Understanding DeFi Metrics w/ DeFi Llama

Transcript

[Music] d5 slate team [Music] what's up y'all real quick if you like the d5 state content on twitter and youtube and sub stack please please give us a like and a subscribe on this video on youtube and join our channel join the community we'd really appreciate it we're pumping this stuff out for you all as much as we can and we really enjoy the support and the community that we've built thank you very much enjoy what's going on ladies and gentlemen we're here today with mr lama of defy llama the superior protocol to d5 pulse don't tell d5 pulse we said that

and we're here today to talk about d5 evaluation so what you're going to learn about today is how to value certain g5 protocols how to access important information in d5 um you know and kind of what to look for in certain projects in certain sectors so definitely excited to kind of break down you know what makes a d5 protocol investable and valuable to the outside eye you know especially to people that come from the traditional world as well you know not necessarily just those who are into crypto and into yield farming you'll notice on my background we've got the nft slate logo check out the nft slate twitter and sub stack we're getting that off the ground starting an nft collection there it's exciting nxt has been nuts recently and

um yeah it's time to build illiquid asset collections online why not so here today with mr lama i'm gonna pass it over to robbie we're actually together in costa rica he's gonna brief us up a bit and then let's get into showing you guys and teaching you guys about d5 valuations oh yeah super hyped to be here uh talking to mr lama thanks andy it's another beautiful day this time in costa rica so we're getting after it it's uh it's really nice here there's tons of jungles and beaches and markets and good coffee good food so great vibes down here so far um and yeah it's just a super great time to just be a digital nomad in the metaverse world of

financial magic internet money um and yeah it is a lot of a lot of freedom for um even your your physical world as well so um here today with mr lama which is super exciting you can see he is an anonymous character which we we have talked to quite a few anonymous characters on uh defy slate so i'm interested in mr lama's backstory how he got involved what made him choose to be an anonymous character in this world full of suits and what led him to defy llama to begin with so i will pass it over to mr lama himself and take it away sir sure so i guess like the reason let's start with the

reason for being adam for me it's mainly like um to avoid being sued and and then i also really like that the idea of an anonymity as an equalizer among like everyone so and the idea that like doesn't matter background or anything and everyone is equalized by anonymity so i just quite like that but the main reason is and for legal legal reasons gotcha yeah um i completely agree there i mean equalizing opportunity i think uh when everyone's an anonymous character it's a completely level playing field

and that that's a lot of um just basic crypto principles is trying to give everyone equal opportunity equal access and build a financial new financial system that isn't bogged down by um you know people's assumptions or uh just really like discrimination against uh anyone's you know personal identifying information so i yeah i think um it's really cool that we have anonymous characters out uh in in crypto and um they they can make just as much of an impact with their contributions um aside from any of their any of their identity

yeah completely like i completely agree equal opportunity unequal results so let's talk about that you know what got you into defy llama you know what is defy lama how has that process been been been going for you sure so um the main reason why the formula was started was and because we didn't like multiple of the practices that d5 tools was was doing we thought like it was important for that to be like an alternative and so we built it and actually i think you can understand a lot of the reason like a lot of the decisions that we're making

by taking the like one of them like we're trying um to be like different from d5 pulse so we're aiming for like more transparency and everything open source a lot of like for a lot of like this business or like design decisions the the they are like deep rooted into like this i guess guiding principle yeah sweet so let's pull up defy llama um and let's have a look at what we're looking at so right here we can see um that the tvl in d5 i mean well it looks like it's it's about it's about ready to make some

new highs which would be amazing um you know push up here so basically we've got 118 billion locked in d5 um you know ave is dominating in terms of tvl uh with 11 billion um and i mean they would claim that they have more um but you know there there's clearly a list here of the top protocols you know that are based on you know in the d5 ecosystem so let's talk about tvl so um mr obama what is tvl and you know what what does that mean for d5 protocols as a valuation as a valuation metric you know especially compared to their market cap now let's talk about that as a valuation metric sure um first unlike the question of like what is tbl

that's already like a pretty difficult question and you mentioned abby and that's a prime example um because like essentially for abby we we get a lot of questions like hey why is there like a difference between these like the number they show on their website and it's mostly in that case it's mostly because the number on the website includes influence more of money and we don't and one of the reasons one of the main reasons for this is i like if you include borrow money that means that like if someone farms it through like cycling deposits then like that money is counted like multiple times so essentially you can like deposit borrow your own money

deposit again borrow again and so on then you're like counting down like multiple times i feel like at the point um polygon which is heavily farmed cuts i think like 3 billion tbl but like they were actually like maybe around like one point something billion in deficits it was actually like 1.5 billion that ballooned into like three billion from like cycle landing mostly yeah kind of like the re-hypothecation of funds you know in ave you know as an example definitely contributes to that so um so we're looking at tbo so we see that ave's got

uh 11 billion in tvo right now on d5 llama um you know in comparison to their to obvious market cap um you know you can see that there is a ratio uh available to look at um you know to assess the valuation of the ave token and of the protocol so right now the market cap is about 4 billion you know so that puts us at a market cap to tvl ratio of about 0.33 all right so 4 billion over 12 is about a third so let's talk about that you know what is the tv out or the market cap to tvl ratio um you know and and and how do you view that as a as a means to value d5 protocols sure so a lot of people like to use that

and we've considered building that into our website by loving and queen gekko really does also yeah but and tbr has this thing like it's a bit like this i guess you could say like there's multiple times of tbl when you could say that like tbl that and incurs like more risk or like more potential losses like permanent laws something that is more worthy or like more like better than tbr when just like money and a masterchef contract so people like to use the

market well tbl divided by market cap um but it's there's like this ongoing debate of like how can you really compare tbl when there's like positions like protocols when tbl is is just like i guess riskless there's like no risk associated with tvo but like for other protocols and you can have like premium laws or something like that yeah and that's something that i i would like you to touch on because i i'm still a bit um unsure about and to me tvl is really a metric of trust in each of these protocols um you know the ones with more total

value locked it's not necessarily like they're valued more or their they have more growth potential or anything like that i see it as you know people are moving their money around and it's going to land in one or more places and the places that have a good portion of this of this total value locked at any one given time those are the protocols that more of the ecosystem trusts and you know do you see it as a similar way and um even if there are multiple types of tvl um i almost see it as different like different risk profiles

right you can have a lot of different protocols in one risk profile and that tvl you know it can be can be i don't know maybe five to ten billion um and those are like the the high credit if we had to translate it into like the traditional finance world um those are like the more the more trusted institutions and as you go down in tvl you almost get into uh more of like the smaller banks the smaller credit unions that don't have as much history or um as much you know assets on their bank account to kind of provide a backstop for any lending and borrowing um

issues or or just things that come up where you would have to dig into kind of uh that that reserve so kind of to really put put a cap on that question do you see tvl as a measure of trust or does it measure something else i think like as tvl's measure of trust um works but i think like most people use it more than like as a metric for adoption so it like is for example um easy to compare i don't know like different indexes such as like pancake swab like texas are like similar like blending protocols also like quite similar

and i think like comparing by my tbl to see adoption like it's it's pretty valid right yeah and i think on different on different types of protocols as you're saying mr llama there's different types of of metrics that you know that can work as as better for valuation so tvl as an adoption metric is certainly present in you know most every protocol however when when we get into dexes you know or cert or other protocols you can look at volume right you can look at the revenue generated to the uh to the native token holders so um yeah i mean i think for you know for

lending protocols it's certainly a a a good metric to have in terms of tbl because it it it does show adoption although there are funds that are rehydrated you know but when you get into dexes and sort of other you know um protocols that are not necessarily tbl determined right there are definitely other metrics um that are important i think one of the biggest ones um is kind of like these yield aggregators so we're gonna go over here to yield tab so you know confidence in these protocols is certainly a big tvl booster because basically these protocols can are doing things that you can do by yourself however when you use them they're they're basically aggregating your liquidity to

put you in pools with other people for certain rewards um you know so what's kind of your take on tvl aggregators um you know and and how does that come into play uh with you know with the the valuation model so uh is tvl more important for aggregators than it is you know other protocols or what's your what's your kind of mental model about yield aggregators when it comes to valuing them um i completely agree with you like and for example for nexuses all the things that you mentioned um or like fees also could be like a good metric for adoption and but yeah like for fabricators like

the the value on the yeah the volume that's like being managed is very important and i guess that would tie into like what rob said about um being a metric of like trust since it's like i would say like maybe the most important thing for the aggregators yeah yeah so defy lama um what is are you guys working towards being a dow what's kind of the structure here of y'all's of y'all's operation and have you thought about creating a default llama token yeah so right now most operation is um me coding and like

the shaman is another guy who like tackles some of the operations um and some other people also like coding and then some [Music] some people are just like sporadically make pull requests like improve our or open source projects and right now we are like we don't have like i guess something that could be like similar to a token although not really it's quite different and when we have like these young punk lava punk nfts which we're giving out like contributors it's like people that contribute like

code or really anything doesn't have to be technical we give them like a lamborghini and yeah i'm thinking i'm thinking of like sending out like some kind of like small governance around them but that's still like work in progress yeah it's interesting the different ways that uh you know protocols incentivize their users what you know what was your reasoning for going with kind of a case-by-case nft incentive rather than this you know holistic governance token model well um

i don't think like a token like really makes makes a much sense for what we're doing like what you would do is i guess um vote on like tvl but um i think it makes more much more sense for like d5 protocols and for something like us which we're like basically a front-end and data aggregator um and also i i would rather buy to like deal with with all that stuff actually like the nft um it it wasn't conceived as like a government store anything like that i just build them because it's fun like i started thinking of like um this llama

palm nfts they were fun so i started like giving out to people that's it and it has like no in her like in her environment and i'm just like in terms of governance and all that and we might use it and we might stop using it there's no yeah right it's i would say they're completely different to a token there's no expectation of anything from that exactly yeah and you get into some some gray areas maybe in the legal sections et cetera you know with tokens and um yeah i i generally agree if there's not one needed then you know why create

um yeah i mean let's kind of shift back towards the the d5 tvl run so we saw uh we saw a pretty massive uptick in tvl from you know december all the way up until may when we hit 150 billion right we pulled all the way back to about uh 185 billion almost a 50 decrease which is basically the the the decrease that a lot of the the bitcoin and ethan um d fights open sell right and so now it kind of appears that we're setting now you know we're we're looking to maybe even climbing back up as you know ethan bitcoin sort of recover their prices a bit um so my first question of a few is do you view the total d5 tbl locked as

you know an important metric to follow in terms of the bullishness of let's say d5 pulse index as an example or um you know any other d5 index that's out there so you know could you per say use the increasing tbl as a measurement of okay i want to get exposure to d5 tokens because higher teeth higher tbl for their protocols means that the governance tokens have more governance power so that they should be worth more and then that kind of flywheel comes back so i kind of laid it out there for you um you know but so do you do you think that that is a reasonable uh kind of mental model to follow is increasing tbl let's let's look for increasing and bullish prices of defy tokens

um yes you said like i think a lot of people follow the mental model and it has like that this was like as you say like it's five well it's like this this is like positive feedback loop where a lot of like tvl growth is driven by like price on the underlying so essentially like you increase price of the online tbl increases and so on and i definitely don't know what we've tried like to and level off this kind of and price reproduction to see like what actual adoption or like what's the actual

growth in terms of tokens so if you for example like click ethereum down there and to see like the icon chart you'll be able to yeah and you click ethereum there and then if you click on if on the chart you will be able to see like the the tvl chart denominated in if and like it tells a really different picture from like the one in usd and i think it's quite interesting yeah yeah we'll we'll see that come up here in a second but i i was going to ask a similar question is if there was any way to measure

how much tvl was due to increase in deposits versus how much is due to asset appreciation and i think that's exactly what what the story of that chart denominated and east tells is this is how much eath is growing it doesn't matter if ethan is 4 000 or 400 the you can see the accumulation or distribution of eth into d5 where price appreciation doesn't really have an impact on that story yeah exactly yeah seriously it's a little bit more of a strong slope you know against the dollar because of just that price appreciation but yeah

generally speaking it's still an upwards trend here even when it's paired against east mr llama yeah it it's like a slope but it's actually like the slope is quite small and well the growth since like the beginning is like much much much slower like much much more yeah like if if you call like in percentage um the growth is much more important like usd yours is like on maybe probably like 10x or something else and it's more like 100 or so against east have you seen any any reasons or any uh yeah i guess events that occur that kind

of see that that we can tr trace as either a deposit event or a withdrawal event in this east chart yeah like what are some of those events um if you guys like uni swap and uh the unisa protocol it's awesome because yeah and you see like like the eth chart you can see like um the launch of sushi the um let's see on like see so like the first one is the sushi launch and then the second one is the liquid the liquidity mining program and the third one is the fey launch you can see like all these events like

so clearly but like if you go to usd you cannot it's like it gets too intermingled with price and you cannot really tell that much seems like the store is like completely different all right so here you can clearly see how like sushi launched and then the migration away from sushi and then like the other thing yeah so this was this was the the the airdrop right here right in september yes yeah no wasn't this when the uni airdrop was in august i'm wrong but like yeah around that but like the uni eyeball didn't affect the tvl

and then this is when the this is when the the liquidity mining launched when tbl skyrocketed right yeah exactly and then sushi swap launched here yes right here when it dropped from like it dropped almost 50 percent and then obviously it it kept regaining because people realized that unit swap was going to also have the liquidity mining and then right here is when the liquidity mining stopped right exactly again and then everybody either migrated to sushi or went into other

farms and then booming you got the fey launch yeah interesting super interesting and i think that that like you said it tells a very different story and if you're only watching the dollar chart and it's just take this back a few years yeah yeah if you're only watching the dollar chart it's up only and you think you know we're in this massively bullish um phase which you know because of asset appreciation that was kind of the case but if we take it back a few years to you know 26 27 2016 2017 era um i think we saw a similar divergence where there was a large influx of people that were now

trading on the dollar chart you know they were they were trading eth versus the dollar or um ripple versus the dollar what you know the coins that were kind of you know just getting started in 2016 2017 um z cash against the dollar binance point against the dollar all of these all of these charts now had more traders looking at the dollar chart where you know if you were around 2015 2016 you know that a lot of these tokens have uh major support and resistance if you want to be a technical trader um at their bitcoin levels and personally i've used that as kind of uh my framework for developing

either a bullish or bearish perspective on a lot of these coins if it's an ethereum based d5 token i'm looking at the ethereum pair if it is one of these dino coins um monero z cash ripple litecoin just you know the ones that were around you know before ethereum really started developing gaps then i'm i'm charting those coins against against their bitcoin pair and now we see most traders um consumed with the us dollar pair and i i think you know it distracts a lot of the progress or or just the growth of the of the

ecosystem um because really what we're trying to do at the end of the day is grow our our bitcoin balance right like we're all we're all stacking sacks at least that that has been the motto um and if you're trading in a dollar dollar term you get into the scenario where you might have made a whole bunch of dollars but if you were just sitting in bitcoin you might have made more and if you don't look at some of these other uh pairs or ratios you're going to be lost in some of those scenarios where actually taking the least risky bet just sitting in bitcoin would have paid you the most yeah totally um i i really like um the like the tutorial for example i just showed you but here well

in all of the dilemma we use ufc charts just because it's what people want yeah but i totally agree with you yeah i mean i want to see 1 trillion d5 tbl so mr lama what's your what's your prediction there how many years and what is it going to take to get to 1 trillion tbl i don't know something something that could like also drive volatile up quite a lot would be like um well this this trend of like compostability that we're seeing um like um we which is like some other all the the

tbr from all part of us together so this has like the effect like if there's like multiple protocols building on top of each other like a tbr container like every protocol this is the this is essentially like increases the total video so it's possible like even without like more money flowing into the system we see like total tbi growth quite a lot mostly by like new all these new projects like launching and building on top of each other gotcha so massive adoption and massive composability yeah yeah and i think that's that's a great question i want to stick there like you know speaking of turn in terms of what grows

tvl i i think is really important um for any you know founders builders developers traders that are that are listening um you know adding value to the ecosystem is is how we all kind of grow this pie and and we're able to to profit from it so you know mr lama like you said composability is a great um just push that that will increase tvl and i've been tossing around this idea of another one that i i think is possible but i want to get your thoughts on the the possibility of a central bank digital currency whether that's an american one a chinese one or otherwise i've heard interpretations where you know this could just drastically

decimate defy and you know now everything's the digital dollar and there's just not not d fire or crypto really even as uh too prominent of an ecosystem but i've also heard the counter argument to that where a digital dollar is actually great for d5 it means now the traditional banking and federal reserve ecosystem is composable with the defy ecosystem and it's much easier to bridge between the two so i'm curious on your thoughts still relating to composability is a digital central bank digital currency a benefit to d5 and tvl or is it a detriment um yeah so

and first of all i don't think like um i've also heard like these arguments around and this like state issued like stable coins like how they can affect like the current state of the art but um i don't i don't see like i i don't really understand like why would they affect it seems like the the i guess like the guiding principle of defy is to sort of like rebuild some of like the institute like some of like the primitives like the financial primitives like offer them with either like lower cost northern spring like more transparency

or yeah so if there's a digital dollar and stuff like starts building on top and it's just gonna be like oh it's probably gonna be like pretty similar to what we're seeing with banks and fund managers well the current banks and fund managers so i don't see like it affecting it a lot and i could see it leading to like an increase um in in adoption i'm watching if it's like free enough i guess but it's too early to like

know what shape it's really going to take like these things have been like like people have been working on these things right like for years and it's still like not clear what shape they will have so it's totally my opinion right yeah i mean it could go one of many ways really um you know we could see cbdc's inside of ave you know we could see them you know use tradable on unit swap or we can see them on completely different blockchains um complete different you know distributed ledger technologies right that i'm sure the governments are going to want to have the most control over possible so to to deploy on something like ethereum may not make sense for them

um you know i think with the with mass adoption with massive price increase for bitcoin and ethereum and with bringing d5 to mobile um making it easy on the front end for everybody i think we could see a trillion tbl in less than you know two years and i think by the end of 2023 we could see you know total total just boom you know 10x quote-unquote of of tvl and d5 through those kind of things adoption the narratives the fomo the hype um you know you got the mobile wallets and the ease of use on the ui front getting way way way more improved right and then just the asset appreciation of bitcoin eth and other crypto assets that lead to the natural increase of tbl so now that's there's

your bullish opium for the day uh mr lama and um yeah i'd like to wrap it up by kind of touching on what's upcoming for defy llama and how our community can get involved to contribute and help you guys out sure so and in terms of like what we're doing like we're kind of like split among a bunch of like stuff and working like always adding more protocols adding more chains and stuff maybe like the coolest new feature we have like coming right up is and sort of like oracle dashboard where you will see like how much money on the management or like or money controlled by each oracle network there is so that's

interesting and in terms of my contribution really like it's like people can just like jump on our discord and talk to us and just take like just ask us like hey god how can i help or just like directly go to one of our projects or one of our open source projects and directly contribute one of the easiest ways is like big project that we have not integrated and integrated it's yeah it doesn't require like previous knowledge of the codebase i think that it's it's actually like sort of like self nice self isolated thing yeah

yeah that's great so so contributors can just go directly to your github uh look at some of the projects you've integrated and integrate ones that you have not yet um and you know they can just pull they can just create a pull request um and then how does that pull requests get approved is it uh like your central team yourself um that actually has admin control on kind of instantiating uh what changes go live so it's mostly just me and that every day i just like go through like all the new pull requests and look at them and like and just merge them

and in most cases like the merging is quite it's quite easy like seems like they're just like adding like tv like tvl sources are like pretty standard and there's some cases in which they're trying to well or like they would be adding like cpl in a way that would be like unfair to all the protocols in these cases i usually just like talk with them explain them and if like their arguments make sense we changed any other protocols and sometimes when we're not sure if we should count something extreme or not we either like pull our community through like twitter or discord we just like ask people hey what do you think we should do

like yeah are we going to respond like make a decision based on that yeah i want that way yeah y'all y'all are able to have community governance without a token by polling your discord and and your twitter yeah exactly i don't think like i really don't think like a token like for what for what we're doing right now we're just like we just it's a it's a website really i don't think like a token is needed and we'll have like plenty of like discussions although i really want to like decentralize out of like a decision making since right now it's centered around me unlike some of the team and i want it to be like much more community driven and i'm i'm working on that like really

like this group called like llamapose we're just like discussing some ideas on that yeah that's the thing it's like how do you incentivize people until you don't want to care about your projects so much that they want to you know push it forward and try to see you know where the leadership can go and incentivize them so um yeah man i mean that's awesome guys check out dfi llama.com check out their discord we'll drop the links in the description of this video thanks so much for coming on mr llama it was a pleasure man thank you for building d5 llama it's been a great tool for us i've used it quite a bit and yeah keep keep pushing forward and making d5 for everybody