ETHDenver 2026 New France Village Day 3 4pm Presentation by Squid's Fig

Hi guys. Good morning everyone. Hope uh hope everyone's doing great. Um I'm talking today about uh DeFi's revenue meta that fundamentals matter for valuations. Uh we have been looking at data from 2021 to 2025 to see if that's the case and how the market has been evolving.

Just a quick spoiler. Um so since the beginning of 2024 fundamentals have added uh 8.7 percentage points and explained variance versus just a simple Bitcoin and Epher based model for uh six month market cap growth of DeFi uh projects and um protocol fees and TVL growth have been the most important drivers with protocol revenue being at the at the third place. So very brief words about uh myself and I'm a partner at Greenfield Capital, a European crypto fund investing in uh DeFi, infrastructure and consumer. Um here a few of our investments on the on the bottom.

Um and yeah, the reason why we have been doing this uh this research is that one of our core DeFi thesis next to many other interesting properties is that uh cryptographic or afallability of real-time financials should should lead to um more efficient markets. um due to um lower information asymmetries leading to more efficient efficient uh asset pricing and better risk management and so yeah we wanted to basically see if if the market has has been pricing tokens accordingly actually. So we have been looking into basically whether um what what explains DeFi valuations is it uh largely Bitcoin and Ether prices is it protocol specific KPIs or narratives on social and how has that changed over time horizon and market regimes here a bit about the methodology we applied so we've taken a bunch of D5 protocols 77 um we have taken uh Bitcoin and Ether ES as um proxies for for market data within the crypto market. Also capturing um macroflows um and uh and then we've taken a bunch of different onchain KPIs as protocol specific fundamentals for example uh protocol fees, protocol revenues, TVL users, uh transactions and and taking the growth rates of those. And then we built a bunch of um random forest machine learning models.

Um the first one being only consist or only taking Bitcoin and EA price growth. Uh the market only model. Then a model only taking into account the protocol specific KPIs. A simple last valuation benchmark. um a model with market beta and um Twitter followers for measuring social narrative and then um a combined model of market beta and protocol specific fundamentals uh to basically control for just Bitcoin and Ether price being um a heavy driver of um KPIs like TVL growth and also DEX trading volumes to kind of um kind of separate out what the impact is of the protocol um idiosyncratic uh KPIs and then we have basically trained the models over 12 months um uh rolling 12 months and then we have tested them um on the subsequent 12 months basically seeing um what is the explained variance of the the prediction of the model and the actual data and to see basically how um how the market has been evolving and uh based on the feature importances and also the the um performance And we have taken different time horizons one month, 3 month and six month uh growth rates to see how long does it take for pro uh the fundamentals to be reflected.

And um yeah, one thing to highlight is we didn't try to predict the future. We rather wanted to see to what extent um market participants have priced in fundamentals over time. So we looked at um the same uh periods of the fundamental KPI growth and uh market cap growth. So here one of the key findings uh being that over a six-month time period fundamentals actually significantly I'll explain um the simple market beta model on this chart you can see basically on the x-axis the different evaluation periods the 12 months each towards the end is getting shorter up to a minimum of three months to incorporate the latest data as well and then each bar shows the the additional explained variance in terms of pear squared um of like the fundamentals models over over the uh simple market beta model and when we can see actually um yeah there is a significant uplift um and um it has to some extent increased over time and and that that pattern actually has held as well over different market regimes like bull bear and flat markets here uh one month time period we can see that um there is very little uplift or even negative at times. So at the short time frame market beta dominates at 3 months we have a medium uplift two percentage points on average.

Um and then here uh 6 months again we can see basically that uh it takes several months for fundamentals to really play out to make a big difference in terms of um the additional variance being explained um by by fundamentals over just simple market beta. Um so that being the key uh second key finding um takes actually yeah quite a significant time for real-time financials being priced in. So uh despite despite real-time financials there are significant time lag and so question is um does that mean defa markets are very inefficient um due to maybe slow information dispersion and decision-m time lags and I guess to some extent that's the case but I think it's it can also um basically indicate that um that there's rational behavior actually that investors market participants actually uh wait to what extent and a certain um KPI momentum is sustainable and and uh uh continued versus just being a blip in the pan and and a short um a short spike and and so investors probably are waiting for persistence um to to really uh price uh the fundamental uh KPIs into valuations here. the most important drivers. Um the we have basically shown the the pre-2024 um KPIs uh feature importance on in the background and the foreground.

It's from 2024 onwards uh with TVL always having being historically the the most important still the most important but it has um ceased in importance uh in in the more more recent periods um where you can see like yeah in the foreground the full colored bar being the the later periods protocol fees and protocol revenues having gained um significantly in importance. So now monetization matters much more than before um uh over for example like more leading indicators like uh user growth, daily transaction growth also to I guess that are also more easy to be manipulated with incentives um since yeah it's rather cheap to just like spin up an account and and perform some transactions um with like the kind of hard financials being uh more difficult to to be pushed with incentives and and to be faked and yeah a clear clear signal basically that the market has been evolving towards pricing in uh real monetization over time. So we believe actually that um indicates a maturing DeFi market. Um that revenues matter still takes several months for for them to be priced in. What are implications for builders?

Um sustainable fundamentals do pay off. So it does make sense to really focus on uh sustainable fee fee revenue protocol re protocol fees fee growth versus just mercenary activity. uh and right now topline growth P revenue has been more important than uh than the revenue metric that's basically accounted for to be like really uh clearly attributable to token holders and but I think over time we will see an increasing importance actually in the latest data we do see an increasing importance of of protocol revenues over protocol fees um and and since we there is actually the significant time lag and sometimes obviously qualitative factors is also matter uh to a great extent it it does make sense to um to help investors to interpret the data to to also basically be integrated in the various uh data providers uh publish KPI dashboards yourself because sometimes it's not entirely straightforward to parse the data directly on chain run earnings calls regularly to explain the latest trends um strategic positioning give some context to basically increase the confidence in the onchain onchain KPIs that that are visible to potentially have uh basically investors price it in uh more quickly, maybe attain higher multiples or get provide some um some some forward guidance as well. um uh which can can be beneficial and uh for investors it means there is uh increased under underwriting clarity uh since there's a much clearer relationship between um monetization and and valuations these days and and that should actually open up uh the gates for further institutional capital coming into the space legitimizing the space which should benefit valuations the overall space and and just default projects generally and Um at the same time the timelines indicate that there's significant alpha potential um to be early to a trend to basically spot uh breakouts and in in in revenue growth for example on chain before before others can can see them and uh and interpret them correctly in terms of like to to see whether a certain um certain tra certain traction is going to be sum sustainable or not or is it just a incentive driven fad and and so Yeah, I think like still you could say uh quantitative signals obviously increasingly matter but at the same time you need to combine it with just qualitative assessment, strategic positioning and basically because it's mostly about the future uh and um to kind of build a holistic picture here. If you scan the QR code you can find uh the full report and uh my contact detail.

feel free to reach out, follow me Twitter and um happy to answer any questions. I think there's not super much time left. Um but yeah, thanks a lot. So, so what we've looked at here is is all basically fundamentals that are reflected on chain based on Artemis data and and so those basically if you look at uh the revenue metric that has been that we've used here that's directly attributable to token holders. like uh revenue that acrews to a treasury that goes into uh uh revenue share or buybacks and so any labs revenue um is separate to that and I mean I guess going forward it's going to be I think yeah very important to kind of really try to align incentives and I have like I mean I guess we see that with a more more recently basically like I guess you have you have to really I think work on on better governance models of how to to make sure that um whatever you invest into future growth is really benefiting um token holders after all.

And I think yeah, generally we're looking also a bit into buybacks. I think they don't really make so much sense. They make sense because there's not so much trust that actually earnings will really benefit token holders, but in the end that that should be the case. And I guess it's that's a bit uh dynamic. So I think time is over.

Thanks a lot. All right, we live. Okay, thanks everyone. So uh my name is Dan. Uh I'm one of the founders of Naent.

We do early stage venture checks in crypto. We do focus on the preede and seed stage. I've been pretty obsessed with DeFi and with the idea of an open financial system since 2018. So uh at the very first ETH Denver I came here I met a lot of the early projects like Zerox um like uh uh there was a few other lending protocols. Compound was around at the time.

And the thing that really spoke to me about this was the idea that we were going to enable anybody to access or create any imaginable financial product or service. And today what I want to talk about is what I think the next phase of that vision of that future looks like. And it's not the one that I expected when I first got involved six years ago, eight years ago. So the original dream was we're going to get everybody on chain. Everyone's going to be doing everything end to end.

They're going to get their money on chain and they're never going to leave. They're going to interact and transact with other people who are also on chain. And that that was that was where we were going to get to. But I don't think that is realistic anymore. the idea.

We need to be honest with ourselves about what it's going to take to on board billions of people over the next decade. The reality is people are really living only about 5% of their financial lives on chain, if they're even on chain at all. 95% is still things like paying your rents, paying your groceries, paying taxes, uh dealing with bank accounts, and receiving your paycheck there. We need to accept the fact that it may have always been a pipe dream that we were going to get everybody living 100% onchain. The apps like Uniswap, like Morpho, and ase work.

They're great. We've made tremendous progress. But that is not the only place that we can expect people to live. and that that boundary between the two things that seam that's where we need to be building the right products and the right experiences for people. So that meeting of the pure onchain world of protocols and then the offchain payment rails existing accounts and relationships that's what we need to be building towards is that connective tissue.

So when I talk about Neo Finance, I'm not talking about DeFi. I'm not talking about things like like Uniswap, like Morpho, which are these really pure onchain protocols. They can be a part of Neoance, but they alone I would not categorize that way. At the same time, I wouldn't call things like Robin Hood or Coinbase as their core product to generally be in that neoinance category either. And certainly any exchange where you're just trading crypto assets on a centralized exchange, that's a traditional legacy exchange that happens to have a new asset class.

There's nothing really new or different about that. But when you bring them together, when you give people the ability to earn and save and spend, uh that is where we start to see like real usage coupled with a c self-custody element and then also hooking in seamlessly to traditional payment rails. Remember, people aren't just coming on chain and staying there forever. They're going to come onchain, they're going to flow back offchain. This is going to happen.

We need to accept that uh and design for those hybrid systems. One of the best examples of this so far is a product integration that Coinbase did with Morpho. So Morpho is this permissionless lending protocol where anybody can set up a pool using any asset as collateral and allow people to lend against that. Now, once that's created, Coinbase came in and they were able to hook into vaults and allow people to come in and deposit Bitcoin that they had on Coinbase, convert it into CBT, CBTC on base, put it in Morpho, borrow USDC against it, and have it in their account. I've used this integration.

I hope many of you have tried this, too. It is incredibly smooth. You don't need to worry about token approvals. You don't have to worry about gas. It handles everything seamlessly for you.

Uh, and the results have been phenomenal in just over a year of usage where they have grown to. Um, Morpho as a whole has over 8 billion in in TVL. They've gotten to nearly a billion dollars in active loans through this integration as alone as well. And now they've integrated with many other major institutions, Anchorage, Bitwise, uh, Kraken, many more. And those are just a few of the ones that have started.

They're making new announcements, it feels like, multiple times a week of new integrations that are coming online. Uh recently they just announced uh Apollo uh a nearly trillion dollar uh asset manager announced a strategic partnership with them and is actually now buying some of their token too. So it's it's really coming along very fast. It's not the only thing though. That was what we would call I think over the last few years the DeFi mullet, right?

The the fintech in the front, DeFi in the back. There are other ways that you can integrate and do these neo finance experiences. One of those is tapping into liquidity. So using uh uh off-chain liquidity on centralized exchanges on CME, you can get so much more liquidity than is available on any of these onchain protocols, especially if you're off uh launching new assets. So Athena is one that grew.

They got they were the fastest digital dollar to get to over $10 billion issued. Uh, and they did this because they were doing a tokenized carry trade where for the short leg of the trade, the shorting on pers, they weren't just doing it on onchain protocols, they were tapping into Binance and By and OKX, uh, where all this per liquidity exists. So that enabled them to scale in a way they couldn't have ever scaled this product if they were only living purely on chain. Tenbin is now doing a similar thing you doing to co to tokenized commodities uh gold and they're also doing uh tokenized non- US dollar currencies and they're able to tap into the existing liquidity on CME um and on the uh FX venues as well in order to create their products. Again, you can't create these just onchain, but you still create self-custody opportunities and product integrations permissionlessly that you couldn't do in a fully centralized setting either.

The thing that I'm actually the most excited about is these onchain neo banks. So through the growth of stable coins, the ability to have self-custody wallets where people can earn into bank accounts that are then linked immediately, convert them into stable coins, uh allow them to invest those, earn off those and then off-ramp them easily, usually via debit cards. Uh it was really hard to even like track down the number of these out there. There's I only included a few here. Uh EtherFi is probably the largest.

Uh Cass, Takenos, Dollar App, UR coming coming online fast. Uh and this is really enabled by stable coins. Stable coins have absolutely hit escape velocity. I don't need to tell you about all the integrations that have happened with folks like Stripe uh and PayPal and Visa, but it is uh kind of crossed that point where in previous cycles we may have seen institutions pull back. They all realize there's real spec non-speculative use cases here that they're very excited about and they're putting massive capital, massive resources and strategic initiatives behind it.

One of the reasons they're able to do this is regulatory clarity. Uh getting the Genius Act passed in the US was huge. We've seen similar legislative pushes in other countries around the world. uh that's made it much easier for banks and other traditional financial institutions to do these integrations with onchain services and we're seeing hopefully workable frameworks on the securities front emerging as well. See if the clarity act can get there.

Um and also infrastructure finally we're at a place where we have these real scalable fast lowcost L1 and L2 experiences. Account abstraction is real so people don't have to worry about managing gas. It can all just be bundled on the transaction and onboarding new users is finally smooth, right? Just with an email address, being able to have a wallet set up, connect your bank account, be on onchain, earning interest in a vault, and then immediately spending out of that via debit card. Uh, that seemed really hard to believe we were going to get there four years ago.

Uh, but today it is just table stakes. Uh, anybody can spin these up very, very quickly. So the message from this I would say to builders is stop pretending that the offchain world doesn't exist or is going away. It's going to stay there. Your opportunity is to build at this seam.

Meet your users where they are. They are going to still have payments. They're still going to have a lot of their assets that are offchain. Accept that fact and build the best integrated product experience. If you're building something where you're not working necessarily directly with end users, you're building new assets, new derivative type products that are tokenized and onchain, think about how you can use these integrations into legacy venues and liquidity.

There are uh now a number of partners who have broker dealer licenses and other things that enable them to work with you and help create these products. Black Rockck has done an amazing job with their uh biddkenized money markets that are kind of KYCed and whitelisted but are then wrapped and used in other products as well. Uh and when you think about what this can be, think about the the full life cycle, right? Where are your users? You can't just build for people who've historically had a lot of Bitcoin, a lot of ETH.

Those there those are still very valuable users to get. But think about how much larger the market is that you can now address when it is this easy to both on and off-ramp people and integrate them into protocols. Don't just limit yourself to the people who are going to come to this conference and come to similar ones. Get out there. There are billions of people that are now part of your addressable market.

The final warning I will have though here uh to builders is don't forget about security. This is still really important. If you lose people's money, whether it's your fault or some hacker doing something that you couldn't have prevented, doesn't matter. It's game over. Uh institutions are here.

They only want to work with partners who understand how important security is at both the wallet and smart contract level. And so, you need to be serious and show them that you're going to be a partner worth working with who's not going to cost them customers and cost them fines and headline risks and all that. This is a place that we at Nason have actually been investing in for years. It's not a new thing. The the guys um uh Andy at the rollup I think was the one who kind of came up with this term of NEO finance.

We've had this thesis for a while. Uh between Morpho, USDA, and Birch Hill on the lending and credit side. um down to folks like Open FX which are doing FX payments are now well past $20 billion in annualized volume uh within less than two years of launch. It's pretty incredible how fast these things are growing. Don't sleep on this.

Don't say, "Oh yeah, maybe this is a trend." I promise you the best founders have been building towards this for multiple years now. It is obvious. Please, please, please start building with this in mind. If you are doing this, reach out to us.

We want to work with you. We've had a lot of experience working with teams navigating the complexities of the NEO finance space and bridging these onchain and off-chain worlds. Don't feel like it's throwing in the towel on permissionless access and truly open finance. That is still going to be supported. The more people, the more assets we get on chain, even if it's coming through intermediated settings, it's adding to the liquidity.

It's adding to the robustness of the pure decentralized, pure uncensorable assets and protocols and we will all benefit from that especially the people who need it most. So please please think about this. Think about where you can play and the opportunities that are emerging as we have this clarity as we have these opportunities. Uh let's let's grow the pie. Let's grow the opportunities.

Thank you. Welcome home. Beautiful. Beautiful. Computers now have primary control with critical vehicle function.

Discovery Houston.

Beautiful. Beautiful. morning. Appreciate you guys coming out. Uh we got a lot of people here that may know who Aaron and I are.

Uh we are the principal and CEO of Digital Ascension Group and we are a multif family office. We specialize in digital assets, provide institutional custody for our clients, do wealth management, estate planning, taxes, all the stuff that you'd think of. So the gentleman up here, I want to start with this. He talked about, you know, swapping between assets to stable coin and then putting that to work and then swapping back. Anytime you're exchanging one token for another, that is a taxable event.

So if if you swapped to Morpho to earn yield on your BTC, if you had appreciation on that Bitcoin, you now have taxes on that Bitcoin. Um, not fun. I think it's stupid, but that is the way the tax law works today. We we advocate for a lot of things with the digital chamber and and we try to explain stuff to them. So I'm hoping that we'll get that changed over, but I just wanted to start there.

So I think for context a lot of people raise of hands you know how many people here know who I am. Okay a few a few people do not though. So let me give you guys some background uh and how we ended up getting to where we are today. Uh and then we will you know talk about where you know where we're at and then where we're going. So I got into crypto in 2020.

Uh before that I'd gone to school for finance. Um did not work in the industry at all. uh worked in sales, did industrial sales, and then started consulting and doing M&A, and I had saved up money for my wife and I to buy a home, which we still haven't done, and I get hell about all the time. Um, so the market fell in 2020, and I didn't even get into crypto originally. I was looking at stocks and what everything that I learned in school like Buffett indicator, sharp ratio, uh, PE ratio, everything was overvalued.

And so I thought, okay, I'm going to stay out. I'm going to wait for a pullback. and and we got it right. COVID happened, everything played out and I didn't get the bottom in the stock market, but I got into Facebook, Google, Amazon, and Tesla. I thought the world shut down.

These are going to do okay. And they did. They rebounded really quickly. And they got back to the same levels where I thought there was risk in the market. And so I thought, all right, well, I better d-risk.

And then I got into crypto, right? So, um, watching a debate between Peter Schiff and a Bitcoin guy. And that's when the aha moment happened for me. And I'm sure many people here, you know, you you have listened to something or read something and the the light bulb went off for you on what this technology is and the difference that it makes and why it's an opportunity in the market. So, I rolled everything that I made in stocks over into crypto, took 13 positions, uh, and I did very well in 2021.

And I got to the height of the market and I had way more money than I have ever had in my entire life. Um, and I thought, "Oh no, I don't want to mess this up." And so I started seeking professional help. Like going going to school, I understood I needed a CPA. I needed a tax attorney.

I needed an estate planner. And when I went to go look for that, it was crickets. Like I I called over a hundred different firms across the US trying to figure out who to work with. And I whittleled it down to the five people that actually knew what they were doing. So I structured my estate, mitigated taxes, and then I got on social media in 22 and I started talking about what I had done and how I had done it.

And many people gave me the deer in the headlights look like what what do you mean you can do this for crypto? There's no regulation. We're just now to the point where we have some regulation coming here in 2026. And so you know with that a few people were nice enough to make some introductions to some family offices. We started consulting for them and then over the last year uh last three years we built out a full endtoend service provider uh for high netw worth individuals or private clients uh when it comes to crypto.

And so in 24 we started taking in uh capital uh as a wealth manager where we have an SEC registered RAIA uh that like actually gives you crypto advice on crypto, a financial adviser you can talk to. Uh and we went from zero to a billion dollars in one year uh under management which is unheard of like does not happen. Um, and that's all crypto, by the way. Like that is that is people that have crypto that want institutional custody and access to institutional products. So there's a lot of DeFi out there.

Uh, but the deal for me was my wife has no clue on this stuff, okay? Uh, and she doesn't care to. And so, God forbid something happened to me, I wanted to make sure that my assets were held somewhere where she's on the account, just like your bank account or your stock account, anything like that, you would want continuity for your family. If something happens to me and it's on a USB drive in a safe at my house and she has no idea how to use the keys or use an exchange or do any of this stuff, it's gone. And we've heard horror stories about this where, you know, people got into Bitcoin early or Ethereum early and then they go to jail or they pass away and their spouse or their family can't access the assets.

All of this wealth that they could have enjoyed is now gone. So, we we feel like we bridge the gap there. Uh we have institutional custody at Anchorage. Uh we just formed a partnership with Fidelity for a Bitcoin product. Um over the past five years, that product has generated 38% in kind in Bitcoin.

So, and we democratize access. Normally, you would need at least $10 million in Bitcoin to be able to even approach the individuals that we partnered with on that. It's only half a million when you work with us, which I know is still a lot of Bitcoin, but it's a step in the right direction, right? So, um you know, over the past three years, we've grown exponentially. We started with just two or three people and now we have over a hundred people that work for the company.

Uh and a lot of that is due to the wonderful efforts of Aaron Freeze. Um I this year have stepped back to chairman of the company. I was CEO for a long time. U we have promoted Aaron to CEO of the company at Digital Ascension Group. So congratulations to Aaron.

So Aaron, uh I I would love it if you would give people an idea of, you know, where we're at right now and then where we're going over the next, you know, three to five years.

Yeah, absolutely. Thank you, Jake. Um so I want to talk about how to think about crypto investing, right? Everyone in this space probably has a general idea of how they approach this, right? You guys are ahead of the curve.

Um, when I think about it, it's really early tech adoption, right? That that's what this is. This is a new tech. This is a new way to think about moving data and moving value in the world. Um, and so there's a the way that you approach investing in the space is about utilization, right?

Who's actually solving real world problems? Who's actually driving adoption of of that of that new tech, right? But it's a really nuanced way of thinking about it and you have to understand it and that is not accessible even to the most um affluent and sophisticated investors typically unless they're in this room right unless they're actually doing the things and getting really curious. Most people don't know how to approach this. If you layer on top of that how do I hold the hold these assets securely?

Which partners should I be thinking about? How do I think about estate planning? How do I think about insurance in this space? who are the right um you know funds that are doing the right things. How do I know I'm not going to get caught in a scam?

Especially in an industry that's been underregulated or not regulated at all that's global and there's not a lot of standards across across the the globe for these things. If you add all of that together, this means this is an asset class that while it might be appropriate to have a place in a portfolio for a lot of people, no one's going to know how to approach that. How do you think about this asset class and what do you do? When you think about traditional finance, you also run into these same problems, right? How do I think about investing in this space?

How am I making the right decisions? But you're likely not making those decisions alone. You have a financial adviser. You work with a brokerage uh a firm. You have a brokerage account that you're likely not managing yourself.

You've been put into a model. your 401k is is, you know, likely tracking a model that's appropriate for your age and for your investment goals and and your your um how risk averse or risk on you are, right? And somebody's helping you make those decisions. To date, that has not been the case for crypto. You have to make these decisions alone.

Your traditional financial adviser won't touch this this asset class. even in the family office space, you likely don't have somebody in the inside of of of that firm that understands this asset class that can make these decisions for you or help you navigate. That is the bridge um that that we're get that we're filling. That is is really where we sit in the middle of this. Um we are a fully um licensed registered investment um adviser.

So uh we can manage the entire portfolio and and we do most of you know 99% of our assets under management today are crypto but we can take a full a full portfolio and the advantage to that means we actually fit crypto into your entire financial plan right we think about how it fits into your portfolio. How should you uh allocate to this asset class? We do believe that crypto has a place in most portfolios and we help you think about that in the right way and make the right decisions, find the right vendors and do the right things. Um this has been a a really difficult journey for the last 18 months to get to this place for a number of reasons. Most of which is that no one else is really doing this work in this space.

Um and we know that now for sure because the operational burdens that we've had to overcome to get the crypto markets to fit inside of traditional wealth management have been incredible. There was a gentleman last night at at the event that we attended and he equated that to crawling over broken glass and I can attest that that is very accurate.

Yeah,

it's uh so raise of hands. How many people like when exchanges comingle your funds with other people?

Nobody.

So we don't do that, right? Like that's a big piece of the architecture and the way that we structure this is it's a segregated account in your name insured bankruptcy remote not going to be a Luna or you know a Celsius or an FTX type situation. We have controls in place to be able to mitigate those risk and structure it the right way so you retain ownership and it's separate of everybody else while still being able to participate with the broader community. Um, and these are things like cryptonative people know, right? If you're in this space, you know that that's what you want it to be.

Traditional people just roll stuff all up together and it's in an omnibus account and they think that's okay.

Yeah. Anyway, I'll let Erin continue. Sorry.

No, that was great.

Yeah. Um, I think the other big piece of what we do is actually provide a human touch, right? Crypto is very digital first. you often don't have any, you know, a trusted partner to call. We provide that human touch.

You can pick up the phone and call your adviser, which can be critical. You know, this market is really volatile and it's really, it can be a really trusted um partner for you to call no matter where the market's going. You know, when the market is is is going down, having somebody that you can pick up the phone and say, "How do I think about this? What does this mean for my portfolio?" Um, one of we offer um loans uh to to our clients.

We have a lot of really great lending partners. Um, if you if you have loans in the crypto space, uh, outside of having an adviser, likely you've experienced a margin call whenever whenever the market crashes. Um, in October when the market saw that that really big dip, uh, we actually saw zero uh, liquidations. We were able to meet every single margin call and that is because we were have really good um, relationships with our lenders. We were able to pick up the phone, meet every margin call.

We saved our clients $30 million in liquidations that day. Um, and and so it it is it is that human touch. Also, when the markets are doing really well, right? If you've got a lot of unrealized gains, what do you do with those? Do do you sell?

When do you sell? Are you bullish on this? Is there tax loss harvesting you can take advantage of? Um should you diversify? Those types of questions.

It'd be really great to have somebody that understands your entire financial picture, is a an expert in crypto markets, can help you make those th those decisions. It's providing that human touch um to the crypto markets.

Yeah. Uh again, so a lot of what we've built over the past three years has been very selfish for me. Uh the way that we've structured the fees, the way that we've worked with our partners, like I know what I want this to look like and I could not find anybody else that was doing it the way that I wanted it done. Um and it's been a beating to get it done the right way. Uh but we're continuing to push that direction and and we get a lot of feedback from our clients, right?

uh we ask questions, we want to be engaged. If we're falling short somewhere, we want to know. Um but you know, and we're want to continue to cultivate that. Um we've got over 3,000 clients today. On the estate planning side, we're somewhere north of 7,000 clients.

Uh and it's it's not slowing down. Um it is it has been a wild ride even in a bare market to see people being proactive and and getting ahead of the appreciation that you inevitably know is is coming for you in this asset class. Once we get regulation here, it's going to be a Cambrian explosion. And I think there's a few assets that are poised for that even prior to uh the regulatory compliance that we see coming in. So on that topic, Aaron, like what where do you see the firm in the next, you know, two to five years?

Yeah, really explosive growth. So um one of the things that we're really focused on is how do we get these tools in front of, you know, other financial adviserss, right? I think um when it comes to the wealth management space, I've always thought that this is the missing link in crypto markets. Um I think crypto's always been a little bit upside down. It's been retail first, right?

Not institution down, but retail and up. Um and I think that the way that you unlock a lot of liquidity in crypto markets is getting every financial adviser to be able to allocate some portion of their clients portfolios to crypto when it's appropriate and in in the amount that it's appropriate. But how do you do that? For years, there's been education in the space for for financial adviserss. um they've been able to learn about blockchain, learn about crypto markets and how they operate.

Um we've gotten a further along with regulatory clarity so they're able to actually access this market. Um the missing piece has been how do you actually do it, right? If if you have a financial adviser sitting in a traditional firm and they understand crypto, they know that their clients are asking for this and we know that's happening because we have many financial adviserss knocking on our door asking for this. Um, so everyone's asking for it, but you they actually need the tools to be able to click a button and allocate um and get reporting and billing and all of those things um uh uh done for them. That is what we're that that's that's what we're working on right now is putting all of those tools in front of every financial adviser um in the country and and and helping to really you know create a lot of liquidity across the space.

So we expect explosive growth. I mean we've this has all been organic growth to this date. Um I mean truly organic growth. We've done zero paid marketing and we've grown to this point. Um, which means that the market wants this.

Everybody w would like to have advice and and somebody to call when it comes to this market and how to access this and how to think about it. So, we expect a lot of really explosive growth. Um, we're we're launching a lot of new products. Um, we we've recently launched um a product specific for retirement accounts um uh that allows you to do some algorithmic trading um within an asset um inside of retirement account. We're looking at international expansion um in the UAE and um at either in Singapore or Korea.

So, we've got a lot of really big plans. Um and in the next five years, I expect us to be I mean, we we went to 1 billion in one year. I expect us to 100x the company within the next two to three years.

Yeah, it's it's going to be a I feel like we're strapped to the back of a rocket. Um and and that's beautiful, but it also comes with a lot of headaches. Uh and you have to be able to meet demand and scale. I I would say two things before we close out here. Um, one, you know, we try to align ourselves with the client.

Many people that are a financial adviser do have the ability to get some exposure to crypto today, like they've got the ETFs that they can allocate to. We work with people that want direct exposure, right? So, there's a lot of people that buy paper gold derivatives, right? But we we know where that's going. Uh, and that's why so many people have started to buy physical gold.

You want the actual asset. You want the bare asset. And that's what we allow people to do is make an allocation directly to the bearer asset while still getting access to all of these large financial products and institutions in a way that mitigates risks and it's structured the right way and protects you and your family for multiple generations. And that's really where, you know, a lot of my attention and time goes is is how do we make this last for your family for the next 10, 20, 100 years? How do you maintain an allocation to this asset, be able to borrow against it, put it to work to earn cash flow for you?

Just like real estate, like the the the analogy that I could give you there is like a lot of people think about taking a heliloc out on a house that's rented out that pays for itself, right? How how do we do that with DeFi inside of an institutional environment and structure that so that the people that are holding these assets have access to those products at scale with the best partners and insurance and all those things. So, that's where I think we're headed over the next three to five years. Uh, and excited to be along the ride with you.

Same. Let's go do it.

Appreciate y'all.

Thank you. All right. All right. Let me see if All right. Sounds good.

All right. Hi everyone. Good morning. Good afternoon. Uh my name is Nicola.

Uh I've been building with Defi Saver for quite a while now. uh we have been in this in space since 2019 2020 or so um and frankly there's been this nagging question in my head that I kind of wanted to I guess put some time time into answering and it's really about whether we are actually still building the thing that we sought out to build. Um, so the original web 3 promise, um, the the original web 3, I guess the idea, it was really a a movement that had a a technology as its catalyst, but it was really a a value based movement. It was a movement around uh kind of uh transparency uh openness, equal uh equal rights and and universal access and then DeFi uh as a movement kind of uh appeared in well it it was born in this ecosystem and it carried this this ethos uh with it. It was meant to be this um financial system that didn't really care who you were or where you were from.

Uh it was uh maker DAO was this I guess the the poster child of DeFi. It was the the project that really coined the term uh and it was very uh what I'm trying to say is it was very aligned with the the centralized etos of of web 3 in general. It was uh this uh fully transparent fully onchain project that had a stable coin whose peg was fully owned by the community. um it kind of proved that this unbanked mission was actually a reality that it was that it was actually possible. Uh however, fairly quickly we realized that the project of that kind is kind of hard to scale uh in the sense that um well we needed to to execute some some compromises uh to actually get to to the millions in the the the billions.

Uh first off it was uh kind of different types of collateral then it was USDC with a shared peg uh essentially tethering die to a fairly centralized stable coin. Um then it was RWAS um and then finally essentially government bonds as backing for uh die savings rate yield. So finally after a few years uh D actually uh and maker turned into this um fairly uh institution first inst institution focused organization uh with a stable coin that's actually fairly centrally controlled and has all these uh kind of powers over the the holders. So there's this thesis uh for brands uh catering to enthusiasts, how they will inevitably kind of betray their um their their users because we as enthusiasts, we're actually a pretty pretty bad uh customer to to cater to. We're uh very demanding.

We're very fickle. We're very um happy and quick to point out when things aren't uh perfect. we're very uh quick to find flaws and we're very happy to try the next thing and trying to move on to to something that we might that that we think might be better. Um so for these brands whether it's you know enthusiast phones or whether it's finance or really any technology um in order for uh those products to scale that actually need to move on to these um larger markets and thereby kind of sacrifice what made them great uh in the the first time sacrifice what made them attractive for the kind of early adopters and the enthusiasts and um same kind of goes for DeFi. I actually heard uh this hot take um that uh DeFi will eventually all the projects in DeFi will eventually either become infra or they'll be competing with Robin Hood.

Um so the thesis is essentially you either become uh uh a backend for institutions and banks or you become uh uh or you try to kind of uh on board uh everyone's grandma essentially or or you know you make these kind of weird videos. Uh but either way DeFi just becomes like a a tab uh in your favorite banking app. Um so the numbers kind of confirm this. Uh we have these kind of record uh TVL numbers. We have millions and and billions and trillions of of capital coming into D5.

But if you look at um the poster shells of D5 right now. So A allegedly has well the top 100 depositors in a allegedly hold 85% of the the total total value locked. Uh, and the numbers for Mofo are allegedly even worse in the sense that the top 100 holders actually hold over 90% of the TVL. I didn't check these numbers. Uh, I found them online.

I didn't calculate them on hand, but I'm pretty sure it's uh it would be somewhere in that ballpark. And these are institutions. These aren't um these aren't retail users. So, does DeFi still make sense? Is this the future of DeFi?

Are we kind of done? Should we all kind of, you know, go work for Black Rockck essentially? Well, a lot of smart people actually think DeFi does have a future. Uh, Vitalik recently made a case that DeFi could be Ethereum's killer use case the same way search was for for Google essentially. Uh, and safe DeFi uh or low-risk DeFi uh meaning um collateralized loans, savings protocols, stable coins, things like that.

So uh uh A's uh Stani Kulchov famously very uh all in on DeFi. Obviously a has its uh institutional avenues. Uh it has RWA markets. It has um it's consumerf facing app but uh very much opposed to chargeable defi still and um well frankly me as well uh I the thing is uh coming back to the the original thesis um both of the paths for for scaling DeFi make a point that uh to scale D5 will have to become CFI or something in between and kind of sacrifice the ideals that made it great. Actually, uh the thing is the values for DeFi aren't necessarily idealistic.

They're actually very practical, very tangible. Uh take transparency uh for example. It's not an ideal. It's uh it's this force that actually keeps us on the right path. It keeps us from making bad decisions.

Kind of like open source software is uh ironically more uh more secure and more safe because it's out there in the open because everybody can see it. Um, in the same way, uh, when everything is open to scrutiny, uh, we're kind of safer from making a a bad choice because we got the feedback. Um, it's essentially this kind of systemic safeguard that uh, keeps D5 from uh, creating another 2008 scenario. Um, similarly, openness u enforces competitive products. It's uh, this force that doesn't really allow for a closed uh world of gardens and closed ecosystems in in in DeFi because being part of this global open ecosystem financial system is really makes for a better product.

Uh it it's that's the the actual force. We could go on and you know replicate all these traditional finance systems on chain but that would just be scratching the surface of DeFi. It's it's uh it just doesn't scratch the it doesn't begin to cover the potential of of DeFi is what I'm saying. And in a heavily centralized world, in a heavily monopolized world where where all these industries are kind of centered around um a couple of large players, uh this feels uh more important than ever especially for a industry as crucial as finance. self-s sovereignty similarly uh protects us as users from government and corporate overreach.

This is the the kind of um on the on the flip side if you're a product owner this is what protects you from a hostile uh governing uh climate. If because in in in a hostile governing climate actually the best thing you can be is non-custodial because you're hands off and you can't do wrong and you can't do evil even if you whether you wanted to or whether you were coerced to uh in in some way and obviously this balance uh of of self-s sovereignty uh takes um implies some sort of self- responsibility as well and a lot of people would be happy to hand off uh outsource their responsibility to a bank in exchange for some of their uh independence and I I think that kind of makes sense for a lot of people. I don't I don't think that's a a wrong choice. But even um even in in that case, putting uh banks on blockchain rails essentially makes them um more efficient. It makes them more transparent and makes oversight easier.

So generally a again a net positive for um us as consumers. Um the obvious thing about the A numbers if A has like around 115,000 depositors uh that means there's like around a 100,000 users kind of like us uh normal users that have like four to six digit TVLs portfolio balances um and they just kind of use this product they get value out of it and uh the infrastructure is there uh transactions are fairly cheap uh the protocols are fairly battle tested. They're fairly safe and secure. We know how to make them now. Um even wallet wallet UX is getting fairly good and all these wallets are um using all these D5 products behind the scenes and actually um providing for example um savings protocols to um well to so many people that actually didn't have them beforehand.

And uh yeah, but uh I mean if somebody tells you about wallet UX and crypto UX and how it's like this bottleneck and it sucks and you know it's it's like this bottleneck for adoption, just uh I mean frankly tell them to shut up because it works. We're doing the thing. We are out there. We're banking people. People are actually using this and there's so there's so many advancements actually being made that actually implemented in the real world that actually make this UX pretty smooth.

So you maybe they should go out there, go out there and actually use these products and uh try them and talk to the people and see what they can do better in their own their own yard and figure out who they're building for. So if you got into DeFi a while ago um based on this promise that you were going to make a difference whether it's on like even on like some minuscule level and now you're kind of asking yourself deep down if that was a farce and if we're kind of doing uh just stratfi on chain uh don't uh defy is making a difference. It's making a real difference. It's this large equalizing force uh in in the sense that well take stable coins sure they provide efficient payment rails in the developed nations on the west but they also provide access to the global um financial system in uh places where inflation is very high and access doesn't actually exist. um savings protocols.

Never before did you have uh savings options that actually gave out the exact same yield whether you had a position of $100 or $100 million. Uh it just doesn't didn't exist. They get the exact same equal yield. Um even access to investment tools. uh the fact that I can use DeFi saver to uh execute as a as an individual u a delta neutral funding fee uh farming yield strategy the same strategy that it or vinm use on like a giant corporate level the fact that we can do the exact same thing it's like this huge equalizing force we have the equal opportunities equal visibility equal quotes all these equal things regardless of who we are where where we come from and what our position size is essentially.

So, don't believe the hype. No matter what you're building, uh it's been claimed that DeFi is dead numerous times before. Uh Dexters are dying, stable coins are dead, um uh overcolateralized lending is dead, uh crypto is dead, web 3 is dead. We've all we've heard these things for years now. So, just focus on what you as a person feel that makes sense.

uh and where you see value and same for the product you're building. Uh figure out what the value that you are providing is and focus on maximizing that focus on actually providing that value and not scaling the TVL. Um and finally know who you're building for. Uh you might be building for yourself, you're probably not building for your grandma. Um, but the audience that you're building for might be bigger than uh what you think right now.

All right. Have a nice day. All right. Hello. Uh good morning everyone.

Hope you've had a good ETH Denver. I don't know about you, but I'm exhausted and uh ready to go somewhere a bit warmer. But uh thanks for coming and joining for uh one more session here. Uh I'm Alex. I am the CEO of Dromos Labs and we are the core contributing development company behind Aerodrome and Belladrome.

Uh so these two exchanges are both built on metadex 02 and they dominate their respective ecosystems and this year uh very exciting they will be coming together as arrow and arrow is designed to be the unified liquidity layer for all of Ethereum. So today, what I want to talk about is how we got here and give you a little bit of a preview uh for what's coming up next year. So by the end of these 15 minutes we have together, uh I want everyone to be thinking about three things. Uh first is that onchain systems must deliver maximum value to their users. It's not just the main competitive advantage that exists in this new onchain era, but it is the only way to align all the stakeholders of systems like these.

Second, liquidity is essential to the onchain economy. Decentralized exchanges should not be just thought of as sort of simple applications but actually as liquidity networks and their tokens must be tools for coordinating these networks. Third, the infrastructure that wins in the aenic future uh must be both maximally efficient and built fully onchain with minimal centralized dependencies. So at Dromos, we don't just see our work as building better products, but better systems, better infrastructure. And everything that we do in our work is guided by a belief that shared systems must create shared value.

Believe, as I'm sure all of you do because you're here, that there are better ways to build this infrastructure. So that is why we build common infrastructure that delivers uncommon value. We combine leading technology with economic innovation to give everybody a larger stake in this new onchain economy. And we think this mission is especially critical right now because we are entering a new global economic era. And if we all have anything to do with it, we hope that this is a better economic era because just as the world came online, it is now coming online chain.

And frankly, we are still in the earliest days of this. Uh Brian Armstrong, the CEO of Coinbase, recently predicted that as much as 10% of global GDP could move on chain in the next 5 years. And as you can see here, that would represent a massive order of magnitude increase over the size and scale of our industry today. And I think everybody in this room knows why this is happening and why it will happen. Uh it's because products that are built onchain, just like the disruptive digital products and services that came before, are better.

They're faster. They're cheaper than incumbent solutions. And as just one tangible example, say you need to convert US dollars to euros. Traditionally, you would have to pay up to 3% in transfer fees and maybe wait 1 to 5 days for that to execute. Well, right now onchain, on base, on aeradrome, you can get execution that is up to 300 times better.

We're not talking about the future anymore. We're talking about now. And the reason that this is possible is because onchain systems and their core technology, the token, represent the biggest revolution to coordination since the very invention of the firm. Because when systems can run autonomously, the distinctions between insiders and outsiders flatten, everybody from the teams to the foundations to the investors to the participants, they all simply become users. Users of the same shared system.

Which means that the systems that will win will be the ones that deliver the most value to those users to all the participants. And this is fundamentally the thesis that drives us that any industry or any product built on centralized value extraction or frankly any onchain firm that extracts value to teams or insiders will struggle to defend itself against these hyperefficient onchain firms that internalize and distribute value maximally. And this will be especially true uh at one of most one of the most essential layers of this onchain economy. So we've seen this play out over the last 10 years and it is why Ethereum is still the world's computer and in 2026 I believe we'll see focus shift to the next most essential layer of any economy the liquidity layer. Decentralized exchanges already generate more value than the EVM chain layer itself.

And I love this stat because I think it's not wellnown, but last year exchanges generated $5 billion in fees versus EVM chains collectively generating about three billion. And as chains become faster and cheaper, this gulf in value acrruel is only going to widen. And this is because the liquidity layer is as essential to the functioning of this onchain economy as the very chains themselves. Without it, nothing else can happen. And so just like Ethereum, we should expect the winning liquidity infrastructure to be four things.

First, neutral, not competing with other layers, but enabling them. Second, open a network where anyone anywhere can contribute and be rewarded proportionally to that contribution. Third, aligned uh the interests of all these different user groups uh need to be aligned by incentivizing behaviors that strengthen the system as a whole. And finally, efficient because better execution will always win. And this is going to be especially true in this new aenic world.

And at the heart of all of these things is the token. At the chain layer, maximally useful tokens are essential. And since we're all ETH fans here, I think this should sound familiar. Ethereum uses its token to coordinate blockace and secure the network. And a functioning liquidity network is actually no different.

It requires a tool for coordination that organizes and secures capital, aligns stakeholders, and optimizes the marketplace. And the truth is that for most of the history, DEX tokens have not done this job. And this is where the Metadex comes in. Launched in 2022, the Metadex wasn't just another exchange. It was a DEX operating system.

the technical and economic operating system that powers a liquidity network and is designed to solve the DEX trilmma. Simply put, a winning exchange must align the interests of three critical stakeholder groups. traders who just want the best execution, liquidity providers who just want the best rewards, and token operators who must be rewarded for coordinating the network. And this requires a token that is not an afterthought, that is not slapped on after the fact, but like ETH is maximally useful. a token that when used represents a claim on the full productive value of the exchange and of the network.

And by the way, in our case, this isn't just 100% of the trading fees. These are additional streams like launch payments and liquidity payments. And that claim is continuously redistributed by providing the most value to the system. And for a DEX, what that means is the users who are providing active liquidity. This is who gets the claim on all of that collective value because traders depend on that liquidity.

And this kicks off a sustainable flywheel of growth. Higher rewards attracts more liquidity, which drives better execution. Better execution drives more revenue. More revenue attracts more token operators who direct better rewards back to liquidity providers. And the cool thing about this is every single one of these groups is merely acting in their rational self-interest.

And in doing so, they strengthen the collective network. And let there be no doubt, this system works. Metadex is the first DexOS to dominate legacy exchange models almost anywhere they compete head-to-head without a dollar in VC funding. They have captured a commanding 74% of flows against the category leader and that is the power that comes with aligning incentives and they are also amongst the top revenue generating protocols anywhere onchain. Over the last year, Aerodrome actually ranked number five in the entire onchain economy just behind Ethereum and Salana.

And yes, they continue to even lead the category leader despite servicing just 1ifth of EVM today. And in Q2, Metadex's will be getting a massive upgrade with the launch of the all-new Arrow. Built on our latest DexOS, Metadex03, Arrow is designed to be the first unified liquidity layer for all of Ethereum. And it's a step that will take Arrow to a new level of scale, transforming it from the leading exchange on L2s into the exchange layer of the entire onchain economy. So I'm going to quickly share some core features.

First, we have these all new economic engines. The air engine will make emissions dynamic and responsive to the market. The rev engine enables new revenue streams for Arrow, fueling realtime buybacks of the token. And the result of this is the air engine reduces inflation while preserving value for LPS. The Rev engine supercharges token buybacks, increasing yield for token operators.

And simply, this just means more in and less out. And according to our back testing, these two engines could reduce realized inflation by a whopping 85%. Second, institutional power. Slipstream V3 will include an upgraded dynamic fee module, Robin Hood Citadel style fee rebates, and the first AMM to internalize MEV value via auctions built directly in. Third is user experience.

With Meta Swaps, Arrow will introduce the first fully unified swapper, bridge, and aggregator allinone, which means users can discover tokens on any chain and swap without any complexity. and autopilot which will make it very easy for everybody to automate um and tap into all of these systems. So under the hood it all comes back to Arrow by vertically integrating all of this into a single exchange expanding across EVM aligning every market under a single token. Arrow will operate at a scale no other token has ever ever reached. And just to show you the the opportunity scale here, decentralized exchanges generated over 5.

5 billion in fees. That's 20 times what Aerrum and Veladrome generate today. And if I'm skipping ahead because I know we're out of time, this means the scale of the opportunity for the winner of the exchange layer across EVM is larger than any in the entire industry in crypto history. No token has ever aggregated multiple verticals and networks in this way. Only chain tokens manage anything close and they are restricted to their individual ecosystems.

And because Arrow will remain an open network just like Ethereum, anyone can participate, builders, traders, institutions, all connected by a single economy. So thank you so much. uh we will be launching in Q2 and just because you know when you're on a stage like this you want to drop a little teaser we have not announced uh everything that will go live with Arrow um in Q2 so please stay tuned as com's water. Hello. Okay, let's get going.

Um, thank you for coming and listening to us today. My name is Ashling and I will moderate your yield chat for today. Um, maybe before we get started, there's like I'm not a yield person. I know more about payments, uh, moving money, infrastructure, things like this. So, I was asking everybody all week, uh, what do I ask the yield guys about yield now?

And the question that came up every single time was where does the yield come from? So maybe I will start with that. But um yeah, we hope to talk about automation distribution. Yeah, the new blueprint for moving yield around, how to yeah, get it from here to there. Um so yeah, we'll talk about first where it comes from.

Uh maybe we'll take a look at, you know, what is the current state of things and we'll go from there. So I can pass it on to you.

Hello everybody. um Lucas uh co-founder of Renzo. Um we've been talking about this uh we all know each other pretty well. So it's it's a topic that we talk among ourselves uh quite a bit and over the last let's say two and a half years like we started Renzo in the summer of 2023 the the whole uh landscape around yield uh has really changed and matured. So uh if we look back let's say 23 24 uh staking was really like eat staking specifically was um was getting normalized and institutions and everybody was getting really comfortable with the risks around it and restaking was a massive narrative that we started off with uh two years ago and it it's crazy to see how fast the space evolves because everybody was really worried about reststaking the security of it, how slashing was going to work.

Um, but very quickly everybody kind of piled in and what we've seen over the last two years is the restaking uh yield uh literally go down. I think it's a premium of about five basis points right now. uh and it really became risk-f free and we're seeing a similar evolution uh on Ethereum staking where everybody's uh very very comfortable to to lever up on a lending protocol essentially arb the the premium between ETH uh ETH staking and uh the borrow cost and you know go up to like 90 LTV which is 10 to 12x uh leverage and I think we're going to see another evolution of each taken probably continue to go down and with that um we're seeing the whole space kind of evolve where um it's not just around eat staking and this is kind of where CAP and Odyssey come in where there's other assets that uh we're all looking at uh whether it's on the RWA side to to really find longevity uh when it comes to yield. So um I'll talk about a little bit more what we've started doing at Renzo over the last 6 months from an experimentation standpoint but uh yield needs to be sustainable um otherwise it just goes down right the the more TVL that comes in it just dilutes the yield so uh it's a problem that we all try to solve for and find that longevity and uh the cap guys have done an amazing job uh so uh I'll kind of hand it off to the

You want to go first?

We'll go down the list. Uh, sustainability or greater fools can impact yield.

Just kidding. Kind of kidding. Kind of not. I'm Zay. I'm the CEO of Odyssey.

Uh, we're a DeFi super app and among other things, we have an endto-end leverage yield stack. Um, I'll share the anecdote I was sharing with you guys. Uh, I was a defender of Renzo. Uh, there was a D-peg a couple years ago and uh, I rushed to buy the DPEG and then I figured out where's the best place to get the most yield. I took it to Lineia.

I looped it up on Zero Land. Rest in peace. Uh, I got the repeg yield, the zero airdrop, the linear airdrop, the ien layer airdrop, the Renzo airdrop. Thank you. I appreciate it.

um that's not happening so much these days. Those opportunities are are smaller and smaller. Um so we're we're definitely in kind of this like transitory phase where yield has compressed quite a lot. Um we all know that. Um, but I am optimistic about uh I think kind of once you get past that, once all these crazy opportunities uh dissolve, what's left is who can come up with new access to yield, who can come up with new yield sources.

CAP's a great primitive there. Um, from our perspective, we aggregate all different types of yield sources. We integrate Renzo, we integrate CAP. And so we're always looking out for who's doing something new and adding a new market to generate yield from. And um since my conversations here in Denver talking to guys like you, I'm quite optimistic for what we're going to bring to market the next couple years.

That was good. Uh I'm Weso, uh CTO at CAP. Uh we are a three-sided uh private credit marketplace plus a stable coin um trying to generate real yield. Uh but I think uh was what is interesting is most of the yield from DeFi summer on has been like just subsidized yield. So when you say where does the yield come from?

Most of it was on either VCs buying the token. So, you know, then, you know, obviously you're selling this token that you earned in emissions or then it's retail, right? And we haven't really seen retail participate in this as much anymore, but uh it's all basically token speculation. Then you resell it, tokens go to zero. That's not very sustainable.

Uh I'd say even if you think about like staking, right, in the in the broader context, that's exactly what it is, right? we're just like kind of subsidizing the yield and it's good while the price is good and the yield uh you know percentages are good but then that's not sustainable either. So I think the whole shift in the meta for like the last couple years has been like hey let's go to real yield right like act activitydriven yield you know whether it's trading fees borrow fees like how can we start to utilize like you know the uh movement of money as a source of yield also there's a lot of off-chain yield so now like I think especially for this conference specifically uh there's a lot of discussions around rwas and bringing offchain yield onchain and utilizing not only you those as like yield sources, but also being able to like leverage up that yield, being able to use RWAS in order to to get liquidity and then be able to go ahead and use that liquidity for something else. Um, so I also for somebody who's actually, you know, building a stable coin, we think about stable coins as like basically three different types, right? One is, uh, you get yield from T bills.

So just like T- bill rappers, we see bidden um even ones that don't distribute the yield to you like USDC, USDT, but they're they're really just T- bill rappers and that's all they basically do. Then there's type two um where it's basically relying on either the DAO or the team to go and generate the yield for you. So uh either that's curation uh maybe doing the basis trade um but there is like some you know centralization with that or you know you're still relying on the team who's actually both supposed to be the technical product owners and also the ones who are good at you know going out and curating where the best yield sources are. So it for some people we've obviously seen that doesn't really work out for them. Um, and then there's a there's the type three, which is what we're building here at CAP.

And that's where we don't have to worry about uh going out and generating the yield. We don't need to go find a new yield strategy. Instead, we're a marketplace of yield generation where anybody can come to us, they can borrow the funds, go and be the specific owner of that yield generation. Uh, it could be scalable to all different types of strategies. And from there, I think we put one, uh, transparency around the yield because the yield's coming from the borrowed of the asset.

Two, uh, we're not having to go and source the yield ourselves or be the proprietary owner of that strategy. And three, it can be scalable into the billions of dollars. So that's what we're doing right now.

Very nice. Thanks a lot for the comprehensive and, you know, intelligent overview. I was expecting one of you to say if you don't know where the yield is coming from, you are the yield. So

that's generally true. No, but this is great and it gives a kind of view of where yield has come from in the past. Um, where you kind of see it going a little bit in the future, but maybe like it's good to kind of mention now like you talk a lot about I mean the title of the panel is about automation and distribution. This is a little bit different I guess to what we've seen before. So maybe you can each say a few words about this like where you see this going.

Yeah. So essentially when you think of a maturity curve when you have new assets and new yield sources um people tend to or LPS and projects they do things manually right they need to understand what the rails are like how they operate and everything else and what we've seen uh probably I would say in the past year especially is um automation come in in a very big way so we were chatting about it uh as well when you lever up on any kind of asset, let's say on a lending protocol, there's something called the kink where uh the borrow rate uh stays relatively flat and then when you hit that utilization point, the kink, the borrow rate just spikes. And you probably see a lot of this on on CT with a saying, oh, ETH, uh supply rates are really really high. I think they were like 6% even a couple days ago. It's because uh supply is coming down and the borrow utilization is so high and it drives up the borrow cost.

Um but uh the reason I'm bringing this up is it's really um like when when you're moving hundreds of millions of dollars around in multi-igs um it's very labor intensive. Uh it's a lot of signatures. It's a lot of time that's wasted. So where automation has come in uh over the past year year and a half is uh being a able to automate uh predefined we do for example predefined strategies uh we do with a lot of our LPs uh who use easy eth and some of the other products that we've launched over the last six months and they know what they're comfortable being exposed to let's say a and morpho uh they know what asset what pool and They're trying to maximize um there's a risk return, but they're trying to maximize what that yield is. And uh where automation comes in, for example, in that part is when you hit that kink and the borrow rate spikes up, depending on how fast it spikes, you could lose all your profits uh in a matter of a couple hours.

So, you you want your infrastructure to be able to delever it as quickly as possible. Uh but it's not always that easy because you're putting up collateral. That collateral is usually locked up in another protocol. So with uh within Renzo, we've we launched reserve vaults uh a few months ago. We've kind of automated this and when you use it um we have things like withdraw buffers that we maintain for liquidity so that we don't have a DPEG event and if you use our vaults um our vaults tap into that buffer liquidity right away.

uh otherwise you have to wait you know a week or two with IGEN layer it's two weeks to get your collateral back if you have to wait two weeks to delever most people will go and swap out uh and there's slippage and you have all these kind of things that happen so uh automation when it comes to risk management and being able to manage your exposure be able to get in and out it's the same thing it's essentially when the borrow rates drop um the profitability of that trade goes up, you want to be the first one in there as quickly as possible because and push it up to the kink. So, uh we see automation uh essentially when it comes to some of the early assets that we've launched um that's how it's worked. Now, we're starting to see other assets come in and they're kind of starting from the very beginning. So, you talked about type two, right? The basis trade.

So uh many of you know Athena uh Superstate is another one with USCC. Uh we built an integration with them where uh you get exposure to that and then you could go to like a horizon and be able to lever up on uh let's say USCC's paying 6% and you're borrowing USCC or U uh USDC at 2%. You could loop that up as well. And um we're seeing these other assets now use the infrastructure that's been built out over the past year, year and a half from an automation. They want access to that um at a risk return level uh that they could also predefine.

Yeah, I'll uh I'll speak to the distribution side because that's uh a lot of where we're at with Odyssey. Um we're unique in that we maintain uh all of the components of DeFi infrastructure to get a leverage yield market. We have synthetic stables, synthetic ETH, we have uh lending markets on Morpho and Oiler, we have our own yield vaults. Uh and what that means is that a new boutique yield source, something that didn't exist before that needs to get its first 50 100 million TVL, uh they can come and have one conversation with us and get their first leverage market because uh yield has suppressed and people don't want to buy the tokens as much. The uh the private LP deals going to the market makers uh you can't go to them anymore and say we're going to give you tokens.

They want guaranteed uh APY in dollars. And um I think that the next couple years is going to be uh how can we get these new interesting uh yield types, new sources of of assets uh into enough mind share where they can get that initial startup uh usage, startup TVL. We're one of the first borrowers and one of the first uh delegators on on cap as well, which is a great example. Um I think that's going to be a big differentiator is who can get that distribution in the world when no one cares about the airdrop as much when you can't just rely on we're going to have a token so come on in. You have to really fight for that uh that initial TVL.

Once you get there, once you get your first 50, 100, 500 million, whatever it is, then you get the economy of scale and it's easier to maintain and it's easier to uh get your iterative growth. But um I think that's going to be where we'll see a lot of focus across DeFi, especially if we continue to have this really uh disappointing bare market uh that we're in now. Yeah. Anything you want to add? Now I was going to talk about curation for a second because I think um what we've seen is that the yield market is so fractured we have I don't know I used to work on beefy and I think beef is deployed on 37 blockchains like 37 there's no need for 37 blockchain they all do the mostly the same thing and so they all tell you something different like we do consensus a little bit different we're a little bit faster what they're all just like a morpho unis swap and that's it and then they when the incentives run out everybody leaves and the TVL dies and you know we re rehash it again for a new chain.

And so um but that creates like obviously fragmentation from all the different places where yield can possibly be. So it's crosschain, you know, um maybe it's really hot on base right now or you know the you know new product on Ethereum and uh as like a user a retail user like it's totally confusing like where do I go? How do I get the yield? Uh what do I access? And so uh what we've seen is that there's you know a growth in curated products.

people who are going to say, "Hey, I'm the more of the DeFi expert. I'll go take your funds, deploy it where I think there's safe and secure yield sources and then unify it all in one product and then deliver that to you." Um, I think that that's obviously way easier for a normal person to understand. I just come with USDC, pop it in the vault, you guys go ahead and find the yield as long as it's safe. Um, just the problem with that is that they blow up and then everybody loses all their money.

So I I I do think it's just a problem that still needs to be solved. But I I I see that's where the automation play is sort of going is that like instead of relying on uh a bunch of retail users who are airdrop farming to be the experts that we're going to go and bounce to different yield sources, we're seeing now these growths or like a whole bunch of products coming and building these curation sort of models where you know they're going to be the experts. They're going to organize everything. um make like an easy to use uh easy to understand UI and uh maybe like break it down just a little get a little bit easier.

Yeah, just to add to that um I think we've also taken for granted how hard it is, right? So Beefy being on 37, I think Renzo, we got up to like 16 17 networks, it's actually really hard, right? It's really hard from a bridge perspective, from a liquidity standpoint. Um, it's really hard to be able to get on certain lending protocols like Ave has always been kind of like it's not like everybody is able to get every single asset as a collateral. Um it there there's things around oracles and DPEGs and liquidity.

Um so it is super important when you're looking at yields, especially when you're doing it yourself. Um it's it's enticing to go and chase the the highest yield sometimes. But as we saw with uh just over the last couple months, we saw a bunch of stable coins where nobody knew what the counterparty risk was. And we're kind of back to where we were in like Celsius and BlockFi where um we've kind of come back to that, right? Like yields go down and people go start chasing yield and now um that yield is being generated offchain, but you can't actually track it.

You don't know where your counterparty risk is. Uh and that happens in cycles and I think we're actually going to see more of it if if we believe that interest rates are going to be going down. Um, you could see, for example, Tether is heavily diversifying their business into other companies. Why are they doing that? Well, we were in a high rate environment.

They were printing money. Um, and now they know that a lot of their revenue is probably going to shift. So, they're diversifying. Um, automation and curation is also evolving. Uh I'm sure everybody here over the last couple weeks with open claw and AI and stuff like that um it is going to be a thing.

We still don't know exactly how it's going to be, but like for example at Renzo we internally we we build uh a ton of stuff that we actually don't release and we experiment with. One thing we're experimenting with right now is 707 um and essentially allowing um individual users because vaults right now are pulled, right? So you can't uh diversify and say, "Oh, I I want 5% here, 10% here." Um and it's pulled with other assets. So we've even started experimenting and seeing oh well with uh XRC uh or um uh ERC7 you're able to essentially wallet by wallet have individual vaults uh but somebody still has to curate and like predefine what those strategies are and where to go get yield right so some of the it automation is evolving right Um, and it's going to be somewhat interesting how we see this kind of play out over the next six months.

Yeah, I think curation's fine. Uh, I don't think curation where we're taking the money off chain and nobody sees what you're doing with it is fine. So, uh hopefully that's like the part of uh this model that we stop uh promoting because we've seen too many times that there's like uh stable coin issuers that are doing that exact model non-transparent take it off chain. I'm going to do some basis trading or you know uh HFT market making and going to bring you yields and really they're not and then they blow up and then all of a sudden it's like you know directly impacts all of the rest of us. Yeah, the the one thing that's changed though, right, with the current administration, especially in the US, we're seeing a lot of proper funds, right?

So, I think Superstate is a perfect example. Um, they're here in the US, they're properly registered. Uh, as an individual, you can't just go and deploy capital there. So, we've built uh a layer there where uh we actually KYB and where the counterparty risk, but allows access for anybody else to go in. Um, that's the type of stuff that we look for versus um I think there's a number of examples.

I I don't want to uh name them where uh it's just high yield on a stable coin and you go and look where the counterparty risk is and they're they're not a registered fund. Uh they don't do the proper reporting and everything else. So, I would say from that standpoint, I've been pleasantly surprised um on how the space is kind of maturing and we're we are starting to see access to that. I still wouldn't put 100% of my money into one thing, right? You still want to be able to diversify because these things can blow up.

Uh we've seen a couple of um hedge funds stop redemptions over the last two weeks, right? Uh kind of out of nowhere. There was a private credit like a big private credit fund that just blocked withdrawals.

Yeah. Like yesterday. So um

maybe we have less than five minutes left and there's one point that I would like to touch on. I think you kind of started to touch on it there a little bit but following from the automation distribution curation like the whole space seems to be maturing a lot. It's less like being in the right DGEN chat group at the right time and like you know getting in and out at the right time like having this kind of better stability and predictability and you know you said like you can promise you know a genuine APR in dollars and things like this. um like in payments and generally in the Ethereum space you see a lot of conversation about the institutions coming and like from my perspective like I work a lot on privacy tech like one thing that is very interesting for them from that perspective is that like you know one of the things stopping the institutions from moving on chain is a lack of privacy the fact that everything is public you say like you don't want everything to be done like um without transparency this is possible with privacy now you can have verifiability and things like this I I think this was talked about on the stage already this morning but I think it would be nice if to hear your views on you know what does it mean for the institutions coming first of all are they coming are they like are you seeing that they're coming are they interested in if they come what does this mean for the yield space and DeFi generally and like this is a bundle of questions now for three minutes but just a final remark like do you see the need for privacy in all of this

so I think the the first thing you need to think about is how do defined institution, right? It's such a broad category and what we've seen initially is liquid hedge funds uh kind of being the institutions but when uh internally when we think about institutions we think I I'll paint a picture especially if you're based in the US finance for the most part in the US has been um not very accessible to a lot of people in the US right there's a lot of constraints about being an accredited investor having access to different kind of yield products. Um but I for example I would not be surprised in like two three years where Apple Pay or Google Pay that's an institution they have massive distribution

where where you're on your phone and you're holding stables um to pay for stuff and you have access to different kind of uh yield products that today just don't exist and you don't have exposure to. Right? So that's one spectrum uh of thinking about institutions and how they already have the distribution and they want to be able to expand their products that they offer to their users. Now is that yield going to be necessarily onchain or is it going to come from onchain? Probably not.

But the rails are much quicker. They're cheaper. Um and we are going to see that market. I think maybe two years is wrong, right? Tim timing is really hard, but especially in the US, you don't have access to that kind of capital.

I think we saw Robin Hood this week um start offering access to private prei uh IPO deals, right? So, that market is really opening up. And when we think about distribute uh or institutions, I'm actually not thinking about like directly working with a bank. it's what kind of rails are they gonna need and what kind of products are they going to want to offer their users? Um because they do have the distribution.

Distribution is really really hard to be able to generate. So that's kind of our perspective on it. Um I don't get too worried about like privacy and stuff like that when you think of it from that concept but we are seeing some of the bigger banks uh start launching their own networks that are private for that settlement because they could run centralized validator nodes that are very quick. Uh they don't have to worry about gas and ETH and uh all this other stuff. Um, so you're going to see this kind of divide where like the big banks to be able to offer some of these products, they're going to have their it's finally happening, but it's happening very differently.

Uh, and then DeFi is just going to evolve uh differently the the way we know it today.

Nice. Any final?

I know we're we're at time. I'll add really quickly on the what does it mean when the institutions are here? My contrarian take is that the sophisticated retail onchain user is going to benefit from whatever onchain institution looks like not get hit by it. Institutions have investment mandates. They have a lot of due diligence.

They have a lot more restrictions than what a regular person can do. They can't be the first borrow on a new morpho market. They can't be the first depositor to the a fork on the new chain. Um but yeah, exactly. But and at the same time they contribute to more TVL more access to opportunities.

So I think that uh once the institutions are massively deployed it'll be good for us regular folk too.

Uh yeah quickly yes they are on chain they're borrowing from cap. Yes they want privacy. I think that's a limiter and they want transparency around the where the yield is generated.

Thanks very much. I think we're at time. Thank you all. Discovery history. Beautiful.

Good afternoon everyone. My name is Jeff Frizzy and I'm an attorney at the Robman Law Group. We have a booth down there, so feel free to stop by to chat with us and get any swag that we have left. Uh I think there's still a little bit left. Uh today I'm here to talk about uh DeFi financing and real world credit zero to one regulatory movers.

Defy products that focus on lending or more broadly speaking advancing credit if targeted to US customers must still comply with US lending and credit laws. This talk will focus on the top five legal movers for founders so your project can get from zero to one. Interest rates you can charge chartered banks versus everyone else. And when I mean everyone else, I mean traditional fintech. And as fintech starts to become DeFi or is now DeFi, if I were to pull the audience and say, "Hey, what do you think the federal interest rate cap is on lending in the United States?"

I'd probably get a variety of responses, but it's a trick question. There actually isn't a federal rate cap. It's state law driven. And so the way banking and specifically chartered banks are set up is they pick a home state, think Delaware, think New Jersey, think California, and as long as they comply with their home state and obey their home regulator, which if it's a state chartered bank would be the OC or excuse me, the FDIC, and if it's a national bank, it would be the OCC. They're free to export that rate throughout the United States.

So take Delaware, which doesn't have a rate cap, moves to New York, which has a cap very much so at 16%. They're free to charge the rate that they want, even though they're only based in Delaware. So what does that leave for everybody else? Traditional fintech, it's a 50-state patchwork of licenses and user recaps. And I'll walk through what each one means.

So what's an what's a what's a lending license? If you want to lend in, let's say, California, which is pretty much the most common state we'll get queries from. I'd say New York second most. Uh, California would require a license to lend in their state. However, once you get the license, there's no rate cap.

But flip to New York. New York on the other hand only requires licensing for 50K and less, but would impose rate cap. So if you're in the fintech space, you have to sort of run this Swiss cheese Patrick approach in terms of where do I get a license? Do I have to comply with the license? Uh and then what interest rate caps would fall following that?

Uh that's on the license side. Now think on the interest rate side. Okay, maybe I don't need the license, but maybe there's a usery cap. And what usually means is interest rate top out, meaning you cannot charge more than. So some states is super high.

Take Colorado, our home state right here at 45%. Some states is low. Say New York 16%. Which for alternative credit products is is is could actually be a challenge. So you're probably thinking, okay, well maybe I'll come up with a lending protocol and I'll just dodge it or I'll push the envelope on it.

Well, maybe you'll get a slap on the wrist, maybe you won't. But if you dig deeper into the reggg, some states will make the debt uninforceable. So if you build a protocol and you're relying or resting on getting that money back, you may not be able to sue to get it back. Some states, and there's eight of them, including New York, uh actually make exceeding the interest rate cap penal, meaning you're looking at jail time. So it can get pretty serious, right?

Three, state versus federal. So I just mentioned earlier that there is no federal interest rate cap, right? So then where does the federal law come into play? Well, federal law is largely a yes but system. So while the states say nope, you need to get a license or nope, you can't charge more than this, feds say sure, you can go ahead and do it if you dot dot dot.

And that's where you get into the whole suite of federal regulations. And so from a lending perspective, think equal, I'm sure you've heard of the equal credit opportunity act. Obviously, people, most people, I would hope don't make, you know, racially or religiously biased decisions, but you do have to actually send what's called a no action letter if you decline someone. And that gets a little more dicey in terms of the reasons you say no and it layers into your protocol. Um, Tila, lenders often dislike this regulation where they're otherwise forced to disclose APR.

And for a lot of products that are short-term or short-term in orientation, an APR number can actually make their credit product look unattractive or a lot more expensive than let's say total cost of capital or cents on dollar, which historically traditional fintech has has tried to look to model after. Um, another big difference in federal versus state law is purpose. So, federal law is heavily regulated or regulates heavily, I should say, on consumer lending. And consumer lending is defined as for personal, family or household purposes. Commercial lending ends up being a lot less regulated.

And so, depending on the protocol you want to throw out there, if there's a commercial purpose you can tie it to or limit it to, it's going to be a lot easier to get off the ground than consumer. Of course, the consumer market is significantly larger. So, these would be things that you want to be thinking through. Um, ECOA is a common statute that you'd have to comply with. Tila, which I just mentioned on on just APR disclosures, but it sort of runs down the gamut.

Cradle to grave. Uh, FC, which is the Fair Credit Reporting Act. So, if you're going to pull credit, you need to comply. Uh, furnishing actually is a big piece for lenders. So, if you're going to furnish data at the bureaus, you'd have to make sure that you're doing so in compliance.

uh TCPA, the Telephone Consumer Protection Act, all these which would would not only dictates when and how you can call, but the underlying technology you can use. Uh most lenders rely on, especially in this space, heavy tech soft phones. And a lot of those softphone technologies are actually pretty heavily regulated at the federal level. So these are things you'd want to be thinking through if you put that protocol together. four alternative products.

So, you're probably thinking, okay, well, is there a way to get around the usery and the lending laws? Yeah, there are. And in fact, they're they're pretty popular in fintech. Uh I would want to step back and say, well, what makes a loan a loan? A loan is an absolute obligation to repay.

Well, what contingent products are out there? You've probably heard of factoring. You may have heard of merchant cash advances. You may have heard of income share agreements. You may have heard of litigation finance which is a little bit more bespoke but here the feature of the product is conditional on success or conditional on revenue and I'll talk I'll take you through like merchant cash advance and income share real fast on a merchant cash advance you're let's call it lender is funding a business but instead of lending it money it's betting a percentage of its future uh bank revenues right so very very popular in the e-commerce space and this does translate over to DeFi fairly well where you're buying a percent and you're gambling on that business's success.

So the underwriting here ends up becoming super key, but the timing of the repayments can fluctuate a lot. So you may get back, you know, if you're going to buy, let's say, 10 or 20% or 30% of the revenues as they come in. uh you may have ups and downs, but because it's contingent on the business success and contingent on cash flows, you're not necessarily subject you aren't subject to the lending laws, let alone the user caps. So, for a lot of I would say getting out there lending organizations or say financing organizations, it's a great place to test out a proof of concept business. It's a great way to get the business off the run, you know, off the ground and then to the extent you're looking to scale, maybe you then look to launch or mature into a more formal lending product.

Another one in the consumer space is the income share agreement. This is super popular in student lending, but it actually applies into basically any form of consumer lending where you're funding someone, but you're taking a percentage of their income provided that they actually have a job and they're allowed to call in and say, "Hey, I don't have a job. I can't pay. But generally, most people want to pay and do the right thing. So, you're contingent again on their income production, which in this case is going to be their wages versus cash flows.

Five, what's best for your project unit in portfolio economics drive legal strategy? So, whenever clients come to us and they say, "Hey, I want to set up a lending organization or hey, I want to set up a factoring business structure. What do we need to do? I ask, well, why don't you tell me a little bit more about what you're looking to do from a price point perspective? Is this going to have an like a 12% APR, 50% APR, 100% APR?

Are you going to be funding $2,000? Are you going to be funding $50,000? Is it going to be $500,000? Those economics actually drive quite a bit how intensive the regulations are going to be. Definitely at the state level in terms of whether it's going to be like a high reggg or a low rag.

So take for example low APR, high funding amount. You should be a lender. Like your regulatory lift is going to be low. It's going to be easier to set the repayment structures and you're going to be able to get the product off the ground pretty easy. Take the other example where it's let's say under 5k average 40 to 50% APR.

Now, you're going to have probably a much higher regulatory lift. But is that a problem? Maybe it's not. Maybe you have the team ready to go get licenses and comply. Or maybe you look into an alternative product where if it's commercial, you can funnel it into the MCA structure.

Or if it's consumer, you can funnel it more into like an income share structure. So you want to really think through the business points, meaning the business drive strategy. As a correlated to that, the next step is loss rate. You may think what does that mean? It means what do you expect to lose, right?

I mean, every lender loses something and still makes money. So, if your loss rate is zero, it's probably too restrictive. Some lenders do just fine off a 10 or 20% loss rate, some even as high as 50. So, you'd want to think, does your loss rate matter and does your net loss rate matter? Meaning, do you actually need to collect to get back your money?

That has a lot to do with the product you set and the states you can target. Thank you very much. That's all I have for today. Hello, good afternoon. Um, my name is Igor Lilich.

I am the data science lead at VETA. And, um, VETA builds vault infrastructure on Ethereum. Um, we have some of the largest vaults under TVL with some of the biggest partners in the in the industry. And I'm here to talk about ETH as infrastructure and why everything else is a meme. Um, if you've ever been to one of my talks, I like to give history lessons or do historical comparisons.

And um you know we like crypto, we like tokens, we like Ethereum, but honestly it is a technology at the end of the day and uh history doesn't repeat but it often rhymes and so using uh comparatives historical comparatives is a interesting way to think about how these technologies evolve. And so, you know, this little penguin here is uh the mascot for Linux, which is a operating operating system server infrastructure play. Um and in 1990 911 um Lionus to Tarvald the founder of Linux he posted saying I want to build an operating system hobbyist hobbyist project out of nowhere no hype no token just his community of builders um and as time progressed more and more people joined the cult more and more people started building and by today's standards Uh it's an overwhelming success. Over 50 over 45% of all server infrastructure in the world runs Linux. Um if you watch Netflix, it'll be Linux machines.

If you're on anything, you're probably using Linux. Um and so it's an infrastructure adoption story. Um from the institutional side, I don't think anyone here maybe maybe at ETH Denver with builders people run Linux. Uh but I don't know if anyone's actually running Linux on their desktop. Um, so it is an institutional adoption story.

It's not a retail adoption story. Linux was able to win the institutional side without really even scratching the retail side. Okay, so how does that apply to Ethereum? Well, before we go to Ethereum, I want to talk a little bit about Bitcoin. Um, and you know, I've gone back and forth between Bitcoin in my in my time.

Uh, but I'm personally ready to call it, you know, call it for what it is. Bitcoin is a meme token. It's all it is. It's a proofof work six fixed supply meme. And you know, my spicy take is it's actually holding the industry behind.

And I won't go too deep into why I think that is, but if you catch me afterwards, I'll explain myself. But it is evident that Bitcoin is not a serious place to build. I think if you search something like lightning network volume on Google and you get the top result, I think Bitcoin magazine said in November of 2025 there was a billion dollars of volume on the lightning network. Uh compare like Ether does you know hundreds of billions of dollars per month easily. At peak, I think we've done half a trillion, close to it.

And so, it's not even a comparable uh it's it's not even apples to oranges. It's just Bitcoin is a meme and Ether is actually real infrastructure. Um, and so yeah, I am I am starting to lean back into my ETH acceleration arc. Uh, I won't even talk about agents, but you know, obviously I think we all know agents are just going to be a thing and they're going to be a thing on Ethereum. Um, and I'm definitely stepping into my ETH maxi.

Uh, I think this is the cycle of the flipping and like, uh, I'm not shy about it anymore because, you know, anyways, I'll get off that soap box. Um, but why ETH? Why like why am I so, you know, uh, such an ETH maxi? It's not ideology, it's engineering. Okay.

Um, boring infrastructure sometimes is the most important infrastructure. Um, and you know, there's a couple of components that make Ethereum what it is, right? So, first of all, Ethereum isn't one spec. Ethereum is a layered system of interfaces um, and interfaces that are open. Like, uh, I've been here for a long time.

I was joking. Uh me and some of the friends, my friends are actually in the museum uh here at ETH Denver. When you walk in the Ethereum museum, um through the process of Ethereum's growth, you could participate in the governance, you can propose things, you can make impact, you can actually create change. It's open, it's an open spec that continuously evolves. uh which is one amazing and then two like how how technologies like this grow again going back to the Linux thing was the same thing.

Lionus said all right if you want to write code if you want to commit changes like if it makes the thing better you know go for it. Um, the second thing that makes Ethereum a true infrastructure and especially for institutions is might be underrated uh for those that don't actually like build too often on Ethereum, but on Ethereum you can reconstruct exactly what happened and why. So determin deterministic educ execution with full event logging. Um, this is also like why I don't think Salana is a true long-term institutional play. Also maybe a spicy comment, but if you've built on Salana, you don't have the historical record of logs for the blockchain that you can just query on Salana.

You can find thirdparty service providers that give you that data and charge you a fee for it. But you cannot get it natively from the execution environment and from an institutional perspective this is a huge deal. Okay, it's a huge huge deal because uh when it comes to audit and compliance etc uh you need that traceability. Um so the third thing it's a native rails for liquidity. I mean stable coins were born on Ethereum.

Ethereum created stable coins. It wasn't Bitcoin. It wasn't it wasn't anything else. It was Ethereum. And the growth of stable coins uh is tremendous.

I mean whatever the price is today of Ethereum doesn't matter. Were all-time highs in stable coin adoption volume etc. and continuously growing. Uh turns out that liquidity just wants to find places that it can flow. You know, Bruce Lee always be like water, right?

Well, if money and liquidity is like water, uh the place it wants to flow to are the rails that support it and that's Ethereum. And then finally, yeah, like the open foundation program programmability um you know the the Ethereum foundation is iterating and going through its growing pains etc. But it has remained an open place. Ethereum remains an open ethos um that anyone can build on. Okay.

So what are the practical adoption stories for this infrastructure? Um we're on the neo bank meta in February of 2026, right? So the first wave of metas were the exchanges and then the ETFs and then the third waves were the DATs. Going back to why I think Bitcoin is holding us back, I think DATs are a terrible idea. Again, not too important for this talk.

Current wave is neo banks. Um, Neoanks are emerging and they're emerging onchain. So, VETa provides infrastructure for all three of these partners. Um, EtherFi, the first uh non-custodial liquid staking and restaking tool with over 5 billion in TVL. Um, we just launched vaults with Kraken here in January.

Our Kraken vaults have steadily increased in TVL and they're currently over 70 million in TVL in about 3 weeks during a bare market. Um, you know, it's one of the growth stories of Q1 of 2026. And you know, Kraken is finding their liquid yield products to be a destination for their customers and creating new value for their customers. And Plasma we launched in Q4 of 2025. Um, you know, and this is this is another example of a NeoA.

You know, Plasma kind of leans into the Neoank meta specifically, but it's one of these neo banks that's using Ethereum infrastructure to build next generation products for their users. And so, you know, going back to VETA and what we do, um, we we are building the plumbing for the Neoank era. So, we have over 120 volt deployments. Uh, we do crosschain yield routing. are we are building compliance ready architecture with white labels for neo banks and this is all enabled by Ethereum and so going back to the analogy why is Ethereum going to win why do I not have any fears about the competitor chains why do I not worry about bare market prices well again you could use history as an analogy in 91 one.

It was a uh Linux was a hobbyist project posted to a mailing list and then you know it took a long time to incubate. Community was building around it creating patches and new releases, forks, if you want to talk about forks, the Linux ecosystem has tons of forks, tons of L2s, tons of dros they call them. Um and it's a healthy competition. It makes the whole underlying infrastructure better to have people experiment and break off the main branch and create their own versions and you know some of them fail some of them succeed and that's like part of innovation. Um but yeah by 99 Red Hat which is a very large Linux distribution uh packages it sells it to enterprises um IBM and you know by 2010 it just becomes invisible.

We actually don't really talk about Linux anymore even like as engineers. It's just kind of like it's kind of just like disappeared but uh it's still massively impactful and it's just become base layer infrastructure for the world's technology and my argument is that Ethereum is going to go through the same path right so the protocol origins the white paper um you know mailing list I think back in 2014 2013 2014 Skype was where everyone everyone was hanging out. There's a lot of Skype rooms. Um, but yeah, we we grow up. We go through the incubation phase, the ICO era.

Um, NFTTS, CryptoKitties. I remember when CryptoKitties came out, the doomers were saying, "Oh my god, Ethereum can't even handle digital cats or whatever. Uh, the cats are clogging Ethereum. Like, it's a failed project." And it's like, no, CryptoKitties was the first stress test.

It's how technology works. Like, you need stress tests volume to see where the thing falls over. And then you know what you do? You put your head down, you go to hackathons, and you go to events and you just keep building and you keep building and you keep building and you keep innovating. And you know, CryptoKitties, rest in peace.

you know, maybe maybe they'll make a comeback at one point, but it was this um initial testing ground and what did we get after? We got the NFT phase uh 3 years later. And so, you know, we just continue to keep iterating and keep iterating and by 2024, you know, the spot ETF was approved. In 2015, the idea of a spot ETF was just unimaginable. And then now, you know, we just take it for granted.

Of course, there's spot ETFs. Of course there's that and of course we can do you know we're fighting for legislation um you know the stable act obviously huge thing the clarity act currently in progress will also unblock the next wave of innovation in the United States for for crypto adoption and you know like at some point just like we don't talk about Linux anymore I think we get to a point where we don't talk about Ethereum I mean we will because we're you know Ethmaxis and we're nerds and we like the culture and you know we like the other aspects of the Ethereum community but the adoptions will just treat it as infrastructure everyone will have an EVM indic indexing product everyone will have protocol bindings everyone will have you know alerting and monitoring and the boring stuff that you have to build um for the institutional adoption and so you know if you use Linux as an example It didn't win with hype. It wasn't about cultural wars and you know globetro trotting superstars that are buying you know Linux swag and showcase. No, it became it won by becoming the thing that every institution depended on and Ethereum is having that moment right now. And so that's it.

Thank you. Hey. Welcome. Beautiful. Beautiful.

history. Beautiful. Beautiful. Hi everybody. My name is Sasha Barry.

I'm with Hype Partners, the marketing and PR agency. And I'm going to be with you for the next couple hours bringing people on. We're going to keep it lively, going to keep it light. Uh we have the first speaker, Fahim Ahmed, who's going to talk about prop AMMs and why they're so successful on Salana and how they're going to change the world on EVM. Welcome.

Hello everyone. So today I'm going to be talking about prop amms and what has made them work so well on Salana and how they can work even better on EVM. to quickly introduce myself. So I'm currently a fourth year CS student at the University of Wateroo who previously worked at Bass, Axar, Flashbots and Amazon. I've also built a lot of DUNE dashboards.

I've hit the front page of Dune and I've created this write up on prop AMMs kind of researching what made them work so well on Salana and it kind of blew up and so I've done a lot more research into it and started like reverse engineering some propm on EVM and I'm pretty excited to share some of my findings here. So what are some things that you're going to learn from this talk? First off, what are prop mms? Why have they taken off on Salana? What are the current challenges that they face on base?

And how are they currently designed on base? So, first off, why should he even care about this? Well, the reason why you should care about propm is the fact that they've attained a lot of volume in a short amount of time. Like on Salana, they've gotten 73% of volume market share. And just two days ago, Will Warren from Zerox mentioned on his talk that propm 40 to 50% of volume or Zerox's volume on base, which is honestly incredible.

And so here's a quick little like graph from sandwich.me from Ghostlabs where they're showing how tight the spread is on uh Salana on props. Like 0.05 bips like that is really tight. And to give a quick briefer of what an AMM is before we get into prop amms, it's basically just this formula here.

X Y equals K where X is the number of tokens like token A, B, Y is the number of token B and K is some constant. And so if you want to swap from token A to token B, you're going to deposit token A. And in order for and so that's going to make the value of X go up. And in order for K to be constant, the value Y is going to have to go down. And that's the number of tokens you're going to get.

And so what actually is a prop AMM? So it's an AMM except a market makers actively managing the liquidity on it. And so what that means is that only the market maker is able to provide liquidity. The price curve is what they're going to be updating frequently. And such as like maybe the value K isn't constant.

And the price curve formula is actually going to be more complex than just x * y= k. And so for example here on the slide uh it can go from like an x * y formula into maybe just some other price curve formula. And so here like prop amm they work best for short tail more liquid assets compared while AMMs they serve these like longer tail assets like meme coins. And so a question that you might ask is why not like a central limit orbrook? Why not a club?

And the reason for that is because like on Salana um there like if you want to update multiple prices, you're going to have to do multiple update transactions. But on a prop mm with just one update transaction, you can update a whole range of prices. And so as a result, it's going to be expensive to update multiple prices on chain if you're doing a club. Additionally, you can't connect um like a club to Jupiter for order flow, but they have a AMM interface. And so when would you use a club over a prop AMM?

There's one main scenario and that's when placing orders is free. So for example, Poly Market, they have an off-chain order matching and Hyperore Hyperore for Hyperlid, they have a free order placement and so you don't pay any costs. And so why has it taken off on Salana? Well, first off, Jupiter is the main source of order flow on Salana. And so if you want to get that order flow, you got to connect to Jupiter.

Second thing is that market makers like Wintermute, they want cheap top-of-the-lock uh updates for market uh they want cheap top-of-the-lock updates, which Salana excels at because of how cheap rights are. And so does this sort of environment exist in EVM chains? Well, sort of, but not really. But I'm going to get to that. The first challenge is that there's no main source of order flow.

Like you have multiple aggregators and you have XRX as one of the top aggregators, but they don't hold all of the order flow. The other challenge is that you're kind of missing like updates are expensive on EVM. They're not cheap and as you can see here, they use a lot of gas gas units in a sense where if you want to frontr run an update, you only need to increment or increase your gas price by 10 times the amount compared to Salana where it's 100 to,000 times the amount. And so this could be solved by like cheaper SS store op codes or even like a priority lane for updates. But that's like a hypothetical solution.

But despite this, you still have propm starting to launch on base. And so like why is this the case? Before I get into that, the current two prop mms on base is from wintermute and loomi, both of which are accessible through zero's matcha aggregator. And so, for example, like if you wanted to uh use their aggregator or use a propm like here's how it look like. You just go into their matcha aggregator, place an order, and it'll show you what the route is.

And so how does one of these propm work on a high level for example L45? I spent some time like reverse trying to reverse engineer their smart contracts actually like submitting a lot of transactions through their well through MACHA in order to land a few transactions in Alphi and also decode a lot of the smart contracts and try to like reverse engineer it. And so this diagram here, it's very simplified and I'll have like a detailed uh version in a future write up. But at a high level, the user, they're going to submit a swap to Alomopi. Alomify, they're going to uh call a pricing contract in order to calculate how much tokens they need to uh send back to user.

If like the quote is stale, such as if a market maker hasn't updated it, um then it's going to fall back to an oracle. And then from there uh the users the uh USCC like if we're doing from USC to uh CBPTC the user's USCC is going to go into the vault and then the amount out amount of tokens that was calculated by the pricing contract is then going to be sent to the user. And so some really interesting insights about this when I was reverse engineering your contracts is that negative spreads cannot be taken advant of advantaged of in the sense where if you have a bid that's actually higher than the ask um an arbiter can't just buy the bid and or buy the ask and sell at the bid and the spread also appears to increase if like the trader is flagged as risky or toxic. Another thing too is that the spread will also increase if the pool is imbalanced. I'm still trying to reverse engineer the exact number, but it seems to be something along the lines of like one basis point uh per like percentage that the pool is off by.

So say for example, if it's like a 6040 pool, then it'll be in 20 basis points increase, but don't quote me on that. That I'm still reverse engineering. And lastly, there's also like a limit on the number of trades that can occur during a specific block. More details in a future write up. And so, so that's this flow for a swap, but what about a flow for actually um updating a quote and so you're going to have a market maker.

They're going to interact with the uh Elomo smart contract. They're going to submit an update. And that update is going to store quotes in multiple price contracts. Well, at least some transactions, they do multiple price contracts. And note that this is very simplified.

There is some routing that goes on under the hood, but that's going to be in a future update. And this happens every block. So here you can see that um you have multiple different addresses um calling this update uh function. And all of these addresses are actually funded by the same wallet if you were to look under the hood. And the reason for that, the reason why you have these different addresses calling these update functions is because of the way like base it kind of limits you if you are the same address calling like the same function.

And so this is just a way to get around the spam limiter. And these update transactions, they consume 54,000 units of gas. And so with that said, how much like one of the questions you're going to like ask is like how much are they spending on these update transactions? Because we've all heard on Salana how they're spending a lot of money, but what about on EVM where these update transactions are around are using much more gas units. And so two days ago when I just ran a Dune query, they were using around 30 bucks in total throughout the day, which is much smaller than I would have expected.

And the reason for that is because they're only updating like once a block as opposed to on Salana where they're having hundreds of updates every second. And a really interesting insight about this is that they don't actually have much of a priority fee. Like it's it's basically non-existent. And so with that being said, I kind of want to talk more about like what's next for propm. And so from and so there's going to be a lot more propm launching on EVM soon.

You kind of heard about that from Will's talk from Zerx two days ago. And I kind of want to plant the seed about the future of propm sense where you're now having a ton of like tokenized stocks, real world assets all come on chain. And so, how are market makers going to be market making for these real world assets and stocks? Well, they're going to want a way to do so with cheap updates and effective ways of being able to bring those off-chain prices onchain. And that's where Prop MM excel at.

And so, with that being said, that's that's my talk and I would love to answer any questions and also happy to answer questions offline if you want to connect with me on Telegram or Twitter. Yeah. That's one. All right, we have our next speaker with us, Douglas Kolkit, uh, founding contributor of Pogo and the founder of Ambient Finance. He's going to be talking about how we're going to fix per dexes so that 1010 doesn't ever happen again.

Basically, right? We're going to fix the the flash crashes. No more ADL cascades and more exciting things that will make our lives safer and better in DeFi. Thank you, Douglas.

Thank you.

You go.

Hi, thanks uh thanks everyone for coming out today. Uh so, yeah, my name is Doug Kulkit. I'm uh the founder of Ambient Finance uh and founding contributor of Fogo, which is a a fast uh fast new L1. And Ambient Finance uh we built basically a large AMM spot uh decks and now we're in the per decks space. Actually, you guys know why the uh Okay, awesome.

So, I guess my talk today is called the dark side of perplexus. Before I get into that, I want to really say the light side of perplexes which are like un arguably perplexes are the most successful DeFi product in history, right? Like we've actually onboarded tons of people. They're real use cases for the chain. People are paying real money for financial application here.

So especially hyperlquid is these are amazingly successful applications and come really far and I don't don't want to negate that part. Where do we get into the dark side of perplexus and say first question we ask is why has there been no perf summer? So we think back to like 2020 defi summer we had these new kind of primitives curve unis swap uh compound synthetics and right there was the cool thing about that is they all built upon each other and one success led to the success of other products when we haven't really seen that in perp space yet. We see individual applications and protocols and products get successful, but that doesn't seem to be spilling over. And so this chart is the for example uh protocols on hyperlquid fee revenue.

You can see it's pretty much all fee revenue is still just going to hyper core itself. Like there's this hypervm ecosystem. It's been out more than a year and it hasn't really seen kind of anything close to the explosion we saw with DeFi summer, right? So it's kind of this weird spot where crypto's achieved very DeFi has achieved a very successful product but we don't have anything right and crypto market's still kind of dead you know besides this one vertical so kind of what happens today in uh perpex world is total vertical integration right so uh you know you go to the trady world there's this concept of clearing house and exchanges and you might trade uh you trade a derivative at one exchange but there's a centralized clearing house and you can move positions between them. uh right now in in crypto even even in decentralized systems these one protocol handles everything matching uh execution margin liquidation ADL even usually UI right um so there's single execution path there's no venue to venue uh competition per positions aren't portable and you really can't do anything with them the same way you can do with uh ERC20 tokens so we'll call this is kind of composability uh cost play like we do have some things that are hooking into perp dexus right especially hyperlquid some on lighter now but these are really APIs they're not smart contracts right even hypervm and hyper core like the hyper core being the actual perpex and hypervm being where you're supposed to build on top of it hypervm is a secondass citizen actually trying to talk between the two as you know anyone who's been a developer knows that it's very tough uh you can't reuse positions so I can't take positions I can't rehypotheate them.

I can't slice and tunch risk. So, everything gets stuck in a single stack. You don't have these DeFi DeFi Legos, right? That really are the core of why DeFi was successful to begin with. Uh, and there's a hidden tax to this.

This is uh 1010 ADL. I don't think I have to tell anyone about like how bad that was, but one thing finance is supposed to do in general in DeFi especially is trunch risk, slice risk, and repackage risk where it's supposed to be and who's most likely to hold the risk. So ADL is one aspect of this and when it's not composable uh what that means is you have people with different levels of risk exposure. What happened on 1010 was a lot of people had exposure uh who really couldn't handle ADL, right? You have market makers, you have people running delta neutral strategies, they get unhedged on one venue and then they're really at risk at another and uh you have these centralized systems that are trying to rank people.

There's really no way for people for example there's one dimension they can't trade that. Uh same thing with liquidations, right? like because there's no way to go out and get additional leverage from riskier protocols or trunch risk, trunch clearing risk, uh you basically lock everyone into a system that's too deep or too den for uh kind of the more conservative professional players, but too risky for uh the more institutional players. So, one size doesn't fit all uh here. And uh right, when it blows up, it it tends to blow up bad.

So kind of the way we've been thinking about this is you really need to split the system into two parts. Uh one is uh the clearing house level and the other is the execution level. So you have you have a clearing system you have clearing house and that handles things you think about anytime you hold a position. So you want margin funding liquidations ADL all of that stuff. And that part I think makes the most sense to be fully on chain.

What that unlocks is you can start doing stuff with your positions. You now have the equivalent of an ERC20 token for your per positions and including right you can lock those into additional funding systems, additional leverage systems. You can take uh you get leverage outside the core clearing house because it's composable. Um and that works fine right because clearing and settlement is actually not a very high frequency system right like a lot of trady systems they only settle at the end of the day. That's suboptimal.

we like faster in crypto, but you really don't need a super high frequency system. The other side of this is execution, right? Execution is kind of a different game than clearing. Uh it's probably always going to be the case that somewhat off-chain solutions or quasi off-chain solutions have advantage here, right? People are going to want to execute on very very fast systems that are just fundamentally hard for blockchains to deliver on.

Um and maybe not all the time, but sometimes, right? So if you don't have kind of a pathway for that off-chain execution uh you know people will go back to kind of siloed centralized vertically integrated systems. So we think makes most sense is have clearing systems that are extremely modular and to allow competition on the execution space between different different venues. Um so in terms of this who owns what right when when you go into this kind of onchain clearing house system right so uh again I think it makes sense keep everything onchain as much as possible and uh the other part of that is right that gives you the part you're really worried about from I'll say centralized attack is the clearing house side I don't necessarily care as much if my limit orders are I'm trusting somebody to give me good execution I care a little bit but what I really care about is okay you can't liquidate me if my position's uh not underwater. You can't uh you can't give me a different position.

You can't say I don't have margin when I do have margin. You can't seize my margin and right these are all the things that we want very onchain systems in in fully generalized chains not kind of trust me bro uh perpex uh you know perpex application chains and again this is this is possible. You can have two systems kind of bridge bridge this gap. So what do you get? What do you get from like open execution like when you have something like this?

I think like the most successful system has been been in spot world. Uh so Salana spot execution has probably been a great example of this right and it doesn't work for purpes layout of what something looks like right and you have different different layers to the system. So right like you have aggregators and they compete for the end user and who what aggregators do users trust most and those you trust those aggregators to route you to the best venue. Um, right, you have execution venues themselves, right? And there's a diversity here.

And as as pers expand, and they probably will keep expanding into things outside of traditional crypto assets, some of those assets have very different financial properties, right? Like a two-year treasury does not trade the same as uh, you know, a super leveraged shitcoin. So, the market structures that make sense for those respective things uh, might be different, right? So you might see off-chain clo, you might see onchain uh what we call dual flow batch auctions, which is basically a blockchain friendly version of a clob. Uh prop ammms, right?

We just had a great talk about them. They don't work in per at all because the problem with the prop amm is uh it isn't the clearing house, right? And if it was the clearing house, it wouldn't work at all because no one can come in and provide liquidity. So you could be stuck in positions if they turned off, right? So if you want something like a prop amm for pers which makes a lot of sense for especially longer tail assets uh you need something like a centralized clearing house.

Um and then right like stuff like GMX like that's onchain virtual AMMs that have use user supported vaults those are actually great assets right because not everyone can provide liquidity in a book but an AMM anyone can deposit to a vault and you know even if execution isn't as good for longtail assets a lot of times liquidity subsidized and we've seen that in spot world uh you uh you just can't do it right in in that kind of world. So once you have this once you have a clearing house layer that stays concerned with its aspects when it plugs in right you can take all the innovations we've seen in onchain spot trading push them push them in the per world right so is what what basically do you get from this right you get spotlight competition the amazing thing about spot is I can buy at unis swap I can sell at 0x the next day I'm not locked into one who I execute with right now is uh it's a date I'm not marrying that Per is different. I open a position at lighter. I can't go and sell that at Pacifica, right? So per right now create a system where you get kind of virtual monopolies.

Um and you know that's not great. So once you have this, right, you open up competition. The other thing is you get portable positions. So you can not only take positions, you can start slicing and tunching the risk associated with that position. What are risks associated with position?

liquidation, ADL, uh you know whether you have to post margin, right? So you get different players who have different sensitivities to those things. You can start tokenizing those positions and you can start uh writing say ADL insurance on top of it. You can go to another protocol and say will you compensate me? You know, if I get a certain amount of ADL, will you guarantee my position stays open?

Uh will you give me higher leverage on top of what the clearing house does? And right, you can isolate kind of that longtail of risk. Uh then you get these once you have these right you start getting real Legos right and this is what this is what we want from DeFi we want Legos we want things that go together and this is how crypto wins because one product takes off you know it's not just that product and only that product it's a bunch of things on top of it right and and that kind of open innovation is really the only way like we get we get to the point uh where pers actually start feeling like a decentralized system and then yeah finally you just faster innovation better execution better risk management That's kind of that's kind of uh our vision for Pers and I think that's how you how you fix the perpex landscape and kind of the dark side issues there. So I have about minute left. Happy uh happy to take any questions.

Do we have the questions? Do we have a microphone? There's a question. Yay! Applause for the question.

Hey.

Hey. Whoa. Hey. Uh, the vision was really compelling, but uh in practice, how does one actually make it happen? Like how do you align all the incentives?

Yeah. Yeah, that's a that's a great question. H So, how it actually looks uh is that you move kind of the clearing house layer and so you have to do all of this stuff fully on chain. And that's that's definitely not trivial. Um but that can be done right and at you know faster chains uh Salana like Salana like speeds and Salana like costs you can do that.

So it's not feasible on mainet probably but it is feasible on fast cheap chains. Uh the settlement part the execution part is really hard but I I think the key thing is right you need good primitives to allow uh kind of those execution systems to hook into the clearing systems. There's a lot of complexity around like making sure you're when you're executing people they have the margin there. Do you have to use intense systems? You have to lock collateral.

You know, we we've been pretty deep about work on it. I could probably go to 10 times as length of this talk, but uh yeah, it's a great question. There's a lot of easy stuff to say and definitely hard. Uh you have to really think about these things in practice.

Thank you so much, Doug.

Awesome. Thank you.

All the deep research and thinking. Applause for Doug. Okay. Hello. Hello everybody.

Um I hope you're having a good Denver. A little bit less people, a little bit more air to breathe. Um we're not going to talk about near intense in general today. I don't want to shill you anything. Uh but I can tell you that uh already over the past 10 years I have been building different crosschain protocols.

um has been building the the biggest permissionless and trustless bridge in the world that was hosting more than two and a half billion in highly liquid assets. So over the past 10 years I got some a little bit of knowledge about the crosschain defy. I would like to share this with you uh in case some of you are building projects in this direction. So uh we're going to talk a little bit about synchronicity, finality, trustlessness versus UX dilemma and uh bad prices versus compliance. Uh it is going to be from one side pretty high level point um high level uh talk but uh I hope that for some of you I'm going to open up a little bit of this world of crosschain defy.

We're going to start with one problem uh which is atomic crosschain transactions. So everybody are used to ethereum or salana style blockchains where the runtime or the way the place where you're executing your transactions and where smart contracts are living it is synchronous. So if there is a transaction that is touching multiple smart contracts it's either fully executed or fully discarded. This is what many people are calling composibility and you know at atomicity within the transaction execution. Now guess what in the real world we don't have mainframes.

So my laptop and the computer and whatever Google server where this presentation is living they are not synchronized and also the financial systems they are also not synchronized in web two and uh if we are going to apply to the blockchains like on different blockchains there are block time differences right we cannot escape this so there is no synchronicity for the crosschain defy which means that there are no atomic crosschain transactions there are some clever mechanisms how people are trying to stimul uh simulate this but in general because of the absence of these atomicity guarantees these transactions may partially fail. You start transaction on one chain, something has happened. For example, a pre- swap is happening. Your memecoin is swapped into USDC, but then you're trying to swap it on the other chain and your transaction is getting out of the slippage tolerance. Now you would like to revert it on the origin chain, but the price already moved.

You cannot. That's the reality of the crosschain defy. Because of this, refunds are necessary. You need to explicitly manage failure cases in case something is not working. The blockchain stopped.

Have you ever heard of sooie? Right. Sometimes blockchain are blockchains are not working and uh uh and they're like you can just cannot finalize it. That's the problem. Another problem is finality.

Now uh what finality means? It means that the transaction that is already executed it cannot be reverted. Uh well it happens that some of the blockchains doesn't have strict finality. They have empirical finality and these blockchains are the big ones Bitcoin, Zcash, BCH um and many many others including some of the EVM compatible blockchains like Avalanche. The finality guarantees fully depend on the consensus that blockchain operate.

And for the blockchain developers and especially for users probably you don't know what is the consensus there and from time to time these consensuses are tend to change for Ethereum uh up until more or less recently the consensus was proof of work with the empirical finality and then it was changed into the proof of stake but this is not like an ordinary proof of stake there are like this split into two different chains we're not going to go into too deep into into this but but in general Well, something has changed. Your user experience didn't change because of this because of this change. But for people who are building protocols, this finality is something that is extremely important. Now, there are other blockchains with a slow finality. So, arbitrums and optimism's finality as any of the Heat.

Heat. And we have Wesley Sha from Momentum to talk about incentives and holding on to the liquidity in DeFi.

Hello everybody. Hope everybody's are uh hanging tight for the last day of East Denver here. Um well uh yeah so just uh maybe a show of hand. How many of you guys have interacted with like D5 protocols? All right, great.

Yeah. How many of you guys interacted with D5 protocols before they launch a token of some sort? Right. Okay. Like did you did you guys receive the amount of tokens that they promised delivered whatever?

Right. Never. Right. Almost almost none. Right.

Yeah. Exactly. Exactly. So, so it sucks, right? So, like today we're going to address that exact issue and uh moving forward hopefully you guys can get something out of my presentation to help you with uh your future interactions with D5 protocols in the landscape.

Uh yeah. So you know uh the the defining questions for the next chapter in DeFi is how do you keep liquidity uh when the incentives are running out right every DeFi protocol launches with incentives with points with airdrops and yield boost right but what happens when the music shares stop running right so this is the this is exactly what's happening today right there are $237 billion in the entire DeFi landscape while there's 22% drop in the user uh users in DeFi, right? That's what we have seeing uh like there's more money flowing into DeFi than ever. Uh but the real users are dropping down, right? What what exactly is the reason behind it?

Uh that's what I'm here to tell you guys, right? It's because of the airdrops. The airdrops are not working. The point systems are not exactly working uh in the ways that they are designed to, right? uh majority uh maybe 60 to 90% of the tokens drop down 90% of the volume uh in less than three months, right?

So what's the point of like getting tokens when you're putting and depositing liquidity of your own assets and referring all the users, right? Let alone majority of the rewards are being uh snucked up by like people like Justin Sun and other whales that are participating at large, right? So there's no point uh really uh in participating into DeFi protocols as a whole uh unless you know you uh you you're one of the whales in a small syndicate or a cabal of some sort. Uh so so so yeah. So uh you know here's a uh a specific case study of uh how much how much money or how much um uh quantitative amount of action that has been put into a example such as Starknet, right?

Uh uh I I love Starknet, you know, like I talked to their founders, but uh the reality is, you know, $400,000 being put in uh in terms of action uh and but as a result, $500 in terms of token incentives and reward are presented to uh the users that interact. So uh that's a 0.125% uh return for months of active participation uh etc. So that is uh that is simply not fair. uh and then uh the uh what we have to what we have seen is almost 94.

3% of the uh capitals right now in the D5 landscape are uh are deployed by uh by by by whales as well right so this is what we like to call the mercenary capital of death spiral right uh if we do not fix this issue uh moving forward into the future nobody will interact with D5 protocols nobody will interact with all these ghost chains uh and and we will face uh more price drops in all the alcoins that people are buying. Uh, pardon my language. Uh, so let's get down to the bottom of this, right? Like how do we build a sustainable liquidity uh across the the the landscape of DeFi, right? That actually lasts longer than uh than normal, right?

Uh so from day one, uh for any protocols builders out there that are uh building your protocol, uh the goal isn't to really eliminate incentives, right? rather is to uh design them to attract users in a way uh that really appreciate the uh the power users, right? The people that interact with your protocol on a daily basis, the people that actually invite and and do referrals. Um and you need to make sure that uh transparent reward budgets are given out immediately to the community. uh a uh activity weighted rewards and loyalty mechanisms are all in place uh to help engage uh all the community right uh so uh keeping the transparency is key.

Uh next up uh I wanted to talk about you know how um how how these uh you know transparent uh reward budget uh we we we should structure in a place to end the guessing game. uh what what the guessing game is is that we often times see a uh a a a a protocol giving a um I guess an unlimited amount of uh uh of points uh but the denominator often times does not change right they're offering like 1% 2% over a vesting period of 12 months uh and and it's not fair right so you need to be very clear as of like okay how much you are allocating immediately from the get-go I don't care if you raise from polychain or a6z you got to tell people uh that come into your protocol uh you know how much how much they're making right um and and we need to have a activity weighted reward flip flipping the script uh so say if I have a whale coming in today uh depositing $20 million they should not be getting a 10% yield on a a 60-day deposit versus somebody that you know comes in at a $100 uh and then you know referring their friends and family members to participate in your uh DeFi protocol every single Okay. And yeah, they're they're getting like $1, $2 uh by the time of TGE. That should not be uh the way uh this industry work in the in the in the future realm of DeFi, right? Um yeah.

So, uh next up, I want to talk a little bit about postGE. Uh uh you know, like a lot of founders uh right now are sort of like giving up in terms of like, okay, like I launch a token, I'm done with my protocol, right? Like that's definitely not not cool and it should not be um the way builders uh uh uh h like builder mentality should be right. There should be um clear mechanisms of buybacks. Uh there should be clear mechanisms of staking rewards uh to really facilitate and stimulate the entire ecosystem uh moving forward uh to grow and uh consistently and organically.

So here is an example of a successful case uh case study uh of GMX. uh GMX basically you know distribute all 100% of the protocol fees directly to the token holders right this is what we like to call decentralization uh to the key right uh so 30% of them goes to the GMX holders 70% goes to the GLP liquidity providers uh it's a truly decentralized protocol in a way that um uh revenue and token prices are uh are are basically having a positive uh uh uh positive mechanis mechanism uh around it All right. Uh so there's not just mercenary farmers uh around your tokens, around your points. Um uh there are uh there are continued uh growing support of this and we have seen uh uh time and time again, right? like we have seen uh you know hyperlquid uh edge all of these like longlasting uh uh I guess per dexes that are coming up uh that are doing a fantastic job uh uh in terms of uh uh making making sure the stickiness of the user still stays right.

Um so yeah so uh here's the moat that uh nobody really uh really talks about the dimensions uh right uh uh the composibility uh it's a moat uh right uh and it often often times is overlooked uh so when uh when you're building a D5 protocol right when your liquidity is deeply uh integrated into the broader D5 system uh then it becomes uh incredibly sticky right uh what I mean by that is like okay if you're building a DEX if you're a lending protocol, it should be a uh a integral part of a bigger bigger piece. Uh and that is uh uh that that is something a lot of uh you know builders uh fail to recognize. Uh but uh yeah, I think uh in the future that should be taken into consideration. Uh and also you know uh going into a bigger uh and broader um uh ecosystem of newer assets uh is something that uh we strive to do. uh uh and also uh I I wanted to kind of iterate as well.

Uh there is currently about $370 uh70 billion uh worth of RWA assets uh including you know securities uh uh including uh uh uh private credits etc right like these these type of assets uh needs to come into crypto uh uh more often than not so uh last year alone you know black rockck toss about 500 million uh JP Morgan about a trillion dollar in volume uh all of these are sort of uh up and coming and a lot of people doesn't realize uh this entire industry is no longer driving just by retails like how it used to be in the previous cycles uh but rather by a lot of the institutions uh as well as bigger uh investors as well right so this is some knowledge to take in uh so here are uh here are some of the RWA asset class breakdown uh due to the time constraint I'm not going to go into details of it uh but mostly is private uh uh private credits and also securities uh in the US in the US capital and also money markets uh so how do we bridge you know RWA liquidity into DeFi uh or into the ecosystem broader at large. Uh this is uh this is some some of the uh scalability issue that we need to solve both from a regulatory standpoint as well as uh from a protocol standpoint. Um yeah so institutional security regulatory compliance uh as well as uh the uh uh composibility right so these are the three items uh uh so yeah uh lastly I want to quickly uh touch bases on you know what define a protocol to build uh and last uh here are five uh you know qualities I think kind of messed up but uh uh yeah so you you need to continue iterate your product uh you need to uh put your tokconomics in as an integral part of your product uh and you need to generate real revenue. I cannot stress this enough, right? Like people think that you know coming into crypto land uh crypto industry launching a token that's and call it a day.

uh you know this is this this entire trend this entire marketplace uh has uh this entire market cycle has changed and uh moving forward from this year onward uh I think we'll see a lot more protocols uh uh DeFi or non-defi alike uh will be shifting more toward real revenue uh to come uh and of course uh right community ownership and de uh composibility uh you need to make sure that your community is alongside with you uh and they they they they are not just there uh to be the mercenary token hunters as well. Um uh yeah, a lot of this uh is hard uh hard to do uh than just you know speaking out loud. uh but uh I would still encourage if there's any builders out there uh you know try to follow the parameter and the guidelines uh uh of this particular uh uh uh framework right uh so the the road ahead right like what what can you do right as a builder uh you know start optimizing for uh for real revenue as an investor uh look for yields looking for uh compound optimization of uh what a protocol can actually do if you're a user uh provide your uh seed your liquidity with a with a protocol that really cares about you, right? Like don't don't just go because they were invested by like, you know, A6Z it was like $17 million. It it doesn't work like that, right?

So, uh so yeah, just a just a just a quick pointer. Uh awesome. All right. Yeah. So, that's basically my presentation.

Uh well, thank you guys very much. I hope you guys enjoy a very uh great afternoon here in Denver as your last day. Thank you. Welcome. Beautiful.

Beautiful. Discovery Houston. Beautiful. Beautiful. And we're back.

Please welcome the next panel, our moderator, Bran Masiel. She leads BD with Upshift, institutional BD with Upshift. And she's going to introduce her panel. Please

please come on stage. Please come on stage guys.

And they're going to be focusing on risk and institution and execution

at scale. All right, let's go. Thank you and welcome everybody. So, as she said, I am Bren. I lead our institutional BD efforts at Upshift and today we're going to be talking about DeFi risk and execution at scale.

So, we've got a rockstar panel here. We don't have too much time, so we're going to try to get through all of my questions. So, I'll let each of you quickly introduce yourself, a oneliner on what you do, what's your mission, and then we can get into it. We'll start with you, John. Uh John Libby, uh DeFi lead at Gauntlet.

Um run the curation stuff.

Hi everyone. I'm Brian Hang. I'm one of the co-founders of Glider. Uh we are building effectively onchain fidelity. We're backed by A16Z, Coinbase, Uniswap, and and many others.

What's up, guys? I'm Cheyan Hussein. I'm the founder of Blog Bites Capital. We are a digital asset management company based out of uh V Virginia. And uh we're here to help the price go up.

Awesome. So, a lot of us have started our careers in Tradfi before coming into this space. So, I'm going to start off talking about execution and coming from that background, how do you guys view the gaps in the market that you know are fully covered in the Trady ecosystem. When it comes to execution, what's really missing to bring that TRDI scale onchain?

Right. I think in higher frequency trading, execution is always the name of the game and with DeFi, execution still seems to be more of an afterthought. Um I think you know most of the ecosystem does optimize things like TVL uh incentives uh yieldbearing products but I think where we're where we're lacking is uh really in kinds of uh mev defense uh risk mitigation and uh information leakage which I think is very important for institutions to really on board with DeFi uh and and yeah

yeah I can I can take a stab here. So I started my career in high frequency trading at a firm called XTX Markets and uh one of the biggest problems that we see today is in particular with equities coming on chain is being able to trade size and so if you want to go and trade like a million dollars Nvidia on like X stocks or something like that the spreads will blow out massively and that is not acceptable because a million dollars of Nvidia is really nothing when it comes to traditional finance markets. Um there are some really nice primitives now around pulling traditional finance liquidity onto uh you know DeFi rails. Um and for example uses this mechanism for their liquidity so you can trade much more deeply but uh liquidity is still the the biggest problem.

Um it probably is liquidity actually. Uh but uh I'll take a hot take and I say predictability I think like um which is probably the same. I think it sums up whatever we're trying what we're all trying talking about. Um a lot of these institutions they come on chain if they do anything in traditional finance they they generally have a very good understanding of what they're doing. Um but but on off-chain activity is not actually uh conducive for onchain activity and vice versa.

They don't know how to deal with atomic liquidity. They don't know how to deal with CCTP transfers or or uh bridging via like query based or OVT models. Um and so when they look at these things like um I think like definitely the biggest problem is like um if they get enter something they don't know exactly what they're getting into because of all this onchain risk. Um and I think one of the biggest things we can solve is like um walk in like a model of like a frame mental framework of predictability and um how do we produce a better outcome? Lending is a great example.

Uh August digital upshift is on Morpho. We're on Morpho. Um if you're trying to do lending on variable rate interest uh these guys it's very difficult for these guys to create leverage or um leverage their activity to constantly um um to get whatever the returns they want on their fund. Um fixed rate lending is a great example. We can actually start offering duration based yield um with actually um better interest rates for suppliers that um we can actually show like BTC, USBC borrow and offer something predictable um similar they do with prime brokerage rates um while actually offering a better solution for these guys that are kind of on chain kind of not that can then activate their USDC more easily rather than going via um a custodian or another party like that.

Yeah, you're explaining my day job for me. So

just to add real quick um completely agree with you about the predictability aspect and I think that is a major point for institutions to start to come in and start using D5 protocols a lot more but I think there's also a lot of doom and gloom around the space in general and if we kind of zoom out and we look at the fact that we are essentially trading billions of dollars of liquidity through through products that are retail grade. I don't think that that is so much of a hindrance as it is an opportunity for people in the space to continue to build and continue to bring in new liquidity into the market.

Yeah, that brings me perfectly into my next question. So, at Upshift, where I'm at, we started with the idea that we were going to most likely be serving all retail depositors. That's kind of what our vision was. And then we looked on chain and realized that 70% of our depositors of our LPs were actually institutions. Uh institutions in crypto is obviously a broad term but a lot of it was executions deploying into these curated strategies, but that's kind of changed how we look at risk and how we decide, you know, what vaults we're going to list, what kind of strategies we're offering.

So, I'm curious for you guys in each of your different areas of the market, how do you change your risk profile or how you view risk depending on if you're serving retail or institutional clients?

Well, I think the magic of permissionless systems is you don't have to draw a line, right? So, um we're building a retail investment platform, but if you want to come in and log in with your Anchorage, Bitcoinbased Prime account, you can. And so we don't necessarily have to draw that line. And I think that's also part of the permissionless permissionlessness of uh of building on chain, right? Like previously you had to be an accredited investor to access these things.

And now anybody for the most part can access these things.

Um for

Oh, sorry.

You're good. Yeah. I feel like I think we're building for retail institutions. Sometimes it's similar, sometimes it's different. Like um glad I think acknowledged that with KYC accounts.

Um, I think like you first have to think about the risk they're currently exposed to. Um, and uh, and it starts rather than looking at the actual like maybe tokenized asset itself. Um, it starts by actually looking at like what is how how does this activity work. Um, so like for example bridging um, uh, auto compounding yield and uh, various products like that I think is where you kind of start and then you you kind of bridge out there. than the risk profile.

And so first design products that solve that solution um is how you really manage uh all these different kinds of like um onchain risks and then from starting that framework um I think that's like where you kind of build from. We have our own infra as well era that actually does all this for users on various various of our products. Um and then from there you when you think about risk profile um it's really hard to differentiate uh when you look at something like a morpho or an era or a glider or an upshift what are these risk profiles you're doing and it's really about um designing very good education about what you're actually exposed to um and like um understanding like creating very strong terminology um for to help define these risk profiles um for example we made it up in a slack channel one day we called our vault prime core and frontier um to design risk profiles ironically a v4 now uses that exact terminology uh which is hilarious and um and uh so you kind of start by defining clear terms that everyone can start adopting and using. We see that now being added on Morpho and from there then you kind of just like um then you start actually um figure out clear ways to understand like okay we solved all the basic execution risk you're thinking about about this activity and then you kind of think about like from there it's it's really about um using the like the terminology to actually build that layer of trust. A lot of people are not going to look into that the details of what this terminology means.

But if they have something they they they understand as a core um as a core concept, it helps define from there where you how you can scale. So I can answer this question from the perspective of someone that is building and managing portfolios for clients in the digital asset space. And so DeFi for me has always uh it's always been uh concerned with how fast can we achieve uh you know whatever uh whatever we are doing uh with the D5 product. It's always been about velocity but now that we are kind of entering a new paradigm for cryptocurrencies in general. I believe uh real wealth creation is based off of durability and having stronger infrastructure and you know while while swaps and all of that it's great for narratives but uh portfolio management is more about how we are controlling draw downs and how we are planning on allocating liquidity and of course strategic rebalancing and you know there is a constant rotation uh in In crypto, people are always chasing the higher yield uh and always looking for the shiny new object.

But I think once we start to get the infrastructure a little bit more, a little bit stronger than what it already is, the opportunity will come on its own.

I want to add one thing to what John said. I'll take it a step further. So, um, yes, I think it's great to try to start to explain the risk levels of these vaults, but fact of the matter is, and I know Upshift and Gauntlet won't like to hear this, but fact of the matter is no one really cares. And so, when we offer things to our users in terms of lending, like the name Gauntlet, Upshift, Morpho, A, these things don't mean anything to users. And so, we actually just don't even mention it, right?

They want to know what the yield is, and that's what it is, right? Ultimately, users are looking for a better user experience. the vault infrastructure sits at the infrastructure layer. It's not important. It's not a brand name that actually is meaningful to users.

Um the other thing that we think about too is when you go to Morpho and you see the 37 volts that they have like how do you pick one, right? Like it's like I don't I know these curators by name. I've been in the industry for forever, right? And you just see the yields. Like it's honestly not the correct user experience that we're offering to people.

It's it's a buffet of options that uh you need to take an opinionated stance on on how to offer it.

Yeah. Go ahead.

Yeah. I think um I think it's better, but I think you're actually I I you're you're you're only talking about retail. You're talking about one distribution line and you're talking about u one platform they're going to with the institutions are here. Um distribution lines are here, fintexs are here.

Um the reality is they're going to be exposing their users to what they want and it matters to them. It's not a lot of the entrance of new new capital is not going to come into a protocol. It's going to come into a new distribution line and they're going to identify and create that for their user base naturally whether it's via retail app or whether it's via that this is already being decided on all these new distribution lines. Um that's like got to be very clear um because that's missing part of the point. I agree.

But I I would say again like when you're thinking about mainstream audience of things, the brand name of a of a morpho or any of these vault creators is incredibly commoditized across the space. It's it's hard to differentiate and actually make a meaningful difference in that.

S did you want to add anything? You look like your head's nodding.

Oh, no. I'm just enjoying I'm just enjoying the

I love when we go back and forth. It makes it a lot more fun here. Yeah. Uh I mean I think you guys are saying a lot of you know the same side of a different coin or a different side of the same coin rather where we tend to sit in our echo chambers especially when we view like these are the risks I'm tackling this is how we're going to approach it cuz these are my customers and you know I'm listening to funds all day long telling me one thing and this is what they want. But then I'm also trying to balance how do I maintain the risk parameters that make sense for my users because again when it is a permissionless protocol you are tailoring it to one subset of users however anyone can come your way right so you kind of have to have all of these things in the back of your mind and it's important to have a well-rounded picture

for sure I also think sorry I also think there's a big kind of fear that you know institutions are going to come in and kind of change everything up in DeFi I don't think that's the case. I think DeFi is going to force institutions to change the way they allocate for their clients. And capital, you know, doesn't doesn't move because uh because there's innovation. Uh capital generally moves based off of reliability and based off of structure. So, you know, as as he mentioned earlier, the predictability factor, the structure factor and all of that will definitely help uh institutional money to flow into DeFi more freely.

Yeah. So, I think all of this is a good segue into we kind of already touched on this, but you know, Morpho keeps coming up, right? That's the hottest place right now. Um, and so Morpho introduced these isolated markets and that created a whole host of complexities. You were kind of touching on this Brian Gauntlet.

You're a curator and you're an allocator, Scion. So, you know, when we're looking at now what we're building at Upshift as well, it's these curator managed vaults, right? So you're basically offloading the risk to someone and you're essentially trusting in them that they understand the risk for all of these morpho markets that they're going to allocate and rebalance accordingly. But how do you then actually look at those curators and assess the risk that you're giving them, right? Like how are you pricing that risk in, if you will?

Um, and we'll start with Gauntlet. I know you guys are major curators. We definitely put a lot of our funds in gauntlet markets. So would love to hear how you take that responsibility on. And then from you guys kind of how do you assess your curator risk?

Yeah, I think the future of a lot of DeFi will be curator based. Um when you're thinking about curators, uh I think in some way people think it's fully commoditized. Um but it's definitely not. Um the reality is who loses money and who doesn't. And there's a lot of curators, especially the last like two instances we've had on Morpho between usual and stream that have in fact lost money.

Um, and as you start thinking seeing how like the we're thinking about like when you're picking a curator, um, that's kind of our job. We do very strong diligence. We actively look at these things and we always make sure how do we keep funds safe at all cost. um you want carriers that are supplier focused have no interest on the borrower side and um in the sense of really trying to focus on bringing in borrowers rather than like they focus on protecting their suppliers and borrowers have to comply to that model. Um and when you think about curators it's kind of like who loses money, how do they perform on on rates um on a you know a 24 three month ninemonth average on whether it's blue chip or high yield exposure and then um what is their track record on scale u and that's really what matters with a curator.

Um, a lot of curators try to think people think it's easy. You'll be very surprised how many curators uh sit make a change once a week, every two weeks to the money you're putting in their vault rather than automating and changing these strategies. I've heard terrifying stories u of uh vault infras where it's um the curators aren't even curating. They're like handing to the vault infra like you can make three changes a week uh and that's like it or a month and it's it's insane. um we are like always so when you think about curator you're think about like you're you're you're trusting a brand of of these different track records um this will this will differentiate more and more over time um and it'll become less commoditized actually I think in a long long enough time frame um we look at black rockck different than we'd look at like a typical fund and then from there it's like I think to build on that is like um you know it's it's what the curio can offer from there it's uh you know um layers of strategies that are bigger than Morpho, that are bigger than restaking or whatever the curation meta is.

It's careful selection and trust and then having a full stack of resourcing to offer to whatever client or consumer you're looking for. To meet whatever need they want and that's how you kind of build vertical stacks that like target the distribution lines.

Yeah, I think everything John said is is entirely what we look at when we decide what we want to integrate into the platform to offer users, right? it does go to brand name. Um but um when we think about the broader audience of like regular people who have no idea what crypto is um unfortunately these names even like a don't mean anything. Um the one thing though that we are sort of maybe counter to to vault and how we think about things is that we've finally built Rails so that you can directly own your assets, right? And if you really want to directly own your assets, you shouldn't be putting them into either an ETF or a vault because likely they are extracting some form of fee.

they are some form of middleman. Now, if they are actively doing something really cool like which Gauntlet does, right, then it makes sense to pay them or have them take a fee from what they're actively doing. But to his point, like there are vault creators that don't do anything. And fact of the matter is you should directly own your assets because then you can lend them, stake them, participate in governance, claim air drops, like all of this stuff that they might be getting that you're not because you are in a vault that they're doing one rebalance a week. And that's like what are what are you paying them for, right?

It's like a wealth manager. And so direct ownership is really important, but um you know there are people who want other people to manage their money and it that's how the industry works. Um and so choosing your vault creator specifically for the reasons that he mentioned is is important. Yeah, I think uh you know just uh just based off of what John and Brian have said, you know, uh smart smart contracts are usually the headline risk, but again it is uh more we look at more of structural fragility in D5 protocols before where we are allocating for for our clients and um yeah.

Yeah, I think we have a lot of interesting points across the board. At the end of the day, Brian, you're kind of the curator of curators, right? So, you said earlier that you're not looking at brand names, but at the end of the day, you are the one that's looking at all those names. I mean, I think one thing we've taken very seriously at Upshift is having everything beyond chain. So, you can click on that vault, you can see all of the exposure for that vault.

We do have cross venue capabilities. So sometimes I think it's going to be really interesting for a market maker that's market making on Hyperlid for example. That's something you know maybe I'm not the best you know I'm not going to go make a lot of money shorting per I'm going to lose a lot of money. So I'm going to delegate my assets to someone else who knows how to do that. But I want to make sure that I can see that's what's happening.

Right? So there are pros and cons. And if they're just running a vanilla carry trade then just like go buy Athena, right? Um,

amen.

Yeah. Or don't. Um, but awesome. Now, I want to finish up on everyone's favorite topic, which is AI and automation. So, when we're talking about all of these risks, obviously not like what's the risk in AI, but how do we kind of offload some of this risk into AI?

Or rather, how are we automating things like rebalancing and actually executing your strategies outside of the vault meta? Um, so why don't we go the opposite direction? We can start with you.

So I don't think AI is going to be replacing people such as myself, such asset managers like myself. I think it replaces it it allows us to make decisions faster. I would say if anything, it it allows us to be more efficient. And uh you know everyone kind of jumps towards AI trading bots or autonomous agents. Uh but as an allocator it is more always always about the risk.

Um as long as you're protecting the downside and you are correlating drift detection uh then you know uh with along with uh liquidity fragility modeling and that as an ass asset allocator for me that is more important than uh any kind of changes that AI would be bringing into uh into the space.

Yeah, I think we've all seen many trading agent bots on on X and and various places. Um, you know, fact of the matter is there's no incentive alignment to ever share a trading bot that actually generates money with anybody else, right? Like that's a trading firm. I I've worked at a trading firm and trading firms spend massive amounts of resources protecting their alpha and how they execute trades. Um, so I would be very weary about giving money to an agent that is trading on your behalf because whoever created that agent, why aren't they using it?

Why aren't they putting their own money into it? And why would they share it with you? it doesn't make any sense. Um, so just sort of debunking that whole thing. When we think about like AI when it comes to managing wealth and and growing retail wealth, um, we think there's nice ways to proactively nudge users towards things.

Meaning like, hey, like um, last week people with your risk profile bought Ethereum and Bitcoin, like does that make sense to add to your allocation based on your risk preferences? Um, but things that are like LLMs are also really faulty because, and I can go on this about this forever, but when you use an LLM, you have to know what you want. And if you know what you want, you're not going to use the LLM. So, for example, like you're not going to type into a bot, tap me Bitcoin over the next seven days, you're going to go and click a button to to do it. Um, and so LLMs themselves are not great for trading.

They're great for research and like assistance, but in terms of execution, you know, there's so many problems with going from natural language to actual call data on chain accurately that then there's a layer of trust that also has to go into it that, you know, we internally don't think there's any product market fit in that. And many people have tried and they're nice gimmicks, but um yeah, we're not going to be doing that.

Uh let me walk you through a really fun example of how we leverage automation um in our curation. um yield bearing stable year ago. Um everyone was hot on uh every what keyword was allocating to grew more for hundreds of millions of dollars. Um it was a very exciting time uh last summer uh or 20 2024 I don't remember uh or spring 2025. Um but when this T- bill based stable coin that everyone is like how it can be risky to T bill um was exposing themselves to on morphalts we knew for a fact this T bill was not safe.

Um but we also saw a lot of rapid growth from curators allocating 50 60 $100 million to this market with very little liquidity on it to scale it. Um we were thinking all right we are risk curators we are risk managers and our job is to get good yield while also prioritizing suppliers at all cost. How we thought about it is um we looked at the overall size of this market like 100 million plus available liquidity. We also tracked we looked at this yield bearing stable and we tracked a million parameters of it and we said how do we automate this exit and design an allocation in a way where we can get yield while also making sure we can react in a second's notice if anything happens. Um this usual this company uh made an announcement and um loved the announcement that they they're uh they're uh it's not working out.

Um there's they're not honoring redemptions. It's a it's a big problem. We tracked the DEX liquidity, the redemption queue, everything related to the stable coin. And we also tracked the morph liquidity in that market. And as soon as a percentage of liquid liquidity on the DEX pool dropped, a certain amount of the redemption queue um orders were not filled.

And a certain percentage of liquidity in the morph market was um passed a certain parameter we set up. We are automatically out of that market. It took us one hour. Every other curator the day after woke up, freaked out. We were sitting on our butts.

We woke up in the morning like, "Oh, that happened. Cool." We already knew it was fully automated and um every other carer now claims they were now exposed to this um had $80 million stuck, a $300 million stuck, $70 million stuck and they all would have been gone if that company did not come in and start liquidating the markets themselves. Um we automate everything as that we can. We make it we take our suppliers our supplier capital very very carefully.

We want to keep users safe at all cost.

All right, thank you guys so much. We are past time, but I'm sure if you have any questions, you can meet all the panelists out over there. So, thank you guys so much for joining me. Thank you guys for listening and hope you enjoy the rest of Denver. All right.

We've heard many a talks about institutional adoption and agents taking over everything, but humans are still here and we're still using DeFi. and we have Dean Trible to talk about the importance of UX in D5. Here you go.

Thank you. Thank you for having me. Uh, can people hear me? Yes. Okay, I can hear me now.

Um, so I'm going to here to talk about getting yield from everywhere, not just for agents but also for humans. Let's start with what people have been having to do, right? Meet the DeFi tiger, right? They've got maybe even a million dollars. They're doing this on an ongoing basis.

They've been doing it for years. They are not a beginner. But it is so difficult to execute many of the kinds of things people want to be able to do that they will see yield opportunities and not be able to get to them. The friction inherent in these systems are very difficult because they have to stitch together their own manual tools with all their bridging efforts and etc. And as they're doing that they get interrupted leading to delays, security losses, etc.

But with the downturn right in this in this bare market, you know, that chaos of of high-flying DeFi yields has been uh more scary than usual, but stable coin yields and the stable coin deployment has barely has barely seen the bare market. And the question is, are you holding stable coins? Are you getting yield on stable coins? And to do that, are you having to babysit your stable coins? Right?

The process of taking advantage of these thousand plus vaults out there that have different strategies for getting you yield on your stable coin is you have to withdraw from one, sign a transaction, wait 15 minutes, bridge it to another chain, wait 15 minutes, deploy it into a transaction, deploy it into, you know, beefy compound a um uh morpho, etc. And you know, you're waiting, you're waiting, go get coffee, come back. Okay, now it's done. But it is fraught with with potential for interruption, potential for loss, and a lot of uh challenge of time that you have to spend in order to make that happen. So really what you want is what people have talked about of much like intents.

You want to be able to express, I've got money. I want it out there in those vaults. make it happen. Of course, that requires currently a miracle, but the end game that you want is I've got the money. Deploy it where it ends up on, and you can barely read there, in Morpho on a on on arbitrum or compound on base or a on mainnet or beefy somewhere else, right?

You want a deployment that takes advantage of vaults independent of where they're at. And as the market changes, you want to quickly be able to adapt to that new situation without having to tediously, manually, and riskily reallocate your capital. So that intermediate miracle is what YMAX is here to provide, right? It does single signature deployment, management, execution of your capital and execution of your strategy on chain. It uses AI co-pilots to assist you in picking uh picking opportunities and of course deploying them efficiently.

And it's non-custodial by design. So it remains your coin. It's not accidentally custodied someplace that you didn't expect. And so I'll show a demo of this. Now this was done recorded uh recently on a portfolio.

We just launched early access which we'll talk about. But here I'm connecting to EVM wallet on whatever chain my money happens to be. I'm going to pick some vaults that I would like independent of what chain they happen to be on. Right? So I'll pick a and morpho and compound and we'll be steadily adding these things.

Now I have my selections and I can just manually move those sliders or balance them evenly or enter a number to say here's the allocation I want. And then I go through, you know, oh well I have to add some money. So great, I'll put in 100 bucks and then say go and that's my this is my intent. Allocate a hundred bucks that I'm giving you to these funds, right? Sign it brings up MetaMask or uh Rabby or whatever it is and and triggers it.

Now we could we could wait for the you know the the time on the block to make that happen, but where you end up with is this. And this account is out there. You could look at it. Um, and up at the top you can see it started the process of executing this. Ethereum is slow.

Base is slow. It will take 20 minutes for them to finish. But it doesn't have to take your 20 minutes. What happens is behind the scenes the smart contract of YAX created a strategy a plan for how it was going was going to accomplish that intent that you provided it and onchain it executed those steps whereas each of them completed it animated and you'd see that happen here and as it completes you can even follow the link to arbitrum scan or ether scan or what have you in order to see the transaction as it happened in order to see your money being deployed into accounts that this contract created on your behalf on all of those other chains. And so what that means is from the one place that your wallet happened, you could create the portfolio and control it from there.

And the assets, they can be anywhere you want getting yield from everywhere. And you know, so now it's deployed, you can dig further. There's the AI co-pilot that lets you dig into the risks, dig into options, ask about what's coming, analyze your performance over time, and as the market changes, look at new opportunities. So, let's let's look at some of that, right? That new opportunities, right?

The market does change. the awesome vault this week that someone comes up with a new strategy next week or adds uh automated compounding on that extra strategy or whatever it is, you want to be able to move easily. And that's the place where having a tool that does all of this execution for you on chain is absolutely critical where you can discover new opportunities assisted by the AI that knows your positions that knows your strategies. you can easily add or rebalance things and each one of those actions you take is a single signature no matter how many funds we're going to oper uh manipulate on your behalf. Okay.

And so if I Yeah. So the optimization piece the way that shows up is over time you offchain agents detect AI agents detect opportunities that for that match what you've got in your portfolio because they have access to that information and they propose them. Oh, so it so it does one click to say, you know, hey, you could move some of your money from a to arbitum. One click and it happens. I just have to confirm it and I'm off to the races.

And again, behind the scenes, it will go through that activity. You're off to have coffee. It's off to make you more money. And so an example of what would happen is, you know, here is a sort of a summary when this first started working some time ago, right, of a portfolio. It's got eight positions spread across three chains, one signature, and it was all done in three minutes where it could reach out from the contract across highly reliable bridges to pull out funds, deploy them into new positions, move them among chains and all those things that you currently have to do by hand and instead it just does it.

Okay, so what's our road map look like? Right, we've got stable coin yield op yield orchestration now informed by and improved by AI underneath. We will be extending that with continuous asset expansion. You know, beefy for example is in alpha. We will be we will be adding the agent automation.

So you can add more of your own agents. You can add more strategies. You can subscribe to more automation strategies and things that end up letting you do adaptive rebalancing based on market sentiment uh changes in APIs, your history, new opportunities available, etc. And that moves into additional information integrated in and integrated in both available on the AI advisory side and the uh or the AI tooling side and the uh application itself to be able to do um riskbased management, AI integration, MCP integration, etc. So that's where we're going.

Um but the tool right now is pretty awesome. During ETH Denver where the booth is right over there um in this nice relaxing teal, right? you know, stress less, uh, yield more where you can, if you create a portfolio of $50 and keep it there for 30 days, uh, we'll add $25 to the end of it. So, it's pretty much the only guaranteed yield you're going to get this this week. Uh, but it's good yield.

So, go create a portfolio, um, and give us feedback and we'll add the things that you need for this. So, thank you very much for your time and for, um, look forward to seeing you online. Good.

I absolutely do.

I talk fast. I was hoping for that.

Yeah, you got you got through through your presentation pretty fast. We have some time for questions. Does anybody have DeFi questions or UX questions or comments or suggestions? Anything?

Well, if you pop up the uh thing, I can show the the uh activity, but no, it's fine. Oh, they popped up the activity.

So, I mentioned you could see all the activity, right? This is the thing that that proceeds through and gives you access to everything that's going on. If I uh were to go to one of these things and check it out, you know, you can see, you know, if you really want to get down to the nitty-gritty and see exactly what happened, you can. And behind the scenes, um, what this thing does is when you sign your, uh, intent, it creates accounts on your behalf controlled by the portfolio on all those other chains. So if you, you know, funded it from Ethereum and said, I went into an arbitrum pool, it makes an Ethereum account, it makes an arbitum account, pulls your money in, distributes it, deploys it into a or compound or what have you, and and holds it on your behalf.

When you say reallocate, it will do the withdrawals, the transfers, the deposits, the autoco compounding, etc. So, we're very happy with this. People have been playing with it to be able to go into a portfolio. Whoops. And uh just edit the portfolio by saying, "Yeah, I want less of that.

I want a little bit more of that. Um let's bring that up." You know, review those changes. make that happen, right? And at that point, suddenly I've got a new vault added to my portfolio on another chain and I'm good to go.

So anyway, thank you all for your time and if there any have no more questions, you can join us over there if you have question. Oh, you have a question? Yes, sir. So the qu the question is when he deposits where does the money go to? So when you do a when you do an account creation cancel out of here you sign a permit that YAX can take your money and deploy it.

So if you do that on let's say your money is on arbitum you sign your transaction on arbitum saying hey add this yax will take that that authorization create an account on ar ar ar ar ar ar ar ar ar ar ar ar ar ar ar ar ar ar ar ar arbitum that it controls and let's say you were depositing on base it'll create account on base those will happen to have the same address. It will pull money from that you said it could take into the arbitum account and then deposit it across. So if you're and then issue once that's happened it'll issue the instruction where from the arbitum account put it into into a and from the base account put it into compound or whatever you're doing and so the money goes from your account to an account on those chains that the portfolio that the YAX portfolio contract is controlling on your behalf. Your key your original key controls your portfolio through the through YAX. So if you say do a withdraw, it will pull from those subsidiary accounts, move it back to the account that you originally deposited into.

So it is um it it is always controlled by you. So your custody, but it will be in a subsidiary account in your portfolio via the YAX contract and and it is possible to withdraw those funds with no operation of off-chain services at all. You can you can withdraw it, you know, in the event that you know any YAX Oracle integration or any of that if that's all gone, you can still pull your money out. It's your money. So the question was from the accounts that we created does he still have the authority to withdraw from those accounts?

The answer is yes. However, they are not EOA accounts. They are not accounts with a private key behind them. They are smart contract or a smart wallet accounts that are controlled by the YAX portfolio contract that it's controlled by you. And so it is indirect, but there's no there's nothing that I, my company, a third party, an oracle or anyone can do to prevent you from withdrawing.

So you have you have access through the YAX contract to those smart wallets that are created on your behalf. There's no co-mingling of funds. So it is a smart wallet for your portfolio that you can pull from. Yeah, exactly. So that you can onchain, if I go up here, this uh this has the accounts for this contract.

This is showing what accounts did it create as subsidiaries for your portfolio. And so you can go onchain and see, you know, by gosh, what does OP scanner tell me is my current balance of USDC in this account. And I can't focus at this level. Uh, it got pulled. I don't know what I'll have to dig in, but you can you can dig in and find where the USDC is.

Um, and what transactions happened in order to satisfy your deployment. Any other questions? Thank you very much. We take, you know, of course, users custody of their assets very seriously. That's one of the critical elements of this.

And indeed, if you look at some of these other systems out there for doing yield optimization, what have you, what they actually have is an off-chain Amazon cloud service that has the keys. And so if that's gone, if that uh trusted execution environment is gone, now there's no blockchain on the planet that can return you your funds. And so from a from a system point of view, the ability to have everything really be relying on onchain custody is an amazing and important security step. So right, thank you all. Is it good?

All right, we're ready for our next speaker. We all know Dexes. We all know centralized exchanges, but here Leila Mchurik is going to introduce us to a whole new concept. Welcome, Leila.

Thank you. Thank you so much. Hello everyone. I'm really happy to be here uh with you and thank you for uh joining me at East Denver. So I'm Leila Msharek, ecosystem partnership lead in Bidgate and today we will discuss about how the future of digital asset is transforming So let me walk through you uh uh about how we are transforming from trading platform to a whole broader ecosystem web3.

First uh bitgate wallet. Bitgate wallet is our gateway for everyday uh onchain transaction with over 90 million user. It's secure uh uh safe and custodial uh onchain operation uh like earning spending and trading and this is with all the control of the whole asset in the hand of the users. Second, morph. Morph is our uh layer 2 blockchain initiative which will support uh payment onchain payment and with BGB as a native token uh it helps to ensure fast and very efficient uh onchain uh payment and also uh stable coin real world stable coin application.

Also from uh the innovative side we have uh get EI which is a tool uh which help to uh define the trading strategy through EI powered solution and which will make easier uh decision making for your whole strategy of trading. In Bidgate uh uh we launched uh Gracie EI which is the first uh digital human uh interactive uh EI in crypto and this uh digital human uh AI will support user through their journey uh in different market cycle and also it will support them to define the trading strategy with very intelligent and smart tools uh which will uh uh analyze their trading uh history. So this is from the product side. Now uh if we speak about uh the human side in bitgate also we uh invest on the human as the key catalyst for the future. So we have different initiative.

One of the initiative is blockchain for youth which is uh mostly for young generation. We committed $10 million over the five uh years to support education to support uh uh partnership uh university partnership and also uh developers program. In addition, we have also blockchain for her and this is mostly for women and for female. We support women and we would like to have uh women leaders in the crypto space and we are building now the next pipeline of the future talent uh of women. And finally, UNICEF.

We have also a partnership with UNICEF and we uh we will provide education and also digital skills for over 1 million learners for the uh over uh by 2027. So here as you see all these initiatives reflects our strategy to build a global uh ecosystem across infrastructure, across AI, across education and also social impact which will uh help to accelerate uh crypto adoption. Okay. Now I would like to check who uh today uh check his wallet trust wallet or perhaps Coinbase wallet. Yes, you.

You either you check AI as well. Okay. Some of you I guess also they have stock or forex. So they use I imagine it Toro or uh or um any other application for gold. So here um all of you also me uh we usually try to go to different application and to check our asset but the issue is we don't have the full visibility in one centralized place and this is the problem that UX is resolving.

Okay so what does it mean UX? UX is a solution and the narrative which cames through integrating all the tradable asset in one place. Uh either we have forex or gold or ETF or stocks or crypto. We will consolidate everything in one centralized solution which we call UX. So here we will not ask you to choose but in beadgate we build and develop this solution to meet your expectation.

Okay. So, let me go through the different mainstream of the UX. First, as I said earlier, it's a comprehensive asset coverage, which means either you have tradeify, defy, uh centralized exchange. You will get access for all real world asset led by forex in one place for crypto user and also vice versa. crypto user will get access to uh gold in the same platform.

So uh this is uh the main uh the main and global uh solution for the asset coverage but also in parallel we have a second solution which is bitgate onchain uh bitgate onchain. So bidgate onchain will allow you the access to millions of token usually they are uh uh supported in different chain either on dex or on coex and this token will be used uh in one place and you can also get uh get access to your uh bitget wallet and bitgate uh account to fund and to trade any token. So I really invite you to check it's million of tokens either between onchain or spot also third uh I spoke also earlier about uh ei is not just a simple tool of a data summary of market but here we developed a very uh smart tool which will analyze all your crypto history then we'll check also your risk profile and also the token uh a a location of your profile and then it will define with you a long-term strategy of trading. Finally, security, but I will go also deeper later. Security is the DNA of uh our solution.

We build all these blocks on very high level standard of security. One of the most important uh aspect in bidgate is to ensure the full safety of your fans. So uh UX solution is a hybrid model between onchain and offchain custody uh to avoid any risk of hack or any security risk. We developed very smart and intelligent tools which will uh detect any token uh concentration and also any rag pool risk and for that uh our main goal is really to ensure extremely high level security stundal and we don't compromise on that because the user are our first uh first uh um security of the user fans are our first goal in bget. Um so we go through all the different aspect of uh our uh journey between developing different solution and we always say in different culture that life is a long uh a long journey and this is what we also build in bidgate.

So it's really a marathon. We try to build a really enhanced solution, secure solution which will meet your uh expectation but in very panin and sustainable way and this is uh one of our slogan uh user first and safety first and I think also um all of you here are contributing in uh our crypto and web3 ecosystem each one in his way and our goal in bidgate is really to provide uh the test and enhanced secure solution for the user and also uh support for the crypto adoption and accelerate crypto adoption globally all over the world. Thank you so much. Thank you. Thank you so much Leila.

Great job. All right, we are ready for our final speaker of the day. Welcome Fig, the founder of Squid, and he's going to be talking about the powers of decentralization and centralization converging. Welcome, Fig.

Hello everyone. Thank you. Um, yeah, very excited to be here. My name is Fig. I'm a co-founder of a project called Squid and we are an API and a UI that allows you to swap tens of thousands of tokens across about a 100 chains.

So crosschain bridge swapping. Um we work with hundreds of projects and about six billion in volume. But I'm here to talk about the path of DeFi from 2020 all through today and um the patterns that I've noticed in how builders are are working with DeFi and the tools. So wind back to 2020. Everyone's in co at home and a whole generation of nerds including myself are sniped into this dream of DeFi.

It's completely free markets. Um a global layer for for finance. Um everything's transparent. systemwide leverage is clear clearly visible and people can build modules for finance which other developers can permissionlessly bring into their apps. Um Vitalik is saying that everyone will have an Ethereum account and it'll be the world computer for your access to everything in finance.

Um unis swap and ave were the spearheads of D5 summer. So unis swap v2 especially allowed you to create uh permissionlessly any market and ave is a lending protocol. These were extremely successful because of the UX. It was just so simple to make a new market. It was really simple to buy things as well.

You didn't need to go through KYC or open a bank account. It was just log in with an internet connection and you're off. They were also really successful because of tax. Um I think a lot of people were avoiding tax. There was a lot of money laundering.

North Korea's everywhere. Um, used by a lot of sanctioned countries as well. And I think that's why DeFi was so successful early on. And then you have all of this liquidity coming in in co from the money printing that made everyone rich. And that incentive brought people on chain.

That got everyone excited that this was the future of finance. But over the next couple years, it became clear that this wasn't going to replace TroutFi. like DeFi wasn't able to replace, you know, a full-fledged private bank or um you know, the stock New York Stock Exchange. Um we needed we're going to need to arrive at a a compromise between the two. Um North Korea has probably stolen I don't know where they're at right now, might be up to 10 billion or something of of dollars.

So security is really bad with smart contracts because you have everything public. It's like you're giving your code for someone to break if they want to. Um, the immutable nature of things means that when money's stolen, you can't get it back. Um, the user experience, while it was really good with unis swap, once you started getting more complicated, it was it just broke down completely. Um, bringing your MetaMask wallet to different apps on Ethereum and trying to work out how each new app worked and then having to go to another chain.

That's where Squid originally started was because going to new chains was actually really difficult. going to new chain was extremely uh complex and confusing. So the UX broke down. People got tired of this like um you know the speculation that was bringing people to DeFi. And then also we found that because tokens couldn't act as equities.

The incentives were all wrong. All the DeFi builders couldn't actually raise money into a good investment product. They'd have to release these tokens that were essentially useless. And then all the valuations have gone down over the last few years. And yeah, it's been terrible for the industry.

So there's all these sort of headwinds we've been going up against. Um, but we solved them with a kind of regulatory arbitrage. roll-ups came along and Ethereum was getting really expensive, really slow and it had this but it had this legal precedent where it was able to run this financial computer where people were holding assets, trading, doing all these things which usually really tightly regulated without any like licenses all over the world and rollups came along and they were like we can also get this legal precedent across to our technology but we didn't need any of the decentralization. So they they built I won't go into the details but essentially we solved the speed and um scaling issues of Ethereum through a kind of regulatory arbitrage and then intent did the same thing for unis swap. So instead of having to combine lots of different smart contracts on say different chains or on Ethereum, you could use this thing called an intent which is essentially a bridge between offchain on one side which can do a lot of complex things really cheaply into onchain which does the settlement of the assets at the end of the day.

So intents allow you to essentially run a centralized um do do the same things as a centralized tra traditional finance company but then you uh since the it's quite permissionless and self-custodial you just limit the blockchain uh to only do the movement of tokens between the different parties. Um and this actually worked really well. Um generally there's been a pivot to this deregulated finance where as much as possible is moved off chain and we keep just the things which are needed for regulation and for self-custody on chain. Um so we get the best of both worlds. Speed compliance agreements were also an interesting thing because we found that you know a lot of credit you actually need trust in the other person.

It's not just a numbers game. You actually need to know the their business or what they make. So a lot of that sort of soft social layer of finance um needed a way of coming on chain and intents do that um really nicely and onchain kept self-custody. Um the Ethereum account model also didn't work very well. Um I went into that before but it's been solved essentially by bringing the modularity into the developer layer.

So instead of a user taking their account to different apps and trying to sort of work out their own modularity, developers can integrate everything really nicely, put a lending protocol, a swap protocol, like whatever they want into one product, package it up, and the user logs in with Google and it feels a lot like web 2, but it still has the best of that self-custo self-custodial model. It's got the global access. And same with institutions, they want full control of their custody. So you building like integrated products works really well for them. Um and yeah, chains stay doing just what they're good at, which is being accessible 24/7.

Um you can issue anything. Anyone can issue a token on them. Everyone in the world can access them and they're quite secure. And then if you put all of these together, you get an exit hatch, which is this was part of the original dream. If you can exit from the system, um, then it makes it a lot harder to gatekeep.

I used to work in traditional finance and I saw just layers and layers and layers of fees being taken and not much value being added. And that's because you can gatekeep in traditional finance with you have this sort of um no transparency and no way of your customers actually being able to leave and go with someone who offers a better product than you. So, we've kept that so far. And I'm really bullish on um on DeFi because of this. Also, we need to um we need to work with the suits to be able to make DeFi successful.

So, I've uh I've got my first suit last year for my sister's wedding, but I might have to use it a bit more in business. Um and so, traditional finance players are actually really really skillful. Like, there's hundreds of years of of skills and they're amazing at what they do. So being able to use a lot of what they've built in crypto is uh I think a really good thing. A lot of yield products especially I think are interesting when you you bring them on chain via a real world asset uh and make them accessible to everyone all over the world but the yield is actually coming from something which is more real like coming from a crowdf player.

So I think that's something that you know DeFi is going to be amazing for giving someone in a country where they usually don't have access to good finance access to these products. Um and I've been chatting with institutions all week actually and the two main things they say about crypto are the 24/7 settlement is um going to make everything a lot more capital efficient and things will come on chain for that reason. Um and then the global access as well is the other one. Um, we need to watch out for though, the gatekeeping might start happening. I've already seen a lot of asset issuers that have mint and burn control on their assets, circle included, once you pass a pass a certain threshold, they can charge essentially whatever they want to for you to have to mint and burn the assets.

So, that could get out of hand. And I'm Yeah, I don't want to be part of a system where only a few players can essentially control the in-n-out flows of money. Um, and then we've also seen self- custody is coming under threat still. Mika is doing a lot against it. Thankfully in the US it's not too bad but we need to watch out to keep self custody.

Um, so this is where we're at at the moment. I think we've got uh speed, cost, UX, business logic all offchain and then we keep the global access and censorship resistance onchain uh decentralized and that all comes together really nicely in these neo banks which everyone's building now but I think that's just the honestly table stakes you should have a wallet access to assets um access to like global investments you can open an account without uh KYC and um yeah these Companies like Xtox on domorpho they're bringing good offchain products onchain and accessible for these these users of the neo banks we did this with a company called mini who have I think 12 million users worldwide often in you know South America Africa Southeast Asia people usually don't have access to any good investment products and we gave them access to gold investing for the first time ever um they don't have to open an account they have to they don't have to buy a minimum of $50, which for them might be a huge amount of money. They can buy $10 or even 10 cents. Um, and it's available in their time zones. Uh, this has been really successful actually.

And yeah, generally Squid, we work with a bunch of these teams, hundreds of uh, businesses to allow them to swap to and from about 20,000 tokens on our API across crypto. And I think the most exciting thing about the next year, we'll be seeing all these RWAs come on chain and our one API can will be essentially more powerful than like New York Stock Exchange or the you know London Stock Exchange or China hopefully one day. So if we can get everything all in one API for every user in the world. Um yeah, I'd love to see that. So yeah, not as all not all is lost.

Um, we've got onchain settlements still going strong and I think the original de dream is dead, but the deregulated finance dream is is well and truly alive. Tons of adoption from the biggest financial institutions in the world and um yeah, thanks for listening. This is can follow us on Twitter and yep, have a good fight back.