SotN#7 - EXPLOSIVE, Special Guest: DARYL LAU (YFI TOKEN MAGIC, ETH PUMPED, DEFI RISK)

All right, everyone.

Welcome to episode 7 of State of the Nation.

So what we do on State of the Nation is we talk about what's happening in the nation.

I'm talking about the bankless nation, Of course, we relate it to big picture stuff, and then we drop some insights and action items.

This show comes out on YouTube because we like to show the visuals when we can.

It's all about the visuals.

Seeing David's face, seeing my face, seeing our special guest face, being able to peek inside the graphs and some of the analytics behind the things that we're talking about.

And we leave you with a list of resources in the show notes to check out.

So this comes out on Tuesday.

So it's Tuesday when you're watching this on YouTube.

You get it earlier when you subscribe to the channel.

Make sure you do that.

And then we release it on the Bankless, podcast stream on Wednesday so you can catch it via just audio that way.

David, how are you doing today, sir?

Absolutely fantastic.

The the bankless nation has a lot of energy in it.

And so it's been absolutely wild seeing that energy grow.

And there's also just a ton of energy, not just, in a bankless nation, in greater Ethereum, and even in the greater crypto sphere at large.

Lots lots of energy to talk about.

So lots of topics to get through.

We have yeah.

Like like you mentioned, we did bring on a very special guest to help us dissect where some of this energy is coming from, but we will get to that later.

Yes.

Yes.

The secret intro.

Alright.

Before we do and before I ask you the question, David, so get your get your answer ready, sir.

Mhmm.

We should talk about our fantastic sponsors.

I wanna start by telling you a little bit about Argent.

So Argent is a smart contract wallet for Ethereum for all of these DeFi protocols, these money Legos that I personally use.

David uses it.

Everyone I know in the bankless community uses this wallet in some form or fashion because it is just drop dead simple to use.

You get easy access to Aave.

You get easy access to Compound, pool together, Kyber token sets.

You can do all sorts of things with it.

It's secure and easy to use.

So this is actually a great entry, wallet for your friends and family.

This is like a Venmo type experience.

It's all mobile.

There's no seed phrase involved.

You can even set up social recovery, which is key.

It's non custodial, most importantly.

So this thing is ultimately bankless.

You can check it out at the link that we will include in the show notes, or you can go to argent.link/state for a state of the nation, special deal.

So that's argent.link /state and check that

out.

Aave is a borrowing and lending platform on Ethereum.

Definitely responsible for a decent chunk of that energy that I was talking about.

So if you want to supply collateral and earn an interest rate, Aave is the place for you.

If you want to borrow assets to participate in yield farming, liquidity mining, all of that energy, AAVE is also the place for you.

And developers who are are leading the charge, you can check out their flash loans protocol where you can borrow any amount of assets with 0 collateral so long as you pay it back in at the same transaction.

There's a lot of potential here with Money Legos.

There's the ideas and ideation that we can go to to think about how you can leverage this thing, is endless.

So developers check them out.

You can go and find out all about Aave at aave.com.

One of my favorite features about Aave is their stable interest loans, which is such an important thing to be able to replace the existing financial system with bankless financial systems.

Stable interest loans help people think in the long term.

They help businesses make business decisions, and they just will help the bankless nation go faster.

Avay's just been climbing the charts with on on DefiPulse with, value locked up in their contracts.

So rip roaring success.

So tip of the hat to them for for everything that has happened, to their protocol in the last few months.

So check them out at ave.com.

Alright.

David, we've got some exciting things happening just in the Bankless Nation that we should maybe start with before I ask you the question.

We had Joey, Joey Krug podcast that we released yesterday.

That was absolutely fire.

And I say that this all the time.

It's one of my favorite podcasts that we've done.

We've got Eric Voorhees coming tomorrow.

So that's going to be, exceptionally interesting.

Eric, of course is, you know, he's came from Bitcoin, but he's nontribal.

And, he's very interested in things that that are getting built in this bankless landscape.

It's also mint week for the bankless badge.

So bankless badge, if if you've been keeping track, is something that we issue to bankless members, give some unique privileges and rights within the Bankless ecosystem.

We'll include a note there.

And then, David, we've got something something coming next Monday.

Right?

I, you know, I don't wanna talk about this too much.

May maybe you should take over from here.

What what what's happening next Monday?

Yeah.

So, you know, the the crypto land is for has fertile grounds.

Right?

The the bankless nation is fertile.

Lots of green pastures.

That's why we're so excited about this.

There's lots of things that are potentially awesome things to do.

And so we found 1, we think, and so, that's coming.

A brand new wing of the Bankless Revolution is coming to, to the Bankless Store.

Yeah.

I'm super excited.

Next Monday is gonna be awesome.

And, you find out about it first because you are tuned in here on Tuesday next Tuesday.

Make sure you catch that episode.

We will, show the big reveal Mhmm.

Then.

David, let me ask you the question.

Mhmm.

What is the state of the nation right now, sir?

The state of the nation is explosive.

Okay.

Which is which is, you know, it's kind of a dangerous word to say in the world of cryptography and smart contracts.

But Yeah.

Right now, it's a controlled explosion.

Okay.

So hopefully, we can continue to, control it.

I I kinda see it as like a slow motion explosion.

Is it controlled explosion?

Is that a demolition?

Is that it?

Hopefully, not a demolition.

We're we're paving the roads with explosives.

Okay.

And so that that's what we're doing.

Hopefully, everything goes right.

But, you know, ether has been in this long drawn out bear market.

It's been hitting this descending line over and over and over again, and it finally broke through it, just on the 22nd July.

And there seems to have been just this massive pent up energy in the ETH price, and it seemed to have been kicked off like like some people have been saying by, like, the the defi mania, which got kicked off by comp.

So and so people have been saying this for a while.

The the comp token, new paradigm of tokens, that all of a sudden there's more of them.

All of a sudden there's liquidity mining.

All of a sudden there's yield farming.

All of a sudden people get it.

DeFi tokens go wild.

Our previous state of the nations were bullish and then and then exponential, and now it's explosive.

I think that these state of nations have been pretty damn accurate with describing what is coming.

Dude, dude, we'll get to that.

Because last last Tuesday, I feel like you called it, man.

I feel like you called it, but we'll get to that.

Alright.

So explosive.

That's what's happening.

But not explosive in a bad way.

Well, that's and leaving that on the table for for what is what is potentially explosive.

But right now, like values of a things are going up like really fast and it's so far it's a good thing.

We're we're successfully controlling the explosion, but you know, there's always risk.

There's always risk.

Yeah.

Absolutely.

And I think we'll get to the rest too.

But let's talk about, some of that explosive behavior.

Again, explosive, we think, in a good way.

But we brought on a special guest to tell us a little bit more about a DeFi asset that I think is, super unique, something we haven't seen before, and it's called YFI.

If you've been tuned into Bankless newsletter, even our podcast earlier this week, we talked about it.

And we brought on, Daryl Lau, who is a writer in the space.

He's a researcher.

And he wrote, I think the best article that I read this week on, YFI, he's also a I don't know if you'd call this, like, a core governor of the protocol.

Daryl, how's it going?

There there he is.

Great to great to see you.

Thanks for thanks for all your work in YFI.

You know what my first question is?

Is, what is this thing called?

Is it is it Giphy?

Is it Giphy?

Is it is it YFI?

Is it YFi?

Is it YFi?

Like, Wi Fi what are we what are we calling this thing?

So I personally calling it wifey.

Like, I've got it we've got it wifey to, like, 3 or 4 people right now on on calls.

Okay.

It's wifey then.

For the rest of the episode, David, we're going with wifey.

Alright.

I'm gonna have to relearn that.

Where where should we start with this, you know, David?

So so, like, should we just talk about, like, what it actually is?

How it came about?

Like, what the products are?

Yeah.

That that's kind of what I struggle and why I wanna bring Daryl on to to help us describe this.

Where is the beginning of this whole project?

Like, where does it start at?

Yep.

So I guess it started in early this year, and it they lawn Andre Condre, the developer, he launched this protocol where it's a yield aggregating aggregator protocol.

So, basically, what it does is that it chases the best yields across the IDX, Compound, and Aave.

So let's say let's say Compound is giving, like, about 10% APR, and Aave is doing, like, about 15% APR.

Obviously, you wanna move your funds over to AVE for that.

So what I what the iron did was that it automated the whole process.

I made it, a lot easier.

So you just have to put your money inside, and then you'll get you'll know that you'll get the best yield possible at that time.

So that that was the whole start of the whole project, I would say.

Then it worked it worked quite well.

I was it worked quite well.

Got about 8,000,000 AUM.

And then in, I think, March in March, there was this whole drama about Andre having holding the entire admin keys for everything.

So, like, quite a few people on Twitter were attacking him saying that he shouldn't have all this stuff.

And then he decided and at that time, he didn't he couldn't even afford the audits because they were quite pricey, I think.

It was, like, 50 k, 200 k at least.

So he decided to, like, decentralize the whole thing, give burn the admin keys away, and then from there, he stopped he stopped working on it because it was at the time the project, the whole product was complete.

Like, it had all the features you could ask for.

It automated rebalancing.

It had the best yields and had the most AUM across all the other projects that are doing the same thing.

So yeah.

Then in more recently in last month, he came back from self.

Like, he's he started to launch new products like, Wisewap, iLeverage, Itrade, all kinds of new DeFi products, all leveraging leveraging on top of existing building existing money that goes on that exists today.

Yep.

So, Daryl, Andre, some people are calling him the Satoshi of DeFi.

Who who is this guy?

What do we know about him?

Why are they calling him that?

So I guess the the comparisons with Satoshi of Satoshi and Andre right now is because that Andre decided to do a completely fair launch.

Like, he didn't he didn't mine any tokens for himself.

He didn't have any token allocated for a team for a team or any presales or what whatsoever.

He just decided, like, I'm gonna launch this protocol.

Everyone has same rules, and that's start, basically.

That's a start.

Like, anyone could if you read the post at the announcement, you would have been able to start mining immediately with by providing tokens, and there was nobody else that had a head start or hit from you except if they read it earlier.

So yeah.

It yeah.

Sorry.

Yeah.

So this is one one thing that we talk a lot about on on bank list where, like, the the compound token, like, went public in a way faster rate than what, like, a traditional company would have gone public on a public stock market.

Right?

So there's 1 or 2 rounds of funding and then there's liquidity mining.

And that liquidity mining is the way that instead of going public on the public stock market, it goes public on Ethereum via liquidity mining.

But what what Andre did with with the, YFi token is he just went straight public because he didn't have to worry about minting anything.

He didn't have to worry about securities issues.

He didn't have to worry about anything because he went straight to the liquidity mining first.

And so that's why this is so incredibly elegant.

He didn't meant any himself.

He just went straight for liquidity mining.

For instant, there was no instance of this token not ever being public.

It was public first, which is absolutely insane.

And he also didn't take any for himself.

So

He also didn't

take any.

How can they blame him?

And he said it was valueless, if I'm recalling correctly.

Yep.

So in his blog post, he put that the fair value for the token was 0 because there was no say whatsoever.

Just don't don't buy it.

Earn it.

That's what he said in his blog post.

Alright.

So you know what I think is, an interesting thing for our audience to see is, the thing that Andre called valueless.

Let's take a look at the, value of it.

So, Daryl, I so first of all, let me just say, in all the time I've been in crypto, I've never seen a chart that looks like this.

You know, we've seen some pretty crazy charts.

Right?

Yeah.

So when you were talking about the the announcement was made, was that on a Saturday?

Saturday, 15th.

It's on Saturday.

Yeah.

Okay.

So this value was That's when

I was camping.

That's when David was camping in the mountains.

He missed all of

it.

Yeah.

Never take vacation in, in DeFi.

That's is that what we're learning from this?

Yeah.

I would have been a richer man, but turns out Yeah.

Okay.

Alright.

So alright.

So, valueless token, he said you've got to earn it.

So people started earning it.

But what they did, of course, some of them, a subset of them, created a market for this.

And because Ethereum is a global permissionless system, they listed on exchanges like Uniswap and Balancer and that sort of thing.

Right?

So we start at a price of $34.

Okay?

And then wow.

Well, it actually started at $3.

$3.

Okay.

It actually started at $3.

Okay.

Alright.

So this is like the earliest CoinGecko reports is, $34, but this started at $3.

Alright.

So, and then and then we're traveling up here, and then look at this.

Like, this is just crazy.

Crazy.

Right?

So we top out at least locally 1 week later at $45100.

So if you're saying $3, right, we're talking over in a 1000% gain in 7 days?

Yep.

Okay.

Like, if you showed this chart to anyone outside of, like, crypto, they'd be like, okay.

That's an that's a scam.

What's the scam?

So let me ask you, Darryl.

What is the scam here?

Is there a scam?

I guess, basically, like, a lot of people are talking about how the token is complete was considered cheap comparative to the total value locked.

So the whole point the whole theory is that the any token any governance token should be able to command evaluation such that it's higher than the total value of the protocol.

Otherwise, it could be it otherwise, it could be easily manipulated or anything like that.

But at the same time, like, everybody wanted to get more Wi Fi, so they kept depositing into the protocol.

So prices kept going up higher and higher.

But, yeah, it reached about a 400,000,000 total value locked.

At the peak, around 450, 400,000,000.

So this is the total value locked before

you talked about the total value locked, if you couldn't go back to the price chart.

You said that you've never seen a crypto chart like this, and I actually, think that you're wrong.

I think you have seen 1 crypto chart like this before, and that's Bitcoin.

That's what exact this is this so it's

not Not in a week though.

Not in not in a week.

That's totally true.

In different time frames.

Because like what we're talking about is like the token value started at 0 because they didn't have a market for it.

And then over and so that's why this thing is so incredibly exceptional.

Like, Bitcoin Sure.

Also started at 0 because and that's why we're calling, Andre, like, the Satoshi of Ethereum because it started in the same way where you can only earn it.

There was no pre mine and that's why this token value started at 0.

Because and so, like, the pricing of of YFi has only come from people buying it on the secondary market and not any sort of, like, perceived valuation.

It's a great point.

Like, I do think, obviously, the time horizon, this is super compressed.

This is 7 days.

Bitcoin did not do that.

But at the same time, Bitcoin did not have permissionless markets to list on.

Right?

Like, it didn't it what how could it list?

It couldn't list it couldn't list anywhere.

There were no

It first got evaluated by, like, 2 pizzas.

Exactly.

But now we're in d DeFi world, and you list something like this without any founders, and immediately there's an exchange permission list.

Don't have to ask anybody.

Don't have to pay an exchange fee.

It's there.

That's probably why price discovery happens a lot quicker.

What do you think about that, Darrell?

Is that is that sort of the right analogy here?

Yeah.

I think it's it's perfectly fair.

Like, we started off with we started off with near zero valuation, and then you just pop up from there from free free market valuing it at so much higher than it should be.

And buying it up.

Yeah.

And you were saying it sort of traveled the, the the total value locked, right, which has become Yeah.

Come kind of a metric for, relative pricing between various DeFi tokens.

So explain this chart.

Okay?

We've got that Saturday.

Let's see.

The Saturday was the 20 what?

Let's see.

21st.

Saturday was 18th.

Right?

18th.

So,

on Friday, there was 9,000,000 locked.

Yep.

So that's that's the method of launch, right before the launch.

Okay.

And then by Saturday, we've got 62,000,000 locked.

And then a week later, we've got 330,000,000 locked.

You said this topped out near 400,000,000 locked.

What what's going on here?

Why all this the this fund all of these funds is, you know, starting to pour into the the YFI protocol?

So I guess at the start very start of the YFI mining, like, when you're trading at around 20 to $50, the APR you would get for it was about 500%, at least.

So areas of the areas of the piling in and started buying up wife buying up to get the in order to get some of the returns, which made the price go up even higher, and the returns are going up even higher.

So at one point, it was, well, 2,000 percent APR at the very like, 1st or second day.

So, like, when you saw the large price, the large price increased from 50 to 1,000 something, it was about 1200 2000 percent APRs.

So that I think if you you break that down break that number down, it's about 5% a day, if I'm if I'm not mistaken.

Yeah.