The Evolution of Sustainable DeFi: Brad Harrison, Venus Labs

Transcript

all right the real the real survivors are here you made it till the end and you're hanging out to be with me so I'm very grateful we're going to talk about the evolution of sustainable defi uh how many defi users if you're a defi user as of today can I see a show of hands okay good um so for the rest of you this will be more valuable uh this is a 30,000 foot view of defi uh this is meant to bring more defi users in confidently give us a little bit of a delay of the land and understanding of what is sustainable D5 because it's important uh to be a sustainable user uh so let's find out what that means um first what is Venus uh it's an autonomous smart contract based

liquidity protocol where you can supply and borrow crypto assets at variable interest rates so the way this works is you connect your crypto wallet like metamask uh you supply collateral and you borrow against it at up to 90% uh loan to value of what you supplied so this is a way to hold on to your precious Bitcoin or ethereum uh over the long term but while accessing working capital so imagine you you get paid in Bitcoin um and you think that Bitcoin is going to go up over the next few years you probably don't want to sell that Bitcoin right you want to collateralize it and pull out a loan against it this is how a lot of people uh use uh uh protocols like Venus uh in

defi so a little bit about Venus from a performance uh perspective it does this many loans on the blockchain that's an important distinction blockchainbased right because whenever you trade or you take a loan at an exchange at a place like coinbase you're doing it on someone else's server and trusting them fully with your crypto and you don't have the keys to your wallet and this is not what Satoshi had in mind right Satoshi wanted things to be transparent um and and done in a way that was immutable and onchain so this is the dream that's realized by decentralized Finance some

other interesting stats uh these are actually older numbers I I debuted this talk uh back in November and things have changed dramatically so you could see where we've gone from November to today so uh current assets are uh approaching three billion now uh and monthly active users also have gone to uh about uh twice as twice as high as a number so we'll get more into the growth of defi which is happening right now and it's also uh really exciting um but I'm here to talk about uh and the most important area of cryptocurrency which which is this uh this idea of Defi and let's see what it boils down to so uh these are the first principles of defi

it's self- custodial it's disintermediated and it's decentralized these are kind of buzzword right you hear them a lot what does it actually mean but it means that you're in control of your assets at all time you have no middlemen and anybody can access this infrastructure finally when you think of defi uh this is what should come to mind that it's transparent uh that it's Global that it has uh peer-to-peer capabilities uh and that it's truly Financial infrastructure that's uh all around the world and that uh anybody can access so where did this really get started uh the first smart contract based systems that gave rise to defi were on ethereum Main net and came in the form of Swap and stable coins and lendon borrow so swap if you know de uh

if you're defi user you've probably heard of Unis swap uh stable coins you've probably heard of decentralized stable coins like die maker Dow has uh probably over a hundred billion dollars in value locked into it as of today and lendon borrow uh is the category of course that Venus falls into and some of our peers in the industry are protocols like a and compound compound was an early entrance and so was uh a so a few years on uh the Confluence of these building blocks blocks or Legos as we call them in defi because they're composable and you put can put them together and in uh inspired an explosion of innovation that literally resulted uh

in some bad practices too uh there was too much experimentation uh there was uh too much Innovation you know right you can have too much of anything uh and people were going too fast so we can relate to this era as defi 1.0 and uh a lot of these projects were notorious for bad user experience this is one very famous uh defi project which is still around today um and one that is is loved and admired uh and but also known for bad user experience U usually people put up with this bad user experience because they're Engineers no offense if you're an engineer but uh we we've come a long way since this uh infamous project called Curve styled itself out

of something from the early 90s uh but of course ux hasn't been the only challenge to defi 1.0 one of the main reasons why uh uh retail users haven't heard of defi uh this phas was characterized by uh going too fast and there were of course were some uh implosions that were of economic nature like terraluna that you guys have heard about uh that that's what we call panomics so it's of course it's important to understand the econ iic fundamentals of what you're investing into um and I look forward to the to the day that we don't have to mention Doan or Celsius uh ever again so um security is also important right because of all of these implosions

and that's why it's good to understand how these different Protocols are rated uh here you can see a leaderboard that's offered by uh a big security audit company and they've actually graded all of the uh different protocols some of them are networks some of them are applications you see Venus at the uh bottom of this list but uh it's this is a list of actually like hundreds of applications uh filtered for uh the the the top uh uh the top scores so we have a 9.73 and the Very uh top of this list you have Bor there uh 93.7 n um so understanding how audited something is is really important we actually have the most security audits uh in in our

sector so that brings us to the present and we've come so far in just a few years which makes me excited for what's to come uh pres present day defi has taken us from these three original use cases of lending and borrowing and Swap and stable coins and added a host of other uh more uh interesting applications so you can see those labeled in white in the middle we have things that are the equivalent of bonds we have defi insurance we have things that are uh the equivalent of overnight repo index funds so the capabilities are really expanding but where is most of the activity concentrated well this is a map of revenue from a couple years ago uh as you can imagine this Revenue uh

actually increased significantly uh since I pulled this data but six out of the 10 most profitable dii protocols come from lending uh that shouldn't be a surprise because lending is a use case that we're all familiar with and that's how we interact with the financial system a lot right if we want to buy a home so uh it's no surprise that this is driving the most product Market fit uh that we can see here so what are some of the narratives that are driving lending that make it so successful since people I don't know how many people are uh using di for mortgages yet but that's the dream uh well it turns out that uh there are about three of them

that are getting interesting so one is RW you guys I think heard that in the last topic or the last panel they mentioned rwa as a trend um and in 20123 the most tokenized asset classes uh asset classes were actually equities in real estate so um close behind private credit and uh luxury goods uh that have been tokenized and uh we're seeing a broader acceptance of an integration of of defi into tra traditional Finance through rwa uh here you can see another view of the uh the breakdown of different types of asset classes that are being tokenized uh this is as of November so this is a little data data uh very stale if you

consider like the speed at which crypto goes right so uh I think that we probably doubled this by now uh it'll be interesting to see what the uh latest data looks like but if you're interested this is from a website called rwa doxyz Z which is a pretty neat dashboard for tracking the tokenization of assets rwa doxyz tokenized treasuries are another big one uh as of this presentation uh they went to $675 million in tokenized treasuries uh a lot of interesting players have entered like Ando maybe some of you have heard of tokenizing us

treasuries us treasuries are one of the big or probably the biggest source of tokenization uh from Real World Finance uh and I would expect this to continue um people like having uh access to rwas like us treasuries for a source of uh stable reliable yield of course okay another narrative show of hands who has heard of liquid staking tokens okay good some people so for those of you that don't know uh this is the largest category in defi uh as of this presentation it was 22 billion in in uh in tvl which is probably increased by an order of magnitude uh over the past six months

and we've seen the pr proliferation of LST protocols signifying a major shift uh in the staking landscape here's another look at this growth in terms of market cap so leaders like Leto to new decentralized Protocols are diversifying this growth in this sector Leo has I think as of today pay uh about $38 billion in tvl uh which is pretty extraordinary for one player uh so a a notable concern remains about the centralization of that power with Leo having 30% of the market and 70% of their uh liquid Stak uh eth tokens are actually on one protocol so that's not

very decentralized in practice and these are some of the nuances and issues that are being discussed within de as it evolves so the next narrative that we're going to highlight is called real yield and this one emerged from solving a real problem uh this is important because users are generally rewarded and incentivized through inflationary mechanisms so you know like the how the monetary system works a little bit uh here we're looking at just how much inflation some of some of these projects have been injecting up to 200% inflation so they're printing lots of token to try and woo you in but that's not really real value uh if it's purely born of uh inflation right so something to be

mindful of so the result of that is the tvl of these a lot of these projects dwindles as soon as the emissions run out uh this is not sustainable defi right so uh they're trying to bring people in by offering lots of tokens uh at a very high rate and so so as you can see once the emissions end uh we have a very quick kind of depreciation of the capital that's locked into these projects these are just a few projects uh that we've captured this view of uh but what about air drops you say maybe there's some of you like to track the air drops out there uh well it turns

out it's the same story users in users out it's not sustainable uh airdrops are not a way to grow uh defi over the long term uh you might get a quick a quick hit or uh some some results in the near term but you're not going to keep those people in right so uh it it it still is a problem that we need a solution for and that's what real yield is so instead of relying on inflation or relying on air drops real yield drives incentives for users uh to adopt defi with Revenue Okay so uh this is the answer that Venus has come up

with uh and you can think of this as a user Loyalty Rewards program uh you help to secure the protocol with the governance token for 90 days at a minimum of a thousand tokens and that gives you rights to access the uh incentive program we see uh other competitors uh doing following suit and offering something similar so we do think that this is uh the way to sustainably grow defi uh let's look ahead now it's not always an easy task but uh how might we look for clues about evaluating uh the future of D5 so we talked about the past we talked about the present um how might

we gain some insight into the future well look at the velocity of code development if you want to know what the smartest people in the world are doing look at GitHub GitHub is the uh Nexus of innovation and GitHub pull requests is the atomic unit of innovation here we have mapped in our industry of lending on defi lending uh the rate of codebase commits from last year Moro is a great project uh that has done a fantastic job at uh innovating a completely immutable protocol um and

second uh Morpho is Venus then you have other notable names like a uh that we've mentioned also cental Fusion rwa Project Spark is a fork of a that was launched by makerd Dow uh and compound uh down there at the end so uh kind of an interesting view of the rate of innovation going on uh in defi uh this is another view of codebase commits but now not only lending but the entire industry so you have networks here at the top you have nosis chain leading the way they must have really good coffee in their office uh then cardano IP and ethereum uh leading the way okay so what's another way that we

can evaluate the rate and the efficiency of innovation uh at some of these protocols uh the story is not only about code but it's also about governance governance uh because the way that you make changes to the protocol is decentralized token holders are people with power that can affect change on the protocol so uh the rate at which these uh uh proposals are executed might indicate how fast that in Innovation is actually being deployed at the top a is leading the way then Venus and then maker and compound uh which is also the leaderboard of capital secured by these protocols uh in the lending

sector so if we completely zoom out and look at defi holistically uh the current valuation is 56 billion dollars so this this is new data I've been showing you guys kind of stale data but this is like a new view uh we were very quiet for a long time so this is you know this this part here was was pretty sideways it's it's a very cyclical industry right uh this is the time not to go to conferences uh and here we are coming up uh setting new all-time highs so this is a really exciting time in decentralized finance um I'm personally um very excited about what's to come uh analysts

say that in five years uh in six five six years by 2030 uh we'll get to $230 billion uh in market value uh in defi the same story for users users went sideways for a little bit but now we're getting uh a com a new inflection point in user growth which suggests that we're unlocking new new audiences of users uh not just the ones that are coming in and coming out but uh that new people are paying attention to defi um so hopefully it means that we're solving some of those user experience uh problems that we discussed a little

earlier so this is the V the vision for Venus it's to bring defi to the masses and power Financial Services of All Sorts in all regions with liquidity that it's amassing uh like we seen we went from 1 billion to three billion dollars in the past six months and since we've started here together uh at this session um we've made it clear what defi is all about and we've done a high level overview of the evolution of defi from past present and future and we also have some clues about what may come next so giving the times we're living in I thought I'd leave you with an AI generated haou about

defi Swift Finance flows free Unbound chains of trustless ease defi Dawn's Rises thank you very much [Applause] do we have time for questions any any any questions yes sir yeah that's an interesting point I

haven't seen any statistic that has uh measured the correlation over time between user growth and tvl growth or user growth and Bitcoin market cap um and if you're suggesting that the correlation uh has been steady um yeah I I I don't know I know that people get a lot more excited about our industry when there's value AC cruel right for obvious reasons uh but if you look at the trends of what's happening in places like El Salvador and countries that are adopting crypto throughout their entire value chain like Argentina what we see is that it's becoming a part of everyday life and so these types of shifts and trends

that lend to people using it all the time to transact as a part of their living uh that will drive the decorrelation of user growth to TBL so I think that's already happening and there's more and more examples uh of that in in different countries but that's a good question thank you any other questions great thanks again fantastic Brad thank you so much for that insightful uh presentation we are heading into uh the networking EPO so hosted by Kraken downstairs you have

a full hour of networking make the most of it and see you tomorrow thanks again e

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