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Anndy: Welcome to our ASK ME ANYTHING (AMA) segment. My name is Anndy Lian, book author, blockchain advocate and currently is the Advisory Board Member of Hyundai DAC. Most people know me by the work I do for the government. Today at Blockcast.cc, we have Roy Li, he is a pioneer in this space. He will be here with me to have a chat about DEFI.
Before we began, please stay on the channel. At the end of this AMA, we will open for questions. We will reward 10 TRX for the questions picked. Each person will only be picked once.
Roy: Hello Anndy, Hello everyone.
Anndy: Hi Roy, nice meeting you online. I believe we have brushed shoulders a number of times in South Korea and China. I have heard so much about you but did not have a chance to speak to you properly. We shall do it today over “Defi”.
Can I request that you give us an introduction of yourself?
Roy: Nice meet you too, my name is Roy Li, I am the founder of Ruffchain – a public chain designed for IoT, since the main usage for IoT will be a settlement between things (hopefully in a few years), I studied quite hard in Defi as this is the infrastructure for all public chains
Anndy: Defi has been the buzz word. Many of the Community members want to know more about it. Tell us in the simplest manner, what is Defi, staking, mining, yield farming and all. Please in the simplest manner. Tell us in the simplest manner, what is Defi, staking, mining, yield farming and all. Please in the simplest manner.
Roy: Defi is short for decentralized finance, it’s like centralized finance, there r yields like in borrowing/lending, exchange, investments. Yield is the basic of definance, the foundation is the time/yield exchange, you either buy time or buy liability within a ratio. If there is an arbitrage in ratio difference borrow/lend or collateral interest & investment income, actions might be taken. staking & mining is the incentive just like bitcoin & ether to reward the workers such as liquidity providers. And the ecosystem, hopefully.
Anndy: I hope so too. Good insights. This question looks simple but it takes a lot of knowledge to reply in a simplified manner.
Next question. Defi is the future finance, what do you think of this statement?
Roy: Defi is definitely future of finance, remember how hard it is to sign all the paperwork and have due diligence to apply for a line of credit? I remember when I applied for a mortgage the approval and appraisal cost quite some money even to my bank.
Defi is trustless, owned by the governance of consensus, that may wind up as a super-efficient way of financing, 100% transparency guaranteed if possible. I think 90% of the financing will be defi in visible future.
Anndy: Next question, could be tricky in my opinion. The majority of popular Defi protocols have some form of centralized control that enables specific ‘administrator’ addresses to intervene in powerful ways. Do you think this trend will continue or will it go total decentralised?
Roy: the admin access is limited from what I know, they can update fees, strategies or so, but can’t move users’ assets, and governance will limit the access, even more, votes will determine whether u should apply a tariff just like president Trump.
In the early stage, we lack a lot of fundamental rules & tools. Admin key is required in some cases, like I accidentally lost roughly 1 mil USD yesterday on harvest.finance upon an investment strategy to cream, without admin key, cream & harvest won’t be able to help me. Finally, the funds got recovered, awesome job on both teams!
Anndy: President Trump as an example. I guess Defi governance got to be improved. Glad you got your funds back. Defi coins on Cefi exchange vs decentralised exchanges? What is the gameplay? Are they the same? Does it mean that is it safer on Cefi?
Roy: Well, it is not my problem, the code was not audited properly but there are bugs. Cefi exchange is good for order book strategies since the fee is low, while defi is more of AMM gameplay, they will both remain major support roles in crypto market.
Anndy: That is risky. Trust me. I do not trust the centralised systems that wrapped up us decentralised. Not sure about Cream, but I know Machi is promoting it strongly.
Roy: Cefi is definitely not safer.
Anndy: Tell us more about it.
Roy: There is always a price for innovation, I would like to take that risk.
Anndy: We, all are :>
Roy: Cefi exchange sites got stolen all the time, almost every year there is a major event.
Anndy: I can name many of them in Asia especially. You have to enlighten us on this. Some Defi project is obviously scams, why are they still in the market? Why are people still buying them? Why are exchanges listing them too?
Roy: In real-world scams are everywhere, u can’t eliminate them, can’t prevent people from buying them, especially at early stage, when you have no idea whether its a scam or not. I still remember when Vitalik was asking for 31,000 BTC for his ICO, like several million USD back then, many people thought he was crazy. When ETH was $0.79 back then, there were articles warning Eth might have huge risk but how can you tell ETH is not one of the scams?
Sometimes we have to tolerate obvious scams to find out the real gold. Chainlink, DoT, you might have no clue what happened last 3 years, till u realized “oh, I remember that back in 2017”, the market will adjust itself. BTW, if a scam is tooooooo obvious, you should be able to identify.
Anndy: Many think that they can run before the scam got caught. People like to gamble LOL.
When there is demand, there is supply I guess. Market forces take over. No one is a saint here in the name of innovation. Cefi needs to catch up the times, else someone else would. Defi promises high interest, in my opinion, it has a very high risk. Do you think Defi is sustainable?
Roy: In 2012, I had no clue if bitcoin was sustainable, I was like, what if people stop paying $50 each for that shit coin? Still, we have bitcoins mined every day, who’s buying them? Sustainable can be tricky, I don’t know where the money comes from, but I do know miners are not providing any real value, it’s just more and more people join this consensus game.
Defi however, is like cefi, you can compare to cefi but are cefi exchange sustainable? Apparently not if people stop trading. I wouldn’t say 100% sustainable, but as long as the market holds 100B volume every day ( from CMC, the number might be exaggerated), as long as the market holds enormous volume every day, Defi can be sustainable.
Anndy: This brings to the next question I have in mind now. Do you then think that liquidity will be an issue after waves of scam-like dumps and pumps? Who is paying the bills? Someone got to lose in this Defi game, isn’t it?
Roy: As long as the net value is positive, I am an optimist in Defi. People trade every day, the trading fees will eventually cover the bubble in the long run. We do have bubbles right now, but we have bubbles in the stock market, bonds, our currency so bubbles are fine, we are using bubble paper money to pay for possibly fewer bubbles.
Anndy: Bubbles back by real assets vs Bubbles backed by air is very different but we will leave this as it is or talk later in a private discussion. What are some of the risks, challenges and opportunities ahead for investors and projects? What should retail investors in this community look out for if they want to also “invest”? And most importantly, how to make money?
Roy: First, always hit for the long run, you know the gas fee is no kidding, if u switch boats rapidly, you will lose money since the APY might drop dramatically in a short time. Second, try to avoid impermanent loss, don’t mine with shitcoin/ ETH pair or similar. I saw APY dropped from 1000%+ to 10% in 1 day if u withdraw, ur gas fee can be 100+ USD. Impermanent loss is the major problem for most users aiming for high APY, I spend most mining on projects like curve, swerve, or so low return, low risk. Relatively low return, still 30%+ APY, in the promotional period, swerve used to be 300%+ almost 0 risks.
Risk is fine, as long as risk can be calculated. I know a few people do like ETH/USDC and do futures at the main time, and some people collateralize ETH for DAI and use DAI to mine stuff.
Anndy: What is the definition of the long run? And a short time? You know, in crypto 1 hour is considered a long time to some lol And please share why is there “no risk” for some platform?
Roy: Swerve is like curve, its like exchange between stable coins, the revenue comes from ppl who want to switch between stable coins, so if you deposit stable coin pairs, your impermanent loss can be very little, a couple of days yield will cover that easily. That is my first point, try to master risk/return ratio, if you can’t control that, don’t invest.
Another point is to find where the alpha chances are, uniswap is definitely an alpha chance, the idea is how to maximize your benefit in UNI, mining might not be cool since the APY is relatively low comparing to impermanent loss, the total liquidity deposits are huge on all 4 pools. However, UNI/ ETH pair generate 600K fees per day, which means if you add liquidity in that asset, you get 0.25% returns per day.
The downside? UNI price might drop significantly, but that is not going to happen on the first day, if your UNI cost is relatively low, you are good. If UNI price surge by a lot, you get more ETH, it’s like selling your UNI eventually, you gain what you initially want plus daily yield from that pool, better than mining. Especially there is enough dump on day 1 since over 12k users have 400 each, buy them, pair with ETH and add liquidity on day 1, that is the alpha chance.
Anndy: Indeed the daily yield + is very attractive. HIGH RISK, HIGH RETURNS. OR NO RETURNS. Seems to the underlying message. Last but not least, share with us an inspiring quote.
Roy: I thought about this question many times, it happened like I have strict discipline, I take no action without calculation. My experience might not be that inspiring. I don’t gamble, I do arbitrage. Even if I gamble, I never play against odds.
People worship Elon musk or steve jobs, who think outside of the box, I do think outside of the box, but I prefer boundaries, I know my limit, even if “sky is the limit”, there is a limit, you can’t gamble without limit. I don’t recommend being risk seeker or hater, I recommend you calculate your risk.
Anndy: Calculated risk and knowing one’s limit comes with experiences.
It is always good to have chats with experts like Roy. He is somewhat a neutral party like me to an AMA like this. We are totally neutral; not promoting for any projects right now. Just want to share our knowledge with all of you. This is what Asia Blockchain Community is all about.
Shall we open the floor for 5 questions first? You post your questions here. Roy will choose 5 of them to answer. You have 5 mins to post your questions now.
Roy: Im ready, shoot me.
(Audience starting asking about Ruff Chain)
Ruffchain is an IoT public chain, Internet of Things, like maybe one day you spend $100 USDT and get a non-fungible token, this will grant you 1-day access to a car at the airport, without signing the paper, registration, credit card and insurance etc.
Since this is more about Defi I will focus on Defi this time, if you like to know more about Ruffchain go to our site at ruffchain.com.
Shuja Hashmi: Hi Roy My questions are as follows: What holding Defi back today and can these barriers be overcome? Where do you see the future of Defi in 15-20 years from now?
Roy: OK, this is actually a good one. There are a few things holding Defi back now:
- Usability, like someone has mentioned it is too hard to understand, too hard to use it properly. There should be some easy tools giving you numbers more than APY, like health/risk factors, withdraw rate or so.
- High gas fees, not friendly to all users on Ethereum. However, most assets are on ether, it will be hard for other chains to build an ecosystem, we have to live with the high gas fee for now until we figure out some cross-chain tech.
- Lack of innovation, copycats will get dumped for sure, innovation like Synthetix is much better than sushi (copycat).
Mahathi: Now Defi is growing all over. What’s your view on Binance bridging the CeFi with Defi ?
Roy: Now defi and cefi are doing similar things (money-related), but when NFT (non-fungible token) gets popular, many things will interact with Defi not cefi, so cefi will be limited to a subset of defi in utilities. Binance will be good on order book trading, but that’s it.
Venkatz K: Recent DeFi Trends Creates a Massive turn towards crypto But The growth is not stable some Projects Launching then it peaks in a short time and dumps to none and exits. A lot of Examples we see Sushi Founder Exit. HotDog Exit with 4k$ to 0$. EOS Defi Emeraldmine(EMD) Exit from Scam. Peoples also wanted to gain profit quickly and massively so they don’t read about the projects and team background. Also loss lot.
Are these facts healthy for DEFI? How to avoid Scam Projects? DeFi will survive with Investors Confidence?
Roy: I mentioned before copycats are not growing organically, don’t invest on copycats. However, yearn clone is an exception as aggregators may be different if they use different strategies. Therefore, you need to find the entity behind a project. Compound, AAVE, cream are banking, Curve, swerve are stable coin exchange(close to real-world foreign exchange as the rate is not volatile), uniswap, balancer are volatile exchange.
As long as you understand the entity, you will know what you invest for, e.g if you buy sushi you are betting on sushi take significant market share from uniswap & balancer, Sushi might have a chance, but how is that possible when rewards dry up? by risk calculation, sushi has high risk comparing to its price, I might have bought sushi since normally the market runner-up will take 10-20% market share, but not at a high price.
Alpha Veer: Do audited platforms n protocols guarantee ppls investment ?
Roy: Every time a new pool or a new strategy is released, another audit is a must. Don’t just look at seals, you should ask if they have audit up to date, you may contact the audit company.
Venkatz K: Ruffchain comes under Alpha chance? how could we find a project comes under alpha chance and safe to go with that?
Roy: Ruffchain is listed on Huobi, as a public chain, our alpha chances will be right next to defi->filecoin type -> NFT. Non-fungible tokens are the prerequisite for Ruffchain as well as defi, the alpha chance is more like finding the trend.
Yesterday I lost 2276 ETH while withdrawing ETH using harvest’s fWETH, fWETH burnt but ETH not received, some other users got that bug too. However, I managed to stay cool and found out the panic is spreading, farm price dropped to $90 (not an alpha chance since risk is still high), fWETH can’t convert back to WETH temporarily so ppl try to sell fWETH , which becomes less than 1 WETH, I bought all the fWETH below 1, and once everything got recovered, I exit with 1.005+ each fWETH. That is the alpha chance.
Venkatz K: Super cool, Good One, most of the losses happens due to panic selling.
Shuja Hashmi: Nice And thank You for your time..learning a lot from this session.
LALA: What is next after yield farming?
Roy: Defi is at very early stage, if you even read the book about Wall street history, you will find out in 200 years human beings stack many tools on finance to create an enormous semi-working system today. And that system needs to get updated every 10 years whenever there is a major financial crisis, Defi is no different.
In March 12th, Makerdao experienced gas attack by ppl using 0 DAI to buy out ETH with higher gas fees, compound experienced loss in liquidity algorithm back when ETH price declines rapidly. We are fixing the problems, many projects state like yearn (beta project, use at your own risk).
We probably need years to make our defi systems bulletproof, and try to stack more tools, insurance, for example, default swap products (sounds familiar if you know what happened in 2008), syntehtix introduced another idea of DIY- asset, which is good, you can bet on a price change or other related factors.
Many more will come out and spark, I just can’t wait.
Anndy: Same here man. Thank you, Roy for all the sharing today!
Roy: Thank you!
Jenny: Good and Interesting Session learning session, love that and thank you, Roy.
Roy: My pleasure.