Charles Hoskinson: How do we come up with a better term for useful Defi? I want to talk about DeFi, and its new translation called RealFi.
Defi and RealFi – what is the difference between the two? RealFi is DeFi as a superset. Basically, what they do is they say hey, these are some categories of different use cases. But there is something that is missing from DeFi.
And, that is really 5 categories, 4 categories and a meta category. So, there is identity, meta data, governance, standards, and certifications, and we put them all together, you have some notion of a regulatory structure that sits on top of that. So, RealFi simply is DeFi with identity. And, we are going to talk about each of these things.
The Dapps themselves have some agency. So, the application running on the blockchain has the notion of identifier, and the people interfacing with it has some notion of identity not necessarily a real-life identity, but enough identity to say, this is a unique individual and it is distinct and different from something else.
An identity does not have to be a universal concept to that everybody in that network knows that identity, it can be completely anonymous to a random person, but to a specific person that identity is null.
Metadata is we are going to tell a bit of the story about the nature of the people, the funds that are in the account, or the story behind them. The transaction that goes into the smart contract or into the DEX or whatever it is we will know a little bit about that.
Governance is basically how we upgrade and update and change the Defi that exists. So, we have a DEX, we have a stable coin version 1.1, version 1.2, version 1.3 and its upgrades. How do you make those changes? What is the process to decide those sorts of things?
To decide certifications, and about the extractions, about how to do certain things in the DeFi that are industry accepted practices.
Whether that is standard for bridges, standard for market making, standard for asset issuance, and representations, standard for data that is produced, and how that data is stored etcetera, etcetera. And, then a regulatory structure is basically the thing that sits on top of that. And, it is scoped to a jurisdiction or jurisdictions relevant to where the assets live and the commerce being conducted by those actors.
So, a lot of people say that regulation is coming from Defi – and that is true and the problem that regulators have is how do you automate it and keep it decentralized. So, Defi going to RealFi has those four properties identity, metadata, governance, standards and certification.
But then, it has this concept of decentralized regulation – De-reg technology. So, there is some reg-tech technology to be put in, so that you don’t have to change the underlying protocol.
Bitcoin does not have to change itself. Ethereum does not have to change itself, but some overlay, where you can apply your regulatory scheme and some basic capability of regulation of things like transaction reversals, freezing, things like being able to identify the actors involved, know your customer, anti- money laundering and these types of things.
So, whoever can solve this I think is going to control the entire DeFi space. Real Fi is the next generation of DeFi
A finance graduate, Maheen Hernandez has been drawn to cryptocurrencies ever since Bitcoin first emerged in 2009. Nearly a decade later, Maheen is actively working to spread awareness about cryptocurrencies as well as their impact on the traditional currencies. Appreciate the work? Send a tip to: 0x75395Ea9a42d2742E8d0C798068DeF3590C5Faa5
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