Is every DeFi a true possibility for developed economies?

Speaker A: So, good morning, Daniel. I'm really delighted to have you here. A big topic to tackle. Um, we're calling this episode is Every Defiratory Possibility for Developed Economies. So not a small question for your, your first time on, um, the podcast, but welcome. We're in season three now of the Future Banking podcast, and this is episode eight for 2023. So welcome to Daniel Farg, CEO of, um, ILV Lab.

Speaker B: Thanks very much. Great to be here. Thank you.

Speaker A: No problem. And before, as I said, it's sort of a big topic, but before we go into that in too much detail, could you tell us a little bit about, um, IOV Labs?

Speaker B: Yeah, sure. So IOV Labs, uh, are the creators of the Rootstock blockchain, the world's first bitcoin sidechain. And we are builders of the riff economy, which is a layer of tokens, example, protocols and products which are all built on top of Rootstock and there to help businesses, uh, build on the blockchain. Um, the company is around 140 people. Um, it was founded by a group of five, uh, Argentinian entrepreneurs and developers, um, somewhere between 2013 and 2015. Yeah. Today we're 140 people around the world and we kind of have people in our company from sort of cryptographers and uh, PhDs all the way through to kind of growth hackers and product managers and marketers. Um, we're quite similar to other,

Speaker A: um,

Speaker B: foundations or trusts that exist to support the growth of, uh, an open source ecosystem like Rootstock. Um, and that's what we do. We're here to, uh, grow out the Rootstock, uh, ecosystem and build out the RIF economy.

Speaker A: Thank you. I think as I have got to know the business a little bit, um, in recent months, it's the sort of the ethos I found m quite interesting and exciting. And, uh, could you tell us a little bit more about the values of IOV Labs and what it stands for?

Speaker B: Yeah. So, um, the first blockchain was the bitcoin blockchain. And it was designed to, you know, with a very strongly ideological purpose, to free money from state control. So it was always this, um, it was a piece of technology with a vision and a purpose. And I think that for a long time, many of the people at IOV Labs have felt that a lot of what has become, you know, the crypto blockchain sector has diverged a little bit from that. Um, but at IVLabs, we're very defiantly, uh, committed to basically making the world a freer and fairer place. And we translate that through the application of our technology to help um, predominantly people in emerging markets who are uh, underbanked and struggling to get access to traditional finance services. And um, we apply that technology to that problem and uh, we don't go chasing after um, the next type. Um, we don't um, obsessively focus on you know, short term, um, total value locked or anything like that. You know, we have um, we have this big bold long term mission and we're, and we're pretty committed to that because you know, in my view what's the point in these remarkable emerging technologies if they are, you know, extract abstracted away from society and not. Are not brought to bear for the, for the highest impact.

Speaker A: Yeah. And I guess to achieve that and to stay true to those goals and objectives, as you say, you have to have that mentality of a rising tide raises all ships.

Speaker B: Right.

Speaker A: And I saw that you, you know, you recently announced a grant fund of 2.5 million. I think it was earlier this year you announced a grant fund for developers building on the rootstock. Is that that right?

Speaker B: Yeah, exactly. So um, we, we have, we have $2.5 million that we set aside for over 100 different projects to get developers and teams to move from different networks to try and explore and experiment things that they might build stock. So we've had a couple of waves of this now. I think we have about 15 grantees uh, being funded in the next couple of weeks and then we have another wave coming uh, later in September. Um, and you know it's kind of a, ah, it's kind of a measure of the potential and the scale of blockchain technology. When you start to see all of the different projects that apply for this, you know, everything from um, you know, remittance solutions, um, but super simple that allows two people to send money overseas in a really easy way all the way through to uh, NFT wallets, um, uh, quite complex, um, mechanisms to uh, pay for mortgages using crypto and on chain technology, um, dollar cost averaging to invest into blockchain into um, into crypto assets, um, NFT minting collections, loads of stuff. We've seen through these, through this grant program. And I think that this, you know, we kind of at IOV Labs we kind of come at the growth of the rootstock blockchain from two very different angles. On the one hand there's some stuff that we very actively want to build out on the network around some everyday defi use cases which I'm sure we'll get into in Some detail. And that's where we're, you know, we're putting a lot of time and a lot of effort, uh, behind actually working with businesses to build out some of these use cases. And that's kind of very much like, that's push, it's top down. It's a number of, couple of, it's a couple of opportunities that we're trying to exploit. But then we have this sort of bottom up stuff as well. And that's where the grants and the developer engagement stuff comes in where we basically say, you know, we don't really have an opinion on what you want to build in the network. It's an open network, we don't control it, it's decentralized, we're not gatekeepers. You don't need anyone's permission, you don't need to sign a contract, you just go um. And it's within that um, area that the grants and the developer engagement stuff becomes really interesting because you are uh, you don't really know, um, you can't really kind of almost guess the amazing ideas that some of these teams have. And so the grants mechanism is a really interesting way to kind of see, to see what people's ideas are for this technology and to see them go wild. So yeah, it's been really fun the last couple of. We launched it I think in, in May, June. And um, yeah, like I said, first wave's done, second wave's coming soon. Um, yeah, it's a remarkable process and I've been really lucky to be judging some of these great teams as well.

Speaker A: I'm sure we'll see the results of it as well, hopefully in the market soon. I think it's really interesting that you're in that role as an organization where you've got to create this fertile playground almost for the technologies to own themselves and to run themselves in the community to take advantage of that. Ah, at the same time you want to input to that and give that and make that happen. But by as you say, keeping the same ethos of this is an open space. Um, and we want, you know, this is not something we're in, we're in control of. So I think that uh, things like the grant programs are really interesting because they bring up those real world, as you mentioned, something really small sometimes a small real world application that are going to do wonders I think for the image of defi, um, and blockchain technology in the, in everyday life. I think it's a really exciting project as well. So I think um, it'd Be good to hear about you. I think that's a little bit about IOV Labs and what you're doing with Rootstock and Riff. What about your journey? How did you come CEO of a company like IOV Labs?

Speaker B: Yeah, so I have, I've worked at the intersection of emerging markets and emerging technology for um, about 17, 18 years now. Um, starting initially in the kind of defense technology space, um, working remote and then in person in um, Afghanistan, then later Iraq, um, and then spending a bit of time, um, working with telco brands in the Middle east and in Pakistan to understand how they can engage with their audiences a bit more. Um, and after that moving back to the uk uh, to build out my own business, um, which was Buffalo Grid. And Buffalo Grid was a company providing power and Internet access to rural communities, uh, primarily in India, although now also in Bangladesh and Sub Saharan Africa as well. And one of the things we kept experiencing. So I spent many, many, many, many weeks on the ground in, in rural India, um, doing frontline product research, trying to understand how people are interacting with our product, what kind of problems that we're facing. And we kept seeing this kind of, this trilemma, which is that um, phones and mobile devices were struggling to get power. If you wanted them to access power, then they also needed some means to pay for it digitally as well. So then you needed a, ah, payment mechanism, you needed Internet, um, if you wanted to give them Internet access, well there needs to be a mechanism to power it and they also needed to be some mechanism to pay for it as well. And if you wanted to enable payment, um, mobile payment, you also needed some means to power the phone and also to connect. So we kept seeing these kind of three problems while we were focused on power and Internet. So building, building these solar powered uh, battery charging devices and remote Internet connectivity systems, we um, we actually spent a hell of a lot of time solving the payment problem. Um, and I think that for me was a, a big window into the problem of being underbanked. I think there's a lot of, we spent, we actually spent a bit of time looking at the unbanked communities. Um, but underbanked is kind of in some ways more. It's a more challenging problem because it, it's not necessarily saying you don't have a bank account or you, or you can't get access to digital payments. It's just that the full suite of products and services aren't available to you. Maybe the bank in your local village is the only one you can access and the bank manager doesn't like you, so, you know, won't offer you a loan or, um, you know, you, for whatever reason, um, maybe you don't have a passport or you don't have a means of ID or perhaps you can't write. So even though you can set up an account, um, you can't sign or read or sign the documentation that will allow you to get a debit card, for example. Right. And this is what people talk about when it's underbanked. It's like you don't have the full force of the global financial system at your fingertips. And so this was where I first started to come into contact with this problem of being underbanked and kind of spent a lot of time trying to fix it in India. Um, now in parallel, because of my work in uh, emerging tech, um, I've, you know, I was tracking, I was tracking bitcoin back in 2012. Um, friend of mine, a, uh, couple of months later in 2013, encouraged me to look a little bit deeper. And um, it was probably so I was always, I was watching it, I was buying tokens, I was tracking some of the entrepreneurs and the businesses in the space and, and, and seeing how it was emerging. At that point it was pretty much only a couple of tokens, some market data and a few wallets and uh, you know, a bunch of kind of like really sketchy exchanges and people buying illicit products on, on um, on, on the Silk Road.

Speaker A: Yeah.

Speaker B: But um, over the last, I think probably since sort of the launch of, and actually was kind of had a few uh, free friends of mine who were building out some of the first projects on ethereum back in 2015, I believe. Um, but I think, yeah, the, the, the, the, the combination, you know, the, the, the, the advent of Ethereum and then watching this ecosystem of startups and technology being built off the back of that in the kind of, in the late 2010s, I got more and more and more interested. And then, um, after you know, wrapping up with Buffalo grid in 2019, um, shortly after that met with Diego, one of the founders of Ivy Labs. And you know, and he basically said, look, we've got this incredible technology, we've built this team, um, you know, we've raised some capital and we really want to try and, try and take this to market and do it properly. And I couldn't resist. I mean it was, it was a, it was a combination of uh, a remarkable technology that hadn't, I'd watched and watch grow and was very excited by, but hadn't been Hands on with before as an entrepreneur with also this incredible mission. Because again at that point and still now if you look at the purpose of um, most of the defi and crypto projects that are being built out, the purpose is quite simple like get as many users as possible, make a load of money for the founders. Um, some of the better ones are all about making money for the community and the token holders and the stakers as well, which is great but actually there aren't that many way you can directly connect the impact of the technology to something that's trying to in some way, in some small way change the world. Um, and yeah, IOV Labs was, was, was very different, very uh, different, very different thing from that. So the challenge for us has always been the same though. How do you connect this like lofty long term mission, vision and purpose um, with the technology and you know, implement that through, you know, for a company of 140 people actually trying to, trying to make it work and, and try and kind of combine, you know, combine that mission, that vision and purpose with the tech. And I think um, one of the things I've seen from Buffalo Grid was also a social impact company. One of the, one of the challenges of social impact is that you often end up, you know, you often end up making trade offs between the commercial interests of the business and the social impact purpose of the business. And it's this kind of push and pull and there's lots of discussion around like circular businesses and the circular economy and you know that's all valid but you know, at the coal face of trying to build on these businesses for many years now, um, it takes real perseverance and bravery not to take the easy path and instead commit to that long term purpose, raise the capital you need for it and not compromise on your values as you're, as you're gaining uh, more and more pressure to grow. Um, so yeah, um, that's kind of, that was the journey that brought me here. I've always um, yeah I've always been a, I've always been a tech nerd. Um, but I've also loved, always loved the kind of complexity and the richness of the amazing countries and cultures and economies that have grown up in the world. And I, yeah the combination of the two is. Yeah, it's what gets me out of bed in the morning. I love it.

Speaker A: Well, it sounds like you're a perfect fit for IOV Labs. As you said, that sort of the tech, the interest in the emerging technologies but then the passion for something that's going to impact economies that need that support, as you say, access to the global, our global financial system. So how would you characterize the global landscape then when it comes to the defi? Because as ah, you mentioned, there's some glaring use cases for it, there's some extremely impactful world changing deployments of it, uh, in pockets of the world. But it's obviously not the same across the whole international landscape. Different needs, different applications, different viewpoints. What would you, how would you characterize in your words?

Speaker B: Yeah, so um, about 18 months ago we started doing quite a lot of thinking about this and we, we see the defi landscape as I'm oversimplifying here, but split into two kind of broad groups, what we call advanced defi and everyday defi. Advanced defi is a lot of the stuff that um, if you, you know, if you spend a lot of time on discord channels and um, and, and following crypto Twitter, you'll, you'll, you'll be aware of, right? It's stuff, it's like super advanced yield farming strategies and you know, uh, token drops which if staked can earn you unbelievable yield and um, leverage margin trading using you know, ex, you know, triple wrapped tokens and all of this kind of stuff. Awesome. We have loads of people in Ivy Labs that love that stuff. Um, a lot of people in the sector ah, are into it, but it is, you know, in essence these are uh, this is technology built by and built for typically um, white, male, Western, uh, financially literate, technologically savvy users who are looking for an outsized return during a kind of unique period in economic history. Um, this is niche stuff and purely from a usability perspective it's also really complicated to interface with. We're talking hundreds and hundreds of steps and uh, familiarity with lots of different networks and blockchains and the latest technology and understanding of some quite advanced financial concepts as well. So typically you find people that are interfacing with that tech that, that market tends to, I mean again I'm simplifying here, but it tends to. People, tends to be people from the financial markets world who are excited by crypto and are doing stuff that they otherwise couldn't do in the traditional financial world in crypto or it's people who are, you know, young love the game of it, love the kind of um, the um, the, the fun and the speculation and are kind of learning about finance and through crypto and decentralized tech. Again, all good. But this is a small market, right? I think um, I'm going To struggle to give you the stats off the top of my head. But I think that there's a piece of analytics done um, recently to determine the number of wallets across most of the main networks that are connected to defi protocols. I think it's about 12 million. So um, of all of the, you know, where are we now in our kind of defi journey, you could probably say 2016, 2017 is when it really started. So over the last six or seven years the, the number of advanced defi wallet addresses and some of these could be doing enormous volume is kind of around 12 million. It's quite niche. Um, and that's okay. Uh, the way that I think about this is you need a lot of this trading, this speculation and these different financial mechanisms as the kind of again for want of a better phrase, like the markets and almost the back office of a new economy.

Speaker A: I like that phrase. Actually. I don't know if you need a different, a better phrase for someone like me who's not as immersed as you but has some knowledge.

Speaker B: Yeah. So that's kind of advanced defi. And like when people talk about DeFi, 99% of what they refer to is that um, high risk, high reward, lots of fun, highly speculative, you know, very much like New York finance guys going for it. Um, but that doesn't really. If we think about the original, you know, the original purpose of Bitcoin and the stated purpose of many of the foundations that are building out these networks, um, you know, this is about building a freer and fairer world. Right. Um, and, and, and building that free and fair world on top of an open decentralized economy. Um, so the underbanked aren't really impacted by this world at all. It's kind of entirely separate from them. And this is where we think there's a kind of, there's a different part, there's a different element of the defi sector which is starting to emerge and we call this everyday defi. Um, and this has been enabled by a number of different technology trends that have coalesced at the same time to bring about basically the ability to, to it. It's kind of these different technology trends have sort of brought about this, this moment where you can now um, ah, facilitate different use cases on the network that you couldn't do before. So these generally, I'm simplifying here, but these generally, um, easy to use defi, uh, defined crypto wallets, um, US dollar in particular US dollar stable coins, um, exchange and on ramp and off ramp coverage in pretty Much every market in the world and the simplification of some of the lending and borrowing protocols um, that are part of the advanced defi world. Um, so what these different technologies enable you to do is essentially enable companies to build out what are traditional, what we would recognize as traditional neobanks in the developed world, things like Monzo or Revolut or um, you know N26 but instead of it being built out on you know, traditional banking rails, it's being built out on crypto rails because in many of the markets where underbanked communities are quite large part of the economy they tend to be um, they tend to be markets where there's significant regulatory capture by large formerly state owned national banking corporations. Um, there's political influence, uh, there's a bit of a revolving door between being uh, banking finance and the high levels of politics and M. This is kind of meant that the regulatory opening up which has happened in many western markets that's allowed these kind of like really amazing great UI, um, rich UX experience banks to emerge again. With the canonical example for me, like Monzo, I'm a Monzo user, um, that can't necessarily, those businesses can't be built in many of these markets because the regulators just won't allow them. And so it's within this kind of um, this environment that you're starting to see this interesting leapfrogging effect where these services are starting to exist but they're happening on crypto rails which in many markets remains um, unregulated. Um when you add into that um, the fact that we've got runaway inflation happening in many countries at the moment. So um, you know with Argentina where we, where we have a lot of users on rootstock, you know 119% Turkey running at 58%, uh Nigeria 24%, um, you've got um, essentially currencies rapidly devaluing and within that environment you know the individual users they want to get access to US dollars as quickly as possible. Now in the extreme cases um, there are capital controls in place that are preventing people to get access to them. There are official exchange rates where you don't get anything like the real value for your pesos or your naira for the US dollar and US dollar stablecoins become a really interesting mechanism here because you can essentially on ramp with your local currency and buy us uh dollar peg stablecoins which are just to give you a very brief example, these are crypto tokens, um, like uh, any other cryptocurrency flowing around the network. But they are pegged one to one with the US dollar. And there are a bunch of different mechanisms. You can have algorithmic stable coins, but some of the bigger uh, and more established stable coins like USDC and USDT set up by circle and tether. Uh, these are one to one backed by typically, I mean it's not always backed by you know, essentially dollars in a, in a safe somewhere, but a range of different instruments which mean that the treasury of those protocols can be liquidated to generate um, to generate a refund at any point.

Speaker A: What's the impact of that?

Speaker B: Well, it means that um, you know, to simplify, you give me, um, you give me actual U.S. u.S. Dollars from your U.S. dollar bank account. I give you, let's call them magic U.S. dollars. And those magic U.S. dollars can now um, operate on any blockchain network. They can be lended out within a defi pool. You um, can um, ah, stake them and receive a reward on them in some cases which will uh, track um, U.S. treasuries, uh, an instrument which is, can be very difficult to access if you don't live in the US Um and so it means that you get um, you basically get like really, you get access to really good financial products, um, and US Dollars um, without being in the US or necessarily being able to access it through your kind of normal high street bank. Um, so what this means for people is um, they can protect their savings from runaway inflation, um, by accessing US Dollars. They can get loans and they can lend out money to receive return on um, from people in a peer to peer way anywhere in the world. And then one of the most interesting use cases within everyday defi is international payments or international remittance. Where a large majority of um, some markets, I think, uh, Bangladesh, I think in Bangladesh it's at least 10% of the economy is driven by international remittances, I. E People living in another country sending money overseas back to their family on a regular basis. Now the fees that many of the companies that facilitate these payments take are absolutely unbelievable, like as high as 25%. Um, so if you can facilitate this through a crypto network, I mean the fees can be below 1%. Um, and they happen instantly. You don't have to wait three to five days.

Speaker A: Why is that? Sorry? Why is it able to be done at such a corporate price?

Speaker B: Well it kind of depends on who you speak, it depends on who you speak to as to whether you think this is kind of bad actors or not. But um, basically legacy financial systems, uh, clearing houses, um, um Some of these stores not being open on weekends, settlement problems over weekends, um, international banking fees, foreign, um, exchange rates, um, there's a whole range of different markets and mechanisms that exist between one person taking physical US dollars in the US and another person taking that out in physical us in physical um, Mexican pesos, um, from a store in Mexico. And there's a whole bunch of systems that exist in the middle and everybody takes their cut. Um, but in a peer to peer decentralized architecture for the same flow, it's pretty straightforward. You buy some crypto from an address, you transfer those tokens from one address to another address, you sell that crypto for your local dollars or your local currency. Um, so this is massive and we're super excited about this. And then there's a kind of long tail of everyday defi use cases, right, which include getting paid your salary in cryptocurrencies, um, number of reasons why, um, especially in a remote kind um, of borderless, um, world of workers, this becomes really interesting. Uh, paying your utility bills in crypto and then what you start to see is as more and more assets within this everyday defi world stay in cryptocurrencies, people don't want to off ramp them in order to buy a newspaper, buy coffee or pay a bill. They want to keep them in, they want to keep them in crypto assets. So they don't want to have to sell their USDC for a different currency, off ramp it, move it into their bank account and then pay their bill. They just want to pay it straight from their wallet. So uh, you know, over time it will probably end up moving in that direction. So but that, yeah, like I said, there's this long tail of everyday defi use cases which we're starting to see emerge as well. And definitely international salary payments is one of them.

Speaker A: I guess that that's something as couldn't get more every day than salary payments. And I guess that that's going to be a significant shift when, because that was even a significant shift for the likes of Monzo, the likes of Revolut, when people start to get their income paid into those bank accounts.

Speaker B: Right. Instead of just seeing it as a payment wallet.

Speaker A: Yes, I think that's something that says that when your primary income uh, then becomes your primary source of funding and your primary with the way you then spend, uh, and you know, use your financial wealth or to live your life, that I think is a huge, going to be a huge shift as it was for the neo banks. So I guess I know that you don't come from the traditional finance world. What impact do you think we're seeing these strides forward um, in the defi space have on traditional finance? Or perhaps there's two different things. There's how traditional finance and decentralized finance is viewed and then there's the reality of what's getting into the hands of individual users. So what impact is it having on traditional finance in your opinion at the moment?

Speaker B: Yeah, um, it's a really good, really good question. So again the inner workings of the global financial markets are a little bit um, beyond my uh, beyond my uh, understanding. But what I do know we keep um, what I do know is that while I think historically transacting on layer 1 networks was considered as too expensive and too slow for most of the market mechanisms that underpin the global financial system. The advent of um, again this is a little bit technical but the advent of zero knowledge roll ups um, which are, I'm m going to simplify here but which are kind of uh, sort of like payment mechanisms and if you almost if you will like smart contract systems that sit above the blockchain and then cryptographically anchor onto the blockchain. Again I'm massively simplifying here. Apologies for anyone who thinks that is a um, uh heresy to refer to a zero knowledge roll up as that. But it's basically a cryptographic mechanism to do huge volumes of transactions um, and then only anchor onto the Blockchain1 cryptographic imprint. So what this means is normally you can basically do the, you can do tens of thousands, if not hundreds of thousands of transactions with at the cost of one. So what that means is that we have in the last couple of years seen that this technology is going to essentially be able to deliver transaction speed and volume as fast, if not faster than the mechanisms that the global financial systems built on today, which is all technology, right? This is all kind of a global um, set of interlocking systems. Um, why this matters is because I think that we're at the early stages of in my view a lot of the global financial system starting to use blockchain technology um, to build out some of its underpinning systems. And I think that that's going to be an really interesting thing to watch over the coming years. You then also have a number of um, there's a number of kind of like major moves in I guess what you call traditional finance to connect um, mass uh market financial products into whether it's crypto assets or blockchain technology. And the big one that everyone's Very excited about is the kind of the spot etf, the Bitcoin spot etf. Why this matters um, is because it will allow um, people to essentially buy Bitcoin or in reality you're tracking the price of Bitcoin through your pension fund through your like vanilla um, uh, you know, um, investment port, uh, you know your kind of um, Hargreaves and Lansdowne, um, uh Schwab account in the US or the uk um, get the tax uh limitation that you would on for investing through a self invested pension plan all without having to hold the assets yourself in custody, have wallets, have keys, worry about any of that kind of business. So you can essentially again I'm simplifying here but the experience for the pension holder is that you're basically getting exposure to the ups and the downs of Bitcoin without actually having to manage any of the complexity of holding it. And that could be quite a, that could be a bit of a defining moment for, for uh, for Bitcoin and for cryptocurrencies in general. Um, and then of course you can kind of project out even further right which is that the, a lot of the open decentralized trading mechanisms that blockchains enable and defi enables is in some ways way more advanced than how many of the financial markets operate today. So you might start to see more and more assets coming on chain because it's just a better place to be trading and operating with them.

Speaker A: Um, is there any risks to that for um, I guess the defi mission? I'm asking because as somebody that's operated largely in the fintech space, I guess has talked a lot over the last 15 years around and disrupting traditional banks, um, competing uh, with traditional banks, um, completely um, disrupting and altering the global financial system. And in reality what we're talking about now is more coopetition. There's a lot of fintechs getting brought in, there's sort of intrapreneurs for the banks. There's a lot of consolidation and ultimately I think what was set out to achieve is being achieved. But the pure size and um, reach and um, channel networks of the traditional financial services institutions is sort of slowly bringing in the fintech world. So is there a happy medium? And you of course I'm only asking for your opinion. So speak, speak freely. Is there a happy medium? Is there a way, you know, for that intersection to happen but for that intersection to be created or will both sides need to compromise?

Speaker B: Yeah, super interesting. So within, within. So a couple of key concepts here so the first one is the difference between centralized and decentralized actors. Um, the second one is that um, what blockchain technology enables is the ability to store and transfer value um, in a trustless or trust minimized, peer to peer decentralized fashion. Why that matters is because as finance is becoming more, I'm simplifying here but becoming more about basically having great UI UX and having great underpinning technology in order to, you know, you're gonna, you're gonna win and lose based on the quality of your, and the 10 of the technology product that you've bought, have you built. You are also seeing this. Um, so, so that's kind of like, so if that trend is going to continue then I suspect there's quite a strong argument to be made that if decentralized technology is starting to uh, erode some of the control of the centralized actors of the Internet, which is starting to happen, um, that might also start to erode some of the uh, product value of some of the fintechs, some of these new FinTechs and Web2neobanks as well. My point here is that you might see what your, what you've just described of sort of Web two um neo banks being brought into kind of consult and help um traditional uh, fintechs innovate. You might in turn start to see a similar process but with Web3 actors, um, trying to help Web2 players to see this new um, technology and this new financial system as something that they should be part of as well. And we've actually been, we have a whole thing around this. So I mentioned before around how we have these two different strategies to grow the rootstock ecosystem. One is um, one is kind of, you know we basically provide capital and um, documentation and training for developers and entrepreneurs to build whatever they like on this in this open network. But another one is where we have quite a strong view on these different everyday defi use cases. And um, you know, which we kind of, we, which we kind of summarize into like four into four kind of high level uh, terms which is pay, save, borrow and send. Um, so we've actually put a team of some of our best developers and product managers into this group that we call co creation. Um, so you know, these guys are you know really at the frontier of blockchain technology, steeped in some of the challenges that many users in emerging markets face and are starting to solve with crypto technology and, and paired them with some of the best um, solidity and blockchain developers that we have in Our business and what we've started doing over the last six months is talking with um, in what, what in our world would be traditional, um, uh fintechs, uh, but um, you know often referred to as Web2, Web 2.5 Neo Banks. These are ah, um so we're talking to some of the biggest remittance partners in Latin America. We're talking to uh, some of the uh, new wave of crypto on ramps and off ramps that are giving people access to these US dollar stablecoins. And we're talking to banks right across Latin America and starting to talk to banks in Sub Saharan Africa as well around how they could bring some of the, this blockchain technology into their business and into their products and give it and put it in front of their users in some cases uh, to help them with basically to help them improve the quality of their offering. And what's been super interesting is we found there's a couple of use cases that we keep finding um, that um, banks are struggling to, banks and financial institutions are struggling to deliver for their users and yet they don't have the knowledge or experience within their teams in order to build those out. And those are typically things like um, interday intercompany banking settlement, um, uh, getting access to um, uh local currency or US dollar stablecoins or access to something that's pegged to a local currency um, without um, in some way launching a token themselves. Um and there's a bunch of other you know, broadening the market of lending and borrowing solutions for them and there's a bunch of others which we've started, which we started hearing about. Um and so we've actually, we've actually this co creation team, um, has been talking to companies right across Latin America and we're super excited about some of those use cases. Um, and we're kind of really interested in talking to more companies to be honest because what we're trying to do is we're trying to bridge this incredible platform we've built and all of the Rift technology that we're building out on top of it like the wallet to make it really easy for banks to launch their own crypto products while also making sure we're doing it in a market where we think could have the largest impact on again what we would call everyday users but typically uh, underbanked um, populations in Latin America and Sub Saharan Africa. Um so yeah this is this thing that we call co creation and um, we're putting a huge amount of time and resources behind at the moment and we're really excited about where it's leading.

Speaker A: Um, and you've just given me so much information that I've got about 10 questions lined up. But I'll try and stick um, to the, I guess the most relevant. I mean first of all, off the back of what you've just spoken about in terms of your co creation, it'd be interesting to hear what's specifically relating to IOV Labs and you and your leadership team is the appetite for progress in the emerging markets in the developing world, as strong as it is to help alter the more traditional developed financial world for the better as well. I know the use case and the. Maybe the application is easier. Not necessarily easier, but more obvious. But then there's also. Ultimately we want everybody to be on the same page.

Speaker B: Yeah.

Speaker A: Even if it takes 100 years. Yeah.

Speaker B: The way I think about this is about like uh, there's no certainty, uh, or determinism around how uh, technology and products become the norm. Right. So um, there are, you know, there are, I mean, okay, this is a terrible example I just come up with but like there's no reason why, you know, the advent of the iPhone was not predestined. Right. It was a series of people and choices and uh, different technologies happening at the same time and you know, a market opportunity that was then captured. Right. And now it's just a given that that's how phones are and were always going to be. Um, I think that there isn't really much need today for widespread crypto adoption in for example the uk, France or Spain within most parts of the population because they have access to most of the functionality you'd need through traditional finance rails, albeit wrapped around with this kind of really, really nice kind of Web2 interface. But that's not the case again in emerging markets. So um, we, you know, the, the rate of crypto adoption in Argentina is wild. I think it's like 15, 16% of the population holds, holds cryptocurrencies and they're not buying them as, as a speculative asset. Right. They're not buying, I don't know, uh, they're not buying uh, dot tokens or matic. Expecting those networks to expand and, and see the kind of up. What they're doing is they're buying stable coins because they uh, want to get uh, outside of the kind of inflation trap that they find themselves in. Um, and you know, without going down a big rabbit hole around, you know, around this. The, the reason behind that is because it is the best solution to the problem that they face today. The I do not face that problem when I'm in the uk So a lot of this is market and context specific. Um, so while I think crypto adoption in developed markets today is going to be focused on it as a speculative asset buying Bitcoin for the long term return, buying uh, tokens in lay one protocols, kind of expecting them to appreciate in value and for that value to be unlocked at some later stage. That's just not the case in emerging markets. Uh, the majority of the adoption is not speculative assets stablecoins. The majority of the usage is things like people paying bills, people saving money, people needing a uh, mechanism to store value, uh, that isn't in their bank and, and gives them kind of a rich experience. Um, so I think you're seeing uh, you're seeing a different set of user problems in different markets being solved in different ways, uh, where that will end up. Um, I think certainly in developed markets, I do think that probably within the next three to five years some, some amount of, most of the financial mechanisms that we rely on to engage in everyday transactions will be happening on crypto Rails, you just won't see it and you just won't know it. It will just be happening in the background. Whereas in emerging markets you will be aware that you're using it because it will be kind of, it will be um, it'll be tokens, it'll be protocols and it'll be um, neobanks that have been built as crypto neobanks from the ground up. They're not, they're not kind of moving into that as web two to web three. Like, like we're seeing people like revolut doing.

Speaker A: Yeah. And at the, at the risk, I guess we, we're already um, almost an hour into this conversation, which is a good thing. I just had a question around how important sort of language and culture is in your opinion. Because it feels like when traditional finance, decentralized finance starts to find some common ground and there's overlap and there's mutual use cases that sometimes um, culture is the issue. And I think it's interesting that you mentioned that uh, uh, that you were using oversimplified language to describe something that. By people who are very well informed in that area.

Speaker B: Yeah, some of our developers hang me for the way I've described that.

Speaker A: But there is that entry point of thinking when it comes to decentralized finance. And that's not just. And that's speaking of somebody that does work in that space and also has a base level, you know, more than a Base level of understanding. Feel nervous almost to have the conversation.

Speaker B: Totally. I mean, one of the things I'd say is that I think that for a long time, people working in crypto and blockchain spent a lot of time, quote, unquote, educating people about how this technology worked. Right? So. And that's a great thing, right? Pretty much within the crypto, uh, sector there's this amazing culture of teaching. You know, everybody's new to this technology at some point. Everyone's been onboarded at some point over the last 10 years. And that's fine for early adopters and innovators, but as soon as you move into the mass market, that's the point at which the products need to switch and they need to basically ape the products that came before them. They need to be slightly different versions of what you already recognize. And that is, you know, that includes the language, the terminology you use. You know, you're not, uh, staking your tokens, you are saving.

Speaker A: Right.

Speaker B: There's differences here and I think that's really important. Now you don't want to do that at the expense of obfuscating what's actually happening in the background, because that's a risk as well. And then I also say, just to caveat this, at some point we were all new to the Internet, right? And we all had to learn the rules of the road. We, um, all had to learn, like, you know, if you get an email from a prince in a foreign country offering you, you know, to send you a million dollars, if you just send them a couple of thousand into their bank account, probably don't do that, right? That's probably not going to work out for you. Although if it does, congratulations. Um, And I think Web3 has its own versions. Web3 and crypto has its own versions of those problems where there are some very basic concepts that it's kind of important for everyone to know, but I think they're nowhere near. I think for the majority of these, uh, crypto neobank use cases, we're talking about providing you're within, uh, you're within a kind of, uh, a safe user experience. Most of that stuff doesn't matter. You don't really need to know the risks with, uh, certain speculative assets if all you're really doing is buying US Dollars as a stable coin and sending it to, uh, a different address. But there are some things you do need to know, like basic security, like the difference between self custody and um, you know, custodial solutions. There are a couple of like, basic things, but there really is Nowhere near as much as I think the majority of the crypto sector would like people to know. The everyday defi use cases are using this incredible technology for things which are relatively simple and straightforward compared to what's going on in advanced Defi. And therefore, while there is some language and education, um, that we need to take users through, it's not as much as you might think. And also of course there's a, you know, kind of following point here which is that like, unfortunately there are a lot of bad actors, there are a lot of scams. You know, this technology is often used for, for reasons, for nefarious reasons. And I think guardrails are really important there as well, like not introducing super high risk, um, uh, ah, you know, uh, features into some of these everyday defi apps that could, you know, lead to, you know, consequential problems for people, um, and their finances. But yeah, so this matters too, you know.

Speaker A: Yeah, but I mean, as you say, I remember I was um, involved. I was working as a payment, a product, product manager in a payments company at the time of the London Olympics and we were trying to roll out contactless payments to small independent merchants, newsstands, um, everything. And I was in a big campaign with Visa and that seemed unachievable in 2010, 2011. So it is. There's an element of it that's not, that is normal, shall we say, the introduction of new technologies. And of course some of the, the issues that cause people concern are the same things that cause them concern. Pain, online pain with their mobiles. So hopefully 100.

Speaker B: You know, the online payment example is a really good one. Right. 10, um, maybe, maybe sort of 15 years ago, the anxiety around the majority of people handing over their credit card in some with some web interface like, you know, whereas now we're kind of at the opposite end where it's like the risk of carrying cash.

Speaker A: Right.

Speaker B: Um, so yeah, I mean like, and we all went on that journey and I think there's a, for the everyday defi users, there's a journey that they're going to go on as well to get comfortable with some of these interfaces. And that takes time, time in education and like, you know, good intuitive interfaces.

Speaker A: So if it's not, it's a mean question almost to say, you know, everything we've just spoken about there in about 50 minutes. In the short term, as an individual, as a leader in this space, what would you like to see if, if there was small incremental or one big change you'd like to see in the next 12 months. What would that, what would that be?

Speaker B: Yeah, that's a good question.

Speaker A: Um,

Speaker B: Yeah, I think, you know, this is a, this is a new sector and a lot of, A lot of the technology that underpins, uh, uh, DEFI and the crypto space and blockchain technology and many things that are being built on it is hap, is being developed very quickly. Lots of new complex concepts. The implications of this technology is not widely known. And I think within this you've got hundreds, if not thousands of businesses, um, with, uh, short investment runways, trying to find product market fit quickly. Lots of, really some of the smartest people in tech are working in crypto and yet they are constantly bumping up against, uh, these regulatory headwinds. Um, and I think that, um, I've never worked in, I've never worked in a sector, uh, where it is so unclear what you can and cannot do as a business. And you have to take so much advice before you act. That kills innovation. Um, and it, I think it's a big. I, you know, I think it, I think it would be bad for the world if we didn't get a lot more regulatory clarity. I think some of the stuff that's happened in the UK and the EU is really good here. But I think, um, the lack of regulatory clarity in the US and the kind of supranational reach that US regulators seem to have, um, is not good for the world. And I think we need some clarity. We need it quick. Um, tell us what you can do, tell us what you can't do, tell us what the guardrails are and then let people, let people go ahead. But there's a balance to strike here, right, which is that too much control and restriction will prevent innovation and prevents all these great things from being built. Not enough, uh, puts consumers and businesses at risk. So, you know, there's a balance to strike here. I'm not a specialist in this, but as a builder and as talking to many entrepreneurs building out some of these companies, um, people just want clarity so they can get on with. So they can get on with it, you know, So I think that would be something that. I think, I think so, not speaking on, um, behalf of the sector, but like, I think this is something that everyone's saying at the moment, like, we just need clarity so we can get on with our work.

Speaker A: Yeah.