Fresh out of the studio, Rawson Haverty, co-founder of Reflection Digital & co-host of Soulbound Asia podcast, joined us in a conversation on the past, present and future of decentralized finance (or DeFi). The conversation began with how DeFi has emerged unscathed after the crypto contagion unleashed by the UST-Terra-Luna collapse. Rawson dived deep into why there is a macro case for DeFi, the current evolution of DeFi protocols from Aave to Frax and what we should look out for as new DeFi innovations are hovering around the corner for the next crypto super cycle. Last but not least, he offered the mental models and challenges for regulators to think about in DeFi regulation.
"Once you reach scalability in blockchain, it should be portable over to decentralized rails. Just like the vast majority of business models that could be built over the internet ,have transitioned to the internet because it's a more effective means of deployment. I think at scale, you'll see the vast majority of financial use cases, which is, a completely digital domain move over to these new rails. But some of the early applications that we've seen emerge are in the basic building blocks of financial services" - Rawson Haverty
- Rawson Haverty, co-founder of Reflection Digital (@Rawson_Haverty , Linkedin) & co-host of Soulbound podcast (Podcast Link, @SoulBoundAsia)
- How did you start your career?
- I started reading your emerging newsletter before it was transformed into the digital reflections newsletter. When you were in Temasek, what brought you into the crypto space?
- In your career journey, what are the interesting lessons you can share with my audience?
- You have recently started a podcast called “Soulbound” and can you talk about what you discuss on that podcast with your co-host?
Decentralized Finance: Past, Present & Future
- Given that we are right in the midst of a crypto bear market, what are your thoughts on the recent crypto crash with the Terra-Luna-UST collapse followed by the insolvency of several lenders: Celsius and Voyager and the billion dollar hedge fund, 3 Arrows Capital and what are the key learnings which we can learn in this cycle?
- The one interesting thing is that decentralized finance or what we called DeFi remain robust in the midst of this current crypto meltdown. Arthur Hayes made this comment, which I find relevant in our conversation here: “When you remove trust from the equation and rely purely on transparent lending standards executed by impartial computer code, you get a better outcome. This is the lesson to be learned.” Can you provide my audience an introduction to define what DeFi is?
- What features does DeFi protocols have that distinguish it from traditional (or centralized) finance?
- Why did DeFi hold up incredibly well?
- What is the macro case for DeFi? [Reference: The Macro Case for DeFi]
- Does the arbitrage between DeFi and the different countries interest rates eventually reach an equilibrium or will the creation of a metaverse based on a digital economy will continue that arbitrage?
- Can you provide examples from the DeFi landscape?
- To dive deeper into the lending protocols, you pointed in a paper that there are three buckets for lending protocols: 1/ Over-collateralized on-chain protocols (~ US$~50B total value locked - at one point (TVL), 2/ off-chain centralized lenders (> US$20B in active loans) and 3/ awkward O2O hybrids (~US$2.b in TVL), what are the mechanisms that can bring the on-chain to off-chain for lending in the real world? [Reference: DeFi & the next frontier: On-Chain to Off-Chain (O2O) lending]
- One interesting thing is to look at MakerDAO that seems to be standing in for central banks. Can you elaborate further on how MakerDAO works and how they manage to do a US$7.8m loan to Tesla and their recent partnership with maple?
- Perspectives on Sam Bankman-Fried's recent effort to bail out the crypto lending institutions in distress that are reminiscent of JP Morgan's efforts in 1908.
- What is the role of stablecoins in DeFi and also in the current times of instability due to inflation and the Russia-Ukraine war? [Reference: Stable Coins in Unstable Times]
- Discussion on whether bitcoin will be the medium of exchange from the rest of the world where China will have its own digital currency (CBDC) and the potential possibility if there is co-opting of USDC by the US government.
- Why is regulating DeFi still a difficult challenge for regulators out there?
- What are the needed mental frameworks for regulators to provide regulation on DeFi?
- What do you think that the crypto extinction events would be for DeFi?
- What are the current trends in DeFi that you are most excited about, given that it’s a time to build with the bear market happening for crypto? What are the most interesting innovations that you want to see in the next wave? [Reference: The Fourth Wave]
- Any recommendations which have inspired you recently?
- Rawson's recommendations: "The Clash of Civilizations & the Remaking of World Order" by Samuel Huntingdon, Bourgeois Equality by Deirdre McCloskey, The Brothers Karamazov by Fyodor Dostoervsky
- How can my audience find you?