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August 3, 2022

Founder Spotlight: Paolo Baroni

Fighting for equality in finance tech

It’s a universal piece of wisdom to find a way to overlap what we enjoy doing with what makes us a living. Even better, is if you can overlap an activity that you are good at, gives you personal satisfaction, can make you money, and serves the world around you. When it comes to Paolo Baroni, you’ll find a consistent track record of doing just that. Upon interviewing a founder, the assumption is that you’ll find an intelligent, bold, and determined personality. What you’ll find with Paolo, is not only those qualities, but also a champion fighting to level the playing field for those disadvantaged by expertise or visibility. We interviewed Paolo about how his love for mathematics has led him on a journey of serial entrepreneurship, all set on bringing fairness to finance.

Q: Tell us about yourself. Who is Paolo Baroni and what has he been up to?

A: I’m a financial analysis professional and have worked in this area most of my career. I’ve always loved math and actually started with a degree in physics. But, when I started working as a researcher, I found the work rather boring and it certainly didn’t make very good money. I knew immediately that something had to change. So, I started my MBA, where I found my love for mathematics applied nicely in Finance, which is much more lucrative than the options I had before. Not only was it more lucrative financially, but I found it quite fulfilling to use my skills to help customers make better decisions, benefitting their lives.

After my MBA, I worked for a buy-side company. I liked that these types of organizations do not have a conflict of interest with the client. The focus is 100% on benefitting the client, which aligns with my values. I felt proud to use my love for mathematics to help people, and it provided me with a good living. My philosophy is that if I make my clients happy, then I’ll make money.

After some time, I started offering freelance work performing mathematical analysis for various financial organizations. This experience is how I came to identify what I describe as “problems”, or imbalances of power in the financial markets.

Asset managers create funds or financial instruments and must sell them to the end client. Often, the asset managers need an agreement with a bank that has clients, and the bank sells the product to its clients. The bank makes money by collecting fees from the sale of these instruments. But, what can sometimes happen is that the bank prioritizes selling funds that pay more revenues to the bank. This means that the primary focus is no longer on the value for the client and creates a conflict of interest and the client has no way of knowing that they are being sold worse products for them, to benefit the bank. I didn’t like that. I always wanted to focus on what was good for the client, that’s where my skill comes in and that is what makes me feel rewarded. That’s why we structured our fee system to be fair and transparent, so it’s still a viable income stream, but controlled and in a way that doesn’t create a conflict of interest.

Q: When did you first get introduced to Crypto? What was interesting about it for you?

A: I first heard about it leading up to the launch of Bitcoin, but my real interest didn’t take form until about 2018. What was immediately interesting to me was not the concept and launch of digital currencies, but the blockchain technology itself. After my experience in finance, the introduction of blockchain just seemed to make sense to me because it immediately adds an element of trust and transparency that doesn’t exist today. It truly levels the playing field. I remember thinking “this is good for the world, I should do something here”.

Q: What was the first project you did with blockchain?

A: It started when I was contracted to analyze some over-the-counter instruments being sold by banks to hedge their risks. The problem was that these financial instruments are not regulated and not traded in the regulated markets and are very complicated. As we know, the truth can be lost in complexity. When that happens, we often see an imbalance of power. In this case, banks would often sell these instruments far above their actual value because they knew the customer would not know that this was a bad deal. To me, this is wrong. There is no balance. No trust. So, I wanted to build an engine to help these buyers understand what the prices should be. I wanted to rebalance the power between the buyer and the seller.

Through some mutual contacts developed over the years, we formed SuperFlat and built an engine to help level the playing field. This is where blockchain comes in. What we found was that we could use smart contracts on the blockchain to handle these financial instruments. By doing this, everyone had the same rights and visibility on what was going on with the contracts. The blockchain forced trust through transparency. We had created a balance of power between the parties.

Q: So at this point, you’re now officially using blockchain. What led to Rebus?

A: It began as a curiosity that was so strong, that I started talking to trusted contacts about it. Last summer, I spoke with Pier and Nicola about a possible application between OTC derivatives in the TradFi and the DeFi worlds, [respectively]. After some discussion, we realized the DeFi world has just as many opportunities as risks, and the number of each continues to grow as companies continue to innovate. However, the adoption by traditional investors was still quite low. So we thought, “what could be done to make risk more acceptable?” We concluded that the factors blocking traditional investors from getting involved were a combination of risk and lack of transparency. Once we realized the problem, it became clear that the solution was to build a bridge between the two worlds. By doing so, we will be taking DeFi instruments to traditional investors in a transparent manner through trusted advisors.

Rebus was created to satisfy a specific need of investors to trust their investments and have better leverage over them. And as our advisors and partners have confirmed, this is exactly what their traditional investor clients want. At the moment, there are many people who trade crypto but few people who invest their savings in a structural and long-term way when it comes to the crypto/blockchain/DeFi world. I believe that everyone deserves the transparency provided by blockchain technology, and Rebus is a big step in making that accessible to everyone.

And why not? First, Investors–private, institutional, or those with savings they want to use for passive income or growth– generally have two requirements to make an investment: trust and comfort. In other words, is the investment transparent and compliant so that I can trust it? And, does the investment have a risk-reward balance with which I am comfortable?

With Rebus, we satisfy both of these requirements with a fully regulated investment process with all the requisites of risk, control, and transparency. Additionally, we provide access to more than simply buying and selling cryptocurrencies. Our platform opens new opportunities to structured instruments within DeFi. Furthermore, we are working with platform partners in the digitalization of industrial uses for blockchain-based transactions which will lead to more, new opportunities for industrial investments.

In this context, we are aware of the fundamental role that asset managers play, they are the key to the rest of the market. Our requirements for Rebus were focused on complete transparency with the end customer including a subdivision of the commissions that go to remunerate the introduction and sale work done by the asset managers.

Q: What would you say to people shaken by the recent crypto crash?

A: First, people are not wrong to be shaken. What they should realize is that Crypto is still a new technology and they should be looking at long-term investments, not get-rich-quick schemes. Second, while issues like UST would have occurred regardless, the global markets are down and that’s not helping. Ethereum lost 75% and Nasdaq lost 27%. So, yes, be smart about where you put your money but there’s no reason to think that this is more than another period of volatility.

I say that with confidence because the crypto world has not yet entered the lives of ordinary people, neither from an investment nor an industrial point of view. For this reason, the investment choices at the moment are very much based on the expectations of what will happen. This adds to the already expected volatility of the new technology market.

I believe that blockchain is the most secure way to make transactions and that it will grow in adoption and therefore, value. Obviously, with the passage of time, there will be more opportunities for investors to choose between the best and worst cryptocurrencies and we will see the most virtuous projects rewarded.

Q: What is your vision for Rebus and the DeFi space over the next 3–5 years? 10 years?

A: In 3–5 years I see a physiological adoption of DeFi financial products as an alternative asset class of investors’ portfolios providing a benefit in terms of return and diversification. In this context, I think Rebus will have a role as a pioneer in this middle world between DeFi and TradFi.

In 10 years I expect a real industrial adoption of the blockchain in real life. Contracts between parties will be managed fairly and transparently by a third party, the blockchain. Obviously, this adoption process will be slower because it will change how the ‘legal’ relationships between users work.

Blockchain will revolutionize every type of exchange of information, goods, service, etc. It’ll be everywhere. Even now, our platform partners are building quite innovative uses for blockchain to help reduce bloat and increase trust and transparency in processes like the authentication of ownership of physical assets as well as financial transactions. If Rebus is still around in 10 years then I guess we will have done quite well. If not, then at the very least, I hope we were one of the first to shed light on how to take this technology to the next level, because the impact will of this technology be felt globally.

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