EP.15 [EN] - Jason Choi: How Spartan Group Pioneer in DeFi Investing / Spartan Group 是如何引领DeFi 投资的
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Hello and welcome everyone. I'm Mabel Jiang, the host of 51%, a podcast series presented by Multicoin Capital. This show is the exploration of blockchain's rapid development across Asia with a particular focus on the perspectives, communities, and operators based in China. My goal is to bring Eastern perspective to West and Western perspective to East so you can better understand the crypto's unique market structure and how these distinct communities think and operate.

This podcast will feature a mix of English and Chinese discussions. The language you're hearing now will be the language I use for the rest of the podcast. Stay up to date with my latest episode by subscribing to this podcast. Thank you for listening.

Mabel Jang is a principal at Multiquin Capital. All opinions expressed by Mabel or other podcast guests are solely their opinion and do not represent the opinions of Multiquin Capital in any way. This podcast is for informational purposes only and should not be construed as an inducement to make an investment or relied upon as investment advice. Multiquin Capital may at times hold positions in some of the tokens or companies discussed on this show.

Hello everyone, welcome back to the 51% podcast. I'm your host, Mabel Zhang. Today we are very honored to welcome Jason Choi, GPE of Spartan Group, to come here and join us. Hi Jason. Hey Mabel, how are you? Doing pretty well. Before we jump into the actual conversation, I would like to congratulate you guys raising the new DeFi Venture Fund. Yeah, why don't you give a little bit of background about yourself before we talk about that fund.

Yeah, for sure. Thanks for that. So I first came into crypto around 2018 full time. But before that, I was already kind of dabbling around crypto. I was working for a consulting firm and they had a blockchain arm at that time in New York. But as you can imagine, a lot of these corporate consulting firms, they tend to focus on private blockchains, which is not where the most exciting stuff is happening. So I was pretty excited to get into crypto full time and embrace kind of the public blockchain side.

and really explore these new protocols that were just being built up back in mid-2018. And I found a team of people called the Spartans, and they're based in Asia, and they're investing and advising different companies. And I thought it's such an interesting business. And I joined the team quite early on as their first employee in Hong Kong for the fund. And I have been there ever since, and it's been a good three years. Yeah, two and a half years.

Wow, that's a journey. That's interesting. So how did you, Kelvin, decided to partner together and really start doing more investment and becoming more active in this space? What are the mission and vision of the fund?

Yeah, so to give kind of the audience a little background about what Spartan is, we are basically two separate businesses, right? So we have an advisory that's based in Singapore and we help with mostly bringing Western crypto projects to Asia. So we think that Asia is such an opaque market for a lot of entrepreneurs in the West, as you will know. So we try to bring them to Asia and help them fundraise from strategic investors. And most recently, we've been more involved with

advisory, especially as it pertains to kind of M&A type of transactions. So we were involved in the sale of Blockfilio to FTX and the sale of part of the Deribit equity to some of the funds in Singapore as well. So that's the advisory side. Myself, I focus 100% on the other side of the business, which is the investment side. So initially that business was myself and Kelvin, mostly in Hong Kong. And we recently brought on just six, seven months ago, brought on Darren, who used to be

an early employee at CoinGecko to be our analyst as well. So how I met Kelvin was basically pretty serendipitous. I met him through a friend who connected me with Casper and Melody, the founders of Spartan, who then connected me with Kelvin. And back then the fund was actually just being set up, which they just had the legal structure set up, just had the kind of money just come into the fund. So I managed to skip all of the fun parts of the fund setup and dive right into investing with Kelvin. And

That partnership is really interesting because Kelvin came from a very experienced background. He spent 20 years at Goldman Sachs as one of their top analysts, and he was a partner leading the equity research department in all of Asia. And after that, he spent two years at a sizable hedge fund called Indus Capital Inc.

So he brings a lot of the traditional risk management experience that I didn't. And he kind of brings a lot of the things related to investments that I didn't necessarily know to look for. Because as a relatively young investor, there are things that I don't even know I don't know. So I thought it was very important for me to partner with someone who has that lifetime of experience. And I will bring in that kind of crypto nativeness, that crypto native network and crypto native knowledge and complement the skill set.

So it's been a pretty fruitful partnership so far. And we're really excited to raise our second fund, which is DeFi Venture Fund, as you mentioned. Cool. Interesting question. Why the Spartan the name? I mean, this kind of reason I wanted to ask was because, you know, for Synthetix, you know, Spartan was also the name of their followers. I was curious, why do you guys also name yourself Spartan?

Yeah, a lot of people thought it was because we were big investors in synthetics or they think there's some relationship with the Twitter account DGen Spartan, which is, you know, highly followed Twitter account. But it's to do with neither of those things. I think the founders came up with that name because they empathized with the culture of the Spartans. So the Spartans were, they were kind of a warrior culture that really emphasized the

I guess, kind of resilience and discipline. And they thought that the name really resembles the kind of ideals they were aspiring towards. And also, I think the other side of that is, you know, as traditional finance folks coming into crypto in the heart of the kind of

bear market back in 2018, it was not a popular decision. You don't see a lot of traditional finance guys coming into crypto as you saw this year. So it was a little bit about kind of me against the world type of mentality. And I think it was pretty well kind of summed up by the Spartan culture.

Yeah, I actually started, I think the first time we met each other was through your podcast. Yeah. That was actually a pretty fun one. Actually, I had my first ever episode experience, sorry, podcast experience on Block Crunch. So thank you for that.

I mean, now that it is a very widely listened podcast, I'm curious, how did that experience help your investment experience? Yeah, no, thanks for coming on. I think you're probably the only guest who's come on maybe twice or three times just because there's so much you can share. But yeah, the podcast is interesting because...

I initially wanted to start a podcast that's similar to this podcast called 20 Minute VC by Harry Stebbings. And it's the most followed podcast in all of venture capital period. So there's millions of people around the world listening to it. And I thought, well, this is a really smart model because what Harry did was he started this podcast and he raised the fund on the back of that podcast. And through that podcast, he's able to, number one, kind of get connected to all of the big

VCs in the world, many of whom became his LPs. And number two, get a huge network with founders. And number three, also provide a platform for the founders that he invests in to kind of publicize the products and companies. So I thought it's really interesting. I've never seen a kind of investment model that kind of spilled on the back of a media property. And I thought this is actually a pretty good way for me to get into this space.

And part of the reason I started it was also because I wanted to learn more about crypto and I've exhausted all the books that I could read, exhausted all the medium articles. And I wanted to reach out to the people who wrote those books and wrote those articles. But it wasn't easy to get them to talk to me because they're all busy people. You know, everyone in crypto is 24-7. So in order to get them to talk to me, I need to give them an excuse. Basically tell them, hey, I will

publicize your fund or your project. And in return, you just need to talk to me for an hour and let me ask you whatever. So that was basically how the podcast started. And I was really, really fortunate that folks like Adam Draper, Chris Berniski, Meltem Demirors all said yes through my cold emails. And it kind of just started snowballing from there and turned into what it is today.

Got it. Very interesting and very smart of you, I can tell. It kind of reminded me of what Mark Andreessen said about A16Z. They basically said, we are not an investment firm. We are actually a media company. So really like this thing, what you've been doing with BlockCrunch definitely kind of shows part of that strength.

So now that we've talked a little bit more about yourself, let us switch gears and talk about the new fund. Can you briefly describe what the fund is like? What are the strategies and also some of the mandates?

Yeah. So the story for the fund is Spartan initially started as a crypto hedge fund. So it means that we can buy tokens on exchanges. We can buy through OTC or invest directly in the teams. It's really flexible in terms of what we can do. And we have a very flexible horizon as well. You know, we can have trades that are very opportunistic, that are catalyst driven from one week to two weeks.

Or we can have longer term investments, which is actually most of our investments. And these things can be, you know, years, months to years. So through that process, as we started looking into projects with a more long term perspective, we realized that a lot of the alpha was really in finding teams that will become core pillars of crypto in the future and betting on them early on and developing a relationship with them very early on.

And that resembles more of a venture model. So while a bread and butter for the most part is still kind of a main fund, we realized that we've been looking into so many deals, so many early stage deals with longer term lockups that simply didn't fit with our liquidity mandate for the main fund. So we wanted to set up a separate vehicle that allows us to be much more patient with our investments and allow us to hold from three to five years in order for the thesis to play out. So

That's part of the reason why we started toying with the idea of a venture fund. And in terms of why it's a DeFi-specific venture fund, and that's primarily because from our experience in investing since 2018, we realized that while there's a lot of really explosive ideas and world-changing ideas out there related to Web3 and the decentralized internet and the world computer, a lot of these things are probably still five, 10 years out. Whereas what we're seeing today, that users are actually paying fees to use

is DeFi. We're starting to see that if you analyze the numbers, we're talking about hundreds of millions of dollars in fees that users are paying to use experiences that are still subpar compared to Web2.

So when people are willing to pay to use something that is not a perfect user experience, it usually means there's pretty strong demand. So we identified pretty early on that this is the breakout category for crypto. This is the lowest hanging fruit. After value transfer, it makes sense for us to build markets around that value for kind of DeFi to emerge from that.

So we started investing quite heavily in 2019 into DeFi and decided we wanted to go even earlier on and make a bigger impact with founders in the earlier days. And that's why we kind of started this DeFi venture fund. And that's a little bit of our strategy in terms of our size. We're about $50 million. So we make anywhere from, you know, $250,000 to 500K checks in a typical investment.

And if we are really excited about the project and there's an opportunity to lead the project, we could invest in larger sizes than that. Yeah, actually, the idea behind you guys setting up the venture funds, we share the same experience. So I remember back in 2017, Multicorn was also set up as a hedge fund.

And then as the company grows, especially late 2018, at that point, it was relatively beer cycle, but there were still very, like a lot of affluent of the early opportunities around the world. So at that point, they decided to like actually set up this fund. We called it Opportunities Fund because essentially there are a lot of interesting small opportunities and then long, long lockups for companies

the investors to invest in. And then we kind of started to run two funds at the same time, which is the main fund and the venture fund. So it's essentially very similar to what your experience was. So then now I would like to talk a little bit more about the criteria and then the way you judge the projects in DeFi. So when you look at the projects, what are the factors that you take into consideration? What are some of the qualities that you look for?

Yeah, so I think for us, because we're investing in so early stage, the founders matter the most. So I'm always very curious about the motivation of the founders, right? Because in crypto, you often get the promises of quick riches. You know, we all know people who made a lot of money from bull runs. And that tends to attract a lot of very opportunistic people. So we want to make sure that the founders we back have a very long term view, right?

I was actually reading this book by the founder of Hill House Capital, Zhang Lei, and one of the criteria that he looks for in entrepreneurs is this kind of grand vision for the future. So that's really what I'm trying to look for. I'm not trying to look for people who are building marginal improvements on existing DeFi products. I'm trying to find people who want to build products that will be the core of this entire DeFi movement.

And we try to balance that with practicality. We try to balance that tactically by asking them, what is your go-to market, right? Is this just a pie-in-the-sky idea, or do you actually have a way to bootstrap the initial user base? So it's a constant battle between the two where we want an idea that's big enough, but we also want an idea that can break into the market today, where users will actually care about today.

So I'd say that the vision for the entrepreneur is number one. And the idea actually is secondary, right? Because the successful protocols, they rarely resemble what was initially pitched. They always have some sort of change in the middle. So I'd rather bet on the entrepreneur's ability to pivot throughout the journey rather than kind of bet specifically on what they proposed, the specific idea that they proposed in the early days. What you said actually reminded me of Alpha.

It has a very excellent team. All the talents within the team are really, really good. But at the same time, of course, they started with this simple idea of providing leverage for yield farming. But essentially what they're tackling was actually one of the hardest problems, how you provide high yield for ETH holders. Because

within the existing DeFi world at that before they launched, there was actually no such place for people to seek for that. And then they basically just kind of matched this demand and supply in between, and then really iterate very fast. And then also, you know, observe the constantly observe the new demand from the market and iterate and then deliver. I think that's exactly what you were describing. So what are some of the

Winning cases in the past year, I mean, Elfo is definitely one. But are there any other ones that you'd like to point out? Yeah, so we actually were quite early on investing in some of the core DeFi protocols that users love today. So things like Aave, Synthetix were quite early on as well. Sushi were quite early on as well. Things like Y-Earn, etc.

And I love that example about Alpha because they were one of the more contrarian bets. It wasn't a very, very kind of hugely oversubscribed private investment. But and the idea at the time, it wasn't very clear that levered yield farming was going to be a huge thing, because even though we know the crypto natives love leverage, it's you

people were already doing it, right? They were already borrowing money on Compound and then doing levered yield farming. It wasn't clear if they wanted one platform to do it all for them. So it wasn't as clear as it is today, but then we spoke to the team. We're really impressed by the way that they think about building all these products and tying them together and accruing all of the value to one token. We're really impressed by the execution speed of the team. I remember that

it was during the race that they were building these products and they were shipping as they were raising. So that was something that I haven't seen before. So that was a huge win for us as one of the kind of earliest investors in them. But I'd say that for some of the other investments, things like Aave, we invested in them when they were still ETH land. And part of the reason why we did that was because we also noticed the execution speed of the team, right? So we compare them to the major companies

comparable project in the space at that time, which is Compound. We realized that in terms of the asset selection, in terms of the new features and integrations with other projects and also borrow volumes, they were growing at a much faster pace than Compound, even though the valuation of their token compared to Compound Equity at that time, there was a pretty significant gap. So we thought that the market was underpricing the ability of the team to ship fast and execute.

And we replaced a kind of meaningful bet there. And that paid off quite well as well.

Interesting. How about synthetics and sushi? Well, let's start with synthetics because I was curious. I mean, I think that one was also relatively controversial, but maybe not to you guys, but definitely there are very strong voices on Twitter or on some of the other social media about how the system wouldn't work and will crash. So I'm curious about your thought around that space.

Yeah, so the reason why people think synthetics doesn't work, so for the benefit of listeners, basically synthetics is a collateralized

a debt pool. So you stake your synthetics token, the native token, and you mint these synthetic assets that are collateralized, heavily over collateralized by your collateral. And then you basically re-denominate your debt in the debt pool. So you can mint maybe a USD exposure and you re-denominate that to maybe an ETH exposure. And that's considered basically trading a USD for ETH. So that's basically how trading on synthetics works. And the reason why people with

thought it didn't work was a few things, right? So there's the fact that it was heavily over collateralized. It was like 750% of that time. So it's very capital inefficient. And people also thought that there was some sort of kind of Ponzi-esque element in the token design where you are basically staking a huge part of the token supply to earn a high token inflation, which is denominated in the native token.

So I hear all those concerns. I think for me, it was actually the first example of successful liquidity mining, even though a lot of people attribute it to compound. Synthetix was really the project that pioneered that idea. And to me, I wasn't really concerned about the token model because to me, it's really a short-term kind of user bootstrapping device for them. And what really drew me to the project really comes back to the team as well. I think Cain,

It's one of the most aggressive entrepreneurs in the space. And in terms of the integrations that they have shipped, you know, they're one of the first projects to really experiment with optimistic roll-ups as well with layer two. So that was partially what kind of solidified our conviction in the team as well.

And I think just in general, the idea about a zero slippage trading was also quite novel to us because the way that it works is unlike Uniswap where you're actually swapping one token for the other. On Synthetix, you're just re-denominating the unit of your debt. So there's no slippage incurred there. And to me, that's a really interesting idea. Now, there are some kind of trade-offs for people who are staking your Synthetix tokens.

For instance, if the entirety of the debt pool is Long ETH and you're minting SUSD, you're de facto short the entire pool. So a lot of users may not understand the risk they're taking on when they do this minting. But the synthetics community has been quite active in kind of educating newcomers. And that's another reason why we were excited about them, because we just hang out on the Discord and realize that this is probably one of the most active communities ever.

we can see, we have seen in DeFi. And I noticed that Paradigm, one of the largest funds in the space, recently also invested in Synthetix. And I know that they have had some vocal critiques of the Synthetix model before on Twitter, but seeing them invest is interesting. I don't have insight into their investment process, but I'm guessing that

They're more likely investing in the community and the team because they bet that since everything is governance driven now, they can probably change any part of the model they don't like. But you can't buy a community. So that's why that's a little bit of a ramble. But yeah, those are kind of some reasons why we're excited about the synthetic team.

I think you point out a very interesting point about the community and the moat. I think in this space, there's no other space like this that has extreme emphasis on the moat that the community created.

And I think you might be right. I think they've been having some concerns and even ourselves, we're actually having some concerns around, you know, if let's say this token itself, the price goes down and then keep going south, then there's like that spiral. I think that was like one of the biggest concerns from a lot of the other boutiques.

But at the same time, I think it's really, really hard to bootstrap the community, you know, without some sort of organic growth at the beginning. I think they are also winning because they were early.

they have enough time to have this robust community around them and then really to have the most. I remember even Kang himself, like he pointed out on Twitter to one of the fork and saying that you can fork our code, but you cannot fork our meme. So they were really able to ride with this meme of Spartans and the Spartan spirit. I thought that was pretty, pretty interesting.

How about sushi though? I mean, sushi was definitely also very controversial at that time. I'm curious, like when did you guys started to feel bullish about the project?

Yeah, so I think that's a great question. So when did we start feeling bullish about our project? In the beginning, it was an interesting experiment for us. It was one of the first major vampire attacks that seemed like it was working. And to be quite honest, in the early days, we weren't very confident because we thought, okay, there's a lot of the TVL, a lot of the collateral that was locked in the platform is because it's incentivized by this artificial sushi inflation. And it wasn't, you

representative of actual adoption. I think, and then that whole Nomi Chef incident happened. But then I think after that,

When we started realizing that the team is actually building features that Uniswap, which they copied from, didn't have, and they have this incredibly rich roadmap that comprises of other products, including lending protocols, margin trading, cross-chain integrations, we realized that they actually have a separate vision. And the way to think about it wasn't really a Uniswap copy, but rather a community-owned version of Uniswap.

So at that time, we started getting very excited about the idea. But what really kind of made us have really high conviction in the idea is looking at the revenues that they're generating. Because currently, Uniswap generates a lot of trading fees, but the fees do not accrue to the token holders. So the token really is just there for governance purposes. Whereas for Sushi, Sushi holders were at one time, I think,

Maybe like 30% yield just from the trading fees alone. And today, I think just yesterday, they made about $1.5 million in revenue. And in the past 30 days, they made about $45 billion in revenue. And that's partially distributed to token holders.

So from a revenue basis that actually accrues to token holders, we think they're incredibly underpriced. So that's part of what gave us the conviction on the kind of valuation side as well. So once we had that view on the team and the vision, and once we had the view on the valuation, that's when we have enough conviction to kind of size big on this bet.

Interesting. Interesting. Yeah, I mean, I personally like sushi a lot. I guess I don't have to emphasize here. People probably know about it. I think they are serving the underserved community of Uniswap.

I think still by today, Uniswap was still quite American-centric. I mean, there are obviously a lot of Asians are using it, but I think there are a lot of features that either you call it degen native or, you know, just some of the extra features that Asian traders demand was actually going to be delivered by Sushi. So I thought that was pretty interesting. And then also, you know, you pointed out the fact that they are laser focused on driving

values into their token, which I agree. I will actually even add to that comment about the fees on their own swap. They're actually running all these experiments on other chains. And I think once Marky kind of pointed out that if

there are some other versions that they deploy on other chains. They will also try to drive that, like bridge that back to the XSUSHI. So I thought that was very, very impressive. And then shows the kind of willingness of that SUSHI community wanting to make sure all the SUSHI holders got the value accrual.

Yeah, I think that's a great point because I think that's what separates VC mentality from crypto VC mentality. I think a lot of traditional VCs, they will scoff at the idea of startups paying dividends out of their equity from day one. They'd rather startups reinvest everything they earn into growing the startup and bootstrapping their early stage users.

So that's very kind of traditional venture mentality and it makes sense for scaling businesses. But I think for like decentralized protocols, it makes sense for you to keep token holders incentivized for you to at least give them a part of the fees they're generating. So obviously many of these protocols

in DeFi right now, they don't share their fees with their token holders and token holders are really just participating with the expectation that eventually when this thing grows big enough and if we do decide to convince the community to give us part of the fees, then we will be rewarded for our work today. But I do think that there is an argument to be made for rewarding your community right now, rewarding your token holders right now and giving them a real-time feedback loop for their participation.

And I think it shows in the governance as well. The governance community for SushiSwap is one of the most active. And I do think that there's a strong argument to be made there.

Absolutely. Actually, this is a really interesting chicken and egg problem. Some people were more thinking like if you were to bootstrap your community and make it very strong, the first ever thing you want to do is actually have your community make money. That's probably not going to be agreed by a lot of other people, but one of the interesting examples was Lynx.

A lot of the early token holders, they made a lot of money. So they're also becoming more and more loyal as they continue holding the token and then the token value appreciates.

So I thought that was a pretty interesting point. I just wanted to echo that point. Yeah, I think people don't like to admit this, but then making your early adopters rich is very important to crypto evangelization because there's so much noise in crypto, especially because a lot of these protocols are really run by communities with maybe no centralized teams or with the intention to face at the centralized team. So you're really dependent on very ardent supporters of your protocols.

And even though a lot of people don't like to admit it, it's really the protocols that made their early adopters, especially if they're not kind of private round investors, made their kind of early community investors really rich that have the most ardent and vocal communities that are able to drive governance, that are able to force these partnerships to happen and integrations to happen. So, you know, Lynx is a great example, but there are a lot of other similar examples for better or worse in crypto as well.

Absolutely. I was going to ask you, so we've talked about the winning cases for you guys. How about the misses? I'm sure all the successful funds have some misses. Yeah, so I'd say that one of my biggest misses in my career is passing on the FTX private round.

When we first saw the experience raising, that was back when FDX was first starting out. I think it was just a paper at that time.

I think there was a lot of hesitation about whether a new exchange could potentially take liquidity away from these larger exchanges. And at that time, because of the relationship between Alameda and FTX, we weren't sure what it meant to have an exchange with its own market maker. We weren't sure that it's closure. So we thought, OK, this is probably not going to work out. And obviously, we were proven incredibly wrong now.

I do almost all my trading on FTX. We're huge fans of the FTX team. Some of our former colleagues actually went to join FTX as well. And we've supported FTX in obviously the portfolio acquisition. And they've become one of the fastest shipping teams in the space.

And as it turns out, the thing that drove some hesitation about that investment was actually the thing that made them quite easy to bootstrap the users in the first place, which was having their own market maker to provide liquidity in day one.

So yeah, I think that's hands down the biggest miss of my career so far. But I'm incredibly impressed and in awe of what the FTX team has done. Every conversation with them leaves me impressed. And the work with Serum is also incredibly interesting. So yeah, I'm huge fans of the team. Yeah, I very much echo to you.

So how about the competitive edges that you guys have? How would you pitch to the founders if you were to make an investment into a team? What would attract them to let you guys invest? Yeah, so I think it's three major things. So number one is there are not a lot of fundamentals-driven funds that are completely based in Asia and Southeast Asia.

So, what we have done since 2017, 2018 with the advisory arm, we can bring over to our portfolio companies and we do that, which is helping them tap into strategic partners across Asia and find out what are the right people to talk to, be it exchanges, investors, other projects. So, helping projects navigate the Asian market is our bread and butter.

Number two is also that crypto nativity, because we've been investing in liquid markets. We have the flexibility in our mandate to do things like staking, farming, trading, liquidity provision. We are users of DeFi first. So compared to say,

more traditional venture fund structure where the mandate might not allow them to do things like yield farming or even interact with some of these DeFi products. We have a much more native understanding having come from a liquid market background. So DeFi founders find that very helpful. And that's part of the reason why we choose to focus on DeFi as well, because that's where our expertise is. And that's where we kind of bring our experience of traditional finance in as well.

And number three is we're also very vocal evangelists of the products we invest in. So myself, as you mentioned, I host Block Crunch and our analyst Aaron hosts a telegram group that is widely followed by industry folks as well. And we're quite active on social media platforms and social.

We're very active with evangelizing our portfolio companies to other investors and to fellow founders as well. So that's something that we pride ourselves in, in that we really try to help our projects in the early days bootstrap companies.

a prospective first kind of class of users. And I think just one final thing to add there is we're also, you know, very hands-on when it comes to investments. So we've had a few situations where our portfolio companies had crises and we were the first people they called and we just worked with them, you know, throughout the 48, 72 hours after the crisis to handle it.

And, you know, I've heard great things about you guys as well. And we've actually, you know, talked about this when it came to Alpha as well. So, you know, that's what I'm talking about there. But yeah, so this is something that, you know, we're quite experienced in as well. You know, we really stick by our founders. We're not the type of fund to, you know, just sell an investment when something goes wrong. We're the fund that founders call when something goes wrong.

Absolutely. No, I have a lot of respect for you guys. I know those things that you guys have done. So I thought that was really, really respectful.

Yeah, Darren's Telegram channel, I check that all the time as well. Today, there's like a crash in the market and I was looking at the anonymous poll. So I thought that was a pretty interesting one because it gives you instant feedback from the market. So I thought that was actually more interactive than some of the email subscription. You just subscribe to the newsletter or whatever, but those you don't get feedback.

So I thought Telegram channel was also one of the things that was very, very unique. And then I appreciate you guys doing that. So yeah, I would like to switch here a little bit, talk about DeFi, but multi-chain DeFi, because I think this is one of the hottest discussed topic right now in the space. What other ecosystem other than Ethereum are you guys bullish with?

Yeah, so we're quite excited about Polkadot. And we've been quite early investors into Polkadot. And we've had a pretty good relationship with the Polkadot guys as well.

Um, and primarily because we just see a lot of organic demand and not just from speculators, but from actual builders, right? Especially out in Asia, we see a lot of people trying to build these, uh, new protocols. And one of the teams that we invested in early on was called Akala, which is building a DeFi hub on Polkadot, which we're pretty excited about. Um, and you know, one, one that we're watching very, very closely that we've actually worked with on the advisory side, uh, is also Solana. And you guys definitely know a lot more about them than we do, but, uh,

The funny story here is that I actually met Anatoly, the founder of Solana back in 2018, when there was still a white paper. And I invited him on to BlockCrunch. And admittedly, I really had no idea what he was talking about, like half the time. But I think in retrospect, this was a true breakthrough, what they're working on. So I'm quite excited to see the CRM ecosystem happening there. And I think just a broader point about cross-chain is that

I think a lot of people expect layer two on Ethereum to be the be-all and end-all for DeFi. But there are some things that are fundamental to the UX level, such as exit games when it comes to optimistic roll-ups and these bridge loans that people are proposing as solution for those exit games that are just suboptimal for me as a user of DeFi. So we're keeping an eye out for things like ZK roll-ups, but I think those are probably still quite a...

You're quite far away from being production ready, whereas we're starting to see actual work being done on cross-chain pegs between things like Solana and Ethereum, Polkadot and Ethereum that provide a reasonable user experience. So I do think that the probability of having a multi-chain future is quite high.

Yeah, I was going to ask you something more spicy. So basically, a lot of people were talking about buying smart chain. I mean, obviously, there are a lot of the youth axes on Twitter. They dislike that. And obviously, there are some other friends of ours in Asia. They're actually quite bullish. How do you see the positioning of buying a smart chain? Yeah, I think something like buying a smart chain...

Because they do have the ability to close that bridge. I remember when the volumes were starting to get too high, they did gate that bridge, which was quite funny because that's antithetical to DeFi. But I do see a very specific niche for them to fit into. It's not the future that I'd like to see in DeFi. I think DeFi's whole value proposition is

kind of permissionlessness and trustlessness. But having a centralized aspect doesn't necessarily mean that it's a useless product, right? It's clearly not because there's actual volumes happening on PancakeSwap. There's actual borrow volumes happening on Venus. So there is a subsector of the market that doesn't really care about decentralization as much as say at crypto natives.

So there's a clear sign of product market fit there. But in terms of where that's going in the long term, so going back to that kind of grand vision, right, whether this kind of C-DeFi movement is a niche within DeFi or if it's actually the superset of DeFi, I still haven't fully made up my mind about that, but we're keeping a very close eye on that.

I see. Yeah, Leslie Lamb and I, we chatted about it in her podcast. And then also I wrote a bunch of Twitter thread there as well. My general view of this is actually...

I think it's net positive in the sense that it definitely gives a lot of people a low-cost opportunity to try out different things, how it works in DeFi, at least from the product experience perspective. I mean, admittedly, it's not going to be exactly the same because it's not permissionless. But let's say you actually send some BNB or some other asset onto the contract. You can actually...

take it back. Or if you kind of lost some stable coins, you actually can try to get it rescued instead of like on DeFi, it's actually much more complicated than asking the help of finance. And at the same time, I do think

you know there's a lot of a lot of projects they're trying to deploy their contracts smart contract and see if there is product market fit and then they i mean if if you try to deploy a full contract on on ethereum right now it's probably going to be like 15 to 20k that was pretty expensive so i feel like this is almost like i i know this is probably not the best analogy but some people think this is like kusama to to polka dot well except that it's not

It's POA, it's not fully decentralized. So I thought that was actually a pretty interesting analogy because indeed there are people deploying things and try out a product market first on finance smart chain. And then in the future, if they see there's actual demand for that, they'll deploy it on Ethereum. So I thought that was pretty net positive, at least from my perspective. Mm-hmm.

So I guess we are coming towards the end of the podcast. I wanted to chat with you about your view on the next big thing in DeFi because you did talk about at the very beginning that you guys like to invest in the primitive or the essential pillars within DeFi. So what are the next big thing? And in your opinion, what are some of the necessary building blocks and Lego in the making?

Yeah, so I think a few obvious things would be under-collateralized lending. So right now, a lot of the debt is still over-collateralized. So it's quite capital inefficient. But if you see what's happening between Alpha Finance and CREAM, Iron Bank, that's quite interesting, where you have inter-protocol lending that's under-collateralized. And there are models for completely un-collateralized loans that are coming to market quite soon that I'm quite excited about. Number two is also kind of risk-trenching.

So there's always been a lot of discussion about how do we bring institutional capital into crypto? How do we bring people who are not at the rightmost end of the risk spectrum into crypto? And one of the ways is to offer them fixed returns, fixed rate returns. And one way to do that is by risk tranche. So there are projects like Saffron that we're really excited about. They're creating these kind of risk tranche products.

And I think that the final thing here, it's probably less of a new primitive, but this idea around a super app, basically a one-stop shop for a DeFi user to use any type of DeFi utility they want.

Because in my mind, I think a lot of these DeFi protocols will probably look the same or look quite similar in the future, where all of these protocols are fighting for the same pool of collateral. And once you have the collateral locked down, you can do whatever you want with it. You can use it as margin for...

leverage trading, you can use it as collateral for lending. You can re-hypothecate it for whatever you want. So I think there will be a huge competition for this type of collateral. And a lot of that will come from how well you can lock the users down. And that in turn is a function of your user experience,

your user interface. So that's why we're also excited about projects like 1inch because they are trying to build this kind of one-stop shop for DeFi. And you also see these other projects like Xerion, Zapper that are trying to do something similar as well. So I'm pretty confident that we will see some sort of a super app emerge from that. So I say that those are the three main kind of quote unquote new things that we're keeping an eye on.

Absolutely. I think the third one is also quite interesting because I think aggregator people have problem with sometimes the value capture. But I think, you know, at the end, I think I very much agree to you the point that, you know, in the future, there are a lot of protocol. There will be a lot of protocols like fighting with each other and trying to get user attention to whoever really competes.

kind of deliver the kind of aggregate experience to users as front end, they're likely to get a lot of, you know, incoming and it's their decision then to decide like what traction they'd like to allocate to where, which I think it's super powerful. And to that, to some extent, I think that's also another way of CD5.

well, rather than just running DeFi on the centralized or relatively centralized blockchain. So I'm pretty excited about that.

Cool. Thank you so much for coming on today. I mean, you've shared a lot about the thesis and strategies of Spartan. I think our audience definitely can benefit a lot from that. So definitely stay in touch. And then I'll post your Twitter handle and some of the other social media below in the show notes. Thank you, Jason. Yeah, definitely. Thank you, Mabel.