Last week I made the mistake of being the only DeFi resident to attend the Bitcoin 2021 event in Miami.
Although I managed to catch up with a handful of builders and big brains at the convention center, it would have been better to spend my time tracking degens at the various satellite events, yacht parties, and nightclub gatherings – the “conference in the shadow “to DeFi instead as the Boomercoin maximalists spoke about the same points that they have been repeating for the better part of a decade.
However, the little time I was able to spend with the DeFi folks was immensely rewarding. I came out of conversations with representatives from SushiSwap, Yearn Finance, Balancer, Polygon, Digital Dollar Project, and FTX, among others, with a couple of useful data on how decentralized finance may evolve in the second half of the year. While the full interviews are due out next week, in the meantime, here’s a synopsis of the best of what I got:
Risk and regulation:
Although it seems that institutional adoption has been alone On the horizon for years, there is increasing reason to believe that money from the big investment banks may finally be splashed into DeFi funds in no time.
As it stands, all the people I spoke to are unanimous about companies showing a genuine interest in finding ways to get involved, but not all are sure exactly what it looks like or how to handle it from a regulatory and regulatory standpoint. custody.
FTX and Alameda Research’s decabillionaire Sam Bankman-Fried (who, in particular, had no security guards, even though Bitcoiners were worth orders of magnitude less like Saylor walking around with a mobile rugby scrum, or, wait, maybe Sam had very well security guards in which I never noticed them?) described the dynamic as similar to a college couple, with one party “waiting” for the other.
“We will be ready, we will feel it, many conversations, many open conversations about our feelings and desires,” he joked.
From their perspective, FTX is ready to flip a switch and provide a gateway to whatever service institutions desire. However, the work sounds more like an exercise in empathy than a business: it involves long conversations about what the institutions want, exactly: more return in dollars, exposure and custody, a kind of access ramp to satisfy the demands of the customers, but when customers say “We want to do the crypto thing,” what do they mean and what is really possible? Everybody has questions. They are all in their feelings. For now, progress looks largely like a company entering an exchange and trading some cryptocurrencies.
The people at DeFi expressed similar sentiments. Yearn Finance’s pseudonym security specialist “Doggy B” framed barriers to participation as one of the personal and unique options: whether or not an institution gets involved depends on the risk tolerance of the particular institution’s lead attorney. , a situation that feels absurd given the possible sums of money at stake.
– Speaker dog ticket (@fubuloubu) June 6, 2021
The problem here is obvious: the regulatory framework at the moment is a lot of noise and fury that means nothing. Elizabeth Warren said some stupid things the other day, and someone from one of the acronym agencies Googled DeFi and got upset about it. It’s the kind of thing that could, and perhaps is specifically designed to, scare away lawyers willing to make the leap.
It’s good to remember that regulating winds are constantly changing, despite how stormy they seem right now. Any actual legislation would be subject to rounds of hearings and testimony, and barring some sort of drastic executive order, more level bosses like Chris Giancarlo would have a chance to have a say.
Going into my interview with the former CFTC president, I thought of it as sitting with the enemy. However, rather than a straightforward rule-obsessed regulator, my impression of Giancarlo was that he is tremendously agile and creative with his thinking.
He framed crypto regulation in terms of a broader legislative trend that has been unfolding for the past 30 years: legislators trying to keep up with the internet.
“The big picture is that the Internet is a multigenerational evolution. It started with information, decentralized information. […] And now he has his sights set on finances. Don Tapscott talks about the Internet of Value, and the Internet of Value has many elements, but two of them are stablecoins and they are based on blockchain. [currencies]and DeFi, when it comes to financial institutions. “
Where the battle for decentralized information came with built-in protections for the masses – because of First Amendment rights, there is no “ministry of information,” as Giancarlo puts it – the battle for decentralized finance will be tougher as there are dozens and dozens of regulatory bodies to deal with.
However, he framed digital currencies as “unavoidable” – a technology will progress and eventually prevail even despite what may eventually be antagonistic regulation.
“You cannot stop the march of technology in time, and if you do, it will become a backwater.”
I’m glad you’re leading the investigation into a US CBDC, and I find your framing helpful when it comes to evaluating these short-term screams and murmurs.
Venture capitalists keep spending:
Here’s an underrated quality of this bear market that makes me wonder if all the talk about supercycles could be spot on – even with a 50% pullback across the board, venture capitalists are still willing to spend a lot of money on quality projects.
In 2018-19, the money just disappeared. I’ve heard stories of eight-figure increases agreed in December that failed in January, perhaps because the funds themselves failed. Dozens, if not hundreds, of companies went under, and where a whitepaper could have generated millions, suddenly a complete product with real users failed to land a bid.
In Miami, however, checkbooks were out of the question. I spoke with Jack Lipstone and David Lucid from Rari Capital, as well as “Tytan Inc.” from upcoming NFTY labs on current capital conditions, and both expressed having to defend themselves against interest rather than trying to raise it.
What stands out is not just that the money is lagging, but that both the funds and the projects they are investing in appear to be more mature as well. Rari at one point sat on $ 110 million in total locked value, and NFTY Labs has a product that works: fancy-sounding NFTs that allow subscriptions and gated community access. In the meantime, the funds are reported to be increasingly focused on the future: dynamic and utility NFTs, and extremely bright teens in Rari, both gambling on the future.
I don’t know if that means a recovery awaits us in the short term, but the builders continue to build and the funds are ready to support them this time. In terms of fundamentals, DeFi is healthier than ever.