When DeFi meets TradFi: Alliance of MakerDAO and Societe Generale-FORGE

Rajiv and Sylvain share their insights on DeFi and TradFi at EBC23.

Rajiv Sainani, Head of European Business Development of MakerDAO, and Sylvain Prigent, Chief Product Officer & Co-founder of Societe Generale-FORGE shared their unprecedented journey of innovative collaboration. Read on to learn what happens when DeFi meets TradFi!

Rajiv starts the panel by saying that the future of finance will be traditional finance (TradFi) and decentralized finance (DeFi) coming together. MakerDAO has been cooperating with Societe Generale-FORGE to issue security tokens for more than a year. In this panel, Rajiv and Sylvain share their experience, learnings, and challenges along this incredible journey.

The collaboration started when Societe Generale-FORGE proposed to issue a native blockchain-based security token on the Maker public forum in September 2021. Their main goal was to bring liquidity to security tokens and they partnered with a DeFi protocol, Maker, to find an innovative solution.

The technical integration was fast and smooth, but the real challenges lay in the governance of a decentralized autonomous organization (DAO) and the legal processes. Know Your Customer (KYC) and jurisdiction were necessary, and the team had to find solutions and educate the regulators along the way. 

Watch the full panel to learn more about MakerDAO and Societe Generale-FORGE’s unprecedented collaboration!

Amazing Things Happen When DeFi Meets TradFi

Regarding the next steps, Rajiv and Sylvain both hope to scale up the collaboration and bring the project to the next level, rather than simply experimenting. Societe Generale-FORGE is planning to open this service to many of its investors through Maker by the end of 2023 or in the first quarter of next year. They believe that both the TradFi players and the MakerDAO community can benefit from this project.

Throughout their cooperation, Rajiv thinks the key to the success of a TradFi-DeFi project is to have people that can navigate successfully both worlds and find the synergies. It’s easy to imagine a financial space when these two worlds collaborate, but the process is not only rainbows and unicorns.

Rajiv acknowledges the difficulties for a DeFi to cooperate with a TradFi. Therefore, he hopes their collaboration can pave the way for other projects as they have proved to the world that despite having different cultures, ideologies, and processes, TradFi and DeFi can work together to create something amazing!

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The Future of Crypto Market-making: What’s the Role of Regulations and AI?

The increasing adoption of artificial intelligence (AI) and the ongoing discussions surrounding regulations are two important factors shaping the future of crypto market-making. How will policymakers’ decisions affect the crypto industry? How is the crypto industry using AI?

A very enlightening discussion took place during the 8th European Blockchain Convention with Joseph Hall, Reporter at CoinTelegraph, Guilhem Chaumont, Co-Founder & CEO at Flowdesk, John Murillo, Chief Dealing Officer at B2Broker, Patrick Heusser, Chief Commercial Officer at Crypto Finance AG, Stef Wynendaele, Head of Commercial Strategy at Keyrock, and David Tunian, Head of Business Development at WhiteBIT.

How Is Crypto Market-making Different From TradFi?

In a cocktail party analogy, market makers are the party planner that manages the risks, provides the necessary support for participants to enjoy themselves, and handles the logistics of the event. They play a crucial role in maintaining order and stability in the market.

Market makers in the crypto industry are more open, transparent, and willing to cooperate compared to players in traditional finance. In TradFi, market makers operate in a highly competitive and fast-paced environment where speed determines performance. However, the crypto market is more decentralized and fragmented. Crypto market making is often offered as a service and the risks are shared among several different stakeholders. Market makers need to collaborate to manage risks and advance the market.

“I’d rather have a collaborative approach and not an “Us v.s.Them”. At the end of the day, the market will decide what is most efficient and the market will decide what’s most interesting to have on the balance sheets. So let the market decide, but we have to do it together!”
– Stef Wynendaele, Head of Commercial Strategy at Keyrock

The panel “Market Making is Key for a Crypto Market Recovery” at the EBC23.

Regulations Can Help Bring the Industry Forward

All panelists acknowledge the importance of regulations, but clarity, transparency, and optionality are the key elements that they hope regulations can bring.

“I’m actually looking forward to regulation and clarity. It will at least be clear about what are the rules and the boundaries. It will help the market be more liquid and more people be comfortable going in. I’m really looking forward to it!”
– Patrick Heusser, Chief Commercial Officer at Crypto Finance AG

Despite being supportive of regulations, Patrick believes that there should be two parallel ecosystems in the crypto industry. One is the decentralized ecosystem where users can trade any token without restrictions. The other is a system for users who may not want to manage their wallets. He envisions that the decentralized system will be the innovative one that helps make the traditional system more efficient.

“In the end, it would be very Darwinian. The actors that are bad and not transparent will be mechanically excluded from a business perspective and those who bring value will obviously have more business and they will make progress.”
– Guilhem Chaumont, Co-Founder & CEO at Flowdesk.

How Are Market Makers Approaching AI?

When looking at the quantitative market-making and technical perspective, a lot of machine learning and AI technologies have been implemented for years. 

Patrick also views AI as a potential support for crypto businesses as the technology can be used to follow updates on multiple protocols, monitor blockchains, and evaluate risks in smart contracts, which are time-consuming and challenging if done manually.

However, Guilhem thinks it’s very unlikely that AI will disrupt the crypto market-making in the next five to ten years. The crypto market is heavily fragmented and there’s a lack of ground infrastructure and a high necessity for less scientific discussion and cooperation, so he thinks it’s hard for AI to make groundbreaking innovations in the short term.

Watch the full panel to learn more about the future of crypto market-making!

Is Crypto Institutional Lending Facing a Crisis? What’s the Next Wave?

Crypto’s Institutional Lending Market

Jamie Knowles, Director of Institutional Sales at Galaxy Digital, and Leeor Groen, Managing Director at The Spartan Group discuss the crypto’s institutional lending market. They identify the challenges and opportunities of the current crypto lending markets and how to restore trust and reduce counterparty risks in the ecosystem.

Failure of Actors Doesn’t Mean Failure of Crypto

Institutional lending in crypto has rapidly evolved in the past two years, with a growing willingness to use collateralized or uncollateralized lending products. Despite challenges faced in 2022, Leeor believes that it is not a failure of crypto or the ecosystem, but the failure of malicious actors.

The technological foundation that allows users to participate in decentralized finance (DeFi), borrowing, and lending pools has stood the test of time and remains resilient. In his opinion, the industry hasn’t experienced a technological implosion.

Jamie and Leeor discussed the crypto’s institutional lending market at the EBC23.

Restore Trust & Reduce Counterparty Risks Are Essential

Jamie identifies the huge counterparty risks in the industry over the past 12 months. There has been a significant drawdown in institutional loans on a notional basis. Both the demand and supply side of institutional lending in crypto has decreased due to the exit of some of the biggest players and many potential lenders.

Remaining lenders have become increasingly worried about counterparty risks and have pulled back significantly. They start to demand high collateralization levels that many borrowers are not willing to meet.

Jamie shared his insights on the institutional lending market at EBC23.

Leeor thinks that the industry needs to implement proper due diligence processes and standardized frameworks to evaluate counterparty risks. This includes asking fundamental questions about who the counterparty is, how many other people they are taking money from, and what their track record is. 

Standardization of diligence processes will ensure that all parties are on the same page and will reduce the likelihood of surprises. Leeor believes that by building connections, the industry can create critical infrastructure pieces that will be the foundation of the next wave of growth.

To restore trust in the ecosystem, Jamie thinks that the market needs time to recover. It’s important to implement better risk management practices and improve infrastructure for real-time monitoring. Zero-knowledge (ZK) technology is a potential technology to protect privacy.

Jamie and Leeor held an insightful panel about the institutional lending market at EBC23.

Bringing Institutional Players Into Crypto Lending

Leeor believes that lending and borrowing in DeFi is still in its infancy, but there is potential for significant growth. He thinks that the composability of liquidity is one of the biggest enablers to unlocking assets flowing into the crypto space. 

To bring traditional financial (TradFi) institutions to participate in DeFi, Leeor suggests that the basic infrastructure needs to be developed to allow them to participate in a meaningful way.

Watch the full panel to learn more about crypto’s lending market!

Investing in Crypto Assets: How to DYOR?

Panelists present how they analyze crypto assets at EBC23

This panel was moderated by Alex Wenham, Digital Asset Product & Strategy Lead at Bloomberg. Vangelis Andrikopoulos, Investment Analyst at CoinFund, Anais Rachel, Independent Analyst, and Matthew Sigel, Head of Digital Assets Research at VanEck, share how to DYOR when investing in crypto.

Taxonomy of Crypto Assets

Matthew states that from an end market perspective, the crypto assets can be categorized into three main markets: finance (worth $3 trillion), tech infrastructure (worth $500 billion), and an emerging metaverse market (potentially worth $2 trillion in 5-10 years).

He also points out various categories of crypto assets, such as consensus layer, execution layer, app-specific blockchains, and decentralized finance (DeFi), with differing characteristics like product-market fit, network effects, and cash flow.

Pay Attention to Blockchains Mechanisms, Tokenomics, DAO Governance, Userships, Developer Activities, and the Whole Ecosystem

Vangelis emphasizes the difficulty of coming up with a standard analysis method to value and invest in crypto assets. These tokens are programmable and there are a lot of variables that can change the equation.

Focusing on Ethereum, Anais reminds the audience that each blockchain and protocols have different tokenomics: burn mechanisms, token supply cap, or monetary policies. She states that the burn mechanism of the blockchain, such as Ethereum and Avalanche, is a direct result of how much the network is being used.

It’s also important to see which network has the most vibrant developer activities (such as the number of commits per developer on a quarterly basis) and daily active addresses (instead of the daily number of transactions).

Anais also highlights the importance of investigating the whole ecosystem. When she analyzes Ethereum, she also takes Layer 2 protocols, such as Polygon zkEVM, into account.

Vangelis recommends considering factors such as the estimated market share in five to seven years and decentralized autonomous organizations (DAOs) governance to see how the networks are kept safe and how the rewards are distributed.

A full house at the 8th European Blockchain Convention learning about crypto analysis.

Anais thinks the first step to investing in crypto assets is to understand what you are looking for as an investor. Researching the application layer will be different from investigating a consensus layer.

She uses data platforms, such as Token Terminal, to acquire relevant data, download it, and make assumptions. However, it’s important to keep in mind that road maps change, hacks occur, and there are hard forks. She shares that she wouldn’t project anything more than 10 years ahead of time, not yet in the crypto industry.

Not sure how to DYOR? Watch this panel to learn more about investing in cryptos!

Aave’s CEO asserts the power of DeFi: “It’s the right way to do finance!”

Joon Ian and Stani discussed the current DeFi ecosystem and stablecoins at EBC23

According to Stani, the decentralized finance (DeFi) industry has rapidly evolved over the years. We have moved forward from having only USDT to now developing different types of stablecoins. The vibrant developer communities, especially on Ethereum, have created resilient protocols that stand the test of time and market volatility.

DeFi is seen as an access technology, providing equal financial opportunities globally and leveling the playing field. Stani thinks the transparency and governance aspects that DeFi protocols facilitate can allow users to share decision-making access. The scalability and technical infrastructure of layer 2s are seen as enabling factors for increased adoption of DeFi technology.

When asked about Aave’s stablecoin GHO, Stani believes that the future of DeFi is promising, with the potential for stablecoins to be integrated into the current payment infrastructure, providing better, faster, and stronger finance. He thinks the Aave community is risk-averse and is building resilient projects.

Stani also shares the Lens Protocol that they developed. It is a blockchain-based online profile system that allows users to secure their online presence, connect with other users, share content, and even tokenize it as NFTs. It aims to give users ownership over their social capital and empower them to hold relationships and create next-generation social experiences.

In conclusion, even though the DeFi industry has experienced lower leverage during bear markets, resulting in lower yields, it also spurred innovation in building financial opportunities. Stani firmly believes that DeFi is the right way of doing finance!

Check out the full discussion of DeFi innovation on the EBC YouTube channel!