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Santiago R Santos

31 Dec 20, 8 tweets, 2 min read

1/ Crypto is undergoing a critical transition in its evolution of becoming the foundational global settlement layer. I liken it to moving from gas (ideas) > liquid (fluid narratives) to a solid-state

2008-17: gas 🎈
2018-20: liquid 💧
2021 +: solid (paradigm shift)

A short 🧵

2/ Bitcoin is farthest along in this state transition hardening as a non-sovereign store of value.

Ethereum is second in line moving from liquid to solid w/ a thriving DeFi ecosystem (PMF) & EIP-1559 (soon)

But there are still legacy parts of crypto that must be shed to advance

3/ Perhaps the most critical chokepoint are centralized stablecoins. Tether is the Achilles' heel of crypto

The recent experimentation of algo stablecoins - $ESD $DSD $BAC & $FRAX - are very healthy for the ecosystem I believe. Buyer beware: they're far from stable (for now)...

4/ Algo stablecoins rely on game theory to simulate monetary policy. But it's turtles all the way down. Quite simply, if trust degrades the peg can spiral out of control. Bear that in mind. Monitor on-chain activity.

5/ I won't expect algo stablecoins to ever be as stable as USDC - they shouldn't be. Some fluctuation in response to endogenous and exogenous shocks will keep the peg fluid, but the amplitude of these sinusoidal cycles should dampen in future cycles ♾

6/ Of note, I've been encouraged by the stability of Frax this early on. Unlike pure algo designs, Frax is partially collateralized which dynamically adjusts based on market conditions. As the system matures, the c-ratio should compress and adjust to restore the peg.

7/ Having decentralized, censorship-resistant stablecoins are crucial in crypto's solid-state transition. The wave of algo stable projects we're seeing in 2021 comes at the right time as governments launch crusades which (un)intentionally can choke the space and crush innovation.

8/ In short, this crypto cycle may be the most important one of all.

2021 will be a pivotal year w/ multiple catalysts. Not all will be easy to overcome - nothing ever is in crypto. But this is a most worthy cause - one that is radically transforming old systems. Onwards

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More from @santiagoroel

Santiago R Santos

@santiagoroel

29 Nov 20

1/ Investing for me is about applying as much pressure to change inefficient systems saddled with friction. I think we can all agree finance, as it exists today, is a patchwork of outdated and fragile systems. It simply has not caught up with the Internet...

2/ It's hard for me to imagine that our relationship with money/finance will not undergo a profound transformation in the next 5-10 years.

The innovation happening in DeFi is foreshadowing how this relationship may evolve. To understand why start playing with protocols/apps...

3/ After using DeFi apps, perhaps you'll start wondering why your tradFi banks can't do many of these functions. Is DeFi perfect? No. Is it risky? Yes.

There's a long road ahead to realize the full vision/potential of DeFi, but that is what's most exciting here...

Read 4 tweets

Santiago R Santos

@santiagoroel

3 Oct 20

1/ Unlike nationalism which is acquired by birthright, digital identities are created at will based on common interests & values.

The free flow of ideas w/ the internet & now capital w/ crypto, inspires and enables us to move more freely & reorganize with those we affiliate with

2/ We’re seeing a fragmentation within countries.

New York is more alike London than Alabama. England and Scotland. North and South Sudan.

Yes, it’s in our DNA to affiliate with people that look & think like us. But the latter is becoming more important esp. among younger gens

3/ The key enabler here is a parallel non-sovereign financial system we call open, decentralized finance (DeFi).

Most think DeFi on the fringes. Make no mistake, it’s front and center allowing many to migrate more easily away from oppressive political & economic regimes.

Read 4 tweets

Santiago R Santos

@santiagoroel

14 Sep 20

1/ Finance has not kept up with advances in technology/Internet over the last 20 years. tradFi is mostly asleep at the wheel while an entirely new financial system is being built from scratch: DeFi. They just don't know it yet. But soon will wake up...

2/ As early players in this DeFi world, we have the opportunity to design a financial system from scratch. Combining elements of tradFi with unique new primitives enabled by crypto (flash loans, composability, AMMs, NFTs etc.)...

3 / A lot of the DeFi stack has been build behind the scenes over the past 3 years, forged in the fire of the bear market.

We're seeing these money LEGOs come together at an exponential pace. This is the power of DeFi - global, permisionless, and transparent capital markets.

Read 5 tweets

Santiago R Santos

@santiagoroel

5 Sep 20

@coinmetrics

1/ Every day that goes by we get pinged by more tradFi players looking to enter DeFi. We've reached inflection points across the board that have made DeFi too hard to ignore:

- $16B in stablecoin supply (h/t @coinmetrics)
- $9B TVL (h/t @defipulse)
- [many more]

2/ Most of them have no clue how to enter DeFi, but will figure it out in the next 12-18 months. Unlike many "blockchain pilots," interest in DeFi is real. It's already a 10x improvement vs. tradFi on some use cases. Proof is in the high growth and earnings across protocols.

@CurveFinance

3/ The beauty of DeFi is that is has a hard ROI. TradFi traders are using AMMs like @CurveFinance & @UniswapProtocol to source more liquidity and better execution on some pairs. Centralized exchanges have lost their edge and are scrambling to list projects that list on AMMs first

Read 5 tweets

Santiago R Santos

@santiagoroel

17 Jun 20

(1) Continuing on the thread of coordination problems. Here is one interesting study to solve for dis-incentives not to hire.

We're in a deflationary environment so firms don't want to be the first to hire, as they can just wait and get same talent for cheaper...

(2)...the result is bad for the economy. Firms delay hiring perpetually, high unemployment, low consumption, low GDP loop.

But here's a clever design: contingent wage subsidy. (paper link below). Basically it works like this:

(3) If Firm A hires and total hiring falls short of predefined level, govt pays a subsidy to cover negative externality

But if Firm A hires and total threshold is met, then no subsidy is paid because they benefit from positive spillover effect from more employment -> more demand

Read 4 tweets

Santiago R Santos

@santiagoroel

29 Feb 20

Crypto is a global asset phenomenon. It transcends man made boundaries and touches one of the most basic human needs: financial independence. #bitcoin #DeFi

2/ Institutions are not global by design. So they will not lead this movement. Retail will.

3/ Crypto native institutions will supersede local, centralized ones. Not because users care about crypto, but simply because crypto native companies will offer better products & services. Few examples 👇

Read 4 tweets

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