GM, this is your Daily Bolt briefing.
In this edition we’re going to be giving you an overview of 3 of the biggest announcements coming out of EthCC; Chainlink CCIP, UniswapX, and Synthetix’s Infinex exchange.
Also; tune into today’s What’s On Our Minds (WOOM), live at 11AM EST on youtube. In this episode, Nick Drakon and Souvlaki delve into RWAs and their potential role in the crypto markets.
Over and out ⬇️
1/ DeFi Trends & Chainlink's CCIP: Enhancing UX & Shaping Regulations
Preview: Jason and Santi host Michael to discuss the current DeFi trends, Chainlink's CCIP, crypto news updates, and more. Click here to listen to the full episode (82 mins).
Read our Note (7 mins) and save 75 mins.
DeFi Trends & Chainlink’s CCIP
Michael says that he notices a trend in the timing of major announcements from "blue chip" companies. He compares the pattern to Apple's strategy with the WWDC event, noting that many are using this time to reveal the progress of their work.
Jason says that the industry will adopt a regular rhythm of product releases, potentially coordinating them with prominent conferences. He mentions noteworthy trends from the EthCC event, including Vitalik's talk on account abstraction.
Michael says that the UX will improve significantly with account abstraction, which has been a barrier for the industry. He talks about the Synthetix team and Kain's announcement of Infinex, an off-chain signup process that involves an email and password. He sees this as a positive step towards more user-friendly practices in the industry.
Santi talks about the low user base in DeFi and the need to improve user experience. He says that the industry is ready to support more users and activity, making it the right time to focus on front-end consumer applications.
Michael explains that Infinex is a consumer-friendly way to access financial markets without requiring a deep understanding of DeFi. He says that it can function across different chains, allowing trading on various ecosystems. He sees this as a critical move towards bringing new users into DeFi.
Jason appreciates the contrarian approach Kain is taking, focusing on consumer products instead of infrastructure. He mentions Uniswap X, an auction-based protocol for trading across AMMs, viewing it as Uniswap's move to become a base layer infrastructure for building AMMs.
Michael finds similarities between the principles of account abstraction and Uniswap X. He says this move will facilitate growth and allow people to interact more easily with Uniswap. He sees this as an effort to optimize for growth and broaden the ecosystem's liquidity.
Santi discusses a recent podcast he recorded with Rebecca and Jake on the topic of Ripple and the idea of programmatic sales. They discuss DEXs, which Santi believes fits the criteria of programmatic sales, but others are uncertain. Santi anticipates future regulatory clarifications.
Santi highlights how DeFi has become more accepted due to its efficiency and cost-effectiveness. Specifically, he references the use of stablecoins in protocols like Curve as cheaper than traditional centralized exchanges.
Santi says that DeFi will surprise many people with its capacity to integrate seamlessly into existing systems and achieve quick traction.
Santi says that Michael has been heavily invested in Chainlink and offers insight into its development and potential.
Michael explains that Chainlink has maintained a consistent thesis throughout its existence, focusing on the internet of smart contracts and enabling unified communication protocols. He sees cross-chain operations as inevitable and believes Chainlink's CCIP is a representation of the industry's future direction.
Michael details how Chainlink's CCIP can eliminate the need for bridging and facilitating transactions across chains. It can ensure more secure transactions and better UX.
Santi asks about the trust assumptions when using Chainlink, to which Michael says that Chainlink has established a lot of trust as the dominant Oracle provider in DeFi, while operators facilitating transactions also need to stake assets as insurance against potential malicious actions or mistakes.
Santi says Synthetix is an early adopter of Chainlink and a significant contributor to the ecosystem. He mentions their contributions towards DeFi summer, Chainlink, and Layer-2 solutions.
Jason asks Santi about the potential competition between Chainlink's CCIP and LayerZero. Santi recognizes the possibility, though he is still processing the exact relationship between the two.
Santi says the current architecture of bridges is flawed but sees the new attempts as progress. He says the CCIP and LayerZero as more elegant solutions. He says that competition is inherent in this space.
Santi says that Jake has said in a previous episode that Ripple isn't security now and that tokens are not securities. He also reports that both Jake and Rebecca agreed that exchanges like Coinbase are the biggest winners from the court ruling on Ripple. They believe it might be the most significant ruling in their time in the industry. Santi also mentions the McHenry Thompson bill and the stablecoin bill.
Crypto News: CoinDesk Deal & Blockchain Trends
Jason talks about the breaking news that CoinDesk has been bought for $125 million by Matthew Roszak of Tally Capital and Peter Vessenes of Capital6.
Michael and Santi recognize Matt's company, Blocq, but say that it never gained much traction.
Jason expresses his happiness about the CoinDesk deal as it brings competition to crypto journalism, which he thinks has been lacking.
Santi announces another breaking news item about the shakeup at Sequoia where they've let go of their entire crypto team. He says that Sequoia will likely not be investing in crypto going forward.
Michael highlights the shift in sentiment towards crypto in other major funds like Tiger Global and Triple Point. He says only crypto-native firms remain committed to the industry.
Michael says that traditional venture capitalists will now have an excuse to avoid blockchain technology.
Michael says that top venture performance has decreased, correlating with an increase in fund size, as the requirement for larger funds to return multiples necessitates large-scale investments. He mentions Framework Ventures’s $400 million fund, aimed at being a strong player at seed and Series A levels, with a goal of returning many multiples of the fund size.
Michael recognizes that competition has decreased, with the crypto market mainly comprised of crypto-native investors. He says that for those without distributions, fundraising may become difficult in the next cycle. Michael points out a decrease in newcomers to the industry but believes that the quality of opportunities is much higher.
Santi says that non-crypto native funds typically focus on larger equity deals rather than engaging in on-chain activities, which he sees as a major opportunity for generating alpha. He mentions that only a few funds are as active on-chain as they are and asks Michael how they convince their LPs about their strategy.
Michael explains they operate closed-ended funds, focusing on ownership, long-term relationships, and participation in every possible way, which he believes LPs understand as being crypto-native. He differentiates the philosophy of running a protocol versus a company, highlighting the shift in power and influence.
Jason asks about the type of advice their portfolio companies seek, with Michael saying that it can range from hiring help to technical advice, depending on the stage of the company. He also mentions the shift in philosophy necessary when transitioning from a traditional startup to a protocol.
Santi adds that his portfolio companies often ask about the fundraising environment and the state of follow-on investments.
Jason observes that the Layer-1 blockchain platform a team builds on often reflects their character and mentality. Santi agrees but cautions against making too many assumptions, highlighting Solana as an example and suggesting a future discussion on the Solana ecosystem.
Santi asks Michael two questions: one regarding his decision-making process when a founder opts to use a blockchain protocol Michael is less interested in, and two, the percentage of Ethereum-centric investments in Michael's portfolio. Michael says that a founder's choice of protocol does impact his investment decisions, as it offers insights into the founding team's understanding of the trade-offs. He says that his portfolio is approximately 75% Ethereum and 25% Solana.
Santi discusses that the nature of the application also impacts the choice of the blockchain platform. For example, games may not require as much blockchain interaction as DeFi protocols and hence, can be more flexible in their choice of platform.
Santi talks about the shift of some applications from running on their own blockchains (Layer-1s) to Ethereum Layer-2s due to the difficulty of securing a network of nodes. They predict an increase in L2s and the impact of this on the crypto market.
Jason discusses the case of Celo, a Layer-1 protocol, proposing to convert into an Ethereum Layer-2. They argue that Ethereum is becoming a "Security as a Service" for other networks, and suggest that this could be a strategy we see more of.
Michael suggests that while it's difficult for a new Layer-2 to compete with existing environments, a Layer-2 strategy could be beneficial for applications with a truly differentiated product or service.