All right, to Tom's question for the second part and see the previous answer if you want to see the first part of this question, why do DeFi projects have to have their own token? Let's ask the answer the second part and I think this is really important to answer so thank you Tom, let me answer that one. What are the risks with DeFi? The risk with DeFi come from a whole variety of areas but I think I cannot identify 405 primary risks. I'm not sure if it's four or five so let's start from the top down. From the top down you have the first risk which is the risk of the financial instrument itself. So this is financial risk. So what is the risk of a loan? What is the risk of a yield investment? What is the risk of a derivative? Well it's the risk that whatever you're betting in goes in the opposite direction. So this is straightforward financial risk. Every financial asset has risk. What you are doing is you're making a bet on an outcome in the future for which you do not have a crystal ball and usually when you're on that side of the bet there's someone on the other side of the bet who's making the opposite bet. So risk number one is the straightforward financial risk and of course that's unavoidable. You have to take that risk and you have to diversify it across a portfolio and make sure that you have the right amount of risk for your risk appetite and that your risk is not correlated with other risks in your portfolio. So that means that when one of your risks blows up in your face it doesn't blow up your entire portfolio. So that's just general portfolio management and risk management for the financial risks. So that's first that's financial risk. The second one is counter party risk. Now that depends on how D your DeFi is. If it's actually CFI then you have a lot of counter party risk. If it's completely DeFi completely decentralized then you don't have counter party risk because there are no intermediaries in that engagement that can seize freeze, go bankrupt, take your money, run away and bezel it, exit, scam, whatever. So that's counter party risk and that depends on how decentralized it is. Then we have contract risk. So you could think of that as two categories which is primary contract risk and secondary contract risk. Primary contract risk is the contract that the DeFi platform is based on or that and it's not one contract. I mean these often have dozens of contracts and they're fairly complex composites of multiple different contracts but there will be the primary contracts which manage whatever the stable coin or whatever. Then there's a secondary contract risk which is contracts that are used as building blocks or foundational components that are not part just of this DeFi application but a part of multiple DeFi applications. One of the big benefits of doing DeFi in a platform and an open platform or open systems way as we see in places like Ethereum is composability. That means that if you need a multi-sake you don't write a multi-sake for every project. You use the best multi-sake platforms that exists out there and your platform uses that. If you need a governance solution you use an existing governance token or platform or library that you can incorporate into your smart contracts in such a way that you don't reinvent the wheel. And the reason you want to do that is because what you want to do is gradually mature these fundamental components, these primitives so that they are robust tested, they've worked across multiple projects, they've been tested in adversarial conditions. You don't want to try and roll your own because if it's not your core area of expertise you might mess it up. So those are secondary risks because it's not the smart contract of let's say your yield farming contract has primary risk which is the contract to do yield farming but then maybe it has secondary risks that have to do with the governance library that they use or the multi-sake library that they use. So if either of those have a bug that can have a ripple effect either bringing down that one DeFi application and causing problems including losses of your funds or in the worst case scenario which we saw for example with a parity multi-sake bringing down a whole set of projects which all used the parity multi-sake which had a bug in it where the contract suicide it. That was a painful one. So that's primary and secondary risk of the contract. Then you have platform risk and the platform risk is basically risks related to the platform in which the smart contracts are running. This would be the risk of Ethereum itself and in that platform risk again you have kind of two categories of risk. One is risk that arises from conditions on the platform that make it difficult to execute your smart contract. And the classic example of that would be volatility and gas fees that makes it difficult for you to execute a transaction that has a timeliness component. Let me give you an example. Back in March of 2020 when we had a big drop in the price of Ethereum a lot of maker-down vaults which have collateral in eth that backs die stablecoin and and die stablecoin loans became under collateralized. So in that case the people who held these vaults needed to do one of two things either deposit more die back into the contract so de-leverage their loan or deposit more eith into the contract or worst case liquidate the vault completely before it was sold on a secondary market. But they couldn't and the reason they couldn't is because at the very same time that the price dropped 50% the gas fees shot through the roof and many of the wallets were unable to get transactions and so people were watching as their contracts became under collateralized and there was nothing they could do. So this is underlying platform risk that has to do with the normal operation of the platform and then you have kind of platform vulnerabilities which is what if there's a bug in the EVM in the Ethereum virtual machine. And so if you add all of these risks together you get kind of the compound risk or the composite risk of the entire DeFi application. And so over time the things that are at the bottom of the stack mature and we find fewer and fewer vulnerabilities, fewer and fewer critical edge cases and exceptions which makes the things above them more and more stable. And this is one of the primary reasons why DeFi needs to be on a platform that iterates really really fast in order to be able to kind of wash out these types of vulnerabilities and problems through iteration and improve the maturity of these systems. So as they become more complex the underlying components have been tested again and again and again and reused in different situations and they become more robust. So those are the risks. I think I gave you five distinct categories of risk and if you think about a stack of DeFi applications you started the top which is the actual financial instruments you get all the way down to the virtual machine that's running the platform, the blockchain risk itself and all of the in between. Hi I'm Andreas Antonopoulos. If you enjoyed that video consider that it takes a lot of work to produce open and free content that can be shared with everyone around the world. 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