The panel discusses the evolution of Decentralized Finance (DeFi) from its experimental beginnings (DeFi 1.0) to a more mature, institutionally-focused era (DeFi 2.0), emphasizing the integration of traditional finance (TradFi) principles like compliance and security to unlock mainstream adoption and real-world asset tokenization.
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hello everyone and welcome to today's
panel defi 2.0 Wall Street meets
blockchain today you will hear from the
largest players in defi discuss their
roles in reimagining finance as well as
the challenges and the opportunities to
make this Vision a
reality you will also be thrilled to
know that this panel is the last
obstacle between you and
lunch so let's Jump Right In we have
assembled an impressive lineup of
Industry leaders who will be sharing
their valuable insights with us today
David would you like to do a quick
introduction hi I'm David Schwarz I'm
the CTO at Ripple and one of the
co-creators of The xrp
Ledger hi everyone I'm Sergey co-founder
of chain link uh the leading data Oracle
in the blockchain space and we also
create bridging Solutions identity
Solutions compliant solutions to create
uh more complex blockchain transactions
I'm Mary Katherine later I'm Chief
Operating Officer of uniswap labs which
builds the most used defi applications
and products and is the leading
developer of the uniswap protocol most
used defi
protocol I'm Constantine Richa the CEO
and founder of block demon we're the
largest infrastructure provider for
institutions in crypto we run around
250,000 nodes Empower transaction
staking and wallet development for
institutions great thank thank you so
much for being here Constantine let's
start with you block Damon is a leader
in onchain infrastructure for
transaction staking and wallets given
your expertise how do you see trafi
playing a role in enhancing this
critical infrastructure yeah thank you
it's a good question I think one thing
we've learned um we've been aligned with
financial institutions really since the
beginning um one thing that's unique
about us we have JP Morgan Goldman Sachs
and City Bank with major shareholder
denomination on our cap table um and and
we've done that um really for the same
reason you know that you asked the
question which is really we wanted to
learn about compliance and the
requirements they've had um in a company
um of our nature that engages in crypto
um so we ultimately don't make mistakes
that would disqualify us to be a vendor
to them in the future and so I think one
thing we can learn from trefi is that
it's very hard to reverse engineer
compliance and so understanding
compliance understanding risk tolerance
is something that we can the crypto
industry learn from the trefi
institutions I think it's really
important to understand that uh
sometimes in the crypto side we're a
little bit like hey our Tech is 10x
better than what you have we can be a
little arrogant about that um but
there's another component than
technology uh to the infrastructure
stack and that's security and compliance
and I think here trafi has a lot to add
um and uh that's going to be really
exciting the other is really you know a
real world asset tokenization where
where obviously institutions are really
primed to come in and bring a lot of
liquidity to the stack that we like
right like these assets need wallets U
there's monetization mechanisms around
it that will really help crypto um to
find a larger audience so um I think
that's a those are the main primers for
it yeah I think that all makes sense
David you have seen the whole evolution
of blockchain from early Bitcoin days
and have been a co-creator of The xrp
Ledger in your view what do you see as
the most significant difference between
dii 1.0 and D 2.0 and what do you think
is needed for mainstream adoption yeah
so thanks uh both myself and ripple have
been in this business for well more than
10 years now um you know we watch the
very early stuff going you know to
what's happening now with institutional
adoption in the very beginning it was
very experimental and it was um it was
almost like Las Vegas it was gam it was
gambling it was very sexy though like
you attract a lot of people to fanty
casinos um but it doesn't have a whole
lot of real world utility um you know
it's not Financial system 2.0 Financial
system 2.0 a lot of it is is frankly
boring like for most people what they
need is like a savings account is an
extremely useful thing it doesn't
Produce High Yield it isn't very
volatile but it's extremely useful and
practical and so we've watched that
Evolution to more useful more practical
more Enterprise focused more compliant
you know compliance was a bad word in
the early days like everything was just
completely decentralized but the problem
is the value is in the real world if
we're going to build Wall Street 2.0 we
can't just say forget about everything
that we have it's trillions of dollars
worth of real world value so what you're
seeing today is you're seeing stable
coins which are you know they're
igniting defi ecosystems they're very
institutional products but they're also
anybody can hold them and transact them
they're compliant but they're also you
know free flowing you're starting to see
defi applications that look more like
trafi they're not about getting huge
amounts of yield at very high risk but
they're about things that make a lot of
sense to people like
treasuries I think the obstacle for Mass
adoption and we're we're within a few
years of that cusp is um we need the
institutional adoption first the same
thing happened with the internet um you
have to con you have to build Bridges to
where the value is to where the people
are there has to be usability all of we
you know we have to solve all of those
problems to be able to turn that corner
to mass retail adoption so I think the
precursor to that is going to be Mass
Enterprise adoption and I think that's
right where we are now that's probably
why everybody's here yeah absolutely um
MC the long awaited Unis swap V4 upgrade
is now live U I'm sure many in this room
are undoubted ly very excited about that
however liquidity remains a key issue in
defi especially for larger institutional
players how can defi projects improve
liquidity while still maintaining
decentralization and is there inevitable
trade-off between the two or can you
have best of the Both Worlds uh well
first thank you Katie and Ando for
having us I'd say I I spent 15 years in
suits in Midtown at Goldman Sachs and
black rock and I'm so happy to now be at
a crypto event where we had to wear
where most people wear suits it's just a
great a sign of how far we've all come
um I there's not a trade-off I think
that's a misunderstanding that there's a
trade-off between liquidity and
decentralized protocols um for some time
the uniswap protocol uh which is
decentralized immutable uh on ethereum
has had deeper liquidity and top trading
pairs than centralized exchanges like
coinbase so that's that's not the case
but what has held back adoption of defi
for trafi a couple things um absolutely
compliance as was just mentioned but
also blockchains weren't fast enough or
cheap enough they just weren't
competitive with your Alternatives and
the systems that you need today and that
users need today and so the net effect
of that means that there aren't assets
that people want to buy to drive more
adoption and so I think what's happened
in the last three years definitely last
10 years is that blockchains are now
cheaper and faster and defi is more
customizable so with Unis swap V4 um
allows you essentially to create your
own Market structure and create your own
customized set of rules for a liquidity
pool so whereas with prior versions of
the UN protocol or other di5 protocols
you have to accept a determined Market
structure and that's the same for
everybody now you can say well we need
only these users to be able to access
this trading pair or we want to
integrate with this kind of Leverage
with these kinds of limits just the
stuff that you're used to having in
traditional markets so that
customization I think will unlock so
much more Innovation which is again open
to anybody anyone can build on top of it
there already hundreds of what we call
hooks of different smart contracts on
top of Unis swap B4 within four days
that are all allowing different kinds of
trading Market structures and different
kinds of assets and the other thing I
want to mention I think is really
exciting for bring way more liquidity
lots more liquidity on chain is uni
chain so we are launching an L2 on
ethereum uh next week that will be uh in
in a few months it'll be as fast or
faster than salana it will be cheaper
than Bas and it will be decentralized so
stakers will validate transactions which
is in contrast to some other l2s um and
that is really allowing the benefits of
decentralization allowing Network
participants to benefit and also
bringing the faster and cheaper benefits
so I'm extremely excited about 2025
because I think that some of those
advances in defi along with all the
other infrastructure that my colleagues
in the panel can share means that we're
going to see a lot more adoption and and
that some of the trade-offs that felt
like they existed will be busted through
and it'll become apparent that they they
were just a point in time yeah
absolutely the momentum is definitely
here um Sergey you work with some of the
biggest names in trafi most of them are
in the audience today how do you see the
relationship evolving between the
traditional institutions like Banks
hedge funds asset managers and those of
the defi world can collaboration happen
or is disruption
inevitable so I I think there there are
two things that are true that aren't you
know fully clear yet the first thing is
that the trafi community and the defi
Community are each other's biggest
customers and the simple reason for that
is that the trafi community has a lot of
the capital that is yet to flow into the
industry and the flow of New Capital it
was what defines the growth of our
industry right net inflow of capital is
what defines the growth of the crypto
blockchain industry where is the new
capital going to come from okay three
and a half trillion now how much more
retail speculative demand is there let's
say we go to seven or 10 okay great
we're at seven or 10 like hoay for us
where's the rest right guess where it is
it's where it's always been with the
asset managers and you know the
Sovereign wealth funds and the banks and
so on right so the TR is def's biggest
customer right that's that's like still
somehow not clear that's that's very
clear to me and I think that's what's
what's going to be happening you know to
David's Point yeah we have to make the
bridge connections we have to make
compliant transactions possible we have
to interoperate we have to make all that
happen that's that's one thing another
thing is that the defi Community is the
kind of hotbed of permissionless
innovation that's going to consistently
push the limit on the risk return
equation right right like what are the
financial markets basically about here's
a certain rate of return at a certain
level of risk where do you see the
fastest rate of innovation is it in
regulated institutions where everyone
has to get a sign up from three people
to borrow a paperclip no it's not in
these places it's in the places where
people can just ship a piece of code
globally and test you know whether
liquidity is interested in that risk
return proposition very quickly right so
you have this hot B of innovation that's
going to continually innovate and make
the highest best risk return turn um
newest stuff you have all this Capital
over here and then you have also a
growing retail Market in the public
chain space I think that's what people
are interested in in now from the asset
management industry is how do you create
in a tokenized fund that captures the
public chain space I think that's just
kind of the early stages and as that
industry grows that's that's also going
to happen so they're each other's B biggest
biggest
customers the the second thing that
that's going to happen um I'm pretty
sure about this as well is is that the
real world asset Trend will reformat the
public understanding of our industry
from being about highly speculative
things meme coins nfts cryptocurrencies
not backed by anything real into what
real world assets are I personally think
that the real world asset total value
locked will surpass the cryptocurrency
industry value right if you add up all
the money that's going to flow into
stable coins commodity coins tokenized
funds and a number of other uh tokenized
things the the universe of that value is
in my opinion larger than the universe
of speculative demand for meme coins and
nfts and cryptocurrencies now meme coins
nfts and cryptocurrencies are great I'm
a I'm a big big fan of those I really am
and it's it's like a wonderful thing but
I I think you had a point in the
internet when it was about like email or
something what's the internet the
internet's this thing that's going to
kill the US Postal Service and that's
not you know what the internet is right
the inter internet is information
technology right right which is all
information not just the US Postal
Services piece of information so I I
think we're going to be now with the new
regulatory environment relatively
quickly in a world where defi tried find
to operate and our industry goes from
highly speculative stuff to very
legitimate stuff and so the average
person goes from cryptocurrencies a scam
to cryptocurrencies is the new format
for financial products that I want to
deal with but you know that's my my view
of where we're going anybody have
anything to add to
that no I I agree I think that I think
that so many more assets and again I
think it comes down to the
infrastructure now can support different
kinds of assets and can support people
like all the people in this room and
that the needs of your customers and I
think that ultimately makes all of our
businesses a lot bigger right that the
point of this technology is that you can
reach Global user bases that you can
create different kinds of markets um and
make them that much more efficient and
transparent there are of course like
technical challenges like we have to
figure out um interoperable and uh
digitally native approaches to Identity
um we have to figure out ways that some
different kinds of risk can that are
sort of Institutions that have risk sort
of parameters are important to them can
make sure those are maintained in defi
when they don't always totally know
who's participating um but all those are solvable
solvable
problems yeah couldn't agree more um as
rwa tokenization growth accelerates what
use cases are you most excited about and
what key problems do you think Builders
should focus on that will drive real
world utility David do you want to start
with that one yeah you know I'm most
interested in the use cases where
there's High friction right now where
people are poorly served um for almost
any technology when you're when you're
trying to figure out where you can get
the traction you look for people who are
poorly served by the existing technology
because you don't have to be perfect to
get their business you just have to be
better exactly and the worse it is the
less good you have to be to be better
and I think areas like real estate um
like Venture Capital private Equity um
things like that that are just very
poorly served another thing that works
surprisingly is the opposite the
opposite end actually both ends work
better than the middle so on one end
people are very poorly served there very
high friction on the other end where
believe it or not where people are very
well served and this very low friction
you can actually get traction because if
you can save a very small amount of
money that's better so for example
tokenized treasuries you probably you've
heard a lot about tokenized treasuries
those actually work pretty well right
now you might think well why why would
that be an area and it's because of that
it's because if there's a $3 transaction
cost and you can push that down to a
fraction of a penny that's actually a
lot because the margins are so small if
I'm only making you know 2% you're
charging me a couple of basis points if
I can save you a couple of bucks that
actually does matter so I think it it's
like the two ends as far as like what
people should focus on if we're going to
turn to the corner to mass adoption user
experience is going to be absolutely
critical the biggest problem with mass
adoption option is when the users have
to understand the details of what
they're doing if you look at any
technology that's gotten Mass adoption
whether it's the internet you know
computers cars um it's when people don't
have to understand the details of the
technology that it works the best and so
it's get getting that user experience
interoperability is a big part of that
if like my money is over here but the
thing I want to do is over here and I
really have to think about that that's
too much too much work not worth the
energy effort and that's probably why
institutional adoption is going to
happen before Mass retail adoption
because insti adoption that that the
complexity is not as big of a blocker
yeah I couldn't agree more Constantine
do you have anything to add to that
about new use cases yeah I think I mean
I think if you look at what's kind of
missing still also for uh institutional
adoption I think one of the there's
really two things one is wallets I think
are really really important and I think
it's something that uh I'm always amazed
as a uh builder in the space how poor
wallet infrastructure still is um in in
the space uh on the consumer side and on
the institutional side and so I think
there's um a lot of evolution there and
obviously we're very active in the space
um and so I think um there's a lot of
opportunity in in that space um wallets
need to be secure for trfice they need
to be air gapped you know they really
the the the risk around digital wallets
has to be basically zero um and um and
it's been um you know a lot of companies
have struggled to to move towards it I
think the other thing um that we need to
understand is is that we also need
insurance products uh for these defi
rails that ultimately protect companies
from Smart contract risk from hacks and
and those type of uh issues when it
comes to defi um I think what we've
learned is that traditional financial
institutions really you know have no
risk tolerance in that area right and so
uh if there's um a shade of risk that
something illegitimate could happen or
that assets are actually completely at
risk um they're not going to engage and
the technology and so um the the game
that we like to play in in in in crypto
the you know the math the the coding and
chances and statistic oh 99.99% is
acceptable you know it's not acceptable
for a trfi right and so I think that's
something we we need to learn and
understand MC s anything to add to that
or yeah so it in the in the in in the in
the tokenization use cases I I think the
money market funds um are
are experiencing an unexpected level of
success because they diversify risk if
you if you are in a crypto land then you
look at things like Tera and why they
fail it's because they have lots of
exposure to crypto stuff right highly
speculative crypto stuff so it turns out
that diversification is like a basic
Common Sense thing that still happens
and is useful on blockchains so if you
have a bunch of crypto stuff maybe you
want some non- crypto stuff on a
blockchain what's the most non-crypto
thing you can think of us treasuries
right so you know here's a US Treasury
on chain and he gets adoption and
diversifies as your risk and gives you
and also well depending on the one you
have gives you certain amounts of yield
the the second thing I think is stuff
you couldn't own before so you couldn't
own a private Equity Fund you couldn't
own a piece of real estate you couldn't
have fractional ownership of um revenue
from an art auction you couldn't have
you know you you couldn't experience
ownership of something thing yeah um
that second thing I think is is going to
is going to start going
somewhere right about now um and that
varies by geography because different
geographies vary real estate versus
Commodities versus you know different
owning different things that they want
to own but couldn't own and there's pent
up demand for that ownership and then
the third category that I'm really
excited about is um getting me yield on
things I can't get yield on right so
let's say the the the very smart D5
people in flipflops are able to generate
yield on the thing that the people in
institutional suits couldn't right like
let's say I can get yield on gold right
that's pretty interesting isn't it so I
think the the the the defi people that
figure out how to create yield out of
non traditionally
non-yield bearing assets are going to be
super successful people like like some
of the most successful stuff will be
that for that you kind of do need this
composable ecosystem where you can start
building stuff around the asset to try
and do experiments to see like how can I
make yield happen out of this
traditionally non-yield bearing thing
but I I think someone's going to figure
that out and like when you start getting
yield on on tradition on things that
didn't give you yield like imagine you
get yield on your home equity imagine
you get yield on
gold that's interesting that's an actual
Financial Innovation that would would
really benefit people and maybe even the
markets depending how much Short Selling
good results but you know that's a whole
other question um but yeah that's what I
think you something to say MC yeah I was
just going to add I think one way that I
like to think about what s was just
describing is that today's markets if
you think of things that can be traded
they're like kinetic energy in the
context of the financial system and
there's so much potential energy that
isn't converted into kinetic energy just
because of the way that we can the way
that markets work and what can be
deposited in the market or exchanged in
the market and so if we have much more
flexible infrastructure and tokenization
allows you to then turn more of that
potential energy and value whether
they're natural resources reserves or um
bringing onchain yield in different
forms to different users around the
world who can't access it today we
should have just so much so much more
equivalent of that kinetic energy and
realize liquid value so what is that
mean I think that trafi you should be
identifying what you think the use cases
are what are your business problems what
do you need solved and then be sharing
that as like requirements and needs with
the universe of Open Source and public
Developers as well as private companies
um that have a specific Focus because
part of the benefit of the permission
list and public blockchain Innovation
that Z was talking about uh is that you
could put out a blog post and just say
hi we're a financial institution here's
some of the problems that we're trying
to solve at a level that you're
comfortable sharing publicly and people
will start to try to innovate to solve
them and that's a new approach to
Innovation I think a major step forward
for financial institutions in the past
several years is accepting public
blockchains and realizing that you can
have your own compliance requirements
and security standards met on the same
Foundation of public Innovation um it
doesn't mean that you have to opt into
the exact same standards as all the
participants on those blockchains or
protocols so I would just invite you to
say what problems you need to solve what
use cases you need and I think you'll
see a lot of people start to rush after
them um in that context I'm excited
about all the things that we talked
about money market funds payments um
onchain yield from new forms of it from
New assets that don't generate today but
I think if you look at even just the
money market funds that are being
launched today
they're being structured in different
ways they have different fund
jurisdictions they have different ways
that they treat distributions and
withdrawals and redemptions and so you
see that each of those examples it may
feel competitive it may feel crowded but
I think the the proliferation of those
will help us come to a standard faster
and so we'll end up with something that
gets you something uh we'll end up with
tokenized products that get faster
towards something that's more like
onchain realtime yield onchain realtime
pricing which is the ultimate Innovation
as opposed to just trying to serve a set
of users who today are on change and you
want them to buy your money market fund
but they're still going to only be able
to redeem in a multi- hour window right
so my point the point I'm trying to make
is like don't overthink what is your
specific use case like just kind of put
it out there and I think we're going to
see um a lot of convergence over the
next couple years on a few different
standards yeah these are all building
blocks as well right once you have that
you can build things on top of it which
makes it compostable and open so uh
leads me to my next question in defi
we're seeing decentralized alternatives
to Capital markets we have lending
borrowing and derivatives
what changes do you expect in the future
of traditional Capital markets as defi
continues to
develop anyone want to jump in
there there's so
many I mean they're going to be more
accessible they're going to be open 247
I mean well all the obvious stuff I'll
give you two two examples one is I think
that I'm really curious to see how the
notion of a funds jurisdiction changes
over time like what do a geographic
boundary for a financial product mean
when you can have you can access users
all over the world instantly um and so I
think that's it's like a mostly a
regulatory question but uh I think we'll
see we'll have to see new kinds of we'll
see new products that are more portable
globally right um that's one and then a
second is I also think we'll see changes
in innovation in derivatives and Futures
contracts we've already seen them but if
you think about just some of the
operational risk around derivatives and
how those can create treating
opportunities Arbitrage opportunities
but also some negative risks I think
that we'll see Improvement and
advancement in um in derivatives markets
that I hope is embraced in the US
because I think there well some onchain
derivatives have a tremendous amount of
risk in the form of Leverage and not
having leverage ratios they also have
reduce a lot of operational risk and traditional
traditional
derivatives yeah so not sorry I
understand your question my fault but um
basically it's going to be very
subdivided on the basis of identity so
there will be identity um unknown
markets and that's what the majority of
public defi crypto per deck who knows
who is who how many cats and dogs do you
trade for my course and who are you and
who am I and nobody knows anything right
like there's there's a certain amount of
um anonymity that's valuable to the
world in financial markets and that's
one subset of the market right that's
that's where a lot of the the market
activity is now Anonymous no identity
trading and activity and assets and
stuff and ownership and now I think
we're enter in a world where there's
identity Laden assets and ownership and
I I think the answer to your question is
what is the value and the amount of
capital in each of those groups what is
the amount of capital that your system
can access as a market if you go into
the identity Laden compliance AML kyc
based World versus the anonymous
frictionless nobody knows who anyone is
and like they could all run away
tomorrow world right right um I think
probably the ID identity Laden world is
is much larger and it's now starting to
to come in which is why you know we've
built a lot of identity solutions for
putting identity on chain and making
transactions identity Laten that's
generally what um what I think many of
the people in this room also believe is
that there's M much more of a market in
the part of the world that is regulated
and where there's AML kyc compliance
versus the part of the world but that's
still part that part of the world's
really cool you know that nobody knows
who anyone is with three cats for my dog
coin World which is great but um you
know I think that's the early stages of
our industry and the later stages are
the identity Laden traditional
institutional Capital flowing in which
is you know what we're building around
and what I feel a lot of people here in
in this room are building around
unfortunately that's time David Sergey
MC Constantine thank you so much for
joining us we really appreciate
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