About this talk
In this talk, Anton Buukov discusses the transformative potential of decentralized finance (DeFi) in the financial sector. He highlights three key attributes of DeFi: transparency, composability, and efficiency. Transparency allows users to access and analyze data within smart contracts, ensuring that the health of DeFi protocols can be independently verified. Composability enables different DeFi projects to interact and build upon each other, fostering innovation and creating opportunities such as yield aggregators. Buukov further addresses the global nature of liquidity in DeFi, which enhances market efficiency. He also raises concerns about the inherent risks associated with DeFi, including self-custody and protocol vulnerabilities, while suggesting strategies to mitigate these risks through multi-signature wallets and audits. The talk concludes with an introduction to the innovative practices at his own company, focusing on efficient smart contract development and the unique features of their cross-chain solutions.
Full transcript
Hi everyone. Uh my name is Anton Buukov. Uh I am co-founder of 1 in. I'm here to tell you uh why defi is the future of finance and uh why it's better future in some aspects. So the main three points here is transparency, composability. No, I don't see anything. One second. Yeah, transparency, composability, and efficiency. In terms of transparency, uh yeah, anything in DeFi, any protocols, the
the the transparency means that you can check and see balance of every account. You could see total balance of the system. You could see any internal accounting things which are happening inside smart contracts because that's the way how they work. their internal data is available for analysis. And uh this means that if any system have some number of users, they have some deposits, you can always check
if whole system is solvent and sufficient. This mean that if everyone can withdraw their deposits and it's still fine or they have some uh uh gap in liquidity. Yeah, you can analyze this. One more point is equality of access of participants. So everyone, every user, every arbitrage trader, every business have the same access to those smart contract platforms, defy platforms. And uh if someone have advantage in
time or price or anything else, it's uh transparent. You you can find this in their code base that someone have some advantage. So you you equality of access is not like mandatory. It can be non-equal but it can't be hidden. Next point is defy composibility. What I understand under this is that every project which is onchain, it can be used by any other project which can build
something offchain or can build anything onchain on top of it. So that's how we end up in DI having different uh yield sources like staking like uh lending like really different opportunities. But we also have yield aggregators that systems where user depos deposit their assets and these systems they redistribute their deposits in other systems and this works uh thanks to composability. This is how programs can be
in touch with other programs, how they can use their APIs onchain and offchain. For example, when we launched 1 in uh aggregator, we discovered that there were like multiple different uh decentralized exchanges, but each DX is actually a smart contract which is like a backend and front end website. And we came up to vision that no one website have exclusive access to their own smart contracts. This
means that anyone can build front end for smart contracts which are deployed by someone else. So actually 1 in was a separate front end for existing smart contracts but we also shipped our own smart contract. Yeah. All these things is how composability works actually and permissionless access. So yeah, if you're trying to access backend API of closed systems like Facebook, Twitter, whatever, uh yeah, they can restrict
you. You need API keys. Yeah, it's it could be complicated and you could be actually constrained from having like a full access for I'm not sure you can build fully functional uh Twitter X client without violating their uh rate limits but yeah with smart contracts blockchain defy it's possible your access to those systems is permissionless no one can restrict you but yeah technically it's possible to restrict
only you but No. Okay. And probably the most important point of DeFi is its efficiency. It's uh actually coming from few points because liquidity there is global. So defy liquidity is actually global liquidity. It's not associated with any local market. It's not European. It's not American. It's not Asian. Uh it's global. It's truly global liquidity. And uh the the the only thing which uh drives this liquidity
is uh pure risk reward riskreward game theory. So yeah uh liquidity is moving among different opportunities and is uh yeah it's actually rebalancing riskrewards. So yeah taking risks into account analyzing rewards and making projections based on this. So DeFi is one of the most efficient markets and how we end up to this uh that's because of non-regulation. It was never regulated for for for like true regulation
and yeah regulation stacks innovation. Here we don't have regulation. That's why D5 is so innovative. And yeah, I have small bad news regarding this D5 thing and we have some new risks which we should take into account, handle, hedge, whatever you can find. So yeah, there are self- custody risks. Owning your private key is responsibility. You can lose your private key or your private key could be
stolen by someone and there are protocol risks. So one second. Oh yeah, I I have a separate slide about this. Okay. Yeah, you you can lose access or your your uh key can be stolen and your funds will be stolen. So there are a few ways to mitigate this uh at least multiix and hardware wallets. Multis is something which can prevent uh both stealing your funds with
stealing your key and losing your funds with losing your key. If you would have set up account like a multi-seek two of three, this account will be able to perform actions when at least two or two owners are agree two or three owners. This means if any of the owners will will lose their key, you will not lose access to this system to this multisig. If one
of the keys will be stolen, you will also funds will also not be stolen because you need at least two signatures. So yeah, you could have much more complex multi solutions like four of seven or five of seven. It depends on what exactly you're working on. And yeah, for sure hardware wallets. Hardware wallets is a thing which basically idea of hardware wallet is to have private key
or seed phrase store it on a separate device to avoid viruses or any other things steal your keys. So if you have separate dedicated device owning your private keys and you use this device to agree or cancel uh digital signatures creation. So yeah, you're like owning your keys and it's much harder to steal your key. Both of these ways help to mitigate those risks and there are
protocol risks. Uh since all those protocols they're like uh their code is usually it's available in worst case if it's not available bite code is available which is harder to read but is still possible to analyze and find vulnerabilities. So code base could have some bugs. These bugs can lead to hacks. Codebase could have backdoors. Back doors allows owners of this smart contract or deployers of this
smart contract to do something to lock funds, steal funds, whatever. Both situations are not good for users. But yeah, the way how users can mitigate this is actually those three factors. This is a auditors who can audit code. Uh TVL here I meant actually total uh value locked or number of uh users and uh amount of their funds being used in this protocol and for short time.
So this means that if protocol have audits, if it's working for long period of time and have uh big number of users and their deposits, it's probably much more safer than other protocol which was deployed yesterday because it's like more time proven, value proven and yeah, it's proven. But there is no any other way to guarantee 100 percentages uh safety for smart contract code to be to
have no bugs. There is no way to do this. For example, we in one in we have like a code values when we develop protocols. We try to make their code base as much compact as possible and uh have as much audits as possible. This is giving class us like a extra feeling of protection. Less code, more audits is uh safer than more code and less audits
for sure because developers should know that every code have bugs and uh for example Microsoft one of the biggest uh software engineering company they have code standards and one bug or like two three bugs per 1,000 lines of code is a good code base. So yeah, we can't have this in DeFi. So you would better develop platforms with uh hundreds of lines of code and few audits.
It would be much better than develop system with tens of thousands of lines of code. Yeah, that's actually a separate topic on how you should develop smart contracts. I I should make slides about this. Okay, that's it. Any questions? >> Yes. Okay. The question was how one in is different from any other aggregator. Okay. Uh I think I can answer like that that uh we actually invented
this uh thing DEX aggregation and we are going forward with it. We are inventing next things. We invented um Dutch auction based price discovery. It's called 1 in fusion. And we invented uh non-custody crosschain solution which is called 1 in fusion plus. We're actually heading to old chain to be all chain crosschain and we have the only self-custody solution on the market. This means that in every
moment of this crosschain swap, you own your funds and you can't stuck in situation where your funds in someone's hands and they are asking for your documents or whatever they could ask you or they stealing your funds and running away. We don't have this situation because our protocol is based on atomic swaps idea which was uh proposed in 2013 a while ago. But yeah, we may we
made this uh concept much more modern with intense and everything else. So yeah, my answer is uh that we push forward the technologies much uh I think we're dedicated to this much more than anyone else probably. Other questions? No questions. If I still have time, I can tell more about software uh smart contracts and yeah, if it's interesting for you guys. Yeah. Okay. I see some signs
that you are interested. Okay. Uh I will talk until they will kick my uh me out. So yeah, we came up to vision that code base should be compact as much as possible but it should be really efficient as much as possible because efficiency here is actually not about like micro optimizations. It's more about high level data structures and algorithms and your uh computational complexity of your
code and storage complexity of your code because blockchains have very limited uh computational comp capacity. They are limited in terms of gas or calculations per second, per minute, per hour. They're usually limiting this to prevent their state growth. For example, Ethereum uh EVMS they want to have nodes which you can run at home. You can buy computer for few hundred bucks and be able to run node
and uh if state will uh grow like to hundreds of terabytes it will not be possible. It it will lead to higher centralization. So I think that computational complexity of blockchains it will be limited almost forever. So we should expect numbers grow but they will not grow dramatically. They will not grow like millions of times and we will not have much more computational power per user. So
you should use algorithms which use infinite scaling or at like le like like constant uh complexities or at least logarithmic complexities uh when they process data. For example, some systems are already using it like money markets. If you would check money markets like our compound and everyone else, how exactly they work? They work that uh hundreds thousands or millions of users can deposit their liquidity and hundred
borrow liquidity. You deposit one asset and you borrow another asset. What's happening inside this system? They're recomputing your depth every second. Your depth is growing every second. and uh liquidity of those who give gave you these tokens in your depth. It is also growing every second. If your depth is growing with like 10 percentages yield annually, this means that if half of liquidity is borrowed in this
pool that then liquidity providers would get five percentages annually and all these calculations they being made in uh in very efficient manner. So it's never enumerating its users. This system is built with a smart formulas that your uh depth is tokenized actually and your price of your depth is growing every second. Your collateral is also tokenized and price of your collateral is growing every second but with
different speed. And the thing is that hundreds, thousands and millions of users can use this system and you actually have like four methods deposit, withdrawal, borrow, repay. And every of these method have same computational complexity doesn't matter how many users are there, how many liquidity are there. So in terms of code base, these methods do not have any loops. So it's just same amount of computation for
any action and it does not matter how many users are inside this system. So I have separate presentation about this about different algorithms uh used in D5. It's called D5 value flows. It's about redistributing different values in different directions among almost like infinite amount of users potentially with a limited computational capacity. And I found a lot of algorithms already implemented and they are used inside existing defy
projects. So whenever you are building new projects, you should take this thing seriously. And now that's it.
