Delphi Office Hours Call (July 27th, 2022)

Below is the full recording and transcript of the Office Hours call our team did on Wednesday July 27th, 2022.

• Overview (00:35)
• Macro (01:31)
• Gaming Thesis (07:28)
• PoW vs PoS (22:33)
• Lido (27:45)
• Lockdrop (31:30)
• Q&A (36:01)
  • Does The Merge signify the beginning of the end of Proof of Work? (36:01)
  • Is Ethereum governance closer to anarchy, democracy, or plutocracy?(42:39)
  • Can Aptos & Sui real threats to Solana? (52:43)
  • Will on-chain undercollateralised lending ever be possible? (59:06)

Transcript

00:35 • Nick 

All right, GM everybody. Thanks for tuning in. This is Delphi Pro’s Office Hours, the date is July 27 2022. We’ve got quite a lineup ready to go for you. We’ll be talking about macro, of course. We’re going to talk a little bit about our most recent piece around gaming, our thesis going forward. Really excited to dig into that. We’ll talk about some research around Proof of Work versus Proof of Stake. What’s happening with Lido and its treasury, from our DAO digest expert, Aaron, and then we’ll go over something that we’ve published in the past, our model around lockdrops, and what to be taking away from that and where innovation might happen going forward. Of course, we want to get the going Q&A in the chat. So please, feel free to jump into the Zoom chat and just ask away. We got some questions ahead of time, of course, and we’ll try our best to answer all those towards the end. But with that, we’re going to throw things over to our macro expert, Jason. Everyone is a macro expert these days. What are you paying attention to?

01:39 • Jason  

Thanks, Nick. Yeah, I wouldn’t consider myself a macro expert, but I’ll give you my best take on what’s going on here. Like you said, everybody’s turning into a macro expert today and the last several weeks and months. I mean, it’s kind of to be expected, right? It’s the big narrative that’s driving prices and markets across all asset classes right now. If you think into crypto right, specifically, everybody becomes an expert on NFTs when NFTs are hot in the bull cycle or when the L1 narrative is hot, everybody focuses on L1s and comes out with their own thesis or narrative around what’s going on. So it’s normal human behavior to focus on the thing that’s front and center and driving prices. What’s the narrative like right now? We had the CPI numbers come in a couple of weeks ago, which were worse and worse than expected, worse on all analysts survey expectations and estimates as well. And then that kind of started bringing in more talks of recession fears. You can see in the chart here, an increase in recession headlines across different media outlets as the Fed continues its hawkish stance in its fight against high inflation at the moment. So what does that mean today, right? Today is a pretty big day for macro markets, you have the FOMC meeting and result of that meeting today at two o’clock. We get the actual numbers, whether or not they’re going to increase its 75 basis points or increase the federal funds rate 75 basis points, which is what the market is highly expecting right now. Or if there is like that outsize chance that they act more aggressively after the hotter than expected prints from  a couple of weeks ago. An interesting thing to note here is that I’m sure many people are aware, but if you aren’t, we had that White House statement on their website where they kind of are playing down the GDP numbers, right? They’re saying: Oh, historically, two negative quarters of GDP growth or two quarters of GDP contraction, has signaled the recession. But that’s not the case here because they look at a holistic view from the NBER, which kind of looks at a few different factors, including the labor market, manufacturing things and things like that. So they’re saying that when you look at the holistic view, a recession isn’t apparent or isn’t near. So that kind of begs the question, right? What’s the motivation for coming out to do that? Are they front running negative numbers or poor numbers that come out tomorrow in terms of GDP results for Q2? Are they trying to ease the market into those bad numbers? But on the flip side to that, if they’re playing down fears of recession and saying a recession isn’t likely and they don’t expect a recession to happen. It kind of removes justification for the Fed pivot. So if the labor market and everything is strong, there’s no need for the Fed to stop their course of action. It theoretically gives them more room to fight inflation. So it’s a double edged sword. I’m not exactly sure what their game plan is with this one. But I guess we’ll find out. So if we go to the next slide, you can see Bitcoin in relation to what’s going on. This is a range that we drew after the June liquidation event. And we were like, after a huge liquidation cascade like this across all markets, and specifically crypto markets, we had the CPI numbers back in June, which is when people started getting really concerned about it when it came in hotter than expected at 8.6%. And then you had 3AC blow up, you had all of the contagion in the wake of that as well. But usually, when you get these big liquidation events, price isn’t going to continue downward or V reversal in the opposite direction. It typically takes time for a consolidation phase to play out as buyers and sellers jockey for position. And the aftermath of such a violent move plays out, right. And it’s kind of done exactly that. It went to the top end of the range after sweeping all those prior, midpoint tests. And now it’s kind of meandering on significantly low volume into FOMC today. All eyes are on the FOMC. What’s Jerome going to say at the meeting? How aggressive are they going to be with their interest rates? And what questions are people going to ask him? If I was there, I would certainly ask him what he thinks about the White House’s statement. Because when you look at it, the largest part of GDP is consumption. And consumption is both business spending, consumer spending and all those things. If GDP is contracting, obviously, that’s contracting as well, generally speaking. Those would be questions I would like to ask him if I was there, and I’m hoping somebody does as well. But we are writing a report on our take on the White House’s statement. So stay tuned for that. That should be coming out later this week, hopefully, tomorrow. Back to you, Nick.

07:20 • Nick  

Awesome. Thanks for that Jason. Yeah, it’d be an exciting afternoon here. I definitely look forward to reading what you have next on that. Next up, we have Yan here to talk a little bit about gaming, we just put out this thesis on where our thoughts are collectively around gaming. What were some key takeaways or how has your thinking evolved? We’ve come known for some gaming investments and consulting, what is this new thesis about? How has your thinking evolved here?

07:55 • Yan  

Appreciate the intro. This is a really lengthy post. So I recommend everyone to go give it a read to get as much out of it as possible. But we thought it was really useful to kind of get all our thoughts on paper an