The Future of Banking: Convergence of TradFi and DeFi - Krzysztof Gogol

Transcript

[Music] so hi my name is Chris goal as to mentioned I'm a um co-founder of DM that's a community of uh local asset managers but I'm also a PhD candidate in computer science from here from the University of TK where I specialized in blockchain decentralized finance and uh researching rollups but uh today my talk will be um more about uh how Defi and thread fi and especially big institutions they can collaborate uh together so generally the tokenization

is uh speeding up I mean yeah it's estimated in the future it's going to be like a 15 trillion uh Market opportunity I personally believe it's going to be much higher but actually when you look at what's being tokenized it's mostly uh there is one asset class which is dominating and it's uh uh bonds or uh both corporate bonds and the government bonds such as us Treasures for example and those instruments they are interesting because they paying Ked yeah you are getting some uh interest rate when you're holding such a corporate or government uh Bond and those uh tokens I mean those products I mean they sound

very similar to a a liquid staking Tok tokens which also when you hold they are paying you um rewards from the staking and then what I will try to show you throughout that presentation there are actually a lot of similarities between how liquid staking tokens are working and how those tokenized bonds uh can work uh in the future actually when you even think about what liquid staking is liquid staking I mean you can also Define as a tokenized uh representation of a ethereum or other tokens like being stake just instead of saying yeah tokenize stake if yeah we simply calling it short liquid uh staking so yeah please think about it

also in context of your tokenization and then yeah there are big differences between a defi and uh thread F I don't want to go into details maybe the most important is that thread fire is heavily regulated it's difficult to enter but people that are there they are protected by the law by the um government bodies inde defi is very different defi assumes that we are trusting in ma we trust in cryptography I mean U ux is very difficult I mean you need to be a Tei to be capable capable to use uh defi maybe it will change uh in the future but uh then the natural question is will those two wordss uh converge uh in the future

into One Financial system or will we have those two par rewards close to each other and generally if we manage to converge it together like amazing things can happen there are already many use cases for liquid staking tokens that can be applied to a tokenize assets and here there are seven use cases uh how um defi protocols can help to boost liquidity and trading volume of tokenized assets you think about those tokenized bonds or any tokenized reward assets I will don't go into details of them if you want you can read my blog where yeah you can see it on every side at the bottom and there I simply describing uh every use case uh

in details there but there are like seven very cool use cases from D5 from amm from Landing uh including flashlands that can really Drive uh Drive the adoption of those tokenized assets but then you might think yeah if there are so many uh potential ideas why they are not implemented and there are a few reasons I mean one of the major reason is that those def protocols don't work out of the box together with a tokenized assets if you put uh inside Unis swap or inside AA for example a tokenized US treasury bond then it will not work uh effectively when it comes to amm almost all of the not almost all of the uh

coupon payments will simply go to the airb arbitr because yeah you will be as LP you will be maed it's Simi similar things will happen inside uh Landing uh protocols there are also some uh on top of those yeah technical uh concerns there are also some uh legal uh uh legal challenges related to under money laundering and finally there is no privacy so yeah as you know if you do something in defi on ethereum or some of its l2s yeah everybody can actually see what you are doing there um and then uh there is uh something like a project guardian which is the initiative of the largest

financial institutions in the world large commercial Banks together with central banks together with financial authorities uh from Basel Bank of interational settlement and they are simply experimenting if some of those ideas from D5 from the public blockchains they can be applied inside um tokenization and they they are looking especially at that to tokenized fix uh income which are those bonds that are paying coupons similarly to liquid staking there are many many streams of that uh project but there's one which is very interesting this actually where the uh University of su and I'm being involved when we are simp testing if Landing protocols like AA or Moro they

can be used of they can be used yeah together with those tokenized uh bonds so I mean the market is a huge today in the thread F that Landing which uh in thread f is being called repo it's about repurchase agreements that are settled between uh two Banks and in that red f works that way that one bank for example is taking a bond from another bank as a collateral for example worth 100 million and then borrowing some uh some cash so once we have those uh Bonds in a on a blockchain in a tokenized representation we could potentially be able to use a for that process but are some challenges that we are exactly uh uh invest

investigating like for example in a uh in a traditional side you're having a lender so you know actually from whom you are uh from whom you are uh borrowing money in case of the uh defi protocols like yeah that uh let's keep the example of a it's actually the smart contract who is borrowing you the uh borrowing you the uh stable coins and it's also the smart contract cont deciding when you are liquidated or let's say when you are allowed to be liquidated what are the interest rates what are the rules uh how they are uh how they are changing it's all done by the smart contract which is causing actually big complications on the regulatory s because yeah you are in

The Lending Market where there is no A lender or a smart contract is a is a lender but I mean but that approach is having a huge opportunity uh to uh to reduce the cost of borrowing in a traditional uh in a traditional finance and then there are actually more things that we are uh uh looking for I mean those central banks at least some uh some of those central banks some institutions are actively um experimenting together uh with defi protocols there are maybe uh two uh interesting examples the first one is about uh effect payments which is the Forex Market when for example you want

to exchange Euro to Swiss frank or Swiss frank to uh to dollar and I mean um today it's happening in the traditional Financial system you wait I know at least two days for the money uh to arrive abroad when we start to use a crypto for that automated market makers then simply yeah we can do conversions within a seconds with within a um block time and for example in those Pro like Mariana um there was a curve V2 being tested for that purpose in Project Realto it's uni swap F3 and I mean as we already have here stable coins with different currencies I mean those things uh they are actually

more real um than uh it was in the past and also when it comes to the regulatory um regulatory challenges with the an money laundering there is ongoing project called project mandala in which uh let's say Banks or central banks are using zero knowledge uh uh zero knowledge proofs to Simply check what's happening with the tokens it's like a erc20 token which is having additional logic and inside that additional logic there is some there are some ZK proofs um added that are validating let's say the history of every token and yeah checking if everything was a compliant in the past if checking currently if everything is

compliant but without revealing any private information about yeah senders and receivers so I mean those things are coming uh soon and then there is another another topic which is the AI and AI agents that uh are also coming to decentralized finance I mean they they are needed not only for the uh those threat uh products like those tokenized bonds I mean in gen in general uh the if I needs those AI engines to increase its efficiency I mean in the coming weeks we will see Unis swap V before coming with the hooks that will be actually perfect to train different AI models so in a one

stream you can use AI in defi simply to drive that optimization but also there is a second thing where you can use it for the fra prevention so I'm not sure if you remember but there was a movie with Tom Cruz called Minority Report in which the AI was used to pred prct the crime before uh it happened and actually we already have a technology that is capable to do uh so this is a project of uh some of my master students from the University in which they use the machine learning models and yeah um tools like CH GDP to Simply scan different telegram charts and based on the messages that were actually uh being sent on that uh

telegram charts and changes in the order book they were able to predict 60% of the pump and dump schemes before they actually happened because yeah there are some patterns in the messages in what's happening inside order book and you can yeah with actually higher and higher accuracy uh predict those things before uh they happen and then maybe uh the concluding slide so if you like uh Defi and that focus on institutions on their tools we are doing a site event uh today uh it's from 400 p.m. to uh 7 p.m. and you very welcome to join us I you don't have to register you can just come uh just I

mean uh mind the number of the room it's on this floor it just yeah a little farther like 5 minutes away from here this is very big building and we are going to have like amazing uh speakers from the Swiss government uh from the minister of finance of swissland a lot of banks but also we have a Unis swap presenting their guys from the SN from a arbit a circuit as some VCS so will be a very very exciting uh event and yeah then uh thank you yeah if you have any questions let's connect I don't have have time for questions if yes I can take them thank [Applause]

you so I have a quick question uh regarding the TR yeah hi uh thanks for the presentation Kristoff uh so quick question about the uh it seemed that you said that one of the blockers for trat fi to use the lending borrowing markets is lack of kyc and you know compliance matters because the the funds are uh unknown uh a few years ago a had like the arc product also compound had like this more institutional um uh attempt of having permissioned uh lending protocols how do you see this evolving because like they didn't really kick off and I think like right now there is a perfect

uh environment for this so so how do you see uh this uh evolving and unlocking the the adoption of trat five uh funding yeah thank youash that's actually excellent question about those previous projects like uh a AR or Ono but there I mean uh the issue with those projects was that you created a defi Landing protocol and every participant of that Pro uh protocol was a Kawai seed and this was uh simply killing the defi composability because one of the biggest advantage of defi is that you have a token and you can use it at AA Unis swap car you can aage it and simply when you uh let's say secure a

one protocol then you are killing that compatibility so those it's also difficult to work uh um for a landing protocol without access to a amm or to anex and that was the major reason why it didn't fly we need to figure out how to do a compliance that will allow for the defi comp compatibility like maybe something with the tokens or maybe something with the yeah with the blockchains oh I mean it's it is a little in that uh mandala project with the Z knowledge because there there you have extension of y20 token and then you can use it across different defi protocols come any other questions we

can still take one or two more if this is not the case we thank you Chris for this great speech again [Music]