XDEFI Wallet & Terra AMA
Note: This AMA took place on 1 November 2021 at 12:00 UTC exclusively on the XDEFI Wallet Discord. The following transcript of the session has been edited for concision and clarity.
Hello everyone. Thank you for coming and joining our special Terra AMA. I’m really happy to have you guys here and I’m equally happy to introduce our two guests. Before I get to that, I’m Akeel and I lead marketing over here at XDEFI Wallet. My colleague Cygnus is going to be in the questions and answers channel, answering a few questions, dropping a few hints. He’s up here on stage and he’s also going to be gathering some of your questions, which ideally we can feed into the conversation. So without further ado, I’d like to introduce our two guests. The first is Do, the co-founder of Terraform labs. And the second is likely no stranger to you all: Émile, the co-founder and CEO of XDEFI wallet. How are both of you doing today?
Fantastic. Thanks for having me.
Yeah, we’re good. Thanks for organising this, Akeel.
Before we go forward, I’ll give you a heads up on how this is going to go. We’re hoping that this is going to be a free-flowing conversation with myself moderating. In the background, there’s going to be Cygnus who’s going to be pulling a few levers. Being a gracious host, I’d like to begin with Do. I have to be honest, I’m a reformed ETH maxi. I know the big numbers around Terra. Luna is ranked 11th for coins. The market cap is 40 billion. UST is holding its own as a stable coin. But can you tell me more about the project itself? What’s it all about and what do you feel has caused its success?
When I started studying about crypto, one of the things that was very surprising to me was that as an industry that calls itself the cryptocurrency industry, there were very few people that were focused on solving the problem of currency itself.
In a sense, most of the efforts were focused on, at a very abstract level, making better servers. That includes making blockchains that are either faster or have a privacy feature on Ethereum — which is a big problem — or are focused on creating specific applications that are focused on a specific use case. It could be like a betting market or it could be options or something to that effect, but there weren’t too many things that were trying to construct better money — that is, an asset that has purchasing parity with the Fiat currencies that users use to denominate their store of value and to mark up their medium of exchange while at the same time retaining all the censorship resistance properties of Bitcoin and Ethereum.
That’s essentially what Terra is trying to do. If you look at the crypto market today, I would say the single product that has had the strongest market fit — after the construction of the smart contract itself — is the stable coin. All the liquidity in crypto, as well as most of its use cases, are denominated and constructed around stable coins. The problem here is that all the decentralised apps that we’ve built on top of blockchains and all the liquidity where we pride ourselves on retaining control, the individual sovereignty of our assets breaks down if the stable coins that constitute the base layer primitives of all these different applications and wallets and stores of value are centralised and censorable. The way that we’re thinking about it is that a decentralised economy needs decentralised money. And in my mind, Terra USD is the most credible attempt so far at creating such a form of decentralised money.
I like where you’ve gone there: a decentralised economy needs decentralised money. And I’m sure the multifaceted approach to how you see crypto and how you’ve approached crypto likely already answers the next question that I’m going to ask. But I’m going to throw one over to Émile right now, and I’m going say, based on what Do just said, has that approach factored into you wanting to prioritise Terra as, as a chain that we’ve added and kind of beyond that, what drove you adding Terra as a chain? Is it the community, the devs: what went into the process? What was your logic?
First of all, Do, I’m a big fan of what you guys are achieving with UST. I believe that in a decentralised environment such as DeFi if you hold the stage from the issues of custodial stable coins, there is something that is not done properly. I think you guys are solving for that and have improved a lot compared to what DAI for instance has done. That has its own limitations, although it was one of the first that worked in a decentralised fashion.
Really early on, we had the community asking for us to support Terra. We were also looking into Terra individually ourselves, because we’re interested in UST first. And then seeing how Terra developed especially since the beginning of 2021… Let’s put it this way. I think, and correct me if I’m wrong Do, but I believe that Terra, the way you guys are trying to position yourself is not just like ‘we want to be the fastest chain, we want to be the cheapest chain,’ but more we want to create a UX environment that is easy to grasp, and that is going to be key to onboard the next wave of users in web3.
Today, if you look at how people are being onboarded into crypto, generally they’re going to do this via Binance, via Kraken, via Coinbase and so on. I believe that you guys are going to focus a lot on educating people. I think this is something that we want to do with all the dApps that are being built in general. I’ve been fascinated to see how easy to use they are. I believe that you guys are most likely going to be the go-to ecosystem when it comes to onboarding the normies. As a decentralised wallet, we’re not the people onboarding first in their journeys. As I said, that’s centralised money in general, but once they decide to jump the fence and, and go to Web3 and maybe Terra’s their first ecosystem, they’re going to have to download a wallet.
And I think if we do things well, they’re going to have to download XDEFI Wallet; at least that’s going to be one of the main options. I believe that we have, if not an opportunity, a responsibility as a wallet provider to get these users at the very beginning of the learning curve about Web3 and create some mechanisms by which we are creating educational frameworks for them not just to understand how to use the wallet at its fullest, but to interact with dApps. Here, there is an opportunity to work really closely with Terra and really take this new wave of users and show them how to use the wallet from start to finish and how to have the best possible opsec, but also interact with the easiest dApps from UX perspective. And obviously, that embeds a lot of projects that have been built on top of Terra.
If I might add to that, one of the interesting things is that when we first started out, we weren’t interested in becoming a general purpose or contract platform. That just kind of happened by pure accident. Today, the interesting thing is that Terra, almost by accident, Terra is one of the largest smart contract platforms by TVL (total value locked) and usership and developers. But the way that we think about it is that our mission is to create decentralised money that is the most useful and most decentralised. And initially, we added CosmWasm, a smart contract on top of Terra, so that we can build out a couple of use cases that weren’t possible with just the monetary policy logic in Terra core.
The goal has always been to get Terra USD into all the places where there happens to be distributed ledgers. It doesn’t actually make a difference to us as to whether Terra USD is being used in, let’s say, Ethereum or Solana or Avalanche; we expect to be working with all those ecosystems.
I think one of the major reasons why developers build natively on top of the Terra chain is because if you think about all the core monetary policy logic living within Terra itself, there are sometimes very good reasons to build programs that interact closely with the monetary policy layer. That gives birth to primitives, like Anchor, for instance, where if you’re depositing a pair of stable coins to Anchor natively on the Terra chain, because it can skip a few bridging transactions it turns out that you can get more security and you can get better yield than you can on other places where Anchor exists through, let’s say Orion.Money. You could interact natively with, let’s say, mirrored assets which are pegged synthetics because usually the deepest liquidity would exist in the ecosystem where the synthetics are being redeemed and created.
Overall, the goal is to get Terra USD as the centrepiece of DeFi and stores of value across all ecosystems. I wouldn’t exactly describe myself as an ETH Maxi, but you can consider me an ETH admirer, but I’m also a Solana admirer, I’m an Avalanche admirer, I’m a Polygon admirer. And I think this vibes really well with XDEFI’s mission, in the sense that we are living in a really weird time where all these blockchains are branded, but if you think about how people interact with web apps today, people don’t know where these web servers are being hosted.
They don’t care if it’s hosted on AWS. They don’t care if it’s hosted on GCP. All those things have been abstracted away because the value proposition usually percolates on the application there. And I think there should be interfaces and I think in crypto, the wallet should sit across the interchange to make those experiences seamless, such that the underlying servers and in this case, blockchains themselves are abstracted away and non-branded. And I think XDEFI Wallet combined with Terra USD presents an exciting vision for how that can be possible.
I totally agree with that Do. I think one of the first things we did when we first created XDEFi Wallet: we were supporting three chains. We were supporting Bitcoin, Ethereum and Binance Chain, and we had compartments. Basically, you had three tabs within the wallet and you had to switch from a tab to another, to access the list of assets you have and manage them. And that was thought of in an engineering fashion, as in, each type of action is going to be different based on the blockchain you’re using, which is not entirely true anymore. And I think one of the first large UX works and refurbishments that we had to do with XDEFI Wallet was to basically abstract the concept of chain. If we want to be able to offer a seamless experience to the normies that are joining the decentralised web we need to abstract this concept of chains. I absolutely concur with that.
This is something that we’ve worked on at the end of last year when we started reworking on the UI. And I think we’ve achieved that at the beginning of last month, when we released the latest UI, but abstracting chains is at the same time really complicated from a UX perspective, because each chain has different characteristics, and you need to take this into consideration, for instance, in the way you are looking at a concerning transaction, etc. It’s challenging, but it’s doable and it has to be done. And I think at the end of the day, we want to give an experience, which is similar to what you have in a centralised venue, but in a decentralised fashion. I think this is something really important. I completely agree and I believe that the next generation of dApps are going to leverage different types of blockchains that bring different things because they’re providing different values.
Great. I think we’ve moved a little bit away from the direction that I was taking the conversation and I readily welcome that. I’ll just ask a question myself out of curiosity. Previously I think Do mentioned, I paraphrase, apps that are the most usable, and most decentralised, and we talk about the next wave of users that are coming in. And Émile just touched on that with the next wave of dApps that are going to be developed. What do you see as the point at which we’re going to be able to achieve this mass adoption? Is it a point of inflexion you see? Is it a friendly ecosystem such as Terra meets friendly, multi-chain wallet, that kind of meets with Émile’s vision for how a wallet is supposed to be? What are your thoughts on this, if, if you don’t mind my asking?
I think different applications have different total reachable markets. I think the adjustable market for, let’s say, investments is probably constrained to maybe a few hundred million users in the sense that there are plenty of people in the world that actually don’t invest at all because they don’t have the luxury to. I would say that on aggregate at least half the world’s population don’t have access to savings because they live paycheck to paycheck. They get their money right away. They spend it, and sometimes they don’t even have enough money to spend on things.
I would say the sort of the total adjustable market of savings right now, theoretically, is the entire world’s population, but it’s missing a lot of core infrastructure like a significant percentage of the public population living above the poverty line, access to internet infrastructure — things like that need to happen before that can take place. Or if you are just looking at DeFi in general, the ability to engage with complicated financial products, let’s say options or perpetuals, probably the adjustment market there is a couple million, maybe 10 million if we’re being generous. And that’s because most of the world doesn’t interact with those products today. But I think there’s a couple of use cases and this wouldn’t be all crypto, but a couple of use cases that could have a really large audience, besides investing. And I think from the perspective of DeFi that starting point is going to be savings. And I think the really interesting reason why DeFi based savings can have a huge leg up versus traditional savings is twofold.
Number one is because traditional savings is shit. You can’t actually put your money in a bank. And the opportunity cost is always negative. The opportunity cost is always huge because the US dollar is inflating at a rate of 5% per year, but Wells Fargo gives you close to zero. It’s very easy to leverage the power of DeFi to give you a savings rate that actually allows you to save your household savings from inflation. I think the vision that Terra is putting forward is that Anchor is going to be that centrepiece of savings. In the sense that by tapping into the most basic and the most robust source of yield across blockchains, and that’s the proof of stake, staking reward, you can get to an average yield across blockchains that we think is going to serve as the reference point.
We think about this as the first serious decentralised challenge to the federal funds rate. The second reason why DeFi savings are better is because they can be programmed on. Not only can you create a bunch of savings accounts packaged in the form of neo banks or savings accounts by constructs but you can actually package the yield to create really cool things on top. For example, you can create a construct whereby instead of, let’s say, donating your money to somebody or outright purchasing a subscription by giving this person money, you can do this in a lossless fashion. In the sense that, for example, if you’re trying to purchase a Netflix subscription, for instance, you just stake Terra USD into a smart contract. And then the yields from the smart contract goes to purchase things like subscriptions and items and other things, or it can even hire developers which in turn creates entirely new social dynamics that haven’t been previously possible.
The fact that you can actually get a yield that is really high, and you have a source of yield that can be programmed on, I think are huge wins with DeFi. Another area that I think in pure usership is going to start to make a lot of sense is gaming and culture. And that’s because while financial applications have a more limited reachable user base I would say a pretty good chunk of the world’s population is engaged in gaming either because they’re kids, but mostly because most of the world’s population have played games or have the intention of playing games at some point. Especially if you turn on features like play to earn games — it’s another question entirely where the earnings are coming from but if you just ignore that for a second — then in tons of these cases, everybody wants to play a game and there’s no barrier to entry to figure out what to work.
Agreed. I think at the end of the day, use cases are always more powerful than concepts and ideology and how you convince people and at least you get their mind open. And I’ve done that with my own family. Anchor was the exact way I’ve done it because I was telling them, why would you keep your money in a savings account and get like 0.1% or 1.5%, which was what they were getting, when you can help them get something, which is more than 10 times bigger than that if not more by taking some stable coins. And that was a really powerful way of doing it. I absolutely agreed. I think this is one of the biggest user cases and gamification and NFT are opening some more now.
If I may take the opportunity to ask Émile: mirrored assets, staked assets, these are all things that you can interact with XDEFI Wallet, correct? These concepts that we’re talking about, these tokens that we’re talking about, they’re all accessible through the wallet, correct?
Yeah, they are. You can have them in the wallet. It’s funny because, I can’t remember when it was exactly, but it was a few months ago, Do asked me, are you guys planning to have mirrored assets directly accessible within the wallet? I looked at it and I was like, whoa, you have the VIX, you have a synthetic version of the VIX. And that got me. I was pretty excited about it. You can see them in the wallet and hopefully, soon you’ll be able to swap them as well.
Just to shift gears a little bit and to dive back in on Terra itself, Do, there’s been a bunch said about the communication between Luna assets and the UST coin. Could you just touch on the seigniorage process and a bit about how it works generally and within Terra?
How Terra and Luna works is that there’s a kind of a virtual automated market maker (AMM) between Terra, USD and Luna. How it works is there’s a virtual pool of Luna that is trading against Terra USD and how this virtual pool works is the virtual pool is just used to determine the exchange rate in the same XYK algorithm that all AMMs use and the resultant exchange rate is determined when you burn UST you mint dollars worth of Luna. Burning one UST results in $1 worth of Luna being minted. And vice versa, in order to create one Terra USD you need to burn a dollar worth of Luna. Basically, how the system works is that as the Terra USD market cap grows, Luna becomes more and more scarce because it requires a dollar’s worth of Luna to be bought and swapped in order for that creation to happen.
In the opposite case, if the Terra USD economy is contracting that results in more Luna being printed into the market. In that case, there’s a price impact on Luna on that side as well. In terms of seigniorage, Luna burns as Terra USD is being created. There isn’t too much of that now, but in terms of staking rewards, it’s a blend of all the transaction fees that are being paid in the Terra ecosystem. And then also when the spread happens in the virtual AMM, while you are swapping UST to Luna or Luna to UST that swap spread is paid to stakers in the form of yield. Terra’s ecosystem is pretty interesting because it is the only Layer-1 blockchain whereby the staking yields are not paid through inflation but paid through all the network fees that are being generated in the ecosystem.
It’s quite interesting. And I think it leads to another question that I was going to throw over to Émile: we’ve spoken about Pylon and have kind of gone deep on some DeFi product accessibility via the UST stable coin. It is worth mentioning that you can stake USTs and earn XDEFI Tokens specifically within the Terra ecosystem. Could you maybe go a little bit deeper on that and just explain what is the deal with Pylon? To a layman, to an ETH maxi such as myself, what’s going on here?
The concept of Pylon is pretty interesting and it’s sort of unlocking a use case around programmable yields and Anchor. Pylon encapsulates this idea of lossless payments. And the idea is that there might be plenty of use cases for which one-off payments don’t really make that much sense. So what if the entire world was a subscription, but instead of paying in principal, what if you were paying with your yields? Some of the things that are possible are that simply by putting USD to a wallet, let’s say you could buy a bunch of Netflix subscriptions, for instance, or if you wanted to fund the DAO for the public good. You want to fund this effort, but you’re not sure if the dev is going to rob you.
Instead of giving this dev money, you stake your USD into a contract, the yields of which fund the DAO, or the dev. If you feel happy with what he’s doing, you put in more money, if you don’t feel so happy, then you withdraw money, right? So in that case, you can actually create a ton of use cases and vectors for payments that weren’t possible before you had a stable and attractive and programmable yield such as the one that Anchor provides. The first use case that Pylon built is something called Gateway, which is an IDO platform. The idea is that users that want to gain access to new projects that are launching, instead of paying the devs directly to purchase the tokens, they put their USD into Pylon’s gateway contract, in which case the yields that are occurring to the underlying USD position goes to the dev so that he can offset his runway and operating costs. And in exchange, the native tokens go to people that deposited USD to compensate them for their cost of capital.
Thanks, Do. Personally, I’m a big fan of how Pylon’s been designed and we will be running an XDEFI pool in not so long. I think that’s going to be interesting for Lunatics to access that as well. And obviously or hopefully, give them an entry into XDEFI.
Yeah, I do like the idea that you kind of brought it back to XDEFI. You’ve talked about a bit of where we’re going in some functionality, and I will use this opportunity to corner you a little bit and move over to the next question. Presumably, I’m assuming when you talk about functionality there’s going to be some sort of a dashboard in future within XDEFI Wallet that, off the top of my head, would allow you as a user to visualise XDEFI positions. I mean, is that outlandish? Is that something you think is going to be forthcoming within the extension?
Yeah, absolutely. I doubt it is going to be within the extension because the reality is that this is an extension and we need to be careful and wary about how we are adding some features and not just showing everything within it. If it gets too heavy, at some point, the UX is going to be not as good because obviously, we are going to have some performance issues. The way I see it is that alongside XDEFI Wallet, a web app would work well. And you’d also have much more real estate to use in order to display plenty of things. You know, it’s not just about the XDEFI dashboard because that’s for me a no brainer; you’ll have plenty of features a little bit like Zapify or DeBank or a few other dashboards.
You’ll be able to see all your DeFi positions, but also your NFTs and a better way to access your NFTs collections, etc. I think what’s really important today is to bring some social elements alongside gamification to what’s happening in Web3. And it combines both DeFi and NFTs and in the web app that we want to create, we’re really trying to focus on the fact that your identity is attached to your address. How can you gamify all around that, how we can give a kind of a score to, for instance, addresses a little bit like the DegenScore has done a little bit, like THORChads score has done it and obviously give some other features, premium features for instance, to people that have a higher score for a given set of attributes.
That’s something we’re going to work on in our web app. It’s not just going to be a dashboard. That’s more for me going to be kind of like a social experience and really trying to make this entire experience of interacting with protocols more enjoyable and more individual in the sense that each of your addresses, which your identity is attached to, is something that defines who you are based on the actions you’ve taken on the blockchain in general.
I’d be remiss, after trying to corner you, I didn’t try to corner Do. On the next question, I’ll throw the same question his way. During the lunar process, part of the Lunas swapped for UST is burned with another being allocated to a community pool and reinvested to build more apps. What kind of dApps are in the works? Émile’s kind of touched on some of the future plans. What kind of dApps can you let us know are in the works on the Terra side of things?
There’s a lot, but I’m just going to do a couple at the top of my list. One of the things that I’ve been thinking about is there’s a really interesting opportunity to build a credit score on top of blockchains and therefore under collateralised lending. And the reason for this is because a lot of projects are giving away ownership and their user-owned economies. But they’re trying to filter out which types of users have good on-chain behaviour. For example, when projects are launching tokens, a lot of protocols do airdrops to get a fair launch, or if not explicit airdrops, they have some ways in which people can get more ownership by displaying some sort of behaviour.
But right now, the metrics that most projects use are super rudimentary. They either look at things like, oh, has this user interacted with the protocol at least once over the last six months, or they might monitor something else like, oh, have they used other DeFi protocols? But I think as the history of people’s interaction with DeFi builds up, there’s actually a pretty large opportunity to come up with something that is akin to a loyalty score, depending on various types of DeFi use cases. For example, a lending protocol might look at the liquidations history of specific wallets and then measure how long the liquidator is willing to bear beta risk before selling off the token. For example, a liquidator can either choose to, let’s say, buy ETH at a discount when ETH is crashing for instance from Maker and then sell that ETH right away, which is net negative to the EP ecosystem.
But if they’re willing to hold onto that beta a little bit longer than in that case, they could be given a priority in the liquidation queue. Or a new DeFi protocol that is looking to airdrop their tokens could look at the marginal propensity to sell of various different wallets. And then look at number one, is the user likely to dump the airdrop? And number two is the user likely to use these tokens to engage with the protocol directly?
Basically, the flywheel that is being created today is that projects are starting to spend more time trying to understand what constitutes good behaviours, depending on the use case of various different protocols and users are now being incentivised to optimise their on-chain behaviour around those metrics. This is why you’ve probably had friends who were randomly clicking transactions on DYDX before the token launch because it was anticipated that that token was going to launch. Or why there’s a bunch of users that are just doing ghost transactions at OpenSea because an OpenSea token is pretty likely.
What I believe is that there’s going to be sort of a set of on-chain scores that determine whether the user is good on specific vectors. And I think once you have this, you have the beginnings of a credit score on top of blockchains. If you have a good credit score and you’re willing to engage in certain types of behaviours, then you could be given preferential terms in, let’s say a liquidation or an under collateralised loan for instance. This is a project called Passport, which is one of the things that we recently put together that I think is pretty interesting.
Another project that’s coming to the ecosystem is a project called Prism. These are interest rate swaps on the blockchain. The idea is that in DeFi users are asked to take on an incredible amount of risk in exchange for outrageous yields. And that’s because there isn’t a way for capital allocators to differentiate in investing in only the yield versus investing in the principal. And if you look at the vast majority of the business of investment banks it has to do with interest rate swaps. The idea of engaging in bond markets is generally field denominated, in which case you don’t have to take any risk on the underlying principle, which is the FX currency itself. And even if those exist, you can easily hedge out of them.
And you’re only really speculating on the yield differentials of various instruments that you’re buying today. That’s not possible because if you’re, let’s say, investing in a yield product on top of the pickle token, you can’t just speculate on the pickle yield. You also have to take a position on the principal value change of the pickle token itself, i.e. providing exit liquidity to pickle holders. Prism solves this. If you have a yield-bearing instrument, let’s say the Luna token, or let’s say an LP token if you put it into the Prism smart contract, it gives you two derivatives, the Y token, and the P token. The Y token gives you physical delivery of the underlying yield asset. And the P token gives you price exposure to the principle.
The idea is that if you wanna only speculate on the yield, you can just buy up the Y tokens because it’s going to give you physical delivery of a lot of the yield assets and the price of the Y token if the market is efficient, should be priced that some discounted cash flow of whatever the market believes that the yield delivery schedule is going to look like before these Y tokens expire.
And then for the P token, well, if you really like the pickle token, and you just wanna speculate on that, then you would just buy up a lot of these tokens, such that, you have leveraged price exposure if that makes sense. There’s a ton of different things that are happening. I’m personally spending time on a few projects that I’m passionate about. And at any given time, there’s three to four of these at a given time, but it’s a really exciting ecosystem. And there are tons of things being built. A lot of which I don’t really have visibility into,
I may go just kind of jump in really quickly to say, Émile, correct me if I’m wrong, but I guess the assumption is that, going off of what Do just said, the breadth of innovation coupled with the potential for disruption is likely kind of a key reason why there’s kind of why XDEFI Wallet is granting money over to Terra. Could you maybe go into that a little bit?
When we decided to run a Pylon pool, we decided that half of the proceeds will basically be allocated to early state projects on Terra. And I think it’s important for us to send a signal that XDEFI Wallet is also here to support Terra. So far we’ve developed a lot around making the user experience for the guys that built on THORchain as nice as it gets. And I think that will always be the case. We cannot fight every battle, you need to pick some battles. And I think Terra is one of the ecosystems we want to have their support, and this is for us a way to show the community that they will have the word to say how we basically help these new projects.
There will be an ecosystem fund which will be around thirty per cent of the total supply of $XDEFI. And these funds are going to be used to help builders to bootstrap the projects depending on what the community is basically expecting from them. And that would be both around THORchain, Terra and potentially other ecosystems later on the road. This is the first step towards something that would be much more material in the future. And hopefully in the close future.
I think a significant aspect of how we iterate going forward is likely IBC: inter blockchain communication protocol. I think we did have a question that was raised about that. And I was hoping maybe Do, you could go into IBC, if you think that it’ll change anything in terms of how people see XDEFI wallet from your perspective. And I’m very conscious that we’re short on time. This will likely be the last question. And then I’ll go into one final question for each of you guys just so that we can wrap things up.
I think IBC is interesting because it’s more complicated than some of the other bridging protocols, but it’s powerful in the sense that it’s another framework on which you can bridge things. The potential reach of IBC is a lot more than just a token transfer protocol. You can actually use IBC to create specific branded zones, even within the Terra ecosystem itself and use it as a scaling solution, for instance. For example, one of the things that you can do is that for applications that use a lot of bandwidth, let’s say something like a DYDX, for instance, or let’s say a game, you can create a separate blockchain with its own validator set. And then you can call it, let’s say the Terra NFT zone, or we can give it a planetary name where we can brand it whichever way we want.
And then we can have smart contracts that are running on these specific zones. And then we can have smart contracts that sit across each of them because IBC gives you the power to call arbitrary bytes just by specifying the name of the chain and then maybe let’s say the contract code ID. You can actually end up in a situation where you have all of these different tiered blockchains and contracts that sit across all of them allowing you to specify, address, and rely on the features of any of these connected blockchains. You can think about this scaling solution as something like a sharding solution, except that each of the shards can be branded. And that’s sort of what Terra Cosmos is if you see when all the different zones are connected.
And I think what’s kind of possible here is that a wallet experience that sort of beautifully wraps across all of these different things, in the sense that you don’t really need to distinguish which chain or which execution engine that this is running on, you just have applications that work really well in the native wallet experience. I think today, the way that IBC is being used is quite simple. You just have token shards first for most intents and purposes, but I think not in the not too distant feature, you’re going to have IBC wrap across smart contract execution. And I think that’s when things start to get really interesting.
I think you’ve touched on something that’s really interesting, and it’s a natural segue into the last question that I’m going to ask you guys. I’m trying to kind of make this the last question so it’s a bit more relevant to what you’ve said. You talk about different zones, not distinguishing between chain applications working well within the data wallet experience. And I think that it has a bit of a key inference in terms of what each of us sees as the future of DeFi in general. I guess my final question is this: what do you think the future of DeFi looks like? And on the back of that, and you can answer it within your answer, how close do you think we are to full mainstream financial disruption, both as a member of the community and also from the vantage of your project itself. And that’s a question for both of you.
I can start with that, but I think Do already touched base on that earlier, I believe that, for instance, replicating what the savings account is giving today to normies, but in a decentralised fashion is something that is really powerful and a strong use case that is hopefully going to help a lot of people adopt the product that we are using ourselves today. I don’t think it’s easy to assess when mass adoption is going to happen. Honestly, we don’t have an answer.
I think the way things work today in the fast environment in which we are living everything could happen in less than 12 months but again I think there are a lot of different things that need to be taken into consideration to assess this properly.
I’m not too sure exactly when that’s going to happen. But we need to stop catering for it and that’s something we’ve already been doing for a few years now. We’ve been ready. We’ve been getting ready at XDEFI Wallet as are other projects like Terra.
In my opinion, DeFi is Wall St. Even in traditional finance it’s almost like paper ledger contracts are programmable, there’s a lot of really interesting instruments. There’s a lot most people don’t know about because it doesn’t touch lives very often. The speculation and fast-paced growth of finance allows it to make productive capital very efficient.
Very simple user experiences like, let’s say, Robinhood or Transferwise are things that make the lives of people on a day-to-day basis. The really interesting thing is that if you look at Revolut or Transferwise at least in the very early days of both companies and at least until very recently, most of the FX operations of Transferwise was actually run by one company called Currencyfair. This company was performing all of the different tasks where different currencies could be pulled and then doing an easy FX conversion between say the British Pound and Korean Won in the background. So all these background apps were pretty front end with a bit of regulatory work that was done to do the heavy lifting of what Currencyfair was doing to retail users.
That’s the role that DeFi is going to play. I don’t expect to see a world where retail users need to learn how to interact with options contracts or learn how perpetual options rollover. That’s never going to happen nor should it. I think it’s going to distil into a few very simple and very powerful use cases that millions if not billions of users will get to use and I think the wallet would be the centrepiece that allows people to interact with these very simple and elegant use cases.
I could not agree more myself. Thank you Do for taking the time to chat. Equally, thanks Émile for taking the time to chat and making this possible. I hope everyone enjoyed the AMA. Hopefully, we’ll have more of these in the future. Thank you to you both and thanks to everyone in the audience for joining us.