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Santiago R Santos Profile picture
@santiagoroel
Oct 10, 2019 • 6 tweets • 3 min read • Read on X
1/ Stablecoin panel @ #devcon5 with @MakerDAO @paradigm and @rDAI_dao

A thread on #DeFi risks and opportunities (not investment or legal advice)👇 Image
2/ DeFi has many risks. Smart contract bugs, interdependencies across platforms (ie Compound, Maker, InstaDApp), centralized oracles and blurred lines between collateral types (USDC ! Censorship resistant)
3/ But #DeFi is an elegant system where assumptions and activity live onchain. This perfect information collapses information asymmetries and reduces principal agent problems. We can also price risk better. It incentivizes market participants to keep the system in check.
4/ The novelty of Maker protocol is that anyone can trade in collateral (ETH or multi collateral soon) for a stablecoin (Dai) pegged to the US dollar. The protocol has built in game theoretical mechanisms that incentivize market participants to keep the system stable.
5/ Open finance is in a hobbyists phase but won’t remain here for long. Innovation feels gradual until it’s explosive and goes mainstream. A few drivers that help us get there: better gateways and onramps (@argentHQ, Libra), fixed loans (Y Protocol) & roboadvisors (@SetProtocol)
6/ Last it’s important to put things in perspective. For the first time ever we have an open, permissionless and transparent financial system. If you’ve lived/traveled in the developing world, you appreciate how important this is. #DeFi is not perfect but we’ll get there. Onwards

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More from @santiagoroel

Santiago R Santos Profile picture
Jun 26
What’s your expected rate of return in crypto in the next 5 year period?
Benchmark here will be total crypto market cap. Think that will do a 3-5x in the next 5 years reaching a peak of $7-10T

But many will do <3x. normal distribution to things. Venture = power law. Many underperform benchmarks in traditional markets and in crypto

Much less from a MoM or realized cash on cash return
If you think you’ll do <5x then consider a portfolio of stables yielding 15-20% probably outperforms whatever strategy you’re doing

Ofc farming stables carries risk but just putting it out there

You can run many combinations from 100% stables to some mix of majors (0-80%) + majors + alts
Read 4 tweets
Santiago R Santos Profile picture
Mar 10, 2023
If you hold USDC do you:

A) Swap to USD & withdraw to bank (are they solvent next week?)
B) Swap to major (ETH/BTC) & take market risk
C) Hold USDC

Everyone in crypto is doing this calculation rn
Exhibit A: Circle held $33.6B in US Treasuries and $8.7B in US Banks*

* Cash held at U.S. regulated financial institutions BNY Mellon, Citizens Trust Bank, Customers Bank,
NY Community Bank, Signature Bank, Silicon Valley Bank and Silvergate Bank

Source: circle.com/hubfs/USDCAtte…
@circle can you provide more clarity on what % is/was held by each bank?
Read 4 tweets
Santiago R Santos Profile picture
Nov 14, 2022
1/ In this dark hour for the industry it’s crucial to remind ourselves why we’re here & why this matters. We’ve lost a lot of ground this year but let’s not lose sight of the good things happening. Among others, Ethereum migrating to PoS & scalability thru L2s
2/ I don’t think crypto goes away or remains niche. Digital scarcity/property rights are becoming an integral fabric of society & reshaping industries - similar to how the Internet did. We’re closer to releasing killer products that are too hard to ignore. Faster, better, cheaper
3/ Long gone are the days of recursive leverage. DeFi yields are lower than tradFi anyways. Many users have been hurt & lost confidence. Candidly, this raises the bar for us to deliver on the promise of creating wonderful apps/services powered by this tech. We have work to do
Read 5 tweets
Santiago R Santos Profile picture
Sep 8, 2022
Few thoughts on regulation:

1/ Envision a state of the world where tokens need to register as securities (see @SBF_FTX 🧵). Is that the end of the world? Historically, it's been portrayed as such but I'm optimistic clarity will unlock much trapped energy
2/ A lot of regulatory uncertainty is already priced in and has help up many participants on the sidelines waiting for clarity to operate in DeFi & crypto

The spirit of the law is consumer protection & fairness, which I think are essential properties for any market to thrive...
3/ So if we abide by these core principles, there is a state where exchanges (FTX/Coinbase/Binance) become the gatekeepers where teams register to issue tokens. By the way, this already happens. The level of DD that some exchanges like Binance do on token issuers is rigorous...
Read 8 tweets
Santiago R Santos Profile picture
Jun 23, 2022
1/ When you think you've missed a trend there's usually a 3-9 month window after the broader market discovers it where you can scale into a trade in size & still make outsized returns. You didn't have to catch DeFi at very bottom of last cycle & you won't this cycle. Here's why
2/ When Compound launched liquidity mining, the market woke up to DeFi. Until then only a few of us were investing across DeFi. Many thought they had missed the DeFi train. Data below supports my framework: usually have a 3-9 month window to catch up & still make outsized returns
3/ Interesting that you can buy core DeFi 1.0 protocols today at similar levels as the beginning of DeFi Summer in 2020. Arguably, many protocols are more de-risked having more traction to show for & Lindy effect. Rising rates changes the picture but still DeFi is not going away
Read 4 tweets
Santiago R Santos Profile picture
Jun 20, 2022
1/ Crypto isn’t perfect. To expect it to be this early on is unreasonable. But the fundamental premise of having robust systems governed by predictable & transparent set of rules no one can control is here to stay. The possibility of having digital property rights is here to stay
2/ Crypto has a long way to go to realize its full potential. It’s important to remember this is still very experimental - on both the technical and socioeconomic side. The encouraging part is that the rate of experimentation is faster in open source systems (vs closed ones)
3/ As I reflect on the past 10 years since I discovered crypto, it’s been remarkable to see the growth of this industry. We’ve created trust-less systems that work. It’s become a trillion industry. It’s captivated the imagination of our generation from people of all walks of life
Read 8 tweets

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