On October 26, 2020, at the 7th Old Friends Reunion IOSG DeFi Summit, we invited Sergey Nazarov, the co-founder and CEO of Chainlink, Kain Warwick, the founder of Synthetix, and Antonio Juliano, the founder of dYdX, from 1inch Exchange. Co-founder and CEO Sergej Kunz conducted in-depth discussions and exchanges on the theme “Collaborative capabilities of synthetic assets, decentralized trading and oracles”.
Original title: Wonderful review of IOSG DeFi Summit | Synthetic assets, collisions and sparks between DEX and oracles
Moderator-Sergey Nazarov (Chainlink)
Hello everyone, I am so honored to be with the best minds in the industry. They are people who have created solid in the DeFi world. You and I are fortunate to listen to them analyze problems and share opinions, because they are all personally and personally polishing products. , The person who pushes the world forward. So today we discuss a few interesting topics. Before the official start, in order to facilitate the audience’s understanding, it is better to ask each guest to introduce themselves and talk about what you are doing. Let’s start with Kain Well, just briefly introduce what you are doing. Each guest will introduce one by one, and then we will enter the question section.
Kain Warwick (Synthetix)
Okay, thank you Sergey, I am the founder of Synthetix. Synthetix is a synthetic asset issuance platform on Ethereum. We use Chainlink oracles to allow users to obtain price exposure of various assets. Otherwise, our gold, silver and Bitcoin assets will not be able to trade on Ethereum. Ok, Antonio is here for you.
Antonio Juliano (dYdX)
Hello, everyone, I am Antonio, the founder of dYdX. dYdX is an industry-leading decentralized margin and perpetual product trading platform. Perpetual products are one of the most popular categories of cryptocurrency derivatives. Sergej is here for you.
Sergej Kunz (1inch)
Hello, everyone. Thank you. My name is Sergej. I am the Lianchuang and CEO of 1inch Exchange. We are the leading aggregation protocol on DEX Ethereum. We have also built other products, such as the first AMM model that avoids pre-trading. Introduce more products.
Moderator-Sergey Nazarov (Chainlink)
Okay, thank you everyone for coming here and talking about these interesting topics. I think the growth rate of DeFi is really gratifying, and I would like to hear how you think DeFi has developed in the past year. In the process of development , Are there any special surprises? Antonio, if you don’t mind, let’s start sharing with you first.
Antonio Juliano (dYdX)
No problem, a lot of things have happened in DeFi in the past year. At least for me, most of them are surprises. Let’s talk about the general revival of tokens. Of course, it’s just that the COMP tokens have performed very well. The new liquidity mining plan is really a phenomenon-level product. Of course, many projects have also launched liquidity mining soon. The most famous example is UniSwap. I think the explosion of these new tokens, these teams do everything Very interesting: They have produced more types of assets and enriched people’s transactions on Ethereum. This is a substantial increase in the adoption rate of DeFi. The real driving force makes DeFi the first place where various assets can be easily traded. It can be said that UniSwap is a real pioneer in this regard. Their transaction volume has always been considerable and they support a lot of new tokens. So I think the biggest bright spot is that the re-emergence of tokens has spawned many new assets that people want to trade. , Which brings new trading volume to decentralized exchanges and other products.
Moderator-Sergey Nazarov (Chainlink)
Yes, it makes sense. Sergej What do you think of the development of DeFi in the past year, have you encountered any surprises?
Sergej Kunz (1inch)
In fact, what I did not expect this year is the rapid rise of liquidity supply and some agreements. UniSwap has done a really good job in introducing liquidity, and the current liquidity is about 2 billion. Compared with last year, the amount of data has increased by a large amount. Step. In terms of the number of users, 20,000 to 30,000 users are using UniSwap every day. This is really important for the DeFi field. This year we have several particularly popular products, such as YAM tokens and development coupons. The money ran away in SUSHI tokens, but the money was later returned. So you will find that these projects can not only promote the development of DeFi, but also may ruin its reputation, but we have always been there and still have a grand goal.
Moderator-Sergey Nazarov (Chainlink)
Yes, the future can be expected. Kain Regarding the development of DeFi last year, what do you know about it, and what surprises you in particular?
Kain Warwick (Synthetix)
I actually feel that the revival of tokens is not unexpected to me, but it has somewhat verified my ideas. I have always been a solid supporter of tokens and have never changed my position. I always believe that tokens are a very powerful coordination mechanism. What surprises me the most is the COMP token. The special thing about the issue of COMP is that this token does not have too many regulations. It is like saying that we are issuing tokens now. This coin itself has no rules. My instinct is generally that we need to be clear. The rules of the company clarify how the coordination mechanism works. However, the idea of issuing a token first as a governance token, and then allowing governance to solve other problems is really surprising to me, I did not expect it. I think this should also be a critical innovation Bar: To enable the new wave of tokens to be launched quickly without planning everything in advance, they first issued the tokens, and then let the community decide to change the rules and governance system. I think this model is particularly interesting, and I definitely expected it. Outside.
Moderator-Sergey Nazarov (Chainlink)
Yes, it is particularly interesting. I did see a lot of innovations. One amazing thing is how fast liquid mining is developing. Kain I think you should have a lot of thinking about liquid mining, right, For example, the principle of operation and iterative methods. Many of the first versions were developed by you, and then others succeeded on the basis of those ideas, which attracted a lot of attention. I really admire you. But I think there is a real point. It is the interest rate, that is, the given interest rate can make people willingly bring Bitcoin into the DeFi ecosystem. This can even give people in the traditional world a reason to make assets encrypted and tokenized, because they can get it. Interest rates cannot be given by local bank accounts. In fact, liquidity mining has been misunderstood. Everyone finds it strange to operate, but in fact, it shows a very basic usage scenario in the form of income. So I think our ecosystem is now It is a great innovation to be able to successfully generate a large amount of revenue in less than a year. We have now made certain progress and reasonably developed some products, which are not only used to generate tokens to circulate everywhere, but also to invest in more Many use cases, such as creating financial products to generate revenue, etc. I am actually thinking, what do you think about this scalability? How do you guys think the DeFi ecosystem will develop, and what role will layer 2 play? I think this question The first one to ask is Sergej, what do you think of this?
Sergej Kunz(1inch)
I think we need Ethereum 2.0 to expand, not the solution of layer 2, because the composability of layer 2 is too difficult to achieve. If our DEX aggregation platform integrates layer 1, it will be fine, but integration of things other than layer 1 is really true Very difficult and painful. We need higher usability, more user-friendly interfaces and processes, and add more content to the existing products. From our point of view, this is useful and can bring benefits. We are also talking with some Russian friends test layer 2 to see how the test results are, but we are optimistic about Ethereum 2.0.
Moderator-Sergey Nazarov (Chainlink)
Yes, it makes sense. It is conceivable that in an environment that focuses on transactions, if the token is not in layer 2, it should be tricky to deal with. I think this is also a problem that many people want to solve, because they want one that is as natural as possible Transition. So when it comes to this point, will DeFi expand reasonably? What role will layer 2 play in it? What do you think of Kain, and how do you think this will evolve?
Kain Warwick (Synthetix)
I think we have been waiting for Serenity and ETH2.0 for a long time. This has been brewing for a while. In the past 3-6 months, the gas price of Ethereum has really caught us off guard. But the good news is that this has really forced everyone People cheer up and work hard to promote scalability. So we are now in a situation: there are about 20 very strong teams to study and solve this problem from different angles. We finally got enough investment to focus on being a layer The expansion of 2 is very exciting.
I think there should be a transition period. You can read Vitalik’s post a few weeks ago and you can see the ETH 2.0 roadmap. I think we will have a transition period, which may be 18 months or 24 months. We are still stuck Since ETH1 is only available for ETH1, we still have to expand ETH1 as much as possible. Obviously ETH1 has composability problems, but we can still take some measures to alleviate these problems. I agree with Sergej’s view on composability. Especially for a DEX aggregation platform. In fact, this is also an opportunity presented by the market. If users need to deal with these complex layer 2 more frequently, it means more opportunities. This is actually the same as the liquidity of all DEX aggregation. It’s the same type of problem. It’s difficult to aggregate liquidity, but you have added a layer of design to solve this problem. Now it’s much more convenient for users. Just go to a place and click a button to complete the operation. I don’t know how the specific router works I know, but as long as I can use it, like a magic, I omitted all the complicated parts. This feeling is: you choose to start trading, and suddenly the magic works, your order will be executed at the best price, even though you are all I don’t know what just happened. So I think that in the next few years, various layer 2 will emerge, you need someone to integrate these. This may be another market opportunity, so let’s say that opportunities and challenges coexist.
Moderator-Sergey Nazarov (Chainlink)
Yes, it’s a good point. This point of view is right. We are here to find ways together. We are in this industry to constantly solve problems. So what do you think of Antonio, how do you think DeFi can be reasonably expanded, layer 2 What role will it play?
Antonio Juliano (dYdX)
First of all, we must realize that it is very important. If users have to pay 5-10 US dollars in transaction fees for each transaction completed, the audience of DeFi will be very limited. If the transaction fees are so expensive, then we and mainstream centralized finance Or an intermediary is no different, so our top priority is to solve this problem. In fact, there are many other restrictions on Ethereum layer 1. Some people may not realize it. In fact , it is not just a gas cost issue, but also a smart contract. You You can only write very simple contracts to perform very simple operations, and layer 2 is more extensible , you can do more interesting things, such as improving user experience. This is also our real concern for dYdX. We are also working hard for this plan. Now we have gradually shifted to layer 2. We are basically focusing on the research and integration of StarkWare, which is a zero-knowledge proof roll-up system. We are also very happy to see that there are so many expansion solutions. excitement.
Many people are excited about Optimism and other layer 1 chains. I think Ethereum layer 1 is actually…maybe my opinion is more extreme. I don’t believe that Ethereum 2 can be used for smart contracts in three years. I think at least It takes three to five years to see the effect. Actually, it is estimated that they are only implementing the initial stage of the seven or eight stages-stage 0. This is also the case in the past one or two years, so I think it will take a long time. And in my opinion Now, there are still some important issues in the expansion of Ethereum that have not been solved, but they are working hard now. So as Kain said, in the transition phase, we will see different projects adopt different layer 2 solutions.
Just like what I just said, dYdX was transferred to StarkWare, and Synthetix also transferred to Optimism. Many synthetic asset agreements, including us and Synthetix, were transferred to layer 2 early. The reason is: (I don’t want to “represent” Synthetix, and keep Synthetix For Kain) At least for us, composability is not so important, because we don’t need so many tokens to be traded on the real blockchain. Since the assets are synthetic, the point is: we can Or a variety of mortgage assets create new assets, but dYdX is not. We only create a variety of different things based on one mortgage asset for people to trade. Because of this, in the derivatives system or the synthetic system, you The first thing before starting a transaction must be deposit. Because you have to deposit collateral first, then you can start trading on top of it. This process is closer to storing collateral on the layer 2 system. So for dYdX, we are right next The product to be made on layer 2 is very confident, and I believe it will be significantly improved in many aspects. We will not be limited by composability. For the above considerations, we will move to layer 2 first.
Kain Warwick (Synthetix)
Yes agree, we are the same. We are lucky enough to migrate the entire ecosystem to layer 2 and become the first person to eat crabs. We don’t need much cost.
Moderator-Sergey Nazarov (Chainlink)
Okay, this leads me to my next interesting question. Do you think composability can enhance DeFi’s value to users, and how does it reflect its usefulness? What elements of composability do you think are important? Do you put the tokens of 1 in layer 2, or the migration of oracle data? Where do you think DeFi and value should go in the future, and what role does composability play in this plan? Kain, let’s talk about you Have an idea.
Kain Warwick (Synthetix)
Ok, I actually have a specific example. We have been developing it for a while. Anton from 1inch, Michael from Curve and some other partners are also working with us to help us make synthetic assets play the role of a bridge in multiple AMMs Circulation in the pool. Sometimes we encounter this situation. If you want to change from one stable currency to another, you can trade a $10-15 million order with very little slippage.
If you are trading different types of synthetic bitcoins, you can easily exchange 5 million US dollars of renBTC for WBTC, but it is not feasible if you want to trade on different AMM pools, because their design does not allow this. We are now cooperating with several teams (to solve this problem). In fact, in the past, everyone researched separately, and then faced each other. But now this ecology has developed to a certain extent, we all know each other, and can start similar conversations at any time , Work together, so now we are building virtual bridges between these AMM pools.
Yesterday we also did a fork test on a fork of the mainnet. It is estimated that it will cost 805 BTC to exchange USDC of 10 million USD into WBTC through 1inch, but if the mechanism of connecting bridge plus 1inch is used, it will cost 831 BTC. Compared to a $10 million transaction, this gap is still very large, so I think we are now gradually seeing the second-order effect of cooperation and coordination between different agreements to ensure that we use these functions correctly. If you just work behind closed doors, This is not easy to do. So I think these are very exciting. I know that some small partners are also developing collaboratively like this. Andre has been working with friends of Wire. I find these very exciting.
Moderator-Sergey Nazarov (Chainlink)
Yes, I agree. Every time I see a group of people docking different components, I am very excited. Seeing them continue to try to use a variety of different smart contracts at a higher level, such as smart contracts built by your team, and then form More advanced contracts, providing more advanced products, driving more total value to be locked in to build interfaces around these contracts, because maybe the interface has not been built by the project party before. I think all the above are the future financial engineering , Is also the direction we are focusing on right now. So what do you think of Sergej, how do you see the role of composability in accelerating the value of DeFi? Do you think the various components of composability, such as DeFi protocol components or oracles What do you think of data or other components? How do you think they will promote the development of DeFi and create value for users?
Sergej Kunz(1inch)
From our point of view, the most important thing about DeFi is the compatibility of currency Lego. We used all the currency Lego of UniSwap, Kyber and Bancor in a hackathon last year, so we founded a company. Then we started to build our own Aggregate platforms to provide a better user experience, to solve problems and reduce costs. Without these currency Lego, we would not be able to develop such tools. In the past year, we have basically cooperated with everyone, except dYdX.
It’s a pity that we haven’t found a point of cooperation before, but we are now looking at the leveraged position, and there will be opportunities for cooperation in the future. I think it is very interesting to be able to cooperate and use these products with various companies and teams. With the traditional technology world In comparison, I think these are small and micro services, and people can use them without permission. This is great. For example, your oracle, we call your oracle price data to avoid simple mistakes, we can directly in our own The Ethereum node or other nodes make on-chain calls, but the red data you get is because this data does not have permission.
Moderator-Sergey Nazarov (Chainlink)
Yes, I think this is the force that really supports this field. Just like some people build libraries in the online world, some people develop various tools to make people better connect and communicate, and finally evolved into a “killer application”. For example, Uber. , In fact, the people who started Uber did not do GPS system, they did not do Stripe to pay and did not do Twilio to send messages, people only see Uber, Uber actually integrates these components. I am really excited, Seeing the reliability of the blockchain, I finally created the various components of these financial projects, which can be used by you and other team members. This is really exciting.
Because I believe that in the future we will see very capable teams use these reliable components to build more products, then everything is possible. It is like the surprise that the online world brings to everyone, e-commerce and Uber There are more than 50 other new things that we could not predict in the 90s. It can be said that we are also on the starting line now. But having said that, I also want to hear Antonio’s views. What do you think of composability? To promote the development of DeFi, how does it provide value to users? What do you think of various components, such as components of other protocols, components of oracles, etc. How should these component blocks cooperate with each other, and how do you see the follow-up development of DeFi?
Antonio Juliano (dYdX)
Of course, it is really exciting to see so many composable components first. I think a DEX aggregation platform like 1inch is a good example. 1inch allows users to get the best price on different DEXs In my opinion, our dYdX development method is somewhat different from that of most DeFi teams. There is no difference between good and bad. What we do is more vertical, so we do not rely on composability. I am not saying that we are here. This kind of development method is the best. This is just our own way of developing products. We are adhering to the product first concept and focusing on how to make the best product. However, although our concept is like this, it can be combined In other words, some components are still very important to us. For example, the ones you just mentioned, especially the oracles, we don’t want to develop our own oracles, it is too difficult.
So an excellent team like Chainlink､Maker has made these good products. We just need to integrate it. This is where composability really helps us. It is really important. In addition, we have another interesting thing about composability. The application of dYdX is that we basically use the Curve of the automated market maker mechanism as our agency contract. If our contract is not available for them. This is because dYdX only supports one collateral, but we also hope to have other collateral Users of dYdX can also use our system. So when users come to dYdX, they can quickly turn their USDT into USDC collateral, and then they can use it on dYdX, but these are all back-end operations.
It is actually very simple for us to implement, programmers can do it in two or three days. This real example also proves how high the composability of each component block of Ethereum is, and everyone can use these components. We There is no need to talk to Curve or anyone in their team about this matter directly, so that our products can really benefit a lot.
Moderator-Sergey Nazarov (Chainlink)
These constantly evolving things really make me amazed. People can directly connect various systems and make a financial product, which is much better than any bank product. More transparency, better yield. You see, transparency Higher, better economic efficiency, innovation without permission, and global integration. These elements are really powerful. After all, it seems that this is also the planning direction for people to develop DeFi. DeFi needs to continue to expand, and composability allows teams to quickly combine Components, and build higher-level applications, just like standing on the shoulders of giants. Then give back to the community to contribute more components for others to use. These two dynamics are really powerful. Based on these two dynamics, let’s take a look The following assumptions, such as scalability, have been studied, for example, composability allows everyone to obtain the components they need. Do you think DeFi will be adopted by the mainstream? How will DeFi perform in the crypto world under these assumptions, How will it behave in the traditional world? What do you think the adoption rate of DeFi will be and whether it will reach new heights? If Sergej, you have ideas for this development, I still look forward to hearing your views.
Sergej Kunz(1inch)
To solve the scalability problem, we must solve the usability problem. We need more friendly apps, including mobile apps, and desktop apps from the feedback point of view, so that everyone can use the financial products here and let users no matter who they are. Financial products that can be used anywhere. When I first started using Ethereum and some DeFi applications, I thought it was too rubbish, and it was impossible to operate. Later I understood that this is all because of Ethereum itself. Extensibility is flawed, but we have tried our best to improve its usability, and we continue to work hard now. I hope that we can continue to develop and grow in this field, and I hope that in the next 1-2 years, we can see more practitioners Who. Because this is about freedom, we think DeFi is freedom.
Moderator-Sergey Nazarov (Chainlink)
Yes, it makes sense. It is really difficult to balance security and usability. In fact, many blockchains and private key-based systems are facing this challenge. I think people always look at this problem very superficially and only talk about private keys. It’s really difficult to handle, and there is no way to do it well. What do you think of Antonio, do you think DeFi will be adopted by the mainstream?
Antonio Juliano (dYdX)
I agree with what Sergey just said, to achieve this goal, we really need to start from the perspective of products . Our products must be comparable to centralized exchanges and other centralized products used to interact with the crypto circle. The product angle should be comparable. However, the first step is really difficult. There are many problems with scalability and usability. The things we just talked about need to be solved urgently, but once we solve these problems, I think many The areas to be improved and the capabilities to be developed in the second stage of DeFi, including the use of censorship-resistant financial platforms, community-autonomous financial platforms, and platforms where other products can interoperate. Once these product problems are solved, the benefits of the second-order will be Really appear.
Once DeFi can be applied on a large scale, it will really be a major transfer point for DeFi. I think the main theme of next year is continuous development, so now we see that many well-done projects are moved to layer 2. Layer 2 is also constantly Perfect, some projects have already proposed MVPs on layer 2. It is estimated that in about 6-12 months we will solve some of the thorny aspects of the product side. I estimate that it will be 12-18 months or earlier, we will see Some DeFi products can be comparable to centralized products, and we will see large-scale adoption by then.
Moderator-Sergey Nazarov (Chainlink)
It makes sense, I think we must at least achieve functional equivalence. But this is not the ultimate goal. We can’t be almost the same. We must go beyond, but catching up is the first step. Kain What do you think, what do you think Can DeFi be adopted by the mainstream?
Kain Warwick (Synthetix)
I think the average user doesn’t care about the technology, they don’t care about the process, they only care about the result, right? And their user experience, if you tell them this product is good, but it’s 10 times more difficult to use, no one will care about you, no People will use your product. There may be some early adopters, and those who are very curious, but most customers like simplicity. They don’t want complicated things, they want the end-to-end experience to be good enough. I think here The question we should ask is, what is this experience, and what can drive product market matching?
I think one of the points mentioned in the discussion just now is still in my mind. Although I am not sure whether this is the correct answer, I think the answer may be revenue. We are in a zero interest rate environment, if someone can get The 1% or 2% rate of return process is also very easy to operate, and money will not be thundered. Then I think it is still very strong. What we lack now is the end-to-end user experience, at least comparable to TraDeFi or Centralized financial products. If we can package the DeFi yield rate and simplify the whole process so that users can easily get started, I think this can greatly promote the mainstream acceptance. But as Antonio said, we still lack a lot of features, we don’t have Twilio, there is not a lot of components that can be combined and spliced for you, because these components do not exist yet. This system cannot be expanded, so we must solve all the problems, we must pay attention to the end user experience, these are what we have to do ｡If these things are done, users will naturally be ready, they will come one after another.
Moderator-Sergey Nazarov (Chainlink)
Yes, I totally agree. I have always hoped to provide more components for the oracle, more data input and payment output, and various components required by users. But I completely agree with your point of view on profitability, I I think it is estimated to be less than half, but most users of the global financial system, at least a double-digit percentage of users, can use the federal funds rate, bond interest rate, and savings bank account anytime and anywhere. People don’t know or care where the interest rate comes from. I personally think that we are well aware that we may develop into the interface of banks and Robinhood, and use the interfaces of other platforms for our use, to finally attract users to use the DeFi protocol. Because DeFi users can get the highest benefits, and this is exactly what What their users want. Banks also want high profits for users, and they want to meet their needs.
Their users want revenue. If the financial system does not provide revenue to users, users will go to other revenue-generating places. This is how the financial system works. What I think is very good is the amount of collateral we currently have And the diversity of collaterals is slowly improving. And the transparency of income sources is increasing, so there is also counterparty risk management. These are really great. I am very grateful to you excellent teams and guests here, together Build these component blocks and integrate them to contribute value to the industry. It is not just issuing coins and selling coins, but also allowing financial products to function and generate revenue. I think this will really open people’s horizons and let everyone understand that in addition to issuing coins In addition, the real role of blockchain and smart contracts. This is a good start, because this value has already appeared.
So I think the future is still worth looking forward to. I am very happy that there are so many people of insight, such as Sergey Antonio Kain, who is fully committed. I hope that other developers and I can give you more infrastructure support. It can truly achieve decentralization and transparency, so that everyone in the world has the opportunity to gain income and use various financial products. I am very excited and very excited to be able to develop with you. Thank you for your participation and discussion. I hope very much See you again in the digital house of Zoom. I am also looking forward to our face-to-face communication in the future, thank you!
Kain Warwick (Synthetix)
Thank you!
Antonio Juliano (dYdX)
You guys are great!
Sergej Kunz(1inch)
Thank you everyone.
Video link: https://www.youtube.com/watch?v=4wbj1GUVf_w
