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If you’ve followed DeFi on Twitter, you’ve likely heard of the name “DegenSpartan.”
The pseudonymous investor, believed to be based in Asia, has become one of the most popular voices within the Ethereum and DeFi community, having entered this crypto industry extremely early on.
The thing is, no one knows where he came from, who he is, and what he thinks is coming next. Some of these mysteries were answered recently when “Hasu,” another pseudonymous analyst and investor, brought DegenSpartan onto his podcast, which he sometimes hosts with Su Zhu of Three Arrows Capital.
Here are a few key takeaways from DegenSpartan’s podcast.
I sat down with @DegenSpartan, one of the biggest and most enigmatic Defi investors there is. We discussed his road to success, how he picks projects in Defi, why he doesn‘t like Maker and Yearn, and more.https://t.co/toJNTlHYWw
— Hasu (@hasufl) November 13, 2020
Humble beginnings
Degen explained that he came from humble beginnings, starting off investing his personal funds into fixed-income and dividend-yielding assets. He says he has a background in finance, though did not expand on that point.
Looking for a way to earn safe returns on his capital, he stumbled across arbitrage between cryptocurrency markets, where you can buy and sell coins on different exchanges and profit the difference.
Eventually, this developed into an interest in more complex financial applications, which is where DeFi comes in.
He doesn’t believe in Yearn.finance (YFI)
DegenSpartan is one of the few DeFi investors not to be infatuated with Yearn.finance, the yield aggregator and full-stack DeFi protocol.
He’s made this clear on his Twitter feed, though explained his thoughts further in the podcast.
DegenSpartan’s reasons for being skeptical of Yearn.finance are many-fold.
First and foremost, he is unsure why its founder, Andre Cronje, is putting so many products under the Yearn.finance banner.
He added that the math doesn’t add up, referencing how YFI holders are somewhat entitled to the fees the protocol generates through its products.
DegenSpartan did admit that he farmed YFI due to the extremely high yields offered, though he caveated that with the statement that he sold the coins early, far before the rally to $44,000 took place.
MakerDAO, too
He went on to mention that he is not entirely confident in MakerDAO, the decentralized loan provider, largely due to the fact that it cannot impose negative interest rates on owners of the DAI token.
Instead, MakerDAO taxes MKR holders, basically, to account for shortfalls in the ecosystem.
DegenSpartan, along with podcast host Hasu, was critical that this disables the MakerDAO governors/token holders from positively affecting the protocol’s economics.
DeFi could see further losses: “you didn’t invest in a perpetual money machine”
While it isn’t clear when exactly this was recorded, DegenSpartan seemingly suggested that the DeFi space has further to drop in the weeks and months ahead.
His comment was that not all investors have realized that they have not invested in a perpetual money machine, referencing how for each percent yield earned, there is a loser on the other side of that transaction.
The incentives of many DeFi protocols are skewed, he added, discussing how investors that farm assets are often barely incentivized to hold them for longer periods of time.
DeFi’s watershed moment will be layer-two decentralized exchanges
Finally, he discussed what he thinks will take DeFi truly to the new level: decentralized exchanges, namely derivatives exchanges built on layer-two scaling technologies.
While DeFi is quickly becoming the place to obtain loans and earn yields in the cryptocurrency space, there are not yet exchanges in DeFi that match the experience of using a platform like FTX or BitMEX.
DegenSpartan thinks that when such exchanges launch, Ethereum DeFi will be brought to the next level.