Deep Web3 Secrets - Episode 3 - Decentralized Finance

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Transcripts:

Ecoinstant: Welcome once again to your digital deep dive this is your Deep Web3 Secrets I'm Alex Trapp

Spiritsurge: And I'm Spiritsurge

Ecoinstant: And we have got another excellent topic for you today. Today we are diving into DeFi - Decentralized Finance. What is it, what does it mean and what is new about it? So as we get started, Spiritsurge, how have you been this week?

Spiritsurge: Oh I've been good, how about yourself? How's the weather in back in Colombia?

Ecoinstant: Really great we are in high summer, we're getting some sprinkles of rain at night that's good for the plants, everything is going great. I might even have to start a podcast about our farming. It's very good stuff here but nothing really related to the tech so let's jump right into it, what is Defi?

Spiritsurge: Decentralized Finance. So you know back in the day, everyone used to say I mean we're talking about 30-40 years ago and people used to say: "Hey you have extra money put it in the bank", right. You're gonna get, we're gonna earn interest off it and you're gonna make that you know 0., I don't know 0.1 - 0.2% in a year and that seemed to be like really big and people were crazy about that. But the problem was it precisely like the bank controlled who earned what right and they could change it whenever they want and no one could do anything about it so what was the solution that you know, people - the investors insisted on and that was having a system, having a finance system where they could put in money, right and earn off it passively but it is something that but it's decentralized meaning no one can interfere with it and it's like working on like smart contracts and it's working it's like trustless systems and that is the thing of the future so decentralized finances specifically defined as that where you can put in money in any project you can make passive earnings from it and system is trustless no one can interfere with it no one can change.

Ecoinstant: Okay so this is kind of reminding me of our discussion about games so I put money in the bank and the bank is with their centralized database accruing interest to me. Where does that interest come from? I mean in the bank side they're probably lending it out they're earning it somehow but if we take that all the way back to the central bank where does new emissions come from in centralized finance?

Spiritsurge: So it varies from country to country. Most of the countries when they're in a state of quantitative easing, that's when your interest rates, you know, from loans are high where they basically insist some people taking loan. Now you're going to say hey what does loans have to do with putting money in your bank well the interest that it's earned from these loans is one of the ways that they use those that interest you pay off to people who have their special savings accounts or you know the special earning accounts that they have. It varies from country to country, if I were to take the country Saudi Arabia, since Saudi Arabia each bank has their own "investment", I put that in bulleted comments right they had their own investing like systems where people put in money and then the bank uses that however they want right and then you get a return from that or you don't get any return from that. So what happens in that particular scenario is that the money that is coming is it's balanced out it's coming somewhere someone is losing money or someone is paying extra so they're paying either interest on loan or they're losing money, money in these investment schemes right saying bank just says: "Hey the money's gone". You remember South Park episode I'm not sure if you you're aware of that there was this episode where they try to teach his, Randy tries to teach his kid to save money in the bank and what happens is he starts he puts the money in the bank right and the banker just says hey I put it in the investment scheme and your money's gone, right. It keeps repeating that saying that you know the money's gone your money's gone your money's gone essentially a bank run so that has to be sustainable if it's not sustainable, if everyone starts taking their money up right or if the you know the earnings at the payout are matching to what the bank can pay then that results in a bankrupt because some bank runs away with the money. So yeah it's a centralized finance is not as you know trustable as it used to be especially after the 2008 crash.

Ecoinstant: That was a big turning point for sure and I think it's no coincidence that Bitcoin was born right after that crash or in the wake of that. Now I understood and maybe this is coming from the United States perspective I understood that the Central Bank prints more money whenever it feels like and it loans it maybe at a very low interest rate to the banks who then loan it to somebody else at a slightly higher interest rate and in this way money enters the economy being loaned to us so at a certain extent the interest that we are getting on our savings account can trace its way back to Central Bank printing and the Central Bank printing the new emissions enter the economy through banks so basically through the richest members of society. Now these decentralized communities have new emissions they do produce interest but they programmatically or they contractually or algorithmically determine who's going to get the interest and that can be reviewed. Am I on the right track here?

Spiritsurge: Well yeah obviously I think what you're saying is totally in line with why everything was born why you know these decentralized finance has made such a big you know space in the crypto world. I mean it's a giant part of the crypto world, sure we're talking about NFTs last time but DeFi is just as big as NFTs is. We're talking about millions and millions of dollars here.

Ecoinstant: So it's a huge part it maybe even was the backbone of the last bull run, DeFi and so it continues to be big but we saw a whole bunch of rugs I guess you would say. We talked about rugs these were not slow rugs these were algorithmically designed rugs that eventually earlier later disappeared with the money. So a lot of people said okay it sounds interesting but it's completely dangerous we should never do DeFi. So I think between those two extremes we need to find the middle ground. Is this safe? Is this a place where somebody could put could treat like a savings account? I mean what are some of the heuristics you use when you consider if a DeFi project is a safe place to put some money?

Spiritsurge: Okay so one of the biggest things right and this is me coming from me who is a Dev right who knows Solidity who can understand smart contract code right so I can look at a code and I can tell if this project is safe to invest in or not but 99.9% of the people who are going to put money in DeFi have no idea if this project is safe or not. All they have is that is to blindly trust the guy who's tweeting and normally it's the guys aren't even doxxed, right. It's like someone is tweeting from an account and apparently has big enough influence people say you know what I trust this guy because he got something right once or twice and there take my money. But that is not the best way to do things so okay, so let's talk about what normal people heuristics people use right heuristics on all people use. So people say okay this is a guy doxxed okay he's doxxed does he have a company okay he has a company right, has he run a project before was it successful? Oh okay he has done that right, so that's like the normal people think. Now but when you're going to DeFi you have projects where the guys isn't doxxed and they say okay is the guy doxxed so he's not doxxed yeah okay so he's not doxxed so what's my next heuristic? My next heuristic is who's investing into this project which big name or which big YouTuber or which big influencer is investing in this project because it always assume that these big influencers are these big YouTubers are going to do their due diligence the due diligence that they can't do but that's not right either because these influences are YouTubers have been paid to shill the project and that's and what happens is you end up losing your money it's inevitable right you're very rarely get it right you're always doing liquidity for someone else. It's why so many people, so many people and I'm talking about 70% of the people who leave crypto is because they have become exactly exit liquidity for someone else in DeFi or in trading. So these like are massive you know dangers of DeFi that comes with that in terms of the heuristics I use I prefer looking at the code myself and looking at the energy report so a lot of people might not know this but there are companies like Paragon, drug free coins, that do audits on Smart Contracts right and these are publicly available you don't have to you know blindly just invest in a project. You go you see if the project is audited that's the first step if the project is audited. If the project is audited great look at the audit report, the audit report is broken down for the average layman of what's dangerous what's not and you know like for the sake of this discussion down the line I will go through one project right just to show you it's a DeFi project, a famous one, has resulted and essentially a rug happen it became a rug so I will run through that later down the you know this discussion but the heuristics that you need to look at is or is the project audited yes if it is not or if it is audited look at the audit report what do the auditors say? So that those are like those are like the first heuristics. Don't care if the guy is charming enough coupon was charming don't like think don't care if the guy is like a genius like SBF or you know a perceived genius right. None of that matters the only thing that matters is what does the code say, you are looking at DeFi, DeFi means trustless systems that means immutable smart contracts so that is what people need to look at.

Ecoinstant: Okay so that is great and I really want to do a deep dive on that in a future episode really get look into the audit reports and maybe even some code but let's continue here on a surface level. Let me talk about one very popular project UniSwap they made something called they kind of brought to the forefront something called liquidity pools which involves matching two sets of assets against each other and I've heard people refer to this as infinite liquidity, the old tool that's still really used in Forex are market order books and so the liquidity pool is a new way for assets to be priced and uniswap was one of the biggest ones that came out during the last cycle to do it, a lot of people have copied that the code is open source at this point. So and if I'm correct in this the liquidity pools charge a fee to swap so these the earnings are not necessarily based on an inflationary model. Is this a more sustainable way to DeFi do you think?

Spiritsurge: So the interesting thing about a liquidity pool right even if you were to take the current DeFi projects that exist. If I were let's say go let let's say I'm taking a decentralized project right. Let's say I take this project called classes right now sure I like do the DeFi thing I earn 2% on a daily basis okay and that's cool I get passive out okay but now where do I trade it. I have passive token where do I trade it I mean it's not there on any centralized, you know exchange it's not on binance, it's not on what we call coinbase. Where do I do it, what I do is I go to Pancakeswap which is just like uniswap has a pair built up with BNB I then convert using that tool and paying a 1% minimum fee to convert my classes into BNB the BNB which is which I will then change on the centralized exchange like Binance into BUSD and then you turn it into dollars in real life. That's the process so what liquidity pools have actually done as they have allowed the average Joe or the average developer to create a project and to create a way that you can turn your spending into a more of a centralized token I use the word centralized here like or stable coin like BUSD, BNB or ethereum. So that's that's what LPs have done and LPs are necessary or necessity for any DeFi project that exists unless of course you have that particular token on a centralized exchange like coinbase or binance.

Ecoinstant: Okay excellent point because getting listed on binance or coinbase is quite a process and usually costs a lot of money so what we're saying is that not only are liquidity pools an interesting tool which we might even talk about a little more about how they work but they're a way for small projects to get basically for free if I understand it. It provides some way to get in and out of the token, is that right?

Spiritsurge: Correct but one of the or one of the things I really need to point out here is that for these for these pools, the liquidity has to be provided by the little guy or someone has to put in liquidity. If you are unable to procure liquidity for this project your project will die there is no way survive.

Ecoinstant: Okay right so that is the key so let's talk about some of the terms and around liquidity pools so the first one is I would say depth the depth of liquidity how much liquidity is available and so if I'm understanding right a liquidity pool will always have 50% in one asset and 50% in another asset. So let's take a simple example like a stable coin pool, we've got tether and you mentioned binance dollar, binance USD so some amount of tether and some amount of binance USDs I mean there's both supposed to be worth a dollar so we can use simple numbers, let's say if there's a hundred thousand dollars of liquidity that would represent fifty thousand tethers and fifty thousand binance dollars, right?

Spiritsurge: Right.

Ecoinstant: Okay and so then anybody with a binance dollar wants tether can switch and anybody who has tether wants binance dollars can switch and so that liquidity can slosh back and forth. Now one thing about liquidity pools that I know most people struggle with and even are afraid of is impermanent loss. So do you have any thoughts about impermanent loss? I have some thoughts but I kind of want to hear as a developer what do you think of when you when people talk about this IL - impermanent loss.

Spiritsurge: So I'm just going to take a scenario whenever when a bear market is going to hit so you have a token which is you have like a total you know liquidity of $500 which is $250 from X token and $250 in stable coin. Now when the bear market hits, the price everyone is just you know rushing to sell because it's the bear market everyone's rushing to sell. So everyone starts selling the X token right they're either selling it on the market or they're exchanging it in liquidity pools. What happens then is to balance out the equal ratios the buy your value of Binance USD right turns more into the X token because the X token is obviously dipping away because people are exchanging that. So what happens is you are $500 right becomes obviously it drops it drops it drops and because the value of the token is dropping and the stable coin here has to match that value and you end up with you know $300 worth of stuff but you don't have 150 USD. You don't have that well you know equal ratio like you expected you're going to have this X a lot of X tokens right maybe the same amount that you had before but because the value is so inflated you have this huge amount of X tokens with a very low down value and you have this stable right that you were so happy with the beginning but now it's not even the same value that you were expecting when you put in liquidity pool. This results in impermanent loss because you now have this huge amount of tokens with an inflated value and you can't do anything about it except sell causing more loss for someone else this similar scenario replicates itself in a bull market right and that's when people are starting buying the token and it's the same thing and this is what this is what we talk about as stable coin. So let's talk about something that has two different X token pairs and none of them are packed to a USD right. What happens then? Well you're gonna have this huge problem where your tokens are consistently shifting themselves based off you know the value of the token and you could end up if you had $500 you could end up with less than a hundred dollars in the bear market because if everyone is selling the token the token price is low and the liquidity pool have to reflect that change so you might have the same amount of tokens as you did before but because the token values are still inflated now, the token volume is so inflated now everyone's selling it the value is just abysmal and that is a risk of, that is the risk of DeFi whether whether you're doing it on a bear market or you're doing it in a bull market there's always a risk impermanent loss is one of the many scenarios that presents itself you know to damage people. What are your thoughts on it since you have delved in so many liquidity pools?

Ecoinstant: Yeah I do have a lot of thoughts and I love liquidity pools as this new tool but because we're experimenting with this technology in a decentralized space and we've had the opportunity to watch almost everything that can go wrong, go wrong so let me back up a step so if impermanent loss it kind of makes sense intuitively if you think about it like this when somebody sells their X token for binance dollars they're taking binance dollars out of the pool and they're putting in the X token into the pool and so the more people that do that the price of X token will go down in dollars but so people are increasingly putting in more and more X token to take out less and less binance dollars and so you get to the point where it'll always be the case that the less valuable token you will end up with more of it. So in the case of a bear market this is the worst of all scenarios you end up with very little dollars in the pool and a lot of this X token but this same thing can happen in the the bull market so one of the tokens goes up and you think this is great but it turns out now you have less of that token you have more of the other token in the case of binance dollars maybe that's not so bad because you at least you have dollars and more of them but if you are matching two different X token pairs you are always going to end up with more of the less valuable token so there's some situations where this can be good but it always depends on you the person there's no JP Morgan that's approving these pools which pool is a good idea which pool is a bad idea. You must carefully select the pairs that you invest in so stablecoin is good on one half at least that mitigates the bull market risk where at least you end up with more dollars if the token goes up but in a bear market we have some serious risks either way which you may which you enumerated. I consider a good pool to be one where I don't mind holding more of either one of the tokens so let's say you enjoy a certain blockchain let's call it XRP Ripple I'm a big Ripple, I'm not personally big big into Ripple but some people are and good for them so if and we know that Bitcoin is probably one of the kings of the space so if you were to match you like Ripple you like Bitcoin if you were to match Ripple with Bitcoin in a certain sense you don't mind having more Bitcoin or having more Ripple because you believe in both projects so that is an ideal situation for liquidity pools and so I would just say be very careful of liquidity pools this technology is very powerful and I want to get into one of the reasons why it's so powerful. We talked a little bit about swap fees so liquidity providers can earn fees based on people needing to use the service, wanting to move from one side of the bridge to another, some of that has to do with arbitrage which probably is its whole a whole nother episode but some of that has to do with regular people moving their funds around on the internet between different projects so the swap fees provide value to the liquidity providers because they're giving a service but now additionally many liquidity pools will provide additional rewards in terms of inflation. So this gets us back to the central banks currently in the centralized system central banks print money and give it you know through the Cantillon effect, give it to the people closest to them they give it to the big banks who loan it to the smaller banks and but now in the decentralized world projects can target inflation to people that provide value. They can give it to team members they can give inflation to developers they can provide bug bounties and one of the places they seem to be providing value to is liquidity providers it's a recognition that liquidity providers are providing value and the theory is which I do believe in if we give new emissions to people that provide value there exists a case this is the hypothesis where we can give people providing more value than we're giving away so we can we can actually create a larger pie by targeting the inflation the new emissions to people that provide more value than they're getting back. That isn't always the case more than one project has diluted itself through inflation by providing that inflation to let's say poor value centers but the theory is this that there exists monetary policies such that we can give inflation to people who are providing more value than we are giving back to them. Do you have any real life examples where you think this has been done well?

Spiritsurge: Yeah so actually I'm just going to take care of it into our real life. Corporates and they give bonuses to their best employees right or you know they give larger shares to bigger investors bigger sleeping partners or sometimes a more active partner. So that's like a real life example of how things work just because the only difference here is in a decentralized exchange you're using your own economy right sure you can convert your dollars but you're just using your own token whereas in the real life you're using actual US dollars. So this is something that's been happening since forever and indirectly in one way or the other. In liquidity pools right and liquidity pools essentially was created out of necessity but now what's happening is that people are seeing how they can use it to further create utility for their project by giving you know rewards giving incentives for people putting in liquidity right and then now that the first layer was people creating LPs because of necessity because both the projecting to exit because they can't afford to in centralized, the next level was incentivizing people to put in liquidity you'll often find stable coin pairs on exchanges that literally just give out 10% APR but you'll find a lot of liquidity in their people reporting it like why would you want to put in something like a slap you see yourself or whatever oh sorry a BUSD you know TUSD or USDT pool why would you want to do that well there's an incentive for it please do that sure it's a 10% APR or 1% APR we don't care it's incentivized and then what happens is the layer on top of that is what you're talking about is you know percentage fees that these people get because there are people trading into the pool and then there's another level on top of that since people are ingenious and they are finding new and new ways to you know, incentivize things is adding a bonus percentage based on how many days your pool has liquidity in it so let's see you put your pool in let's say if you put liquidity in a pool in for a hundred days now well on the hundredth day you're gonna get 100% increase on the trading fees that you're going you're getting like a 0.1 trading fees that's coming to you there's going to be 100% increase on that and that is just you know amazing how people are utilizing something that was created out of necessity to something that is now a normal utility and then yeah now there's next level. There is further rewards for people who have put in liquidity in different things like if you go to app right, for those who don't know is an exchange service where you can take you know loans by staking something but if you already have liquidity in those pools you get a you get a like literally you don't have to pay any interest fees to take a loan and that's amazing if you want to you know do a quick exchange from one currency to another on from one chain to another. So that is just one of the utility percentages where you're talking about so there are like tons of other utility I know there are people who have received like for energy projects have received NFTs right from for their project or for other projects for putting in or providing liquidity for that particular pool because obviously it's a very important part, it keeps the sustainability for the project and the project doesn't have to die. So this topic about LPs the reward structure what can be done to create more or what can be done to create more incentives or you know how to use it further as a utility is a huge topic and probably talk to hours about that we should probably do another episode just for about that.

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Ecoinstant: Okay I want to get into gamified DeFi, so you mentioned several layers here and I think that is going to lead us right into this gamified DeFi so this is the cool thing about decentralization in the last bull run we really stress test maybe the first layer and getting into the second layer of these things but now people are building increasingly more complicated layered structures and it's really starting to get exciting for us spreadsheet guys but in a certain sense I wonder is this going to get too complicated for the average person? Maybe that's where gamified DeFi comes in some of this could be educational some of this could actually be a game where does your mind go when we talk about gamified DeFi?

Spiritsurge: So it's actually a very interesting topic. I came across this project what I did was it had this pig right and what this pig did was it ate truffle and then what happened is with selling those truffles you could buy more pigs right and then that now that creates a cycle where you have this ability to keep buying pigs that eats truffles and then you know that can be circulated. It's similar like similar concept there was another one where there's a fisherman catches a fish you sell the fish now you can decide whether you wanna buy more fishermen or have what you want to do with it right it creates a cycle about things so even if you have something very complicated right and all of these projects that I'm talking about aren't like it's not simple math. It is actually very complex because it talks about compound interest and you know compounding the effect of compounding which a lot of people say like the eighth wonder of the world. So it has already started in 2000 I think 20 was the first one that came out and that was like really famous and then you know things started coming out after that so what happens is now just your clarify these games that I'm talking about they you want you can't you know those truffles that you're getting like that the pig is eating, what you're doing is you're converting those truffles back into actual the game token right the game token can be called anything it's not going to be called truffles, it's going to be called something else right belongs to the project you could call it fish for all you care even though you're like has no relation to the token through the game itself but the fact is because it's gamified and because people are you know able to throw in not in one not two not I have seen projects that have thrown in four tokens four different type of tokens in one project and they are trying and they're balancing it through this gamified way and using LPs to manage the values of all the tokens right and you're gonna get complex yes but the way it's going to get complex is not because of the game part because there's a limit unless you are an actual game developer and a game designer, you are not going to create something that is really fun to play and you're going to have this you know tokens that you can really manipulate however you want, or the people however you want no what you're going to have is a system where you're going to have increasing amount of tokens in the same gamified cycle and you're going to find the developer or the owner of the project is going to find new ways to balance the prices of token in respect to it. So that's how the complexity is going to be important if the day comes when there is a game that's fun to play right and they and you know it can manipulate the person, the player to doing specific tasks you can create and this is my theory, you can create an ecosystem that is going to be sustainable and to the extent that there's not going to be a massive increase or decrease in to the value of the total. This is my belief, has someone done it yet no because you there is no way for anyone to protect how millions of people are going to respond to the market the same way like the stock market has been trying for 60 years trying to predict how millions of people are going to interact if a war happens or if this happens or if that happens and it's very seldom that the machines are the people get it right.

Ecoinstant: So many good points there so one thing I like that you said, first of all DeFi is gamifying but in a sense it's not really a game. Winning the gamified finance means you're making money I guess so really the scorecard is you're a financial thing but games are also heading in the same direction they're trying to financialize their games and since they are already games it's in kind of a gamified way so and I also like that you as somebody who builds games clearly admits that nobody has done this right yet. We don't know if we need four more years or ten more years for somebody to get this right but there are a lot of people working in the space and they're all after this Holy Grail of a sustainable game economy where the game is at the same time fun but people are financializing in the sense of maybe a sustainable economy doesn't mean that anybody goes to the moon but it does mean that when I'm done playing the results that I've earned I can sell on to somebody else get some of my money back, a rebate or if I've done really well perhaps get a little more money than I put in. So this is interesting it makes me think about Axie, so Axie Infinity I never really considered it a game although there was some gameplay, to me it seemed like a little bit more advanced gamified finance so you're you're pets produce love potion and love potion is needed to buy pets but you could also sell the love potion. I mean so would you agree that Axie really never was a fun game it was more of a gamified finance or am I being too harsh with them?

Spiritsurge: So Axie was the first of its kind that basically tried to go into the next level of gamifying stuff and they managed to create a turn-based system game that had you know that used the NFTs right the way they were supposed to be used but the problem was they created this system where people could only spend it on the same thing, right. The utility was consistent the utility never changed so what happened because of that was the price ballooning to the moon, right. A lot of people think oh that's a good thing, no that's not a good thing, that's a horrible thing for our project if a project price is going to the moon it creates attention and creates distraction, a distraction where the guys from Ronin right they had to end up firing some of their own guys because they were suspected and you know trading or trading their shares or trading company shares in different setups right and that was a distraction the attention is because their blockchain got hit by 400 million dollar attack and exploited. It brought in famous attention of hackers who saw that there was a security exploit in Axie in the Ronin bridge and they used that to exploit the system so having something that balloons the price to the moon for your token is never good. Axie got on to the next level they should have remained consistent with the development and they should have created more utility. If you have a game right it's the same thing, you have truffles you can only buy pigs well what's gonna happen if you can only buy pigs or turn into money right, you're gonna keep buying pigs it's the same thing here what are you gonna do you're either gonna turn into money are you gonna keep buying Axies and that's what happened people started buying Axies, breeding more Axies and again just to find that perfect you know actually with the traits that people can use to climb the ladder and get rewards. Again rewards a lot of earning, a lot of earnings with utility being minimal and that is the problem that gamified financing I think your perhaps in essence and concept are right with saying that this resulted in the same like any other project but if I were to actually look at the project itself in a bubble then it went to the next level it taught people what they need to do. It taught projects what they need to do, how to do it it's just they fell short because they got distracted and they they like infamous attention was created that brought in the bad guys and if there is any project that says oh we're not hackable, trust me, there is every project has a security exploiter or security flaw that cannot be dodged. Every project there's not a single project in the world that cannot be exploited you need someone on the spot right you need to have a full security team on payroll to actively take care of projects to ensure that they are not exploited in any way.

Ecoinstant: Another ton of good points there so one thing I like that you're saying is that at least in the game world, to the moon is not the goal, really what games should be looking for is stability and probably gamified finance as well. When the price goes to the moon, we're distracted it's less of a game and more of a finance project and now suddenly it's a honeypot, a honey pot is something that attracts ever more and smarter people to try and hack, to try and exploit and I think you're right, the funny thing about trustless is we can trust the code but hacks and new hacks get developed all the time based on incentives and so a larger pool of money they call this a honeypot it it becomes ever more attractive to spend time trying to figure out what the exploit is so and the last point that you made really good. So maybe I was a little harsh on Axie but it's somewhat true but the key is this is such a new space that every success which some ways seems like it turns into an eventual failure, is a lesson learned so we're still learning in this space the developers and hundreds of teams are doing the best they can and every episode becomes a lesson and so ever more advanced and complicated systems not necessarily complicated but complex systems are being developed based on the lessons of the past so this is a this brings me to a point that I mention all the time, new people come into the space this is the space this is great everything's exciting here let's do this project, wait a second let's review the best practices a lot has been learned, do not come into this space and think that you can make the same mistakes as past projects and that people won't notice. Everybody in this space is learning as we go but we're very aware of the lessons of the past and we're very intent on not repeating it. Again the counter-intuitive point that a game really shouldn't be trying to moon the token it should be trying to achieve stability is a lesson that I almost want to say is kind of new because everybody thought that Axie was winning when that price spiked up and and there was a lot of talk about scholarships and this is this is something that Filipino people probably people around the world but Filipinos get called out a lot, they're now this is their job, their job is battling and and breeding Axies and what a strange world and if we really analyze that what value are they providing to the world, right? I mean they could do wicked work as a virtual assistant on upwork and transcribe things, I mean that's real work but battling and breeding NFTs what is the value they're really providing and so that seemed to me unsustainable at the time it proved to be unsustainable but that doesn't mean that this whole space is without potential, there's a lot of potential and lessons continue to be learned. Are there any lessons best practices that we haven't mentioned today yet, anything that's on your mind still?

Spiritsurge: We've already mentioned it but I want to rehash it because this is so so much important, audit reports every token, every famous token on ethereum, on binance, on DeFi projects have an audit report. Go through the audit report it's very important I'm sure in the next episode I'll be able to like go through in detail about several tokens but even something like peep 2.0 right big token everyone's like getting into it and there's like a 11 million dollar market cap and a lot of people are investing in it is that a good project to invest in? In my opinion no because I went through the audit report and I found out that the owner of the project has 11 privileges right and there is a huge centralization risk, he can turn off the contract at any time he can enable or and disable trading at any time, he can change the buy and sell fees you know up to a five percent maximum, they can disable swapping in any of the liquidity pools and that you know is a huge thing. So if you see someone on Twitter saying I made money off peep 2.0 just keep in mind that tweet is bait for people to invest and become exit liquidity. Always look at audit reports I will I think we need to go through the section of audit reports as soon as possible so that I can tell people or tell what my findings are I can understand quality code right but there are already tools available since 2020 that people can look to see if a token is worth investing. So if you get alpha then you're not the first one just keep in mind if the order report says that there's a high risk of owner privileges that could mean you could get rugged pretty easily or that could mean you could become exit liquidity for the owner and I want like really really hate rehash this point. Go through the audit report, don't ape into a project because if an audit report is available you're literally a bloody ape for putting like investing in a project without going through the audit report.

Ecoinstant: Okay great points and maybe we should, let's do that next episode so you have some time to prepare. This is a topic that I am particularly interested in at going through with you, I am a person that does wait for audit reports, I have read some audit reports but I generally trust what something like Certifique or these big companies say because I'm not personally able, I don't have the skill set to actually go through the code. So I would love to walk that through you walk through that with you next episode let's plan that another episode that came into my mind and this was a deeper dive into specifically liquidity pools and terminology and considerations when getting into liquidity pools, it's one of my favorite things and something I've had a lot of success in but success identifying the things to avoid because not all liquidity pools are created equal. So I think this is very topical, very well timed that we do some of these episodes because a lot of excitement is starting to build again. BTC is trading sideways but development is still happening, bigger players are moving into the space a lot of new projects are coming back, old projects are starting to show up with updates again so I think this is really timely. Would you agree then Spiritsurge to be to prepare something for us to really dig into audit reports and smart contracts in the next episode?

Spiritsurge: Sure and I think it would be very very wise if we were to go through audit reports every week for newer tokens because there are tokens that are available that are coming out on a daily basis right. A lot of people think hey should I ape into this project, does this project have futility is this project something that's going to moon and I'm going to make a profit on it. I'm sure a lot of people have these questions and I think the one of the biggest things that people wonder about is hey how do I find tokens to invest in? So if by just by on every on a weekly basis going through the more than the latest audit reports of the latest tokens will just give you an idea of how to identify a project that have future growth and also will identify whether this project is something worth investing in to you know turn a profit in the bull market.

Ecoinstant: Fantastic that's a great idea. We may end up having to do this podcast twice a week this is fantastic now a little bit of housekeeping work for you all, make sure to follow us on Twitter and subscribe to our YouTube channel, the episodes currently are becoming available on YouTube one week after we publish them. We are trying to grow our presence if you're listening to this right now make sure follow the links in the description below, subscribe to our YouTube channel. Get after us follow us on Twitter. We've also discussed possibly as we work through some of these basic level things to open up maybe once in a while once a month, Twitter spaces where people can offer their questions. We have a lot planned for you, we're really excited about this podcast if this podcast is providing value to you, do the social things, follow us on Twitter ask us a question, leave a comment let us know what you want to hear from us, we are excited to be building this up at what we think is the right time to give maximum value back to the community this is not our first cycle it's coming up on my third cycle now and so we have a lot of information and we'd like to share with you if this is valuable do those social things give us a follow, give us a like and stay tuned for next week.