Interview with DegenSpartan - with Hasu

Transcript

welcome to Uncommon Core where we explore the Big Ideas in crypto from first principles today I'm not only joined by a very special guest but the format of this episode is highly unusual as well I interviewed the man who goes by the name at Legion Spartan on Twitter and who is one of the biggest and most enigmatic IFI investors there is I have wanted to have them on for a long time but there was one problem D Spartan or D Essen short is fully pseudonymous and did not even want to have his voice known so we looked for a solution and ended up doing a text interview instead then I got Patrick

mccy who is at Petty Pizza on Twitter to speak the part of DS in the final recording while I spoke my own part at this point I want to give a huge thank you to everyone who reached out to us on Twitter and offered their help to make this episode reality I get that this isn't your average podcast episode and you're free to go and read the text interview instead if you want but I think peny did a fantastic job s DS and the final product came out great so please enjoy first of all thanks so much for coming on the show DS I always thought

you're not just one of the most educational but also one of the most entertaining people on crypto Twitter thanks for having me on um I've been listening to your podcast since it began and I'm a really big fan so it's pretty surreal for me to be here right now thanks thanks so you have an incredible story um from starting out as a retail investor um who bought the ethereum top in 20178 to becoming one of the biggest defi inv s in the world how did you manage to do that and um what set you apart from so many others coming from the same place um I I doubt I'm one of the biggest uh perhaps I'm more I'm I'm one

of the more prolific participants that is actually retail rather than professional I have a finance background and I was pretty I was a pretty active investor in the traditional markets before I spited over so focus on crypto so I think that sort of background gave me a pretty decent Edge when thinking about the various cryptocurrencies as Investments or even just working out what strategies to employ in the market to make good money without doxing yourself too much is there anything more that you can say about your specific skill sets and interests that you had before finding this space I'm thinking in particular um what made made you see the potential in crypto and defi to begin with and um form the level of

conviction that is necessary to become a full-time investor um well before coming into crypto I was just your typical retail investor I was looking at stocks bonds raits all those typical things you'd expect a regular Jo to be dabling in while they work out their long-term investment strategy to retire you know one of the concept Concepts that were really popular at the time was the idea of income investing which is looking for businesses that can pay out a steady dividend or interest income that would be the core part of helping you you know fire with is this popular idea these days to be financially free retire early by having income exceed

expenses so so one of the things I was you know particularly sensitive to was uh yield investing and I'd search high and low to find Investments That Could Give me a decent income or dividend uh without my Capital being at risk and I say that most things end up with roughly the same kinds of returns you'd expect you know like 6% PA or even lower for the you know the safer stuff and one of the things I first noticed when I joined the crypto space was is the rampant mispricing between exchanges and the insane Arbitrage opportunities um you know I just kept comparing the numbers and just doing them Ma because I I just couldn't believe it there were opportunities

where you could use a few thousand to make $50 in in net Arbitrage returns and I saw this happy you know several times a day on several pairs you know was sure $50 net that isn't very much but if you can do that a few times a day and the market open seven days a week well you know I just did the ma and this blew my mind that you could arbitr versus amazing returns and keep in mind you know this is all manual and by hand I wasn't using Bots to do this and then you know after engaging in Arbitrage for a while that was one of the things that really you know solidified my view that the crypto Market s is extremely inefficient and this inefficiency also meant profit opportunity and I was just really you

know motivated to come into this space and hustle yeah to to to go back to um to the start of your answer I love that you started out as fixed income uh SL dividend investor because I always had this hunch that basic despite this kind of Dean brand that you have created for yourself on Twitter um that you're actually very prudent risk manager below the surface um so we we do have to touch on that for a moment why why did you choose this as your Alter Ego uh perhaps a PR of Spartan rebron in the future might be in order uh but no one actually believes I'm a dgen anymore um I guess

when I was deciding my altero you know I I didn't really want to restrict myself to being this permanent cheerleader for of any Pacific coiner project MH so I purposely avoided including something like Bitcoin in my name you know I wanted something uh a bit more natural but I also wanted something that could remind me myself that uh that crypto is really just this crazy space and anything can happen uh so I guess it also worked out well that my dgen branding can also serve as a very obvious warning to others to consider the stuff that I talk about you know I I never really expected I'd be able to get such a following on

Twitter um sometimes I do hope that the newer followers uh that they're you know like the newer followers who are not aware of my inside jokes and humor you know that they just don't take everything that I said face value um I guess as well it it worries me sometimes that when I make jokes about buying or selling something others just copy that because you know I'm I'm an influenza you know AKA this influencer uh you know pun intended there uh I think I've managed to prevent a lot of that kind of copy trading Behavior to a minimum by constantly just rolling out these you knows scops uh campaigns so that followers can think a bit more before they IEP into

things based on based on basically what I say on Twitter the Spartan pit um I guess the Spartan bit just came about because you know Spartans are pretty badass and cool aren't they so yeah that's why um yeah you know I love the way that you use scops on Twitter um be because it always makes me think for sure and that's something that not a lot of accounts um can do consistently but what I found um most impressive about your um performance is that you are not defi Yes Man like so many others are and you were extremely early to defi but you were also one of the first to say um guys I think as an

industry we are growing too fast right now and um I think we are seeing signs of extreme exuberance and I think I think the top is in how did you manage to do that and what were those signs um yeah well I I guess the defi top was in late August uh that was just a really really crazy time for me with all the farming going on I would say the start of the defi hype was probably the Lun of comp and basically since that day you know I've been sleeping three to four hours a night just trying to stay on top of everything uh I I've been in this Spar

for a while so I think I have a pretty good stamina as a participant but this was just going on for weeks and weeks uh the thing was though it was just really that the quality of the projects popping out was just starting to deteriorate at a very quick Pace oh yeah uh yeah we had we had yam and then we had a doesen yam inspired food clones we had wifey and then again we had a dozen more wifey inspired these Fair lunch clones and these Cycles just kept repeating and every new thing just got shorter and shorter as people realized that you know the the optimal strategy here was really just the exit earlier

than others uh basically front run other people and everyone was trying to front run everyone else on the way out you know initially the yam game that took I think what two weeks to play out the last of the food Farms that I was looking at were collapsing within a day or two um I mean I guess of course you know as a heavy defi user I was also just pretty active throughout this entire period Al is moving Farm the farm as an honest farmer and being on the front lines and seeing how you know how much worse you know every new project got was playing out and that was basically a tell for me that you know this Insanity would eventually have the end uh personally I actually felt the

sushi swap was the top uh Sushi swap uh it was you know it was by far the riskiest type of def5 farming that had come on the scene uh previously the only time you'd be taking risks you know other than this malicious or you know smart contract risk uh would be if you were braver or I guess silly enough to participate in the P to of the farming projects and Sushi swap pretty much has forced all of these you know farming participants you know most of whom have never done liquidity provision before they all suddenly just injected hundreds of millions of liquidity in the Unis swap

and one of the problems with these defi tokens until that point were uh were that these you know these defi tokens which just pretty liquid and now with sushi swaps is incentivizing everyone to provide liquidity it just created this huge opportunity for anyone l in the exit to finally swim out to this massive ocean of liquidity and I guess at the same time uh you know while all this was going on I was just printing a massive amount of money every day you know by just participating in sushi swap it was just so surreal you know I kept saying to myself this is this doesn't make any sense know what could be more

silly than this I was pretty much scared of how ridiculously rich I was getting each passing day and that made me stop and think um you know I should probably get out now uh the last time I had these kind of ridiculous thoughts were uh the 27 17 Peaks uh you know what that didn't really end too well for me so um I learned my lesson from that um so you're saying Not only would basically the the the the prices of these tokens collapse when the subsidy ends but it also provided exit liquidity for their largest holders yeah yeah pretty much um yeah I should of had guessed that stuff like you know yam and wifey you know

there'd probably be more sushi style clones popping up they really use these Unis swap LP shares as farming Assets in their pool ones uh which we did see with things like uh sashimi and you know Moon swap but it's just like how all these uh other projects collaps really fast you know that basically happened there as well uh so my thesis eventually became that you know none of these clones could provide as much liquidity as Sushi swap during the initial reward period and that shrinking liquidity we just caused larger holders to head for the exit you know while the liquidity ocean was still available to them um and I guess

basically everyone was farming at hundreds of percent of annual yields for the past month or so now how many people would want to send those assets back to their native protocol to be used you know as intended and probably earned either massively reduced returns you know relatively speaking or some of them ear know just nothing at all so um I guess it was his Confluence you know uh the ever increasing sediments revolving around the def5 farming situation and uh the thesis that is going to be pretty hard for anyone anything sorry to uh top sushi swap as a D5 F and that made me

think that we'll probably be heading lower once reality sets in that this is coming last forever you know we didn't invest in some Perpetual free money machine based on digital food farming you know so um yeah eventually hard the end yeah so how do you manage to to keep enough distance to these Investments that you can actually sell them after they have made you a lot of money because I mean as we know investors tend to get pretty emotionally attached um to those Investments um well one of the things I do I guess rather differently than other Traders or investors is that I never actually have

a specific price target for me the decision to buy or sell should really be based on the siment you just regarding that project if the price had gone up uh but there are still plenty of disbelievers or you hear comments that people have only just dip their toes in I'd assume that there's more sideline Fire part to keep the party going I think it is pretty much a question of you know who's going to buy these coins next and is there anyone after that but it's definitely more an art than a science um I mean what you could also do is you know you can always a sell a bit

and then another bit and just see if things are still going well before you start selling again know every Peak has a leg on both sides uh but some people seem to forget that you can also just sell on the right side post Peak as it's going down as well so as long as you don't have this mental stigma of you know oh no but I'm not selling at the alltime highs that holds you back from selling um H how do you measure sentiment H I think it's just really hard but it's also one of the reasons why I use Twitter so much you know you get these sneak peeks of things happening in the nukes and crannies of our

universe people having conversations on what they did how they felt what they plan to do next all in public view uh I use all the different social media to spy on and to chat with other investors on how they feel and then just try to figure out what I think the different players want to do next mhm it's probably probably a pretty trust way of doing things I'm sure some uh staticians would cringe at what I just said and Ru their eyes that I consider this method even useful by any measure but uh I just don't know any better way to do it so that's that's what I do I mean I I know that I always

trust the practitioner in that case um so how how would you describe your approach to investing in general I mean you just mentioned sentiment but you have always struck me as someone who pays a lot of attention to the fundamentals as well so what do you watch out for and how long do you usually hold a position and maybe de trade long as well as short um I think my crypto so far my Approach has been the play the contan finding a pretty unpopular Fe thesis an investment is just trying to sus it out if it actually has the fundamentals to shake things up it basically means I try to work out in the niches that the pros aren't

looking at and the attention really isn't on it that means I'm not competing with smarter and more talented people that would beat me in a fair fight I'm winning by playing a game that they didn't even know what going on this makes my job as a capital allocator easier since I don't need to compete with others when accumulating my positions and they don't bid at my average investment price as well of course course um I'm not just looking at on love segments the idea has to make some sense as well you know combine a rather on love project with improving fundamentals to back it up and I think that's the re

me to get a high profit multiple I'll hold a position for as long as I think they're still upside though I may pair down a size as it becomes too large relative to the rest of my portfolio I almost never short because I'm just really terrible at it and given just how irrational the crypto markets are I think playing the short side of things is massively difficult and riskier I don't think it is worth it unless it is some really obvious play and I have the Catal liquidity the open is short I think it is definitely you know this is a lot easier to be a bull rather than a bear in crypto you know during the recent defi drop I felt really

uneasy being bearish the whole time and I kept thinking to myself you know when can I just get back in and just post bullish nonsense so um yeah I mean I guess the kind of like the danger of Short Selling was really in defa in particular was really emphasized when um we had uh basically people on Twitter getting together and chasing like the large shorts trying to liquidate them and some of the tokens like yfi and uh and so on that really like had 100% increases in price from the bottom and that was really unexpected for me as well um but next I'd love to learn how you think about a few different uh of the projects that we that we touched on

um so far and um more than than any other project you have become associated with uh synthetics you're known as their quote unquote patient zero who brought many other big investors in can you describe for our listeners what is synthetic when did you find it and um most importantly how did you recognize its potential p in zero that this is hilarious can't believe you know that one before yeah um I suppose synthetics is best thought of as as a derivatives or synthetics protocol uh it basically allows you to go long or short on supporter synthetic

assets uh since the positions are synthetic you know the assets aren they're not really restricted to just erc20 tokens but you know they can cover wide range of non- ethereum based crypto assets like Bitcoin and ripple and also known cryptoart as like precious metals and Equity indices um pretty must the sky the limit as long as there's a price feed somewhere it could become aesthetic asset on the platform I think um I think it's m is just dumb dumb luck to be honest you know synthetics was originally hav and that was a decentralized stable coin project that had the idea of tagging protocol fees every time a transaction

was made but then you had these centralized stable coins pop up like you know G gusd usdc and of course tether you know usdt uh pretty much killed that idea of a stable coin that could charge fees every time you move it um I viewed the pivot the synthetic asset as a heel Miry that actually was successful but as I understand it it was actually more of a mindset change for the community regarding the path of the project you know rather than a technical chance uh because it still Leverage The you know the pool debt model that original hav was based on now they just really figured out that the pull debt could be used for so many more things

and I guess I just got sold in that pivot as well um I think it was just easier for me to accept that n as the pivot cuz I understood technically why it was possible to Pivot and what they were trying to do with the new Direction but I I really will to still credit myself as just some dumb luck and mostly this the synthetics team's big brain realization that they could pivot to something something larger as the main reasons why you know n snx turned out to be a good investment for me mhm um yeah I do remember reading about heaven uh as well back in the day and thinking that their model of you know charging fees on transfers that that would probably not

be sustainable um but I mean it's I guess it's a really easy mistake to make that when basically you see a project and you you find some something that you see as a terminal floor then to write that project off and not pay attention to it anymore without realizing that I mean this is the teams can actually pivot in crypto right as well and um and many of the the projects that we see have success today actually are the result of such um such pivots um how has your view on synthetics changed since then and are you happy with the current direction and um and what what maybe do you think is the end game for them

because again in my mind so the biggest in my mind the biggest question would be when does synthetics feel comfortable issuing shares or not shares but issuing synthetics on an individual us Securities right I would you say that is the watershed moment for the the def synthetic space in general um perhaps not many of the current Community share this aspiration of mine but I really you know I really want to see synthetic stable coins outside of USD being used outside of traing purposes and as an alternative to official digital feed

currencies uh synthetics is unique in its design in that it could actually bootst drop crypto versions of various fat and it really does overcome the liquidity problems that any custodial stable coin would have would interact with the rest of the market you know perhaps one day far in the future that could happen um I guess the general end game that most of the community does share is to become a multi-asset version of bitmax allowing traders to trade on a variety of assets long or short you know with the option of using leverage um about individual us Securities perhaps that could come after the project can further decentralize

itself from regulatory acction I think we are fast approaching the point where the team does not have control over everything I you know is you know sufficiently decentralized that you just can't round up everyone in a room and say okay guys stop trading you know stop being DJ but um I mean overall though I guess I actually feel the watershed moment would be the Perpetual swaps in Layer Two of Leverage not really these uh individual us Securities okay um so the way trading works on bitmax for listeners um is they only match external Market participants

with each other right so for every customers long position there's not a customer who necessarily holds the short position to that as a result bitmax doesn't occur any balance sheet risk no matter what trading occurs on its platform but synthetics is different from that in that the the snx stakers they take the other side of every synthetic that is outstanding so for every SD in circulation the the snx sters are short USD snx for every SPD C they are short BTC snx and so on um do you see any material risk from that approach and um what do the current

stackers do to hch that risk yeah I mean that's why the Perpetual model to me is the watershed moment uh that will be when the protocol is aware of the imbalance of positions and the funding read could exist to get people uh to get people to balance out the position positions it has always been a concern that I've raised up early on so I'm really eager to see that upgrade when it finally goes live I'd expect that would make the risk exposure of synthetic minors to be squeezed into a narrower band you know really reducing the risk of them being C severely offside by large winning Traders on the

platform and as well you know hin is pretty clunky right now in fact I thought people don't really worry enough about it but synthetics has rolled out uh stop C measures of paying for shorters through sticking inverse synthetic positions in BTC or eth and since that program has launched the skew of positions and the risk that mentors take on has reduced drastically at least from my perspective I'd consider a small success for now but uh I really think it is not very elegant at all um yeah right I I saw that you can now get um snx rewards for minting and

staking ibtc and ie with just these inverse synthetics um and the reason they do that is because it help der risk the exposure of uh the stakers somewhat so I I agree that's definitely a step in the right direction um speaking of of Haven and and susd though another project that um both of us have been vocal critics critics of in the past is maker um can you say more about why you don't like it oh boy h m um I'd say that my main critique is their design which I feel is inadequate because it lacks the ability to go

negative and the charged you know die holder for stab ability or from another perspective is unable to incentivize die Supply creation another design issue that I have with the maker protocol is their three-party system you know there's these three parties you have the die holders you know or the user uh the die supplier the the CDP owner and actually the maker holders themselves I think their three stakeholder system creates a weird you know tension in every situation on the decision making because it always seems that one of the three parties is made a loser at the benefit of the other two parties my last is less about the protocol I'm more about their you know

token value Curel design uh I don't really like buy and burn models because you need to assume you know you need to assume going concern on a secondary Market bid I prefer fee collecting and strip Distributing models because it is straightforward and self-serving but I suppose this could be a security avoidance slice text decision to have things done this way um what do you mean by going concern um that it continues indefinitely to be able to realize eventual gains when you eventually want the sell as opposed to a fee distribution model that if it ceases operations at

least you've recouped some of your investments from the fees distributed until that point so after the March events um and then compound yield farming um after those had um catapulted die to trade consistently above dollar and 5 cents I thought that um maker would reach would for sure reach a boiling point and um that they'd finally be forced to uh integrate the negative interest rates that we both have been waiting for for so long um but what they did instead was to to flood the system with centralized stab coins um that they can't even charge stability fees fees on

I mean to get the pack back down um what do you think of that and um and maybe also their what do you think about their focus on implementing um real world collateral compared to issuing more synthetics than just die from the the trustless CER that we already have I always thought that these were would be the two obvious routes to to choose between yeah I mean I think accepting centralized sto coins as collateral really hurt the you know the whole die is a pure decentralized stable coin narrative that had largely enjoyed yeah you know a lot of the strong yeah yeah a lot of his strongest supporters

had to do a lot of soul searching to decide if this is the direction you know it's something that they can really support I felt their Community fractured quite a bit since March and I mean it has given uh it has given R to like competitors like like reflexer there St coin Ray right that no one had even like DED attack maker uh and becoming more trustless before that point yeah um in fact I'm I'm actually tempted to put on my 10 foil hat and say that everything they have been doing was planned all along and that it' be too easy for their supporters to tear apart to be honest I'm not really sure what their end game is

their holders seem to be out of trust for reality where it took them months to accept link is collateral why Mana was collateral all along I don't get it I don't know what they are doing I pretty much you makeer as entertainment at this point you know what's their end game I have no idea okay okay um the last project um I want to talk to you about is is your own Finance um you you have been like maybe one of the most prominent Skeptics in the past and um you did not buy into the hype at all so why were you skeptical and and when when when when when wifey did this

spectacular runup to 40K did that make you question yourself at all um I mean my skepticism was from day one I was familiar with Y curve and the IR products for a while since I've always kept close I've always I've always kept close to my yield seeking rots I almost didn't even want to farm wifey tokens because I was thinking you know what would they govern what products streams are they gen are they governing were the fees being generated that they can vote to Red a token holders but of course the price of the token was going nuts so of course I I farmed them

hard um I cannot understand why people were buying into the tokens not did Andre pinky promise that he would do some pro bono work for all the wifey holders exclus exclusively until he retires to be honest I was perplexed that Andre kept releasing things under wifey umbrella uh I'm Bonner at all um for example why you know do W vaults need to be W vaults to me they could have easily you know they could just as easily have been Andre vaults and Andre himself collects the fee for maintaining and managing the Vault but I suppose he wanted a body to be able to recognize themselves and do that instead I did not expect Andre to keep building

things and injecting them under the wifey umbrella it was also just excellent timing of the universe that curv Lun CRV shortly after wals and you know directing the vaults the farm it was as ridiculously profitable for everyone involved everyone was euphoric about the cost flows coming in from the vaults but were these cost flows sustainable in my opinion you know not by a long shot you know yield above 20% is an anomaly in this world that would be cracked sooner or later of course seeing the token price run up there was always a thought of damn if I had held until now I could have made X much more profit but fundamentally I couldn't do it I

couldn't just buy back in the mouth didn't make sense to me it still doesn't I can appreciate it as a fun pair you know fun trading pair when I started thinking about the fundamentals it just falls back to to narratives of a magical future and the numbers just don't make sense to me maybe I'm really offsite on this I guess I'll just have to live with it you know you can't catch every single run in every crypto even if I was in wifey I never have the conviction the conviction to hold it which is why I sold it when I did when I did have it yeah um I I think your arguments make a lot of sense and I I too would be really surprised if the year farming

opportunities don't compress a lot in the future especially for large pools of capital uh that run completely transparent strategies right that that the market can just copy for free um but since since you mentioned the the governing capability abilities um of wifey um that brings us actually to the final topic that I have planned for today um you have been one of the more vocal Skeptics of governance tokens in general would you say you're that you're a governance minimalist um I never really thought about my own classification but yeah I guess um I was

I'm a governance minimalist so look at the real world you know governments can be a mess and do more harm than good the whole idea of governance tokens being valuable because they can vote in fees later this doesn't sit very well with me could could makeer be a good example of a governance token that's having a hard time voting in fees for his token holders and I guess you know it maybe it's not really seen strong value Ur to his token uh I feel the governance token holders that extract rent uh are free writing quite heavily in proportion to the value that they create you know does hold and wifey and rubber stomping governance proposals create value or are

the builders that operate under the wifey umbrella the ones that create the value the flow of who is creating value and who is earning that value seems strange to me perhaps tying governance tokens to more you know quantifiable work than just voting for proposals may be a better way to get holders to be value creators as well instead of I justers that's a that's a fantastic way to close this off this was great um DS thanks so much for taking time