Why DeFi gets ignored and whether TradFi will adopt it

Transcript

GM. Good morning. Welcome to the Milk Road Show. The daily crypto show where the ride is terrifying, the ups and downs are sudden, and we're the seat belt keeping you from ejecting. I'm your host, Jay Hamilton. It's Thursday, April the 10th. Wow. Wow. Wow. Wow. Wow. Wow. Uh I I called it earlier this week. I was like, "Please, Trump, please pause tariffs on Wednesday." And he did, everybody. He paused tariffs kind of. Kind of. It's It's always messy exactly what he did. We'll get into exactly what he did, but hey, markets bounced. I mean, they bounced right now. By the time you guys listen to the show in a few hours, they might be down again. I can't keep on top of it minute to minute. Uh, but what we want to talk about today is we're going to talk a bit

about macro and what is going on there. Uh, and then we're also going to talk into what is one of the the topics I keep bringing up right now is okay, macro is going to line back up eventually. I don't know when. I don't have a crystal ball. It could be next week. It could be a month from now. It could be at the May Fed meeting and drone Powell decides to cut rates and NQT. I don't know exactly. You can listen to a bunch of episodes we had earlier this week specifically with Kyle and Benjamin Cohen if you want to understand the macro stance. But when macro does come back, we all know Bitcoin will run. What runs next? I believe very strongly that DeFi is set up to run next. So today's conversation is really going to be a look into DeFi.

What are institutions doing with DeFi? How are they going to interact with DeFi? going on with the market structure bill in the US and the stable coin bill and how that impact the large DeFi players. To break it all down, we have Kane Warwick, founder of Synthetics, also founder of Infinex, leader in the DeFi space, and just a gigab brand who really understands how we going to take DeFi to the masses. Before we jump in and hear from Kane, if you guys want to do me a favor, hit the like button, hit subscribe wherever you're listening, especially during these red times in the market. Extra that little bit extra love makes a big difference for us. Today's episode is brought to you by Moonay.

Trade crypto fee free and fast on your own terms. It's also brought to you by Coin Shift powering top crypto treasuries with their yield bearing stable coin CSUSDL. Without further ado, Kane, welcome to the Milk Road Show. Thanks Jay. Thanks for having me. Yeah, absolute pleasure my man. Okay, uh let's start off. I mean, we got to start off with the news of the day. I'm going to bring up here the um uh tweet or the uh the truth social tweet. I don't even know what you call it over on truth social uh from Trump. So, here's what he said. And I mean it's just classic Trump. I'm going to kind of read between the lines. Basically, he said, "I'm raising tariffs on China to 125% effective immediately because China is

fighting back and throwing tariffs on the US and so he's got into this tariff war with them." Uh really only thing that really matters. So hopefully that gets resolved soon. Then he said, "Hey, there's 75 countries that are willing to negotiate. They're not going to tack on reciprocal tariffs on top of the tariffs that I'm saying going to put on. So are those countries. We're going to pause for 90 days, but but still going to have reciprocal tariffs of 10% effective immediately." So I mean, basic long story short, pause, 90-day pause.

market responded well. Uh, everything is green. All of a sudden, we're back up after after a scary few days there. We were getting into some dangerous territory. Kane, what's your thought on macro markets right now? I mean, there there's so many different things that that you could sort of take away from this, right? Um, you know, I think the last probably 72 hours, I've seen every possible narrative, every possible interpretation, every every different take, you know, counter takes that that you could imagine. I think everyone's trying to figure out what's going on here. I think that for me the the crux of it is that we are going through something that is very unusual.

Um, like that's that's the the takeaway, right? this is not a a typical um situation that uh that we're going through right now. Um and so there's a lot of volatility, there's a lot of uncertainty. Um and you know, for traders, that's great. Volatility is great. That's what traders are looking for. Um for people who are either builders or or you know, long-term participants in the space. Um the thing that I always say is you have to have conviction in moments like this where like the the short time frame setup is so insane. um if you don't have long-term conviction, it's going to be painful. And and so that really is the question like where is your conviction coming from in the long term uh you know that that regardless of these kind of uh

you know volatile times that in in the long term things will work out. Yeah, it's it's really a moment of separating the signal from the noise for me. And it's very difficult to know what is signal and what is noise, especially with somebody like Trump who's a master of creating the most amount of noise possible and getting the most amount of tension possible for it. But you've really you've really got to step back and not get caught up in the noise, but at the same time stay tuned in because so much is happening. We're in we're in one of those times where one tweet, one comment can can put us up or put us back

down. And so you've got to stay in the game pretty pretty closely right now. But then also, I don't know, like give yourself that separation so that you're not, you know, in panic mode and you can still like live your life and be a good partner to your wife or whatever you need to do at home, be a good dad, all of that stuff. Like it's it's it's it's tough out there right now. It's it's distracting for sure. And and again, I think it comes down to like if you're a trader, this is great, right? It's hard, but it's that's where the opportunity comes from. If you are someone who is a builder in the space or you know someone who is an educator in the space or someone who is you know um here long term based on a long-term thesis that crypto is going to be transformative

then you really should just check out a little bit right like the short-term uh you know volatility is not helpful. Um and and you know you can just kind of let it wash over you a little bit is is kind of my recommendation. Um, so you know the funny thing is over the last 48 hours we've got a a large team here at Building Infinex and I've had a couple of conversations um you know and a few all hands where I'm just like this is fine. You can't control this. Um all we can do is keep building. All we can do is keep you know delivering the the functionality that um that we're trying to do. And if we do that then we'll be fine. um you know we'll we'll it'll all kind of wash out

and and and you've been through many cycles before like yes this is unusual in some ways but it's also not unusual in other ways. There's always something like markets don't just all of a sudden puke and in every cycle there is a few pukes. There's a few big pukes like Bitcoin being down 30% right now. It's not completely unusual within a bull cycle. Now, only time will tell whether, you know, the bull continues as many people hope and still optimistically expect and for a lot of good reasons or if we actually are in a bare market and there is a shift and we

can't pull out of this pain. I I it's it's difficult to say right now. think there are still a lot of reasons to be optimistic, but I think you nailed it when you said like you've you've really got to zoom out and look at the bigger picture unless you're like a day trader and you're trading like every day. But most of our listeners, I think now is when I worry and now is when I get sick sick to my stomach because a lot of people get so uh down and into despair and into fear, especially in moments like this when the um the the rhetoric in the media is is overwhelming and everything you're hearing around you is so overwhelming that you can really you can feel like you just need to like leave, but like leave for good. You

know, nothing wrong with going and touching grass, but like stay stay in the stay in the game. Don't just don't sell now is what I'm saying. Like now is not the not the time. Yeah. You don't want to get you don't want to get shaken out by by short-term volatility, right? Which is the other reason, you know, sitting comfy in spot, even if your spot's down 50% is is actually fine, right? Um that's that's kind of the name of the game. Um, and I think having been through a number of cycles, um, you know, the the the key thing is to not be in a position where you can actually get shaken out of of a particular position, right? Um, so, you know, avoiding leverage, avoiding, you know, if you're if you're a long-term convicted person

in crypto, avoiding leverage is is probably the biggest, you know, thing that I could recommend because you can just write it out. You can write it out, you know, you can you can kind of let uh let the volatility wash over you and come out the other side. Let's be honest, everything in crypto comes with fees. But here's a nice surprise. Moonay balance doesn't take a cut. You heard that right. No moon fees when you buy or sell crypto with your Moonay balance. Top up with dollars, pounds, or euros. Then you're ready to trade instantly whenever the market moves. And if you change your mind, withdraw your cash. No moonay fee there either. Simple, fast, ready when you are. Check it out at milkroad.com/moon. Disclaimer: Network

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milkroad.comshift. Yeah, couldn't couldn't agree more. Okay, let's shift from current uh macro uh pandemonium and shift into DeFi. Sure. You have spent good part of your crypto career in DeFi being a builder in the space. DeFi is the as we see this shift from pumpamentals to fundamentals and this thesis gaining gaining more steam was really gaining steam early in the year kind of has died off as if tariffs have just taken over the entire narrative right now. But I I I really believe that when whenever the noise and the macro

stuff gets sorted out, um we will we will see a return of the bull run. And when we see a return of the bull run, I think that the fundamental assets are going to do the best. And I think that where do you see the best fundamentals is in DeFi. And so that gets me very excited. Would you would you agree that you think that DeFi could be a leading a leader in a rally when the macro turns around? I think that the challenge for DeFi is and and this is um something that I guess I've I've kind come to realize this cycle, right? Um the challenge for DeFi is that many of us tried to pivot to this real yield

narrative probably a little bit too early. um when there weren't that you know we were still in a a market structure where most of the DeFi projects were extremely early stage right you're talking about startups that you know were 1 2 3 4 years old um there there's no startup in in you know traditional venture that one two three four years in is doing you know uh stock buybacks or dividends or or whatever it's about growth right and and so I think we got a little ahead of ourselves. We we were a little too um you know convinced of our own um you know uh amazingness and and so we were like guys we've solved this. We can get

rid of all of the you know to your point pumpmentals all of the um you know uh frothiness. We can just focus on the pure fundamental um you know uh returns that that something like a or maker um you know are generating. And on one level that is true, right? Um but the problem is that I I think um all of crypto is still uh very much a place where people come for high variance returns. There there's not that many people in crypto who are looking for, you know, a stable three, four, 5% yield. Um eventually that will happen like eventually there's a convergence of DeFi and Trady and DeFi is just another

kind of option in the menu of uh yield strategies and and you know structured products and things like that. Um, but today the vast majority of people in crypto are looking for high variance returns. And so saying, "Hey, we've got this amazing 7% yield is probably not going to attract as much attention as um as it it could and should." And if you look at DeFi Summer, why Defi Summer works so well is you had crazy APIs that were based on, you know, pool twos that um were super speculative. Again, the thesis was that all of these DeFi protocols would eventually supplant Trafi. But in the short term, it was a game of, you know, who can farm the most. Um, you know, what what the crazy,

you know, 10,000% APY is, etc. Because that's what the audience who was in crypto wanted. And I think the reality is that still today the majority of people in crypto are looking for that kind of return. And if that's the case, then DeFi needs to kind of come to terms with that and and figure out how do we offer, you know, higher variance returns. How do we go back to the the old days of like, you know, classic yield farming schemes and things that are that are high attention? Uh because otherwise people will just go and gamble on meme coins. So, so you know, there needs to be some some balance there, right? If it's hey memecoins you know crazy volatility or you know 2.5% APY on a people who the audience we have today

wants high variance they want you know a 10x or 100x right a 2.5% APY doesn't get you a 10x like you're going to be here for you know a century right so so like you know we we need to um we need to acknowledge that I think and we need to figure out how how does that work Um it's one of the reasons why I'm so excited about uh projects like Ekko. Ekko kind of restructured this early stage funding um you know and and took some of the power away from VCs to allow people to potentially invest in the next Athena right um at you know whatever 10 50 100 mil FTV um which is what people are looking for that that's what they

want to be able to do. They want to be able to invest in this upcoming infrastructure that is going to give them, you know, a 10, 50, 100x return. Um, and they're willing to take that risk. That's why they're here. They want to take risk for high variance return. So, I think that dialing that in and figuring out, you know, what our audience today wants, not what this future audience in 10 years of, you know, structured products, uh, guys on Wall Street might want, right? Like, we have a different audience today. We'll get there. I I'm very convinced that we will get there, but today the audience wants what they want and we need to give that to them. I I want to chat about uh when you think we're going to get there and what it looks like when we get there and what institutions want in DeFi and

if institutions will use DeFi. But first uh what is Ekko? Tell tell us a little bit more about Ekko. So Ekko was started by Kobe. It's an early stage uh um venture platform. Um you have to be an accredited investor. So you have to go through uh self accreditation or some kind of accreditation um validation process and they have uh deal leads. So they they've got different groups that are are closed groups where there is a a deal lead who brings early stage opportunities to the group. Um and they've done some really good deals over the last like six to nine months, right?

things like Mega E, um, Fogo, um, you know, there's there's been a bunch of, uh, even Athena was one of the first deals. Um, so there's been some very good deals that have been available through Echko. Um, and that again is is, I think, you know, what people are looking for. They want to be able to um, you know, get access to these um, early opportunities, which for a period of time was not possible. uh you know all of the price discovery was happening in private markets via VCs and there was no opportunity for you know the the average crypto participant who might have you know a net worth of three four $5 million but and they're they're an accredited investor but they don't have

enough clout to get into the Athena. So that's what Echko kind of solved is the ability for for you know many more people to be able to get access to these kind of deals which which really connects back to the original ethos of of crypto of what we were all trying to solve for which was more democratizing access to these types of businesses early on. I mean we've talked about you know token the return of ICOs and tokenized stocks and could we you know could you get in on that you know in the VC round? I mean, it sounds like Ekko is doing exactly that. Incredible to see.

Uh, so come back for a second. It's interesting to me. You you point out a really you make a really good point that like the current crypto user does not want the yield that a lot of the DeFi products are offering. So, why has why has DeFi focused so much on that yield? Is because they were building for the institutions and they're just not here yet. again, we just drank the Kool-Aid, you know, like we like I was one of the people that um was really pushing this real yield narrative, right? We were looking for the new narrative. We'd come out of DeFi summer and we're like, "Okay, that was great." You know, um it was, you know, the party was fun. It was amazing, but like what's next, right? I

think there was a sense we can't run that back. Like there's no way that that's going to be I was just going to ask you that. So like c can you run that back? And I mean you know people did try right there was defy 2.0 O and then you know there was algo stables and so people did try to reintroduce high variance but I think some of us you know felt like we were um in this world where like we you know we were we were kind of beyond that like that was the the ponzenomics and you know all of the craziness that we needed to kind of build momentum around DeFi that was in the past now let's move forward right and I just I think we were too early to that transition right we needed to embrace

um higher variance uh and and volatility um you know more more closely for a little bit longer. Um and unfortunately what happened was DeFi got boring and so DeFi got boring and people were like uh NFTTS I guess and you know there there was the NFT boom um there was the altar one thesis there was um you know Terral Luna um which is interesting because you know Terra Luna was only 20%. Right? But the funny thing about Teral Luna is that it wasn't even the yield. Like the yield was there, but it was the high variance return on the on the uh token itself, right? That was that was the thing that you know was keeping people interested.

So um you know people did kind of take up the high variance uh you know high volatility um you know kind of mantle and run with it. Um and and Terra was one of them. Um and again there were a bunch of others as well. But we haven't been able to kind of recreate that. Um, we haven't been able to to rebuild that. And I think that that's something that's important. Now, the irony of all of this in my mind, right, is that today as we stand here in the current setup, the the likelihood of Tradfi adoption and the likelihood of like um, you know, DeFi and Trady converging and is higher in my mind than it's ever been. Like we actually have a setup now

where we don't have regulators trying to destroy DeFi for the first time in four years. Like we're actually in a really good place. We've got really good technology. We've got a bunch of amazing primitives. Um the setup is amazing, but we're also now dealing with this crazy tariff war and global trade wars and you know, all of this stuff. So that's that's kind of creating some noise in the background. But if you zoom out from that and ignore all of this short-term insanity, the setup today with this idea that we're going to get more regulatory clarity in four years time, DeFi will be in such a better position. It just like in it's inevitable to me. I'm I'm more convicted on that than I've ever been at

any time. Um and so yeah, we are going to need 3% APYs and 7% APY and you know 9% APY on on structured products and Trafi is looking for that and we will have an audience for that. Um but we also need to address the audience we have today. Do you have an an answer to the question which is difficult question to answer but what is the I I want to talk about the institutional side so we'll get there in just a second but what can nobody's brought it up the way you have to me and this is very interesting what can what can DeFi do though to get this like crypto casino crowd back like is without without running back the DeFi summer 1.0 play playable. Yeah, it it's

it's a it's an interesting question. So, one thing that I think that they can do, right, is for novel D5 protocols to make the token available early to more people. Now, we've tried this in different ways, right? We tried this with airdrops and you know, Hyperlink did a great job with this, right? they they built for 18 months did the airdrop you know 30 plus percent of the the token supply went to um you know to uh people who were using the platform and I think that created a really powerful flywheel not everyone can do that though um you know I think uh that's a hard that's a hard kind of playbook to replicate and so a lot of people have kind of gone oh I'll just do the hyperlquid thing but you can't really

they were coming out of a bare market there was a bunch of setup stuff about how hyperlid did what they did that is is yeah hard to replicate. Um but I think the what people are looking for is access to tokens as early as possible. So finding ways to give people access to tokens early is is the best thing you could do. Now yield farming was that you know urine it was like hey you can get the token for free if you put money into this thing and you know this pool one pool two etc. um you know that that kind of uh distribution structure is is very powerful. Now it didn't work for other reasons. Um but I don't think that we should be ready to kind of throw in the

towel and say, you know, as much as I'm I'm not a fan of airdrops, I think that there is room for innovation in distribution strategies for novel, you know, nent DeFi protocols that will get people excited again. I think that that is possible. Yeah, I I I agree. It's I think it's a good take. We we need more experimentation, right? We need more founders. We we need more people trying this stuff. So why did people stop experimenting because they're [ __ ] scared? They're petrified if I go and do this weird thing. You know, you could get away with it in in 2020, right? But in 2024, hey, I'm going to go and do this weird, you know, uh option drop

scheme. Like no chance. everyone who did anything, even if you were doing things that were not even that that wild, um they're getting their brains blown out by by regulators. Anyone who popped their head up at all. So, everyone just kind of hunkered down and said, "Let's not, you know, get attract attention." Um, but that's what you need to be doing if you're building a novel protocol. You need to be doing wild things to get attention. And everyone was too afraid to do it. Now, I think that we're going to have a window of opportunity for the next, you know, two to four years where people can do novel stuff and we're going to see a lot of very interesting schemes um for token distribution that will, you know, reignite some innovation in that space. You know, there was there

was no innovation for a period of time and uh that was dark. Let's shift to institutions. you you said before and I I think you might have just been casually throwing out 10 years that it might take 10 years for for Tradfi and DeFi to to converge. Let me just ask the first obvious question that I think everybody wants to know is will tradfi use DeFi or is there a chance that they don't actually embrace DeFi and they do it on their own they just use centralized rails or they build their own rails internally in house. How do you see you you talk to institutions all the time so I feel like you probably have a good idea of the landscape. I I look at it this way, right? Like, you

know, in and I, you know, I'm old enough to remember when we transitioned from, you know, companies didn't have websites. All of a sudden, everyone had websites, right? And it was like, oh, you can email the company, right, back in the day. Um, and so I look at it a little bit like this. In like in, you know, um, 1998, whatever, 1999, um, there were a lot of people who were like, will companies use the internet, right? And that just seems like in such an insane position in hindsight, like it's just a technology.

It's a it's a way of communicating with people anywhere in the world. like will people like some people might not but they're going to die if they don't right like it's just too good of a tool and and I think interestingly you know if you think about internet to DeFi to now you know this AI wave that's happened over the last uh you know two or three years it's kind of a similar thing like there there are people wandering around in the world right now that are like uh I mean do you think companies are really going to use these AI chatbot things and it's like bro like like right like like what are you talking about right um and and the funny thing is I've noticed in my own life there is

a huge divergence in people right because one of the one of my jobs as a founder is like noticing who is most effective right um who is having the biggest impact on whatever it is that you know whether this is a portfolio company or Infinex or or something else Okay. And I have started to develop a heristic where I can tell the type of person who uses AI on a on a daily basis who's actually using the tool. They are a more effective human being. And it's it's not even close, right? Like and so I've started to kind of be like this person uses AI. Like you can just tell that they're they're someone who's using the tools that are there in the same way that someone was using the internet,

right? they would just know stuff and it was like did they read that in Encyclopedia Britannica? Like how did they how like how did it's like oh no there's a there's a there's a website where you could where all of the information is and you can just go and read it, right? And so there was a there was a period of time I think in the early internet where early internet adopters suddenly they were just more effective at understanding the world. That's what's happening now in uh in um you know in the world. And if you go just one kind of technology revolution back which is decentralized you know uh kind of payment technology right the uh you know what Bitcoin kind of ushered into the world um will companies use

that is is in my mind like just it's such an obvious inevitable thing. The question is how exactly will they use it? That's that's less clear. Um but it is an enabling technology that allows for people and companies to be more effective and so of course they'll use it. Um you know of like the successful ones will they'll find a way to extract value from it and they will be more effective and they'll out compete. That's why we have markets. Yeah. and they will get an edge that allows them to continue on the same way those who adopted the internet were able to adjust and continue on and use the tech to improve. What are I I think you're you're you're you teed up my next

question well which is the how will they use DeFi. What are the give us some examp what are the different ways that institutions are thinking about DeFi? What do you think is that going to be the likely how? And maybe maybe there's certain things that you think they might do sooner, certain things that you might think they're waiting for regulation to do. So we we have uh we have representations of ownership of things like equity in a company, right? Um and the the technology to represent the ownership of equity in companies has evolved a lot over the last h 100red years right um from you know

uh paper to you know through like there's been there's been you know a number of iterations right in in how these things are represented it um tokenization of equity is like such an obvious improvement it's just like so obviously an improvement even whether it's a tokenization on a centralized ledger or some kind of like um you know uh consortium chain or something like that, right? It is just such an obvious better solution to the problem. So it's like you have to have a pretty strong thesis for why um you know a clear 10x improvement in the technology is not

going to get adopted. Now you could have I think two years ago had a decent thesis which is regulators are so against it that it's just never going to get adopted and people are too fearful to try it and you know institutions are are worried about even being seen to be involved in it. That thesis hasn't played out very well over the last six months. Right. So now what's your thesis like what is your what is your justification for why you know every single um you know equity in the world is not tokenized. you you got to have a pretty compelling theory there and I just don't think there is one when when they do get tokenized because I agree it's coming. The one thing I wonder though is let's say it comes

quickly. Let's say we get the market structure bill this year as everybody seems to expect right now. A lot of people saying we're going to get it like in the first half of this year possibly and and we and we start to get tokenized equities. Who's going to be buying these tokenized equities though? Like are institutions going to use tokenized equities? It feels to me like it's just going to be cryptonatives because those are the only ones that are on chain right now and we actually still have to wait for the better UX to come in order to bring on users that want to use an app that allows them to then go purchase tokenized equities. Yeah, I think the the tokenized equities thing as it's as it's kind of proposed now is a bit of a red herring. like it's kind of like a

delivery mechanism for equities, but there's an expectation that it's it's kind of at the margins. You have tokenized equities, but like you know there's still uh all all of the actual ownership registers are are still held by the deposit corporation, right? Um and that to me is again a transitional phase, right? Like what what tokenized equities are is kind of the canary in the coal mine of this transition from how do we represent ownership of a company from you know some some books in a basement somewhere right to uh you know to a a token on a decentralized ledger like that that's but it doesn't

really work until you kind of move from one technology to another right like going from, you know, paper records to in a database, right? Now, going from a database to uh, you know, decentralized ledger of some kind with tokenized representation. That's the transition. So, until that happens, then it's sort of just like a a weird thing that people are doing, but it it hasn't really transformed the the process, right? hasn't created efficiencies that you know and changed how we actually interact with the concept of ownership of a company right so so I think that's the thing that needs to that's why I said 10 years right these things move slowly I think you know 10 years from

now I can imagine a world where all of equity ownership in the world is tokenized on you know distributed you know uh systems and that's just how we do But that's just how we do it. Now the question is what are the what are the kind of implications of that? If that happens okay well all of a sudden anywhere anyone anywhere in the world can access that right. Um and so you know there's there's the question is okay if we were to enter a world where all company ownership is is tokenized and when you go and register a new company you're issuing a token right and you know it's a certain type of token that doesn't trade on public you know uh

um uh exchanges yet and you know there's some things you need to do in order for it to get to that point. So there like once you kind of reimagine what the world looks like when it's powered by that you get a very you you know there's all of these things that kind of fall out from that just the access alone approximately I think a billion people in the world can access investments on the NASDAQ a billion that's it right like think about that alone you know if you could open that up through tokenized equities and have access to all humans all 8 billion like that's a that's a 8x of the market alone that is a big deal Right. So, I can see I can see the path. Do you think there's a I just as we're having this conversation, a thought's popping up in

my head, which is like, is there a risk that um that that there's this lost years of DeFi right now? That's I'm being a bit uh brash when I say that. But if if de if DeFi can't figure out how to get how to attract the crypto crowd that is chasing the higher yields and the higher returns because we don't have enough innovation happening there and if the Trady crowd is going to take 10 years to get here in a meaningful way like I know they're here in some ways now. Um, is there is there is there a risk that this that we could go into like a slow period? I know stable coins and there is areas of DeFi. I guess we

are we're there. We're there like you know like uh Djen Spartan's you know prophecy of the three-year DeFi bare market, right? It's turned into a fiveyear DeFi bare market really right. Um you know he he undercooked it. Um, so I think there's app like it's not just a risk like that is the world that we live in today and yes there are some great examples of amazing DeFi protocols you know things like a etc. um you know there's some really cool stuff happening on Salana but we are we are not even in the top three narratives I would say right now like defi is not in the top three narratives and and so then the question is okay if DeFi is about facilitating transactions in existing crypto tokens

that's a very small subset of the market right um my my ball case for DeFi is that it is the core infrastructure structure that when you do get tokenized real world assets of various kinds and when the world does pivot to well obviously everything needs to be tokenized and everyone kind of gets that then all of a sudden a looks like a thousand times better you know if you can if if you're doing uh you know tokenized loans against your uh Tesla shares right when Musk is borrowing on a against his his Tesla shares That's a very different world and but it's a world that's like easily imaginable,

right? Like you just have the token and the trades and there's liquidity and you know dexes and sexes and all kinds of places and you know we've we've got the NASDAQ DEX then yeah of course you would go to Ave to borrow against your equities. It's so much faster. It takes five minutes to go and borrow $10 billion against his $200 billion Tesla position. Of course, when when we say it like that, it sounds so obvious, right? It is [ __ ] obvious. Like, it could not be any more obvious. Like, all it takes is for people to realize that email is useful. Like, if you go back to like ah these email like I can just call someone like why would I like I don't

know like you know I get maybe there's some weird reason why I might want to send an email but then it's like the world transforms and everyone uses email and calling people is [ __ ] weird. Why would you call someone? Um and and just the world transforms and it's like, wait, we used to keep records of companies on sheets of paper in a basement somewhere. Like that's that's wild, right? Like why like, you know, why would we why did we do that? Why didn't we just tokenize them? How much of an impact will the legislation that is currently being worked on in the US, the market structure bill, stable coin bill, uh two stable coin bills I believe, um how much of an impact will that have on DeFi? Is that going to be large tailwinds? Is

there a lot of institutions waiting on the sidelines right now in your mind? I I think it's two things. one is it once we actually start to get some some rules in place um and and you know there is uh like genuine traction not just noise and maybe it's going to happen whatever um all of the people who have been in Washington advocating for the last three or four years for DeFi and for crypto more generally um it's going to be a huge validation of all of that effort that they put in um and it's signaling suddenly you know The legislature is signaling to the market this is an okay thing to interact with. We are starting to figure it out. That the signal for

the last two or three years has been if you touch this we will nuke you from space. two very different signals, right? Like, you know, so so I think that regardless of almost what's in the bill, the signal from from even the ability to get legislation passed is the the most important thing when you when you look at the legislation, any concerns, red flags that you see or drama that you see happening as they work their way through figuring out exactly how this should be put on paper. You know, so here's the funny thing, right? Like there are entrenched interests in crypto um that have differing opinions of how things

should play out, right? Um you know, you've got yield bearing stable coins and non-yield bearing stable coins. Wouldn't it be really convenient for the non-yield bearing stable coins if yield bearing stable coins were not allowed? So, you know, that that would be a great outcome, right? Um and so so there's a tension there where there are different factions within crypto that are trying to you know um this is an opportunity right like and and unfortunately in markets uh you know uh legislation is one of the weapons that that uh you know companies and and projects wield to get what they want. Right? So we have uh opposing forces of centralization and

decentralization. we have opposing forces of, you know, yield bearing stable coins and all. There's all kinds of factions that are that are kind of fighting out to try and, you know, figure out how this is going to play out. Um, and I think there's people in crypto who look at that and say that's bad. That that's like just net bad. We shouldn't be worried about what, you know, some particular uh, you know, legislation in some particular country is doing. we're building decentralized tech that is going to um you know be able to bypass all of that. But the reality is we've seen for the last two or three years it well that wasn't working out very well for us, right? It it you know we can do it but the headwinds are crazy, right? Like it's

not to say that DeFi can be stopped. You can't stop DeFi, but it would be so much easier if we could just go and have a conversation with people without being worried that, you know, we're going to be thrown in jail, right? So, um, that that to me is the shift is like you can you can kind of say, "Oh, all of this real politic it's bad and you know, we shouldn't worry about it. We shouldn't engage with it or whatever." Um, but I think there there is a a value in being incorporated into the rest of the world and not being an island unto yourself. Yeah, it's a it's a great point that you you really do have to balance the two.

Okay, final topic I want to touch on before we wrap here is your vision uh and the and the vision of Infinex for for a while has been to simplify UX for DeFi. That is the a core challenge that we have I mean across all of crypto but particularly in DeFi. How how are you solving that? How are you focused on solving that? What are you doing? uh walk us through some of that stuff because I know you guys are up to some pretty cool things that are really helping improve improve this problem. I mean all of the ways like this is fullcourt press. We're throwing everything at this. Um we don't necessarily know what the optimal

solution is, right? But we know that there is a a solution there. Um and so we're looking at ways of building firstparty applications inside of Infinex that you know allow you to swap and bridge. So, we have this switch product that um supports, you know, a bunch of chains, a bunch of assets. Um is gas abstracted, is chain abstracted. You just you want to buy Sonic and you've only got Saul. It's just a couple of clicks, right? So, that's that's one approach. That's that's a which which is insane. By the way, I've got a I don't think a lot of I'll bet you a lot of our listeners have not heard of Switch or used Switch. It is this is a big this is big, right? It's not getting it doesn't

get a lot of attention, but this is this is what everyone wants. This is what we all want. I don't want to ever think about bridging ever again. Uh me that that you know, we've built this and for whatever reason um you know, we haven't necessarily communicated it as effectively as as we um as we could. But my my view is a little bit that um it's very difficult to get attention in crypto if you are not buying attention even even good attention right and and I talk to my portfolio companies about this a lot right um if you don't have a token or you don't have a point scheme or you don't have some incentive scheme right and all of your competitors are

doing that let's imagine there's you know five different dexes out there right and four of them have some kind of incentive scheme, referrals, all of this stuff, and one doesn't. Um, the one that doesn't has to be so much better than all of the others for people to engage with it. And and this is part of the growth strategy of crypto, right? Like it's an extremely competitive growth industry. And the the growth hacking that goes on um is far more aggressive than you know what you see in web 2. Um and so I think Infinex has not gone out of its way yet. we haven't been comfortable yet to really um go out and buy attention. Um I think we're getting close to being able to do that and it

will be, you know, kind of wild, right? Like once people are paid to pay attention, which unfortunately is kind of for a lot of people the only reason to pay attention is if you're being paid to. Um then there's going to be this, you know, kind of parabolic uh thing where people go, "How did I not know?" And and this is the funny thing is I think a lot of your audience probably has seen something about Infinex but it hasn't been sufficiently compelling for them to go and set up an account and try it and realize how good it is. Um so we need to make it sufficiently compelling to get them on the platform. That's that's the goal, right? But we've been a little bit cautious about oh we're not quite ready and you know we got time.

We're not in a rush. Uh but we're about to kind of switch on just the early incentives to really juice this up and I think that we're going to see uh a lot of traction from that. I think that the the risk of doing incentives too soon for a builder and for a founder far outweighs the the the risk of not doing it in the beginning. And we've seen that again and again where it is very as you said it in crypto and in in all new technology there is going to be competition that uses incentives to get marketing and get attention and that's just like the way

it's going to be. And you can really get caught up in thinking that that is the only playbook. And if you take that playbook it can really it can backfire in big ways. Whereas if you build slowly and you build properly and then you turn on incentives when you know you have a product that works it is much more effective. Now it doesn't work for everybody. It's difficult it can be difficult in the beginning to get any attention and so maybe you do need some incentives but shout out to you for being patient I think is what I'm saying because it's not easy to be patient when all your Yeah, it's not easy. And look, I'll be honest like for me it's it is easier for me than it would be for a first-time founder, right? like I can just, you know, yap on Twitter and

people will kind of semi-pay attention at least, right? Um, you know, we've got some traction just from that alone without actually, you know, providing huge incentives. Um, but like there is a there is a ceiling of how much attention you can get without incentives in crypto. It's it's a fundamental limiting factor, right? Okay. Um so um you know even even the best products like Hyperlquid if they didn't have a point scheme that turned into a huge airdrop they would have struggle to get that all things being equal their traction would have been you know five or 10 times less even with a great product. So that that's you know one of the just harsh realities of crypto is doesn't matter how good your product is it's going to be 10x better if you're paying people to

use it. Mhm. I mean I mean just bringing up the Hyperl liquid example. We have seen that with every per DEX before them, right? You know, first it was DYDX, then it was GMX, and then it was Hyperlid. And Hyperlid does seem to be a great product that has staying power, but time will tell. There's certainly that is that playbook continues to play out. Here's the funny thing. You know, I tweeted about this uh right after the Urge, right? I said, I'm looking forward to, you know, where the locusts go next, right? Because there's a there's a group of people who are mercenary farmers whose only sole job, right? And and the problem is it's hard to actually differentiate them from like a real loyal user. They they're like um you

know replicants or something, right? Like they look like a normal person, a normal user or whatever, but there's actually nothing behind it. And so they are incentivized to not just use the product to farm incentives, but to also talk about how much they love the product sort of irrespective of any actual allegiance to it, right? Like it's their job. Um, and so what we haven't yet seen for a couple of weird reasons maybe is like a new perplex. when the new per deck on a new chain launches, that's when it's going to be very interesting because all of a sudden they're going to have, you know, blue sky clean incentive structure to give out points and tokens and whatever. And then that's when you really tell how much do people love

Hyperlid. And and again, this is not to say Hyperlid is not a good product. It's a very good product, right? Um, but it's incredibly hard post incentives, post token to compete with a pre-TG product. Um, and so yeah, I've been I've been really curious to see how that'll play out. We haven't yet seen the hyperlquid killer, but there's one brewing somewhere. Someone's building a hyperlquid killer and um, you know, when it comes out, it's going to be very interesting on the timeline. Yeah. Yeah. I feel I feel the exact same way. It'll be very interesting to watch. Kane, thank you so much for joining us today and for breaking this all down. Really appreciate your time. Shout out to your team and everything that you guys are building and for being so dedicated to furthering DeFi and crypto. Thank you,

sir. Appreciate it. What's up? You're still here. Giddy up. I got to tell you guys about Aval happening in London May 20th to 22nd. It's going to be a one-of-a-kind crypto conference retreat style experience. very unique, very intimate, a lot much different than some of the larger crypto conferences out there. It's going to be developers, founders, investors. Great place to really connect with some of the brightest minds in the space. Don't miss out. Hit the link in the show notes. Grab your tickets today. Hopefully, we'll see you there. As always, if you liked today's episode, please hit subscribe and make sure you follow us so you don't miss out on the next one.

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