 Hello, everybody. My name is Andy Millenius, and I'm here from MakerDAO, one of the oldest and most ambitious projects in Ethereum, and today I'm going to be talking about the prospect of financial reform in the 21st century. And to do that, I have to bring it back to basics. In a few months, the Bitcoin Genesis block will turn 10 years old. And I think that it will be remembered as one of the few monumental events of the first decade of the 21st century. And that is because it is so cool. It is such an interesting and fascinating example of Internet enabled global coordination, right? A peer to peer electronic cash system. And we've all heard this tagline so many times, and it seems very familiar at this point, peer to peer, it's our bread and butter. Electronic, we spend our entire lives in electronic spaces, but I actually think cash system goes a bit unexamined in this space. And that is the part that I want to talk about today. What is it that makes Bitcoin a cash system, right? Bitcoin, at least in my opinion, takes advantage of a very ancient concept called commodity money, right? This is a concept that is at least 9,000 years old, corresponding with the rise of agriculture. And it allowed groups of people that otherwise didn't know each other to interact and coordinate and share resources, right? Using a medium of exchange that had value because of its underlying usefulness, just like Bitcoin was originally attractive because of its underlying usefulness in the form of digital portability and uncensurable nature. And like a commodity, Bitcoin's fixed supply and predictable inflation allows it to behave in a way that takes advantage of these ancient concepts. But this is actually only part of the story of cash systems when we look at the historical record, because commodity money has not been used as a dominant cash system for the majority of human history. And with the appearance of Ethereum, we have an opportunity to explore new types of cash systems. And that's where we get to die. Ethereum's peer-to-peer electronic cash system. Now, what is it? What makes it different? It is based on the concept of credit. And it's a much, much older tradition that spreads back even farther than commodity money. And it is very powerful and foundational to what makes us human. And it starts with the principle of mutual credit. This is even older than the rise of agriculture and in fact, spreads back at least to the appearance of modern human behavior. And the principle is simple. I know you will find it similar because it is the simple idea of thanks, I owe you one. This is probably how you interact with your close friends and loved ones. Thanks, I owe you one, right? If I do you a favor and you do Bob a favor and Bob does me a favor, then a whole bunch of work got done and we didn't even need any money at all. And this is how humans primarily interact at the human scale when everybody knows each other and it works really well. But we want to coordinate at larger scales, something has to change, right? And that's where money comes into the equation. And thanks, I owe you one evolves into I owe you five of something, right? Becomes quantifiable. And that is when the project of civilization begins 5,000 years ago and we see the first credit backed ledger money. As the cities arise in the fertile crescent and the first temples are built, we see that they serve a function as the first debt clearing houses. And the first writing that we see on the Cuneiform tablets are actually debt agreements. So these forms of commodity money are laid up in temple warehouses and debt is issued against these assets. This is a 5,000-year-old concept that we're dealing with here. And we see so many complex and sophisticated instruments that appear as the historical record comes online, whether it's long-term debt agreements, annual crop finance, or most importantly, IOUs, promissory notes, for these valuable assets that can then be taken down to the market and exchanged as money, a very, very old concept, right? And credit systems are essential to what makes civilization possible. And together, credit systems and civilization go on many different adventures, evolving, twisting and turning. And eventually, 400 years ago, it becomes the modern commercial credit system. And this does not coincidentally correspond to the rise of capitalism, right? There are two main characteristics that we can point to when we talk about the modern commercial credit system. One, the rise of fractional reserve banking, and two, the issuance of paper banknotes. And this is so useful, so adaptable and so decentralized, that it was able to keep pace with all of the different discoveries and innovations that attended the rise of the scientific method. And because it was so useful, adaptable and decentralized, it basically remained in place and didn't really change for most of the history of capitalism until 40 years ago, when the internet first appears. And this is when we see monumental transformations in the way that humans relate to credit systems, whether it's the rise of ATMs, credit card networks, or e-commerce, all of this stuff is enabled by the internet. But most of these networks, the three that I just detailed there, talk about how we can use the internet to connect to legacy networks, whether it's the Visa Network or the New York Stock Exchange. A lot of times, they're enabled by cyberspace, but they are rooted in the logic of previous systems. And it isn't until we see cryptocurrency that we see a financial system that is completely endogenous to the internet and can only exist within the logic of cyberspace. And so how does cryptocurrency relate to credit systems? Well, that is where DAI comes in. The DAI credit system has been live for almost one year. And if you look at this diagram, it should look very familiar, right? It's because we're dealing with 5,000-year-old concepts here, and we're using the blockchain to make them even better. Here on the left, we see crypto assets, oddly all diamond-shaped, in the center. We've got, again, a credit clearinghouse. This time, a smart contract, something that we can all trust on a global scale. And then on the right, coming out as debt against these assets is DAI. Very, very familiar, very easy to understand, right? And we can go deeper. How does this actually work on the micro-scale, on the micro-economic scale? Well, it deals with the concept of secured debt. Most of the debt in the world is secured against assets, like I keep saying. And if you see here, what the diagram they have on the screen is what's called a collateralized debt position, a CDP in MakerLingo. And like all secured debt, when a user takes their assets and escrows them into the Maker Smart Contract system, they can issue DAI against them as debt, but they can never issue more DAI than the value of the asset itself. This is just a rule about all secured debt. Nobody anywhere in the world of secured debt ever lets you issue more value than the value of the collateral that you've locked up, in this case, ETH, right? And if you want an example, very simple example, consider the humble mortgage. If you want to buy a $200,000 house, the bank will lend you $160,000 to do it, with the down payment making up the difference. Here on the right, you see our CDP with ETH and DAI. And the only difference is that the ratio of DAI to ETH is a little bit different than the ratio of dollars to house. Now why is that? It is entirely a function of risk and volatility in the marketplace. Now unfortunately, I think that we can all admit that cryptocurrency is a little bit more risky than real estate, and so you cannot issue as much DAI against it as you can issue dollars against real estate. But how do we know this, though? How do we actually make this decision? And more importantly, who makes this decision? And that is where we get into the MKR holders. MKR is a second token. It is the administrative token of the system, and its holders comprise a decentralized regulatory community that come together and make those decisions about the nature of reality, the nature of risk in the marketplace. They are tasked with coming to consensus about which types of assets can be used as collateral in the system, and the ratio of DAI that can be issued against those assets, and the fee. Whenever somebody locks their collateral up into the system, if they want to retrieve it later, they have to return the DAI that they issued plus a fee based on how long it was outstanding. And this fee is transferred to the value, the aggregate value of MKR, as a reward for their services, right, because they're very much providing a service to the network. And in exchange, no, sorry, on the other side, if they make a mistake and they misjudge risk in the marketplace, then the aggregate value of MKR is actually used to protect the integrity of DAI. And this is very, very important, right, because if we look at the responsibilities and the roles of MKR at the macro level, then what they're responsible for doing is actually protecting the integrity of DAI and protecting its stability and usefulness in the marketplace. We want it to be a useful cash system, right, it's very, very important. And so, when we look at the macro level, the job of the MKR holders, because DAI is a unique currency, the job of the MKR holders actually looks a lot like central bankers. And so, we can learn lessons from central bankers when the MKR holders do their job. And the most important one, I think, that really has a significant impact is this idea of central bank independence. A few decades ago, it was discovered that by making central banks independent from the electoral cycles, then they could make more long-term decisions that would be beneficial for the health of the economy. And I think that the principle sort of makes sense if you think about it, right? If a politician wants to be re-elected, they might make short-term decisions to kind of gas up the economy to the detriment of the long-term, right? And so, this idea of central bank independence was introduced as a tool in their toolbox to allow them to do their job. And MKR takes it a step further because not only are we separate from any one country's electoral cycle, but we are independent from all country's electoral cycles, right? In my opinion, Maker Dao, DAI, and MKR is one of the most international ideas of the decade. It was literally started in a chat forum in cyberspace, in this non-jurisdictional space that we call the blockchain, right? And DAI and MKR exist on every inhabited continent, and they are entirely in the space in between these countries, right? It's such an international coalition that we've built here. And that is a tremendous, that provides tremendous value to the integrity of the project. And it's not just like a nice aesthetic, it actually goes a step further because there are economic forces that we can use to our benefit. The most important one, in my opinion, is the Triffin Dilemma. The Triffin Dilemma is a natural tension that emerges when one currency is doing double duty, both as a national currency for some specific country and as a world reserve currency, the currency that countries use when they interact with each other. Whether it's the US dollar or the British pound sterling or the Dutch gilder, many, many national currencies have been world reserve currencies and they have all suffered from the Triffin Dilemma. And this tension exists in the space between the desire to curb domestic inflation. It's basically a desire to control the money supply and put a dampening on it, make sure that it doesn't overheat and overexpand and this global demand for dollars, sorry, for world reserve currency because if everybody in other countries is using it to interact, then they need it. They need to actually get it and they wanna expand the money supply to get it. So there's global demand for this currency and there's national desire to keep it under control and this tension has pulled apart every single currency that has done this double duty. It's widely understood that it's responsible for killing the Bretton Woods system, this rigid system of exchange between gold and dollars and when dollars were used as an international reserve currency, there was simply too much demand for the amount of gold that there was. But this is not just a historical fun fact, it actually has real effect in the modern day. And if I may quote directly from Dr. Zhou Xiaotuan of the Governor of the People's Bank of China, he says, the desirable goal of reforming the international monetary system is to create an international reserve currency that is disconnected from individual nations and is able to remain stable in the long run. Thus removing the inherent deficiencies caused by using credit-based national currencies. I have simply never heard a stronger call for exactly what maker is trying to do. And if you look at the date there, you see that it's in March of 2009. That is incredibly important, right? Because that was one of the most hopeless moments of the financial crisis of 2008 and 2009. This is when this idea first appears, right? And I think that this sentiment sort of kicks off a new age in global human coordination. And I call it the financial reformation. And I call it that because I believe it bears a lot of resemblance to the Protestant reformation. If you think back to history, the Protestant reformation was kicked off when Martin Luther indignantly nailed a public message onto the front door of his church and we see the same thing with Bitcoin, right? The Bitcoin Genesis block has this indignant inscription on the first message. What is the first idea of Bitcoin? The Times, 01, 03, 09, Chancellor on Brink of Second bailout for banks, right? And like the Protestant reformation, people who are involved in the financial reformation are not asking permission nor forgiveness from the large institutions that they take issue with. They are simply reorganizing their society at the grassroots level in a way that they can have direct interaction with these forces that organize their lives, right? This is incredibly important. This era that has begun, you know, I think that we don't actually give it enough explicit respect when we talk about where we're at and why we're doing what we're doing because the alternative is very, very dire. The stakes are very high. We all can admit it. The stakes are very high when we look at global problems and challenges today. And the fact is, if we miss this chance at financial reformation, then the alternative is unspeakable. We simply cannot miss this chance and we need to seize this opportunity and reorganize our lives, right? I don't even want to comment on the alternative. And if you look at history, you will see for yourself what happens when humans miss an opportunity at reformation. This financial reformation is where Maker, I think, comes in the most and becomes the most relevant. And I think that there are three main areas that actually highlight the strong use case for blockchains in the MakerDAW system. The first is transparency. This is the key innovation, in my opinion, and it is actually, I think, a bit underappreciated in blockchains, but it is entirely essential to what makes Maker a compelling project. It's this idea of real-time auditability, this idea that anybody in the world, any potential customer of the system, can look for themselves and see every single feature, every single modern, or sorry, current condition of the system and verify for themselves that it is, in fact, trustworthy. If I went to a commercial bank today and I said, show me your entire loan book, I wanna see all the assets under management, I wanna see your whole risk profile, and I wanna see it in real-time, they'd tell me to get lost, right? But in Maker, this is entirely the logic of what's happening. There's no other way that the system can even possibly exist. This is incredibly important when we talk about financial reformation, right? But it doesn't just stay with the technology, it actually bubbles up into the culture. And that's where we get to decentralized scientific risk assessment. A while back, I said that the MKR holders are responsible for coming to consensus on the nature of reality, right? That means that they have to share knowledge and agree on what is the truth. If we look in history at decentralized knowledge sharing systems in the past, we quickly arrive at the academic system, the scientific method, and the system of peer review, right? And this is what the MKR holders are currently realizing that they need to interact with each other, because this is a far-flung international coalition who talk to each other online, remotely over the internet, possibly never having met in person. How are these people going to talk to each other and come to consensus on the nature of reality? It has to be evidence-based, rational, repeatable, articulate, and candid, right? This is how the MKR holders have already committed to coordinate amongst each other. This is so important, right? Because the alternative to this, the alternative to this commitment to articulate communication is incoherence and obscurity. And I think that this culture is actually a lot of what made the financial crisis of 2008 possible, right? It was this culture of obscurity that we saw on Wall Street, this collusion with the credit rating agencies, this corporate doublespeak euphemisms, this insane concept of moving risk off the books, how they would shake quant models in your face if you asked too many difficult questions. And it was in this culture that we could have an insane phrase, like super senior tranches of high grade, multi-sector CDOs literally mean the exact opposite, right? And what we got was an imperfect picture of reality, where financial engineers were hailed as masters of the universe. When it turns out, they didn't know what they were doing at all. It was monkey business the entire time. And this monkey business had dire consequences, right? We quickly slipped into moral hazard territory, and the taxpayers had to step in and bail out all these banks. I remember the bailouts of 2009, and I remember them as some of the most profoundly unfair experiences of my life, right? It was amazing. This indoctrination of free market ideology for decades and decades and decades was suddenly conveniently suspended when everything went wrong, and profits after being privatized for decades and decades and decades were suddenly turned into socialized losses overnight, right? This was very unfair. And I don't even blame the government regulators and the agencies that did what they had to do. I understand that the way that the system is set up left them with no other choice, but make no mistake, the problem did not go away. And if we don't take advantage of this opportunity to reform the system, then it will come back because that is what a moral hazard is, exactly, right? Like it doesn't go away unless you take a new look at how you're organizing. That, I think, is the second point that maker can really bring an opportunity for financial reform. And it's this idea that we are bound by our rules. It's this idea of code is law. It's so familiar. But when you apply it to maker, it makes so much sense because we're talking about aligning incentives and we're talking about a rational system where we can understand the rules upfront. And MKR restricts itself intentionally and it can't do a lot of things that normal banks can actually do. MKR holders cannot repossess the collateral. They cannot move debt off the books. They cannot create die unilaterally without following the rules of the system, right? These rules, clear as day and written, inscribed on the blockchain, are what make the system trustworthy on a global scale because anybody knows no matter where you're from, no matter what walk of life you are from, you are going to be treated fairly according to the rules. And even if the MKR holders undertake to change the rules, that too is bound by rules. It has rules all the way down and these rules-based systems are such a huge opportunity to create global coordination mechanisms that are trustworthy. And this is really important because it brings my third point of financial reformation. And it's this idea that die is globally accessible. Die needs to be trustworthy, but more importantly, die needs to be globally accessible. And this is another cool sort of fact, well, blockchains, a cool sort of feature. This idea that anybody, I love this about blockchains, this idea that anybody in the world, no matter where you're from, if you found out about a blockchain, if you found out about the blockchain and thought it was cool and understood what was going on, then you could participate. Nobody could stop you. You were invited to participate and share in the wealth that we're all creating. This is really, really important because a large amount of economic activity is not being welcomed and included to participate. 61% of all workers in the world are not formally employed. That's two billion people that were not onboarded into the global financial system. They just were never invited, right? And it is clear after all this time that the top-down pyramid-shaped system of nation-state capitalism that we have today is simply not adequate to get these people online. We need a new type of thinking if these people are ever going to be included in the global financial system. And all of their productivity and all of their hard work will never be recognized and they will never have the financial tools to take control of their own lives until we start thinking in a different way. And that is not an insignificant amount of productivity. We leave $10 trillion on the table by not treating these people with the respect that they deserve. The people of the informal economy, right? The informal economy, in aggregate, is the world's third-biggest economy. And if we can endeavor to come up with a system that respects the sovereignty of the workers of the informal economy, then global productivity will only benefit, right? So how does the informal economy actually relate to us sitting in this conference hall right now? Well, it's typically through the global supply chain. This is how it interacts. A lot of goods are created informally at the bottom of the global supply chain and then they bubble up to the marketplaces like where we're sitting here in Europe. And this brings us back to history. If we look at the history of credit systems, then it is almost always the case that credit systems experience initial traction around the concept of trade finance. Trade finance is very much related to the global supply chain because it's all about moving goods from where they're produced to where they're sold, moving goods to market. This is exactly what the global supply chain is all about. And the fact that these historical credit systems see traction around here, around this type of financial activity, gives me a lot of hope and makes me very excited about some of the partnerships that we've made in 2018, whether it's with TradeShift, a platform that is trying to digitize supply chain interactions and has already 1.5 million businesses signed up, or if it's wire, which makes it easy to translate dye into over 30 national currencies. These are huge opportunities, and more importantly, they're opportunities that have a historical track record of giving traction to these new types of credit systems. And this brings me, I think, to my final point, possibly the most important. It's this idea that Maker is symbiotic with all other dApps in the ecosystem. This is huge. We need each other because Maker needs other dApps to create wealth and utility and useful crypto assets to serve as the base of Dye's monetary supply. And all of these dApps need Maker to come together and coordinate a useful cash system for the Ethereum blockchain. So we are so in this together, and I feel like this year was the year that the flywheel started to get going. There's so many dApps that came out this year that I encountered that simply could not exist without having Dye as a useful medium of exchange to make everything work. And it's so exciting. We've interacted with these dApps and we're so committed to incubating this ecosystem because it is exactly where we are placing our faith and our trust. So if you have an idea and you know how you can take advantage of all the work that we've been doing on Dye, then please reach out and come and contact us because we are so, so incentivized to make it work for you. So please come to our booth up on the third floor and say hello if you have any ideas at all because we really want to be at the center of where all of the activity is happening on Ethereum. I think this is a good place to conclude, right? Because what I'm seeing this year with the rise of Maker and all of the growth that we've been doing in the Ethereum ecosystem is this idea that we're finally beginning to unlock our potential. There's so much potential in what we're doing here. And I think that with Maker and all of the interesting projects that we're enabling and working with, I think that that potential is finally being unlocked. So if you're ready to be a part of this and unlock your potential, then please reach out and get in touch. And thank you so much. I'm very excited about the future of Ethereum.