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sessions to go. I want to start off with
bringing on Martin from Zurket to tell
you all about new ways to think about
Defi and security. So, please give
Martin a big round of applause.
>> Thank you for coming. Um, and this is
Martin. I'm from circuit and I will be
talking about platform specifically
about how we build it and how it works
itself. So
this is define TDL how it was developing
over time. This is where we are standing
at four
weeks ago. So we had in total roughly
130 billion deposited in D5. But I think
that it always is interesting to sort of
pause and reflect and sort of wonder,
you know, how did it get right? So since
we now have 300 million in stable coins
and $175 billion of D5 that didn't
happen on its own. So how did that
happen? So I will go in this talk
through some brief history of defi and
some significant events that were you
know created or maybe also destructive
and in the end I will tell you what's
happening in circuit and what our
response to uh you know is the defi
these days is so the best spot to start
is actually talking about the very first
protocol and for me this is actually the
origins of maker they reach into 2015
that's why actually I call it the first
protocol spider wasn't uh you know
deployed until 2017. Laker is a
collateral debt position protocol. So
what it meant especially at the
beginning 2017 is that user were able to
deposit a single volatile asset that was
e and mint stable coin called die
against that asset given some
volatization ratio. So uh D was the very
first widely openly mintable decentral
stable coin and maker for us was the
protocol we were using as a leverage
engine because we had liquidity in ETH
we didn't want to sell that ETH but we
wanted to use our money so this is what
maker uh at the beginning of the
existence maker was single plat
eventually we developed a little bit
more multiplat and so on when I talk
about default I I essentially categorize
defi into three verticals. One vertical
is stable coins. The other vertical is
lending and the third vertical is
trading. So let's take a look at for me.
The very first D5 protocol focuses on
lending is actually it was a
peer-to-peer based protocol which
operated on request matching. So you say
hey I have so much and so much ET and I
will lend it to somebody or somebody
could submit request hey you know I have
uh the need for so much and so much I
want for platform will match you and the
would be realized when I talk to people
about they tell me hey I've never heard
of which actually might be true but what
they definitely did care about is the
successor so in 2020 regretted to a
right now is at least for me the
actually like so really really big
project. Um a is also responsible with
this upgrade uh of the system for some
innovations. Uh they chose their design
through pool based lending which I'm
going to talk about in the next slide
and they you know introduced something
called flash which uh if you have been
in DeFi for a few years you have
suffered some hacks or if you have been
looking at the smartwing field it's not
a new term. So [snorts]
uh this is implant.
Shortly after implant uh started
operating uh a competitor emerged and
that competitor was called compound.
Compound didn't operate on this uh
request patching peer-to-peer type of
basis but they had a design based on
tools and they still have design based
on because these protocols still exist.
So LPS would deposit the funds into the
pool and then the pool would calculate
some kind of interest rate and whoever
would come given some collateral all
these other tools they would be able to
borrow uh assets from the markets. What
compound is responsible for and why they
are really really important feature is
because this was actually the first
widely used skillbearing tokens
implementation that has existed in DeFi.
So co-ound is really important for us
and they are actually important for a
few more things. Finally the third
vertical for me here is uh trading. So
Athereum as a network is responsible for
the ERC20 standard right. Uh so if the
ICO we created an abundance of tokens
there always hands you trade it for that
stable coin you trade it for ease but
implementing dynamic portable which was
actually really really difficult back
then for multiple reasons. It was the
gas cost and it was also the speed of
the network right because blocks were
mining within the range of 12 to 15
seconds over time. So you know this is
probably the interval that you would be
able to update your your order the book
uh at and that's very very slow work. So
this was difficult and therefore the
researchers at bank were actually came
with a new concept called automated
market making which was also based on
trading. So inside of an automated
market maker, parties deposit liquidity
into the pool and then anybody can trade
against the pool and the tool prices the
asset based on some mathematical
formula. While Bangor was the very first
automated market maker uh actually it's
not the most popular automated market
maker. The next one that came a little
later was sort of took the glory and
there are a few more decisions
particularly for based on the formula
and the way how they price assets and
based on some
the bottom line is in these early days
of E5 and that's why I actually have a
TVL chart in there you can see that the
adoption was significantly lower than
what we are used to uh these things we
can actually see that up until 2020 that
line remains sort of flat compound
didn't develop significant liquidity
gains receiving $100 million until 2020
and the whole uh deal itself didn't
exceed 5 billions until 2020. So
something needed to change but before
something changed, Black Thursday came
and this is actually an example of the
very first sort of destructive action
that I'm going to go through. So what
happened on Black Thursday? Black
Thursday happened on March 12th, 2020.
Both Bitcoin and Ether back then priced
in price by 40% within the scope of one
day. This is how it looked on Coin
Gecko. Honestly, it's like every Friday
this year uh back then we call it back a
black.
What it resulted in we know from these
days very easily, right? It resulted in
a series of liquid relations, network
congestion and the gas prices spiked up
on the network. So you know it was
problematic to submit transactions and
that again became quite problematic for
maker in that because maker had all of
these laws right minted. So it hit some
faults uh with ETH because price went
down
under collateralized and those bolts
needed to be auctioned off. And this
didn't go easy because despite maker
providing some kind of software for
running bits for an auction if the
auction was secured that software
actually only had static gas pricing
strategy and because gas prices were
rising very very quickly uh bitcoin were
mining and there were calls with lot
that were being auctioned for $0. Really
really beautiful day for some people. So
overall, Black Thursday, it was actually
the very first example of some systemic
problems and it was systemic problems
that were caused by leverage, by network
congestion and weird execution
conditions resulting in lack of
participation. Really interesting.
So as I said something needed to change
for D5 to actually take off and that is
what uh sparked sort of uh the D5 summer
and what changed is compound inventing
liquidity mining. So somebody at
compound realized hey uh we have these
people who are depositing liquidity to
us and we are rewarding them with
something for us but you know we can
also create other tokens and you still
they will have some value. We can you
know put them on the market right
liquidity is to develop more that the
value will be there and we can
additionally distribute these tokens to
incentivize protocol uh participation.
So this was called liquidity incentives
and people were liquid buying it and
this mechanic actually became the most
prominent incentives for protocol
participation all the way up until it
was replaced by various points campaigns
uh in uh 2023 and 2024. So another very
very cool innovation from compound and
uh I actually was lazy you know just to
just justify my claim that uh this was
really really significant I asked GP to
list me some protocols that ran uh
refining campaigns in 2021 2020 uh and
you can see the list on the screen uh
you can see some pretty big names and
the list is actually short and you know
it's much more comprehensive if you ask
liquidity mining was a mechanic that
created created something else. It
actually created a lot of activities.
The problem with liquidity mining was
that people wanted to compound their
positions. So they were always trying to
collect their rewards. What those
rewards were additional collaterals and
deposits and you know amplify their
position, right? But that costed gas and
you would always be doing math. Hey, you
know, is it actually profitable for me
to collect my rewards, liquidate them,
really? So uh some projects came with
the idea that uh this can actually be
done through smart contract and if we
pull all our funds in this effort we
will save on gas we will offload the
overhead to the smart contract. We will
remove the learning curve because it's
the smart contract actually to be very
very aware of the uh underlying mechanic
of the integrated D5 protocols and we
will essentially automate the whole
thing. So this was super convenient.
Very first uh yield farming aggregator
was um it was uh shortly followed by
farmers and this is when the D5 TVL
actually started picking up really
really hard. So everybody was farming
and these uh yield aggregators were
really big because they managed to
develop their own ecosystems. Here I
have an example of urine. So in June of
2021 year actually consisted or somehow
through series of mergers and
acquisitions affiliated themselves with
whole bunch of protocols. Sushi as their
deex cream as a lending platform. Pickle
that was like a farm for me covered
insurance protocol. propolis some kind
of governance platform taking you know
uh stealing all of these and there was
also something called iron which was
like lat platform which was protocol
like the uh kind of intended so
aggregators were really big everybody
was using them and they are sort of
responsible for introducing into our
field something that we call normal but
maybe it is not entirely normal and it's
called loop so here I have an example of
a yield loop that to provide it by earn.
You could take your USDC, you could
deposit them into Europe, you could uh
turn that into yield bearing your USDC
and then someone implemented called
Apracadabra which was also
collateralized that position. So you
would take that USDC deposited into
Apocracadabra. They meant something
called magic internet money which was
also a stable coin back to US dollar. So
you would want to one swap it for USDC
and then you would rinse and repeat as
long as the collateralization factors
would allow. So this is what deal
looping is. And now this yield looping
combined with other mechanics actually
led to whole bunch of uh bad things in
D5. So this is not entirely moving but
the very first or second example of bad
are sort of senior controls uh really
bad invention. So two protocols to
mention one was empty set dollar. The
other one was basis fast. They both
issued an unqualized stable coin and
said hey this will cost $1. And if it
ever costs less than $1, then we will
offer to the people to burn these stable
coins uh and mint for them some coupons
which you know if the stable coin or
when the stable coin again reaches $1 or
exceeds and price $1, you will be able
to burn and you will be able to get
yourselves more stable coin and some
sort of next bonus. What they failed to
explain
was uh why this issue had ever happened.
It was purely a reflexive mechanic
hoping that you know at some point an
interesting stable coin will be spark.
So it didn't work. Then we had another
example of something similar that was
called D. They are actually inventing
something we call protocol for liquidity
and uh they help program uh for their
own because purely inflation program uh
and they try to community that uh you
know you can hold their you can stay
them to get more old or you can sell
them if all of us stay them based on
some prisoners dilemma is actually best
outcome for everybody. It's the 33 that
signifi signifies the big scary outcome
in here that is going to be great for
everyone. But all had no derailers. It
was purely inflationally token. It was
just being released into the system. So
this mechanic also did work and
eventually collapsed because you know
once you [snorts] exited the system you
materialized your gains and projected
losses for everybody else. And an
absolute expert in these reflexive
mechanics amplified by the looping was
the block Luna and their stable coin
USD. Again, they had some volatilized uh
depth position protocol where you could
take Luna volatile asset. You could uh
take uh USD uh or mint USD by burning
Luna. So Luna's price was going up and
the demand for it was going up as well
because cost price is going down and
there was also something called anchor
protocol that was actually offering
really really high APYs to USD which
really amplified this higher USD spark
more demand for USD leading to water and
prices going down and that sort of you
know kind of worked up until it didn't
because all the trust sort of
disappeared from the system and USD
defect that means that USD get under
volatilized uh Luna's prices dropped. Uh
that meant that USD is actually more
under volatilized and created this like
exploding imploding loop and that
actually followed progress and all
activity in for a very very long time.
Here you can say that this is how long
it took for us to develop this liquidity
or this TDL and this is the spot where
it just you know single dropped. So
really just started event later D5 was
actually revived uh by the merch which
was also the event that developed the
staking for their state. So when
Ethereum merge happened uh they had a
way that immediately after staking your
piece you couldn't unstake it. The uh
unstaking functionality actually wasn't
introduced into bacteria up until one
year later with the shell. So that
clearly created ground for tokenizing uh
stake ether and those were the protocols
of bio with a rocket to them and uh you
know later taking in all this huge field
of staking and restaking by like buffer
rental and actually and this is what
helped us revive uh DeFi for where we
are today. So where are we today? We are
probably on par with the peak of D5
summer or the year 30 of D5. We're still
not the state of it and probably you
know if you have been following markets
we are actually a little bit further
from there but we still you know went
through a long long long journey. We
have many chains all of them have
different features. You have many
protocols all of them have different
features. Some of them provide E5
landscape themselves. Some of them adds
privacy. Some of them add some utility
and uh you know provide options. We have
whole bunch of SDKs, development tools
and we have amazing interal
infrastructure. A year ago I was
actually complaining about the existence
of whole bunch of chains. This year I'm
super super excited. We have a whole
bunch of cloud chains that we can build
with because that interop is so good.
Despite that, we have deployments of
protocols that are isolated on multiple
chains. Here I'm showing a screenshot of
various uh dropdowns selecting what
chains uh do what chain do you want to
operate.
We also went through some
standardization. So we have an ERC 4626
uh for tokenized ws.
We have the consensus or agreement uh or
you know prevalent opinion that some
prevails in D5 actually reach maturity
and they might be themselves the primary
product market fit for Ethereum. Defy
and blockchains
internally intersect with our own life.
Right? We have Ether many other
companies actually that offer uh credit
cards. You can operate with crypto on
PayPal and you can actually use it to
make purchases on all Shopify stores and
as I said before we have $300 billions
in stable coins and we have $135 billion
in defy applications and deposits. So we
really went the long way. Is there any
space to innovate still? I say yes
because we went so far and we have this
you know landscape of things that can be
integrated we can actually build better
products. I still strongly believe that
it is a responsibility of a defi
protocol to protect their users. However
you know over time the secondary threats
have been evolving together with the
field even from bugs over market
manipulations and platforms to hacking
bridges. These days when people are
using blockchain more and more we have
the many many fishing impacts and we are
responsible for you know a lot of
damages and all of that actually
aggravates and adds up finally I
couldn't ask for more innovations and
transparency and managing risk and more
responsible defi in general especially
in the light of the risk events with
street finance
what is our response to that and here
I'm switching to the national for
finance So at circuit we are blockchain
at random hacks on uh from the chain uh
and we are launching new flagship
product. It is a response to the state
of defi. It is uh yield product that
exists on multiple chains. It builds on
layer zero. So you can deposit funds
into it uh you know on any block where
the vaults are deployed. system base of
liquid and uh primary. Okay. Uh all
these vaults they are going to be
generating yield. The yield will be
based on lending. Uh the lending is
going to be combination of D5 protocols
such as a morpho and um C5 opportunities
and as I said we have strong focus
security. So all will be protected by
our system called sequencer level
security and data both in the future.
This is currently uh in the private
interface. We are working with our
partners. We are bringing it into the
platform. But if you want to get in uh
as soon as uh possible, secure your uh
spot on the wait list uh on find.com.
And that's everything that I wanted to
tell you here. If you have any
questions, if you are interested in D5
or building something, please catch me
in the back and I will be glad to talk
to you. Thank you.
Join Martin Derka, Co-founder of Zircuit, for a talk titled "How DeFi Builds (And Breaks) Itself", live from Pragma Buenos Aires 2025! _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 🇦🇷 *Pragma Buenos Aires* Pragma Buenos Aires 2025 was held on November 20th at Mansion FUNTIME in Buenos Aires, Argentina and was an in-person summit for builders and leaders in the web3 ecosystem. Watch the full Pragma Buenos Aires YouTube Playlist here: https://www.youtube.com/playlist?list=PLXzKMXK2aHh6O9YWG6zHghXHSTYQVI5b0 ETHGlobal's Pragma series takes place in cities around the world, and is designed to be a different kind of event. Pragma is a one-stage conference with founders-only on stage, bringing together a small group of curated attendees and speakers to discuss the future of web3 and reflect on the past. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ ✅ Follow ETHGlobal X: https://x.com/ETHGlobal Warpcast: https://warpcast.com/ethglobal Website: https://ethglobal.com YouTube: https://www.youtube.com/@UCfF9ZO8Ug4xk_AJd4aeT5HA _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Are you interested in Ethereum development and entrepreneurship? 👉 Sign up for the next ETHGlobal event: https://ethglobal.com/events 🎁 Get exclusive access and perks with ETHGlobal Plus! https://ethglobal.com/plus 📣 Want us to throw an event in your city? Tell us where! https://ethglobal.com/city _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _