In this conversation, Michael Bentley, co-founder and CEO of Euler Finance, shares his insights from his background in dynamical systems at Oxford to revolutionizing DeFi. He reflects on the 2008 financial crisis and its impact on innovations in decentralized finance. Bentley discusses interest rate design using control theory, the critical role of credit in economic systems, and the unique features of the Euler protocol. He also draws parallels between natural selection and the evolution of lending protocols, highlighting the importance of cooperation in both finance and biology.
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2008 Financial Crisis Experience
Michael Bentley's first finance job was at the Royal Bank of Scotland in August 2008.
He witnessed the financial crisis firsthand, observing the inefficiency and stagnancy of traditional finance.
insights INSIGHT
Interest Rate Mechanisms in DeFi
Interest rates in DeFi can emerge spontaneously through mechanisms like PID controllers.
These controllers adjust interest rates based on utilization, similar to a thermostat.
insights INSIGHT
Efficient Market Hypothesis in DeFi
While efficient market hypothesis holds true in the long term, DeFi users can be irrational in the short term.
Interest rate models require arbitrage, but arbitrage depends on accurate risk assessment, which is complex.
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In 'The Selfish Gene', Richard Dawkins presents a gene-centred view of evolution, arguing that genes are the primary units of selection and that they behave selfishly to ensure their own replication. The book explains concepts such as kin selection, inclusive fitness, and the evolutionarily stable strategy, highlighting how these mechanisms can lead to altruistic behaviors in organisms. Dawkins emphasizes that the 'selfishness' of genes is a metaphorical concept, describing their evolutionary consequences rather than any intentional behavior. The book has been influential in shaping modern evolutionary thought and remains relevant today[1][3][5].
This is my conversation with Michael Bentley, the cofounder and CEO of Euler and previously a dynamical systems postdoctoral research associate at Oxford.
Timestamps: - (00:00:00) intro - (00:01:11) early DeFi and experiencing the 2008 crash - (00:06:52) interest rate design and PIDs - (00:20:40) risk management - (00:28:27) sponsor: Splits - (00:29:10) macro view of the world - (00:32:27) the fundamental importance of credit - (00:35:47) Euler protocol design - (00:39:08) modularity and integration - (00:54:40) network topology - (01:10:55) natural selection and dynamical systems - (01:26:33) outro
Links: - Michael on X: https://x.com/euler_mab - Michael on Medium: https://medium.com/@euler-mab - Michael Bentley on the evolution of lending protocols: https://youtu.be/TW9Tv2Y0fkw - Euler: https://www.euler.finance
Thank you to our sponsor for making this podcast possible: - Splits: https://splits.org
Into the Bytecode: - Sina Habibian on X: https://twitter.com/sinahab - Sina Habibian on Farcaster - https://warpcast.com/sinahab - Into the Bytecode: https://intothebytecode.com
Disclaimer: this podcast is for informational purposes only. It is not financial advice nor a recommendation to buy or sell securities. The host and guests may hold positions in the projects discussed.
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