246: Uri Klarman - Thought Provoking Opportunities in DeFi with Crypto Tech Wizard

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Uri shares his contagious excitement and passion combined with his in-depth knowledge about the history, technology, and benefits of DeFi and cryptocurrencies, which many believe that traditional markets cannot match. Please note, at the end of this interview, Ian has a brief addendum related to the topic of crypto and DeFi that you will want to stick around to listen, especially if you're focused in this space.

As a reminder, none of what you hear on chat with traders is ever financial advice. You are responsible for your own trading and financial decisions. Trading and investing have potential for big losses. Please welcome Uri Klarman.

And so I quit. I joined the PhD program here at Northwestern University, here in Chicago, and with my then advisor and now co-founder, Professor Kuzmanovich, and I was studying. computer networks. So I, you know, my background is computer science, more specifically, computer networks. And even more specifically is the blockchain network layer.

So really from my research, I kind of went down that rabbit hole. You know, I've heard of Bitcoin since like, you know, 2013 or something, but really didn't really pay much attention um until 2016, I think. when my research kind of like started to lead me that way, to kind of like by r random accident spin-off of an idea.

But once you go down the rabbit hole of crypto and later on DeFi, you can't really go back. Everything else in the universe is boring and and it's kind of an uncomparable to the amount of stop happening and excited and drama and everything. So this is going, it's been like an addiction for me ever, ever since.

then went down the, you know, a gold bug rabbit hole, oh, centralized finance is kinda like isn't backed by anything and like inflation and whatnot, which kind of like I think And Bitcoin is a hedge of that, etc. And then around 2017, it started earlier, but in 2017, there was a major split in the Bitcoin community. Splitting actually the block the Bitcoin blockchain into two Bitcoin and Bitcoin Cash. Basically, the Bitcoin people who were in the camp of saying

This doesn't need to do anything. Like you're not supposed to transact it. It's not to be, it's not to be used as money. It's not to, it's not to better money, right? It's kind of like the the the pitch back in the day was kind of like.

Instead of, you know, paying two, three percent for every credit card swipe, which you really shouldn't, right? It's kind of like it's literally sending bits around the world. And we're really good at sending bits around the world at this point. Like, why is anybody paying like these amounts? It just like.

like really incumbent and network effect and whatnot. So there was the people who said, you don't need any of it. Bitcoin is not for that. Bitcoin is gold. It's like to back other assets. That's the idea. And there was another another camp who said, no, no, it needs to be functional. Okay, which is like you need to support, you need fees to be lower, you need all these kind of stuff. And Bitcoin like there was a a major split and I was very much on the camp of saying

Bitcoin needs to actually do something. The Bitcoin cash chain still exists, but it's very small and minor and like not on anybody's mind. But what happened afterwards was um a bit Bitcoin kind of like provides the functionality or aims to provide the functionality of kind of mean goal, basically to back up, to back other assets.

And any cool functionality that all crazy DeFi crypto people came up with, we're kind of like, oh, what if we do cool stuff with it? And we're going to talk about maybe why DeFi is so exciting and why am I so attracted to it in a second. But basically, Take all the functionality, a different chain, Ethereum. Okay, the it's the second largest in terms of market cap. It is the largest in terms of like how much usage is in it, what it's being used for, etc. Basically, kind of like

I think captured that gap. So functionality doesn't happen on base basically people take Bitcoin and kind of like wrap it and move it into Ethereum and then use it there for all sorts of like cool and and interesting and and innovative like usages, etc. So That was kind of like my path, kind of like what was I attracted? Originally I wasn't it wasn't me coming to sit coming and say, oh, we should fix the financial system. I'm a nerdy, kinda like computer science.

less knowledge than probably most like of our of of our listeners right now about macro and whatever, et cetera. I'm the I'm the technical guy who's kind of like, oh, I can help the others. Here's here's what you could be doing. Here's this is important. That here's how you do that. So I'm I'm much more on that front. But you know, you give a five, seven years or so and you find yourself knowing quite a lot about quite a lot of things.

I actually pinged the organizers, which is kind of like it's a coin desk event. So I pinged them, said like, I'm a poor PhD student. Like I would love to come. This is my research, whatnot. So they gave me free tickets and kind of like allowed me in. They were super nice about it. But I I remember that feeling of walking into the the the the the large venue there, so kind of like the main event, and everybody are excited and the price of ETH and the price of it and kind of.

Everybody here are rich. Except for me. Like this is like I the I missed the boat. I'm too late. Everybody here already bought it. And now it's like they bought it at like$10. Now it's like$1,000 or whatnot. Everybody here are rich except for me. And it's funny, right? You think about like, well, if you came in 27, you're so OG, whatnot? Like, this is many years ago. Um, so

At that day, I kind of signed up for the first time, like moved from the theory to the practical. I went to Coinbase, I created an account, and I bought um I at At the time, so I bought Bitcoin, I bought Ethereum, I bought probably XRP, which is now, I think, already agreed to be a security or something like that, and isn't important in any way at this point.

And then afterwards, being like being new to the thing, of course, then I did some trading and whatnot and lost. I would have made a lot more money if I didn't trade. Okay. So la like Probably falling for all the mistakes that every new trader kind of like falls into. And I think especially my revelation was years afterwards was

If you don't have a lot of capital, then you keep saying, oh, it goes up. Like you try to capture a bit and then you lose it and you actually end up losing all your money that way. If you have a lot of capital, you're kind of like, well, I'm going to put this money here.

And I'm not going to touch it. Then like you know, well, it went up a lot. Do I feel like that it's the end of the bull market? Well, maybe we I'll sell this percent or that percent. So moving to much longer timescales and not getting like so frantic about oh I'm Losing that money and

It really shows you how having more capital, even without additional expertise, which you get up, just having more capital and not have to worry whether you're losing it or not, makes you, I don't know, 10 times better trader. So luckily for me I was a terrible trader, but I was early enough And kinda like, okay, enough in the no, et cetera.

And a lot of conviction in crypto and in DeFi. So when Ethereum was, I think, like eighty dollars, right, or something like that in the I said like like I don't know what's going on. I don't have that much money, but I'm definitely buying it like right now, under a hundred and right. And it went Up to I think it peaked at four thousand eight hundred.

And again, I'm not the greatest trader. I'm the tech guy who helps traders. So it's kind of sold along the way. So sold it at like 400 and at 800 and at$6,900 and at three. 3,000 and at 4, 4,800. So I actually sold at the top, but I also sold in many, many times, like along the way.

But that was basically, well, you know, people put like like ask and bids and whatnot. And every time you do that, you need to make a transaction on chain. And that actually doesn't work. Okay. So we can talk about blockchains a bit and how they work. But making transactions is costly. So you can't just like, you know, send them, cancel them, send them, cancel. And there are

only so many transactions being executed. More so now, less so then. So let's say 10 transactions per second or something like that. So you could you could definitely understand that for an open global financial system, this is not going to be enough. And so in the summer of 2020, people realized, or let's talk about this for a second. Okay. In 2019, the DeFi annual volume was like$100 million or something.

And in twenty twenty one, it was already a trillion annual, trillion dollar annual volume. So like there was like a 10,000 X like like Growth sprout right there, which stemmed from really finding product market fit. Okay, basically saying, oh, this primitive, which we took from what we call C Fi, centralized finance or TradFi, traditional finance.

Let's take this primitive and let's see how it fits in the DeFi setup. Okay. How does it work on chain or pieces of it on-chain? So putting an order book on chain on Ethereum doesn't But what does work, what does work is saying something that we call AMM, automatic market maker, basically the idea that people pull liquidity. Okay, you put one asset and you pull another asset on the other side. And basically their ratio defines the price.

And you can buy one in exchange for the other, but you'd pay some fee depending on how much you buy. And there's like a slippage curvature. So if you buy a lot, you actually affect the price more and more. And that turns out to be that you don't need to actually make put bib like you don't need to to be making and taking and

And and kind of like putting bids and ads and putting the order book on chain. And instead you have a new primitive where you kind of like interact with a smart contract. Okay, we can talk about what exactly is a smart contract, but So D Fight summer really happened. Boom, it likes the summer of 2020. And for us as a company that does And networking. Okay, so our blocks route as a company, what we do is that we allow people to see transactions fast, to send transactions fast, to see blocks.

And we had all sorts of ideas why this is useful and can like allow for scalability, right? We just said like 10 transactions per second is isn't going to cut it. But when the DeFi summer happened, we had like an oh crap moment. Okay, pardon my language. Like we allow people to see transactions faster. And so they can identify and blocks faster, they can identify opportunities faster, and we allow them to execute faster to send their transaction to happen.

So we allow people make better trades. Okay, we're kind of like flash boys for DeFi. Okay. We connect you with the rest of the network. You hear about critical information faster, you send your transaction faster. And at that moment, you're like, oh wait. This is our product market fit. And that drove me really into the DeFi world. Right. So we were kind of like playing with all sorts of stuff around blockchain and how playing with the network underneath the blockchain helped.

But really that realization, people are going are paying us quite a lot of money to get an advantage in trading. And again, trading turned out from being a niche. to a trillion dollar per year. Okay, like that's becoming some serious money.

And so actually the percent of activities that are related to criminal and whatever, et cetera, out of crypto is actually very, very small. And you could think that the gatekeepers of the existing system are looking at what we're doing and say, like, Lena, no, no, this is a terrible idea, right? It's kind of

This car thing, like a a carrot without a horse, like who needs that? It hardly moves anyway and it can't get you any more than a day's ride. But it's kind of like the fact they're against it. or some of them are like like who was it um what's the name Damien from he's no longer the CEO uh was it Chase

Which is almost by definition less efficient. Okay. Like we'll do our best to make it as efficient, like that's as good as we're going to. And the answer to that As starting with a bit of an analogy, DeFi is open in the same sense that the internet is open. Okay. It's always on. Anybody could participate. Anybody could start a project.

or start an idea or start a product, anybody could interact with that, right? So it's kind of if you're a small shop owner, you could only reach the people around you, like in your small town, in wherever. But if you have an online shop, all of a sudden that is literally available for everybody out there in the world. If you build like something really, really good that people really like, then you'll find yourself like they don't know how big or small you are.

And the exciting thing about the DeFi is being a single global open financial system for the world. Okay. It's open 247, 365. It's not closed on the weekends or, you know, US holidays. And if you want to send, you know, I I as I said earlier, I moved from Israel.

to to the US and when when we moved here I knew I'm going to stay here to do a PhD. So we actually bought a condo here because because it was more economic. And I took my savings from Israel and then I moved them here and then Taking the Israeli shekel and converting it to US dollars, okay, that's like one percent like

Commission just on that, then wiring it to a US bank, and that's another commission. And it takes like five days, and the money didn't make it in time. And then no, then it didn't come and then. Turns out the bank is trying to send me letters like snail mail letters.

Oh, what is this money you want to transfer? And I already signed a deal here and I need that money transferred already. Otherwise I'm losing my deposit or or um honesty, honesty or whatever it's called, like the the the the right term for that. And so if you think the current financial system is actually sufficient, it means you never had to send money abroad. If you have relatives abroad, if and if you wanted to send to transfer money for the Or if you want to move large sums of money

If you're using like um ACH or Swift, et cetera, what you're actually doing is kind of like, I want to send money that way, like to that bank, and then it hops along banks. Sometimes it get lost. Okay. It's kind of like we send it. It's somewhere. We're not sure where it landed. And it's kind of guys, this is electro. Like, are you in 2022 where I can tweet something and it goes literally to the rest of the world immediately?

So it's kind of it's systems built in the 70s with with needs after 70s really aren't what we have now.

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Can I send you USDC? Okay, so that's like like US dollars on Ethereum. Can I just wire you? Yes, okay. I sent you a dollar. Did you get it? You know, just to make sure it works, like properly and nobody, yes, got it. Okay, just sent thanks. This is Done within like a minute rather than you know. Okay, the for the CFO of the hedge fund needs to create like an order. This is a lot of friction that goes away. And I'm not even talking about, you know.

Credit card companies taking like two, three percent out of like every transaction happening around the world. I'm not talking even about. that fragmenting the market. Okay. So like why does like if you're in the UK, you can probably participate through an intermediary, right, in the UK.

stock market etc, right? So you l like if if you're if you're in London, it's not like being in Chicago, which is not like being in Amsterdam or Hong Kong or Shanghai, etc. And the world is fragmented around these Points right about around these centers of financial activity. And there isn't any reason.

to fragment the market. There there shouldn't be like, well, the market is closing on the market like in Australia right now. So the prices just went down a bit, but within three hours it's going to open up, I don't know, somewhere in the middle of Asia. So we're going to Like all this stuff shouldn't exist.

In 2022. Okay. Like, so this is my my my sorry somewhat emotional answer. DeFi, people talk about DeFi and oh, you could buy coins and they'll go up by so much and here's an opportunity. That's like one. And it's true, but that's not it. And it's it's mostly a byproduct of people getting excited about DeFi and then kind of like building stuff. And some of it makes us and some doesn't.

And some would say, well, you know, if you're trading, if you're day trading, and this is where this might be become very interesting. to you know our listeners right now. If you're day trading and you know the regular this has become so competitive. You're competing with the best algorithms around the world and like like

shops that do just that and they have better networking connectivity than you and they're going to beat you basically every time. And and so so you should think about DeFi because it's a greenfield. And again it's true too, but that's not the point. The point is that DeFi Is an open global financial system that a lot of people

Some of them very small, some of them very, very big entities, okay, are saying, oh, this is super interesting. This is useful for us. And this is the thing that which is why people should pay attention to DeFi. Okay.

Uh, you know, I'm tired of getting 1% from my bank and and uh many stocks don't pay that high in dividends these days. So are there any income opportunities through DeFi?

It's stupid. It doesn't work at all. Blah, blah, blah. But you know, but it goes 10x. So you didn't buy it. Are you stupid or are you smart? Okay. And this is like this happens every full cycle. So basically everybody do and said. You buy that and it works all the way until the point it doesn't, right? And then some people, which is usually retail and not like the investors who got in really early on at much better prices and made like their 100x, etc.

So I totally agree with that. Now, in order to answer your question about okay, I'm an investor, what do I actually do? How do I participate in this? And there are really cool primitive cool primitives. basically provide liquidity. Okay, like one of the things that helped DeFi boost is the idea that you can provide liquidity. That liquidity pay other like allows for product to work and you get fees.

for that. Okay, so we'll we'll kind of like unpack this in a second. But before we do that, I want to unpack a bit what happened when we moved from C5 to DeFi okay it's kind of like okay so okay c fi centralized finance defi design what does it actually mean defi okay and it has three main components okay which is kind of like what happens when you take ideas from TrodFi and C5 and move them into DeFi. And the first one is that

In DeFi, you we took on like the idea of like matching engines and back office and some central entity does whether that's the matching, et cetera. And instead you have smart contracts on-chain. Okay, what does that mean? Let's unpack that. Smart contracts are anything but smart. Okay, smart contract is a really bad name.

Smart contract just means it's a program, okay? It's a computer program that runs on the blockchain, which means nobody, no single entity controls it. Okay, so let's think about something very, very Um simple. There, let's say there is a program and it counts. Okay. So it started zero. And every time there is a new block added to the blockchain, new transaction being executed.

It increases by one. And so that it's autonomous in the idea that everybody are running nodes in the blockchain, et cetera. And everybody are running it. And if you run your own node participating in the blockchain and you said, oh, let's change it. It's supposed to move from two to three. I can change it from two to seven, right? You could. But you'll only change it locally on your computer. You can't go to the rest of the network and

change how they're running the program. So it's as if everybody are running the same program. And therefore everybody gets the same result. And you could run something else, but then you're just like everybody else or doing one thing and you live in your own tiny world and nobody cares. Like, oh, you made a million dollars, right? You just added money to yourself. But yes, only in your world. Nobody else accepts. It's not in the consent.

So this is kind of like the idea of blockchain to smart contract. So instead of matching engines, people work with these smart contracts. So if we said earlier uh Uniswap, I think it's the largest decentralized exchange, it's the I think the best example. It's that AMM thing that we mentioned earlier. Okay, so basically.

Let's say the price of ETH is$1,000. It's not, but it's easier to kind of, and there there is liquidity there. Okay. So there are a thousand ETH and a million dollars, and that's of the current market. Now you think this is too low. The money like it should be higher than that. Okay. So you interact, you go to the Unismart Smart and smart contract and you say, I would like to buy.

$100 worth of Ethereum. So you increase the amount of US dollars there, USDC, and the you get back some amount of ETH. And the price is kind of like based on this new ratio between them. But the point I'm trying to make here, no single entity has control over it. This is like a program that does it, but that's being run by everyone. No single entity can control it and push it in one way or another. So when you take stuff or primitives or ideas.

or concept from C5 to DFI, that's the first change that happened. The second change that happened is that you no longer have order flows and price feeds coming from that centralized point.

Instead, you have a network, right? So if I want to make, you know, buy Ethereum as by ETH, as I mentioned, I create a transaction and say, well, oh, here's I want here i have a hundred dollars i want to speak with this smart contract and make that action and i signed it and it just kind of propagate to the network and then after a while some

validator or miner creates a new block and then we say it executed. It was added to the chain. Okay. So instead of order flows and price feeds, you have transactions propagating around and blocks propagating So that's the second component, which is different as we move. And the third one, and the most critical from my perspective, is that we just move from a point-to-point model.

to a peer-to-peer model. So if you're a competitive market maker or a trader, then in traditional finance, you need to be connected or locate co-located with um Чикаго, Нью-Йорк, Лондон, Амстердам, Чапан, Гонконг, Шанхай. Planking or three others. But basically, the major exchanges around the world, this is who you need to speak with. And in the DeFi setup, you need to be connected with the entire network. Okay, if you want to be competitive.

Critical information could come from anywhere, right? So a transaction coming from this direction. You want to see somebody is selling East, somebody is buying East. Somebody got liquidated, somebody put a new position, etc. So all this is happening. And for you to be a competitive actor, you need to see all these. And this is kind of like the framing of DeFi. This is how you move from.

C5 to D Fi. These are the changes. Now going back to your question, well. I'm not if if I'm and again, me personally, I'm not a a trader. Like I trade a bit, etc. But I'm it, you know, if if If big trading firms have like the traders and they have the tech guys supporting them, it's kind of like, oh, let me build you this tool and that tool. I'm that guy. Okay. I'm the tech guy who can help. And so when I participate in DeFi, a lot of the time I

I run a company, I have really better stuff to do, which is more valuable for me and the world than being the trader. I'm not actually that good at it. So like let somebody who's this is what he does do that. But it does open at least a few interesting opportunities.

One of them is as we mentioned, so we're calling it LP, liquidity providing. Okay. Basically, when there's a trade happening on a Uniswap, then You give some whatever whichever pair you're working on, but like you give some ETH, you get USD, you give USD, you get some ETH. But a portion of that, and it depends on the market. It could be like 0.3%, it could be like like a BIP, it could be um 10 bips, so kind of like like depending on on the specifics.

But basically that goes to the liquidity provider. Mathematically speaking, it's like put it's like a put option. Okay. That like it's exactly that. Basically, you're willing to be the one somebody wants to sell the asset, and you're saying, like, I'm willing to buy it. Okay. Like at this price. And so so you could. strategize around if if if you know puts then like you could strategize around that.

And basically you could be active around it or you could be passive around it. You could say, Oh, I'm providing liquidity, but just in this range. Okay. So it's kinda like If I think all the activity is going to be between fifteen hundred and sixteen hundred dollars in the upcoming week, I'm putting the my liquidity just there, basically making it more efficient there.

Um but if if if it goes outside the range, you won't be making fees, etc. So that's one thing. Another thing, other protocols, okay, like lending and borrowing. Okay, so credit. Um, which is something a lot of people are excited about. Again, being less of a trader. Then it's kind of like less of less of my go-to option. But basically you could come and say, Well, I have ETH, but what if I want too long ETH? Okay. Can I?

Lend my ETH and borrow USD for it. So it kind of puts me in a position and then use this position. And let's say by there's something called squared ETH. So basically the idea is like like like like like its value is the It it it's it's a way to be long to like to the to to exponentially. So you could buy squid.

And you constantly pay a stream to those who are shorting it on the other side. But it if you're long ETH for the short period of time, then that kind of allows you to get exposure. And so So that's kind of like in there are leveraged options, but usually it's about like everything's collateralized and over-collateralized in in the DeFi setup. So that's another thing. And you could do like even fancier things like take ETH. Take squid, right? Squid E.

Create a market. Okay, so provide liquidity of ETH and Squid. And then you're basically long ETH 1.5. So it's kind of like in between them. So you could do like fancy things around that.

Um I was act d does that make sense up until

Try to send it to yourself. Figure out you need ETH in order to send stuff so you pay for fees. Okay. So send money from yourself to yourself. Understand that that costs you like two dollars. So making transactions, or maybe maybe less. Right now it's actually less. So it's like Twenty cents, whatever. But basically understanding that execution is actually cost. in blockchains and crypto in DeFi. And when you're touching the more complicated products, so like Uniswap, et cetera.

Fees are actually substantial. Okay. So you could be paying like$20 to get into position, et cetera. So you're actually going to do a lot less movement. Because it doesn't unless you have a lot of capital. If you have a lot of capital, then then it's a no-brainer. You kind of like like, yes, it costs money, but not not compared to how much you're you're kind of like putting like in line there. If you

If you know you're a normal person and getting into that is kind of like, well, hold on. I don't like, you know, burning$20 every time I get into position and out of position. Like this game is different. The way it works in Uniswap, like right now we're at Uniswap V3, okay, which is where you could do what I said earlier. You can decide in which range you want to be. You could also do like, well, you can cover the entire range. But basically it only makes sense to do LPing between two assets.

That you think are going to kind of like play against one another. Sometimes one will go up and the other will go down, and vice versa, et cetera. But they're going to be somewhat correlated between them. And you're going to be making money out of fees there. If they're not correlated and one go up and one stay the same, or one stays the same and one goes down, you know, long term, basically you're going to end up holding all the bad assets.

And it like continuously selling them, you know, selling your good assets for your bad assets. Okay. So it's kind of like you have to understand how.

If you're in a position, right, and you kind of like you're providing liquidity between the price of a thousand and two thousand. If the price goes be like you're kind of like selling all your ETH all the way to a thousand dollars, and if the price goes below that, sorry if it's the right you're going to hold on only to your ETH right it's kind of like you're you're putting it between a thousand say uh you sell them at two thousand you sell them at

um um 1900, etc. etc. You end up when you go outside of the position at the lower end, you end up holding the bad asset, right? It's got ETH went down really, really, really badly, and you're holding that and you gave away all your US dollars. And if it goes up,

You kind of like you sold all your ETH for the US dollars and you got you end up holding all the US dollars, but you're out of ETH, right? So it's kind of like you have to keep that in mind. So you want to be mindful of cycles and what the current market looks like. Is it like crab like? Is it It and this is where me as as somebody who's

not an active trader, then I am much more like I take multiple assets, which I'm bullish upon on anyway. And so like, well, I think these two assets are both going to do really good. I'm not sure which one is better. And I could extend the value I'm getting or kind of like like I could make be making more by also providing liquidity for that. And then it gets even funnier than that.

In Ethereum, literally next week we move. So I don't know when this is going to be broad broadcast, but as of like like September, somewhere between September thirteenth and September 15th. There's going to be a major event called the merge. Okay, basically Ethereum moving to a proof of stake system.

mine the next block and add another block to the blockchain. And this is a major concern and a major criticism of crypto and blockchains. Well, you're burning all this money just trying to make the next block to get a reward. And this is just like really bad for the environment. In proof of stake, you throw this competition away and basically it becomes to be included. Is it my turn to add a block? Is it your turn to add a block? Like it it becomes like

a predetermined order, each one depending depending on how much stake, okay, how much staked ether they have, they're going, they're going to to to be adding blocks and be rewarded for it. So Staking ETH, basically, if you have ETH, great, okay, you're long ETH, you have it. Okay. You could stake ETH, basically getting something like four percent APY by saying, like, okay, I'm going to support the network. Basically.

The re the the idea is that People would add blocks and they want to do anything nasty because if they do nasty things, they get slashed and it hurts their state. So it's kind of, well, if I have a billion dollars of ETH there, I'm not going to, you know, create two blocks at the same time or try to create an invalid block, which again, it doesn't break the system, but it hurts the system. And so if you long ETH, you could buy ETH or you could stake ETH or

stake it with a company like Lido, not company, a project like Lido. Okay, Lido basically uh they would stake it for you, they would give you a token. staked ETH. Okay, so basically you get that, but the same way as that you provide liquidity using ETH, take this yielding like asset and use that.

to provide liquidity. So you can like the cool we call it like playing with like the the DeFi Lego pieces. Okay. So it's kind of like okay I have ETH, I stake it, I actually stake it with somebody who gives me a token in in exchange of it. So I still hold it. I could go afterwards and kind of like um um I'm very blanking on the term, um, you know, give it back to kind of like get my whatever I stake there.

And more right with a four percent APY on top of that. But getting this token back allows me to do other stuff in DeFi. So It reduces the opportunity cost, right? Like it it's not it doesn't mean you could take that and now go to the lending and borrowing, like go to maker, okay, or compound, okay, like to Lend that. And let's say like put it there and get or or maybe borrow USDC dollars.

and put it like keep it as a collateral there. So now you actually have back all your USB dollars. You could you could be do whatever you wanted to do with them, but to now Or also getting the four percent APY. Now you could take that by squared ether. This is where it gets complicated in terms of not technically complicated, but look, okay.

build a good strategy around that. But this is where DeFi gets exciting. This is the kind of stuff you can't do in centralized. You can say, oh, I'm going to make up here i have an idea let's take the state eve and make a token around it and you know just plug it into the the rest of the financial system you can't do it in the centralized system like ten

What are you even talking about? And this is where DeFi gets super excited. Like, how can we combine the different Lego pieces and build more and more complex stuff?

Almost$5,000, went back like to seven, maybe$800,$800,$50,$100. So this is a very volatile market. I am very, very bullish and very, very long ETH long term. But this is crypto, it has cycles, there's bull market, and I have z I have no idea if within a month it's going to be higher or lower. I I'm very maybe I'm wrong, but I'm confident and I'm betting that if he's going to be higher. three years from now. Okay, so I'm very bullish, I'm very like I'm very excited about then.

Not a financial advice. You should do your own homework, like what do I know? But that's my perspective. But if you're an investor and you're an actor, I don't know if you're happy or unhappy about it, but you could either hedge against this exposure or

You could extraborate it, right? You could like say, oh, I want to be even longer ETH. So I'm going to take all that and go kind of like, okay, squared ETH, because I think short term it would go up. I don't know. That's kind of in this is where the merge comes in and less like cell pressure and whatnot. I was a PhD student. I wasn't really never into Robin Hood and day trading. Like I knew it exists, but like not really excited about it. And if I invest in

And I got excited about leave and said, oh wait, you could do this and you could do that. And what if you do you combine them this way and that way? So I I very much encourage, and again, take a thousand dollar, consider its tuition and go play with it. Okay, it's frightening. It's like, oh, what do I miss it up? Consider this money lost. Okay, if you end up with b that money back or more than that, like like

Yeah, it's just like winning the lottery. Consider it last and then use it. Go download MetaMask. Try to move it, you know, move it to a different chain, move it to Polygon, then move it back. Understand what that means. Stake it. Provide liquidity, you know, LP. Take it back, understand what are the costs for that. Um look into NFTs and what do they mean, fractionalize NFTs and that's an entire domain we could you could consider. But

Actually do it and that puts you in the 98th percentile. Okay. That like it puts you ahead of basically the rest of the

And somebody tells you a really cool idea. You can't participate because you're not an accredited investor. You're probably not an accredited investor. So this is an entire world. Which is close to you. There are great opportunities as as somebody who spoke with every single major VC early stage, mid-sill like so C pre-seed seed A group B growth and after that, anywhere from Sequoia to

softbank who led our la latest round to Tigered. Like basically there are all these deals. This is where the real opportunities are. And to make us all safe. The SEC prevents you, me, and the like you normal people from participating in them. Okay, you won't get to play in this game.

And as somebody who's a founder and kind of I I was never planning to be a founder. Okay. I'm a tech guy. I'm a nerd. I'm a really nice I'm I'm not with an entrepreneur or the douches, right? I don't want to be even in that group. No, no. I'm a nerdy geek. I stick with the rest of the software engineers. Once I got to this kind of like this is where the real activity is, okay. Being able to participate in companies early on and investing and

You like this is the real opportunities and they're close to you. And I think There were probably. You know what? It goes back to the question of DeFi and is it like is it useful at all? We already have centralized exchanges. Maybe in the seventies when you couldn't look up people and project and companies and see their financials and look in into everything about them and what they do.

And et cetera, then maybe it made sense you don't want to allow people to invest in other people. Maybe these companies don't exist, et cetera, because the SEC filing filing provided something that other people didn't have. This is 2022. And if I want to look up people and companies and what they do and partnership, I can get a lot more data than the tiny bit of information that's on the SEC filing. Okay, so from my perspective, this is a protection which

Its damage is much greater than its good. Okay, so and again, that's the it's kind of allow people to invest. And if they get screwed over, they get screwed over. They shouldn't invest. Okay, this is On but on the flip side, this is exactly where Dogecoin and the rest of them are really hurting. It's kind of no.

Or it's a casino. If you know it's a casino, you can go and play. Take your money and say, like I'm willing to bet. There is a chance to get 10 eggs, knowing I could lose my pants on this. And if you want to play, go play. And if you don't want to play, don't play. But know that that is a game. Don't pretend this is a different game. But on the other hand, it again, it really prevents people from participating. And this is where DeFi is exciting.

You have no idea what ETH is, but you heard this podcast and you kinda start your answer, oh wow. I can send I can send money, like I can send to my friend on the other side of the world money right now, like like like without I don't need to ask anybody like the same if I send it, it's there, it's kind of like without even thinking, nobody can control it. It's a this is valuable. Then you start down the rabbit hole and say, oh well, ETH is interesting, DeFi is interesting. Oh, here's Uniswap.

Oh, unitoken doesn't have so Uniswap has a token. It doesn't get any percent of the fees, which are quite significant. Okay, like really like Uniswap is big, but I think everybody are betting on it because they think it has a good chance of turning the fees on. And you could decide, do you want to participate? Do you like are you betting that it would be turned on? Or you say like, oh, it would never be turned on in Uniswap.

Do your own homework, figure it out, decide and participate. I think regulation hurts a lot. That's my, you know, personal feelings. Does that make sense?

We've seen, we call them Ethereum killers, EKs, right? And like we see them come and go, and most of them don't leave a mark. Some of them are kind of like I think the worst example, um, EOS. Okay, like EOS is kind of like the oh it's kind of and it's terrible, it doesn't work, like uh the technically incompetent and whatnot, et cetera. Like Ethereum has a lot going for it in terms of community.

People actually using it, people actually getting excited about it, building the right tooling for it. So it's much easier to participate in it. And basically all these other chains. try to connect to Ethereum because that's the own this is where the activity is happening and they're trying to compete. But you know BSC is on the Asian side. BSC is the bind and smart

uh contract uh chain or smart chain. Um and it's actually quite big and getting quite a lot of traction. Um so long I'm actually bullish on. Um but but again so so there's There are people betting on it, you know, I'll buy the token, the token would go up just like Ethereum. So like that's one angle I can't even comment on it. I have no idea. I don't know that how that's going to play out. We're definitely seeing

actors working on these other chains. I I personally, or we as a company are actually working quite hard on Solana and on boarding really big users and really big traders to utilize the significant trading capabilities happening there. If we talked about um ETH Delta at the beginning, like order book on chain, which doesn't work on Ethereum.

It does work on Solana. Okay. So it's called Serum. Okay. So there is literally an order book on there. So if we we provide an API that anybody could utilize to trade on top of that. So it's kind of If you're familiar with an exchange API, here's an API that gets you there. Okay, so like allows you to trade on top of that. And it is a viable.

solution on top of Solana. Now, how is this going to play out? I have no idea. I My bet would be that Ethereum is going to be significant and dominant, potentially the most likely most significant like chain going forward for the foreseeable future. But two, three caveats for that. One is that it doesn't mean it doesn't happen elsewhere too. Okay. So it's kind of like you have pieces that.

What Ethereum got is composability. So you can play with one piece and you know take this and use this token to land there and then take that and put and if you can connect with that, actually you can get a lot of activity going into you. That's why. Second, I mentioned earlier about Bitcoin and Bitcoin Cash and kind of like the a bit of the history. So Bitcoin kind of like proof say, like we're going to be gold and Ethereum.

jumped in and filled the gap of functionality. But there might be additional. So beyond DeFi functionality and gold, is there a third functionality which currently nobody's catering? And if so, and whether that's like, you know, Assets, gaming, on-chain, like I got like metaverse, you name it, etc. So are there pieces out there that cannot be achieved with?

Bitcoin as gold and Ethereum as a like functional um um piece. I don't know. I didn't think about all the stuff you could imagine potentially do. So there's definitely an opportunity.

One potential comes down a bit to your regulatory question. It's it's about privacy. So, and and maybe that's worth tackling and kind of like even digging a bit deeper. The US dollar cash is valuable. So the fact that people use it to launder money and you know do all sorts of stuff is kind of like yes, in there are bad stuff with it, but like it's worth it, right? And we have cars and people die in car accidents because they're like, okay, but it's very functional.

And we use it. So it's kind of like the good is kind of like bigger than uh the cons or the negative externality. And then you say, well, but privacy, what only if you're a con man or or a scammer or something like that, or a terrorist or a money launderer or whatever, you want privacy. Everybody else should be just fine with everybody looking over their their shoulder and seeing what's in there. And I encourage people to rethink that and say, like, maybe. Maybe you donated.

to planned parenthood. Okay. Okay. And something like that, which is something which is very controversial. Or you're in the 60s and 70s and you're contributing time, effort, or or even you have business with. activists, whether that's about like race equality, whether that's like feminism and civil rights. Maybe or or

completely different angle. Maybe you're participating and you have trades with Ukraine. You're in Russia and you have trades or activity and you're supporting Ukraine on the other side or vice versa. I'm pro-Ukraine in the situation. But like maybe you're doing something that wherever you are, maybe currently it's not okay, or maybe it's okay right now, but within five years it won't be okay. And so maybe.

You want your privacy. Maybe you don't want the administrator, right? Or the the governor. And I'm I'm anything but an extremist on this. Okay. I'm not a libertarian which are like, no, we should have no. I'm not that. That being said. I should have my pri the that that is actually important. It's important.

for civil rights to have privacy. I should be able, right? Maybe you're gay and all of a sudden, you know, like 15 years from now, we're like super conservative like um legislation or something like that. Can you get married? Can't you get married? So like I'm it in not also guns, okay. Like like I intentionally pointing out all the questions that people have really strong opinions one way or the other. And say, like, do you want

To be discriminated because of your opinion, whether they're we should have guns or nobody should have guns. I don't even know what's the right opinion there. Your personal opinions are yours. You should be able to act on them and whether that's donating or participating or whatever you want to do. And not to be thrown outside of your bank. Oh no, we're not, you're banned from here. Okay, you're not allowed. You we just freeze your assets, et cetera.

So privacy from my perspective is important. Yes, it also allows for con man and scammers and whatnot to get away. But but but but but it's worth it from my perspective.

Consider yourself, oh, I'm interested. I'm going to actually do it and do it hands-on. And once you do, you're so much ahead of the curve, you don't even know it. Okay. So it's kind of like it's scary. Do am I doing it right? Do it. Go g good just go and do it. So find me on Twitter.

feel free to reach out. Also see like okay I mean all sorts of conversations are happening there in the open. Some of them are important, some of them are just funny and and and silly. So I I'd I'd send them that way.

Thus, as of mid-October, the annual yields for staking your Ethereum is expected to increase from the previously mentioned four percent. Up to 7% or more because stakers will receive money that used to be paid to the miners. As I know, there is a lot of interest in this topic. I am completely open to going more in depth with the decentralized site that Yuri mentioned in the interview called Uniswap.

and share some concrete practical ways to generate income, things that I am doing for my own investment. As of this recording, current market conditions are giving well into the double digit percentage yields on the liquidity pool. If you would like to learn how I do this and explore other opportunities in the decentralized world, join me for a live discussion inside the Chat with Traders community currently targeted for early November.

If you haven't been invited to join our new community by email, which is currently invitation only for the initial launch, it's not too late. Go to the Chat with Traders website and click on the community tab at the top menu to sign up and get an invitation. I look forward to seeing you all there.