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Deep Dive with Nadav, Founder at @DharmaProtocol.

Dharma posted 11 months ago

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Soona Amhaz
One thing you wish would change about the crypto community (and one thing you love)
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Nadav Hollander
@soonaorlater

Wish I Could Change: Too many smart people who have a deep understanding of crypto are starting hedge funds and joining VCs -- yes, investors add value, but we need *much* more smart people in the trenches building.

Thing I Love: There is *never* a dull day in crypto :)
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Chandan Lodha
What makes lending on blockchain compelling and how can Dharma be used to increase access to capital for those who can't access it today?
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Brenner
@cglodha @Nadav-Hollander Why do loans represented by cryptographic tokens make it easier rather than a centralized db hosted by a platform?
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Nadav Hollander
@cglodha @BrennerSpear From a technical standpoint, definitely *not* easier. All digital assets / tokens are easier to implement using centralized databases. The reasons why cryptographic tokens are a useful way to represent loans are the same reasons why cryptographic tokens have become as popular as they are -- decentralized, permissionless token standards are easier for the heterogenous, global ecosystem of exchanges, wallets, and developers at large to hook into than their centralized, proprietary counterparts. Decentralized computing of any sort is incredibly inefficient -- but incredibly necessary when what we're trying to build is shared, public infrastructure.
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Nadav Hollander
@cglodha The market mechanisms by which a dollar gets from an investor's pocket to an eventual borrower's are generally known as "capital markets" -- and the infrastructure that enables capital markets to function today resembles the DMV much more than it does AirBnB in terms of efficiency. With on-chain loans represented by cryptographic tokens, trading and securitizing loans becomes *much* easier and *much* cheaper -- and, insofar as this gives fixed income investors more attractive investment opportunities, more lending capital enters the capital markets ecosystem. In turn, access to capital should become cheaper and more convenient.
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Chandan Lodha
@Nadav-Hollander that makes sense conceptually at a high level — thanks for sharing! Can't wait to see some disruption in the lending markets. Really should be just as easy to get a loan as booking an Airbnb.
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Tudor Stanciu
@cglodha @Nadav-Hollander do you see the advent of fintech disrupting fees/UX as being an enabler or disabler of on-chain lending?
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Sterling
You mentioned 0x, dydx, {set} as complementary protocols (providing more liquidity to decentralized exchanges, derivatives, and token baskets) to Dharma. What basic primitives for financial transactions do you see missing that you would like to see developed?
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Nadav Hollander
@thestermeister Two big ones are swaps and futures.
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Steven Zheng
Why did you decide to build on top of/leverage 0x?
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Nadav Hollander
@Dogetoshi I view our tech as being part of a suite of largely complementary protocols that have emerged in the ETH ecosystem on similar timelines -- 0x, dydx, {set}, and others. All focus on building basic primitives for financial transactions of various types, and there's an interesting dynamic in which I would argue that our success as a protocol is inextricably linked to theirs. More liquidity to decentralized exchanges, derivatives, and token baskets will likely drive demand for decentralized credit, and vice versa -- insofar as this is the case, leveraging 0x protocol helps us tap into their emerging user base as a core cadre of early adopters. Hopefully in the future we'll be able to return the favor by driving more liquidity to 0x relayers.
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grahammcbain
Should more DAPP developers be leveraging Ox ?
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Nadav Hollander
@Graham-McBain Absolutely :)
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Chuck Pettid
Just how big is the tokenization opportunity in fixed income?
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Nadav Hollander
@chucksterolove Global debt markets hover at around $217 T cumulatively. That's approx. 500x the current crypto market cap, and approx. 3x the global equity market cap. So the raw numbers are certainly there -- bigger question is whether tokenization truly provides a 10x improvement in terms of efficiency / cost.

I would argue yes. Whereas equity markets have much more formalized trading mechanisms (i.e. NYSE), fixed income markets only really have formalized exchange mechanisms for sovereign and corporate bonds. There's a *huge* long tail of securitized debt products that are largely traded over-the-counter and rely on a whole rube-goldberg machine of intermediaries to process their clearance and settlement. We think we can make this infrastructure significantly more efficient.
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Max Wolff
i get how the relayers and underwriters profit, what's dharma's business model?
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Nadav Hollander
Great question, and one that we ask ourselves frequently. Internally, we discuss 6 potential business models, which we’ll explore over the next 6 months.

There are three “traditional” business models:
1) Fees — tx fees, membership fees, etc. Relatively unattractive due to our commitment to open source and the broadest, most inclusive system possible
2) Consulting — the RedHat model. Build the protocol and then help others build on top. This is definitely possible, questionable from a scalability / profitability perspective
3) First-Party Application — Xbox+Halo model. Build the protocol and then participate in the lending ecosystem that emerges. This is also definitely possible, but we’ll have to be very careful about making sure the entire community knows that there is *literally zero* favoritism of our own app vs. third party apps

Then there are three token models that we’ve discussed:
1) Governance token — as we build out our community and ecosystem, underwriters, relayers, and even potentially borrowers and lenders may want to have a say in how the protocol is developed. We could have some sort of governance token and capture value there
2) Medium of exchange token — require collateral or payments to be denominated in our native token. We don’t like this option because we want to be as inclusive as possible and deliver the most flexible system possible. Restrictions like this are a net-negative from a user experience perspective
3) Staking token — as a potential future addition to the protocol, we are thinking about some sort of staking system for underwriters or borrowers to discourage default. A native token may make sense here, and we could capture value on that token

We're trying to be very thoughtful and cautious about inserting a token model into the protocol -- there are a lot of people rushing to do token sales nowadays with half-baked models. We'd rather build out the protocol and ecosystem *first*, and then focus on value capture later.
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Soona Amhaz
Advice you'd give people who are nervous about the recent dip:
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Nadav Hollander
@soonaorlater 2014-2015 was the trough of crypto hype after the "last bubble", and those were the years in which things like Ethereum were built. Stick to your guns, keep your head down, and focus on the technology -- though the price may have cooled down, pace of development has not. We should be thankful the most recent bubble ended as peacefully as it has -- I expected the "crash" to be much more violent.
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Soona Amhaz
What are some projects you're excited about in this space (outside of Dharma ;)?
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Nadav Hollander
@soonaorlater Aside from 0x (who we're naturally big fans of), I'm really excited about projects that are making meaningful headway on scaling -- particularly Truebit and DFINITY.
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Evan Botello
How are you going to handle protocol upgrades?
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Nadav Hollander
@evanbotello Great question! The Dharma smart contracts are modularized such that they can effectively be hot-swapped out at any given time -- upgrades basically involve us shipping out a new set of contracts, and then users can leverage the upgraded protocol contracts by using a newer `kernelVersion` value in their debt orders.

In the short term, the process by which this happens will be entirely centralized. In the future, however, we want Dharma to be a piece of shared, public infrastructure. As such, we're exploring using decentralized governance models for protocol upgrades at some point -- more TBD on this.
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Shlok Vaidya
How many private equity funds have you talked to since kicking off Dharma?
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Nadav Hollander
@shloky We've been talking to a fair amount of crypto-focused hedge funds about potentially leveraging Dharma for high-volume margin use cases, but haven't dug into the PE world at all. Any ideas?
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Ben Tossell
What's a common mistake people make when deciding which crypto companies to invest in?
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Ben Tossell
What are some public crypto resources you check regularly?
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Nadav Hollander
@bentossell Big fan of Eric Meltzer's Proof-of-Work Newsletter. Also, Stefano Bernardi's Token Economy Newsletter is fantastic.
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Ben Tossell
What are the biggest unsolved problems in crypto today?
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Nadav Hollander
@bentossell Scaling is easily #1. Identity / privacy and how to represent “meat world” assets on blockchains are two others that would be a huge boon to the ecosystem. Finally, UX in this ecosystem is lightyears behind what consumers are used to expecting in applications -- there are some really low hanging fruits on this front.
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Sterling
@bentossell @Nadav-Hollander What about the fiat-crypto gateway problem? I think this one is huge.
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Ben Tossell
How did you get started in crypto?
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Ben Tossell
What products do you recommend for new people in the space?
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Ben Tossell
What is one thing you've recently changed your mind about in crypto?
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Ben Tossell
What is a belief you hold that many in the industry disagree with you on?
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Ben Tossell
I'd love to see more tutorials like the Crypto-Kitty one - has their been any ideas for more?
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Nadav Hollander
@bentossell Thanks! In short, yes ;)
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Ben Tossell
What inspired the creation of Dharma?
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