DeFi relies on Creating Wallet Infrastructure and Secure Access


At a panel discussion hosted by the European Blockchain Convention (EBC), four enthusiastic speakers laid out what lies ahead in the future while having an animated discussion on deconstructing DeFi, not particularly agreeing on specific issues, especially regulations.

Visual of Patrick Heusser, Francisco Maroto, Lex Sokolin and Stephen Richardson at the 6th EBC

Patrick Heusser, Head of Trading at Crypto Finance (Brokerage) AG, who has 20 years of experience in investment banking, opened the session by defining DeFi and why it matters. He accepted that DeFi often gets misused and explained that it is about accessing a permissionless and trustless protocol, not knowing who is on the other side of the ring.

“DeFi often gets misused, it is about accessing a permissionless and trustless protocol, not knowing who is on the other side of the ring”
– Patrick Heusser, Head of Trading at Crypto Finance (Brokerage) AG

Stephen Richardson, Head of APAC & VP, Product Strategy and Business Solutions at Fireblocks, who has been doing strategy consulting with financial services institutions and working with digital asset startups since 2016, looks at DeFi as a way to recreate the services already in traditional finance, whether it is trade and execution, lending and borrowing infrastructure or yield generation.

“At Fireblocks, we provide infrastructure to integrate with the largest DeFi networks and different DeFi applications.” – Stephen Richardson, Head of APAC & VP at Fireblocks

Also in the panel was Francisco Maroto, Head of Blockchain and Digital Assets at BBVA, who has 20 years of experience in the banking space and has dedicated 4-5 years at BBVA contributing towards its blockchain efforts. According to him, DeFi is a different way of doing things. “We are not operating peer-to-peer or peer-to-institution, but we are operating peer-to-contract,” he explained.

He termed DeFi as an automated market maker for trading, exchange, etc., with no involvement of humans. He further explained the price is set up by the number of assets in the pool.

Panel Discussion Visual elaborated by EBC team

Lex Sokolin, Head Economist at ConsenSys, who moderated the session, added that the trustless and permissionless computational blockchain, which is validated in a peer-to-peer manner, gives users confidence in engaging with the data and information stored on it.

Patrick, who has a background in derivatives trading, explained that interest rates in crypto are higher than in the traditional trading world, mostly because the crypto trading ecosystem is still in need of the ‘on-ramp’ and ‘off-ramp’ services of the fiat system, wherein fiat money is allowed to be used in order to buy or sell cryptocurrencies.

Explaining the risks in DeFi, Stephen pointed out the major ones are technological and regulatory. The technological aspect is about creating wallet infrastructure and secure access, which must be impeccable. Financial institutions cannot access DeFi protocols due to current regulation as they would need to know who is on the other side receiving the assets. He admitted that in DeFi, the governance mechanism is limited. “At Fireblocks, we provide infrastructure to link the governance models against the wallets that they deploy these assets to and different DeFi applications,” he added.

“The technological aspect is about creating wallet infrastructure and secure access, which must be impeccable.” – Stephen Richardson, Head of APAC & VP at Fireblocks

Francisco mentioned that BBVA banking customers can now buy, sell, and have custody of bitcoins. “We are looking at offering tokens including security tokens and cryptocurrencies and ways to enable our customers access the derivatives option,” he divulged.

“BBVA private banking clients in Switzerland can now buy, sell, and have custody of bitcoins” – Francisco Maroto, Blockchain Lead at BBVA

Francisco warned that the risks of volatility and hacks in DeFi will remain if regulation is not set up, although there are ways of mitigating those risks.

On the question of having a minimum standard of regulation to avoid the risks of rug pulls (a malicious maneuver in the cryptocurrency industry where crypto developers abandon a project and run away with investors’ funds) or other malicious practices, there was a bit of contention among the panelists. Francisco warned that the risks of volatility and hacks in DeFi will remain if regulation is not set up, although there are ways of mitigating those risks.

Patrick fervently stated that DeFi is unregulated and should stay unregulated because regulation is centralized. “If you have money in the crypto system, no one can tell you what to do with it. You have all the options, and your privileges are better than the normal retail banking customer,” he stated. He admits that as a private investor the possibilities are unlimited.

“As a private investor in DeFi the possibilities are unlimited” – Patrick Heusser, Head of Trading at Crypto Finance (Brokerage) AG

On the other hand, Stephen noted that large-scale institutions such as financial firms, exchanges, and central banks rely on human intervention to execute functions of back office operations, reconciliations, etc. “To me, DeFi is about using technology applications to replicate and execute all those functions,” he affirmed.

On the concluding question of when will DeFi be just finance, Patrick expected it to stay DeFi. In contrast, Stephen expects more adoption in the next 2-3 years with institutions being around. Francisco believes that DeFi will continue to evolve during the next 5-10 years replicating the services we have in the traditional financial world.

Thank you for reading EBC news. If you have enjoyed this article, we would be happy if you forward it to your colleagues or share it on social media.

Published December 17,  2021, Barcelona

https://eblockchainconvention.com/author/danisalmeron_10/

Consumer Interest Is Driving Blockchain Developments In Supply Chains

Consumer Interest Is Driving Blockchain Developments In Supply Chains  The 6th European Blockchain Convention featured an insightful conversation about how blockchain can support sustainable supply chains. The panel composed by Duncan Johnston-Watt, Daniela Barbosa, Garance Osternaud, Alberto

https://eblockchainconvention.com/author/danisalmeron_10/

Paradigm Shift: Financial Instruments and Commodities Meet DLT

Paradigm Shift: Financial Instruments and Commodities Meet DLT During the European Blockchain Convention, executives from the financial services and the commodities industry met to discuss their vision of the new era of financial instruments and commodities. Visual

https://eblockchainconvention.com/author/danisalmeron_10/

Gaming in the Metaverse is the Next Big Thing

Gaming in the Metaverse is the Next Big Thing  During the panel "Gaming in the Metaverse” at 6th European Blockchain Convention, Rudy Koch, Co-founder at Mythical Games, Sebastien Borget, Co-founder at The Sandbox, and Sarutobi Sasuke, Head