DeFi practitioners discuss in depth what are the advantages of open finance at the moment? What else should we learn from traditional financial markets? And what is the outlook?
On August 28, it was co-sponsored by the leading financial technology elite readers Chain News, Winkrypto, the integrator of encrypted ecological resources, the world’s largest Chinese encryption community Binhu, the open financial application platform smart wallet MYKEY, and the original blockchain investor D1 Ventures. ——The first Open Finance Conference (OFC) continues to be in full swing.
This roundtable focused on the issue of the direction of “opening financial infrastructure”. What are the advantages of open finance? What else should we learn from traditional financial markets? What role does blockchain play in open finance? And what’s the prospect of DeFi in the foreseeable future.
Roundtable theme of this issue: Open Finance Infrastructure
- Moderator: MYKEY Ma Jing, head of market
- Velo Labs Vice Chairman Tridbodi Arunanondchai
- Kitco Chief BD Officer&Media Director John Dourekas
- Force protocol CEO & ForTube co-founder Lei Yu
- Frax.Finance Founder&CEO Sam Kazemian
Content Record
Moderator: What are the necessary components of open financial infrastructure? Do you think that blockchain is an essential part of open finance?
Sam Kazemian: Yes, the reason why I think DeFi can “represent” the concept of open finance is because the cryptocurrency market is a special market that is open 7×24 hours a day, which means that the market will not open and close No one can decide or influence this in terms of market. This is also one of the main differences between the cryptocurrency market and the traditional financial market. In addition, the openness of cryptocurrency and blockchain in the application field is also very important. For example, people can create special tokens that anchor various assets, and the convenience of interaction and combination between various assets and applications It is also lacking in the traditional financial market, and this is the main reason why the word “Lego” is appearing frequently in the blockchain world. Take Ethereum as an example. At present, applications based on Ethereum have gradually developed into a huge ecosystem. A series of stable coins and exchange protocols allow people to process a considerable number of transfers in a very short time on this network. Features. Because of the large-scale outbreak of market demand, I think now is a very good time to launch algorithmic stablecoins, and this kind of product was simply “unworkable” a year or two ago.
Tridbodi Arunanondchai: I think blockchain is absolutely an indispensable part of open finance. Because the blockchain is the Internet without middlemen, and if you want to make a transfer in the traditional financial market, your transfer operation is likely to be passed through five middlemen, and the middlemen need to build enough trust. The blockchain greatly simplifies this process, because a major feature of the blockchain is that there is no intermediary that needs to be trusted to participate, and anyone can participate in it at very low cost.
But in addition to this, it is also necessary to ensure that it can be resolved when the participants are untrustworthy, because the unreliability of the participating individuals will affect the credibility of the entire system. So although I think blockchain is a necessary part of open finance, there is reason to believe that in the future, more first, second and third layer applications will appear, and these applications will make the entire system more powerful.
And it must be admitted that although we have seen a lot of liquidity pouring into DeFi, the amount of capital participation outside the cryptocurrency market is actually not very impressive. The market is still looking for a way to better connect traditional financial markets. A bridge with the cryptocurrency market.
Lei Yu: First of all, we should first confirm what is open finance. At present, I think that the “decentralized” financial market is open finance. It can be understood that the open financial system refers to those financial systems that do not require permission, are transparent to the public, and that all external auditors can inspect the system at any time. The opposite is actually the traditional banking industry. Generally speaking, we have no way of knowing whether a bank is functioning well, but in the world of open finance, all information is public. What the blockchain technology can solve is precisely this most critical requirement. Therefore, I think the blockchain must be an important part of open finance, and it can even be said that the blockchain is the foundation of open finance.
John Dourekas: I will add a few more words to the banking industry that David talked about. During our Kitco team’s report on the World Economic Forum, we did a survey and found that almost 30% of millennials do not trust the banking system at all. , These people don’t think they live in a fair and honest environment. So why can these institutions persist for so long when a large number of customers are dissatisfied with them? The main reason is that people lack powerful means to change, because there is no technology that can shake this kind of system that has been operating for hundreds of years, and the existence of the supervisory layer makes this matter more complicated.
However, it is precisely because of this pain point that the concept of open finance has an opportunity to develop. All the rules in the new system are transparently written on the smart contract, and these distributed applications naturally have global characteristics from the very beginning. Anyone can participate freely, just like Lego bricks, you can create better products through any combination of components.
Blockchain can make this matter more efficient, significantly improve the efficiency of the entire system, and further optimize the customer experience. As long as the problem can be solved, blockchain technology must be required for open finance. Of course, if other things can better solve these problems, then you can show me the white paper, but if not, then the blockchain is what is most needed for open finance at the moment.
Moderator: Currently DeFi is still in a very early stage. Everyone is saying that DeFi applications are still very far away from large-scale commercial applications, and they lack sufficient infrastructure to support it. So what exactly is missing in DeFi today?
Tridbodi Arunanondchai: I think DeFi currently lacks a few things. The first is a universal “ticket office”, which is a channel that allows people from all regions of the world to participate in DeFi projects smoothly. Must have consensus credit. The second is how to create a better credit system than the current banking system, and this system must be sustainable. Because we have also seen some precedents of DeFi applications failing to function normally due to certain problems, if more and more people are willing to use DeFi applications, then this infrastructure must be further improved. And as long as these are in place, we will be able to get a system where everyone can maximize the benefits of “no middlemen make the difference”, which is what everyone wants to see.
John Dourekas: The most critical point of creating a new financial system is to provide liquidity, so in the past period of time we have seen the birth and development of AMM, stablecoins that anchor various assets, and various synthetic assets. , And if we want to do better things, we need to provide liquidity while allowing these assets to circulate in the market without large price fluctuations due to small transactions. The DeFi field is obviously lacking in this respect, because the overall volume is limited, so this problem is not obvious, but if our vision is bigger, how to better solve the liquidity problem must be a particularly important topic. It is also an important link that DeFi lacks.
In addition, a sufficiently easy-to-use system should not have too many uncommon technical terms, because our goal is definitely not only to cover those developers or experts in the market. If we want to spread the net bigger, we must Making complicated things simple is also an aspect of DeFi that needs to be improved.
Moderator: Liquid mining has become the fuse for the recent rapid development of DeFi. How do you see the future development direction of DeFi?
Lei Yu: Although the market has cooled slightly recently, there are still many projects launching new liquid mining products. Therefore, the concept of liquid mining has not yet reached its curtain call. For DeFi, I think there will be considerable growth in the remaining months of this year, and some new projects will bring new funds into the market. At present, we are still in a small bull market. Among. And it is expected that more and more money will flow into the cryptocurrency market from the traditional financial market in the near future, or into DeFi.
Another trend is that I think some DeFi service providers will get government licenses. With these licenses, more and more traditional financial assets will be introduced into the open finance world. This market will also get more resources from the regulatory authorities and the traditional financial sector.
Sam Kazemian: I think we have seen the 1.0 era of DeFi, and most of the DeFi applications at this stage are based on the Ethereum network, and over time, DeFi applications based on networks such as EOS, Polkadot and Solana will also Gradually emerged, and I think there will be more and more cross-chain projects. Liquid mining, as a sufficiently successful cold start solution, is expected to still be applied in the “second generation of DeFi”. In addition, it is expected that more financial applications will be launched. These products can obtain real-world knowledge and prices through oracles. I think that in the “second-generation DeFi” people can access their credit in the real world. Score and get different types of loan services. These new products are expected to promote a new round of rapid development of DeFi, and we should not have to wait too long.
Moderator: For Open Finance, besides lending and trading, what other use cases are there for DeFi?
Tridbodi Arunanondchai: I think the biggest opportunity now is to provide transfer services for large institutions. Looking at the huge transaction volume of cryptocurrency banks, such as the cumulative transaction volume of Silver Kid, the numbers are amazing. As happened during the COVID-19 pandemic, many large institutions are beginning to worry about the risk of dollar positions, such as the Bank of Thailand, which holds 300 billion US dollars. In addition, we are beginning to hear a lot of news related to the digital renminbi, and we are also cooperating with large corporate groups, including our nearest partner, SEBA Bank, which also has a digital banking license. Simply put, DeFi should have the opportunity to play the role of a digital bank, bringing real-world liquidity into the cryptocurrency market. The prospects in this direction are very broad.
Lei Yu: Lending, swaps, and derivatives. These are actually the basic business models of open finance. The remaining innovations are basically based on these extensions, such as some projects that specialize in oracles, or say NFT and so on. As far as I know, some projects are trying to write the housing ownership certificate on a token and make this an asset that can be circulated in the open financial world. Therefore, innovation in the open finance world has a lot of room for imagination, and it is by no means limited to payment or the manufacture of digital gold.
Maria: Stable currency is the blood of open finance. It can allow billions of people to enter a new financial system with a lower threshold. As we have seen now, most of the mainstream stable currencies circulating in the market are based on the US dollar. I want to know if this situation will continue in the long run?
Tridbodi Arunanondchai: The current situation is very interesting, because although the dollar’s global dominance still exists, more and more economies and organizations have begun to try to find alternatives to the dollar, because if you don’t do this, Will cause the transfer of assets to become very complicated. Therefore, it is expected that more and more different types of fiat currency stablecoins will appear, and this may also be the first step in weakening the dominance of the US dollar.
John Dourekas: The dominance of the US dollar will inevitably be shaken in the future, but investors around the world are still accustomed to thinking in US dollars and trading in US dollars, and this is why the US dollar stable currency is so important. However, from a longer-term perspective, there will inevitably be more stable coins anchored to other legal currencies, and even tokens anchored to precious metals. As long as such assets are backed by real assets, the risks of these new assets are Controlled. In addition, the demand for some new use cases will gradually weaken or even eliminate the market’s dependence on the US dollar stable currency.
Sam Kazemian: It is foreseeable that in the future, the types of stable currency anchor assets will definitely not be limited to the US dollar. Compared with anchored assets, stablecoins are more important in their price-stabilizing mechanism, and this mechanism does not conflict with the diversity of assets. I very much look forward to seeing more and richer stablecoins emerge in the next year, not only anchored to fiat currencies, but also things like gold stablecoins.
Moderator: What should we learn from traditional financial markets at the moment of open finance?
Lei Yu: Everyone is talking about the shortcomings of opacity in the traditional financial market, but they often overlook the advantages that have allowed the traditional financial system to stand for hundreds of years. For example, because they are under strict supervision, it conveys a firm belief to users that it is safe for me to put money in the bank. With the rising popularity of DeFi, more and more fraud projects have entered the market. These projects have exposed users’ assets to risks. Therefore, we should learn from the traditional financial system to pay attention to security. Especially the builders of open financial infrastructure must put code security and business logic security in a particularly important position, and control it to a high enough level, so as to give users confidence.
Another point is that even if the opening of the financial system originally does not require permission, you should be prepared to be regulated in advance, because as long as you need to stay in a certain place on the earth, you must abide by local laws and regulations, and we should do it in advance Be prepared to be supervised so that it can still maintain a healthy development when supervision comes.
Moderator: Last question, please briefly talk about the outlook for open finance in the next three to five years.
Sam Kazemian: Three to five years are too long for this fast-growing market, and if I look forward to the next year, I think this market will achieve very substantial growth, and there will be a lot of real-world Of assets will be “moved” to the cryptocurrency market. I expect the total market value of DeFi to grow to $200 billion in the next 12-18 months.
John Dourekas: Before predicting how much development there will be, I still want to emphasize the current problems that need to be solved. First, we must let users have a better participation experience, especially those unfamiliar terms and bad user interfaces will dissuade some users , And this is likely to cause open finance to stagnate in the future. And if these problems can be effectively solved, the potential for open finance will be huge.
Lei Yu: In a word, we will see products with better user experience, safer networks, and more substantial assets.
Moderator: This is the end of the round table.
