Harnessing DeFi to Better DeFi: The DeFi Collective - TokenBrice | The DeFi Collective

hello glad to be around uh slides are coming shortly so yeah welcome everyone to is Belgrade I'm happy to be here and today I want to talk about um topic that would be quite critical to def5 for the next years I think it's um essentially stemming from my personal experience with the space over six years from uh being passionate being crazy about it thinking is going to change the world and then this spirting about it being Casino for apes and I guess some point of in between realization on how do we move things forward [Music] so it's okay I don't need the slides I can free um all right so um initially defi was built on some uh principle values whatever you call them and it's a kind of where we all when I say we let's say participant of defi of web3 of crypto in general we have an understanding of what we mean by that so um you know it's those value I'm telling you about that will essentially go like that this is my reading of it but I think we all align on this you know so transparency everything is on chain you can verify if you own a stable coin you can audit it's collateral it's basing functioning of the smart contracts and so on um another simple idea like resilience you want system protocol that can resist all kinds of attack and in my perspective I think it's the most critical State and big corporate uh initiated attacks and I think we tend to forget about these ones there is this idea I put Community Driven Community own we all understand you know some form of participation of the community token holder anyone a bit ner on the governance Forum that can jump in um the accessibility you know stemming from the very basic thing that to use an eum wallet you just need a computer you don't need an address you don't need an ID you don't have a list of countries that are forbidden to interact with Sate services or whatsoever um the one before the last trustless is tied with resilience but a bit different it's essentially basic idea that you don't need to trust any person or entity to behave in a good way for the system to hold uh and last one is probably the one where there's more um disagreement but essentially some sense of public utility we're building all those fancy things that's nice if they can achieve all those quality to begin with but I think if they do achieve those quality they deliver a form of public utility so that's a vision that's what got me in but this is more of what I see lately uh at what's being done in defi so you know when it comes to transparency of course things are on chain but there are tons of officiation technique to make a product a service overly complex so that the information asymmetry is bigger and there is more profit to make money um You probably seen that at a very personal level with points or other things like that lately so I don't need to give you a full rundown when it comes to resilience uh we have a vast majority of defi qualifying as uh what I call toy protocols because essentially a state or a big corporate actors with Millions at hand could break that protocol in a day uh because they have centralized point of failure of all various problem we have the whole problem of being completely VC driven so now you know you're backed by paradim or a16 Z it's like um it's a medal it's a mark of achievement in the space um it's not really coming from from community directly uh gated access so if there is any American in the room they know what I'm talking about or even from other countries you've seen the messages you have to sign before getting into those apps maybe you had to use vpns to to interact with some defi protocol so you know what I'm talking about um the lack of trustless so then trusted setups so the numbers of protocol that are operating with somewhere in the chain or as long as those three guys on this three out of five multic sing are doing fine we're good but this is not what uh I came here for I don't want to trust anyone and if you protocol resolve on trusting some people or entity to behave well it cannot achieve real resilience and in terms of utility uh it's hard to tell uh but you know looking at face value of the impact of defi for instance a centralized table coins and know big holders of TS to the size of countries so it was nice operation for for the treasury Department I guess I don't know so much about um the wider audience so that's kind of the the whole idea of the talk today is what happened there how did we straight so far from uh what we set out to build and um ideally how do we correct course so to understand this I want to go back to the internet uh I was barely born when it was emerging but I feel we have a bit of a similar pattern here where you have a new piece of technology that comes Ste some enthusiasms around big IDE in a share of the population and then with the internet you end up 30 years later with a state that is uh pretty depressing so um same thing here we can go quite quickly because I think we all see it but you know in the early 90s uh it was all about um Freedom of Information sharing with any everyone finding communities for uh fans of whatever to discuss between a teenager and a professional uh everything was to be collectively own or govern in some way and it was going to be this kind of little online Paradise where we all grow as a species um and you know even had some beautiful projects like Wikipedia okay the world come together share the knowledge we're going to be the best encyclopedia ever made because we're getting the feedback from everyone and not just the expert you know the uh situation today is of course uh a bit different you know about those uh 10 maybe services that are making for 90 % of the traffic uh the whole situation on the monetization side of thing um even this war that came to describe the reality of Internet the encent enci ification essentially how everything is turning to lowest quality and maximum profit for the investor and um in the case of Wikipedia even uh you have a situation where the the website um I mean it's a long story here too but essentially there is a foundation maintaining the website the foundation is collecting tons in donation every year using this tons of donation to do all kinds of random thing very few are directly related to improving Wikipedia as a website so yeah everything is kind of going uh out of the road out of the plan and then the question becomes how do we avoid something similar for for web how do we learn from the web two uh mistakes essentially um and I think one thing important here is this question of commment so this little meme is well known for uh any open source developer you will have the situation where a whole subset of the industry is using some piece of cat from a random guy in in Utah that got maybe $1k do of donation over the last 10 years and is still maintaining the thing so essentially it highlights the problem that was in web 2 where um The Commons the the piece of software or Goods that were used by everyone are poorly maintained uh the good news is in web3 we have tool to exchange value natively so at the technical level it's a problem we can uh solve but it's it's more than a technical problem it's really and I'm going to say a big word but it's essentially a political problem a question of which kind of world we want to build and where do we allocate resource to obtain which outcome so this is inherently political and I think this is essentially the big reason as to why we were able to uh already stray so far from the Target because we refuse to acknowledge this political dimension in any conception of defi crypto whatever um so yeah that's my uh my perspective on why Commons are needed is essentially we Face some um let's say soal to the def scope level problem so you know problems of Education of aggressive regulatory bodies of um communicating about risk about uh all kinds of common shared problem that are not specific specific to a protocol now those problem they're not lucrative to solt so your beloved VCS that are the The Pinacle of achievement they don't care about spending one Euro on a topic like educating the crowd about the risk of value stable coin model there is no money to be made here or at least directly uh and um and the last thing is so this is not going to do it so it's up to us to do it but it doesn't mean we have to do it all little soldier on the side we can create structure to answer those program collectively and this is where uh my notion of the def equivalent of public institutions come from um so yeah that's essentially um the core Vision here is think about all the situations that are not a direct profit to solve so you cannot expect some team to raise money or some VC to fund some team which is raising money to solve that problem you need to address it in a mod direct manner organized to solve it as an industry uh so now there are some good news for for those institutions is um they have tons of fancy Tech to harness to do much better than what we know equivalent be you know public institution or even Association uh so of course you know the whole accounting expense operation can be on chain and it offers a new level of preced uh unprecedented level of transparency of U auditability for anyone that is you know just curious about this structure or maybe supporting them with donations or or whatsoever um the mission of public interest I think I expanded quite a bit on that but think of all those task and we're going to go into some examples that are simply uh of no interest to um a profit driven actor to solve and uh this sense of collective ownership Community Driven whatever the the form it takes but essentially anyone can become involved with such structures um so to think about this uh I think this example is uh is quite interesting um you'll understand me better so there's a question of uh stable coin a bit of a pet peef topic of mine for those who listen to some other talks um but essentially there's a big question of evaluating the risk of stable coins it's a complex Topic at a crossroad of several expertise technical economy Game Theory and and few others and um so it's complex it's critical because as you know stable coins are integrated everywhere across defi so if you have a big new stable coin coming up it will get listed on AI and other big platforms eventually so there's a question of you know the chain of consequences if there is a problem um the other and probably the biggest problem here is the question of the mismatch of incentives so meaning you know the stable coin developer will want to minimize the risk uh perceived on his stable coin the crowd the other Dow interacting with that stable coin they want the true story they want to know what kind of risk they're taking so they're not um they're not align here um and so altogether I created situations where assessment of risk of stable coin was pretty poor before the structure we're going to just mention and I think a great example of that if the previous Point didn't convince you is simply the US uh episode Tera where essentially all expert were rating this an F if you may but somehow general population thought it was an A in terms of risk and and threw life saving into there so uh shortly after Tera actually uh there is a an institution that appeared that emerg blue chip which is essentially the first stable coin rating agency and a good embodiment of this vision for a public institution in defi um so the way it work is established a framework to evaluate the economic um sturdiness of stable coins um they funded by donations and nonprofit entity and they simply go at it and review stable coins so it would look like that yeah it's a bit small on the green but essentially every stable coin is valued across those six dimensions uh ends up with a letter there is detail of the report for every stable coin so you can know precisely what is the problem here why is it a b why is it a d or so on um and it's also used starting to be used in other apps so you can imagine you know um a wallet or a product to earn yield could feature those ratings on stable coins next to the yield opportunities to help people better decide what they want so you have a little Matrix for each coin uh I probably don't have time to go into too much detail check it out if you're interested blue.org but essentially you know this go idea of we had a problem no single directly involved actor would have solved it properly because they all have an interest in that topic so we needed some kind of NW credible third party to emerge and act as the referee and this is pretty much what Blue Chip did here um so yeah from here I want to take a minute to think of what we can improve uh on an institution going webway so um probably from botton to up it's easier so transparency I think everyone understands that you know uh you give money to some real world Association you have no idea where it goes you're lucky if you get a report and you have no way of verifying anything they tell you anyway if they tell you they spend it for this or that here in in defi you can essentially put this whole thing on chain so not only you'll be able to see the assets of the structure you're supporting but how they you using your assets and uh audit over time is they are effectively making the use of the money they're supposed to make so this one is a is a massive win of course and it's not so hard to implement um there is a question of ownership so it's a bit more specific depending of the structure but essentially you know mixing what we have on chain Dows or whatsoever and the structure available in in the real world you can create uh something adapted to the situation but the most interesting one I think is the source of funds because um Regular institutions are essentially funded by the state we have no state in defi except if you consider maybe the smm to be a state um so we need to find other source of funding mostly donation then from interested parties but the interesting part becomes that defi comes with um opportunities to earn um in various ways and so you can you can have situation that's the one of the defi Collective I'm going to tell you about in a minute where you have an association operating with expenses and essentially this Association control some assets that allow uh it to produce several times expenses for every given quarter so it's essentially a self-sufficient snowboarding um structure so welcome to to the defi Collective so the the core idea is uh using defy to better defi that's how we present present it stem from the vision of you know now you've been with me for like 15 20 minutes you you probably um understand where I'm coming at but you know this big mismatch we see between the initial value that we thought were uh being able to be delivered upon in Defi and what is actually being done uh so of course we can scream at the clouds like I'm doing now you can go to conference and tell people about it but at the end of the day the best solution is simply to uh put money and action where the Mars is and start uh providing support to projects that are doing um proper genuine defi so that's what we do at the collective uh on the uh in real world side of thing it's a Swiss nonprofit Association and uh on the on shade side of thing it will essentially be set of multi and various processes to to coordinate all of that so um from a high level you could essentially describe it like a blue chip but for decent ation status of protocol so the goal is to be able to navigate this question that it's similar problem here protocol will mislead or miscommunicate about this it's technical it's complex it's not easy to evaluate and so on but uh we go a bit further than uh Blue Chip because there is a dimension of action it's not just a curation and evaluation um institution so the idea is there is an evaluation of decentralization status done by the collective Collective control form its own assets that are used in an OP manner in defi so deployed in those genuine defi protocols that's the first way of supporting them helping them grow and um as the collective is doing so it's generating revenues allowing it to cover its expenses and also gather a surplus that can then be snowballed essentially into this Capital deployed to support uh those genuine defi project um so the question of assessing a decentralization status is pretty much a topic of a talk on its own uh but I I'll try to give you some um some quick pointers so it's essentially done on a spectrum going from what we call genuine defi to uh onchain CI and uh obviously what would make you a paracle move from one or the other end of that spectrum is the centralization vectors and actors that have control governance system it's a a very wi framework yeah it's too small for you to read but essentially it's looking at several level at the settlement layer at the asset layer the protocol layer and the interface layer to evaluate here all the centralization points and attack vector and from here get a sense of um how actually decentralized the protocol is the the goal of this is for the prod the collective to be able to identify those genuine defi prod and then provide them with support um so the way it works um on top of the structure that described you we have essentially those policy documents that are a bit like the interface between the offchain structur the association and the onchain structure so they Cornerstone documents kind of Define processes of the collective and and how we operate so you can have a look if you want uh give the page on on the bottom but essentially every critical activity of the collective is um framed thanks to those documents so for instance in the treasury management policies uh how we focus on Capital on the most resilient protocols and we have responsible risk management practices and so on um yeah I don't know if you can see sorry so essentially I just wanted to show you um and that's the funny side of this story is remember how I told you these topics these challenges they're not profitable to address so uh VCS don't come at them um well with with the collective we found a situation where um there is profit to be made addressing those issue and the profit can be further compounded into the cause so this is just uh Financial for the first quarter of this year and essentially uh Collective was able to generate about 172k of Revenue and after the expense of the net earning over 130k so it means that a bit nor of 40K a month in this treasury to be used to support early protocols help them with a liquidity or whatever is needed early on so yeah it's it's like a snowballing uh support for those defi genuinely defi protocol so those includes protocol like um pull together liquid cutting the Box pum Labs of course we have still limited resources so we kind of focus them on where we can have most impact um this is just to show you also a revenue Source uh essentially how it work I don't know how long I have okay I give you in in one minute it's a good def crash course so the way it works is uh the defi Collective is um earning uh sizable amounts of what we call liquidity driving tokens so those are tokens locked but that allows you to direct emissions to various liquid pors so they're very useful for projects looking to grow liquidity for their own tokens usually uh as at the collective we don't have own token but we are looking to help those projects I you mentioned the Pome the cut in the Box the pool the liquidity and so on grow liquidity on that token so this is what we use or liquidity driving assets for as we do so it generates some uh fees and bribe revenue and this is uh part of what allows the the collective to um to grow and cover its expenses Collective is also liquidity provider uh and as a few other Revenue sour but those are the main one so yeah to small of a screen but I just wanted to show you the whole structure that we mapped recently uh I give you more of a focus on the bottom right part which is essentially the uh onchain operations the treasury management but the idea is really to cover a full scope going from technical consider technical consideration on protocol legal and help them in uh all these kinds of way um really at the end of the day uh it's a bit like uh to decentralize a protocol there is a lot of things that are required to happen and um it's often a bit of magic thinking where we're like oh we need some people to run Bots to AR on this thing it's okay people are going to do it or we need people to host front end or we're going to have a ner in the middle of Texas who wants to do this on his free time um you can see see the thing the pattern problem is there is not that many little nerd in the middle of Texas looking to spend an afternoon to spin up an alternative front end to their favorite protocol um so you need essentially uh a team to do all this uh this little work of decentralization um and this is what we uh we see the collective doing in the in the long term um we're doing it already at the liquidity level and we're looking to to expand in other areas so um we are uh seven in total now just wanted to give you a quick overview of the team but essentially a structure with uh board members so you know from the uh logic of it the association side which is coming with its own expertise so myself for the Defi and news for technical topic and flow on legal which is also a big deal for us and then we're setting up progressively those teams to tackles um key topics uh of of importance for the collective so the first one was the treasury management um and we recently hired um marketing and we have a whole uh ecosystem we call it which is essentially making sure we are working with u v STS or whatever relevant Partners to help scale the mission of the collective upward um so over the next few months Collective has been launched since October and we have quite a few exciting things coming out uh the main one probably in your interest if you resonated with what I said today was um those guidelines that I mentioned to assess the protocol we putting them into practice we reviewing more protocols and so you're going to be able to um use the collective essentially as a way to navigate decentralization level of protocols already maybe guide how you view defy what you decide to do with your assets hopefully so so it's your call of course um and uh we recruiting a few roles mostly uh centered around that so if you are a nerd of protocol analysis uh welcome to have a chat with any of us I'll be be happy to to discuss with you and we're also looking to beef up at uh marketing so if you have the vibe of uh perfect reply guy only always on Steam uh hit me up to so yeah goal of today was really to tell you about this um situation that we have in Defi and uh really I hope that you will share my understanding um of these needs for whatever you call them maybe you don't like the word institution but think about all those topics that canot and will not be solved by a private individual or VC investing in something to make a profit out of it because there are so many of those thems and essentially the current state of the space is just reflecting that 100% of the projects or almost are for-profit companies and so what do you expect out of them they're not going to give you free candies they are making what they need to do to make a profit and a return for their investors and sometimes even failing at doing so so yeah that's it for me uh if you have some questions maybe we have some time I don't know else I'll be around for talking yeah I have one question I have one yeah if if for example you oh okay I'm going first um hi great presentation um if you want to work with the defi Collective from a project side how would that look like um yeah so it's uh I think a good start would be to check those uh protocol guidelines uh I showed you and kind of um self review your protocol against it get a sense of are you matching those guideline or not um if you do not it's simply likely going to be impossible if you do then it's a question of uh uh looking for ways where we can actually help the project growth uh we have a bit of um um how do you say that um we look at the impact more than um what we would like to do essentially because you know we young assciation we have to demonstrate the viability of the concept um and so there are some protocols that will match your guidelines but that we do not support uh simply because we will not be able to impact them sizeably so to give you concrete example picture Unis swap like what three four billions of tvl I don't know how many billions of volume daily the collective is not going to be able to do much to help them grow further even if Unis swap is uh prop original cyberpunk defi protocol in the way it works you know trustless immutable nobody can prevent you from accessing Unis swap it will run as long as the network synchronized so it's everything we like to see but it's doing fine on its own so we're more focusing on uh projects that are still small in size and would gain from having this extra support and awareness so that's why we've been working uh with pull together and and Pome lab it's kind of like the two smaller projects we put the focus on recently because uh there are the size where we can um effectively impact them on their growth and and make a difference there hi thanks it's a really great presentation and um I'm interesting and wondering how you are going to solve I think the problem may be a little bit more related to centralization versus decentralization because in whole our history as in your example of internet centralization has a lot of advantages it's like an economic of scale it's great to work on only one project then on multiple of them in terms of efforts and so on and in society we have like an antimonopoly committee to break the thing so there is no economic thing which could protect in real life from this part together together join each company to build a huge Monopoly like Google or Apple or everything how to make this things sustainable because in your way you really steel based there are it would be enough Enthusiast to continue but of course it's more and more we are going and become more developed infrastructure it would be not enough and we can heads up with internet as you mentioned is there is any sustainable things which could be I don't know at least profitable or provide some additional features which could not be achieved through the centralization to make decentralization sexy back yeah you touch on a lot of points here uh I think the key thing is it's not just a technical question uh and this is sometimes where we we we fail to see the situation you know we think that we add more features to this deex or whatever and it's going to flip bance but um really what I see with those institutions is you have tons of critical topics that are not solved just with whatever piece of code even if it's fabulous uh code written by uh expert there are some things that are more to the level of how projects are funded or on the level of Creations or um l in for topics related to law and so on and all those topics uh we cannot let them um just solve themselves because um they won't or if they do they will be essentially handled by a large private actor that will steer toward its own benefit instead of U form of collective benefits so it's a bit of um what we need know is like a form of self-actualization of the the PO of defi as um an entity essentially and to manifest its power to implement it it needs those institutions to relay the vision in um you know several topics but it's it's kind of connecting everything like the question of why do we have uh you know the bit boy and the other similar fion of influencers being the the biggest one being essentially kind of The Advocates the main thing people see from the outside when they think of crypto because same here nobody invested with a mission of um educating on defi all the Educators we have are essentially for-profit Ventures and they're acting in their own best interest but not necessarily in the interest of defi as a coalition or whatever you want to call this we have time for one question no more question questions all right thank you everyone I'll be around anyway if you have more questions [Applause]