How DeFi is Disrupting the Financial Space with Julian Hosp: An EOFire Classic from 2021

0:01Light that, Sparkfire Nation. JLD here and welcome to Entrepreneurs on fire brought to you by the HubSpot Podcast Network, the audio destination for business professionals with great shows like Sales Evangelist. Today, we're pulling a classic episode from the archives and we'll be breaking down how DeFi is disrupting the financial space. To drop these value bombs, I brought to Julian Hosp in the EO Fire studios. Dr. Julian Hosp is one of the largest crypto influencers in the German speaking world. He's a medical doctor, an ex-professional athlete, CEO and co-founder of Cake. And today, Fire Nation, we'll talk about blockchain, DeFi and decentralization, how inefficiency always comes with diversification.

0:38And there are seven things that finance or banks normally do. And we'll talk about that and more when we get back from thinking our sponsors. Marketing Made Simple, hosted by my friend, Dr. JJ Peterson, is brought to you by the HubSpot Podcast Network, the audio destination for business professionals. Marketing Made Simple brings you practical tips to make your marketing easy and more importantly, make it work. A recent episode on whether vulnerability is a superpower and business is a must listen. Listen to Marketing Made Simple wherever you get your podcasts. Dr. Julian, say what's up to Fire Nation and share something that you believe about becoming successful that most people disagree with.

1:20Pleasure to be on. I believe timing is everything. And I think many people don't give proper timing enough credit. Timing is everything. Proper timing, enough credit. And I can tell you a little bit on our conversation today, if I had just had a little better timing when it came to Bitcoin slash other cryptocurrency, my life might be looking a little different as well. So I'm all about the timing. And as I mentioned today, Fire Nation, during the intro, we're talking about how DeFi is disrupting the financial space. So let's just dive right in, Julian. What the heck is decentralized finance? Break that down for us.

2:01It's actually something that's quite straightforward if it's explained simply. It's seven functions or seven things that finance or banks normally do, which is create value, transfer value, exchange value, tokenize value, lend value, identifying value, and predicting value for the future. So seven very fundamental things normally banks do and decentralize that, which means there's not a central party anymore that is in charge, but it's actually the entire community that's in charge of those function sets. So Fire Nation, that's why I brought Julian in here because this is kind of an interesting topic.

2:37It's a timely topic for multiple reasons, which we're going to be getting more detailed into. But this is the world that we're moving into. We're not saying that there's not going to be a centralized finance going forward for the next 100 years. But there's definitely going to be a strong decentralized growth in the financial space. Let's talk about how it is different, actually, Julian, from the traditional understanding of centralization. So I think the concept that most people are familiar with is actually that of creating decentralized value and transferring that value. And that's because Bitcoin has been starting over 10 years ago and doing this in 2009.

3:14So it does actually those first two function sets And Bitcoin is extremely disruptive, as probably most people see in the news, large companies like Tesla putting it on their balance sheets because they believe in this future. Now, I agree with you. I don't think DeFi or decentralized finance is going to be everything, but I think it's going to be an important part. And, yeah, with that, you're going to just have a lot of extensions. You're going to see suddenly so-called decentralized exchanges where things, digital things can be exchanged without a central custodian. And that's very, very disruptive.

3:46Decentralized lending is going to be very disruptive for access to this financial space. And so especially for those that have followed everything with GameStop and the Robinhood stories right now, the so-called decentralized tokenization where stocks and bonds and commodities suddenly get decentralized, that very highly regulated part gets decentralized. We're moving towards, well, total financial freedom. And that's sometimes quite scary, I think, also for the regulator. Now, for those people that may not be that familiar with the GameStop and the situation that's going on there, maybe just a little confused about it.

4:18Can you dive a little bit into that and how that actually plays a role in the conversation we're having right now? Yeah, the main story there was that a lot of the smaller investors, retail investors, what it's called, kind of gathered up, especially on Reddit, which is like an online forum. And they were kind of fed up with large funds and large institutions trying to push down certain companies, which is called short selling. So you're betting on these companies going down. And these people just ganged up and said, you know what, if it's a lot of us and we put all this money together, we can actually really push back.

4:52And that's actually what happened, especially on companies like Nokia and GameStop and BlackBerry. So companies were objectively saying they're not worth much, but this retail bunch of group really pushed against. And so you would sit there and say, okay, all fine. And it was a back and forth. And on one hand, It looked like the big boys, the institutions were winning. And then it looked like the Reddit investors were winning. But then, and that's where it got extremely disruptive, it really looked like retail, Reddit, the average show, the small investor were winning. And suddenly, Robinhood and many other platforms pulled the plug and didn't let those small investors keep investing, but actually forced them out of the investments.

5:35And so that meant the other side was inevitably winning. And so there was this major kind of outcry where, well, as long as the big boys are winning, you kind of play on their side. And as soon as we would start winning, you pull the plug. And that was because Robinhood or those banks or those platforms are centralized. There is this central party that has the power. And so there was a humongous move towards DeFi, especially since this happened over the past couple of weeks. There was a lot, a lot of people tweeting and commenting on that. And there's now even a hearing in the Senate on it because it was very, very questionable if what they did was market manipulation or not.

6:13And DeFi would completely remove the power from those platforms and would the power actually put the power to the community. And that's something obviously that I'm also very passionate about. Yeah, there's a lot of crazy conspiracy theories that are being thrown around. And this is a very interesting and crazy time right now that we are dealing with. I mean, the Robinhood CEO is literally getting death threats and living in a hotel right now because people are so pissed off because of what happens. You know, of course, they're claiming that like, hey, they're not in collusion at all with the Wall Street hedge funds.

6:43They're just were forced to do it because they couldn't cover these, quote unquote, bets that were happening, you know, from this Reddit forum that's actually called Wall Street Bets, Fire Nation. Wall Street Bets, I guess, has now over eight million and growing. It's probably well over that now users of people that are in there, you know, taking all these crazy, quote unquote, Wall Street bets, you know, trying to go all in and YOLO. You only live once and doing all these different things to just kind of bet on the house or I should just say bet like it's a casino because that's kind of what their their attitude is right now.

7:15And it's some really fascinating information out there. But to kind of pull it back to what we're talking about, Julian, what are the specific advantages of decentralized finance? I mean, we've been talking about what that could be in the last situation, you know, with what happened with GameStop. But what are some of the other advantages in decentralized finance that could really make just this world a better, fairer place? I would love to talk about the advantages, but also the disadvantages. I think both are really important because not everything just has an upside, right? There's always a flip side.

7:45The advantages definitely are that there is no one that you have to trust. So you are in control. The community is in control. There's no trusted counterparty. And that's very disruptive by itself, because that also means that if you make a mistake, it's up to you. There's no customer support. So that's obviously a downside. You are in charge, but that means you are in charge. And that can be very, very scary. The other thing, because no one is in charge, everything is completely transparent, which is extremely powerful because especially in financial space, you hear about this intransparency and you hear about a lot of these kind of things happening behind the scenes that the average person doesn't have access to.

8:27And suddenly the playing field is leveled because of this full transparency. And obviously that's powerful. And then the last aspect is this open access. A blockchain or a decentralized system doesn't discriminate. It doesn't discriminate against age. It doesn't discriminate against gender, against race. Everyone is 100 % equal. And so obviously, that's what a lot of people appreciate. And that's what, especially the past months, past years, there has been a push towards that. And you can see this in the upcoming of DeFi and the importance of DeFi beyond what Bitcoin is providing to those additional services.

9:03So Fire Nation, I hope that you're really understanding what some of the advantages are. I hope you're seeing what some of the disadvantages are. Is there anything you want to add, Julian, to either the advantages or the disadvantages, or do you feel like you've covered them fully? The advantages are clear. It's open. It's democratized. Everything is equal. Everyone has access to it. But the problem of this is it's very, very inefficient. It's extremely slow because everyone needs to be on the same level. Sometimes it can be extremely expensive to do that. Inefficiency always comes with all these diversifications.

9:38Many times, and especially as an entrepreneur, you should know that focus is everything. Lights bundled into one small beam can light something on fire. Anything else, yeah, and not doing that is, well, just light. And the same thing is here. So there are ups and downsides. And that is why, especially when you mentioned that DeFi is not going to be the only thing going forward, You're 100 % correct. But I love to see DeFi as this gatekeeper or the check that makes sure that the centralized finance system doesn't go haywire, doesn't go totally overboard. So there's this counterbalance. And I think that's what DeFi is so excellent about.

10:18So Fire Nation, we've talked a lot about decentralization of finance, the advantages, the disadvantages, how different it is from traditional understanding of centralization in the world that we've lived in for so long. We have a lot more we're going to be discussing, such as blockchain. We're going to be talking about the fundamental understanding that we're all going to be having over the next five to 10 years when it comes to blockchain and centralized and decentralized finance. if we want to have our finger on the pulse and so much more when we get back from thanking our sponsors. Are you ready to start your year off with increased revenue, faster growth, and record-breaking performance?

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11:32I know what you're thinking. Sales Hub must cost a fortune. Nope, it's free to get started and will grow with your business as it scales. And with more than 1 ,300 integrations and a ton of valuable add-ons, you can customize it to your exact needs. With Sales Hub, closing deals is no big deal. Head to HubSpot.com slash sales to try it for free. So Julian, we're back and this word blockchain gets thrown around a lot and I don't really feel like people have a great grasp as to what exactly is blockchain. Can you just for once and for all share with us what is blockchain? So imagine we would, everything is digital, quite easy to understand right now with all the COVID situation going on, everyone being remote.

12:13So there's nothing physical, everything is digital. And let's say we would try to keep check on money that we owe each other. And we are not using traditional dollars, which is using our own money here, EO Fire coins, for example. But we don't want anyone to be in charge because then that person could just create those coins out of nothing. So no one should be in charge, but everyone should be in charge. So how would we go about that? And the way we would do it is we would put, let's say, a regular Excel sheet and we put it into blocks. And we say, you know what? Every 10 minutes, we hop on a Skype call really quick and we talk to each other.

12:49How much did you send to everyone else? And so we hop on this call every 10 minutes, obviously very inefficient as a human being, but as a computer, it would be super fast. And we discuss this, and John says, hey, you know what? I send a couple of EO Fire coins to you, Julian, and I send a couple to Kate, and Kate maybe gave you some. And so we just record that in that block. And afterwards, we synchronize that block among each other until at least the majority, and that's always a key thing, the majority, at least 51%, say, you know what? Yes, that's exactly what happened in the last time block.

13:22And this is a cryptographic thing. There's going to be a final little key, and that key connects or chains the one time block to the next one. And we need to include that key in the next block. And the reason this is important is because now when we fill out the next block, it's automatically chained to the block before. If we were to change anything in this block, the other blocks would become invalid. it and everyone could verify that. And so if we keep doing this, what's going to happen is we're going to have blocks of information chained together that is unchangeable unless, and that's the key part, unless you change at least the majority, so 51 % of all the participants.

14:05And so the power here is, of course, if it's just the three of us, it's not that exciting. But if you have hundreds of thousands of people, it suddenly becomes this point where trying to manipulate the blockchain, the database in a malicious way is actually way more expensive than an economic gain that you would get out of it because there's so many people involved that you would have to change or manipulate and it just wouldn't work out anymore. And so the power of a blockchain general is that you could store any information. For example, I got into blockchain seven years ago because I'm a medical doctor and I wanted to store medical data in there.

14:40And I just realized it was extremely difficult to do that. And that's how I ended up in the financial space and cryptocurrencies where it's very easy. So if someone asks, what is a blockchain? It's nothing else than a database where information is stored in blocks that get chained together, where the majority of the community agrees on and thereby it's unchangeable. Fire Nation, unchangeable. And just listen to what Julian is talking about when it comes to blockchain in general. And how I really want to take this conversation, Julian, is why? Like, why is blockchain specifically going to be a fundamental part of our day to day in the next five to 10 years.

15:16I mean, this is not a long timeframe from now. Like this is the near term future. Like this is literally in 2025, 2027, 2030 is going to be part of our day to day. Why is that the case? I mean, just like decentralized finance is an application of blockchain. So it uses blockchain, uses the same advantages and disadvantages. And so these advantages apply to anything. Anything that uses a blockchain is slow. It's inefficient. It's expensive. But there's no central party that can overrule someone else. Everyone can join that community. There's no discrimination. It's completely transparent. You see exactly what's happening.

15:55So you can trust what's happening. And we live in a world, undeniably, where we always look for more equality. We look for easier access. We want to have equality. And we look, obviously, for this transparency because we believe, not sure how fair and how transparent everything is going on in order to build that trust. And that's why, again, blockchain is not going to solve everything over the next 10 years, but it can solve a few problems. And I think solving those problems can make society a better place. So how do you want to end our conversation today? Wrap it up with the key takeaway you want to make sure Fire Nation really gets from everything that we've been talking about.

16:36Then share a way that we can connect with you specifically to learn more about this conversation, this topic, and then we'll say goodbye. Blockchain, DeFi, decentralization is not solving everything, but it's going to provide options. And it's going to provide options in an area many times where people without the system do not have any options. They are forced into one option and that means no option. And that's why it's so powerful to learn about that. And that's why I'm so passionate about all that. Yeah, I'm mostly active on Twitter. If you want to follow me on there, my handle is at Julian Hosp.

17:12I talk a lot about DeFi, about my companies, my investments in Bitcoin and how I see the entire cryptocurrency world. So obviously I would love to get in touch. So let's get real specific. What is the best way for Fire Nation to get in touch with you to learn more from you about this topic? Follow me on Twitter. The handle is at Julian Hosp. J-U-L-I-A-N-H-O-S-P. Julian Hosp on Twitter. And Fire Nation, you know this. You're the average of the five people you spend the most time with. And you've been hanging out with J-H and J-L-D today. So keep up that heat and head over to eofire.com and type Julian in the search bar and his show notes page will pop up with everything that we've been talking about today.

17:55Best show notes in the biz. And Julian, thank you for sharing your truth, your knowledge, your value with Fire Nation today. For that, we salute you and we'll catch you on the flip side. Hey, Fire Nation, today's value bomb content was brought to you by Julian and I've created a treasure trove of free courses for you. I teach you how to podcast, run a mastermind, create funnels that convert and more. All you need to do is visit eofire.com slash resources to start learning today. I'll catch you there or I'll catch you on the flip side. Marketing Made Simple, hosted by my friend, Dr. JJ Peterson, is brought to you by the HubSpot Podcast Network, the audio destination for business professionals.

18:34Marketing Made Simple brings you practical tips to make your marketing easy and more importantly, make it work. A recent episode on whether vulnerability is a superpower and business is a must listen. Listen to Marketing Made Simple wherever you get your podcasts. Thank you.