Traditional finance is limited by the absence of a sandbox for developers, as mentioned in a previous post this is one of the key pain points that allowed Stripe to become so successful. DeFi enables anyone to build synthetic assets, somehting that until now only large institutions have been able to do due to high barriers of entry.
Permissionless nature of blockchains opens up arbitrage opportunities to developers not burdened in the same way that legacy financial institutions are, communities building from the bottom up can take advantage of the current regulatory arbitrage.
High quality entrepreneurs are the scarce resource of the blockchain space, they’re Playing for massive returns, things like trillion dollar market caps or one billion users. Not unlike the team at Nash.
Team & protocol are the most important aspects for a projects success. The team is most important in the beginning, in the end the protocol takes over as the driver for success. Instead of being large being small and agile allows teams to shift to where the value is. Having crypto native founders is better than teams coming from legacy finance etc. also being people oriented better than thesis oriented this enables you to pick the best people for the team and community increasing your chance of success.
Framework Ventures helped make and grow the link marines who as a community are now a strong driving force in the market.
Bootstrapping volume is a challenge all platforms face, hedging futures on Binance with synthetics was one of the profitable means Framework Ventures used to get things rolling for the Synthetics platform.
Value capture is key, ETH or BTC locked in vaults yield farming or in Maker, Ren, Comp etc. is all value not locked in layer 2 being traded on Nash or in Nash savings/liquidity vaults. The more we can get into layer 2 on Nash the greater the gravity of the platform and the more liquidity we can pull from the rest of the market.
It takes year to a year and a half to get something online, sticking with it through good and bad. (Nash has only been alive for a year so we should not expect success to have been achieved sooner than now)
Successful products have strong community, the most successful protocols integrate with chain link, interoperability allows for collaboration which is a force multiplier as two communities join together. Value in comp, synth, maker, DAI, YFI, REN can be utilised across all platforms. Nash should look to integrate with other communities as much as possible to take advantage of the force multiplier effect of multiple crypto communities.
Protocol composability leads to composable communities this is why yams was successful, it brought together many protocols/communities. Aave is also used by link marines leading to cross pollination between those communities. This aspect is non-zero-sum because these protocols are both technically composable as well as culturally composable. These communities create their own memes which become the rallying cry of the culture of that community. These memes synthesise each communities culture making it easy for new comers to understand their values and vision for the future. Composability enables protocols & communities to build on themselves enabling them to take market share from OTC desks and then centralised exchanges, slowly then all at once.
Perpetual swaps coming on chain will allow decentralised exchanges to achieve parity with centralised exchanges.
The most difficult thing to do is get the first 100 users who are trading in size. This is a challenge Nash is looking to address with upcoming community initiatives.
Looking at Bitmex If you can get leverage you’re going to make a ton of money.
Synthetics as a platform based on SNX reflexive on way up and down, if the value of synthetics falls the whole platform, SNX and each of the different synths are exposed to that risk. Backing synthetics with BTC, ETH, USDC makes more sense as they’re better forms of collateral.
How do you grow trading volume organically?
How do you construct a trading incentive program that pushes volume onto the exchange?
How do you deal with cannibalisation risk eg. SNX being traded on centralised exchanges or Uniswap. In the case of Nash can we look to cannibalise SNX?
Choke points for pricing power and value accrual is where data feeds and outward payments get processed into and out of blockchains, this is something ChainLink is addressing for data and Nash is looking to address for payments i.e. NashPay.
ChainLink instead of being used just for one-off price feeds it can become middle-ware to build products, store private keys, do option computation and bring data from off-chain to on-chain and eventually users will interact with ChainLink more than the ETH base layer itself. Should Nash be succesful this may become the case for Nash as well whereby the vast majority of L2 activity takes place within Nash without the need for users to settle to L1.
Community is what made chain link special, informed discussion in community channels led to a strong community well before the price started moving.
Populism is real in crypto, having a diverse community is valuable and helps whereas tribalism (see Bitcoin maximalists) slows growth.
Comp is more transparent than BlockFi and they offer a higher yeild, this is something Nash can do as well, leveraging both self-custody and transparency.
The protocol sink thesis states that the protocols with the highest settlement assurance will become the base layer…the base layer for crypto banks, commercial banks, and even nation-state banks.
Can Nash become THE base layer?
Does Nash have the highest settlement assurance?
Is Nash credibility neutral and dense like other successful DeFi protocols?
Next leg up for DeFi will depend on is layer 2 as the next inflection point.
Front running problems from oracle’s is still a problem that needs solving, something Nash has solved already through it’s provably fair off-chain matching engine.
Fractal is the largest market maker on 0x, it costs an arm and leg to get done on centralised exchange. Market making should be a public good just like Uniswap is a public good for permissionless listing. As Nash has a strong focus on regulatory compliance we wont be able to compete with Uniswap however we may be able to enable community run market makers as a public good on Nash.
People have trouble thinking in terms of exponential regression vs thinking in linear step changes, we’re undervaluing just as often as we’re overvaluing.
Here’s a bonus meme for reading to the end…