so my name is Dominic Williams and I'm
introducing Phi which is a decentralized
commercial banking system that creates a
stable currency as a side effect it
gives out loans algorithmically and
creates a stable currency now let me
just work this out so before we look a
fight let's just recap the problems with
commercial banks quickly so commercial
banks have massive infrastructure costs
HR and buildings compliance that kind of
thing and all of these enormous costs in
commercial banking end up on your loan
interest and financial charges they're
also they kind of made chronically bad
judgments when they're giving out loans
and this is one of the things that
exacerbates the credit cycle which is
very damaging to the world economy and
of course the big example was 2008 when
we had this massive deleveraging that
cost cost the world trillions of dollars
they also are a major threat to civil
liberties because as money becomes more
digitized if your access to the banking
system is removed you're pretty much
just frozen out of everything and
actually many people in crypts have
already experienced what it's like to
have bank accounts shut down because
you've been taking a transfer for an
exchange or something like that so
stable coins let's just recap that
quickly there are two main approaches to
stable coins currently around at the
moment the first is something a bit like
make a diet where you have collateral on
chain market-makers margin calls that
kind of thing
problem with these kind of approaches is
that they're inherently unstable you
create a kind of Rube Goldberg device
okay and when you put it under stress
it'll turn it'll tend to fail the other
approach is to use tokens as
bearish as colored coin bearish as with
collateral actually held in a bank or
other financial institution now that
does succeed in producing a kind of
stable robust system but of course the
problem is the banks will want to
dictate policy in relation to how these
coins are used people in contracts will
have to be authorized and of course you
add in the geography of the bank and the
jurisdiction of the bank into what would
otherwise be a very much extra national
system so quickly and fiat money fiat
money is what we use every day it's
dollars euros RMB and not many people
are aware of where it comes from but
it's actually created by commercial
banks when they give out loans so the
way this works is that you go into a
bank and said I want to borrow $10,000
and if they approve the loan all they do
is flip some bits in a database to
create the $10,000 from Finnair you get
it on the bank's balance sheet the loan
is an asset and the money they created
is a liability so what does fiat money
fiat money everyday money is really an
IOU it's backed by the collateral of
loans that means that every day money is
backed by you know cars houses business
cash flows personal guarantees that kind
of thing so the a ha moment is okay well
why don't we make the world computer
give out loans algorithmically and
create a stable currency backed by loan
collateral right we'll kill two birds
with one stone
we won't need these expensive commercial
banks anymore so I'll save the world a
lot of money and we'll also get this
wonderful stable currency that won't
depends on intermediaries so fie money
is is exactly the same as fiat money
it's backed by loan collateral how might
this work well first of all it involves
a network of validators this is a bit
like a proof of State Network where the
validators are really kind of lone
miners if you will anyone can become a
validator and this and you do it by
making a security deposit to the
computer
in this case the validators deposited
$50,000 and he can validate loans up to
$5,000 in size and the total aggregate
amount of those loans can be up to half
a million dollars so how does a computer
issue loans well first of all the person
who wants the loan approaches a
validator and says hey I want to know if
that validator agrees they become the
proposer they create a loan application
package using open source software and
they commit to it with a hash and they
tell the computer hey I want to propose
a loan the computer then randomly at
this point randomly selects another
validator and says look can you encrypt
that loan package to the public key of
the next validator right that next
validator then becomes a checker they
look at the loan proposal and and so on
in a chain which is decided
algorithmically until looking the
computer decides that the the loan
application has been validated once the
loan application has been validated the
computer creates the Phi from thin air
and gives it to the borrower and bear
with me for a moment and you'll see why
the fibers created out of thin air
actually has valley so this this chain
of validators the thing to remember is
that it's randomly selected in sequence
and and it'll depend upon the size of
the deposits of the validators and their
reputation and things like that
why do the validators do this well when
people repay their loans it generates
interest and the computer gives a share
of that interest to the validators right
so we might imagine that in this example
the proposer gets sixty percent of that
interest because you'd put in the work
creating the loan application in the
first place the to checkers get twenty
percent there's another side to this
which is that they're also underwriters
right so if the borrower fails to make
er a payment the computer is going to
take that repayment from the deposits of
the validators right so we can imagine
that the under writings and the same
proportion as the rewards and their
reputations also a risk
so this is how interest is generated
let's imagine I borrow $10,000 and I've
got to pay it back in ten monthly
installments of $1,100 well I get I get
eleven hundred dollars worth of I pay it
back to the computer the computer burns
one thousand dollars which is the
principle right just burns it and it
created out of thin air in the first
place right and the hundred dollars
interest is then distributed amongst the
originating validators and and also
savers and investors who've placed via
time so this is I mean I've
oversimplified this whole system but
intuitively this will give you a grasp
of why fire has value even though it's
conjured from thinner when somebody
receives a loan artist let's say I
received $10,000 in fie they're gonna
place it onto a crypto currency exchange
to get Fiat that they can accept that
they can spend right so I've got $10,000
in fire and I put a ten thousand five
sell order on to the exchange but
meanwhile there are other people who've
already borrowed fie and are paying back
their loans and they have to buy Phi in
order to pay back the computer and in
fact you can see that the demand for
file be greater than the supply right
because people are paying things back
with interest so I may when I borrow ten
thousand dollars I get $10,000 worth of
Phi but actually I've got to pay back
$11,000 worth of Phi right so we end up
with the system that doesn't involve
banks which gives out loans creates a
stable currency the last remaining
question might be well what stopped
somebody just taking a loan getting
their $10,000 worth of Phi and just
walking away the computer can't chase
that right the way that works is when
they applied for the loan and the
validator would have made them sign a
contract that says
if you don't pay back the computer the
computers going to take the missing
repayment from my deposit and
consequently all these money and so you
will owe me that money so if somebody
doesn't repay the computer they can
activate this contract and the borrower
then has a debt directly to the
validator and the validator can just use
existing debt recovery systems which
which are you know widely available
worldwide and so I'll post this deck
online on my Twitter if anyone wants to
look at it at their leisure I'm from a
company called string labs we've got two
projects at the moment one is fire
another one is called affinity which is
a kind of business oriented blockchain
which has some new cryptography and
think we'll the blockchain nervous
system we're presenting on Saturday
feel free to catch up with me later
there's many questions Thanks