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Token Daily Newsletter #39

To DeFi or Not to DeFi

The narrative around DeFi is predominant in Ethereum. In fact, the vast majority of recent funding in the Ethereum ecosystem has gone to DeFi companies. These include DeFi protocols like Opyn, DeFi data analytics tools, or smart wallets that abstract away DeFi interactions like Argent. Other Ethereum narratives like dapps or Web 3.0 haven taken the backseat - companies operating in these verticals are largely departing or planning their departure from the Ethereum ecosystem. Examples here include Loom (basechain), Aragon, and Dapper Lab's Flow. 

Many Ethereans are excited about DeFi for a few main reasons:

  1. It enforces ETH's monetary value. Many DeFi enthusiasts view Ethereum as an SoV that will function as the backbone of DeFi.
  2. Financial products such as lending, options, and synthetics are familiar to mainstream audiences which can help facilitate onboarding.
  3. DeFi, so far, has brought in a nontrivial number of uses and volume into the Ethereum network which means more fees which means better network security.

However, not everyone in Ethereum shares this view - namely, Vitalik Buterin.

In a thread he tweeted this week, Vitalik first argued that Ethereum is less financial in nature than Bitcoin.

Secondly, Vitalik argues for other Ethereum use cases like decentralized publishing, communications, and governance. Projects like Cent and Peepeth have been built on Ethereum to address these use cases, but even after quite some time, they haven't achieved significant growth or adoption.

Finally, he concludes with a view about how decentralizing financial structures is not enough to address our current problems. Vitalik notes that builders in the crypto space have to change priorities and adapt to the needs of the world.


Can Vitalik Redirect the Ethereum Ship?

Many Ethereum critics claim that Vitalik is a centralizing force in Ethereum and they attribute a lot of power to him in shaping Ethereum's direction. This notion largely started as a consequence of the fork away from Ethereum Classic. In reality, his influence appears to be declining - while Vitalik advocates for other Ethereum use cases, the reality is many Ethereum users and builders today are heading in a different direction: ETH as a programmable money. 

Vitalik's thread didn't spur many discussions or debate, though that may be a consequence of macro events. Still, his sentiment appears to have been widely sidestepped by the community. Individuals and entities are independently deciding how they want to use and build on top of a very public Ethereum blockchain.



Long Reads

⚡️  What Goldman Gets Wrong About Bitcoin by Jill Carlson, a former Goldman Sachs trader. Jill breaks down each of Goldman Sachs' arguments against bitcoin point by point here

⚡️Bitcoin Mining's Three Body Problem by Leo Zhang delves into the tradeoffs and complexities of bitcoin mining.

🔹  As Compound Finance is one of the highest growth DeFi protocols, understanding how the protocols will decentralize itself is critical. Henry He recently published an article on how the COMP distribution plan might harm Compound in the long term. 

🔹  Matter Labs' Alex Gluchowski compares the Starkeware rollup mechanism used in DiversiFi to Matter Labs' zk Rollups approach. 

🔹  The OMG Network (previously OmiseGo) has finally launched after 3 years of work to launch the first implementation of Ethereum's Plasma. However, as the network is not really decentralized yet, it's been likened to Bitcoin's Liquid sidechain at this stage. 



Volt Participation in Magic 

Last week, TechCrunch and CoinDesk wrote about Magic coming out of stealth. Volt Capital is proud to be an investor in Magic as the team empowers users to own their identity while simultaneously mitigating reliance on incumbents like Google and Facebook. 

Disclosure: Volt Capital and/or its partners may have exposure to some of the cryptocurrencies mentioned in this newsletter.

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