Summary of the conference on 'DeFi and the Metaverse: what does a decentralised future look like?'

8.25-8.55 Registration (tea and coffee provided)

8.55-9.00 Welcome address

Prof Francisco Veloso, Dean of Imperial College Business School

9.00-9.15 Conference Introduction

Prof Deeph Chana, Co-director, Centre for Financial Technology

9.15-10.45 Session 1: Current trends of the decentralised space

Chair: Jason Engelbrecht - Head of Innovation Lab, Citi

• Prof Cathy Mulligan - ERA Chair in Blockchain, University of Lisbon
• Conor Svensson - Founder, Web3 Labs
• Almira Cemmell - Senior Advisor, Binance Charity
• Miguel Morel - CEO, Arkham Intelligence

10.45-11.15 Break (tea and coffee provided)

11.15-12.45 Session 2: The opportunities and risks of DeFi, Part 1

Chair: Ben Brabyn - Director, Amitypath

• Dr Arthur Gervais - Decentralized Systems & Security Group, Imperial College
• Prof Aggelos Kiayias - Blockchain Tech Lab, University of Edinburgh

12.45-14.10 Lunch

14.10-15.40 Session 3: The opportunities and risks of DeFi, Part 2

Chair: Kartik Varma - Angel investor

• Mario Stumpo - Founder, BmyBit
• Prof Wei Xiong - Princeton University and Cambridge University

15.40-16.15 Break (tea and coffee provided)

16.15-17.45 Session4: What does the regulation of DeFi look like?

Chair: Dr Ying-Ying Hsieh - Centre for Cryptocurrency Research and Engineering, Imperial College

• Dr Joseph Lee - University of Manchester Law
• Dr Igor Makarov - London School of Economics

17.45-17.50 Day 1 Closing Remarks

17.50-Onward Drinks Reception

8.30-9.00 Registration (tea and coffee Provided)

9.00-9.15 Summary of Day 1 and Introduction to Day 2

Prof Gilles Chemla, Co-director, Centre for Financial Technology

9.15-10.45 Session 5: Future Society and the Metaverse, Part 1

Chair: Prof Robert Kosowski - Head of Finance Department, Imperial College Business School

• Nisha Surendran - Digital Assets, Citi
• Sophia Bantanidis - Future of Finance, Global Insights, Citi
• Dr Jane Thomason - Co-Founder, British Blockchain and Frontier Technology Assn

10.45-11.15 Break (tea and coffee provided)

11.15-12.45 Session 6: Future Society and the Metaverse, Part 2

Chair: Dr Victoria Baines - Visiting Fellow, Bournemouth University  

• Arda Akartuna - Crypto Threat Analyst, Elliptic
• Omer Suleman - Founder, Haruko
• Athena Yu – Deputy Head of NFT, Binance

12.45-12.50 Conference closing remarks

12.50-14.00 Lunch

The first session was a panel discussion with four experts in the area of DeFi and the Metaverse where they spoke about their own work, the current state of the industry currently and where it is heading.  

Discussion of DeFi

• Cryptocurrencies can play an important role in offering stability and access to finance in areas that may not have either.
• The regulators, society and technology are all moving at different speeds with technology moving the fastest.
• The hype around Non-Fungible Tokens (NFTs) may have peaked but their usage hasn’t; they are already playing a key part in the charitable sector.
• There needs to be more public information about who is controlling and how they are structuring cryptocurrencies.
• We need to agree new social norms around privacy related to money
• The technology itself will continue to be decentralised but the services that are placed on top of it will likely be multi-centred.
• There is a nexus of exclusion that prevents access to finance that cryptocurrencies won’t be able to solve by itself.
• The engineers, bankers, coders and data scientists need to have a better understanding of the impact of the technology and the importance of ethics in their designs.

Discussion of the Metaverse

• Privacy is a big concern due to the significant amount of personal data that will be created by sensors and interactions within the Metaverse.
• The internet didn’t take off until the user interactions with it were seamless; the DeFi and Metaverse space needs to go through a similar transformation to survive as it can’t only be accessible to those that understand the technology.

Key trends

• Soon we will see more decentralised trading, synthetic financial products, and even decentralised derivatives instead of just spot trading.
• Large companies will put greater emphasis on developing their infrastructure to integrate into these new systems.
• Decentralised identities will become a bigger thing as they are able to be used across platforms due to improved integration between infrastructure.
• There is going to be a greater use of NFTs for charitable fundraising.
• Large NGOs and other charitable institutions such as the UN are looking at more direct ways of giving using cryptocurrencies.
• There has been a trend of centralisation in the crypto space; this will motivate a period of growth as traditional finance feels safer.
• There will be a move away from a focus on anonymity as the technology is more widely used.
• There will be a greater focus around on-chain Know Your Customer (KYC) technology.
• The usage of the funding model of a DAO (decentralised autonomous organisations) to pay for small scale infrastructure projects in emerging markets is being tested.

This session focused on the risks and security issues of DeFi through two talks. The first talk looked at Blockchain Extractable Value (BEVs) attacks and the second looked at how Single Points of Failure (SPOFs) can exist in a decentralised systems.

• There are four main ways to create Blockchain extractable value (BEV): Sandwich attacks, Liquidations, Arbitrage and Transaction Replay attacks
  • Liquidations are caused when your collateral drops below a health factor resulting in a liquidation at a discounted rate. During a 32-week study this resulted in US$80M being extracted.
  • BEV from Arbitrage resulted in US$100M per month.
  • A Sandwich attack is when an attacker front runs a victim and sells back it back to them within their slippage limit. During a 32-month study there was at least US$10m in Blockchain Extractable Value per month from Sandwich attacks.
  • A Transaction Replay attack is when an attacker copies a trade that he sees taking place on the blockchain, but copies is more quickly – this results in the attacker then receiving the profit and can be done through simple algorithms. During the 32-week period these attacks resulted in US$35.37M being extracted.
• Flash loans enable access to huge amounts of leverage used to take advantage of arbitrages. They take place in one atomic cycle where the loan must be paid back by the end of the cycle as otherwise it will never have happened.
• We can combat these attacks by:
  • Fair-Ordering on the Blockchain Layer
    • e.g., Aequitas Protocol Family.
  • Fixing MEV (Maximum Extractable Value) of existing dApps
    • Merging AMM (Automated Market Maker) DEX (Decentralized exchange) into one.
    • On-chain aggregators such as A2MM.
  • Designing MEV-Mindful dApps
    • Avoiding MEV by design.
    • e.g., a price oracle update immediate performs a liquidation.
  • Might not fix cross-chain MEV.
• The SEC definition of front running is acting on trade given private information; this may mean that data which is available publicly on a peer-to-peer network falls outside the SEC definition.

• Technological decentralisation can emerge from two competing requirements:
  • Improving the utilisation of available resources
  • Increasing the scale of the system
• Open-source development promotes decentralisation
• Single Points of Failure (SPOFs) can still occur even with open-source software, because even though it is open to all to be checked no one actually checks it. An example of this is the Heartbleed bug in OpenSSi which had an estimated cost of US$500M.
• In a large system, having control of a SPOF may allow for the extraction of economic rent.
• Blockchain systems remove SPOFs by cryptographic key-management
  • Participants can be responsible for their own keys
  • Access control is cryptographically enforced
• Since these are resource-based systems, in theory resources can be pooled to maximise rewards, such as mining machines; this creates a SPOF.
• The lesson is that permissionless “resource-based” operation does not necessarily guarantee decentralisation.

• We need to understand and get the incentives right (there are clear issues).
• Serializability: Order fairness is a difficult problem.
  • Random miner randomly choses order of transactions
  • Condorcet paradox/Condorcet cycle
  • No matter how transactions are ordered, they will never coincide with the majority à deep result in social choice theory
  • Corollary: Plausible transaction order fairness concepts can be unattainable in a decentralised setting
• Block order fairness
  • Where fairness is ensured by grouping transaction into blocks where the order is preserved, minimizing sender/receiver timing and order discrepancies.
• Timed order fairness
  • Fairness is ensured by parties having local (not necessarily synchronized) clocks. If there is a time t such that all honest parties see tx_1 before t and tx_2 after t, then tx_1 must be scheduled before tx_2. A transaction tx is blocked, if less than t+1 valid votes are received.
• Second order fairness
  • focusing on the sender’s perspective; need to ensure that sender and receiver experience the same order. This is a tough problem… who determines the notion of time at the sender’s level?
• Input independence to ensure security of system (i.e., no one can adapt their input based on someone else’s input)
• Constitution DAO (decentralized autonomous org.) as example of situation where contents of smart contract wallet being public is problematic
• Problems with private smart contracts:
  • Concurrent transaction issuing needs to “commute” execution wise (to be valid) … how can this be reconciled with privacy? For commuting to occur, some information of these contracts needs to be leaked… again, this can be problematic with regards to privacy?
  • It’s also a difficult task to establish time harmony when there are inevitable discrepancies in timings based on the available resources (internet speed, geographical location, etc.) of the sender and or receiver
• Access control SPOF:
  • Losing access to key can be catastrophic; cryptographic key management & security can be the Achilles heel of decentralized systems
  • Quantum threat since encryption based on PNF/hashing
    • Consensus is that the encryption can be made resilient to quantum computing driven calculation accelerations via new algorithms that can be applied for proof-of-stake and key management.

This session focuses more on the opportunities of DeFi by helping define important aspects of it. The first talk looked at how combining DEX (Decentralised Exchange) and CEX (Centralised Exchange) may offer the greatest benefits to both, as well as looking at the role of stablecoins. The second talk spoke about tokenising company ownership to change the incentives for the organisation and how CEX could be used for bond markets to make it more centralised along with a messaging system which identifies possible trades during periods of low liquidity.

• The linking of Centralised Finance (CeFi) to DeFi will enhance the capacity of Web 3.0.
• DEXs allows for direct peer-to-peer cryptocurrency transactions to take place online securely and without the need for an intermediary.
• The negatives of DEXs are:  slippage risk, low liquidity, and poor transparency of the liquidity pool.
• Connecting CEX and DEX exchanges could offer a solution to the issues of DEX while maintaining the benefits.
• A stablecoin aims to mimic the functions of a fiat currency, with the additional advantages of cryptocurrencies such as faster and cheaper transactions.

• Tokenization provides a way to decentralise control over digital platforms, so there isn’t an incentive to take advantage of users.
• Tokenisation provides a device for platforms to pre-commit by giving control to token holders.
• Why not move bond markets to a CEX? Bond markets are currently more complex and more segmented than stock markets.
• An important challenge is managing one-sided liquidity especially if the bonds are relatively illiquid.
  • A possible solution is messaging system where an alert is given to potential buyers and sellers during liquidity shortages.
  • Effective communication could be allowed through the development of a ‘social media’ platform.
  • Professional brokers may still help through being paid fees.
• Our current regulatory framework is built on regulating intermediaries. In a system with intermediaries serving limited roles, the regulatory framework needs to find a new focus.

Q and A

• Certain part of centralised finance can be leveraged by DeFi by bringing in liquidity and reliable instruments.
• Commodities markets are highly centralised; could benefit from crypto by enabling greater transparency and accessibility.
• The DeFi market is complicated for two main reasons:
  • You need to be sure of what you want your users’ experience to be.
  • Your use case might fall into regulated activities; start-ups tend to avoid this as regulatory environment can be uncertain.
• We need to make sure society as a whole is more financially literate in understanding the possible impacts of DeFi.
• Regulation is going to be a multi-country effort.
• There was discussion over the long-term viability of central banks in a crypto world.
• Centralised system will still influence decentralised systems; crypto being pegged to the US dollar is an example of this as the USD exchange rate will determine the exchange rate between the crypto and other currencies.

This session addressed the direction of regulation and the challenges it faces. The first talk discussed the importance of developing legal structures to create an efficient market and safe metaverse where there is a clear recourse when something goes wrong. The second talk spoke about what the move to DeFi would mean for how we approach regulation. Existing regulation occurs via authorised financial intermediaries but with DeFi that is harder to do so we have to find new points of regulation such as validators and developers. There will also be a need to design new KYC standards; if we wait too long then the industry could become too big to regulate.

The big issues in DeFi:

• Data privacy and transparency
  • Traditional intermediaries are tasked with solving the tradeoff between maintaining privacy and performing societal goals such as anti-money laundering (AML), tax evasion, terrorist financing etc.
  • Cryptocurrencies built on permissionless protocols to ensure privacy by not collecting any personal information of address holders.
  • Trading on DEX removes the need for CEX (that could perform KYC check and tax enforcement), as the system can run entirely through automated contracts.
  • DeFi created externalities for the rest of the economy that are currently not internalized by market participants.
    • Impedes enforcement of taxes, AML or ant-terrorism regulation.
    • Worsens preventions of bribes, ransomware and other malfeasance.
• Economic rents can still accumulate at different layers in the DeFi architecture
  • Validators/miners have incentive to be concentrated, possibility of collusion.
  • Smart contract platforms have strong network externalities which limits competition.
  • Individual DeFi applications benefit from economies of scale.
• Governance
  • Governance rules needed to balance the interests of different
    stakeholders in DeFi apps, e.g. developers, investors, users
  • Governance research has shown that recourse to the legal system is necessary to effectively implement these goals.
  • Experimentation with on-chain and decentralized governance (DAO)
• Systemic risk
  • DeFi has primarily operated under a narrow banking model
  • Main risks stem from a potential run on stablecoins and the ability of investors to take highly leveraged positions
• Regulation
  • A natural solution for regulatory oversight is at the level of validators and developers, which control the network protocol. The private sector is already developing digital IDs that could then connect to crypto currencies to provide KYC.
    • Regulators could then limit exchanges with only interacting with validated addresses.
    • If validators are known and regulated, they can verify that only certified participants transact on the blockchain.
    • Countries that agree on KYC standards can use the same blockchain while those that have different requirements can require their own blockchain.
  • If regulators give up on the ability to oversee validators and developers, the effectiveness of regulation will be much more limited and will depend on the goodwill and voluntary cooperation of validators and developers of the blockchain.
  • If regulators wait too long, cryptocurrencies and DeFi applications can become too big to regulate.
• Consumer protection in the crypto space needs to be made clearer or created.
• A crypto token can represent a share and a unit in an investment fund and a bond. When they represent a security does the regulation around securities apply?
• The regulators need to engage at the beginning of the value chain, not just at the end.

Q and A

• To what extent do we need to re-invent the wheel?
  • the current frameworks are useful to identify the risk but how they are applied needs to be fitted to the crypto space.
  • the regulators need to have different skill set and mindsets; they need to have better understanding of the technical aspects.
  • there is still a significant debate between various regulators as to which agencies regulate which aspects and instruments of DeFi -- there still isn’t certainty over what crypto actually is in the regulatory space.
• Validators and developers are the natural places for regulation/supervision
  • Anyone can be a validator as long as they are willing to do it in a responsible way.
• How prepared is the industry for tax compliance?
  • Players in this space don’t like regulation so if regulators impose these costs on them, the asset prices will lower.  This could reflect badly on the regulators which in turn might result in political blowback, given the growing lobbying power of the DeFi industry.
  • Service professionals such as lawyers and accountants need to educate themselves on this space quickly to support compliance.
• The dialogue between regulators and innovators is vital; lessons can be learnt from other situations in finance where this already occurs.
• Law matters: we need legal certainty for efficient markets to work.
• This is an exciting new space which is moving with frightening speed; we need more security and structure as this space grows, resulting in higher societal stakes.  

This session outlined the exciting potential of the Metaverse, the impact it could have and the importance of good ethics in its development. The first talk looked at the size of the Metaverse, its use cases and infrastructure needs and finished with what the regulation of the space could look like. The second talk was about what life will be like in the Metaverse, the benefits for healthcare that can be created and importance of developing it with ethical principles encoded into it.

• “The Metaverse is effectively an interface layer made up of hardware and that makes the physical and virtual world indistinguishable from one another” Jamie Burke, Founder and CEO, Outlier Ventures
  • Has its own economy and currencies native to it.
  • Value can be earned, spent, lent, borrowed, or invested in both a physical and virtual sense and without the need for intermediaries.
• Can exchange physical assets, economic assets and content assets. Corporations are deploying the Metaverse to connect with Gen Z or Millennials.
• The explosion of the Metaverse and DeFi came from people being locked away during Covid powering innovation in these areas. Facebook’s announcement of a name change to Meta brought even more attention.
• The metaverse in 2030:
  • The digital economy will make up 20-25% of global GDP.
  • The Metaverse will make up one third of the digital economy so will be worth $8-13 trillion.
  • It will have around 5 billion users 
• Governments are getting involved:
  • Singapore simulated their traffic management system on the game system unity instead of a purpose-built simulation system because it is so advanced now.
  • Seoul has announced they are moving their public administration into the Metaverse.
  • The Dubai regulator is setting up in the Metaverse.
  • The Saudi city of Neom is spending $1 billion on developing the metaverse.
• The Metaverse infrastructure is still in its early stages:
  • Current internet infrastructure is not ready for low latency experiences that the Metaverse needs.
  • The network infrastructure needs to target latency more than bandwidth; we are currently at 150 milliseconds we need to be down to 10-15 milliseconds.
  • Need a lot of investment in high performance chips.
  • A lot of computing power needs to be moved to edge computing instead of server-based infrastructure.
  • Who controls the hardware controls the software; big tech could still be the gatekeepers extracting large rents, look at Meta’s investment.
• Regulation of the metaverse
  • Regulators will have a greater focus on the metaverse particularly around:
    • Content moderation.
    • Privacy, we will have to improve privacy rules as we will be dealing with highly sensitive data, eg long term brain wave data. Is GDPR ready for the metaverse?
    • Ownership, IP and contract law will have to evolve.
    • Competition and antitrust, already early warning signals from the European Commission about companies getting a dominant position. Look at this article for more details.
  • Regulation is a work in progress, already existing legal principles will need to become more sophisticated.
  • Regulation will be determined by how society interacts with the metaverse and who controls it.
  • Even though it is a global system the regulation will be fragmented due to state sovereignty. Where are state boarders in the metaverse? What about virtual states?
  • The societal implications can be huge, rules and regulation can only take you so far, how should we engineer the systems to amplify the good and minimise the bad? How do we decide what is good and bad?

• Medical applications of the metaverse
  • enables collaborative working from great distances to get the best expertise from around the world.
  • Allows training without the need for real world risk or cost.
  • Can test theories on virtual twins.
  • There is a work shortage in the medical field so the augmentation the metaverse offers will allows for greater efficiencies.
  • Surgical simulations will allow for more personalised medicine.
  • The gamification of medicine will allow for an increase in preventative medicine through the incentivisation of good behaviour.
  • Self-Sovereign identity will allow for easier access to data while being able to control how it is used. This also offers the possibility of individuals monetising their data.
  • The metaverse empowers social prescribing.
• Community owned economies
  • Digital communities can form networks through token economies.
  • Attention Economy will be replaced through social tokens in the Metaverse to bring a new immersive community economy.
  • This could create bidirectional relationships between provider and consumers.
  • Individual consumers can become the agents of innovation in a distributed model of collaboration, the players can decide the direction of the game.
  • Communities such as Climate action and social prescribing are already being created.
  • The user is no longer a passive consumer.
  • Gamification increases people’s engagement; this can be paired with nudges to create socially positive outcomes.
• The ethics of the metaverse needs to be thought about, Technology gives us new choices, but only ethics can tell us which choices are good.
  • We need to encode ethical principles from the beginning.
  • Developers need to understand how to create ethical outcomes with algorithms.
  • There needs to be professional standards developed for ethical software developers.
  • There needs to be community demand for ethical approaches.

Q and A

• How do we integrate those coming from the underprivileged backgrounds into the community?
  • We are seeing the greatest uptake in the usage of virtual currencies in emerging economies.
  • Part of it will be defined by infrastructure.
  • The person that developed the mobile phone that can access the metaverse will win.
  • It depends on how governments interact with the metaverse.
• How do we stop the virtual world from taking over the physical world?
  • The metaverse is an evolution of what we already have.
  • To a large extent we are already doing this with mobile phones.
  • It’s a personal choice that will evolve over time, this is why your personal ethics are so important.
• What blockchain can support the metaverse
  • Needs to be able to support some general-purpose smart contract functionality.
  • High transaction speeds.
  • A lot of decentralised storage
  • Bitcoin would not be good for this, but Ethereum is doing better but has high gas fees.
• Should there be more emphasis on duties then rights in the metaverse?
  • Yes, there should be a greater focus on duties, there is a lot that could go wrong.
  • It gives us an opportunity to build a society in a better way.
• How do we shape the technology to not have the unintended consequences that we have been dealing with in web 2?
  • DeFi and the metaverse allows access to areas of wealth creation that hasn’t previously been accessible to all.
  • We need to make sure policy makers understand the technology and don’t just see it as a threat. They need to think carefully about the ethics of it.
  • Today’s policy makers and business leaders are not well equipped from a technology point of view to guide the world.
• How do we address the constrain of hardware?
  • It just needs to be built.
  • The consumer interactions are not very good yet, Facebook avatars don’t have feet as the distance between your eyes and your feet can be quite disorientating if wrong.
  • Apple is still not out with a hardware device, when this happens it could be a big shift.
  • It is a complex problem that organisations have not dealt with before.
  • We are seeing a return to how people need to develop the software and hardware together, as we move back to this notion you start to get huge amounts of energy efficiencies, smaller form factors and better convenience.
  • We are learning so much about exactly how our brain experiences things.
• We have not yet developed risk frameworks for these technologies
  • There needs to be more literature on the risks of the metaverse.  
  • Look at Europe they have an enormous agenda of rules and regulation they are working on now it is unlikely they will be coming out with stuff on the metaverse soon.
• Is there an informed outlook on competition policy for the metaverse?
  • There isn’t currently a precise answer the digital markets act in Europe will apply to large companies that act as gatekeepers, the executive vice president of the commission says, ‘that someone will have dominant position and we need to look at it’. It is unlikely the digital markets act will be changed for the metaverse now but maybe in future iterations.
  • There will be more pressure for big tech companies to apply a more open approach due to the technology, which is available now, the market forces will push towards a more decentralised approach.
• We need a way to continually share and learn globally from others on the development of this technology as it will not be able to be regulated individually because it touches so many things.

This session looked into what is needed to create a metaverse and what role decentralisation and NFTs play in it. As well as the security implications for DeFi and the metaverse. The first session questioned the benefit of decentralisation, talking about how it is an unnatural state the needs to be worked that also limits the speed of growth, as such it should only be used when needed.

• Is DeFi needed for the future? What already exists? None of these were possible without a central trusted party.
  • Metaverse: social networks and games
  • NFTs: in game items, digital identities
  • Digital Money: PayPal, visa and Mastercard
• Cost of decentralisation
  • Crypto trilemma, can’t have all three at the same time:
    • Speed
    • Security
    • Decentralisation
  • Decentralisation isn’t the natural state – it is an aspirational one
  • It costs to decentralise
• It’s important to think through decentralisation is needed for a situation instead of just applying It to everything, it needs to be applied carefully.
• The future is a hybrid one between decentralised and centralised.
• What is web 3?
  • Refers to an evolved state of the world wide web, boasting a blockchain-powered decentralized system.
  • Bottom-up design encourages user participation and gives users more control over their digital content.
  • Web 3 and the metaverse are different concepts, web 3 is the building block for the metaverse.

• NFTs are the building blocks for the metaverse and a lot more than just pictures of Monkeys.
• The functionality of NFTs is evolving, they are more than just collectible digital assets, they are assets of value with differing applications across industry.
• Myths and facts about NFTs
  • Are they just hype?
    • They are reshaping some traditional industries.
    • They are breaking down the wall between the physical and digital world.
    • More refinements are needed.
    • The boom bust cycle is natural for the evolution of technology.
  • How can we lower the barriers to mass adoption?
    • There needs to be a lot more education about what the technology actually is.
    • The user experience needs to improve, better registration experience.
    • Trust and security needs to be improved.
    • The technology itself is not right or wrong it is just a tool it is for us to decide how it is being used.
  • What are the best NFT use cases?
    • Disrupt the gaming industry.
    • Extension of identity, community, and social experiences.
    • NFTs can revolutionise digital ownership, currently most digital ownership is trapped inside walled gardens while NFTs can be transferred to other platforms.
    • NFT ticketing and momentous.
• NFTs can be extensions of identity, community, and social experiences.
  • NFTs will play an integral role in defining your identity on the metaverse.
• NFTs can revolutionize digital ownership. They are emerging as a means of asserting and exercising ownership rights over digital assets, which will form a foundation for a new digital economy.

Q and A

• What are the financial crime implications for the metaverse?
  • We need to solve these scam and thefts.
  • There was 1 hack every three days in 2021 an average of $16m was stolen.
  • Fishing attacks are significant
  • Elliptic have found $40m worth of stolen NFTs since July 2021
• What law defines stealing in relation to Crypto? there is no law that says a DeFi hack is punishable as theft. When you steal from a centralised platform then the law does apply.
• There needs to be some way for laws to be enforced and an ability to retrieve your loses, in the physical world this would normally be done through insurance, however in the metaverse the insurance system is not fully developed. How do you quantify the value of your digital assets especially with high levels of volatility?
  • The insurance could come from the Blockchain space.
  • Enforcement needs to be applicable to the metaverse, and this should be done inside the metaverse as external enforcement is hard to do.
  • We have seen smart contract insurance itself being hacked.
  • We have seen some NFT hacks being reversed due to how hard it is for the thief to cash in on the NFT as a transfer can easily be seen and policed so they will instead transfer it back to the original owner at a reduced cost.
  • The enforcement has had push backed from the community as some don’t like the idea of a centralised power enforcing its will on the community.
• Fishing scams are the most prominent attack and will occur on any blockchain no matter how secure it is.
• With greater centralisation can cryptocurrencies live up to their original ideals?  
  • Central bank digital currencies (CBDCs) are as far removed from the original ideas of bitcoin as can be.
    • CBDCs are a tool for monetary oppression and will be favoured by more dictatorial states.
    • Bitcoin is a tool created for monetary freedom and should be a tool used by democracies.
  • CBDCs may help motivate the development of the technology and applications.
• Last week the high court announced that it will treat NFTs as property in UK law.
• Thinks twitter will move from a centralised service to a decentralised service. There is social pressure for big tech to seem more egalitarian. Meta will find it hard to decentralise.  
• Binance has invested in Forbes and Twitter, they will keep on investing in mainstream companies, they want to attract more attention from the mainstream world to make the pie bigger.
• Doesn’t see a clear boundary between centralised vs decentralised.
• Do you think the biggest power to make the decentralised system work lies with the centralised powers?
  • There is a lot of VC money that goes into new blockchains that are more centralised.
• Trust and security in the metaverse challenge or opportunity
  • It is a challenge but it’s not a big challenge, NFT scams are much less than 1% of transactions, NFT money laundering really isn’t a big thing.
  • Binance can act as a custodian to make it safer.
  • Thrustless architecture is a big opportunity, but security is a challenge.
  • We are already seeing the zero-trust approach in cyber security.

• The growth in the importance of trust and security is clear in the discussion that took place at the conference.
• We are living in a cyber physical world
  • The way in which technology collaborates with humans to help us do things in the last 50 years has seen a seismic shift.
  • Underlying all this is a mathematical philosophical construct, all this technology enables us to build an extension of our human existence.
  • The finance aspect is a key enabling technology.
  • Is there an inevitability between the combination of DeFi and the metaverse? Deeph thinks so, but it is a question that needs to keep being asked.
• What does citizenship look like in web-based communities, how do these interact with the status quo.
• There is a risk we can use the technology to amplify the problems society faces but it is also in our control to use it to solve these problems.