Why Real World Assets (Don't) Lie on the Blockchain?

Transcript

fantastic all right we're about to start the before last session uh that maybe I said last session before uh fantastic uh real world assets which has been a really big one actually from the Inception of the Krypto Valley many many years ago and we have one of the best journalists that I do know from the big wh here hael coming to do this so I think it's going to be a great session so uh let's give them a round of applause and stay tuned thank you um so hello everyone um I'm Rafael so co-founder of the big well I'm based in Paris and yeah I'm very glad to to be with you today because the first time I came in zg it was in 2017 so it was I mean quite a long time and yeah it's

really interesting to see that sug is still uh in the crypto map especially with this conference and we can gather many I mean panelists Builders from the crypto space and also from the traditional world uh and I'm very excited to to I mean moderate this panel because I think that this is a very nice uh subject when we talk about blockchain and crypto it's more about economical and technical things but I think that uh I mean yeah the ability not to lie with the blockchain is really interesting and maybe it's the biggest part of the value of this ecosystem so I will host and I invite my four panelists to come and sit

with uh me so fatmiri from Signum Bank Stefan Roost yeah we will just exactly yes Stefan R from tration PRM duta from zot and nichlas con from Chronicle if you could just introduce yourself in 30 40 seconds it would be perfect thanks fatmir if you want to to start thanks thanks a lot so thanks for having me my name is v b um I'm responsible for the tokenization department at Signum Bank I'm since three years with Signum and prior to that I used to work in Consulting and traditional Banking and I'm very happy to be here today with all of you thank you yes stepan good

yeah hi I'm Stefan Roost I'm the I've been in crypto for over a decade uh I was the CEO of bitcoin.com and then in 2021 decided to launch true flation uh when the government shut down the economy printed a lot of money we decided that the world needed to have accurate data and real data to make better investment decisions so we launched a data stream network that allows anybody to build indexes on top of this data stream network 18 million items that are tracked with three price feeds per item and we work very closely with chain link and coinbase and namura bank as well okay cool thanks pram if you want it's working okay cool

yep hey hey everybody pram here um been building Z for year and a half Z primarily brings yield products on chain both RW based yield which is typically trade finance and money market funds as well as permissionless yields which includes yield aggregation areas across various D platforms prior to this um I was with Biser not really selling beer but but nfts uh and building a fintech business primarily around we got chocolate we didn't get beer yeah that's on me next and yeah really looking forward to kind of this event and yeah uh my name is Nicholas kungl I've

been in crypto for about a decade now um was part of the founding team of a tiny project called maker um we uh we we did we did a lot of stuff there uh including the uh the first Oracle ethereum the uh the first deck on ethereum the first uh solidity debugger and uh and also this uh this thing called a stable coin um so uh about two three years ago um my team spun out of maker and we started Chronicle and so what Chronicle is is um essentially this uh Oracle that we had like pioneered at maker but now

productized and and open to to everyone uh so today Chronicle is the second largest Oracle by value secured just after chain link uh we secure over billion doll in crypto assets um mostly through the major dii protocols including maker Dow spark protocol and uh and Moro okay thanks um so I have many questions for all of you but I would like to start with one very direct and maybe a little bit ative question um and with you fat so if real world assets do not lie on the blockchain uh can we say

um I mean that in the traditional world I mean people are lying to to us uh what do you think about this um is the blockchain the the solution so I think it's needless to say that lying uh requires negative energy so if you want to lie then you're going to do it anyway so when we speak about um real world asset so since the verification is taking place offchain so I think to certain degree um we lie the same as on and offchain because for example if you tokenize a piece of art and you lie about the condition of the art piece so it doesn't matter if you tokenize it or not so you need to have

this um negative energy behind it but where block clearly helps is um that you have this transparency where you don't have it for example in in the traditional world you have uh transparency you know how many co-owners you have for example when it comes to um as I said art for example in the end I think when we speak about real world asset we need to trust still uh the tokenizer the issuer uh we need to have a good governance in place bulletproof um legal Frameworks and so on and so forth as I said as long as the verification of the real world asset is taking place off chain we have also to trust who is um Cadiz this this peace and so on and so forth yeah this is how

I see it and stepan you explained that so you launched a tration uh because you thought that uh I mean yeah the government so printed a lot of money uh so do you think that yeah blockchain uh is um I mean the perfect solution just to provide the good information especially regarding economic figures and maybe real world assets so is it perfect I don't think so but I don't think anything on the planet is perfect and if it were perfect we wouldn't be needing to improve all the time so I think we still have to improve I think there I mean why I did what with true flation what we did is I did not trust the data I did not trust somebody that

berates us and tells us don't worry we'll look after it don't worry we will solve the debt don't worry we will the inflation won't come it's only transitory all of those statements I didn't believe and that's what really gave me the energy to go in and build true flation stream network we knew from the beginning that there was an inherent trust in number one rwa number two stto and number three security token offerings that took place uh that were very popular if anybody was around in 2017 and by the way we're in 2024 and we still don't have stos um and then the Third element was really how do we address the inherent mistrust to real

world price data on the blockchain because there's a human that's going to come and put a price in and so the way we did it on the true flation stream network we have six infrastructure partners that are helping build a decentralized network of um that actually verifies the source not only do we verify the source of data provider who is whitelisted and has skin in the game we have three price feeds for every single Source or item that we track and then we have a consensus algorithm that manages and monitors different price variations between the individual prices and so that's how we've tried to address the verification process and making sure

that the data doesn't lie okay and anybody can dispute it anybody can and then when it gets disputed it goes up to an arbitration process okay and how is it economically sustainable I mean to have so many people to check and how you check the I mean fact Checkers or the data shakers so we've built this out for the indexing industry and if you look at the indexing industry just look at indexes there's one index that is the msci world index Morgan Stanley blah blah blah something index that is a $65 trillion product one single product 65 trillion in market value and so if

that index can do that and people trust that there's a lot of money to be made by bringing this index business from this murky centralized com conglomerate owned by three big hedge funds by the way um around the world that control what data the methodology of calculation the injection of different types of companies all of a sudden I can now have that on the blockchain this industry is going to be a trillion dollars by 2030 if it's a trillion dollar by 2030 then there should be enough money for participants to want to build on this and by the way we have 60 data providers that are contributing their data in return for truth tokens we have six core infrastructure developers that have

about six you know six or seven developers on their own each working to improve the concept of the true flation stream network let alone customers and consumers we have Wall Street consumers we have hedge funds macro investors that are consuming the data as well we started a bit more centralized and we're trying to decentralize on and goinging and ongoing so more people can share and participate sorry I'm hugging the no no it's perfect pram your your thought about it so I think uh you know very similar to Stefan we are also part of the chain link U ecosystem and one of the things for example in our case we bring traditional products uh on chain providing yield for crypto users so you know obviously we started with crypto

native customers which is treasuries hedge funds but what we are seeing especially from Middle East where I operate that lot of new to crypto institutions are coming in now where is their money going it's primarily the top five crypto asset they don't do any d uh staking they don't do anything else but once you have got access to your crypto assets you are not going to trade it daily how do you get yielded on top of it and how do you ensure that there is a very transparent mechanism which provides them with the safety the sense of security that actually lags in the crypto world you know I believe that we are in an industry which operates from a very low level of trust and products like index and products like you know having a clear proof of Reserve you know provide that sense of trust which you

know which is very basic needed to grow this industry to like5 10 trillion dollar industry which doesn't exist as of today and nichlas um about this uh what's the main advantage yeah to tokenize the real world asset and to have them on the blockchain oh well I I think this is a question that VCS should be asking uh real world asset projects much more than uh they maybe have been in the past um I I think there's a bit of an identity crisis uh when you look at like the rwa landscape I think there is an army of people who want to be asset Originators and couldn't tell you the first thing about who their magical customer is on the demand side who's going to be buying

any of this stuff um I think if you look at the data in terms of like well in not just who has launched an rwa but like who has actually grown it to like hundreds of millions billions of dollars in scale um the picture becomes much more Bleak right and essentially what you see is you see that the initial product Market fit is Dow so the the the uh talk is always like oh institutions will come and buy your rwas right institutions can already buy assets they're involved in traditional Finance Cal markets why do they want to come on chain to buy the things they already have access to so the the unpopular answer is your Target

customer is a DA your Target customer is a Dao who has uh you know a treasury um sometimes a very big treasury right if you look at these layer twos they uh like I don't want to call anyone out specifically by name but some of them have over a billion dollars in uh their non-native token so that it's to stay in is to saying stable coins uh staked eth BTC right not like the the native token of the L2 so the they're pretty sizable in in that respect right and so where rwa have really seen the initial traction is in those types of dows or in uh I think the one I can probably talk about most concretely is is maker Dow

right where um with a book of about like8 billion in assets two billions of those are uh in art right and maker wants that exposure uh from a revenue diversification uh perspective right where um defi is a very boom bust kind of industry right which means that uh when prices start going up people want leverage which makes the yield go up right for for Lending and makes uh make or make a lot of money right um and then when number stops going up and number goes down right the whole feedback loop unwinds and it goes in the other direction right

and so for from an organizational perspective and this applies to any organization that has this boom bust kind of revenue cycle it's incredibly destabilizing right because you go from like being a risk on and investing into all kinds of innovative projects and hiring a bunch of people to all of a sudden oh the money gets cut off and now you have to like stop all of these projects that you've invested so so much energy and to fire all of these people who have all this domain expertise right um and and and and so that that's kind of like the very unsexy answer but like the the initial customer for all of this is Dow now is is that the ultimate promise of an rwa no I don't think so right like

the promise of an rwa is that uh um I would say you know we have all of this like Legacy Traditional Finance infrastructure we've had built up and it kind of of all placed together with duct tape and Bubblegum and this is our chance to kind of do a refresh and say Here's a new container we can all agree that we're going to use this container to you know settle and trade assets and like everyone can agree let's use this neutral infrastructure just would like to hear you fat on this you're not a Dio but I think that Signum is working on those kind of um um of things um what do you think about Nicholas what just say

about the fact that it's maybe more for Dow rather than the traditional Finance for example yeah I I agree to to a certain uh Point absolutely I mean um the recent project that we did so we see really a demand from this kind of of clients that they really appreciate if they have real world assets on chain if they have a proof of reserves and other things on chain but I believe that this is just uh the beginning and um I see now a lot of traditional players uh coming into the market um so yeah but for the time being I I agree yeah yeah and when and and we tokenize only things not just to tokenize it because we can tokenize but it's really important that we see that there is demand um and yeah

sometimes you do things you start with something you see if there's a product Market fit if yes you continue and if not then you have to further evolve and we have to accept that we are at a very early stage and uh we learn as we grow um yeah yeah and we saw that black Black Rock tokenize the fund uh do we need to tokenize everything or is it more relevant yeah you think yes everything everything okay we need to toize everything I mean y today if I want to trade if I want to trade Commodities where do I go to trade Commodities I have to find 15 middlemen seven toall takers along the way it costs me a lot and then I have to know somebody to go to One exchange that centralized controls access to that

exchange and charges a significant premium and only 15 Banks make a hundred billion dollar a year just trading Commodities on behalf of clients if I can open up that market how can somebody in India 1.7 billion people that want to participate in oil I believe in the EV cars I believe how do I get part in Niel in Platinum in Palladium I can buy a synthetic version of that I don't need to wait for regulatory approval and permission I go to Dubai and then I go work with coinbase who have a tokenized oil token I can then list that I go through chain link I can put that on 27 different blockchains simultaneously have a centralized treasury that's governed with proof of Reserve boom you're off the market I can make that

available to 1.7 billion people that historically have not been able to access that yeah I mean we need the Kon to go and build this stuff we need the balls and the guts to take on the regulators and the governance and the financial institutions and if we don't have those blls anymore then we'll just be compliant we'll move very slow nothing will change because we don't to change the people that are in control they don't want to change why would they want to change they make all the hundred billions of dollars we're here to change [Applause] that I'll stop there quickly pram you want to no I I'm just adding to Nicholas point you know one of

the things which in crypto we see that we focus more on the tech but less on the customer Journey so a very interesting story we met one of the top five treasury managers and you know we're talking about how can they allocate more to onchain funds and their response is that we already do like off ramping and allocate it to direct treasury I don't even want to take smart contract risk so what what we really believe is that there is a very thin line between um you know tokenizing everything and like where like the point that stepen mentioned I think the first wave would be products which have very clear established priz oracles very clearly established kind of uh regulatory oversight over it I still believe that you know other products

which are more localized to some extent real estate will stick will take a much longer time because you know the the kind of uh I would say price sensitivity and the mechanisms which Drive price is still not there so yeah I think the first wave that is currently working is the more globalized products with stronger price mechanisms which can determine the pricing and with the blockchain it's more efficient but it doesn't mean that it's I mean more relevant that the numbers are more accurate for example so talking about oracles we need I mean to guarantee that the data is is okay so yeah what do you think between efficiency and the fact that we are talking about lie and Truth on

this I mean we can have a more efficient system I mean there's nothing more transparent than on the blockchain right I mean you see all the transactions you have an open Ledger um and at the moment we we are heavily reliant on a piece of paper that tells us the truth that is put forward by a company that we hope and pray is true um that we believe oh maybe it's audited by a price Waterhouse or Anderson Cooper anybody remember Anderson Cooper and Enron Enron um you know sort of you look at number you believe those numbers um versus an open Ledger that's public for everybody and if you look at the

policing that takes place on the blockchain I don't think there is a community that actually holds a lot of the protocols accountable I mean from all the big protocols that they're managing their treasury my multisig it's not on the blockchain I don't believe that transaction or there's somebody released a wallet that released X number of Bitcoin that got listed on an exchange oh they're going to dump oh everybody sells right so you have immediate transparency on which you don't get anywhere else I don't think and then at the moment it's not perfect but I think we can approve on that nichas and so where I would disagree here is that um you know a key part of real world assets is that they

are not crypto native they don't inherit these implicit transparency and you know ownership properties that we have with say like a token like eth or or any kind of alt token that that's issued on chain right and so have a synthetic version of that sure but uh I I I think at that point we're stretching the definition of of RW asset uh but but I I I would say maybe we disagree on on what the scope of a world asset is then um typically maybe you can just I mean say everything to what's so so typically when we talk about tokenization we're saying that here is an asset in the real world right

and we are going to transcribe it onto a ledger and as soon as we do that right if we want these transcribed assets to have these great amazing properties that decentralized systems have um that's when kind of oracles become much more important from an interoperability layer um to to bring all this data on chain right um and it's totally possible to bring the data on chain but uh you still have garbage in garbage out right so if you are getting the data from excuse me um like an asset originator this is just recreating some

some BS right because this asset originator has complete moral hazard to uh to lie to you and tell you whatever great picture you you want to hear right and so when we're build like we we're very early in this rwa tokenization like um industry and you know I understand we have to take baby steps right so we have to learn how to build the products right we have to learn okay who is our customer right we have to build up the corresponding infrastructure and it's not going to be perfect right the first time around or the second time around or the third time around but we also can delude ourselves into not being aware of the complexities that we just kind of like hand waving

away right now yeah uh actually I agree with you I mean it's really easy with I mean crypto native assets I mean to be sure that they are on the blockchain they are natively on the blockchain but yeah how how to manage the fact that it's way harder for real world assets for example in the real estate world or whatever to to be sure that so if I look at the model that you just highlighted I 100% agree I could not agree more that if we wait to tokenize this building and compartmentalize it get the land registry to give us the land registry and you know encrypt all of that verify that that's authenticated and it's from the right Source Etc that's going to take yeah I I'm I'm too short my life is

too short to wait for that moment so I will not be looking at that but I look at innovations that are taking place today that actually compartmentalize and tokenize the square foot price of real estate in Zurich and I can buy a token that represents that square foot price and Zurich remember 16y olds to 29 year olds around the world have no access to real estate they cannot afford to get onto the ramp that all of you know the inherited down from family to family the real estate that's been transitioned Etc they don't have access to that how do they get on to this and so their way is I can buy a token that represents the value of new New York and by the way

Consumer Price Index is Jack who cares about the 2 4% what matters is asset price inflation and asset price inflation is up at the 12% range right so you need to break 15% hurdle to hold and protect your wealth outside of Switzerland I mean Switzerland is you know has different but asset price in inflation is pretty high in Switzerland right property is pretty well High working yeah anyway sorry I digress but that's where I think this is going to go much more so so that ultimately you're creating synthetic versions of it and the innovation's going to happen in that realm right I'm going to token an index I'm going to tokenize a Futures product I'm going to tokenize tradable items that people can

trade on and that's where I think it's going to go f me on this so I forgot what I wanted to say but um so what I said initially so we still have to rely on prices coming off chain so when we think of private markets someone is valuate it's performing valuation on these assets so as um my colleague just said like garbage garbage out so we still have to trust blockchain is not going to solve this for the time being but we can see on chain for example even asset had a evaluation two years ago what is now and so on and so forth and if you create this kind of um synthetic products that you said so I agree to to some point but you still have to be sure

that you know when you go in front of a court with this token that you really have the right so we cannot just simply ignore the regulation or the legal frame workk even if we have the balls or not so me as an investor if I buy a token and this is how we do it at Signum for us it's really important that um we work very close with the issue and we understand what the token is actually representing because if we issue a token in a synthetic form I don't know what but the risk that you at some point you go in front of a court and the token is worth nothing this is really what we have to avoid and I don't like coins uh to um so what I want to say we should not

ignore the regulation we have to take the baby step and I don't like this conversations um as well but I don't see um like really a way around it yeah just um you know adding to what the stepen said if you take a a step back and look at you know who is actually buying RW as of today you know like traditional players don't really need to buy RW who are being bought by treasuries and couple of other players but you know nobody buys RWS for the sake that you know I really want to get access to that asset means what like if you if you look at the psychology of a typical customer like buying a tokenized

real estate for example is just for the appreciation and the price and not really the underlying asset because you holding possibly 1,000 of a share of an asset and you you are never going to have any physical ownership right on that so what like what we strongly believe is that you know RWS are positioned towards like a more of a basket of products say if you are say as more and more Holdings of individuals and institution grow in crypto people would like like to have assets which have say for example some kind of real world linkages both for the price appreciation and the yield on top of it U and it will be like more like a portfolio allocation at one end you have products which have very high say def

native staking products as well as top crypto assets and at the other end you'll have RW assets which will be seen more as a wealth preservation or more like towards like you would have as of today with any other portfolio allocation so I think that's where that's where things are major challenge as of now with RWS is that there are only two three products which have found to scale or true adoption with treasuries and you know the whole crypto community and there are very few which have really scaled so I think um the market you know is still very Niche and there are very few products which can which have found scale as of now compared to other digitally native products okay and according to you what's I mean the the best leverage uh for this sector I mean to democratize

real world assets what what do we miss today um I think um so I think Nicholas added a point that everybody is focusing on origination and tokenization like I met somebody like few days ago and he came with me a list of 100 million assets he wants to tokenize including a beach house in Panama my first question was who do you think will buy that first of all how should I validate that that house is wor 10 million or 20 million I have no clue and you know I just want you want me to take your word put it for a 20 million SPV and then you are run out and then I chase you know the whole structure to figure out what happened you know it's never going to be scalable so I think the first challenge is liquidity is an issue in the RWS sector

and we need to figure out products first like synthetics that Stephen mentioned or like eeld products which have strong established protocols to start with um and start with them the reason like some of the treasuries and money market products are so popular is because there is a clear price Oracle there is quick liquidity and that's what works in crypto so start with that and then go for products where you know it's much more harder to establish price and then go from there so I I believe this is the these are very few products where we kind of start with and focus on okay okay nichas about this maybe what's same question or what's yeah yeah actually what what do we need

um well a big influx of of capital would would be nice um no I I I I think in terms of like the development cycle we're we're seeing the maturity come come along right uh but there's a lot of moving pieces here right there is the regulatory question of in different jurisdictions right because it's very jurisdictionally dependent right can we get some reasonable crypto policy in place in the US you know depending on the elections in November right can we do so here in Switzerland in London in Singapore in Dubai right um that's that's one part of the equation right

the other is you know can we build these products with a set of that has a level of maturity that gives you know uh right investors confidence in these assets that they're buying because uh um while there is a lot of quick and dirty like rwa oh we tokenize this house or we tokenize this property and you can buy a piece uh the a lot of the time the legal uh strength backing your claim is rather weak right and uh so coming up with these structures right uh for the most part what you see is it's

very bespoke right um if you talk to any of the rwa asset Originators right oh we do this in Jersey we do this in BVI right and they all have their very unique structure right but but but we in Switzerland right but over time right there will be consolidation right and unfortunately that consolidation is going to come at the price of like well this one blew up this one exit scammed right this one just doesn't work from a tax perspective right but we will identify those structures we will see consolidation um it will make the infrastruct the surrounding infrastructure not just oracles but but anything else um much better because we

don't have to do oneoff bespoke uh implementations for every single asset originator that comes to us and like can you do an oracle for our rwa right um so it's not any one thing right it's everybody has to make these like take these steps forward and then the whole piece will kind of come together but it's it's going to take time okay okay thank you just we have only four minute left just for maybe one or two questions uh from the audience if you have any questions feel free Y no any questions so pretend if you want to add something yeah sorry yeah I will just want to add

if you look at data it's also very you know clear you look at the top five RWS products by the number of tvl and look at where is the tvl coming from the top two you know pretty much everybody knows them with close to uh half a um half a billion worth of tvl 70% of the evil is coming from just two institutions so you know retail is still not there in terms of product usage so unless retail is there the sector won't go big so how are you solving for that so I think these are some of the challenges having a strong institutional back backing I think is the number one requirement for a rwa project right now to get the liquidity bootstrap for the

first few years seed serieses phase and then kind of have a clear strategy of how you are going to get retail because without that it's not scalable and you will find the banking Partners like signal I just want to to add we tokenize on the Swiss law so not anything else so so it's working so um maybe the the last question so about blockchain of course we need to use public blockchain I assume but on which one um you think that we should or maybe we I inan cross chain we should tokenize real world assets yeah look I mean I'm an entrepreneur yeah I'm I'm an entrepr rur

so I'm by Nature going to be positive and I think this is the best time to be alive we have so many Innovations taking place and if we do not take advantage of these Innovations we won't achieve growth and the governments have torn us down a path with debt that is insurmountable anymore and they've put on bureaucracies and lawyers into stopping entrepreneurs build and drive growth either we can constantly sit back and be negative and not believe in the future or we can be positive and take the leap of faith into the future and try to make differences happen and that's where I'm coming from I think the blockchain crypto AI is out of the bag

you're not going to stop at three trillion dollar business and that's why the institutions are coming for this there are going to be thousands of blockchains don't think there's going to be one blockchain they're going to be multiple of oracles they're going to be multiple of banks that will have their own blockchain that will interact with other blockchains and obviously I'm going to be very proud of chain link that does the ccip that connects all of these Banks and the digital and physical world together um but you know blockchains are going to be blockchains and look how many layer ones there are I think you have said it right there not enough daps we need to build services that users can engage with and at the

moment we don't have those and that's where we need the Entre rurs out there to come and help build and work with real institutions and let's not I don't want to Advocate going against the law right I mean we don't want to go to jail nobody wants to go to jail we want to stay on the right side of the law but we have to push the boundaries if we stay too far in safe mode we will never go into beast mode and we have to be in Beast modes at certain part of time to push the boundaries and the thinking Switzerland did a fantastic job with ethereum but now look at what happening in Abu Dhabi you know they're launching all the companies are moving to Abu Dhabi the brain is going to Abu Dhabi and because why they're much more

crypto-friendly they're issuing futures tokenization of Futures products and real world Commodities and then guess what next is going to be Lisbon again because tax benefits people are going to go build there and so you're going to see more Innovation happening not just on a blockchain by blockchain basis but think of a blockchain as a country you're going to move move from blockchain to blockchain to blockchain wherever it's faster it's cheaper and that's what's happened over crypto Bitcoin Fork how many times you know because it was too expensive ethereum sorry yeah no no thank you very much I think that's yeah thank you um so yeah uh This is the End thank you very much um to all

of you uh it was very interesting I hope that you enjoyed it and if you have any question for our panelist don't hesitate and maybe you be on the boat tonight so let's each other thank you