Nicholas Fett on tokenized derivatives at Daxia

0:22excited to talk about daxia today and there's so much to know and you know this really is the future of Finance so if you would give us an overview of your guys' project and how you guys are redesigning Financial derivatives I'd appreciate that intro sure so I actually to just kind of talk quick about how I got into it I was actually working at the cftc so

0:45was a federal regulator for derivatives and you sort of saw a lot of people trying to put derivatives so basically Financial contracts on the blockchain you know whether it's Goldman talking about doing it or some other companies but it was all just you know Reinventing this the same middleman model and I thought you know there's definitely a better way to do that so

1:06why don't I just start doing it myself but the basic product that we create are long and short tokens so instead of the traditional derivatives contract where you have you know Ashton agrees to pay Nick if the price goes up and I agree to pay you if the price goes down what we do is you lock money into a smart contract on top of ethereum and that smart contract agrees to pay the holder

1:27of a token based upon the change in a reference price so now what this actually enables is you know now you can have long Bitcoin tokens or short Bitcoin tokens on top of ethereum you can have a long S&P 500 token you can have a short S&P 500 token or you can have a you know leveraged Bitcoin token so like a 5x the price of Bitcoin token all of these can now be put on top of

1:52ethereum and can be traded around completely trustly so you don't have any of those middle band problems H you know that lead to all those problems that derivatives seem to cause that's awesome Nick yeah and you know this really does sound like we're opening up a whole new door here to you know decentralized smart contract based derivatives where we can have a trustless system you

2:14know how how far can we go with tokenizing assets on ethereum and know with daxia are you guys able to essentially tokenize you know the entire stock market yeah so you just basically need a reference Oracle and then you can you know have long and short tokens on any different asset and that's really you know if you think about how the traditional Financial system works

2:35so you know you have ETF products but ETFs for in most cases they're backed just by derivatives so you know they you have options contracts or Futures contracts that are backing all of these products and that's what we see happening on top of ethereum so you're going to see these decentralized funds and they're not going to be backed with the actual tokens or you know you

2:55obviously can't put Apple stock onto ethereum but you can put the price of Apple stock onto ethereum and then you can tokenize it and trade it around and that's what we're doing yeah very interesting and you know with oracles and you know tokenizing these centralized stocks it really isn't like a fully decentralized asset so to say because you know oracles have to rely on

3:20centralized price feeds and the stocks are still on the stock market technically but I guess it's just the way that you're trading them is more decentralized is that right yeah so that's with most derivatives contracts on ethereum you sort of rely on this centralized Oracle so you know you would say like okay what's the price of Bitcoin and then how do you get it onto

3:39ethereum that's usually has to be a centralized manner but we actually just released our white paper on Teller which is our Oracle solution and we actually have we use miners to securely Place Oracle data into our contracts so we have a system of miners on top of ethereum and they all compete to enter in theice of Bitcoin or apple or the S&P 500 into our smart contract so there are

4:05actually ways that are currently being developed so that way you can completely decentralize these contracts wow that's very interesting actually I've never heard that before so I'm looking forward to that now is the product is the main you know daxia product already released and in the market or you know what's the timeline like and when did you guys start the development of

4:26that so we started the development of this probably in mid 2017 we released our first beta last February and then we released our main net version in last August and then we're releasing a new version next quarter with the new and upgraded Oracle so you know we're continuing to develop it and just create different pieces for people to trade around as well as

4:52different products you know right now we actually just have the short and long ethereum tokens on a leveraged basis so you can go a 5x ethereum token or you go short on a 5x basis either you know and that's really I'd say like short and long ethereum tokens are sort of what you've seen really over the past six months so if you think about what a stable coin is a stable coin is actually

5:13just a short eth US dollar derivative so you're shorting the eth US dollar price and then you actually have somebody on the other side of that so that's you know now that people have sort of realized the value of okay well now you can tokenize the short of something let's move Beyond just a stable coin let's move into other assets and that's what we're doing yeah very interesting

5:35and you know do you see stable coins still you know being it's a lot of people have talked about that as one of the top trends of 2019 and I haven't seen too many updates regarding stable coins but you know do you see those still having a stable position in the economy on top of all of these derivative contracts that you guys are bringing in or do you think that will

5:57sort of transition into what you guys are doing so I think you can definitely see them having a role so there's really just two flavors of stable coins in the market you know you have the algorithmic stable coins whether it be like a make or die and that's really just sort of a derivatives contract or you have the collateralized ones which are you know with the usdc or

6:19any of these tether for instance where you actually have or supposedly have the dollar backing them up you know they're really two different flavors and right now you're starting to see some of those transfer into other assets so for instance if you've seen wbtc is coming onto ethereum so people are you know locking Bitcoin in and then issuing

6:37tokens so it's a very centralized thing but I think you're going to start seeing the next trend is going to be with you know the algorithmic Bitcoin tokens on top and that'll probably be you know the future because as we all know you know there's there's not really a whole lot of point to putting these centralized tokens on top of ethereum it makes

6:55much more sense whenever you can do them in an actual trustless manner and you have these Bearer s that you can trade around yeah yeah I completely agree so you know this sounds revolutionary and I'm glad that you guys are doing it but it makes sense that you know maybe there's other people doing this as well you know do you guys have competition that are working towards you guys

7:15working towards the same goal or are you guys really doing something unique and you know what makes you guys unique doing this so I'd say there's a few other companies that are trying to do different pieces you know so the biggest differentiator between us and sort of any of the other derus platforms is you all you really just have to look at what

7:34the Oracle mechanism is because that's really the core piece you know we've developed our own other people so for instance dydx is one of the more well-funded derivatives projects in the space by coin base they use an auction mechanism so they can only use erc20 tokens and then they lock them up and auction them off as their Oracle Veil is another super cool project I

7:57I actually love all of the projects so you know I hope they all succeed because they're all you know kind of working to get customers just like we are Veil they called they use augur prediction markets as their Oracle so you know you can have those those different pieces and also create derivative structures off of prediction markets and that's what they're doing

8:19but you know there's it's it's so early in the market we're all just trying to you know tell the world that this is actually a thing together yeah totally and I love your mentality behind that really it's you know at this stage we're so early that if you're comparing even the whole market capitalization of cryptocurrencies to the stock market we're you know just a little drop of

8:41sand here so working together obviously is going to bring this forward faster rather than trying to compete with each other because you really are trying to do you know bring this industry to grow so I like that you guys are doing that so do you guys are are you guys looking for any you know outside investors or outside help workers to get involved with daxia you know what

9:04kind of Partnerships or interest are you guys looking to reach out to you yeah so we're definitely we're starting to raise money here we were ethereum Foundation grantees last year so we were funded by the ethereum foundation we did a lot of research on side chains and helping to build out our product and now that Grant period is over we're moving

9:27into where we'll be looking for outside Capital to kind of help Propel this forward through you know I guess the next retail boom awesome congratulations on that ethereum Foundation Grant that's sounds amazing and obviously justifies what you guys are doing right now so I'm excited to see you know more of those new types of derivatives come into fruition as the platform grows now you

9:52know as like a sustainable business do you guys have a business model built into this where there's either some sort of transaction fees or Revenue model for daxia so right now we do not at least we you know we the way that we envision sort of monetizing in the future is more of the custom contracts for various exchanges and other people who want to

10:13utilize the products so whenever you look at you know whenever you can say that oh we want to create a long Bitcoin token oh we can create that for your exchange and give you long Bitcoin tokens the way that we sort of Envision it playing out is you'll have you know some some exchanges that list you know just long Bitcoin tokens other ones may be more risky and they'll want to do the

10:33long Bitcoin tokens on a 100x multiplier for instance or you know the one day contract eight hour contracts or the quarterly contracts and we can really just do that as a service to help create them in addition our Oracle solution also has a minable token on ethereum that's associated with it so we do have that aspect of it because we get a Dev share from the

10:55token mining that's great awesome I'm looking forward to seeing that and that sounds great for exchanges to be able to provide those custom solutions for them so that sounds like a great model so I'm excited to see you know your guys' Oracle come to fruition and that mining aspect built into it and that competitive nature sounds like revolutionary so you know what's

11:16the specific timeline on the release of that is that something that's coming out in the next couple months here and you know what other big things beyond that Oracle you know are we going to see for a major release to the public so the Oracle is right now undergoing an audit so we don't assume that there's going to be any issues with the

11:37audit there but that should be over within a month and a half and then after that we'll be pushing it out the other big releases are you know we're looking to have rebalancing tokens so we've partnered with set protocol in the space so what they do are sort of these decentralized ETF baskets but what we've figured out how to do with them is you

11:57can actually have these rolling derivatives contracts that you can build so if you have say a one-week long contract you can have a set basket that you'll put put the derivative in for one week and it'll automatically roll over to the next week for you so then you can have more of the consistent exposure which is actually how you know the traditional financial sector works so if

12:17you want to have a consistent short you know with a Futures product you would just roll over every month rather than you know like like maker for instance they just over collateralize this will actually reduce the amount of collateral ization you need for a lot of these stable coins or other tokens M that's great and you know as you guys release these products

12:38Of course usually you know challenges and barriers come up do you are you guys foreseeing you know predominantly legislative barriers or technology barriers you know what are the hurdles that you guys need to overcome in the next year or two to really grow this to a mainstream thing you know the crypto winter is obviously a giant OB le as far as you

13:00know you want to make sure that you have the right sentiment in people's mind for adopting these new decentralized Financial products and be willing to try them just because you know like you and I obviously see that they work but we need to sort of convince other people that they work some of the other things obviously you know legislative if

13:18they slap down and say that you know all crypto needs to be kyc Amed or something like that it could it might hinder the decentralized finance space a little bit but you know the biggest pieces are just sort of building it and creating a market for it that's awesome well I'm looking forward to seeing those new products released and I'm super excited about it so let's hope

13:40that our viewers see the same in that and if people are looking to find more out about daxia what's the best way for them to get involved or reach out into the community yeah you can just go to our website www. da. us and you'll find everything you need to know there awesome thank you so much Nick I appreciate the time today and it sounds like you guys have a great

14:03project and I'd love to follow up in the coming months you know after the Oracle is released and we'll see how the growth of daxia is going so I appreciate you taking the time today awesome thanks Ashton