The Breakdown - How DeFi Could Disrupt Traditional Finance, Feat. Sergey Nazarov

Episode Date: July 30, 2020

Today on the Brief: Big tech goes to Washington The debate on the next COVID-19 relief act heats up More on institutional investors’ move into gold  “Imagine a world without counterparty risk.” That was Chainlink co-founder Sergey Nazarov’s answer when asked to describe the true disruption of decentralized finance to a traditional finance audience.  On this episode of The Breakdown, Sergey and NLW discuss: Brand-based contracts vs. math-based contracts The history of smart contracts What it means to build an “abstraction layer” for “universally connected smart contracts” Key moments in the history of smart contract infrastructure  Where smart contracts and DeFi are in terms of analogies to the early internet  Why Sergey believes traditional finance will inevitably shift to a math-based contract model  Find our guest online: Website: Chainlink Twitter: @SergeyNazarov

In scenarios where either middlemen are overly inefficient and or when brand-based contracts suddenly start failing left and right, I think that math-based contracts are going to become very, very attractive because they're going to be the manner in which you have an actual guarantee of ownership. You have an actual guarantee of a financial product paying you out its interest. You have an actual guarantee of a contractual obligation with a counterparty being followed through on, not because you trust the counterparty, but because math and physics will enforce the contract according to the way that it was written. Welcome back to the breakdown, an everyday analysis breaking down the most important

stories in Bitcoin, Crypto, and Beyond. This episode is sponsored by BitStamp and Crypto.com. The breakdown is produced and distributed by CoinDesk. And now, here's your host. and LW. What's going on, guys? It is Wednesday, July 29th, and today we have a very special conversation with ChainLink's Sergei Nazaroth.

Sergei and I go deep on not just what's going on right now with D5, but the theory and history behind it, and I think you'll really enjoy it. But first, let's go to The Brief. First up on the brief today, big tech goes to Washington. Amazon's Jeff Bezos, Apple's Tim Cook, Facebook. Facebook's Mark Zuckerberg and Google's Sundar, Pichai, will testify remotely today in front of Congress. Now, while they've been there before, or at least most of them, all of them except Bezos, have been there before, this is the first time that they'll be testifying together.

The theme of the questioning is antitrust concerns, but really the subtext is the growing power struggle between platforms and the government. I do believe that there are real issues here. These companies represent products that do have an influence on our lives and on our society like nothing in the past. There are questions of competition, of natural monopolies, of all sorts of issues, but there are also some very juicy politics. And you can expect at least as much political point scoring as there is actual substantive debate about the nature of competition on the internet. Now, there is an additional context, which is that the Judiciary Committee's Antitrust Panel is preparing a report on whether stronger antitrust laws are needed in this context. A few things to watch out for on this, and I'm sure we'll talk about it again tomorrow or later this week on the brief.

First is, how much does this end up being about actual competition versus accusations of free speech issues and the other sort of hot-button political point-scoring type of issues? Not that free speech isn't an important question, obviously, but more that it is such a popular talking point right now that I can imagine a lot of this being not such sincere questions, but instead, again, looking for that soundbite that's going to appease constituents back home. When it comes to the individuals involved, there are also some interesting things to watch. For Bezos, he's never been there before, so how he actually does in this setting will be interesting to see. In terms of substantive issues for Amazon, a big thing.

has to do with how they use data from third parties. Imagine, if you will, that you are a company with total perfect access to the buying behaviors of virtually everyone. Wouldn't it make sense to use that data to launch your own products that are perfectly suited to the needs of people that you've seen over and over again? In a lot of ways, that's what's been happening over the last few years with Amazon launching hundreds of Amazon-owned brands. That, of course, take advantage of this big trove of proprietary data. That is a major issue and a major question for this antitrust group. When it comes to Tim Cook and Apple, Apple has frankly avoided a lot of the same level of scrutiny that these other companies have, in part because it sells things, right? It sells

atoms, not just bits, and it doesn't use an advertising-based business model, which is where a lot of these issues come from. But there are still significant issues around particularly the App Store rules and how anti-competitive they might be. So look for that. When it comes to, alphabet, i.e. Google, it looks like there is a monopolization case coming right down the pipe, so in some ways this is like a preview of what that might be about. And of course, then there's Zuckerberg. I mean, expect absolutely everything to come at this guy because Facebook is just the political punching bag. Not in many cases without reason, but I think that in general you're going to see a huge amount of that point scoring probably happening at Zuckerberg's expense.

Next up on the brief, previewing the battle around the next government aid package. A number of the benefits that were agreed upon in the early days of the coronavirus are coming to a close from the $600 checks that are extensions of unemployment to some of the anti-eviction type of practices. As that happens, the government is now debating another government aid package. There are a couple key issues here. The first has to do with this $600 check, which is basically ending this week for most people. The Democrats want to see it extended for another six months, while the Republicans want to reduce it to $200 a week just till the end of September.

Another key issue has to do with litigation shields for schools, for businesses, et cetera, that open up and then are cited as having helped contribute the spread of coronavirus. This is something that Republicans are hugely in favor of, and Democrats don't want to see. Steve Mnuchin and Donald Trump have both suggested that the two sides are very far apart and should agree on a short-term extension to give them more time to come to some, equivalent middle. One of the fascinating things to see is rightly or wrongly, there is no party here that's arguing for no benefit. The Republicans are bringing a $1 trillion package to the table as their starting argument, which shows, if nothing else, just how far we've come in terms of the

expectation of government involvement in this issue. Finally, a quick follow-up on gold from yesterday. A Bloomberg article today was entitled Gold's record rally fueled by unlikely buyers, and you'll Remember that yesterday, as we were interpreting or trying to ask whether this Bitcoin rally was real, part of what we were looking at was gold. And in particular, the way that gold is now appealing to people that aren't just traditional gold bugs. Specifically, there are a lot of folks who, in the context of a negative interest rate world, are saying, can't gold do what treasuries used to do for us with more potential upside?

The article references a quote from PIMCO, which said, safe government bonds have always played a very important role as a portfolio diversifier and will continue to be. But we have to recognize that their potency is diminishing due to the low absolute level of yields. The article goes on to point out exactly what Dan Tapiero pointed out in the tweet that I quoted yesterday, which is just how little exposure this institutional class has to gold. So this is a quote directly from the article. Even so, gold ownership among the professional class is viewed to be low. The total value of investor positions in gold futures and exchange traded funds is equivalent to just 0.6% of the 40 trillion in global funds, according to UBS Group AG strategist Joni Tevez.

That position could easily double without the allocation looking extreme, she wrote in a note. So you know it's my favorite word, but big Overton window shift here on, really, it's not even so much about gold, and I think that that's why Bitcoin becomes interesting in a part of this conversation, but a shift away from looking at government bonds as that baseline. safe haven asset, a look for diversification of those safe havens. That's the type of context and recipe that certainly is going to benefit gold as something that's established already in that area, but is likely to, for some percentage of funds, institutional investors, etc., also lead to Bitcoin. And speaking of institutional investors looking at new assets, let's move to our main

conversation with ChainLink co-founder Sergei Nazaroff. For those of you who are unfamiliar, ChainLink is a project that builds data oracles for decentralized applications. What that means is that ChainLink allows data from the outside world. That could be financial and markets data, such as price feeds from assets like gold or silver. It could be totally different types of data like weather patterns. Anyways, what ChainLink does is it allows oracles that pull in that data to plug into smart contracts and decentralized contract infrastructure. The idea is to build something that they call universally connected smart contracts. In other words, smart contracts that can pull from the real world at will and any data set they need to build that

data into their logic. To put it simply, imagine a smart contract that pays out some specific dividend only when gold hits a certain price. Well, you have to have a price feed for that data. This creates a burden where all of a sudden you are trusting that price feed. And so the idea of decentralized oracles, which is what Chainlink is trying to offer, is to apply the same logic of decentralization and confirmation that's what is underpinning the blockchain itself to that oracle layer, to that layer where data from the outside world comes in, to ensure that it is not just requiring a trust of a single entity of that data feed, but sources from multiple data feeds and is validated by a number of different node

operators to ensure that that data really is accurate. Now, that's all a mouthful, and this is kind of the point about why I wanted to have this conversation. Over the last few months, we've seen a major growth in the decentralized finance space. We saw total value locked in defy applications move from $1 billion to $2 billion over the course of about five months, after taking more than a year to get to the first $1 billion, and then to go from $2 billion to $3 billion, it only took two weeks. Those sort of numbers plus the four-digit percentage growth numbers for certain tokens in the defy space means that more folks from the traditional world, the macro world, et cetera, have an incentive to start poking around. In that context, I wanted to make sure that people have some background

around the fundamental ideas underpinning defy. So last week I did an intro primer episode for that type of audience that's just about what these terms mean and why yield farming and liquidity mining have gotten so popular and exciting. This week is even more theoretical and historical in some way, and Sergei really steps out from his role in Chainlink to give an analysis of the lineage of smart contracts and more than just smart contracts themselves, the logic underpinning them. In fact, Sergei connects the logic or core property of Bitcoin as removing trust from the equation as a part of this new financial infrastructure layer that's being built. The goal of this episode is to make it so that when you hear the term smart contract, you know not only what people

are talking about, but what they're trying to achieve and how it connects to the entire history of this industry going back to the very beginnings of Bitcoin. As with all of our long episodes, this is edited only very lightly, and let's dive in. All right, we are back here with Sergey. Sergey, welcome back to the breakdown. Great. Thank you. Thank you for having me once again. It's always a pleasure to chat with you. Thank you. So I'm really excited for this conversation. Over the last few months, there has been obviously a huge amount of new activity and excitement and interest in the DFI space. And you and I were talking, and we were talking about how it would be potentially really interesting for folks to actually

go kind of high level and even a little historical to provide a frame of reference for all these things that are going into building what is becoming known as decentralized finance. So I'm really excited to have that conversation with you today. But for folks who aren't familiar with ChainLink, I'd love to just have a little bit of history and a little bit of what you do. When did you start and what is your main focus? Yeah, so we've been building smart contracts for over seven years now. I've been in the blockchain industry for over, I think over nine years now, starting out with mining back when mining was the only thing you could actually do. You could mine and you could send Bitcoin around basically.

What we do is we make something called an Oracle mechanism or a blockchain abstraction layer. And what that does is it enables blockchains to interact with the real world. So basically, you have blockchains that are these very secure, tamper-proof, highly reliable contract kind of systems. Bitcoin is an example of one type of contract where it's basically about Bitcoin ownership. And then there are other contract types driven by platforms like Ethereum. and others. And in those platforms, you have the actual ledger and you have the actual contract code being executed. But what those systems don't have is they don't have an ability to

interact with external data. So the same security that provides the unique tamper-proofness of those systems, the unique kind of value of them being ungameable and unchangeable and beyond the control of any of the participants in the system. Those same security that, dynamics make it impossible for them to connect with external data. And external data is what automates many contracts. So what we do is we make a decentralized Oracle or a blockchain abstraction layer or a secure blockchain middleware. You know, those are all kind of a name for the same thing that validates the outside world

and makes it reliable enough and the data about the outside world reliable enough to be used by smart contracts. So what we basically do is we extend what a smart contract can do by extending the validation that underpins its security to the outside world. So we can validate that a price, market price is a certain price, or we can validate that goods were delivered, and we can validate it to such a high level of accuracy and reliability

that validated data can then trigger a billion dollars in value. and you need that validation because the smart contracts are so efficient and so reliable because they are validated, because the contract itself is validated by hundreds of different node operators. And in our case, the data is validated by many independent node operators. So it's applying the same model that secures the contract, but to the securing of external data in order to properly trigger the contract, which is kind of the missing piece for smart contracts to grow and grow into more mainstream applications.

So we're going to be talking a lot about this concept of smart contracts because it's obviously at the key of or at the center of the difference between decentralized finance and traditional finance in a lot of ways. But maybe to help create a frame of reference, could you explain what this smart contract really refers to, how it's different? And I guess you have a concede or a concept kind of that's brand-based contracts versus math-based contracts. That was really helpful for me as we were talking before. So maybe we can start there and just explain what makes this particular type of contract

different from what people might know and be familiar with. Sure, sure, of course. I think one of the simpler or clear ways to think about this is what are the actual guarantees that you get in a contract? If you have a contract with a traditional insurance company or a traditional bank or a traditional payments processor, you have what I call a brand-based contract. So basically you have a logo and you have a brand and you feel very good about that brand. You see that brand on a big building somewhere or that brand has existed for 50 or 100 years and you sit there and you have a paper document with them or that paper document is memorialized in a digital format. that you can see on your phone, on your desktop.

And the real crux of the agreement is that you have faith in that brand to follow through, right? There's no, the amount of actual guarantees that you have in the contract is very small and relatively weak. And the actual relationship that people have to their insurance company or to their bank or to asset managers or to, you know, any number of other kind of entities that. that they have contracts with, even if they're digital contracts or tech entities that sit as platforms between them and other parties, those are brand-based. So those are contracts where there's some kind of central party, a bank or a technology platform or an insurance company, and they can realistically do whatever they want. They cannot honor your contract.

They could not send you what you do. They could, like you've seen certain countries out there, the A, ATMs get locked up and people can only withdraw a certain amount of money per day, 66 euros in Greece a few years ago, now with other parts of the world, certain limitations like that. And people are always shocked to see that, but the reality is if you actually look at the contracts you have, they are based on a game theoretic assumption about the good behavior or the solvency or the proper behavior of this brand. And that might be an okay assumption when things are going very well and the brands need to fight for market share and they're willing to make 50 promises and things like that. Math-based contracts, on the other hand, are not based on a promise for somebody. They're based on mathematical facts that guarantee you certain outcomes. So this is why the tagline of, for many Bitcoin people is veris and numeris, trust in mathematics or trust in numbers or things like that.

because if you put money in a bank, the bank owns your money and they control your money. And they can actually choose when to pay you or not pay you out your money or to give it to you in whatever form or whenever they want. In theory, they can do that. With Bitcoin, there's no such situation. You have something called a private key. It depends on cryptography and mathematics. You sign something with your private key and you send it through the internet into the Bitcoin Net. network and it will execute a transfer of the value controlled by that private key.

Now, I'm not saying what a Bitcoin is worth. I'm not kind of discussing the Bitcoin is worth this or the Bitcoin is worth that. I'm not saying that Bitcoin is always better than a bank account. I'm saying that there's a fundamentally different type of relationship that people can have with digital contracts. And the relationship they have now is based on fuzzy nice promises. And those fuzzy nice promises, which are encapsulated in kind of a brand, if you find yourself in a world where, let's say the financial markets don't do well, let's say certain assumptions about the solvency of certain brands come into question like they did for

Wirecard and others, you start to see an erosion in people. faith in brand-based contracts. Because the reason you have faith in them is because they don't fail, right? The brand says it's going to be solvent and follow through on payments to you, and it does. But then something like Wirecard happens, then let's see a few more of those happen.

At that point, the brand model of contracts, the brand promise of, oh, it's fine, you know, we have a contract, you can trust my brand. It's been around for 10 years. It's in some, you know, big stock index it has a huge valuation somewhere. Those assumptions will road away if brand, brands fail to deliver on their contractual obligations, as I think they're slowly starting to insert in certain industries or in certain

places where the current financial kind of environment is putting pressure and will unfortunately probably put much more pressure in the near to medium term. Conversely, math-based contracts, they have nothing to do with brand. They're just physics. You have a system somewhere. It's not run by a bank. It's not run by you or me. It's run by a huge group of independent node operators and people running that system.

There's economics that make sure they keep running that system. And then you, each individual user has their own cryptographic direct mainline access to what they have in that system. And there is nobody that they need to speak with. and there is nobody that has custody for them. And they have a greater security burden because they have to secure those private keys. That's absolutely the case. But in scenarios where either middlemen are overly inefficient and or when brand-based contracts suddenly start failing left and right, I think that math-based contracts are going to become

very, very attractive because they're going to be very attractive because they're going to to be the manner in which you have an actual guarantee of ownership. You have an actual guarantee of a financial product paying you out its interest. You have an actual guarantee of a contractual obligation with a counterparty being followed through on, not because you trust the counterparty, but because math and physics will enforce the contract according to the way that it was written. And I think that's something that the blockchain space at a fundamental level in different flavors is really talking about and using it in different use cases. But it's, but it's always the same kind of pattern of, well, the traditional world has all these contracts that I don't really know

what's going to happen there. And the reason people, most average people don't have a problem with that is because they think they will know what will happen there. And the reality is that those assumptions are very different from reality. And it kind of depends on how quickly that reality, that starkness comes into relief for people, into their kind of eye line. But I think between that and the efficiencies of eliminating middlemen, those are two of the main reasons why math-based contracts either slowly or very rapidly will become the way in which people want to hold value. If you even look at those examples where the AQMs got locked up in countries like Greece and others, you see a 300% rise in Bitcoin address generation for those IPs and those

geographies because people basically realize that their brand-based contracts have completely screwed them over. And then not only do you see that, but you see the neighboring countries that are also under threat of having some kind of banking crisis or solvency issues, you see the wallet generation numbers in those neighboring geographies also go up, 300, 600, 700%, because people kind of click on and they go, oh, wow,

it turns out that can happen. And then almost overnight, the adoption of systems that are math-based, guaranteed systems of contract execution become adopted. So I think that

it's very possible that we'll see that happen rapidly in the current economic environment and the way the way some of the underlying assumptions there seem to be playing out or it'll happen slowly because of the benefits from eliminating middlemen. But math-based contracts are definitely what our whole space is about. Blockchains and smart contracts, they're giving you this math-based guarantee. So I really like the way that you've connected. the reorganization of the world that underpins smart contracts to the reorganization and reimagining in the world that underpin Bitcoin, right? A removal of trust as a prerequisite in

order to transact. I guess my question is now, maybe let's take this to the historical context. What is the history of these math-based contracts, of smart contracts, you know, where does Bitcoin fit into that? And how did we get to the environment? that these are being built in now, which is obviously very different from perhaps where some of these ideas started? I think Bitcoin deserves a huge amount of credit for basically beginning our entire industry and this entire category of truly decentralized computation. And I think it's extremely difficult to say what a Bitcoin is worth.

So I'm not going to be talking about that. I think the more interesting question is how... how to properly view what Bitcoin initially achieved. And what it initially achieved was complete control over an asset by a user without a middleman or an institution. And also beyond the reach of some government or system that might seek to manipulate that asset to its benefit. And then that evolved into digital gold and this companion to gold holdings that the gold holdings, that the gold holdings are physical and Bitcoin is digital. And fine, that's a very interesting evolution.

I think what Bitcoin had as far as more advanced smart contract functionality was basically multi-signature. And that's the functionality that people were playing around with. Initially, I got into the space by mining initially Bitcoin and then other coins around 2011 and then you really had only multi-signature. So multi-signature is actually fascinating enough. Multi-signature is something you can't even get at most banks or really any banks these days where you firmly have to have both signatures. So even now when you go to most banks, they will only have for legal liability reasons a setup where you only need one of the signers to sign to do

something. They won't actually, in many of them, they won't act as a more advanced escrow agent to force both people to have to sign. And so even in that initial functionality, it seems to beat out the banking sector in providing true multi-signature capabilities. From there, what you really saw was you saw people building the first smart contracts as a way for their protocol to function. So you had people build smart contracts that were written into the blockchain's code and how the blockchain itself.

that the contract ran on actually operated. So you didn't actually have a contract running on a blockchain. You had a blockchain that had code to run contracts as part of its normal daily operations, which was a really long and convoluted process because you had to change how a blockchain worked in order to make a smart contract. And these kind of protocol contracts

were very difficult to do. It took months to make over a year, in many cases, to get into the actual protocol. And so there wasn't a lot of activity, and there weren't a lot of things being generated in the years when that was the way to make smart contracts. Then you had the appearance of scriptable smart contracts, and I think Ethereum deserves a lot of credit for this. And the scriptable smart contracts really allowed us to arrive at a place where you could write a smart contract in a number of days or a week and get it live. So it was orders of magnitude improvement in terms of the speed at which you could actually generate a smart contract.

Now, the categories in which you could generate the smart contracts was relatively small. It was basically the generation of a token and voting using private keys or voting by the attribution of tokens to certain things. And the reason it was focused on tokens was partly because tokens are built into blockchains as a foundational mechanism for paying the people that run them. So you need to pay the people running the blockchain in order to have these independent computing networks. and the tokens are used to pay those participants for their independent participation in that independent, once again, independent computing infrastructure.

But also a token doesn't require external data. So a token contract generates all of its own data. It basically says, I've generated a million tokens. I'm going to send them around to people. I'm going to keep track of who has how many of those million tokens. But it doesn't really need external data. So the token contract generates its own data, moves the data around within a blockchain, and the ability to generate these token contracts in a matter of days or a week,

basically jumpstarted the space from being about mining and multisignature to the token ICO boom of 2017 and 18. So that token and ICO boom happened because people were now able to build token contracts, not in six-month increments or one-year increments, but in daily or weekly increments. And so people did. People generated a lot of tokens. There was a huge boom in them. They allowed a lot of value to flow into the space, a lot of value to get blocked into the blockchain infrastructure that we use today.

And that's kind of where the space was after the token boom for a little while. Now the space is evolving into something where both there's enough value on blockchain, for there to be financial products built around the tokens and all that, you know, really billions of dollars in value on these public chains. And so the token boom ceded all this value. It kind of ceded a user base of private key holders that have enough value to move around into financial products. If you made these types of financial products back in 2014 and 15, you very likely you

wouldn't have had, you wouldn't have had enough private keys, enough value to go into them, to make them highly successful. Now they can reach past a billion dollars per product. They can collectively reach past three, four billion dollars as an industry. And I think that's going to continue. But the defy products, these decentralized financial products, are basically using the tokens that were brought in from the token boom. So it was a very important evolution in our space,

which Ethereum, that does deserve a lot of credit for generating an infrastructure that allowed that kind of, kind of shift and speeding up of what people could do with blockchains while still remaining secure. And now with the decentralized financial products, you're seeing that there's actually the need for two pieces of infrastructure. So there's a need for the infrastructure where the decentralized financial product runs, which is the same infrastructure where it holds those tokens, which is why a lot of these are in Ethereum, because Ethereum has the greatest amount of value in terms of tokens on its platform.

And so if you make a defy product, you have a much larger user base to put tokens into that defy product on that environment, on Ethereum specifically. As tokens migrate and stuff, you know, that will evolve. But I think what you really see is financial products using the token value that was brought in during the token boom, the amount of token values is going up. As math-based contracts become more valuable, I think the value in these blockchain infrastructures will even accelerate beyond what it was accelerating at before.

And the financial products now also need external data. So just like there was before a limiting factor for not being able to write a smart contract in a number of days or a week, you now have a limiting factor of I want to make a financial product. I have the tokens that I want to put in that financial product. There's users that want to give me tokens that want to. to give me $100 million or $200 million in value, but I need a way to trigger the contract from an external data source. And because the smart contract, despite being called a smart

contract, can't actually reach out and talk to an API, you need a second piece of infrastructure called an Oracle, the centralized Oracle network or a blockchain abstraction layer, to sit between the highly secure, highly reliable, highly tamper-proof blockchain smart contract, And the much less reliable, easier to game, insecure, off-chain world of data, and to almost act as a blood-brain barrier to validate and make sure that only what's actually going out in the real world triggers the highly reliable contracts in these infrastructures. And that's what people really call decentralized finance is that every part of the smart contract and the financial product is decentralized. going on from the core place where the contract runs to the Oracle mechanism, to the place where it validates the external data, and even in many cases on to the data sources to have multiple data sources.

So you're trying to create a truly decentralized financial product that in its inputs, its core operation, and in its outputs operates in a decentralized way. When we use this word decentralized, what are the constituent parts that are important? For example, a lot of what makes decentralized finance so appealing to people who even don't care about any of this is the permissionless nature of it. So when you use the term decentralized, what does it convey or what's the set of things it conveys? It basically means that you have independent node operators running full replicas of a computational environment and validating the same outcome to a very high degree of assurance. So in, and using various puzzles and cryptographic proof to, well, not always puzzles, but using various measures of cryptographic proof to make sure that what is happening is what is supposed to

happen according to the terms of the contract. So I think, I think there's two dynamics about what you mentioned. The first one is the actual decentralized infrastructure and decentralized computation guarantees as far as tamper-proofness and security. And I think the second one is permissionless, and they're both important. So the dynamic around decentralization is really that none of the parties in the contract can manipulate its outcome. And in order to guarantee that, you need the contract to operate in a system that's technically beyond their control. So this is a good example this is Bitcoin. Bitcoin claims and is outside the control of its participants. I can't, I can't control Bitcoin even if I'm a government somewhere. And it's, and it's that way because

the different node operators that operate Bitcoin are so distributed and there's so many of them and the cryptographic proof around the operations they perform is so firmly ungameable. going back to the idea of math-based contracts, that you can be a huge participant in the Bitcoin system. You could have hundreds of millions of dollars in Bitcoin, and you don't have any kind of asymmetric power dynamic against smaller participants. And this is the kind of big innovation,

is that everybody participates in the system equally, and the system meets these requirements of reliability in a way that many bank and institutional finance systems don't. And those bank and institutional finance systems, they're not permissionless, partly for something related to do regulation sometimes, partly because it's not in their interest to provide themselves as a platform

to too many people that would compete with that. And what you generally actually see, when you look at blockchains versus either banks or even technology companies that seek to act as platforms, is you see something in a blockchain which has different goals. The blockchain basically has the goal of becoming a public good that is beyond the control of any of its participants. It's not meant to enrich any of the participants. It's not even meant to enrich some singular technology company.

It's meant to generate a globally shared publicly accessible. infrastructure. And to do that in a way that none of the participants that use the system can turn it against the other participants and to do it in an open source and highly security reviewed matter. All the private systems out there that try to do similar things with payments or contracts that are digital agreements but don't really provide what I call math-based kind of guarantees. They just provide brand-based guarantees. All of those systems are not. seeking to create an open public good. They are seeking to create some kind of platform that they uniquely control, that they can monetize, that they can eventually extract monopoly pricing from,

and essentially seek monopoly rent. And so the fundamental assumptions of blockchains as an infrastructure to enforce the contractual agreements between people start out at a very different place. They start out at cryptographic proof, independent node operators that can't be manipulated by big participants against small participants, which is actually the type of system that all participants would want to participate in because even the big participants often have bigger participants that want to mess with them. So if you have an impartial fair system of contracts, that's actually the system people want to be part of and put their value into in the long term.

and then you arrive at a place where the explicit goal of these systems is not to generate some kind of massive wealth for a single company somewhere. At the end of the day, the goal of these systems is to generate a public good, and it actually makes their longevity much more likely. Because the history of digital goods, digital currencies, and many other forms, of digital contracts basically live and die with a single technology company being able to raise their next round of funding and move on to create the next version of the system of digital contracts or the system of digital goods transfer and creation. But just like Linux is now a global standard

that is maintained and used by people to run their servers and to run the majority of the world servers. It makes perfect sense that this extremely important technical resource that underpins how we all agree with each other in the predominant format of digital contracts, of digital agreement, would also take that path. Because even the systems that have existed for some amount of time and have successfully generated digital agreements, they end up becoming member owned. If you look at SWIFT, if you look at DTCC, if you look at a lot of the central clearing depositories of the world that actually manage a lot of these transactional volumes and manage the relationship that high value contracts embody between institutions, a lot of these

things end up becoming member owned. And so there already is even a historical precedent where what people want is they want an impartial, ungameable system of digital agreement that can't be turned against any of the participants and that will continue to exist into perpetuity so that their technical investment in that system for the life of their enterprise is worth it. And that's where blockchains begin from. And that's what they're architected to do.

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and their APIs are recognized as the best in the industry. Download the BitStamp app from the App Store or Google Play or visit BitStamp.net slash pro to learn more and start trading today. That's bitstamp.net slash pro. What's going on, guys? I'm excited to share that one of this month's breakdown sponsors is Crypto.com. Crypto.com offers one of the most cost-efficient ways to purchase crypto out there, as they've just waived the 3.5% credit card fee for all crypto purchases.

What's more, with crypto.com's MCO Visa card, you can get up to 10% back on things like food and grocery shopping. When you buy gift cards with the crypto.com app, you can get up to 20% back. Download the crypto.com app today and enjoy these offers until the end of September. Part of what I've heard a lot in this conversation is the way that evolutions or changes in infrastructure create new opportunities. that when new infrastructure comes online, it creates a level up moments, right? And so it was interesting to hear you actually defined the introduction of token creation via Ethereum as an infrastructure moment, right? Most of us just associate it with kind of the rabid market mania that coincided with it.

But I think it's interesting to also look at it in this context of infrastructure. I guess what are, what are the other key pieces of infrastructure alongside, tokens alongside oracles, as you've mentioned a little bit, that are either have come online or are coming online now that are enabling new types of defy applications. Yeah, I think that that's right, Nathan. I think what you really see in our space, and even in the historical context of the Internet, is that once you have certain infrastructure capabilities. Once people have the capability of creating an e-commerce website or an email system that can send encrypted messages, that's when those systems become popular. And it's not a coincidence,

right? The internet was something where people sent around unencrypted information. And there was a period where everybody would look in the internet and say, oh, interesting, I can send an unencrypted piece of information. You know, who cares? Then you had the appearance of privacy through SSL, HTTP, the encryption of data across the larger Internet. And amazingly, guess what that leads to? It leads to encrypting credit card numbers and e-commerce, right? And encrypting email messages and the appearance of email clients. And then you see the appearance of greater and greater infrastructure improvements that correlate exactly with new user-shel

new applications that become available, right? Before people had mobile phones in their hand and they had a GPS capability in the phone, they wouldn't have had any kind of ride-sharing app, as maybe even the simplest example. So I think understanding the evolution of a space really begins at understanding how the infrastructure is evolving. And it doesn't make sense to look at the space in the context of

what is the space about today and what is the size of the space today? it only really makes sense to look at it in the context of if all the promises of the industry or of a certain space were delivered on how much of the larger global market would be powered by that infrastructure. So if you talk to people about how much of retail e-commerce would have been powered by the Internet 20 years ago, many, many experts. would have been way off. If you talk to people about the amount of information that would have been transferred over the internet 30 years ago, many, many people would have still been way off. Right?

And the real question is how, it is how is the infrastructure evolving today. But it's also what is the infrastructure evolving towards and at each incremental improvement in infrastructure, what are the new use cases that get unlocked to define what the internet is about or what mobile phones are about or what blockchains are used for. And I think it's exactly right that the tokenization boom that Ethereum unlocked basically redefined how people view our industry. Before that, you would go and you would speak with people and they would talk to you about Bitcoin in the context of some weird payment mechanism or dark markets or some weird thing that was on the news.

after Ethereum and the token boom, you basically had people talking about the entire space as something related to ownership and tokens. And now what you're seeing is you're seeing the appearance of a new piece of infrastructure called an Oracle or a decentralized Oracle network or a blockchain abstraction layer or whatever kind of terminology we want to use depending on the group that we're coming from. you're seeing that the ability for people to generate these math-based guarantees and these smart contracts against external events, against market price changes, against the delivery of goods, against rainfall insurance for farmers, against any number of other use cases, is now starting to hit an inflection point of once again redefining what our industry is about. So what I'm seeing and what we're a part of driving forward is turning our industry

into something that's 10 times bigger because it was suddenly able to encompass 10 times more use cases. And those new use cases right now are being called defy, right? which is really the initial versions of pretty straightforward financial products, such as lending and derivatives and a lot of other financial products that are out there in the traditional financial markets, but are made in a superior way on a blockchain infrastructure and then made available to all these token holders who were seated from that previous token boom. So what you basically have right now is just like in the, in the internet where you had an evolution from unencrypted email to encrypted email to,

you know, more advanced systems that can send images to better browsers, to better broadband. You're now seeing an evolution from I could only do Bitcoin multi-sig. Then I could own, then I, then I had to take a year to write a smart contract. Now it takes me a week to write a smart contract. And now I can write that smart contract about all the things out in the world with the, with the help of an Oracle. So the evolution we're seeing now is that these financial products are being generated in lockstep with the quality and the amount of data that the centralized Oracle mechanisms

like ChainLink are able to make available to them. Because if you think about the fundamental constraint of, I want to generate a financial product, but I can only generate it if there's data about the market that I want it to be about already on chain. So I can only make the financial product around data that's on a blockchain. That means you're limited in a linear fashion to the amount of data that's available to you on a blockchain, which is the problem that Oracle solved, right? This is what's often called the Oracle problem of how do I get data onto a blockchain such that the data is actually reliable and usable by a smart contract. And this is the big change in my opinion happening now. And it's

not a coincidence that as we are putting the largest amount of market data ever onto these blockchains, you're starting to see a growth in the same financial products that depend on that data, right? So you're basically seeing people be able to go and build a financial product because it's a very similar pattern. Before a three to five person team of engineers who wanted to make a financial product and make it available to users would have to build that smart contract into a protocol. And so they didn't do that, right? Then Ethereum came along, gave them a way to script the contracts, and they were able to get certain types of financial products built, specifically tokens, centralized exchanges, things like that. Well, and then if they wanted

to build a more advanced product, they would have to build a piece of infrastructure called an Oracle. And so this is really the same exact pattern playing out again. You're kind of seeing teams that would have spent months and at least 30 to 50 percent of their engineering capacity building an infrastructure instead of building their product, now being able to plug into the data they need in less than a day, in a few hours. And we already have users that launched with us less than a year ago. They recently crossed milestones like over 500 million secured. And they didn't have to build any kind of Oracle mechanism.

So they didn't have to spend engineering time on making an Oracle. They could work with an infrastructure that in a matter of days allowed them to get all the data they need into the blockchain environment where they wanted to build their financial progress. These are teams like Ave, was the example I just had, and other great teams like synthetics that we work with. In synthetics case, they're able to launch new markets because new data is made available to them. And the more data that's made available to them, the more markets they launch, the more markets they launch, the more usership and value there is secured and defy in their platform because they were able to launch that market. And that creates a virtuous cycle between the amount of value locked in defy and the amount of data. made available to it because the more successful defy becomes, the faster we can get better quality data to it because there's more of a market for that data. So I think what you're seeing now is a

virtuous cycle starting to take hold between defy finally being able to be built efficiently and securely the token value put in from earlier evolutions of the space into those defy products for which there's a lot more value to go. And then you're also seeing a number of centralized web services or companies that want to be more decentralized, seeing a way to use this infrastructure such as oracles to do that for themselves. And then you're also seeing enterprises need a blockchain abstraction layer to interact with all the blockchains that are out there. And then those are kind of the really the three categories where I think a highly

reliable Oracle mechanism is going to, like ours is going to excel, is serving the the Defi community helping more traditional or web-based systems that want greater decentralization guarantees to provide those guarantees efficiently and for enterprises to be able to access all the different blockchains they want to access through a single abstraction layer. So you mentioned a number of the the defy products, kind of early adoption products that are getting traction right now and feeding this virtuous cycle. And a lot of them have sort of traditional finance equivalents or prerequisites, right? You have lending.

You have derivatives. Now, there's obviously really different dimensions to how they are, how they work in DFI. But I wonder what do you think in the long run, how much of the role of DFI will be seen to simply replace existing financial products with better versions that are either disintermediated or are just improved because of the, you know, permission. nature or whatever benefit they have versus some totally new type of products that simply can't exist in the traditional analog. So I think there's generally speaking three paths. The first and slowest path is that these financial products generally provide a superior relationship to the actual underlying contract.

And you'll see successful crypto-first kind of blockchain teams building better and better financial products and getting those in the hands of users through traditional channels or the traditional means of building an application. And then you'll see fintechs and certain digital banks moving more towards these products because they have certain superior properties to them about ownership and security and reliability and certain asset types and certain asset categories that can't or won't be offered through traditional means. And so you basically see that slow progression. That's that's that's that's one variant. Another variant is for whatever reason, if there's a massive influx of token ownership, if all of a sudden people decide I want to own physical gold in a vault somewhere. and just in case I can't get access to the vault, I want to own digital Bitcoin in my pocket in a private key. And then I also want to own a bunch of other tokens for whatever other reasons,

gold tokens or stablecoin tokens or whatever other tokens there might be. If there's a massive influx of I own tokens as a normal part of my path to diversification, well then the amount of value that these defy products can pay interest on can't create derivatives around can generate all kinds of financial outcomes around also grows and so then these financial products can then grow pretty much in lockstep with the value that flows into the space because what they're all doing now is they're creating these kind of efficient pathways from token holders to that. So that on a percentage basis, every incremental piece, dollar of value that flows into tokenized assets on public blockchains, the percentage of that additional dollar flowing into

tokenized assets that's actually going to be put into decentralized financial products is rapidly going up. And that's being done through all kinds of things like yield farming incentives and various relationships between the underlying applications, how somebody makes it better interface and then forwards the value on to some other protocol and that protocol manages the value better so it manages it. And that's getting kind of figured out basically right now. And a huge boom, a huge influx of token ownership for whatever reason by the mainstream would pump a whole bunch of money into these DFI products at a very high conversion rate

from money into the ecosystem to money into defy. And that conversion rate is increasing the percentage. The third dynamic is the dynamic where people actually want math-based guarantees for their financial contracts, irrespective of how much value they hold in tokens. And these dynamics around, I am used to doing a lot. financial contracts in the traditional financial world. And for whatever collection of reasons, let's say the traditional financial world doesn't meet my requirements anymore.

I'm not going to rely on the brand-based guarantees of my counterparties. The world has been turned upside down. There's some kind of watershed moment where something goes sideways in a big and unexpected way. Brand-based guarantees basically get shown for the fragile. relationship between a contract participant and the contracts outcome that they are. They get shown for what they are. And that leads to a rethinking of counterparty risk.

And that rethinking of counterparty risk and rethinking of how do I properly de-risk myself in the proper operation, in terms of the proper operation of my financial contracts. And that being the core focus, not I want deficiencies or certain new assets types that I can't get elsewhere, or I want to put all my money in tokens and oh, if I have my money in tokens, I'm going to use financial products related to the tokens. But the explicit goal of brand-based financial agreements no longer meet my requirements because there was Wirecard, then there were 10 other things like Wirecard that were five times as big. And then there was some huge problem somewhere where somebody's brand-based guarantee that I thought could never, ever go sideways, never in a million years could that brand default or not fulfill its obligations. In that world, what are the choice that people have? if brand-based guarantees no longer underpin a sufficient amount of faith in a contract, then people still want to transact across borders within global financial markets.

Their alternative will be math-based financial contracts. And at that point, you'll see things like the $600, $700 trillion derivatives industry. moving towards these math-based contracts. You'll see the global insurance industry, the global trade industry, basically start to say, look, I can't deal with this level of counterparty risk. Brands don't mean what they used to be. The only thing I can rely on is math-based guarantees. And in that environment, math-based guarantees are, I mean, they're not only highly

demand, whatever usership hurdles people need to go through to get that type of guarantee about $100 million, billion, $20 billion set of contracts, they will go through because it's now the way that they want to transact around that category of contracts. So long and short, there's those three categories, right? either there's a slow adoption from the logical benefits of all this, which is already happening, or there's a huge influx and token value, which makes the D5 protocols extremely successful overnight because they secure a lot more value and make infrastructure like Ethereum, other blockchains, and the Oracle mechanisms that control their data delivery and feed data into them

successfully, even more important because they now secure more value. And so those Oracle mechanisms have to be made by real academic teams with a real background, real security audits, and a way to scale their security against that increase in value, the way that we scaled by being able to add more nodes and connect to more and more data sources as the value secured in a Defi contract scales. And then the third thing is that, yeah, I mean, if we're in a scary world where brand-based contracts no longer meet people's requirements, what choice do they have? What are they going to do? Imagine if the top three brands you knew in the world in terms of contracts were being questioned as whether they're solvent or whether their contracts are going to be fulfilled, whether your insurance company is going to pay you out, whether the money in your bank account is going to be paid out to you.

Do you really think that somebody showing up and saying, oh, don't worry, my brand is better than their brand? my brand won't do what their brand did to you or the risk it's putting you under. I don't think that any amount of brand-based guarantees in that type of environment would fulfill people's requirements. And their only choice would be math-based contracts. So that's the third way. That's kind of a scary way. But the way everything's going in the global financial markets, I think all three of those are

possible. Yeah. And I don't think that third way. way, right? It doesn't require a mass scale disillusionment with trust overnight. All it requires is a encroaching, creeping nervousness, right? That reduces trust in just enough of a way for people to start to want these things and then find that they maybe prefer transacting in this way in general. But I guess that brings me to a question which feels really relevant as we start to wrap up here. what are, I mean, you're basically making the argument that the benefit is so differentiated

that at some point people will adopt this type of approach on the basis of just the guarantees that it offers that traditional finance cannot. But beyond just being absolutely forced into it by this kind of cratering of trust, what do you think are the key barriers to mainstreaming in DFI? And who for, right? Are these barriers for these barriers for, these barriers? for individuals or these barriers for institutional players or both? Yeah, so I think you're really talking about that first variant, right? The first variant is the gradual adoption of these contracts and this infrastructure in an environment where people don't suddenly want a ton of their valued tokens

in the token economy or the blockchain token world. and they also didn't have a cratering of trust in brand-based contracts. So it's kind of that first variant. In the first variant where people gradually adopt this technology, I mean, I think I see two trends. I think the first trend is that the assets themselves are getting better. So I'm seeing people make stable coins. I've seen people make all kinds of various tokens around various assets underlying

real estate assets underlying kind of exotic financial products that for whatever reason probably due to permissionist innovation some bank somewhere hasn't generated yet and these teams are somewhere in some favorable regulatory environment Singapore some some other great environment and they they basically have an ability to to generate these financial products or these offerings, assets, asset-backed security offerings, or whatever the offerings are rapidly and at a better level of quality than even digital banks, which are the banks competing with large conglomerate consolidated banks. And you basically see an improvement in the quality of the products. And then I do see an improvement in the usership, right? The usership dynamic between users and

and blockchain assets. And on that front, I see two things. I see more traditional entities like banks and other people starting to do custody. So as soon as a bank somewhere starts doing custody, it's putting them on a path to actually have access to an asset. And that means they could offer that asset for sale or purchase. They could make some kind of centralized financial product on that asset. Okay, it's not decentralized, but maybe they can still offer to their customer. and some of their customers wouldn't know the difference.

And you basically see certain banks and more and more of them going into custody operations. And then you also see an improvement in the different startups. So there's all kinds of, I don't know, I would say mobile wallets, but there's definitely some improvement on the usership dynamic. And also it's just becoming more accepted that cryptocurrency is something you can own. It wasn't as accepted before. Four years ago, five years ago, owning cryptocurrency was kind of weird. Now it's more accepted. So I think what you're going to gradually see is you're going to see better and better

uses of blockchain technology through permissionless innovation to create better and better assets, better and better financial products. You're going to see the more vanilla version of all those things be the more simple version of all those things actually get offered through traditional financial institutions. And then you're also going to see, like, you know, that could even be buy some Bitcoin from your bank account or something. Like that's, that's an entirely possible thing. And, and then you're also going to see more and more people trying to capture average everyday users through UI, UX, user experience, kind of innovations about some kind of mobile wallet or some kind

of desktop wallet or some way for users to acquire the token through some kind of partnership with a company or something like that. And all of those things will slowly, slowly, slowly, slowly advance. I think the important thing to realize in all that is it's not as critical that users have to think about a blockchain in that world. In that world, you're using the permissionless innovation and the unique properties of these assets to actually offer something that doesn't get offered by the traditional financial world to a user.

And the user might know that it has a blockchain underpinning it. And that might be attractive to some users, but it might not be super attractive to the other users. Or it might not be fully understood by the other users. And they just like the fact that somebody made some kind of cool product for them, that they couldn't get anywhere else. So I think that's how to evolve in the first case. I think the other two cases where you have people diversifying their assets by going into tokens or the crisis of faith in brand-based contracts, those are both serious failure scenarios of like global financial markets, the global financial system, certain brands people really believe in.

Yeah, I think that's where you would see a really rapid uptick in adoption, in astronomical amounts that. that would probably even surprise the people in the blockchain world. But those two outcomes aren't clear. I think the first outcome is clear. It's going to be driven by this permissionless innovation you mentioned and people using this infrastructure to make better and better tokens, financial products, assets for users to hold, and slowly it'll gain mainstream adoption.

I know that the context is totally different, but if you had to use the Internet analogy, to describe how far along we are in the process of defy. Where are we in internet terms or internet history terms, I guess? I think, and maybe people might disagree with this, I think we are at this point relatively close to getting past unencrypted email. So I think we're at a place where we don't have inherent privacy built into the financial products we have an ability to connect certain systems together we have an

ability to generate certain smaller categories of information or yeah we have the ability to generate token information voting information so we have a few key categories where we can generate information we're just now with the health of oracles like chain link getting into a place where we can connect successfully to systems and Then I think the next big frontier, which Oracle's also have a hand in helping with, is privacy. And so I think where we are right now is we have unencrypted information transfer because all the data on these blockchains is largely public.

And therefore the DFI products are public. And you have people trying to manipulate the DFI products because there's certain information that's public about them. Other people don't put money into that maybe because they're not public. So I think we're at a very, very early stage. I think we're at the stage where the percentage of value that's secured by the blockchain ecosystem for the categories of contracts that it wants to secure value for is still extremely low. partly because those financial products are just now being generated with the help of oracles like chain link, partly because there isn't privacy,

and also partly because some of the scalability dynamics are still getting figured out. So I would say we're in the very early days of the internet when the first two or three use cases, like email, started to go somewhere and things to load very slowly. you have to wait 15 seconds or in certain blockchain's cases minutes to confirm a transaction. You don't have privacy for your transactions. Connectivity to other systems is limited. The amount of actual transactions that can happen on many public blockchains is still being refined and proved upon. I think it's very early.

I'm thrilled to have, you know, kind of worked on it for seven years and I'm thrilled to work on it on seven more than seven more than seven. more years, and seven years after that, and kind of see where the whole space goes. But if I look at the properties that are full-fledged kind of network for exchanging information like the Internet has and where we are and the types of value we want to secure, I think that we're still very early. But the thing that I'm very, very hopeful on, I'm very excited about on a daily basis now is the rate at which things are accelerating. So the rate at which you are seeing people build new financial products

because they don't need to make an Oracle mechanism or they don't need to make a smart contract platform or make their own blockchain. You find they are now starting to have an infrastructure where a three to five person team can come in and in a matter of a few weeks or a month put together a financial product that has a large enough user base,

in terms of token holders to make them successful, to get them $50 million, $100 million in value secured into their financial product, and to get their next stage of VC funding, to be considered a success, and to continue to iterate on that product, right, and then to grow it from $50 to $100 to $300 million to cover. And that's not something I've seen in the space

until relatively recently. So I think the rate of acceleration is very, very impressive. And if the space can actually solve these problems around scalability, privacy of the transactions, and without help, make sure that there's high quality connectivity to data that's properly secured and validated for its triggering of contracts.

With those three pieces in place, together with some kind of crisis of faith and brand-based contracts, I think that can add up to some very, very rapid, rapid adoption for industries like the global derivatives industry worth 600,700 trillion, the global insurance industry. So I think there's a very, very interesting scenario where the rate of acceleration is definitely increasing.

And the rate at which I think these math-based cryptographically guaranteed contracts are going to be in demand is probably reaching. an inflection point in my own personal opinion. And as long as the feature richness and the capabilities of our space match up with that inflection point, then I think this can become, you know, this blockchain-based smart contract model can become the dominant form of digital agreement for the global economy.

Well, Sergey, it is always a pleasure to have you here. You know, I was actually, I had one final question, up in my head about what's one thing that you would like folks who aren't familiar with Defi, macro folks to know. But I feel like the way that you just described the potential for this to be the dominant form of agreement is kind of that, right? The potential that you see is so overwhelming. But I guess I'll just ask it since I already threw it out. You know, if you had to, in a sentence, based on what you've kind of shared about where you think the industry is now, let macro investors, macro thinkers, people who aren't in DFI or crypto in any way know one thing

about DFI, what would it be? I would just say to them, imagine that we could remove all counterparty risk. That's it. Imagine you had no counterparty risk. You just need your contracts. You didn't have to worry about who the counterparty was. You knew they were only solvent. Things were settled in seconds, not really.

and the financial products and the assets that you could purchase and deal with took the days to generate after your request instead of months and millions and fees from large banks. And at the end of the day, you get better products. You get pretty much no counterparty risk. You get settlement times that allow you to not give up millions of dollars. And you don't have to depend on somebody's brain. on somebody's brand, hoping that you're somewhere in the line of debt insures for people who you're basically hoping you haven't taken too much counterparty risk.

So what I would say to the traditional financial industry focus is you right now exist in a paradigm of assessing counterparty risk and settlement and your relationship with contractual parties that is not ideal. It is not optimized. it is built around the technical constraints of the global financial system and how it functions today. This is why you can't get certain assets. This is why settlement times take weeks. This is why when you want exposure to certain risk or you want to deal with certain financial products, you can't. And realistically, those technical limitations are going to go away.

and if the counterparty risk that you have been taking go sideways in terms of the actual underlying asset, the underlying currency, the underlying value that you hold, it might be worthwhile to do two things. It might be worthwhile to think about how do I diversify my risk towards math-based contract guarantees of ownership through Bitcoin, through any number of other tokens. and then also how do I utilize these math-based contracts in my relationship with risk, with counterparties, with assets. And I think when you think about how that actually looks, a lot of people are just used to things being a certain way. But when you actually outline the math-based contract guarantees and the brand-based contract guarantees and all the risk they're taking and the fees you're paying

and the layer you're having versus the math-based guarantees of practically no risk, pretty much no delays, and pretty much minimal costs that are going to remain efficient because the whole system is built to be efficient and it's not built to allow someone to get monopoly rents from you. It kind of becomes an operating. So that's the really long sentence that I would say that. Perfect. Well, Sergey, it's always great to have you on the show. I really appreciate you taking some time to go through.

the theory, the history, and the current state of defy. For people who want to hear more from you, where can they find you online? I don't spend too much time online. Our website, chain. That link, is somewhere they can learn a lot about how this infrastructure is evolving to work the right way. I think Twitter.com slash chain link is where a lot of interesting content about this stuff is probably going to get put out. And then I'm on Twitter as well as well at Sergey and Azarov, though I don't spend too much time on that. But yeah, probably chain.link and Twitter.com slash chain link are the two places where they could go to stay up to speed on things.

All right. Awesome, Sergey. Well, thanks again for hanging out today. My pleasure. Thank you for having me on the show. It's always great to chat with you. Thank you. I think one of the most important parts of that conversation is the simple empirical difference

between a math-based contract and a brand-based contract. and just how much Sergey argues that in the long run, once people have experienced the simplicity and clarity of math-based contracts, it's going to be very hard for them to turn back to brand-based contracts. I think it's really compelling because that's an argument for long-term adoption of what we now call decentralized finance and smart contracts and all these other terms from traditional players that isn't focused on improving the UI, the U.S. or anything like that. It is simply about the core design principle being better suited for the world that we live in. Imagine a world without counterparty risk. That's how Sergei put it.

That's a pretty powerful way to look at things. So I hope this episode was informative, was interesting, and gave you a better sense of this entire new space, whether you're interested in getting involved or not yet. I want to make sure that as people do start to look over at this defy space that's seeing more financial activity, they're much better prepared than, let's say, the folks who got into ICOs were in 2017. So again, hopefully this helped with that. And I appreciate you listening, whether it did or it didn't. Anyways, guys, that's it for me today. I will be back tomorrow with another episode. So until then, be safe and take care of each other. Peace.