Thread by @kaiynne

The only defensible aspect of a crypto protocol is its monetary premium. Essentially every component of defensibility resolves to this. The fundamental question is, how deeply do people believe this is real? A few examples; 1/13

First, what is a monetary premium and how does it accrue? A monetary premium is what an asset acquires through usage as money over and above its intrinsic value. The intrinsic value of a $100 bill is minimal, but it has a very high monetary premium vs a blank sheet of paper. 2/13

How does a monetary premium accrue? Belief + time. If enough people believe for long enough that an asset can be exchanged for other valuable assets it will tend to accrue a monetary premium. Belief is predicated on trust this will remain true, and it is a spectrum. 3/13

The most important example in DeFi is the ETH monetary premium. Ether over the last ~4 years has accrued a significant monetary premium over its intrinsic value as payment for compute in the network. Though this too is predicated on continue demand for access to the network. 4/13

@MakerDAO, was able to leverage the ETH monetary premium to enable Dai to scale and gain adoption. This was of course hampered by its lack of direct convertibility into ETH but early supporters willing to put their ETH at risk to convert at parity bootstrapped it. 5/13

@compoundfinance, cTokens have been able to accrue a monetary premium and are accepted as a proxy for the underlying assets. 6/13

@dydxprotocol, short and long tokens while less liquid than we might like are trading as proxies to the underlying assets. 7/13

@WrappedBTC and @keep_project tBTC pegged BTC assets on Ethereum are somewhat convertible and hence leverage the network security of Ethereum and the powerful monetary premium of BTC to create an insanely useful asset within DeFi. 8/13

@SetProtocol, tokensets like ETH EMA20 token have generated enough confidence in the market that they now have almost 2000 in ETH locked into the contracts. 9/13

@synthetix_io, sETH pool incentive has resulted in 7,000 ETH deposited into @UniswapExchange at parity with the synthetic ETH token. Providing confidence that sETH can be converted at parity with ETH on demand. 10/13

Trustless financial instruments like @danrobinson's yTokens will likely accrue a similar monetary premium if they are deployed and adopted at scale. This will be extremely disruptive to services attempting to generate profit from fixed interest rate offerings. 11/13

Most importantly all of these assets accrue monetary premiums symbiotically due to permissionless* interoperability on Ethereum. When people say fork X and remove Y they often miss the point. It's almost impossible to fork a monetary premium, it must be built from scratch. 12/13

Now take all these assets, plus the infrastructure and tooling that supports and binds them; @etherscan, @MyCrypto, @metamask_io, @UniswapExchange, @KyberNetwork, @0xProject @compoundfinance and many more and try to simultaneously fork/clone them to another chain. lol. 13/13

My bad meant the 20SMA I had the 12EMA in my head from the announcement...