SotN30: DeFi Season with Anthony Sassano (Top 10 DeFi Tokens on Ethereum, $DPI Index)

🚀 SUBSCRIBE TO NEWSLETTER: http://bankless.substack.com/ ✊ STARTING GUIDE BANKLESS: https://bit.ly/37Q17uI ❤️ JOIN PRIVATE DISCORD: https://bit.ly/2UVI10O 🎙️ SUBSCRIBE TO PODCAST: http://podcast.banklesshq.com/ 👕 BUY BANKLESS TEE: https://merch.banklesshq.com/ ----- GO BANKLESS WITH THESE SPONSOR TOOLS: ⭐️ AAVE - BORROW OR LEND YOUR ASSETS https://bankless.cc/aave 🚀 GEMINI - MOST TRUSTED EXCHANGE AND ONRAMP https://bankless.cc/go-gemini 💳 MONOLITH - GET THE HOLY GRAIL OF BANKLESS VISA CARDS https://bankless.cc/monolith 📱 DHARMA | MOBILE ONRAMP DIRECTLY INTO DEFI https://bankless.cc/dharma ------ SotN30: DeFi Season, with Anthony Sassano (Top 10 DeFi Tokens on Ethereum, $DPI Index) Ladies and Gentlemen, we're calling it. It's DeFi Season. We have an era of DeFi token speculation ahead of us, so it's time to get prepared, and sharpen our mental models for how to evaulate and asses tokens on Ethereum. We bring on Anthony Sassano from the Set Protocol team, to go through the 10 DeFI assets inside the DPI index. Anthony gives his bullish or bearish takes on the DeFi tokens mentioned, as well as shares his mental models for how he judges various assets on Ethereum. Highly revelent to this conversation is the most recent Market Monday piece out of the Bankless newsletter: https://newsletter.banklesshq.com/p/defi-market-monday-118 ------ Don't stop at the video! Subscribe to the Bankless newsletter program http://bankless.substack.com/ Visit the official Bankless website http://banklesshq.com/ Follow Bankless on Twitter https://twitter.com/BanklessHQ Follow Ryan on Twitter https://twitter.com/ryansadams Follow David on Twitter https://twitter.com/TrustlessState ----- Not financial or tax advice. This channel is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This video is not tax advice. Talk to your accountant. Do your own research. Disclosure. From time-to-time we may add links in this channel to products we use. We may receive commission if you make a purchase through one of these links. We'll always disclose when this is the case

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:07Ryan Sean Adams?

  Bankless Nation, welcome to another State of the Nation episode. David, how are you doing tonight?

• 0:13David Hoffman?

  Absolutely fantastic. Things are heating up in the crypto ecosystem, in the bankless universe. So it's, once again, it is a fun time to be in this industry.

• 0:23Ryan Sean Adams?

  Yeah, okay, so we are going to talk about tokens today. Specifically, 10 of the top tokens in the DeFi Pulse Index. And we brought on somebody who's actually in jail right now. Twitter jail, I should clarify, Twitter jail. Anthony Sassano is, he monked himself from Twitter, sort of a vow of silence until ETH goes over 1420. But we brought on Anthony to talk all about these tokens. Can you tell us what discussion we're about to have, David?

• 0:56David Hoffman?

  Yeah, so this is a little bit, this was my idea to bring Anthony on. And it was a little bit of a, of a claim about how we are about to enter alt season or DeFi season. DeFi Summer 2.0, I think that's ahead of us. And so we wanted to get Anthony on the podcast to go through the tokens in the DPI Index. Anthony is an advisor at Set Protocol, which is the company that is part of the Index Co-op, which produces indices, the first of which is the DPI Index in partnership with DeFi Pulse. And there are 10 tokens in the DPI. And so we want to go through every single one for all the new listeners out there who are looking for ways to understand tokens, right?

• 1:39David Hoffman?

  Tokens are fun, they go up really high, they go down really low. But it's also, they're also really hard to understand. And so I think having a conversation with the three of us to understand how we all think of these things, how we see value being captured by tokens in different ways and how we analyze these, these things, I think will be really useful for people coming into this space who, you know, are excited about investments and, but don't know what to do. I think this is going to be a conversation to tap into our brains and see how we model. Out what we see as valuable versus not valuable in this space.

• 2:13Ryan Sean Adams?

  Absolutely. So we talk about Ave, we talk about uni, the uni token, we talk about balancer, a bunch of the top DeFi tokens that you know, and really talk about the kind of the value proposition and accrual mechanisms behind them. We brought Anthony on because what else is he doing, right? He's off Twitter, lots of time on his hands. David, what else is new in the bankless ecosystem? We have a fantastic podcast that just came out yesterday on Monday with Lynn Alden. Can you give a sneak peek on that?

• 2:42David Hoffman?

  Yeah, Lynn Alden is the rising star of macro, of just macro commentary, especially as it relates to Bitcoin. She's a big Bitcoin enthusiast, but she's first and foremost a macro expert. I got so much value out of that podcast. What my biggest takeaway was talking about the primacy of the US dollar and how that relates to US manufacturing. It turns out as there is global demand for dollars, in order to serve that demand, we need to export dollars as a country. And so we've exported our dollars. And what, what does that mean? When you export dollars, you import goods. But that means we are emphasizing the manufacturing of other countries instead of our own country,

• 3:25David Hoffman?

  which I think is part of that social unrest that we've seen in the last few years. That social unrest is a result of economic forces and the lack of jobs that we have in America. And I think that is kind of the story of 2020 is that the social unrest could be connected to the primacy of the US dollar. I thought that was absolutely crazy connection.

• 3:44Ryan Sean Adams?

  Absolutely. Fantastic podcast. And we just recorded another podcast that is going to come out next week that you've got to check out. Our first podcast with Drake.

• 3:55David Hoffman?

  Drake?

• 3:56Ryan Sean Adams?

  Yes. Well, should we clarify which Drake we're talking about?

• 4:00David Hoffman?

  Yeah, we are talking about Justin Drake, a lead researcher at the Ethereum Foundation. Justin Drake is all about cryptography. He's a cryptographer. And while we were doing our bull case for Ethereum, bull case for ETH, he wanted to get in on that because he had a really bull, a really very strong bull case for cryptography. So that's what that conversation was all about. Ryan, what were your favorite takeaways?

• 4:24Ryan Sean Adams?

  Oh dude, it was just, I think it was amazing to view sort of how early we are in the evolution of Ethereum and Bitcoin and how far we have yet to go. It's really like we have just, we're in the stone age of this new era of compute. And I think Justin really made that clear. A lot of the challenges that we see today around, you know, centralization of like Metas, mask or private key management, cryptography really is the answer to some of these challenges and problems. So it's a super unique episode. I don't think I've heard any crypto podcast episode with this kind of content. So make sure you tune into that and catch that. And David,

• 5:09Ryan Sean Adams?

  because it's state of the nation, let's begin this by asking you the question I always ask, what is the state of the nation today?

• 5:16David Hoffman?

  Yeah, I teased it a little bit at the beginning of this intro. The state of the nation is heating up. As I put out a funny tweet that, well, I thought it was funny, that on a three minute long popcorn bag, microwave popcorn bag timer, it feels like we're at second 45. We saw MKR pop off, go from $500 to $1,500. We just saw DOT do something crazy. Things are popping off.

• 5:40Ryan Sean Adams?

  All right. Wait, so you're saying some of those kernels in the bag, like a few of them have popped, but you've still got the rest of the bag, just only the very early stages of the popping process?

• 5:50David Hoffman?

  Yes, that's very right. Very early stages in the popping process. And when that comes to a head, I think that's what quote unquote alt season is, or you know, DeFi summer 2.0, you know, this time it's DeFi winter because it's literally winter, it's January, but DeFi summer 2.0, I think that's ahead of us. And again, that's why we brought Anthony Cezano on to talk about some of the best tokens in the ecosystem to use for mental models about how to understand and evaluate tokens.

• 6:18Ryan Sean Adams?

  And you have to be careful, just like a popcorn bag. When you take that popcorn bag out of the microwave, you don't burn your fingers on the water vapor. Maybe I'm taking the analogy too far, David.

• 6:27David Hoffman?

  No, that's perfect. There's plenty of ways to get hurt by microwave popcorn. So long as you follow the instructions and play it safe, you should be good.

• 6:35Ryan Sean Adams?

  All right, David, let's get to the sponsors that made State of the Nation possible today.

• 6:39David Hoffman?

  Gemini is the world's most trusted cryptocurrency exchange. I've been a customer of Gemini since I first got back into crypto back in 2017, and it has been my main exchange of choice to make my crypto buys and sells. Gemini is available in all 50 states and over 50 countries worldwide. And on Gemini, there are markets for over 30 various crypto assets, including many of the hot DeFi tokens like Wi-Fi, Aave, Uni. And also, they are one of the few exchanges that has liquid DAI markets. Having both the option of logging into the gemini.com website or instead opening the Gemini mobile app has allowed me to be able to access any and all exchange and on or off-ramp services that I've needed to on a moment's notice.

• 7:22David Hoffman?

  With instant deposits and fast withdrawals, I'm able to make my money do the things I want it to when I want it to. You can buy crypto safely and securely on Gemini with the peace of mind of knowing that your investments are insured and protected with industry-leading cybersecurity. You can open up a free account in under three minutes at gemini.com/go-bankless. And if you trade more than $100 within the first 30 days after signup, you'll be gifted a free $15 bonus. Check them out, gemini.com/go-bankless.

• 7:57David Hoffman?

  If you want to live a bankless life, you need to get a Monolith DeFi Visa Card. Monolith is a one-two punch of both an Ethereum smart contract wallet and an accompanying Visa Card that lets you spend the money that you have in your Ethereum wallet everywhere where Visa is accepted. When you swipe your Monolith Visa Card at the grocery store or at a restaurant, it actually makes a transaction on the Ethereum blockchain that spends some of the money you hold in your Monolith wallet. It's insanely cool and it's one of the best tools out there for living. Living a bankless but still normal life. Monolith also offers on-ramp services for getting your fiat money into the world of DeFi. So it's trivial to top up your Monolith card if you ever need to.

• 8:39David Hoffman?

  And your deposited money goes straight into your non-custodial wallet. So your money is never held by a centralized intermediary. Because Monolith is native Ethereum infrastructure, the money you hold in your Monolith wallet still has the power of DeFi behind it. Swapping assets on Uniswap or earning yield in DeFi is at your fingertips. Go to monolith.xyz and sign up to get your Monolith Visa card today.

• 9:05Ryan Sean Adams?

  Okay, Bankless Nation, we're super excited to do this special State of the Nation with Anthony Sassano of ETHUB of TokenSet. Anthony, the self jailed, how are you doing in there, Anthony? How's it going? You've been weaned out there for a while. I actually went cold turkey. Are you, how are you holding up?

• 9:24Speaker 02

  Yeah, yeah, I went cold turkey. Can't post tweets. Haven't posted a tweet since January 8th. I am, I'm okay. I'm enjoying the memes, of course. They're quite funny. That's keeping me going. It's kind of funny how I didn't expect that to happen. I, I was like, wow, I'm actually getting people talking about me more with me not even tweeting. So this is just a bit weird, but definitely feeling withdrawals. Because as you said, I did it cold turkey. I went from like tweeting a lot to nothing. And it definitely is like, I, I, I do realize now that I had a kind of addiction to tweeting. So maybe it's a good thing to take a break.

• 9:58Ryan Sean Adams?

  Yeah. So for those of you, oh, go ahead, David. Yeah.

• 10:01David Hoffman?

  For those that don't know, Anthony has decided to take a self-imposed hiatus until Ether breaks its previous all-time high of $1,420. I think that's actually a pretty genius marketing move, Twitter marketing move. Because Anthony, you've made yourself synonymous with the ETH all-time high. And so now when the ETH breaks all-time high, it's also going to be known as the time Anthony finally returns back to Twitter. I think that's a pretty genius move.

• 10:28Speaker 02

  Yeah, yeah. And the funny thing is, I didn't plan it to play out like that at all. I was actually in the car. Uh, my fiance was driving and I'm like, what if, what if I just put out this tweet? ETH is at thirteen hundred. We're gonna get to all time high. I know we're gonna get there. So I put it out and then we, we kind of like ranged a little bit, went up a little bit and then we crashed like thirty percent or whatever it was. I'm like, okay, that didn't work out very well.

• 10:50David Hoffman?

  How long did you think this didn't go? How long did you think this is gonna be a window for?

• 10:55Speaker 02

  A couple of days. I, I really did. I mean, I was so bullish. We were so close. But, you know, I think, uh, it's just karma, right? I mean, you know, some people are saying, oh, the whales are conspiring against him. They're pushing the price down to, to maximum pain, but who knows?

• 11:14Ryan Sean Adams?

  I am loving the memes that are coming out of this. This is one from DC Investor, like visualizing what Anthony is doing right now.

• 11:20Speaker 02

  That's, that is legit, legit me when I see the price going up. I'm just like, yes, soon, soon.

• 11:27Ryan Sean Adams?

  Here's another one I've put out, which is a, a DMs I received from Anthony. That's funny.

• 11:33Speaker 02

  I found it funny how many people didn't get that this was a, as, as a joke.

• 11:37Ryan Sean Adams?

  Yeah, I know.

• 11:38Speaker 02

  It sounds pretty funny.

• 11:40Ryan Sean Adams?

  It's really amazing. So, and people are asking how we're going to welcome you back. And DC, of course, says, uh, let's report his account as soon as he comes back. So.

• 11:49Speaker 02

  That was a winner.

• 11:49Ryan Sean Adams?

  He's having a lot of fun with this. What's your prediction? So we are recording this on, on January the fifteenth, Anthony. So this is, this is Friday, right? It comes out on, on a Tuesday of next week. Do you think you're gonna be out of Twitter jail by then?

• 12:02Speaker 02

  I, I hope so. I have high hopes for this weekend, you know, uh, just based on, uh, my general kind of bullishness here, the sentiment. You know, we're very close still. We're at twelve hundred, around twelve hundred at the time of recording. So, yeah, I hope so. I think so. Um, but I mean, I said that last time when I tweeted this. So I don't know how much my, my kind of sentiment and my feeling is kind of worth writing now.

• 12:28Ryan Sean Adams?

  Yeah, well, we are pulling for you, my friend. And of course, we are just as excited to see ETH hit all time high and to see you get out of Twitter jail. If you want to live a bang.

• 12:38David Hoffman?

  Bankless life, you need to get a Monolith DeFi Visa Card. Monolith is a one-two punch of both an Ethereum smart contract wallet and an accompanying Visa Card that lets you spend the money that you have in your Ethereum wallet everywhere where Visa is accepted. When you swipe your Monolith Visa Card at the grocery store or at a restaurant, it actually makes a transaction on the Ethereum blockchain that spends some of the money you hold in your Monolith wallet. It's insanely cool and it's one of the best tools out there for living a bankless but still normal life. Monolith also offers on-ramp services for getting your fiat money into the world of DeFi. So it's trivial to top up your Monolith card if you ever need to and your deposited money goes straight into your non-custodial wallet.

• 13:23David Hoffman?

  So your money is never held by a centralized intermediary. Because Monolith is native Ethereum infrastructure, the money you hold in your Monolith wallet still has the power of DeFi behind it. Swapping assets on Uniswap or earning yield in DeFi is at your fingertips. Go to monolith.xyz and sign up to get your Monolith Visa Card today. Gemini is the world's most trusted cryptocurrency exchange. I've been a customer of Gemini since I first got back into crypto back in 2017 and it has been my main exchange of choice to make my crypto buys and sells. Gemini is available in all 50 states and over 50 countries worldwide. And on Gemini, there are markets for over 30 various crypto assets,

• 14:07David Hoffman?

  including many of the hot DeFi tokens like Wi-Fi, AVE, Uni. And also, they are one of the few exchanges that has liquid DAI markets. Having both the option of logging into the gemini.com website or instead opening the Gemini mobile app has allowed me to be able to access any and all exchange and on or off-ramp services that I've needed to on a moment's notice. With instant deposits and fast withdrawals, I'm able to make my money do the things I want it to when I want it to. You can buy crypto safely and securely on Gemini with the peace of mind of knowing that your investments are insured and protected with industry-leading cybersecurity. You can open up a free account in under three minutes at gemini.com/gobankless.

• 14:51David Hoffman?

  And if you trade more than $100 within the first 30 days after signup, you'll be gifted a free $15 bonus. Check them out, gemini.com/gobankless.

• 15:03Ryan Sean Adams?

  Let's talk about what we wanted to talk about today. And this is kind of a topic as we're entering the bull market that I think is on a lot of listeners minds right now is how to prepare from an asset from a portfolio perspective. So I got a text just this week from a friend of mine. He's like dabbling in DeFi, dabbling in crypto, of course. And he's wondering, like, in this bull cycle, should he start to rotate some of his ETH, maybe some of his Bitcoin as well into into DeFi? And maybe let's start there, right? Because some people believe, of course, that Bitcoin is going to eat everything. Bitcoin dominance is going to stay in the 70% type range.

• 15:49Ryan Sean Adams?

  And it will get the majority of upside and accrual in this in this bear market, right? Others believe that Bitcoin might have a, you know, four to eight X while ETH has a five to 10 X. While DeFi outperforms both, like a 10 to 20 X possibly, right? That's more along the lines of what I think could happen. But but what do you think could happen, Anthony? What's kind of your perspective? Do you think Bitcoin goes higher, ETH goes even higher, has more upside? And DeFi has more upside than both of those asset categories?

• 16:25Speaker 02

  Yeah, that's that's my general play for sure, just based on, I guess, a lot of it is based on market cap for sure. It's much harder to move Bitcoin and ETH as opposed to DeFi. But at the same time, I think DeFi is a very broad category, right? Where there's a lot of tokens that fall into that bucket. So if you're talking about, you know, these tokens that maybe have a really tiny market cap that can be very easily pumped or whatever, and a kind of outperform. You know, that's that's just because they're very small, right? So I guess when we're talking about DeFi, what I like to think about is the DeFi Pulse Index, which is an index of the top DeFi tokens that we have, that we created at Set Protocol to let you track and get exposure to DeFi.

• 17:08Speaker 02

  And and that's kind of what I mean when I when I think about DeFi and when I'm talking about it to newer people. Because, you know, a lot of these newer people taking on the risk of buying like the really low cap coins is just is not not a great way for them to start in this space. Because they're so volatile, they can fall 50% on the day, go up 50% on the day, right?

• 17:28Ryan Sean Adams?

  There's so many of them.

• 17:29Speaker 02

  There's yeah, this and it's just yeah paralysis of trying to choose which ones to put your money into. And if you're not, you know, used to the volatility, you can very easily just get kind of wrecked trying to trade in and out of them. So I know we're going to talk about the DeFi pulse index in depth more, but that general kind of, you know, BTC being outperformed by ETH and ETH being outperformed by DeFi during a bull cycle is definitely something I subscribe to.

• 17:57David Hoffman?

  So some listeners who have, you know, been through market cycles before might think of the term alt season, which is a little bit what we're talking about here. There seems to be a general rotation, and this is a rule of thumb, and there's totally examples of when this is invalidated. But the rule of thumb is that BTC pumps and then Ether pumps and then all the other tokens pump. And so we're kind of getting prepared for perhaps that third leg of the rotation if it does indeed play out. And so looking at CoinGecko, and it's my belief, and I'm pretty sure Ryan and your belief as well, that DeFi is the underserved category, right? It's below what it should be.

• 18:40David Hoffman?

  And if you look at the market cap of all coins excluding DeFi, the market cap is over a trillion dollars. Ryan, if you go down to that purple line in the graph below, yeah, over a trillion dollars. Whereas that blue line is just at thirty billion dollars. So there's a huge discrepancy here. And we believe, according to the protocol's thesis, that a lot of these protocol tokens represent upside potential to DeFi and are ready to close that gap. That is what my, that's where my head is at. What do you believe, how do you think about that Bitcoin Ether altcoins alt season cycle? And then how do you integrate specifically the DeFi tokens inside of that category as well?

• 19:23Speaker 02

  Yeah, I think the thing about the alt season, it also kind of includes all the other coins and stuff out there, right? It doesn't just cover DeFi, but obviously DeFi falls into that from a market perspective. And you were just showing that CoinGecko kind of stats there. And thirty billion being the DeFi market cap, they actually include Chainlink in that. And Chainlink to me, and I maybe I'll anger some people by saying this, to me, it's not a DeFi token. It's a middleware protocol, right? It's something like the graph. It falls into a different category. So you can take out Chainlink out of that, right? And lower the DeFi market cap even more, it probably lowers it to about twenty billion. So, yeah, I mean, as you pointed out, the total cap's over a trillion. Most of that is Bitcoin. I think seventy percent of that is Bitcoin almost, which is, which is a huge amount, right?

• 20:08Speaker 02

  Um, but I don't think it's gonna stay like that during this bull market. I think, as you said, there's this rotation that goes on, you know? People, you know, coming to Bitcoin, especially newer people. And then they, you know, Bitcoin kind of stagnates and then these newer people think, oh, okay. You know, Bitcoin's going sideways. What else can I rotate into? Um, or can I speculate on? And especially traders, right? Traders definitely do this. They want volatility. They don't, they don't want sideways. So if they're sideways in Bitcoin, they'll go to ETH, right? Then they'll go down the list and it's obviously like as the kind of more, more new money floods in and volatility heats up. Then the lower cap coins, uh, which DeFi falls into, obviously, uh, can go up a lot faster and a lot easier than the large cap coins.

• 20:51Speaker 02

  So, yeah, I mean, this, as you said, there's plenty of evidence of this happening during bull markets in bear markets. It doesn't really happen. Um, you know, people fly to safety, which is obviously cash first. And then Bitcoin to a certain extent, um, I think, you know, last cycle, we didn't really see people flowing to ETH for safety. Maybe this cycle we do, but yeah, it's hard to tell there. So, yeah, definitely, um, that rotation you can see play out on the charts. It's, it's pretty obvious. So, uh, but only in bull markets, I think.

• 21:20Ryan Sean Adams?

  So this is kind of the, the, the bankless portfolios, as we call it, Anthony, that we're basically describing here, which is, you know, uh, a generous helping of crypto monies like Ether, right? And like, like Bitcoin. So you have that in your portfolio. And then also you want exposure to this, this neo banking layer, this DeFi layer. So if you want to drop dead simple, like bankless portfolio, it's basically Ether, Bitcoin.

• 21:50Ryan Sean Adams?

  And DeFi, like the DPI, the DeFi Pulse Index. And that kind of gets you what you need to be positioned for this bull market. At least that's kind of what we think. And if your thesis, if the thesis plays out that we get the cycle of Bitcoin, ETH and DeFi, then you have exposure to all of those assets as the, as the cycle, as they cycle into one another and out of one another. So the great thing about DPI is you can just like put some money in and set it and forget it. It's just an index of all of these top 10 DeFi protocols. But it doesn't do one thing, Anthony, and that's this. It doesn't give you exposure to the, the micro caps.

• 22:31Ryan Sean Adams?

  So essentially, when you're buying the DPI, you're buying more, more so the blue chip DeFi tokens, but you don't have exposure to this micro cap. And if we think DeFi is going to do something like a 10 to 20 X, like part of the question is, does that 10 to 20 X happen in the large blue chip assets? Or does it happen with these like micro cap DeFi assets at the very bottom? And do you lose out if you don't have exposure to those micro caps? Any thought on that?

• 23:02Speaker 02

  Yeah, I think with the DeFi Pulse Index, you're, you're buying safety, right? You're buying less volatility on both sides, the upside and the downside. Because they are, as you said, more blue chip assets. They're supported by more exchanges. A lot of them are on Coinbase, for example. A lot of them are part of projects that have extreme product market fit, you know, like Uniswap, like Yarn and things like that. So that's kind of the trade off there. Whereas if you are investing in the smaller caps, right? You have a bunch of different things you have to, the small cap DeFi, you have a bunch of different things you have to take into consideration. Your risk tolerance needs to go way up, right? You need to be able to stomach, you know, those 50% in a day drops.

• 23:46Speaker 02

  And as a new investor, I don't think many people can do that. I remember when I first got into it, I, I couldn't do it. It was just, it's something you have to learn and go through. And then you try to swing trade it right. And, you know, you, you get kind of like wrecked because. A lot of us have to deal with taxes too. So swing trading with taxes and everything and all this sort of stuff is just, it's so hard to speculate on the smaller ones. So that's why I think DPI is perfect even for seasoned people in crypto, because they can kind of hedge their risk with DPI like they do with BTC and ETH, and then use a small part of their stack to go speculate on smaller cap things. But yeah, it's all just the kind of like, how much risk do you want to take?

• 24:28Speaker 02

  If you don't want to take, if you want to be exposed to DeFi, but don't want to take on a ton of risk, don't want to have to worry about rebalancing out of everything. You know, there's an argument to be made that an index product on built on our infrastructure it's set is tax advantaged as well. But obviously talk to your own tax kind of accountant for that. But you know, there's that argument there. If you just want like passive diversified, low risk exposure, then the DeFi Pulse Index is basically for you. But you can always buy some of the DeFi Pulse Index and then use some of the money you have left over to go speculate on the smaller cap ones. But you do need to realize that your risk tolerance has to be much higher than it does for the DPI.

• 25:09Ryan Sean Adams?

  It's almost just like in the in the stock investing world, you know, people will invest in indices in S and P 500 and then they'll also maybe have some money set aside to play with penny stocks and really like small micro. That's kind of what we're talking about here.

• 25:22Speaker 02

  Yeah, exactly, exactly. And I think, you know, if you look at the DPI and the performance of it and how it handled the DeFi kind of bear market. So it actually launched at, I think, at the top of DeFi summer. So it was a bit of a bad time to launch it, but it's rebounded quite well. I think it went from a hundred dollars it started at, it dropped down to maybe, you know, sixty dollars or something like that, which is a pretty, still a pretty brutal drop, but that's crypto, right? You're going to get that volatility and that was like DeFi coming off of a really heated market. So that was pretty, I think that would be the worst amount of volatility you'd see there, besides maybe the end of a bull market.

• 26:01Speaker 02

  Or a macro bull market. So yeah, you can see here that it just like dropped like pretty far down. It probably went under sixty, actually. Yeah. Fifty nine, something like that, which you can see fifty. And then now it's gone up to over two hundred, right? So it's not like you're you're only getting like ten percent out of this, right? If you bought around the bottom at around like sixty dollars, you've gotten a quite a nice gain, you know, over a three X since since November. So, you know, you are trading, you know, you could have gotten a ten X on something else, right? But the thing is, like, could you have picked that something else? Would you have stayed in that position? You know, could you have prevented yourself from getting wrecked during the drawdowns? Most people can't, and that's why.

• 26:41Ryan Sean Adams?

  There's also like there's smart contract risk, there's rug pool risk, there's team risk, there's all of these risks at the at the small new project micro cap level that you have to take into account.

• 26:52Speaker 02

  Yeah, and those those risks are actually commonly understated, I think, you know, because people, you know, love to get kind of like, I guess, high on the on the pumps and everything. But if you want to look at the perfect example, look at what happened to Cover, right? The Cover token, that pumped up quite quite highly, and it was a very popular kind of low cap DeFi token. And then they had a bug in their contract, which let infinite amounts of tokens be entered. And, you know, a lot of people got got kind of wrecked on it. So, you know, and if I post in there, he's very strict about what tokens it includes. You'll notice that it's all, you know, high quality projects and high quality tokens. It's not it's it's not necessarily excluding like smaller cap tokens because they're smaller caps. It's just because they don't meet the criteria that was outlined by DeFi Pulse, and that's to protect people as well, right?

• 27:37Speaker 02

  From this kind of thing happening, you know, bugs and stuff like that.

• 27:41Ryan Sean Adams?

  Your lord, that cover chart looks brutal.

• 27:45Ryan Sean Adams?

  What is that?

• 27:47David Hoffman?

  Drop to zero. So that actually leads us into the conversation that we wanted to bring you on to have, Anthony. We want to use all of the tokens in the DPI and and go through each individual one and use each one as an example for, you know, for listeners to understand how you and how we think about these assets on an individual basis, using the assets inside the DPI. And and like you've said, the assets. Inside the DPI, we would consider to be the safer assets. That's why they are in there in the first place. They're more justifiable. They have more usage, they have stronger value capture in the market. Tends tends to value them more for that reason. Things like Synthetics, Ave, Uniswap Maker, Wire and Compound. These things tend to be the DeFi blue chips.

• 28:31David Hoffman?

  They're not going to like a hundred X, but they're still going to track DeFi very strongly. And they're not, they're, it's less likely for them to get like rug pulled. And it's easier for for new people to, you know, understand why these things have value. And I think if we go through each one and, you know, you explain our mental models with them. It's going to be easier for listeners to understand how we think about these assets and be able to extend that to do their own research about, you know, people like to speculate. People like to gamble in like low cap DeFi tokens. We know that's going to happen and we want to equip people with learning how we think about our mental models. Using some of the best examples in the DeFi Pulse Token Index so that they can be equipped for that.

• 29:13David Hoffman?

  So I think we should get started. Let's go down the list in of of all the tokens in the DeFi Pulse Index. Let's start with Synthetics as the the token that has the highest weight. Anthony, can you explain to our listeners what Synthetics Network is and what the SNX Token does?

• 29:32Speaker 02

  Yeah. So basically, I mean, as the name says, Synthetics is a synthetic asset network. You know, it does a bunch of different things. You can get exposure to a bunch of different synthetic assets on there. Whether they be crypto assets or other assets like gold that they have currencies on there as well, like SUSD, S A U D, things like that. And the SNX Token is kind of at the heart of that. So what the SNX Token does is it acts as collateral for the system. So people will stake their SNX as collateral and they'll be able to generate synthetic assets against that. So a lot, a lot of people do is they generate SUSD, so the synthetic USD against that because it's the it's the safest play.

• 30:12Speaker 02

  And then, you know, you might be able to do yield farming with that SUSD or or use it as like a stablecoin within DeFi sort of thing and and all that sort of stuff. Yes, and X token also gives you governance rights as well over the platform. I, you know, I mean, they have a whole governance system that they're currently building out. So I'm not sure how much governance rights you get just yet on the platform. I don't think there's any on chain up binding on a chain governance yet for synthetics. And also it will capture it captures fees too. So it's the S and X token. When you stake it, you actually get paid S and X tokens as a reward for that each week. But on top of that, you also get some of the fee revenue that's generated by the synthetics exchange.

• 30:57Speaker 02

  So that's not, I mean, that's still quite small as compared to kind of it's like market cap. Because synthetics has a very high market cap. And I think, you know, as a top level thing here, actually, because we're going to be diving into all these assets. One thing that actually strikes true for a lot of them is that a lot of them have really, the the top ones have really powerful narratives, really powerful communities, because a lot of these trade like a growth stocks where you are basically bidding this up so high. Well, the market's bidding this up so high because they believe the growth potential is extreme, right? So yeah, that's kind of like the TLDR on on SNX there and and kind of, you know, I mean, it's it's one of the best performing DeFi tokens of the last couple of years as well.

• 31:39Ryan Sean Adams?

  So we're looking at a market cap of over two billion and just a massive run up over the last few months here. In the, in terms of total locked value, it has 1.7 billion locked. So another metric we can look at, guys, is the price to sales ratio on Token Terminal. And synthetics right now is about 58. So, you know, if you look at P E ratios in stocks, things like Netflix are trading 80, Amazon 120 or so. So this is possibly undervalued relative to those things. But you you're paying a bit more for synthetics than you're paying for some of these other assets on the charts. Any, any thoughts on that?

• 32:22Speaker 02

  Yeah, I mean, as I said, these things trade like growth stocks, right? They will go up very quickly because of a narrative or a story. And this isn't just synthetics. You can see here how many of them trade like that, right? You know, Curve are there, you know? And that's because people are betting that these things are going to grow much, much larger. And I don't think that's a bad bet to make at this point in time, considering how early we still are in, you know, DeFi and all that sort of stuff. So, but at the same time, it lends itself to extreme volatility that I was just talking about. You know, it's funny, like, Aver during the DeFi kind of mini bear market we had after the DeFi summer, it actually dropped down to about $30. And at the time, I think less than that, maybe like 27 or something.

• 33:05Speaker 02

  At the time, I was thinking, you know, this is insane, right? Aver's growth in just one year has been incredible and it's going to keep growing. They're launching V2, right? They've got all this stuff coming and that's what you're betting on, right? And I'm sure even at $27, you know, the multiplier might have been quite high still. But you can't, the market doesn't trade these things like that yet. It trades them based on future potential, just like how Tesla is worth so much, right? Even though their revenue is nowhere near justifying their market cap. But people are saying, well, I think Tesla's going to change the world. They're going to be huge, they're going to be everywhere, so I want to buy it now. So, yeah, a lot of these things trade like that and that's why we get the extreme volatility.

• 33:46David Hoffman?

  I think one of the factors that is factoring into the SNX price that you might not find from, you know, metrics or on train, you know, on train metrics is the fact that it's likely that Synthetics is going to be the first major DeFi protocol to incorporate optimistic rollups and really be the first DeFi protocol that is able to scale into the L2. I think there's a decent amount of the justification of Synthetics price based off of there being the first major DAP to scale, speculation based off that. And that's something that you just won't find unless you are really paying attention to all of these assets and all of the ongoing things inside of Ethereum. And so you can't just look at the charts and know that.

• 34:28David Hoffman?

  So using that as a mental model and incorporating that into other things that are also looking to scale, I think is a pretty useful thing to do.

• 34:37Speaker 02

  Yeah, and on that note as well, I think with synthetics, it's also a unique case in that, you know, as I mentioned, SNX is used as collateral within the system, which means that most of the SNX is actually sitting in a synthetic system, not on exchanges. So you have a low float of SNX tokens that people can actually purchase. You unironically have a sell-side liquidity crisis at times if there's a lot of demand for SNX, right? So that also plays into it. So this is why these these kind of assets have all these little intricacies that you need to be aware of if you want to trade them well, right? Um, and if you want to like invest in them well. Uh, and I guess that's why, you know, the Defi Post Index makes this really easy because you don't have to do all of that.

• 35:16David Hoffman?

  If you are looking for a product that connects your fiat bank account with DeFi tokens and products, you need to download the Dharma mobile app. Dharma is a non-custodial smart contract wallet and comes with a bridge that connects you right into your bank account. Dharma is the fastest and most efficient wallet between your fiat in your bank account and any token on Uniswap, or even any vault in Yarn. With Dharma, you can get over $25,000 per week into the DeFi universe, and you can do it non-custodially. If you or anyone you know is hot on DeFi and you're trying to get your money into a DeFi investment, Dharma is the place to go. Signing up and going through KYC is an absolute breeze.

• 35:59David Hoffman?

  It took me just under three minutes, and after signing into my bank account via Plaid, I am now just one transaction away from any token that Uniswap has to offer. Go to www.dharma.io, that's D H A R M A dot I O. Download the Dharma app and get yourself unbanked today.

• 36:20Ryan Sean Adams?

  All right, let's talk about the next asset in the DPI, and that is AVE. It was formerly called Lend. So the token had an absolutely incredible year, even in the DPI, it's up like 300% or so. But last year, didn't it do something like 6,000% in terms of, in terms of growth? Like, what's going on with AVE? Can it, can it repeat, you know, not 6,000% level growth, but can it repeat some of the growth that it had in 2020?

• 36:50Speaker 02

  You know, it's funny because a lot of people think that Aver has been live for quite a while. But if you look back, Aver's platform, so it's money market, only launched in January of 2020. So they were actually building it out for years. And as you said, it was known as the lend token back then. It had a much smaller market cap. I think in 2019, early 2019, it had a market cap of $5 million or something like that. Now it's over $2 billion, I think, last time I checked, or something crazy like that. And yeah, it's only been live for a year. They just launched their V2. So, you know, there's all this kind of speculation, as I mentioned before, on the fact that they're going to keep growing and they have been growing. They're growing like crazy. And so everyone just like loves the Aver token.

• 37:33Speaker 02

  But it's funny because that token actually launched in 2017 as part of an ICO. And it kind of, it went up, right, during the 2017 mania, then it came down and it stayed down, like really kind of brutalized for a while. And, you know, some people made life-changing money on this because they scooped it up when it was low because they followed the project. This is another thing. If you follow the project closely and you, you kind of get to know the team, you get to know what they're building. During bear markets, it's, it's, it's like a perfect time because you get to.

• 38:02Ryan Sean Adams?

  It was the time they said Ethereum was dead. They said every project that, that raised via ICO was basically an exit scam, right? And here's Aver continuing to build and continuing to ship. And that's why they were so undervalued during the bear market.

• 38:14Speaker 02

  Yeah. And, and, and SNX was actually in the same spot. So those two are something that I commonly use as an example of, you know, ignoring the, this is dead, this is that kind of fud in, in bear markets. And just, you know, making sure that you understand what's actually not dead, you know, what kind of runway these teams still have to build out these products and, and kind of like the product market fit, the potential product market fit. But yeah, I mean, Aver is just like one of the best stories. They went from zero to, you know, billions in their protocol in just a year. Absolutely incredible story.

• 38:47Ryan Sean Adams?

  And they are number two on the DeFi Pulse leaderboard in terms of total value locked. They've got 3 billion assets under management right now. On Token Terminal, they are generating 56 million. In revenue from on an annualized basis, which is pretty impressive with the price of sales.

• 39:05Speaker 02

  I think it's fifty fifty three million, sorry.

• 39:07Ryan Sean Adams?

  Oh, God, I'm looking at synthetics again fifty three million. So a price to sales ratio of forty eight. So pretty impressive asset. So what's what's kind of your your consensus on this then, Anthony? Are you bullish, bearish, neutral?

• 39:23Speaker 02

  Yeah, I mean, it's pretty obvious that I'm I'm very bullish on it going forward. I think money markets, you know, lending borrowing is the greatest product market fit in DeFi outside of AMMs. So yeah, definitely very bullish on on Arbe going forward. And I actually want to note one thing about their growth that I think makes it even more impressive. They didn't do any liquidity mining. All that growth was unsubsidized.

• 39:46Ryan Sean Adams?

  Yeah.

• 39:47Speaker 02

  That was natural growth. And you don't, you know, a lot of DeFi protocols don't have that. So that's just lends itself to another kind of like really bullish aspect of Arbe is that their product is just so good that you don't even need to subsidize the growth.

• 40:00Ryan Sean Adams?

  Wow, that's a really interesting point. Okay, let's go to you our our next asset on the list, which is Uniswap. So tell us about Uniswap.

• 40:11Speaker 02

  Yeah, so I guess uni, the the Uniswap token was was launched last year to much fanfare, but I'll quickly just give an overview of Uniswap and why it was revolutionary, I think. So Uniswap launched, or at least I think the idea for Uniswap had been around for a very long time. Vitalik actually wrote a blog post on the design for Uniswap very early on. And then Hayden Adams, the founder of Uniswap, took that blog post and kind of ran with it and built a product around it, launched it in twenty eighteen, I'm pretty sure. And then launched a V two later on, and then in twenty twenty, they launched their token. So Uniswap is an automated market making

• 40:53Speaker 02

  kind of a trading platform or swap exchange. It basically lets anyone be a liquidity provider. So if you have a bunch of kind of tokens, like you have ETH and you want to kind of liquidity provide ETH against USD, you can do that. No one can stop you. It's fully permissionless, fully decentralized. And then you can earn kind of exchange fees. So from there, uh, you, you know, a uni launched the token um and it got airdropped to every user of Uniswap uh four hundred uni tokens, which uh right now is worth a lot more uh than it was back then. I think uni is at what seven dollars I just saw. So worth a nice amount of money then. But at the time, it was still worth, I think, about a thousand dollars when it first, like on day one.

• 41:36Speaker 02

  So that was like a very nice airdrop for for every Uniswap user. So even if you had actually failed a transaction on Uniswap for one reason or another, you still got uni tokens because you had interacted with the protocol. So yeah, you had that launch and the uni token right now is just a governance token. It doesn't do anything else except governance. In the future, the hope is that it'll capture fees from the network and Uniswap is generating an insane amount of of fees for the liquidity providers, but there has to be a split between liquidity providers and the uni token holders. So the the proposed split is that uh well, currently, zero point three percent of all volume

• 42:15Speaker 02

  that goes to uh that goes to the liquidity providers, right? Based on what they provide liquidity for and their share of it. And then the the proposal is that we should do zero point two five percent for the liquidity providers, zero point zero five percent for the token holders. Now that hasn't been switched on yet. It's it's been kind of said that it's going to get switched on when they release B three of their protocol. Um, but yeah, I mean, uni is a funny, funny token here. I think, you know, you can see there it's not trading it anywhere near as uh uh as large of a premium as um the other things are because Uniswap actually does generate a lot of revenue um.

• 42:50Ryan Sean Adams?

  Yeah, so seven point two billion market cap and six hundred and four million annualized revenue generated by Uniswap. It is an absolute cash cow. Now, to your point, Anthony, whether uh uni token holders actually get a portion of that yet hasn't been decided, but if that is turned on, then a a large portion of this cash starts to flow to uni holders, which is pretty incredible.

• 43:15David Hoffman?

  It's also worth talking about that not every token has the same value capture mechanisms, right? So what Anthony was talking about with that 0.3% fee collected by the Uniswap protocol, right now, all of that is going to liquidity providers. So token holders actually get 0% of that fee. And token holders will never get 100% of that fee because it needs to incentivize deposits. And so when we talk about these tokens, SNX, AVE, Uni, it's important to know that each one captures value differently. And we are just beginning to figure out how to analyze these things and understand that, you know, maybe Synthetix has a value capture

• 43:55David Hoffman?

  mechanism that is stronger or weaker than Uniswap. And therefore, the fees, even maybe one protocol has 2 to 10x the fees of another protocol, maybe a different protocol can capture the fees 2 to 10x better. So these are all really important conversations to have. Anthony, how do you think about both the ability of the team, the Uniswap team, to innovate? I'm pretty bullish on the Uniswap team because they, like Synthetix, are really exploring the fold of L2 capabilities, layer two capabilities, really leveraging the power of cryptography, which makes me really excited about Uniswap. And then there's also the conversation about Coinbase as well. Maybe you can talk about how you speculate into

• 44:39David Hoffman?

  the future version of Uniswap and how you incorporate some of these things into your model about it.

• 44:45Speaker 02

  Yeah, yeah, I mean, Uniswap is a community darling, right, within Ethereum. It is the quintessential DeFi project that everyone talks about, that everyone loves, you know, everyone loves to use. It's, I mean, literally, you know, pretty much everyone in Ethereum and in DeFi will have used Uniswap at least once. So that in and of itself is a very bullish case for Uniswap. But then when you dig deeper into, as you were just saying, you know, how is the token going to capture value, right? Outside of the governance, you know, it's going to get a small portion of the fees. Okay, so are those fees going to keep getting larger and larger? I believe they will. But are they going to get to a point where, you know, Uni's market cap can go to the Hundreds of billions of dollars, right?

• 45:27Speaker 02

  Um, because it's volume and and and uh that it's generating is actually rivaling its centralized counterparts. And you look at Coinbase, you know, they're going to IPO this year. It said that they're going to reach a hundred billion dollar plus market cap on on that. Now, Coinbase obviously makes revenue from other areas as well, not just exchange fees. They have a custody business, have O T C stuff that they do. They have a bunch of other things that they do. But if we, most of their revenue, I believe, still comes from exchange fees. So if we take that as an example, you know, you could say that uh uni deserves to trade at the same valuation, right? At a surface level narrative, and that's the narrative that gets perpetuated throughout, you know, crypto Twitter and all that sort of stuff. Because it's a very easy narrative to to cling on to.

• 46:10Speaker 02

  Uh, but you then you have to dig into the intricacies, you know, a Coinbase equity holder is going to get dividends, right? I don't know. I haven't read the prospectus. I don't know if they're going to give dividends out. What's the share, right? Uh, what's the the price to sales ratio, all that sort of stuff? And that then it becomes it's not a one to one comparable anymore. You need to kind of go into the the depths of each of them and and kind of work out there. But I think, and as I've said, these things are growth kind of assets. I think narrative power is more than the fundamentals for the time being in crypto and DeFi because it's so new. And that very, very powerful narrative of Uniswap doing more volume than Coinbase on some days, you know, and and centralized exchanges in general.

• 46:50Speaker 02

  I think the asset will continue to appreciate just because of that, even though it doesn't do anything except governance at the moment. Um, and it's already worth seven billion dollars on a fully diluted basis just for governance rights. So and and and you know, that that that on token terminal, it shows the price to sales ratio is very low. But but as you said, um, uni token holders don't have uh access to any of that. So really, I mean, the price of sales ratio is infinite because

• 47:16Ryan Sean Adams?

  Yeah, it is.

• 47:17Speaker 02

  Holders, yeah, don't have uh, don't have a claim to the fees yet. So in in that respect, it is, you know, just valued based on a narrative and a story and and a little bit of governance value.

• 47:28Ryan Sean Adams?

  Yeah, and and at some level, so are like some stocks like, you know, Amazon for a long time what had no profits, right? Um, basis. Just kick that back into business. But I want to ask another question on uni while we're at it. It's kind of the bear case for uni, right? So we don't know how all of this will play out yet. There is a bear case that says, hey, liquidity is actually fickle. And because protocols like Uniswap can be forked so easily, we could just fork and create a Uniswap clone, like a sushi, maybe, and start vampire attacking Uniswap, absorb the liquidity from that project, right? So what's interesting about that counter narrative or counter thesis is

• 48:10Ryan Sean Adams?

  if you're buying something like the DPI, you don't even have to worry about it. Because what will happen is a sushi will just like be indexed by the DPI as it market, as its market cap grows and its governance kind of votes to include it in the index. You don't even have to worry about that sort of thing. But if you are buying uni, the token on its own and not as part of an index that kind of rotates through the top DeFi assets, then you do have to worry about something like that. What do you make of that? That kind of bear case, that liquidity is fickle, that Uniswap does not have a high moat?

• 48:46Speaker 02

  Or a strong moat? Yeah, I mean, Sushi Swap has obviously done very well over the last few months. They have gotten a lot of liquidity that they are subsidizing. I just want to make note of that. They're subsidizing with the sushi token. So a lot of that liquidity is floating because of that. But you know, people like to say that liquidity isn't loyal, and that's true to an extent. But I do think there are a handful of, more than a handful, like a pretty decent amount of liquidity that is loyal. Because you know, Uniswap had their liquidity mining incentives. And for a little while, they were giving out uni tokens for providing liquidity on four different pairs.

• 49:25Speaker 02

  That lasted, I think, six weeks or something like that. They got like, I think, $2 billion, some crazy amount of liquidity. And that left as fast as it came. But there was still like over a billion dollars left in Uniswap, and that's kept growing without the liquidity mining incentives. So to me, that's just sticky liquidity, loyal liquidity, that's there for different reasons. Uni swap can be considered a more secure protocol than sushi swap, right? People trust the uni swap protocol more. Uh, there's more volume being generated on uni swap. So the fees that you're generating as a liquidity provider are better than sushi swap. The brand awareness is better, right? Um, the interface might be better, you know, the way people interact with it, all that sort of stuff. So it's, it's hard to know where this is all going to land.

• 50:09Speaker 02

  Because, you know, some people say because liquidity is not loyal, it's just going to be fragmented across different pools. Whoever's paying the most for it, blah, blah, blah. Then the aggregators are going to win, something like a one inch, right? Um, is going to win because that's just going to be the user facing interface. And then one inch is just going to plug into whoever has got the best price for the user, which I can see happening actually in the end state. Um, not just one inch, I can actually see centralized exchanges doing this where they tap into the DeFi liquidity pools and just act as an aggregator as well. We saw Shapeshift recently announced that they're actually going to be using these DeFi protocols in that way. Um, so yeah, I mean, and, and as you mentioned, because it's so hard to tell the future here, having something like the DPI where, where, you know, sushi swap will get added eventually to it. Once it meets the criteria.

• 50:54Ryan Sean Adams?

  Or, or even one inch would get, if, if the aggregator layer becomes kind of the, the fat layer here, the fat value, then one inch would be added to the DPI.

• 51:03Speaker 02

  Yeah, e- exactly, exactly. So these are just things you don't have to worry about if you have the, the DPI. You just get broad act, broad, um, kind of exposure to, you know, a bunch of different categories within DeFi as well, right? You get the AMM category, you get synthetic category, you get money markets, you know? And then you can just like rest easy knowing that, I mean, uh, that's just going to keep going up because a lot of these tokens are just going to keep going up and you don't have to pick and choose. So that's a very powerful thing and that, and that's why index products are so popular in the traditional system. No one wants to research 500 different companies that they're in, in the S and P 500, right? They're happy cruising on what eight to 12% annualized, right? Um, on average, uh, with some of their, their, their capital and they know that it's safe. They know that they have exposure to the economy, they're not getting inflated away.

• 51:49Speaker 02

  Uh, and their money's actually going to grow. So that's, that's the end state for, for DeFi investing, I think. Um, because there's no way an everyday investor can keep up with everything. There's no way I, even I can keep up with everything and all, all of us, right?

• 52:02Ryan Sean Adams?

  Right.

• 52:03Speaker 02

  Um, so yeah.

• 52:04Ryan Sean Adams?

  All right. So.

• 52:04Speaker 02

  Definitely.

• 52:05Ryan Sean Adams?

  So let's finish up uni with a bullish bearish neutral.

• 52:09Speaker 02

  Yeah, I think I think neutral for uni, even though I think it's gonna go up, well, I think the bullish case is there from a narrative point of view, but for me, I just I mean, it's it's kind of hard to to kind of like give a really bullish investment case in terms of like future growth. I mean, I I still think it's gonna grow. I know it's weird to say this, but for me, I'd rather put my money into something else that maybe I feel more comfortable investing in, and maybe it's like got more upside potential as an active investor within this space, but I do own it as part of DPI that I own. So I mean, I've already got exposure. So yeah, definitely, I'd say neutral or bullish. Let's let's let's say that.

• 52:48David Hoffman?

  All right. So let's let's turn the conversation to MKR and Maker, one of the oldest assets in the DeFi ecosystem, which also had an extremely explosive week. Listeners will know that the MKR is the token behind Maker, which is the token or which is the system behind the DAI stablecoin, which is really the the only decentralized, trustless, stablecoin with the level of liquidity that we would expect in the DeFi ecosystem. Anthony, how do you think about Maker and MKR?

• 53:18Speaker 02

  MKR has been the most brutalized DeFi assets ever, I think. It did not really move during DeFi summer, which, you know, people were like, why isn't it moving, right? DeFi is moving. Why is this thing not going up? And the sentiment on MKR was very, very bad. Until one day, it decided, I'm just gonna pump really hard and go 3X in like a week. So the the thing about MKR is that I think the Maker platform has kept growing very, very rapidly. It's still number one, right? DAI supply is at all time high. There is a lot of ETH in there, 3.5 million ETH in the Maker platform backing

• 54:00Speaker 02

  the DAI, and there's a lot of USDC and WBTC, all this sort of stuff. So you can see here, $4.2 billion worth of collateral in Maker.

• 54:09David Hoffman?

  And then there's also 1.4 billion die out there.

• 54:13Speaker 02

  Exactly. And that's kept growing all throughout the time that MKR has just stayed flat, right? It's flat against USD and kind of falling very rapidly against ETH. Um, so because of that, the sentiment was was really bad, right? You you saw it on crypto Twitter, if you're on there, people were ragging on it, saying it doesn't have a good value capture mechanism, blah, blah, blah. Um, but then you obviously it woke up this week and now people are suddenly bullish on it. I don't know. That's how the markets work. But the way MKR generates fundamental value is is in basically two ways, right? It's a governance token. First and foremost, it governs the maker platform. And then on top of that, all the positions on Maker accrue stability fees. So basically, this is the revenue that make the maker platform generates.

• 54:57Speaker 02

  And those stability fees are basically used to buy and burn the MKR token. So the the the real bull case for MKR is that there's so many, so much fees being generated by the platform that there's always buy pressure for the MKR token. So that eventually, you know, it's so scarce that naturally the price just depreciates because there's always demand there. Now, there's arguments to and for, kind of, I mean, sorry, for and against, sorry, this this value accrue mechanism. People say, you know, burning isn't the best use of of of kind of um mechanism for for a token to accrue value. You should do staking and let people accrue fees themselves, like directly directly accrue fees and like die or something like that.

• 55:40Speaker 02

  And I get that model. I do get the burn model as well. I know, David, you've written a lot about this in the past. It was one of you, some of your earlier writings, which I really like, really resonated with. Um, and that thesis didn't really play out till recently. And now people are like, oh, well, you know, Maker's growing. It grew a lot, right? It's at all time highs across all its metrics, you know? Well, maybe maybe MKR should be worth something. Um, so I I actually think MKR is a special case in where its fundamental value was growing and its token price should have gone up. But the sentiment was so bad on it that it actually trumped all that. Its narrative, its story was not good enough because crypto runs on these narratives. So now that it's it's gone up again. And the story kind of flips. People, people start asking questions, you know, they're like, oh, wow.

• 56:24Speaker 02

  But how didn't I see this coming? You know, hindsight, twenty twenty and all that. So that's why MKR has been a very, very difficult token to invest in previously, and it still is difficult to invest in. Um, it's whether you buy that it's going to keep going up still, and it wasn't just like a once off thing. Uh, but personally, I mean, I can see it keep going up because the maker system is not going anywhere. Dye is not going anywhere. Uh, there's obviously demand for it. I mean, I use maker, um, and all that sort of stuff. A lot of people I know use it. So. Yeah, that's like the, I guess, the TLDR on, on maker.

• 56:53David Hoffman?

  One point four billion dye is nothing to ignore. Maker is a really interesting protocol because it's got this dual token model. So users can think of dye as the product of the maker protocol and the MKR token as like the pseudo equity, the, the capital asset, the one that collects fees. And then it, it deflates, it deflates in supply, right? And so. It, that one point four billion dye out there is accruing fees somewhere, depending on the collateral inside of Maker Dow, whether it's Ether, USDC. Whoever minted that dye is paying fees in the same way that if you are borrowing from Compound or you're borrowing from Ave, you are also paying fees.

• 57:32David Hoffman?

  The difference with Maker and with versus Ave or Compound is that the interest rates that you pay on Ave or Compound fluctuate according to the market rate. Maker, those interest rates that, or what we call the stability fees, uh, change as a result of the governance of MKR holders. And the MKR holders will make a very human led decision rather than a robot led decision like Ave or Compound, a human led decision. To, uh, increase or lower the stability fees to help adjust the price of dye. Not unlike how our central bank will issue, uh, more currency to keep the, the price of the dollar down. Or raise interest rates to keep the price of the dollar up, very similar mechanism.

• 58:12David Hoffman?

  Yet when the fees are collected by the protocol, those fees go into burning the MKR token. And so when we see the dye, uh, the supply of dye just marching upwards, basically nonstop since the genesis of the protocol into one point four billion dollars worth of dye. That's one. .4 billion dollars that the MakerDAO protocol is able to collect fees on. Right now, the the average fee, I think, is roughly 2%. It's been as high as nineteen and a half percent in in previous times. So if you're bullish on MKR, you're bullish on more die supply as well as increasing stability fee interest rates, right? So more fees paid per die over time.

• 58:53Ryan Sean Adams?

  So all this, David, David, you sound maybe that you're you're a bit bullish on MKR right now. I'm not sure, but let's ask the question. So bullish, bearish, neutral, guys, on MKR.

• 59:05David Hoffman?

  Anthony, you want to go first?

• 59:07Speaker 02

  Yeah, I think, again, I think neutral here because, as I said, it's been very, very hard to trade MKR and invest in it. Because, you know, if you invest in it over the last two years, you had been kind of sideways and underwater against ETH. You know, up until recently and still, depending on where you bought it, I mean, it hasn't recovered that much against ETH. I think it it peaked at like five ETH per MKR. Is that like 1.3 last time I checked? It was down at like 0.7 at one point. So, you know, if you if you had bought a long time ago, you're probably still not up against ETH. So I think the sentiment is still not great on it. I can understand the fundamental value, and I think DAI is going to do a lot of things.

• 59:46Speaker 02

  So neutral in that, I don't think I'll be buying it, but I do think that it can can go up, given the right conditions. So, yeah.

• 59:55David Hoffman?

  I think the the fundamentals behind Maker are absolutely astounding. I do agree with Anthony. I think it's kind of a tortoise v hare kind of scenario where Maker is the tortoise. It's going to be slow, it's going to be boring. DeFi tokens are going to like pop off like rockets. People are going to feel FOMO, and I don't think people are going to feel FOMO about MKR just because of how old and, you know, mature the asset is. I think it's going to be a slower slower mover, but the fundamentals there are so strong, are so strong. And and some people are going to tap into that. So net net time, MKR was like my first love as a token outside of Ether. So I I'm happy to see it come back into the fold of conversation. I'm long term bullish.

• 1:00:39David Hoffman?

  is a borrowing and lending protocol on Ethereum and just recently released Aave version 2, which has a ton of cool new features that makes using Aave even more powerful. With Aave, you can leverage the full power of DeFi, Money Legos, Yield and Composability all in one application. On Aave, there are a ton of assets that you can deposit in order to gain yield, and all of those same assets can also be borrowed from the protocol if you have deposited collateral. Here you can see me getting a 200 USDC loan against my portfolio of a number of different DeFi tokens and ETH. I'll choose a variable interest rate because it's a lower rate than the stable interest rate option, but I could choose the stable interest rate option if I wanted to lock that interest rate in permanently.

• 1:01:25David Hoffman?

  One of Aave's V2 features is the ability to swap collateral without having to withdraw your assets, trade them on Uniswap and then deposit them back into Aave. Aave does all of this for you, all in one seamless transaction, so you don't have to repay loans in order to change the collateral you have backing them. Check out the power of Aave at Aave.com. That's A-A-V-E dot com.

• 1:01:46Ryan Sean Adams?

  All right, let's go to the next. So you mentioned if MKR is the tortoise, then why urine, YFI has got to be the hare? It's had like an absolutely crazy year. Anthony, your thoughts on the urine protocol in YFI?

• 1:02:03Speaker 02

  Yeah, YFI is the craziest token to ever launch, I think, yet. Maybe those crazier ones. I think, you know, for those who are who are around when the token went live, you will know what I mean. But first I'll explain what the protocol is. So what Yern is, and I guess what it has been up until this point, is a yield farming aggregator. So it basically lets you pool capital with a bunch of other people into what's called a vault. And this vault will chase the best yield farming opportunities for you. It will let you save on gas because it will do the trading for you, you know, automated, all that good stuff. So that was very popular during DeFi summer, of course, right? Because their yields were very high, because there was all these farms popping up and tokens were going up.

• 1:02:47Speaker 02

  And, you know, the APYs were through the roof. But, you know, it's less popular when there's not like a DeFi bull market, which, you know, they're not really, there isn't really one at the moment, right? It's still very much, I think, sideways movement. Um. With some going up here and there, but it's nothing like we saw in DeFi summer yet. So, um, and then, you know, with, with Yarn also launched the YFI token, which was, uh, the first quote unquote fair launched token in, in kind of DeFi where Andre, the founder, put out the token. Uh, he said, there's only going to be thirty thousand. You can yield farm for two weeks or around two weeks. There's no pre-mine, there's no VC allocation, everyone gets a fair shot at farming it.

• 1:03:30Speaker 02

  Um, by putting capital into these contracts and that's how it was distributed. And because of that, it had an extremely strong narrative and meme for DeFi summer. It, it is like, it went nuts, right? It started at zero dollars essentially because, you know, there wasn't any initial sale. Went up to, I think, forty five thousand dollar all time high. It went on Coinbase, you know, really quickly. All these kind, kind of things happened and, you know, the, the Yarn protocol was growing rapidly because of the fact that yield farming was taking off. So you had this incredibly powerful narrative and the token went up extremely fast within a month or two. Now, of course, you had the come down, right? After that, Wi-Fi fell harder than most DeFi tokens. It went from forty five thousand to seven thousand in a month.

• 1:04:15Speaker 02

  Everyone thought it was dead, game over, things have finished. Then it went back up and now it's hovering around thirty thousand, right? Nothing's ever dead here, like, uh, you know, a lot of the, the, the things that are actually dead are still not dead, um, in terms of coins, so. But anyway, they kept building and they've, they've kept building up until this point. They have a lot of, um, stuff going out, um, they have a lot of products in the pipeline. But unfortunately, the token kind of feels like a second rate citizen in the protocol at this point. Um, I think at the moment, the, the, the community is struggling with how this token is going to accrue value going forward. It originally started as governance token and you could put your, your tokens into the governance contract and accrue fees from the protocol.

• 1:04:59Speaker 02

  Um, and that was actually paying a lot during DeFi summer, of course, but now it doesn't pay much. And they've proposed to turn that kind of governance off and do a new model, um, which is, could be called, uh, it's going to be called a buyback and make where they buy. Back YFI from the market, they being the developers and use that to pay salaries and things like that. Um. And there's no like fee capture, but there is governance. So it's kind of, yeah, it's kind of like this limbo state now, this token. Um. Where I think it's worth as much as it's worth still because of its powerful narrative. You know, I think the products are still uh still sound and I think they've got good products coming out in the future. But yeah, it's it's this token is probably the hardest to value in DeFi uh right now.

• 1:05:43Speaker 02

  Uh, just because it it could change, right? It could be something else next month. We don't know. Um. So it's very hard to project what what's gonna happen here.

• 1:05:50David Hoffman?

  Uh. Young assets are very hard to value because it's so easy for something to change. Anthony, what would you say to the critique that YFI was just a flash in the pan? Just like a, it's a one-time, once and done kind of kind of move. It had its big claim to fame. And now it's kind of just drifting off into the into the ether. What would you say to to somebody like that?

• 1:06:11Speaker 02

  Yeah, I mean, I can kind of sympathize with that argument um to some extent where. I, as I said, like the token seems to be in limbo right now. The the the community and the developers don't really. Seem to know where they want the token to go, like what they want it to do. Um. So, I mean, there. There is critique there is to be made, but that's like assuming that they're not gonna figure this out, right? So the more positive case is that they figure it out, they figure out good value accrual mechanisms for this token. They keep keep building good products um that generate revenue and all this sort of stuff and and everyone's happy. But that is just like a very big risk, right? Um. You know, buying the the token right now, I think you'd be buying it more for the narrative, the meme, the story.

• 1:06:54Speaker 02

  Right? The Andre narrative too, like he played a huge part in it. Um. You know, his whole persona um played a huge part in it, so.

• 1:07:01David Hoffman?

  It's a, it's a massive ecosystem and a massive uh community, but but like, why did they turn off the value accrual like fee mechanism?

• 1:07:10Speaker 02

  So it's, I mean, in the proposal, they said that it's going to be temporary. The justification was given that it wasn't generating much value anymore. I think it was generating maybe 1.5% a year or something like that in terms of APY for Wi-Fi stakers. So they would rather, you know, basically use the fees generated by the Yarn Vault or the Yarn platform to buy Wi-Fi from the market and then use that to fund developers, developing other core developers essentially. Now, obviously, you know, you might think, well, I mean, that's not really a value accrual mechanism because that Wi-Fi is inevitably going to be paid out and sold, right, on the open market? Because if you're paying developers with these tokens, they might cash it out.

• 1:07:54Speaker 02

  So eventually it finds its way back to the market anyway. It's not like a make, a buyback and burn, right? It's a buyback and spend, essentially. So people are like, okay, well then how is that bullish for the token, right? Like, how does that generate value? But then other people say, well, you know, the more developers we fund, the more we pay them, the better products they're going to build. And I agree with that, right? You obviously need to pay people, you know, people need to make money. And then eventually, you know, as the product matures more, it kind of accrue value. So, I mean, to use David's kind of metaphor here, it's like, Yarn started as like a hare and now it's gone and become a tortoise, right? And it's planning to play the long game now rather than that short-term game it played because that wasn't sustainable.

• 1:08:39Ryan Sean Adams?

  So what does that make you, bullish, bearish, neutral on Wi-Fi?

• 1:08:43Speaker 02

  I still hold Wi-Fi. You know, I'm definitely still bullish on it, but I wouldn't say I'm bullish on it for fundamental kind of fee revenue reasons or value capture reasons. I'm bullish on it because the story is very powerful. The builders are great. They have a great ecosystem that they're developing with the, they call it the YCO system, where they've got a bunch of projects that they've partnered with, like Sushi Swap, Cream, Cover, all these different projects. So I'm bullish on that because that's like a first for DeFi. But yeah, I wouldn't say I'm holding it expecting to generate dividends, if you want to call it that, anytime soon.

• 1:09:22David Hoffman?

  All right, shall we move on to Compound? Compound is a very interesting protocol. Anthony, tell us your thoughts about Compound.

• 1:09:29Speaker 02

  Yeah, so Compound is a money market protocol similar to Aver in that you can lend and borrow assets on there. It's number three, as you can see on DeFi Pulse here, $2.7 billion, local $2.8 billion in there right now. Compound is great. They've been around for a while. They've been around longer than Aver, I think. They are definitely the tortoise if Aver is the hare, and I wouldn't even say that Aver is a hare. It doesn't move that quickly. But the main difference is that Compound moves slower with adding assets, changing system parameters, you know, it plays it safer, right? Whereas Aver will play a little bit more fast and loose, where they'll they'll listen additional assets that may be considered riskier than than what

• 1:10:12Speaker 02

  Compound will do. But, you know, Compound is probably safer than Aver for for that reason. I don't know on on a fundamental level or a smart contract level, but maybe maybe more people trust Compound because of that. You know, maybe the rates are better, more efficient on there because of that, too. It's worth noting that Compound currently still has liquidity mining, I think, where you can earn the comp token for lending and borrowing on there. And it's also worth noting that Compound is what kicked off DeFi summer, because in June of 2020, they launched their liquidity mining program, which turned into what's known as yield farming. And they were kind of the thing that the the the protocol that popularized it. And that was just the very beginning. And and the comp token launched, and obviously, it went up a lot from

• 1:10:56Speaker 02

  all the hype at initially, and then it came down, and it's gone back up during during this kind of like bull market we've seen recently. So the comp token itself is governance, of course. I mean, most of these things are governance tokens. I don't know if they have fee capture on yet for the comp token. I don't believe they do. Last time I checked. So, yeah, same situation as uni. I think you you could say that Compound is is like Uniswap in terms of, you know, that kind of like moving slower, playing it safer, not taking all these risks, whereas, you know, Sushi Swap moves a lot faster and takes more risk. Uh. So and then I think Ave does as well, but I actually think sushi swap.

• 1:11:39Speaker 02

  I mean, sorry, I actually think like something like cream, which we're not going to talk about. I don't think because it's not part of the Defi Pulse Index, but they move even faster. So, yeah, I mean, Compound's going to be around for for a while. It's here to stay. It's not going anywhere. But the the the main difference, because people might say, okay, well, we have Ave, we have Compound. We have cream. We have all these money markets. You know, what are the main differences? It really is that kind of like how fast they move to add new assets is is a big part of that. Because that that plays into the governance culture of how fast they wanna they wanna um do things and how much risk they wanna take and how much risk they wanna introduce to the protocol. Uh. So and that's the same with with Maker as an example here. MKR governance moves very slowly, right?

• 1:12:20Speaker 02

  That's been a critique. Um. But as you said, David, some are playing the tortoise game, some are playing the hare game, and I think Compound is is definitely playing the tortoise game. But uh, you know, long term, I I think it's it's a winning model for sure.

• 1:12:33Ryan Sean Adams?

  It's funny that that's a critique too, because it it definitely does add to the robustness of the DeFi ecosystem. That you have um some protocols that are very conservative and and and slower and playing kind of the tortoise game. And others that just move fast, maybe move fast and break things at at, you know, the the far end of the spectrum. But when you look across all of this, you you get the speed advantage and then you also get kind of the the conservative, low-risk advantage. And all of these projects together just make DeFi a whole lot stronger because we have we have different options.

• 1:13:11Ryan Sean Adams?

  I'm glad there isn't only just a compound, but there's also Ave and cream and that there's own like not only just a Uniswap, but there's also a sushi. It makes for a uh a much stronger ecosystem.

• 1:13:26David Hoffman?

  I would definitely categorize Compound and Uniswap in similar categories because both of those teams are really pushing the limits of crypto economics, right? Both of them are experimenting with L2s. Both of them are doing a brand new things that no other protocols are doing. And I think that's kind of where the theorized upside behind something like Compound or Uniswap comes from is they they integrate with something like optimistic rollups or some sort of L2. Compound is experimenting with its own application chain. And that is something that, you know, we are not seeing out of Ave or Cream and we're not seeing out of Sushi Swap where Ave and Sushi Swap are more focused on like native DeFi Money Lego integrations and really pushing the fold with how integrations with other protocols can work.

• 1:14:11David Hoffman?

  Whereas Uniswap and Compound are kind of just, you know, working on themselves and working on how can we, how can we, you know, maximize the value capture using L2? And using some of these very early nascent crypto economic primitives that I don't think anyone else is really equipped to work with. So like Ryan said, really happy to see similar protocols go in two different directions because there's so much left in untapped potential in DeFi. Somebody needs to go in all directions.

• 1:14:40Ryan Sean Adams?

  All right, so let's ask the question, Anthony, bullish, bearish, neutral on comp?

• 1:14:45Speaker 02

  Neutral on comp, I guess, yeah, neutral on comp, neutral bullish, maybe. I haven't kept up too much with all of the work that they're doing. I know, you know, high level what they're doing and I kind of was bearish and still am be bearish on their application chain that they want to build. I don't really see the point of it. Until recently, actually, I, you know, we saw that the OCC in the US said that federally chartered banks could use blockchains as settlement layers, public blockchains as settlement layers. So maybe the comp chain kind of fits into that and the banks are more comfortable using something like a comp chain rather than Ethereum. Maybe there's a case there, but yeah, I mean, I'm definitely neutral. I still don't think they're going to grow.

• 1:15:29Speaker 02

  I just think that, yeah, I, that kind of comp chain thing gave me pause, but other than that, yeah, definitely still think it's great.

• 1:15:39David Hoffman?

  All right, let's get into Loopring. Loopring, I feel like, is the most unique asset so far in the sense that it just pertains to an L2 network. Anthony, can you go ahead and get into Loopring for us?

• 1:15:52Speaker 02

  Yeah, Loopring's been leading the L2 charge for a little while now. So they have two different exchanges on Layer 2. They have an AMM exchange, something like a Uniswap-like exchange on Layer 2. And they also have an order book-based exchange, just something like a traditional kind of centralized exchange order book model. And they've seen some incredible growth recently on their Layer 2. They have over $100 million locked in there now. They're doing liquidity mining on there to get people to migrate across. And they're really leading the charge here. They're using Zero Knowledge rollups or ZK rollups, which is a different technology to what some of the others like Synthetix and Uniswap are going to use. They're going to use optimistic rollups from optimism.

• 1:16:37Speaker 02

  So and Loopring have built their own ZK rollups as well. I don't think they're actually using any other companies. So that's even more impressive. But yeah, they've seen some incredible growth. You can see on the on the chart there.

• 1:16:47David Hoffman?

  Yeah, Anthony, what happened here? So what happened on January 1st? Because we see total locked value just shoot right up massively and also token price.

• 1:16:56Speaker 02

  Yeah, yeah, I think, I mean, token price would play into that a little bit because they have LRC on their exchange that you can use. But also, they did a liquidity mining program which had people put their tokens on L2 and, you know, to earn their LRC rewards on there. So I mean, I think that's needed. You know, liquidity mining programs are really great for incentivizing that early liquidity. And we need that for Layer 2. So I think Loopring deeply understands this, and that's why they've done it. And they haven't done it in a super speculative way where you're earning like 1,000 APY or whatever, like, oh, none of that. They've done it in a proper, sustainable way, which I'm really impressed by. And yeah, they've just made the great Layer 2 exchange.

• 1:17:37Speaker 02

  And one of the first that actually has traction because, you know, Uniswap's coming with it, but we don't know when. You know, I'm sure Sushi Swap's looking into this. I'm sure other projects like ZeroX maybe are looking into it and stuff like that. But yeah, I think that they've just had lots of success being first movers here and being innovators. So I applaud them on that.

• 1:17:58David Hoffman?

  So what's the value capture mechanism for the LRC token? This is something I'm not familiar with.

• 1:18:04Speaker 02

  I I I wouldn't say I'm an expert on the L R C token itself. I'm going to assume that it will have governance rights and that it will have a fee capture on both layer one and layer two, if they have a layer one exchange as well. But yeah, I I think the token itself is probably in in in kind of like early stages where they probably haven't figured out the value capture mechanisms yet or implemented it at least. Because I imagine that they're very focused on growing the liquidity on their layer two exchange first before worrying about the token.

• 1:18:35Ryan Sean Adams?

  This is something else that's really nice about buying an index because like Loopring is just the first. I mean, I know we've all talked about before and you've written about this, Anthony, that there there's going to be kind of a layer two war for liquidity and for users, right? And this is the only layer two token in here. It it it probably won't be the last. So with an index, you don't have to pick the winners. You just kind of they they float up in inside the index, which is which is kind of nice.

• 1:19:03Speaker 02

  Exactly. And I and I think, you know, L R C, the token wasn't one that was talked about as part of the mainstream consciousness of DeFi tokens. But it went up a lot because people were sleeping on it, right? So as you said, with the DeFi posting that you don't have to even pay attention to any of this. It's already in there. You already caught that upside. Which is just, I mean, it's great because there's nothing worse than, you know, going on CoinGecko and looking at something that went up a lot and being like, wow, why didn't I buy that? Right? And then, yeah, that that's why the the index products are really beautiful, I think, for sure.

• 1:19:35David Hoffman?

  All right. So let's move to Ren. Ren is, I think, the most unique asset in this category because it's a cross-chain token. Anthony, what can you tell us about Ren?

• 1:19:45Speaker 02

  Yeah, so Ren, I guess it used to be called Republic Protocol. It's a it's quite an old asset. I think they launched in either twenty seventeen or twenty eighteen their asset. But basically what their their platform does, it's a cross-chain kind of bridge. They have Ren BTC, which is like a Bitcoin, tokenized Bitcoin on Ethereum. They claim it's to be to be fully decentralized. I I think that that claim was actually debunked recently where there was centralization vectors. But basically, they have like a network of nodes that they call dark nodes, I think, that let you do these kind of cross-chain transactions. In terms of the token itself, I think on the dark node, you have to stake these tokens.

• 1:20:27Speaker 02

  I'm pretty sure that the the token also gives you kind of fee capture because to use the bridge, it generates fees and obviously that goes to the the node runners and things like that. And I believe it's probably a governance token as well. I mean, I'm just assuming that all of these things have some sort of governance built in because, you know, if you want your protocol to be more decentralized, you don't want to be the the admin key holder, you need to offer incentives to do governance. So, but yeah, they've seen some really great growth because of Ren BTC over the past few months. You know, we have so much tokenized BTC on Ethereum now, the largest obviously being wrapped Bitcoin, which is a centralized, Ren BTC aims to be a decentralized version, but they're also competing against something like TBTC.

• 1:21:11Speaker 02

  But Ren, I guess, goes beyond just BTC. They're trying to organize a bunch of assets from from kind of different protocols. But it also speaks to like, what's the demand for this bridging, right? There's also Rune as well, Thought Chain, which is a very, very popular thing, especially on crypto Twitter, that is competing in that area. So, yeah, it's it's kind of like the growth has been great, but it's kind of like hard to to value this thing when there's so much competition and it was so early in the cross-chain kind of thing right now.

• 1:21:42David Hoffman?

  Yeah, the investment thesis behind Ren really depends on there being like a poly-chain ecosystem that really has many assets that for some reason need to be transferred between blockchains. Right now, the only the only multi-chain ecosystem I can really see is between Bitcoin and Ethereum. So for I think for the long-term case for Ren would really need to require, you know, many, many chains with many, many valuable assets. So you would you would need to believe in that. It's also worth noting that while Ren is a token that provides cryptoeconomic assurances to transfer tokens between chains, the team has a backdoor in the same way that, you know, the Compound team had a backdoor to Compound before they plugged it up with a comp token. The Ren team currently has a backdoor, so it is not trustless.

• 1:22:27David Hoffman?

  The goal is to make it more trustless with the Ren token, but that is not there yet. So that is something that is worth noting, especially when we come and and start talking about, you know, how to evaluate tokens, whether or not the team has a backdoor is definitely something that people should include in their research.

• 1:22:43Ryan Sean Adams?

  Bullish, bearish, neutral guys on red.

• 1:22:46David Hoffman?

  I'm gonna go with neutral.

• 1:22:48Speaker 02

  Yeah, I'm gonna go with neutral because I don't know enough to be bullish or bearish about it. Yeah, but I just to David's point quickly, I think, you know, a lot of the stuff we've spoken about today. Um, I think, you know, not just those, but like a lot of other DeFi protocols have these admin keys or backdoors and stuff like that. Um, because they're young, right? Uh, you know, a lot of the DeFi pools index don't like Maker doesn't because they have the on-chain governance, right? But synthetic still does, even though synthetic is the largest kind of um, token in that index, right? You, if that's something that you're that concerns you, if you think that for some reason, the team's gonna do something that's gonna jeopardize the protocol with their admin key,

• 1:23:29Speaker 02

  then that's something to keep in mind. Um, I wouldn't say it's like a major risk for the top DeFi protocols, but it is a risk.

• 1:23:37David Hoffman?

  All right, let's turn it to a Kyber Network. Kyber, a very, another very old asset in the DeFi ecosystem. Anthony, what can you tell us about Kyber and the KNC token?

• 1:23:48Speaker 02

  Yeah, so Kyber was very popular last year, I think. Um, there was like a very strong narrative around it, but I haven't heard much about it lately. But basically from memory, and maybe I'm misremembering here, I haven't looked at it in a little while, but from memory, they, they do a buy and burn model as well, where KNC is burnt. They also have a staking model where you can stake KNC and earn fees that are generated by their exchange in ETH. So it's actually paid out in ETH, not in KNC.

• 1:24:15David Hoffman?

  One of the few tokens that pays out ETH dividends.

• 1:24:18Speaker 02

  Yeah, yeah. So that I thought that was very cool, but I think, uh, and just for for kind of context here, Kyber Network is basically a, an exchange aggregator. Um, they have liquidity pools that they pull from and, you know, they give you the price and that that space is obviously pretty crowded now, you know, you have one inch, you have, Dexag, you have PowerSwap, there's a bunch of others. Um, so I think, you know, and I saw a post recently from Kyber's CEO. I think they're trying to, I guess, reevaluate what their protocol is and where it sits within DeFi from a strategic point of view. Um, because yeah.

• 1:24:52Speaker 02

  Last few months, they've kind of like sat flat. Um, they're they're kind of, I I wouldn't, I wouldn't say they're getting outcompeted, but you know, the other things have have grown more than them, the other aggregators and stuff like that. So, you know, investing in K and C right now is probably pretty risky because you're betting that the team will figure out, you know, where to go next, right? You're basically betting on the team. You're not betting on the protocol anymore, or the growth of it. You're betting on the team being able to plug whatever kind of hole has been, you know, pushing K and C down more than, um, you know, more than maybe it should be. But yeah, uh, I think that's kind of the gist of it. Uh, I hope to see them kind of like come back from the little, I guess, maybe the little hole that they're in right now because

• 1:25:35Speaker 02

  they're a great team. They've been, they've been kicking away since 2017 as well. They're one of the first defi protocols. But such is life with being the first is that you build during the bear market, you do all the hard work and then someone comes and forks you and does it better. Because they have all the stuff to work from. So, you know, this is the risk of building in DeFi for for these teams, I think.

• 1:25:55David Hoffman?

  I think one of the bull cases for Kyber, for K and C is that, uh, with Uniswap, providing liquidity to Uniswap is very capital intensive and providing capital to Kyber is less intensive. Uh, you can get more liquidity from less total capital when you provide it to Kyber. And so if Kyber can collect, you know, comparable amount of fees, you can keep that capital allocation low while still collecting a decent, healthy amount of fees. That's my understanding for the bull case for for the K and C token. I do, it does have a competitive advantages and disadvantages to other things. And so just that uniqueness, I think, gives it a lot of sticking power.

• 1:26:34David Hoffman?

  Um, but it really takes a little bit more of deep diving into research and value accrual to really be able to place this token in relation to other, you know, market making tokens.

• 1:26:42Ryan Sean Adams?

  Bullish, bearish, neutral.

• 1:26:45Speaker 02

  Neutral.

• 1:26:46David Hoffman?

  Neutral.

• 1:26:47Speaker 02

  Neutral. All right. Well, we made it to the last one.

• 1:26:50David Hoffman?

  Balancer, balancer. I really like balancer as a project. Uh, uh, let's get Anthony's opinion on balancer and the B A L token.

• 1:26:59Speaker 02

  Yes. So I mean, I'm the same as you. I really like balancer as a project. I think they are doing innovative stuff. But the major issue with balancer, I think, and the reason why they maybe haven't seen more. I don't know what their volume is right now. I think their volume isn't like as high as you would want it to be. For the amount of liquidity that they have in there because they're actually subsidizing a lot of that liquidity with liquidity mining rewards paid out in the B A L token. Um, but their problem is that their interface is shocking, right? The balancer exchange interface is not friendly to noobs. Um, the last time I checked, I don't even know if they've updated it at this point. Um, it's, it's just very difficult for noobs to, to, to, uh, navigate. Um.

• 1:27:40Speaker 02

  It's very difficult for, for even not even just noobs, like people in general to, and even in DeFi to navigate. So I think that's let them down a little bit. They're obviously competing within the A M M space with, uh, Uniswap and Sushi Swap and all the other ones. Um, balancer lets you do some things like adjustable fees, let you have up to eight tokens in a pool. But I actually, and this is what I originally thought about balancer. I kind of thought that the adjustable fees thing was actually something that shouldn't have been implemented. Because the only reason people provide liquidity without the incentives is to generate fees. Or that's one of the reasons, one of the major reasons. Now, if you have a protocol where you can adjust fees and, and there's all this stuff happens.

• 1:28:23Speaker 02

  You, and then anyone can spin up these pools with, with different fees, you fragment the liquidity, right? Because, and, and, and, and with, with Uniswap, it's just a flat fee. It's point three percent. So everyone is just paying the same, no matter if you spin up the same pool or whatever. Whereas on Balancer, you know, you can do different weightings and different fees and it just, it complicates things, I think. To the point where it's just too complex for most people to grasp. Um, you know, the volume, uh, because it's going a lot through aggregators. I think aggregators usually choose other exchanges like Uniswap and Sushi Swap and everything and things before they choose Balancer. Because it's just better, the prices are just better because the weightings aren't, you know, always fifty fifty, they're not. You know, custom, the fees are always flat, right at point three percent.

• 1:29:08Speaker 02

  So, you know, that's why I think Balancer hasn't seen more success here. But um, I, I think that the fact that they've got, you know, the, the up to eight tokens in the pools and stuff like that. And the adjustable weights and fees is innovative. I just don't know if there's product market fit for that, right? I don't know if that's going to be a long-term successful model. And it's also something that Uniswap can just put in if it wanted to, right? It's not like it's, like, they could literally just change a few lines of code probably and do that. Um, I don't know, maybe, maybe not, but you know, it's not something that they can look at and be like, oh, we can't do that because Balancer did it. I just explained to you that like, it's all open source, so anyone can, anyone can do this, so. Um, yeah, maybe you have a more bullish case than I do.

• 1:29:48Speaker 02

  I wouldn't say I'm bearish, I just think that we need to see some more action happening on the, on the Balancer side of things.

• 1:29:55David Hoffman?

  Yeah, I do think that Balancer might be the thing that captures the long tail of AMM value. Uh, things like currencies, like, you know, the ETH, the ETH USDC, WBTC, USDC. I think those are much more appropriate to Uniswap. However, there are things that Balancer can do that no other protocol can do. And what Balancer really is, is a much, much more flexible Uniswap. And there's a lot of value in that as well. The, the, the T-shirts that Ryan and I sold through Bankless, we would not have been able to do that through Uniswap. We needed that flexibility that Balancer offers, that, that differential weighting where Uniswap locks you into fifty fifty. But Balancer can make a pool that's ninety, ten, eighty, twenty, or, you know, adjustable.

• 1:30:37David Hoffman?

  So it can start, you know, ninety, ten, and then finish ten, ninety. Then you can adjust fees based off of, you know, some sort of logic. So like, not only can you change the fees, but you can also change how, how you change the fees, right? So everything gets really modular and flexible.

• 1:30:54David Hoffman?

  And I think maybe one of the reasons why balancer is kind of lagged behind in growth is that they are trying to go in all directions, all at the same time. There's so much left to do before balancer can really consider itself done. And I don't think we know what the version of balancer is going to be when it's finished doing all of the things that it needs to to build itself out on. You know, one of the things that really gets me excited about something like balancer is that the adjustable fees can can reflect the changing market environment. And a great way to view this is like surge pricing with your Uber, right? If there is high demand for your Uber, Uber will charge you more. And balancer can do the same thing with volume on some of the balancer pool. So if there's more volume going through a balancer pool, balancer

• 1:31:38David Hoffman?

  can increase the fees for that pool in that specific moment to adjust to market demands. That flexibility is really powerful. I just don't think people have learned how to leverage some of these powers that balancer is giving to the world.

• 1:31:51Ryan Sean Adams?

  I almost think it's a little bit like the Apple versus Android, where it's like Uniswap is like, it provides the the easy button, Apple, just there's not a lot of options, you know exactly what to do. Whereas, you know, Android, there's infinite customizability on top of this thing. And balancer has all of those properties, but the trade off there is it's a bit more complicated to use and to grok and to understand.

• 1:32:16Speaker 02

  Yeah, I mean, that's, that's kind of, I guess, what I was alluding to that is that modularity might actually be the thing that prevents balances growth, because I think liquidity providing, because it's, you know, on Uniswap and stuff, because it's so simple, right? You know that it's 50 50.3% fee, that's it. That's all you have to think about. Now with balancer, there's a lot of other things you have to consider. Now, as a, as a, as a, just a simple liquidity provider, as someone who just wants to put liquidity in and forget about it, right? Obviously, Uniswap is probably going to appeal a lot more to you. Now, the question is, are there more of those people? Or are there more people who care about the modularity, the customization, right?

• 1:32:55Speaker 02

  And I actually think that it's it's the former, because using your analogy, Ryan, um, you know, Apple, I mean, Android phones pretty much look like Apple phones now. It used to be all about customization, customizing literally everything you do on it. But most people's Android phones are a Samsung, and they all look the same to me. Whenever I look at someone's Android, like, no one really cares about customizing their phone that much. Um, so it's it's all about like, how much kind of like, uh, I guess people care about what? Um, and not to say that Balancer can't succeed or anything, and not to say that, you know, maybe there is a lot of people that do care about that, or not just people, but liquidity. Um, but yeah, that modularity is letting them down right now, I think, um, because people just, it's too complex. There's no,

• 1:33:37Speaker 02

  there's no like, I guess, like a shelling point, right, to go to. It's like, there's nothing to, there's people just doing a million different things and a million different experiments, but we need to get to that point where they all converge and people learn the best practices of how to use Balancer. And I just don't think we're there at that point.

• 1:33:53Ryan Sean Adams?

  All right, bullish, bearish, neutral. We'll start with Anthony.

• 1:33:57Speaker 02

  Uh, definitely, definitely neutral, because I I can see the value. I just need to see it play out, um, for for me to be convinced.

• 1:34:05David Hoffman?

  I'm a long-term bullish, and I think when, uh, bigger players, bigger funds start to get into Ethereum, Balancer offers really compelling tools for funds to manage their own assets. I think we're gonna have to wait for them to really come into the ecosystem and mature and figure out how to play in DeFi. But once those types of people get in, uh, Balancer's offers really compelling infrastructure to them.

• 1:34:28Ryan Sean Adams?

  Guys, we went through the DPI ten. That was fantastic. Anthony, thank you for your insight so much. Maybe just, uh, could you spend a minute talking about a couple of honorable mentions, maybe some assets that you think could jump into the DPI index in in the next couple of quarters?

• 1:34:46Speaker 02

  Yeah, so I mean, I spoke about how there's a certain criteria that tokens have to meet to be included in the DPI. One of the strictest criteria is that it needs to be live for six months, the project. So six months or more, and then it's eligible. But there's a bunch of other criteria, but that is the one that prevents most of the tokens from coming in. And that was put forward by DeFi Pulse, the creators of the index. So I guess honorable mentions and ones that I think will go in soon because they're coming of age, so to speak. Sushi Swap, definitely that token and that project has had a renaissance over the last two to three months. It has become a community darling. They're doing a lot of innovative things. And as I said, their project is coming up on six months, so they'll be eligible for inclusion.

• 1:35:31Speaker 02

  I don't see a reason why that won't get included. So definitely think that that's going in when it can.

• 1:35:38David Hoffman?

  What about Curve? How if Curve has got a ton of value locked, how come Curve hasn't made it into the DeFi Pulse index yet?

• 1:35:44Speaker 02

  From memory, I think it was because when their token launched, the one of the criteria is that more than 5% of the token has to be in circulation. And their token launch with basically zero in circulation and has been increasing since then. I think at this point it is eligible. I have to double check, but I think it is eligible, which means that it can be included during the next rebalance. But that's up to DeFi Pulse, who are the managers of this index, along with the index co-op, which is a DAO that actually manages these index products as well. So, and I don't even, we've never done something where we've included two tokens in the same rebalance. Rebalance happens monthly, so I don't think there's anything preventing us from doing that. But yeah, Curve should be eligible at this point.

• 1:36:28Speaker 02

  You can actually go to pulse.inc, that's where the methodology is if people want to see what the criteria is for every token. INC, INC.

• 1:36:39Speaker 02

  Yeah, you can scroll down and it'll show you like the methodology, I think down the bottom.

• 1:36:46Speaker 02

  Yeah, so there's the basically methodology there of why tokens are included or which ones can get included. Yeah, so I think, oh, there you go. It's 7.5% of its supply, not 5%. So I think curve is at that point. So yeah, it's probably eligible.

• 1:37:04David Hoffman?

  Well, you guys, this has been a walk through the tokens in the DPI as well as a few others. There are so many more tokens listed on DeFi Pulse that are worth paying attention to. The purpose of this episode was really to kind of go through the big ones. So you could learn how Anthony thinks, how we think about some of these tokens and use some of these analytical tools and analytical mental models to do your own research, right? This is how we do research. This is how we think about these things. So if you start to use that as your mental models, you will be better equipped to do your own research. I think that DeFi summer is coming. It'll be DeFi winter this time because it's, you know, it's January.

• 1:37:44David Hoffman?

  But DeFi summer 2.0, I think that's here. Hopefully this episode will provide the listeners with really good mental models for how to understand what might be a really awesome time. I put out a tweet not too long ago that, you know, if you look and listen closely, DeFi, you can hear the sound of DeFi tokens popping off. And I kind of think that we're in like second 45 of like the three-minute microwave popcorn bag where things you start to hear like a single pop, a second pop, but things are starting to heat up. That's where I think we are. And I hope this episode kind of leads into that market.

• 1:38:17Ryan Sean Adams?

  Anthony, thank you so much for joining us. We hope by the time listeners hear this, you are out of Twitter jail, sir. And ETH has exceeded 1420. It's all time high.

• 1:38:27Speaker 02

  Yeah, always a pleasure, gents. Thank you for having me on again. I hope that, you know, this helps a lot of people listening to it to better analyze different DeFi tokens. And yeah, I definitely hope that ETH is that all time high sooner rather than later.

• 1:38:39Ryan Sean Adams?

  All right, fingers crossed. Guys, risks and disclaimers, of course, none of this was financial advice. You need to do your own research. DeFi is risky. So is ETH. So is crypto. You could lose what you put in, but we are headed west. This is the frontier. It's not for everyone, but we're glad you're with us on the bankless journey. Thanks a lot.