Market Monday: The deeper reason for going bankless
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Dear Crypto Natives,
It’s Market Monday! Every week I scan the open finance market to surface the best opportunities and insights for us.
Today I want to remind you: there’s a deeper reason we’re doing all this.
Last week videos surfaced depicting Uighurs transported from trains, blindfolded, shaved-heads, locked hands—detained in Chinese state run re-education camps. Reports claim up to 1 million people are being held in these camps.
Do these images remind you of anything?
A state with the surveillance powers of China can do what it wills to its populace. For any totalitarian regime, a first step is to lock political enemies out of the global financial system. And it’s never been easier to do it.
Uighurs living abroad have started to hear reports of family members being arrested and jailed on suspicion of financing terrorism after sending money to relatives abroad. Those relatives have also had their savings and assets confiscated by the state, they say.
Some macro-investors have recently compared our current times to those of the 1930s—I agree. And if we think the democratic republics are immune from totalitarian tendencies, we need to pay closer attention to what’s going on and remember how fast things can accelerate.
It’s too easy for those in power to strip groups from access to their money.
We need crypto money as a check on tyrants.
We need bankless alternatives so the oppressed won’t be locked out of the money system by those who seek to control them.
Every dollar converted into crypto money, every new user of money protocols, every entrepreneur with a business built on this non-sovereign system makes it stronger.
That’s the deeper reason we’re doing all this.
We’re going bankless to create a better system—a legacy for future generations.
A public, neutral, open financial system for the world.
Bankless means freedom from tyrants—sovereignty back to the individual, back to the people—never forget why we’re doing this
Scan this section and dig into anything interesting
- ETH up to $209 from $189 last Monday
- BTC down to $9,918 from $10,151 last Monday
- Maker stability fees hanging at 12.5%—no change
- (Invest) Set releases a new 26 day moving average product (here’s our Set how-to)
- (Invest) Buy Bitcoin w/ fiat using Lightning (complicated but very bankless!)
- (Invest) your spare change on every transaction into crypto (beginner psych hack)
- (Lend) BlockFi still has some of the best BTC/ETH rates (3.3% ETH + 6.2% BTC)
- (Trade) mentioned 1inch but Totle is another dex aggregator to min. slippage
- (Trade) setup Binance US account to get $15 (after doing $100 in trades)
- (Borrow) fixed rate DAI/USDC loan at 16% w/ Torque (high rate but not variable!)
- (Bet) will Trudeau win the Canadian election?
- (Give) to an open source project (multiple matching opportunities)
- (Spend) Canada only—instant DAI to Canadian dollar exchange (try private beta)
- (Earn) cool but complicated ETH + Set arbitrage tactic (may work for a bit)
- Try DeFi Strategies simulator (invite only—Inner Circle gets early access)
- ConsenSys releases starter framework for loan protocol risk scoring (my take)
- Signup for Gnosis Safe for Teams (must trusted multi-sig on ETH—team use)
- Concept for a smart-contract escrow solution called AtStake (more here)
- Geeky stuff but this a bit like Uniswap only w/ liquidity on one side of pool
- Bitpay is going to start accepting ETH (longtime crypto payments processor)
- Dolomite is non-custodial exchange launching later today (I plan to check out)
- DAI as a safe haven asset in Argentina over BTC? (this is the reason DAI exists)
- bZx up to 6th place in total DAI locked (go here click “DAI” under top graph)
- Is this Bitcoin OG & appointed one of Satoshi going bankless? (wow!)
- Ethereum numbers looking good but still niche compared to traditional finance
- Excited about Linen product by LoanScan—DeFi card for normal ppl (soon)
- ETH is the best model for money (🔥read if you liked this) - David Hoffman
- Ray Dalio and Bitcoin (imo this applies to ETH too) - Qiao Wang
- ETH vs BTC in short to medium term - DCInvestor
WHAT I’M DOING
Check out a few opportunities I’m capturing right now with my crypto money
Giving to Gitcoin grants: gave 50 DAI to Prysmatic labs team which will be amplified by matching donation sponsored by the Ethereum Foundation and private donors. I used a MetaMask wallet extension on Brave browser to donate. Felt very cool (almost natural?) to send crypto money through my browser. (Transaction here.)
Opened a Binance.US account: to test out the new Binance exchange in the U.S. Similar KYC signup process as non-US Binance, which I don’t love—but it’s a crypto bank so those are the expectations. You can only deposit, no trades for now—they will activate trading soon. If you want to try Binance US click this referral link and you’ll get $15 after you trade $100. Not a bad deal—$15 cash to test it.
Make time to complete this assignment before next week
Get an insurance quote on Nexus Mutual. (15 mins) Nexus mutual provides insurance for money protocols—they call it smart-contract cover. It insures you against technical failures of a protocol—hacks, bugs, flaws in the code would all be covered. (Note: centralization & economic risks not covered). Invaluable!
This week all I want you to do is to get an insurance quote from Nexus to see how it works:
- Go to Nexus Mutual quotes
- Enter “makerdaoscd.nexusmutual.eth” under Address to cover
- Type 1 ETH under Cover Amount
- Type 365 days for Time
- Click “Get Quote”
All that’s happening is a quote generation, nothing binding, no transactions.
Now read your quote.
The above would insure you for 1 ETH for 1 year which you’d receive in the event of technical failure of Maker contracts. My quote generated a cost of 0.013 ETH or $2.71 for this insurance, about 1.3% annual. Effectively, for a cost of 1.3% you can mitigate a decent chunk of the risk on the ETH you put into a Maker loan. Very cool.
A few other quotes you could generate:
- uniswap.nexusmutual.eth (uniswap)
- compoundv2.nexusmutual.eth (compound—limits exceed though)
- argent.nexusmutual.eth (argent wallet)
- dydx.nexusmutual.eth (dydx)
- tokensets.nexusmutual.eth (sets)
- instadappv2.nexusmutual.eth (instadapp)
We’ll do more with Nexus soon. Just want you to get a feel for how it works this week.
Extra Credit Learning
- (Beginner) Complete beginner’s guide to earning on Compound (Zero to DeFi)
- (Beginner) Look up ETH address to see Compound loan on Etherscan (example)
- (Beginner) Understanding Ethereum basics
- (Beginner) VIDEO: Whiteboard explanation of DeFi by Financial Planner
- (Intermediate) VIDEO: Set Protocol Overview - Chris Blec (complements this)
- (Advanced) How to margin trade using Fulcrum on bZx money protocol
Read my takes but draw your own conclusions
- Crypto native or bank coin? is a dichotomy the Maker team needs to consider in the design of its multi-collateral DAI. Crypto native would mean backing DAI primarily with assets like ETH that settle on-chain. Bank coin would mean backing DAI primarily with assets that settle off-chain like tokenized securities and permissioned stablecoins (e.g. USDC)—both approaches have pros and cons. Some think DAI will fail as it ventures toward the bank coin direction others think DAI is too risky if only backed by native crypto assets. (For more—read this excellent thread prompted by Inner Circle member davoice321)
- I’m breathing a sigh of relief that the InstaDapp audit finally happened and revealed no critical or high severity issues. With $38m inside the InstaDapp contact this audit really should have happened sooner. Knowing the team I realize this delay was unintentional—it was due to the gap between proving product traction in order to get funding and in having funds to pay for an audit in the first place. Minimum viable product is a fine strategy in the web world, but with money protocols and millions at stake it’s much less satisfying. For now, the best Bankless users can do is to realize the risks of unaudited smart contacts and allocate accordingly. Initiatives like this can help. (Also, get Nexus insurance!)
- High transaction fee revenue on Ethereum was a big story last week as fees generated by Ethereum exceeded fees generated by Bitcoin. Lots to unpack here: 1) fee revenue is a major sign of traction—it shows how much people are willing to pay to use the network 2) people are only paying to use BTC and ETH—nothing else is close 3) a chain like Bitcoin must maintain the highest fee revenue in order to remain the highest security chain 4) the chain with the highest fee revenue may prove the most secure and best store-of-value in the long run. By these measures ETH and BTC are currently neck-in-neck.
- Yes Ether and Ethereum are different but I don’t care to correct people who call Ether “Ethereum”—this stuff is hard enough to grasp so I say let’s be as newbie supportive as possible
- You can now buy crypto on SoFi the FinTech startup and while this is one of the least bankless ways to buy crypto (you can’t even transfer out) I’m fine with beginners starting here if they think Coinbase is too intimidating—I just don’t want them to stay here!
- Speaking of Coinbase their listing considerations prove they are no longer attempting to protect retail from bad crypto investments—buyer beware—it’s why I recommend getting educated on crypto investing using the crypto money framework
- Opyn a decentralized margin platform using DyDx is closing—one thing we can learn from this is that “the main use case for margin trading in DeFi right now is to go long ETH”
- WellFargo Coin is not bankless and is much less exciting than some initiatives, however I predict they’ll eventually connect their stablecoin to a public asset settlement network making it similar to USDC (so will JPMorgan Coin)
Tweet me your question—I reply to one per week
Great question Stanley!
No, I do not thinking holding MKR and ETH are interchangeable. They are very different assets with different upside potential and dependencies.
Fundamentally, the value of MKR is based on the value of fees generated through use of the Maker system. Like a bank, the Maker protocol generates revenue through the interest accrued on loans and through fees due to early liquidation. These fees accrue to Maker holders. This makes Maker fairly easy to value—you can use a discounted cash flow model with a set of assumptions to value MKR kind of the way you’d value a rental investment property or a stock.
ETH on the other hand cannot be valued. It must be priced.
Here’s what I mean: given ETH is a money you can’t value it using a discounted cash flow model the way you’d value a stock. It’s price is determined by the supply and demand of ETH as 1) a currency to pay using Ethereum and 2) as store-of-value commodity—the price of ETH is based on its speculative demand as a money—its monetary premium. Yes, when staked ETH becomes a capital asset like a T-bill with a revenue stream, but since its returns are still self-referentially denominated in ETH, once again total returns must be priced, not valued.
Still with me? Okay so…
Investing in MKR is like investing in the stock of the world’s first crypto-native bank. You get a cut of the cash flows from interest fees generated by this money protocol.
Investing in ETH is like investing in the money of the world’s first non-sovereign economy. As the economy grows the value of ETH will grow. And given this money is potentially the best model for money the world has seen it’s possible that ETH becomes a globally significant reserve asset in the future.
In short, if ETH becomes a globally significant money its upside is far higher. This is why I recommend the largest portion of your crypto money portfolio remain in the money bets category vs the bank bets. How much in each? That’s a topic for a future Thursday thought-piece.
Some recent tweets…
- Execute any good market opportunities you saw
- Complete the weekly assignment: get an insurance quote on Nexus
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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.
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