Ethereal Summit 2021 Day2 more DeFi (2021 May)

Day 2 is more focused in DeFi. Topics are Ethereum as the network which holds the most DeFi projects, Binance, Galaxy which has closed large acquisition recently and ConsenSys with Joe Lubin.
From today’s presentation, it is easily imagined that market is still in early stage with more upcoming solution. CEO of Galaxy also shared his view on upcoming flourish future in DeFi space in next couple years.

Ethereum Update

Vitalik and Aya Miyaguchi from Ethereum foundation talked on ETH 2.0 update.

ETH 2.0
Vitalik told that merger of execution chain and consensus chain is likely to take place toward end of this year or beginning of next year. He pointed out there are lots of wizardly changes happening seamlessly so that existing users would not need to relocate data and it does not impact UX.

Task for Ethereum Foundation
Lacking knowhow of asset allocation: Considering rapid growth of Ethereum network, Ethereum foundation lacks manpower according to Aya at foundation. She said that they will need to appoint one by one to where needed such as communication to outside of foundation for developing apps. Vitalik may feel the need of some sort of intervention instead of leaving it to its organic growth.
Decentralized Self Governance: Vitalik told that the key to growth in future is decentralized self-governance structure, which is also basis of blockchain concept.

Binance update

Binance session was split to global team led by CZ and America team led by newly appointed Brian Brooks, ex OCC, Office of the Comptroller of the Currency, head. Split session might have target to emphasize image of American operation in independent stage to counter the speculation of Chinese influence to its governance due to CZ’s blood origin. Binance America is currently targeting to gain license from every State (at 41 out 50 now) under new CEO.

Binance as tool maker
CZ called himself a tool maker. So Binance will stay that way according to him. Apps built on Ethereum such as Metamask are more for experienced customer. Instead Binance is built for everyone including lower literacy customers. In that point, he is launching NFT marketplace so that all the transaction can be done in one place through their central exchange instead of new apps been installed.

NFT as entry point
CZ talked NFT as new entry point for new customers such like Bitcoin. NFT also opens untapped customer to those existing artists.

Strength of Binance
By far, Binance is the biggest platformin terms of trading amount, daily active user and number of app downloaded. Binance will continue to keep its position by investing in its customer support to shorten response timeline to 2~3 hours to max 1 day. Binance continues to emphasize beginner friendly platform.

BNB token
BNB token had aan image of discount token previously. That image is slowly changing due to more apps built on Binance chain. Rapid growth in Ethereum surpassed its capacity and its overflow is coming to Binance according to CZ.

Copycat
Binance is often talked as copycat of Ethereum in their new business model to name of it. CZ talked that best way to prevent been copied is constant improvement, which would lead industry growth. He also stated that human as species tend to copy something better than one, which should not be a problem.

Binance America
Binance America aims to improve relationship with authority by hiring new CEO Brian Brooks who is ex head of OCC. Brian’s mission for next 6 months is to gain license in every State and hire necessary number of task force to support its growth. He also commented on possibility of listing to equity exchange as difficult for next 2 years with shorthanded reason. They intend to make 70~100 hiring as soon as possible, especially in compliance and project managing positions.

Galaxy update

CEO Novogratz told that the best outcome from recent acquisition was to gain numbers of blockchain engineers. He intends to be actively involved in developing apps as a major player in the industry instead of being an investor, backed up by its capital from TradFi.

Acquisition of BitGo
Galaxy has become 2nd largest custody by acquiring BitGo, which opened more connections to investors around world. Mr. Novogratz said that gaining access to 60+ blockchain engineers was the biggest take from this acquisition. Galaxy will be core developer in the industry instead of an investor and will bridge TradFi and the industry.

DeFi

DeFi apps developers are keen to gain capital from TradFi. In result, some of app developers are reshaping its structure from decentralized form to centralized ones. Here we are going to touch base of the risk along this transform.

Expansion in DeFi eco system
Panelists have emphasized the role of DeFi as a bridge between those who didn’t have access to current financial system in emerging countries and TradFi, by offering services through click on smartphones.

AML risk
Compound and AAVE which offers yield firming said that the institutional investors are showing more and more interest in DeFi project. To fulfill their needs, Compound and AAVE have shifted to more centralized business structure so that customers will have less risk of AML.

Transaction fee
Rise of transaction fee in Ethereum network is causing spill over to Binance Smart Chain and Polygon. AAVE said they are activating Polygon chain along the market trend.

Impact of TradFi investors joining DeFi

TradFi is often said to be in capital glut. Blockchain industry can be eyed as better yield candidate at moment. There is already impact of capital inflow from TradFi to blockchain industry.

Talents from TradFi
Study of blockchain technology in TradFi has accelerated in past couple months. According to Novogratz, those who purchased their first bitcoin in recent weeks are talking of DeFi today. This transition is expected to accelerate the industry growth.

Price impact on crypto currency
Novogratz at Galaxy expects ETH at $5000 on back of increasing demand from institutional investors. He also commented that recent hype/bubble was largely due to crypto currency ranked up from investable to investable, which is not sustainable. He indicated he has taken profit by part.

Watch out points when institutional investors are to participate DeFi
Efficiency in transaction: TradFi investors have high interest in ESG. Although Ethereum is said to consume less energy along transition from Proof of Work to Proof of Stake, there will be demand for more efficiency in transaction such as electricity usage.
Key man risk: Current blockchain network requires proprietary programming language which makes it difficult to sustain human resource.
Standardization: TradFi investors would seek for some sort of market standard in case of any incidents.