DeFi Intro - Smart Contracts and Decentralized Finance

Summary

This video offers an introductory overview of decentralized finance (DeFi), explaining its core principles and distinguishing it from traditional finance. DeFi leverages public blockchains and smart contracts to create open, transparent, composable, and non-custodial financial protocols. The video outlines the four key aspects of DeFi: openness, transparency, composability, and non-custodial nature. It also clarifies misconceptions about DeFi, emphasizing that it is not synonymous with CBDCs or in-house blockchain projects. The presenter introduces the DeFi stack, which includes layers like settlement, asset, protocol, application, and aggregation, setting the stage for more detailed exploration in subsequent videos.

Takeaways

• 📚 The video introduces decentralized finance (DeFi) as the main topic for the class, focusing on how smart contracts are utilized in a vibrant ecosystem.
• 🌐 DeFi is built on public blockchain networks and smart contracts, aiming to create open, transparent, composable, and non-custodial financial protocols.
• 🔍 The video provides a high-level overview of DeFi, with the intention to delve into specifics like tokens, decentralized exchanges, and lending markets in later videos.
• 🔑 The term 'open' in DeFi refers to the absence of access restrictions and special privileges, allowing anyone to use the independent infrastructure without KYC or whitelisting requirements.
• 🔍 'Transparent' indicates that all interactions within DeFi can be mathematically verified by anyone, ensuring security through smart contracts and public blockchains.
• 🧩 'Composable' suggests the ability to combine different financial building blocks, similar to LEGO pieces, allowing for significant financial innovation.
• 🔒 'Non-custodial' is a key aspect of DeFi, meaning users retain control over their assets and do not need to trust intermediaries with custody of their funds.
• ❌ DeFi is distinct from CBDCs (Central Bank Digital Currencies) and in-house blockchain projects, which are not open, transparent, or non-custodial.
• 📈 The video outlines the DeFi stack, which includes layers such as the settlement layer, asset layer, protocol layer, application layer, and aggregation layer.
• 🌟 DeFi offers advantages over traditional finance, including trustless execution, reduced need for intermediaries, and the ability to create atomic transactions that mitigate counterparty risk.

Q & A

What is the primary focus of the video series after the introduction of smart contracts?

The primary focus shifts to Decentralized Finance (DeFi), exploring how smart contracts are employed in a vibrant ecosystem.

What does the term 'DeFi' stand for and what is its significance in the video?

DeFi stands for Decentralized Finance, which is a financial system that utilizes blockchain and smart contracts to create open, transparent, and trustless financial services.

What are the four key characteristics of DeFi as mentioned in the video?

The four key characteristics of DeFi are being open, transparent, composable, and non-custodial.

Why is the use of a public blockchain important in DeFi according to the video?

A public blockchain is important in DeFi because it provides an independent, open, and transparent settlement layer that allows anyone to participate without special privileges or access restrictions.

What does 'trustless' mean in the context of DeFi as discussed in the video?

In DeFi, 'trustless' means that users do not need to trust a central authority or intermediary; instead, they trust the math and the code that is transparent and verifiable by anyone.

How does composability in DeFi differ from traditional financial systems?

In DeFi, composability allows different financial protocols and smart contracts to interact and build upon each other, creating new services without the need for intermediaries, unlike traditional systems that often operate in silos.

What is the significance of being non-custodial in DeFi?

Being non-custodial in DeFi means that users retain full control over their assets without having to entrust them to a third party, reducing counterparty risk and increasing individual autonomy.

How does DeFi contrast with Central Bank Digital Currencies (CBDCs) as explained in the video?

DeFi is decentralized, transparent, and built on public blockchains, whereas CBDCs are centralized digital currencies issued by central banks and often operate on permissioned ledgers with access restrictions.

What is the DeFi stack and how does it structure the ecosystem?

The DeFi stack is a layered framework that includes the settlement layer, asset layer, protocol layer, application layer, and aggregation layer, structuring the ecosystem from basic blockchain interactions to complex financial services.

What are some of the advantages of DeFi over traditional financial systems as highlighted in the video?

DeFi offers advantages such as trustless transactions, deterministic execution, atomic settlement to reduce counterparty risk, and programmatic composability that allows for easier interaction and innovation compared to traditional financial systems.

What is the role of smart contracts in the DeFi ecosystem as discussed in the video?

Smart contracts are the backbone of the DeFi ecosystem, automating and executing financial agreements and protocols on the blockchain, ensuring transparency, security, and efficiency.

Outlines

00:00

🔑 Introduction to Decentralized Finance (DeFi)

This paragraph introduces the concept of Decentralized Finance (DeFi), which is the focus for the rest of the class. DeFi is a vibrant ecosystem that utilizes public blockchain networks and smart contracts to create financial protocols that are open, transparent, composable, and non-custodial. The speaker emphasizes that this is just an overview, with more detailed videos to come on specific subtopics like tokens, decentralized exchanges, and lending markets. The definition of DeFi is based on a paper from the Federal Reserve Bank of St. Louis, highlighting its trustless nature where trust is placed in the code and math rather than intermediaries.

05:02

🔍 Exploring the Core Principles of DeFi

The core principles of DeFi are discussed in detail: openness, transparency, composability, and non-custodial nature. Openness means no access restrictions on the blockchain or protocol level, allowing anyone to use the infrastructure without special privileges. Transparency ensures that all interactions with smart contracts are verifiable, maintaining security guarantees. Composability allows different financial protocols to interact, enabling innovation by building on existing smart contracts. Non-custodial refers to the user maintaining control over their assets, contrasting with traditional financial systems where custodians hold assets.

10:02

🚫 Distinguishing DeFi from Centralized and CBDC Models

The paragraph clarifies what DeFi is not, including Central Bank Digital Currencies (CBDCs) and in-house blockchain solutions. CBDCs, while digital, are not decentralized and are issued on a new infrastructure but lack the transparency and immutability of DeFi. Similarly, running DeFi protocols on a private or consortium blockchain controlled by a single entity or with heavy centralization does not qualify as true DeFi. The paragraph reinforces that DeFi is based on public, open, and non-custodial blockchains.

15:03

📚 The DeFi Stack and Its Components

The DeFi stack is introduced as a framework to understand the various layers within the DeFi ecosystem. Starting with the settlement layer, which is the blockchain itself, the stack includes native protocol assets like Ether and gas fees. The asset layer involves tokenization standards for fungible and non-fungible tokens. The protocol layer encompasses financial services recreated as smart contracts, such as decentralized exchanges and lending markets. The application layer provides user interfaces for interacting with these protocols, and the aggregation layer aggregates these services for a more user-friendly experience.

20:04

🌟 Advantages of DeFi Over Traditional Finance

The advantages of DeFi over traditional finance are highlighted, including the removal of the need to trust financial intermediaries due to the deterministic execution of smart contracts. DeFi allows for atomic transactions that eliminate counterparty risk and enable direct asset exchanges without intermediaries. It also overcomes the siloed nature of traditional financial services by offering programmatic composability, where different financial protocols can interact and build upon each other, fostering innovation and efficiency.

Keywords

💡Decentralized Finance (DeFi)

Decentralized Finance, often abbreviated as DeFi, refers to the ecosystem of financial applications built on blockchain technology, particularly smart contracts. It aims to recreate traditional financial services in a trustless manner without intermediaries. In the video, DeFi is introduced as the main topic, highlighting its role in creating open, transparent, and non-custodial financial protocols.

💡Smart Contracts

Smart contracts are self-executing contracts with the terms of the agreement directly written into code. They are a foundational component of DeFi, enabling trustless transactions and automating processes on blockchain platforms. The video discusses how smart contracts are used to build financial services on public blockchains, emphasizing their role in creating transparent and deterministic execution of financial agreements.

💡Public Blockchain

A public blockchain is a decentralized ledger that is open for anyone to join, participate in, and verify transactions. It is a critical aspect of DeFi as it provides the infrastructure for creating independent financial services. The video underscores the importance of public blockchains in DeFi, contrasting them with corporate or permissioned blockchains that may have access restrictions.

💡Open

In the context of DeFi, 'open' signifies that there are no access restrictions by default, allowing anyone to participate in the financial protocols without the need for KYC (Know Your Customer) or whitelisting. The video highlights 'open' as one of the four key attributes of DeFi, emphasizing the inclusive nature of these financial services.

💡Transparent

Transparency in DeFi means that all interactions with smart contracts and transactions on the blockchain are visible and verifiable by anyone. This allows users to mathematically verify the execution of code and ensures that the system operates in a clear and auditable manner. The video explains transparency as a core principle of DeFi, allowing users to trust the system based on the verifiable code rather than third-party assurances.

💡Composable

Composability in DeFi refers to the ability of different financial protocols and smart contracts to interact with each other, creating new services and functionalities. It is likened to Lego pieces where different components can be combined to build more complex structures. The video uses composability to illustrate how DeFi allows for financial innovation by building on existing protocols and smart contracts.

💡Non-Custodial

Non-custodial financial protocols mean that users retain control of their assets at all times and do not have to entrust them to a third party. This is a significant departure from traditional finance where custodians hold assets on behalf of users. The video emphasizes non-custodial as a key feature of DeFi, allowing users to maintain exclusive access rights to their assets until the moment of transaction execution.

💡Atomic Transactions

Atomic transactions in DeFi ensure that all parts of a transaction are completed successfully or not at all, preventing any partial execution. This principle eliminates counterparty risk and ensures that all conditions of a financial agreement are met simultaneously. The video mentions atomic transactions as a mechanism that enhances the security and reliability of DeFi protocols.

💡ERC20

ERC20 is a token standard on the Ethereum blockchain that defines a common list of rules that all fungible tokens must follow to be integrated into the Ethereum ecosystem. It enables interoperability and is used for creating tokens that represent assets. The video touches upon ERC20 as part of the asset layer in the DeFi stack, highlighting its role in tokenization.

💡ERC721

ERC721 is another token standard on Ethereum, designed for non-fungible tokens (NFTs), which represent unique assets. Each token has distinct properties and cannot be interchanged on a one-to-one basis with another token. The video explains the difference between fungible and non-fungible tokens and positions ERC721 as a standard within the asset layer of DeFi.

Highlights

Introduction to Decentralized Finance (DeFi) as the main topic for the remainder of the class.

DeFi is based on public blockchain networks and smart contracts to create financial protocols.

DeFi protocols are open, transparent, composable, and non-custodial.

Openness in DeFi means no access restrictions and no special privileges on any layer.

Transparency allows mathematical verification of all interactions within DeFi.

Composability enables different financial protocols to interact and build on each other.

Non-custodial nature ensures users retain control over their assets.

DeFi is distinct from CBDCs and in-house blockchain projects due to its decentralized and open nature.

DeFi stack includes layers such as settlement, asset, protocol, application, and aggregation.

Advantages of DeFi include trustless execution, reduced need for intermediaries, and increased efficiency.

Atomic transactions in DeFi eliminate counterparty risk and streamline asset exchanges.

DeFi promotes composability and innovation through the reuse of existing financial building blocks.

Traditional finance is often siloed, while DeFi encourages open and programmable financial services.

DeFi's approach to financial services is fundamentally different from traditional custodial models.

Upcoming lectures will delve into specific subtopics within DeFi, such as tokens and decentralized exchanges.

The paper 'Decentralized Finance and Blockchain and Smart Contract-Based Financial Markets' is recommended for further reading.

Transcripts

in the previous videos we looked at the

foundation so you got a basic

understanding of what the blockchain is

how you can interact with it through

transactions we looked at smart

contracts and you even got a chance to

develop your own smart contract but now

it's time to turn to an actual example

of a vibrant ecosystem where these smart

contracts are employed what i'm talking

about is called decentralized finance or

d5 for short and will be the topic for

the remainder of this class

all right let's get started with an

introduction to decentralized financer

d5 now in this video you should not

expect me to go into any of the details

it's really just a high level overview

of the topic to

build a common foundation but there will

be more specific videos later on

dedicated videos and various sub topics

such as tokens for example such as

decentralized exchanges or lending

markets and there we will really go into

the details of these topics but right

here this is just an overview basically

some information of what you can expect

from the remainder of this class and

what this topic is all about

the first thing we have to do is of

course define what decentralized finance

actually is and this definition right

here is based on a paper recently

published with the federal reserve bank

of saint louis their review

and the definition goes as follows defy

employs public blockchain networks and

smart contracts to build open

transparent composable

and non-custodial financial protocols so

the idea is really that you use all of

these technologies we looked at so that

we have a public blockchain and that's

super important so one of these

independent blockchains

not a corporate blockchain not a

permission ledger a public blockchain

basically it's a settlement layer and

then you use smart contracts

like we have looked at like you've

developed to recreate many of these

financial services in a different way

and in a different way really means that

you can recreate them in many cases in a

trustless manner a trustless meaning of

course you have to trust the math of

course you have to trust the code but it

means that you can look at the code xnt

so you know exactly what's supposed to

happen you have a transparent way of

studying of scrutinizing this code and

you you basically have deterministic

execution of safe immutable storage on

the blockchain but let's look at these

four keywords so the open where is my

cursor right here

the open the transparent the composable

and the non-custodial

one by one and let me start by open what

do i mean by that open essentially means

that by default there are no access

restrictions and it's important that

this there aren't any access

restrictions on neither of the layers

and we will look at these different

layers later on so not on the blockchain

it wouldn't be good if there are any

access restrictions on the blockchain

and there are special privileges in the

blockchain but it will also not be good

if there are special privileges on the

protocol level so it really means that

it's completely open that you have this

independent infrastructure

that can be used by anyone

and that no one has special privileges

for example

that they can can do things other people

cannot do there is at least by default

no kyc and no whitelisting requirements

no minimum amounts nothing like that

it's really just this independent

infrastructure you can build on

and then the second part transparent

means that everything that happens in d5

whenever you have an interaction with a

smart contract whenever there's anything

going on really

then you can mathematically verify it

anyone can mathematically verify it so

you see the code you know what is

supposed to happen you can look at the

codexante

so the smart contract code and then you

can verify whether it actually has

happened so

all of the security guarantees we get

from a smart contract

in combination with a public blockchain

as a settlement layer are intact

depending on the implementation of

course subject to the implementation but

at least in theory you can get these

security guarantees and you can create

something that is extremely transparent

that can be scrutinized by anyone

and then composable

composability is usually described as

lego pieces so where you have all of

these different building blocks and you

can piece them together and create

something new and the way this works is

because as you have seen in the earlier

lectures small contracts can interact

with each other of course you need

somebody who is initiating the

transaction so at the beginning the

issue initiator has to be an eoa has to

be an externally owned account but then

you have all of these internal

transactions you have all of these

calls of other smart contracts and that

way you can have a

basically a sequence where one smart

contract uses a function a different

smart contract where one smart contract

builds on a different already existing

smart contract and that is usually

referred to as composability so they

give an example when you have a let's

say a decentralized exchange where you

can

swap token a for token b when that is

already in existence and you create a

new financial protocol that

may have a need to to change assets

as part of its own protocol as part of

its own contract execution this new

protocol these new smart contract can

rely on a decentralized exchange that is

already existing

to conduct these swaps and that's

something that allows of course for a

huge amount of financial innovation

that really allows you to interact with

other smart contracts and have this

composability where whenever there is

already a building block in place it can

be reused by everyone else by every

other smart contract and that's

probably one of the main reasons why we

see this massive speed of innovation in

the d5 space

and then last but not least

non-custodial and that's super important

and for many applications in traditional

finance you have custodians

so they essentially have a financial

intermediary you have to trust

basically you give you give that

custodian your assets in custody they

are holding on to it

and the only thing you can do is ask

whether they will release it back to you

whether they will send it back to you

but you're not in control anymore and

with d5 that's different with d5 again

depending on the implementation at least

in theory it can be coded in a way such

that you will never lose

exclusive access rights to your assets

until the very last second when it's

executed and then as you will see later

on there is a concept called atomic

settlement atomic transactions so the

atomicity that also ensures that you

don't have any counterparty risk when it

actually is executed the long story

short the non-custodial requirement

means that you don't have to trust any

institutions

yes you have to cross the code in the

sense of course you can look at it but

you have to

you have to check it for yourself and

you actually want to know what it's

doing

and yes of course you have to trust the

math

again something you can check if you

really want to but you do not have to

trust anything you cannot verify

yourself you do not have to trust for

example an institution that they are not

running with your money that they are

not messing up

everything you have to trust can be

verified

by you by yourself so you basically can

check the conditions you can make sure

that all of these conditions hold and

that's something that's super exciting

the information is there

and then you can verify it yourself

and these are these four

for keywords these are the four most

important aspects to d5

this is what is different to a

traditional financial system because in

traditional financial systems in many

cases it's neither open

so

the open part right here

isn't really existing i mean there are

so many access restrictions it's also

not really transparent

in many cases it's really these silos

where you don't have access to the

information you don't know exactly

what's going to happen you cannot verify

it in many cases it's not composable

because

these financial intermediaries they

either use their own core banking

systems or have a different

interpretation of many of the parameters

in there there is little to no exchange

between these core banking systems and

it's just it's just in many cases a mess

and uh also in traditional finance it's

custodial uh most of the applications in

traditional finance rely on the fact

that you give your assets away in

constantly with to someone else and in

many cases you don't even have another

option so for for many of the assets

that exist um in traditional financial

markets you will

in some cases not even have the option

to hold on to them yourself whereas in

d5

it's it's non-custodial meaning that you

can always if you choose to do so you

can always

assume self-custody and you don't have

to

trust anyone

else now what is it not that's also

super important to understand because

especially when you read articles in

many mainstream media channels but also

from some people who call themselves

experts on the topics and d5 has

absolutely nothing to do with number one

cbdc programmable euro programmable

swiss franc programming usd

it's something completely different i

mean cbdc can be interesting but they're

certainly not decentralized they're not

immutable it's essentially just digital

money that is issued by a by a central

bank

on a new infrastructure but it has

nothing to do with this decentralized

transparent way of creating financial

markets

it's usually on a permissioned ledger

and not on a public ledger and of course

you have many access restrictions there

as well so it's something completely

different that can be interesting but

it's not defined

and then of course when you're running

d5 in

air quotes

uh protocols on your own in-house

blockchain

so for example when there is a

financial intermediary and there they

are running some test case and they're

saying yes we also have our d5

applications it's on our own uh test

network we're running in-house then this

is also hardly defined i mean when you

have your own test network and you have

your blockchain that's that is under the

exclusive control of just one entity

then

it's the settlement layer is already

heavily centralized and then of course

anything you do on top of that doesn't

really matter anymore so you can hardly

call that

d5 and then last but not least of course

the same counts for heavily centralized

settlement chains

and this is something that can be also

in the domain of the cbdc or so the

in-house blockchain

but there are many consortiums around

the world where some of these financial

intermediaries they work together and

they create their own permissioned

lectures

mostly for settlement mostly for the

issuance of

various assets

bonds for example but that's also not d5

i mean again we have the access

restrictions again it's not completely

transparent in the sense that just

anyone can can check whether it match

matter and it actually works out the way

it is supposed

uh to work

it's just

there are all kinds of privileges on

there and essentially it's just a

regular database

that gets recreated d5 is different d5

is based on public blockchains d5 is

non-custodial it's open it's transparent

and these are really the things you have

to look for and that's what define that

is for d5

that is what makes it special at the end

of the day

and

there is a place of course for all of

these projects but they shouldn't be

referred to sd5

now let's look at the d5 stack this is

also part of the paper

i've published

a while ago in the federal reserve bank

of st louis review and they have

proposed

basically a framework a model

of how you can think of about d5 of the

various layers that exist within the d5

ecosystem and this is also super helpful

to structure the class and to

think of the different topics we look at

in this class so i mean we started with

the settlement layer right here and

we've looked at of course the ethereum

blockchain

looked at the basic building blocks make

sure you understand how the blockchain

works we have also looked at the native

protocol assets so ether things like gas

fees and so on and the next thing he

will do after this introduction is turn

to the acid layer on the acid layer of

course you could argue that native

protocol acid so e4 is also part of the

acid layer what we will do in these

videos is we will look at tokenization

so you look at standards like erc20 or

erc721 so standards for fungible tokens

and non-fungible tokens

to give you a quick primer fungible

token is something where it doesn't

really matter which specific token from

a class you have so when you have for

example i don't know a stable coin let's

go with that when you say it's a us

dollar packed stable coin

then it doesn't really matter whether

you have

this specific

one of this class of us dollars packed

stable coins or another one

um

it's essentially the same whereas with

non-fungible tokens we are really

talking about something that's unique so

it could represent let's say a

painting or just something that really

only exists once and therefore it has a

unique identifier and therefore every

single token is different that's the

difference between these fungible and

non-fungible tokens and you have

standards for both of them and that's

something you look at at the asset layer

then we will go to the protocol layer

with the protocol layer

you really recreate these different

financial protocols these different

financial services so for example you

would look at decentralized exchanges we

look at lending markets you will look at

derivatives synthetics

and we will also look at asset

management

as some examples so these are just some

categories and what's important and this

is also true for the asset layers that

everything you're seeing here so be it

these different tokens uh the ec20 or

c721 but also all of these protocols

everything is built on smart contracts

everything is in fact one or more smart

contracts

and we will also look at some of these

examples how these things are

implemented and then on top of that you

have two things uh i referred to as the

application and the aggregation layer so

the protocols themselves such as the

smart contracts and then on top of that

you have

basically an application that makes use

of these smart contracts there is a

gateway to the smart contract so you can

think of it a little bit as a front end

that makes makes the access to these

smart contracts much easier so a web

three based front end and with every

aggregation layers you have can think of

it a little bit like an an online

banking platform where some service

provider they aggregate these various

smart contracts they make make a they

build a nice front end that is easy for

people to interact with

make sure that in one nice dashboard you

have all the information you need and

you get access to these different kind

of smart contracts usually in a much

more

user-friendly and more convenient user

interface that's the basic idea

so why define what are some of the

advantages of course there are many

advantages

but some of the things i want to

specifically mention at this point was

number one in the traditional financial

services

world what you're doing is you have to

completely

trust these financial intermediaries

it's a trust-based execution whatever

you do

you usually

already have the assets with a custodian

but then also when you for example give

an aldo to do something

then you have to trust that these

financial intermediaries are actually

doing what you're asking from them but

you you cannot i mean you cannot verify

anything yourself you just have to trust

that they did it you have to trust and

that they that they're actually doing

that on on your behalf and that they're

not

cheating and

that of course has several implications

and

number one is that there are all kinds

of audits all kinds of regulations all

kinds of inefficiencies because somebody

has to take care somebody has to

actually verify uh whether you can trust

these people you cannot do that but

there are some certain regulators that

will do that and there are certain

requirements and that just makes the

process in many cases cumbersome and

also you could argue inefficient

now again in theory

um you have deterministic execution with

uh smart contracts and of course when

you

do a sloppy job and implementing them

then there can be some errors of course

when there are all kinds of dependencies

that are implemented

then it can also be cross-based

based but there is a way for smart

contract based financial protocols to be

completely deterministic so that you

know exactly what's supposed to happen

that you can verify everything and that

is extremely exciting so at the end of

the day we're really talking about basic

instructions basic instructions that are

coded in the form of smart contracts and

you can verify everything that happens

for yourself

the second

in traditional financial markets

most of the infrastructures built on

really complicated clearing and

settlement systems where you have some

financial intermediaries in between that

take care of clearing that take care of

settlement

of course they will not do that for free

because it's a service they provide and

they also have a

place in the system because in many

cases in traditional finance nobody

wants to make the first step so let me

give you an example let's say you have

alice on the left side you have bob on

the right side

and they want to exchange

some assets okay so we have alice has

the a asset and bob has to be asset they

want to exchange it

and in a traditional financial

services world what they would do is

they would go to a financial

intermediary both of them would deposit

their assets with that financial

intermediary or already have it there

and

then it gets exchanged eventually

the financial intermediary in between

would also take care of course of

clearing they would say everything is

fine it would take care of settlement

and this is of course somewhat

cumbersome this is of course really

expensive now what you can do with

blockchain based solutions and that's

one of the main advantages of these

blockchain based financial protocols is

you can make use of atomicity of

transaction atomicity so you have this

principle of atomic settlement

where you

have certain conditions that will only

ever get executed together so in this

case in in my example you could say okay

you make sure that

token a from alice to bob and token b

from bob where to alice

essentially becomes one transaction of

course it's two steps

of course it's two individual steps that

are part of the same transaction but we

make sure by creating an atomic

transaction that these two steps cannot

be separated so you know exactly that

token a from alice to bob and token b

from bob to alice can only ever be

transacted together as one

and that of course eliminates a lot of

the counterparty risk with this trade

and is something that's extremely

exciting and innovative in the finance

space and there are many of these

examples that build on this atomicity

principle and that we will also look at

later on and that's a big advantage

and then the third one is in traditional

finance you see all kinds of silo

services

so there isn't really

any way of sharing

information efficiently there isn't

really any way of

interacting with different core banking

systems efficiently there has been a

concept that has been discussed for a

long time it's called open banking or

open finance where people are are

advocating for these open interfaces

and in some jurisdictions this has

already happened to some extent

unfortunately it's still a pain and when

you look at the infrastructure and the

the basically the legacy infrastructure

that already exists in finance and then

this is really no surprise it's it's

really cumbersome it's hard to change

anything in many cases you cannot really

change anything because nobody knows

exactly what would break what would

happen when you do change it

and

of course on the complete opposite you

have d5 with this programmatic

composability that everything by default

happens on the public blockchain where

everything by default is open and

transparent and there everything by

default is completely composable so you

can basically have the sequence of

various smart contracts that interact

with each other and everyone can just

make use of anything that has already

been out there okay so whenever there's

anything deployed you can just reuse it

and that is extremely exciting

so these are just a few of the

advantages

again

we will

tackle the various topics

that i've shown on the device deck in

the next few lectures

but that's it with the first ov on d5

now

as a as a primer i recommend that you're

reading the paper i've teased

various times um it's called

decentralized finance and blockchain and

smart contract based financial markets

you can find it online

and it will help you

to understand the things that are to

come when we tackle more specific topics

in the next few videos with that

stay curious see you soon