Lessons From the Recent Crypto Bull & Bear (Or Why Crypto Sucks Right Now)

Transcript

[Music] thank you all right um hello everyone um thank you so much for joining me here I'm just so thrilled to be at ECC um I I first came at ethereum Community Conference back in 2018 and I had just left Bloomberg I was starting on my entrepreneurial crypto journey and I never imagined I'd be speaking at the main stage so thank you

so much HCC for having me I'm Camila Russo I'm the founder of the defiant the best place to get information about defy and web3 I also wrote the infinite machine the first book on the history of ethereum and so um what I'm I'm talking about today is the lessons that we've learned from hopefully that we can learn from the 2020 2023 uh Bull and Bear cycle um crypto is looking a little bit like a theater right now and you know after 10 years in the space I'm kind of wondering is the magic still

here I started out my journey 2013. I was at Bloomberg News at the time covering markets and I found out about Bitcoin this revolutionary money that was allowing people to protect their savings against inflation and currency controls and it just felt uh so groundbreaking then 2015 I watched how ethereum brought the space forward introducing smart contracts 2018 I was at Bloomberg covering the um the Ico boom and though it was a little bit manic back then there was so much idealism about everything that could be built on the blockchain it was like famously stick a blockchain into

anything and it'll be better and then 2019 I saw the birth of defy and that inspired me to start the defiant and then 2020 it was defy summer and sure there was a lot of craziness at the time but um there was this promise of a truly a democratized open a Global Financial Financial system um and I thought you know like all the excess that we're seeing today we're seeing it because it's early days surely things will start to get better but I'm not sure they have so I'm not saying that we haven't made

progress we definitely have uh the 2020 and 2023 cycle brought a lot of um important developments in the space so Dallas helped organize individuals across the world towards working towards a same goal Constitution Dao is a great example of that nfts inspired a new wave of users to be excited about owning digital property ethereum was able to execute something that many thought was technically impossible with the merge Layer Two started actually delivering on a more scalable blockchain infrastructure and

real world assets emerged as a really important use case that can potentially a bridge to non-spegulative use cases but at the same time the failings of D5 and web3 have become more and more apparent and why do I say crypto is like a theater right now it's because we're seeing decentralization theater governance theater Community Theater and D5 musical chairs and I'll explain what I mean about each of these and importantly how I think that we can do better okay so

um decentralization theater it's uh this idea that a so-called decentralized apps that developers are portraying themselves as um as a decentralized and removing intermediaries when in fact it's actually you know a bunch of dudes in a room controlling controlling the whole thing um whether it's via control of the Project's admin keys or because they control all the validators or the nodes uh in a network so of course like the reason for this is because it's a lot more efficient to build this way you don't need to consult with anyone and you you just execute very quickly but

the problem is that it reduces censorship resistance which it's a very reason why crypto exists um it's to have this Unstoppable uh system but if you know the the team is actually controlling the whole thing um lawmakers can coerce developers into changing the code or even shutting it down so how can people trust that this can be a feasible infrastructure for the future of Finance how can institutions trust to move trillions of dollars in the system if it can be arbitrarily changed it's

not a very credible way to build the future of the internet and the future of Finance and then lastly you know with when there's uh Dallas and Anon Founders who are really a facade for centralized teams it really does put user funds at risk because you know the the individuals can be hacked or they can steal the funds themselves and sure enough there have been many examples of this happening this is just one of many such cases esify lost over 60 million dollars in an admin key hack the the team actually

you know was I think charged for that and uh it's not it's not a one-off uh Chris black who is a researcher that attracts very diligently uh these things um I don't agree with everything he says but definitely agree with this that the vast majority of D5 projects still have the ability to enter into god mode and unilaterally make changes um and then El tubid this really great data dashboard shows that code can be changed without notice on many layer 2 networks including optimism CK sync Era Loop ring and starknet this is

concerning because we're we're basing the entire future of ethereum on these layer twos then there's governance theater so another promise of web3 was that users would be owners of the internet of the applications the use of financial services they'd be able to have a say on how things are run on how decisions are made and this would be done through a holding tokens um the truth is that government governance tokens are actually traded like stocks people are buying governance

tokens because they think it's a proxy to um to having a stock in in a protocol that's the reality they're uh They Don't Care About governance they're not participating in governance all the data shows that uh the truth is um most token holders just care about making money and then um Governor so governance tokens are traded like a customer acquisition costs they really are a marketing tool to attract more users and attract more liquidity this system of one token one vote has enabled a plutocracy in D5 exactly the thing that we were supposed to be

fighting um what happens is that uh because uh votes depend on who has the most funds who has the most money it was the biggest allocation of tokens teams and VCS are effectively running D5 right now foreign so this is just again one of many examples of this happening arbitrum recently transitioned into a Dao in their very first proposal to confirm the constitution of the Dao and assign the arbitrum foundation

some say hidden in the proposal or at least not highlighted enough was the the point about transferring 1 billion arbitrum tokens to the arbitrum foundation in crypto we sometimes lose track of like what numbers mean but one billion dollars is a lot of money to not have at least a discussion on how that will be spent um worse than that part of the tokens for this one billion that was to be transferred it was already moved before the vote was actually approved showing that the Vault was actually just a formality

there's a study that showed that less than one percent of Voters in compound uniswap Sushi Swap and yearn hold at least 50 percent of the vote so since voting is usually based on a majority it means that less than one percent of Voters could determine the outcome of every proposal in these protocols some of the biggest in all of defiant crypto that's from inventors the study is somewhat outdated but things have not changed significantly then the next type of theater is Community Theater I've talked a lot about defy now it's nft's turn but this

also happens in D5 um and what what we're seeing is that nft projects have devolved into a race to create a perceived scarcity to fabricate these exclusive communities and the reason to do this is because promoters want to suck people in to drive value to these projects and then you know flip jpegs Founders are repeating culture and Community to sell yet another 10K pfp collection to den rug and then move on to the next camp thank you again one of unfortunately many many many examples of Founders and promoters

scamming people in the nft community this is frosties uh it's an nft project where the um the the founders tried to steal 1.1 million dollars and they they were actually arrested for this asuki one of you know kind of the Blue Chip or like the most well-known air projects the founder sagabond admitted to a semi-rugging or bailing on three different projects before starting this one and then um last in in my brand is this tvl musical chairs

um D5 has kind of become not decentralized Finance but degen's eagerly following incentives um so what we're seeing is that really the same money uh the same funds are cycling across the the same users um we're missing a connection to the real world what's happening is that these funds are mostly used to speculate which means that D5 remains Niche it's closed off to the mainstream only technically Savvy a very risk hungry Traders are taking advantage of what was supposed to be a more open Global and democratized financial system

the numbers show this uh tvl or value logged in smart contracts in D5 has mostly hovered between 40 billion and 60 billion dollars in the past year monthly tax volume is stock at around 70 billion and monthly users have hovered around 3 million so again same money moving around the same people okay so um why is this ecosystem doing this nobody here has bad intentions if you're in crypto it's because you believe in a

better future you're an idealist you want to change the world um so the reason why uh Founders developers are are doing this and using tools like airdrops governance Forum valueless tokens fee switches and non-founders non-profit foundations and towns in many cases it's not because they actually need it not because the project is actually decentralized enough to have these things but it's because it's what they think can keep them of jail basically it's what they think Regulators will the you know won't frown upon

um but my point with a with this presentation is that there's no point in doing all of this we're not fooling anyone not even Gary Gensler the cftc the cfdc was able to successfully sue adao ukidao it was the evolution of the bcx project a court of Health that lawsuit they found that down members could be found liable for their actions it doesn't matter if they're Anonymous it doesn't matter if if they're not based in the U.S as long as you have some U.S users

um saying that you know you're not marketing to the US is not going to help you um and uh and they'll just come after you no no it doesn't matter how how they decentralized you're claiming to eat even and actually decentralized project like tornado cash couldn't escape the grasp of regulators so you know what's uh what's the rest of of web 3 going to do it we don't stand a chance they'll come after us anyways so my proposition or what I would like to see more in the space

is um to decentralize when it actually makes sense when you you actually can decentralize if it doesn't make sense for your project because of the stage you're in just don't do it if you can't do it right just don't do it uh don't decentralize because you don't you know your your skirting regulation because it's a fad because um that's that's what you you think uh again Gary wants to see just build things the right way so on on the decentralization front starting out more centralized is often necessary but we just need to be

transparent about it uh just don't portray your application your protocol as decentralized when it's not and just you know be clear be transparent about where in the roadmap you are and what that roadmap is I believe um the defiant and other media companies financial organizations have a key role here to make sure that this is uh this is well understood by users and on the community in in governance uh same thing if um if your token holders are centralized if most uh decision making is happening in the team just save everyone's time

um don't subject people to these governance votes that nobody's attending and just run the thing yourselves I mean you're already doing that uh then um in the community front uh exclusive supposedly exclusive nft clubs had their time I think the market is already doing its thing and most will fade some are actually valuable most are not so hopefully we'll see this technology non-fungible tokens be used for a you know the um the really groundbreaking thing that digital property can bring uh that's

beyond a Collectibles and and avatars and then in in the use cases front uh the tvl musical chairs that I talked about and to me that's the least concerning uh I think um it's natural to have this sort of thing in the early stage of the technology that we're at in this stage it's those who are able to take the most risk the ones who are able to put up their capital and play around with these new tools that are able to help Founders battle test their protocols um and you know real

non-speculative use case will follow once we have more liquidity once the space is more battle tested and a bit safer but um it's not like there there are no non-spegulative use cases uh going back to the beginning of of the talk um to my time in Argentina I see how people in Emerging Markets uh are already using D5 crypto stable coins to protect themselves against uh populist governments mismanagement um and and actually use this uh this technology to to participate in a more democratized and open system so this is

this is already happening uh so um again I think we should just cut the and build for for these users uh build and use the technology in the way it was intended so I think it's it's time to close these theater evidence and just build and decentralize when we mean it [Music] subscribe to the defiant foreign [Music]