Introduction

Kane Warrick, founder of Synthetix, talks about the latest V3 launch and what's next for Synthetix. He also discusses his break from the ecosystem and how he got into the crypto space.

Kane's Background

• Kane started in the crypto space in 2014 with Blue Shift, a business that allowed people to convert fiat into digital currency.

• He was interested in Bitcoin as a solution to payment problems in online commerce.

• Crypto has evolved from digital currency and payments to store of value.

D5 Summer

• D5 Summer was not as big as people think; it was just a few Telegram groups discussing new yield farms.

Synthetix V3 Launch

Kane talks about the new features of Synthetix V3 and why they decided to launch on Layer 2.

New Features

• The main feature of V3 is binary options trading.

• There are also new synthetic assets such as inverse tokens and range tokens.

• The platform now supports multiple collateral types beyond ETH.

Layer 2 Launch

• They launched on Optimism because it had the best user experience and security tradeoff.

• They burned all bridges behind them because they believe Layer 2 is the future of Ethereum scaling.

Future of Defi

Kane discusses what he thinks will be the next big thing in Defi and how it will impact traditional finance.

Next Big Thing

• He believes that the next big thing in Defi will be decentralized insurance.

• This will allow people to insure against smart contract failures and other risks.

Impact on Traditional Finance

• Decentralized finance has the potential to disrupt traditional finance by providing more accessible and transparent financial services.

• However, it will take time for Defi to reach mainstream adoption.

FTX and Three Arrows Capital Drama

Kane talks about the drama between FTX and Three Arrows Capital and how it relates to Synthetix.

Drama

• There was a dispute between FTX and Three Arrows Capital over a large trade that caused FTX's insurance fund to be depleted.

• Synthetix was indirectly involved because they provide liquidity to FTX through their platform.

Lessons Learned

• The incident highlighted the importance of risk management in Defi.

• It also showed that even large players can make mistakes, so it's important to have contingency plans in place.

The Early Days of D5 Summer

In this section, the speaker talks about the early days of D5 summer and how it proved that smart contracts could do things like make money.

Initial Insular PVP Game Style

• The initial insular PVP game style in D5 summer was what proved that smart contracts could do things like make money.

• Smart contracts were doing things like making and losing money.

• It was a bit weird and self-contained but functional.

On the Cusp of End User Adoption

• In the middle of the boom, it felt like they were on the cusp of end user adoption.

• Somewhere along the way, adoption didn't really happen.

• Transactions got expensive during D5 summer.

Concerns About High Transaction Costs

• There was concern about high transaction costs during D5 summer.

• Synthetics had complex contracts back then, and deploying them on Ethereum was different than it is now.

• High transaction costs were always on their minds.

Ethereum Couldn't Handle Mass Adoption

In this section, the speaker talks about how Ethereum couldn't handle mass adoption due to too many interconnected systems and arbitrage-like transactions.

March 2020 Crash

• During the March 2020 crash, it became obvious that Ethereum couldn't handle the amount of activity on it.

• There were too many interconnected systems and arbitrage-like transactions to keep in sync when there are thousands of pots of money involved.

Transaction Costs Blow Up

• Transaction costs blew up during this time.

• It cost $300-$400 to get a transaction on chain.

• This made it impossible to support a million users on Ethereum.

Synthetics Community and Layer 2

In this section, the speaker talks about how the Synthetics community was concerned about high transaction costs and how they were one of the first applications to migrate to a layer 2 solution.

Concerns About High Transaction Costs

• The Synthetics community had concerns about high transaction costs as early as 2019.

• Transactions were too expensive to use, which impacted their adoption within the nascent DeFi community.

Migration to Layer 2 Solution

• Vitalik's promise that scaling was coming didn't materialize, so they decided to take matters into their own hands.

• Once solutions like optimism and uni peak demo popped up, Synthetics was ready to jump on them.

• They migrated to a layer 2 solution.

Migrating to Layer Two

In this section, the speaker talks about their decision to migrate to a layer two solution and how they burned the boats by going all in. They also discuss the value of being connected to early work on optimism and having a symbiotic relationship with those building the new network.

Going All In on Layer Two

• The speaker made a decision to lean into migrating to a layer two solution.

• They decided not to keep optionality open or hedge up, but instead go all in.

• The speaker compares this decision to burning the boats, similar to what they did with Ethereum.

Value of Early Work on Optimism

• Being connected to early work on optimism was invaluable.

• There was a symbiotic relationship between those working on complex smart contracts and those building the new network that would support them.

Defi's Next Leg Up

In this section, the speaker discusses where Defi is headed next and mentions that we may be in a position for "Defi Summer 2". They also reflect on how Defi as a whole didn't quite get there and wasn't able to provide solutions for people in a safe, transparent, non-custodial decentralized way.

Potential for "Defi Summer 2"

• The idea of "Defi Summer 2" has been floating around since 2019.

• Four years later, we may actually be in a position where it could happen.

Reflections on Defi's Progress

• Defi as a whole didn't quite get there and wasn't able to provide solutions for people in a safe, transparent, non-custodial decentralized way.

• Infrastructure providers and scaling solutions weren't ready for an influx of users which led criminals stealing everyone's money.

D5 Summer 2: The Real DeFi Summer

In this section, the speaker talks about the upcoming D5 summer and how it will be different from the last one. He discusses the importance of having a competitive marketplace and a range of solutions to meet user needs.

Infrastructure for DeFi Device Number Two

• Synthetics has released their V2 Perpetual Futures Trading contracts with the lowest fees of any decentralized purpose markets available anywhere outside of a centralized exchange.

• Synthetics perps are available to trade with up to 25x leverage on through two partner dapps quenter.io and dcentrex.com.

• The community intends to launch dozens of unique assets and is developing plans for trading incentives by the end of the month.

• The speaker thinks that having a genuine competitive marketplace is essential for being responsive to user needs.

Categories in DeFi

• Borrowing against crypto assets is one area that people want to be able to do in a bull market.

• Lending and borrowing was an area where infrastructure did well in D5 summer, but there was no capacity at that time to take on assets from other ecosystems or chains like Bitcoin.

• It's important to have solutions that protect users as much as possible when they engage in risky behavior like giving money to criminals.

• At that time, there wasn't enough capacity for taking on assets from other ecosystems or chains like Bitcoin.

Creating an Environment for Crypto Users

In this section, the speaker discusses how to create an environment where people understand the risks of crypto better and have easy access to solutions for common problems.

Providing Solutions for Common Problems

• There are only a few things that people want to do in crypto, such as lending, trading, perks and derivatives.

• Robust solutions need to be created for all these activities and made easily accessible.

• It's not possible to compete with traditional finance in terms of in-kind yield.

Trading Equities on Blockchain

In this section, the speaker talks about whether there is an appetite for trading equities on blockchain and if it's even possible given regulatory constraints.

User Demand for Trading Equities on Blockchain

• Synthetics tried putting equities on blockchain but failed due to lack of genuine usage.

• Users don't necessarily know what they want; sometimes you have to optimize something and let users decide if they want it.

• People don't really want to trade equities on blockchain in their current form.

Degen Culture in Crypto Trading

In this section, the speaker discusses the influence of degenerate traders (degen traders) like Celsius, Three Arrows Capital, Alameda Research etc. on crypto trading.

Influence of Degen Traders

• Degen traders engage in a big zero-sum game which doesn't benefit everyone.

• The market will solve something if people really want to trade it; most experiments fail because there is no demand.

• Degen culture has influenced crypto trading but may not be sustainable.

Crypto Traders and Risk

The speaker discusses the risk-taking behavior of crypto traders and how they wrap themselves in mystique and secrecy. They compare this to Madoff's playbook, where he pretended to have profits that he didn't actually have.

Crypto Traders' Behavior

• Crypto traders wrap themselves in mystique and secrecy.

• This behavior is similar to Madoff's playbook, where he pretended to have profits that he didn't actually have.

• Alameda Research and Three Arrows Capital were two examples of traders who convinced people they had huge amounts of money under management when they were really trading other people's money.

• On-chain transactions made it easier for these traders to convince others that they had large sums of money.

Philosophical Differences with Three Arrows Capital

The speaker discusses a run-in with Three Arrows Capital on Twitter and explains their philosophical differences.

Run-In with Three Arrows Capital

• The speaker called out Three Arrows Capital on Twitter for going after a founder.

• There was a philosophical difference between the speaker and Three Arrows Capital, but the speaker doesn't think they were subconsciously subtweeting them.

• Most of the time when the speaker calls someone out on Twitter, it's Kyle from Multicoin.

Multi-Coin Capital's Opportunistic Strategy

In this section, the speaker discusses Multi-Coin Capital's opportunistic investment strategy and how they were investing in new things without going all-in on something.

Multi-Coin Capital's Investment Strategy

• Multi-Coin Capital invested opportunistically in new things without going all-in on something.

• Kyle loaded up on Ethereum when it was undervalued because he wanted to make money, not because he believed in it.

• Multi-Coin Capital doubled down on their opportunistic strategy when others stopped investing.

• It was later discovered that they were doing it with other people's money and doing crazy things in the background.

Calling Out People in Crypto

In this section, the speaker talks about calling out people in crypto who are not transparent or honest about their intentions.

Calling Out Sam from FTX

• The speaker called out Sam from FTX before the FDX blow-up because he felt that Sam was playing a game at a higher level than everyone else.

• People need to call out those who are not transparent or honest about their intentions, even if it is difficult to do so.

Future of Crypto Markets

In this section, the speaker talks about the future of crypto markets and how there will always be characters like Sam who are incentivized by certain behaviors.

Future of Crypto Markets

• There will always be characters like Sam who are incentivized by certain behaviors.

• One Inch Wallet aims to be the single app you need to manage crypto.

• The speaker clarifies that he was not saying Sam stole all your money, but rather that he was playing a game at a higher level than everyone else.

The Challenge of Calling Out Fraud in Crypto

In this section, the speaker talks about how difficult it is to call out fraud in the crypto space and shares a personal experience of being falsely accused.

Calling Out Fraud on Twitter

• It's hard to get to the truth on a platform like Twitter.

• Even if someone has suspicions or thinks something is not right, it's challenging to call someone out without direct evidence.

• People may blow themselves up eventually, but calling them out doesn't always work.

Personal Experience with False Accusations

• The speaker was falsely accused of being subpoenaed at an event.

• Despite 50 people witnessing that it wasn't him who got subpoenaed, people still believed he did it for months afterward.

• It's really hard to prove things in a space as adversarial and crazy as crypto.

Synthetics: An Ongoing Experiment in Financial Engineering

In this section, the speaker discusses synthetics and why they are passionate about it.

What Are Synthetics?

• Synthetics started off as a stable coin and evolved into tokenized assets and exchanging of tokenized assets.

• It has further evolved into a pseudo-lending platform that supports other things like options.

Why Is the Speaker Passionate About Synthetics?

• The difficulty of the problem is what draws people interested in hard problems to synthetics.

• It's an evolving experiment in financial engineering that lays everything out there and says what's working and what isn't.

Building a Perpetual Market on Ethereum

In this section, the speaker talks about the challenges of building a perpetual market on Ethereum and how it took years to release. They also discuss the importance of having multiple implementations of perps in the DeFi space.

Challenges of Building a Perpetual Market

• The speaker had an idea to create a BitMEX-style perpetual market for tokenized assets like Bitcoin and ETH.

• It took years to release due to various reasons such as organizational issues and decentralization.

• The initial version was not optimal, but iterative experimentation helped them improve it over time.

• There were internal debates within the community about how to design it.

Importance of Multiple Implementations

• To be successful, there needs to be multiple implementations of perps in the DeFi ecosystem.

• Users want leverage and margin trading, so meeting that need is critical.

• The perp space in DeFi is one of the faster-growing spaces.

• Different options are important for users, and they care more about liquidity, trading experience, and onboarding process than nuances between different platforms.

Differences Between dydx and Other Players

In this section, the speaker discusses how their product differs from other players like GMX or dydx.

Comparing with dydx

• Dydx exists in its own app chain silo which gives them advantages in terms of usability but prevents composability.

• Composability is still an open question in the perp space.

• Dydx is probably the best competitor to centralized exchanges due to its compromises in decentralization.

Introduction

In this section, the speaker talks about the emergence of different perks and solutions for users in the next six to twelve months. The speaker also briefly mentions their relationship with synthetics governance.

Emergence of Perks and Solutions

• Different perks and solutions are emerging for users.

• These solutions will be ready for mainstream use in the next six to twelve months.

Relationship with Synthetics Governance

• The speaker has had an on-and-off relationship with synthetics governance.

• They have given up power to the community, making it hard for them to reclaim control.

• Due to technical challenges, they were unable to vote for a year in synthetics governance.

• They resigned from the council and watched as factions flooded DMs with accusations against each other.

• Synthetics functions perfectly without them now.

Seating of Power

In this section, the speaker talks about seating power to the community and how they tried to do it too early in the past. They also discuss how organically that power vacuum has been filled.

Seating Power

• The speaker has been seating power to the community over time.

• They tried doing it too early in the past but came back when chaos ensued.

• It is important that people who build things are directed by the community while having control over what they're building.

Filling Power Vacuum Organically

• Creating a power vacuum allowed them to see how organically that vacuum was filled.

• Mistakes were made during experimentation but eventually got back on track.

• Synthetics functions perfectly without them now.

Synthetics and Metamask Learn

In this section, the speaker talks about Synthetics and Metamask Learn. He explains that Synthetics is a governance experiment, while Metamask Learn is an educational platform designed to immerse people in the world of web3.

Synthetics as a Governance Experiment

• The speaker explains that top-down hierarchies are not effective for governing humans globally online.

• He notes that experiments like holacracy have been tried but have not been successful.

• The speaker believes that synthetics is a governance experiment, and it's an opportunity for OG D5 protocols to work out how to coordinate humans globally online.

Metamask Learn

• The speaker describes Metamask Learn as an educational platform designed to immerse people in the world of web3.

• He notes that it's for people who are interested in web 3 but don't know where to start or understand its principles because they've been too jargon-heavy.

• The platform teaches core concepts in fresh and engaging lessons from the world's leading self-custodial wallet.

Decentralization Ethos

In this section, the speaker discusses decentralization ethos. He explains why decentralization is important and how it differs from traditional finance.

Decentralization Ethos

• The speaker talks about how three arrows Capital criticized him for leaving the ecosystem because they didn't understand the ethos of decentralization.

• He explains that when all you have are top-down hierarchies, power flows from the top, and that's it.

• The speaker notes that holacracy and other experiments have been tried, but we haven't had the tools to coordinate humans globally online without it evolving into chaos.

• He believes that we need to work out how to govern ourselves in ways that are not top-down hierarchies.

Coordination of Humans Globally Online

In this section, the speaker talks about coordinating humans globally online. He explains why it's important and how D5 protocols are experimenting with governance.

Coordination of Humans Globally Online

• The speaker notes that we're working out a way to get people to coordinate and all work on a thing without recourse to specific jurisdiction and laws.

• He believes that synthetics is an opportunity for OG D5 protocols to experiment on how we coordinate humans globally online.

• The speaker notes that most of them have taken this opportunity, and the experiments are playing out.

The Value of Coordination in Crypto

In this section, the speaker discusses the value of coordination in the crypto space and how it can make a significant impact on solving problems in the world.

Importance of Coordination

• The main problem in the world is not lack of resources but rather inability to coordinate effectively.

• Crypto technology has the potential to help coordinate resources such as food, water, and shelter more efficiently.

• Crypto attracts workaholics due to its 24/7 nature and can feed into obsessive tendencies.

Challenges for Founders in Crypto

• Workaholism is a common trait among founders, but it can be unhealthy and dangerous if left unchecked.

• Obsessive tendencies can stem from trying to avoid dealing with one's own mind.

• Founders should be mindful of how crypto taps into their obsessive aspects and take steps to avoid burnout.

Finding Balance in Crypto

In this section, the speakers discuss their experiences with obsession and finding balance in their lives. They reflect on how they have been able to find a more measured way of engaging with crypto without becoming obsessive.

Reflecting on Obsession

• The speakers discuss how they have struggled with obsession in their lives, particularly with regards to crypto.

• They acknowledge that there are healthy aspects to crypto but that it is possible to take things too far.

• The speakers talk about the importance of finding a balanced way of engaging with crypto and not allowing it to become an unhealthy obsession.

Examining Motivations

• The speakers reflect on their motivations for engaging with crypto and how these motivations can become skewed towards something more obsessive or unhealthy.

• They emphasize the importance of examining one's own motivations in a deep and honest way as a first step towards personal growth and understanding oneself better.

Defining Success

• The speakers discuss what defines success for them in the context of crypto. They believe that what they are doing is the optimal way to coordinate people and that historical ways of coordinating people have been ineffective due to lack of technology.

Pushing Through Resistance

In this section, the speaker discusses the importance of pushing through resistance when pursuing a new idea or innovation.

Defying Opposition

• The speaker acknowledges that pursuing a new idea will likely face opposition from those who do not understand it.

• He encourages listeners to ignore negative feedback and push forward with their ideas if they truly believe in them.

• Even if they are wrong, there is no harm in trying, but if they are right, the impact can be exponentially more powerful than conforming to traditional ways of thinking.