Presented by Brendan Forster, Co-founder of Dharma, at Fluidity 2019. Fluidity brings the worlds of finance and technology together to shape the future of blockchain and capital markets. On May 9, 2019, we welcomed companies and teams to help shape the narrative of rebuilding finance at the historic Williamsburgh Savings Bank in Brooklyn, New York. Resources: Website: https://fluiditysummit.com Facebook: https://facebook.com/fluidityio/ Twitter: https://twitter.com/fluidityio LinkedIn: https://linkedin.com/company/fluidityio/ YouTube: https://youtube.com/channel/UC0NBCYlgLIxjSljf7CV91nQ/

2. DECENTRALIZED
FINANCE (DEFI)
Brendan Forster, Dharma

3. DeFi
Building a Better Financial System

4. 1. DeFi is a Revolution
2. It’s Day 1 for DeFi
3. What it will take to Make DeFi Great
Agenda

5. What is DeFi?
A meme and a rallying cry A global mass movement
An industry of builders A reaction to failures in traditional finance

6. Finance has not even begun it’s equivalent to the printing press
phase of the information revolution!
— Joey Krug, CoFounder of Augur and Pantera

7. 1. Inaccessible
Financial services are
exclusionary based on
arbitrary criteria like
jurisdiction and investor
accreditation
2. Inefficient
Financial services are
plagued by human
intermediaries that are
costly in terms of money
and time
Finance is overdue for a revolution
Because despite all of its successes, finance remains:
3. Opaque
Financial services are
opaque, resulting in
“surprise” over-leveraging
or “too big to fail”
systemic risks

8. 3. Transparent
DeFi services are built on
publicly auditable
blockchains
2. Efficient
DeFi services use code to
eliminate intermediaries
with rote responsibilities
1. Accessible
DeFi services are globally
accessible to anyone with
an internet connection
DeFi is an attempt to correct these failures.
Flipping the script on traditional finance, DeFi services are:

9. DeFi will do to Finance
what the Internet did to News Media

10. DeFi democratizes creation
Blogs are permissionless news media.
DeFi is permissionless finance.
Insurance, Derivatives, Options
Augur
Baskets of Assets
Set
Lending Agreements
Dharma
Synthetic Financial Instruments
UMA

11. DeFi democratizes access
NYTimes.com provides anyone with an internet connection** access to news.
Dharma.io provides anyone with an internet connection access to dollar-denominated interest.
**Excluding government regimes that censor news media. One attack vector for DeFi may be government regimes that censor finance.
Hedging, Leverage, Shorting
dYdX
Exchange any value
AirSwap, 0x, Uniswap, Kyber
Compound your wealth
Dharma
Earn in the way you want
Whisp

12. Smart contracts automate human processes that previously
needed to be “trusted”:
1. Custodians
2. Escrow agents
3. Paying agents
DeFi automates inefficient human processes
Who needs newspaper deliveries when you have the internet?
Who needs regulated custodians, escrow agents, or paying agents when you have smart contracts?

13. DeFi is systemically transparent
In 2008, it was really hard to be Michael Burry.
In 2019, all it takes to be in The Big Short is Etherscan.

14. DeFi is a revolution, creating the financial system that
was always meant to be.

15. Ok we know where we’re going,
but where are we today?

16. DeFi growth will play out in phases
PHASE 1 PHASE 2 PHASE 3
Market
Expansionary
Subsume
Legacy
Blockchain
Native
Today we’re in Phase 1, but by 2020 we’ll be market expansionary.

17. Overcollateralized loans are the "Hello World" of programmable money. —Julian Koh
1. Lending (30 Day Originations)1
a. Maker — 15.1m USD
b. Dharma — 7.9m USD
c. Compound — 3.4m USD
2. Exchange (30 Day Vol)2
a. Kyber — 18m USD
b. 0x — 13.2m USD
c. AirSwap — 5.7m USD
d. Uniswap —
DeFi Phase 1 — Blockchain Native
https://mikemcdonald.github.io/eth-defi/
Sources: 1) loanscan.io; 2) Tracker.Kyber, 0xTracker, UniSwap,

18. Every disruptor starts small
DeFi Phase 1 — Blockchain Native
Sources: loanscan.io, SEC Edgar

19. 1. Net-New Access
● Global dollar-denominated interest
● Global access to all equities
● Global information & betting markets
Sophisticated financial services in every pocket.
DeFi’s Market Expansionary phase will be defined by two broad movements:
DeFi Phase 2 — Market Expansionary
2. Net-New Products
● Parametric insurance for #AllTheThings
● Invest in entertainers, athletes, & politicians
● REITs with Region/City/Street specific profile

20. Who reads a physical newspaper anymore?
DeFi Phase 3 — Subsume Legacy

21. Ok, but how are we going to get there?

22. Smart contract insurance
Smart contracts fail. We need insurance for this.
Who’s cooking up a solution?
DeFi’s missing building blocks
What we need to go from here to there to everywhere
Better Fiat Onramps
Still takes far too long to move fiat to crypto.
Where’s my Stripe solution for this?
Better Oracles
Getting off-chain information on-chain still a
challenge. Who’s working on this?
Better Private Key Management
Hexadecimals, seed phrases, no recoverability.
Let’s fix these things!

23. We know what the future can look like.
It’s up to the builders here to make it a reality.

24. dharma.io
@dharma_hq blog.dharma.io@brendan_dharma