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foreign [Applause] thanks for coming I hope you got to see a very tiny piece of the Bitcoin interest rate curve at the product keynote this morning um I wanted to give a quick thank you to gando for talking at the keynote hes head of product at CF benchmarks and well be going a little bit more into the methodology uh later on so one of the best things about coming to Smart con is that I get to see so many different perspectives on what people think of when they think of D5 and I usually think of defy like a jigsaw puzzle that you get in a cardboard box but instead of the normal kind with the picture on the top of it you have no idea what the puzzle is going to look like so when you put the puzzle down on your kitchen table or your dining room table you might get a few bits and pieces of what the color scheme is but you really dont get a sense of the size and scale of the puzzle and still use until you start working on it and I generally think of the Bitcoin interest rate curve as that corner piece of the puzzle that one that really sets off your you being able to speedily get through the rest of it that first Edge when you can really see this size and scope of what the D5 Market might look like and then hopefully as we go more into the Bitcoin interest rate curve in action youll be able to see a fuller picture of what that final D5 puzzle looks like so when Im talking about the Bitcoin interest rate curve Im really putting it in the context of reigniting the the D5 growth engine I think weve all seen um some maybe unsustainable growth habits during defy summer that we really want to be able to perpetuate healthy sustainable growth in the D5 Market and one of the big pieces thats missing here is proper tools to do so so if I want to borrow Bitcoin and put it into a new project or new to me project I have to go to different liquidity providers OTC OCD OTC desks liquidity pools and research on my own what kind of interest rate risk I want to take on what kind of prices I have and how I want to how I want to borrow and if Im one single piece in that D5 puzzle and you take a look at a macro view of that theres really a case where without a meaningful Benchmark to lending and borrowing in D5 its holding the industry back its slowing us down from sustainable growth and if we take a look at really some of the fragmented information that we saw during D5 summer even the most cautious investor can have a feeling of missing out when you see apy like 20 15 percent and you dont have the proper tools to evaluate what your risk is there and so when were talking about any type of you know interest rate were talking about um interest rate risk that is everywhere so the interest rate they get on borrowing the interest rate that you get on Lending its a piece of the market in defy a fundamental piece even if you dont realize that its there and maybe some of them the things that weve seen happen during D5 summer we might take a second look and say there must be a better way of deciding how we want to evaluate our risk in this scenario so without that corner piece without that North Star Capital becomes far less productive theres merciless yield farming Ponzi schemes all of that that youve seen comes from exploiting uncertainty and the more uncertainty there is in the market the less New Growth happens the less new money comes in the more people put their money into subsidized protocols and while that might be great for the individual User its really holding us back its preventing financing new growth and when I think of the real root reason for this is that were speaking a different language information is all over the place but theres no one single way that we can really begin to talk to each other both as retail investors institutions D5 protocols Etc and when I think about the type of language that I would use to talk about it I take a look at the debt markets and traditional Finance they have what started as Libor and now is sopher and other base rates a clear-cut language that they can talk about lending and borrowing and if you take a look at the debt Market in traditional Finance crypto is so far from its potential I dont want to call it small I want to call it far from its potential over there in the corner and if you take a look at interest rate derivatives which are a huge piece of the global market they are really there because interest rate risk underpins so much new growth and being able to have that sofa that base rate that the traditional Finance Market can use to communicate the interest rate Market completely dwarfs the entire crypto Market total market cap if I take a look at what chainlink has done in in the web 3 space in the last few years theyve really done democratized information in web 3. they allowed to have the same language surrounding our price feeds so it makes complete sense to me that chain link could be a democratizer of information in this lending and borrowing space and thats why we want to introduce the CF Bitcoin interest rate curve in association with chain link and Im going to hand it over to Gonda to talk a little bit more about the methodology thank you Nora excited to be here thanks everyone for joining um Im gonna dig a bit deeper into what we do generally and then how we decided to approach this problem Ill dig a little bit into some of the context which may feel like similar to what Ive spoken about in the morning so apologies if some of you have caught that but the methodology piece is is going to be new I did not dive into that level of detail in the morning so lets get started so a little bit about CF benchmarks um my name is gando Im head of product at CF benchmarks we are uh the leading crypto index provider we like to think uh were best known for uh our Bitcoin reference rate the brr which settles the CME Futures as well as our digital asset classification structure uh the Dax which provides a taxonomy and a framework of how to invest in crypto similar to what the gigs is for equities if if you know about that and when we think about doing uh benchmarks any kind of Benchmark for prices for basket and thematic indices or in this case interest rates uh we have our principles that we make sure we apply in every case uh in the case of every Benchmark we make sure it has to be representative of economic reality so it needs to reflect whats happening in the Market at the point in time when we are snapping for the day or for the second or for the minute it needs to be replicable and thats really really important to facilitate hedging and risk management is that participants have to be able to say if the Benchmark is saying for today it was like four percent there must be a way for me to replicate and get that return on that day for four percent so its not just a number its a number that participants can go and replicate using financial instruments and then last but not least is the manipulation resistance it needs to be highly resistant to manipulation to maintain the Integrity of The Benchmark in all you know price conditions and and bull runs and and busts of different assets and given like everything thats happening in the macro environment we make sure our benchmarks can essentially be robust enough to withstand some of the these like crazy events that happens on Market sometimes as Nora mentioned Global debt is a massive massive thing and I and I think just for context for people that do not interact with debt and credit markets every every day a reminder of what is the purpose of you know these credits and and that markets the purpose of of these instruments is to parse risk and reward so it allows one participant in a certain Endeavor to take limited risk with limited return versus if youre an entrepreneur starting your own company building your own protocol you are undertaking all the reward and all the risk for that endeavor so this is the the main kind of purpose of of debt and credit and it allows for ecosystems to grow in a much more efficient manner as as the industry grows that that go back one more thing on this uh that that currently that has no no indication of slowing down is is spread across geographies its spread across Industries um it permeates really all Industries and crypto is no different and for that ecosystem to continue to evolve in a healthy way in an efficient way and something that can be scalable it needs benchmarks for risk to be priced as a spread too so thats what were trying to do here uh with this benchmark transparency really important when people you know see a return of 25 sometimes its not clear if somebodys offering you 25 versus 30. but if the Benchmark is saying that the returns for Bitcoin should be you know five percent a replicable return with very minimal risk uh then a participant can ask themselves if such and such project or protocol is offering me 25 thats 20 above the Benchmark rate what incremental risk am I taking to deserve that incremental reward so that thats really important from a user standpoint it allows users and investors to parse through the risk and reward of various different projects um and then so thats from the user standpoint and then from the from the the other standpoint from the protocol side of things you know you want to be able to assure to the whole ecosystem that youre transparent about how youre pricing both the risk and reward of all of these products that youre offering and this allows market makers and other Financial participants to then start offering hedging solutions to people that are using the protocols so for example I might be lending my Bitcoin to you for five percent maybe somebody else with counterparty risk higher counterparty risk I lend two for you know benchmark plus three percent but this allows everyone to be able to go and start hedging that Benchmark piece and our market makers out there that will step in and help people hedge out the Benchmark piece and you would be left with kind of the the user specific risks that are priced as a premium to the benchmark so thats really important to just unlocking the hedging solutions for all of this now lets go under the hood a little bit and and see how were putting this together so as Nora mentioned this is a unique partnership were leveraging CF benchmarks expertise building benchmarks and chain links on chain capabilities to power defy smart contracts so together were building this its going to be an open source methodology thats going to be publicly available people can scrutinize it they can see exactly how were calculating everything down to the formula so you could literally go out there and and replicate the rate calculation if you wanted and we are pulling data from three distinct sources the first one is derivatives markets so the Futures markets so perps and fixed term futures this is probably by in terms of size the largest markets so these are the markets you see on venues like the CME or binance or FTX were also collecting data from D5 protocols such as Ave or compound were observing kind of whats happening in this smart contracts where you could lock kind of Pledge Your Bitcoin and earn a yield last were going to collect data from OTC activity borrowing and lending activity of Bitcoin between institutions and were doing that that on a survey basis and were combining all of these and youll notice that the data that were collecting from Market transactions under D5 and fixed term Futures is partitioned and that partitioning of the transaction data is to the service of the manipulation resistance so if one if were just doing an average of everything together one minute uh bad actor might try to manipulate The Benchmark by doing you know a concentrated uh large transaction or a series of transactions but if they want to manipulate this Benchmark they have to manipulate all the partitions because all the kind of volume weight averaging is happening on a per partition basis so were observing between three to four pm London for the fixed term Futures were observing between 12 and 4 pm for D5 and were taking a snapshot of uh transactions and quotes from OTC lenders at 4 pm were taking all this data probably thousands of inputs uh at a time were doing typical Financial engineering statistics uh interpolation bootstrapping type techniques to kind of make it coherent and normalized across these sources and were going to be publishing it at 4 30 London time once a day and this is what it looks like uh in terms of final output so this is an example of what the curve looked like between beginning and end of August uh youll see that its a little bit bouncy on what were calling the session rate which is akin to the overnight but not quite but this is the very front end of the curve and then you can see because of the perp markets thats very it bounces around a lot once you get into week one two three and months one through five then you can see its uh kind of yielding a small positive yield for Bitcoin out for four five six months which is a far cry from uh what Bitcoin yields were this time last year when it was north of like around 20 percent uh annualized so this is this is what were doing I think if youre engaged in um borrowing and lending of Bitcoin in your protocols or uh any kind of derivatives uh for Bitcoin like Futures and options integrating this can be really really useful just to be transparent with users around what risks theyre undertaking and for what return back to you Nora thank you so hopefully if youve seen some of the potential of the size and the scope here we really hope that if you take that corner piece and run with it you end up with something that is useful for an array of users so its not just my particular example of me going to take a pretty minuscule amount of Bitcoin and putting into a project that I particularly care about its also institutions who want to leverage interest rate data for portfolio management and risk management its the OTC desk themselves who want to offer a competitive rate because they also want to know what the market is like for interest rates at the time for automated market makers they want to automatically recalibrate their leverage positions and set more uh more efficient collateralization strategies and for models that are very common in traditional Finance like Black Shoals that interest rate is an integral part of asset valuations and a big part of options exchanges so we are going to leave a QR code up here and if you are interested in learning more about the Bitcoin interest rate curve we encourage you to scan it and uh thank you very much thank you very much [Applause] With the launch of the Bitcoin Interest Rate Benchmark, Chainlink and CF Benchmarks are bringing the first-of-its-kind marketwide benchmark to the blockchain industry—giving all market participants, from DeFi developers to institutional players, access to replicable and manipulation-resistant Bitcoin interest rates across a variety of timespans. In this SmartCon 2022 presentation, learn how projects can leverage the Bitcoin Interest Rate Benchmark across lending and borrowing, asset valuation, swap markets, and beyond.Featuring: Ghando, Head of Product at CF Benchmarks Nora McGlynn, Market Analysis Manager at Chainlink Labs Chainlink is the industry-standard Web3 services platform that has enabled trillions of dollars in transaction volume across DeFi, insurance, gaming, NFTs, and other major industries. As the leading decentralized oracle network, Chainlink enables developers to build feature-rich Web3 applications with seamless access to real-world data and off-chain computation across any blockchain and provides global enterprises with a universal gateway to all blockchains. Learn more about Chainlink: Website: Docs: Twitter: Chainlink Chainlink,