April 21 2022
Composability cuts both ways
One of the most powerful aspects of crypto and blockchain tech is composability - I like to think of it as open source software on steroids. Chris Dixon of a16z put it this way:
"Composability is to software as compounding interest is to finance"
I think that’s probably true when times are good and perhaps its true of the space in aggregate, but it’s incredible to watch how fast some defi protocols have been created and disrupted. It feels like the cycle of creative destruction has almost gone exponential. What does that mean for value capture and sustainability of a business? Perhaps this is simply capitalism in its most raw form (without any real regulatory moats for the moment).
While much of defi is a self-referencing casino right now, if we dropped a sliver of tradfi activity onto crypto rails, I wonder if we’d be seeing the same pace of change?
Would a property title protocol be able to maintain the same lead as the current intermediaries?
Does everything effectively become winner-take-all - more so than web2?
I don’t know if this is a bold prediction, but I think we could be early days on completely re-writing revenue models for software and traditional financial valuation.
Private equity has entered the chat
Mark Rowan, CEO of Apollo Global Management, gave an interview this week on Bloomberg where he was asked about crypto. Mark sounded pretty bullish on blockchain tech (“moving securitizations onto blockchain” - really?!) and NFTs as a precursor to significant change in the financial industry, using that example of title/ownership in the meatspace. Apollo isn’t a growth investor, so buying alt-coins is a bit outside their wheelhouse, but it’s interesting nonetheless that a shop of their caliber is taking notice of the current frenzy.
Magic beans
Another week, another defi hack. The Beanstalk stablecoin and lending protocol was drained of 25k ETH through a governance exploit that utilized a flash loan to temporarily take control of the treasury. Check out this thread from my favorite red-pilled UChicago Booth professor for a high-level explanation. This also got me going down the flash loans rabbit hole for the first time in awhile. Not a great look for the code-as-law movement.
The shilling corner - coming soon?
Upon some encouragement from a newsletter reader, I may add a section for some of the projects that have caught my eye recently, even though the market is probably down/sideways for the foreseeable future.
Marinade (MSOL) - Solana liquid staking
GenesysGo (SHDW) - Solana infrastructure
Cell Protocol (no token) - AMM for central limit order books