FTT Defi notes and thoughts

What is it?

Fintech Talents, a conference events organisation, holds conferences throughout the year, with a variety of focuses culminating in their primary conference in November.

For 2022, FTT launched their inaugural FTT DeFi conference in London, bringing together “the community of 700+ innovators and creators who are challenging the…establishment when it comes to the future of financial services and beyond.”

How was it?

Overall, it was a well-organised event and well run, the three tracks were interesting and had enough breadth and variety and many of the speakers and panelists were very knowledgeable and certainly had interesting things to say or opinions to give during discussions.

In particular, I enjoyed the panel hosted by web3 builder and personality @BullishDumpling (of Cardano — LinkedIn/Twitter), who chaired a very interesting discussion.

Themes and notes

Below are some themes, quotes and thoughts I’d put together from some of the sessions I attended.

“Democratisation of access”

@BullishDumpling said that defi is all about the democratisation of access, though I’m not sure if I agree. Although its intent may, in part, look to solve this, the current mechanisms and infrastructure aren’t there.

Defi (and by extension blockchain, crypto, web3) are inherently exclusionary — they require buy in (you have to buy into the ecosystem), they require internet (it does not exist in the physical world), they require smart devices (there is no dumb, offline access point), and they require yet another evolution of financial literacy, which, with defi in its current form, sets a high bar of knowledge to access.

Over time we may solve these issues but we need to be careful how we contextualise these proclamations in the interim.

“Banking the unbanked, identifying the unidentified”

Another quote from @BullishDumpling which sparked an interesting set of thoughts.

Firstly, is this strictly true? Given the premise that Defi may be inherently exclusionary, are the unbanked and unidentified reachable if they’re already not reachable in web2?

An audience member asked a similar question to a panel later where Flavia Kenyon was discussing similar point:

If I have cash and no bank account but I can still access the economy then why do I need a bank account [or by extension, defi wallet]? And if I have a bank account and I don’t have enough money then what use is the account to me?

This is a really important point to keep in mind when we build our financial services — not everyone has access to basic financial services or has the funds required to live outside of poverty, so, to them, our services are almost useless.

If we’re truly about inclusion, then we need to step outside of our ecosystems that often only serve the majority with access and privilege while the larger systemic issues remain unsolved for many more.

As for identity, this is a highly debated topic in crypto — programmable and identifiable currency.

This can be deeply scary when we think about the potential negative use cases of programmable money, especially when combined with open finance. Imagine buying a packet of cigarettes and your life insurance premiums increasing, or buying a modification for your car and your car insurance increasing automatically and programmatically?

Or further, being actively excluded from the economy because you committed a crime or dissented against the government in protest — could programmable money be used as a means of population thought control? Yes, it could.

However, similar to the issues around cashless and the prevalent scaremongering, we need to understand the trends and where the industry may go and design in the safeguards against these perversions. For example, we could have better prepared the UK for the decline of cash usage, but instead of designing in inclusion with ideas like trusted local cashless champions to support those with additional needs such as the elderly, or leveraging co-located banking services at supermarkets and post offices, or pop-up banking services in cafes, essentially bringing shared banking services to where their customers are, many pundits, analysts, politicians and industry professionals just argued and scaremongered and now we’re years behind.

There absolute are issues with cashless, don’t get me wrong. If we don’t design inclusion into the system itself and support a crossover between cash and cashless then there are real risks, and as usual, the most burdened and affected are the most vulnerable in our society.

Sweden is a prime example of pulling the gun arguably too early and having to reconsider for inclusion. Yet, we’re still not doing enough. Instead, it’s happening to us by sheer prevalence of market trends.

Analogous, think customer fraud — when the industry is not on the hook, there’s less effort and innovation put into the area. Make them accountable and we’ll have innovation budgets galore for inclusion. Instead, we’re shutting down branches wholesale with no system to replace them and people are being actively excluded from the economy.

KYC

This is something I’m hugely interested in and something that, while you could solve in web2, could have very real benefits of being solved by web3.

“Why do I need to do KYC with every bank I interact with? Why can’t we do KYC in a decentralised way?” — Paul Ridley, Old Street Digital

Shared KYC is starting to make tracks and is super exciting!

ABN Amro, ING and Rabobank sharing datasets in an attempt to “reduce costs, provide compliance departments access to better, more timely KYC data and ease the burden on corporate customers”, while in Estonia, Salv are leading the charge with their AML Bridge pilot which saw “AML and fraud cases being resolved in as little as three minutes, with an average resolution rate of 15 minutes”.

“Salv’s AML Bridge significantly improved the exchange of information between the banks and helped us quickly stop many fraud and money laundering attempts.”

This may all crossover with digital identity, self-sovereign identity, soul-bound tokens, zero knowledge proofs as a potential way to improve or further solve this area.

Imagine every bank in the UK sharing customer data in a blind pool that can only be accessed by a unique zkID generated by the customer, or if there’s a valid need by a participating provider — you could passport your onboarding to any institution, and any worrisome activity can easily be shared across the network.

Yes, there are potential dangers here, too, but again, designing in safeguards and inclusion from the start and having systems for review and improvement are ways to mitigate and ensure safety and inclusion. Nothing is a foregone conclusion but doing nothing.

“Minimum viable centralisation”

Again from @BullishDumpling and I absolutely love it!

General discussion was that, while blockchain zealots (my phrasing) have been screaming about decentralisation being the solution to everything, the fact is that there will always be some level of centralisation, either proactively required, or by the providence of societal trends toward centralisation.

For the former, do we want our financial records and healthcare on public chains? Probably not. Or maybe there’s a private permissioned chain with a public trustless layer on top for interoperability, for example finance and insurance and healthcare all sit separately but cooperate interoperably via zkProofs for data sharing.

For the latter, @BullishDumpling had a great allegory — influencers. “People still lean towards centralisation” (whether knowingly or not). This is really important — think politics, lobbying and influencer culture, do we really think that every single person makes up their own fully informed and opinion-formed mind when voting?

Think how blockchains operate, are they truly decentralised or are they run and maintained by well-funded oligopolies (1)(2)?

Lastly, a great quote from Paul Ridly again — where decentralisation can be important is in creating a “distribution of accountability instead of a centralisation of power”.

I agree with this to an extent, but bringing together the above points of societal and technological centralisation trends, how decentralised and autonomous are DAOs in practice? While DAOs are new and primarily consist of active early adopters it’s perhaps less of an issue, but if we hit critical mass and the late majority it has the potential to start looking like politics and herd voting for the loudest voice again.

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Anyway, that’s all for now! Come find me on Twitter @goforsergei!