HK Blockchain Week 2020 -Panel: DeFi: What's Exciting about DAO, Liquidity Pools, and Yield Farming?

Well, thanks for joining us at Hong Kong blockchain week. Let's get right to the point. We've been talking about it at the world has changed arrest. Kabli it's hard to even say that word because that's where we are at. What once was unimaginable is now pretty much every day in our daily lives and then just to expand it to central bank. Then to policymakers were seeing, you know, the system, pumping the stimulus driving down yield that were experiencing global economic uncertainty. Pretty much volatility is in bold and

underlined and what's really interesting, however, is the rise of beef. I am. It's all of this. Let's talk about it now or decentralized autonomous organization. Let's talk about liquidity pools yield farming and the external conditions driving it. We've got some great panelist for you. Play some introductions. I'm excited to be your moderator. I made you our editor-in-chief and founder forecast news. We cover blockchain and emerging technologies that are shaping our worlds at the intersection of business, politics and economy

for professionals and you. And I'm joined right now really thrilled to introduce them McCormick, high or low as a dear friend and one of Asia's leading blockchain and financial regulatory lawyers, and her focus on emerging Technologies and financial crime really make her an advisory and thought leadership voice at Fort. Not only governments, but for institutions, as well, in 2018, she was recognized as a financial times top 10 leading innovator of the Year award. So there you have it.

I'm so some, some, we have a deep bench for you, Alex mashinsky, of course, that many of, you know, Alex, He's on his 8 startup company at Celsius network of which you know has already raised 50 million in Nico. He is a prolific investor 120 VC, Investments himself, Alex, you've been busy, you hold 34, patents, you've raised billions of dollars for your company's I and end about that much in exit. So it's it's great to have you on the show and at Hong Kong blockchain week

and to really kind of tap your brain about what's happening in the space Nico, it is great to see you again because Matt's Amora is a general partner with Venture Capital fund. Ghumiya kryptos capital is a general partner there, this is a 30 million-dollar Venture Capital fund focused on early-stage startups. He's also co-founder at evercoin, the safe wallet and cryptocurrency exchange. So that's really, really great. Cure for this discussion. Okay? So let's let's go off. What is defy?

Yeah, so I think Alex actually was kind of grabbing having some fun with that before we start at the panel? So, you know, I I, I guess to me, the thing that's really interesting, is this, right? Which is, there's really broad Define narrative writing so narrow Defy is really just a theory them and if they're in smart contracts, right? And it's really people seeking Meals by offering liquidity into the contract rights of the really locking is so-called locking value of ethereum into these contracts, right? That's narrow defy, right? But if you really think about broad defy, right? Brought

Defy is decentralized finance and it's really a Counterpoint to you, no centralized Finance. So if you, if you think about it, much more broadly than it is potentially inclusive of things like Bitcoin, you know, and it's inclusive of a whole bunch of things. And obviously people talk about defy going to other platforms, like pesos. And, you know, through spark going on to things like xrp and, you know, so there's a whole bunch of different defies that are kind of starting to now am worse off of. Aetherium. So, you know, I think that it really depends on how people look at it, but I get

an ultimately, it's a bunch of nerds looking for yield. So Well, you know, this is a movement that is there. They're also being joined by a lot of serious money looking for you and there's no doubt about that. Look at things, like compound Finance. You know, if there are absolutely, it's a power line distribution of liquidity providers. So you know, there are absolute super whales in here. I think Alex had something to say, Yes. The first before I jump in to be fine, just want to say, I think all of us in that cryptic should

be thankful that you know, if we are tracing a economy where the digital world is going up and up and doing great, most of the regular kind of Meet the Adams and the, you know, any boxes of making anything in suffering through this. So we are, I just want to recognize all those people wish them well, and, and hope hope for the best because I think for all of us, it seems like we just sailing through it, but there's a lot of people suffering and let me see, heard from the covid situation and so on. So I don't want anyone to forget about

that and we want to be as inclusive and supportive as we can, but jumping jumping into defy. So, if you read our paper from a white paper from 2017 and we were one of three, Thousand projects that we're kind of like part of that I see. Oh, you know, Cambrian explosion of experimentation on the Block right. There was like a second phase of a renovation after Bitcoin in the theater room. And, you know, xrp and other chains of kind of showed us. What is the

you know what is layerzero? Okay. Let's figure out what Slayer 1 and 1/2 is going to be here, right? So, so and we at Celsius we focused on this yield. This idea that if the killer app for Bitcoin a store of value, the second wave of innovation is going to be all about the yield. But I can tell you that a lot of people looked at us in a very weird way. And and thought that we was we were talking about was completely crazy and they will never be successful. And we launched the product. In 2018, we will pay start paying interest on in the beginning was 5 hours since and then 12

and then 25. Now it's 41 assets right? To Celsius today, supports more blockchain than any defy project on a planet. That's three more blocks in that all of our competitors put together. And and so for me defies not are you fully decentralized? Or do you have one leg in the centralized World acting in the best interest of the community? Are you delivering a service that cannot be provided by the banks that I? That's why we wearing these unbank yourself shirt. So so because if we are fighting over bringing hundreds of millions of people from the

centralized World, from the banking world into the centralized world, they're going to come because of yield. Some of them can afford to come because they want this store of value and on the Bitcoin. But most of them are going to I'm just because I want to earn that 5-7 10%, so I'm very excited and we were the first ones to offer interest in kind with the, paying Bitcoin, a Bitcoin, or ethereum ethereum and the first one to pay you with the token, right? So it wasn't compound, it wasn't uniswap. I hear before all those guys else is really invented the whole idea of

defy. And, you know, I'm very excited though. Everybody stopping us, but we still pay more than anybody else. So my argument for all these guys who are, you know, fighting Celsius, is we pay 80% of what we produce back to the community. If anyone wants to be better than us, show us that you're paying more than that shows, you paying 90 on 95% in the only project I can point to say, yes they do better than Celsius is Wi-Fi because they've been effectively have no pre mine and they don't charge any fees. And that's exactly the model that I think you've all of us focused on that improving

them all. Then we will actually bring hundreds of millions of people from the traditional Finance world and make it a better world for all of us. And realized means that there's just you know as project Pile in I there there is there is a new Wild West emerging and for no I want to bring you in here because you know this is this is space that you've been in for a while and you've seen regulators and policymakers alike. Look askance at at some of these

developments and, you know, Rex respectively, a Time start policing that way and a restricted. Do you see what do you make of what's happening and defiant? What are some of the reactions that that you are feeling in your conversing with in, in from a reaction from regulators? And in policy makers, Might be fine now, is that y'all are really high and dry them at the international policy level. And you don't ever regret, is it looking at it? You know, this countless industry for now. I'm running just a tad, is mushrooming everywhere and

it's now because of the right start, the critical aspects of that, the challenge that it poses to traditional, which looks like that. You are in fact that the regulatory model across the industry is Spectrum. Define pensive and completely decentralized for Crest minimize. They used or use automation. You smack on text basically, you know as an inherent part of the way in which they operate right through to protect set. You do I cool defy but are actually more just to decentralized finance projects but

with utilizing the actual assets. But, you know, I think it's that is, it's that that class that utilizes automation, very heavily that is pledging. The biggest challenge, one of the challenges that consistently and persistently is kyc know-your-customer, until we have seen a lot of people get in the crosshairs I most recently bitmex I and so n. V, e d v space. How do you end this question? For all of you both from the Enterprise side and and the the policy side, how do you regard this? This attention has focused this issue. This

Issue of kyc know-your-customer in the defy space. Guess I'll I'm happy to be a bit of a contrarian hear you do for me. Like I feel like that's the place where it's there's a kind of non-negotiable you know so you did that. One feels like you know in this isn't my preference necessarily but you know I don't think that the particular I don't think Benson is going to take it easy on this one. You know what, I don't think they're going to be excited about things. Like oh it's decentralized so we don't need to do you know kyc, you know. So I think that's what's going to

happen and you know so I think if you're running a decentralized service like you know, if you eat the precedent for that, is that Cobain who created either Delta an SEC basically went after him for a settlement, you know, and they say you do that was not icy at all. It was actually running an unregistered exchange but it absolutely had to do with, you know, hey, you know, he didn't even own either Delta anymore. I already sold it and it was decentralized to begin with. So, you know, at some level that you. So I feel like, You know, I don't go after people associated with decentralized

exchange, you know, and whether it's even fair or not for them to do that. Like that's, that's I don't think they're going to care. Yeah, I totally agree with me. Calling the guy. Got it Celsius. We, we filed with the fence and we filed with the SEC back in 2018. When we just got started and every one of our customers from day, one was fully kyc, we could do continuous AML. So that's one side of the coin, down the side of the coin, and I'll throw this to her. So I just cuz she's a lawyer in the room. But take an example of a fully decentralized exchange ride. That's Ron's half of the

assets on any of those dex's are centralized assets. Usdc is a centralized Acid Rap, the ABCs centralized acid is essential as assets. So let's a court order comes out then freeze, a certain assets that are deposited one, one another in a decentralized exchange them against that, someone Anonymous person borrowed. Other assets, right? So now you have this conundrum, okay? Who is actually whose assets are safe? And whose assets are not who has a claim and who has not. So do you have a tremendous asset of new

circumstances that have never been tested? At least not that I know of that are really going to create the account. So I think we there is a completely legal way and compliant way to do. What we are trying to do in Celsius found out that way we squeaked our way through, even though everybody said there was no legal right to do it with one of the very few institutions that never received a single action from a single regulated, we operate in a hundred fifty country. Let me stay compliant in a hundred fifty countries so there

is a legal way to do all of this and but our industry somehow always jumps is not. We don't need any of that. We can just ignore all the rules everywhere in the And pretend like all these rules. Don't apply to us because whatever, we were founded in Silicon Valley, or because we are registered on some Island. No one knows where or even where it is that we can get away with it. So, you answer the question, is deploy card to release card into into, you know, they've identified the space and also heard that might have multiple possible uses. It might allow people to form Dow's.

Am I allowed them to, you know, deployed in a way that generates you could have multiple purposes and you know what, you know, the way that we look at that is yes. Okay. So let's look at it through the lens of the classic regular tri-motor old Houston involvement of the developer in promoting it in, you know, using it, instead of tailoring it in a particular way. So he's involving a software that was released in the people who found liable to Emily for aiding and abetting a criminal offense

to the regulatory framework around. But it was because I would be if I can send her and I were involved. I knew that and outcome and I think that's where we're going to start to stay where, you know, if it's a piece of car that you know, where that she's dumb, you're genuinely multi-purpose then it's less likely that they can a full in panties to the regular tree nets. The more and more targeted that it becomes the more willing regulated. So we're going to want to find a system to regulate at and yeah we talked about the possible existing types of laws and Frameworks

that we modify some people talk about will look you know you're done in the wrong hands. Is it illegal? But it's okay. Just texting. Laura and highly. What about trading printed? What about, even puppies for my puppies. I would discuss and decide. You don't know the group the other day and you use for heroin that can be used for incredibly medicinal purposes thinking around how we deal with your smart contracts II. More broadly is, what we need to be thinking about for the decentralized central eyes when they will be innocently

willingness to find actors who ought to be conducting kyc. And, you know, during complying with all of their obligations around the world. I still say, you know, documents to say, this is governed by know Lord, existence by the space, we just saw a Lyndell on my way to tell you not to blow us out of space. Might not side, you know, recognize us laws on NAS, you know that we still say this sort of stuff, you know, happening. And I think we will for some time. Well, he is one of the people on this planet that can escape gravity and living space. And the laws will not apply to him for

the rest of us. Gravity still applies and we do have two domicile here or there and and be governed by local laws, you know, if you boil down to what law is which is human civility, we should be tied to, you know, a greater goal of just being good to each other, right? Law demands, it of us to behave with that Civility and in this way, you know, you can you can create a safe environment where people will feel safe and trust, you know the platform or trust the project and invest dollars without that trust, you know, that that growth is hard

to come by, don't you think it's not just through each other? That's word is that it's the, the consensus, it's that ability of all of us to get together and do what's in our best interest. The reason we always lose against the bank because we always a 1-1 against the bank, one of us against the back, if we all got together and pull their assets and acted in our own best interest, we don't need the bank anymore, right? That's why you can Invent Yourself because the pool of assets can earn, he'll just like the bank or in the yield on your own ass that. So I think when you

see companies like PayPal or line who we partner with bringing hundreds of millions of people into this industry, they want to bring it in that. In that again, it kind of compliance way, they don't, then I'm going to go for that fully defy decentralised. No one is in charge when so, so we need. We need, we are so close. We are so close. And yet, what are we do we throw sand at the regulators and, and the people on the other side and and pretend like we can get away. Anything so well and I think that you just couldn't agree more, you know. And a lot of them that you know,

you have good intentions. But you do see how long the way and it's used insatiable. You know why I asked to make that money and get our adamantly against any form of, how do we keep those people out from spoiling? Yeah. How do you do that? But I think that this is really the question, right? Because it's the question of externalities, right. Externalities are basically, I can take my cost and I can push it on to you without your consent. That speaks disability. It speaks to wealth inequality, it speaks a lot of these really really important

but maybe not diving into one of the big Promises of what I call open-source Financial infrastructure. You can call it be 5 if you want. Is, you know, it's about really lowering the cost of infrastructure, right? And I think Alex is made, probably the most Salient point, right? Which is that you don't Ultimately, what's the difference between kind of deal did not yield right? Is is ownership, right? So like, you know, and I called the back of a Bitcoin, like the bank of the internet owned by the user's, right? So

it's in. Sometimes you do, if your user, you know, you're using it to store value in the extent, to which you're using at the store value, is the extent that which you get the kind of dividends of the increase in the value of Bitcoin price of Bitcoin becomes more valuable. You kind of get your share of that value, much like, owning the bank, right? So to me, that's where they yield is coming from. It's coming from over shift and it's because people are disenfranchised, and they're not understand because they that's why they're getting no yield. And, you know, I think Angela, you said

something really intriguing, which is you're talking about how give me a list actually decreases yield, right? And if you look at like what the Federal Reserve is doing, you know, they're slashing the prime lending rate to 0. Right? But much like whack-a-mole the thing that's so fascinating. Is that that exact Behavior is what's driving the old on the Bitcoin side? It's right. So it's so you know, the more likely it was comes out on that side, you know? It's like a whack-a-mole, right? So you know, this side and the other side pops up. So that's what wait, wait. We're just at least in

the US right away. Borrowing from the future. We reaching out to the Future printing dollars and belonged to our kids and grandkids and using them today to fill a hole that we have because we didn't save doing the good days ride. So, we spend everything. We made during the good days on stock BuyBacks and dividends and whatever. And we got into a pothole. We went to the government in the fellows that plays Bella South look, there's a pandemic. Well, great, there is a bankruptcy court for that. If you have a business, it's better because you're

defy, and where the yield is only January at it because of newbies are coming and putting more money in and you can sell them your token that you got basic. The lower-priced that is not true value creation, right? I mean like again, the Celsius model is based on the landing to institution. Most of our money comes to make changes in institutions who pay us interest past yield and we distribute 80% of that to the community. But the PewDiePie model does not have that real engine at. Like, you know, like Nico is saying, the engine that generates value creation for Bitcoins, not really exist

in a fight. So we're still experimenting with different business model, was still trying to figure out what works more and and again, not to brag. But our token is about 3100 per cent this year, right? And it's not because, you know, we're part of these fights because I don't we have a sustainable business model, right? So so that what people don't spend enough time on is digging into the flywheel digging into was driving the stuff and trying to understand. Why is it working? Where is the yield coming from? When we go to say, and then say, okay, let me. Proven that right? Let me make

let me hear the bell in the whistle will make it run on this without the blockchain or add be more inclusive or make it run on multiple languages and so on. So so we still struggling with what is a valid business model and what is not available Well that is a perfect jumping-off Point. Let's let's get let's dig deeper just as you suggested Alex we've got the great panel to answer exactly this. Let's talk about how what what are some of the most interesting applications of doubt that you're seeing right now with a potential that that's

emerging in, in, in your opinion. Nico, Alex is making a mechanism, is a great vehicle that basically creates value for the market makers who are participants of the community and basically provides a service to the people are. She want to exchange one else it for another? So I think that is definitely a sustainable, scalable business model now, I know what to do there, and it only works for the first 60 days or whatever, right? But maybe we can improve on that ride. Then we can and you have a permanent loss that you have to deal with that. You have

to really kind of think about how do we fix that there are other projects that are trying to to deal with out as well. But but there are some very good business model them, not that I don't want anyone to come out of this. There's only one. Good one in what Alex is running, right? There's a lot of other good ones, but but we are when we see a bad one. You, and you see all that money, rushing in like it, like sushi swap, for example, you know, it's not going to end well, you know, it's going to be a bad ending for the people who came late and all these people going to

leave crypto. They're going to go back to fear plan and is going to make it so much harder for all of us to get to that mass adoption. When people don't feel safe that they're just not going to trust you with their money, did that? There's no doubt about it. So you named a project, let's let's let's think about it, more broadly. What are the characteristics of a great gal app or a great project? What are the characteristics of one that doesn't smell so good. It's like you here probably from the legal point of view. You probably have some good things to say about that one.

Case, I love dogs really our Collective investment scheme. So they are actually security is right by it. When they don't necessarily support by centralized. Turk, make enforcement difficult or they might know what I would say. More broadly, is that your the connectivity? You know, if you lie to the rich life that they can work very well at the same time, you know? I query the quality of dominance which one of these Julie decentralized, you doubt that the necessary have long-term incentive long-term investment investment. And so it is a various techniques that can help with that.

You are very astute of La cops and you know, me to take him. She said no she did not State Building in and understanding that you know, how you guys have been sent by the best interests of of of, of that organization. So I think that's how I'm definitely a cage for really understanding that brought order contacts in terms of potential. Running it today. It. Said the key thing, but I think it's also important for us to recognize that when I'm out of sorts about value creation, one thing that's really important to recognize that defy

endow is the value in credit in terms of rethinking, how traditional Finance works. And we can spend a whole nother session on those learnings that will inevitably make their way into traditional Finance what necessary, replace traditional Finance. I'm going to start to see a lot more vice-principals pretty and stable coins. I really gained traction. That that's really. What's been exciting about? All of these conversations you know some of the best fintech Professionals in the world's all headed to Hong Kong this week. I'm virtually at

least and that's that. He has the opportunity to you know, learn from The Innovation that were seeing a device Payson. And how do you kind of almost take that the back learnings the best practice in in potentially you know, create Innovation, internally on Legacy systems that is a great list that you started with me. Could you want to add to anything to add to what are the best characteristics of projects that, you know, really resonate with the community. And then what are the ones that don't really? I know, we're really short on time and I know that like,

with this panel, it's obviously hard in the short of time to actually do reasonable service to a topic like defy and to go sufficiently deep. So, Do it. If I'm a, I'm just going to tell folks to check out my show. It's me. Co.com bits b, i t s. And, you know, I have a bunch of folks like us, Bonnie, the creator of Ave. Eastland and then obviously, you know, folks, like Ken Warwick who created synthetics and, you know, folks like Alex machines, can you create itself? We have here. So you know, yet and then there's like love to have

you on my shows while so you don't got to come check it out. Okay, good. Good at liquidity pools. You know, this obviously is also the Crux of the question that defy, which is as people fled into the space. How tamper-proof is it? How secure is it? Is it a Ponzi scheme? Is it? You know, how, how is it explicable that you've got a thousand percent yield when in Real world in India, central banks are doing negative yield their there, you have to pay a bank to hold your money because central banks want you to spend it. You know, that that's, that's the, that's the, the monetary policy

of the real world and its defy defying that in in the virtual world. So, let's talk. Why do people carry and in? How should, you know, how should projects be thinking about it? And in doing it just it's just lie in it and doing it. Honestly, I love to delete off here cuz I think Alex said something really interesting, right. Which is about kind of durable, value-creation, right? Cuz the thing that I think is super important is, you know, I think I'm Warren. Buffett says, if you don't know who the mark,

the soccer is at a table that that you are it, right? So, I think that corollary and Defy, is that, if you don't know where the The old is coming from, like it's coming from you because basically yields a large amount of the Lost value yield comes from people, getting wrecked, right? So they're aping into coins, that have no value, you know, they're exchanging things that have value for things that have no value, you know? And so like, this happens, right? Then, I think I'm Drake, Ronnie, or the creator of wife? I said that, like, it's money transferring from people who

don't know, two people who know. But like, that's, you know, that can't last forever, you know. I do think there are fundamental utilities that have been dealt that are valuable but, you know, there are also a lot of things that don't fit the bill so I bet that's my read on it. What I mean? Alex? Yeah. Night. I totally agree with me, he always manages to summarizes and such a great way. That's hard to go after him. You know. That's why I always try to jump in front of him to try to see what the what he said. Look, there's definitely value

here and then one of the reasons there is value is because if you look at him too, or the money supply and you look at the velocity of money, you will see that it's down dramatically, right? But when you look at the velocity of money and defy or on the blockchain it's up it's ten times. Greater is greater 3, * 10 * wear them because of that, when you would, when you deploy money on the Block, in it, if you can or and much more. So, like Celsius pays 10% on stablecoin, that's a hundred times. More than your bank 100 times more. Now it's not because

Celsius is a hundred times better than the bank. It's a bit because the bank is stealing from you 9. Percent of the value. They are creating with your money. So so what but we do what we do need to do is we need to differentiate between the real sustainable projects. Like Nico was talking about the guys who are really in this to help you who represent your best interest one thing about Celsius that I can tell you that no other project in crypto can say is that we're not in neutral project like uniswap or I will compound. We only represent the people with the assets. Our job is to

collect that. I said, now, we have over 2 billion in Collective assets, from two hundred, fifteen thousand people and extract as much value as possible from the institutions. Again, each one of those people going against the institution will lose every time but when we have 50000 Bitcoin in our position and we negotiate with institution, we can get 10, 11, 12 per cent to borrow these assets and deliver most of their back to the community. So, Not sustainable is when you create something that has like a thousand percent they yield and

everybody while they're afraid, they're going to put some assets and they hope they're not going to be the ones getting wrecked and and their many of them do and that's just not, it's not good for the community. It's not good for the developers. No one wins from that. Got to ask you. This were talking about liquidity, pool and safety. This is what you think about on behalf of governments you, you think about this on behalf of regulators, you also think about this when we have a project so when you so when it comes to actual money flowing in

for projects in for people participating, what is the one take away that protects us all? I just want you to keep messages, you going to have that crystal ball, you have to think about where, you know, you will protect, you know what, environments going to be in in 5 years and we hit it hard from various angles there, and hit it hard from the people who looking for X-Plane, you know, it in your beautiful system. You need to look at it from a regulator standpoint, who came to clamp down

on that use, can't you send the flows into your into your into a pool and you need to get at that. For the five steps ahead is that turned it off. Aside from the usual side, you know, the tricky thing is navigating information. There's so much information that they are and you know, the quality has dramatically starts. Your what Alex has told me that the differentiating between, you know, what is ridiculous and what is reasonable is still pretty hard. But then for the young boys who were in the peace that, you know, there really is halfway to getting some good diligence and projection.

It's basically people who are in the sky. Will be able to smell a rat, pretty, pretty quickly or tell you, you know, this the 10 things that you need to think about. I'm and look at very carefully. Look in your head in educating yourself. That's a huge take away. And as Nico said, he is a great resource. Alex is a great resource very vocal in the space Ursula and do that. You are an incredible resource is well and I hope to be a good resource for you are at ww.w., Forecast. News, but the ultimate resource and then the big organizer to thank for this

conversation is Hong Kong blockchain week. I and it was great to see all of you. The panelists here and all of you who are watching virtually right now, wherever you are, collectively on behalf of the panelists and and the conference, we hope you're staying. Well you are a hope you're staying safe. It's a very volatile world, but knowledge, truly empowers. So thank you all great to be here with you. Next year in person in Hong Kong. Thank you, thanks.