Valuing DeFi Through Cash Flows and Security Concerns

Dan Elitzer, investor at IDEO CoLab Ventures, and Will Price, data scientist at Flipside Crypto, discuss the yield farming craze. In this episode, we cover:

• the goals of protocols offering liquidity mining
• the goals of users yield farming right now
• whether users of Compound will have much awareness of COMP in the future
• how Compound is trying to dampen inorganic activity and properly align incentives 
• how incentives in one DeFi protocol can screw up another's such as changes in Compound's liquidity mining program causing Dai to lose its peg
• whether the activity created by liquidity mining is sustainable and how
• whether Compound is overvalued and how to determine valuations for DeFi tokens
• the security risks that come with trying yield farming
• how teams can keep their protocols safe given the composability of DeFi and the growing number of developments in the space
• whether the yield farming craze will cause the price of ETH to rise and why the prevalence of stablecoins might prevent that
• whether new DeFi tokens could push flagging layer 1s out of the top 10
• what will happen if even more Bitcoin comes to DeFi
• how the next big thing in DeFi might be trying to stack yield across protocols and eventually prime brokerage protocols

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Crypto.com: https://www.crypto.com

Episode links: 

Dan Elitzer: https://twitter.com/delitzer

IDEO CoLab Ventures: https://www.ideocolab.com/ventures/

Will Price: https://twitter.com/will__price

Flipside Crypto: https://flipsidecrypto.com

Total value locked in Compound: https://defipulse.com/compound

What liquidity bootstrapping pools are: https://medium.com/balancer-protocol/building-liquidity-into-token-distribution-a49d4286e0d4 

Dan on earning more from borrowing USDT than lending it on Compound: https://twitter.com/delitzer/status/1272642107128164354 

Tony Sheng on how yield farming works and how much you can earn from it: https://twitter.com/tonysheng/status/1274393189231689728

And his followup on the risks of yield farming: https://twitter.com/tonysheng/status/1274780457729617920

The purpose of COMP for governance: https://medium.com/compound-finance/compound-community-ownership-ee0ed1252cc3 

https://medium.com/compound-finance/expanding-compound-governance-ce13fcd4fe36

Risks of so much BAT being held in Compound: https://twitter.com/spencernoon/status/1276897377446776832?s=20

https://twitter.com/defiprime/status/1277026665952980992?s=20

https://twitter.com/devops199fan/status/1274732220192829441?s=20

Cyrus of MakerDAO concerned about the risks COMP poses to the Dai peg: https://forum.makerdao.com/t/upcoming-comp-farming-change-could-impact-the-dai-peg/2965

Dan Guido and Taylor Monahan on Unchained discussing DeFi security: https://unchainedpodcast.com/defi-security-with-so-many-hacks-will-it-ever-be-safe/

Twitter discussion on whether ETH price will rise due to yield farming: https://twitter.com/RyanSAdams/status/1274781676875452421

What will happen to other Layer 1s? https://twitter.com/Shaughnessy119/status/1274376237239189504?s=20 

Aquaponic yield farming: https://bankless.substack.com/p/aquaponic-yield-farming

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