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DeFi needs more than ‘high yield synthetics’: Dragonfly’s Haseeb Qureshi

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Haseeb Qureshi is a managing partner at Dragonfly Capital, a well-watched venture capital firm, and the moderator of one of the top crypto podcasts, “The Chopping Block”. These are two roles that he assumes with serenity and coolness. In the aftermath of the Terra fiasco, Qureshi wrote one of the most lucid articles on why blockchain collapsed. After FTX, he rounded up his podcasting partners — including fellow Dragonfly Thomas Schmidt, Gauntlet’s Tarun Chitra, and Compound creator Robert Leshner — to do a series of informative episodes about FTX’s downfall. And as a VC, Qureshi has great foresight but is afflicted with the same problem that all humans share: an inability to predict.

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Yet, when it comes to understanding the current moment in crypto, it is more or less unmatched. Or, at the very least, he’s not afraid to go a little against the grain. At Consensus 2023, for example, Qureshi argued that CertiK, an auditing firm with a lackluster reputation, made a mistake by offering to reimburse the victims of Merlin, a decentralized finance (DeFi) protocol that Certik recently had. audited. “This is explicitly insurance,” Qureshi said, saying that if the decision were repeated, it would increase premiums for audits without necessarily improving their accuracy, as companies would expect to have to make payments. CoinDesk sat down with Qureshi to talk about the state of crypto venture capital, the regulatory environment, and why Ponzi schemes will always fail.

Read full Consensus 2023 coverage here.

How has your investment thesis changed in a non-ZIRP [zero interest-rate policy] environment?

The biggest change has been the demand for [decentralized finance]-sourced return. It was a big theme of what made DeFi attractive in a ZIRP environment. Now, risk appetite has totally changed, so to gain traction with consumers, you need to do more than just create high-yield synthetics.

You have said in the past that one of crypto’s particular selling points is permissionless innovation. Are there any emerging trends that have developed over the past year that you didn’t see coming.

No, I planned everything perfectly. I also knew you would ask this question.

Don’t like the Cosmos ecosystem?

The Cosmos community is an army of generals. A community founded on the basis of radical independence from other channels is, unsurprisingly, incapable of agreeing on things.

After FTX, there have been many calls to rethink the structure of the crypto market. Are there ways to redesign centralized exchanges (like separate negotiation from conservation or the addition of a centralized clearing house) that you would support?

Separating trading from custody is obvious. Major brokers like Hidden Road and FalconX already facilitate this. After FTX (and after the Binance Commodity Futures Trading Commission lawsuit), institutional players are no longer comfortable dealing with risky trades directly and taking counterparty risk. In this regard, we will see the same disaggregation of financial layers that you see in [traditional finance].

See also: Mike Belshe – SEC Custody Rule Would Be A Net Positive For Crypto | Notice

Do you think VCs should be subject to similar lock-up periods on token stakes as they currently are on equity stakes?

To be clear, participations are not necessarily blocked. There is generally nothing to prevent a company from selling its shares through a secondary transaction (unless the board specifically prohibits such sales). What usually stops them is the damage to their reputation. The same is true for tokens. But yes, in general we push for long blocks when we make investments, both for the investors and for the team.

In 100 years, will there be more or less money?

Fewer.

Is it better to be able to do what you want or to feel obligated to do what you have to?

It’s better to feel obligated to do the right thing. It doesn’t feel as good, but it leads to a better lived life.

Are there ways to design cryptosystems that have network effects without “Ponzi-like” attributes?

Ponzi schemes do not have network effects (they are not networks). They don’t even have economies of scale – that is, they don’t get easier to maintain as they grow. It’s the opposite: the bigger they get, the more difficult they are to maintain. This is why Ponzi schemes that are small can survive for a while, but the bigger they get, the more likely they are to burst.

Do you think mass automation will ultimately lead to increased productivity in the United States and decreased working hours for most people? Bonus: any thoughts on why the last century of technological progress hasn’t increased leisure time?

I think it’s going to increase productivity, but I think it’s going to have very uneven effects on time spent working. Poorer people will work less, richer people will work about as much, I guess, because rich people tend to like their jobs more. I think the way we measure increased leisure time is not well measured. We do a lot more leisure at work now than in the past. It is difficult to quantify one for one.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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