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Radek Zaleski (Bull & Bear)
Interview with Projects - Santiago Velez (XDFi Platform) (PL,ENG Subtitles)
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Hi and welcome to my channel. Today we have a special guest who is well known in the XRP ledger community and in the Flutter community as well. Santiago Velas is today with us. Hi Santiago, welcome. How are you doing? Thanks for having me. Hello. Okay, so I think we can start. Maybe Santiago, can you tell us a little bit more about yourself and also about your background in the crypto? So what brought you into the blockchain space? Yeah, I guess just going back a little bit, I got into digital assets and crypto in 2017 pretty much how everyone else does. The price action was very exciting. It was very compelling.
And then once you started peeling back a lot of the layers of what was going on, it became so compelling that I decided to change my career. So what originally started off as kind of price was really the beginning of this whole journey into building technology that I think is very transformative. It's just kind of a new way for human beings to express and transact value. So I wanted to be a part of that. So I've been in the space long enough to see a lot of the cycles and a lot of the problems that have arisen and also a lot of the problems that we can solve with this technology.
So I'm super excited to be a practitioner and somebody that's actually building things. And I'm happy to be here with you guys and the community. Yeah, so that's a definitely good approach. So you are involved in a project called XDFI. So maybe can you tell us a little bit more about this XDFI platform? So what does the platform do? What are these key features of the platform and who will be your target audience here? Sure, yeah. Thanks a lot for letting us kind of showcase what we're trying to build here. We're very excited about XDFI.
So I guess it's important to go back to 2021 and 2022 and see what a lot of the problems crypto and the space had in general. There were a lot of centralized actors like FTX and Celsius and others who led to disastrous losses for both investors and holders. And it kind of perpetuated this myth in the public mind about crypto that it's about scammers and criminals. And one of the problems is that these were centralized actors who had a lot of counterparty risk and who made a lot of promises.
And so we wanted to build something that didn't have those same flaws that we could with 100% confidence put out into the space and provide the kinds of protections and assurances that people really need in decentralized finance and digital assets in general. So really this is a response to all of those failures and we're hoping that this represents kind of the beginning of the next phase of crypto. So XDFI, we wanted to start off with something pretty simple, which was the ability to get exposure to digital assets without having to actually custody them. And we thought the first and quickest way to do that was with a futures product.
Essentially a future, if you're not familiar with that, it's kind of like what the name suggests. You're trying to guess at what the price of something will be in the future. And your guess might be some long or short position. And you can use this guess for a whole number of financial objectives from hedging to speculation to coupling it with more complex financial instruments so that you create more sophisticated training strategies. So futures is very common in crypto. There's nothing new there in that regards, but the way we built it, we wanted to have some of those attributes that I talked about earlier with respect to managing counterparty risk and managing risk in general.
So XDFI has a couple of very basic elements. Element number one is it has what we call a KYC token, which is a compliance mechanism. And I'll get into what a KYC token is later, but we wanted to make sure that this was a regulatory compliant environment protocol. The second thing it has is that it's 100% non-custodial. So no one can steal your assets. The people who engage with the protocol have 100% control of their assets for when they deposit, when they withdraw it, when they transfer it. And there's no counterparty risk in that sense. Somebody can't use your funds for some reason other than what you intended.
That was paramount for us. And then we wanted to add elements of decentralized Oracle technology. We chose the Flare network because a lot of other financial processes, both in the traditional financial world and in crypto, rely on a lot of centralized pricing signals. We've seen manipulation at centralized exchanges in terms of random wicks that will liquidate, leverage longs and shorts. So we wanted to mitigate that. And we thought the FTSO of the Flare network was perfect. And then I guess finally, I'd say that we wanted to build something that incentivized community usage of the protocol and rewards the community for that use without involving a token.
We see tokens in almost every other project in crypto and we didn't feel it was necessary. So that was kind of the final big piece for XdFi. So I hope that kind of gives you a little summary. Yeah, that's quite interesting. Can you explain us that two-token architecture you mentioned before in your platform? There is one KYC token you mentioned and the other one is a governance token. Can you tell us a bit more about it? Sure. And just to right off the bat, we want to make clear that neither of those tokens are for speculative purposes. And in both instances, they are kind of soul bound to a person's wallet.
And we wanted to make that in that manner because we don't want to create a marketplace for governance. We think that mixing governance and value in other tokenomic structures is inappropriate. And it tends to lead to disproportionate say or voting power just by the fact that you might be a large capital holder. And so we think that's unfair for a lot of the users of the platform, especially if you might only have a little bit of value.
So what we tried to do was decouple this idea of a token that manages tokenomics from governance and say the people who most use the protocol should have most of the say, not the people who are backing our company, Cedric, or the people who might have the most tokens of some other sort. We really wanted to make it so that the people who use it most get to decide on critical parameters. So we created a governance token. And the function of that token is to make decisions about very important attributes of the protocol.
For example, how much a contract might cost to purchase the types of assets that might be up for purchase of a futures contract, the amount of risk exposure that the protocol could offer for an individual contract position, all of these kinds of critical parameters we thought people and the marketplace should decide, not us as the creators of the protocol nor large holders. So the governance token is basically earned as a function of the number of contracts that a user purchases and the positions that they take. And the more positions you take, the more governance tokens you earn.
Once a decision is put forth and you vote on that decision, once a quarter, all the governance tokens are wiped out from all of the wallet holders. And this is on purpose so that we don't create kind of an early class of governance that forevermore will have disproportionate governance on the rest of the community. We wanted to make it so that it's an ongoing requirement that you engage with the platform to maintain your kind of say over those critical parameters. So that's kind of the governance token. The second token that we created is very special. We think it's unique in crypto. We call it a KYC Know Your Customer token, KYC token.
And that also is kind of a sole-bound token to your wallet. Once it's claimed, you can't sell it to somebody, you can't transfer it. And that's for a specific reason. We want to make sure that the way in which an individual earns that token, that it pretty much reflects who they are and that it's bound to their wallet. You can only earn one KYC token per individual entity. Could be a person, could be an institution or a business.
Well, so the KYC token, we think it's special because the way it works is once you claim your token, you go through a third-party provider process where you, as an individual or legal entity, go through a Know Your Customer onboarding. You provide your information to that third-party. They're a licensed KYC provider, so none of that information goes through the protocol. It doesn't go through our company, Cindrick. We don't even know who you are. Basically, that information is handled by that licensed third-party provider. And then if it comes back as acceptable, we receive a notice that you passed the KYC process.
At that point, we provide a service which is to mint this token and we deposit it in your wallet. Once that token is deposited in your wallet, all of the smart contracts that the protocol relies on chain are looking for that token in the wallet. If you don't have that token, then the smart contracts won't execute. So you won't be able to deposit funds, take positions, withdraw funds, that kind of thing. Okay, so it means it will be some kind of on-chain KYC process. Yeah.
So, and to be clear, this would be very nuanced here, but what occurs on chain is that the smart contracts that enable all of the futures positions, and this could be applied to any other smart contract for any other function on chain, they're looking for this token. The KYC process happens in the real world because you have to check, let's say, a government sanctions list or a credit check or some accreditation check. So the KYC process happens off-chain, but then the token is kind of the way that a wallet proves to the smart contract that it's gone through that process and then the smart contract will execute.
So it's more of like a permissive that once you have the token, it allows you to make forward progress on execution of the contract. So, did that answer your question? Yeah. So, you know, we're excited about that because that doesn't exist anywhere else in crypto and it could be used for a whole range of other functions like accredited investing, transfer of real-world assets between eligible counterparties. And, you know, we see a lot of things going on now in crypto about concerns that, you know, North Korea is using funds from Uniswap or something like that.
With the KYC token, that wouldn't be possible because you would know that your counterparty is a legitimate individual or entity to transact with. You never have to worry that on the other side of a swap or a loan or some other financial crypto product that there's an ineligible counterparty. That's what the KYC token really achieves. Yeah, great. Also, you mentioned about your unique approach to incentivize the users something what's called referral chain. Can you tell us a bit more about it as well? Yeah, again, so just to go back to something I said a little bit earlier, the protocol is 100% non-custodial. So funds never touch Cindrick or any of our third-party providers.
Funds are always from the user wallet to on-chain smart contracts that have been deployed. Once those funds are entered into a contract, let's just say a futures contract, when the contract's settled, which happens once per day at the end of day using an FTSO oracle price, once those contracts settle, the funds are dispersed and they're dispersed back to the wallets that originally deposit the contract in proportion to how well they guessed at their futures position, long or short. But part of that dispersal also includes funds that the protocol takes as a protocol fee. That fee covers things like gas for the network and our profits for Cindrick.
So what we decided was why don't we take that protocol fee and split it in half and share that with our community. We thought that the best way to incentivize continued use of the protocol was to have people who use it and refer to others be the beneficiaries of that protocol fee. So the way it works is once the funds are dispersed and the protocol fee is cut in half, half goes to Cindrick, the other half goes to what we call a referral chain. That referral chain is essentially all of the people that you in your chain have been connected to in generations.
So for example, if you shared a referral code with five people and they went on to buy 20 futures contracts, when that protocol fee is split up, you as the person who originated that referral would receive that half of the protocol fee for all of those people that used your code. There's no limit. So if you had a referral of a million people, then on chain all of those funds would refer back to your wallet. And so we really are excited about that because again, it's a way we think first time in crypto where we're incentivizing a community but without a token. And this is important because there's nothing to manipulate.
There's no bag holders to be had. There's no securities violations that the government could use. It's really just about, hey, you're helping us share the knowledge of the protocol. And we want to reward people who do that. We want to make sure that not just now, but as your referral chain grows, that you continue to grow with the protocol because we just see that's fair. So yeah, that's basically how it works. And there's really no limit to how big your chain can be. Some people may decide they want to join other people's chains because they're already a large chain.
But some people may say, hey, I want to organically build my own referral chain. I might be a YouTube influencer or something like that and really build out that chain. And it can go several layers deep, three, four, five, six layers deep and all of those protocol piece gets split out. We'll be releasing a tutorial on how it all works mechanistically with examples. Yeah, but that's basically it. Yeah, it's not interesting. Yeah, of course. Definitely. So it sounds interesting. But Centaur, can you tell us a little bit more about this pricing fees? Because you also mentioned that you will take this FTSO pricing fee.
So it means for now we have overall 18 crypto patterns here. But you also mentioned that you will enable this futures trading. So it will also apply to this traditional. That's right. Yeah, so my question is if you will wait for this FTSO version two, because for now it's quite limited. So I'm not sure if. . . It's super exciting. I mean, the FTSO, being a decentralized oracle, it's so important to get accurate, reliable price feeds for all kinds of things. For reasons I mentioned earlier, you can't have internal exchange manipulation with bad pricing. That's quite right.
But then you also want to be able to take exposure to futures with various asset classes. Crypto is not the only asset class. We think that crypto really is a primitive for all other asset classes, being commodities, equities, bonds, collateralized debt positions, all types of financial instruments are reliant on good pricing and good market structure. And the best kinds of markets are the ones where there's complete information and it's reliable. So we plan to expand the kinds of futures that you'll be able to purchase on the protocol as soon as they're available. We're going to start with, of course, the biggest cryptos, get the ones that our community wants the most and prioritize those.
But we plan to release commodities as soon as possible. That includes things like gold, copper, silver, corn, different kinds of oil. These are the largest financial products in the world and there's really no reason why we can't give people a way to get exposure to them. So very, very excited about that. We think that's a huge differentiator to kind of a lot of the other crypto products that are out there. Yeah, right. You mentioned FTSO. Is there any chance you will use F-assets in the future when they're going to come out as well? And what's your view on that system? Yeah, we're super excited about that.
I mean, just philosophically, our team, we're asset agnostic. We don't necessarily think that this space is going to be all about one particular asset and all transactions are going to be done with one asset. We actually think that the best way to get the rest of the world onboarded to digital asset space is to make it asset agnostic so that people can use the things of value that they align with and that they have.
So F-assets is kind of the first step to that, where if you're an XRP holder or a Bitcoin holder or a Doge holder, you want to take a position to hedge a contract or you want to engage in a financial transaction, you should be able to do that. And so we're going to offer our futures products for all of the F-assets and so we'll create matching pairs. To start, the only way you can buy a futures product is with Flair, just because that's the native asset of the Flair network. But eventually, when these F-assets are released, you'll be able to buy a product with FXRP, FBTC, et cetera.
And long-term, our goal really is to create a global derivatives market that is cross-border, that you can use a yen stablecoin, a Euro, a Bitcoin F-asset, and have those interoperate and take positions, because that's really the only way you're going to get a global financial system. And it's really ambitious. Yeah, piece by piece, right? Yeah, of course. Step by step, because it's the only way to achieve this. Yeah, so we have discussed these topics for Flair, but can you tell us a little bit more, maybe? So what's your insight? So what do you think about this latest amendment, which was implemented on XRP Ledger? I mean, this AMM, this automatic market maker solution.
So what do you think about this? Well, there's this debate about the need for test networks or canary networks. All true, but I think that you really can't find problems until things are in production in the wild. It's just the reality of things. Crypto is still really new, and I don't fault any party for not catching something. This is incredibly complicated technology, and there's always risk to its use. So I encourage people to use these products, experiment and help find these errors. We plan to take that as a lesson learned and say, we're going to release our product on Costed2, which is a test network for Flair.
We are going to release XDeFi on Songbird. So people who have Songbird token will be able to get exposure. And of course, on Flair Network. So we think with this combination of uses, we'll be able to find and correct any problems. But there's always small things out there. And even if you get third party auditors of your contracts, there's just complex code. So you really want to approach this cautiously, and it has to be a battle-tested, time-tested protocol before you can kind of grow that volume. So our goal is to approach this incrementally, slowly, and build it until it's really, really reliable.
I plan on using the AMM on the XRP ledger, just because I think that for impermanent loss, the auction mechanism is very clever. It could be used more effectively than some of the AMMs used on other like EDM networks. So that's very, very compelling for managing liquidity for large LPs in the future. And so I have a lot of conviction that the error will be corrected, and then eventually it could be a very useful product. And if you combine that with things on other chains, EVM side chains, or Zahow, or Flair Network F assets, now you have something really interesting, because you have cross-chain interoperability and proper liquidity management.
And that's a little difficult for people to understand because it's very complex, but from a product standpoint, businesses will be able to build something that's abstracted that you don't need to worry about all the underlying complexities in detail, you just can use it as a reliable product. So that's the goal, and I think we'll get there. And in such cases, the possibilities are endless. Yeah. You mentioned starting on Songbird, right? Can you give us an estimate time frame when you can expect such a thing? Well, you know, our original plan was Costum2 test network for Flair first, which uses C2FLR. Then we were going to launch directly on Flair Network.
But we got a lot of feedback from the community saying, hey, why not Songbird? It was designed as a Canary Network. And we took that feedback and said, you know, you're absolutely right. Let's do that on Songbird, but we want to make sure that we carry over all of the rigor that we put into Costum2 and Flair. Because, for example, we don't want people having to worry about managing multiple KYC tokens in their wallet or going through multiple KYC processes, right? So we want to make it so that eventually you go through one KYC process and then you get tokens that represent whatever network you're on.
It could be non-Flair networks, it could be test networks, Canary networks. And we want to abstract that complexity for the user and just have a very seamless experience. So we're still sticking to our original plan, Costum2, Flair, but then quickly right after that it will be Songbird. And you'll have just one KYC process that you'll have to go through for all three. Yeah, great. Thank you very much. Yeah, thanks a lot. So I think we don't have any other questions. So, Santay, thank you very much for your time. Yeah, my pleasure. My pleasure. Thank you guys for having me. Yeah. Thank you. Great interview.
Thanks a lot. Thanks, guys. Thank you. .
S K R Y B O T
Skrybot. 2023, Video transcriptions from YouTube
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