Leaders in Lending
Leaders in Lending

Episode 1 · 10 months ago

How Blockchain, Crypto Assets, DeFi and NFTs are Transforming Financial Services


In traditional finance, the system runs on a centralized infrastructure and the burden of trust falls on people. In decentralized finance (DeFi), the burden of trust falls on smart contracts and on code.

According to today’s guest, Ryan Berkun, Founder & CEO at Teller Finance, financial institutions are going to dive into DeFi in a big way over the next 12 months.

Do you need a primer on all things DeFi, crypto, and NFT? Listen in.

We discuss:

- How lending on the blockchain has evolved

- Lending challenges around identity and privacy

- The emergence of NFTs and DAOs

- How to gain an understanding through hands-on experience

Mentioned during the podcast:

- Chainlink

- Coinbase

- MetaMask

- Aave

- Arbitrum

- Polygon

- OpenSea

To hear more from Leaders in Lending, check us out on Apple Podcasts, Spotify, or on our website.

Listening on a desktop & can’t see the links? Just search for Leaders in Lending on your favorite podcast player.

I'm a financial standpoint. The cryptocurrency space has an opportunity to revolutionize how digital assets are transferred and held and the transparency and openness of that. You're listening to leaders and lending from upstart, a podcast dedicated to helping consumer lenders grow their programs and improve their product offerings. Each week here, decision makers in the finance industry offer insights into the future of the lending industry best practices around digital transformation. In more let's get into the show. Welcome to leaders and lending. I'm your host, Jeff Keltner. This week's episode features my conversation with Ryan Burken, the founder and CEO of teller. Now Ryan's in the crypto space and this goes pretty deep into Crypto, so I wanted it in the intro give a little bit of an overview of some of the key terms for those who might be less familiar. It's a couple things to keep in mind. Number one thing will dive into blockchains. Blockchain is a concept of a Public Ledger Versus Traditional Private Ledger, where you know things are kept by a central authority off in a bank or Credit Union. The blockchain is a public ledger of assets and ownership, and it's usually verified by either a proof of work. So the traditional thing, what we call mining, where you saw hard math problems to stamp the to stamp the Blockchain's ledger, and then you're rewarded with some tokens, some value, and slowly shifting to proof of steak, whereas, opposed to solving hard math problems, you put up some tokens of that of the blockchain that you're that you're staking in, and in return you get a yield, kind of return for putting that, those tokens at risk, at stake very some or to kind of, you know, lending or putting a collateral lot for a loan on top of blockchains off and our cryptocurrencies. These the tokens that you're given. Most common ones here are bitcoin and Atherium, though there are many other blockchains and many other cryptocurrencies. cryptocurrencies can be used as both the store of value, you can hold it, similar to a security, where it can go up and down to value, but ideally to hold value, and as a medium of exchange, of transaction, so you can buy things, sell things and exchange value in blockchain and cryptocurrencies. Importantly, there's a type of cryptocurrency called a stable coin, which is generally pegged at one to one to a traditional Fiat currency like the dollar. So USDC is a great example of a cryptocurrency that's pegged one to one to the dollar, which allows you to easily move in and out of US dollar or other currency denominated transactions and in assets when you're when you're doing transactions and blockchain. Another kind of kind of asset that's often sort in the blockchain is n FT, or a non fungible token, which is kind of validation of ownership of a digital asset, often an image. You'll hear the phrase PfP for profile picture on, where you own an image that you then use for your profile picture online. The last concept I will talk about is defy, or decentralized finance, which is really the concept of bringing traditional financial services onto the blockchain without a centralized player like a bank or credit unit. So lending or investing in a decentralized way where you can earn, yield or borrow money. Today, most lending and defying on the blockchain is over collateralized. So people are are lending cryptocurrency, but they're lending it with large amounts of collateral. Teller is really involved in this shift. That's what I would say. Two things for the blockchain that are really important for the future and how it might interact with financial institutions. One the shift away from highly overclateralized loans to less or even unclateralized loans being made on the blockchain. That's a huge shift, true lending, I would say, versus just kind of a liquid lines of credit kind of thing. And the second is the ability to connect in a privacy protected way, real world information like credit scores or identity to digital wallets or kind of digital identities that are on the blockchain. So I think it's really great conversation at delve into only some of the fundamentals of cryptocurrency but where this world is evolving and where it's going to intersect with the world of what the Crypto folks called Trad Fy, but the traditional world of banking and credit unions, and kind of way that intersection is going to happen and what it's going to look like. So please enjoy this conversation with Ryan Burken, the founder and CEO of teller. Ryan, thanks for joining me on the podcast today. I really appreciate it. Couldn't be more excited than talk. Let's talk about dfives, like about banking. We're lending goes in the future, defy banking crypto. You are going to be a first of, I hope, many guests bringing not just a banking perspective but new new categories of, you know, banking adjacent or relevant content to to the audience. So I'm really curious for the conversation day, but I would love to start off with just give me a little bit about who teller is and what you guys do, since, like a lot of my guests that are banks, it's not as easy to put into a box. I think for most of my audience. Absolutely so. When I got into the CRYPTO space there was such a big learning curve. When was that? Like, I'd always six months ago, six, three months ago, getting into the NFT space. Yeah, this was around two thousand and Sixteen, Kay, twenty seventy when I just I went down the rabbit hole and decide I wanted to be full time, took the bluepill cryptocurrency space. Took the blue pill, I was in the Matrix and I haven't looked back. It is the most exciting, invigorating space to be in, even when we have a downturn in a bear market, which two thousand and twenty nineteen was that for crystal. I had always been trying to figure out how we could bring mainstream into the cryptocurrency space and I never got the feeling that an over collateralized system was where that mainstream appeal would come from. I'm shocked by how much mainstream Peil NFTS have received. But I do believe that from a financial standpoint, the cryptocurrency space...

...has an opportunity to revolutionize how digital assets are transferred and held and the transparency and openness of that. But we're going to see so many traditional like models, underwriting models, traditional like platforms for lending and borrowing that enter the space. So teller is an unsecured lending market place. We are software that can connect borrowers and lenders where borrowers want and unsecured loan for any type of use case. It's almost like the underlying primitive if you were to take the brand off of a bank or a lending institution. We replaced at lending desk, the Limit Order Book and from out. For us it's completely transparent. So a Barrower can say I want alone with these terms. I want a loan for x amount of dollars at why percent. And we do something really simple but powerful, which is allow the Barrower to append a data signature, so they can append something that links out to any type of data that they want to apply to a loan. That could be credit information, that could be their employment information, that might be their twitter profile, that might be their uber driver data, might be Crypton native data, anything that they want to append to a loan request that they want to submit. So now you have globally the opportunity for bar wars to say I want to loan, here the terms I'm looking for and here's the data I'm willing to showcase for this loan. And on the flip side you have lenders in a normal market place like fashion that can look at any loan requests that has been submitted. Just because a barer ask for loan does not mean noill be filled, but lenders will, which Barrowers do assume and defy. Today, in the state of overcladization, you assume as a bar where I request alone, it should be filled within seconds. But in a world where risk assessment matters, that likely won't be the case it's like normal banking. For there's are a risk in play. Yes, that's where the lenders can come in and say, Hey, you now have this API to tap into where there's a global host of loans. Loans could be specific for personal ending, they could be different for jurisdiction in the states or were abroad. They could be for auto mortgage. The world is your oyster for figuring out what type of loans you want to lend into as a lender. And the markets are more competitive, naturally because it's an open system, or anyone could fight for these loans. Let's let's back up a minute for the for those who are not as who have not fully taken the blue pill yet. I just watch the Matrix revolutions are resurrection on my kids. I'm going to make going to make many matrix references, I fear, today. But a comen, just give me your take on the state of crypto defy now and kind of what you're what you're seeing in that space and where you see the most mature and then you've been using this word over collateralized. So I really much to go back and kind of give me the background. Now where lending on the blockchain is really at today. Let's dive into it. So the whole initial purpose of Crypto was to solve transparency from a technical side with digital assets, and that's what the bitcoin white paper was meant to solve, where you could say that I own an asset and I and it's true. You can't improve or you can't falsify this information, you can't create a duplicate in the digital sense, and that takes the burden of trust from people. Where currency currently, the burden of trust in the US and at in other jurisdictions is on people to print that money and moderate the money supply. With watching. You now have the trust, that burden of trust, being on the smart contracts, being on the code M and that's the start of where defy comes along. To date, everything in Crypto has been decentralized finance. It's figuring out how we can remove the people that have been at holding that burden of trust and replace it with code. So now you have digital assets like Bitcoin, like an etherium. That our commodities. They are something that everyone can buy, use and hold. But as the space evolved, people started thinking how do we get a unit of account on the blockchain? And that's where stable coins arose. You have USCC, which is backed one to one to the US dollar. You have died, which is Paig to a basket of assets, okay, and these different stable coins allow people to say I really have a dollar like index on chain. That's where defy started to flourish. So People Thought, Oh, if I have this stable unit of account, how do I make money on that? Well, the easiest thing you can make money on is an overcollateralized system, a world where if I am depositing some asset into a vault, I can borrow some amount of credit or cash against that asset and if the assets appreciates, the value that asset will get liquidated, thus covering the entirety of my loan against that asset. Okay, so this is really my understanding of overcollateralized lending on the blockchain. Now it's kind of people who own a bunch of crypto maybe want to borrow in a stable coin. Don't want to sell their assets. Right they think crypto. They still think bitcoins under priced to theoriums...

...under priced in the long term, and they go but I want some US d in the near term. They can borrow and basically put up their their crypto as a collateral against the loan, usually overcollateralized to what they're borrowing. Blenders, safe consumer, you know, crypto owner gets US D or maybe a stable coin that they can, you know, sell in the US D and everybody kind of walks away happy. But to your point, so a do I have that roughly right, and that's the use cases. Typically people who actually have some obviously some holdings in Crypto that they can overcollateralized alone with. They're not not borrowing beyond their current their current crypto. After it's very similar to stocks. So if you had ten million in stocks, there are institutions that will take those stocks and allow you to borrow against them. The same phenomena, not phenomena, but principle here in Crypto. But the question is, what is the demand for in these use cases? There's two things. One the genuine demand of not selling my crypto and being able to use money in the short term. But actually a more prominent demand is to buy more cryptic. Most people are borrowing over collateralized subibe more because they want a leverage. Wow, that's being the use cases. So really that next unlock for Crypto is on secure lending. It is places where there's actual risk involved but we're able to offer value to the end user where they didn't have that value at the start. That's a that's fascinating. So how do you go from in a world of you know, I think cryptos really fascinating because in the blockchain, if I have a wall ad dress, it's not really tied to a person, but I can see everything that that wallet has done and FT's they might own crypto assets. Ay Whole, I mean that, but but as an own right, I probably have a couple. I've got a coin based account, I've got my Meta Mask Wal it's why I have at least a couple of different, you know, homes for assets, if you will, in the crypto universe. How do you think about the challenge, J is, of moving to an unsecured world where you don't have some sort of identity tied to you know, wallet and you you know, if I think about a credit bureau, the one of the beautiful things about it from a lender's point of view is it's supposed to be a collection of all the deobligation. So I can go one place and see what you owe and of course, in a world of multiple wallets, I can see what this one wallet's done, but maybe not what what Jeff has done across all of his things. And I certainly think bankers are curious how you you think about, you know, overcoming that challenge in the context of Crypto, because it does seem like the thing that you have to do to unlock a less typical use Q, so a less easy like overcollateralized. You say it's in getting. Do actually like lending in the pure sense of people who don't have, you know, access to the funds that they need in a near term, not just kind of a market, a margin line or liquid access line or something like that. CRYPTO loves this idea of an an amenity just being fully anonymous, but that's not necessarily how the space will evolve. Even though people are anonymous. I think what we saw with the NFT craze of two thousand and twenty one is people want to show themselves in some type of digitally native way, and that's where profile pictures, as Nft, started becoming more and more popular. Identity will enter the space, but it won't be as outright as it is in the traditional form and traditional finance. There is going to be this spectrum, this blend of identity. Identity could mean multiple wallets that you're combining. Identity could mean this nft that's associated with some of your social accounts. But how we see unsecured lending so starting to evolve is where you can underwrite. If you don't have the ability to underwrite and prove that if this user defaults, that they will be penalized, it's going to be difficult. You need some sort of reputation and that's where this data part of teller that I described initially or teased out, comes into play. So the idea for us is not figuring out necessarily what that data looks like or what that identity is. It's allowing people to attach any identity that they want to attach. Something that's key for that is privacy and ownership of your data. This is how identity will transform in the web three standard with web to the institutions or the platforms are using, whether that's Google cloud or aws or dropbox, that's where your data is and when you share it with an institution, they also house your data. In web three. You own your data. You own that nft that you bought you own your etherium in your wallet. That's how your identity will play out and to enhance that, their privacy solutions being built. So there are two projects that anyone in the audience could look at. One is called chain link. Chain link is an oracle, so they're like an API for the blockchain industry and they're working on a solution where they could privately prove certain data about an individual without review revealing the original data interest. So they could privately say your credit score is above seven hundred and fifty, true or false, without ever showing, ever revealing the score. All you have to trust is that the alurth and was run and you can do that cryptographically. Got It. So That's how privacy will be built in natively, and these users will be able to opt in. So when the they want to attach identity to these loans. Interesting. Now I want to use the...

...word Oracle and I'm gonna give you my understanding of Oracle, and I love if you tell me if I'm right or wrong. But I think of an Oracle as I understand it, is some sort of a connection between the blockchain world and the non blockchain world. The simple example I always got is we make a smart contract which is on chain. It's like a bet on that outcome of a basketball game and we both put in the money. It says, whoever wins, we're going to automatically withdraw the funds. We got to know who won in so the Oracle is the thing that we can say we're going to rely on this conduit for the Real World Information who won the basketball game we've bet on back to the blockchain to execute our contract. Where do I have that roughly right? How do you? How do you think about oracles? That is, they seem like a key component of what's needed to bring kind of a real world identity or a traditional credit history into a blockchain world. Absolutely so. A blockchain can only read its own data. That's why it's limited. Every block that's produced. That block can look at any previous block, any data set. It's like an excel spreadsheet. As you add more rows to the spreadsheet and could look at yeah, previous rows, it cannot look at new rows. It has no way of looking at forward data that's not already in the database. That's where an oracle comes in. So an oracle comes in to say, okay, at the next row, I'm going to write some piece of information from the outside world and then the block after that the Oracle enters their information, will be able to use the INFO. So that new block is saying, Oh, the Oracle ten minutes ago said that the Spurs won the basketball game. Then there will be a payout event. Let's say it's a betting contract. There will be a payout events where the winner gets paid out. So that Oracle is dependent. Absolutely. So ask you two questions about this. One on oracles. It seems like that's going to be a point of if defies about decentralized finance. We need some sort of trusted entities, it would seem to me to run the oracles. They seem like a point where we're going to have to have some agreement on how we represent the real world. A do we trust that you didn't you know if I took control of the Oracle, I could win all my bets just by by lying back you games on. Is that going to be a point of somewhat centralization or at least trusted organizations that are that are owning this kind of connectivity to the real world? How do you see that plan out? It's going to be a spectrum. So on the define native side you can have if the data is a commodity, it's easy to decentralize or mitigate the risk of anyone actor tampering with the data. So with chain link, for price data, let's say it's the theorium based data, they have twenty, twenty five plus trusted node providers that are providing data into a singular data stream and then the final output, which is the aggregate of all of these streams, is used. So if anyone shuts off or it's out of the stand or deviation, they're just not included and they don't get paid for that. So there are ways to mitigate risk from one soul party holding it. However, when it comes a credit and data that is not a commodity, it becomes more reliant on those institutions. So a question when you get asked is, as credit is built on chain, will the transunion, the Equifax of the world, equifaxes of the world, be able to play in the secosystem? In the answers, absolutely, they are data providers and data services at the core and they will continue to provide that stamp of legitimacy for this data. So a simple walk through would be if a user wants to apply for a loan at a block chain level and it's a personal loan and they need their credit score and they need to connect to bank account, they're going to go to to you, or in the back end they'll tee you. Just have the API. They'll answer their social security information to you. Gives you the legitimate data. What will change is that to you will put a stamp of approval on it with some type of cryptographic native wallet. Okay, so let's say they take their etherium to their theorem Wallet Address. You can sign messages without ever writing to the blockchain and that means that you can cryptographically prove that whatever account or Admin owns this wallet legitimately sign this information. So that's how the user will get their data in a crypt native way and they'll be in charge of applying that data to the loan. So they'll aggregate the data say here's my information transunion. Maybe they can make that private by going through something like chain link and private deco solution. They can then say, okay, yes, my score approved by Trans Union, legitimately was above this number. That's all they're saying to the public and they're also saying maybe something about their banking information or their income. All that data gets compiled and the user would go to something like teller or they would be going to an interface at any market owner would have that has teller integrated as an API. Okay, so they would. They might be going to Bank of America and Bake of America could be submitting to tell her. They might be going to a neo bank. That neo bank is submitting the loan to teller as an underlying infrastructure market place. Then you have lenders on the other side, though, look at the data, underwrite it and fill those loans. All...

Right, I want to ask you about a couple more concepts just so we can for the audience, can help them understand. Number One, you know, one of the things I hear a lot about, this really interesting and I've seen some work going on around securitizations or the things, is this concept of a smart contract. So help me understand kind of what you know, if I think of a contract pen and paper, I've signed many in my day, so I'm with this very pen. You know, what does a smart contract look like and how and why is it different than a more traditional contract? Just by having moved it to the blockchain. It's fun that the industry called them smart contracts for the reason that's fun to say, but they're actually logic statements. So a smart contract it's very different. Bear I have a very different concept. When you say logic statement, when you say smart contract, they are not like a business related contract somewhere verbiage matters. They are if then, statements with simplistic functions and how money can update a database or how changes can update a database of money. So an analogy to this would be like a vault at a bank and a vaulted a bank has a certain pass code and if you know that pass code, the function will say open. That would be the result of the function. So that's the same analogy as a smart contract. It has very rudimentary, if then, business logic that can change things on a database if the right parties are signing off on that change. What is useful about a smart contract that's on Atherium is that a theorem in a Theorem, smart contract can act as a holder of money. So unlike the Bitcoin blockchain, where only the wallet owner. So I have to own a wallet, you have to own a wallet for there to be money in my wallet. The theorem blockchain said you can have a user wallet, where I own it or you own it, or you can have a development or market wallet, and that's the smart contract. It's almost like a vaulted a bank. So that smart contract, instead of being owned by the people at the bank, it's owned by code, and the code might say that no one is the owner of the smart contract. That only works on basic if then logic, or it might say the owner of this smart contract may be able to upgrade the parameters or settings of these functions for this vault. And that's how overcladized lending started. You were able to say I have an asset in one hand and there is this vault, this smart contract, at this other place I want to lend in. So the smart contract will have a lend function and it all it's doing is updating the database to say that token from my wallet plus that token at the vaults. HMM, tokens in the vault. Great, now I can make money. Now the contract owns your collateral, so to speak, exactly. So it's if then statements. It's a little bit more than just a legal contract. It can do thing, but it can like, for instance, automate the overcollateralized loan. You can say I gave the contract my my my collateral. When loan is paid back to from this walllet to that wallet, give me my collateral back. If it's not exact, keep my collateral and send it to the lender. If I don't pay them back in a specified time frame, they get the collateral over here. So you can kind of automate that. That that process is my understanding. Through the smart controverse is having to go on to the chain say I want to do something you know Ryan did and pay me back. What do I do now? Like? But it can be automated through these contract exactly, and that is easy for the overcollateralized world. So that's why the world of putting an asset in a smart contract and borrowing against it made so much sense. Where this becomes more real world esque or more traditional is with unsecured lending, where you might have someone like transunion be able to dig a phyco score if there's a default. You might have more traditional rails to monitor the activity and reputation, I imagine as lending goes on chain. I mean, I don't have no offense to transunion. I don't have to call them to see if you're a particular walllet has repaid loans or not. Theoretically, that's how you know, right there on the chain for me to of view, and I imagine there's a world in which even non chain lending could be represented on chain, repayment history, things like that, without having to be intermediated through a bureau or some third party. That's what's going to be fun about this and, I think, interesting for underwriters. You can see everything. So in the blockchain space there's a concept of a decentralized identity or a did for shorts, and this is an aggregation of everything that you, as a user, want to tie into an identity. So we're going to see that pseudo and amidity evolve over time. Where you took out loans in the blockchain space, but you also had loans coming into the space. Maybe it is beneficial for you to depend all the loans you've taken out in the traditional space because it gives you some type of Bet God good credit history. I want to like, I want credit for it here on the blockchain. Exactly. Okay, exactly. Are there ways? I think one of the big questions I've always had is, are there ways to bring some of that information in a way that I can control who sees it? Because, of course there's a nice thing about like the Universal Ledger. I don't have to prove to you that it's true. It's there. On the flip side, I don't really want my credit file visible to them, to the world right like if you go to a totally defy world, all my payments and transactions and the information my plaid transactions for maybe income verification, my depository account transactions that you're talking about providing to a lender, I kind...

...of don't mind them being on chain if they're not, you know, for transactional purposes, to be able to share them to people via a blockchain mechanism, but I don't really want everybody who can download the chain to like see my whole history. What is the state of having information that's connected to an identity in defy, invisible to some parties but not totally public in a way that kind of, I think, violates a privacy expectations. At most consumers would have in the end about some amount of their private financial information. Yeah, it's early. It's early in development, but it is being worked on and there are two scenarios that this this model can can showcase. The first is what I described earlier. There's technology called a zero knowledge proof. Zero now that's acknowledge, that's say zero. No, counterintuitive zero knowledge proof. I'm proving that I didn't know something, I didn't know the actual information, but I'm proving that the result was true, was correct. Okay, can you give me example that? That's how I can wrap my hand around it. It is the idea that we have a zero knowledge proof. It's just a function that's says, is your credit score above a preset number? Okay, just if you think even javascript function enter credit number and then prove out the result TRU or false. That is a very basic way where the user, on their end, so not on a bank send not on the chain, can say I'm submitting my official score from a transunion and the zero knowledge proof is going to showcase of the world that I have a proof. The function really ran, it did its job, I'm not tampering with it and my score is above a certain number. Interesting, and it would it be possible for the let's say a lender, to have a function like credit score that was more their own underwriting that they would not necessarily see the underlying data that was in the file, but was able to see the lass prediction or whatever it was. It was the output and they go this really ran, it really ran on jets credit file. I can't show you the file, but I can tell you what the outcome of the function you've defined is. That's sounds like that's what you're describing. Yes, we are so excited about that model because then users are truly in control of the process and they own their data. So it will be easier for those models to happen. From a preapproval level, where the PREAPPROVAL is this more out of the box solution that the user can run. There is computational limitations to it, but in theory this will happen where you have some type of out of the box underwriting model for preapproval and the user runs it on their at their home on their laptop and they get pre approved or they get some type of underwriting. Complete that underwriting they can depend to the loan. Now the question begins when the lender or the underwriter needs to see more information, which they might. At that point there will likely be more closed off pools where lenders have to be ky seed. They need some type of regulation or licensing to be able to see more information, and users would be able to dictate which lenders would they like to share their information with. Interested School is that on chain you will get a hash of the data. So on chain you could say I will prove to the world that the data is really this data. No one is getting different data. As a lender, you'll see all the public information and you could compile it as well to get the same hash to make sure the data adds up to what they're submitting. However, no one will be able to see the data except who the user shares it with. And that's how there's an off chain world of real data selectively shared, but an on chain world where you don't know anything about this wallet. All you know is they took out a loan, maybe they repaid it, maybe they defaulted. Interesting. So you're able to share selectively private information validated on chain, but the data itself only visible to certain party. That feels like a really interesting space in terms of enabling the kinds of transactions most of us would expect with a financial institution. All right, interesting, when I you said a few things, I'm kinds and we don't have don't have infinite time. But you've talked about NFTS. For those who are not familiar, can you explain what an n FT is? And then you mentioned profile picks and so like talking with a little b about the history of nfts and how they came into being. And should I be buying multimillion dollar in FT's, which seem to be an asset category people are interested in these days? Dyour your own research. Yes, the board APES HAVE GONE UP TO INSANE LEVELS. They're the cool kids club, so are the punks. NFTS are a simple idea that we can go from the a token that holds value on chain, so a digital native token that you can't duplicate, to saying what if we replaced the idea that it's currency with an any type of data? HMM. So I can say as the creator of the data. In the baking terms or in the credit world, this could be the originator of a credit score. I'm the originator of a credit score and I'm going to put my stamp of legitimacy to say this credit score came from me. HMM. Everyone else that tries to copy it is a fake. It's a phony. There's a stamp of approval.

A non fungible token is saying that this data that's not fungible, it's not reproducible. There's a unique piece of data and unique credit score for everyone out there. Can Be token ice, you can have a digital representation of it. That proves the authenticity of it, and then after I token eye it, you don't need to rely on me or keep pinging me as an API provider. I was just the originator of the data. Hm. So that's how the NFT started generating interest, because you can append any type of data and prove that it came from the legitimate source. It's just like if you had a Gucci Bag, you want to prove it came from the legitimate source. It came from Gucci's Yeah Company. My wife can tell a difference. She looks at the patterns, but I can't tell the difference. But we could. But the blockchain can tell the difference. On chain a theorem can tell the difference. You can't fool the blockchain and that's why NFT's are valuable. They started gaining popularity as images. It is more to fit into a culture rather than to value the artwork. At the start. It's to understand that this technology proves I genuinely am a part of this club, and that's why I when I talked about bored apes. It's more of a social club. It's just or Apiacht Club, like one of the first big popular in FTV in understanding, say, profile pictures. People are making their minds ahead, shot my picture and twitter or Linkedin, but people are using these, they're making nfts that are images that are used for the purposes of being profile pictures, kind of to your point, as a club membership card, but I understand some are now using it as a actual membership card where owners of these NFTS are getting access to real world events, real world activities. They're actually like like a legitimate club, have activities or events or services are only available to people who own Inn ft from a certain creator. Yes, nfts are going to have so many cool use cases, the reason being most assets that we purchase outside of stocks or cash is are nonfungeable. Their natively nonfungeable assets and we've never had a way to authenticate or monetize them in the digital sense. So example is exclusive access during NFT NYC, the board a Pacht Club community actually hosted private events where you need it to own this nft, to be a part of the club. They on a Yah and in was it like a board a yacht? One of them was on a yacht, course it was. Another was a onstage party. I think they had Chris Rock. They had a bunch of other performers. Come on, you need a board a and people who didn't have one, we're starting to have fear of missing out and they want to join the club. Yeah, for the listeners, I will I will say this feels to me like a bubble. No offense, but they're like board a PIACHT club up buying a yacht with Kurt you know, are renting a yacht with Chris Rock. Feels like a bubble. But but I think of it as the Gardner Hype Cycle, which is a kind of you know, at the peak of the hype is the early stages of real adoption, the utilization, and you've got, I feel, coming the trough of disillusionment where it feels like you know, you know. I think board AAPS are trading for a hundreds of thousands of dollars, if not millions of dollars now, for an image and and they're interesting but they're not exactly, you know, classic art. That's where we feel the use case of NFTS will expand. Yeah, I'm most excited about when they can represent title from the traditional world. That will be title to a loan, where you can have secondary markets of loans with NFT's being the vehicle. They'll be titled to a mortgage. So many exciting use cases from the how do you I mean? There was this interesting I don't really want to get into Dallas now because I think we'll run out of time, but there was a you an interesting organization set up whose goal was to raise money on chain to buy a copy of the constitution. The constitution. Now I'm sure you're familiar, Ryan, because I fear if it's a crypto and I know it, you got to know it. But there was this really interesting question of how the on chain wallets could ultimately have any actual ownership of a physical object. There was no legal precedent for how an on chain ownership represented ownership in some off chain real world property, and I would put a loan or any kind of fight traditional financial asset into that category. Have you seen people bridging that gap? That feels like it's going to be a really interesting moment when there is a verifiable on chain way to say that this Wallet Address owns this thing that's not just a piece of data in a database but is actual, you know, connects to the ability to sue or take ownership in the real world of a possession of this is coming. Have you looked into the Wyoming Dow laws? I'm not looked into the Wyoming Dow laws. I will admit to being behind the times in this row. Wyoming has put out the first laws surrounding a Dow and how you could launch a Dow. A Dow for Wyoming is like an LLC. However, the governing rules you no longer need a piece of paper where you signed and have official members. The governing rules are based on smart contracts, so you can actually point to a smart contract that has all of its logic built into it for governing which is and that Dow also functions as a legal LLC. So that legal LLC could go out to hire someone to buy some property, own property, it could own land. There is a project called City Dow that has pioneered this. One of...

...the applications for it is that you they actually have gone out to buy land and Wyoming and you, as a token holder, have one of many voting rights on what happens with the assets owned by the LLC. So it's almost like combining a co op with general like Sea Corp corporate structure where everyone around, everyone who owns a stake in this can vote, but they're still needs to be some type of management that connects it to the physical world. That, yeah, I think that connectivity be rancing the for the those aren't as familiar. Can you just explain briefly the concept of a doubted and not sure we totally want to dive into dowels, but if we're going to talk about why I'Ming Dowal Law, we should talk about what a doubt is. But I think it's fascinating that a doubt could be both an on chain entity and represented as an off chain entity in the form of an LLC. So it could have on chain votes or contracts that might be representative of real world world properties or items or objects, which is a just a fascinating conversion there. So a dow is a decentralized, autonomous organization. It is a crypto terminology that became popular. It represents the ability for a collective group of people to own some share in governing some treasury or some amount of assets. The easiest way to think of it is like a coop where many members control the steak or where this boat will go. Very similar to owning public stock and the ability to vote on the board, but instead of the board, you're actually voting on use of funds and treasury, so you're helping make managerial decisions. That brings everyone involved in. What that's allowing is for actimization. So if you were to buy a multimillion dollar property or maybe most expensive property in Manhattan, maybe you individually might not be able to afford it, but you want upsided you want the ability to have some steak. A Dow is a really good way to facilitate that, where you have a legal entity. That legal entity can now pull money together. Every dollar that gets put in represents that percentage of share divided by the total amount of dollars that have been contributed. So you have that fractionalized percentage ownership and you can vote on what happens with the property that the doubt buys. You can vote on whether you want to liquidate that property. Well, so I want to ask you one question on this and then I want to wrap up with a little advice for you. But like convince me or help me understand why this isn't going to look like a really bad version of my Hoa, like I have, you know, a handful of people voting in my hia. It's hard to get anybody to agree on anything. And now you're talking about multiplying that and putting real financial weight behind there. I mean, is there a reason to think that this is not going to become mired and you know, awful voting procedures in back and in politics and all the stuff the real world? You know, voting mechanisms end up in for things like, you know, Homeowners Association or Condo building or something like that. It feels really interesting, but it also feels like there's some real challenges in terms of management and structure and how we how we ultimately guy, I think every CEO is how here's going. Please on, have my vote board on every budget decision I have to make. Like good God, that sounds off, and then multiply my board from ten or fifteen people to, you know, tenzero and they're all voting on my budget choices or my hiring decisions like that feels like a nightmare. You know what's The why am I misreading that? A my missreading that, or places where it makes sense, like why should I not be as scared of that as my gut reaction? It depends where the Dow comes into play. To date, there are problems with voting. Voting has a lot of attrition to it and not every token holder votes. If you get more than twenty percent of the token holders voting, that's a miracle, like it's a great feat. So, with that being said, dolls come into play when there's a final product, when, if you're talking about a software company, a down makes more sense to govern the product itself, and that's where D by is heading as a product space. All the products and De Fire Open source. So ownership, collective community ownership, is very important because that builds a mote around the product. And an example is compound finance. Another is Una swap finance. Both these products have decentralized, autonomous organizations where you're the token holder, can vote on the settings of the project, of the actual code. So it's compound. You can say I want a new token to be added to this overcollateralized lending software and by voting, the smart contract will actually add that token. If everyone approved it, it's automatic. It's a way for products to evolve with community ownership, without centralized management. The same thing can apply if we're thinking of land or thinking of real estate, because it's already a final product. However, as dows evolved, we're going to see a model where the Dow more access a pool of money and then it directs money to centralized companies that are not governed by some crazy number of a hundred thousand people that get to vote decisions. Yeah, I mean I people talking about startups being replaced by dolls and I went I've been a part of a startup now and, like you know, met decision by committee is not the way you...

...make generally lots of progress in the early days of a product. There are certainly, I can see use cases for that kind of control of voting. Or, you know, something like a fund and where where we want to invest in a an angel investing fund would make a ton of sense. Yab In this kind of structure. So I wanted to kind of and I usually ask for history of advice in different areas for my guests, but I kind of want to want to get your take on you know, my sense is to really understand defy crypto web three. You can't just read about it or listen to it. You know, all the great podcast aside, but like you got to do it. So what's your advice on for those listeners are saying, Hey, this stuff is interesting, I feel like it's going to be relevant to me sometime. How do I get a better handle on it? Where can I go out and like where do I buy in an FT or look at this stuff or a smart contract? Like, how do I start, you know, dipping my toe in the water so I can understand it a little bit better with a handson experience? What's your advice on where to go and do that and then tell us a bid about any way they can get involved and actually, you know, testing the teller platform, what you guys are building. For anyone getting into Defi, you need to play with it. It is too confusing to simply read white papers or, lets them, podcasts. Once you interact with the technology, you will feel the power of its transparency. So the first thing you need is you need assets that allow you transact on the blockchain itself as could start. There you go. I can need any very different from logging in with Gmail. There is no log in with Gmail, so you need a theorem. If you want to play on the theory and blockchain to save gas costs, you could use a layer to which is a layer of a blockchain built on top of Atherium, or something called a side chain like polygone. So you could go to a platform like arbitrum or polygone, and I'd recommend using an APP like ave a, ave a docom. I believe they allow you to do overcollateralized borrowing and lending. So very easy. And what was he what's a good on ramp like? When tell me how I could have done better? Output it this way. I on boarded myself through something like coin base just to like take my us D and ownatherium, because I've got to get somebody who can actually I can from whom I can buy, you know, my stuff. I moved it to a Meta mask wallet and then I was able to use my Meta mastic experience to log into a a or other things. Is that a good route? Like you gotta, you know, get it, get the crypto acid in something like coin base. Most people, I think, are familiar with coin base and you something like Meta mask is my holding place to then go and interact with different compound or a a or other places that I can go and try and actually partake in in these kind of ecosystems. That is the best on boarding. I would recommend that. All good job. I'll go. Our cofounder gave me that route. So Paul Ryan says he did good. Called the great by Ethon Coin Base. Transfer the eth or, if you want to use polygone by Matic on coin base. The point the coin of Polygon is called MADIC. And then you'll send it to Meta mask. So once you send it to Meta mask, it will be natively yours. You will have custody of it. Coin based custodies the asset on your behalf once it's in Meta masks, because you're token. Now that you're on the etherium network, you have a choice of using etherium and you can go to compound finance, you can go to Abbycom, you can deposit that etherium into any of these platforms and then you'll be able to use that etherium, borrow against it, borrow stable coin or an ascid against it, and the steps may feel confusing or unnatural because you have to sign every transaction you do, unlike application in the traditional financial world, there's not only buttons that you go to the next page, you have to sign with your wall to transaction. That is proving that you are legitimately doing this action. Then, as the money moves, you'll notice that etherium is actually being depleted from your account because it's being spent on the fees needed to make that action on your behalf. Yes, and talk to me a little bit about the fees they're think they're called gas fees and I find them a little ironic because the I remember the original when Bitcoin was from two thousand and twelve or two thousand and thirteen, two thousand fourteen, I first started hearing about stuff. You know, there was this like we're going to have micro finance and micro pime payments and everything is going to be cheap. And it feels like the gas fees on a lot of these blockchains aren't small. The kind of fee added to pay for the processing of the black chain seems to be quite high. Is that a long term challenge for Crypto and are there ways I can like times of day or things I can do to avoid paying like I think some people pay like two hundred bucks to just deposit a hundred bucks into the constitution data by the Constitution. That that seemed silly. So are there you know? Where do you think about the state in the future of gas fees escape and getting reality? Be Aware that it's going to cost you something to do this right now while the fees are there. Absolutely, and this is why I would recommend looking at other layers outside of a theium. For your initial go at this. It will cost a couple hundred dollars to make a transaction on theoreum, and that's because there are scalability costs. A theorem is upgrading to a new proof of stake network. Currently they are proof of work, so it should be cheaper, should be more scalable. However, with that being said, it's just the more bandwidth, the more network demand there is,...

...the more concentrated the demand on the bandwidth is in the higher the price. Gas Fees are a function of demand and bandwidth. So I would recommend looking at arbitrum or polygone. ARBITRUM and Polygon. Okay, I might have to check those out. Anything else I should check out? I know the most popular in Ft. if you want to go buy yourself a board APE, you can go look for him on open see, although I don't think they're very available. But if you want to kind of look at what buying an FT looks like, an owning a piece of art, I minted one so you can find you can try and find the NFTI made. But as open see the best place to go. That's a place I'm always referred to in terms of an n FT market place to see what's out there. Absolutely by or sell items. Open see is the Ebay of NFTS. That is your one stop shop. If you want to buy an NFT, you want to experiment in the space, definitely head over to open see to buy your first one. All right, anybody wants to go bit on my fabulous piece of artwork as an n FT, I think it's currently value something like two dollars. I don't know how they came with that price, but a I'd part with it for the right number of a theory im if anybody out there wants to check it out. But elling for Tenny, that's right, to Tenny, to Tenny, that's yours. I give you a free, free, free re recreation if you want it for Tenney move about. That's training for now, but I will say I highly recommend that for anyone who's curious about this space. And my wife's medical school class I always said see one, do one, teach one. I feel like that applies here. You kind of I learn more every time I try to play with it, and I learn even more when my son, who you'll love this, Ryan, follows doagecoin. I love he's always asking me what the price of doagecoins the only thing he has in a stock tip or APP. He's got it, you know, at the Mac and a stock ticker. APP only has doagecoin, which he follows for reasons I don't fully understand. But you kind of doing it teaches you a lot, and then trying to explain it to someone who is less in it than even you are, I feel like, helps even more. So highly recommend getting your hands on right. Is there anything people can do to interact with what you guys have a teller of people are kind of curious what's going on. What can they do to check out where you guys are acts? I think you're at a really interesting place for a banker interested in Crypto in terms of moving away from this highly overcollateralized smart contract based lending for people who have a lot of assets and crypto into a more unsecured something that looks like maybe what the future of real banking and Crypto could be. Absolutely follow us on twitter. We are at use teller. Head over to tell her up finance so you can play with our V one or view. One allowed users to deposits assets in an unsecured manner. Those assets would be locked up and use an escrow. So our initial version was very defy native. Coming soon will be an application. They'll feel a lot more familiar, will feel more like a limit order book and something that really could be integrated into a bank today and a place where you'd be able to lend out to those type of more traditional loan requests. Got It. And then I will ask you my one traditional final question, Ryan, which is give me a bold prediction about the future. You feel like you're in a space that lends itself well to bold predictions about the future, but if I want to call you back in a year and and tell you you are right or you are wrong, what's on bold prediction for us about what's coming over the next twelve months. You are going to see in the next twelve months you are going to see financial institutions begin adopting defy in a serious way, where defy isn't their front and center, it's actually something that blends into the back end infrastructure. Just like we saw paypal and other major financial technology companies cross the line for digital assets, you will see the same in the next year with institutions, institutions on defying the back end and the next twelve months. All Right, I look forward to hearing from those institutions and responses podcast right. I appreciate your time. Thanks so much for joining this been a facetating Delvin de Crypto, and I appreciate your taking us down the rabbit hole. I love it. Thank you so much for having me, Jeff. Upstart partners with banks and credit unions to help grow their consumer loan port folios and deliver a modern, all digital lending experience. As the average consumer becomes more digitally savvy, it only makes sense that their bank does too. Up Starts AI landing platform uses sophisticated machine learning models to more accurately identify risk and approve more applicants than traditional credit models, with fraud rates near zero. Upstarts all digital experience, reduces manual processing for banks and offers a simple and convenient experience for consumers. Whether you're looking to grow and enhance your existing personal and auto lenning programs or you're just getting started, upstart can help. Upstart offers an into ind solution that can help you find more credit worthy borrowers within your risk profile, with all digital underwriting, onboarding, loan closing and servicing. It's all possible with upstart in your corner. Learn more about finding new borrowers, enhancing your credit decisioning process and growing your business by visiting UPSTARTCOM Ford Banks. That's upstartcom Ford Banks. You've been listening to leaders and lending from upstart. Make sure you never miss an episode. Subscribe to leaders and lending in your favorite podcast player using apple podcast. Leave as a quick rating by tapping the number of stars you think the show deserves. Thanks for listening. Until next...

...time. The views and opinions expressed by the host and guests on the leaders and lending podcast are their own and their participation in this podcast does not imply an endorsement of such views by their organization or themselves. The content provided is for informational purposes only and the discussion between the host and guests should not be taken as financial advice by companies or individuals.

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