Deus Finance – Decentralised share trading – bringing Tesla, Apple and GameStop to the party!

hello and welcome i am piers ridiard ceo of 
the decentralized finance protocol radix a   public ledger entirely focused on 
bringing d5 into the mainstream   this is our podcast the d5 download a show about 
decentralized finance and all things crypto where   we dive into the details of the projects assets 
and services that are powering the d5 revolution   today i am joined by lafayette founder of deus 
a uni swap version of robin robinhood which is   basically a decentralized application that allows 
you to trade any traditional financial asset like   stocks and shares for example you can already 
buy and sell tesla amc gamestop silver and gold   lafayette thank you so much for coming on our 
show thank you for having me um pierce so yeah   let's start if you if you were gonna describe 
you know the uni swap for robin hood what does   that mean let's break that down so so basically 
it all started in in in in march 2020 when i i   i for like i was back in i was a crypto enthusiast 
for all time long and in in march 2020 i for the   first time i thought like maybe i should buy some 
tesla stocks or some stocks it was like everyone   was like talking about it and i wanted to buy 
it but it was just complicated and i thought to   myself why why is it not possible somehow on the 
blockchain i can buy any crypto i can transfer   it anywhere and but a tesla share is somehow 
complicated then i i researched more and i   found out that the actual problem or bottleneck 
are oracles so i spoke with my good friend and   gifted developer marty who also works at bright 
id which are doing um uni unifi unique stamp   of id so basically a a private key that is tied 
to your identity every person can only have one   very interesting topic for another podcast and and 
and then i asked i my first question was like hey   marty you think we could we could somehow create 
an oracle where you get like a live feed price   um of a stock and he was pretty confident about 
it so we dive we dig more into the idea and and   started the first oracle um kind of prototype and 
then from there on we we launched a token and now   almost a year later we are now one two weeks 
away from launching hundreds of stocks that's   super exciting so yes let's break that down a bit 
more yes yes why is being able to trade stocks on   top of a blockchain an oracle problem and what do 
we mean by an oracle um so an oracle is basically   some kind of server or some kind of software 
that can interact with the blockchain and also   with outside world outside of the blockchain 
and can communicate between these both and   current integrations of oracles are mostly with 
some kind of waiting time there's some kind of   you wait until something is verified and then put 
on the blockchain or they try to build a database   on the blockchain and all of this is basically 
not suitable for doing live instant trading   why is that like what what's what's the 
what's the difficulty of setting up an   oracle why is it difficult to why is 
it difficult for me to set up a server onto yeah yes so so first of all there's like the 
um there is always the risk of of being exploited   so if you just haven't like for example you have 
just one server and it's providing the data for   for all of your applications or for and for tesla 
for example and then someone gets somehow access   to that server and is able to tell the protocol in 
case our trading engine that tesla is now trading   at one dollar people buy it extremely cheap and 
then he tells it tesla is now worth a thousand   dollar and then he basically empties all of the 
the reserves so there is always a security issue   and we we basically from from 
the first moment we were always   focusing on making it as secure as possible 
while still being able to trade the prices live   and how do you achieve that what's what's 
the secret data source so so so currently   the the origins that we're currently using 
are basically version 0.1 and they're   they're working within within multi-signature 
oracle so you basically have like eight notes   and at least five of them need to sign the same 
price in order for it to work but in parallel   we're already working on the the version 1.0 and 
it will be a completely decentralized network   where you can where everyone can host the note 
and the special ingredient will be that instead of   verifying everything before we push it to the 
blockchain we're using a validator network   that basically verifies it afterwards and 
the oracles need to take care by themselves   and basically ensure everything they tell to the 
blockchain with a stake so it's somehow like proof   of stake they lie then they get their stake taken 
away yes exactly exactly so you always you always   get this interesting like trade-off with oracles 
right which is like if you make them centralized   then you have a problem around centralization but 
obviously what you can do is you can secure that   with brand equity right you can say oh this is the 
bloomberg feed and if and and yes sure bloomberg   could change it the value but if they did then 
it's bloomberg and that was really pretty serious   ding on their brand equity right and then the 
other alternative is to go well let's make it   completely decentralized and have some kind of um 
voting mechanism that allows people to like get   punished if they lie but then the the problem is 
well what happens if a an anonymous actor can join   the network gather enough stake and then pull 
off an attack like the tesla one you described   that means that they still make a profit even 
after they've had the what they've done slashed   so like how do you balance those two things so so 
in in general we balance so that basically you're   all like the insurance the stake that you need to 
put in is always more than what you could get out   so every attacker would basically he would 
need to pay more in order to to get less   when he attacks it so it's basically economical 
doesn't make sense similar to what 51 attack on   bitcoin i mean it's possible but it costs so much 
money that no one is doing it so that's basically   the approach that we took okay so you guys decided 
to go look we need a flexible oracle system   that allows us to quickly move quickly and like 
add lots and lots and lots of leads yes um and   then what does that speed allow you to do what 
can you offer like now you've got that oracle   how do i go from an oracle on on a public ledger 
to a tesla stock on a public ledger without   actually bringing tesla to the public ledger 
okay so so we at the beginning we're using an   over collateralization rate similar to what snx 
and every other pro protocol is doing so there   is basically someone is providing collateral to 
the system and is basically betting against the   traders so he says so describing that like 
in in in real terms you're saying like okay   tesla it's stock price today i don't know actually 
what a stock price is it was it traded no i think   it i think it dropped like six seven percent 
yesterday i i i saw that ellen musk is not the   richest person in the world anymore and 
and stock price today of tesla is 678.   yes and if i want to create a tesla stock on deus 
what i have to do is i have to use use collateral   so what you're talking about is is assets that 
exist on top of for now the ethereum blockchain   right so let's say i take i take usdc is that 
is that a collateral type you guys said um   current currently we only support our native 
tokens like the usda and and yes that that's   it for now but the idea is also so that the trader 
doesn't need to provide the collateral so we also   separated this so basically a person that is only 
interested in tesla stock he can just come and buy   the tesla stock without providing any collateral 
so how does that work so he basically just comes   to our website and then or he uses a link and 
then he sees a similar interface to uniswap   you can just choose tesla and go long or short 
currently we still support long or short talk   tokens later we will only have them as spots 
so you can basically you buy a tesla a real   stock that is backed by everything around the 
system okay so from the front end point of view   me as a user i come in and i'm like all right 
i like tesla i like it trading at 678 bucks so   i i put 678 bucks worth of deus in and i 
get out a tesla stock in yes in my in my   uni in my metamask wallet yes one tesla yes what's 
happening in the background like what's that long   position actually look like inside your system so 
in in that sense the the tesla token would be then   backed by the system by the oracle so tomorrow if 
the tesla is worth 710 dollars he could go back   and sell it for 710.

Who's buying the other 
side of that right so so so what what deals   actually doing is like it's like a decentralized 
clearinghouse currently it's still backed by   vaults and and and over collateralization rates 
but in the future we will basically apply the   same mechanisms that are in in future exchanges 
and and other cfd brokers where you have like   um funding rates so basically people that 
go long or short they're paying the profits   every hour to each other so that the pressure 
is completely taken off the system of course at   the beginning we still needed to bootstrap it to 
get some more traction by attracting some users   and later we will completely switch to the funding 
rate system and then there will be a volatility   index on every stock so every stock will have its 
own funding based on the volatility and also this   is only possible because we use our own oracles 
so we can basically calculate it so breaking that   down a bit more making that yeah let's let's open 
it financial box and uh talk about the sort of   what's important from the point of view of a trade 
that the trading in the back end on the volatility   to create what is essentially a synthetic 
instrument right like so me as a me as a   user who just wants to own tesla i i i all i want 
to know is that when i come back to the platform   that the asset the synthetic asset that i own has 
the same price on market as what it is in other   words you know on the nasdaq stock exchange yes 
so how does that back end like market of traders   go from being able to create you know just betting 
on whether or not it's going to be higher or lower   in the next hour to ending up creating for 
the end user a stock that essentially follows   exactly the same trajectory as the underlying as 
the london asset i'm trying to get exposure to   so basically the the term that we 
formalized is it's a synchronized   perpetual it's like a perpetual contract 
but it's it's synchronized to the real price   and the funding is based on how much people are 
actually going or how much value is going long   against how much value is going short and in the 
end we incentivize people to take on the opposite   position so they are farming funding basically 
and the the smartest idea would be for example   let's say four four hundred people go 
long on tesla and and only 100 people go   short so there is a four to one difference so 
there would be a funding rate paid to the short   people now it would be optimum to to take 
the short position and somehow on another   broker or somewhere else along your longer 
tesla position and then you're just farming   the funding that's that's basically how it's 
done in traditional finance and that's also   the system that we want to integrate for now 
we use over collaboration rates and somehow   perfect funding where we attract hedgers 
through the funding rates and the incentives   that they're getting and somehow later also 
provide them with the opportunity to hatch it   through the system but everyone could basically 
already hatch it by themselves so a lot of this   stuff often sounds like you know financial 
wizardry or it's financial recovery right   so let's take a um an example of of tesla 
now and we're doing and what's what's your   um what's your perpetual period is it is it 
just a one-hour period or is it like you can   take multiple lengths of time or like what's the 
way in that works so so currently in our in our   trial phase with the very high over clarization 
rate it's it's basically it's just a token   and there is no no strings attached you just 
pay a v but very short after our our x die   test launch to to prove our oracle's 
network we will switch to a leverage engine   where you can also go leverage and then you have 
we have a one hour uh contract length basically   and after after one hour let's take the one hour 
yes yes yes yes so like what you're basically   doing is on the back end if i'm if i'm if i'm 
correct and like please tell me if i'm not   you you're going okay in an hour market 
what do you think is going to be the is   going to be the price of tesla and like 
is it is it going to basically is it um if if if you have more longs than shorts meaning 
that the market is generally thinking that tesla's   going up from here you then have a secondary 
incentivization mechanism which makes it   profitable for me to take a short position to 
balance out both sides of the box now can you   explain a little bit more about how that works 
so so basically um it's more like this you could   you could buy the tesla for more than an hour 
you don't need to bet on the price in one hour   okay but what what you're basically betting on 
or what you're paying for is how is the system   looking during that hour so how much people are 
actually going long how much people are going   short and after one hour everything is cleared 
so long space shorts completely so that there   is no open depth in the system that's what it's 
really about so like in the in the traditional   financial world there is like a t plus two it's 
like two days until everything needs to be clear   that's also what happened to robin hood a month 
ago yes so and we are because it's decentralized   and and everything is automized we can do this 
way more often so we're going for one one hour uh   length of contract and in that time there will be 
a funding fee calculated already and even if you   exit the position before you're basically already 
paying it so there is like no way to escape it no   no front running and you're it in the end we want 
to have experience so that every trade so that for   the trader it feels like um he's really trading 
the stocks on robonaut or anything anywhere else   so we want low fees low spreads low funding rates 
but still have a system that is collateralized and   solvent so so if i zoom out you're doing something 
really interesting yeah and i think that to some   people who aren't like fully defy native i think 
this is a really interesting thing to highlight so   you are relying on the existence of an efficient 
external market that some people have access to   and will arbitrage your market to make sure 
that the efficient external market and your   market equal each other and this is this is what 
uni swap proved out this is what people didn't   really think would actually work in an efficient 
markets way until uni swap came along right   because what uni swap did is they went look we're 
going to have a constant function market maker and   if the market moves off ledger the price 
will stay the same but what we're relying   on is that some people have access to that 
off-ledger market and what they'll do is   they'll do the logical rational trade between 
the two to bring those two prices in line again   and what deus is basically doing here is they're 
going look not everyone has the ability to trade   traditional markets but some people do and that's 
all we need is the people who have the ability to   trade traditional markets and the ability to trade 
on deus to then create the arbitrage opportu to   then trade the arbitrage opportunities between the 
two and therefore rely on the existence of those   people who can sit between the two to make sure 
that the synthetic asset and the real asset trade   versus each other right exactly exactly and 
that will open basically a brand new world for   people that never had the ability to trade 
financial assets traditional financial   assets on the blockchain okay um i have to ask 
the question which is like what about regulation   so what about regulations yes so in in that sense 
deals is is it is a decentralized protocol so   basically the the stocks um they are not deployed 
by us developers we just provided an engine   like basically a script somehow like uni swap you 
go to unit swap you can create any pool you want   the same with our protocol you can go to 
the website and you can basically create   any asset you want right so it's basically it's 
the user doing it right user creating the market   it's it's not us right creating the market 
okay i understood and and it once once a user   has created that what what's what what does the 
what needs to happen in terms of liquidity and   volume for a for you to be confident or for for 
the community or the pro school to be confident   that a newly created stock will actually track 
its its equivalent counterpart off of ledger and   how do you make sure that that sort of like 
happens for the stocks that are created   so so that's a pretty interesting question and 
it's also a very important question it's something   that i was was thinking about from the beginning 
and what we basically did instead that we are   using order book models or somehow yes or a book 
we are basically using automated market makers so   it there needs to be no counterparty for the 
person to trade there needs to be no volume   all that we need is an over collateralization rate 
and later the funding so that we know the trades   that are taken they're not destabilizing the 
system at all and then basically everyone could   trade any stock that he want even if there is 
actually no volume for it and he's the only buyer   for it so i understand that being true for the 
over collateralization system for the sort of   like the synthetics yes yes the system 
but for the for the funding rate system   you're gonna have to spell that one out for me 
a bit more so in in general it's it's like this   even if there is like not um 
the person maybe trading um   a palantir or some other asset that maybe no 
one knows about he's like trading it alone   but because it's it basically works as a as 
a pooled liquidity if there is somewhere else   someone already take that took a loss and that 
is everything is calculated into the funding   that loss is also inside of the pool and is now 
able to back our trades so it's basically all the   trade all the traders together are creating an 
insurance fund similar to what bit max and and   and and yes bit mix is doing so there is like all 
the all the losses of the traders are accumulated   and and are used to to back everything that is 
coming in the future so pretty interesting yes   so what's the black swan event what's the thing 
what's the thing that breaks the system so so the   thing that that basically like we have called 
we have the collateral in in crypto and crypto   is going down for a very long time while all the 
stocks are going up and everyone is only betting   on stocks going up that that is so do you have a 
a rule in which stocks are introduced like can can   anyone literally create any stock pair or is there 
like a system by which you kind of try and create   i don't know i mean like my the way that my mind 
goes straight to is covariance it's like what's   the covariance of the total stock that are allowed 
to be traded on my platform like the closer to   zero i can get the better um just because that 
means that my total diversified risk of positions   is as close to zero as possible depending on 
time frames right so what we're what we're the   approach that we're doing now is we basically 
use assets that are less volatile ah okay yes yes and and in the in the future like 
the the oracle enables us to to do   all kinds of calculations of chain so 
we're experimenting with all kinds of   like funding systems and the idea like our goal 
is to make it to make the users able to trade   any asset and that the volatility and 
everything is taken into consideration   the the the total collateral is always 
taken into consideration and that every hour   every hour we're calculating all of this and 
applying it to the to the positions of the users   so there that there is never like in because it's 
like the time like it's going into one direction   for a very long time and crypto are going into 
the other direction that's the risk so when we   when we bring it back to equality every hour it 
reduces reduces reduces yes we balance it out so   you guys are live already with with with five or 
six yes um you say you're talking about going from   an over collateralization system to a funding 
rate system what sort of what sort of timelines   are we talking here what are we expecting to 
see the sort of the next iteration of deus   so our currently we we just had a talk yesterday 
having a minimum viable product of the leverage   engine ready in two weeks but of course this 
will not be rolled out immediately so we will   we will have the stocks with very with very low 
volatility in the near future on x die like on   layer two where basically you don't pay at almost 
no fees so it's perfectly to show of the system   and then slowly introduce the leverage a system 
with the funding and then move it completely over   and introduce more and more and 
more and more assets over time so   q2 q3 should be the ending of queue like somewhere 
in summer we want to be ready with it for sure   it's super exciting and if people want to find 
out more like where do they go how do they get   involved so um our like most activity is basically 
on telegram in our telegram chats we have very   active community we we we um like we grew we grew 
we were grown like we grow completely organic so   every user uh that is india somehow found about it 
um on twitter or something we have we have some a   lot of influencers that joined the project in the 
static sale phase like in september already so   that's something that we're very excited about so 
if something if someone wants to get to know more   about the project he should come to the telegram 
and also check out the wiki or wiki we have like   what's the telegram channel called uh it's called 
diaz finance so that's d-e-u-s yes d-e-u-this   finance your website is d-e-u-s dot finance 
exactly exactly which is nice and easy to remember   yes and then your wiki where's your wiki it's wiki 
dot so key dot desktop finance yes cool   um awesome well lafayette it's been absolutely 
pleasure talking with you thank you so much for   coming on the show um really interesting very 
very intrigued to see the full uh funding rate and yeah massive congratulations 
on on where you guys already are   thank you thank you for having me and see you soon

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