Podcast Summary
David and Rsa's new weekly series: State of the Nation on YouTube: David and Rsa discuss current events, their relation to the larger picture in the Bankless Nation, and provide insights and action items on a weekly basis through their YouTube series.
David and Rsa are starting a new weekly video series called "State of the Nation" on YouTube, where they will discuss current events and their relation to the larger picture in the Bankless Nation. They aim to provide insights and action items, and the episodes will be published every Tuesday. The duo believes that what they are building in the crypto space, centered around Bitcoin and Ethereum, is a new way of organizing humanity, which they refer to as the Bankless Nation. This term signifies the bankless nature of crypto and the interconnectedness of Bitcoin and Ethereum, which they view as a cohesive unit. Overall, the State of the Nation webcast will offer deeper insights into the crypto world and its impact on society.
Exploring the Thriving World of Decentralized Finance: Multis offers a secure banking interface for businesses using smart contracts, while Aave is a leading borrowing and lending platform in DeFi. The sector's success is fueled by tokens like Comp, which incentivize holders and could lead to the convergence of governance and cash flows.
The world of decentralized finance (DeFi) is thriving and bringing about the birth of a new asset class. Two sponsors of the discussion, Multis and Aave, are making significant strides in this space. Multis offers a bankless way to run a business using the Gnosis Multi Safe, providing security and a banking interface on top of a smart contract system. Aave, on the other hand, is a borrowing and lending platform that has evolved into a suite of services, including stable interest loans, which allow for financial planning with fixed interest rates. The DeFi sector is particularly bullish due to the success of DeFi tokens like Comp, which functions as a governance token for Compound and is incentivizing holders to vote in cash flows, potentially leading to a convergence of governance and cash flows similar to traditional stocks. This new asset class represents a transparent and exciting development in the world of finance.
DeFi Applications on Ethereum: A New Era of Cash Flows: DeFi applications on Ethereum are generating real cash flows, marking a sustainable and promising development in the crypto industry, different from the vaporware of ICO mania.
The cryptocurrency industry is experiencing a rapid evolution in the realm of decentralized finance (DeFi) applications on Ethereum, with tokens representing equity in these applications beginning to produce cash flows. This is seen as a reinvention of the traditional financial system, with parallels to the early stages of joint stock companies in the 18th or 19th century. However, some critics compare this to ICO mania of 2017 due to the rapid rise in market cap for tokens like Compound. Despite these comparisons, it is important to note that there are real cash flows behind these DeFi tokens, unlike the vaporware of the ICO mania. Vitalik Buterin, the co-founder of Ethereum, has predicted that the next bull market will be based on real-world fundamentals, and this is what we are seeing with the growth of DeFi. The market cap of DeFi applications is rapidly increasing, with Compound currently having a market cap of over $1 billion, and it is generating real income. This is different from ICO mania, where tokens had no value accrual mechanism and were valued based on the fat protocol thesis. The current growth in the DeFi market is based on real-world fundamentals and tangible value, making it a more sustainable and promising development in the cryptocurrency industry.
DeFi tokens evolve from ICO community management tools to earned value instruments: DeFi tokens are no longer just community management tools. Users can earn them by contributing value to decentralized finance protocols, creating a feedback loop that benefits both the user and the protocol.
The distribution and use of DeFi tokens have evolved significantly since the ICO mania of 2017. Now, instead of buying tokens in a manic retail market with little to no fundamentals, users can earn tokens by contributing value to decentralized finance protocols. This earned value comes in the form of providing liquidity, making these tokens more than just community management tools. For example, Compound's COMP tokens are distributed to users who supply liquidity to the platform, creating a feedback loop that benefits both the user and the protocol. This shift in distribution mechanism not only aligns incentives but also adds legitimacy to the tokens as they are now tied to real-world value and cash flows. Overall, DeFi tokens are living up to the original thesis of ICO tokens, but in a more sustainable and effective way.
DeFi's Growth Hack: Higher Returns for Stablecoin Supply with COMP Tokens: DeFi's Compound protocol offers higher returns for supplying stablecoins like DAI and USDT, including supplier rates and earned COMP tokens, leading to significant annual returns and encouraging liquidity provision, putting DeFi on par with traditional banks.
The Compound protocol, a decentralized finance (DeFi) platform, offers higher returns for supplying stablecoins like DAI and USDT. These returns are a combination of the supplier rate set by the protocol and the COMP tokens earned. For instance, supplying 1,000 DAI would yield a 1.09% supplier rate and an additional 1.21 COMP tokens per year, leading to a total annual return of 12.2%. This incentive mechanism encourages liquidity provision and puts DeFi on par with traditional crypto banks in terms of growth hacks. The returns vary depending on the stablecoin and demand, with USDT currently offering a 99% annual return. This system also helps smooth out differences in pools and nudge capital towards specific assets. The potential for leveraging stablecoins through InstaDapp adds to the growth potential of DeFi, making it a bullish move for the space and a possible contender for the next bull run.
Ethereum as a Trading Pair in DeFi has Advantages Over ICO Boom: The Ethereum network's use in DeFi offers more grounded alternatives to the increasingly gamified stock market, as real assets and cash flows are involved, providing a better understanding of the situation.
The current trend of Ethereum being used as a trading pair for decentralized finance (DeFi) applications, despite consuming a significant amount of ETH, has advantages over the ICO boom of 2017. Real assets and cash flows are involved, and the numbers and models provide a better understanding of the situation. However, the stock market's disconnect from reality and potential inflation event could impact Robinhood traders, who may be relying on the Fed's continuous printing of money to bail them out. The Fed's ability to print money indefinitely is dependent on the demand for dollars, which may not last forever. Ethereum, on the other hand, is a real protocol with real-world applications and potential for cash flows, making it a more grounded alternative to the increasingly gamified stock market.
Discussion on US debt, central banks, and crypto as alternative currencies: The US debt and central banks' practices are concerns, but crypto like Bitcoin challenges the assumption of fiat currencies as the only alternative. Ethereum's milestone of 100 million ETH addresses shows crypto's potential as a global network, and solutions like Ramp and Monolith ease access to fiat and use of crypto as a currency.
The US's debt, including its role as a reserve currency, is a significant concern, but other central banks are also engaging in similar practices. However, the assumption that fiat currencies are the only alternative could be challenged by decentralized currencies like Bitcoin. The discussion also highlighted the growing adoption of crypto, with Ethereum reaching 100 million ETH addresses, a milestone the Internet took 15 years to achieve. This shows the potential for crypto to become a global, borderless network like the Internet. For DeFi developers, solutions like Ramp and Monolith are addressing pain points in the ecosystem, making it easier to access fiat and use crypto as a global currency.
The Internet and Crypto: Interconnected and Complementary: The Internet and crypto are interconnected, with crypto adding value to the digital world and creating a new economy based on decentralized systems. The Web 3 movement aims to rebuild the web using crypto technologies, focusing on value rather than attention.
The Internet and crypto are interconnected and complementary technologies, with crypto adding a new layer to the Internet by enabling the transfer of value. The Internet focused on global, distributed, permissionless, and credibly neutral communication, leading to innovations like email, social media, and e-commerce. Crypto, on the other hand, is bringing value to the digital world, creating a new economy based on decentralized systems. The Web 3 movement aims to rebuild the web using crypto technologies, creating a more equitable digital economy. The Argent Wallet, for example, functions like a Netscape Browser for crypto, making the experience more user-friendly. However, it's essential to recognize the differences in metrics when comparing the two worlds. While daily active users are important, the real success of crypto is measured by value, liquidity, and volume. It's crucial to understand this shift from an attention economy to a value economy when evaluating the crypto space.
The success of DeFi protocols like Maker is determined by value locked and loans originated, not daily active users.: The number of daily active users is no longer the primary metric for measuring success in DeFi. Instead, the value locked and loans originated are now the key indicators.
The success of a decentralized finance (DeFi) protocol like Maker is not determined by its daily active users, but rather by the amount of value locked in the system and the volume of loans originated. This is because the liquidity attracts the daily active users, not the other way around. Additionally, the security of a blockchain does not solely come from its fixed issuance policy, but also from transaction fees. This dynamic will be seen in Ethereum 2.0 with sharding and EIP 1559, where transaction fees will burn ether, making it more scarce and increasing its value and security. Two years ago, there was a misunderstanding that the number of daily active users was the key metric for success, but now the focus is shifting to looking at the value and security of these protocols.
Fees ensure long-term security and value in cryptocurrencies: Fees provide security and maintain value by reducing the need for issuance, but Bitcoin faces challenges in transitioning from issuance-based security budget to one based on transaction fees.
While the issuance of new coins is important for the creation and existence of a cryptocurrency, it's the fees that ensure long-term security and value. Relying solely on issuance can lead to a decrease in asset value, requiring more issuance and ruining the asset's value. Fees provide security by reducing the need for issuance. However, the conversation also touched upon the challenge Bitcoin faces in transitioning from a security budget paid for by issuance to one paid for by transaction fees. Bitcoin's monetary policy, which emphasizes a fixed supply, may result in its security budget being exceeded by more flexible networks. The demand for block space, which is primarily used to move Bitcoin, is not increasing at the same rate as other networks like Ethereum, which offer more uses for their block space. The Bitcoin community's focus on the fixed supply often overlooks the importance of increasing demand for block space. Ethereum, on the other hand, prioritizes security and making its block space in demand, ensuring its success regardless of market conditions.
Bitcoin vs Ethereum: Religion or Nation State?: Bitcoin's dogmatic community resembles a religion, while Ethereum's focus on security and long-term existence is more like a nation state. Effective navigation of unique challenges is key to success.
While both Bitcoin and Ethereum share some similarities with nation states and religions, they have distinct differences. Bitcoin, with its strong community and unwavering belief system, resembles a religion more closely. Ethereum, with its focus on security and long-term existence, is more akin to a nation state. The Bitcoin community's dogmatic nature can limit its scale, as it requires a large number of believers to maintain its purity. Ethereum, on the other hand, may benefit from injecting a bit more religion into its community while still leading with its fundamentals, which are based on facts and cannot be disproved. Ultimately, both Bitcoin and Ethereum have their strengths and weaknesses, and their success will depend on how effectively they navigate their unique challenges.
The power of Bitcoin's intolerant minority: Bitcoin's small yet steadfast community drives significant change and is a unique strength for the cryptocurrency.
The steadfastness and immutability of Bitcoin's intolerant minority, representing just 1-3% of its population, can bring about significant change and is a unique strength for the cryptocurrency. This was discussed during the first "State of the Nation" episode by Ryan Sean Adams and David Hoffman, who also touched on the bullish state of the crypto market and the comp opportunity available through token deposits. The episode will be released every Tuesday, starting from Wednesday mornings. Adams and Hoffman emphasized the importance of facts over faith and the value of different visions and experiments in the crypto space. Nassim Taleb's concept of an intolerant minority was introduced as a powerful force for change, and though Adams admitted it was hard for him to fully grasp, he acknowledged its significance for Bitcoin. Overall, the discussion highlighted the importance of persistence and conviction in the crypto world.
