ETHDay - DeFi surfing the highs & lows - Julien Bouteloup, Alex Vinyas & Jeremy Musighi

would you like to go first yes so i'm alex vinas i work for cow shop and i do marketing and communications there and as you know cow shop is the best dex exchange to trade with me protection so if you haven't tried it out make sure you do at cal shop dot exchange yeah i'm julian butler i'm involved in a few different projects curve of finance to market maker stake dao the central exchange for strategies rect that news deep investigations yeah and uh and state capital which is uh algorithmic quantitative algorithmic trading firm and investment cool blackpool well thanks a lot guys for being here and we're going to be chatting about d5 surfing the highs and lows so the first question here is obviously in in 2021 there was d5 summer right or was that 2020 actually 2020 yeah missed a year there was d5 somewhere and now nfts have kind of really taken the limelight so what do you think is next for d5 and kind of how to get that limelight back i mean i think in general d5 i think crypto markets in general are very narrative driven um there's a at different moments there's a different narrative that kind of catches on and kind of becomes the pervasive um story that uh you know catches everyone's attention and leads to certain sectors of the market really uh taking off so defy summer is a great example i think defy summer was a moment where for the first time a lot of people realized like you know there is a lot of value here and there's um you know this this thing is going to be the future financial system and protocols are yeah not only promising conceptually but they're actually generating significant uh revenues to show for it so um and you know you've seen that happen with metaverse assets towards the end of last year nfts have been on an amazing run and i mean it's hard to predict like where the narrative kind of finds itself i think it's an organic process that you know maybe can be driven intentionally by certain certain people who are really good at building narratives but at the end of the day it's the market that that has to agree and and kind of go along for the ride um i think um for example like if you look at rect.news we're seeing an emerging activity on the uh bridging like cross layers and the the fact that multiple different chains will operate between each other and and what i believe this year what we see more and more is um like real financial products coming from traditional uh finance but like sophisticated financial products what we've seen so far in defy are not they're not really i mean they the the good but not so rocket science in the sense that okay auto market maker is the fact of automating market making but you still have a lot of different this financial products like uh bonds like swaps and all the different things that are very complex that will appear in the decentralized finance the reason for that is because the market is getting more mature and the products and features are easily you can easily build those products and that's the reason why we'll see more and more complex product coming in defy but stuff that actually doesn't exist in traditional finance and i think we'll see like new product new ideas that never they were not able to to happen in in a in a financial and financial market yes so touching on what jeremy said i think because we know that the two narratives that have worked so far are they defy summer and the kind of nfts and also adding on what julian said in my opinion the next thing we'll see is the the marriage between nfts and defy which in essence allow like the sophistication of financial products because i feel like there is nothing better than one nft to actually trade on on a specific financial product like this will allow like two different like exchange venues to trade bonds swaps derivatives that at at this moment in time we kind of have but they're still very tricky but if we allow like similar to like lp positions you know that people are able to actually like trade the the contract itself without actually having to move the the capital that is deployed on that on that position or whatever it will be like the next the next thing my opinion cool if i can follow up yeah just i think julian made a great point about bridging there's a lot of energy right now around cross chain bridging but at the same time there's a lot of like security immaturity in that space there's been some some you know the wormhole hack which i think was the biggest one there was also an issue with ronin recently and their bridge so i think that probably uh when the market can be convinced that bridges are sufficiently secure then that that will probably be a very strong moment for that for that narrative to really take off yeah do you think that's one of like the big limitations to the industry at the moment given that there's lots of hacks and stuff that kind of go on it kind of puts people off how do you see that as builders in the space well i mean i think that that's a big deterrent for a lot of people from um using bridges and being more active on cross chain that doesn't mean that that people aren't still aping in like they are but i think that um it's definitely to me a barrier to kind of yeah move significant assets like across these bridges that haven't proven to be like totally secure yet i'm actually the opposite i don't actually stop people from using bridges we've seen it across many different projects uh people are not scared of using bridges because apparently they feel like it's it's very short so they don't actually they don't feel like it's going to be hacked in the time that they're actually using the bridge which is very funny uh but bridges are not stopping people from from from crossing assets right now the vulnerability are attached to those bridges for me i think more than the bridge itself acting as a stopper is more in general the cost of having to transact with the bridge that's stopping people because in essence we have all these new other chains that have been born like i don't know in the past year or past two years they're very cheap but mainly like the good chunk of the liquidity is still on ethereum so therefore it's still relatively expensive to move one thing you know from one chain to another yeah and also i guess the added layer of complexity like i think where d5 came from it was pretty complex when it started and obviously i don't know where you see kind of the vision of how easy d5 should be in the future but do you think we're like almost there of it being really easy to use or halfway kind of where do you think we're on that spectrum at the moment yeah i think coming back to your first question i think the idea about defy and what we're moving into and potentially maybe this year is the fact of using blockchain tokens nfts would actually knowing you're using blockchain nfts or tokens at the end of the day you want to use an application without understanding the technical aspect behind this application it's like every day you use internet without knowing or you send email without any smtp and all different protocols that's exactly what the space is moving into like what i call layer three layer three is very focused on utility very focused on providing the the the interesting value of the feature and that's the reason why 2017 that was the ico boom people building landing page raising billions or millions of u.s dollars and now like 2022 you don't see those guys because building a landing page and raising a lot of millions it's not possible because the space matured the same with nfts nfts was jpeg simple images simple like uh yeah designs raising a lot of money but now if you look at the market openc and all the people doing nfts it's now actually difficult to raise money by just building a simple nfts because the space matured it will be the same so now this year hopefully in a hub we'll see more and more products i mean like twitter like application that people are using daily that will use this technology and the the underlying concept of defy without the user realizing they're actually using it and that will be the true defined vision i strongly agree with that i think that the protocols that are sort of popular in d5 today mostly will be more in the background in the future i don't think that like they really are best served as being like end user facing technologies i think i mean and that's i'm definitely speaking from a balancer perspective i think balancer really sees itself acting as this infrastructural piece for defy and and like not trying to be the ones that um you know develop the best end user experience we want to be the ones who develop the best hardcore tech behind that and and being the best at providing the tools and the the platform for uh others to to to take that and to develop on it and to build those applications and those experiences and i think i i think the future of d5 is not that like you know everyone is going to use balancer and curve and uniswap and cow suave and i think that like well i don't want to speak for calisthenics maybe everyone is going to but for the for the music [Laughter] but i think most more likely you know they're going to be indirectly using all these protocols through other applications that are sort of closer to the user yeah so for me i mean realistically speaking i think we're still like far away from a lot of adoption but i i do think like julian and jeremy that the next wave is like facilitating this new wave of people to actually use this this technology without without i don't want to say without realizing but without having to realize all the technical details of it and and at least that's what we're trying to work at at cow shop which in essence is we want to abstract the user from from all these complexities of what is the correct gas price for me settling this transaction what is the occurring new hot d5 trading venue for this type of pool is and and it all comes tied to this professionalization that we talk in the beginning hey like you just need to know that you want to trade asset a for for asset b then let the i don't want to say experts but let the people that actually have business built around this deal with it for you yeah thanks a lot for sharing i think that's ultimately where the space is is going right it's all about banking the unbanked that's kind of where what defy was invented for and bitcoin at that matter um then there's kind of this new conversation around permissioned d5 and the idea of kyc and um you know doing attestations on wallets or even adhering to the sanction lists for d5 protocols what are your thoughts on this topic and how that fits into the future of d5 it's definitely a taboo topic but in in my opinion as as as long as the people that are forcing more permission defy with at the stations which is i don't know i guess the the normal world the real world as long as they accept the fact that those funds are going to be mixed with real unknown users funds then it's fine because if we if we're all here to truly build an open space for anyone to build whatever then like even someone that is trying to do like a permission system should be allowed we should be allowed to to build it that said if if i think the thing to take care of or to be vigilant is if this permission people push more the narrative and take over the fact that no one can really have like an unknown funds then i i hope there is trouble and i hope there's backlash from from the community yeah i completely agree with that it's an open space freedom of building whatever you want but at the end of the day for example state capital we are um a liquidator on ave uh arc the liquidity for where you have traditional financial uh players that provide liquidity and between each other they can borrow um well the thing is like if they start playing and start using permission like um tools and like like such a ivy ark and then they in a couple years they realized that their rate is lower than if they use uh permission less or like ether mainnet and all different protocol like where they have access to the entire liquidity worldwide without borders well i think it's still good it's very good because then they realize that they're missing a huge opportunity but for them to realize this opportunity they first need to put a foot inside this space and as soon as like slowly virtually uh traditional market we realized that it's a massive opportunity for them rather than being something that they will lose money for them they will make more money and it's to us to teach them that it's easy to use it's for good and obviously you still have some people worldwide that will try to use those tools in a very bad way but then regulation still need to tap and investigate but at the end of the day we'll still all need to play in the same room because it's beneficial for home yeah yeah i agree i think that the long term future of d5 is permissionless i think that there's an adoption curve for getting there and i think that permission defy can be a useful milestone uh along the way uh or stepping stone along the way there are a lot of institutions today that are you know you have your early adopters you have individuals who jump right into permissionless d5 but then you also have others mainly like large institutions that are highly regulated they're not ready to fully dive in to permissionless d5 they kind of need to take a first step and i i don't know how long that will that will uh last i i'm not here to like give predictions but i think that eventually um it will lead to lead to sort of a merge into the permissionless world and um i think that like just one other interesting thing that just popped up into my into my mind on this is um okay so institutions will continue to change as well right like financial system is changing d5 is growing right so the institutions of today that are structured in the way that they are that are very limited in the decisions that they can make and the types of investments that they can get involved with right they are changing too there are new types of institutions being born there are more d5 native institutions being born the this value of this space is going to grow so much that those institutions will probably be the most successful institutions of the sort of next era that is ahead of us and those institutions do not have these limitations right and they will be using permissionless tools so i think that like either way that you look at it that's how i see the future playing out i think the institutions that can't get involved today will sort of find more avenues to to get more directly involved and i think that also the types of institutions that will be leading the space can look very different in the future that's fair and would you say like as as builders in the space who have kind of spent a lot of time obviously building the products that you're working on as as the audience of devconnect is ultimately a lot of builders as well a lot of developers who are looking like are there any kind of opportunities in the space or problems that you've seen that you either think need to be solved now or future problems that you think might need to be solved that's a that's a curvable question right there honestly i think like the question like are there opportunities in this space for developers like is a comedic question you know like because there is like an insane amount of opportunities for developers in this space like not only does the does every project is um in need of development uh help and and talent and and hunting and competing for it but if you're more entrepreneur entrepreneurial minded or you know you have an idea that you want to build i don't think it i think it's never been easier to access capital to fund your project there's a lot of demand a lot of appetite um for investing in in early stage uh projects um and i actually got like so caught on this first part of your question that i don't even remember what the rest was are there any problems in particular that you wish could be solved i'm i would say making the learning curve faster for people that that are that wanting to join because i feel like we've kind of like tried out a lot of new developers that are coming because mainly like all the here is just like speculative topics around it and i feel if there was like an easier learning curve and more topics to divulge around then maybe like it could work as a bait for more people to like get interested and attracted to the space well i think the biggest one is the legal framework that's that's a no-brainer how can you and also like in europe at the moment is like how can you operate uh defy company or building defy space in blockchain space and uh and and not be under uh erect uh process so yeah i think if europe uh it can be like a huge lobby worldwide and and fortify in blockchain in order for us to build and and not think about uh too much about legal i think that's the biggest thing that this space can build right now for builders to actually prosper and concentrate on changing the world and yeah as mentioned educations making tools uh easy for others to build i can see like many projects in the room like a star turn here that are building platforms and tools that can help builders to facilitate inboarding from web 2 to web3 uh super easy without understanding the concept behind the technology so just plug and play drag and drop like what the space with the web 2 scene like from that was like really difficult to build in web 2 before and then you had like cms like drupal and and wordpress like they look like very bad now today but before they completely disrupt the space well we need this kind of same tools in web 3 to make super easy uh to build uh applications and uh and change uh the space to build on that a little bit um if you're a web 2 developer interested reach out to me web 3 web 3 if you're if you're a web 2 developer that's looking to transition into web 3 one thing that's very interesting for you to kind of think about is that imagine if you you wanted to build something in in sort of web 2 and you could um use google you can like build something that uh sort of leverages some parts of like google leverages some parts of amazon leverage some parts of apple uses like something some element of like netflix technology like because in web 3 everything is composable and everything is open source so when you are a builder you have so much at your disposal to work with and to build on top of and and what people are building in web 3 is largely um kind of a further construction on top of infrastructure that's been built by other people and built by other teams there's there's a lot that's already there for you to get your hands on and to kind of combine and to add some new elements that didn't exist before you have a completely new application that provides value to users that didn't exist you did not need to build the whole thing from scratch yourself you have a lot of of code and a lot of you know battle tested systems that are available for you to to use as a platform yeah i'm going to move on to the next question if that's okay so traditionally a lot of the d5 yields has been subsidized by the handing out of governance tokens one way or another um ultimately that's not really long term sustainable like do you think that's going to be you know a problem for the d5 ecosystem or kind of how do you see that transition away from kind of yeah grants being given out to more of a sustainable uh it's meant to be a temporary mechanism of bootstrapping a community in one that's one purpose right one purpose is yes it bootstraps growth it bootstraps user acquisition but it also bootstraps the development of a community of community in order to exist as a large diverse community you need a large diverse set of token holders so you need to distribute your token to a lot of people somehow right and one of the ways to do that and i think that sort of what the space realized was a really good idea is let's give the tokens to the users who actually want to use what we've built and um use that also as an incentive for them to you know use it in the way that brings value to the protocol so um that i don't i mean that's not meant to happen forever it's it's there's a bootstrapping phase where the token is being distributed and that is the time where you know you should expect that to happen and it's not supposed to happen forever and it's and it's also supposed to you know the whole concept of bootstrapping something is you get it to a place where it's sustainable and it doesn't need that extra incentive doesn't need that extra push behind it right so you're hoping as a new protocol that you are using these token incentives to kind of get off the ground and to create enough momentum and traction that that genuine organic traction is enough to carry you forward if you have to continue to rely on incentives then you know that you've failed to to build something that really solves a need yeah i assume that they did there are two different answers to and two different aspects to this uh the question is like will inflation of governance token continue in the long term yes will those governments talk and have a price then it's a different question because inflation of tokens as jeremy mentioned is a way of rewarding users and is the same as traditional finance even if i don't want to call it because we being recorded legal is the governor's token but in traditional finance you could see like equity and dividends and then you distribute you have equity and you receive dividends when in defined you have governance tokens and you receive free wants it's a way of rewarding people that are using your product but the problem is because you will have so much competition in the space because so many people and we are boarding modified builders to build projects then at the end of the day you will you will have a lot of inflation a lot of governance tokens but only projects that are providing true utility people will focus on this project because they will receive rewards plus they will have utility of using them it's the same with the nft market the nft market well before for example gaming if you think about projects like axi infinity and all these different projects they were paying you to play without you enjoying the fact of playing is just because you were playing i mean let's call it like what it is it's like it's a game but the game was so simple that compared to another game you could have fun playing it or here just play because you were earning money well the space is moving now the chance of building those games is over and people will build like for example electronic arts big players that are investing sony investing billions in the market with four knights and all different things you will have the exact same features as to get paid to play but also to have fun to play it's the same with defy like for example casual balancer or curve they will slowly disappear under the protocol level and then you will have project building on top of them and providing utility and rewarding the user for using their products and that's what we're actually moving into so inflation governance inflation of tokens will continue but many many different projects will disappear for the project to have true utility in providing people value over time for them to use because they're solving a problem in their life yeah that's right yeah so i completely agree with both opinions like i think there is a limit to what we've done with governance tokens in in general and even though they're they're still going to be continue to with this inflation to be printed i guess the the true turning point is what julian says that is when like projects start to actually give more value to those tokens that pure governance rights like first case that comes to mind it's like for example dividends no like are you holding this are you benefiting this dao by being like a kind of like a shareholder then you maybe why not receiving a dividend or even like what we're doing right now at cal state like for example are you holding enough tokens to have a different tier of discounts when you're trading then sure then it's like all these different paths that we can find to actually add more value to the token that just pure governance that this is for steroiding adult yeah value is important um jeremy you have to run so thanks ever so much please give a round of applause for jeremy thanks so much for coming it's been a pleasure um and now we're going to also transition to the audience questions so if you've already submitted something on slido great if not uh please do if you have a question and uh upvote the ones that you also want to see answered and we're just gonna start from the top um one of you can answer or both of you can answer we have another 10 minutes or so so the first question is uh how are protocols preparing to deal with hacks that's a very open question well obviously i'd make that news we've been who knows raked okay so there's uh yeah so we've been uh we've been pretty busy over the past uh two years a year and a half it's good for business [Music] but i mean first thing obviously don't rush your deployment um try to use other piece of code that were fully audited and so like industry standard don't try to be fancy in the code that you're trying to deploy if you are uh get auditings uh also pair programming with other people in the space like other projects that you're trying to either integrate with or you're trying to build on top of i mean working with so yeah like be super cautious because i mean usually people i mean they say like solidity is complicated so it is super simple to uh to build or to like write a piece of code but not to get wrecked it's completely different world so like try to maximize the security over uh time or complexity of the product you're trying to use so just baby step and i think it you can put all the chance in your side to not get uh right and if you are you have a nice leaderboard anyway you know i i agree like in essence don't don't reinvent the the wheel and and especially don't don't rush your code to market like regardless of the timing it is more beneficial to deploy with your soundness and your secureness than actually rushing it to be on oh i mean def connect now it's gonna pump if i release now and then actually get wrecked and appear on on the leaderboard yeah and uh how to recognize because your question was about how to build project not to get exploited and how to use project to not get exploited well look at the people that have been in the industry for if they have the chance for a long time they've been building a lot of different projects and they're usually the one that always get criticized for not shipping fast well those guys it means that i mean if they're actually shipping at the end it means that they actually focus on security but the um i deployed i mean was the name like i i code in prod or whatever testing prod and all these things i mean it's very likely that you get wrecked at the end so yeah like huge project that i've been building like they have a good track record they potentially slow to deliver but it means because they focus on security rather than uh formal or attention and that's very important because over time the one that are providing huge value and they're staying for a long time are the one that will not make you on the leaderboard so touchy subject security um a question from earlier which was yeah so yeah that's a good point right it's not because the project has been audited by a huge firm that it cannot be wrecked you know like yeah because there's no formal verification and there's tough stuff um so question from earlier was if bridges tend to expose vulnerability as you've mentioned what are the best solutions for dapps and games to build on east that need a high speed tp yeah high speed tps and a cheap gas fee have hope on the marriage believe i mean it it just depends on i guess what your target audience is because if your target audience is mainly going to be staying in those type of chains that live around ethereum then maybe it's better just to concentrate on on not not making your users have to breach money from from one place to another because in the end like a bridge is sort of this centralized actor that is holding a lot of funds that sooner or later something can go wrong in very different ways so i mean it depends on how you use a bridge because it's what julian said earlier if you use it for short periods of time and you're aware that you're just putting your money in and out then i mean that's maybe the best approach you can do but it's still hard to try to convince people like not to preach or not to take things carefully because you know that's the problem like with the price movements so fast they just want to do it like as soon as possible what's the question um how to get cheap gas fees and high tps um you know i think like it's tough yeah okay i understand now um what you have without i mean i think you have like some good project that are using for example like been using a little bit uh stocknet stockwear it's really good because you you don't find yourself isolated uh the the [Music] yeah that's a tough question like because if you choose one chain over another then you end up being isolated in in in this chain so i'm very looking forward uh what i call um layer three so the fact that as an application you using blockchain but then you have those bridges that are super fast and super cheap to use so at the end of the day the user don't actually need to know that he's using one chain over another one and this will just scale the space to another level because you'll be able to interact with your product have utility on your product without knowing which chain you're using because those bridges are so fast and so cheap so then it's uh yeah yeah but for now it's complicated very complicated yeah because it takes times or money and then so you have the speed but you need to spend uh yeah you need to learn 100 bucks um another question is uh will there ever be defy on bitcoin will there ever be defy on bitcoin i think some people are working on that problem i mean technically with a rsk no with rootstock there's already it's already possible then i think you also have the stacks ecosystem i think which is also kind of building but i guess it depends on what you define as as bitcoin you know because a lot of people always say that especially like a lot of bitcoin maxes you know any bitcoin that is not on the main chain is is not bitcoin which varies is true but then it's like if you go down that answer then we're never going to see defy on bitcoin if you go down the answer that and a token can be wrapped and can be bitcoin then i guess we'll we'll see defy on bitcoin soon yeah i mean if you consider bitcoin as a reserve of value do you want gold to be on the internet well my point is like bitcoin is bitcoin right now there's a reason why not a reason but the fact that you cannot move it really you cannot build legal defy on top of it or even defy i think it's good for bitcoin because then at the end of the day you want bitcoin to be accumulated by nation states by big corporation and yourself and you don't really want to be able to build uh internet on top of it we'll we'll see what happens um so this i'll take maybe two two more questions um what do you think about the new types of models of liquidity for example v 3.3 tokemak and pv pcv i'm not sure if that means anything to you it doesn't mean anything to me right now for me there's i mean i've heard of tokenmark but i don't i'm not confident enough to actually give an opinion because i haven't researched enough on that topic well i have an opinion but i don't really want to mention because then you get all these guys on twitter attacking you so i prefer staying [Laughter] yeah i mean v v e three three v four four five five six six i mean i don't know what we're stopping but uh it's interesting we'll see um so we mentioned uh permissioned versus permissionless and and obviously um the things the implications it has for aml and anti-money laundering like the question here is what is your take on anti-money laundering and the new types of law enforcement i guess also someone from france with everything that's going on now with the eu like what do you really think about the future of this it's tough question like i see we have a lot of people in europe that are loving to make sure that people understand why what kind of value can bring them to use blockchain also in terms of european as a nation compared to the rest of the world if you want sovereignty and like all these different concepts so the idea is not to enforce not to force them to realize or to use this kind of products but more to them to fully realize that the potential of this technology but yeah with mika what we saw lately uh that's not a good sign but i'm sure like the the i mean i'm sure and they're never sure they're sure but uh yeah i hope they will realize that the potential is enormous and it can bring a lot of value to europe um and also like compete with um the us or asia uh so like central bank like digital currencies european uh stablecoin massive topic you know i think the main push for regulators to actually put anti-money laundering in place is because i guess they're very scared of what's happening in crypto but i think they're like told the wrong story because in essence even though like people tend to think crypto is anonymous it's not it's so anonymous and it's still completely trackable and very enforceable and it's just a matter of teaching or educating the right government agencies to actually in the same way when computers came you know things change how to track operations and it's it's even better than the systems we have now and then currently it goes more on the question that he said like is this more a political debate you know what what does europe or or any country want to stand up in terms of sovereignty of their citizens do they want to push like only uh cbdc because it's the perfect aml tool everything control or what would they want to trust a little bit more like okay if they actually a user is capable of doing a proof of attestation or something like proving that those funds come from listed sources or or whatever case then like it's valid enough and it's a question that we'll see yeah we here in europe we definitely have a big fight ahead so if you can lobby lobby do you guys have any closing comments or anything you wish to share to with the audience before we close off words of motivation inspiration no i think like it's if you just join this space well welcome it's a full of opportunities and focusing uh building and shipping and providing value back to this uh this space and the space will reward you in one way or another and the most important aspect of this space is knowledge i think it's the biggest school that the world never seen and the day after day you'll be learning and learning after learning so i think it's a massive opportunity yeah so don't let the noise distract you and keep on building because i think the future is has a lot of potential is very bright and it's a very exciting space to be on so yeah kudos to the builders well thank you very much guys it's been an absolute pleasure and if we can all give these fine gentlemen a round of applause thank you [Music]