How can DeFi enter the mainstream

How can DeFi enter the mainstream?

Arthur Breitman, the co-founder of Tezos, explains why the tokenization of real-world assets will be the key to unlocking DeFi’s true potential.

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Full Transcript of this conversation: How can DeFi enter the mainstream?

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Jackson DuMont: Hello there. I’m Jackson from Cointelegraph and with me today I have the co founder of Tezos, Arthur Breitman. How’re you doing today, Arthur?

Arthur Breitman: I’m good. Thanks for having me.

Jackson DuMont: So, first thing I want to ask you is, can you just say in your own words what exactly Tezos is, I always think it’s interesting coming from the creator, how’d you formulate it?

Arthur Breitman: I’m good. Thanks for having me.Yes. So this is a blockchain. It’s a smart contract platform. And also it powers a cryptocurrency called Tez. So in its balance, you would say it’s a layer one protocol.

Jackson DuMont: So, first thing I want to ask you is, can you just say in your own words what exactly Tezos is, I always think it’s interesting coming from the creator, how’d you formulate it?I like that, nice and simple. So what’s going on in Tezos? What are you developing right now?

Arthur Breitman: There’s a lot going on, we’ve had a tremendous year of growth, especially in the NFT space and art NFT space has been really, really booming. Now we’re seeing a lot of new growth coming in DeFi space and in the gaming space. The things that I work on is I tried to bring projects to the chain, I try to talk to entrepreneurs, developers and creators who are looking to work on Tezos. But I also talked to development teams, core development teams, because Tezos is a self-evolving protocol, which means that it has rules on the blockchain, to decide what’s the next version of it is going to be. So people will be familiar with Etherium, and you know, saying like, oh, we’re gonna get Ethereum 2.0. So we’ve had nine upgrades on Tezos’s chain. So talking to the developers who are working on those upgrades, and that’s many teams working on that is also part of what I do.

Jackson DuMont: So you named a couple of sectors earlier, there are DeFi gaming, are there any particular spaces in the Tezos blockchain, that you really are, you know, in blockchain general that you’re really excited about, like sectors of the industry?

Arthur Breitman: Gaming, which says that’s a very exciting, it’s very exciting sector. And it’s, you know, it’s something we’ve been passionate about for a long time, you know, I started involving, getting involved in some gaming projects in Tezos in 2018, before giving an NFT was a big thing. But I would say now, largely speaking, people are starting to realize that gaming is very important. And those areas I’m quite excited about, that people haven’t really tapped into, is DeFi for real world assets. We’ve seen DeFi for DeFi assets, which is interesting as a lab and as an experiment. But I would say to unlock the real power of DeFi it will have to be used for actual financial implications, real word assets being tokenized. So the combination of those two words, the meaning of a traditional securitization, and default is going to be quite big. I think.

Jackson DuMont: When you say real world assets, are you talking about like stocks? Are you talking about like cars like…

Arthur Breitman: Yeah, absolutely. No, I am. So it could be it could be stocks, it could be digital arts. I consider that a real agonist. Is that a real assets? Stocks, digital arts, real estate, anything you can think of.

Jackson DuMont: So are we talking about NFTs here then?

Arthur Breitman: Yeah, absolutely. Financialization of NFT is going to be a big thing.

Jackson DuMont: You know, it’s funny, because whenever I hear about, like the stocks thing, I always think about Synthetix, you know, you know Synthetix right, and I mean, maybe I’m wrong, but to me, it seems like it hasn’t really become too popularity, even on the TradFi community.

Arthur Breitman: Yeah, so there’s a couple things. One is that right now, we have a high tide, there’s a lot of excitement. And you know, you’re either out of the crypto space, in which case, you’re not going to look at it or you’re in the crypto space, and there’s just so many opportunities, so many things going on, that it doesn’t feel that those applications are very, very compelling at the moment when you know you have a yield farmer you can get like 500%. If you’re a finance person, and you’re looking at this space, this is what you’re looking at, right? Now I would say the tide is going to go out at some point because you know, these things are not sustainable. And what will remain are real use cases and that, at that point, I think we’ll see more interest in these.

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Jackson DuMont: Got it, so like, what’s that, what’s that catalyst then? To get people in.

Arthur Breitman: The catalyst I say is some of the hype dying down a little bit actually.

Jackson DuMont: Ok, got all the dust settle. Figure out what’s good.

Arthur Breitman: Yeah, exactly, exactly. I think we’ve had tremendous hype over the year 2021, which brings a lot of money into the space so we’d help spill a lot of things. But you have to, you know, it’s kind of like bulking up and cutting down at some point you have to come from that to what actually has a point and the point of DeFi cannot just be to trade DeFi tokens.

Jackson DuMont: Yeah, I’m laughing because that’s what it is right? So okay, you have Tezos, you have Ethereum, you have Cosmos, you have Polkadot, you have all of these layer ones. What is the resolution of this layer one landscape look like?

Arthur Breitman: I mean, consolidation definitely is going to happen. Network effects are possible because as we’ve seen, bridges are very difficult between trains, we keep seeing bridges getting hacked. There’s natural reasons for this to happen. Blockchains are not very good at porting state from one to to another, even an ecosystem like Cosmos, you make some, you have to weaken your security assumptions as soon as you have a bridge. So I would say that that is going to leave verticals for different layer ones. So I think network if it can be built around their verticals in no spaces, but lots of consolidation.

Jackson DuMont: So are we talking a zero sum game, two or three blockchains? Like, what do you think?

Arthur Breitman: Well it’s not a zero sum game, because it is the universe of what can be done is, is still expanding. And like I said, right now, it’s very, very incestuous, almost, you know, the type of trading that happened on this blockchains there’s a gigantic untapped universe that’s out there. So I think everyone has a lot of room to grow at this point. But I would say after a growth phase, and there will be some consolidation, I don’t know, if it’s two or three, like, you know, I’m gonna give us the safe center sensor, which is going to be a paralel, and then the the exponent of the paralel is just going to keep increasing.

Jackson DuMont: I like the idea of, you know, having niches for blockchains, like specific use cases, what do you think about that, like Solana for gaming or, you know, carving out a specific sector of the industry for that blockchain to inhabit?

Arthur Breitman: Yeah, I think it’s possible. One thing we have to be careful about is that a lot of time people think that blockchains are going to specialized from a technical standpoint for those niches. I think like, oh, your blockchain will be designed specifically for that use case. I don’t think that’s going to be really the case, I think we’re going to see a lot of convergence in the design of blockchains. We’re kind of circling patterns of you know, what works in terms of upscaling and what doesn’t. So we’ll have a lot of convergence. But what makes, I think, a niche sticky is simply just a network effect of the composability between the contracts and just people being there.

Jackson DuMont: So you think we’re kind of just like waiting around to until someone finds the best solution. And then we kind of like iterate on that.

Arthur Breitman: I think we’re getting there.

Jackson DuMont: So that kind of brings us to the trilemma, right? Decentralization, scalability and security? How is Tezos like?What, where do you stand in all three of those?

Arthur Breitman: I mean, for a while we stood back, because I was looking at the scale, I was looking at the solution that were available, the way that I wanted to do sharding in 2017, and I didn’t see anything that was convincing. My own approach that I published in 2017, for doing scaling was using zero knowledge proof for scalability. So that’s now known as ZK-rollups is what you see, for example, with companies like Starkware and StarkNet, or Aztec or Matter Labs. So these have become extremely popular at scaling solutions. Interestingly, I do think that the best paths now for scaling is combination of similar technological called Optimistic Rollup, and data availability sampling. So that combination I think is a winning one, it’s what we’re going to start seeing being deployed. I don’t really bind a very, very big, very, very fat layer one, high throughput layer one approach that Solana is doing, I think, having a modular approach is going to win.

Jackson DuMont: So I think a lot of what you just said, might have gone over whoever’s watching this, do you think you could like dumb it down a little bit and explain what’s…

Arthur Breitman: So I think, so the first thing is, I think we can solve the trilemma, right? I don’t think it’s inescapable fact, I think you can have something that scales, that’s really decentralized, and that’s really safe. So that’s the great news, the good news about it. So the way I think about it is that when you think of a validator on a blockchain, they’re really doing three different jobs. One is that they’re taking all the transactions and then saying, in which order, this transaction should happen. And that sounds very, very trivial, you know, who cares about the order, but it’s actually a subtle problem. And that’s, you know, that’s what at the heart of solving the double spend problem, right? It’s like, you want to have an ordering. That’s where consensus come from all of that. The second thing they do is they take all this transaction, and they execute them, they compute the results. And asserting that they do is that they tell everyone what transactions have happened so that I know if someone is paying me, you know whether or not that the payment is valid. The approach to scaling and solving the trilemma involves unbundling those three activities, you basically take your validators and you say, you’re just going to audit transactions, that’s all you’re going to do. And we’re going to rely on different solutions for making the transactions available. And we’re going to rely on different solutions for executing them. The way ZK-rollups work is that you outsource this to another party, it could even be a single party, someone who’s going to collect all the transactions have been posted. They’re going to compute the results. They’re going to pose the results. And they’re going to post a cryptographic proof that the result is correct. That’s the magic. So they post a very small proof. It’s got a 100 bytes. You spent two milliseconds on internal like, yep, yep, you know, you’ve done this calculation for five hours, you’ve checked everything and I am convinced is correct. That’s a magic. It’s very, very magical. There’s a big downside, which is computing this proof is really, really expensive. It takes a lot of computing power. This is a lot of overhead. The Optimistic-rollup is a very similar approach. But instead of posting a proof, you just post some, you just post a bond and you say look, I believe this is the result. And if anyone disagrees, they can prove it very, very easily. So instead of proving that you’re right, you wait until someone proves that you’re wrong. So that’s a, it’s a very slightly different security properties, but you don’t have to have this giant overhead of computing this proof.

Jackson DuMont: Interesting. Thanks. Thanks for giving that definition. I appreciate it. Any final words you’d like to say to Cointelegraph viewers?

Arthur Breitman: Yeah, check out Tezos, because you know, we’ve been around for a while. And last year has been a year of tremendous growth for the project. We’ve had a lot of really cool applications launching and a chain, check them out. And also check out a roadmap for scaling because I think we have one of the best roadmap for scaling out there. And we’re executing very, very quickly on it.

Jackson DuMont: Thank you so much. That was Arthur Breitman from Tezos and I’m Jackson. Hope you enjoyed this interview.

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