Regulation, Innovation and DeFi: A Recap of the New Finance Podcast Season 1

So Mike Kelly and I put out our first podcast series at the end of last year and season 1 just finished.

We had some amazing guests, but first I want to thank Nasos, Shaaz and Meg for making this possible. Their work on the production and graphics was amazing.

Back to the guests, I thought it would be great to look at each episode with brief highlights, issues, or learning points I took from the interviews:

#Ep 1- Alex Dunsdon — VC, Shaman & General Wizard

This episode was a lot of fun. Alex tends to approach things and think in a way most people don’t, he always has an interesting perspective. I had a few key takeaways from this conversation which included:

• the importance of options versus our current old, creaking, broken institutions
• Decentralisation is a spectrum, people draw their own line and different points along this spectrum as to what is ‘ok’
• Social tokens are a super interesting part of the future. I wrote more about what they are here :)
• There is a ton of hype and greed in the space, so you have to be thoughtful about what you are looking at and why you think it is interesting.
• He thinks most people don’t care about decentralisation and that a lot of centralised companies will win — i.e Coinbase, FTX, Binance
• Narratives and story-telling and mimetics rule the world

This was a fascinating episode and more a philosophical dive into some of the issues facing crypto.

#Ep 2- Dr. Will Robinson, PhD- AllianceDAO

Will Robinson is a brilliant guest and has a great resume including a PhD in Game Design, previous work as an auditor focused on crypto and now a Core Contributor at AllianceDAO and their web3 leading accelerator programs.

Will shared some serious alpha during this podcast. Some key takeaways for me were:

• Guilds are a huge part, if not the biggest, of crypto gaming! If you don’t know what a guild is, I wrote an intro here to whet the appetite.
• He likens DeFi to Cthulhu once it is out of the box you can’t get it back in. We have summoned money-gods in a sense. I loved this analogy.
• A lot of what we are doing here is toying around with different or new incentive mechanisms to try to shape human behaviour, whether that is in gaming or DeFi.
• Smart-contracts/decentralisation can offer greater transparency in gaming and confidence that you are getting treated fairly.
• Decentralisation offers a chance to reward users and supporters in novel ways i.e ownership in protocols, transferrable assets, community engagement.
• Disintermediation can be a powerful tool, and the lack of regulatory clarity can give projects the chance to experiment in ways public or more traditional companies currently can’t
• Regulation is coming, but we would love for the role of the regulator to be more of an educational one — present warnings and options for users.

Will shared a lot more so make sure to give the episode a listen :)

#Ep 3- Ioana Surpateanu- Chief of Strategy- DIA Labs

DIA Labs are an oracle provider and part of the key infrastructure of Defi. Oracles provide data into different protocols in a robust and decentralised way (I wrote more about oracles here). So we were really pleased to have Ioana on the show. Not only that but she has a long history of engagement with government bodies and understands the practical workings of bureaucracies in a way most people rarely get to see.

Ioana provided some great insights:

• DAOs can be powerful social coordination tools and part of the future of how many crypto protocols will be run
• You can crowdsource the wisdom of crowds, such as the way DIA is structured for pricing data
• Regulators find it hard to keep up with the space, but that doesn’t mean it will continue and regulation is on the way.
• There are many new areas that pop-up such within Defi or NFTs that don’t have easy or neat analogies in the traditional world and this can be tricky for regulators.
• Stablecoins are something regulators view with a great deal of interest and suspicion.
• DeFi wasn’t/still isn’t recognised as an existential threat by regulators in the same way that perhaps Bitcoin or projects like Meta (prev Facebook) Libra is. This is reflected in the swift reaction by regulators when Meta initially proposed it.
• On/Off ramps for fiat into crypto are the obvious areas that continue to get regulated.
• The metaverse is interesting from the perspective of self-sovereign identities
• The successful DAO’s so far have started centralised and moved towards decentralisation- the most successful to date being MakerDAO.
• The lack of regulatory clarity is also stopping some people from building and the uncertainty is an issue. We want to engage with regulators in a positive way to prevent heavy-handed decisions.

#Ep 4- Alex Amsel, AKA SillyTuna- The OG of NFTs and Gaming

SillyTuna is, as Andrew Steinwold said, ‘an OG’s OG’. Alex has been in this space for a LONG time. (as an aside also check out his great interview with him here). With his background in running a game studio, discovering Bitcoin when it was $49 and being early to NFTs. Not only that, he is thoughtful and passionate about gaming and the realities of crypto- so when he talks you should listen!

Some of the key takeaways (hard to narrow it down):

• NFTs are in essence certificates of authenticity
• There is value in digital scarcity and in provenance and provable ownership.
• Value is a combination of factors, including; provenance, scarcity, skill, the message behind the work, the creator
• Crypto has a UX problem, particularly with wallets. We must improve options for people so they don’t have to rely on private keys, seed phrases.
• Being your own bank is NOT a great idea for most people.
• Centralisation is not inherently bad, especially if there is interoperability with decentralised protocols/the option to withdraw into a decentralised world.
• Utility and rewards are key aspects of NFTs and they can help build active communities
• Cross-chain interoperability is the future.
• Open standards are incredibly valuable and something that open blockchains bring to the world. It makes it easier for everything to talk to everything.
• Regulation is not inherently bad and in fact a significant part of the market would probably like to see it.

Alex is such a great guest and we cannot wait to have him on for round 2.

#Ep 5- Ajit Tripathi- Head of Institutional Business- AAVE

Ajit brings such a unique perspective to the crypto space with a background in traditional finance (ex- Goldmans, PWC and more). He has a practical mindset that is really refreshing and we can all learn a lot from his insights.

Some highlights!:

• The backend of the tradfi world has not changed for a LONG time
• The innovators dilemma is something to consider when understanding the issues incumbents face
• The tech is still maturing and the comfort levels from many enterprise clients isn’t quite there yet.
• The lack of regulation/creation of this new industry has given innovators the opportunity to experiment in ways they couldn’t in the traditonal system.
• Regulation is often blamed for the lack of innovation in finance, but Ajit proposes that legacy institutions are just incapable of innovation. I wrote a bit about the question ‘Does regulation hurt crypto?’ here.
• Some of the targets for regulators are the wrong ones- don’t go after Uniswap or Compound, look at Shiba Inu or other meme coins.
• The current rules aren’t equipped to deal with what is being produced. The danger is regulators and founders end up talking past eachother. The 70 year olds vs the 17 year olds!
• Education is an important piece for DeFi. We want to avoid making the same mistakes of the past.
• They have recieved an extraordinary amount of inbound interest from instutions at AAVE, which has led to them creating AAVE Ark to expirement with KYC’s pools.
• Community and culture is absolutely key for successful protocol building.
• DeFi offers the chance for people anywhere in the world with internet access to contribute- it reduces credentialism, you have a good idea, you can ship it.

#Ep 6- Xavier Lavassiere- Regulatory and CBDC Researcher & CEO of ECAN.

Xavier finished off season 1 in great style. He has spent a huge amount of time researching the relationship between regulation and crypto and the mindset regulators adopt. He is well-positioned to discuss the future of regulation and the challenges the space may face.

• The four quarters of crypto:1) fully permissionless/anarchist & opaque, 2) crypto related centralised exchanges, 3) regulated version of existing protocols, 4) private or permissioned blockchains
• The relationship between progress, regulation and innovation is a complex one. I explored that more here!
• One outcome could be financial institutions getting involved in the space but using blockchains on the backend- so many won’t even realise they are interacting with a blockchain.
• European perspective on private versus public goods will also shape regulation and how private companies can particpate in the space
• There are useful concepts and innovations from crypto that could be borrowed and applied eslewhere- cryptography and message signing for example doesn’t only have to apply to public/permissionless blockchains
• Many of the questions around regulation and strucutre are legal and economic rather than technological.
• Understanding regulators and banking compliance mindset is key- some overzealous action doesn’t come from bad intentions but the opposite- either they don’t want to lose their licences or they are erring on the side of caution. This isn’t justification just important to understand.
• One advantage of crypto is that is is global and distrubuted, so it can take advantage of different jurisictions.
• The future is multi-chain and he thinks its likely that chain-specilisation happens (i.e chains targeted for specific uses)
• Bitcoin has benefited from its simplicity in many ways, clarity of how the protocol works.
• Governance is messy and the current strucutres don’t work, he expects to see a lot of change here.
• CBDC’s are likely coming, but the risks and systems are not fully understood yet. It is not as simple as just rolling out a whole new financial system that hasn’t been stress-tested.

We hope you enjoy season 1 and found it as educational as we did.
We can’t wait to bring you more great guests for season 2 and other forms of content in the meantime. Watch this space! :)