Bankless - TL;DR | The China Ban Can't Stop New DeFi

Starting point is 00:00:06 I'm Luke and this is TLDR, where we catch you up on all the headlines and important narratives from around bank lists this week. As always, there are going to be links down in the show notes so you can do a deeper dive into any of these topics. And before we get started, I want to shout out our sponsor, Xerion. Zirion's a big player in the Dashboard Crypto Portfolio Manager game, but they're also rolling out a series of really cool NFT-related features. This includes ways to flex like home screen widgets on your phone and Apple Watch faces and also more technical features like sending NFTs between wallets and detailing and NFT's attributes. If I had a Cryptopunk, I'd be showing it off at zirion.io.

Starting point is 00:00:41 Oriana Simpson from A16Z came on the podcast this week to discuss the absolute explosion that we've seen in crypto gaming. Since the start of Defy, gaming has emerged as an obvious use case of crypto, but it's been slower to arrive than other sectors. For one, game development takes a long time, and it also requires scale. So now that we're scaling with layer 2s and side chains, there's no surprise that gaming has seen a boom alongside it. Axi Infinity has had an outrageous year, building an entire economy on top of its vibrant community. This is a salient example of the concept of play to earn. Gaming has evolved substantially from the early days of going to a store and buying a disc or a cartridge or going to an arcade. And currently we see a pay-to-win

Starting point is 00:01:21 ecosystem with microtransactions for skins on Fortnite or your favorite player on 2K. But with NFTs, crypto is leveling this up. Players can now own their in-game assets, generating value for themselves and their community. You know, if you look at the history of crypto, we've really spent the last few years building the core infrastructure that was necessary in order to start enabling some of the more consumer-facing and application layer experiences, including games. We've now reached a level of kind of functionality where we can build things on top. And so I think the fact that, you know, that's the point that we're at now is what's a enabling a lot of these gaming and entertainment experiences, obviously first and foremost AXE,

Starting point is 00:02:08 but the whole ecosystem around it, too, to really start to flourish. Crypto has always had a very high barrier to entry. It can be a little bit daunting. You have to be fairly technical. And gaming, I think, occupies a really unique space in the sense that it's allowing people who might otherwise say, oh, I don't know how I would get into this. what's a transaction, what's a hash, what's either scan, all these things, to start playing around with it in a way that's a lot more approachable and fun, frankly. And so what we're seeing is that

Starting point is 00:02:46 it's really opening the floodgates for a whole universe of new crypto users. Once people come in, start playing games, see the fun, the potential economic upside, you know, the communities, like there's just so many positive things that can be found in these experiences. As people play around with it, you know, then they start to percolate out into other parts of the crypto ecosystem. The growth of crypto gaming is a key pillar of the emerging metaverse. And it will be really interesting to watch as high quality game studios continue to build on crypto rails. Gaming is just one example, one fractal of what's happening in crypto right now.

Starting point is 00:03:25 This industry is taking off in all sorts of directions at a breakneck pace. And this is due to us leveling up our ability to. to coordinate. That's what David talked to Gitcoin founder Kevin Awaki about in this week's layer zero. Progress becomes exponential. So basically every new money Lego that gets added to the Ethereum open source world means that there's a new possibility that I can build when I walk into a hackathon. I like to say that you walk into an Ethereum hackathon today and you can get enough software off the shelf to build something during the weekend as three hackers that some bank 10 years ago would have to have 100 people and $20 million worth of budget to build with closed source

Starting point is 00:04:03 because there's this exponential ability to just pull new Legos off the shelf and every new Lego creates a new permutation of something that can be built. And so I think we're going to see exponential. This is why I think the open source financial system is going to beat the closed source one is because progress is just exponential in it. You can build things so much faster with open source libraries than you ever were able to in the old financial system. So that's what makes me almost certain that Defi is going to beat out TradFi eventually.

Starting point is 00:04:32 Evolution happens on a generational scale. Each time something iterates, it has the chance to get better, to improve, to innovate, and the internet is giving us the ability to iterate at a faster and faster clip. This is exaggerated even more when we promote open source software, building things that anybody can use. And that right there, as Kevin puts it, allows us to stand on the shoulders of giants. When we promote open source software, we can more easily promote public goods. And as time seems to be speeding up on us, we are quickly launching ourselves into the next generation of society.

Starting point is 00:05:01 How it's all going to shake out is still a big mystery, and it definitely depends on our priorities. If we incentivize open source public goods and promote coordination and collaboration on an individual and collective scale and seek harmony with the world around us, there is a good chance we can find ourselves on trajectory for a solar punk civilization. And if we don't, well, Blade Runner and Viver Vendetta are pretty cool movies. On a more practical level, our tactic this week covered fixed yield with Barnbridge. In Defi, we're pretty used to seeing variable interest rates, but fixed yield brings the stability and reliability that many investors want to see. Barnbridge's smart yield system, offers fixed rate yield opportunities on your assets, and is building out infrastructure for composability for both collateralizing their products and scaling to layer two solutions.

Starting point is 00:05:44 Read the article to learn more about how to earn fixed yield and some of the other cool projects Barnbridge is working on. We also covered Lira, which is an options protocol that deployed natively to optimism's layers. to roll up. Lira lets you buy and sell options and also provide liquidity for those options. Now, derivatives and defy have been tricky in general, first because they're difficult to both price and scale, but also because of their inherent risks to counterparties, the liquidity providers. Lira uses synthetic spot markets to measure both price and volatility, and the products here offer investors exposure to leverage, hedging, and income. All of this would be impossible without scaling, and although derivatives can be tricky to understand, options are

Starting point is 00:06:21 extremely powerful financial instruments, and it's definitely a level up for defyed. Also, Ben covered Rari Capital this week and the RGT token. Rari has been a blue chip in this new wave of defyne native protocols we've seen emerging recently. Their fuse protocol creates isolated money markets, which means there are fewer limits to how many different kinds of assets can be lended or borrowed. Rari is moving in the direction of opening fused to permissionless pool creation, which could mean an explosion of new borrowing and lending markets. Paraphrasing Ben, Rari could become the uniswap or sushi swap of money markets. I'm personally really interested in this emerging sector of newer defy products that Rari finds itself right in the center of. They've partnered with protocols like

Starting point is 00:06:59 Olympus Dow, Index Co-op, Faye, Tokomac, Yearn, and more. What's good with the new defy? The last big narrative we covered is regulation in China and the U.S., and there is a lot going on here. There's regulation worries, and there's also macroeconomic worries. But for the same reason, there may be caused to be bullish on the macro picture and bullish on regulation. In Market Monday, David talked about the infeasibility of regulating crypto. If everything in crypto is a security and you want to regulate all of it, well, there has to be a trade-off somewhere. You either have to change what you're willing to regulate or how you regulate it. There's simply too much building going on to rule with the firm grip Gary Gensler talks about. In State of the Nation, Sahil Bloom came on to talk about the

Starting point is 00:07:38 Evergreen scandal, this Chinese real estate giant taking on gargantuan sums of debt and the current liquidity fallout. Although this pales in comparison to the 2008 crisis, Sahil describes us as the tip the iceberg of the reckoning and credit looming before us. This is all taking place amidst another China crypto ban, but this time, it seems a little more serious. Data sites like coin market cap are being blocked, and exchanges like Kowobie are closing out accounts. This has had the side effect of capital pouring out of centralized exchanges and into D5. I think everything is long-term bullish for crypto. I just think it's like the natural trend of progress and technology and society is where we are headed with these things. And so I think that like these blips along the way,

Starting point is 00:08:19 bands, the different people that are going to try to take control. It's like trying to put, you know, a dam in front of a river that's moving. It's just going to find ways to pour around it and continue marching towards where it's ultimately going. And we're going downstream. Progress is being made. Real technologies and applications are being built. And you can't stop that in such a simple way. And so I continue to be just long-term bullish. Short-term, who knows. I mean, governments do crazy things. It causes price impacts. I don't really have a view short term ever on things. But long term, the technologies are real.

Starting point is 00:08:54 They're here to stay. And there's real useful high utility stuff being built, which at the end of the day is what matters. People want to be free. And the more that nation states tighten their grips, the more people and their capital will flee to the amnesty of defy. Centralized exchanges can be stopped. But stopping defy is a much greater challenge. So with that, I want to quickly shout out our sponsors, Gemini, Lido, Avey, and Uniswap.

Starting point is 00:09:17 These are places where capital is fleeing as they, the credit-bound nation-states falter. Also, this video wouldn't be possible without them, so thanks a lot. And finally, none of this is financial advice. ETH is risky, D-Fi is risky, but we are headed west. It's the frontier. It's not for everyone, but we are glad you are with us on the bankless journey. See you next time.

Bankless - TL;DR | The China Ban Can't Stop New DeFi

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