Tether (USDT) – Paolo Ardoino: The Evolution of Exchanges, Stablecoins & Tether story explained

Prime Minister has announced the most
drastic it's clear that we're gonna have a recession is more severe than the
global financial crisis we are looking at other available options more and more
people are buying and holding Bitcoin Bitcoin Bitcoin let's take a look at
Bitcoin some call this digital gold everybody should probably wrasse 'it's
in Bitcoin everything jerk crypto comedian
blockchain blades across the globe welcome back to Cryptonites season 3 live
here from the CryptoCompare Digital Asset Summit 2020 and we have tons of
mind-blowing and timeless interviews just for you the awesome community and
today we're talking with Paulo Ardoino CTO Bitfinex just because we had access
to the story behind tether tons of really interesting things we're gonna
debate and don't forget to like subscribe and comment below if you hear
anything interesting we'll get back to you as soon as possible but without
further ado Paolo, it's a pleasure to have you today
thank you for having me here I'm so so happy to have you and I have so many
questions but first and foremost I was looking at your LinkedIn background and
I saw I'm a computer scientist and yeah you tell me what geek means in my days
you know when I was in the in the 80s like the word nerd or geek was kind of
like the guy who had parents up to here with the funny glasses and stuff like
that is it a cool thing these days well I mean probably I added to link it in
before it became cool I think that I'm not updating my LinkedIn profile since
quite some years but you know I been developing coding since I was eight you
know I was I grew up in a really small town five six hundred people my dad
bought me a computer with a few of his salaries when I yeah when I was hate and
from there I started coding my friends were all quite distant from my house so
the only thing that could do in summer winter was coing so I feel like I'm you
know a geek a nerd I mean I spend I'm only coding all my time so that is a
good definition for me I don't have much many obese or I don't have all these at
all then just just creating stuff so but you know today it seems like criticals
has made the term nerd and geek more more appealing and more more cool so
that wasn't like that back in the days but I'm glad that that
is getting there yeah there comes a really funny memes
out there you know with kind of like the geek with a really cute girl and really
funny stuff out there which I'm sure everyone has seen but you mentioned
something really interesting you said you were taking computer science classes
and I remember a little bit earlier you were saying like out of a roughly 170
engineers only between 10 to 15 were women was that the case yeah I mean when
I was at university the number of women in our course was was quite low i'm i'm
i think that is similar to that also today i think that we need more women we
need more more women in development science coding project management they
are i mean sometimes they a team made only by guys is not as expected as a
mixed team or a team made by girls but also probably a team made only by girls
would not be as effective as well so it's it would be great to have a company
that's maybe 50% by guys and 50% by girls that would be more productive and
would grow faster in my opinion that's a really good point I mean even I've seen
in our team so some women women had great focus like yes earlier and like
you said the attention to detail which is critical right when it is definitely
I mean when you are in a trading platform you want you don't have space
for errors and we often see women spotting things much faster than than
the man we are always trying to hire women unfortunately the number of CVS
that we get is like 95 – 98 percent guys, 2 – 3 % women so why would these women or
men want to join our space obviously you as a computer scientist you have many
options but you chose the cryptocurrency space what were the motives that really
got you interested in this space well for me it was thinking that eventually
looking back 10 20 years when the the financial revolution would
completed or more established I will be able to say I was there I have to make
that happen it's really rare that you have an
opportunity as a person to be part of such a big revolution right and so for
me it's like yeah III was there I was there I did my part
good bad I tried my best to help these this movement that I believe that is is
incredibly important to change the face of finance in in the world because till
today finances is managed by the fuse there are a lot of people unbanked I
believe that needs to be changed bitcoin is the right solution for that
and that is why engineers coders project managers marketing experts and they are
all trying to look into this this new field because it's exciting it's like a
territory unexplored territory so you have one opportunity in 100 year like
this that is so lovely I just love the way you put it because I felt exactly
what you're feeling as I want to be a part of this financial revolution you
know I'm approaching 40 this year and I want to do something that you know it's
meaningful in my life and you know the day I I leave this earth you know I want
to really be say that I'll be that I've done something to help this even a
little bit doesn't matter everyone needs to give it one up one other percent then
I think that is the first time that that group of peers trying to create
something that is that can be sorry right is this is a peer-to-peer finance
we are creating a better system I think that something that can is more salient
to problems in the future and I really love that I mean I'm all about peer to
peer like peers peer trading peer-to-peer networks peer to be my
background is in scalable networks and distributed computing so
this is my dream job dream life their dream future you know that's great I can
I can feel the bass shit I can feel it so in terms of the actual cypherpunks we
were talking about them earlier were you inspired by other cypherpunks or were
there particular people in this space that you look up to still as of today
and you think all this person is a great ambassador or this person motivated me
so there are many people in the space that that that money made motivated me I
mean well I grew up you know looking at films and reading about kevin Mitnick
you know and all the stories the social engineering
Kubik i was calling a lot right was you know I really loved the cyberpunk aspect
of our of our industry I feel like with with time while we go mainstream Bitcoin
and cryptocurrency will lose that aspect already they are losing it a bit but
there are a few people I believe that the atom back is one of the least a
block stream is brilliant guy so knowledgeable and he I mean is an
inspiring figure so yeah I think that I'm trying to do my best to keep that
aspect also in between X and terror because treating this as a playground to
create new things to break things as also you know the type of what I like
about the cyberpunk culture is that things need to do to be super resilient
to resist even in the worst case Inari is in are even in the apocalyptic
scenario you're right I like I like that I like to be when I when I create things
when wise when I talk to people that like Adam and and other in from other
companies the the the old thing about how we can create something that would
resist to any catastrophe and you know I blocked stream launch the satellite that
is that is mind-blowing is so cool I mean you can you can send transactions
and and messages through their satellites I mean how what is more
exciting than that so yeah I want to be part of it
it's incredible like sending like peer-to-peer transactions through radio
waves yeah well even if the internet turns off now this cyberspace is
definitely these are very exciting topics for the future and there's
definitely one thing guys if you have someone who really inspired you don't
forget to put them in the comments below we just talked about adding back to
massively contribute to this space so don't forget to comment below right now
on stage you gave a really nice presentation thank you so much for that
we'll put a link for everyone to be able to watch your presentation and you were
talking about the evolution of exchanges obviously you have been here with one of
the first gen you know BitFinex on the biggest exchanges with Fiat gateways can
you tell us a little bit about this evolution so let's say the past five to
six years and a few minutes can you tell us how you saw the evolution of the
exchange space so exchanges started as websites like you know you're just small
pages yeah exactly likes more calmer seas we're about the
custom made homemade well of course they are weird but that is not necessarily
bad finger and they created they were created by enthusiasts people that where
they have this vision already they understood the potential and they
created these websites that then got more more traction so this in 2011 12 13
older there was a really huge technology gap in exchanges the internet was
already there and massive things 12 12 years right and yet the exchange is
where we what we call today exchange is where more really like shops now in
2013/14 that you know the we're more say more engineers started to be hired by
exchanges to trying to bring traditional finance knowledge into into the into the
platforms in these platforms and but the problem is that it takes maybe months to
redesign a machine engine and if not years and to find the right moment to do
the integration to swap from one or the or the solution to the new ones
to the new solution and while you you keep working on new things on the new
future machine engine there is the time passes and you get hundreds of new
traders per day or per month anyway and the current system is not able to cope
so you have customers that are pissed off and so on right because they cannot
use the platform well then that is part of my story joined I joined BitFinex in
the late 2014 because at that time and their machine engine was really slow I
mean could like to 1015 transactions order per second that that is isn't it
was not enough you have to remember that betweenness was the main training
platform offering Fiat on ramp and margin trading so we had a lot of
traction because we were offering margin training so you had the possibility of
going long and short Bitcoin litecoin and that brought a lot of people
interest in that but of course if your machine engine is not fast enough
sometimes you you have problems you can have problems you have slugs so you
insert an order and maybe you wait a few seconds in order to get it executed
while people coming from traditional finance world are used to have
microseconds or milliseconds later Z so you don't even notice that so the API
traders that represent 95% of the volume made by exchanges are all about really
high frequency trading I want to place an order I want to place 1,000 orders in
a second and expect that they are all executed or they are I get a knowledge a
knowledge meant for each or one in within one second right and that was not
the case in 2015 I believe that nowadays we are seeing more and more professional
platforms I believe that 2020 in 2020 we reached a really good point in terms of
quality or the past formation in general that's really interesting but you're
right and many people miss kind of like this success secrets from the past right
they'll build their online shop without looking what traditional finance does
institutional great platforms etc and taking hints from the past so that's a
really really interesting point was mal Cox the first real exchange and not shop
or do you believe that first-gen of crypto exchanges came the
bit with the bid for next era was that Mongoose was I believe the first
exchange the first real exchange didn't end up well but but I believe that it
was quite slow they had that machine and she called me das that they were
supposed to deliver at some point but there they everything
well fell before they could do that and that should have been a big improvement
so we we will never know how it was supposed to be before it's a crashing
but yeah I'm I recall seeing even Bitfinex I mean you was I mean was really
really ugly when I when I joined I mean the book was refreshing every 30
seconds I mean now the book refresh every two milliseconds before was 30
seconds before you see a new bid and offer into the into the middle or
outside I mean crazy it's really interesting in terms of like this show
is called Cryptonites so the Kryptonite of Superman what do you
believe is the Kryptonite for exchanges as of today and where should we go next
year and the year after is what would you love to see in terms of development
so there is a great question I believe that one of the missing pieces
now everyone talks about institution money it will come it will come but so
far it didn't really come right when I believe that the game changer is risk
diversification so it means that hedge funds and people with huge money are
used to have one custodian one trading venue one settlement platform so you
have three parties or maybe for parties or minimum two parties that so the
trading venue is not also the venue that one handles your money and your capital
right so that is how it is supposed to be because of course if you trade on one
and if you train on the location and they have also full control or other
funds is one single point of failure and we are building an entire ecosystem and
entire industry on distributed well on resiliency
right so and now but we have centralized exchange them talking as with Bitfinex
I'm talking as the guy that runs one of the biggest centralized exchanges and
first of all we are working really hard to find an experiment with the
centralization and with the peer-to-peer machine engine and things like that I
spend a good time in coding around this topic but at the same time is important
to start integrating other parties into the equation and like this year there is
a big boom of crypto custom solutions and as an exchange we we need to offer
this type of diversification to hedge funds and institution because otherwise
they will not come they will not trust an exchange having both the money and be
in the trading menu because there is too much risk in a single location so that
still needs to come the 99 percent of the assets are still sitting on
exchanges we probably will see some sort of shift maybe a 50/50 percent in the
next two years but it has to happen you have two percent for trading and fifty
percent just for storing yeah exactly that's really interesting and you just
mentioned centralized exchanges you know defi is a massive topic these days I
would love to hear your opinion on the decks you know a lot of people say well
but the decks is the real libertarian you know type exchange it has the
philosophy of cryptocurrency because it's decentralized some people think
that's not true there are many debates back and forth how do you feel about the
decks as of today compared to centralized so I can so we have
first-hand experience in that so we'd bitfinex we created the first at
Ethfinex that was that at offer well not non-custodial trading and use
Ethfinex that is a fully on chain machine engine so we when it comes when it comes
to technology we wear different hats we trying to we try to play with as said
before we are nerds so we like to play with things and break things now we we
tried to build axes my and when there was not yet enough information about
regulations now I mean all the taxes is clear that all the taxes
if if you are doing matching on chain of chain whatever you are subject to the
same regulation so you the promise that you cannot hide behind your finger you
have to respect regulation so the only way to so the problem is that there is
one single entity that will take the train fees or there is a group of people
that will get trading fees as much as you put a lipstick on that there is one
single group one group of people that will get benefit from running that tax
and that where the regulations will will strike
so the the only way to do that is to create a proper peer to peer exchange
where everyone runs their own matching engine and there so it's not one
matching engine on on a blockchain but is everyone runs their own liquidity
pool and they are all basically it's like lighting network knows everyone is
on their own there you can have market makers that can't get liquidity and
their chance to basically arbitrage between all these mall nodes but that's
it you can you have single entities all hundreds thousand of the single entities
that run their own machine and they get their own benefit so the system is fully
resilient right you cannot have like one decks that launch their token that their
war token that with the Bernie mechanism that benefit their community that is a
problem that is at least what our compliance team has understood from
regulators so I'm much more preferred to talk about and to consider an innovation
the non-custodial trading right so you keep funds that are that own on a on a
smart contract you use centralized liquidity that is great is the
centralized exchanges has the most liquidity which venus is recognized to
be the most liquid exchange across all the current biggest ranges and that's it
you use non-custodial training that says no I'm not gonna get found on them but I
love how you took the best of both worlds again you know thinking how you
can combine the two and that's a really interesting point because yeah you're
right you know people in terms of the Dex's it all goes to one central
point right whether it's a middle man or a smart contract that gives you the fees
the money is still going to a central unit exactly so that's really the first
time I read that perspective if you guys agree disagree have any thoughts on how
decentralized x's really are don't forget to drop them in the comments
below thank you so much for sharing that now Tether
your presentation today fascinating actually as of today Tether has higher
trading volume than Bitcoin obviously maybe for multiple reasons which love to
hear your thoughts I believe it's 43 billion dollars that
are being traded on tether as of today first off why Tether so why did you
guys create it? What problems are you trying to solve and if you don't mind
telling us you know why is the interest so high these days that'd be great
so Tether was born to solve one simple problem is that Bitcoin space was not
really fishing so there we talk about the exchanges right there where
sometimes shops sometimes we're starting to look like real exchanges it was 2014
and there were few exchanges like BitFinex bits ok acts coinbase so the
problem is that when the where big price movements the price was chained was
there was a huge price discrepancy of even 23rd percent sometimes and that is
not the type of asset that cannot go mainstream you you cannot have funds
that are stepping into a market that is so difficult to arbitrage because first
of all you have the friction so the only way to do arbitrage between different
venues is to send Bitcoin on one side and to send cash on the other side but
how you send cash is wires and wires take from one to five days and what
about the weekend that was not going to work so at least this group of guys are
behind either this visionaries the tighter team really the the base idea
was how we can create a cryptocurrency that has the same value of the dollar
that is that has the same settlement speed that Bitcoin so we send Bitcoin
from a to an exchange with sent around the other change with but we sell
going when that the exchange is higher and we buy back with the patter from the
other change that is lower right super simple idea I mean if you think
about it is crazy simple right but no one thought about it and this group of
guys say well why we don't try to do it and that song attacker started like that
and the first two years was quite hard was quite hard to even talk to exchanges
to explain the potential of that everyone was kind of you know no didn't
I read understand the potential and then colonics added it was the first big
exchange that add the header and that her pairs and that created the first
real arbitrage opportunity between BitFinex and politics so you could
start arbitrage in a theorem Bitcoin litecoin pairs at other pairs against
between X that had the pact between terror and Fiat so that was massive that
was the first time where I betrayed where the spreads were really really
tight 2017 was the real year where tether
boomed because wahby okay acts added tether pairs bonus was
born upon the entire IC o—- word and boo boomed and all these two new tokens
we are listed against a turn all everyone then had a potato pair so the
tether demand grew from 20 million to 2 billion in one single year was crazy I
mean it really was crazy he it's and tether was you know started as a utility
and become a huge business model and and in so fast that we couldn't believe it
it was so crazy and and was so good to see and then 2018 there was some sort of
current period the price of Bitcoin started declining and of course that
also put opposed to the number of Tetris in circulation because there we were
going through a curtal winter that lasted till Putin first quarter of 2019
and then after that 2019 was was the second part in us in
the nineteen was characterized by nice volatility the price of Bitcoin
recovering we launched on many blockchains so be to
keep you know our our hatch our first mover advantage we understood that we
tether had to be this the common value across all the block chains I don't
understand when people I mean I am a big Bitcoin fan right but I try to not wear
multiple hats and to not be involved in in were legions in religious wars
because I mean I have to I'm helping a company I'm working for two really all
the biggest companies there and I'm trying to be objective and trying to
serve as many community as possible because only within that way we will we
will keep our we will keep growing as terror and we will continue to offer a
better product so I mean competition is still on one one single block Shannon
for me is crazy because it's the obvious thing is to be on multiple block chains
and serve as many commuted as possible right the US has a big community theorem
has become community Iran as a beacon community liquid so all these are
communities that are worth serving and and they will bring additional value to
to your ecosystem so why not exactly yeah exactly so why why hate on them
when they're contributing to the space right it doesn't make any sense we we
felt that was natural for us to be become the liquidity center and there
are so many new business opportunities around theater that goes to a company
that talked to us and say well we want to use Center for immittance is for to
pay salaries invoices there are a lot of companies now that are paying
electricity bills in terror there are companies that are offering loans in
tether in exchange for Bitcoin collateral I mean so people so
businesses can grow using a stable value without giving up their commitment to
long-term to Bitcoin so that is beautiful and that is adding an
incredible value to terror and define is another space that we are
tackling soon we are going to also announce announce a big partnership with
one of the biggest players in the five space flash so I believe that we are
seeing define that's a great movement they are trying to to build that open
and fair financial movement we are seeing all the loaning industry booming
around that I talked about before the USDT loans we will seem soon that we
will see in the core a few projects in the possibility of borrowing USDT
with BTC collateral directly through our contracts through the five projects and
say or to basically land USDT to others through this the smart contracts
this is a we got so many projects approaching us in the last months is
incredible flash loans are really interesting use
case is well was quite spoken in the last last weeks I believe that shows the
type of innovation that is pace is capable of it is it's just mind-blowing
that's fantastic I want to ask you more about fashions but just one question
based on what you're saying so kicked off together as kind of an orbital
arbitrage tool yeah a lot of people use it as a hedge as well micro ribbon
senses paying people loans so many utilities are getting built around
tether are there any reasons why people should use tether and not US dollar the
actual fiat currency when they're trading well because fiat currency is
slow I mean is every time you move it you have to pass through an update and
banking system as much as use Swift whatever you're using is still I mean is
different than having a confirmation every 13 seconds that is theorem for
example or one minute is liquid right is when you have your keys the I mean think
about the the entire concept of having or holding your private keys
suddenly you you feel powerful you know that that doesn't matter how much money
you have but you know that that money is yours no one will catch it no one as
long as you keep your private key things that is yours and is there is no better
feeling than that like the entirety of Bitcoin is not not you're not your key
is not your Bitcoin right that that is why cryptocurrencies are so important
because he gives back the power to people it's you've wake up in the
morning you have the good feeling that what you have is your yours isn't no
better feeling that it's incredible the ownership right yeah yeah I mean and you
just raise a really good point we had Rune Christensen so the CEO MakerDAO on
this show and he was kind of saying that the future stable coins are
decentralized coins or centralized coins will we'll probably have a decentralized
network with centralized coins laying on top of that decentralized network is
that do you agree with rune and how he sees the future stable coins moving
forward and how do you see this evolving eventually I believe that we will see
more project like make her down we are seeing already fueled them and many will
grow and synthetized stable coins are in my opinion really important because cash
reserves are a good mix in in in the bowl in a sense that if you have cash
reserves they they are stable by nature right you can have Treasuries as well
but they are really stable right so most of the five projects that are offering
stable coins have an hour time to reach really big sizes because of the huge
depends on the sea from cryptocurrency collateral right so that is really
really volatile so the risk of getting liquidated is really high and so on
right so I would imagine that let's say an algorithmic stable coin on a smart
condi would like to have a good component of a centralized fiat and
traditional instrument backed stable coin in order to keep to the risk it to
keep the risk lower and I believe that so I agree with with with that idea yeah
was so nicely put thank you so much for educating us on that now I have a
question on you know how can we build trust for
people to use tether imagine I'm a traditional guy I'm used to fiat
currency this is a bit new to me and we're always afraid of new things like
how do you build trust and how would you reassure people who are thinking of
using tether rather than fiat currency directly I think that one of the major
problems is using experience so this is one of the real one of the main problems
in our industry in general so there are not good wallets that are really easy to
use for the average Joe I mean I with my parents I mean they even the BitFinex
application is really way too more to complicate it's to trading oriented
there are interesting projects I be I'm really in love with a few projects that
that are offering wallet around lighting network they are super good but there is
still I believe a lot of work to do on user experience in general and it's also
important the speed of payment right also when it comes to terror
so that er the journey of terror in experimenting is not completed yet so
because you said how we can have people using more Thai Rak and we can improve
the adoption right and the way to do that is to ensure that when they call in
to the tube and they can they can pay with their phone like instantly with
chatter yeah so I believe that one way to do that is to create two and tatter
is is one of the promoters and it's providing funding to a project called
RGB spectrum that is a way to a protocol to to issue digital assets on top o
light network so lighting network my opinion is the best decentralize
peer-to-peer micro payments protocol ever built and is how it should be built
so I know that people have different opinions we can people like think that
you can do on everything on one single blockchain you can have sharding fine I
disagree my background is in peer-to-peer
networks and in the supportive computing that is how you do you build that that's
how you build a peer-to-peer micro payment system now the logic for a
following step is how we bring tethers to lightning Network so we
are providing funding to this project and we are helping this project to grow
and so then you can have a nice wall at work you can keep your midpoint you can
keep your assets that you build on top a lighting network and the settlement
existent is real-time the payment will go through immediately without without
any any problem and you will be easy to use for everyone so we are really
focusing on that side of the of the to improve the pattern adoption in future
for someone who works in connectivity in scaling solutions you know for financial
engineering and stuff like that I'm so happy to hear that
lining network is looking really good do you really believe this will solve the
scalability issue with Bitcoin yes seem really enthusiastic about it that is the
right way I mean I like that Bitcoin didn't implement smart cultures on the
top of it I believe that smart contra should not be on the first layer I mean
smart contour should be built on a second layer or on our own side chains
whatever I believe that like in network is there I approach is the only thing
that can resist really apocalyptic events because these there are small
segregated networks that can be interconnected by weak bigger nodes is
all should be done so fascinating Paolo thank you so much for all the knowledge
you've shared today with regards to stable coins with regard to defi flash
loans cypherpunk geeking off being a nerd and all these
cool things if someone wants to follow you or get in touch with you which
network do you use these days I'm mostly on Twitter that's my preferred social
network so twitter.com slash Fowler do you know names your name all attached
with no Dodson and underscores or github that is really important in PR at the
end so you can see I'm really active a coder there so you can you can see the
probe the open source projects I'm according to Brut into some fantastic
thank you so much for contribution in this space and guys if you have any
questions comments don't forget to drop them here below the more perspectives we
have the more we debate the better we become sharpen the saw too
together so please do share your feelings and opinions don't forget to
subscribe and we look forward to seeing you next week
eight o'clock gmt premiering at a pc near you thank you so much guys

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