way uh we can take you know shortcuts we can take trade off we can compromise like so I think right now

is the most critical because we are legit we're building in the leg way we're starting to get the institutions on board we can build [clears throat] the D5 for institution which should be defi and not threat with defy distribution which is a different Um so to me it's like it is the best time to build into the space but it's also the most critical for the future ahead and back to you know even the question that you made before. Um the reason why we have an institutions now because the retails are not around anymore they didn't do too much they finished the money that's the reality like now they're doing IPOs uh now they're buying cerebras they're buying you know SpaceX they don't get into crypto because they got burned too often. So the thing is we need to make sure that we don't burn people. We need

to make sure that this space is accessible, welcoming and you know we not just use them as ex liquidity and um that's why we have institutions now because we finished the other liquidity. >> Um I agree with you. Buy hype, right? Buy hype and use risk. >> Liquid. That's it. >> Yeah, liquid. That's what we all actually dreamed of for the space. >> I think what you said financial advice, >> I can say financial advice. It's all time high, right? Um I think you said something really interesting which is hey we can still innovate. It feels like there's still innovation happening but not as a parabolic scale that it was happening maybe 2 3 years ago in DeFi.

DeFi summer was wild the amount of stuff that was coming out. And again we can choose to work with the institutions but we can still choose to innovate right you know we can it doesn't need to be another lending protocol. It doesn't need to be X Y and Zed. we can try new things because it's a complete playground. Like people will use it in this industry. Um so yeah, just my my my closing thoughts is really let's still innovate and let's choose to work with these people not because we're forced to work with them and they should adapt. um and and so will we but we should not lose our culture of innovating and trying to change the world or change the space right um which I feel in the last couple of months with these institutions

it's kind of decreasing right um yeah [clears throat] it's [snorts] good I mean I do like the fact that this is the first time where like institution are looking at Q and not vice versa so basically D5 bring like a new movement of people building financial instrument and then institutional came and say oh I'm curious about it I want to know more I do believe that next year we not we are not going to call it decentralized finance but maybe onchain finance because nothing is decentralized to be to be I mean it's a bold statement I know but if you look at it in the end there is not a bank behind the scene doing that but there is another guy with a wallet signing the transaction so the centralization is a didn't find the right like it was a philosophical concept in the end IMM and these kind of

things and now it's evolved on okay there are there are h middle layers that are acting around every kind of protocol and thing which is not any longer explaining this as a centralized stuff. >> It's all market makers in the background right? >> It's not just market makers but there are also people running things you know I mean where where is where is the governance? Where is the evolution of the governance? We talked a lot about DAO decentralized autonomy organizational these kind of things is it vanished. No one is talking any longer about it. So even in into a decentralized protocol is not decentralized because there is someone taking all the decision and having the governance out of it.

>> Yeah. In general you just need to have enough decentralization theater to trick the regulator not to put you to do KYC. So I mean that's actually that's the product. I mean permissionless non KYC financial products and uh yeah the decentralization is uh for most people is a tool not not the end. So I think it was also about convenience, right? Like if you need to do it's even like using onchain. If you need to go do 20 different transactions manually, if it's fully decentralized or just one if it's centralized, people are going to use the convenience method, right? Um yeah, that's so that's how Bit Fenix and all the SHs succeeded because they were even way more efficient than the centralized solution. And now basically I mean it's

not any longer a difference between like C5 D5 because if you trade if you do a swap on unis swap in the end you are having like the same I mean the same centralization you're having on a centralized exchange probably. >> Yeah but still then all the market maker on the centralized venue the the edge of centralized venue. So it's kind of the same flow. So yeah but I think yeah this is also maybe an interesting uh moment for the industry because few years ago crypto was like the the the cool industry where you come to and you make money just because everything is is going well. [snorts] Uh so you have all these people that will come will build in crypto just to to ride the wave and just because they're building here they they will become rich and also same for the uh VC allocating now that the

industry became AI so that people that are left here are more focused on building stuff that uh matters rather than just build here because uh just the positioning is good to make money. So uh I think the stuff that is going to come out in now in the in the coming years is going to be much higher quality than what we saw in the past. To add on the the decentralization, right? Um I agree that the centralization means you know everything and nothing at the same time. But one thing that I really one example that I love about this is uh hyperlid right we we might agree by did they say liquid? No. like I liquid we we might agree or not that it's like not fully decentralized or whatever but one thing

that they've done it is when the attack um couple of months ago about you know jelly jelly on the HLP happened we went on Twitter looking at it live like everyone without any special infrastructure without any special access we saw exactly what happened we saw the attack we saw who were the attacker we saw like what happened people were like commenting in real time about all this attacker liquid made a decision back then that it like okay we want to protect our users so they somehow made a centralized um act to you know to solve the problem if you think about different example which is Binance on 10 we still don't know what happened like no one knows what happened on 1010 like liquidity

completely disappeared massive you know liquidations and so on and still no one knows what happened that day so from two very similar product one is the decentralized version even though again We might not be fully decentralized but at least the transparency he has you know the permission that you can see anything happening we know what happened we know the decision that we made now as a user I'm using hyperl knowing that they can do that or they cannot do the other thing if I'm using Binance I don't know what's going to happen on the back so I don't think it's like I don't think the real value at this point is about the centralization but like the visibility the permission and so on it is a very big deal and as a user I I I love it

>> and this is on chain not the centraliz ization. >> It is on chain. Yeah. >> So it will chain >> onchain finance over >> you have all the transparency needed because it's onchain instead of offchain not because it's decentralized or centralized. You don't care. I mean >> yeah the the the value proposition is the transparency not the decentralization. I mean the centralization is always kind of a mean to certain. So it can be to yeah avoid the custody risk or to have transparency or to be permissionless. The decentralization is ne never the goal. I mean no one cares. people want the centralization for something. So, >> okay, thank you very much uh to our panelist. Uh was a great talk on DI. Uh let's continue to bring our friends on

chain and to try all the D5 protocols that they that you think they should keep trying. Uh let's let's keep pushing DI for the next generation. Thank you. Let's do it. Thank you. Thank you. Hyper liquid. Hyperlid. Bye. Hype. Bye. Hype.