kain.eth Profile picture
27 Oct, 25 tweets, 5 min read
As promised, a thread on where DeFi goes next and why DeFi summer was not the zenith. I’m feeling particularly self-indulgent so this is going to be a long thread.
Original tweet I am responding to is here.
It is irrefutable that every og DeFi token has been rekt against ETH in the last year, in hindsight this really shouldn’t be surprising. During DeFi summer the blue chip projects were not just the dominant ETH narrative they were the only narrative.
As new narratives have emerged many people have rotated out of DeFi tokens into NFTs, DeFi is deep into the trough of disillusionment.
Combine that with severe regulatory headwinds and market uncertainty and you have a perfect environment for a lack of conviction on the future of DeFi. But the future is actually brighter than ever, we just need to zoom out.
Let’s take a step back to 2016, the early Ethereum community was very diverse and so were the narratives. Governance, identity, prediction markets, tokenisation, DEXs, stablecoins, capital formation and of course DAOs.
The DAO in mid 2016 managed to combine many of these narratives together creating the first concrete example of the power of smart contracts on Ethereum and of course the danger.
Watching $150m pour into a smart contract and then pour out again made headlines worldwide and raised awareness of Ethereum significantly.
But the capital formation narrative had actually started almost a year before the DAO with the @AugurProject ICO in August of 2015. By the time of the DAO there had been more than a dozen token sales.
For good or ill, depending on how tolerant you are of speculation as a driver of attention in capital markets, following the DAO the dominant narrative became the ICO. This barely changed except for a few flickers from early L1 competition like polkadot until early 2018.
We also had our first brush with NFT mania in late 2017, but this was crushed by both scaling challenges and the start of the bear market.
In mid July 2018 it became pretty clear that the market correction was not going to be temporary, the late November sell-off was the nail in the coffin on the bull market as even our most ardent hopium dealers faced reality.
But in August of 2018 right as things were looking grim a group of memologists looked around at the rubble and realised almost everyone still building was implementing some kind of financial contract. coinmarketcap.com/alexandria/art…
Thus the DeFi narrative was born, and from the first DeFi summit during DevCon4 it was the dominant narrative until early 2021.
DeFi momentum continued to build as yield farming gained traction. The problem was basically everyone building at the smart contract layer was deep down the DeFi rabbit hole. We drank a little too much of the koolaid and started asking ourselves how DeFi would onboard 1m+ users.
With benefit of hindsight this question looks hopelessly naive. The fundamental problem is that finance is primarily infrastructure. Very few people in the world deeply care about market structure and payment rails. Maybe a few tens of thousands.
While the ICO boom had tapped into the almost unlimited demand for speculation, DeFi yield farming was a much more challenging process. Plus the market had matured and become more efficient making it tough to just yolo into anything, though of course many did.
This meant that most of the DeFi summer participants were existing crypto natives. There was a ton of capital flowing in but it was mainly from large funds and whales rather than end users. The gas price spikes only skewed this further.
But fundamentally most of DeFi is infrastructure, which is only interesting to a tiny fraction of the population even factoring in the speculative aspects of governance tokens.
So where does this leave us? We have new financial in fracture that will enable a 100x improvement in many aspects of financial markets. But very few people care and the install base of Ethereum is still a tiny compared to web2.
Queue NFT mania wave two. NFTs are the tokenisation of culture, and where most people do not give a fuck about financial infrastructure everyone participates in culture. The addressable market is all of humanity.
If you need any further evidence of this just look at the number of celebrities being NFTpilled on twitter in real-time. Yes we had a few ICO chillers in 2017, and a few anomalies like @mcuban during DeFi summer. But NFTs have generated more attention than any other narrative.
Does this mean that we will see DeFi continue to languish in relative obscurity, I honestly think so from an attention perspective. But this doesn’t mean that DeFi will not have impact.
NFTs are going to absorb and connect to many aspects of culture. Gaming, Sports, Music, Movies, Art and many more will be transformed by NFTs. And this will lead to the moment where we have an install base of 50m+ users.

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More from @kaiynne

27 Oct
Here is part 2 due to 25 tweet limit on threads 😓.
When was the last time we hit a 50m+ install base of a transformational platform? It was 2010. Here is the first three years of iPhones sales.
Instgram, Uber and other Apps that launched as the iPhone install base scaled were able to tap into this new platform to grow at phenomenal rates.
Read 18 tweets
8 Aug
I’ve been thinking a lot lately about the intersection of DeFi, NFTs, art and gaming lately. Putting my current thoughts into a thread…
The first thing I want to highlight is the difference between attention and impact. Many things that garner high attention are not impactful, think the latest marvel movie. While many things that are high impact get minimal attention, think novel mathematical proofs.
As excited as we have all been about DeFi the reality is that it falls into the category of finance, which is typically high impact but low attention. The one offsetting factor being that speculative manias are often high attention. As are market implosions.
Read 12 tweets
22 Jun
One month later, checking in. Balance of probabilities definitely shifting towards bear market, but I don’t think we have confirmation yet.
In late May we were in -40% now -50%+, the further we go the more unusual this would be in historical terms as a bull market correction. But this is already historically a weird bull market.
A few points that really stand out and may have head faked the OG’s. I will mainly focus on BTC here. The biggest imo is the ATH->ATH ratio.
’11 ->’13 ratio ~30x
’13 -> ’17 ratio ~20x
’17 -> ’21 ratio ~3x 🤯
Read 13 tweets
28 Apr
Something I’m a little concerned about given the recent interactions I’ve had with the BSC and SOL communities is that they seem to be genuinely gaining organic traction. Much more so than say EOS or Tron last cycle. I have some thoughts about this…
Firstly Solana is pretty clearly an upgrade on the previous generation of ETH killers. Primarily because they have managed to hide the scaling trade-offs much more effectively.
The likelihood of EOS devolving into plutocracy was called out by many people including Vitalik pretty early on, but obviously the reality was even worse than most people including myself expected. And it was fairly easy to point out where they had forsaken decentralisation.
Read 13 tweets
1 Feb
Now that sXAG (silver) markets are live I want to provide some context on the situation for those who have not been living in the Synthetix discord for the last few years.
Firstly, sXAG is a Synthetic ERC-20 (lives on Ethereum) silver token that tracks the price of silver via this @chainlink oracle: data.chain.link/xag-usd.
This allows anyone in DeFi to get price exposure to silver without needing a traditional brokerage account or paying crazy spreads on bullion. Synthetix also supports sXAU (gold) and sOIL (Brent Crude Oil) as well as a number of forex currencies like GBP and AUD.
Read 20 tweets
19 Jan
It appears that “you are just a VC project” might become this cycle’s “no token, no ICO” both of these statements are just counterproductive virtue signalling imo. The no token mantra alone probably set us all back 18 months due to overcorrecting for ICO scams.
I said many times through 2018 and 2019 you actually want scams and other fuckery, not having them is a sign of underinvestment, which is far worse than the alternative.
The market can solve these problems and it clearly has already to a large extent, deal structures are now much clearer and incentive aligned than they were in 2017. Does that mean we won’t see vaporware raise tons of money this cycle? Of course not! But again that’s a good sign.
Read 13 tweets

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