Why DeFi matters for everyone

Transcript

hi everybody i'm oliver yates i'm the ceo of aplo based here in france and today i'm going to talk to you about why d5 matters for everyone so let's look at the current situation we're currently more or less in a bear market but this gives us an opportunity to consider what we're going to build ahead and the ecosystem we want to have if we look back at you know the early 2000s the dot-com bubble and then 2008 the financial crisis this gave us web 2 the way we know it a better web 2.

so we have an opportunity to build a web 3 that's not built on greed but more on resilience and this is important because finance matters for everyone here you can look at it as a body a human body you have blood vessels flowing through the body this is what allows it to function and compared to the economy financial rails are what allow the economy to function so we're all affected by it we're affected by it directly you're all you all use money here um you probably have some savings accounts as well you're able to make some loans but also indirectly you know when you're purchasing

something in amazon with e-commerce supply chains mainly function on automatic payments today and uh content economy which is growing every year right now with tick-tock we're only fans this is all built on financial rails now the thing is this whole system can work better and i'm sure you all know it here this is the reason why you're attending the conference we all know that d5 can solve a host of problems let's take a first example loans right now loan mechanisms are controlled by oligopolies you know a few banks a centralized lender they set the prices they said the rules they own the infrastructure

but we had the opportunity to centralize the pricing mechanism you know you have ave and a few other protocols are you doing that borrowers and lenders can set the rates themselves yet they still rely on infrastructure that functions almost just as well as traditional finance does and the good thing is that terms are non-negotiable you know if we look at the celsius example the first lenders that they repaid were avi and maker because there was no way to renegotiate the terms of the margin loan you just you have to pay or you're going to get liquidated there's no human on the other side that's going to listen to any of your issues a second example which personally i'm very interested in is cash productivity let's say you own an e-commerce website um you know you sell i don't know close

if somebody purchases one of your t-shirts over the weekend you're not getting the cash over the weekend you're getting it on tuesday because banking rails are slow and also because banks don't operate on the weekends now with sale coins you can get that cash in 12 seconds and then you can use it right away to repay some vendors to repay your loans to to invest whatever you want you just you just want two additional days of usability on your cash you can use it 24 7. and if you take that a step further let's imagine you know you're rich enough you have a few companies you want them to share their treasury you want them to share their assets this is hard to do when you're using euros or dollars because you can't just transfer money instantly between your entities if

you're using stablecoin it's so fast that the stablecoin that's in one of your entities is essentially in any of your entities it takes 12 seconds this is called cash bullying by the way and another example that i actually like a lot is content economy so 2020 like in the 2010s you had facebook and youtube and these websites were free but you were the product you were consuming ads all day long to watch a video or to talk with your friends and this was okay at first but at some point people got tired of it so we started moving towards another version which is um what you can find with patreon or only fans or even again on youtube and tick tock you consume your content but then you pay your

your creators separately for a personalized content this is something that's been hugely popular especially with the covet era where you were stuck alone at home and you wanted to have something directly brought to you now the issue with this is that there is a lot of friction as a creator on let's say on tick tock for example or only fans you're a lot of the money that's being paid out to you you're not actually touching it a lot of it is going to be taken away by payment payment rails again in all the intermediaries um and also it doesn't really allow for small amounts you're generally going to ask for 10 15 bucks but you can't just go out and consume one minute of content again d5 is what can solve this you can pay as you go pay as you use stream your

value and it still works it's still cheap enough that the unique economic works for the producer they still get paid all the time so this is also in my opinion a very interesting opportunity um and i'll i'll finish this part with a quote from a very famous bitcoin septic um jamie dimon from jpmorgan who says that decentralized finance and blockchain are real there are new technologies that can be deployed in both public and private fashion permission or not so he seems to be going my way as well here the thing is that you bring these benefits to the mainstream to make d5 matter for everyone we need to recognize what needs to change

let's take a first example b5 is not built for stress situations there's a reason why capital requirements exist if a default protocol takes market risk which by the way for the moment very few d5 protocols are built to take market risk on purpose well it should have a shield for its users capital requirement is not an invention made for banks it's just an economic principle it's having a cushion to protect against whatever happens when your balance sheet loses value now more specifically if d fires to offer unsecured loans which apparently is the next step of what's coming for us without crashing at the first market downturn there needs to be some rules around capital capital requirements

built into the protocols you can't just rely on whatever arbitrary reserve the founders decided to put away when they launched the protocol and i know i might be seeing some people off in the room by saying it here but i'm still i'm still going to say it the second part is that d5 requires a whole new form of risk management um again if defines you offer risk taking services protocols have to assess the credit worthiness of its users this is the whole reason why lending protocols right now are are over collateralized they don't they can't assess who the person borrowing is so they can only consider that they might not repay um there is no system right now that allows for accurate

credit scoring on define and also the risk of the crypto portfolio takes a whole new dimension when you take into account the risk of failure or of congestion slowing down whatever you want on the protocols on which your crypto is built this brings me to last point which is we need even stronger infrastructure and by the way i'm not i'm not a deaf so i'm saying that's very humbly i'm not going to be able to contribute to this but still look at darpa's very recent report from a few weeks ago the main point is that contrary to what people thought even if you compromise a single node in a public blockchain infrastructure there is actually danger for the whole network because the messages that are shared

through that nose can be modified and it can still have impact even if you don't possess 51 percent of the network value that was the common conception until now um and i please that they have a public paper you can go check out which is quite interesting and also nice little metric almost five billion dollars have been lost to d5 hacks since v5 has become popular in the past past few years this is 11 of the total value locked on d5 so it's it's it's still quite big so my message to you guys and i don't really know which profiles are in the room but let's just suppose that there are some regulators some quants and some devs here for the regulators

please include d5 and your upcoming frameworks this is not done enough for the moment if you look at the european legal framework what's done in the us and the uk they're not really including d5 you have to work hand in hand with the protocol founders to figure out what capital requirements look like when you have an automated protocol that's not run by a human being you have to be proactive about this for the quants in the room counterparty risk has taken a whole new meaning and it's your job to build the models that function on it and finally for protocol builders out there there are so many great public research institutes across the world that have great value in cyber security and they're not involved in the community at all some of them have even become septic by being isolated they're on the

sidelines please include them in the building phase in france you have a bunch of them just you know even if you look around in paris include them before you release anything and go full on marketing mode but i believe that together with a few simple rules we have the potential we can unlock the potential of d5 thanks everybody [Applause] i think we have a few minutes for questions if there are any all right thanks everyone enjoy your day