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Degen Spartan: The extreme effectivness of Memes
Also: Makers scaling issue and the future of liquidity pools
Leonidas avatar, a lot of confidence and enthusiastically knowledgeable about DeFi : This week's guest is Degen Spartan. We spoke about being an ‘influenza’, liquidity pools and stablecoins.
There is a little announcement at the bottom of the interview.
A Chat with Degen Spartan
can you tell us who Degen Spartan is and as far as you feel comfortable doing so: Who is the guy behind it?
Degen Spartan is just a person taking advantage of the information flow on Twitter to make good investments in the crypto space. I do have a finance background, but so many things in the crypto space are so irrational that sometimes I feel it hardly matters!
You are an influencer on Twitter but also an experienced investor/trader. How well do these two things go together? And how well could you do one without the other?
I think part of my appeal is that I am very upfront about my biases and I do not have any particular agenda other than making money for myself and sharing particular things that I come across which are interesting and useful to my thought process. Within the space, almost everyone has some agenda driving all their actions and I think people are rather sick of hearing “sponsored” views or opinions, especially if the intentions are veiled.
Also, if you’re somewhat successful, I guess people want to observe and learn how they can replicate it!
I do think that you can be a good investor without being an influencer (I personally prefer the ‘influenza’ label to remind people that there is always an agenda), though having some voice helps with directing attention to things which can accelerate market mechanisms of price discovery through more market relevant information.
Either way you are certainly a sophisticated guy and you know what you are doing. How come you choose this “memefied” style to communicate on Twitter as a way of expressing your opinion, opposed to publishing more conservative blog-type articles or the like?
I think many people underestimate the extremely effective medium of communication and education through memes. I am also on Twitter to enjoy myself and creating and sharing memes is one way I find enjoyment on the platform.
Without a more relaxed approach, Twitter feels like an old western movie where everyone is on edge, fingers on the trigger and ready to rip each other apart!
I find the short bite-sized communication style also better than the blog approach since it focuses attention on the content rather than the author. This is important because even sometimes trashy people have occasional good takes, while some “thought leaders” can put out garbage. Focusing on content helps to stay objective and avoid idol worship.
Down to more serious crypto topics: You are a real DeFier who really goes in-depth and has a deep knowledge. As a DeFier but also as an investor: What’s hot right now? Anything particular you are looking into?
I think the 2 hot topics now are options and liquidity pools.
The market is slowly realizing that many altcoins have questionable value accrual and have so far turned to straight leverage to juice up returns. However, many are getting blown up with their poor risk management.
Options are an interesting development to the current market because on top of being another way to access leverage, it does have utility as an insurance product as well, since it helps cap risks. What this does is essentially refocuses the attention of the market away from high beta, high risk altcoins to leverage trading of the “majors”. On-chain options getting more mature and popular also unlocks a new “tech tree” for more advanced strategies and developments within the space.
Liquidity pools are also getting more exciting. Balancer announced their governance token. Bancor and Uniswap both have a V2 coming up. Curve is dominating the stable:stable swap pools. Shells is coming out of alpha soon, hopefully. And Thorchain… well people hate it when I mention Thorchain, but they are hopefully going to launch their limited mainnet soon too.
As with all these liquidity protocols, I want to stress that users that want to swap do NOT need to own any of the “project tokens” or even understand much about what goes on behind the scenes. Just compare rates, or use an aggregator that have tapped onto those pools, and viola, you’re golden with the swaps.
I think people are really underestimating the power of pooling “lazy capital” together to execute a fixed strategy, such as, but not limited to, Automated Market Marketing, like in the examples above. I find pooled models to be significantly superior to silo-ed models, and I predict that we will be seeing reimaginations of many systems that uses pooled capital for better capital efficiency, risk sharing and strategy automation. Not just AMM models!
Now, I know you are also well informed and strongly opinionated on decentralized stablecoins. Can you tell us how you feel about the options out there and why one might be so much more promising to you than the others?
First off, I’m heavily invested in Synthetix, so keep that in mind! That said, I have opened multiple CDPs in both SCD and MCD, I have been using DAI for a very long time, and I follow the project closely, so I hope I am not too ignorant about the MakerDAO system even though I am not a MKR holder!
We appreciate the disclaimer!
I would say my criticism of MakerDAO isn’t with regards to the safety of the system, but with regards to its ability to scale. I was actually going to go in really deep, but I don’t want this interview to become an essay! Even putting aside the issue of having permissioned assets being used as collateral, solving DAI’s scalability is not an easy one to solve.
Perhaps the flaw that I personally see in the MKR system is that the Collateral providers must also be the source of leverage demand, and they would usually be paying for the honour to get access to low leverage, and generate stablecoin supply for the system. I say usually, because stability fees have been brought down to 0% recently, yet leverage demand and DAI creation is still sluggish! Basically, the current design is unable to go into negative stability fees because it was never considered that DAI holders themselves would want to ever pay for stability, while it was always assumed that CDP holders will want to pay to access leverage, even while having to put up collateral (opportunity cost) and risk liquidation.
And opposed to that, where does Synthetix stand?
For a system like Synthetix, there are a few significant improvements (in my opinion):
There is an in-built, native DEX that treats it’s native sUSD with preference by allowing no-slippage swapping to the other synths in the system, such as BTC, Gold, Nikkei225 and of course, other major cryptocurrencies and fiat currencies. This captures trading demand and retains value in its ecosystem.
There is a direct link between sUSD demand and it’s supply creation - the more sUSD is used on it’s native DEX, the more fees are collected, which increases the intrinsic value of the SNX collateral, which allows more sUSD supply to be minted. This also works in reverse to reduce supply.
The sUSD collateral supplier is NOT the same as the people who want to hold sUSD / synthetic fiat for stability (or other synthetic assets to express their trading views).
I think that the last point is the chief main difference between the Synthetix system and the MakerDAO system and I will just elaborate on it a bit.
Synthetix minters are not only paid to lock up collateral, but are also encouraged not to speculate with their minted supply, but to release it to the market for people to acquire who demand its as sUSD for stability, and instead hedge themselves externally to be in a market neutral position. This means that Synthetix minters are being paid to lock up collateral and provide stability by the people who are demanding it.
DAI minters / CDP owners on the other hand seem to have gotten the opposite deal. Not only are they locking up collateral and paying stability fees (if they weren’t already 0%!), but they are also encouraged and expected to be speculators!
That being said, even though much of the MakerDAO community denies much of what I said above, their project is not entirely a lost cause since they have recently resurfaced the TRFM discussions again, which does allow negative price pressure on DAI, but at the expense of morphing from a stablecoin to instead becoming a “semi-stable” coin instead (their words, not mine). However, I still do have several doubts. Why not re-engineer to have negative SFs instead? How receptive would the broader community be to a “semi-stable” coin? How quickly can this even be deployed? Exploring MakerDAO usually ends up with me asking more questions rather than finding answers to previous questions!
Mind you, during this entire tirade of mine on MakerDAO, I have said nothing about the problem of having permissioned assets as collateral, or even my gripes about the MKR token itself, but those are another can of worms that I would rather not go into!
Interesting take so far… Any last thing you would want to add?
I don’t want to end off this interview with such a downer of a take, so I want to say that I do believe both projects can co-exist in the ecosystem. MakerDAO was and still is a phenomenal project and they are an inspiration to a lot of decentralized projects!
Having both projects (and potentially more!) contributes to an overall larger supply of decentralized stablecoins, which is definitely better than less! At the end of the day, I am a strong supporter of the crypto ethos of being open and permissionless, and this also means that ideas which I am skeptical about can pay me no attention and continue onwards with their development and progress. Diversity in approaches is truly the Darwinian way of naturally selecting the projects most suitable to survive and thrive in this rather hostile environment.
Thank you so much for taking the time!
Thanks for interviewing me, it was fun chatting about crypto! M2G readers who are interested in dank memes, questionable humor and the occasional DeFi takes can give me a follow on Twitter @DegenSpartan.
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