Speaker 1: 0:38

Thank you, hey, how's it going Testing? Can you hear me?

Speaker 2: 0:41

What's up man. How are you keeping Glad to have you on what's up man?

Speaker 1: 0:44

how are you keeping? Glad to have you on. Yeah, glad to be here. I figure you usually start a few minutes after the hour just to let people filter in.

Speaker 2: 0:51

Essentially, yeah, starting man, I'll play a little bit of music. We have a couple of little tweets going out on a couple of our community accounts and things like that, and let a few people filter in and I'll play a little bit of music in the meantime and when the music goes off, we'll dive off straight into a man looking forward to having a chat perfect.

Speaker 1: 1:07

I'll share for my account again as well 100, my friend talking about two minutes great.

Speaker 3: 1:20

All because of you, all because of you, all because of you, all because of you. Can't control me awake when I sleep. Want you to feel this too. Finger on me can't be so deep. Want you to feel this too. Your life is far bright, is the home. Wanna get out of here, but just for me can't be far gone, so deep. I want you to feel this. I'm a cool man, I'm a biggie. All because of you, all, because of you, all, because of you, all. Because of you All, because of you All, because of you, all. Because of you, I'll be here.

Speaker 2: 3:03

So welcome to Helios horizons, episode 42. And today we are chatting to patrick scott and aka aka defy dynamo and we're going to chat about the state of defy long time defy participant creator and newly minted injective validator. And yeah, welcome Heliauthorizons, my friend, glad to have you on.

Speaker 1: 3:33

Thank you for the invite. I'm honored to be here. It's an eventful week with a lot of things that are outside of DeFi affecting the industry, but I guess that's good in a way, because it means there's a lot to talk about. I'm driving for the first two minutes of this call and then I'll be uh in a stationary location. So if you hear background noise now.

Speaker 2: 3:50

That won't last that's no problem, man, that's no problem. Look, we're all, we're all busy. Everyone's always, always, especially in this industry, going around getting things done. So no issue with that. But yeah, maybe, um, for people who aren't so familiar with you or haven't followed you, a little bit of a background into yourself and how you got into the space.

Speaker 1: 4:12

Absolutely so. Real name is Patrick. My YouTube channel is Dynamo DeFi, which I launched right around four years ago now, and I'll get into some of the other things I've done in the space in the meantime. But really I first got involved in the space as an investor, going all the way back to the 2017 cycle, and then kind of lost interest for a while after that, unfortunately, and then I got back into it, like most people, in 2020, just sitting at home looking for ways to make money online and becoming interested in the ability to rebuild systems in a decentralized way, because my background before that was in finance, related to supply chain forecasting, and so I had a deep understanding of how interconnected systems are and how much things can break down when you have something go wrong with those systems.

Speaker 1: 5:10

And I think we've seen that a bit this week with tariffs and you saw that a lot in 2020 with global supply chains going down, and I realized that decentralizing the financial portion of that actually can make systems much more anti-fragile, and so I got involved in it in 2020, started going deep down the defy rabbit hole, investing on my own, and then started creating videos really originally for family and friends, but turned into a lot more people watching them about how to actually use some strategies in defy and and a lot of things that were just me showing what I was doing, and it took off way more than I expected. So I started at mid-2021, and by the end of the year I had 5,000 subscribers and by the next year I hit 10,000. And then fast forward to today. I have still the YouTube channel.

Speaker 1: 6:03

I also have one of the top DeFi sub stacks. I'm also head of growth for DeFi Llama, so I head up marketing for them people who don't know DeFi Llama it's the premier dashboard for DeFi analytics and I've had the chance to make a lot of educational content about all sorts of chains related to DeFi. Also, we do some joking around on Twitter and that kind of thing as well. And then, as far as Injective, I'm glad to be a part of the Injective ecosystem because I launched a validator in partnership with the Friends validator team just less than a month ago.

Speaker 2: 6:44

No, I think that's a comprehensive background and I appreciate the insight and looking forward to diving into your history and the journey you've been on. But the sentiments are echoed that we're obviously happy to have you in the Injective community and obviously yourself, having been around for a long period of time, seeing the quality of the ecosystem and the team the chain has to offer is, um, yeah, it's, it's, it's good to see you getting involved and someone who has that experience seeing the value. But if we were to go back to like we were saying you first got into space in 20 2017, and like your prior background or even your background around that time might have been in supply chain forecasting, and maybe let's have or even your background around that time might have been in supply chain forecasting and maybe let's have a look at like that, that time before crypto, and then like what made you become an investor in 2017, what excited you about the industry at that time, I think you're, you may be losing connection and speak again there. Oh, no, we, we can't, we can't hear you, we can't hear you. And if anyone in the audience can hear him, would Patrick, would you mind putting a thumbs up?

Speaker 2: 8:11

No, I'll tell you what, man? Actually, if you want to go out quickly, close your app, come back in rejoin. We'll try that first, and if that doesn't work, we will just restart the space. And if that doesn't work, we will just restart the space. So yeah, hopefully he comes back in in a minute and the mics are working. Oh, here we go, we're back. I think we're back.

Speaker 1: 8:46

I think we're back great, can you hear me? Now I can hear you. I can hear you. Okay, perfect, yeah. So what I was saying was uh, going back to 2017, um, like a lot of people, someone showed me a coin I think it was litecoin and and um, I got into you into seeing the opportunities.

Speaker 2: 9:19

I think the internet might be gone again, if I'm not wrong. Can anyone hear in the audience? No, no, one second. I'll tell you what we will see if he comes back in and again he's back in. Third time's a charm, hopefully problem.

Speaker 1: 10:00

Can you hear me?

Speaker 2: 10:01

I can I can hear you again now. My, it might have been the wi-fi and it might have been, like you know, starting the space on mobile internet and then going on to wi-fi. X. X is doing its best to rub us, you know absolutely so I apologize. No, no, it's okay, man, look these things, things happen. Man. I'm um excited to hear um about your journey and yeah, you were so.

Speaker 1: 10:21

So what was the last thing you heard? You hear me talking about my co-worker shilling me litecoin in 2017. Yeah, and then, and then it wasn't really until 2020 that actually made the connection between okay, this is, uh, a system that actually a can make you more future-proof personally, because you've got, you know and I think this is becoming relevant again but in 2020 there was a real concern around supply chains and no one really knew what was going to happen. And so then you have exposure to a store of value in the form of Bitcoin Originally, I was mostly investing in Bitcoin and, to a lesser extent, eth but a store of value that's not tied to a particular nation, that's borderless, and I said, ok, that can make me more future proof. That's not tied to a particular nation, that's borderless, and I said, okay, that can make me more future proof, uh. But then and then you also have the defy aspect, where you can actually rebuild rebuild a financial or payment system in a way that's that's less susceptible to either censorship or or other sort of unforeseen risks, and so that's really what got me to dive deeper into it to 2020, and I it's unfortunate that I think that that vision was lost for a long time, where you have some good projects working on it, but it's not what this space became known for, but it's what the technology is really useful for at the end of the day. So then you fast forward to 2024 or 2025 now, and I think you know what keeps me involved is a that DeFi, I think, is ready for primetime at this point. So a lot of these systems now, these applications take something like like Ave, a premier lending market, or even many of the chains right I mean injectives, a great example that have been running for the better part of half a decade at this point without, without any major issues, and so now it's at a point where you can actually bring billions, or eventually even hundreds of billions or trillions of dollars of assets on chain.

Speaker 1: 12:14

And despite the fact that he's maybe controversial in the space because people think of themselves as anti-establishment, people should really take a look at larry fink's recent letter to shareholders, the, the chairman's letter to shareholders because in it he I think on page 13 or 14 he outlines um, he outlines, like, the benefits of tokenization and and I'll highlight this because I know alsojective is doing a lot with this but he compares it to shifting from sending emails by the post office to using email, and he says right now, in a way, a lot of the financial system is operating as if we were still using the post office, and so tokenization and blockchain is going to move that into the digital age, where it's like switching from mail to email, and I thought that was a good analogy.

Speaker 1: 13:07

And then he talks about many of the benefits of it in there as well. But you know, so in the present day. I think that's part of the reason why it's such an exciting time to be in this space, because you actually have this potential for these applications to no longer just be theoretical and about speculation, but to actually have them being used to power entire financial markets.

Speaker 2: 13:35

No, I agree fully, and it sounds like you're in a lovely location there, man. I can hear the birds chirping in the background. It's very, very serene. But I agree with everything you said about in terms of when you got into the space, and it's probably one of the things I initially thought myself as well.

Speaker 2: 13:51

Like you know, having a store of value that was borderless permission is accessible by anyone is so important, especially when you consider people who don't have access to kind of reliable infrastructure around the world, and even for those who do, you know the chance of, like political interference in these things and that making us, as you said, more robust or less susceptible. And then, obviously, you were referring to building DeFi on top of it and then like, defi is ready for prime time now. So, like what do you see maybe at the moment that you think makes DeFi ready for prime time as opposed to the last few years since? Like, maybe and we'll dive into those things a little bit more about, like your actual journey itself and making the videos and the content. But what makes DeFi ready for prime time now? We have Larry Fink talking about the benefits of tokenization and moving into the digital age and compared to where things were back in 2020, and the technology, if that makes sense.

Speaker 1: 14:47

Yeah, totally so. I think the number one thing is the time. So there's a certain lindiness that's come from a lot of for a lot of DeFi applications. At this point where you take something like Aave right, I'll name them, since they're the largest money market, so they've been active for half a decade at this point, tens of billions of dollars in there, probably one of the biggest hacking targets in the world, if you think about it, because it's crypto based and there's tens of billions of dollars. So anyone who could look at those smart contracts and try to find a way to exploit them probably has hopefully, hopefully, I don't, you know, I don't end up eating my eating my words on this, but but probably, like anyone who could look at it has and they haven't been able to do anything because because it's still standing. So you have a certain amount of lindiness now where these systems can be safely trusted with more assets.

Speaker 1: 15:39

You also have the fact that I actually think some of the existential risks the industry went through, fact that I actually think some of the existential risks the industry went through in 2022 actually make it significantly stronger. So the fact that that all of these defy applications were able to they're the ones that were able to survive, for example, ustd pegging, uh 3ac, uh going under and eth dropping below a thousand dollars without leaving any bad debt, not to mention the altcoins that got slaughtered, ftx collapsing and then even moving into the years after that. You had the temporary USDC DPEG, you had these more recent market crash, and the fact that these applications were able to keep running through all of that and, in fact, run better and better each year, uh, to me, is is a sign. Okay, these are actually ready to be used for, for real world things. And then you also have the, the user experience, so there's a lot more scalable blockchains now.

Speaker 1: 16:37

I mean, you can take injective as as an example. That's that's uh significantly faster than what would have been available, say, you know, pre-2020 or back. Then. It was mostly Ethereum. So now that you have these next-gen blockchains as well, I think that that's another thing that makes it ready for primetime.

Speaker 2: 16:57

No, 100%, and I agree with you as well. I think that's a great insight and like the lindiness of the technology and especially looking, I compare sometimes the aviation industry in terms of like how it's no consolation in any way to those who are involved in like incidents or accidents or defamilies or anything like that. But the aviation industry learns from everything that happens. Every failure, every accident is like studied and then the learnings are brought forward to as best as possible ensure nothing similar happens again. And because DeFi is obviously built on code and it's kind of so, and binary it's obviously any it's slightly easier to like learn from the mistakes because it's just purely mathematical, code based and then they can build better systems going forward, and so that's like one piece that is definitely interesting. And then obviously you build better systems going forward and so that's like one piece that is definitely interesting.

Speaker 2: 17:47

And then obviously you were saying it survived all these different events and that have challenged it in the past and come out the other side and we also have more scalable infrastructure. Now how do you feel? So like it's interesting to look back on some of those things you know, like ftx, ust and three arrows, like a few seismic events that like really did kind of rock rock, all the people who are involved in the space in more ways than one, um, but yeah, like, how do you feel those events? Maybe two, three, four years on, have they? Are we still feeling the effects of those things um, nowadays, if that makes sense.

Speaker 1: 18:26

Yes, yes, definitely. So I'll go through. I'll highlight UST and FTX because I think those are probably the most significant. So, ust, the effect we're seeing years on is you had. I think stable coins are the clearest product market fit that crypto has found so far, excluding maybe, things related to illicit activities. I think stable coin payments and people who want access to dollars using stable coins is probably the clearest product market fit where people are using it and don't care about price speculation.

Speaker 1: 19:01

At the time, you had a lot of these like neobanks popping up that were using stable coins as a way to store money and, unfortunately, a lot of them either were entirely or partially using anchor on terra and because those things generally went under and in some cases they were able to return people all of their money or at a minimum, you know it was. It was embarrassing and, um, the investors sometimes had to front the money, but so I think that that killed a lot of that aspect of the industry where you had most of those types of businesses went under, and I think now there's a real aversion to anything related to stable point farming, and so that's one effect because that's a very clear product market fit that you don't see anymore. Sorry, I was a dog making a noise um in the background.

Speaker 2: 19:52

Okay, what, what type of, what type of dog you have?

Speaker 1: 19:54

so I have, um. I have two belgian malinois um, so I'm gonna take them outside for a second, um that's okay, that's why. I was outside before to avoid loud playing inside, but it's clearly not going to work.

Speaker 2: 20:10

That's okay man To be inside. They obviously want to join in the conversation.

Speaker 1: 20:13

Yeah, exactly so you had. So, anyways, ust, that's. The effect of UST was that you no longer have people willing to do these kinds of stablecoin-based savings type applications. And then you have the effect of FTX, and I think FTX the fallout is getting resolved sooner than later.

Speaker 1: 20:33

But the big effect of FTX from talking to a lot of my friends who were involved in crypto on Wall Street or anything like that is that a lot of people's careers were burnt, and were burnt very badly, and the people whose careers were burnt were the people who were the strongest advocates for crypto within their whatever institution they were in.

Speaker 1: 20:54

And so, as a result of that, it really really killed a lot of real momentum as far as adoption, just because so many people had real, you know, like uh, real legitimate career harm because they stuck their necks out and then and then were humiliated and and I think that's starting to get resolved now that you have, uh, blackrock, fidelity, vanak, other institutions getting involved in a major way, but uh, but I think that we would be several years further along in terms of bringing tokenized assets on chain if that hadn't happened. Because I mean, if you look at a lot of the improvements I talked about before. Yes, there's more lindiness now, something like ave and, yes, you can actually trust him more because it weathered the ftx collapse. But a lot of these technical improvements as far as, as far as like blockchains, were probably ready to start being tested on a larger scale with real world assets as far back as 22 or 23, but it didn't happen because there was so much distrust in the entire industry following ftx I'm not sure, are you?

Speaker 1: 21:58

oh, you're just gone on mute oh, I, I just, I just I just muted for a second. Yeah, that was that was, that was a a close thought, excuse me that's okay, no problem.

Speaker 2: 22:06

So, yeah, no, I think that's really interesting.

Speaker 2: 22:08

And talking about how there might be an aversion to stable coins and then people maybe, and then maybe the feeling that, like ftx is reason why careers were burnt and and there's a mistrust in, maybe, the traditional financial sector, is an interesting thought.

Speaker 2: 22:22

But I'd like to maybe fire it back to you and say do you think maybe that there's an element of still a lack of understanding among a large amount of the population, even these people in these circles who maybe are holding large amounts of stable coins and are in trad fi, because arguably, let's say, like, especially ftx, it's a, it's the primary reason crypto nearly needs to exist, or it is the reason crypto needs to exist all their assets were not held transparently, were not on chain, they could be right, rehypothecated, like and if they, if they were actually on chain, if FTX was actually a DeFi protocol, like, they couldn't have, the things could not have unfolded as they would have, because the code would have stopped it.

Speaker 2: 23:09

If there were not enough assets to back and the transactions that were being made by smart contracts, they wouldn't have gone through. And then, when it comes to stable coins, like maybe just a lack of understanding about what the difference between UST and now the likes of USDC or USDTR, if that makes sense. So do you think there's still a massive information gap among people in traditional finance who are responsible for maybe making the decisions to onboard into crypto DeFi, real world assets?

Speaker 1: 23:42

100% and everything you said about how DeFi would have prevented it are true. That being said, I still think that it set it back by a few years because of the perception, because you had this exchange and founder, who were heralded as, like you know, one of the premier um american institutions in the space was supposed to be. The one that was, that was, that was trustworthy, that was legitimizing it, and a lot of people stuck their heads out, uh, for crypto, who did understand it, saying, saying, um, you know this, this technology is now ready to be used. And then what did they get in return? What they got was this institution or this exchange that was supposed to be the legitimate one, turned out to be a complete scam and then, as a result of that, even if they knew that DeFi would have prevented it, a lot of people, I think, ended up with a lot of egg on their face and it killed a lot of momentum. I think, ended up with with a lot of egg on their face and it and it um killed a lot of momentum because, because no one wanted to touch it, uh, even just because it was also like politically then then untenable.

Speaker 1: 24:45

If you remember all the talks about how how the industry was going to be regulated in the us or even regulated out of existence and, um, yeah, I mean I think we're getting back to that now because now you have you have again major institutions like like black, etc. That are getting involved in some respect, and I know that a lot of people have arguments over how good or bad that is for the industry and its original cypherpunk ideals, but I think that it's now becoming more acceptable again to to talk about crypto. Uh, but I think that a lot of these conversations would have been happening, say, in 2023 instead of 2025, had we not had those, those major events no, definitely, and I think you know that's a nice little segue, because we were kind of talking about one like, one era of like.

Speaker 2: 25:35

Okay, there, the technology there started proof of concept and like started to emerge and like the concept proved its robustness to a certain degree and then some catastrophic events happened, and now we're coming back to a point where people are revisiting the technology again, like institutions are adopting and understanding the value. Like you know, over the last year or two, we've had the ETFs obviously going live for Bitcoin and Ethereum. We've had nation states adopting, whether it's Bitcoin as an acceptable, like medium of exchange or a reserve asset, and so there's, there's a greater acceptance and integration of Bitcoin, at least into um institutions and like nation, like nations, ultimately. And so where do you think we go? We go from here, if that makes sense. So it's like how do you feel about how things have evolved since that point and like the role of regulation and where we're going to go now and what is the path forward, if that makes sense?

Speaker 1: 26:38

yeah, totally so. I do think. I think there's a couple big changes to the market. One is, I see, across a lot of data points, waning demand for, for altcoins. That's independent of fundamentals. So so a lot of crypto business models if you boil them down to their core, they rely on people wanting to speculate on altcoins, and sometimes the business model is selling the altcoin directly and sometimes it's related to an exchange.

Speaker 1: 27:11

I think there will always be some of that, like there is for all sorts of assets, but that seems to be diminishing. You see it across exchange volumes. You see it across DEX volumesishing. You see it across across exchange volumes. You see it across dex volumes. Uh, you see it across prices, right, and you also see it across bitcoin dominance and especially in the eth btc ratio, which, which is currently at it's I don't know what it is at this moment, but there was many points this week. It was actually below its low from the covid crash in march 2020 the eth bt-PTC ratio.

Speaker 1: 27:39

So that reflects that there's less interest in buying altcoins, and the consequence of that is that instead, you're going to need to have projects that actually provide something useful, and I think that there's useful things that they can provide in terms of stablecoin payments and savings.

Speaker 1: 28:00

Increasingly, you're having other assets brought on chain. I mean, we usually make a distinction between stablecoins and real-world assets, but stablecoins really are just RWA dollars. They're tokenized dollars, in a sense, or tokenized dollars that are backed by treasury bills, but similar concept. So you're going to see increasing the applications related to that as well as I, I actually am optimistic that we're going to see a resurgence of some, some applications that are based around the original crypto ideals of owning your own data and being being independent of these, of these centralized systems. As far as people who are speculating on markets and where things go, I think the question is like, of those things that are built now, what are they actually? What are they actually worth? Based on fundamentals, and I think that question is kind of kind of up in the air, but people realizing that the fundamentals are improving, but maybe not every coin has fundamentals as part of the reason for things performing as they have this year.

Speaker 2: 29:11

No for sure, and I think that's actually an interesting discussion. Actually, when you're saying, in terms of the resurgence of applications that resemble the ideals and going back to things like privacy, I see have one from million in the audience and I think they're working on and essentially building a privacy preserving blockchain, and so shout out to you in the audience there. And but, um, in terms of the waning demand for all coins and and, like we said, the market dynamics are shifting. There's more technologies competing for users and obviously they need users, they need transaction activity to drive volume to the chain, to essentially make it sustainable for stakers, for validators, for all these things. Where do you see them? Assuming Bitcoin, which looks unquestionable now remains the dominant store of value? And where do you see the altcoin market going, or, if we're to call it the like, yeah, the altcoin market going and the altcoin technologies, how do you see it evolving?

Speaker 1: 30:17

yeah, I think altcoins I mean. I think first you can distinguish between network tokens and and, uh, I guess, governance tokens for protocols, because in some, especially in cosmos, as, as we know, the networks will have governance themselves. But by governance token here I'm thinking of protocol tokens, right, rather than something that's at the chain level, because because things that exist at the, at the, at the network level, I do have value because they're securing assets and because you you can stake them to to um, to secure the chain, and then they get some sort of either inflation or fees and and that you need them typically to pay for gas on chain, at least chains that that require gas gas. So there is value there and the way that they're valued is distinct and should be distinct from equities.

Speaker 1: 31:05

I do think it's wrong when people try to, for example, apply a discounted cash flow to blockchain tokens, because that's just not where the value is coming from. But I think that if you look at the actual protocols themselves, but I think that if you look at the actual protocols themselves, then you are going to see things where they're judged much more on the potential for it to actually be a business that makes money, and in the past I know people have often like sort of there's the phrase, you know, utility is a meme or utility is bearish. But if there's less demand for blindly speculating on altcoins, then really the only place that demand would come from would be if there actually was utility and value accrual.

Speaker 2: 31:52

Yeah, I agree, I agree, and there's actually two questions I'd love to dive into. This really interests me here that you kind of touched on, and we'll go with the first one. First of all, in relation to the staking aspect, as opposed to the governance aspect, which is when you say that sometimes there's a tendency to lump staking tokens in with and value them similarly to how equities will be valued, but they should be valued differently, and value them similarly to how equities will be valued, but they should be valued differently, how do you think staking tokens should be valued and what makes them valuable, if that makes sense?

Speaker 1: 32:27

Yeah. So I think the value of the staking tokens it's going to depend on the network, but it comes from broadly. I can think of three places. First would be the network fee. So that's you know, that's I said you don't value it like an equity, but there is some value that comes from a network if they pass on the fees to stakers, because that is revenue and yield. But I think most of the value comes from the other two things, one of which is they're securing value on the network. So if you have, say, eventually we have a trillion dollars of real world assets tokenized on chain and then one specific chain has 100 billion dollars of those, there's some value. And actually that there's some inherent value to the tokens that secure the network, because if someone were to buy buy enough to attack the network, then they'd be able to control that amount of money. So there's actually some inherent value you get from securing the network there.

Speaker 1: 33:25

And then the third aspect would be treating them like a commodity, and I think this applies most clearly to Bitcoin, since there is no staking, or it applies most clearly to proof of work.

Speaker 1: 33:36

I should say but, um, but. But there's the actual commodity aspect where, if you need. If you need the asset to make transactions on the network and there's, say, a million transactions a day then there's going to be some natural buy flows for the token, where people are buying it because they simply need it as a as a commodity, like you need gas for your car or you need you need a coal for a coal plant, and and um, and that's also going to be a sort of value. So the way in terms of, like, actually valuing them, I find it much more helpful to look in, to think in terms of, uh, buy and sell flows than actually in terms of absolute value. But to me, the network tokens, the value comes from those three things You've got the fees, you've got the value secured and then you've also got the natural buy flows to use it for gas.

Speaker 2: 34:30

No, definitely, and I think it would be interesting to reflect on especially that third point.

Speaker 2: 34:35

The second point was actually very interesting, something, a perspective I hadn't really thought of, where, in terms of if there's a certain value of assets on the network and the network needs to be secured, ultimately the price of the staking tokens and the price of a certain amount of the staking tokens is the price it would take to attack the network ultimately. So that's an interesting perspective that I hadn't thought of. So it definitely positions things as more, more rwas come on chain and promisingly. But thirdly, like, let's say, in terms of the buy and sell flows and the tokens like commodities and if people need them to like, transact and do things on chain because they do not yet have them. And do you think like, maybe the recent like at the end of last year, like the meme coin run with Solana was evidence of like what could unfolded as maybe predictive of what will happen in the future. What could happen in the future as we start to see incredible inflows of, and adoption of, real world assets on-chain, if that makes sense.

Speaker 1: 35:57

Yeah, so just make sure I understand the question. Are you saying I forget the exact amount at the peak, say, there's 10 billion dollars a day of of dex trades. So you're saying, if that was all like tokenized equities, then you'd also have similar value accrual?

Speaker 2: 36:12

yes, exactly so. It's just people were looking to access different assets, but when assets that come on chain, that are inherently probably way more actually valuable and popular and widely traded by a far larger amount of the population, come on chain, do you see some of those factors that drove the demand for Solana occurring across other scalable DeFi infrastructures that are supporting these real world assets?

Speaker 1: 36:42

I do. I do see it happening in some respects. The one difference with Solana is that in many cases the assets were paired with Sol and I would expect that most of these RWAs will be paired with stable coins rather than with the network gas token. So I guess that would fit in my earlier framework, that would fit into the commodity aspect, where if something is being used as the, as the trading pair, then it's it's almost like a um, it's like a means of exchange on the network. Uh, but yeah, I, I think that you, you would see that happen with with heavy uh rwa trading on chains. In another respect, one benefit of the meme points, even though there were many negatives. One benefit is you could think of it as a stress test. So like, okay, what happens if millions of people suddenly start using RWAs? Can the networks handle it?

Speaker 2: 37:29

Yeah, I agree.

Speaker 2: 37:30

Actually, I often thought about that myself and a couple of earlier conversations we've had with other people on the podcast as well, we kind of had those sentiments echoed also.

Speaker 2: 37:40

Um, but let's say the second aspect you were talking to, versus the, the staking, versus the governance tokens, and how the two of them are slightly, um, separate or differentiated from each other, and maybe how the governance tokens are going to break off into maybe being and more valued in terms of like, like revenue accrual and a business that makes money.

Speaker 2: 38:01

And how do you see so like what do you see as the key revenue drivers within defi? So obviously we're saying like real world assets are going to come on chain, but there's probably multiple forms that will take. It could be that the actual representation of real world assets will come on chain so people can tokenize their house, their car and then they can sell their house and their car on chain. It could be things like Forex, where there's like we currently have DeFi pools, our LP pools for, like, wrapped BTC. We could have LP pools for like Euro and dollar or other currencies around the world as more countries begin to adopt stable coins. But what do you think are going to be the key kind of DeFi sectors or niches that really kind of make an impact and grow the most over the next few years.

Speaker 1: 38:59

I'll pinpoint three, and these probably won't be a surprise, but one is going to be DEXs, and I mean spot DEXs in this case. So especially for Forex, as well as trading between stable coins and RWAs. I think that's going to be a growing sector, uh. The other is going to be perp dexes. So you talked about, you know, actually having the tokenized asset versus the, versus the? Um, you know some sort of synthetic variant of the x? Uh of the asset.

Speaker 1: 39:27

But perps, uh, both on centralized exchanges and dexes, are probably, aside from stable coins, the most proven business model on crypto, and it's something that there's a very clear demand for, because people, people like to trade with leverage, and so I think you're going to see perp dexes grow. You've already seen that in some respect, where perp dexes are at a record proportion of all perps trading. So I don't know what it is at the moment. It was it was.

Speaker 1: 39:54

It was at 10 a few weeks ago, up from a fraction of of percent a couple of years ago, and in crypto we see huge fluctuations every day, but in the real world, something going from 0.5% market share to 10% market share in three years would be considered exceptional growth. I mean, that's 20x in just a few years. And then the third aspect would be lending, and I think that with lending, you're going to see protocols like Aave is the biggest, at around $18 or $19 billion TVL right now. I think that would be something like a 50th largest bank. I don't know the exact number, but something like that. I think you're going to see some crypto lending protocols grow, especially as stable coins become more popular.

Speaker 2: 40:40

Grow to have, you know, actually be this, actually be the size of, of of more competitive banks specific kind of niche advancements and like that you see around the industry and that like maybe are up and coming, or any specific protocols that you think are innovating in a very interesting way that hasn't really been seen before uh besides injective yeah, yeah, widely man any widely um doors open here. Like you know, we're just having a having good conversations yeah, so um other ones that are.

Speaker 2: 41:22

Well, you know, one one I always talk about it can be protocol level or sorry yeah like chain level or simply like um, as we touched on, and application level yeah, so so one interesting example I have.

Speaker 1: 41:36

I don't have any financial stake, but I'm friendly with the team behind this, but there's a protocol in Solana called Parcel, for example, and I like to use them as an example because they basically have perps on real estate markets so you could, for example, short the Northern Virginia real estate market if you wanted, for example, like short the northern virginia real estate market if you wanted to, and I think that that's an interesting use case because that actually allows people to do.

Speaker 1: 42:01

It's like a financial instrument that anyone can access using parcel that they may not have a good way to get exposure to otherwise. So I think I think things like that are going to become more common. I actually think that another interesting use case is some of the protocols that are tokenizing private credit, and I think soon probably, we'll see some that are trying to tokenize private equity regulation, if regulation allows it, and that's interesting because those are asset classes that a lot of people probably would like exposure to and are unable to get exposure to, and thankfully, blockchain allows that. And actually, if you go back in that shareholder letter I mentioned from Larry Fink earlier, he mentions that as one of the core benefits of tokenization is that you can have fractional ownership of asset classes like those that are normally difficult for the everyday person to access no, I 100.

Speaker 2: 43:00

I think the fractionalization of like of assets that previously you could only buy in like boluses or tranches is like very, um promising. Even myself, like, if I'm to like it's very. I'm from ireland. Like real estate has like increased in price significantly and maybe over the last like 20 years'm to like it's very, I'm from ireland. Like real estate has like increased in price significantly and maybe over the last like 20 years or so like and obviously currently the only way to get exposure to the real estate market is to buy a house and but you need a certain there's a certain barrier to entry in terms of the the upfront capital required to do so.

Speaker 2: 43:30

But something like this, like where you can fractionalize um like either a large treasury of like real estate or like an index fund of real estate and get exposure to the market, that way is definitely another interesting opportunity and like will give, like you said, people who previously were like maybe frozen out from investing in these assets and the opportunity to participate, the chance to do so.

Speaker 2: 43:56

Like you know, the same way, like and let's say, all these advanced things that are happening on chain, like lp pools, perp dexes and like, even like lending to some extent and you, you wouldn't have been able to access in tradfi without a certain amount of capital, and now it's okay on chain, you can do any of these things with as little as like a dollar and as much as you want.

Speaker 2: 44:17

So it's like the democratization of finance is incredible and I just actually don't think that people have like fully kind of understood it enough yet and in my, in my eyes anyway, you know, only time will tell ultimately, but I think we're we're heading in a very promising direction and I think a lot of those discussions brought us like right up to the right up to the present day, where you're seeing things going in the future and and I want to have a little bit maybe of a chat about even if we go go back a little bit to the content side of things and go like okay, how have you seen, yeah, like how have you seen the content side of things evolve and how has the journey been as a content creator since you started back in 2020?

Speaker 1: 45:09

how do you balance making content that is going to get people to click and view it versus making the highest quality content possible? And I've tried to strike a balance with my own content where I mean, at the end of the day, if you don't pay any attention, for example, to the headlines and thumbnails and those sorts of things, then no one's going to read it. And then even if you put the best content in the world, if no one reads it, then you know you're almost doing them a disservice, uh. But while trying to be honest and and um and like, make what I consider to be actual, actual educational content. But as far as how it's evolved, so I mean, the clearest thing is back then there was a lot more interest in guild farms. That was one of the major things that people were interested in. Crypto. Now I would say that's become highly niche in a sense that that game, if you want to call it that is a lot more difficult for the average person to find an edge there than there used to be. So there's a lot more difficult for the average person to find an edge there than there used to be. So there's a lot less interest in that. You had multiple waves where people were very interested in airdrop farming, first following the Arbitrum airdrop and then following the Jito airdrop and a variety of airdrops Celestia and Dimension in the Cosmos ecosystem, where people wanted to stake Cosmos-related tokens to earn airdrops.

Speaker 1: 46:38

And as far as how the content space has evolved, I think my thesis, which I've tried to do with my content, which has allowed me to have what I would consider to be solid growth, but probably not as much as I could have if I had done other things was my thesis has been that people are going to shift away from crypto being focused on leverage trading, on centralized exchange, to be focused on evergreen type videos like how to set up a wallet, how to yield farm, how to check the fundamentals of a token that's how I got to know the DeFi Lama team, because I was making a lot of videos about them how to check the upcoming unlocks of the tokens. That way you don't get wrecked by buying something with an FTV that's 100x its market cap with an ftv that's 100x its market cap, and so. So a lot of what I've tried to do is is make those kinds of videos with the assumption that more people would come on chain eventually, and that did bear out to some in some respect. Um, because I think a lot of the tokens that actually did well in this most recent bull run were on chain first, and they oftentimes ran to billions of dollars of market cap before they were on a major exchange, and so, in that respect, a lot of people did come on chain, or their first interaction with crypto was using moonshot or or some other application that let them buy tokens on chain.

Speaker 1: 48:09

In a sense, though, it was like the genie that grants your wish, but not in the way you wanted, because, um, because, because my thought had been, people are going to come on chain to actually use defy as, like, an alternative financial system, and most of them that came on chain did so to, uh, to buy meme coins, yeah, yeah, exactly as they use as an alternative gambling system. Not right, like, like the people, instead of betting on sports, they were buying meme coins. Um, I guess you know, maybe that's the onboarding mechanism, though, and they'll, they'll, they'll eventually turn to other things as well. I will say, my video I made in 2023 about how to set up a phantom wallet got, you know, it was in the. In the fall, it was getting hundreds, hundreds and hundreds of views every single day because of people setting up phantom bullets to gamble with. But, um, uh, sometimes, sometimes you, uh, you know, as they say, the next big thing starts out looking like a toy, and so, uh, hopefully that's defy no, definitely I've been.

Speaker 2: 49:08

You know, I think it's funny talking about like, maybe that phase of like, an alternative gambling system and meme coins and things like that, because, um, obviously, look, it's not ideal and it's not the ultimate use of the technology on a fundamental level. But you look across some of the like, bigger like, even the traditional financial sector, like the, the futures and the and the options and the speculative nature of the financial system is arguably like, one of the largest like facets of it. And you look at even things like the sports industry and the speculative aspect of the speculative aspect of the sports industry is one of the like, biggest like and highest performing sectors in terms of revenue. So I suppose it's only natural that for this technology, people would try and find a way to integrate it into it and although ultimately, as we touched on, we hope it's not the, the final, the final use case, um, yeah, if that makes sense.

Speaker 1: 50:01

But yeah, definitely like what?

Speaker 2: 50:03

like maybe a couple of um. So you like, you're always educating people, you're making the content, you're probably have your finger on the pulse about, like what people are interested in and with your youtube channel, your sub stack, and even researching with them, or, sorry, marketing with defile llama um. But do you think maybe that it is more of how we can get more people on chain um and interacting with all the protocols and understanding all the things that are going on and how they can benefit from from them? Do you think it's an issue of more and more education or do you think it's an issue of better application design or a combination of the two?

Speaker 1: 50:46

Application design 100%. As someone who spends a lot of time making education, I think it's application design because because, at the end of the day, if people really if, if people really wanted to use applications, I mean you can look at application, something like polymarket that had a lot, of, a lot of users coming who were not crypto native during the american election cycle last year, and you know, polymarket never had an issue where it's like oh, there's not enough tutorials and how to use Polymarket, because there were people who wanted to use it and so as long as they had an FAQ on their website that was usable, people were willing to set it up. So I think a lot of it comes down to actually having applications that people who don't otherwise care about crypto would want to use.

Speaker 2: 51:35

No, definitely. And then let's say like what do you think? I agree entirely. Like, you know the best, the best products don't need like, like you don't log into facebook or instagram or tiktok and you don't look for the docs as a user, you just dive straight in and it's blindingly obvious as to the things you should do and by the cause to action and how they're placed within the platform and the design of it. And but what do you think are the key kind of the key kind of jigsaw pieces that are currently missing among most applications. That means they are not capturing and enough users and engaging enough users and helping them understand the value of what is being built.

Speaker 1: 52:15

That's a good question.

Speaker 2: 52:16

I'm putting you on the spot here, man.

Speaker 1: 52:20

Yeah, no, I'm thinking about it. Yeah, I mean, I really think a lot of it, at the end of the day, comes down to what problem is it solving for people? Now there's this guy, friends with Back the Bunny, who does a lot of good writing on twitter and he had an interesting. He had an interesting um article he wrote basically saying that crypto is, at its core, a better form of finance. And so if you take the next step from that, you say, okay, crypto is a better form of finance, then which existing financial applications would be obviously better to an end user if they were using crypto as the rails?

Speaker 1: 53:02

One that jumps out is anything related to moving money across borders, and other companies that offer remittance services are probably the first companies that are actually materially impacted in a very negative way by crypto, where they're seeing large drops in their revenue because people are using crypto for remittances instead. So then you'd say, okay, what are the other financial-related companies or payment-related companies that would be better served by using crypto rails? And then the next question would be okay, since crypto is a better form of finance, it's digital rather than analog which financial applications are not viable with the current financial system? That would be, and so one we talked about earlier would be tokenizing private credit, private equity, certain types of real estate deals. Another one might be making assets that are not currently liquid.

Speaker 1: 54:02

So I know that there's projects that do this that have people debate over their legitimacy. But one example I think is actually a good one is something like intellectual property, where right now, if you wanted to buy and sell ip or you wanted to rent out your ip for someone to use in ai generating photos, um, you know, we all kind of many people laugh at the original nft boom at this point, but that's actually a very good use of something like nfts, where you can have, you can have a programmable ip right that someone can actually rent out if they want to use that intellectual property, but do it in a legally compliant way. So again, that's something that's not possible within the current financial system or would be very difficult, but is straightforward to do with crypto.

Speaker 2: 54:51

No, definitely, and I actually think the provenance of ARK is definitely going to be and some of these like technical creations that are done by machines instead of humans, um, is definitely going to like.

Speaker 2: 55:04

Nfts were maybe like three years early in terms of like and how they could integrate into like, I think, um, with the way things are going now, they were obviously when they initially came around were purely used as a speculative asset and that's obviously not the reason they were created.

Speaker 2: 55:20

And.

Speaker 2: 55:20

But even if you think of like a painting that is, that has provably or has provenance as having been done by a specific artist and at a specific time, has so much value, whereas like, replications of that painting don't, but there's a currently a system for proving provenance of physical art and it makes sense, the same way we chatted about earlier larry fink talking about money moving into digital age, how nfts are going to help prove provenance in the and for art in the in the digital age now, especially when you see, and especially the, uh, the studio ghibli founder, I think, was very or according to any way reports I was seeing on x and was very upset about the, the replications of his work and and and these sorts of things actually on interview with him or a a speech he was giving about, like, maybe, how he doesn't think that machine generated art or AI generated art can actually be considered art, and so I'm sure he's one person that would be very interested in the provenance of art and proving that it was a human that created it and it was a human mind that maybe came up with whatever someone holds in their hand or holds in their wallet, if that makes sense created.

Speaker 2: 56:32

And it was a. It was a human mind that maybe came up, came up with whatever someone holds in their hand or holds in their wallet, if that makes sense yeah, yeah, 100.

Speaker 1: 56:41

I mean I think, like with a lot of crypto, honestly, like with a lot of technologies, if you look at nfts a few years ago, they were like a solution in search of a problem and now that you have ai generated content, probably producing a large, increasingly large, uh, maybe absolutely large percentage of all content produced online, at this point I thought, suddenly I saw an insane.

Speaker 2: 57:07

Just on that exact point I saw an insane statistic. Um, like like a week ago or something like that. It was basically that this year there will be more data generated in the world than there has been in the entirety of like history.

Speaker 1: 57:22

Basically yeah, 100, I know with text it's like all the way there, um by far. With images, I bet you it's getting there, um, and I bet you on social media at least just from my own browsing of social media increasingly you see things that are ai generated, or generated videos that are incorporated into things. So as that becomes more common, that actually is a more clear use case for for nfts, because either we live in a world where nothing any human has ever created has any value, or we live in a world where it does have value and there's actually a programmable way to incorporate that value into ai, because I don't think we're going to live in a world where there's no ai generated content. It's just going to become easier and easier to create it.

Speaker 1: 58:09

But I also suspect that, as like, for example, a movie studio wanted to incorporate it, or or say, say, even like a, like a youtube channel with with a million subscribers wanted to incorporate some sort of anime style uh, I know studio ghibli probably wouldn't be interested but say, different anime style into their videos. They don't want to get banned from youtube for some sort of ip issue, uh, but if there was a way for them to incorporate that through some sort of IP issue. But if there was a way for them to incorporate that through some sort of programmable smart contract where they actually paid a commission to the original artist, I suspect that many of them would choose to do so.

Speaker 2: 58:46

No, definitely. I just don't think technology exists and it doesn't really matter about your opinion of it. It will just continue to exist and continue to grow and so you may as well, to some extent, like roll with it and rock with it and just like see how you can like and ethically and benefit from it and how we can all ethically benefit from it. You know, and I actually, there was an interesting piece and there was there was huge opposition to the introduction of calculators. I think it was England back in the 60s or 70s when they were introduced into schools because it was like it's going to prevent people doing maths or it's going to prevent them learning how to do maths properly, when in reality now we probably look back at that and go like, ok, well, that wasn't really what happened to be the case, it just allowed people to solve more complex problems faster. Be the case, it just allow people to solve more complex problems faster.

Speaker 2: 59:36

And hopefully that's kind of where ai is going as well, where it's not um actually going to um impact negatively.

Speaker 2: 59:41

It's just going to allow us to solve and solve problems and come up with solutions faster than ever, if that makes sense, to problems that previously would have taken months or years and they can now be ideated and executed in a very short frame of time. But yeah, but we're actually coming up um on coming up in the hour and I don't want to don't hold you too long, but I'd love to maybe to close it off if there was maybe one thing we should be looking out for from you over the next couple of months. If there's anything you want to share with us that people should be looking out for from you over the next couple of months, if there's anything you want to share with us that people should be looking out for, we're going to clip this up in some sound bites and publish as a podcast after this as well, and then also maybe something that excites you about the industry and something you're really looking forward to seeing how it unfolds over the next 12 months.

Speaker 1: 1:00:32

Absolutely so to the first point of things that people can look for from me. First off, we have the injected validator running now and I'm constantly putting out a new stream of content related to to how to use defi and the opportunities within defi within defi. Over the next six months, I'm going to be focusing more on the real world usage and applications of crypto, especially within the new global environment we're entering and we'll see in the future what that means as far as as far as geopolitics and cross-border trade, and then as far as things I'm looking forward to, I think we're seeing Bitcoin and stable coins specifically reach escape velocity Bitcoin as a store of value in a non-national currency and stable coins as a better form of financial rails, and I'm looking forward to seeing those really come into their own as an asset that people are using in their day-to-day lives.

Speaker 2: 1:01:38

No, I think that's perfect and I think this is a great conversation.

Speaker 2: 1:01:43

I really, really enjoyed it and I think at some point in the future we'll pick it up again and maybe see how some of the predictions unfolded that we kind of made today about stablecoins and some of the the evolutions of defy 100, 100 thanks everyone for joining us on helios horizons, episode 42, and today we chatted about state of defy with patrick scott and aka d defy dynamo, and we we covered his early days in DeFi right through to today, where he's an established content creator and is running an injective validator and heavily involved in DeFi. Great conversation, lots of insights. Thanks everyone for joining us in the audience and anyone who's listening in in post-production. And yeah, and have a good evening everyone and talk soon thank you for having me.