An introduction to DeFi in 2020 as an email to my friend, Will.

January 2020


Preface

Many of my friends know me, for better or for worse, as the "crypto guy" in their friend circle. As much as I love to talk about blockchain, I try not to bore my friends to death in social settings unless they ask me about it first.

So when a friend asks me for a hot tip, I get a bit excited that maybe I can drag him down the crypto rabbit hole with me.

Charlie From Sunny - Conspiracy

Sidenote: I've been getting a lot of these questions recently. Maybe a signal that the bear market might be coming to an end?

At the time of writing this, January 2020, there has been a ton of innovation and development in the blockchain space over the course of a two year bear market yet adoption and awareness have not yet caught up. I see the biggest efforts in 2020 needed to be made on the marketing and communications side. I believe it will eventually catch up, but there is a lot of work that needs to be done.

With that in mind, I'll be spending a lot of time this year thinking about and trying my best to get people all over the world to use decentralized technologies and apps.

So, enter Will G.

WhatsApp from Will - Dec 29, 2019

Above: The Text that Led to the Email. December 29, 2019

Will is a pretty smart dude. He's a Yale graduate, former lacrosse player, and proud father of two. He worked at Goldman Sachs for a long time but transitioned over to the Cocoa business a few years ago. His most crowning achievement to date, however, is that he is the most-esteemed commissioner of our fantasy football league.

I'd say while he hasn't been actively trading over the last few years, he knows what Bitcoin and Ethereum are, the major differences between them, and probably even owns some BTC or ETH himself.

I say all this because there is a concept in Marketing called a Persona. Essentially, a marketing persona is a stereotypical version of a product's users. It is a framework that can be helpful for marketers and product people to imagine what each type of user's motivations, UX/UI pain points, and needs are as they go into development.

I love Will but when it comes down to marketing personas: He is an All-American white dude with an Ivy League degree. That is also to say, Will is also not a Honduran coffee farmer that needs a loan to finance their next crop.

Will's main personal use case for blockchain right now is to make a speculative investment with some of his disposable income.

This is/was definitely not financial advice, but rather my attempt to quickly articulate some cool things happening in the space to one of my friends at a particular moment in time.

I am not a technical trader, but I do believe that some digital assets have been massively undervalued throughout 2019. There's been way too much development and too many cool things happening that not enough people know about. Therein lies an opportunity, but again this is not financial advice.

While I've made a few slight formatting changes, including adding some pictures for readability, the general message remains intact. Please keep that in mind as you read below.


The Email

From: Andy Simon
To: Will G
Date: Sunday, December 29, 2019
Subject: Stuff on Blockchain

Will,

My general perspective right now is that 2019 was a year that saw a lot of interesting new projects launch and pick up real users, particularly in the "Decentralized Finance" or "DeFi" area.

Ethereum is miles ahead of every other layer-1 blockchain when it comes to developer activity (people actually building applications) and user activity (excluding casino & gambling type of games that are prominent on low/no-fee transaction networks like EOS and Tron).

Ethereum ecosystem has 4x the developers of the next biggest

Source: Electric Capital Developer Report H1 2019.

Other layer-1s that are aiming to solve interoperability or transactions-per-second challenges will have a role in the future, but I believe they have a long uphill climb to gain traction right now (for example, Cosmos, Polkadot, Algorand).

In my opinion, Bitcoin (BTC) will continue to have a role over the long-term as a Store-of-Value, but ETH can be used to do things right now beyond HODL-ing like used as collateral to take out a loan, earn interest by providing liquidity for decentralized exchanges, and staking tokens to secure networks.

To me, this is a big part of what makes it such an interesting asset (and undervalued IMO but this not official financial advice and I am not a financial advisor). ETH is not only another store-of-value, but it can also be used to do things today on the "web 3.0". This article is a great summary of the "ETH is Money" meme and the concept of ETH as a "triple point asset"... I highly recommend the read.

Next steps I recommend (with links):

Get MetaMask for your browser. This enables you to access all the projects built on Ethereum.

Buy ETH with USD (likely Coinbase is your best option in the US and you are already setup there).

By the way, Coinbase has a program called Coinbase Earn that awards you "free" tokens for learning about projects on their exchange. This is usually watching a series of explanatory YouTube videos and earning the equivalent of a few USD worth but still, free money!

Once you have the ETH in your Coinbase account send it to your Metamask wallet. In Coinbase, you have to go to your Ethereum wallet page and then find the "Send" feature.

To get your new Metamask address, click the fox icon and then you should see it pop up, and a button to copy the address to the clipboard. Paste that into Coinbase and send it.

Send Eth to Metamask from Coinbase

Once you've done that, go over to Zerion.io. Click "open an account" but all you will really need to do is sign in via MetaMask with a button click.

Zerion is a very cool UI layer that essentially organizes your holdings across DeFi assets and protocols (on Ethereum). I check this everyday, and you don't actually need to login to Metamask to check your portfolio.

Zerio profile

DeFi Pulse is a great resource for tracking "value locked" in each of the Decentralized Finance (DeFi) projects that have recently gained a lot of traction (like Maker, Compound, etc). If you scroll down below the header, you'll see the full list of projects. If you click into each project, you'll get a detailed profile page with links to relevant sites and historical data.

Zerio profile

Source: DeFiPulse.Com. January 14, 2020.

The project that I was telling you boys about on the chat was Synthetix, (SNX). Essentially it is a decentralized platform (no counter party) for creating synthetic assets that track the value of real-world assets (like Tesla Stock, S&P 500, Price of Bitcoin, etc.) on-chain (built on Ethereum). This is just like UMA Protocol, but Sythentix is fully live right now whereas UMA is still only testnet as far as I am aware.

Synths Available on Synthetix Exchange - Jan 14 2020

Pictured: The Synthetic Assets Currently Available on Sythentix.Exchange. January 14, 2020.

It took me a while to get my head around the concept of decentralized derivatives, but here are a few links to things that I found especially useful in understanding what Synthetix is, how the SNX token works, and the "investment thesis" behind SNX ownership and staking.

Finally, the project that Foster told me about in 2017 and that I am a big believer in, is Chainlink. Chainlink is a decentralized oracle provider and has a native token called LINK. They have partnered with Synthetix recently to provide secure data feeds into the Synthetix platform.

That's all I got for you for now. Might turn this into a blog post or YouTube video.

Happy New Year!

Andy

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