Defi Top 20 with Arthur0x, Su Zhu and Hasu - Part 1

Transcript

welcome to Uncommon Core where we explore the Big Ideas in crypto from first principles after our video on the top 20 crypto coins by market cap that was very popular we got a lot of requests to do one on defi decentralized Finance uh which mainly exists on ethereum and uh for that episode we have brought the foremost expert on defi there is at least he was one of the very first and most successful defi investors who knows a lot of things about it knows every protocol so um welcome Arthur hey hey hi hu and Su thanks for having me yeah great to be here yeah and just to

introduce Arthur a bit further um uh he he's kind of gone from being one of the earliest adopters of synthetics and a as well as kyber uh to being now running the largest defi focused Fund in all of Asia which is defance Capital um which um I've had the pleasure of um supporting uh from the early days and and uh it's it's been quite impressive to see their growth so without further Ado let's um let's get into it uh we've got a list of the top 20 defi coins uh in front of me we last time we went just uh an ordered list by market cap this time we taking a

little bit of a different approach just because so many projects in defi try to solve similar problems to each other and we actually group them by by six different categories and we'll talk about them one by one so we have the deck category decentralized exchanges then we have spot Landing synthetics Landing um Bridges and then the other two you'll see when we get there so uh yeah let's uh let's start so I think we start from unisoft uh unisoft is probably uh one of if not the most successful uh descent Tri exchange right now both by uh the trading volume and by the active

user so uh on average is Du around 200 to 300 million volume and have around 20,000 daily users and it's also the first one to popularize the automated Market maker uh model to uh provide liquidity for exchanges which is uh you can say that it changed the decentral Exchange Land because without it this is very expensive and uh difficult to trade on decentral exchanges so yeah so this is uh what uniso is about and the interesting thing is unisoft was launched uh using the Grant from the ethereum foundation to the founder H uh Hayden and he was a former mechanical engineer and started this as I think

more of like a hobby project so I think I think my view is a is definitely the most successful uh decks right now uh as you can see from the user volume and uh user and the volume and I think the it did change entire landscape and I think bring a lot of wealth effect into the entire def5 space through their retroactive distributions uh Al of there was a lot of criticism on the amm model that brings impermanent loss to the liquidity provider uh which is also can consider as a market maker in a traditional context but uh despite this uh I think that people real I that the fee in some situation can actually offset the uh the impermanent losses although if I don't

really like this term but this is what people called it uh so that right now you still have around2 billion dollar of liquidity lock inside unisoft uh to provide liquidity for various tradings so I think that uh the the next move is really for them uh to innovate from this uh because right now the model is uh uh is inefficient for for the popular mainstream asset because the slipage is way too high uh given the capital it has that is under lockdown so especially let's say you talk to a professional Market maker with that amount of capital they can definitely provide a much tighter uh pricing compared to unisoft but yeah so I think that the V3 uh they supposedly have a lot of new innovation

that can mitigate uh part of this impermanent loss issue and there was has been a lot of engineering and research work uh in the work they have been very secretive about that uh but it's supposedly to be very good and they have the backing of one of the most uh biggest Venture crypto Venture Fund in the space Paradigm which has allow of the top researcher in the space to help them on that as well so I think that we I mean everyone in the defi space is definitely looking forward to this and see uh how Innovative uh the unisoft V3 will be and I think that's really a key event to watch right now that's say I think one of the key issue is the governance issue I think that uh the 40 million threshold is too high and I mean everyone agree I think most people agree

with that and uh I think the previous uh Governor's proposal to lower the threshold didn't go through so and the team seems to be taking a pretty hands-off approach to this government they they kind of just say that we'll let Community decide anything that we are not going to drive this and I think probably partly due to the legal reasons since they based in us but I think that this deadlock is is slowing down the progress on the community side quite a fair bit yeah that's probably to the general View yeah it seems yeah I think that the governance thing is uh the governance problems are very real right it seemed almost like they it didn't want the community to have any say in what they're doing yet probably because they have a very concrete vision for

what the UN V3 is supposed to do um and they don't really want anyone meddling with that so they they launched the token and the governance in a way that it would be be paralyzed at least until V3 is out and then maybe do like more of a handoff to the community kind of interesting also the the governor's proposals were focused on um on giving Dharma and some of the Arin and some of the smart wallets that aggregate a lot of small users together and then interacts with Unis swap themselves they kind of fought hard to get their own um to try to get their piece of the air

airdrop for the users right um and that ended up uh not happening uh or not passing rather but um I think one thing interesting with with these kind of um with these kind of equity slash um slash airdrop slash emission coins is that you get really three different distinct uh token holders right you get some that are focused on uh trying to get more governance power you have others that are trying to maintain their power and then you have yet others that are trying to make sure that they keep getting rewards the LPS

basically so I think I think Unis swap being the first and sort of being the biggest like these are the toughest questions in my opinion in defa which is how do you reconcile these three very different forces how do they align on the vision and then governance doesn't stall right because in theory you could have these retrospec Ives get pushed forever it could come up again in a few months right it can never end uh in that sense so moving on to to Sushi swap So Sushi swap forked from um a Unis swap basically and uh had one major change which was to add a governance token um before uni was out so um as I understand

you guys both like sushi SW a lot so um let's hear why uh why you think this this is a distinguished uh project from unisoft that that deserves our attention yeah so I think I probably start with this so I think is definitely a very interesting one for me personally because I was pretty uh against it uh when it was launched because I think it's pretty distasteful uh and the way that the initial founder Chef Tomy uh was obvious like you I don't think it was launched with a good int ention to return the reward to community I think that's part of the intention but another part of the intention is really just to be a founder of another successful D5 for and make a

lot of money in the process although he did return the money in the end uh but I think that there was always part of the intention that the soal profit maximum list Mantra uh and I think there was no innovation it's purely uh like launching a token ahead of unisoft uh so and I also think that the the initially they the staking contract they used to for the liquidity mining was also that uh they are not using the existing one which is the one that was used by synthetics that was a the one that's most commonly used by other uh like the fot coin D5 for but they actually used their own staking contract and there was not audited so I I didn't feel that safe so I as a result I I I didn't really uh interact with sushi much uh when the at

the height at the peak of the liquidity mining of sushi um so so that was actually how it got started and at that time there's really no much Innovation because I mean it's just copying unof feature and add a token on top of it I don't see how uh a a thought without any unique selling point can sustain in the future I think what changed my mind is like uh at the during at the at the at the bottom of the D5 correction uh I think when some of the like some of the B coin have rebound from the bottom I start looking for undervalue stuff and I realized that actually to my surprise Sushi is still doing a very decent volume uh despite the the the over of the hype at that point of time there's

almost nobody talking about it in social media and like it's just nobody even know what is happening to suop at that point but it's still among the top five decentral extion by volume and also by user as well so that despite the the the all this drama is still retain a core community of user and uh also have volume as well and they already impl mented the the value capture which is like a five basis point of all the volume we go to the you be go to the feed pool they will be distributed to the sushi Staker uh and over the last two month it averaged around 10 to 20% of analized U and this U is a real U because actually they do get the cash flow and use that cash flow to purchase

more Sushi from open market to distribute it to the soci Staker so it's not like an inflation driven you I mean they do have inflation but that is to pay the liquidity mining reward but uh actually over the last two month uh the liquidity mining reward have decreased significantly and two3 of the reward are actually locked up so um and despite this uh there's still a pretty sticky bunch of liquidity and even at the bottom he has around $200 million do worth of liquidity and right now I think he has around 1.2 billion worth of liquidity and with the same reduced emission schedule so I think that that is what surprised me and make me to do more research when I after I start the research process I start to learn more

about suop uh it turned out that uh the call they did manage to attract a call group of contributor to keep contributing and there are some like they're not even in the official team like the borrowing crypto this his uh nickname and he was on like a contractual role he take a certain amount of su in for as a remuneration and do launch a margin trading feature for sui St and so there was a community that was start to form around Sushi and start to build on on top of it which is too my surprise because I didn't expect that to happen at all uh and I'm not sure why I think probably they have the First mve Advantage to be the first to fall off unop and get the kind of like a uh attention in the space to congregate towards them uh but yeah I I I talked to

the the team and who did my research that there is a pretty vibrant uh Improvement happening uh it's a bit uh chaotic as well it's a bit like grassroot kind of democracy like a fast moving A bit chaotic but it is working and there are people working on improving the product so that's what changed my mind and uh I think that uh the difference between Su and Unis right now is really that uh uniso is a bit more of like a a very elite kind of a project right now there's like a top pedigree like a back by the top Venture Fund in the space and Unis V3 supposedly have a very good uh like a like a breakthrough in the technical feature uh that will solve a lot of the current issue Su is more like a grassroot kind of uh version that respond to the

community month and like iterate fast and build on the the the future that Community really want uh such as the margin trading and various other feature uh so I I think that's the difference right now um and it start to become more differentiated so that changed my view I think the suu stop is here to stay uh and might uh yeah might might cons might consistently be the top three or top five decks in the space going forward if they can keep up the Innovation yeah MH now what I like about them is they are also working on a pretty big Upgrade U called Beno box I think it's like it's almost like a global repper for for like all the assets that that exist in sushi Swap and the goal is to increase the

capital deficiency of uh basically all the money that the LPS put in there so tokens Can Be can be lend out or made available for Lending uh as well as uh sit in a DEX pool at the same time so this kind of goes back to how how uh the white pool in Cur for example did it yeah definitely I guess what's interesting about sushi 2o is kind of uh kind of you know FTX alamaa they they were one of the biggest LPS in the beginning and um kind of took a more active role there as well and then kind of proposed um various Integrations with salana and serum and then and then you

kind of see now Sushi exploring um moon be and polka dot so I I do think too that because Sushi is very um Grassroots driven and sort of it's just based on what the users ultimately think is the best direction for them uh I think I think Sushi is going to be quite quite a trend Setter in terms of going cross chain whether there's value to do so and and going toward uh just as chain agnostic and as you know principal agnostic as possible and and sort of more just uh trying to maximize value for holders the the the third deex is zerox and um I actually don't know much about

it probably the exch the one of the dexes that I know the least about so I'm very curious to hear what would you say maybe in relation to the ones we've already discussed Unis swap Sushi swap so what is uh what's ZX doing uh okay so I think probably I'll I'll explain it so uh zerx is actually the I think one of the first uh uh one of the def one of the earliest uh decentral exchange protocol uh they they in itself they're actually not a deck they actually a protocol for decentral exchange to build on top of so I think what they have discovered is that uh at that point of time that you need the common protocol for different decks to build on top so that you can share liquidity so their model is a little bit like the RFQ model and adopted by the

professional Market maker RFQ being request request for COD yeah so yeah so you can you can you can press a button you get a quote from the market maker so they the order book is not onchain it's actually like a offchain model maintained by all the zerox Rel layers to communicate each other and to to to match the price among each other so yeah so I think and obviously there are some economic uh uh incentive to ensure that they do match order and do not front run their their users so there are certain uh economic element in did but basically it's like a offchain order book uh but onchain matching model but the it's not as exactly order book it's like a RFQ that the relayer will like talk to each

other to share the liquidity um is definitely one of the more longlasting uh descent Tri exchange protocol because as it was launched in 2017 and uh the io and I think they launched a product uh in late 2017 and been used since then obviously the adoption has been pretty slow uh but it has always been there since the beginning uh but I think some of the issue was during the earlier stage a lot of the more promising relayer like paradex was actually acquired by coinbase but I don't think there's any development happening on paradex right now it's kind of like being sunset uh then there was a rather relay uh but again I think that is also being Sunset I'm not sure what's happening the team doesn't seem to be building on it anymore the the the domain is still there you can still use

it but nobody's really using it anymore so the problem is I think the incentive is just not sufficient and the volume is also not sufficient for the relayer to really make a living from building a zerx relayer so uh uh that is kind of the challenge that lead to like none of the zerx really really successful that's why before Unis really changed the Dex landscape uh the volume was always only zerox idex uh and a kyber so before unisoft become successful this is the three only dexs that really doing some volume but still very minimal it's less than $1 million volume a day so it's nobody really cares at that point of time uh recently they kind of have some mini Resurgence uh because I think they they changed the token economics a

little bit uh I think it was uh early this year or late last year um so that you actually the fee does go to the zerox relayer so instead of a pure 2017 era of like utility token you pay to access Services uh it become like a little bit of small value capture inside the token but it's still pretty insignificant I would say um then uh and there was one uh wallet uh the in token wallet which is the most largest uh ethereum and actually crypto in China uh they actually built their own version of zerx relayer called token loan that actually Builds on built on XX protocol and that has been quite successful for the last six month and that actually drive I would say more than 90% of the zerox relayer volume

right now oh what yeah so uh yeah it's just a mobile based Dex uh and it's a zerx relayer that built on xerx protocol the Chinese uh especially Asia user will be more familiar with it uh because it's really the biggest uh ethereum wallet in China yeah and obviously and they launch their own aggregator matcha uh which is quite similar it's a tax aggregator which aggregate liquidity from every place but they also have their own proprietary liquidity Source uh by the Periscope which is their own Market making arm of zerox uh which I think is driving decent part of the ZX protocol volume as well so I think that aggregator play which is MAA has been fairly successful so it's been making them the top three top top five Dex by

volume right now yeah but I think that uh I think that is um I'm not sure what's the next step right now uh yeah I think that that's a key question I think the token has been there it was this on coinbase like since 2017 uh definitely one the more old school D5 project before the term D5 was even created but right now is definitely losing a little bit of shine among the latest crop of Defi and I think that we just need to know what's the next step uh before that people have been more interested in did yeah zerx is the only Exchange in this list that's not an amm I think right it uses kind of order book based model um uh correct yeah kyber is like a qu hybrid am yeah but yeah oh yeah okay yeah I was going to ask you so what do

you think about this debate going going forward which of those is is is going to win the amm or kind of the RFQ aut book based model I think this is a very interesting debate and I don't think we're going to see a conclusion so soon uh I think that everyone uh a lot of people people even in the D5 space including me myself was pretty skeptical of a pure xyk constant product uh amm model initially because you think that beyond the longtail asset uh it's just too Capital inefficient to work but uh I think I think probably you guys discussed in this previous podcast before like you actually do not have to be the best solution you just have to be good enough solution for a lot of the retail user that actually do not have a

better solution for them so I think that uh this so I think am is definitely going to be there for a for foreseeable future but again I don't think order book model will go away uh I think for spot Dex uh definitely I think amm have a stronger H right now due to the underlying base layer issue but uh I think if the base layer performance can improve further probably we can see audible based decks to be able to compete with uh amm based decks in future but I think that uh another innovation of uh amm Dex is it brings about like the combine some of the asset management element with uh a DEX uh liquidity provision because that if you

have like a if you think this two pair of assets going to range Bound in value it actually makes sense for you to provide liquidity using the constant product model and that is inde an innovation so that people might not be just providing liquidity for the sake of providing liquidity but it's also they they are attracted to the asset management element as well so um yeah I think they both will coexist but it's too early to write off uh aable uh decentral exchange right now yeah there was kind of an aha moment for me when I realized that an amm Bas Dex is is more Dex as a kind of site product uh and actually you can think of it mainly as as basically an investment strategy for investors who want to kind

of sell volatility and to uh yeah basically want to be re rebalanced by the market to have fixed weight of assets in their portfolio right which is how ETFs for example work another protocol that leans into the kind of fixed weight uh investing framework would be balancer because it allows uh more than two assets to be in each pool and that's one of the main Innovations in balancer so so you can have more more Assets in a pool um in a fixed weight with each other and um people can have way more customization uh available when setting up the pool so they can actually change the fee that is charged uh it's not a standard fee like on Unis Swap and

um they can also change the curve itself I believe so um what do you guys think about balancer I think it's actually for me uh even until now it's definitely one of the bigger mystery in D5 on why despite the similar feature uh balancer lack behind Unis swap or and even Su swap so hard in terms of the user number and also volume like uh if you look at the latest number uh I think that the balancer TV is not that bad it's around um 600 million volume which is around half of uh let's say Sushi volume but uh there was a tvl but when you look at the volume uh Su is doing 150 million volume

today for the last 24 hour and balancer is only doing 25 million volume so uh the volume to tvl ratio of balancer is very low compared to both suop and unop and in a way both Su and unisaw is actually only a subset of balancer when they come to the am model because balancer you can do 5050 weight you can do 8020 uh 9010 and even like a 30 33 33 33 um so from a pure logic uh like like a quantitative point of view there's no reason that you should not use balancer over uh unisa or sop but the fact is it is way less used by defi users I think that a commonly cited reason is the user

interface and the user experience is just not as good as both uni and Sushi um and I think it's like the the gas cost is higher uh although I think for power users that's probably not the main reason um but I think there also a lot of the TV there is actually quite of stale like the people who are there is just actually kind of to farm the the the balancer pool token and also to farm the other uh Native token reward pool for other they set up that liquidity pool in balancer just to have some sort of liquidity but usually their weightage are not 50/50 uh sometimes 8020 which is quite suboptimal for certain way for for for One Direction of trade so that's probably the reason that drive the big

disparity between the volume to tvl ratio for balancer and I think the uiux and the gas cost issue definitely plays a part and um beyond that I actually think that uh it's a decent product uh I think that you is is a further next step on unisoft in terms of combining Asset Management like investment product with uh a liquidity provision and it's even more customizable and it's also the liquidity B bootstrapping pool which is uh used by quite a number of D5 protocol to boost the initial Equity was also a good Innovation so I like I like balancer as a product uh The Innovation and some of the features but uh the fact is it's not as uh gain as much traction

compared to both uni and sui for a number of reasons and yeah so I think that it's just that they probably just need to innovate improve their uiux uh low optimize their gas cost and find the next step yeah but I'm not I'm not 100% sure what is the next big Improvement coming uh yeah yep yeah I just would second the idea that the balancer user experience is pretty bad um think you get a lot of failure messages that for normal users I don't really understand what's going on I think there was like a few bugs in the early days too that were pretty scary for people um which is really quite ironic right because if you remember like WiFi farming that those are all balancer pools so you would have

thought that given the massive growth of Wii since then that balancer would have done better but somehow it didn't really manage to uh deliver something that that people wanted to use every day yeah yeah I with thought those concerns so the ux is I mean it balance has probably maybe of all the projects on the entire list the one that has like the biggest question marks in terms of like they are so obviously low hanging fruits that you could improve and it would just make the project like a couple times better right if you only forked unops uh front end and user interface then would immediately be such

a relief like I don't think anyone really uses the the balance of front end like all the volume that's actually to balancer is from aggregators because the existing front end is is such a joke actually and um I also think you're totally correct that a lot of the liquidity is is stale um we we looked into this a while ago and balancea is actually the of all the decks is the one that has that pays the most for uh liquidity in terms of token rewards um but it's I mean it's I always want to say it's like a circle jerk because so like a huge amount of the liquidity actually goes to B holders

right so they I want to say it's like 50% of the entire rewards goes to kind of bell pools and um even Bell against like like third or fourth class defy assets that have absolutely zero trading volume earn huge amounts of rewards just from being like in a 5050 or 8020 pool with Bell so I think that it's a project that has like so many question marks about it but at the same time it's fundamentally looks quite good but I mean maybe maybe they I don't know have to revisit some of their actual business decisions so Bor

um I don't don't know much about it other than um it's sort of a one-sided uh amm model so how does that differ from what union suis F do okay I think B call is also one of the oldest uh decks in the space and actually they are the first one to come out with the am model but uh I think the difference is uh so okay I think some background story actually B launched one of the biggest Ico in eum history I think they raised more than 100 million from the Ico and actually got a lot fair amount of flake from the from that and but they did launch a product uh I think fairly early on I think late 2017 uh and they always been working since 2018 so yeah you have

to give them credit for that for really building a product during the bare Market but the check the main difference is Bank call you have to uh it's also amm uh but you have to go the liquidity is concentrated on the BNT token itself so instead of like a hoop from Eve to USD you actually have to go from Eve to bankor then from Bank call to USD so uh I think that create a lot of user friction a lot of people don't want to hold the bank call token just to provide liquidity um so I think that you can say that's probably one the main reason that bank call uh Unis did so well compared to bank call because a lot of the if uh ethereum they just don't want to touch anything except ethereum and or probably some other stable coins so they were

happy to provide equity for E to USD but they just don't want to touch any coin especially the Unis early days is really supported by many ethereum bills uh before the whole liquidity mining thing so I think uh so that's a friction but they did have a massive Improvement recently uh which is like you can provide a single set liquidity you do need to provide both token pair uh and actually how they solve the impermanent loss issue they're actually going to use a bank called BNT token itself to provide subsidies as an impermanent loss so if you s if the liquidity provider suffer impermanent loss uh they will actually I think issue more or just take some of the existing BNT to uh give it to the liquidity provider to uh like cover the impov losses to incentivize a

liquidity on BNT and he has launched it a while back I think it's called banko V3 uh I think he has seen some improvement some traction is doing around 7 million uh every 24 the last 24 hour uh see some slight increase in TV as well but still not at the top five tax by volume right now so I think uh it's a constant is am model similar to unisoft uh and is even have the permanent impermanent losss kind of subsidized by the token holder as well so again I'm not 100 I'm not super familiar I'm also not 100% sure why it's not as successful as the both un ass but I think that is probably some uh user experience reason as well and uh

personally I um I I am a bit uh wary of the previous uh uh uh the work done by the team on how they handle the whole Ico and also how how the whole EOS thing I think there was some controvery I'm not 100% sure I didn't follow that much but I think that they are just they are not always not not the kind of the favorite Child of the ethereum community and you cannot underestimate the importance of ethereum community that me they just don't like bank so yeah I think that's it about B call so three arrows actually invested in kyber pretty early right so um what

can you say about kyber the last exchange on our deck list yeah kyber we have a good relationship with we've helped them with a variety of financial services as well I think um definitely a very early project as well a 2017 project I think Arthur can probably speak to how he sees it uh playing out in the overall ecosystem of de it's definitely gotten more competitive these days but I think I think what's interesting too with like KC staking is that I think they kind of pioneer the idea that you will get a instead of a buy and burn you're you're going to get actual cash flows from the coin and I do think that that's

a that that's a superior model I mean it's worse for people who have to pay taxes but I do think it's generally good to assume people not paying taxes in defi um like like I would just assume this like as a rule so given that people don't pay tax in defi I think that I think that um it's better to that they have their knnc staked and then they're getting cash flows um while they don't have to touch their balance I think that that whole user experience has now been convincingly shown to lead to better engagement and better understanding of what kind of returns are being offered by the protocol and also how to improve it uh so I think Kyra kind of was at the

Forefront of that as well yeah so uh I'm pretty familiar with kyba um so I think the interesting thing is uh I actually followed their development process pretty closely fairly early on uh and also U so I think the interesting thing is kyba was fairly under uh the radar for most part of the 2090 I say that even though they actually by volume the top three uh for the most part of the 2019 so uh second half of 2019 like kyber and unisoft uh was consistently the top two decks by volume obviously the time change they right now they're not in in the top five uh and I think that their model was always kind of like a quite ahead of its time they kind of think that onchain

liquidity is very important so they everything for kyber is on chain if you're a market maker on kyber every like new code you're providing is actually a new transaction on chain so actually yes is quite expensive but uh they have a different way of providing liquidity so that's why it's like a hybrid amm so there you can use a Unis version of a constant product xyk model uh for the like usually adopted by the treasury team like synthetics or others like to just have a very passive way of providing liquidity on kyber and then you also have uh like a professional Market maker can use something what they call a fat price Reserve model to be to add to customize a lot more on how are they providing the liquidity like the pricing will not be

like a constant product it will be a lot more like a traditional order book way of like decreasing uh liquidity as you go further from the mid price um and it was fairly successful at that point of time and yes they and they recognize that they were one of the earliest uh o Ico old5 project to recognize that yes they need to change uh token economics and that's why that uh they have changed it to to that you have to participate in the governance to get some of the free reward that is non-inflation is paid in ethereum and they also still remain some of the the burning component as well although it's a fairly small part of the total token value capture right now and I think that uh uh so and I think they

have always maintained that it's the capital efficiency is fairly important because uh I think during late 2019 uh they were doing on par volume with unisoft at 110 of the capital the tvl so they think that okay that model is clearly Superior because with way lower amount of capital we can support a higher amount of volume and so I think that is they have always believed in that and I that's not wrong it's actually correct in certain way but I think what uh what they don't really foresee happen is including me as well is how underserved the retail is in terms of they want to actually want to have some product that can actually also earn you and probably help the project that they like at the same time they

don't mind providing some extra liquidity and when you have like a 5,000 retail token holder that each of them proba like a few thousand liquidity at some to be a pretty significant part of the portion of the total liquidity and help to bootstrap the initial liquidity Pro until the professional Market maker step in so I think this is what they don't really foresee and so they always been more thinking that the professional Market maker is the better solution to solve the liquidity issue instead of the Gathering liquidity from uh retail to do that so I think that that's why that when the whole def5 summer happened uh balancer launched aity mining campaign and also unisoft did the same thing uh they did not have have the room to innovate on that because the token Supply is already there they can't

really change that much because they already the token sale back in 2017 so uh they are a little bit restricted in that and as a result their volume did not experience a parabolic growth like what happened to uh unisoft so Unis one have probably grown 100 times this year uh they and kyber have probably grown like 10 times it's still a very impressive grow but when you compare them to unisoft is it's an auto magnitude difference right now so but that say is definitely one of the more leg most leged def5 and Dex protocol but I think that they are doing a little bit of a soul searching process on the next step on competing in the deck space because it's definitely very competitive right now that sort of wraps it up for for the

Dex category and I'd have a question for you about this whole category so what do you see happen in in 2021 for example do you could you imagine that centralized exchanges start roting uh orders to dexes and sort of act as the front end for for the user and acting with a lot of these uh interacting with a lot of these defi protocols I think that um I think the cange will not do that do it directly I think that's not really within their their responsibility I think they will just delegate this task to the professional Market maker which is uh prevailing right now they probably for

some of the longtail asset or some of the new asset that just get listed on Central exchange uh I think that the professional Market maker will actually Source the liquidity from the central exchange so that there are sufficient liquidity on the central exchange I think that's actually what happened to probably WiFi I think because I don't think Wii have official deal with any of professional Market maker I think they probably have to get some of the token from the central exchange themselves because that's the only source of liquidity all from binance yeah so so I think that's yeah I think the professional Market will do the job for the exchanges yeah and I think in terms of uh The View on 2021 uh I think that the market share uh will continue to

grow that means I think that Dax volume will grow at a faster rate than Central exchange but I think that both both of them the volume will also experience a pretty exponential growth as well I think it's possible we see like a defi uh Dex do like consistent like a 500 million to1 billion volume a day uh and I think that if the layer two solution adoption is as successful as what the most optimistic person think uh yeah I think that that's possible yep yeah I think definitely we'll see CI and D5 volumes grow especially for the uh exchanges like binance.com and the the ones that are um non us I I see as

um almost having already been a sort of like cross chain layer too right in a sense be because you're depositing various different coins to binance and then they're giving you back uh like other coins that you can withdraw and and I think you've seen that volume go through the roof uh along with defi actually so I think what what kind of um is is likely to happen is um is that these exchanges are going to be able to offer like cdy that kind of makes sense for them where they're getting a cut of the the staking reward let's say in the case of sushi or something else um and conversely uh users that are already quite familiar

with the binance experience or some other exchange experience they'll just use that and they don't have to deal with onchain um so I think you kind of see that High Hybrid approach um I do think though that there's going to be continued like pressure for exchanges to list like the popular dii assets very quickly because nowadays you know an asset just comes out it's immediately in Unis swap sui Swap and does well and exchanges rush to list it I think that that's only going to continue and and I think like they're going to eventually try to figure out ways to support as many of the beneficial

actions on chain as POS possible for users because that stems the flow of capital out of centralized exchanges and gets them to stay if they think they can get the same benefits uh on the exchange moving on to our second category I labeled this The Lending category and um we have a projects in your a compound maker synthetics and humor but I would further distinguish between protocols where you can um where where people basically deposit spot coins and you can uh basically lend those out and other

people can deposit collateral and then borrow your the coins that you put in but there are no new coins being issued and then coins like maker and Sy synthetics where you deposit collateral but then the coin that is issued is actually created um from that collateral so it's tokenized debt and that debt can be stable against an Oracle and that's basically how you can create any synthetic asset that you want that's kind of how all those three works so but let's get first into the spot Landing category so we have a and compound yeah so I think that uh the spot Landing category is uh it's kind of

interesting uh because it's actually quite obvious that uh there's two very dominant uh leader leaders uh in this space right now which is a and compound uh and I think all the others don't really come close so it's really a two-way race right now uh and I think they are quite interesting because uh compound was definitely the first mover uh and but Al managed to catch up uh fairly uh earlier on and I think that their main difference is really like a a traditional kind of a a faster moving uh agile newer Comer against the more established uh uh One Vision they are like probably move a little bit slower uh they trying to do things in a more

careful and cautious manner uh I think and that's uh what the main difference between Ave and compound so I think I'll talk a little bit more about Ave first so a I think that the what they did is like they strike a good balance between uh Innova thing Innovation and also the the security of of uh of the protocol because being a landing and B protocol the security is uh is probably one of the most important thing because if they have some issue the entire asset of the protol can be drained so it's good that both compound and a have no issue on this P that people cannot just drain the asset randomly um and I think that uh that when you stri a a good amount

balance between security and Innovation and uh that is what we what drive a significant part of the growth of a so a was only launched I V1 was launched in January this year uh and they hit like a one and a half billion of TV during the D5 summer which is in less than seven months so I think that even during the fintech history you probably have not seen such a fast growth in tvl before um and that was without their own native liquid money granted they get a lot of help from uh y from their own uh kind of like a stable coin U project that just automatically redirect to a but nonetheless uh one one and a half billion tvf in seven month is very impressive I'll say for anything in the

and and yeah and the protocol is secure enough and the team is really uh like they know what the community Wass and been very reactive and responsive in delivering that and uh their token economics also is the same they were actually an old I it was called L and they render to Ave and they actually know that their old token economics is not the most optimal one and they actually spent a lot of time thinking about how to improve it and I think the outcome was uh fairly successful I think everyone think that the the token was a very well designed and especially that it it has some sort of value capture but it's not like a pure ring because the a token holder that is sticking are actually providing kind of like a insurance back back stop to the lender

on the protocol so if there's under collateralized event uh for the lender alv Staker is actually responsible for like kind of like a slashing some of their state to uh to repay the under collateralized portion of the debt so that this make the ler feel safer to interact because you know that it's like a some sort of back stop in the PA so in that sense it's a little bit similar to like a you can think of in the conceptually like Equity of the bank like uh the bank Equity is there backed up the B bad depths yeah so I think that is the the good token economic design part of arway and right now they have some small amount of liquidity mining but it's like the U is so low it's like probably less than 5% a year so it's not

really the main reason that people going to go and uh like Al I think Al there's a lot of organic economic activities and the Flash load Innovation yeah is one of the they they the one that popularize the the term and also the the usage of it so yeah I think they definitely one of the top D5 team and a very young and very fast moving agile team that doesn't sacrifice the security of the protocol at the same time which is a pretty uh uh rare and uh important combination I think that uh I I expect them to remain the top uh landing and Bing protocol for the forceable future and for compound uh is definitely the first one to popularize the money market based uh approach to landing and borrowing and uh and this has been proven to be extremely

successful and even the earliest like D5 protocol one of the earliest Dharma actually pivoted from like a pure matching based model uh to a pool based model and instead to build on top of a compound so I think that uh this the this approach is definitely the most successful approach and uh they have been very secure have no major incident so far and they also uh kind of synthetics is technically the first one to start the liquidity mining campaign but compound is the one that started the whole CRA of liquidity Mining and I think that is kind of like they get some credit for jum stopping the entire Define summer over the last few months so it's definitely one of the more successful protocol but I think that

right now uh the new direction of compound chain uh I think there was still a lot of question uh what is the main take away from this I think that um the vision is probably to connect all the different chain including probably some cbdc I think that's some of the speculation uh but that vision seems very big I'm not sure how are they going to pull it off in practice uh and right now it seems like um initially when they launched the governance module uh there was a lot of interest and passion for people to keep improving the compound protocol but right now uh I think the passion kind of w a little bit uh that the governance did not move as fast as it used to uh I think that the team probably uh I think the pure decentralized uh method uh I think this

apply to RV as well like I think that the governor's apathy real like pure one coin One V uh will will leave to a lot of people just end up not participating as well so I think that uh not sure how are they going to keep up Innovation if the governance uh keep having a little bit discount like a stale issue yeah yeah I think compound a obviously by far the two biggest uh Bor and lending uh my firm 3 a is also pretty active in the ODC Bor lending so it's been fascinating to kind of compare and contrast the different uh approaches that they take I do think compound was very uh preent in in seeing that the

broker matching model uh would kind of not be the one that takes off and has a network effect uh in in onchain in in in decentralized finance for the main reason that I think pure to pool activity is is definitely preferred where people can just Supply assets and get some yield no matter how small they can put something in and they can borrow against it so I think that kind of two-sided uh asynchronous borrow lending is is pretty is pretty interesting and you you know they kind of basically invented yield farming as

it is uh where people are getting the comp token as they Supply and uh borrow from it and they definitely had a very ambitious um token emission program which was intended to get people to participate uh as much as possible in the governance and give it to the users so to speak um so but but I do think that the the idea of you know yield farming and and liquidity provision I think it it it does always raise the question of who will actually be the users um right because because every activity that has a dollar reward will become a dollar auction you know who who

has the capital and who has the desire to earn that coin and what do they really want do they want it to earn that reward because they want to participate or do they want to earn that reward because that's the highest Roi they can find right so I think compound kind of suffered a bit from that kind of mercenary uh farming activity and I think it's something where because they have they have had to rely on that for their tvl it's kind of something that they can't get away from either right because if they stopped rewards then the tvl would also collapse and and go to a so they're kind of stuck between a rock and a hard place because the TV all they

have is is generally there for um for farming uh especially double-sided farming but then if that were to the farming were to stop in any way then it would go to a so you're in this kind of a very tricky spot because because of the way that it's put positioned in the market um so I think that's the biggest challenge for a compound I think a um you know for its part it it also is very reliant on it its own native token but also on uh link as well where there's like key assets that are in a and not in compound um things like that um but I think what what they've been

better at is having better terms for things that people want right so like wbdc collateral factors and and you know having WiFi earlier and and and all these type of things uh I think they're just a lot more reactive a lot more responsive the government is a Sounder as well the the token distribution is much better so I think it's not a surprise that it's outperformed compound quite a bit um I generally think it'll continue to do so for those reasons as well yeah um I agree but also I would say like credit Rec credit is due I always love to like when when I tell someone new about compound then I always like uh sorry about defi then I compound is always one of the first projects that

I talk about because it brought a lot of fundamental innovation defi that makes defi very different and unique from traditional Finance right so for example the uh one of the first things that I would mention is kind of tokenized balances right so when you deposit collateral into compound and are there of course then you get uh an A C token a compound token um and you can use that compound token that represents your your savings in in compound in other protocol right so and Arthur actually touched on that with the cooperation between Ur um and Ave where uh there were white to so-called white

tokens that actually put um basically your money into uh a and a couple other uh money protocols depending on where you get the best yield at the time and then you could still put those white tokens into curve amm pool um where so they would actually earn triple yield at the time right um which was uh was I guess one of the best yield farming opportunities at the time yeah so um the difference between the synth synthetics Landing category and the spot Ling categories in the synthetics lending category the asset you lend is actually created from thin air it's basically it's you can think of

it as tokenized debt and that debt can be stable against uh whatever you want what as long as there's an oracle that provides price data then you can you can do that and uh the biggest ton of those uh would be maker and maker issues only one synthetic that's issued from collateral and that uh synthetic is D it's the biggest synthetic stable coin uh as of right now with I think uh about about 1.2 billion die in circulation so what do you guys think about maker and die I think that uh maker is uh first of all definitely should get a credit for being actually the first def5 protocol

uh and to launch successfully and get some of the adoption and proof that it's possible to launch a decentralized stable coin and have been through multiple uh big Market correction event and still be there I think that's definitely not easy existing itself is actually a big issue because actually I remember that I was very bullish on stable coin back in 20177 I was actually looking into what are stable coin projects that we can actually invest in and there was T but that you can't really get a price exposure to t uh and I found about maker and there was actually a lot of the theoretical debate back then about like how uh like the flaws of maker model is not going to work you know it's not going to scale and despite all that like yeah still

like more than one billion die in the circulation right now uh which is a success definitely a success um and uh the model has been like it's shown to be possible to push a DEC C stable coin from scratch uh so I think that is definitely uh credit where is still uh I think and I think that's uh and being the first D5 protocol to the major D5 protocol they get a lot of uh support from everyone in the space because everyone initially want to see them succeed so when you see the q1 2019 when the D5 getting started uh dma compound no that time they all support the D because they like kind of the def facto stable coin of the D5 it still is right

now but I will say that usage of other stable coin have increased significantly in D5 right now so um that is a definitely so it's definitely one of the more it's definitely the one of the top D5 protocol out there um but I think that also that is a lot of issue uh so I think I'll be probably a little bit not so politically correct on this which to say that uh if you're like a super knowledgeable and sharp uh have a good understanding into D5 fairly ear on because I would say the true smart money already recognize the potential of defi in around mid 2019 everyone kind see the potential but just not sure how big it will be um and there are some that think that okay the maker mkr token is the best way to get exposure to def5 because

it's the leader of defi what can you go wrong it has the biggest adoption by far yeah the too economics have some issue but it can be fixed uh yeah so if that is a thesis you put all your money into maker you underperform so much during the def5 uh wave this year I that's just not even an understatement like you even underperform if ethereum itself which if you ask to I think you have a lot of things to stay about St um so I think that that's the kind of irony like despite being one of the most successful Diva protocol the it's not being reflected in the token price of maker itself and that kind of lead to a lot of the disillusion among the community and

I think that uh like so right now I think the governance is um there's obviously still some uh very passionate uh Co commun member participating but I don't think there's a new Fresh blood joining the maker Community to really participate in the governance and drive them to a New Direction and uh I think and their approach of trying to onboard centralized asset as part of the collateral base also have also CA some of the difference in opinion among some of the key Community member uh because they didn't that means it's not f sensorship resistant anymore other if it does allow D to scale faster and bigger as well so I think there a key debate I don't think there's a right to or wrong

answer to that uh but again I think that's has caused a lot of challenges and I think that the next step uh for die is pretty challenging in a way that how how is it going to go beyond the next step are you going to take the real world uh assets such just like some of the uh mortgage uh into as asset so why how I going going to do the offchain liquidation I I I think that is quite challenging uh and the value capture also uh very uh Toro review on how it can align the success of the protocol together with the token value because right now that is clearly not working and among all the token model like a buyb and bur is the least preferred model in my opinion because I think a

placeholder VC wrote a very good article on that like basically if you like early stage growth stage uh B like company or like a network protocol you should not really be like burning your token because that's kind of like a destroying your network Capital which are 100% agree with like at early stage you really should invest in growth instead of like a burning away your uh your token because that's a redin red domination of it can make the token price go a little bit but I don't think it really serve the protocol much in the long run yeah so I think that's the D maker so if if you could if you were put in charge now uh in Mecha is the kind of level in dictator uh what would you do to get the project kind of back on I

always don't want to say back on check because the die growth has actually been so impressive um it's at $1.2 billion in comparison to the second biggest sthetic stable coin s USD which we'll get to in a minute is at 100 million um so what would you do to yeah I guess reinvigorate kind of the passion for for this project and uh get some rewards to mkr holders for example I I think it probably do like a open call to The Wider D5 Community to give an input on what is the best way to improve the maker token economic going forward because I think that most people will agree with me that the current

model is not the best model for maker I think yeah there's kind of like a consensus among a lot of people right now uh so I didn't get an open call and I think some of the bright Community member can probably put up some very uh thoughtful proposal and they can combine a few proposal and come a better one to incentivize more Community alignment uh with the growth of the protocol yeah and also I think that one of the thing that maker is not doing which is Count you can consider them counter trend is like most D5 protocol are actually rewarding their users for using them right now I know it's not sustainable but at the early stage uh it makes sense to do that to incentivize user to use a protocol but maker is actually not doing that uh if you are like a user of maker which is

like you open a uh CDP they call W right now you paid stability fee uh you're actually not being rewarded and depending on who you are a lot of the user will actually penalize for using as early user because when March 13th happened a lot of people were liquidated for zero that time and they're not getting any compensation and the the response is basically that oh this is the early stage PR there's experiment that you know you're taking the risk of using this it's too bad that's definitely destroy a fair bit of the community confidence they need to restore that back as well so I I think that that's what I would do to really change the token economic and find I I I wouldn't even mind printing more token I don't think that's a St good car I think

just like a number so you should able to like inflate the supply if you think it's necessary for the protocol to grow uh to the next stage yeah yeah I agree with a lot of that and I think too like I mean I've been quite publicly bearish on maker for for I think almost two years now and I think actually not only has it out like underperformed defi I think it actually has underperformed dollars uh which is quite impressive to to even be able to do uh that's true yeah like I for like three years yeah and and I think it actually it it it gets at the heart of a bigger problem for some projects where if the if the coin distribution is

too is too tightly controlled by similar types of thinkers or players uh let's say us VC's then you end up with a lot of uh you know choices that are not necessarily made for the interest of the community or the interest of the users but for the interest of the investors right and so like that that kind of question of how do you make your users Rich from using it well maker just decided they didn't want to do that at all right they they kind of saw that as as not part of the mission which kind of defeats the whole purpose of defi in in some ways where the users are not benefiting from the protocol doing well uh you know they don't have any like the maker holders

are completely divorced from the CDP owners uh which creates this impossible traction where their their incentives are always at odds and I think too like even talking about buy and burn versus staking right like because the US VC's are the ones holding it and because staking is so difficult for a lot of us VC's because of the fact that once you start staking a coin you uh trigger a lot of tax issues especially for some of these USBS that have uh that have L LPS who are Charities or who are like uh nonprofits as soon as you get this like staking yield element and this kind of element it sometimes can trigger a lot of

complex tax issues right for uh for some of these investors so so basically you you end up with this like prioritization list that ends up having nothing to do with defi has nothing to do with the protocol but it it has to do with like who are the bag holders uh and what do they need at that moment right and and so like a good example of like you know maker price being like pumped high and then overvalued is like they need it to be propped high at that moment to make it look like they had adoption or they made it look like it did really well right let's say they want that so they can raise a second fund but you know if if that's what you want then that is obviously not going to be

good for your users who then follow this and then buy it at the top and then have to watch it be flat in dollars over three years right so you know I think I think these kinds of things these kinds of things are are the very kind of thorny issues uh in our space and and there's there's honestly no right answer because I mean two makers credit they they have created a very successful stable coin they have created something something very excellent uh it it has challenges but it is used uh and it is growing and the code does work it's it's audited uh it it's withstood some tests of time it it it's failed some of the other tests but like it kind of It kind of you know gets

back to what I mentioned in our previous podcast which is like what makes a project a success for a failure right like zcash could be the most successful Fair coin because it makes people poor so that it's fair right it in like in that sense like like maker also makes you like it makes you poor if you bought it but you know if you just really wanted to borrow uh you know a decentralized table coin against your ether and you happen to not do it during the bad times like that succeeds and if you just want to hold die like and you put it into some defi protocols like that works so like what like who gets to decide of it's a failure is it just price alone right it's I I don't think it's just price right so so I think it's a massive success his own merits I think

price-wise it's a failure by Design I think the price is designed to fail in in kind of that sense um but like to the extent that it kind of is achieving its its initial goals I think it's already surpass some of those goals and and I think too like even with the on with the offchain stuff and and with like that kind of stuff if they do end up getting like a regulatory mod for themselves if they are if you know if their backers are closer with government uh Regulators I can imagine like worlds where they have a privilege place in in kind of be able to do that road uh I I'm not privy to those discussions and I'm not I'm not

privy to how that works but it very well could be a reasonable Road for them to go down to if they think that they have the clout to do so right like if you like imagine if they get the ability to do mortgages while nobody else can because they're you know like that's a great like like it's not up to us to say that's good or bad if if they can pull it off then power to them yeah and there are two kind of competing Visions when it comes to these real world assets right so on the one hand people who are more focused on the stable coin they they would say but if you include real world world asset assets those are by definition censorable so if D is then partially backed by these assets then d d is not

actually the centralized stable coin anymore but on the other hand you could argue that actually maker creates a lot of value for its users um if they can get liquidity on kind of Arcane assets that it's very very difficult to borrow against otherwise and um all it takes in defi is kind of price Oracle and you need some way to liquidate them uh if necessary but if they don't really like if it's price stable assets then you don't even have really the problems with liquidations and it's really a huge unta field for example borrowing against debt right so you have kind of you're a business and you have uh you have

basically payments incoming in the future uh payment obligations um from your customers for example then you could you could deposit those in maker and borrow against them or royalties as a musition or whatever right so those things are extremely stable against against the dollar so you don't even have really the problem liquidating them and um I think that's where a lot of people in Meer want to go um I just hope that they don't forget kind of the the token holders along the way the Meer token holders should we move on to synthetics sure it launched as Haven right back in

the day um and was actually a very direct maker competitor yep um and I remember the them having a series of really excellent blog posts that's where I kind of first noticed them where they um where they really wrote great fundamental analysis about maker about basis which then never ended up launching um kind the algorithmic St coin and uh yeah and kind of the Haven Vision yep and uh I would say those posts they are still online today and they still absolutely worth worth reading yeah absolutely so I think that uh yeah sythetic is actually the first

D5 protocol I invested in so uh it goes a long way on this but I think uh currently uh synthetics is actually uh if you look at circulating market cap is the number one uh right now if you exclude chain link and R Bitcoin and die I mean talk about like nonstable crypto asset it's it's number one right now and I think that uh again I think it's like show that in D5 uh a lot of the things you can actually consider kind of like Alchemy of Finance I mean uh most people know that I'm a big uh supporter of uh synthetics but uh and a lot of the initial skepticism will actually correct in a way that uh how do you really uh

bootstrap a stable coin or a synthetic asset from their own native token because that in itself is like a cirular reasoning but I think that uh uh what changed my mind is actually like really one of the uh blog post of sthetic actually that is to really as long as the there's value created from this Services uh the collateral token should be worth something because that means that people are actually willing to pay to use those services and the fee that go to the Token holder uh is what make uh the synthetics token uh snx token valuable so I think that in that sense you can think of them as like a uh obviously initially is nothing but it's like just like early stage Equity it has the equity is not worth anything they

the founder raised it and based on certain future expectation of what they going to do to make it such in a way that it will be valuable in future so I think that's what uh make uh what the difference of uh synthetics value model that confounded a lot people earlier on so right now uh snx uh in the simple term basically you collateralize snx token and you can create various s synthetic asset and you can trade those synthetics asset around and the fee will go to the synthetics uh snx token holder that are sticking it so uh so that's a juice of it and they are also the earliest the first launch partner that kind of partner with a optimism optim a layer two solution that is using optimistic Ro up uh yeah so I

think that they really need the layer tool to solve their uh the current gas price issue because you interacting in synthetics is a very the gas gas price can be very high so they really need that layer two solution but uh I'll say it's definitely one of the most uh has definitely one of the most vibrant and uh active Community around and that was have went through a lot of the different tough time so that the community is fairly sticky I mean there are some CH here and there like I even me myself I was not as active as I used to be but I think that a lot of the bright people are there helping the protocol and even K has uh have delegated some of the responsibility away to the community as well so and uh their approach on

governance is uh pretty refreshing I think that uh like they think that the pure one coin One V model is probably not the most optimal uh is that you lead to a lot of governance apathy and all sorts of issue and the whale uh calling the shot and the smaller token holder would not feel uh motivated to vote which is uh the correct assessment actually so they went for like a more Council model so I think that governance is also refreshing difference between compared to other D5 protocol um and I think that yeah they are definitely one of the most uh the whole team is uh very uh good in execution and fast moving and yeah but I think there's some uh I think some of the key uh like challenges is like the uh as of right now the Deb pool

because as uh if you're staking you're actually taking on the de pool exposure which can go up uh if a lot of the uh sythetic asset Trader is actually profitable so I think that uh it's a little bit at being in the house and they it's always constant process to mitigate this issue uh I think the next version of the product we'll be able to uh largely mitigate this issue but I think this is probably like a a issue when they when the bigger you get the more important this issue becomes yeah y yeah and I think um what you said about having a very Vibrant Community that's that kind of goes back to why you would want to funel some value to your

token holders and have some uh some way that the token benefits from basically increased usage of the protocol which maker doesn't seem to have and hence it doesn't have this kind of Vibrant Community that or constantly makes improvements uh to to to the project it's more like a team sitting in an ivory Tower um compared to synthetics and that's what I what I really like about them yeah I think synthetics is kind of the is kind of the darling of composability right of of ethereum based composability because the snx holders and the snx developers the team they're kind of pioneers in using curve and using curve pool to stabilize uh susd and also using

uh Unis swap right to uh to synthetic ether versus ether uh and and funnily enough right if you were LP in in the Seth pool you got an insane amount of uni uh from the uni airdrop and if you were in the uh curve pool you got in insane amount of uh curve tokens CRV so I think it kind of uh uh you know by having that Grassroots um community and and and having that distribution it it enabled them to to uh be really like looking out for what other people are doing and seeing how it fits in and I think like understanding that the whole point of

ethereum is that you can compose apps with each other right the the money Legos uh concept and I think that um you know the synthetics uh staking contract is is was uh heavily used uh the mure contract rather uh was heavily used in in then later stage D5 projects that that wanted to have like a CL like a stake and claim concept um yeah and I think too like the like the big innovation of of synthetics uh that I that I also failed to see in the beginning but but like like you get to see as you start to interact with it more is that um when people buy a and then they draw like

susd against it and then they trade it for other things um it it kind of gets like a like a double beta effect right like you're you're one you're long snx so you have the defi exposure but then two is like you then use your susd to try to beat the pool uh and you can use your susd to like Farm in defi do a whole bunch of things like s because it's arguably the most decentralized stable coin you know it was used in based uh as the as the farming token you know it's used in various curve pools so you so you kind of like you you you own your snx and then you get a seat at the table you get what I mean whereas like with maker you own maker and then you vote in things

that are irrelevant because you don't have enough maker anyway to impact anything uh and meanwhile you can't do anything with your maker you you can't borrow against it you can't like you basically you basically own something that's very uh static whereas when you own snx your possibilities are your your possibilities are endless you know you're your the things you can do with it are endless uh so I think I think that that kind of like let people figure out what's cool is uh has worked out very well for them yeah and I guess also notably synthetics is way more centralized than than maker um and in fact more than than like most of the projects that we talked about and I think for an unfinished pro project that

still has like a lot of Kings to work out and not not just Kings but really fundamental stuff that needs to be solved which is kind of the Staker taking on exposure to the de pool which is in its current form very hard to hatch um and it's really not kind of said and forget like compound or a or Unis swap right um I think they they they'll have to figure that out and I think it's good that the kind of the governance works the way that it does right now and it's not already too decentralized and too aifi in order to make these changes that are necessary so um should we move on to Yuma uh yeah I think Uma is

a uh I actually don't have too much thing to say uh because first of all I I think probably all the def5 protocol that have the least understanding in and I think that uh I also don't really understand how it can attain the current level of market cap because I don't think it's widely used and integrated within the entire def5 ecosystem uh as even I think they have a synthetic dollar or like some of the thing that you can do some U farming you see some traction uh but I don't think it's like a super successful I think it has some success uh but at a current level of market cap I I it's it's a question mark to me that how they attain such a level of market cap and get disted by coinbase

so quickly but again I think that there are asset approach is sound uh in a way that is is it doesn't take on that much risk compared to the snx model where you take on a de risk all this thing it's like a collateralized model and then you mean synthetic asset but I think the key challenges is how do you really Bo the liquidity for those synthetic asset um it's you can do some U farming for it but the more synthetic asset you have the harder is to bu for for liquidity for different stic asset is really difficult uh I like to pay some professional Market making to do it so I think that's probably the key challenges how do you go beyond like a proof of concept phas to being widely used in the entire space uh this is the part that I

don't really get about um yeah so sue do you know how how kind of the architecture of humor Works in comparison to mea and synthetics because I really don't know much about it at all yeah like I would say the simplest way to explain it is they have kind of like a augur like system right where where it's it's based on instead of instead of um using Oracle you have like a dispute system uh so like disputers are essentially the ones who are who are um making sure that contracts get settled properly and things like that

and I I've had a lot of problems wrapping my head around how that will work in practice I I get the appeal of it uh from a construction perspective because you get some nice like no Arbitrage like assumption if you get some no like nice no Arbitrage assumptions then it should resolve nicely but I I think the game theory of it to me is something that like cuz I consider myself quite an adversarial thinker and and I do sometimes wonder how it'll look uh if there's collusion if there's like you know you could in theory like when it's near big liquidation you could have disputes like like you could have like

spam disputes that last like four hours while you know it's at the it's at the pin right it's at the liquidation price and then you kind of wonder what will happen uh you know there's there's all these attack vectors that that are very hard to reason about I think I think like first wave defi you kind of saw saw like people like okay if it's if it's audited then I ape in right and then and then now they're saying like Okay it can have five Audits and it can still be wrecked by not like smart contract design but by cryptoeconomic Design right and like now people are realizing like even if you're cryptoeconomic design is correct you you know do you have the market forces do you understand the market itself well enough right do you understand Game Theory and and so

this has like I think Uma is a good team they have a good um they have a promising idea but but these are the tough questions and they're and they're really tough in the sense that you may never know the answer until there's a big enough Bounty because let's say I know how to exploit uh like something I obviously won't do it unless that there's enough money right and and so that would be the same with with any of these kind of uh constructions and and so like like that that kind of like Thanksgiving turkey effect uh is is the biggest challenge for any sort of radical new way of trying to solve an issue or trying to say that you don't need oracles or you don't need that I think these are these are very tough

questions to to to actually say you solved uh okay that's all for today uh please come back next week where we discuss the second half of the D5 top 20 with Sue and Arthur X goodbye