[Applause]
thank you all for being here for
building synthetic derivatives on
aetherium just to quickly start off by
introducing ourselves my name is Alison
I'm the co-founder of Puma I come from a
traditional institutional finance
background after graduating college I
traded interest rate products at Goldman
Sachs for about six years
managed at thirty billion dollar buck
with 100 million bail ultimately decided
though that you know that was just
making rich people richer um and wasn't
particularly fun decided to get back
into my roots and technology joined a
start-up in California that did mobile
lending still that company is still
doing great but through that experience
I really discovered that you know
whether I was working with big central
banks or micro entrepreneurs in third
world countries
the financial incentives that existed in
art the existing financial system just
weren't aligned between different
stakeholders so I got married in chanted
with all of this blockchain stuff the
idea that you could embed economic
incentives into a technology and changed
the way that people interact with it and
so that's how I came about to get
started with uma my co-presenter is my
colleague regina by regina I lira
financial engineering efforts at uma I
also came from a traditional I'd say
finance background so prior to joining
Emma iOS AI could be derivative
structure at a bank so I thought a lot
about different kinds of natural
products and how to structure bespoke
trades for clients so first just to tell
you a little bit about what we do at uma
we build financial infrastructure for
aetherium and specifically this means
two things one is a set of smart
contract templates that you can use and
filling different parameters to create
customized financial products the other
is a decentralized oracle service that
can be used to verify and validate the
payoffs associate
these financial contracts today this is
beliefs agenda we're going to be talking
about synthetic derivatives different
types of derivatives the market dynamics
with which they trade just a high-level
overview and then we're also going to be
talking about what you can actually do
with today we've created basically a
subset a particular type of synthetic
derivative that you can actually use and
interact with both on the etherium
rinkeby test net and main net and we're
going to talk a little bit about ways
that they are both being used and could
be applied to different use cases today
and how you could actually extend it
further and then lastly because all
derivatives fundamentally require an
ancient Oracle we're also going to touch
on how you can actually write a secure
scalable financial contracts on the
blockchain that don't require a
constantly live on chain price Oracle
called the priceless contract design
framework and hopefully we'll have a
little bit of time at the end for Q&A ok
so just to really quickly introduce
synthetic derivatives here I'm sorry if
this is a little basic for some of you
but derivatives are a very very very
flexible invention within financial
products where basically you can create
any arbitrary payout structure that you
want based on external reference data
and so what we build at uma is basically
the smart contract templates of if this
then that logic for how different
payouts should work and then the
decentralized Oracle service to validate
the accuracy of this external reference
and really simplistically if you
understand betting you really probably
get derivatives sorry I'm American so I
used a football example here but you
know these binary discrete and
continuous examples here really are
actually the simplest examples of
derivatives that you can make so you
could create a binary derivative that's
answering a yes/no question like will
the Giants win their next game if yes to
pay Alice if no pay Bob that really is a
binary derivative same with the street
where you're choosing between a discrete
set of possible outcomes like which team
within the NFL is going to win the Super
Bowl this year and then there's
continuous derivatives of like how many
rushing yards are you going to have or
what's the valuation of a given team and
just like when you're making a bet with
somebody you have to define the terms of
a derivative in advance so if you and I
were to make a bet right in advance we'd
say what size like ten dollars that the
Giants win their next game we would also
define the expiration or it might be
implied that the exploration is right
after the next game occurs and we'd also
have to talk about the collateralization
and payout terms do I just trust you or
are we both going to put ten dollars
into a pot and have somebody else hold
on to it and are we talking about
dollars or die or eath as the payout
currency
and then finally there's the valuation
function so a really simple binary bet
is really easy to understand ten dollars
if the Giants win the next game for me
and ten dollars at the Giants lose their
next game for you but the valuation
functions are can become infinitely
complex or are composable as well so it
could be like you know if the Giants
ever win the nectar if the Giants win
the next three of five or if the Giants
ever win some number of games in some
particular permutation of ways over the
next 10 years of existence so the thing
that powers all of these synthetic
derivatives is a external reference so
in the example of you and I making this
bet about whether the Giants are going
to win the next game or not you know
we're kind of also implicitly where
we're where we need a way to actually
reference and validate you know who
actually won that next game and
unfortunately when it comes to
blockchain smart contracts well they're
actually quite dumb when it comes to
external data they have no way of
knowing anything about the external
world and unfortunately there's no
external penalty if we encode all this
logic into a smart contract but somehow
you're able to corrupt the Oracle so
what we need to do is in order for us to
even begin to think about building
synthetic derivatives we need a way of
being able to build an honest Oracle and
so our the way that we've basically
defined an honest Oracle here is we're
simply trying to create an Oracle where
the cost to corrupt this Oracle is going
to be greater than the profit our actual
initial assertion is that any on chain
Oracle can be corrupted there's some way
in which you could pretend
whether through a bribe or even hardware
malfunction caused an oracle to return
bad data so we need to make sure then
that if we're going to be using an
Oracle to to validate the payouts of a
multi-billion dollar a
multitrillion-dollar contract that we
have a way to guarantee that it will be
on and that it will be honest and so in
the example earlier of you know Alice
and Bob entering into a contract that
has external reference data the way that
we can think about setting up these
incentives is any amount of money that
Alice and Bob are putting into this
contract to back you know their bet is a
potential profit that somebody could
earn if they were able to corrupt the
data and the amount of money that Oracle
would accept as a bribe to actually
corrupt that data as kind of the
potential cost of corruption so what we
need to do is to design a mechanism to
keep the cost of corruption greater than
the potential profit from corruption and
so it's really just three simple steps
figure out what the cost of corrupting
an Oracle is figure out the potential
profit somebody could make by corrupting
the Oracle and have this mechanism build
this mechanism and prove that it's white
or I cut the slides with all the math
but the white paper is on our github if
any of you are so inclined to go and
look at it okay so
do my protocol yeah um okay so talking
about synthetic derivatives I gave the
really high overview of how you can
create arbitrary payouts and these
payouts mean binary or discrete or
continuous there's also another thing to
think about when it comes to synthetic
derivatives and they're the way that
they're created which is how many
counterparties are involved so if it's
just a bet between me and you that's a
bilateral trade typically those are done
peer-to-peer or OTC and because it's
just you and me that needs to negotiate
the terms of this thing we can make it
very very customized we can make the
payout in Nike shoes if we wanted to
even there are nobody else in their
right mind would probably want to build
out a market for trading you know
Giants games from the tip to Nike shoes
in other types of synthetic derivatives
the number of counter parties involved
are way more numerous so in some cases
you have many people who want to be on
one side and many people who want to be
on the other side typically when that
happens a good example of that would be
like you know bit Mex perpetual futures
where many people are long perpetual
futures on bit mechs many people are
short perpetual futures on bit backs and
what happens in the bit Mex exchange is
every single term of the contract is
already standardized and the only thing
that people are negotiating when they
actually trade is price and size so it
simplifies the potential terms for
negotiation because everything has else
has been standardized and advanced and
it allows many people who are long and
many people who are short to actually be
able to coordinate to do a trade with
each other
generally speaking many to many when the
counterparties are many-to-many those
products trade on exchanges then there's
this kind of newish paradigm that exists
in this blockchain space which is a
one-to-many a coordination mechanism so
that could be like one smart contract to
many users of the smart contract or what
regina is going to be talking about
later is actually our first template
which is a template that lets you build
synthetic tokens where there
one creator of the synthetic token
facility and many users of the synthetic
token that gets created from that
facility and depending on the specific
dynamics of that contract that they
create that product could substance
subsequently trade peer-to-peer OTC or
on exchange depending on how liquid how
liquid the underlying product becomes
so Alison mentioned one of the first
products our financial product templates
that we've created is one of these
synthetic token builders so I'll talk a
little bit more about what is another
asset token is and then I'll also show
you hopefully a video of how you can
actually use these synthetic token
builder to build your own synthetic
tokens on repeat a snap today so a
synthetic asset token is as Allison said
a type of one-to-many derivative a
synthetic derivative and what that means
is that one person such as me could
create a token facility which is this
rectangle could create this token
facility and then mint tokens from that
token facility but I can then distribute
to other people to give from afterwards
so in that sounds it's one too many or
I'm a single token sponsor giving
financial risk to many different people
all who just watch won't have to hold
some children so they don't actually
have to enter any particular spoke
agreement with me all I have to do is
buy a token that was created from the
token facility that I created okay so in
that sense of some that isotope it looks
a lot like other over collateralized
lending facilities that you might have
seen so I think this looks very similar
to for example a maker CDP where in the
same framework you're depositing some
collateral and then using that
collateral to back tokens that your
vintage and then distributing to other
people there are definitely a couple of
differences though between this and who
make your CD key namely that these for
example are expiring tokens so what
happens here is if I create this token
facility
I use that to create some synthetic
tokens that track the price of something
and what happens is the after a certain
expiration timestamp the amount of
backing collateral that backs the tokens
is fixed
so it's fixed to whatever in the latest
price was at that point and anyone can
then redeem those tokens for the backing
collateral so it's one really big
difference between this and other
communities perpetual lending facilities
but in some ways it is very similar
right so you've also got these good and
bad situations where depending on what
the Unchained price feed tells you the
prices you can be under or over
collateralized relative to the
collaboration requirements so in the
good case the price key tells you okay
this is the actual price that's how much
collateral you need to have to back the
tokens you need to be over
collateralized by say five or ten
percent that's where that is and oh
great you've got access collateral in
excess of your required clock in the
back case what happens is let's say
again the reference price comes in at
this it says you need to have this much
required quadrille but you're under
collateralized relative to that that's
fine a penalty is assessed
that's awarded to the token holders
anyone who holds those tokens is equal
to come in and redeem their tokens for
the backing collateral plus a
proportional amount of the penalty and
the whole trades on ground so there are
two or at the main differences here one
is that the tokens always have an X Bri
so they have this future where they can
be redeemed for the backing collateral
when they expire and the second is that
these token facilities are not fungible
if I create a token facility and I admit
these tokens those tokens can't be
redeemed against someone else's facility
so they're not fungible in that sense or
as with dye right diet is fungible you
can use try to close out anyone's cdz so
those are two of the main differences
behind the synthetic asset tokens and
I'm more than happy to discuss some of
the motivations behind why we chose to
include those two features that has a
toll on stead of
but that's roughly how a synthetic
asymptoting works and we think this is
really exciting because it means that
you can use this in your contract
template to create lots of different
kinds of natural risk and provide that
type of financial risk to lots of
different people the single a universal
market access
so I also will discuss some other
examples of that but first I'm going to
show you that you can build your own
token honoring to be using the synthetic
token barrier so if you're connected to
the Wi-Fi you can go to token builder
human project
org and on wrinkly test net you'll be
able to actually follow along with us
hopefully that video there not to show
you you just need to have tests eath and
test net die
all right so let me try to get this
video up summary okay so if you're able
to get to this website and you have test
it you can doesn't die first thing
you're gonna do is move in a token
facility so it's actually creating that
box that I showed you in the diagram
before right so what does that mean
you're studying a bunch of parameters
and then launching a smart contract so
when you launch the smart contract it's
like you're opening a new token facility
then you're going to deposit some money
into that trophy facility right and
borrow tokens that are backed by some
portion of that margin so in this case
they're depositing 10,000 tests net died
in withdrawing five children's so
they're borrowing five tokens that are
backed by the 10,000 died that they
deposited so I think this this clip is
actually 50 seconds so really fast and
if you know you're doing a presence
that's super fast but you should feel
free to actually go in look at the
different price feeds that we've already
curated for you as well as some of the
experts that we've curated play around
with it create your own tokens send them
to people have test net financial notes
and then check it out but that's how
we've basically shown you the financial
engineering behind it right
and then we've shown you an
implementation or a way that people can
access that type of financial
engineering
I think especially the structure I see
the first kind of diagram with boxes and
arrows and cash flows it makes a lot of
sense to me but one of the really cool
things about tokenizing this kind of
natural risk is that it becomes very
accessible once you have these tokens on
test it you can just send them to anyone
and begin your financial risk that way
there's no need to hammer out a
bilateral agreement between two
counterparties so that's the video me
close this was anyone able to actually
get onto the token builder well we tried
and for at least trying this is a look
at a QR code for that theory of galaxy
game so that's going to be our little
challenge but feel free to scan that and
collect your in your star I'm just going
to pass it around to so the Machine I
can move up reputation if you don't have
it yet
okay I see some phones so I will give
you three seconds okay that's it I'll
set so we're moving forward
but anyway so now we're going to talk
about a bit more about the financial
engineering behind the scenes and what
that synthetic acid token really is and
what it's doing so as I mentioned before
right in that video but someone did was
the first thing he did was he defined a
couple of parameters so he chose a
freight speed you chose an expiration
date
he chose a name for his tokens and his
total facility then he employed the
contract right so now we've actually got
a Toby's facility that's live on earth
we test now nobody knew he deposited the
collateral gracie deposited died died is
the margin currency that we've chosen
for this synthetic token will there at
this point but of course that's
something needs change we see you
probably died in the choking facility
then you borrow tokens that are backed
by some portion of that guy remember
that you're over collateralizing the
value of the tokens like our borrowing
and so there will be at least as much
dye in there as the value of the dye
value tokens that you're borrowing and
then once you do that right that's all
done by its token sponsors so that was
the position that I was saying I had
before
I'm a token sponsor so I'm creating this
hooking facility and then borrowing the
tokens and now as a token sponsor now
that I have these tokens I like to is
some I trade them some I trade them with
a token holder I'm to actually begin
having financial risk just raise your
hand if you understand why the token
sponsor doesn't have anything actual
risk here before this
okay okay so I think that's actually
that's a really interesting data point
happy to go into that in more detail
later but that's also an interesting
tidbit about this kind of token system
toking facility employment is that
before here before you trade them with
anyone you actually have no risk to the
price feed that you're using but in any
case sure you have a good question on
defining the parameters looks like you
have a limited set of portables and some
expiration dates so how do you think
about letting people create contracts
and do composability versus just
launching this on yourself
like launching like the perfect question
allison is going to discuss a lot of
that in the next couple of sections so
yeah so I just wanted to highlight here
that the idea someone is defining a
bunch of parameters and then launching a
token facility from which they borrow
these targets and sell them but to your
point absolutely you can change the
parameters and we would love to see
people change the parameters are
currently available and include their
own parameters so what you can do is
again if anyone can access this this is
just a link to that yet have where all
the code that powers the synthetic choke
and builder lives so you would actually
go there and follow along as I'm talking
about this but there is in the code
there's a section where we define a
bunch of parameters in fur to have a
facility and I want to highlight three
of these parameters because I think
they'll probably be the most interesting
to people who want to create their own
token facilities they're synthetic
tokens one is this finer dress
is basically the price feed right on
trading price feed that the token price
is going to track so if I say for
example that this address points to an
on chain price feed for the price of
Bitcoin and die it means that each of my
synthetic asset tokens that I'm
borrowing from the tribune facility will
be backed by that number of die so
that's the one but should be interesting
and then two other ones are the
expiration deed of the facility so in
the synthetic token builder in the video
you might have seen that there are a
couple of pre-selected dates that you
can choose other ones and then the
margin currency of the facility so as I
mentioned right now we're using die on
testa but you could certainly change
that to be a different origin currency
that you would like we already have some
cool projects that have done things like
that or looking to do things like that
so Alison's going to spend a bit more
time talking about those projects that
she's seen as well as some ideas for
those of you out there who want to build
new things
okay so we started off by saying Who am
I is a decentralized financial contracts
platform with the decentralized oracle
service and smart contract templates
specifically right now the first one
that we've created is the synthetic
token template and what you can do to
customize and adapt the synthetic token
template to your particular use case or
any is first choose the reference price
index and as regina mentioned in the UI
we had already curated a certain set
price indices that we thought the
audience might find interesting but the
cool thing about derivatives is that
your imagination now is really the limit
so in terms of the prices that you want
a reference you can reference cross
chain assets like Bitcoin or gos or
whatever off chain acids like
traditional Fiat Adsense old sp500 etc
local currencies so not just dollars but
sterling or any local foreign exchange
currency that you can think of and then
also non-tradable things so things that
aren't inherently assets or things that
you can touch and buy but rather just
price indices so for example the number
of followers that CZ has on twitter or
the number of votes that a particular
reddit post has or my favorite topic
interest rates which we're going to get
into later you can also customize your
margin currencies so you know in the
Daffy UI we curated it with dye it's
just a little bit easier from a mental
model perspective I think to think about
things in dollars but you could also use
Eve or even things like interest bearing
stable points so that you can be even
more efficient with your margins and
then once you've created your synthetic
token there's a lot of different ways to
actually apply them and use them so you
could go and trade them on an exchange
or bills and build an exchange around
synthetic tokens you could use them for
local payments you could like for
example if we had a synthetic yen token
we could be trading again with each
there instead of trying to figure out
actual cash you could obviously
interface with them through a wallet or
some other sort of brokerage experience
and by a brokerage experience just to
differentiate that from exchange that's
like how if you're buying stocks in the
US or something you're probably buying
them through a broker you're buying them
through like fidelity or Robin Hood or
etrade as opposed to trading directly on
the New York Stock Exchange or something
like that and then you can also look at
creating funding and issuance platform
so much like the maker CDP portal you
could actually use these token
facilities to attain leverage for
yourself but in this case customized
levered exposures so just to highlight
some of the use cases that we found
really interesting and that were either
working with on proof of concepts or or
supporting in the marketplace
I talked a little bit earlier about
local currencies and how they can be
used for payments there's a really
interesting company called tempo they're
building they basically helped NGOs to
give aid directly in places that have
been affected by disaster and for an aid
recipient right they don't really want
to think about died or eath or whatever
they think about their world in their
local currency but unless their local
currency exists as a stable point on
blockchain we can't actually use a
blockchain base wallet to facilitate
that whole process so what we can
actually do then with the synthetic
token builder is reference the price of
the local currency so like the vaatu die
exchange rate and then we can margin
that contract with something that has
real value like die or see die
interest-bearing die and then we can use
these synthetic basu tokens that get
created in the actual wallet and payment
system so that from a user experience
perspective the end user just thinks oh
I'm moving bought you around
great like I'm familiar with that
instead of having to do some sort of
mental gymnastics around what's the dye
to bought to exchange rate is another
really cool use case I don't know Tom's
here but if you're building
International wallets or serving
international users many of them lack
access to international traditional Fiat
assets or if they're already crypto
native just would prefer the convenience
of being able to manage all of their
financial assets out of a single wallet
so what we can do is reference something
something like the sp500 or another
major global Stock Exchange margin and
again either in a stable point or an
interest-bearing stable point depending
on how capital efficient you want to be
create these synthetic tokens that track
the value of let's say the S&P 500 and
then actually sell that to these
international users that are looking to
invest in US stock indices but don't
otherwise have access to it and then the
third use case is making otherwise
untradable things actually become
tradable so a lot of people talk about
Bitcoin dollars that's right
and you can look at you know the Bitcoin
dominance index or you could look at an
altcoin dominance index whatever it is
it's actually really really hard to
trade right there's thousands of coins
imagine trying to actually go around and
swapping those in and out and then
rebalancing it in live time you'd incur
a great deal of trading cost and it's
just kind of a headache well what you
could do instead is you could create a
synthetic token that directly references
the Bitcoin dominance index itself
margin it in whatever you think makes
sense and then take these subsequent
tokens and trade them out so if you
wanted to if you're a Bitcoin maximalist
right you could actually buy a Bitcoin
dominance token or if you're an Allpoint
if you wanted to short like the 2017
okras you could try to create this
facility and sell an L point dominance
token to somebody else as well on the
topic of non-tradable indices I'm gonna
talk about interest rates in particular
so interest rates have this really
really interesting quality where they
give you one more variable to play with
so most of the time if you're trading
something like if you're trading Bitcoin
for East there's only two variables that
you care about how much am i treating
and what's the price that I'm trading at
and you know most things kind of follow
your standard 2d supply and demand curve
when you're trading interest rates you
add another variable of time so interest
rates measure the cost of renting some
amount of money for a period of time
and you end up being able to basically
create these 3d interest rate curves
according to what the cost of rent in
that money is how much money you're
trying to rent and how long you're
trying to rent it for the killer use
case centerfire and basically all of
defy has been within borrowing and
lending and that the interest rates that
are used in those borrowing and lending
protocols and all just been short-term
interest rates they're more or less
ignoring time and they're saying here's
the cost to rent die for you know to
rent you know a hundred die and then the
interest rate actually resets every time
the stability fee changes or every time
somebody new interacts with that
compound lending pool but oh but if we
wanted to create an interest rate market
we could actually create a market for
how much it would cost to rent that
specific amount of die for a defined and
longer period of time the reason why
this is
it's because first of all it's a huge
huge huge market if we look at the Fiat
world derivatives are 500 plus trillion
dollar market almost all of it is
interest rates so and if you want to
talk about uniquely enabled use cases
these things have to be traded
synthetically there is no other way to
trade time without a synthetic
derivative because an interest rate is
an abstract thing you can't touch look
see or feel it it's not a token you can
only trade it in the form of a
derivative and it's important actually
that we are able to trade these interest
rates and allow people to trade interest
rate risk over time because right now
the only reason why people are using
these borrowing and lending pools in d5
it's generally for speculative and kind
of not price sensitive use cases right
if I believe that eath is going to moon
next week I don't really care if I'm
borrowing at 1 percent 10 percent or 25
percent but if you're talking about non
speculative use cases a home loan car
loan business loans student loan price
does matter a lot more and the ability
for borrowers and lenders to actually
start offsetting their interest rate
risks the ability to walk in interest
rates or speculate on interest rates is
a fundamental necessity in order for
these use cases to get unlocked and
define so this is why you know we care a
lot about this there's a whole hour and
a half long workshop on YouTube that you
guys can find later if you want to go
really deeper in but I'm gonna highlight
three ways actually that you can create
interest rate products with uma today
using the synthetic token template now
I'm not saying that the synthetic token
template is necessarily the way that it
should be created or the way that it
necessarily will exist forever and ever
ever but these are actually three
different ways that you can actually
create them today that would give us
price discovery and insight into how
this market could evolve and so these
three are why it took kind of a
simplified version of Dan Robinson's Y
tokens Summa which is a project that
came out of each Boston and then fixed
rate tokens which is more or less
something that I made up so to dive into
these um so how many of you have read
the white Hogan paper just okay okay so
the way that basically Y tokens work is
you're trying to create a yield curve
for what the eight dollar funding rate
looks like over time so how much money
will it cost or sorry how much will it
cost for me to borrow dollars against my
eighth for different periods of time
that's that's what a yield curve for
each dollar would be and and that's what
the motivation is for creating y tokens
is the way that it would work is you
take the uma synthetic token template
you make the reference price index the
price of dollar e so it's just one
divided by the price of e you use eath
as the margin currency and you basically
just say that every toe can I borrow
will pay out $1 at expiration if the
price of East goes up it's less East and
if the price of East goes down its more
East it's always $1 worth of East at
expiration and so effectively it's sort
of like what you've created there is an
expiring stable point from the token
sponsors perspective if they were to
create this product create this token
facility and borrow tokens against it it
would enable them to get levered east
exposure kind of a similar reason to why
anybody might open up a a maker doughsay
appears
like that but the difference is that the
way that they would get this exposure
would be with a fixed interest rate over
the lifetime of that token facility from
a token holders perspective they get to
own a token that they can redeem for $1
at expiration and they're buying it for
less than one dollar initially free
money right but basically it's it's kind
of like interest it's an interest
bearing token interest bearing stable
point but you know kind of different
from seed die and if we have a market
for this what we could do is observe the
market price for these y tokens that
have different expiration date and use
that market price to calculate back into
what the implied funding rate for East
dollar is for different periods of time
so you could create a a Y token that
expires in three months
a why token that expires in six months
and a why - that expires in one year
they would all have different prices and
based on that price you could get an
implied interest rate based on that
implied interest rate you'd be able to
build out a yield curve and then you'd
have better visibility into what the
market expects the east dollar funding
rate to look like over periods of time
right now all we know is that the makers
- what the maker Stability fee is today
we don't know what it'll be next week we
don't know what it'll be next month and
it's actually quite hard to figure out
what expectations are if any of you have
ever been on any of those governance
calls there's quite a bit of debate this
would actually give them more insight
into what the market already naturally
expects the interest rates to be
another way to treat this is through soo
much oaken's where basically the
reference price index is 100 minus the
expected to the stability fee that you
would pay between two fixed dates so
let's say we're the two fixed dates are
January 1st to December 31st and we're
what we're referencing is what the
market expects the stability fee to be
on average between Jan 1 and DS 31 and
then we take 100 minus that so the price
of this thing would generally always be
less than 100 the reason and the reason
why somebody might actually want to do
this is if they wanted to really
directly speculate on what their
expectation of what the expectation of
interest rates are over time so the
token sponsor would make money if rates
increase effectively a token sponsor
could use this if they were a borrower
and they were worried that interest
rates were going to increase and so they
could create these too much hook ins in
order to match off the P&L there from
assume a holders perspective they make
money if rates decline it's kind of like
a lender who wants to lock in their
interest rate today because they think
interest rates are really high and
they're going to go down in the future
and the same deal we can look at the
market implied price and it will reveal
information about what the market
expects the interest rate to finally be
the future final version is a fixed-rate
token it's just kind of like too much
pumpkins but a little bit simplified you
just directly reference an expectation
of what an interest rate will be between
two fixed dates and you tokenize it so
if I say like you know between Jan 1 and
D 31 the expected interest rate is 10%
every token so the interest I 100 I'll
own would be 10 died then the token
would be redeemed for 10 died at
expiration and then you can directly
trade these fixed rate tokens between
each other so every token is effectively
the variable interest rate that you
expect the maker Dao system to cost you
on a $100 loan over those 2 fixed dates
so to kind of summarize what we've
covered there with all these different
use cases synthetic products are highly
composable within the defy and general
etherium universe and the innovation can
kind of occur at many different levels
the innovation can concur of her at the
price index level where you can just
make up basically or reference arbitrary
price indices the financial engineering
level basically the interaction between
the price index and the margin currency
and the payout structure that you're
creating or even at the application
layer so how you're delivering the
product to the user and what's new or
unique or different or special about the
way that you're delivering that product
and synthetics are really great because
they you know offer the features of
leverage support for cross chain off
chain non-tradable assets and this
ability for synthetics to
we'll risk transfer for things that were
previously not tradable is critical for
developing markets like interest rate
markets where we can start to think
about supporting non-speculative news
cases and so Regina is now going to talk
about how you can actually build
contract templates not necessarily just
the synthetic token one that we already
have but other contract templates that
are safe secure and scalable the
fundaments as great as some synthetics
are at a fundamental level they all
require an Oracle and on Jane price
feeds are expensive they are hard to
maintain they're dangerous you know a
number of d-phi projects out there all
do use Oracle's and many of them have
had Oracle that has actually failed at
some point or the other and so we
actually believe that you know it's
going to be really hard for defined
actually scaled at a global and large
size without a secure arm chain there
sorry without a secure Oracle but we
believe that the right way to actually
build these contracts that need an
external price reference is actually to
minimize the use of on chain Oracle's at
all and so Regina is going to talk about
our framework for writing templates that
fulfill this I want to emphasize one
more time that the topic of this
workshop is building synthetic
derivatives so what we mean by synthetic
is specifically this that the financial
risk that you have on chain comes from
an external price feed come from a
reference asset that the derivative is
referring to rather than any sort of
physical token that's being borrowed or
- chief leverage I just wanna emphasize
up like very very clearly because I
think the rest of this talk is going to
be about getting rid of those price
feeds and so I want to make sure that
we're gonna chance it like synthetic
derivatives are all about referencing an
asset and they have nothing to do with
like actually physically borrowing and
lending anything to get leverage so on
that note we talked about the stokin
facility right and how there is a
certain price that comes in from this
price feed that tells you how much
collaterally needs have to actually
fully back the tokens and then again
will your Kalaa causation requirement is
so fast off of this one price fee that's
being pushed into this token facility we
know both the price of the Mondavi
plateau and the micro fired bottle some
of these two things then we just do a
check to see if you have sufficient
collateral to meet those requirements
right and so depending on what price the
price feed pushes you know that you're
either in this state or in this state
and once you're in this state you know
that okay great like it's penalties
assessed and that all gets paid out to
the token holders and people
so this is how probably most people
think of synthetic derivatives I'd say
in fact this has a lot of analogies to
how Fiat works and how synthetic
derivatives are settled in Fiat so if
this is our existing framework for how
we march in and trade and set all
synthetic derivatives we've got a lot of
pensee on this price view and that's why
these prices are so expensive we pay a
lot for them in the fiat world and of
course as Alison's been talking about
with the Oracle they're corruptible so
if I have students make a lot of money
by saving me from this penalty maybe
it's really in my favorite to crop this
price steep so I can keep the penalty or
so that I can really reduce the amount
of money that token holders get I might
want to accomplish my scheme there are a
lot of reasons that in defy especially
this is susceptible and in Fiat that
there are a lot of reasons why this is
really expensive so it-it's things like
it's Fiat it's expensive from a dollar
cost perspective and in d5 it's also
expensive from a leg computation and
keeping things alive on constructors
is there any legal framework to
basically put some liability and for for
the price it's like in the current
business India yeah sorry in traditional
finance I think there there might be I
would say the larger places the more
conventional way that we've addressed
this issue in Fiat is we hire a lot of
people to look at prices and confirm
that the prices that are being sent from
one custodian to the other custodian are
currently some of the will neither
we can undo the things right and yeah
let's another thing you can do on Fiat
is that you could undo these
transactions so you can hire people to
go back and move money back from certain
accounts to their goats we should be
able to pack for this future I know it's
not fully process on that Senate
automated but know this is the like I
think that's a little bit out of scope
for this presentation but happy to
discuss later okay so as I mentioned
before right in that picture we've got
these crises that are regularly pushing
prices to smart contracts so one way to
visualize this is to say okay we've got
this price feed that runs that someone
has to maintain it's an unverified
priced feed your innocence but I'm gonna
say it's just something that's been
piped in from say Bloomberg onto the
blockchain
maybe we're using some service that
ensures that you know it's not been
corrupted from Bloomberg on its way to
the blockchain
but it's unverified in the sense that
like if it comes out incorrect from
Bloomberg we don't really have a
solution so here is my price see that's
regularly pushing prices to this smart
contract I'd say frequent 15-minutes
price updates right so the question is
how do you provide prices so quickly
from a decentralized economically
guaranteed or say that's the big
question that we're trying to answer
right we want these prices to come
frequently so that we can liquidate
people when they need to be liquidated
but we also need enough time to actually
have I guess in the Fiat world to have
like humans look at prices and check to
make sure that they're correct so how do
we how do we address this problem and
then there are two options that were
currently seeing in the person you can
implement a delay at the Oracle level so
what you can do is you can say we're
still gonna get prices every
minutes but each of those prices is
going to be delayed by an hour so the
price you get at 1:00 p.m. is actually
the price from false yeah so 1 p.m. in
blockchain timer like real real-time
corresponds to a price of pocket
so you're basically giving people a
one-hour delay before the price from
public lock hits the blockchain at 1
o'clock
one thing that's really cool is this
looks kind of like how settlement works
in fiat so right now if you trade stocks
let's say in your brokerage account as
Alison mentioned you get filled at a
certain price and you know that you got
executed at say the price about 12
o'clock but the stock doesn't actually
arrive at your custodian until say two
business days later so you know
physically have it or you don't have
that record implemented until that time
so in that way right it's a lot like
this kind of mechanism where you've got
this price that's delayed then hitting
the blockchain at a later time and then
you move you actually move tokens or
collateral at 1:00 p.m. to correspond to
the 12th BAM price so that's one option
one of the challenges with this though
is it puts everyone on the same clock so
this is a great because let's say you've
got a lot of different smart contracts
all depend on the same price and this is
fine but it means that let's say you've
got some contracts that have you know a
small amount of money and you're ok
having it be updated every 15 minutes
you don't need the one hour delay it's
not that much money at risk like I'd be
happy without it but let's say you also
have some contracts that have a lot of
money and you really really care about
making sure those prices are right well
this it works but it puts our own signal
so you me not I do
another option is you can implement the
delay at the smart contract well so what
you can say is great so again the price
is coming in exactly at one o'clock this
time then what we say that's fine
we recognize that price on chain but
we're gonna move margin at two o'clock
so here it's just like the the picture I
had before but instead of implementing
the delay at the Oracle level we're
implementing it an athlete smart
entrepreneurial but still it again it
looks still like someone to Fiat it
still looks like the option from before
the only difference is do you implement
the delay when removing margin or do we
implement the delay of when the price is
coming on chain requires fewer Oracle
calls in the sense that you don't have
for example here right like you don't
have this limits one hour delays it's a
little bit less Oracle intensive but you
still have the problem of you just put a
one hour delay summer whether it's at
this level
so the benefit of the delay is if you
have for example a price that you're
seeing in the real world at 12 o'clock
it gives time for us all to agree that
that price for 12 o'clock was the
correct price and when I say us all to
agree I mean physically for like human
human analysts to look at it and like
confirm oh that makes sense the price of
the SNP is not 200 right and so it gives
people a chance to review so as you can
see both of these options are doable
certainly they have been implemented but
they're not great like you still have
this whole settlement issue we still
have unverified price feeds so what I'm
gonna propose is instead of pushing
prices to smart contracts let's let the
projects just pull them when they need
them right so instead of having all of
these prices pushed onto the smart
contract why not have a smart contract
that says okay like I don't need to know
the price right now because everything's
going fine there are no limitations I
don't think there should be any
limitations it's fine right so so we're
here everything's going fine then when
you see in this defy smart contract that
there's something that would require
their price say oh hey like I think
there should be a liquidation here why
not let them just raise that as an issue
I'm going to call that a dispute in this
picture but raise that as an issue and
then let an Oracle handle it
so this concept I think is one of the
most important things that king
designing like finished contracts that
are compatible with an Oracle is this
movement away from a push mentality into
a poll mentality so as you can see here
right you're moving away from having
someone pushed prices into a smart
contract and just letting the smart
contract pull prices from hiddenness can
be decentralized economically
guaranteeing of our goal and just pull
those prices when it eats them great
[Music]
great question so the smart contracts
doesn't know what the prices all right
because the support contract hasn't
actually pulled for a price it doesn't
know it doesn't know if you should be
liquidated but we've got a bunch of
human beings interacting or I guess like
other robots interacting with these
smart contracts and they can do the work
of saying oh based on my assumption of
what the price is right now I don't
think there should be a liquidation so I
don't need to raise a dispute to make
that smart contract to pull a price down
what I can do is I can say well it looks
fine to me because I can see off chain
that oh like I look at the price on
Bloomberg it looks fine I think that
these should not be liquidated I'm okay
I don't need to pull a price so I'm
basically saying that the human beings
or the other robots interacting with a
smart contract are looking at that smart
contract and saying I don't need to go
pull a price right now I'm letting them
decide when okay there's actually a
situation where someone's actually in
default someone needs to be disputed
someone needs to be liquidated at that
time there needs to be an issue that's
raised to another power that I can say
okay you're correct you're right and
segregated I'm now going to give you the
final verdict on what that price is
great question
I actually know it's a really great
technical question left oh sorry are we
worried about das attacks
great question our team has done some
thinking on that I will put you in touch
with this people after this so what I
want I want to get through the rest of
these slides because I do want to
mention this in the context of synthetic
tokens which I hope will be helpful in
understanding the framework more than
happy to take questions after this and
outside cool so I talked about this
framework right now let's talk about how
you might apply them to the synthetic
tokens that we were just talking about
because in the synthetic tokens before
right there still is that problem of
okay we've got these aren't we and
phrases to each other team is really
hard to put on chaining but those are
still comfortable and potentially could
cause limitations on their Trinity so
how do we make these synthetic tokens in
the priceless framework I I kind of
mentioned this in my answer to that
questions that I took it but here does
it here's what you can do right you've
got the token facility
you know there's backing collateral in
it and you know that there is some
hearts proto plot so I can see this
information I can see this information
kind of but what I really did see is the
total clock and then I'm sorry I'm
saying I is the token holder right so
I'm someone who holds a token that was
patient right here what I can say is I
see the total cloud when I look outside
of tests that I love and I say oh a
bloomberg is telling you this price
based on that information I can say well
that looks right okay he's got enough
collateral that it's that price we're to
be pulled onto the blockchain right now
and it really were that price there
would be no issue this person wouldn't
have enough back in collateral they
would have an
to meet the required collateral these
question marks would turn into checks
and so what I can do as a token holder
is say this looks fine I don't need you
to pull in a price I don't need you to
pull that data and perform that very
expensive check to make sure that
everyone agrees on the price this looks
fine I'm happy with it the token sponsor
is free right now to keep depositing or
withdrawing margins from their token
facility they're free to keep doing this
because no one's disputed his position
but if something were to happen let's
say I look off chain on the chod we
called our little Goff chain and the
price actually looks really really high
and I think to myself
the total collateral actually is lower
than the required collateral there
should be more collateral in here right
that's an issue why it's a spread right
that's an issue so what should I do
I should say that looks wrong EVM help
us resolve this dispute raise this issue
- as I was saying before the other power
this is DBM raise this issue to them and
say hey we need you to pull a price off
chain now we need you to come and
resolve this dispute because I think
this guy is under collateralized you
need to help us resolve that issue and
that's why you miss building a TPM to
help you answer that question right to
say hi how can I help in this situation
great so we've got these two scenarios
right in the happy path in the happy
scenario this is going on no one needs
to pull an expensive price on chain
tokens phones that are free to deposit
and withdraw with no delay well with
some delay I'll go to the delayed this
but they're free to deposit in withdraw
and
unhappy hath an unhappy case well we've
frozen the margin in here while this DVM
the DVM stands for data verification
mechanism but while this dispute
resolution process takes place we freeze
the margin and someone else does that
work
of pulling about price chain so what
does that mean for a smart contract if
you're building a smart contract that
intends to use this framework what
additional considerations you need to
have the way it works is your smart
contract remember this is the token
facility from before that was deployed
in the ring feet s net this token
facility needs to consistently pay these
continuous taxes so what we have in this
picture is they're paying taxes
regularly to this Ummah store contractor
so you've got a token facility that's
paying these taxes and that helps ensure
that going back to Allison's statement
about the Oracle it helps ensure that
the cost of corruption is higher than
the profit from corruption because what
this is today is it's saying these taxes
are going to make the cost of corruption
higher and once you've done that right
once you've created a token facility
that's up to date out of taxes let's pay
the correct amount of taxes it gives
them the ability to later call the DBM
when they need it
so what you can do is you can say well
as the asuma's DBM as the Oracle I say
well great this token facility has paid
its taxes regularly now that they need
to raise a dispute I'm more than happy
to
when they do that right the token
facility requests the price on train you
pull it in to result in dispute it
generates an answer and then you as the
smart contract can go in and retrieve
the price from that Oracle great so to
recap what we've discussed so far
actually I guess this is all of it but
to recap what we've what we've discussed
we started out this conversation talking
about on chain price feeds and sancho
contract templates right we started out
talking about how with ease and with our
synthetic token builder contract with
the synthetic asset token contract all
the different kinds of things you can do
with that Allison gave like six or nine
examples of things that you can build
with that and more and we would love
love love to hear other things that you
want to do with these things and how you
might use them in different applications
so if you have ideas about that please
please talk to Allison because we're
thinking a lot about you know how you
can use these templates to to meet cool
tools for other projects then from there
we talked about how you could deploy
these commands or contracts with new
parameters so we talked about how if you
change for example the price speed or
you change the expiration date or the
merchant currency you can make new
things that go into those applications
Matt writes who's our lead engineer
sitting here and can help it anyone who
has questions about how to do that from
a technical perspective and then we
ended this conversation with how you can
use you can escape these on train price
feeds and build things that rely on
Oracle's or these kinds of backup
Oracle's like the most
and how you can do so many different
types of financial products in that way
and see if you want to talk about that
more please find me so that's kind of
what we've discussed so far more than
happy to take questions now and have
additional conversations well is there a
mic we should use or should they just
yell just yell okay can you explain more
details how taxes from the contract to
may will help to keep the Oracle
there sure sure so it's a basic idea of
how the Oracle works is that when the
Oracle is requested the price is
requested from the Oracle okay what a
wonder price is requested from the
Oracle the Oracle then goes out to a
bunch of people or I mean they're saying
that's very colloquial e but it goes
autopunch people and says tell us what
you think the correct price should be
those people then submit their answers
for oh I think the price should be this
and they also have some balance of
voting tokens so those voting tokens
influence or determined how much
influence they have over the correct the
final price that's returned to the smart
contract so the it's basically if you
own more voting tokens you have more of
a say in what the references the taxes
that I was describing for those go to do
token buybacks
so those increase the cost of corruption
because now those tokens have gone to to
increase the price of the tokens so if
you want to go and bribe the Oracle you
need to go out and buy more voting
tokens for those voting tokens are now
expensive that's a cost approach so the
only way to get that audience is from
taxes which were say oh well I can get
it somewhere somewhere else if I want to
vote on prices for the Oracle I can go
out and buy the boat token but the price
at which I have to buy the voting token
is influenced of course by that at the
buybacks
20 seconds here I'm going to use
because I wouldn't really need your cost
right somebody I said people are living
I'll let math math you know get burned
they get the ideas that it be prizes out
of all the value of those vote oaken's
go to zero because you effectively from
those into that worthless because you're
gonna expect use the system in the
future so so the boat tokens you don't
burn them the idea is that you're
holding them so if you were to do
something bad the value you're holding
will go to zero so that's that's the
economic
because I think
place
human goodness
maybe fix that we have another hybrid
humans
that continues to have
and
have
okay that's more a statement so I think
that in some ways there are a lot of
corollaries to the fiat world right but
like when you and I enter into a
contract in the regular Fiat world we're
abiding by the terms of the contract
because we know there's external
consequences if we fail we know that you
can take me to court you can sue me
potentially if I did something really
bad somebody could send me to jail right
in the blockchain land there is no such
thing so this horrible that we built is
basically a primitive that allows us to
create an economic incentive to be able
to get some of this off chain data on
tape and be able to verify things that
you can do more with our smart contracts
that we otherwise would not be able to
do because in this blockchain global
world there is no you know external Jail
there is no external single global court
system that we can all arbitrate you
what is the wonders of what happened
great so on the first question let's say
you're right so so let's say someone
misses like a situation where the right
so let's say in that in that diagram in
that diagram right so there was a
situation where initially we were here
and then we got here and no one called
the pole for a phrase there are two
outcomes right one is the next time
someone does call for a phrase we're
still here so eventually it gets caught
just not by the first person the second
case is find the time someone's come in
to say okay something looks off we're
back here in which case what's happened
is you've given someone that kind of
like optionality right and saying oh
well oh I know I'm under collateralize
but I'm just gonna hope that no one
calls to pull fair price I think that's
a very valid concern but the hope is
that with lots of different about
utopian or voting lots of different
voters or is lots of different
counterparties in a system that has like
more liquidity that people will be
monitoring that stuff and I would say
actually one of the cool things about
potentially the way that this ecosystem
grows is that we eventually have third
parties that are incentivized to watch
for this kind of stuff and pull pulled
for those kinds of price feeds or pull
those prices because they've got some
kind of economic incentives to do so so
I think there are lots of ways that this
could could be built up in the future
and has like different add-on features
so all this driving and placement would
still like in whatever
two types of legal contracts
enable someone to operate
right
so a pretty complicated because every
country kind of has their own set of
rules the first thing to kind of
understand is that sadly there's a lot
of ambiguity when it comes to this stuff
actually not just because of the
blockchain aspect but just in general
the definition of a derivative and the
definition that missile carries not
always super clear and it really depends
on the specific facts and circumstances
of what you're trying to create so if
for example you're using a non security
as the if you're using something that's
not a security as collateral like E and
you're using something that's not a
security as the reference price index
like the price of Bitcoin and you don't
have very high leverage then you know
it's unclear these products depending on
jurisdiction could be classified as a
derivative or a loan or a hybrid
instrument but certainly not a security
alternatively if you use a preference
price index that absolutely is a
security like the price of Apple stock
or if you're using a margin currency and
that absolutely is a security like some
sort of an sto thing then yeah like that
would probably be subject to Security's
regulations but it always depends on the
precise combination there's things that
you're trying to do
so every one of these unique effects
plus the traffic was following
obviously UX work with this when you
have thousands of different codons this
interoperate with
like this isn't gonna what great
question I think again there are like
two different ways that this could well
and probably more one way that I can see
the ball thing is we do more financial
engineering work on making those tokens
fungible between different contracts
that have the same parameters we've done
some thinking about how you can
implement that and decided not to launch
our initial version with those
additional features because they seem
very very complicated but it's possible
to make a system where all those things
are fun - I mean dye is an example of
something where they are much well and
the second is depending on the way that
that marketplace for synthetic tokens
looks in the future potentially we could
have you know lots of different
individual token sponsors who then
create children's and sell individuals
but depending on the way that the the
ecosystem looks in the future you could
imagine a scenario where there actually
is one big token sponsor and maybe that
one big token sponsor is actually some
collection of individuals who've pooled
their risks of power right there there's
so many ways that this could grow and
change leggings definitely like the
first thing I mentioned with the
financial engineering is one thing the
composability with other ways to pull
risk is another lastly is maybe there is
like UX solution that works better so I
think there were lots of different ways
that this could go and I'd be more than
happy to can you continue that
conversation
if you consider this from Melissa you
have the light do you think this would
work from a parametric insurance
perspective
but you just have an event you get to
pale festival is too much right yeah so
your question is about parametric
insurance yeah well just insurance in
general we have events and this would be
a panel tool because the minutes
essentially the same logic just a
different price feeder so yes asterisk
with some caveats so I think the biggest
issue with binary payouts on chain is
the question of margining so if you want
like a million dollar cot insurance
policy like I get a million dollars if
the rain is really bad this year then
the only way to do it really safely is
to put the full million dollars into
that contract from day one and then have
an Oracle that tells you whether it
rained really badly was here or not but
that's really really capital inefficient
and most insurance products don't
actually work that way generally when
you buy a million dollar insurance
policy from a normal insurance provider
they're only putting up a small amount
of money a small fraction of that
million dollars and they don't have to
put the full million dollars upfront
otherwise they wouldn't be able to write
as many policies as they do in the fiat
world so it's it's I think this is an
area where at least for right now and
the way that we've thought about writing
insurance on the blockchain that it
would probably be less competitive to
the Fiat alternative
at least I certainly have all the money
in governments and then as an investor
you just take the recipe gets reserved
at the wheel money goes away if the
event happens but I was just saying
there are catastrophe balls where you
put all the miles runs there's a kind of
bonds where you put all the money
upfront disappears that the bad that
never happens but not actually sure how
popular they are yeah and there's
actually still embedded leverage in
those and the way that they work in the
Fiat world that doesn't really translate
easily into watching land okay
and you know your
or you have a dispute you see that the
conference is gonna fail
when it's what is relative happy
immediate pricing when he started the
presentation
very expensive or those price providers
can be very expensive and I agree with
you but if any on the magnitude of the
crisis
and significant trillionaire business
so the question is more like about being
the Oracles
what if you would have like five six
different Oracle's we have read the
derivative from page you have beliefs
where this price is coming from if it's
going to be from the central bank or
from Reuters they've only work at this
specific time so my question would be is
this Olmec famous about forgetting about
the price provider or not trusting the
price provider because the financial
services so I think that when we were
saying expensive we actually meant
expensive in a number of different ways
so expensive is expensive in terms of
actually purchasing the data and getting
a license with Bloomberg or whoever for
that data but there's also expense with
running your off chain servers running
the DevOps effectively between your
opportunity server and your on chain
communication paying the gas fees and
then also all of the coordination costs
amongst anybody who's participating in a
contract like the centralized version so
bit max for example they just decide
what their XP team indexing is and when
they decided that this annex wasn't good
enough or when they want to tweak their
algorithm
they just make that decision
unilaterally and they changed the way
they calculate the price index they cook
up the new API is they do all that stuff
but in this blockchain decentralized
land if you don't want a single point of
authority in that way to make
decisions but you similarly have
thousands of people who are long and
dozens people who are short this is
seamless burn doctor how can you
actually do that effectively just as own
Oracle maybe the Oracle must be like a
centralized already established trust
for the party like a ruler or for some
writers or artists
so it's I mean it depends I think on
your use case and where and why you're
willing to accept that centralization
but again even if you are willing to
accept Thomson Reuters as the source of
truth and you're willing to say I'm
going to go with that price things still
happen you still get in again you still
get 0 you get flash crashes where they
go back and break the price and in a
smart contract world where you're
everybody's kind of self custody in
their own points well if you're using
that in a end or the zero price from
tops of Raiders the coins already moved
that's a very very bad yeah your
underclothes our lives like before right
you see the price of the real world and
then you're like oops
right and though in this system right
before the points in actually move you
go to a decentralized verification
mechanism to actually validate that this
price is the right price rather than
just directly and gently using it
what prevents the
from shorting so in the case that you
pneumatic construct pulses instant
previous point participation trophy
Department something that would allow me
to flow across America
there's absolutely potentially an even
easier way to do that which is if these
tokens were on some sort of a landing
protocol and they were being lent out
their massive size you could simply
borrow the tokens take no price risk
yourself use the tokens to vote create
lots of bad prices that break every
contract and then you know make out like
a bandit so huge problems will be really
interesting to see how that evolves but
as that's why the initial conditions of
the token distribution actually matter a
big deal and why it's really important
that you have a really highly engaged
voter community so as a rational Ummah
token holder as a rational stakeholder I
should never lend these out or if I ever
observed that there is a meaningful
portion of these things lent out then I
should not I should no longer own these
tokens
so these are ghosts while copying these
contracts and something great that's
really little ammunition
the coordination required to get
everyone up easily exhibit their
contracts before something happens but
you need somebody on the other side
who's willing to go Leopard lon
so if you want a short a trillion
dollars worth of these uma tokens you
got to find somebody who's willing to go
a trillion dollars long so in that
discovery process in it will impact the
market there will be signal to the
market that this is happening and so
that it should not happen it would be
irrational for that so if it isn't a
payoff and on my comment value is left
inside
like for example if
if the group of what a lot more there's
a lot of capitals
that risk very much so that that's
actually the system that we built where
if you have let's say a hundred million
dollars of margin locked inside of smart
contracts that are referencing the uma
Oracle then the uma tokens must be worth
at least 100 million dollars or the
value of the voting tokens actually must
be worth at least 100 million dollars in
order to prevent a civil attack so
that's actually why we have that dynamic
tax rate that Regina talked about
earlier so if we ever observed that the
value of the tokens is too low for the
system to be guaranteed to be
economically safe because there's so
much margin in the system we would
actually implement the tax on the system
and use that tax to buy and burn tokens
until the market cap got high enough
again yeah every contract has
potentially different collateral and the
acceptance of collateral is a governance
parameter of the system so you wouldn't
be able to just use some random alt
point that nobody actually knows what
the value is please take your stuff with
you
don't give it here before you do we
would still have more time for more
questions okay I remember to leave this
up so that you at least you guys know
who we are and come find us later
[Music]
it seems to me this time like looking
more circle this together they'll make
sure that by using the pole
push using the list to external parties
that are hard and I wonder if there are
some ways sufficient level of market
players and sufficient amount of market
need to catch those enemies is where we
do
you invoke some kind of call it is
and
where there might be like things where
you just got to noticing things are
happening because you're not practicing
rarely data right so I'm just curious if
you've thought about this more and you
know maybe there's some things being
yeah I mean definitely I think one of
the key takeaways is just economic
incentives drive the world right and so
within months of maker it out for
example releasing their keep their
reference implementation of the keeper
code somebody had already improved it
and their original code was being beat
every single time and they haven't yet
had a failed you know liquidation so
similarly that we didn't go into it
explicitly here but a portion of the
penalty actually is basically paid out
to the collar of the dispute and so we
economically incentivize people to
actually go and dispute in addition to
just saying like everybody takes some
responsibility for it because like you
kind of
yeah definitely
I think also standardization is
important so if you so I think if you
had affiliates for contracts and a
million different ways to all of them
and you had to write a separate API for
each of them or whatever to actually
protection be the keeper that's a
souvenir heart so I think the key
partner really sorts of systems I think
you're successful to make sure there's a
standard way to quickly look through all
the contracts to make sure they're going
to you - across the monitors so for
instance if you had ten maker doubts you
must all have the same API so the same
keeper who we work for
so one person can run one system monitor
100,000 contracts
yeah how would you say your Oracle
solution papers from their solutions
I have like chained lineker some of
these other systems how would you say
this comes in America however there was
not necessary sir we around the
financial engineering order everyone's
part of that yeah so I think the system
is very different from systems like
chain link because what tree link is
effectively doing is taking the
programmatic API data and then making it
such that rather than having a single
node reporting on it you have multiple
notes from morning on it where settlers
augur and that we both use a shelling
point game to incentivize the reporting
of honest like honest reporting but
we're different in the implementation
details specifically that augur has to
have a designated reporter initially
rather than artists we're actually using
the entire network for reporting and
also augers markets are done in natural
language which is beneficial for some
things and that you can do more but
really harmful for other things and that
a lot of markets resolved in invalid in
uma system the price requests are
standardized so there's just a simple
identifier
the schedule this argument system it is
a whole system which is of course quite
as much less
place of information and the strength
regularity love but still if you need a
specific actions more like some people
maybe it's warming and water you asked
event some active so you cannot have
like 50 already let's do the same
information or a thousand organizations
information as to what happened to just
regularly push data different different
cool that one piece of information
because they're all doing contracts on
for example like your chancy it would
have that actually request each time
yeah and I would say that's actually
feature not a bug because it prevents
parasitic usage parasitic usage so it
ensures then that if there's lots of
contracts that would like to use our
Oracle well in order to use it and have
the Oracle use for them they've got to
be paying their taxes they can't just
observe what other contracts are getting
don't worry I'm freaking out
still have five minutes one lucky
peeking about that even stranger would
it make sense in your opinion to be nice
under the users on the system to an
agreement in currently users to be net
magnetic recommending the users with the
sponsors and Oracle now look at
something that could happen at the
application layer if that was a desired
feature but not a built-in feature of
this are you planning to visit the Regal
why not there's over a hundred countries
in many countries impact areas and the
financial instrument will be considered
as a security so if using for adoption
yeah so I think that that again is just
something that needs to be handled at
the application layer and not the
protocol there so on on the decision
resolution process one thing that
occurred to me is
you not only need to be able to then
very near Oracle to find out with
different places and see whether there's
discrepancy yeah
we also need to like at least I'm asked
do you need to then Larry that sort of
like a ceremonious
to verify that this upside-down
look I don't know what you call it a
derivative worse it's not
yeah where's under collateralized
weather this day has occurred in the
recent past right because it did the
dispute generally is saying like
something happened here right but it
might not it might not be in that state
anymore right so I assume you have to go
back away so the point you call this do
you say you're basically saying contract
is bad right now yeah we take time
Stanley yeah it's gonna take some time
to get resolved but you figure out the
price exactly that time sampling is
called and you say is it is freeze all
the parts of the contract so basically
contract waits to see it was
let's add that right into the price net
exactly so you're saying that there is
no support for like some kind of domino
effect
got it at the store opening time
correct there's me I would think notice
where I'd say like the items on your
financial contract unemployment
ideally it should be more of a dream or
president these are all simpler because
the value it's kind of complicated
people say I wanted it weird less like
10 prices and I want to like check out
this kind of arbitrary points because
time is continuous any invited and
they're also developing but also like
all our Oracle does is then it returns
what is the price of this thing at this
time if you wanted your contract to be
complicated you could request some sort
of a slightly historical price I mean
there's limitations to how historical
you go and then you can design your
contract for that domino effect if you
wanted it to we didn't make that design
decision but you could this is that
I want to talk about it
or distance and employment because most
of the costs of all girls
collaterally need to have secure
in operation and the fact that now we
work in the form of Jewish means that
they get much less with still the little
all the same collateral so somebody
needs to pay for the fact that they they
operating in a indistinct so one way to
think about like a much boating token
holders incentives is basically
compensating them for the work that
they're doing of providing these prices
and compensating them for the
opportunity cost of holding onto these
tokens rather than selling these tokens
and find something else that could be
productive or more yielding or something
like that
and when you actually do the math which
is in our white paper you can basically
think of it the value of these tokens as
being a discounted cash flow a
discounted cash flow series of all
future expected to men's hands and
there's kind of different stages for
what a total holder would expect over
different periods of the ecosystem sperm
so at steady state which is kind of like
where Fiat derivatives are right now
Fiat derivatives have been around 500
trillion dollars of notional volume for
like the last 10 or 20 years run a
steady state in the movie
the desired compensation for Puma token
holders is pretty much simply just the
yields that they want to be earning on
their assets whatever that target yields
might be it might be a function of the
environment it might be a function of
how much work they have to do etc but
you can think about what those
assumptions might be you can look at
like traditional stocks and what the
dividend yields are for those things and
and come to some number like if an Ummah
token holder backed Amanda five percent
annualized yield or a 10% annualized
yield and then backed that into what the
taxes would look like on on on the
financial contract users and it's
actually quite reasonable so back of the
envelope math tells us that something
like a 50 basis point annualized tax on
these financial contract templates on
just the margin which is an even smaller
percentage of notional would be
sufficient to compensate in whichever
holders and still earn the mclubbe a
healthy
it's about the roadmap that the current
usage I senior but the material but are
you launching an agnostic
and then the second question is that
that's mentoring that any water
basically built
the best six months
it's basically only interest rates more
effects it's a dying versus what are the
actual
that are
sure so the synthetic token template but
financial contract template it's both
deployed on maintenance and test set the
Mina implementation is referencing a
centralized Oracle so it was really just
to test proof of concepts at different
application and use cases earlier this
year a market maker used it to create a
US stock index token so that anybody who
goes to crypto could also vote u.s. get
exposure to US stocks we ended up
deprecating that and now we're working
with other kind of other proof of
concepts around we I think I mentioned
currencies earlier there's a different
stock thing that we're working on now at
the different application layer provider
those are coming out later this year or
next on the decentralized oracle site
our biggest internal priority is to get
that on to banette later this year or
early next year right now that's still
improved all the testing and your final
question or watching across the block
changes theoretically yes years
theoretically yes but practically
speaking the Orion community is pretty
magical and I think defy composability
and standardization is a huge component
of what gives this stuff value so until
there unless other block chains actually
have that type of community where things
happen
since it doesn't make sense to try to go
into playoffs right
so do you talk
which is why nose
let's say prices that being pushed to
change we have one of these students
existence that used the same basic
offense methods in batch the samples
choose one price people
you can actually end up with a lot more
than is being paid taxes because I got
only to double up your someone's just
created the article last five minutes I
probably don't need to create
yeah yeah so what you what you are the
question you're asking about is
basically what a girl calls parasitic
usage right and maybe do you want to
talk about it yeah I mean we have some
we have quite a few ideas but how to how
to deal with this but the rough idea is
that like we we don't want me to be able
to do that we want you so we have we
have designs for like a basic white
listing contract in some ways they send
their bytecode I'm sure they kind of
fold to allow them into our systems and
it's a little bit technical how we
prevent contracts from getting around
with those white lists but I just like
reading the breaching data like basic
proving the existence of our contract
and reading it that what but it's a
little more like we can talk offline
I mean the summary is kind of mr.
fuzzing so that you can't directly read
outputs but it's all fuzz that's
pregnant information yeah we do payout
this rather than late prices so you
don't say the price is $5 you say this
person just $7 whispering for help and
that way it's you need to the contract
and not everybody can use that because
it's specific to that particular
contract if you want to oppress each
other
so you can take
that expiry so I got these tokens like a
thousand people
the nominees was my thing is going pull
there on the line right
it's a great question and I think there
is like a challenge of how do you
broadcast to all ticket holders that's
time totally repins regularly they they
know that they should go back and
routine for the afterlife model again a
lot of different solutions I'm going to
throw out there one is that you know you
could have the walnuts being in charge
of that race if your wallets supporting
these kinds of tokens like you're able
to go back and read what is the
expiration notify your users rate that's
one way the other way is in our
synthetic token builder dab and we have
right now it's geared really towards
toget sponsors right because it shows
you what your collateralization is and
what you should deposit or withdraw
again that could turn into a portal that
all ticket holders as well as token
sponsors a lot of different answers
about but we definitely love to
collaborate on different types of
products if you're interested in
building that kind of functionality I
mean ultimately I would say they kind of
the solutions that we've envisioned all
currently live at the application layer
not the protocol layer so we're building
this infrastructure and would love to if
you have ideas about how we can support
at the protocol level would love to hear
them otherwise okay yeah I think we're
gonna and here but with lavash had
outside and they are Thomas
[Applause]
you