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Dear Bankless Nation,
As the price of $YFI broke through all barriers this last weekend, all eyes are on DeFi.
The common-denominating theme since the launch of yield farming and liquidity mining is this: fair launches.
In the world of Ethereum, there has been a long-standing assumption that rent-seeking protocol fees will generally trend towards 0, or at least as low as possible because any protocol that introduces a fee also introduces the incentive to fork it, and offer the same product/service but without the fee.
It was believed that protocols or teams could only implement a fee that would be so long as to keep the threat of forking the protocol to a minimum.
Swap out ‘fee’ with ‘early VC investment’, and you get the current state of DeFi. It seems that all the money-legos that have been produced over the last 2-3 years have given the grassroots community the tools they need to replicate every single DeFi app on Ethereum, and re-launch it with a new set of protocol owners.
Now, for every VC-backed protocol with a high percentage of tokens held by teams and investors, there is an opportunity to fork the code, introduce some yield-farming incentives, and redeploy the same product/service under new management.
The incentives for this are so dumbfoundingly simple, that it’s a pretty safe bet to expect that every single DeFi app will have a ‘fair-launch’ carbon-copy spin-off.
Frankly, this incentive comes from the same energy as a lot of the ICO’s of 2017: teams that fork the protocol have privileged knowledge and early access to the upside. However, at the same time, the incentives are totally different, because forking-teams have no ability to take an undue percentage of the tokens or print themselves any money.
Same pattern, new structure, a big step in the right direction.
New Boss, Same as Old Boss?
Ryan tweeted out on Sunday that he loves how VCs need to buy retail bags to get in on YFI—the tables are turning!
But Jacob Franek of Coinmetrics returned a counterpoint, the truth is a lot of the VC funds are in these yield farms too. James Prestwich echoed his point…the average position size is $117k. This isn’t retail, these are whales. Same as the old boss.
Jacob and James are missing something. We’ve just invented a new way to allow retail to gain the same level of access as VCs! Joey Krug of Pantera confirmed the point. His fund wasn’t structured for farm YFI, so they had to buy it.
Laws of the Universe
It’s important to remind ourselves: some laws are written into the fabric of the universe itself, and will never be able to be violated.
Capital begets capital
People paid to make money will outperform people not paid to make money
Professionals and professional teams have more resources to make more informed decisions than retail amateurs
One thing that’s also written into the fabric of the Universe is that humanity tends to create new systems of fairness that get permanently integrated into the world.
The world always trends toward more fairness and more equality. This thesis is a core component of A Bankless Nation pt. 1and in A Bankless Nation pt. 2where I discuss how all protocols will eventually converge on their least-extortionary version.
The way humans organize themselves across time becomes fairer and fairer.
No, with this new wave of fair launches and liquidity mining, we haven’t relegated VC behind Retail. Rather, instead, we’ve given Retail the tools and opportunities to become VCs!
Venture Capital will never go away; there always exists the possibility of front-running the opportunity, and there’s also the possibility of paying someone else to do that for you. That’s VC.
Fair launches on Ethereum don’t care if it is Venture Capital or Retail that is competing for the yield; if there was an attempt to restrict VC involvement, it wouldn’t be a fair launch anymore ¯\_(ツ)_/¯
Let me reiterative, if you’ve participated in a fair launch, either with $10 or $10M, this is you:
With Ethereum, not only can you be your own bank, but you can be your own VC.
- David Hoffman
P.S. The Bankless Merch store just went live. Start repping the Bankless Nation 🏴
We’re kicking off with the essentials — standard issue tee’s & hoodies.
So grab your Essential Bankless Swag and start repping the nation. 🏴
Scan this section and dig into anything interesting
Market numbers 📊
ETH shoots up +11% to $433 from $403 last Monday
BTC barely moves -0.31% to $11,722 from $11,759 last Monday
TVL moons +14.1% to $7.75B from $6.79B last Monday
DAI stability fee still at 0.00% with savings rate steady at 0.00%
Market opportunities 🤑
Secure your crypto with a Ledger hardware wallet (use ‘BANKLESS’ for 20% off) 🔥
Trade SNX, LEND, COMP perps on MCDEX (5% of fees go to Badge holders!)
Margin with a LINK Perp on dYdX (use link for 10% of trading fees)
Earn 6.17% APY on DAI w/ Aave (higher rate on USD in the yield farming section!)
See more Bankless exclusive deals in the Deal Sheet. 💸
Yield Farming 🌾
What’s new 🗞️, what’s hot 🔥, & money reads 📚
WHAT I’M & WHAT YOU’RE DOING
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Aave is an open source and non-custodial protocol for money market creation. Originally launched with the Aave Market, it now supports Uniswap and TokenSet markets and enables users and developers to earn interest and leverage their assets. Aave also pioneered Flash Loans, an innovative DeFi building block for developers to build self-liquidations, collateral swaps, and more. Check it out here.
Not financial or tax advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This newsletter is not tax advice. Talk to your accountant. Do your own research.
Disclosure. From time-to-time I may add links in this newsletter to products I use. I may receive commission if you make a purchase through one of these links. I’ll always disclose when this is the case.