ETHWarsaw 2023: Anton Mozgovoy, Holyheld - Why is DeFi still a sandbox?

uh thank you very much right so the long topic of the conversation or of my speech I don't um remember what was there but the point is is that I know you guys are here not to read not to you know listen for the boring stuff so I actually wanted to make it a little bit more fun and I wanted to start with just uh you know one simple statement that I think is pretty bold and aggressive maybe to most of us here because the only reason why you're here today is because you're already in crypto so the statement is I believe that we are all working on a very big sendbox so we can do amazing things like in 3 years in four years of you know since the Inception of you know real defi there or defi 1.0 we've uh replicated almost every single existing traditional Financial primitive and now people are going even beyond that but but um you know how do we even how do you even use this like how do you guys uh how do you guys even like move your money from crypto to like into crypto like isn't that really really I don't know stupid in a sense have you ever thought about it's really all just about exchanging asset a to Fiat b or you know Fiat B to asset C or whatever it is it's just literally that plain simple you can have the most sophisticated me strategy you can have this you know really um you know C VX CRV you know like frag people on Tre crypto whatever it is like on your chain but like how do you how do you how do you actually use this how do you pay you know how do you pay rent how do you pay for your gas in the gas station how do you even buy coffee like all of that is pretty you know stupid I keep repeating this word but I really want it to get in your head because uh let's just take a look at like how the typical un ramping looks and even this term on ramping it feels like there's some sort of obstacle that we have to like onramp on it to like get into it like in our mindset we're actually thinking that we are some sort of like isolated from the rest of the world so let's take a look what do you have you have a bank account maybe even have like a credit card a debit card so you have some euros um I would assume most of you guys are you know locally based um some are not but ultimately let's say you have some Fiat so what do you do next well then you open an account on a crypto exchange and then uh you have to wire your Euros to that crypto exchange um the funny thing is I opened my Twitter today and I got uh probably like you know with a GE location obviously targeted ad and it was uh like in Polish uh but I you know translated it and it was something like you know when the next bull market starts you know make sure that you can have some us DTS you know like to buy some of those coins and you know like uh and then I was like all right let's take a look and then it's like a telegram chat with like an OTC desk that tells me like okay we can onboard you and then you wire funds to us and then we'll give you usdt I'm like Jesus like that's exactly the perfect use case for me here so you wire your funds and then what do you do well an exchange has a number of assets right so um it's practically impossible for a large exchange to support longtail assets so they support only a few or handful or maybe a bit more um say hello to binance Innovation zone right but um once you get some tokens then uh what do you do well I want to get into defi like that Promised Land I want to do something with my money because well what can you do in exchange you want to trade all right what if I want to gamble but I want to gamble something with more sophisticated well then I will have to wire my tokens to my non-custodial wallet one more thing right well I have a wallet but now I need this thing gas like Jesus like how how easy it is that you are making it for me so I also have to remember that all right I want to have some gas as well if the token is not native on that Network then I need to wire all of that to my non-custodial wallet then I connect that non-custodial wallet to the actual dap that I want to use and then whatever the DAP actually allows me to do then I need to execute that into my you know in in my wallet so that is just like all of that is just for me to you know have easier access for me to lose my money on whatever I want to lose it on how do how does the how does the off ramping look like well it looks exactly the same but in Reverse you have to use multiple platforms you have to use multiple um well services just to use that money on and off and that's why I believe that defi is mostly a sendbox and it doesn't mean that defi is bad it's just that the rails the connection even the terms that we use are really primitive and that is you know pun intended right like how do we use those Primitives in the real world well what if I could tell you is that what if you could remove all of that middle connection what if you could just say you know what what if the wallet that allows me to have all of this composability and you know lose my money really easy across all of the you know crypto what if it can be connected to my bank account what if it could actually control my bank account what if for me as the user there'll be really no difference between Mo like moving money in and out is it you know is it really possible I think it is obviously but um if we look into let's imagine let's just imagine that you know one day this is possible somehow your wallet your non-custodial wallet can actually control your bank account what kind of things would you do because this is the problem with the crypto right we're building infrastructure for billions and billions of users to come in and somehow they never come and then we ask ourselves well you know it's it's not that they're stupid right like you know it's not you know something's definitely not right but then you figure out well it's because we haven't actually build the applications for other people to use it something that well they would want to use it for so there has to be some sort of benefit when we're talking about financial stuff well what kind of things would be beneficial for for the users here's just one example um and you know arbitrary names but ultimately what if you could easily have that over collateralized loan to take a you know like a pay off your car lease um as easy as you know a couple of clicks because that's something that in this case alchemics as a platform allows me to do but then again I still have to follow all the steps that we've walked through in order for me to actually pay for that car lease but then what if you could do that right away what if you could have your true def5 savings account so there's something that pays off yield doesn't matter if it's real or not you don't really care right what you care for is that when that Netflix ction comes in on your card it doesn't bounce so that the next time you know the new series is up you're like oh damn I have to you know top up my C to sort of like pay for it what if there was a way a programmatic way for that yield to pay for that transaction on the card and not the principle so you never really touch the principle it always yields you pay off the yield and that's that what if uh oh this is cool yeah liqu uh liqu is amazing um what if you could actually pay with your eth for your rent without spending your eth right take a look at liquid from a reverse perspective what if it's not really the LUSD that you're looking for but it's what L LUSD unlocks what if you want to keep an exposure in eth but you don't want to sell it but you still need to pay for your bills and I just one of the ways well why not take a loan mint LUSD pay with that um you know for your monthly rent or whatever it is and still keep an exposure in E so if you close the Trove again all these different terms but ultimately you can can still have access back to your e if you pay back the loan there's many more things what if um you could buy now pay later on the C so same thing same concept right you can have some sort of asset you can borrow against it you immediately pay that when it comes to some sort of payment Bill Etc and then you can repay back that debt now that is a primitive that is existing in traditional Finance that's a market on its own it's called like bpnl buy now pay later same concept but in a and here's a here's a point it's not only decentralized matter but it's in a noncustodial matter and there's a there's a big difference in that we can expand all of that um I just took this logos maybe you uh figure out some of them some of them are pretty dead now so sorry about that but um ultimately what it means is that there shouldn't be um exclusivity there shouldn't be that well this is the protocol that you know is allowed to do that this is the protocol that is not allowed to do that there has to be the generalized solution the problem with that is is that while we in crypto we love one thing we love building standards it's like today I'm going to build a new standard to manage all of the other 18 standards and then you know like you are yet creating the 19th standard to do something so that when the 20th guy comes in he's like no no no no that was all wrong I'm going to do it the right way this is something actually slowing down our momentum when it comes to the money Lego that we've all been advertising but nevertheless the future that I see is something that would actually allow you for you as a user to pick and choose the service providers who can allow you to do something with your money and depending on what exact you're trying to do it could be different things um at this point um you know I lied in the first slide right you know you're not reading it but ultimately I'll have to you know make you read this something but you're wondering like how does it work or that um I see I don't remember my own slides but um now here comes the boring part let's take a look at and let's run through this quickly what if you could connect all of that I already spoke about that um there still has to be some sort of interconnection or there still has to be some sort of service well um the previous speaker already told about that well there's a company that has to do something with that um the company has to be has to have the necessary licensees because you connect actually to the traditional existing Financial Marketplace um and um you know there has to be some sort of infrastructure on chain all of that complicated boring stuff you know there we go thank you very much that was all that I wanted to tell you about but um no let's actually touch on the first part so we're not going to get into the existing traditional Financial ecosystem why back in 2016 and 17 um if has anybody been in crypto in that era at that time like 2016 17 quite a few so you guys remember that um at that time we had this big idea what if every coffee shop on the planet would accept my you know Bitcoins natively and we would all transact we would all live in this you know Utopia somehow it never happened the problem with that is is that that coffee shop owner never really wants to accept your crypto why because while they are counterparties they want Fiat they have to pay salaries in Fiat they have to pay their taxes in Fiat they have to pay for those products in Fiat etc etc so what it means is that in those 5 years or six years we started slowly Shifting the momentum to okay what if I a user want to pay in crypto but then the merchant that coffee shop owner will accept Fiat so this is where you have the intermediaries the layers that you know on the Fly convert crypto to Fat etc etc oh no guys stay in please no no I'm kidding blacklisted we're not going to get the airdrop guys yeah I'm kidding well but the cool part about this is that what you can really do is that you can actually tap into that ecosystem so you can work by its own rules licenses Regulators but you can do cool stuff on chain so for example this is the approach that we're taking to make sure that it can actually be accessible by all you know other contracts other chains other networks one thing that traditional Finance does really really well is called locking the users locking the users means that you lock your customer into your service into your app into your wallet and it makes it really hard for the user to switch to something else now Regulators everybody doesn't like them but they actually made one really cool thing about Europe so they started in the UK now it's happening in Europe it's basically open banking so for example you can bank with One bank but then if you open an account with another one you can still have access to your you know previous account that's not the case that is you know in in crypto but this approach and this is where the you know unintended chill comes in what we allow you anybody to connect in any of those six parts and we can quickly touch based on that that will allow you to actually work on one of one of the possible ways on that onchain settlement or one of the possible legs of that unchain settlement let's take a look at a quick example let's say you have as we already spoke on the uh centralized exchanges right so you have some fat you have some eurus you want to get into some some uh new shiny token well the exchange would not be able to support that so you need to go to dexes and then you need to swap into that Dex um you know the token whatever is available what if you could do that on the fly so what if the lawn tail asset can actually be swapped in an atomic transaction into the asset that you want to keep on the balance sheet which is most likely something stable so stable coin something that can be settled something that can be accepted on a balance sheet does that what if you have have to uh be able to prove that specific transactions can only occur with specific customers or specific corter parties um this is where we're getting into this like gatekeep it stuff right meaning that uh well users in EU they have one set of regulations users outside where elsewhere they have different set of regulations set now the third part which is where how does the actual settlement happens have you guys ever thought about this magic word settlement right so you have some crypto and there's some fee there um that will land on your card account Etc like what does really happen how does it really work well it's actually plain dumb and simple there's a company that uh either has some processor involved or does it on its own but basically it accepts the token in the balance sheet and then it spits out Fiat that's it you know you know those um back from like what probably like '90s or even 2000s do you guys remember those uh like pawn shops like exchange things right so like small boxes they would have those like USD Euro like uh USD JPY whatever like you know exchange rates and they would have like I don't know 5 10% markup well everything else in finance works exactly that way literally you have some assets you know like on one side you have the other you know asset there and you're just literally arbitraging between two things so one you know person comes in to buy dollars the other person comes in to sell Euros that's it that's basically your working capital that you work with exactly the same way every single trade desk OTC desk credit card uh or crypto debit card provider works exactly the same way the second part um is that the settlement forwarder contract this is where again you may need to involve multiple quarter parties um this is where we get into an example have you guys ever tried to exchange that large sums of money through those like pawn shops like exchanges so that you know the the guy like in there in the you know in the Box calls someone and then the guy like with a you know little suitcase comes into the box because they don't have enough money to give you right well this is exactly the same thing what if you want to settle large sums of money that's where again you may not have enough liquidity so uh that's exactly that this is where you know different quod dep parties come in the bridge contract here's a question um have you guys ever bridged from one network to another Network like how many of you guys have ever tried it fantastic um you guys ever thought why does it take so long like it's never instant right there's always the delay and depending on the network there's like a different delay time um how many of you guys have actually bried from polygon for example quite a few have you ever wondered why it takes like up to 15 minutes for exchanges for you know for even Circle to recognize its own token you know to be you know bridged to Circle well that's basically something that's um you know called finality time what it means is that you're not sure that something has actually happened or not and that's not you know not the case with um oh I guess I'm done sorry about that you you took too long yeah I guess it was too boring right anyhow um what I mean by that is that we will never reach the point of um being able to use those Primitives truly natively in the real world if we have all this um I would say independent actors right all the l2s l1s uh layer 3s layer fours whatever it is on different networks so there has to be a something a unified system that could accept that risk or that could work with different parties to make sure that we can actually we as users we can always transact on the network that we want to and then you as a service as a company then you figure out how the hell you can get my money of that Network that is them complicated that is damn hard and that is why right now there's actually no single crypto deit card live that would allow you for that just in time funding right so from the money on your smart wallet or crypto wallet to your card instantly without locking you on their own network and that's an important part so we as an industry at this point still failed to make sure that there's a generalized solution for you to be able to do that so yes you can bridge now to my specific app chain and then your transactions can be settled instantly but then you know isn't isn't that the whole point like I don't want to use your app chain like I just want to use my assets on the network where I am and then I still want to be able to use them so this is still a big problem and while we again and that's where we really don't want to talk about holy Health the point is is that what we believe in is that the only way we in crypto can actually break through this send box and then allow us ourselves as users to use our own crypto money in a more efficient way so just give you like four examples of that and the only way is possible is through well generalized Solutions where you do not force me to lock me into your smart wallet which is non-coral to say but ultimately well I can only use it with you you do not need to bridge to your network where you know my funds only work with your network it has to be generalized and until somebody is able to come up with that thing well um none of it makes sense even my speech today but um this is this is the least boring part what I wanted to say is what we are working on is to make sure that what you as a user can do is you can have your Finance controlled by your self custody wallet and with that you're starting right it's just like a small dent I saw a dent somewhere on the you know on the on the name there and you know we are that dent and the entire you know name there is is like the entire crypto we're making the dent to make sure that at some point of time what you will be able to do is you will be able to control 100% of the time the assets that you hold in your self custody wallet while making every single transaction at the point of sale so Shop gas station wire to make sure that it actually works um you know just in time with that being said everything has been said but um what I wanted to finalize my conversation or my talk with you guys today and um you know uh I would say hopefully it wasn't boring is that what we really need to think about and rethink the approach that we're taking what I mean is it's a message to you guys as participants of the industry as Builders I would assume most of you work with um you know crypto companies and crypto projects is that for the 100 people or thousand people that remain in defi today you know bare Market everything else let's stop so-called like pvping right so let's stop fighting each other who's right who's wrong let's stop fighting over those thousand users that are still there for some reason maybe because they're stuck or they lost their key so they cannot get out and actually start thinking about how can we utilize what we've built together collectively how all of that can work together to make sure that you know the people that have never heard about your new network new token new protocol new contract how we can get to those users to be able to you know let them use their money freely because ultimately in the end that's the only thing that matters with that being said thank you very much guys um and and if you have any questions let me know and the questions before the lunch break hey great talk um do you think we can do better by skipping the card providers which means I I know you mentioned that you know in the past we think we're going to like transact natively on the blockchains or like lightning networks or or anything like that no um the reason the reason very simple is they have such a big influence already um if you go into the rarest possible Village in Africa Visa Mastercard most likely going to be accepted um so the problem with crypto is the distribution and that's why when we started you know making this approach to can the shop like accept crypto natively it failed just because who's going to use crypto if I can only accept you know if I can only pay with Crypton in like one shop somewhere you know in a different country in a different city it has to be universally accepted and then this is where the status quo comes in why would existing incumbents allow you to do you know something that would you know compete with them well this is why if you think if you look from the you know card payment processors well Visa Mastercard AMX is probably the unique one but everything else is State uh endorsed controled build uh union pay China um Russian one Mir right whatever it is it's state enforced because they have the authority to say well if you want to sell stuff in my country you know you have to use this and that's basically how it works so the problem is unless somebody comes up with enormous immense amount of capital to have such a big infrastructure to be able to support universally it's always going to be this you know like egg and chicken problem like okay well we don't have enough points of Sal so nobody's going to use it so my Approach is let's not fight it let's work with it and well then you can still provide the benefit to those that do want to use crypto but for them without even having a notice or dense right in that sense um you know we we're we're just like literally getting started but I have my I have my Apple pay so I can pay whatever I want to but um you know that Apple pay is funded with you know my hot wallet right that's there on the phone and you know with the use thec that sits there and that is just the base heart and it's still boring what's going to be really exciting as school is that when that usdc on my hot wallet is actually going to do something with some other protocol some other network and then it's more exciting because um I'll give you just one example it maybe it's of topic right but um you've guys all heard about this thing like treasury bills right T bills how many of you guys heard about this stuff quite a few right how many of you guys own t bills one right right one two right how easy was that process so like me as just like retail customer like I maybe have like I don't know n26 revolute whatever it is right um well they now started offering me some like interest on you know my dollars right but then uh it's pretty damn complicated and then you know in crypto I should be able to just like swap it in it may not be redeemable because you know kyc Etc all of that that's a different part but then it should be able just like one click I have it and when that happens that's that's where I would like to switch to crypto right it's just general user because I just want my money grow but it has to be stable it has to be secure so we're not getting into you know another Luna Terra thing so but anyhow 's one more question no no because we we record uh you mentioned about uh banking unbanked uh recently I've been in Argentina and I've been a little bit shocked by two things thanks first there is a discount uh between physical dollars that they really like and dollars on train so for me it should be if if there is a this price difference it should be another way around because I canot get any yell on physical dollars and I can do a lot of things with dollars on chain but they don't trust them second all those guys who are exchanging uh crypto they use TR so you cannot do a lot they don't using L2 or like another more sophisticated chains they're using trone um I'll give you another example uh quite often and Ukraine is just you know just like literally next by um for you to redeem usdt Tron to local fiat currency like gria they pay you so you know typically to offramp to Fiat you have to pay the fee it's natural right there they pay you why the question is that well because people want to flee the capital out of the country so they lack that liquidity and what you know the the good example here is Argentina is going through a very volatile period and then it comes to The Clash of two things one is well cash is again it's just mentally it's the best thing you know if I have you know US dollar here in my pocket it's worth way more mentally than whatever digital stuff there is so there's still this huge gap in me mentality that's just one part of it the second part of it again it's just how the economy works there who can get dollars into the country and out so exactly well you have to have connections right yeah so but that's that's where this like this Arbitrage comes in and you see this very obvious clear Arbitrage but and then you think well why nobody has arbitraged it well because it's not an open market and you know that's basically why it's being created so um I I'll give you another thing I was thinking uh the same way like back in like um back in the days and I wanted to have this huge Mission let's bang the unbanked but then what I realized very quickly is that well majority of the people don't want that like it they just not ready like you come in you're this like cool guy and says look guys we you know develop the thing that we think that you want like go ahead and use it and you know the people out there are just like why right and then you're stumbling with that thing okay well sit down right let's have a talk this is why you want this um and this is why I I I tried to switch the mentality from what if we start servicing the people that um already need this or need this as in you already have crypto so you already understand this for some reason you already do this so why I don't make your life better right or easier because you already use it so for me as a company it's cheaper right I don't have to sit down and talk to you this is why it's cool right you're already on board it and then as we progress as we go that's how you can expand and say say well you know my friends you now use like Tron us like why actually I have no idea why you know a lot of it is like money laundering etc etc but ultimately you see it's like that conviction Point like how many of you guys hate metamask like deep in your heart and how many of you guys still use it huh huh all right so that's the conviction point right once you like once you start using it it's really hard to get off it even though there's like other competitors there may be better wallets but because it works you kind of like you still stuck with it and and that's why it takes so much time to shift some sort of mentality and most crypto startups are not long enough to even have a dent in that you know mentality shift so everybody who has like big goals Ambitions to change something they have to realize it's going to take like years years to build and then are you going to be in those years well that's a question right so that's why step by step um sorry for taking so much of your time guys I know it's food time let's go get some food you have a question uh one more question okay yeah one of the biggest countries is Poland um also all continents or just Europe uh Europe so we are live in EA soal European economic area um and that's to do with again licenses right so