hi this is Charles hoskinson broadcasting live from warm sunny Colorado always warm Always Sunny sometimes Colorado well wait a minute it's December gotta turn on the fireplace ah there we go see you gotta have your fireplace going so I am three days into my two week fast so forgive me if I forget anything or use ums or odds but this is the worst day of that long-term fasting always hard to push through just bone broth of water for me and some coffee not supposed to drink that much coffee out fast but it you have to do something all right we have 15 minutes but I want to make a quick video talk about a topic and concept that we've been working together on talking about for a while that I think is very important so I'm going to share my screen a bit uh let's see here is that share screen wow there we go okay so when I was at Stanford for the blockchain conference there the science of blockchain they had a lovely presentation from Sam Warner's team at ICL in Cornell and it was an sok paper on decentralized finance and it kind of covered some foundational definitions of defy and the different types of Primitives of D5 so smart contracts and Keepers and oracles and governance different D5 protocols on-chain acid exchanges lending stable coins portfolio management derivatives and so forth and it let me think a little bit about how do we come up with a better term for a useful D5 so let's do a whiteboard video and let's talk a little bit about that because I want to talk about basically a concept called [Music] hang on a second well that's not working let's unplug it and plug it back in foreign there we go just a moment ah there we go okay so we'll zoom in a bit my dad died on me all right [Music] well that's concerning just a moment [Music] I guess what we're gonna have to do is stop sharing the screen and go back to my whiteboard who says I don't have technical difficulties from time to time that's okay but anyway what I wanted to do was I wanted to make a video talk a little bit about uh D5 and its translation into a New Concept called realfly so we're going to format the background we're going to enhance the ink shapes we're going to put a graph in and uh [Music] just not working okay all right well I'm gonna have to reset the uh the setup so I'll just explain it verbally so defy and realfly what is the difference between the two uh real fly is D Phi is a superset so if you take a look at the sok paper that I I just presented and I'll put it in the comments basically what they do is they say hey these are some categories these are different use cases but there's something that's missing from D5 and that is really five categories so there are four categories in a meta category that fits over it so there's a dendi metadata governance standards and certification and then when you put them all together you have some notion of a regulatory structure that that sits on top of that so real fly succinctly is D5 with identity okay and we're going to talk about each of these things that's why I wanted to do the Whiteboard video but it's identity so basically the dapps themselves have some agency so the application running on the blockchain has some notion of an identifier and then the people interfacing with it have some notion of identity it's not necessarily a real life identity but it's enough identity to be able to say this is a unique individual and they're just distinct and different from someone else and identity doesn't have to be a universal Concept in that everybody in the network knows that identity it can be completely Anonymous to a random person but to a specific person uh that identities know metadata is saying okay we're going to tell a little bit of a story about the nature of the people the funds that are in the account the story behind them the transaction that goes into the smart contract or into the decks or whatever it is we're going to know a little bit about that uh governance is basically how do we upgrade update and change the defy that exists so when you have a DEX or you have a stable coin or an oracle for example jet version 1.1 version 1.2 version 1.3 how do you upgrade how do you make those changes who gets to decide what's the process to decide those types of things and then we talk about standards and certification and saying okay are there abstractions about how to do certain things in the D5 that are industry accepted practices whether they these standards for Bridges standards for Market making standards for asset issuance and representations standards for data that's produced and how that data is stored etc etc and then a regulatory structure is basically the thing that sits on top of that and it is scoped to a jurisdiction or jurisdiction relevant to where the assets live and the Commerce being conducted by those actors so a lot of people are saying well regulation is coming for defy and that's true the problem Regulators have is how do you automate it and keep it decentralized so uh D5 going to realfi has those four properties identity metadata governance standards and certification but then it has this concept of decentralized Regulation d-reg so there's some reg tech technology that can be put in where you don't have to change the underlying protocols I mean Bitcoin doesn't have to change itself ethereum doesn't have to change itself but there's some overlay where you can apply a regulatory scheme and some basic capabilities of Regulation are things like transaction reversals freezing uh things like um being able to identify the actors involved and go through know your customer and anti-money laundering and uh these types of things so whoever can solve this I think is going to control the entire D5 space real fi is the next generation of D5 and I'll do a series on it at some point and I'm sorry my whiteboard is is down right now I'm not sure what happened to it but basically uh this is the Crux of what makes D5 work for everybody now there's one last part of real fly it's kind of a meta part of real Phi which is the user base now one of the things I've always been bothered about by the D5 Revolution was it was a bunch of dgen yield Farmers could come in and they're embracing pods economics and they're always looking for the greater fool they have no intention of doing real loans or real transactions it's just looking for some money to make with D5 at someone else's expense so it's a Sub-Zero game you win some of the loses real fly reason why we call it real is beyond the fact that you have identity and metadata and governance and standards and this regulatory overset the people who use it they use it as their primary Financial stack they don't have a bank account they don't have credit cards um or that's not a primary concern it's a secondary concern they want to use a blockchain based cryptocurrency based Financial stack it's real fine he said well who would do that well let's imagine let's say that you are a small business in Nairobi and right now when you interface with Old Trafford Marketplace every time you want to get a loan every time you want to get new inventory for your store uh every time you want to get a little bit of capital store a little bit of capital there's a 5 10 15 20 fee and in some cases you have no access they just won't give it to you for whatever reason well what if you could move all of that to digital assets and find a way to keep them secure stable safe fluid Global and make the fees go very low and instead of getting a loan from your local community where it's 35 you can get it across the world and everybody can put a penny in and then it adds up to 50 cents that's why you'd want to use that because you have total control over your identity self-sovereign you have total control over your reputation you have total control over your asset storage all these types of things that's real fi at its core and it's what gets me interested in this industry when we say we want to be the financial operating system of the developing world the new world that we're moving towards that's really the point of it because you'll notice that each of these things identity metadata governance standards and certification are not controlled by a single government a single individual a single company and in many cases the assets that are produced there are owned by you the user as opposed owned by a corporation a transnational body a standards body or whatever it may be you see and that is the difference in a nutshell what is D5 versus real Phi it's realfi is a superset of D5 it has added capabilities and it has a very particular philosophy on the user base in that the user wants to use this it's capable enough for the user to use this as their primary Financial stack is it but Charles crypto is very volatile well it's true why we build things like algorithmic stable coins and these types of things to try to figure out a way to skew the volatility you say but Charles there are conversion issues liquidity issues that's true and that's why people build on off ramps and these types of things and there are Forex fees and so forth you see but Charles the defy applications aren't exactly where they need to be and it's absolutely true it's a new economy and there's some warts and some stretches and then rough edges and these types of things that are a little difficult to work with however the difference is instead of this being an individual innovation of an individual or a company it's an individual innovation of an industry meaning the things I saw at Stanford blockchain week I get to use and the things we come up with at cardano they get to use and so you have tens of billions of dollars of innovation that's basically working its way through uh and we collectively are open sourcing all of that innovation So within just a few years the dexes will be more efficient faster and and have much better security guarantees than any of the centralized exchanges floating around in just a few years we'll have much better ways of representing knowledge information data and its veracity than you'll ever get from a centralized company in just a few years many generations of stable coins will work their way through we'll have much more nuanced way of algorithmically locking value in creating stability and very interesting Community baskets and all of these things their cost goes down because once the Innovation cost has been paid it becomes a public good to everybody and all of these things run on protocols for everybody so what gets me so excited about the industry in the space and it's something that my company in particular is going to focus tremendously on in 2023 is real fine and it's something that we hope to be able to create an industry definition for and move us beyond the dgn D5 movement into the age of real five so I hope you guys enjoyed listening apologies about the uh tablet I'll get that fixed up and uh we'll uh we'll uh do a whiteboard video and I'll draw it all out cheers
