DeFi

We look at the state of M&A in decentralized protocols, and the particular challenges and opportunities they present. Our analysis starts with Polygon, which has just spent $400 million on Mir, after committing $250 million to Hermez Network, in order to build out privacy and scalability technology. We then revisit several examples of acquisitions and mergers of various networks and business models, highlighting the strange problems that arise in combining corporations with tokens. We end with a few examples that seem more authentic, highlighting how they echo familiar legal rights, like tag alongs and drag alongs, from corporate law.

In this conversation, we chat with Daniel Finlay – a former Apple software developer, co-founder and co-lead developer on MetaMask – a non-custodial Ethereum wallet, allowing users to store Ether and other ERC-20 tokens and make transactions. Further. With the growth of DeFi and NFTs over the past year, MetaMask has increased in prominence as an entry point for novice users. So much so that its user base is now over 20 million monthly active users.

More specifically, we touch on how Dan went from teaching kids to code to having an app rejected by the Apple App Store to MetaMask, the philosophy behind e-government, questioning the role and job of software engineers, how crypto wallets compare to neobanks, and so so much more!

We look at a recent report from Protos that traces the issuance of USDT to the institutional players in the centralized crypto capital markets. The data reveals the market share of players like Alameda, Cumberland, Jump, and others in powering trading in exchanges. We try to contextualize this market structure with what exists both in (1) investment banking and (2) decentralized finance. The analogies are helpful to de-sensationalize the information and calculate some rough economics.

In this conversation, we chat with Nicholas – an NFT developer and a contributor to Juicebox, which is an awesome DAO enablement software, as well as SharkDAO and PartyDAO. He is very active in the ecosystems, got a solidity podcast called Solidity Galaxy Brain, a collaborator with multiple NFT artists, but I could go on and on. Let me welcome Nicholas to the podcast.

More specifically, we touch on the philosophy behind programming and coding, what a decentralized autonomous organization (DAO) truly is and what it is comprised of, various successful examples of DAOs that Nicholas has been involved in, the concept of community and the value that DAOs serve in this respect, how DAOs leverage tools to achieve their purpose, and so so much more!

We discuss the Facebook pivot into the metaverse and its rebrand into Meta. Our analysis touches on the competitive pressures faced by the company from big tech players, other ecosystem builders, and limits to growth for a $1 trillion business that likely motivated this refocus. We further dive into network effects around platforms, and why super apps and financial features are attractive, and how owning the hardware is a required defensive strategy. Lastly, we discuss these development through the crypto and Web3 lens, deeply disappointed with Facebook trying to domain park a generational opportunity with a centralized solution.

In this conversation, we chat with Sergey Nazarov. Sergey is Co-founder of Chainlink, the leading decentralized oracle network used by global enterprises & projects at the forefront of the blockchain space.

Chainlink is the industry standard oracle network for powering hybrid smart contracts. Chainlink Decentralized Oracle Networks provide developers with the largest collection of high-quality data sources and secure off-chain computations to expand the capabilities of smart contracts on any blockchain. Managed by a global, decentralized community, Chainlink currently secures billions of dollars in value for smart contracts across decentralized finance (DeFi), insurance, gaming, and other major industries.

More specifically, we touch on what it means to build in DeFi, what Oracles are like, what smart contracts are and what they enable, how all of this works and where the protocol is going, and so much more!

This week we continue the discussion of the shape of DeFi 2.0. We highlight Tokemak, a protocol that aims to aggregate and consolidate liquity across existing projects. Instead of having many different market makers and pools across the ecosystem, Tokemak could provide a clear meta-machine that optimizes rewards and rates across protocol emissions. This has interesting implications for overall industry structure, which we explore and compare to equities and asset management examples.

Decentralized finance is formulating new mechanisms to correct for the pitfalls of liquidity mining, yield farming, and other early token distribution approaches. This is happening both at the level of individual projects like Alchemix or Fei, and at the level of industry wide consolidation through Olympus DAO and Tokemak. We explore where this evolution is going, and potential outcomes. In this first part of the analysis, we look closely at Olympus DAO, the concept of Protocol Owned Liquidity, and whether the economics make sense.

We focus on the law of unintended consequences, and how making rules often creates the opposite outcome from the desired results. The analysis starts with the Cobra effect, and then extends to a discussion of the Wells Fargo account scandal, dYdX trading farming, Divergence Ventures executing Sybil attacks, and Federal Reserve insider trading. We touch on the concepts of credit underwriting and token economies, and leave the reader with a question about rules vs. principles.

In this conversation, we chat with Tim Frost, CEO and Co-Founder of Yield App, a fintech app making DeFi accessible to everyone. Prior to founding Yield, Tim helped build 2 previous digital banks, Wirex and EQIBank. Tim has also helped accelerate early-stage blockchain startups QTUM, NEO, Paxful, Polymath, and many others.

More specifically, we touch on all things crypto banking and debit cards, crypto onramps, juristictions and regulation, defi banking, yield generation mechanisms, and so much more!

In this conversation, we chat with Gabriel Anderson – Managing Director at Tachyon, Head of Market Strategy & Business Intelligence at ConsenSys Labs. Former Head of VaynerMedia. Alumnus of Merrill Lynch.

More specifically, we touch on what Tachyon is, how it works, and who it’s for, the growth of crypto, and what needs to come next to allow the widespread adoption of crypto by mainstream society. Gabriel talks about the best projects he has seen so far that combine NFTs with other elements of DeFi and crypto, and what he’d like to see more of in the future.

In this conversation, we chat with Erick Calderon is the founder and CEO at Art Blocks, a platform for creating on-demand, generative art pieces. Since its launch a year ago, Art Blocks has garnered the attention of many, including auction house Sotheby’s, which recently sold 19 of the platform’s pieces in a deal totaling $81,000. Calderon, a native Houstonian, uses the online handle Snowfro, which stems from a snow cone stand he used to own.

More specifically, we touch on projection mapping, generative vs. algorithmic art, machine learning, smart contracts, the constructivist art movement, Artblocks’ unique approach to NFT algorithms and minting, NFT flipping vs. scalping, gas price wars, flashbots, dutch auctions, and the massive demand for anything Artblocks in the world today and the justifcations behind such demand.

We talk about OnlyFans, and how its bank vendors pressured it to try to ban adult content, and how and why that failed. We also discuss the crypto tax provisions in the Senate version of the $1 trillion infrastructure bill, and their impracticality. These themes are tied together with a metaphysical hypothesis about the role of financial services, anchored in a discussion of the Platonic model of the mind. How are rationality, emotion, and social context involved to define the shape of our industry?

In this video conversation we feature a roundtable by The Defiant exploring how and if the gap between Fintech and DeFi will be bridged.

DeFi Panelists
Lex Sokolin, head economist at ConsenSys
Santiago Roel Santos, angel investor
Spencer Noon, Investor at Variant
Vance Spencer, co founder at Framework Ventures

Fintech Panelists
Keith Grose, head of Plaid international
Nik Milanović, founder of This Week in Fintech
Simon Taylor, co-founder of 11:FS
Bruno Werneck, Business & Corporate Development at Plaid

Moderator
Camila Russo, Founder of The Defiant

In this conversation, we are so lucky to tap into the brilliant mind of none other than Sheila Warren who sits on the Executive Committee of the World Economic Forum and is a key member in the executive leadership of the Forum’s Centre for the Fourth Industrial Revolution (C4IR), in which she oversees strategy across the entire C4IR Network, consisting of centers in 13 countries. Sheila also holds board member and advisory positions at multiple institutions and organizations including The MIT Press (Cryptoeconomic Systems), The Organisation for Economic Co-operation and Development (OECD), NGO network TechSoup and she is a Member of The Bretton Woods Committee.

More specifically, we discuss her professional journey from small claims court to NGO Aid to refugees to corporate law to The WEF, touching on rational choice theory, corporate personhood and its correlation to the growth around ESG, new substrates, DAOs and protocols, artificial intelligence, the purpose of The World Economic Forum and its impact on governments and society alike, and just so much more!

Gen Z is becoming a cultural force, reshaping culture and online society. This is starting to echo in fintech startups and crypto protocols. We explore how financial communities are beginning to congeal into DAOs, their nature and structure, and potential longer terms outcomes. The analysis identifies the differences in Millennial and Gen Z approaches — however imperfectly — to explain the frontier of social tokens and why ShapeShift chose decentralization, while Revolut chose decacorn funding.

DAOs are not socialist communes built for the benefit of humankind. Rather, they are techno-fortresses to defend, and make valuable, exclusive online tribes.

Whereas Millennials dream about a VC-funded unicorn startup, permissioned into wealth with capital from traditionally successful investors, Gen Z and crypto natives dream about bottoms-up community syndicates with trillions to spend on the sci-fi future, unshackled from regulatory overhang and the sins of the 2008 quantitative-easing past.

This week, we cover these ideas:

• Crypto prices show increasing correlation in market swings, which hides the large substantive differences between projects

• The core narrative of Bitcoin, and its fundamental indicators

• The core narrative of Ethereum and Web3, and its fundamental indicators

• A sanity check on potential market caps relative to gold, equities, and other assets

This week, we cover these ideas:

• The nature of digital identity, and the difference between a representation at some moment of time vs. a record of your being

• The launch of the DeFi Passport by Arcx and how it can be useful for underwriting

• The European Digital Wallet, and the implication of such a development for CBDCs and government services

• China’s CBDC, Sweden’s BankID, and other existential crises

If you want to go deeper on this topic, we strongly recommend our conversation with Michael Cena of the Ceramic Network here. Whereas Michael started working on the identity problem by trying to add labels to people, where he ended up is creating a protocol that tracks historic software activity and interactions between actors. In thinking about the Ship of Theseus, this is the solution that says — your identity is your journey through the river of time itself, and not any particular stop you make along the way.

In this conversation, we talk with Kevin Owocki, who serves as the CEO & Chief Roboticist at Gitcoin, about the evolution of the programmable blockchain space, how open software gets made, where value comes from and all sorts of other really cool futuristic things.

Additionally, we explore the nuances of being an early developer in shifting markets, idea mazes, the founding of and philosophy behind Gitcoin, the deep work being done towards the Open Internet, the building of community-driven grant mechanisms, early work on quadratic-funding, and the idea behind memes powering DeFi.

In this conversation, we talk with Robert Leshner of The Compound Protocol about the early days of crypto and how a fascination with Ethereum smart contracts drove him to build one of the largest DeFi projects to date.

Additionally, we explore the nuances of lending and interest rates, consumer privacy software and data monetization, floating interest rate pools of capital across different token pairs, DAO evolution and its influence on mechanism design, the role Compound plays in chain interoperability, and the discovery of yield farming as a means for user incentivisation.

This week, we cover these ideas:

• How market structure determines the types of companies and projects that succeed

• A walk through Marqeta’s economics and business model, and how Square’s Cash App and DoorDash were needed for success

• The emerging $10B transaction revenue pool on Ethereum, MEV, and the changes to mining and gas

In this conversation, we talk with Rune Christensen of Maker Foundation about how he became one of the most influential builders in the DeFi ecosystem. Additionally, we explore the creation, experiences, and evolution of Decentralized Autonomous Organizations (DAOs), the nuances of stablecoins, the interaction between Maker and DeFi with traditional finance and traditional economies, and Maker’s approach to leveraging layer 2 solutions to aiding scalability and transaction throughput.

This week, we look at:

• The fundraises of Jumio ($150MM), Feedzai ($200MM), and Chainalysis ($100MM) and the function they perform in the fintech industry

• The nature of human competition and hierarchies, and why inequality is recreated across the various economic networks that exist

• How the NFT markets have higher engagement than DeFi, which is more participatory than Fintech, which is more participatory than finance

• The emergence of signalling in the crypto economy that resembles digital citizenship and social capital

The most popular AMM, Uniswap, is annualizing to $1 billion in fees. That’s a chunky amount of value for its users.

The team has just released the third version of its protocol, and it is an innovation in the structure of the AMM logic. Instead of providing liquidity across the entire price curve, users are now able to specify pricing ranges for which they are participating in the curve. This protects market makers from the extreme price fluctuations which they may prefer not to fund. Because most trading also happens in narrower price bands, it is possible that capital is much more actively used in those bands, and generates higher fee returns comparatively.

In this conversation, we talk with Camila Russo of The Defiant and author of The Infinite Machine, about her journey as a successful financial journalist was derailed by the Crypto boom and subsequent winter of 2017. Additionally, we explore the success behind her first book, the nuances of the NFT craze, and how The Defiant became one of the most popular crypto media brands to date.

In this exciting conversation, we talk with none other than Joe Lubin of ConsenSys and Ethereum, about his journey from being exposed to advances in artificial intelligence at Princeton to becoming the household name in programmable blockchain. Additionally, we get an insider look into his founding of Ethereum and ConsenSys, and how the technology and individuals behind these two companies are transforming the very fabric of financial institutions that exist today and how new products/services are started for the betterment of humanity.

In this conversation, we talk with Patrick Berarducci of ConsenSys, about the valuations and multiples of capital markets protocols in Decentralized Finance on Ethereum, now making up over $60B in token value. Additionally, we explore the nuances of scaling Ethereum and its solutions, such as Metamask and the emerging Layer 2 protocols.

We also discuss law and regulation, including a fascinating story about Bernie Madoff from when Pat was a practicing attorney. This leads into a conversation about the embedded compliance nature of blockchain and crypto technology, the early days of ConsenSys, the path of crypto brokerages like Coinbase, and Metamask exhibiting emerging qualities of a neobank.

his week, we look at:

• There are two very large revenue pools in the crypto asset class — (1) mining, and (2) trading. There are some large revenue pools in crypto-as-a-software, too, but those tend to be less sensational.

• This analysis will establish a 2021 baseline for the most regulated of crypto exchanges, Coinbase, including a detailed financial model building a $100B+ valuation case

• We then consider the valuations and multiples of capital markets protocols in Decentralized Finance of Ethereum, now making up over $60B in token value

• Lastly, we look at Binance’s $1B in profits, its $35B BNB token, and the activities on Binance Smart Chain

This week, we look at:

• Hashmasks, CryptoPunks, and other large NFT / crypto art projects generating tens of millions of USD trading volume

• Perceptions of financial value, as well as whether it matters to have an “original” digital art piece relative to its digital copy

  The intersection of collectibles with decentralized finance, and its collateralization, tranching, lending, and trading, as well as a view on 2021