Delphi Office Hours Call (August 4th, 2022)

Below is the full recording and transcript of the Office Hours call our team did on Thursday August 4th, 2022.

• Overview (00:35)
• Macro (01:11)
• Solana Wallet Hack (03:37)
• Bridges: Centralised or Decentralised? (06:31)
• Tradfi product market fit in DeFi? (17:00)
• Effect of KYC on DeFi + Cexs? (29:12)
• Is a no-counterparty trading system possible? (33:33)
• Q&A (37:55)
  • Under-collaterlized lending, how will it scale in crypto? (37:55)
  • Is the recent Synthetix growth organic? (44:18)
  • What’s stopping Osmosis implementing interchain security? (45:00)

Transcript

00:35 • Nick  

All right, first, thanks for bearing with us there. Welcome to Delphi Pro’s Office Hours, Today is August 4. We’ve got a slightly changed lineup, a new format for you. We’re going to start with our macro teams read on the situation. And then we’re going to go into more of a free flowing Q&A format and talk about different tweets of the week, things that got us excited. And towards the end, we’ll talk a little bit about your specific Q&A questions. As always, you can just go straight into the chat and ask us questions there. And we’ll try our best to answer it towards the end. So with that, I want to turn things over to the macro team. Macro guys, what’s happening? What’s the latest there? 

01:21 • Kevin  

Thanks, Nick. One of the things we’re about to come out with a report on this, it goes into more depth, but one of the things we’ve been diving pretty deep into is this concept of global liquidity. Because the more and more we’ve researched and dug into we know what’s really driving global asset prices. From this standpoint the world of liquidity becomes more and more important. And so when people think of the term liquidity, oftentimes you think of market liquidity, market depth, your ability to transact with low transaction costs and be able to basically buy and sell assets and securities relatively easily. What we’re talking about here, when you say global liquidity is more around funding liquidity and that looks at aggregate savings and the private sector’s access to finance with savings and credit and why that’s really important. We’ve actually seen similar dynamics kind of play out in the crypto space. It can be very procyclical and very reflexive in that when you have periods like we’ve seen this year, where you have asset prices falling and risk appetite certainly curbed and investors are becoming more risk averse, it can have a really reflexive impact on the ability for the private sector to not only finance new debts, but more broadly, finance existing debts or rollover debt. And because we’re facing such large worldwide debt burdens, this concept of being able to refinance and rollover debt becomes more and more important, especially during times like this. What we’ve got here in this chart is one portion of what we call global liquidity looking at global M2 money supply and year-over-year change in that versus Bitcoin. Just to highlight how again, the crypto market is not siloed from current macro conditions and the expansion of global liquidity probably makes crypto one of the most leveraged bets on that expansion. We’re going into some more detail in a report we’re about to come out with. But it’s something we definitely wanted to highlight because it is probably the largest determining factor for if and when we get a true sustainable rebound within risk assets and more importantly, within the crypto market itself.

03:31 • Nick  

Thanks for that, Kevin. Yeah, I’m really excited to see what the report reveals in a couple days here. But with that said, we obviously have seen some interesting things going on with Solana. I know we have our local Solana expert in the house here. I guess I want to ask Alex, what exactly happened? What does this mean for developers? Can you give us a quick debrief on what’s going on with Solana these days?

03:59 • Alex  

Thank you, Nick. Yes. Hi, everyone. So as you may have seen from my tweet thread yesterday, slightly after 7pm Eastern Time, a hack started to happen. And it ramped up pretty quickly. At one point the hacker was withdrawing about 1000 SOL per minute or about $39,000 to $40,000 per minute. Within a couple hours, it slowed down to about one SOL per minute. We are not sure of the exact cause. There have been some, I think premature, finger pointing going on by the Solana Foundation and others claiming that it was Slope wallet. However, auditing firms Otter Security and SlowMist have recently come out in the last 10 hours saying that Slope wallet only accounts for 15% of the compromised wallets. To give you some hard numbers, there are about 9.2k people who had their wallets drained. And about 15% of those can be traced directly back to this Slope wallet issue. So the other 85% of the ‘reason’ is still TBD. In terms of the total amount for crypto, this was not a large hack, slightly over $4 million dollars’ worth of assets were hacked. So compared to Nomad, which I think we’re going to talk about as well, this is maybe 2,5% of Nomad’s size, and a relatively small hack. What are some action steps that people can take? One, move all of your assets to a new wallet with a new private key and a new seed phrase. We don’t know exactly how this was done, but the hardware wallet seemed to be safe. So if you have a ledger use that, if you don’t have a ledger, make a paper wallet. If you don’t have a paper wallet, you can create a multisig wallet with Squads. Squads is a terrific company, we have invested into them on the venture side. The product seems to be very safe. So that is the TL;DR. We will keep you updated as new things happen.

06:28 • Nick  

Awesome, thanks for that Alex. Really, really helpful comment. So another big exploit this week has been around Nomad, which is a trustless bridge protocol. We saw some interesting takes going down this week and there’s been a lot of bad takes around it. “This is why trustless bridges are better”. Well, the trust model wasn’t compromised. “This is why multi chain = bad”. There was nothing bridge-specific about the exploit, according to Daniel here. And also 3: “The Nomad team = bad”.