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1 Oct, 7 tweets, 3 min read
In September Uniswap 🦄 became the 4th largest crypto exchange in the world.

The best part? It’s now entirely community owned and bootstrapped.

Decentralized networks thrive upon communities.

Communities thrive upon shared narratives.

1/ Image
Without anyone expecting it, on Sept 16, Uniswap retroactively rewarded all its early community members an amount currently worth $600mm for their crucial role in bootstrapping Uniswap.

Uniswap effectively put the entire DeFi community on its cap table.

messari.io/article/the-im…
The Uniswap retroactive distribution is likely 1 of just 4 token distributions that can be described as immaculate.

People got rewarded not because they were explicitly trying to get rich.

Rather because they genuinely took an interest in Uniswap before it’s value was obvious.
Uniswap’s business model is simple.

It boils down to crowd-sourcing a balance sheet in order to make markets for assets on Ethereum.

Uniswap now has the largest balance sheet of any DeFi protocol

(Note: I use balance sheet as a synonym for TVL) Image
This is important not just because it's a high number; if Uniswap could facilitate its financial activity with less capital that would be ideal.

Rather it‘s important because Uniswap’s balance sheet has allowed it to provide some of the deepest liquidity for many trade pairs.
The liquidity Uniswap provides for many ETH pairs for example outcompetes many centralized exchanges.

This is an incredible achievement. Image
But what does this all mean for UNI as an investment?

Check out my latest piece where I cover:

- Why narratives matter
- How to frame Uniswap‘s valuation
- What to look out for in the coming months

messari.io/article/the-im…

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More from @RyanWatkins_

Ryan Watkins Profile picture
9 Nov
On November 18, Zcash will undergo its first halving which will drop its inflation rate from 25% to 12.5%.

But will it matter?

And where does Zcash fit into the crypto monetary stores of value anyways?

1/ Image
The problem with Bitcoin, and nearly every other cryptocurrency, is that they’re completely transparent.

Even just making a simple payment to a counterparty may reveal your entire financial history on Bitcoin - a status quo that is unacceptable to many.
messari.io/article/zcash-…
Storing your assets in transparent addresses and attempting to “anonymize” them through technologies like mixers only to return to transparent addresses doesn’t solve this issue.

Read 13 tweets
Ryan Watkins Profile picture
2 Nov
The idea that token holders can passively extract rent without providing equal value to a protocol is unsustainable.

In the long-run, token holders will likely need to be active network participants or assume some of the risk of the system to be viable.

1/
Projects like Maker are at the more ideal end of the spectrum.

MKR holders backstop the entire MakerDAO system.

For assuming this risk they are rewarded with the systems’ income.

This risk also incentivizes MKR holders to be active managing the protocol’s risk.
At the opposite end of the spectrum are tokens that simply extract fees from owning the property everyone uses.

They need not assume any of the systems’ risk.

In many cases they just vote on proposals that protocol politicians create, who so far are just unpaid labor.
Read 9 tweets
Ryan Watkins Profile picture
28 Oct
Proposal to rethink @iearnfinance's capital allocation strategy.

Rather than distributing income to YFI stakers now, Yearn should use income to buy back YFI to reinvest in growth.

The goal is to maximize long-term value creation for YFI stakeholders.

1/
 gov.yearn.finance/t/proposal-ret…
Yearn is DeFi’s leading yield aggregator and one of its most exciting community-run projects.

But it's still in its infancy with much work to be done.

This YIP could meaningfully improve the attractiveness of contributing to Yearn, by providing contributors with upside to YFI.
There are many community members that create enormous value for Yearn, yet did not participate in the initial YFI distribution or buy YFI early.

It would be beneficial to all stakeholders in the long-run if these contributors may also participate in the financial upside of YFI.
Read 6 tweets
Ryan Watkins Profile picture
27 Oct
DeFi protocols now store billions of dollars in assets and facilitate billions of dollars in financial activity daily.

But how do they actually create and capture value?

1/
This summer it was easy to ignore longer-term questions of sustainability and competitive advantage when all DeFi asset prices were rising.

But now that the market has cooled down, more level heads may now prevail and position for the next stage of DeFi.

messari.io/article/defi-c…
Value creation in DeFi all starts with a balance sheet.

DeFi protocols are coordination mechanisms that define rules and provide incentives in order to facilitate financial activity.
Read 10 tweets
Ryan Watkins Profile picture
22 Oct
yUSD is an incredible product, but it’s also one of the riskiest stablecoins available on Ethereum.

In addition to compounded smart contract risk, yUSD’s risk of peg loss is the sum risk of all its underlying stablecoins losing their peg, combined.

1/
If even a single one of the underlying stablecoins in the yPool (USDT, TUSD, USDC, DAI) underlying yUSD loses its peg, yUSD will also lose its “peg”.

There is nothing insuring against this risk and Curve is clear about this on the risk section of their website.
This peg risk may be addressed in the future by allocating the underlying stablecoins elsewhere to protocols that backstop against this risk, or don’t introduce it altogether, but for now it’s there.

Other ideas for how to insure against this would also be welcomed.
Read 8 tweets
Ryan Watkins Profile picture
21 Oct
🤯 Ethereum now transacts two times more value than Bitcoin daily.

This is what a cryptoeconomy looks like when it starts to find product-market fit.

1/
There are two key developments over the past year that made this all possible: stablecoins and DeFi.

The two provided a strong foundation for real financial activity to take place on Ethereum.

messari.io/article/ethere…
Ethereum’s progress has been so incredible that it will likely becomes the first public blockchain ever to settle $1 trillion in a year.
Read 6 tweets

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