With the upcoming Pre-IDO — Understanding how the data oracle Lithium Finance innovates pricing strategy through collective intelligence
Question1: Welcome David Lighton for the first time to CryptoJ as our guest. First of all, let David Lighton do a brief introduction to Lithium Finance as well as its emerging background and its future vision?
David Lighton: Hi everyone, I’m David, the co-founder of Lithium — and an entrepreneur passionate about inclusive financial innovation. My team and I feel the traditional financial sector can be improved enormously by the innovative tools of DeFi and cryptocurrency.
As the DeFi space and the traditional finance world converge, the needs and expectations of having real-world assets in the DeFi space are also growing simultaneously. Pricing these assets in a decentralized manner is an inevitable process of bridging the two worlds together. This is where Lithium comes in; in short, we are an antidote for the reddit insanity of the public market and the lack of access to private/illiquid assets. Lithium is the first collective-intelligence pricing oracle to give precise and timely pricing on private, illiquid assets.
My hope for Lithium is to create a bridge between DeFi and traditional financial services and functions that opens doors for millions of users. We want to have top investors and institutional advisors as clients as well as the kinds of retail investors who made waves on social media. Lithium is a community of coexistence.
Question2: Since the establishment of Lithium Finance, it has gone through a rapidly developing process, which can never occur without the effort of your team members. Now let’s invite David Lighton to do a brief introduction to your team members, including some interesting stories behind the project.
David Lighton: I’d like to use this opportunity to talk about my fellow co-founder, Steve Derezinski. Steve is a Senior Executive and MIT Blockchain Engineer & MBA, who has launched 80+ startups that have cumulatively raised over $250M to date.
Steve and I share the same ethos, that bringing real-world assets into the world of decentralized finance — offering financial services with no intermediaries or guarantors — is the final frontier of crypto. However, this vision of decentralized trust can’t be realized without the right pricing oracle. Why would I buy private stock, if I don’t have a good idea of what it is worth? The market still hasn’t seen a pricing mechanism that’s able to price illiquid real-world assets effectively. This is the problem that brought us together.
On my own background, I am also the Founder/CEO of SendFriend, a blockchain-based payments startup out of the US. I also serve as Global Justice Fellow at Yale University. Previously I was World Bank Staff in Haiti, following the Haiti earthquake. I was educated at MIT and Johns Hopkins.
Question3: Lithium Finance has always been attracting preferences from numerous investment institutes. Could you share with us the financing process at present?
David Lighton: What I can say is that on June 1st, Lithium Finance completed a $5 million seed round led by Pantera Capital and venture capital firm Hashed/
The funding will enable us to bring forward our research to blockchain applications and create the oracle. It will also go toward the launch of the protocol’s subsequent mainnet in beta and help develop the project’s ecosystem.
Question4: One of the application scenarios of Lithium Finance is that it can offer an appropriate pricing strategy to real-world assets. In your opinion, what are the potential market scale and development prospects for real-world assets?
David Lighton: One of the most powerful elements of DeFi is that it enables greater price transparency in markets. The initiative is targeted toward existing DeFi protocols, traders, and investment analysts, so the use cases are extremely deep.
With Lithium Finance and its powerful DMI mechanism, we will be able to source prices for any asset through a decentralized honest-rewarding protocol, all on-chain — whether it be real estate, art, antiques, private stocks, and more. Price discovery for illiquid assets is something millions of people can benefit from.
Question5: What are some of the existing pricing strategies for real-world assets? On the whole, we haven’t achieved the pricing consensus and large-scale application for real-world assets. In your opinion, what are the potential obstacles that need to be overcome?
David Lighton: Currently data oracles do not provide regularly updated pricing for private companies. In fact, the only way to price an illiquid asset is through an expensive and slow valuation process. This limits the pricing to only very highly valued assets.
For example, even an existing investor in SpaceX won’t know the latest valuation and transaction price. Current price discovery is impossible — brokers and investors have no incentive to disclose the latest price of private companies. Decentralization can remove the “trusted” intermediaries of the financial world, creating more efficiency, transparency, and better pricing for everyone.
Lithium harnesses the wisdom of the crowd to quickly create a dominant truth. Experts (Wisdom Nodes) answer a series of questions about the pricing of upcoming private stock sales and stake tokens to signal confidence level in their answers. The more they stake the more they stand to win.
Question6: The position of Lithium Finance is a decentralized oracle utilizing collective intelligence. How can we understand “collective intelligence”, and what is its specific running mechanism?
David Lighton: Lithium will become the global currency for the world’s prices by sourcing and evaluating the wisdom of the crowd — and rewarding those answers which are accurate. This method of finding the dominant truth by asking subject questions is known as the DMI-Mechanism.
Basically, we’re building an on-chain pricing oracle to price real-world assets more efficiently, more transparently, and more accurately. Recent advances in peer-prediction capabilities allow us to query individuals to provide answers without access to the ground truth (an external answer with finality, i.e. stock price once IPO, or final score of a match). Previously, aggregating multiple users’ opinions have been thought to require access to final answers (ground truth) — but this is not the case. We can therefore select a set of Wisdom Nodes or aspiring Wisdom Nodes to answer questions in a binary fashion, or ternary, or categorically.
From this set of Wisdom Nodes and their confidence staking, we can mathematically determine the best answer prior to the disclosure of the future ground truth, giving us the pricing information we need during illiquidity. The mathematical combination of all answers allows common answers to reinforce each other and off-axis — or non-correlated answers to cancel each other. This combination allows us to reward those participating with inconsistent results. In some cases where the eventual ground truth is revealed, the reward will be distributed on disclosure, meaning once an asset is priced in the market.
Question7: The system of Lithium Finance is mainly composed of two participants including Wisdom Nodes and Wisdom Seekers. Could you briefly introduce them to us, including their positions and running theory?
David Lighton: In our system, participants are asked subjective multiple-choice questions to find a dominant truth. The answer provides price discovery for illiquid assets.
So yes, there are really two major stakeholders in the Lithium system: Wisdom Nodes (e.g., experts who have knowledge in the latest pricing of private companies — they could be brokers, investors, or anyone that is familiar with private market activities) and Wisdom Seekers (e.g., Crypto projects, investors, private equity firms, merger and acquisition investment banks, wall street analysts — all of these firms are seeking accurate pricing information to make decisions.) Those seeking answers to questions about the price of an asset will use LITH tokens — Lithium’s native token — to provide a bounty, and those with expertise in delivering answers will stake LITH to signal confidence in their answers.
The theorems behind our DMI-mechanism can be found here in our Litepaper.
Question8: We are seeing extensive application scenarios of decentralized oracles within the DeFi area. Most of DApps that need to interact with off-chain data need the assistance of oracles. How do you consider the current developing status of the oracle market and what do you think are the future developing directions and application scenarios of it?
David Lighton: The growing volume of data oracles suggests high demand among dapps for their solutions to power the increasingly complex ecosystem of DeFi products. Because there are no centralized financial institution authorities in the DeFi ecosystem, we need data oracles to help establish decentralized governance and to empower the smart contract infrastructures DeFi sits on top of.
As Lithium enters the picture, we notice a new, profoundly interesting application of an oracle, to a new problem. We have not yet seen a data oracle price illiquid assets, but as we have created with Linear Finance and Convergence Finance new environments to trade illiquid assets, we must equally possess data on the value of those illiquid assets, and this creates the logical case for Lithium finance. As to the question of what this means for the development of the oracle market, it should continue to grow. The spirit of DeFi, whether it reaches high, mainstream levels of liquidity today or in five years, rests on more transparent information. As long as oracles are creating better information for the market and for participants, they will continue to be an important factor in the DeFi revolution.
Question9: Compared with the existing decentralized oracle projects, such as Chainlink, Tellor, Band Protocol, NEST protocol, etc, what are the characteristics and differentiated advantages of Lithium Finance?
David Lighton: Virtually all on-chain protocols listed use publicly available pricing information. Lithium is generating prices that are not available on-chain and most are not available anywhere — pricing the unpriced. In addition, our source leverages many hundreds of contributors and ensures we encourage the best answers from all sources.
Question10: How does Lithium Finance ensure the accuracy of price feeding and pricing strategy? How do you avoid the single-point expiration of the nodes and data sources, so as to ensure the decentralization of the data?
David Lighton: By encouraging broad participation in the protocol — as broad as you can imagine — people from all over the globe can provide input and insight — we ensure robustness against any centralized failures and deploy on fully decentralized blockchains. The accuracy of unpriced information is well-known to be better than experts and also using the broad and diverse group of providers we can ensure a much higher accuracy than any other source of data.
Question11: What other application scenarios Lithium Finance has apart from being able to offer pricing strategy to the real-world assets?
David Lighton: Beyond pricing information, which we have a tremendous market — we also have a broader ability to address general expertise. If a partner was interested in working with us to address other opportunities, that would be interesting. However, we are focused on pricing and feel this represents many hundreds of billions of dollars of opportunity for Lithium.
Question12: Lithium Finance is issuing Pre-IDO token allocation on ConvO, which is the asset launching platform of Convergence Finance — a DeFi asset protocol. Could you introduce to us the detailed regulation and participation method of this Pre-IDO token issuing? Any process like KYC needed?
David Lighton: Yes — here’s what you need to know about our upcoming dual pre-IDO on Convergence and Polkastarter. Lithium’s pre-IDO on Convergence will take place on ConvO. For Polkastarter, there will be a designated pool for the Lithium pre-IDO, and the procedure is similar to other regular token launches. Trading of the pre-IDO Lithium token 𝑓LITH will be available on ConvX, Convergence’s AMM.
Our whitelist opens on June 17th and closes on the 21st. Only whitelisted addresses will be able to access ConvO and ConvX for the Lithium Finance pre-IDO sale in both premium access and public pools. KYC emails will be sent via Convergence’s official email.
Question13: Liquefy — an STO launching platform — is processing an in-depth deployment within the DeFi area through Liquefy Labs. The entire ecosystem is already containing Linear Finance, Convergence Finance, as well as Lithium Finance. Could you introduce to us the relationship between different protocols and their positions within the ecosystem?
David Lighton: I am, of course, a big fan of Linear and Convergence. We at Lithium are honored to be working with them. These projects represent the leading innovations in a big wave of financial innovation that is just getting started. The synergies with Linear and Convergence were clear to us from the start — Linear has synthetic assets on-chain, and adding a new source of pricing information enables more profound levels of innovation to happen within the Linear Finance ecosystem. With Convergence, looking at their wrapped token offering, we can quickly wrap new assets.
Overall, looking to the future convergence of real-world assets and DeFi, we couldn’t be in a better place. The missing piece was a robust pricing oracle to empower those assets to move into DeFi, and we are providing exactly this solution at Lithium Finance.
Question14: What are the projects that are establishing partnerships with Lithium Finance? What is your plan for the following period? Any new products being launched?
David Lighton: Stay tuned…our announcements page will be increasingly active over the next couple of weeks :-) follow along here: https://t.me/lithiumfinanceofficial