Last week I made the mistake of being pretty much the only DeFi inhabitant to go to the Bitcoin 2021 event in Miami.
Although I did manage to catch up with a handful of builders and big brains in the convention center, my time would have been better spent hunting down the degens at the various satellite events, yacht parties and nightclub gatherings – the ” phantom conference “for the DeFi take to take place while boomercoin maximalists talked about the same points they had been repeating for nearly a decade.
However, the short time I was able to spend with the folks at DeFi was extremely rewarding. I emerged from discussions with representatives from SushiSwap, Yearn Finance, Balancer, Polygon, the Digital Dollar Project and FTX, among others, with some useful cores of information on how decentralized finance can evolve in the second half. of the year. With full interviews coming out next week, in the meantime, here’s a rundown of the best of what I’ve gleaned:
Risk and regulation:
Although it appears that institutional adoption has been fair On the horizon for years now, there’s more and more reason to believe that money from the big investment banks may finally be splashing into DeFi pools for too long.
As it stands, everyone I’ve spoken to is unanimous that companies are showing a real interest in finding ways to get involved, but not everyone is sure exactly what that looks like or how to solve it from a regulatory and custodial point of view.
FTX and Alameda Research whore Sam Bankman-Fried (who notably had no security guards, though Bitcoiners are worth less like Saylor walking around with a mobile rugby scrum – or, wait, maybe Sam had very good security guards in the sense that I’ve never noticed them?) described the dynamics as similar to that of a college couple, with one party “waiting” for the other.
“We’re going to be ready, we’re going to feel it, a lot of talking, a lot of open talk about our feelings and desires,” he joked.
From his perspective, FTX is ready to flip a switch and provide a gateway to all the services institutions want. However, the work is more like an exercise in empathy than a corporate exercise: it involves long conversations about exactly what institutions want – more return on dollars, exposure and custody, a sort. ramp to satisfy customer demands – but when customers say “we want to do crypto,” what do they mean and what is actually possible? Everyone has questions. Everyone is in their feelings. For now, much of the progress looks like a company going public and trading crypto.
The folks at DeFi have expressed similar sentiments. The security specialist by Yearn Finance’s pseudonym, “Doggy B,” presented barriers to involvement as one of the singular personal choices: whether or not an institution is involved depends on the risk tolerance of the institution. chief lawyer for the institution in question – a situation that seems absurd given the possible sums of money at stake.
Me, at the conf: https://t.co/53sboRxrs6 pic.twitter.com/EQS2CN6FjE
– Dog speaker ticket (@fubuloubu) June 6, 2021
The problem here is obvious: the regulatory framework right now is a lot of noise and fury that doesn’t mean anything. Elizabeth Warren said stupid things the other day, and someone at one of the acronym agencies Googled DeFi and got mad about it. It’s the sort of thing that could – and perhaps is specifically designed to – scare off lawyers willing to take the plunge.
It’s good to remember that regulatory winds are constantly changing, even though they seem stormy right now. Any real legislation would be subject to a series of hearings and testimony, and barring some sort of drastic decree, more balanced heads like Chris Giancarlo would have a chance to weigh in.
Before my interview with the former president of the CFTC, I thought it was about sitting down with the enemy. Instead of a simple rule-obsessed regulator, however, my impression of Giancarlo was that he is extremely agile and creative with his thinking.
He presented the regulation of crypto based on a larger legislative trend that has unfolded over the past 30 years: lawmakers trying to keep pace with the internet.
“The big picture is that the Internet is a multigenerational evolution. It started with information, decentralized information […] and he has now set his sights on finance. Don Tapscott talks about the Internet of Value, and the Internet of Value has many elements, but two of them are stablecoins and blockchain-based. [currencies], and DeFi, when it comes to financial institutions.
Where the battle over decentralized information has come with built-in protections for the masses – due to First Amendment rights, there is no “ministry of information” as Giancarlo puts it – the battle over decentralized finance will be more difficult, as there are dozens and dozens of regulators to struggle with.
However, he called digital currencies “inevitable” – technology will advance and eventually prevail even despite what could possibly be conflicting regulation.
“You can’t stop technology in time, and if you do, you’ll become a backwater. “
I’m glad he’s leading the research on an American CBDC and finds its framing useful when trying to assess those short-term screams and whispers.
VCs continue to spend:
Here’s an under-reported quality of this bear market that makes me wonder if all the talk about supercycles might be relevant: Even with a 50% pullback across the board, VCs are still willing to spend a lot of money on quality projects.
In 2018-19, the money just disappeared. I’ve heard stories of eight-digit increases agreed in December that failed in January – perhaps because the funds themselves flopped. Dozens, if not hundreds, of companies have gone bankrupt, and where a white paper could have made millions, suddenly a complete product with real users failed to receive an offer.
In Miami, however, the checkbooks were out. I spoke with Jack Lipstone and David Lucid from Rari Capital, as well as with “Tytan Inc.” from upcoming NFTY Labs on current capital conditions, and both have expressed that they need to push back interest rather than trying to push it up.
What stands out is not only that the money is sticking around, but that the funds and projects they invest in also seem more mature. Rari at one point was reaching $ 110 million in total locked-in value, and NFTY Labs has a working product – smooth-sounding NFTs that enable subscriptions and secure community access. Funds, meanwhile, are said to be increasingly focused on the future – dynamic and utilitarian NFTs, and extremely bright teens at Rari, both betting on the future.
I don’t know if that means we’re going to bounce back soon, but the builders are still building and the funds are ready to back them up this time around. In terms of fundamentals, DeFi is healthier than ever.