TRON 4.0 Online Conference: Sam Bankman-Fried — CEO of FTX Exchange: Prerequisites for Mass Adoption of Blockchain Financial Derivatives and Leverage Contracts

So decentralized derivative function as a tool for race edging. Diversification and two way investment, how to make such financial available to more users in a professional and simple manner. We are pleased to have Sam, CEO of FTX to talk about the financial derivative the and leverage contracts. Welcome, Sam!

>> Sam Bankman-Fried: Cool, thanks! Thank you for having me and I’m excited to be here. Today, you know, I’m going to be talking here about basically, I’m going to be talking about DeFi and centralized exchanges and how they can work together and basically what you can sort of accomplish when they each play sort of their important role in the ecosystem.

Answer for what those roles are and what it might look like going forward and what role FTX may play in that. My name is Sam and I’m the CEO of FTX. FTX is a global derivative exchange in crypto. We have quarterly and perpetuate features — spot market, leverage tokens, onramps, options and a bunch more on a ton of different products in the cryptocurrency ecosystem. We have been getting more involved in DeFi and we want to talk about what our experience is there is like and what we see for the future here.

So the first thing to note is that, there is sort of different strengths of the weakness of decentralized and centralized platforms in crypto.And you know, I think that the biggest advantages of decentralized platforms is there’s non custodial so you don’t have to trust other party with your funds. They are permissionless so you are guaranteed to be able to do what you’re supposed to be able to do.

It’s provable that this is true to look on chain at the code and for the platform and to see how exactly it works. That’s really cool and powerful and sort of the first in the world.

And it’s universal in a sense because you don’t have to rely on the outside communication. It really does sort of work even exactly how it’s written. The big advantage that centralized exchanges have is that they’re a lot more computational efficient. And you know, they have a lot more power than the current Blockchains.

So because of this they are a lot faster, super customizable and very powerful and you can rate a ton of different programs there and just have a ton of flexibility in what you express with them. And you have the power to do a whole host of things on them. The last thing is, because you retain control of the system, you can adapt. And both, you can improve it over time but you can also adapt to threat models and attempt to keep informing the product to keep it as resilient as possible.

So over the last month or so, we have been launching a number of products in the DeFi space. We have launched a DeFi index which is a future that expires to the average price of a lot of whole different DeFi products. So it’s a really cool way to get exposure to the entire DeFi sector at once. We have also launched futures on compound, on balancer, maker, and a whole host of other products and at the same time, we know that TRON has been making some really exciting progress in the DeFi space.

You know, we have TRON listed on it with TRON features and we’re excited to look into all of the new products that are coming out and see how we can integrate those in as well to the exchange. And you can see sort of the current DeFi index, the various products in it. And yeah, it’s basically a super clean and easy way to get exposure to this whole set of things.

And you know, I think over time, it’s increasingly comfortable that both of these models of centralized and decentralized models have a lot of advantages and can play super important cool roles in the world. And it’s a matter of fitting it together in the right way and making sure that each is, you know, each is sort of accomplishing its biggest strengths. And sort of talking about what that split may look like. On the DeFi side, again, it’s not super powerful right now, in terms of the capability of the product. It’s not extremely fast but it’s clean and provable and safe if done very well.

So I think it’s sort of a great place to put the kind of core pieces of a lot of financial infrastructure, especially the really clean ones or the ones where it’s super important they remain private.

And these are sort of like, real strengths of DeFi. And so what this means is we’re seeing a lot of activities on decentralized exchanges where users can swap tokens for each other. On decentralized burn or lending platforms and we can see this set of things grow over time. Especially as new players, get into the game and sort of other networks beyond just this grow out their decentralized offerings and obviously including the whole product sweep that TRON is unveiling.

I think as we see that sector grow in the decentralized space, we’re also going to see it play a more central role in, you know, really the entire spaces notion of token swaps and things like that and I would expect to see integration of decentralized token swaps, borrow lending and interest and other things into other centralized platforms. Over the next few years as we are already starting to see with centralized exchanges offer DeFi base staking and other things but I think there’s a ton of room to grow there.

On the flip side, I think you’ll continue to see decentralized systems be dominant in the spaces that are very computationally complex and spaces where the product needs to adapt very quickly.

So I think this sort of deeper into the derivative space you go, the more important a centralized platform is because it just allows you to express you know, substantially more complicated things way faster and sort of keep tweaking, building the platform rapidly.

And because you can do much on margin, you know, you can use the centralized product while limiting the extent to which funds are actually stored on them to the extent necessary.

And so I think we’re going to continue to see centralized exchanges roll out the complexity the complexity of their product offering the way that traditional finance has over time, sort of massively grown out the sophistication of the set of products that it is offering.

And again, we’re going to see these start to work together. Where you know, you’ll see centralized products integrating the decentralized protocols in really cool ways and on the flip side, you will start to see the decentralized systems listing tokenized products from centralized systems and you’re already starting to see this with USDC and other Stablecoins which are very centralized tokes on the U.S. dollars becoming a backbone of the DeFi and I think you will continue to see this with the tokenized derivatives like the leveraged tokens.

And ETF will come out and even more complex products managed by centralized services but represented by tokens which can then be easily transacted through decentralized systems forming a really cool breech between the two worlds. I think those two core things, centralized systems integrated DeFi protocols and DeFi platforms listing tokenized products from centralized systems are really going to work to allow someone to get the best of both worlds, experiencing the sort of privacy and permissionlessness of DeFi being able to harness the flexibility. This is going to allow the crypto space hopefully to continue to scale into a fuller and fuller version of what it can be while retaining the ethos of the decentralization and privacy and permissionlessness and compete with traditional finance on its own terms.

And I think that’s all really exciting and you know, I’m excited to see various platforms building out over time. Whether it’s supporting for the DeFi systems or new platforms, new protocols and new systems like all of the decentralized features that the TRON platform is working on right now.

Rolling out, really powerful and clean, sort of protocols and support for more and more types of DeFi products which can then, you know, make their way into the rest of the world.

So anyway, we’ll obviously see what happens over time and you know, it’s hard to predict the future here. We have seen really explicit growth over the last few months in DeFi and we’ll see how it continues but I’m excited to see, you know, I’m excited to see what happens here. And excited to see the role that you know, that all of the new and major players are going to be playing in developing out this ecosystem. Any way, thanks for listening and thanks for having me! You know, I’m excited to see the future of the industry.

>> MC: Thank you, Sam! Thank you your insightful speech.