The Cryptonomist interviewed Camila Russo, founder of The Defiant, to talk about the DeFi ecosystem, Ethereum 2.0, Maker DAO and many other topics.
What motivated you to create your own blog, leaving the position at Bloomberg?
I left Bloomberg in January of 2019 to finish my book on the history of Ethereum in the best way I could, and also because I felt eight years was enough time to spend at one place. I thought I had completed that phase and was looking forward to starting something new, but I didn’t leave with the idea of starting The Defiant. As I continued to write and research my book, I was excited to see the innovation and growth in the DeFi ecosystem. I noticed a lack of quality information sources covering the space and saw that as an opportunity, given my skills as a financial journalist, who is also knowledgeable about crypto and Ethereum. I decided to start a DeFi newsletter, and published the first issue five days after turning in the first draft of The Infinite Machine, in June last year.
Decentralized finance began on Ethereum, what do you think of projects on other blockchains?
I have yet to see meaningful traction for financial applications on other, non-Ethereum blockchains. Ethereum has a great first-mover advantage, with the biggest developer community out there, even beating Bitcoin’s. I see great technical promise on other blockchains, and we’ll see whether that’s enough to attract builders and users, but it’s not happening yet.
What is your prediction regarding the transition from PoW to PoS on Ethereum?
I believe the transition from PoW to PoS will be successful. ETH 2 already has client diversity, thousands of validators and over 1 million ETH staked. A successful PoS chain will be a big step forward as it will give way to a more environmentally-friendly way to secure distributed networks, and it will lower entry barriers for node operators, as mining equipment and infrastructure won’t be required.
What do you think is the best DeFi project on Ethereum?
I don’t think it’s possible to pick one single “best” project in DeFi. Right now, I think it’s a fact that Maker DAO is the most important project in the space as it holds about half of total value locked in DeFi platforms, accounts for most of loans outstanding, and issues the DAI stablecoin, which is used as the main means of exchange in the ecosystem. I think there are many other interesting and innovative projects, doing things that just couldn’t be achieved in traditional finance; a few examples are Pool Together, Sablier, TokenSets, IdleFinance, rDai and flash loans. And I wouldn’t leave out interest-generating tokens, such as cDai, aDai, iDai, which I think can very easily bring huge value to mainstream users.
Will the problems and attacks that DeFi has suffered in the last period make the industry less attractive for investors?
DeFi is very young; protocols in the ecosystem are a couple of years old at most, and they’re dealing with untested code and tech. It’s a risky space and should be treated as such by users. The latest attacks and hacks on DeFi protocols are a reminder of this fact and will likely help make the space stronger as the community works to prevent similar events in the future, with better code and safety procedures.
What do you think about using a centralized stablecoin to create a decentralized one?
If you’re referring to trusted collateral for DAI, I believe there are tradeoffs. I understand the position of purists who say a truly decentralized stablecoin shouldn’t rely on assets that can be censored. Still, I also believe the Maker DAO system is taking measures so that in the future, no single asset poses an outsized risk to the system. If they achieve this, the liquidity and collateral diversity provided by trusted assets may be worth the risk that one of these assets gets censored.
DeFi is very dependent on the DAI stablecoin and Maker, is this an advantage or a disadvatage for the industry?
It’s risky to rely on one project. Maker DAO’s dominance has gradually declined, which shows the ecosystem is becoming healthier. Greater diversity is best for users, as it provides more choice, and the competition should make the protocols and applications better.
What do you think about privacy coins and blockchains that are integrating protocols to guarantee privacy?
I think privacy will be key to drive adoption. Most people aren’t comfortable with the fact that their whole transaction history and holdings can become known to anyone as soon as their name is linked to an address, and for many institutions, that becomes a deal breaker. For permissionless blockchains to appeal to corporations and financial institutions, privacy solutions will have to be implemented.
How do you feel about AMM (Automated Market Maker) solutions, will they revolutionize the system?
I think AMMs have already revolutionized crypto; they’ve been key in the growth and development of DeFi by providing an easy, quick and trustless way to trade any two tokens.