The document compares traditional finance (TradFi) to decentralized finance (DeFi), describing TradFi as centralized and familiar while DeFi is distributed and less familiar. It discusses how Bitcoin has created digital scarcity and addresses the double spending problem. It also covers decentralized autonomous organizations (DAOs), smart contracts, oracles, and challenges around privacy and regulation on the blockchain. The document speculates that in the future, TradFi and DeFi could converge as blockchain technology is integrated into traditional banking infrastructure through the use of technologies like multi-party computation and oracles to connect blockchains to off-chain data and systems.

1. TradFi and DeFi or,
Where the Land meets the Sea.
Simon Redfern
TESOBE / Open Bank Project
APIDays Hong Kong 2021
© TESOBE 2020

2. 2
Land
© TESOBE 2021
Sea
Image: Jacob Reyes (CC BY 2.0)
Image: Cherie Lynn (CC0 1.0)
80% unmapped,
unobserved,
unexplored

3. 3
Familiar
© TESOBE 2021
Less so
Image: Cherie Lynn (CC0 1.0)
Image: Rahim Mngwaya (CC BY-SA 4.0)
“Web 2” “Web 3”

4. 4
Centralised
© TESOBE 2021
Distributed
Image: Cherie Lynn (CC0 1.0)
“Off Chain” “On Chain”

5. 5
TradFi vs DeFi

6. 6
Has created Digital
scarcity
Double Spending
Problem
Medium of exchange,
unit of account, store of
value , the definition of
money
● 21 M finite supply
● Divisible in Satoshis, the smallest unit of a
bitcoin (or 100 millionth of a bitcoin).
○ 1 satoshi = 0,00000001 bitcoins
○ 1 bitcoin = 100,000,000 satoshis
● Miners' reward block is halved as more
transactions are made
● Deflationary mechanics, but highly
speculative
Source: TESOBE
TESOBE GmbH 2021
Bitcoin - P2P “Cashless System”

7. 7
The Evolution of Money
Source: ConsenSys
TESOBE GmbH 2021

8. 8
Decentralised Autonomous Organisations (DAOs)
© TESOBE 2021
vote, fund,
traceable
DAOs are a form of
governance that is carried out
through smart contracts that
execute agreed upon protocols
without human intervention.

9. 9
TESOBE GmbH 2021 Image: Lin Padgham cc-by-2.0

10. 10
Database
© TESOBE 2021
Blockchain nodes
Core Banking System
(CBS)

11. 11
Multi Party Computation (MPC)
© TESOBE 2021
● split private keys over nodes
● key is safe even after compromise of several
nodes
● MPC came from 2PC (2 party computation,
millionaires problem with garbled circuits)
● custody solution

12. 12
Smart Contracts
© TESOBE 2021
Web 3

13. 13
Oracles
© TESOBE 2021
Bank Y
Bank Z
Bank X
API3 brings (OBP)
APIs to blockchain
smart contracts
Web2 -> Web3

14. 14
Blockchain, Lock chain - GDPR?
© TESOBE 2021
● natural person‘s right to be forgotten
● definition of personal data
● anonymisation getting harder
● who’s the controller / processor?
● purpose limitation & data minimisation
● accuracy
https://www.europarl.europa.eu/RegData/etudes/STUD/2019/634445/EPRS_STU(2019)634445_EN.pdf

15. 15
Quantum secure
© TESOBE 2021
Money and data on the line
https://csrc.nist.gov/projects/post-quantum-cryptography
https://quant-x-sec.com/
Image: NIST

16. 16
Infrastructure of Programable Money
2. Private Issuers
4. Service Providers
Source: ConsenSys & TESOBE
3. API Services
1. Blockchain Platforms
TESOBE GmbH 2021

17. 17
Where the Land Meets the Sea
© TESOBE 2021

18. 18
Possible Future?
© TESOBE 2021
From the Ted talk https://www.ted.com/talks/david_gallo_life_in_the_deep_oceans
● We are familiar down to 200 to 300 feet but not the ones below that
● No sunlight down there, all the energy that is being used comes from the inside of
the earth (chemosynthesis…?), very toxic, you would never get a permission to dump
that in the ocean
● Living in extremes (but “only” from human perspective ;-))
● Everything on this planet works by cycles and rhythms
My Octopus Teacher on Netflix

19. Simon Redfern, CEO
simon@tesobe.com
+49 (0)30 8145 3994
www.openbankproject.com
© TESOBE 2020 19
https://www.openbankproject.com/obp-airnode/