Decentralizing finance using blockchain

68a8092ba46ca5848bcdfc453d81c4bb?s=47 Koshik Raj
November 24, 2019

Decentralizing finance using blockchain

An introductory talk on open finance at Mangaluru Tech Day 3 (https://hackersmang.org/)

68a8092ba46ca5848bcdfc453d81c4bb?s=128

Koshik Raj

November 24, 2019
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Transcript

  1. 2.

    Agenda ➔ Introduction to Bitcoin and DLT platforms ➔ Finance

    and challenges ➔ Enterprise DLT in finance ➔ Open finance (DiFi) ➔ DiFi projects ➔ Maker, Compound, Nuo, Uniswap, MolochDAO, DAOStack ➔ Challenges
  2. 3.

    Distributed Ledger Technology (DLT) ➔ Each node holds a copy

    of the ledger ➔ Blockchain + P2P+ Consensus algorithm = DLT
  3. 4.

    Ethereum platform ➔ Ethereum houses its own distributed virtual machine,

    and scripting language called Solidity ➔ Ethereum is a widely-used platform for creating decentralized applications ➔ Decentralized applications are deployed on public ledger
  4. 5.

    What’s wrong with the existing financial system? There are an

    estimated 1.7 billion people who currently lack access to financial services. Remittance is expensive and time consuming in the existing siloed services Any kind of loan issuance is a costly and time consuming process
  5. 8.

    Decentralized Finance/ Open Finance Decentralized Finance (DeFi) is the movement

    that leverages decentralized networks to transform traditional financial services into trustless and open protocols that run without intermediaries.
  6. 9.

    More about DeFi ➔ DeFi system built from the ground

    up with a set of open-source protocols that are deployed on a public blockchain like Ethereum, EOS, TRON. ➔ It has the ability to be a financial tool that is outside of government and regulatory control ➔ It doesn’t have geographical barriers ➔ DeFi system is not completely decentralized as they still depend on some of the external inputs.
  7. 10.

    What does it provide? ➔ Instant transaction settlement and novel

    secured lending methods ➔ No credit checks, meaning broader access to people that cannot tap into traditional services ➔ Transparency of loan issuance, collateral, repayment ➔ Standardization and interoperability (Open integration) ➔ Collateralization of digital assets
  8. 11.

    DeFi projects Maker protocol (Debt market) Compound Finance (Lending protocol)

    UniSwap (P2P exchange: DEX) DAOStack (Governance)
  9. 12.

    Notable projects ➔ Nuo, ETHLend, Dharma (P2P Lending) ➔ Augur

    (Prediction protocol) ➔ TokenSets ➔ InstaDApp (DeFi bridge)
  10. 13.

    Maker protocol MakerDAO is a decentralized organization dedicated to bringing

    stability to the cryptocurrency economy Maker protocol has 2 token system ➔ DAI - A stable coin ➔ Maker - Governance token
  11. 14.

    DAI economics ➔ Supply curve is shifted through a permissionless

    credit factory on Ethereum ➔ Actors are incentivized to shift the supply curve to ensure that the price is close as possible to $1
  12. 15.

    Collateralized Debt Positions ➔ Maker is a smart contract platform

    that stabilizes the value of Dai through a system: Collateralized Debt Positions ➔ CDPs hold collateral assets deposited by a user and permit this user to generate Dai ➔ Active CDPs are always collateralized in excess
  13. 16.

    The CDP interaction ➔ Step 1: Creating the CDP and

    depositing collateral ➔ Step 2: Generating Dai from the collateralized CDP ➔ Step 3: Paying down the debt and Stability Fee ➔ Step 4: Withdrawing collateral and closing th e CDP ➔ Default: CDP is automatically liquidated if the collateral value (in USD) falls too low
  14. 18.

    Maker updates Introduced Multi-Collateral Dai (Nov 18th) ➔ Collateral can

    be any approved asset (Not only ETH) ➔ More diversified and stable ➔ CDP is renamed to (Maker) Vault ➔ Existing DAIs are renamed to SAI
  15. 19.

    Compound Finance (Money market) ➔ It is a protocol that

    establishes money markets on Ethereum blockchain ➔ Contains pools of assets with algorithmically derived interest rates, based on the supply and demand
  16. 20.

    Supplying assets ➔ User can supply an asset to the

    pool of asset and earn interest ➔ Assets supplied to a market are represented by an ERC-20 token balance (“cToken”),
  17. 21.

    Borrowing assets ➔ Compound allows users to frictionlessly borrow from

    the protocol, using cTokens as collateral with floating interest ➔ Each market has a collateral factor ( borrowing capacity), ranging from 0 to 1 ➔ Liquidation is performed when borrowing outstanding exceeds their borrowing capacity
  18. 22.

    Uniswap decentralized exchange (DEX) ➔ Uniswap is a completely decentralized

    exchange on Ethereum blockchain ➔ A simple smart contract interface for swapping ERC20 tokens ➔ Provides liquidity of any Ethereum asset ➔ Kyber, Oasis, 0x are other popular DEXs
  19. 23.

    DAOStack (Decentralized governance) ➔ Its decentralized model to organize, govern

    the profit and non profit businesses. ➔ The investors can directly and collaboratively take decisions ➔ DAOStack provides an interoperable scalable governance platform for companies ◆ Submit project proposal ◆ Proposals are passed by community vote ◆ Records are secured and transparent
  20. 24.

    DeFi challenges ➔ The platforms are not user friendly for

    general audience (learning curve) ➔ Scalability limitations of the existing blockchain platforms ➔ No friendly regulatory compliance for the digital assets
  21. 25.

    “Keep calm and DeFi” Contact me: Koshik Raj linkedIn: koshikraj

    GitHub: koshikraj twitter: rajkoshik koshik@consensolabs.com www.consensolabs.com “We are hiring for SDE interns and blockchain devs” https://angel.co/company/consensolabs