depending on whichever part of the world you are in
we are going to start this event very soon
and we are just waiting on a few of our guests
and then we'll soon kick this one off
just a quick sound check can everyone hear me
I can hear you as well loud and clear
while we're waiting I'll go ahead and just kind of introduce ourselves
welcome everybody to episode 10 of XTalks powered by Layer One X blockchain
thank you for listening in and being here
we're excited to have you
my name is Cody I'm the chief experience officer at Layer One X
a Layer One blockchain and I will be your host for today's episode
while we while we're waiting I just want to remind everybody that
to mark your calendars we have an episode 11 of XTalks coming up on the 19th of January at 1am UTC
so you don't want to miss that one as we're going to be diving into the web3 gaming space
in regards to interoperability current problems and solutions that may come from implementing interoperability in there
so like we mentioned let's just wait for a few minutes to make sure we've got everybody on board
I think while we wait for our guests to hop in
I'll just share a few details regarding us Layer One X
and the things that are going over at our discord
we do have a few competitions some marketing campaigns and stuff like that
where you can win amazing prizes such as Layer One X tokens and stuff like that
so if you are keen or interested on checking us out
we have the link to our discord in our bio
so make sure you check that out hop into our server and say hi
Cody, would you like to give us any opening statements before we dive deep into the questions?
so I think this is going to be a great topic today
just because of the technology that we're talking about
you know, Bridgeless Interoperability and its potential to rewrite the finance rules as we know them
I think that it'll be a great discussion on whether or not it'll become truly
DeFi will become truly decentralized
or it could basically help power entities in the current space capitalize on
so I think that that'll be a couple of good questions to go down
you know, I think it's going to be good to kind of see if there's some kind of a reputation that DeFi has
if we're going to be able to overcome that
if interoperability will play a part in that
so yeah, I say let's dive in and let's get going
so before we do, let's do some quick little introductions
thanks everybody that's on our panel today
we're excited to have you
if you wouldn't mind please just taking a second to introduce yourselves
and give us your 30 second elevator pitch, that would be great
Brian Culligan, Alpha Growth founder
basically deployed over 200 grants in the crypto space
connecting projects and chains and bridging interoperability is a rad topic
got heavily into DeFi with Sushi
and currently running the BD and marketing for the compound protocol
Hello everyone, this is Abraiad from NaBloFi
I'm the community manager at NaBlo
very much interested in DeFi and real world assets
thanks for having me on the stage
we're from Composable Finance
we also have a protocol called Picasso
that is doing restaking and bringing IBC to Solana
and has already brought IBC to Polkadot, to Kusama, to Cosmos
and now we're in testnet for Ethereum to Cosmos and then soon to Solana
I also wear another hat as a partner of Fundamental Labs
which is a well-known VC based out of Singapore
we've been around since 2016
Hey guys, I am Ki here and I live in Dubai
I am the founder of Forward Protocol
which is a drag and drop no code solution for DAP deployment
that works across 800 chains and it's salary revenue positive
and we are soon hitting the market, the product is live
apart from that, we are running an accelerator
and a fund in Dubai, Key Difference Labs and Key Difference Capital
so our whole ecosystem is focused on bringing web 2 businesses to web 3
I've been 10 years in the world of blockchain
played multiple roles across the space
from leading crypto news media giants as CMO
to helping founders market and go live and so on and so forth
so super excited to be in the space today
Hey guys, it's Andrew Lubon
I'm joining from Pulsar.ai
We're the business development hire there
business development executive
I've been in space for a long time
some angel investing, was CEO of an NFT marketplace
before that was professional athlete
but now I'm in the space for a long time
I've been in the space for a long time
I've been in the space for a long time
before that was professional athlete
but now I'm bringing out and growing the ecosystem at Pulsar
we scrape all of the NFT marketplaces and all the chains
and then make it searchable using our AI for keyword search and personalized search
Hey everyone, can you hear me?
All right, it's finally working
Sorry, I've been having a little issues as always with the Twitter spaces
I'll jump in with a quick intro
I'm Dan Goldman, founder and CEO of AllTrade
In a nutshell, AllTrade is one of the world's first
bridge-less cross-chain order book DEXs
It's a new trading technology that's coming finally to the market
to enable you to trade like you would in a centralized exchange
with all the capabilities and UX
but completely non-custodially
with shared liquidity across all 12 plus chains
that we support with no bridging
which I believe is relevant to what we're going to be talking about today
and not only that, AllTrade is what we call DeFi as a service infrastructure
which means anyone, any project can actually launch the entire platform
and provide branded cross-chain trading services to their users
self-list their own token for trading
reducing their reliance on centralized exchanges for listings
and basically create a global network of exchanges that work together
but each of them actually has its own brand
earns their own trading fees, self-lists their token
and create a new way for trading in the market
that is non-custodial with order books across many, many chains
I'll take the opportunity
Hey everyone, this is Jonathan
I'm a guardian of nabla.fi
nabla is a upcoming next generation AMM
we're doing away with impermanent loss and a lot of other cool things
so hopefully that is interesting
and yeah, I've been involved with crypto a lot
going way back over 10 years
yeah, I've been browsing a lot of ecosystems
have been coming from the polka.ecosystem
and now back in the EVM space
so yeah, excited to be here today
Hey guys, I'll take the opportunity here
my name is Jay, I'm one of the co-founders of SuperSight
we're building crypto-specific large language models
so on the on-chain side we firstly let you search
you can search things like
who bought X and Y NFT, who are the top 10 traders
and somewhere like GMX, who bought LIDAR between these prices in the last 30 days
and then there's the off-chain side as well
you know, what is account structure and what are ZK proofs
and then both of those worlds come together
when you search something like
why did the price of board apes go down
and on the on-chain side it might be that two people sold 15
on the off-chain side it might be that
there was a negative news piece around the founders
so that's what we're doing
been in the space since 2017
thank you for bringing us on layer one
so I think those are all of the introductions
or am I missing someone, Cody?
I'm just going down through the list
we might have a few stragglers here and there
but as they come on just kind of watch for them
and we'll give them an opportunity
to give us our 30 second elevator pitch
but in the meantime for the sake of time
let's just jump in and start talking about today's topic
so interoperability and DeFi
can they go hand in hand together
that's the questions that we're going to be proposing
and it sounds like we've got a lot of great experts
in the DeFi space joining us today
and yeah so let's get going
if you do have any questions for our panelists
just make sure that you drop those in the comments
Sam will be looking for those
and he'll get those promoted to us
so that we can answer those questions for you
so the first topic kind of breaking them down
into a couple of different sections
the first section I want to talk about today is
DeFi's future and the power dynamics behind what you view
will be happening in 2024 and beyond with DeFi
and the first question I guess is based around
decentralization versus control
will interoperability help basically
democratize the DeFi space
or will it empower existing entities
to basically grow their control
and they're capitalized on new opportunities
to control their user base
not directed towards anybody
so if you want to jump in on that question go ahead
can you maybe clarify what you mean by control
in other words since you're mentioning decentralization
and DeFi etc are we thinking about control
in terms of market share, walled gardens,
keeping the users in a specific application
versus the decentralization of certain apps versus not
yeah exactly that's exactly what I'm talking about
just gain in market share, gain over regulatory control
it could be government, it could be specific individuals
it could be different projects
just kind of seeing where the conversation will go from there
the gorillas in the market
the 10,000 pound gorillas
once they have a new technology they can utilize
it is certainly easier for them to further grow
they can utilize these new technologies
and they have a huge user base
so it's easy for them to utilize a new technology
and gain more market share
or cement their grasp on the market
one of the big boys can certainly find ways to utilize these new technologies
and keep a grasp on their user base
and for newcomers obviously things are more difficult
so I'm trying to think where do you want to go with this
because that's a pretty clear thing
if they find a way to utilize a new technology to improve their offerings
the moment we talk about this we need to divide this into two layers
I can see those two layers emerging in the world of DeFi
so one obviously as you said
we would have more and more big players trying to use the existing products
improvise and consolidate
but DeFi to me is not products
DeFi to me is a layer of yield generation
or layer of opportunities, financial opportunities
so I'm thinking about more and more new innovative products coming on
which works across multiple chains
but they're creating different interesting financial models
of earning higher returns, higher yields and so on
and the second layer which is emerging layer
which I can only notice from quarter 3 of 2023 to be prominent
is the application layer which is focused on traditional or general users
public who are not on the crypto side
who don't fully understand or can use our way directly
I mean if they can use our way directly they would rather use it
it's similar to how you have liquids taking coins
instead of just going and running your own node
so it's having further layers of simplicity that groups things
like if you are using Binance and you're part of Binance Earn
you see that a lot of DeFi products are grouped there
you don't know what products they are
you just go put your money in, it's simple
you park the money there, it's even automatic
but then they go around, use various DeFi products out there
to make it work and you don't know what other chains they're using out there as well
so I can see that layer coming in
more and more of those wallets, simplified solutions
alternative saving solutions and real world assets
playing a key role towards this
people launching RWA based products
which uses a way to park the ideal capital on DeFi
on a safe way, simple lending and borrowing protocols
but they also do have their own asset classes
and their own internal DeFi based on the asset classes
based on validated liquidity and so on
so it's a new layer or new sub-sectors because DeFi is growing
it's growing with on one side permission, blockchains
and serious government business, regulated business on the other side
innovative mechanisms, yield mechanisms on the third
it's a combination, new ways of leveraging yields based on existing tools
so these apps are a beautiful layer that's up and coming
they're purely a connector, like a middleware
that connects DeFi to a user who needs simplicity
and I think we need to take into consideration all these different layers and angles as well
Perfect, thanks for sharing
I see we've got a couple of hands up
just feel free to jump in into the conversation
Sure, I think the biggest...
Go ahead, Brian, you were before me
I think the interesting way and interesting way to frame this
is the monsters, the big players, the gorillas
is just the amount of capital
whether it's the Boomer capital or Web2 capital
or those who have not really entered the space yet
it's still a massive group, right?
So I think the fascinating thing is how DeFi protocols
how new ways of generating new products
kind of interact with this massive group
if we can bridge all of this, let's call it Boomer capital
or traditional capital that hasn't entered Web3 yet
I think there's a lot to be said about how it's going to be regulated
I think the law, unfortunately, at the moment
doesn't really have a clear way to say
who can custody what, how do we frame it, how do we package it,
I think this is really the key innovation
now the bigger players and gorillas in the crypto space
have to figure out and they have to find a way to bring
a lot of those players into the space
but DeFi still is kind of run by some of these bigger players
some degens and it's still being
productized in a palatable way that then can bring
a lot of this capital into the space
but it will be fascinating to watch
and I think there's still plenty of room for innovation
it's the class of innovators dilemma of
who is going to productize these
and then how are we going to make it palatable
for these bigger players into the space
Totally, it's a giant question on decentralization versus centralization
Two key points that I think are kind of a little bit counterparty
to what most people talk about in crypto
is a lot of people say, hey, we need a better UI UX for
to bring the next million users, next billion users
and I think that you have security
and you have rational self-control
and the easier it is to access something
and the better UX it has, the less security it has
so when you're talking centralization versus decentralization
what you're talking about is the blend of security and UX
at the core because the easier it is to use
the easier it is to ape in and supply liquidity
the easier it is for somebody to take it from you
the harder, the more security that you have
and the harder it is for somebody to hack your wallet
I think that's kind of one of the conversations
on centralization versus decentralization
the whole point of decentralization is that nobody can take it
as soon as you get to more centralized interfaces
you don't have radical self-reliance and total control over your assets
and so I think that's one point around centralization versus decentralization
the other thing coming from the compound angle
what I've seen in the markets
we're going to these other centralized exchanges
and yield-bearing constructs
from more traditional financial centralized exchanges
and saying, hey, what can we do with you together at Compound
and saying, hey, bro, we don't need you anymore
your code's been out there in open source for almost four years
we're going to launch our own protocol and internalize it
and just use the code that you guys built
unless you have something more for us
we already have all the distribution
we already have all the TVL
we don't need you in your protocol anymore
so there's another angle here of who has the distribution pipeline of users
whoever has the distribution pipeline of users
can streamline and verticalize what protocols that they use
and how centralized or decentralized they want to have it
so I think those are the two balances between centralization and decentralization
is one, security, and then the second part is
whoever owns the users owns the flow, owns the trade flow
and whoever owns the trade flow owns the yield
yeah, I think from this security standpoint
I would say we already have a bunch of products that are already coming out
to help with the security in the DeFi space
we have products like WalletGuard
and Revolt.Cache and a bunch of other security products
but the most important thing is
trying to make sure that during the onboarding process
of people to the DeFi space
they tend to go through this part of the security first
before they can even think of interacting with these protocols
and from the interoperability standpoint
I would look at it in terms of the liquidity providing
since I work with an AMM project
and what I see interoperability doing in AMMs is
it's going to allow creation of cross-chain liquidity poles
which can increase the efficiency of trading
and reducing transaction cost in general
Perfect, I saw a couple of extra hands up
if not I'm moving on to kind of a follow-up question
Thanks everybody, those are some great insights to think about
when it comes to how interoperability can play
how DeFi, what's facing DeFi
some problems and some solutions as well
One of the things that we were kind of battling with with DeFi
is that it's unfortunately earned a negative reputation
for being full of scammers, pump and dump schemes, developer rug pulls
and these are coming from the eyes of many new crypto investors
as well as non-crypto investors
Do you think that we can overcome the security issues
basically this negative connotation that has kind of started building around DeFi
do you feel that we can overcome this reputation?
I personally believe that overcoming the reputation is not
there's no one straight answer to this because it's a community developed one
everyone complained about not having the freedom
well you have a freedom right now but it comes with responsibility
and that responsibility means education
does it require everyone to learn the code to be able to read and function
well that's what blockchain is made for with the smart contracts
we call it smart contracts, it's transparent
it's not transparent unless someone cannot read and understand it
this is the language it speaks and this is the nature of how it works
which is why you have tools out there which are crowdsourcing security
where multiple entities test something and they can display ratings
to show what is safe, what is not safe
but there's a lot of complexity you could say something is safe
but it's not the same contract linked on the application when you're using it
the issues will exist and the only way to circumvent that
is to have that layer that deals with the challenges
by removing it away from the users like those centralized applications
or user focused applications even if it's non-custodial
but still its app that simplifies the journey on behalf of the user
where the application is responsible to choosing the right
DeFi protocol, the right contract and right interaction and so on
so someone has to do the job
the freedom was asked and the freedom was given
but someone has to still take care it's the right thing
and they need to choose the ones with the right liquidity
constantly be aware if some new vulnerability is released and deal with it
so unless that is taken care of I mean it's not that easy
it's not just about DeFi applications
we know that stablecoins can go crazy at times
so it's not just about okay I have a great amount of USDC
parked in this particular place is it safe no USDC, USDT, BUSD
none of those matter end of the day what you use
can all be subject to troubles
so being that cautious full-time focused on managing these assets
there's a job and someone has to do that if you want that full freedom
otherwise you do use other tools
middlewares or applications that simplify that for you
but someone has to do that it's not going to happen by itself
and the scams and the challenges I don't think they will go away
and I don't think blockchain is even meant for them to go away
because it's about freedom right you could go deploy something yourself tomorrow
and delete it I mean remove it or stop take the liquidity out of it
it's your choice it's your wallet it's a public blockchain
you can deploy anything in any name and do whatever you want with it
it's called as a scam or rug pull from the perspective of the other player
maybe someone was just playing with it
there's been so many different apps out there
where they did say things along the lines
it's completely a alpha software and there's no guarantee
warranty use it if you like with the risk
so I believe the solution is that new layers of products being developed
someone dealing with that to ensure that the end user are protected
and if the end user go ahead to a point where they want the highest level of protection
probably there'll be banking products out there
which will leverage DeFi in the future
and help with the lending borrowing yields
it's not too far I mean if you have Bitcoin and Ethereum
starting to trade on all those NASDAQ and exchanges
it's not going to be too far for DeFi products integrated into banking
sure it could be probably the safest one if you can wait for another few years
perfect thanks for sharing
so I kind of want to jump back to something that I believe it was Brian that mentioned
it's a balance between security and UX and blending it at its core
do you feel that we can have our cake and eat it too in the sense of providing good user experience
and keep our users safe when it comes to security
so I'm not a security expert so I can't really kind of totally answer that question
but I know building other kind of payment apps and web 2
and what we found was the easier it's access to the capital
the easier it is to get the capital out the easier it is to kind of become hackable
so I think it's a feature and not a bug
so people think like the UX and DeFi and wallets right now is a bug
and I actually think it's a feature
the more levels of security and keys and ledger that you have
the harder it is to get in and out of your capital
it's annoying as heck to have OP positions and voting on OP positions with a multi-sig
but at some certain point you have to have that layer of security at some value
so no then the opposite is true too
we're working with a client that has a wallet integrated in with Telegram
and that wallet that's integrated with Telegram
if you get your Telegram hacked they basically have access to your wallet
so obviously I'm not going to put anything more than a couple thousand dollars in that wallet
but now I have a Telegram wallet with pocket change kind of walking around with
so I think there's different use cases for different aspects of this
where you need a lot of security
and when you don't need a lot of security depending upon those use cases
the right level of security kind of makes sense
Sorry, I'm going to have to jump real quick
but I just wanted to kind of share some of the work in the Cosmos ecosystem
with the audience so that everyone can kind of start doing a little bit of research
on the inter-blockchain communication
in terms of I guess cross ecosystem communication protocol
IBC has been driving the most volume out of all
and has been the most stable
and particularly it does not have any trust in multi-sig
and uses like client technology for both chains that they're interacting
and just trusting the consensus and validators on the both chains at the chain level
so we decided to adopt that
and building DeFi on top of the IBC is on the roadmap for us
for both Composable and Picasso
so without understanding kind of the brilliance of the inter-blockchain communication
it's difficult to understand how much better it is
than any other sort of multi-sig solutions for DeFi
so I think in terms of securities it has to be trust minimized
and there's really no other option out there in the market today besides IBC
that is the most battle-tested
and that is the core component of the Cosmos ecosystem
which has been getting a lot of attention in the last several months or so
so just want to encourage everyone to take a look at that
and yeah I'd love to chat more
so thank you for having me, I appreciate it guys
Yeah, thanks for coming by, I appreciate it
so it looks like we just had a person join the stage
Margaret, do you want to introduce yourself
and just give us your quick 30 second elevator pitch for your project
Hey, hi, I'm Margaret Rosenfeld
and I am with Cube Exchange
we are a platform that combines a DEX with a SEX together
so you have a centralized user experience on the trading platform
but when it comes to custody we have a NPC technology that we built from Xero
and that is a non-custodial vault that we use for it
Perfect, perfect, thank you
Just to kind of take a quick check here real quick
for those that are just joining us
my name is Cody and I'm the host of XTalks AMA today, episode 10
and we're talking about interoperability
and how it will change DeFi forever
so let's continue the conversation
and let's move on to a different kind of area of questions
regarding regulation and user experience
and so one of the questions that I have around that is
as projects begin to develop interoperability into their platforms ecosystems
as we'll just call it, country regulations start taking hold in the DeFi space
and specifically trying to regulate specific chains that projects might be built on
as interoperability gets introduced
do you feel that this is going to be harder for them to regulate
or is it something that will be welcomed and easier for regulators to come in and take hold of?
Yeah, I'm not seeing a whole lot of demand for regulation from the actual user base
I feel like this is much more orchestrated from
well, let's say the political cast to actually get a hold of the web free space
so I don't really feel like anybody is actually in favor of more regulation or added regulation
I feel like most of the things that are already illegal, theft, etc.
would perhaps be covered, I'm not an expert here
but in my mind it should be very similar if you're stealing a digital asset or somebody's car tires
so yeah, I don't really feel like this is going to do the industry good as a whole
and of course, especially with interoperability
if you rely on some messaging from the Ethereum chain to output data on another chain
and regulation is getting in the way of that
well, it kind of messes up your interoperability protocol
but I'm kind of hopeful that regulators will give up rather soon
if Ethereum is getting regulated and therefore is becoming unfeasible to use
well, you might as well fork the chain, use Ethereum Classic
there's of course drawbacks to migrating
but yeah, there is no real final solution for regulators to really put a hold on it
and I'm very hopeful that this will hopefully turn out true
I think they'll just go after the big, the documentaries around this
around the big cases where people did wrong and it was kind of public
they'll carry on going after those people to make an example of them
and obviously the blockchain is very public, there's a history behind there
so anyone who's done a reasonably serious level of crime might be chased after
but equally, if they really wanted to, they could
you're already seeing this in some countries, on-ramps, off-ramps are being affected
but as the industry matures, I think we'll be fine
I think a lot of people will still be able to do what they want
things like ZKs are going to come, they're going to be privacy chains as well
so there's always going to be this use case for people who truly want to be
a bit private, a bit anonymized and not really in the public eye, so to speak
I'm the Chief Legal Officer for Cube Exchange
so I spend a lot of time globally interacting with regulators
and it's only been within the last 18 months
that regulators have wrapped their head around what is Web3
the difference between centralized, decentralized
so throwing into the mix concepts of interoperability when talking with them
they're not even yet at that education level on the technology
at least some places are, and some people within regulators are
but it's just like when we went through the experiences in the late 1990s
through now educating on Web1 and Web2
we had to spend a lot of time going into global regulators
talking to them about what the technologies can do, what they had to be concerned about
so as long as you talk to regulators in their language as much as possible
and know what regulators' missions are
the securities regulator in every country has essentially the same mission
they want to protect the retail investors mainly
they don't worry as much about the institutional, the moms and pops
and so they want to make sure that whatever you're putting out there
is not going to be put out without full disclosure about what it's about
they also are concerned about the financial stability of their geographic market
so they don't want to let something into their market that could harm that stability
and then you have some countries that beyond that are concerned about
non-country entities coming into their market
and it's kind of a nativistic sort of geographic approach
so if you go towards the regulators and you are addressing those things
in how you talk, I think it's helpful but also just be aware that
the technology education and using lots of terms that we
interoperability, centralized, decentralized, consensus, proof of reserves
all of these terms, it's a whole new lexicon to them
and so be aware of that when you walk into them
Thanks for sharing, I think you bring up a lot of good points
in that sense, for us over here at Layer 1X
one of the things that we are definitely trying to do
because we are a bridge-less, true, native interoperability
for not only access to be able to trade, access to TVL
but we're able to basically transact with the passing of logic and data across
meaning that we can have a contract on Ethereum, speak with a contract on Binance
and interact with each other through a single click
and so I think that for us it's all about raising the standard
in the projects that build on us and trying to foster a level of quality
and something that we can try to get behind with the regulatory
as they step in trying to understand the different chains and what they do
our goal is that we don't want to compete with other chains
we definitely want to try to unite them
because I feel like it definitely opens the horizons of opportunity
not only for the blockchains but for the projects that build on them
to be able to tap into new resources, new audiences, new users, that kind of stuff
so with that being said, would regulatory hinder some projects, DeFi projects
using interoperability to tap into other chains
if those chains are being heavily regulated
by government entities or even by the chain itself
would you feel like that would hinder your decision to move to that chain and partake
or do you feel like it is something that you would want to build into your protocol
to help sustain the quality and security of it?
Yeah, I think at Pulsar we're using AI generated search to make an upstream Google search for NFTs
where product ties for different type of DeFi applications
we want to be chain agnostic, so something that we have to be cognizant of
is if we are bridging or sending search results to a specific chain
the fact is, and Margaret pointed it out, the regulators don't even have lexicon
in many cases to say, yes this is legal, no it's not
it's just something that you have to be super wary of
it's a grey area, you can get an opinion from 10 different white shoe law firms
and you can get 10 different opinions
so I think it's still a grey area, it's something that we're trying to navigate
but it's something to be aware of as if your company wants to be involved in this space
You can buy an opinion anywhere
I'd be wary of even the white shoe ones
I was in law firms working in crypto for a long time before I went in house here
and we all know the firms that you can go and get the opinions from
but opinion doesn't protect you from if the regulator comes calling
usually those opinions also have so many caveats and assumptions
they again don't protect you
I think you have to know what you're doing
and do really good diligence on the chains that you are going to interact with
for us, we act as a centralized interoperability layer between chains
kind of like the same function as proofers, reserves, but better
because we never take custody
but the chains that we're going to integrate
and we're in the process, we had our early access launch in November
so we're in the process of integrating chains
we're going through those chains that we are going to integrate with
and we're doing the careful review and diligence on what are they doing
what is the view of them globally
and there are a lot of great chains, the great thing is
there are amazing chains out there that have incredible management
great, great staff that support it in the foundations
and then there are a lot of chains that pop up and we all know them
and you're like, this is going to be a, this is where all the rugs are going to go
so I think you have to be aware of that
so one big question I always have is
do you just have interoperability with every single chain
or do we have a responsibility to kind of police ourselves somewhat?
Yeah, I think definitely as you've already said
in terms of being interoperable with every chain
you would have to be very careful with the kinds of chains
you want to have on your protocol or on your project
because definitely as you already said, some chains we already know
the kind of things happening on those chains
those are the chains you don't want to get yourself connected with
because it might also bring the attention of these legal entities
to your product as well since you are interacting with this chain
that has a lot of these rugs
and all these negative stuffs in the blockchain space
and I think it's also not like you want to have this approach
and diligence of who you're interacting with
not just because of the regulatory concerns
but just the concerns of reputation of your own project
and what you're doing as well
Yeah, I would agree with that
I think we have a fiduciary responsibility
you mentioned Margaret before
of basically kind of, I forgot the term you used
but just self-regulation of our own protocol
of our own ecosystem that we develop
I think that it starts with the project, individual projects
and then it kind of goes out from there, right?
I think there's also the security risk
going back to what Brian was talking about earlier
with the security and the UX side of it
I think that as we start tapping into these other blockchains
for growth purposes, let's just go down that avenue
we need more users to keep the protocols going
and to have that influx of capital
and with that raises a lot of security risks too
because we've been talking about reputation
but also is that blockchain up to standard
with what kind of level of programming you're doing, right?
And we've seen quite a few different projects
at least I have over my experience of six years in crypto
of just when it comes to DeFi projects
it just seems like a lot of people are
a lot of developers are just taking senior type protocols
and basically forking them and making a copy of them
and taking all the exploits with them
and just being lazy when it comes to that kind of stuff
throwing a new skin on it
and it's a new project, right?
Even though it's the same fork of something else
how do you feel like we can help change the mentality
of just forking and actually trying to re
or I should say innovate in the space?
I would say the protocols that are building on those chains
it will be their responsibility to really dive deep
when they're doing research on the chains
to ensure that this issue is not associated
with those particular chains
and then when those kind of developers
that are into just forking the chains
and using them when they start seeing that
people are not interested in building on their chains
because of this and this reasons
they would definitely be working towards fixing that up
or the new ones that are building
they would work towards ensuring
they have optimized their chains
to the level where it will be very interesting
and eye catching for all those protocols
and projects to build on.
I also think, are we talking hard forks or soft forks?
We've seen some good hard forks occur
for the users it's backward compatible, right?
So how do you encourage this?
There are different reasons forks occur
and sometimes it's just management project disagreement
other times there's really good reasons for it happening
so I don't think you can come up with a general philosophy
towards that you have to look at the facts and circumstances
of why a particular fork might be occurring.
I think there's two stories I can tell
I was once at a kid's birthday party
and I started talking to somebody
and I was like, yeah, I work in crypto
and they're like, oh, cool
I'm writing the rules and regulations
for the CD VC or whatever
the Central Bank Digital Currency
and I'm like, oh, really? Yeah
and she's like, this is amazing
I never talked to one of you
I was like, what do you mean?
She's like, I never talked to a crypto entrepreneur before
so I think a lot of this stuff on the rules and regulation
it kind of turns out that they're kind of building in a vacuum unfortunately
and I was like really shocked
and we talked for about like an hour
about the different opportunities that were available
and what kind of her take was like
oh, a lot of this stuff is just like scams
and the permissionless nature of things
like allows for too much potential scams and stuff like that
and kind of like where we kind of both agreed and landed on
at the end of the conversation was like
hey, if you want the regulated token
and the regulated chain, cool
like everybody wants to play safe space
great, you can play over here
but at the end of the day
like this is a permissionless protocol
for like 50 bucks, 100 bucks worth of ETH
that can like launch a contract
and I can have like a new financial primitive launched
and maybe it'll work and maybe it won't
so you kind of, regulation definitely does stifle innovation
but you kind of need both, right?
You don't want the grandmas of the world
or people with their entire pension get lost in a rug
but you also need a place where you can have financial innovation
and new DeFi primitives created
without kind of regulatory constriction of it
because the regulatory constriction creates too much capital
it requires too much capital to comply
so you want the Vegas where it's like YOLO
and everybody can go play in a rug
and invent new financial primitives
and you also want kind of like the stable conservative types of DeFi
and that's my opinion and hopefully
and if you kind of constrict everything to regulation
you're not going to get as much financial innovation
so I think there's always a place for both
If I may, I'll give you like a quick summary of what I've observed
I've been in this ecosystem for 12 years now, coming around 12 years
and prior to that I had a day job in normal finance
so regulation I would agree does have a place
and there's a cost of regulation
that's like you could think of two sets of a coin
so regulation increases the cost
and it also suppresses innovation in one sense
so if you were to compare like a typical very large bank
if you look at the fines they pay
the total amount of the gross they spend on complying
by all the compliance regulations is quite high
like you could have like 10, 20, 30, 40, 50 startups
just the amount they spend paying fines
so there's that bit of it
and the other side of it is like how does one get the right kind of behaviors
without going to this rigmarole of
the key I would say is like always regulation catches up with innovation
day one what happens is like whatever innovation happens it happens
and the people in regulation they just wait for it to get to a steady state
and they have enough of time for them to respond
so they would go back to it and kind of come up with a bunch of regulations
that might or might not help
and hopefully if it works it'll be very good
I just wanted to add one other point
that somebody else was speaking about just before me
about forking there is a prime reason
the economic reason why folks seems to always happen
you know a fork whenever it happens irrespective of the outcome on the long run
produces a lot of liquidity for everybody
both on their protocol and the full protocol
and this is definitely an incentive misaligned
this is two things I just wanted to mention
yes thanks for providing your insight I appreciate it
so just a couple more questions
and then we'll kind of wrap things up here
one of the main focuses as we all know in web 3 is to move to
more decentralization and giving the power back to the users
one of the focuses that we're focused on at layer 1x is also
decentralized digital identities
and being able to provide the power
empowering the user to control their own data
to no matter the chain that they're on
building their digital identities
is this something that you feel is important to implement
is the ability to tap into these decentralized identities
that people are trying to establish
I believe this is crucial right now
because we are no longer in the early early stage
this is going to be very helpful for people who are hardcore crypto enthusiasts
yes people who are already in there for a couple of years or more
if you go back to 2017 to 2021
yeah sure you had one, two, three, four wallets disposable
you had transactions in them
but you always had one primary wallet
you had a bunch of different applications you interacted with
when I say bunch of them probably it's two dApps that you interacted with
but right now every one of us
we not only have few dozens of wallets
because of the history over the period of time
we ended up with more wallets
not every wallet is in MetaMask or the like
there are many which are dedicated
they have their own version
their own way to access it
you have certain things on your mobile app
and then you have a lot of dApps
it's not just one version of the dApp
like take an example of Avi
you have some money there
you have some money there
and on top of a 10 different chains for each of those things
so it's an extremely complex situation
even something as simple as an adsense portfolio
is very helpful where it brings all the different dApps
from all the different chains and consolidates it
although I don't agree on the user experience of that at this point in time
so with digital identities
it is important to bring that along
so a user at least for a record keeping purpose
knows what they are, who they are
what actually still belongs to them
and their digital footprint in the blockchain space
and the way they want to represent it
because right now it's still fragmented
members with multiple open sea wallets
and different chains where they're participating
it's just very hard for them to represent themselves in a unified way
and these digital identities are a need at this point
not because it has a major application
it does have a major application moving forward 20, 25 and beyond
but right now it's a matter of necessity
and something I believe just makes user experience of people
who are in the space long enough much better
May I allow you to talk about the U.S.
The concept of digital identity has been around for a while
of we should have that and just in banking
so if you look at banks need to have corresponding bank relationships
with other banks in order to operate throughout the world
and if they don't and you see that issue in the U.S.
for example related to banks that deal in crypto
have trouble getting corresponding banks in the U.S.
and that means therefore they can't really get access
to our payment system in the U.S.
and so if you even just take it from a
not even looking at the decentralized digital asset
just like the concept of a digital asset
that can be passported and used by smaller banks etc.
that gets rid of this corresponding bank idea
that would be just one simple step
that would be amazing and change a lot of things
but I do think decentralized identity overall
or digital identity and decentralized
is going to be a major theme for us in 24 and 25
this is how we get to the place of fully decentralized finance
eventually but we can't do that without this decentralized identity
infrastructure being built up
If I may, I just wanted to add a couple of things
As I was saying, I've been a researcher prior to getting into crypto
so in my research days I've done some work on identity schemes
and I've sat on my subcommittee for Group 3 and Group 4
and being in crypto all this year is one of the things I noticed
is that we are going through the same process
we went through in Web 2 for identity schemes
and if you go on Google over a back machine
and see the number of failed identity schemes
it will tell us how much of energy, time and resources were wasted
in trying to get in one sense acceptable identity
and the other part of this thing that we need to recognize is
even though identity schemes were there
there was always some effort spent on having privacy
and I am kind of not sure that the current set of all layer 1s
have the construct of privacy in the right place
in the right order with the right priority
that one needs to understand
it's like in the machine learning world
where there's an arbitrage between people who have access to data
who could run machine learning pipelines
versus people who don't have access to data who could run pipelines
you know who is going to win
and if you were to have an identity scheme
and if you were able to map this back to all the public chains
that is a very interesting scenario
and so whenever we think about identity schemes
we definitely need to rethink the way in which we would create one
how it would interoperate
and what would be the criteria for accepting an identity
so identity in general is like a composition of claims that somebody makes
you can have some fancy cryptographic mechanisms like ZK to create them
but I guess this bridge between the real world and the virtual world
is a challenging one and as far as I can see
we haven't really thought this through
we've had a whole bunch of projects that's coming in
that some of them have succeeded and some have disappeared
if we go forward and we have some schemes
we probably need to spend some time understanding lessons learned
both from web 2 and web 3 and like incorporate those lessons
so we don't end up having more failures and more cycles
where all the data that we have is in public
and all the things like all the upsets and downsides of that sense
Yeah I think you bring up a couple of good points
I know that as we've been educating our communities
on the importance of digital identity
especially evolving into the web 3 space
and taking control of their data
taking control of their web 3 experience and in essence
you know there's been a little bit of pushback
because it's all about the anonymous kind of atmosphere that crypto brings
and so by building out an identity
it does make people feel a little uncomfortable
that they're going to be putting their information out
but I believe that it really boils down to being able to control
being able to in that sense of being able to
having a user be able to share the certain information
that they want to share with specific people
and being able to revoke that access as needed
and so with that being said
one of my follow-up questions to that is
I come from a space of the SaaS development world
and I've seen big companies have absolute control over their user data
and in today's world data is king
it's the currency of web 2
and so as we kind of move towards web 3
do you think that projects, chains, things like that
do you think that we can share the data
and come together in a universal form to form this digital identity
or do you feel that the change will happen as users
begin to take control of their data
and begin allowing different projects, devices, things like that
If I may add my two cents
just to be completely clear
I've actually given a talk a very, very long while ago
the title of the talk was
My Identity, Your Service
and literally this is in 2010
you can just google it and find it
and this isn't the identity as a service thing
when the previous speaker was talking about software as a service
this was the kind of thing we had at that point in time
and what has effectively happened is
firstly there has to be incentive alignment
so typically any identity provider
the identity provider bootstrapping
is like the most expensive thing for identity schemes
and somebody has to put their money down
and the second part is once this is set up
then there's a network effect
the virus that has highest ability to infect people
and don't kill people survives the most
talking of comparing identity schemes to viruses
so this is effectively what's going to happen
so there could be different scenarios
and I don't have a crystal ball
but I've seen what has happened over the years
in various identity schemes
so given you were talking about identities and enterprises
one of the reasons why identities and enterprises
they can lay down what they want
is because first the identity store is completely
if you were to look at your contract
they actually own your data
so then they have the ability to say whatever they want
and then there's this predominance of MS stack
so that could be directory plus other rubbish
plus other people have now started then
so there's Google and their services
because of this network effect
once you are in this ecosystem
it's easy for you to run federation
so if you are in a Microsoft stack
if you want to interoperate with somebody else
you can turn on federation
and then you can make it work
so the way I'm thinking is like
something similar might happen in the web3 world
one or two of the protocols might gain enough of attraction
so that's a high chance that randomly
if you had to pick one format or a protocol
this would be one of the many
and then because interoperability adds value to everybody
there's some sort of a federation
or bridging or something like that might happen as well
this is my two cents worth
I don't know how it's going to be
no those are some great insights
so we are over by about seven minutes
so we'll wrap things up here
thank you for everybody that has joined us today
one last question if you want to jump in
great if not after that we'll just kind of wrap things up
but the question for you guys is
how or what do you feel is going to be
some of the challenges that will need to be overcome in DeFi in 2024
and yeah so if you want to jump in and give your last kind of comments that would be great
yeah I think I'll tack on to the identity in DeFi in 2024
the big conversation that I'm having is really around identity
KYC AML RWAs access because the on-ramps and on-ramps of these things
will require KYC AML and different types of new identity schemes
there's a whole lot of interested parties in getting things on chains
because the concept is if we get these RWAs on chains
more access to capital there's more liquidity in the markets
there's more liquidity in the markets
there's more fun new DeFi primitives that we can build
so in terms of interoperability identity
I think they're absolutely required for real-world assets coming on chain
and I'm excited to hear more solutions around that
and also looking for real-world assets from the context of compound protocol
so if you have a real-world asset and you want to get it listed on compound
please feel free to contact me
we are actively looking as part of our mandate in 2024
I think if you look at the vast majority of DeFi projects
they actually have elements of some centralized control
yeah I would say the biggest challenge is being selective
as an organization, as a startup, as a company
into what chains you're going to work with
how you're going to kind of ensure that those chains are secure
what those bridging protocols are like
and what ultimately you feel comfortable maintaining as a brand for your users
it was a great conversation about the legal ramifications
but the reality is as innovators in this space
we are upstream of the regulators
so the decisions we're going to make have to be vetted internally
have to be self-governed as an industry
and first as a leader of your company
and from there you can make a decision that you feel good about your end users
so I think it's going to be vitally important
and certainly for all of us in this room to hopefully be cognizant of
so we can help to grow the space and legitimize it in a really meaningful way
Margaret you were saying something
I think the majority of DeFi products actually have certain elements of centralized control in them
and so I'd like to see more of a focus on transparency
about what projects really are doing
not what they hope to do for their users out there
you know we all have what we're planning towards
but like being really transparent
here's where we are right now
and here is where we're going
and I also think 24 is sort of a bridge period
where we will see a lot of hybrids
and the hybrids are going to help us move to the eventual decentralized concept
so that's a lot of what I would say
I also think it's going to be just another huge trend
is RWAs and the tokenization of everything is going to be driving a lot of this
which is going to be a great driver for DeFi to start to take hold
So I just wanted to add two lines
just to be sure that everybody gets their views across
so in Europe, Mika is going to happen by December
it is going to be an interesting
I'm not a regulator, I'm not a lawyer
I've been a cryptographer but build protocols
so my understanding of law is limited
but I've actually talked to the regulators multiple times
and advised regulators at times
so that to me is an interesting construct
and similarly everybody that spoke before me also mentioned regulation
so the requirement of KYC, KYT is going to be very very interesting
I know someone else was saying that we as decentralized projects
should think through what we do
have consensus, then publish what is happening
I want to add a couple of things so that everybody understands what we are talking about
if you were to look at Ethereum
for possibly the largest chain which we have right now
and look at all the L2s that are there
pretty much all of them have some sort of a mechanism of a multi-sig underlying
with less than 15 people having the key shares
so if that is the gold standard for decentralization
well we can all reach decentralization
but again as I said I'm not a lawyer
I don't know how to define decentralization by legal means
there are definitely interesting trade-offs that we as DeFi have to come to terms with
because the trilemma is real
unless you can spend space and time
there is no way in hell that we can actually create trade-offs
where people claim they can make
because it's like simply second law of thermodynamics is thrown out of the window
people with no understanding of cryptography or consensus
or basic physics talks very interesting stuff
and the regulators who have no ability to understand any of this
looks at the worst case and then make a pass-loss
and then makes it very difficult for people who are fair and honest
and say what they do and explain everything they do to everybody else to operate
and that's something I think we all need to answer
does anybody else have anything they would like to add?
before we close out this episode thanks
let's give a big thanks to everybody that was on our panelists today
as a panelist and for their participation
sounds like you guys have got some great projects that you're working on
can't wait to see what you guys do
agree with a lot of the things that were mentioned today of coming together
and us forming the standard of raising the bar in an essence for projects
to help users feel secure, safe
and basically be able to participate in the decentralization
and financial opportunities of DeFi
so again please mark your calendars for episode number 11 of X-Talks
on the 19th of January at 1am UTC
again we'll be discussing web 3 gaming and interoperability
current problems and solutions
so until next time keep pushing the boundaries of innovation
and to unite all of crypto and everybody have a good day and thanks for coming
thank you Cody and just before we wrap up I wanted to add that we do have
many competitions and stuff like that running in our layer 1x discord
so if you aren't in yet the link is on our bio
and thank you for joining see you again in the next episode of X-Talks
thanks guys thanks everybody bye-bye
thank you thank you have a great day everyone