Episode 86: Intro to DeFi with Kris Kay

Ben Lakoff, CFA
September 26, 2022
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Today's interview is with Kris Kay - a DeFi Educator and YouTuber.

Decentralized Finance, or DeFi, is something I’ve talked a lot about on this channel. Kris is doing a lot of onboarding in DeFi - which is very hard. I run CryptoMondays here in LA and know from experience that taking someone from zero to yield farming or some more advanced DeFi concepts… not easy.

In this episode we talk about what is DeFi, why it’s important, some of the risks, onboarding newbies into DeFi and some predictions on where the space could be going. We go through a few websites on the interview, so if you’re listening on podcast, it might make more sense to jump over to YouTube for a few of these sections.

Listen on your Platform of choice:

Check out for all the listening options (Spotify, Apple, etc.)

Show Notes

0:00:00 Welcome and context

0:02:10 What is your background?

0:04:47 What's the story about DeFi Donut?

0:06:00 What is DeFi?

0:08:06 What kicked off during the DeFi Summer?

0:11:22 What's going on in DeFi right now?

0:16:25 How do you think through the differences of each platform?

0:20:15 Why are you so passionate about onboarding people to crypto?

0:24:30 DeFi Guides Grandma can follow

0:27:45 What are the biggest hurdles when onboarding newbies?

0:30:02 What do you provide people that are having difficulty understanding crypto?

0:37:05 Where is DeFi heading next?

0:44:20 Where do you see the biggest DeFi hurdles going?

0:48:00 What risks and problems do you see in DeFi?

0:52:01 Where can people find out more about you?

Show Links

DeFi University

Kris on Twitter

Grandma's Guide to DeFi

Transaction Visualizer

Kris on YouTube

Helpful other Alt Asset Articles

Episode Transcript

[00:00:00] Ben: Welcome to the alt asset allocationpodcast, exploring alternative investment opportunities available to theeveryday investor. Here's your host Ben lake off

Hello and welcome to the alt asset allocation podcast. Today'sinterview is with Kris Kay he's a defi educator and YouTuber decentralizedfinance or defi is something I've talked a lot about on this channel.

Kris is doing a lot of onboarding in defi, which is very hard.I run crypto Mondays here in LA. And if, if you're in town, as of side come, wemeet every Monday. There's gonna be 200 some people there tonight, buttypically it's somewhere between 50 and 250 people. But anyways, there, I lovetalking to people newbies, but taking someone from zero absolutely zero don'tunderstand.

Public private keys to yield farming or any other advanced deficoncepts. This is not easy. So in this episode, we talk about what isdecentralized finance or defi, why it's important, some of the risks, and thenin general, about onboarding newbies into defi. And then we close it off withsome predictions on where the space overall could be going.

Shocker. Nobody knows, but it's always nice to have thoseconversations. We go through a few websites on the interview. So if you'relistening on the podcast, it might make more sense to jump over to YouTube fora few of the sections, either way I try to narrate it, but it could be easierto follow along in video format in the show notes, I've linked up all therelative links.

If you miss them during the interview, you can find them

All right. There you go. Enjoy this intro to defi with KrisKay.

Kris, excited to have you on the show today. Welcome to the altasset allocation podcast.

[00:01:56] Kris: Thank you, man. Thanks for having me onhappy to be here. Yeah. Looking forward to it.

[00:02:00] Ben: So we we chatted after a Twitter spacesand not too long ago and wanted to have you on cuz you're doing a lot ofeducation around and onboarding into defi decentralized finance. So it's, it'snot easy, anybody that has taken anybody from zero, not having any cryptoexposure to like. Yield farming in defi it's it's God's work and it's not easy.

So I wanted to have you on talk about current state of the defiecosystem what's happening there and, and more specifically about onboardingnewbies into defi. So I wanna get into all of that, but let's start off alittle bit of your background, how you got into crypto and, and what you'redoing today.

[00:02:45] Kris: Yeah, man. Let's do it. Alright, sobackground basically I graduated college in like 20, 20 16, summer 2016 with acomputer science degree jumped into a job that I tech really didn't like, whichwas software engineer stayed there about a year and quit right around likeexactly a year later. And that was like right around the time, like 2017 beforethe Crip first, not first, but that crypto bull run started that like we allknow about.

And I still didn't, wasn't really into crypto like that, butthat year, like couple months after I quit, I started, you know, kind of buyingstuff like, like coin and just, you know, getting financially involved. I knewof crypto for a long time through my brother. But yeah, I didn't start gettingfinancially kind of in the mix until a couple months before that crazy maniastarted.

Right. And that really caught my attention, but, you know, we,we all know like back then there wasn't really much to do. It was like buy low,sell high type of thing. And it was, it was amazing, got into a lot of stupidthings, but also, you know, there were a lot of great things I learned. And theone thing I did do right, is I didn't really go away and like summer 20, 20,like D five summer that a lot of us here know of.

And that's how a lot of us kind of got roped in. That's kind ofwhen, you know, my, my interest was like an all time high and it was stilllike, kind of like bare winter, you know, it wasn. Nothing like it is today.And that really like ever since then, man, ever since Def five summer 2020,I've kind of literally been 24 7, 365, just all eyes on crypto.

[00:04:23] Ben: So yeah, I've been all in since then andhaven't looked back nice and very similar Trajectory within the crypto marketfor me as well. I mean, I, I got in like late 2016, but like 2017 bowl marketwas the welcome to crypto. This is, this is the pretty cool place. And itdefinitely was the depths of the bear market that really like solidified it anddefi summer swinging back up.

So yeah, very can resonate quite a bit with a lot of thatstory. I'm curious your Your well, your Twitter handle is Kris Kay, but you goby defi donut. What's the, what's the story there?

[00:05:05] Kris: Yeah. It's it's not that exciting,actually. I was so the first YouTube video I made it was, you know, about likemark Cuban's NFT thing, like way before NFTs were like crazy close to liketheir mania stage.

And I was like, okay. Brand new YouTube channel. Right. I needto post it somewhere. And it was, it was out of like passion. Right. I, I madethat video cause it was super, super interesting to me this whole NFT conceptand it was a new channel. I was like, all right, I have to name this something.Right. So I was, I knew I wanted to name defi and I was like, okay, what'sanother word that starts with D that kind of, you know, sounds catchy.

Donut is literally the first word that came to mind. So that,that there's no big story there. It was just my YouTube channel. It's kinda

[00:05:47] Ben: stuck with it. Nice. All right. So defi.Let's let's start by defining it. And for my listeners, we've done a number ofepisodes on defi. So the one that comes to mind is defi dad came on and talkedwhat it is and why it's important.

But I, I like to hear this from everybody because It is thisrather broad industry that like, you know, what it is to different people issome sometimes different, so let's start off by defining it. What is defi andthen why, why is it important?

[00:06:22] Kris: Right. I'm sure. Like if you ask fivedifferent people, you'll get five different answers.

It is a broad term. But so for those that maybe don't know,defi stands for decentralized finance, right. And it's kind of like an idea ofthis open financial system. And essentially what, you know, kind of what we'retrying to do is take all the current finance, financial applications and movethem onto the blockchain.

And I know blockchain is like a, a buzzword to a lot of people,but the kind of benefit in that is everything becomes a transparent immutable.And we kind of have. All these applications that can build on top of eachother, communicate with each other and we call them money Legos. Right. And itjust makes for a super like hyper innovative kind of growth trajectory where likewe've seen, there's always something new in crypto.

That's just because the way I put it is, you know, in theMySpace days, for those that remember HTML kind of let us create our ownprofiles. And there was all these different themes and everything wasdifferent. You know what HTML did for the internet and like the nineties, Ifeel like the blockchain is doing for finance and a lot of other things in the2020s.

So it's just like a customization layer that we've never reallyseen before, especially like in this sector. And at the end of the day, it'sjust meant to be like a financial system that's govern by its users. You know,ideally I know that's kind of, you know too early to say, because it's stillkind of an experiment, but ideally right.

We want a system. We kind of are in charge. If you use aprotocol, you can buy voting power to it and have a say in it. Right. And yeah,I think that's, that's a pretty. Basic definition of decentralized finance tome. Yeah.

[00:08:10] Ben: Yeah, indeed. And that's why it'simportant, right? For each person it's slightly different, but a lot of the SIMsimilar characteristics are there.

All right. So you mentioned defi summer. So this was summer of2020, kind of perfect timing with COVID lockdowns and everything. But walk methrough. The timeline from like what kicked off in defi summer and kind of someof the ending up with like the current state of defi.

[00:08:37] Kris: Right. So so defi summer when I got in,right.

And it wasn't the very, very beginning, but. Essentially to me,what kicked it off was the lending and borrowing markets. And the fact thatsomething like compound, which is a lending and borrowing market on Ethereum,they kind of had, you know, their comp token, which you could earn bydepositing or even taking a loan.

So people were getting paid to take loans, essentially, whichsounds crazy. And there was a bunch of you know, we call it yield farming, butyou know what I like to refer to it as is kind of like a similar to likeairline miles. When you spend your credit card, you get airline miles. It'slike everybody was making money from these new tokens that were being releasedby just using this thing.

We call defi right. Different applications. So it's kind oflike yield farming is kinda like a, a marketing allocation budget of like a newtoken and it's like free money. Right. So things were going crazy. And to me,what caught my attention was when the price of this coin, I was holding at thetime for like a while called backed shout out to the brave browser.

It started going up in price, which was super unusual, right.It was super aggressive. And I was like, all right, why is this happening? Sowhen I dug into it, I found out that I think on compound, the bat token had asuper high P Y like if you deposited or borrowed bat, you were getting a lot ofcompetence for free.

So people were buying that, putting it in compound, borrowing,borrowing, bat, and all that. And that was causing like a supply shock. So Iwas like, damn, that's, that's crazy. Like this, this lending thing. Like, I, Idid, you know, you kind of did hear about it in like 2018 with like a lend orthere, which was like what Ave was called prior, prior to being called Ave.

And there was also this one other, I remember it was calledsalt lending and that's like super 2017, but I don't think all that was.Structured well back then, but like now we actually had something that workedright. You could literally take a loan against your crypto. You could lend itout. API Wises were high.

And I think that's what kind of stirred the pot and the wholeyield farming craze lasted all summer and obviously into 2021 as well. But thenwe got, you know, something like uni swap and I was like, all right, besidelending, I can swap my coins, put 'em back into like Ava compound. And itstarted like this whole domino effect of.

Us realizing that there is actual use cases for, you know, thiswhole blockchain thing. And yeah, the basically defi summer was a bunch of freemoney, bunch of free money, and that got everybody's excitement up and, youknow, the rest is kind of history.

[00:11:16] Ben: Oh, yeah. And UNOP well, I guess Bancorwas probably the first AMM, but it came a long day from like from ether Deltaback in the day mm-hmm of 2017.

Yeah. So, so deep by summer, super super important kind ofkickstart this lots of craziness, food coins and all, all of it. Yeah. Whatabout, what about right now? So this is being recorded early July and we'vejust had. The collapse of UST and anchor and Luna and like this wholeecosystem, I forget what it was, but like 40 billion just had three arrowscapital.

So 18 billion hedge fund prop trading fund blow up. So thethere's a, there's a lot of this. Mantra right now of like, defi is dead. Itwasn't sustainable. It was just this like admission schedule to get people touse things there. There's not a lot there, or there wasn't as much there as wethought there was.

So like paint me the picture of what's going on right now, becauseI would imagine for the, the average bystander it's Defi is dead and it'sevolving into something else. So let's, let's talk about where we are rightnow. Let's

[00:12:32] Kris: talk about it. So, you know, ironicallyenough, I think the events of the last couple months have strengthened the casefor defi, cuz if you look at it right Celsius block five Voyager.

And three arrows, capital blowing up or any fund blowing up hasnothing to do with defi. Right? Those are, you know, some call 'em, neobank somecall 'em just banks, disguise banks, whatever you wanna call them. Right.They're not defi. And the problem is I think. Most people, especially themedia, right?

They put the, the word crypto on everything like crypto ismelting down, right? Celsius is going under. Crypto's melting down. When inreality we have Ave compound uni swap maker curve, all chugging along, justfine. Right? There's been no, it's been super boring for them and that's good.Right? Boring is good.

So nothing is broken on that end and that kind of shows youright. Celsius and all these kind of Neo banks that are blowing up it'sbecause. They they committed the sin of don't trust, verify, right. Theytrusted and didn't verify. So they gave out loans to people that they trust.And you know, what happens when you only rely on trust is we saw exactly whathappens.

Right. But with. With Ave or compound, the reason they're notblowing up is because you can't have under collateralized loan. Right? It's a,it's a, it's a piece of code that as soon as that loan becomes undercollateralized, you know, it, it does what it has to do to make things, right.So to me, I'm sitting back and as every everybody's kind of like uncertainabout crypto I'm like this kind of like proves the.

That like, we really need this. Right. So like that, that'skind of my, my take on things. Of course, like the Luna UST thing, it was, Imean, you can argue like that's, that's defi that's crypto and stuff, but atthe same time, I mean, I never got into Luna at all. Never use Luna and I use alot of, a lot of chains.

I'm always trying stuff. But the reason like anchor didn't pullme in is because I read the documentation, which I feel like most people don'treally care about still, but I mean, 20% fixed Y right. I was like, okay, that,that like caught my attention, obviously. So I was like, let me go to the docs.Then I realized within literally 15 seconds of reading.

Oh, it's subs. When I saw like the word subsidized by, I waslike, yeah, this is not like raw yield. Right. It's not supply and borrowdemand. So there's, there's a good quote. That goes, I don't know who startedit, but if you don't know where your yield is coming from, you are the yield.That's exactly what that was.

So yeah, it's, it's like people are blurring the line betweencrypto and I mean, everything's crypto nowadays. Every company wants to jump inand, you know, get a piece of the pie, just ride the wave. But the real, real,like defi is more alive than ever. I think I. Yeah,

[00:15:20] Ben: and I, I agree. I, and the media kind ofjoining these two together between defi and actual these neobanks or CFI,centralized, finance, whatever.

Definitely doesn't help. For the industry. My, my biggest thingwith this blow up is that for the average person, I, I don't have a coursewhere I walk people from zero into defi. Right? So the onboarding funnel forme, a lot of the times is, you know, sign up for block five or Jim and I, andput, switch into stable coin and like treat it as a high yield savings accountthat like is actually high risk.

But I mean, you're getting the same yield seven to 9% that youwould be getting on, on high yield bonds, which like. I probably trust thosecompanies more than like the shitty high yield bond that's earning 7% anyways.So that, that was kind of the way I, I did it. So, so it is a shame, but likein general when looking at the discrepancy between defi which Ave compoundthese borrowing and lending platforms are like 0.5% to 2% right now.

So quite low yields. And then when you're looking. This isCelsius, Nexo block five, whatever they're of five to seven, 9%. So how, how,how do you think about these differences? Because it is like the alluring sirensound of these centralized platforms having much higher yield

[00:16:50] Kris: yield. Well, that's the thing I'm gladyou brought this up.

The, the Celsius and Voyager, all those yields are not yields.Right. So what they're kind of doing is. Taking super high risks. So all ofthem are like a black box. Right? You put your crypto in, you don't know what'sgoing on within to get your returns. Like when they offer 5% yield on Bitcoin,there is no yield on Bitcoin.

Right. Unless you're lending or borrowing, but we know likeBitcoin doesn't produce any type of yield. So where's that coming from? Andit's coming from just like what the banks do, right. They pay you 0.01 interestor whatever, but they're doing things. When they turn around and lend out yourmoney and get way more.

So that's kind of what they're hoping to do. They think, youknow, because it it's a raging bull market. We can, you know, lend this out topeople. We can take risks with it. We can over-leverage and we can make moremoney and still promise an unsustainable yield. So for AER compound to be 0.5or two or three or 4%, that's fine because that's the market price.

That's the market yield, right. I, I, I know. That's it'stransparent. I, I know like exactly what I'm getting into, so whatever it is onAve or compound, I can't be mad at it. That's just, that's just what it isright now. But that's the problem. I think, I think greed and it all comes downto education at the end of the day.

Right? If, if you think getting 6% returns on your Bitcoin issustainable, right, then you just don't know. Exactly. What's really going on.So, and it's funny, cuz like in my course I found a slide when, you know, kindof Celsius blew. I went back. I was like, I knew I talked about this and therewas a slide from like September 20, 21 where it explicitly says block fi next.

So Celsius are not D five. Once you deposit your coins, youdon't own them. You don't know what they're doing. So, I mean, I realize thatwithout really doing much research, I just kind of look at things and alwaystry to understand the yield or the back end. So, I mean, to answer yourquestion. It goes back to that quote, right?

If you, if you don't know where your yield is coming from, youare the yield. So yeah, that, that same with anchor, right? That that's notyield. That's, that's a subsidized, subsidized money you're getting that justdoesn't make sense. So when we talk about yield, right? If anything, defi has atrue yield and over the last like year or two, if you just left stable coinsin.

You got like a good 4.5, 5%. So, I mean, that's, that's stillamazing, you know, right now there might be down, obviously because less peopleare borrowing. You know, right now times are crazy, but yeah, I prefer to stickto the transparent side of finance and that just kind of proves the point andbuild the case for defi in my, in my opinion.


[00:19:42] Ben: Yeah, I agree. And ultimately, I mean,if, if somebody is paying you 5% and unless they have a massive treasury thatthey're subsidizing this, that means somebody's paying them more than 5% andthey're making a spread. So what risky behaviors is that person doing to paymore than 5% on their money, they need to be making, you know, So they're payingthem 7%, so they need to be making 9% like, and it goes, this Daisy chain goesall the way down.

I want to transitioninto onboarding. So we've talked about the reason why defi is important andsome, some of the some of the. Intricacies of defi in general. And I definitelywant to get into predictions of what's happening and where this could be going.But before we get there, let's talk a little bit about onboarding people intodefi.

So let's start off on why you are, you feel so passionate aboutonboarding people into Def. .

[00:20:45] Kris: Yeah. So the reason is basically kind ofpiggybacks off of what we just talked about. Right. The, the main reason isthere's a right way to do it. So a lot of people crypto is super, super like a,it's like a one big shiny object.

It's kind of like a get rich, quick scheme. Oh, no, sorry. It'sit's a. It's like game changing life, changing technology, disguises, a getrich, quick scheme. Right. And the problem is people focus on the ladder. So,you know, my thing is I, I, I want to calm people down. Like everybody wants tojust start buying stuff and making money and kind of get to the basics becauseif you don't, we kind of saw what happens to people that kind of just jump in.

Right. And there's, there's some students of mind that, youknow, maybe didn't go through more than 10% of the course. And they ended upbuying, you know, going too crazy on Luna or anchor or block, you know, somehave funds stuck in like Voyager or CELs, but, you know, I'm definitelynoticing a difference for the people that like went through the course and areconstantly like, you know, trying to experiment and learn.

They're not getting involved in any of that stuff. And I thinkthere's a reason, right? So my thing with onboarding people is I know how crazythe space is, and I know how. How shiny of an object it is, and that makes itso much more easier to lose money. But at the end of the day, it comes fromjust the passion of like this defi thing.

Like there's actually something there, like it's not anotherbuzzword. Right. And you know I know how exciting it was for me to learn. Inlike the first six months of discovering this thing. So I just kind of wannashare that with everybody else and obviously the right way, right. I'm I'm nothere to tell you what coins to buy or draw lines, draw lines on a chart andtell you it's going here.

But I do know that the hockey puck is going towards, you know,decentralized systems and, and all that. So, you know, I'm, I'm, I'm almostcertain of that, but you know, as far as like prices go. You never know. Yeah.

[00:22:43] Ben: Well, especially short term, right? Whichthat, that seems to be special. The, the, the point when people are like, oh,you're in crypto, where is Bitcoin gonna be next week?

And you're like, I have no idea. Yeah. It could be plus orminus like 10,000, $20,000. But like, I'm pretty sure that this technology inthis thing will be a lot higher and better and more adopted in three years. Andthat's the important thing to focus on. But you know, we get the dopamine rushof checking prices every two minutes anyways.

So I nailed it. I I'm on your site. So from your Twitter, youcan get all of these and I'll, I'll link these in the show notes, but for thoselistening on the podcast if you check out on YouTube, you can see me sharingthe screen. I just kind of wanna go through this a bit and I'm driving so youcan point me around, but wanna poke around and show my viewers.

What you have here, because I think you have a treasure troveof information that is quite good from zero to you. Kind of know what you'redoing enough to be dangerous within defi. So walk me through kind of what wehave here and where I'm let's do.

[00:23:49] Kris: Yeah. So I made this site just, justbecause it, there was, at the time there was like nothing really like it.

Right. This was like April 20, 21. And like I said, all of my,all of my content kind of stems from, I, I took a bunch of notes when I waslearning defi and NFTs. I'm basically making them prettier and sharing themwith everybody else. So I structured LSU in like a particular way. Sothat like, you kind of go from like top to bottom as you scroll and it kind ofgets easier to understand.

Right. So we obviously start with like the basicsdecentralization. Oh, no, sorry. Yeah, this section, the need to know topics,right? Like what is a, what is a wallet? What is a DAP? Like the, the basicsthings. And once you kind of like, understand, like what are gas fees and kindof everything that's covered in this first section, you kind of move on, right?

Cause you have more questions then you get to like, why are webuilding this space? And you know, this is like the boring stuff I realize, butI mean, boring stuff is Al almost always like the most valuable, so. We gotdecentralization. These,

[00:24:53] Ben: these are the most important, right?These are, these are the core values and tenants that all of this is built on.

And you, you exactly kind of lose the force for the trees, likewhen you're just yield farming and making this stuff. So these are theprinciples. So it's very important to like, understand why decentralizationmatters and why self custody matters and immutability all of these tenants thatcrypto is, is built on.

Sorry, continue. But definitely wanted to add that.

[00:25:21] Kris: Yeah, no, a hundred percent. I meanthat, that's the, like the hard part of being an educator. You know, this isthe most important stuff, but everybody just wants to get to the money, like,okay, show me, show me where to get yield, what to buy. Right. But if you don'tknow what decentralization even means, then you are so far behind that.

It's not even funny. So eventually you'll have to loo learn.What these things are. So yeah, this, this section is kind of just goingthrough like the, the four pillars as I call them. And as you keep scrollingdown, you kind of love this money is

[00:25:52] Ben: defi is like putting money on digital iceskates, a world where your money is UN uncaged fast and free from banks orthree to five business days coming from somebody that's like been operat.

Almost primarily in crypto for five years and then like has todo a bank transfer every once in a while. You're like, mm-hmm, what the heck.And then of course it gets flagged. I gotta talk to somebody. Which has itspros and cons. Right. If you send it to the wrong address, they'll revert it.They'll bring it back.

And crypto it's gone forever. So pros and cons of all of this.

[00:26:21] Kris: Yeah. But yeah, man, it's it's you know,then we get to like a couple of just easy to do tutorials and yeah, it, Ibasically structured it and there's some resources after that, like podcastpeople to follow and stuff. And I definitely do need to update this becauseit's been a while.

But yeah, that, that's basically basically the goal of lets dodefi it's it's like start here basically like start you. You don't know whatdefi is. Start here. That that's kind of my goal for that website. Yeah. It's

[00:26:49] Ben: it's, it's it's really good stuff. Imean, seriously, kudos. So when, when onboarding new vs to defy and crypto,what is the biggest hurdle you have?

In one, getting them to understand and two actually gettingthem onboarded and using D

[00:27:10] Kris: five. Yeah, very good question. I thinkthe biggest hurdle is something I just talked about and that's getting themexcited about the basics, right? The foundations, the pillars, you know, cuzeverybody, as soon as they, you know, come in.

They're just, they just wanna make money. They just wanna makemoney. Right. So I think that's the biggest hurdle is like, all right, let'slet me show you why. And, you know, I do my best to use analogies and stufflike that in metaphors to kind of tell you why, like, this is the importantstuff, but as far as understanding all of it is tough because it's just,non-traditional right.

We have this thing called a wallet where not only do you have apassword, but you have a seed phrase. Right. And it's. What's the differencebetween the do between the two and then you have self custody and, you know,something like an exchange like Coinbase or something where you don't havecontrol of your funds and people have a tough time kind of reading between thelines and understanding the difference between just the basics.

Right? And then you have gas fees, which is like, why is itcalled gas? Right. So my thing is to. Kind of like focus on analogies as muchas I can when explaining this stuff and try to create like a mental model thatkind of describes these non-traditional things in ways that we can understand.So I definitely think the, the two hurdles are one is focusing on the boring stuff,which you actually need to know.

And number two is. Kind of having a super open mind and beingpatient because a lot of this stuff is just, you know, we haven't seen, like,what do you mean connect my wallet? Where, where do I sign up to this website?Where do I sign up to Ave? Right. Where is, where do I put my email in? Andit's just like a whole different model.

Right. So it's, it's tough. It's definitely, you know, super,super difficult. And it it's super time consuming as well. Right. Because my, mywhole kind. Brand is dumbed down education. And that takes a long time. Likeevery time I'm, I'm writing a line for my YouTube video, I have to read it twotimes. And if, if I, if I don't think like my parents would understand what Ijust said, then I have to redo it.

So, you know, it seems, I mean, I feel like that's why we don'thave many educators like that. Everybody kind of talks in the terms that we allknow as like crypto natives, but it's hard. Like I know now I know why, like,it takes a lot of. What kind

[00:29:37] Ben: of wording or example do you use to, youknow, that person that just doesn't get it?

And there's a certain bit of like, if they refuse to get it,they'll never get it sort of thing. But like the one that just doesn't get it,but they do want to understand what, what do, what do you give them to kind ofget them over that chasm that they're. Oh, that's what that is. That's why it'simportant.

Do you have some sort of example or some sort of walkthroughthat like you lean on when, when you have that person.

[00:30:08] Kris: yeah, it depends on what, right. Whatare we talking about? Blockchains? Are we talking about NFTs, et cetera? Soyeah, either I, I,

[00:30:15] Ben: I would say either crypto in general,which at this point, those are a little bit more rare.

The NFT thing, I think I've, I've beat that one to death on mychannel. So if people haven't listened to this and don't understand why NFTcould have value, can't probably can't help them at this point. But so moreeither crypto or defi.

[00:30:34] Kris: So I really like this, thisvisualization website called transaction street, TX street, or transactionstreet.

And it's it's like a super easy to understand like visual ofhow and what a blockchain is. So I definitely like to use that quite a lot justbecause if you, you know, blockchain is like one of the first things you gottaunderstand, but you know, I, I would, I would ask them like about their run-inswith traditional finance first.

And kind of, you know, when they explain something, I kind ofcut 'em off and be like, all right. So what if you could do it this way andit's easier. Right. And that kind of tends to make more sense, but honestly, Ithink the best way to make them get that light bulb moment is to actually useit. Right. I think that's when kind of everything changes because I mean, youcan, you can read a whole textbook.

On like how to swim. Right. But when you jump in that water,all that goes out the window, cuz there's panic. There's, you know, there's,you can't really read to learn how to swim. You gotta just jump in there and,and kind of learn it's the same way with defi, right? Making mistakes, payinggas fees, understanding what that is, seeing your balance or your interests goup every block on like Ave.

That's when the light bulb moments hit. And that's when youconnect the dots. So, I mean, I, that's why I try to tell people like you can'tjust read or watch videos. You have to just jump in and, and it'll just startkind of making sense.

[00:32:02] Ben: Yeah, that makes a lot of sense. And I, Imean, this goes back to like Roger bear, which people who there might not bepeople who know who he is because he was a bigger a person or bigger name backin the day.

But he used to onboard people by like, you know, Hey, sign upfor Bitcoin wallet. Here you go. I'll send you the, your first 10 bucks inBitcoin or whatever mm-hmm . So he was, he was very much like. Greatestambassador. And onboarder by doing, because like you said, you can, you canread about it all day long, but until you actually see which I think this iswhat you had in mind with transaction street.

So I'm at TX So talking about being able to seevisually but I've never seen this website and it looks flip and cool. So willyou walk me through what's happening here?

[00:32:52] Kris: For sure. So on the left hand side, wehave the Ethereum blockchain, right? Right. Hand side is the Bitcoin one,right?

Basically the same thing. So what you see for people thataren't on, like the YouTube is there are, there's a line of buses, right? Andeach bus is supposed to be a block. And on the left hand side, you havedifferent defi applications or just, you know, anything that's on theblockchain. Like you have meta mask, you have open C, you have Ave all of thatstuff.

So anytime you do any action transaction on the blockchain, Youhave to pay a gas fee, no matter what blockchain you're on, right in thatblockchain's native coin. So there there's like these little people, like southpark characters that are leaving the buildings, which is the defi apps on theleft and going towards the buses.

So if I'm buying an NFT on open sea, right on the Ethereumnetwork, I would leave the open sea building and then get in line for the bus.So the bus is in the front, right? They are. They charge a, a higher, I guess,price to get on the bus. Right? So it's like a, it's like a bus fee. And if youwant to pay less, you have to go further back in line.

So it's kinda like a priority queue, right? The, the moreexpensive buses are in the front. And the cheaper ones are towards the back. Soif you wanna push your transaction, you know, quicker, you get in one of thefront buses. So that's ex that's exactly what that is. And once a bus is filledup, right? Each bus is you have to pay the bus driver.

So let's say there's 200 people that can fit on a bus. Once 200people have paid and gotten on that bus and that bus closes doors forever andtakes off to be added to the blockchain. So the blockchain is basically. A hugedatabase. Think of it like a huge Excel sheet. And these, these buses have justa bunch of transactions in them.

So when people pay to get their transactions onto a bus, Thatbus is sent off, added to the blockchain. And then also your transaction isvalidated and everything goes through. So that's, that's basically like therundown of what you are seeing this,

[00:35:01] Ben: this is so freaking cool, man. I, I can'tbelieve I've never seen this website.

This is, this is fantastic for a visual representation. Yeah.of how blocks and transactions and data gets allocated to blocks based on the,the amount of gas or priority that you're paying. And if you pay less gas oryou're, you're down here in the low fee life , I mean, this is mm-hmm this isfantastic. So highly recommend listeners.

If, if you haven't checked out this website before I'm at and you can actually compare different blockchain. Which all havedifferent speeds different block sizes. So really, really cool resource therefor visualizing what is happening while we're on it. So talking about gettingthose, those Users onboarded to defi let's transition into like where it'sgoing next.

So also sharing a screen here and sorry for the audiolisteners, lots of screen share today, but. On defi Lama or defi pulse to showthe total value locked. And this has kind of been the, the barometer of use andadoption of defi that we and crypto use. So starting say January 2020, therewas like $500 million locked in Def.

Then during the height of defi summer, we crossed the billionthreshold, which was a big deal. But I mean, it recently in like late 20, 22,we were at 230 billion in total value locked. And this is across allblockchains. So E was slightly different. Or slightly lower, but still probablythe, the, the lion share E was at 160 of that 250, but now we've droppedsubstantially.

And part of this was the tear out, blow up, but we're at 75billion TVL so, still terrific, insane growth over the last two and a halfyears. Mm-hmm . Yeah, but yeah. Yeah. So zooming out, like looking this year,it's pretty drastic and ugly, but like looking over the long period of time,it's still come a long way.

So what's dropped substantially, but what kind of catalyst or,or next moves take us back to, to higher highs or, or, you know, if your thesisis maybe they're not going to higher highs would love to hear that as well.

[00:37:33] Kris: Yeah. So one thing to kind of like keepin mind, right? So the current TVL you said was in the like 70 somethingbillion.

The thing is there could be the same amount of crypto. Butbecause the USSD value of each crypto is lower, then the TVL USSD price islower. So maybe nothing has changed. Right. But if E goes back, you know, fourX to four $4,700, the TVL would be the same, even though there's the sameamount of E in defi.

So. You know, it's looking at the USD value. Of course, it'sgonna go down with the prices. But I think the, and I mean, the USSD valuedoes, you know, have substantial meaning, but you know, my kind of thing isit's. The question I like to ask is are the crypto assets leaving like theseplatforms?

Because if like I have 28th inside of ABA, let's say, and backwhen the TVL was at the all time high. If I still have 'em in there, then my Edidn't leave just the USD price of E got lower. So the TL looks like, oh man,people are exiting crypto, but are they, or is it just, you know, the, the USDprice kind of affecting the TVL?

So I don't, I don't really look at TVL as something that's liketoo, too you know, telling of anything, although it is important. But Idefinitely, yeah, like you said, man, once we zoom out, like, it's, we we're,we're still so high up even at these like low, low prices.

[00:39:00] Ben: And that is, I mean, very, very goodpoint.

I mean, E is down 80% from it's all time high. Exactly.Everything percent or whatever. So yeah, every, every all crypto assets, Imean, look, the NASDAQ is down 40% or whatever as well. Yeah. So it's not justnot just isolated in crypto. So that is a very good point that this is indollars and. The dollar value is down by 8 70, 70 5%.

So good, good point. Yeah.

[00:39:24] Kris: Where, where

[00:39:26] Ben: can where's defi going? Let's gopredictions kind of what's next in crypto and what can, or, or in defi and likewhat catalyst will get us back to new highs.

[00:39:38] Kris: Right. So I think the one kind of darkcloud right now is the whole macro thing. You know, I would really love.

Obviously in a, in a perfect world to see the trajectory ofcrypto, if we didn't have all these crazy things going on in the world. So thatis definitely, I mean, I don't think that anybody can deny that, like, that isa big reason, not just crypto, but everything, but let's focus on crypto. Thatcrypto is down a lot because there's just a lot of peer fear, panic, andobviously crazy inflation wars.

So that is definitely something that has causes downturn, but.No. I mean, defi is here to stay right. And defi, you know, there's the way Ilook at it is defi is mostly meant to be a foundational layer that everythingis get, gets built on top of, right. So something like compound in Ave, I don'tthink the world is gonna be using, when I say the world, like the majority ofpeople are gonna be using meta mass to kind of take loans on Ave.

I think it's gonna. Coinbase saying, Hey, if you want to getinterest on, on your crypto, here's what you can offer. Right. And they'regonna abstract the fact that they are just depositing your coins into somethinglike Ave. So that is, that's kinda like batching users together, abstractingthem from the hard stuff and using defi as like the foundation layer and it'salready happening.

Right. It's I mean, fintechs and stuff they're already doing.As we saw Voyager Celsius, they're obviously not doing it. But I feel like theabstraction is the ultimate. And I think it it's called the protocol syncthesis where you know, all of these foundational layer protocols, like Ave,like maker kind of sync to the bottom and everything gets built on top of them.

So I definitely see defi as something that is, is not goinganywhere. Right. And I know that's can be like a broad term right now. Yeah, itjust, it just makes sense. It just makes sense. And you know, if, if Celsius,if Voyager and block fight, if all they did was just use their user funds tokind of deposit them into defi, we wouldn't have these problems.

Right. I mean, because Def I won't let. Kind of have a undercollateralized loan, but they're they're they went the opposite way and theyjust stuck the tra fi BS, you know, tendencies. And this is kind of whathappens. So yeah, I think you definitely have an edge if you know how to usedefi in its current state, because, but like, like you on Lido finance, right.

Which is like, Eat sta or just liquid staking platform. They'llgive you, like, let's say right now, 3.7%, if you stake your E, but if you knowhow to set up a validator, right, you'll get the, you'll get like the 4.5%. Soif you know how to use defi, you're always gonna be making more money becauseyou know, the companies that build on top of it that make it super, super easyfor you to transact, they're gonna take their cut.

So I think that's why it's super important to. Get educatedbecause it's gonna be way more lucrative. And I think we were only seeing astart. I don't even know if we've seen the start this whole thing's kind ofjust beginning, so yeah. Learn as much as you can now, because you know, you'rekind of losing that edge every, every time.

Like Coinbase, just, just announce that they're launching likepolygon and a bunch of other bridges, right. That means things are gettingeasier. So like before a month ago, knowing how to use a bridge was an edge.Coinbase launches it, you lose your edge because everyday person could justsend something from their Coinbase to their polygon meta mask.

Right. So it it's all about just being, being, being early,being aware and just being immersed and having all of these edges kind ofcompound. And I mean, we've seen like the early, early adopters, how much ispaid. .

[00:43:40] Ben: Yeah, so education definitely, definitelyrelevant. So what, what big trends do you see happening like within defi?

So seeing a lot of comments on Twitter, I, I put out there, butmost are around like, Trends coming up where you see the defi space, you know,some of the, some of the difficulties or hurdles that we face now where do yousee this going in the next pick, your timeframe that's relevant?

[00:44:08] Kris: So just, just to get to the trends pointand I think You kind of know where I'm going.

I think the next intersection that only makes sense is defi andNFTs. I think that's kind of something that nobody's really, really focused onand that's why. I like it because usually when everybody's already aware, itmeans like it's probably not like the, the next thing or it's too late to kindof get ahead.

So I mean, you, you know, with charge particles, you knowexactly what I'm talking about, but just the fact that there's so muchliquidity in NFTs, right. And now it's time let's open that liquidity up right.As, as kind of crypto does, and let's put some money Legos in. And that isgonna just open the floodgates.

I mean, I think we're already kind of seeing it, at least some,some people are seeing it and that intersection is just like, kind of like justa ticking bomb of just. Innovation to happen. And I'm super excited for, forthat. Maybe you can kind of give your perspective because I think you're verywell aware of, of what's

[00:45:14] Ben: coming.

No, I mean, I think in general, a hundred percent agree,obviously charge particles are Twitter handle is D I NFT that we got inFebruary, 2020. So definitely thinking about the, like convergence of these twothings, but as NFTs, continue to grow in importance and in value in our lives.Being able to use them as the financial assets that they are in new uniqueways, whether it's trustless, renting them out, using them as collateralbundling or unbundling them.

These, these are kind of like the future trends where I thinkthings are going. So it would be like NFT, defi game by Mefi, you know, all ofthis. Decentralized finance kind of integrating its way into these other biggercrypto themes of blockchain gaming, or metaverse like, all of them will beinterconnected under this broader UN umbrella of like NFT and defi.

Definitely. So a hundred percent agree with you there. Oneimportant thing that I forgot to bring up that is very, very important.Somehow, we talked about all the great things and all onboarding people and wherethe space is and where it could be going. And we skipped over arguably the mostimportant part, which is the risks so wanted to probably should have edited inthis section, throw in the very beginning.

But there are risks to defy. We talked about the collapse ofTara $40 billion, kind of banished very, very quickly. Three errors, capitalblew up $18 billion, big chunks of the ecosystem, but there are scams smartcontract risks, red poles, all the sort of things that happen within the space.So let's talk a bit about.

Risks that exist within defi. And how you think about those andthen also what problems do we have with the existing defi that exists and, andkind of, yeah, let's let, let's start with those. And again, does it, eventhough it's one of the last questions, it's very important to understand thesethings before jumping in there's no, there's no free lunch.

There's no free yield.

[00:47:23] Kris: Yeah, risks. Like you said, man, therethere's a lot of risks. I think for me, like I'll take smart contract risk anyday, right? If it's audited and you know, that's the O maybe only your biggestconcern then. Okay. I'm fine with that. But when you have like crazy PonziNomics and stuff going on, you know, that's, that's definitely a risk, I wouldsay you should probably stay away from the real risk is just.

Reading up on what you're buying or using that. I mean, let'sbe real, most, most of these things happen because nobody really cared to kindof understand what exactly it is that they're buying. So when prices go down,you kind of look at your portfolio and you're like, what are these coins evenlike, what do they even do?

Right. And you know, that that's kind of on you because nowyou're either gonna sell them at a huge loss or, you know, some of them thatare, you know, super. Fundamentally sound. You're not gonna buy more of whenyou probably should, because again, you don't know what you're buying, butyeah, I mean, there there's all kinds.

I think it's super important to kind of do a deep dive on, oneverything you get into like look at the team. Right. You know, I know we arein a anonymous kind of area where, you know, there's anonymous teams, anonymousdevelopers, but you know, there's some risk with that as well. Like we saw withthe whole Wonderland.

You know, that that was not great at all. So as much as I, Ilove and non teams, like personally, I think if they're docs, there's a layerof risk that kind of goes away. So it's tough because I know that crypto's kindof built on this whole anonymity thing, but I mean, I think it's worth talkingabout, and of course, just, just straight up audits, right?

There's a lot of protocols. They launch, they look reallygreat, but they're not audited yet. And people don't even, I mean, I think ondefi Lama, they have like a section when you click on a protocol that says, isthere an audit, right? Yes. No, you can get the details. So at the end of theday, the risk is. On you as much as I hate to say it, right.

You, I mean, anything can happen, like could be, you could domost research, it could seem like a Bulletproof protocol and then there's likea bug or an exploit. Right. But that is a risk you should be per personallyI'm, I'm willing to take because, you know, I know I did my research andthere's nothing more I can do.

So yeah, there's definitely risks. You know, it's it's I dunno,I feel like the risks. Every time there there's, you know, somebody gets theirseed seed phrase compromised, or they lose money in something like lunarCelsius. And, you know, when I see people get mad, like, oh, why, why didn't,you know, people talk about the risks or this, I mean, you shouldn't rely onother people to kind of do your risk management for you.

I know this is a new space and I know it's like, there's notmuch regulation, but then at the end of the day, like, it's your money if likemost of you, most of you wouldn't lend a hundred bucks to a stranger. So whyare you putting a thousand bucks into a protocol that you know nothing about?Right. I think people kind of see it differently and think, oh, just becausethey have a pretty website.

It has to be safe or stuff like that. So, you know, I don'tlike to focus too much. Obviously I do talk about risks, but it's, it's likeobvious, like you, you have to, most of the time, it's just the user justbeing, you know, not being responsible.

[00:50:48] Ben: Yeah. Truthfully. Yeah. Good points. AndI mean, Do your own research, think about, think about risk sizing with all ofthese things.

Don't put all of your money in it. And, and treat it like arisk asset because it is this nascent space overall. Even if it's battle testedwith billions of dollars and coupled of years, and there's a lot of people thatfeel very strongly about it, there are risks. Chris, this has been a greatconversation.

Really appreciate going through a little bit about your courseand onboarding people. Where can my listeners find out more about you or wherewould you like to send them for more information?

[00:51:24] Kris: Yeah. So on Twitter, I'm the Chris K andthat's Chris with a K K R I S I know a lot of people get that wrong.

I'm on YouTube at defi donut. And I let Sue is my, youknow, free website of education as well. I also have a course that you can findit's my pin tweet on Twitter, if you want to kind of dive a little deeper. Soyeah. I'm kind of, I'm everywhere. I'm in a lot of discords, but mostly I thinkTwitter is a great place to find me at the Chris K.

[00:51:53] Ben: Awesome. And I'll link up all of thosethings in the show notes and congrats on the recent course launch and yeah.Keep providing all of this excellent free resource for people to find out more.And like I said, doing God's work, onboarding people. It's it's not easy attimes, but we all appreciate it in the space.

That's that's definitely sure.

[00:52:14] Kris: Thank you, man. Thank you, man. Thankyou for having me on. There you go.

[00:52:18] Ben: First off. Thank you very much forlistening all the way through. I hope you got a lot of value out of thatconversation as always. You can find show notes, links, [email protected] Please share this with anyone you think might beinterested and derive any value from this conversation.

And as always, you can reach out to me for any feedback orquestions. Please give the video a like, or even better subscribe on YouTube

[00:52:44] Kris: or your podcast

[00:52:45] Ben: player of choice. This really helpsothers find the podcast or the video as well. Thanks a lot. Hope everybody hasa fantastic day and stay safe out there and invest wisely.


Ben Lakoff is an entrepreneur and finance professional. He has developed strong global finance experience through 10 years of international assignments in the US, Brazil, Afghanistan, Southeast Asia, Czech Republic and through the award of his Chartered Financial Analyst (CFA) certification.