Fault Tolerant Episode #3: The Block & DeFi

Published in

Membran Labs

4 min readFeb 21, 2019

In this episode I spoke with Matteo Leibowitz. Matteo writes for The Block (theblockcrypto.com). We talked about how Matteo got into crypto, The Block and their new premium offering, “Genesis”, and Decentralized Finance.

Listen on Anchor.fm here

The Block

“These days I’m a research analyst at The Block. The block was founded back in October 2018. It’s a new blockchain/crypto media and research outlet. It really strives to be as impartial as possible. Which I think is really important in this space.” — Matteo

DeFi

“I’m really thinking that decentralized finance is going to be the Trojan horse for digital money... Bitcoin has been around for 10 years now and the core product hasn’t really changed a whole lot. It’s essentially been digital gold and it still is digital gold. There has been some adoption, but if we only had Bitcoin, I don’t know how long mainstream adoption would take. I think that with decentralized finance on Ethereum we’re seeing this entire set of tools and mechanisms that support the money that is at the heart of it (Ether). I think the value that is being added to this digital money — I think that could potentially drive the adoption of digital money faster than would happen with Bitcoin.” — Jordan

Lending — Compound, Dharma, and Maker

“Compound is currently working toward v2. Under v2 different assets will have different collateralization ratios based on their risk profiles. So if I’m putting up Ether I might need to maintain 150% collateralization ratio. If I’m putting up REP or ZRX, I might need to maintain 250%.” — Matteo

“Broad money is about $90T. But the global debt market is $200T!” — Jordan

Derivatives — dYdX

“The high-end estimate for the derivatives market is $1.2 quadrillion… That’s essentially 1200 billion — no wait 1200 trillion!” — Jordan

“One question I have when it comes to platforms like dYdX, compound, and Dharma — obviously these markets are massive — question is, how do these platforms capture value? Or have they been built such that they don’t capture value? I never quite figured out how the compound team makes money, but I presume it’s from making markets themselves…” — Matteo

Sets/Baskets—Set Protocol

“When we start tokenizing real world assets, like real estate — imagine some percentage of buildings around the world are tokenized. You could then take an entire neighbourhood/area like Manhattan office space and create a set that represents those tokens. So then you could have a Set token that gives you exposure to that portion of the real estate market… You could have sets that represent regions, cities, etc. You could long Manhattan and short SF!” — Jordan

Prediction Markets— Augur and Veil

“Prediction markets are just absolutely fascinating and super exciting… I’m pretty upset that Veil is not available to US customers right now… Essentially all these prediction markets are just derivatives so it makes sense they would need to comply with regulation.” — Matteo

DEX’s — Uniswap

“100% on-chain, no token, no fees to founders… On a typical exchange there’s an order book. If I’m looking to sell I set a sell price and quantity. if I’m looking to buy I set a buy price and quantity. The order is filled directly or by a market maker and that’s how the price is determined. With Uniswap there is no order book — there’s just these piles of tokens — of ETH or whatever, and the buy/sell prices are determined algorithmically. All the users have to do is supply liquidity and they earn a portion of the fees.” — Jordan

“If I had to say what the success story has been over the last year I would go with Uniswap… AZTEC stuff is super interesting too. I think their first implementation of zero knowledge ERC20 was zkDai... Private Dai is the game changer. That really is as close as we’ve got to digital cash — truly fungible, private, stable… There is this interesting tension though between Dai and Ether when it comes to money. If Ether isn’t being used as a medium of exchange or unit of account, can it retain its monetary premium just from being used as collateral?” — Matteo