Unlocking the Potential of Cross-Chain Bridging for Enterprises

Transcript

Perfect. Hello. Thank you everyone for coming. I must say this is about 10 times the amount I expected of uh attendees on a Thursday or sorry Wednesday afternoon. Um I'm assuming it's a combination of uh Khan is amazing but the air conditioning is quite crap and the AC here is good. So probably half of you there. Uh the other half are probably disappointed it's not the maroon 5 Adam Lavine and wondering why he knows anything about blockchain. Uh anyway, really appreciate it. What I'd like to do today is uh just give you a little bit of context about who I am, who Fireblocks is and then focus on the problem of interoperability. This is not a technical session, right? This is really focused on the outcomes you're trying to achieve, why this is something you should be thinking about. Uh depending

on where you are in the ecosystem and then some of the solutions that Fireblocks is really focused on. Uh not a sales pitch. These are not homegrown solutions. We're talking about what we see that's best in the industry. So very quickly, uh again, my name is Adam Lavine. I'm the SVP of corporate development and partnerships at Firebox. I'm also the CEO of the Firebox Trust Company. Uh most people in the industry do know who Fireb is, but uh as you can imagine, sometimes the details get a bit fuzzy of of what we are and what we're not. Uh so Fireblocks is digital asset infrastructure, right? We focus on providing the most secure infrastructure to let our 2500 plus clients globally build their own digital asset business.

Right? Our focus is providing the the best wallets, tokenization, payments, orchestration, and a variety of bells and whistles to help any of you build your industry and your business. Um, now, as part of that, we've spent a lot of time thinking about not just the crypto side, but thinking about traditional financial services as they move on chain, uh, with tokenization and RWA, all the buzzwords that we know so well. Uh so we work closely with companies and help them bring their assets on chain whether it's fiat or structured financial products. Now then comes the problem of interoperability.

So I just want to explain a little bit about that. I'm not going to go into the details of why RWA is exciting. I imagine if you're in the room you're already excited about it. Uh so the concept is we've seen from many different protocols. They all have their unique differentiation of what makes them special right? Some of them are pushing on tech. Some of them is who they're connected to in the industry. Uh some of them they just have a cult following for a variety of very valid reasons. Not all of them focus on RWAs but many of them are. Now the challenge that you see is that protocols they're working very closely to develop the RWA working with asset issuers whether it's fiat or some other financial asset. Uh sometimes it's because of great

relationships and differentiation. Other times they're providing financial incentive. Right? That's the playbook. There's nothing wrong with that at all. Uh that's not the point. But the point is that we're seeing assets come on chain on EVMs, on the Cosmos ecosystem, on other areas. People even trying to do this on the Bitcoin. Uh when you think about things like lightning and other solutions that are trying to develop, the industry is going to continue to innovate. I I think all of us could say with a straight face that we probably don't need more protocols than we already have. But I would also say that if you think about five or 10 years out, do we know with certainty which are the five most important protocols five or 10 years from now? The answer is probably not, right? And will there be five or 10

that are really important? Will it condense even further? We don't know, right? And the idea is not for us to start choosing with definitive which is the best one, but to figure out how we're going to get the advantages of bringing assets that are traditional assets on chain. Now the challenge you have is liquidity pools, right? Sounds really cool when you get to say those those finance words of liquidity pools, but I want to make sure we're understanding exactly what the challenge is, right? The idea is maybe you're working with one of the EVMs, you really like the optimism world or arbitum or whoever, and you choose to bring your bond, your asset onto that protocol, right? Most likely the thing that you're going to sell that protocol for for some version of traditional money, right?

That could be USDC, it could be USDT or some other fiat, right? You're not seeing people swap uh bonds for uh some sort of financial structured product. They're usually making a payment with a version of dollar. And the challenge you then have is where is my dollar? Now, before there was tokenization, the very early days of interoperability, I would argue that's something that Fireblocks amongst other people solved when it was a pure crypto world. You wanted to hold your Madic, your Soul, your ETH, your Bitcoin. You didn't want five or six or seven wallets. You wanted one that supported all of those. But the problem has now evolved. So when you get to a scenario where you have your money on one in one protocol and the asset in another, this is where you're talking

about the liquidity pools. So from an asset issuer perspective, the answer is pretty easy, right? I just go out to every single foundation and say, "Please give me money and I'll issue my stable coin uh onto your platform natively." Right? And there's many that have gone down that path because interoperability wasn't really an option. Uh but this introduces a tremendous amount of complexity and still doesn't entirely solve the problem of interoperability. If I want to buy a bond and I have USDC or USDT on four or five different uh ecosystems or blockchains, I now need to somehow combine them to buy the $100 worth of the bond that I wanted. Right?

So I've not solved it just by natively uh issuing my asset onchain. Now, I'm focusing primarily on the stable coin because it's most likely the stable coin that you need to move from one protocol to the other. There's nothing to stop it or say that if you're issuing an asset on chain that you don't want to think about interoperability. But where we are in the industry right now, it's really much more about how you get that fiat to the right protocol at the right time. Right now, the reasons for that is really around things around risk. In a traditional finance world world, they're thinking about things like credit risk.

they're thinking about settlement risk, right? The idea is you don't want to let go of your money until you get the other asset that you bought or vice versa, right? And if you do that on the same protocol, you start to allow for some of the innovation around delivery versus payment, which will be critical as we continue to evolve. But interoperability is that necessary step. So what do you do, right? And so again, it depends on where you are. or if you're thinking about issuing an asset, issuing a fiat, or maybe you're working for one of the protocols, the foundations, and trying to figure out what should we be doing.

So, Firebox has spent a lot of time there, and we work with a variety of different companies. I want to emphasize not a sales pitch, but I really want to talk about some of the leading providers, right? And so, if you think about institutions like layer zero, chain link, Onera, wormhole, even circle or allstar developed really unique solutions here. Right. So again, I mentioned fiat a few times. The two most dominant are obviously USD based. It's going to be USDC and USDT. So starting with Tether, they've been very prolific as we all know. Um but they still have that same challenge of how many different protocols do they want to work with, right? Do they want to natively support? And what I think is really

exciting innovation for the market is what they've done with layer zero to have USD USDT0. The idea there is that they can now uh issue this the USDT on tether. you can issue that on any of the blockchains that layer zero is able to support, right? All right. And so layer zero is that interoperability solution that's working with countless number of protocols and continuing. Right? So it's a great opportunity thinking about all the transactions globally that are happening with Tether that you now no longer need to think, wow, I have my USDT on Tron, but I need to buy the asset on a different protocol. What do I do? Right? Chain link is another company and they've taken a really interesting perspective on it. Working with some PC's uh including with Swift. For many

people, they hear Swift and they sort of want to vomit in their mouth if they're they're truly a DeFi person or even if you're in the Trady side, Swift's really important, but sometimes can be quite frustrating. But working with interoperability with someone like Chainlink, there's opportunities to leverage some of the best of the Tradfi world, but really think about this interoperability solution. Wormhole has also taken some giant steps working with Bidd, right? Right. And I think Bidd's a great opportunity for the world to realize that boring assets like money markets are still really important and being able to move your stable coin to a money market and back is critical. It really adds more value to your money especially throughout the day. Uh and now wormhole you think of as someone that is truly more on the crypto side but doesn't get too much more trified

than thinking about money market funds. Uh but again it's that same solution. Now, one that's a little bit different and get a bit less notoriety is Onera, right? On takes a very different approach and they really focus on connecting ledgers, right? Not necessarily just blockchains, which means, and some of you will probably want to throw a tomato at me now, there's an opportunity to think about moving traditional assets and digital assets, right, on a on different basis, making sure they're coordinated. institutions like Onair in particular have the ways with their router to make sure that they're tracking what's going on with one ledger which could be fiat-based uh against the digital asset where we are today in the world where not every asset is on chain in a

meaningful way that connectivity with the fiat is still going to be very important through this transformation. Another example JP Morgan just recently worked on a a transaction that was moving fiat against digital. Uh, so I bring that up as just another proof point that one, the industry is getting significantly more serious about moving assets unchained, and two, we definitely need a solution until we get to that long-term state where maybe there's a limited number of protocols. If that's even where we end up, but you need a solution that's going to be able to help you quickly, safely, securely move assets from one to the other. So now the question is, all right, Adam, that's really fascinating. So what, right? What do I do? Uh so a few things we'd recommend. If you're bringing an

asset on chain today, you're doing some version of tokenization, think about interoperability day one, right? You can come and talk to institutions like Fireblocks. Go talk to some of the companies that I mentioned and really understand the nuances the technical side and commercial side of what those different solutions offer. Right? We strongly recommend thinking through depending on what you're trying to achieve, having that interoperability uh ability as early as possible. Right? Now, similar thought, if you're thinking of tokenizing something that is not necessarily a stable coin or some some version of money, that still doesn't that still means there's opportunity to think about interoperability, right? You do want to have uh an ability to ensure that your access can be re can be reached by as many different

institutions and people as possible. Right? Now the exception may be if you're doing something closet could be a stable coin within a in a global company and doesn't want to extend interoperability for those sort of projects are smaller or less valuable. Right? If you're thinking about proof of concepts interoperability could be interesting but may offer unnecessary complexity. So the guidance we're giving is really around thinking about launching something that you're looking for mass market adoption. Right now the next thing is some of you may be saying hey that's great I understand but I issued my stable coin six months ago or 12 months ago before it became the the theme toour what do I do now right the answer is still you really want to think depending on your use case if you're

trying to maximize adoption interoperability is still a really important factor you don't see anyone as successful as tether and they obviously did not start thinking about interoperability but as I mentioned with their USDT0 with layer zero they found opportunities and advantages of having that interoperability. So do not think, hey, I've already issued it doesn't matter anymore. This is something that's really critical. Now, many of you may also be working at a a foundation or a protocol, right? And part of what differentiates you are the types of assets, the type of activity that you have on your protocol, right? And you could take the view of actually interoperability is worse for me because I'm kind of a big deal. I like my clients. They're happy with the type of activity. gas fees are low or there's

some version of zero knowledge proofs or whatever your differentiator is and you may be thinking interoperability is going to undermine that right I would advocate quite the opposite uh we we know with certainty that there's going to be different use cases where maybe your protocol is not the right one for whatever use case or there's just assets that are not there today instead of thinking about a closed loop solution which we've seen in almost every tech industry or tech sector is generally not the way to go think about how you can get exposure to those additional assets through versions of interoperability, right? If if you have a tremendous amount of uh TVL or RWAs that are on your your protocol, fantastic. But you could still get more. There could be

more opportunity for you to go and work with those institutions that have issued stable coins or RWAs but didn't natively start with your foundation or your protocol, right? So, it's an opportunity to further differentiate by having that interoperability. And so speaking again to the sorts of companies that we mentioned is absolutely essential. Ultimately what we're all looking for is to see that all the assets are moving on chain and that they move quicker, cheaper, in some cases with less risk. Things like delivery versus payment or payment versus payment is not just something that banks care about in their back office. Those are legitimate risks that traders care about. They're going to care about in the DeFi world as much as they are in the CFI world. Uh people on the retail side are going to care as well, right? as you get to larger uh

values of transactions, they're going to want to see this innovation and interoperability is part of the path to get there. So hopefully that was insightful. I'm very happy to answer any questions after uh come find me or come reach out to anyone at Fireblocks. Uh and uh again, we mentioned some of those companies that we think are great, really leading in the innovation. Uh make sure you're not sleeping in this space. Thank you.