I'm Dominic as introduced um so quickly
first question you know why do we need
synthetic assets synthetic assets are
crypto tokens the represent real world
assets like gold facebook stock pretty
much anything that you see in the
traditional financial world and the
answer is if we have high quality
synthetic assets we can power open
worldwide trustless finance based upon
small contracts it's a we call
autonomous finance so next question what
is autonomous finance do well once we
have synthetic assets such as d google d
gold we can obviously unable to
centralize trading hedging derivatives
that kind of thing people can use them
for saving and investing and we can
cradle kinds of interesting innovative
consumer applications another thing we
can do is we can create price stable
cribs occurrences so you might imagine
that cryptocurrency called fire was
created by blending d gold d USD that
kind of thing and this would be liquid
and it would be price stable so we could
use it as a unit of account as a medium
of exchange and a store of value and
that in turn could be used to power
other fiduciaries smart contracts
prediction market could be used as a
prediction market at collateral for
money transfer and payments that kind of
thing so
we'll look at the kind of basic
architecture talking about you know
traditional financial assets are you
know underpinned by clearing systems
exchange systems the thing called the
DTCC broker-dealers banks this is a very
complex slightly on Tikrit ated
infrastructure and when two people
transfer or trade these assets of course
it's going through a whole series of
middlemen and really there to customers
of this financial system that are
transferring these assets and what we'd
like to do is have synthetic versions of
the real world financial assets that
mirror the values securely but can be
traded peer-to-peer without middlemen so
you know we'd like to have a mirror copy
of all all of the major financial assets
and through this we can get some
interesting properties you know rather
than one two three days settlement time
we might get 20 seconds settle the time
we might get rid of commission
completely on transfers we might label
people to have fractional assets and
even something like fractional assets
can be a really big deal and if you look
at a google stock at 611 look recently
that's six hundred and fifty dollars or
something if you're living in a BRICS
country you may not even have six
hundred and fifty dollars to unless you
perhaps like to buy you know no point
nor five of a google stock or something
like that i think other things too like
you need twenty-four seven trading right
i mean it's if you have traded it's
crazy restrictive anything else to trade
with you access to good liquidity sort
of 925 the key aspects of the system is
that it's open and and trust less and
that enables permission that's
innovation and that's very very
different to what we have today the
current system is very restricted it's
expensive its hegemonic and you
certainly don't have permission its
innovation so the question is you know
how can we how can we get to this place
where people can truly innovate and
provide access to people that don't
really have access at the moment
so which studies of the synthetic assets
to create one of us finance to be
synthetic assets and then the question
is well how do we create these synthetic
assets and there are three main
mechanisms for creating synthetic assets
first one is colored coins which is
quite widely known second one is
cryptocurrency collateralized
instruments and the third one is Dow
issued assets so returning to colored
coins hella coins are really Berra
shares in cryptographic form they're
issued by some company who promises to
pay the bearer on demand whatever the
asset represents good dollar for example
tether does this it could be a inequity
and of course this results in some
pretty severe regulatory problems
because the issuer is based in some
jurisdiction if it facilitates exchange
it could be subject to money transmitter
laws exchange regulations that kind of
thing it's a single point of failure do
you really trust this issuing given them
your money and they promise to pay you
on demand whatever the crypto token
represents but you're really trusting
that they'll be true to their word it's
a poor funds ability often as well I
mean if you if you have a tether and you
have a chase dollar chase of talked
about creating a blockchain with with
dollars oh no these the same thing wit
is is one tether equal in value to one
chase dollar probably not so you don't
have funds ability and press the biggest
problem of all is that there are seizure
risks because you've got the single
company custody everyone's assets and
you might imagine that an agency comes
along says we don't like this user can
you seize the gold coin for example and
there's a problem there because that
gold coin may have been used as
collateral in some small contract and
you can imagine a kind of web of
dependences fanning out from from from
this contract where the gold coins being
used as collateral so we don't like
color coins cryptocurrency
collateralized instruments are
instruments where you know they're
pegged some kind of thing cause i'm
going to peg to an external asset you
know for example Facebook stock or
something for that
and they're collateralized by liquidity
provider in crypto currency and the idea
is that you know the value of the stock
goes up the liquidity provider will
wreak lateral eyes the instrument if the
value of the cryptocurrency goes down
they'll reflect relies the instrument
and so on but there are problems with it
too I mean there's very expensive
because you've got to put the collateral
into the instrument you've also got to
hedge the collateral on the real world
market so you actually have double the
amount of capital in this thing there's
an ongoing role cost in every time you
have a margin call or something like
that you know the spreads involved and
these constant friction it's just
leeching money out of the system the
biggest problem though is you've always
kind of recursive debt spirals so
cryptocurrency really at least at this
stage is far too volatile to be used as
collateral but it might be that you know
five ten years when there's a huge
velocity due to in vast numbers of d
apps executing it'll be much more stable
because the velocity of the currency or
underpin its value of making ya remember
and reduce the volatility before now
it's not suitable and the idea often is
that you know crypto equity will be
offered will be issued as a last resort
and injected into these instruments to
collateralize them when the quiddity
providers can't do that but of course
the problem is that the the problems
with the crudity providers will be
correlated with decrease in the value of
the equity so you gotta kind of
recursive death spiral so the third
option is dow issued assets i don't know
if you've been putting out a peep heard
of a dow yeah great says it's in
proposal denotes it's a decentralized
autonomous organization which is a bunch
of smart contracts that fulfill many of
the roles of an organization but they're
not controlled by any individual or
organization probably them have time to
explain exactly how this works but we've
got a user there talking to what we call
it
d asset API the data API is pushing
calls through to the data exchange which
falls through to a DI sit down all of
this is autonomous financial logic
that's executing in the cloud for the
most part we hope that the assets would
be recirculated on the exchange but when
for example you want to buy some asset
there isn't a an ask in the exchange
full through to the Dow the Dow can
generate you d assets and redeem than it
does that by hedging this position in
the real world by interacting with the
quiddity providers who essentially sell
it CFDs and close them on demand some
zero base CFD so the redemption value is
from zero to the price and these CFD
traders exist within a compliance
framework there's an association of
governance them and you know they do
with broker dealers and there's multi
six games to stop them withdrawing money
and all kinds of other things and the
requirements are that they hedge their
positions in the real world by buying
the underlying asset the key thing here
though is that when you buy a D asset if
you buy a Facebook coin there's no
mapping between your Facebook coin in
any particular Facebook stock held by
brokerage account and the dance in
itself doesn't give you any voting
rights in a company dozen give you any
dividends it's just a synthetic asset
whose value happens to mirror the real
world asset just quick note on what
autonomous financial code is an
important point it really mustn't be
controlled by developers or
organizations it probably has some
voting shares which enable it to vote on
the logic used and things like that but
it cannot be controlled by any entity
and it must exist pretty much as a
network protocol in the cloud and its
regulation then falls on the entities
that access it in in in local
jurisdictions and that's pretty much any
way you can create a global financial
system you can't have some kind of
global financial system which is subject
to the regulation of every several
hundred
countries in the world I kind of scale I
know skip past this quickly but and this
is just talking about a decentralized
kyc scheme in which of course you have
that KY CD users kyc providers and
voting shares that decide upon who can
be a kyc provider and finally just like
to introduce this idea of a liquid
wallet which is an example of a consumer
application you can create using
synthetic assets and this illustrates
what's possible and how you can create
different kinds of mass-market consumer
application using this kind of
technology than you might be able to
create using existing facilities so his
liquid wealth wallet and because all of
these different assets are convertible
to cash form they can be treated as cash
so we've got a single balance at the top
which of course is a real dollars it's d
USD and we can spend that you know
through gateways BAM you know where
money's exported is Bitcoin and pass to
a debit card and in the wallet we have
some DSD we have some apple store get
some face book store we have a kind of
derivative that generates interest based
on margin lending we have a folder which
is the kind of crowdfunding folder for a
bunch of friends to crowdfund a burning
man camp and this illustrates some and
stuff as possible so when you spend
money from this wallet it would go to
each of these items and liquidate a
little bit but but of course you can do
all kinds of great things you can lock
items you can lock folders and generally
speaking is programmable so you can
imagine creating a folder called my car
fund right just saving up for a car and
you you might program that folder so
that every time your every time your
balance goes over ten thousand dollars
for a full day it's it sweeps fifty
dollars from your balance and sticks it
into your my car fund folder
so it's kind of kind of a merger of a
checking account a savings account and
an investment solution which you can
configure to behave in exactly the way
you want and furthermore addresses the
issue which a lot of people have that
you have you know money lying around in
your bank account but you just to have a
time to send it to a wealth management
solution or you need an equality on hand
and yeah that's it for me I think I've
stable