06 | The Perfect Storm

Are we at an inflection point for DeFi?

Hi all, this is Kinjal! Welcome to Two Cents - a monthly-ish newsletter on my thoughts and favorite reads in crypto, tech & business. I’m still finding my groove so Two Cents earns a spot in your inbox - if you have suggestions on what you would like to read about please let me know! If this was forwarded to you and you want my two cents - subscribe below:

Stats From DeFi Pulse

It’s been really fun to watch the decentralized finance or “DeFi” space grow recently. For those of you who are less familiar, DeFi loosely refers to financial products & services built on public protocols and open-source software. What started out as an idea has taken off, with nearly $2B+ in assets locked in the ecosystem. Since 2017, the crypto industry has been growing strong, albeit without that same dangerous mania we witnessed with ICOs. Over the past two weeks though, people felt ICO level excitement.

We’ve started to feel some palpable energy. So what gives? Crypto projects are shipping at a crazy fast pace - new tokens, growth hacks, and excellent UI. Speculation is still the main use case for platforms bootstrapping liquidity, but in doing so, they hope to sustain longer-term growth. Despite the recent growth, DeFi is still in its “toy” phase - many cool projects are looking for that killer app. But to anyone watching closely, DeFi has proven itself to be resilient and crazy innovative over the past 18 months. Jesse Walden wrote up a great post about DeFi crossing the chasm and how DeFi might make its way to mainstream adoption. He discusses three popular narratives: (1) banking the unbanked (2) institutional adoption, and (3) a real crypto economy. I tend to think it’ll be a combination of all of the above. But there is a missing piece here - the context of the world DeFi is maturing within. There are three broader trends I believe are important to the success of DeFi.

(1) Memes | Investing culture is increasingly becoming a sport.
Meme investing is a hallmark of crypto and now, its found its way into the stock market. We have David Portnoy doling out advice on YouTube, Hertz brought back to life momentarily, and the stock market hitting all-time highs in the middle of the pandemic. Memes are mainstream and investing is increasingly becoming a sport. This behavioral shift from niche to mainstream audience behavior could alter how individuals engage with trading platforms of the future. This attitude lends itself well to DeFi, albeit with high degrees of risk.

(2) Content Creators | Own your distribution
The time for individual content creators to shine is here. However, unlike the early days of social media, there is a new mantra: own your distribution. Creators continue to rely upon aggregators but are constantly looking for ways to maintain control over who they reach and how they engage with communities. Crypto projects are poised to provide economic tools for the creator economy. Whether it’s monetizing a creator specifically or coordinating incentives for new product launches - crypto projects like Roll and Foundation are providing an economic incentive layer for creators that will increasingly be in demand.

(3) Globalization | First with communication, now with money.
The web made it easy for anyone to communicate with anyone around the world. Yet, financial markets remain relatively siloed. With the onset of financial companies removing global barriers for payments, infrastructure, and more (e.g., Stripe), markets are opening up. DeFi platforms take this idea of open access even further. While the globalization of the internet may not solve all the “unbanked” challenges, I do believe the macro trend will open up paths for adoption in DeFi that would not have been possible a decade prior.

It’s unclear if we have the perfect storm yet for DeFi to really cross the chasm, but it certainly feels like we are witnessing an inflection point in financial markets. Would love to hear other thoughts on why the DeFi ecosystem may or may not be successful - and what’s needed to get there.

Monthly Links

Crypto & creators

  • Foundation is experimenting with building markets on ethererum for creators. This paired with Jesse Walden, Fred Ehrsam and Blake Robbins’ podcast on crypto & creators is a great explainer on the opportunity space.

  • Li Jin touches upon critical crypto ideas with her thread on platforms vs. creators

Meme investing & the Robinhood casino

  • The markets saw some wild behavior with Hertz - I loved Alex Danco’s breakdown of this.

  • Howard Marks shares thoughts on the rally and risk vs. reward in this sobering memo.

  • Anuj Abrol is doing an experiment called The Witty Transparency Fund that I’m looking forward to following - the goal is to emulate Chamath’s investing style.

Odds & Ends

  • Tracey Young’s account of being a female founder is a must-read.

  • Laura Deming’s writing is mature beyond her years - this thoughtful post on how not to be sad is brave.

  • I’m working my way through this masterclass list of essays. Will Haynes kindly aggregated them in this Notion page.

Monthly Mood 😂 we all are just giving up

05 | User-Owned Networks

How Do You Know When Your Resilience is Low? » Community | GovLoop

I’ve been thinking about user-owned networks recently, and how covid has allowed their resiliency to shine. One example of user-owned networks are crypto networks. These networks rely on open source code, and anyone with a computer can participate. What does it mean to be a user-owned network? Here’s one definition.

User-owned / ownership, thus value, is distributed across participants.

Networks / a group or system of interconnected people or things

User-owned network / A group or system of interconnected users who are all also owners

The internet could be considered the best known “user-owned network.” There’s no CEO of the internet; its infrastructure abides by a set of common open-source protocols. All users of the internet contribute to the network effects it benefits from. You use the internet, and you also benefit from the fact that other people use it. However, the web is siloed, with value aggregated into applications built on these protocols.

Bitcoin is a true user-owned network. There are three attributes I believe are important for a user-owned network:

  • the ability to generate value

  • the ability to use shared infrastructure

  • the ability to secure the network.

On the internet, most of the value is generated by individual companies and applications built on top of internet protocols. In the bitcoin network, any user can generate value (by holding / using bitcoin), use its shared open infrastructure, and theoretically, secure the network.

User-owned networks are a powerful idea.
Many Web 2.0 companies have successfully built network effects: each additional user to the network contributes to the increasing value in the network itself. Facebook is a prime example. Every time a new user joins, the platform becomes more valuable. Most of the value, especially the monetary value, goes to Facebook.

Bitcoin and Ethereum are perhaps, truer user-owned networks. With these networks, individuals have monetary incentives to participate, without being part of an '“organization.” As Jesse Walden explored in Crypto Business Models, these incentives can further entrench the network effects. By tying financial participation with the network itself, the switching costs increase. If I leave Facebook, I don’t lose my friends. But if I leave the bitcoin network, I can’t benefit from bitcoin appreciation. This reinforces the ability for these networks to scale.

That said, there are a number of tradeoffs associated with UONs.

  • A lack of formal governance can lead to a ‘tragedy of the commons’ situation, where a few parties end up being responsible for most of the work.

  • Without proper incentive alignment, networks can struggle to scale.

  • The open-source nature of projects introduces a different competitive dynamic where ideas can be easily copied and modified, although it’s not as easy as copy & pasting code.

However, crypto networks as UONs might have mitigated some of these tradeoffs.

Crypto user-owned networks have strong incentives built into the system
In the bitcoin network, there are three types of users: miners, developers, and users. Each group has an incentive to participate in the network for its collective growth. Miners secure the network and make money from the fees associated with doing so. Developers, who usually also use bitcoin, maintain the code and make network / governance related decisions. Users can be defined as anyone who holds, buys, sells bitcoin, and believes in its value as a non-sovereign store of value asset.

Initially, bitcoin’s community was largely powered by ideology and values. There wasn’t much incentive to build or participate outside of philosophy. However, as the network grew, so did the monetary incentives. There are now financially motivated players; financial incentives are pushing people towards the network.

This makes the bitcoin network more resilient. Since it no longer simply belongs to a niche of the population, less depends on each individual user. Bitcoin means different things to different people, meaning there is a widespread incentive to sustain the system over the longer term. As long as these incentives continue to exist, bitcoin will have an inherent resiliency that will move the network forward as a whole.

The first decade of bitcoin was driven by a small group of hard-core believers whose belief in the system and commitment to securing the network, pushed the network forward. As the network continues to grow the diversity of its user base, in which every new user can share in the value generated from the network appreciation, I believe we will see a new era for the use of shared infrastructure and building on top of the bitcoin protocol. The resiliency of the network compounds over time, as users grow, network value grows and belief sustains.

Many thanks to Ellen Fishbein for working with me on this post!


A few links on ways to help given the turmoil in our country:
This past week has been incredibly difficult, and my heart hurts for everyone in pain right now. I’m working on finding ways to contribute, be actively anti-rascist and support black communities. Here are a few things I’m doing right now:

If you have any other reccs, please send them my way.

On building in tech:

On crypto dollars & central bank digital currencies (CBDC):

  • The geopolitics around CBDC are increasingly coming under scrutiny and attention - this was an interesting read on China’s planned CBDC launch

  • JP Koning posted an update on Fedcoin, nearly six years after the initial idea. “Fedcoin” puts the spotlight on the messy role of anonymity in currency.

  • The digital dollar project released their white paper proposing a U.S. CBDC

  • Lastly this tweet from Nic is too real

Monthly Mood

04 | Online vs. IRL Learning

When universities go online

Bryne Hobart has an interesting piece on education in American Greatness arguing the long decline of higher education in America has begun. While I agree with this idea broadly, I believe it’s less about the decline of higher education but rather the increase in acceptance of online education. When I think of the value of college education, I refer back to the notion of positional scarcity that Alex Danco explored a few weeks ago. Higher education is one of the best examples of positional scarcity, as it is often attributed with “legitimacy” and “prestige.” The experience of being on a campus with a few thousand other students, unknowingly building your network has proven to pay dividends in the future. In most industries, this stamp of approval from a college remains relevant. But tech, of course, is embracing the model that technology enables. Democratizing access to high-quality information and education.

Colleges began as a place of research and exploration of academic frontiers, but it’s quickly evolved to become the place to build your social network and get a high-earning job right now out of college. Tech companies have long explored how to bring education to the masses, online in a high-quality manner that doesn’t cost a small fortune. Khan Academy, MOOCs, and even programs like Lambda School have paved a path for alternative learning with limited cost. Up until now, they failed to truly compete with universities. The community aspect has been a challenge and accountability with free educational resources causes student turnover. Feedback and mentorship can be nonexistent and online credentials and certification don’t seem to hold the same weight in name as universities.

Which brings us to Covid. Every university is being forced to compete with online education. I don’t think this is a model that will prove to be worth $40K for Zoom classes. Nor do I think this a long-term model that educators will want to adopt unless it becomes necessary. I do think this opens up the broader conversation of online alternatives. Universities are competing with the plethora of online education available. I don’t believe that higher education is going to disappear anytime soon, but I do think the normalization of getting an education outside of the college classroom is on the rise. So the question remains - will covid create greater acceptance around the legitimacy of pursuing a non-traditional path of higher education online?


On Silicon Valley & building: Marc Andreessen wrote a call-to-action piece, titled “It’s Time to Build” that calls for the disruption of our government and how we will build after coronavirus. I’ve seen a few pieces in response, I really enjoyed this from Jose Luis Ricon and this from Jerry Brito. Jerry’s piece articulates the broader question of what “we” want as a collective. In order to build like Marc says we need to there needs to be some agreement on what that even means. Many of the tech’s greatest companies over the past decade have fought against regulation and created markets in places where they were least expected (e.g., Uber and Airbnb). An attitude of civil disobedience might just be incredibly rewarding for society. So the question may be, what do we want but we’re not allowed to have?

In other tech musings, John Luttig’s excellent piece is a must-read, covering the diminishing tailwinds of the internet-era and how SV may operate moving forward. While I agree that Internet-era growth may not be the playbook in the 2020s, I feel like the world is at a prime time for radical ideas in new markets. The internet is no longer this new thing to grasp, it's integral to every company. I don’t necessarily believe that we’re at the end of innovation via the internet, I just think it might come from some of the less sexy places. Education, infrastructure, and e-commerce still have a long ways to go in my opinion.

On “unlimited” money printing and debt cycle: Ray Dalio’s been sharing chapters of his new book, Changing World Order, which discusses money and debt cycles in a clear, concise manner. I’m a big fan of Ray’s writing as I find myself naturally nodding along to his conclusions while I read along. It’s hard to overstate the magnitude of the Fed’s actions in the past two months. I’m doing my best to understand the bizarro macro environment right now, and Ray tells it to you straight.

On dollarization: Max shared an excellent write up this month on crypto dollars and the broader evolution of the eurodollar market. Eurodollar market refers to unsecured USD held outside of the U.S. jurisdiction. It’s a massive market and reveals the interdependence the extent to which the world really depends on the dollar. The piece explores the potential for stablecoins in crypto, to behave in a similar manner, providing exposure to the dollar around the world. A fascinating rabbithole to go down.

Monthly Mood

I love these war style COVID posters from Annie Atkins. April 2020 in a nutshell.

If you enjoyed this post, please consider sharing it or subscribing if it was forwarded!


03 March | Coronatine

the month that lasted a decade

March has felt like a literal decade. It’s hard to put into words this weird feeling of uncertainty mixed with exhaustion, dread for what is about to come, gratefulness for frontline workers, hope for the future and a slight three-year-old level breakdown lingering right under the surface. Nevertheless, I’d say we all have to get comfortable feeling whatever we’re feeling as it doesn’t look like it’s ending anytime soon. Sending everyone who needs it a virtual hug and some wholesome memes.

What I’ve Been Reading:

The internet has been overwhelming as many of us transition from our mostly online selves to our *completely* online selves. Whether its Twitter, private chat groups, news outlets, or Houseparty, there have never been this many people sharing their thoughts, creating content or just hanging out online as ever before. That being said, the silver lining of quarantine has been the extra time (for some of us). Here are a few links I from around the web this month:

  1. On coronavirus & the market: Blizzard, Winter, Ice Age, The Hammer & the Dance, and Corporate Socialism

  2. On crypto: an excellent macro thread and a post-mortem on market panics on DeFi

  3. On surviving & thriving: 75 Things to do during social distancing (from yours truly), Morning Brew’s guide to staying home, and Finding Purpose & Mission in Bleak Times

  4. On ways to help during a pandemic: a running list, donate masks and support local businesses by buying gift cards and ordering takeout!

Things I can’t be bothered to read anymore: Remote WFH home tips, Trump tweets, toilet paper jokes

I read four books this month across all genres, currently working through Big Debt Crises.

If you’re in the mood for something light that makes you giggle awkwardly to yourself while reading, I recommend The Storied Life of A.J. Fikry.

If you’re in the mood for some heartbreakingly beautiful writing about a mother and her son’s journey from Mexico to the U.S., I highly recommend American Dirt.

If you are using quarantine time to work on your writing chops, On Writing Well is a straightforward refresher of the basics.

If you’re thinking about the emotional rollercoaster the markets have been, What I Learned Losing A Million Dollars, is a good reminder to always have a plan and remove emotions from the equation.

Felt great to get back into a reading groove - what else should I add to my list?

What I’ve Been Listening To:


Invest Like the Best - Chad Cascarilla - This conversation with Chad (CEO of Paxos) and Patrick was clear-sighted and pragmatic, a great walkthrough of the markets and a few potential scenarios moving forward with the pandemic.

On the Brink’s Dollarization Series - Nic and Matt have been killing it with their podcast and I love the dollarization mini-series they launched. They cover crypto-dollarization, stablecoins, free banking, and more. I particularly enjoyed the conversation with Lawrence White and his research on “popular dollarization.”

On Purpose with Jay Shetty - I am loving this mental health podcast by Jay Shetty, which covers topics like negativity, personal growth, and productivity. He’s got some killer guests - loved the combo of Jay’s soothing voice and Sophia Bush’s passion in the linked episode.

One Big Thought:

This is the first time I’ve ever experienced a multi-front crisis. Up until now, I’d go into meetings and people would look at me and joke, “you must have been in a child during the ‘08 crisis” (spoiler: I was) or “kids who’ve never experienced market cycles just don’t understand.” And they are right. I had never seen the markets tumble in the way they did a few weeks ago. I’ve never seen or understood the magnitude of a $2T stimulus, record-level unemployment levels and zero to negative interest rate environment, while virtually every single country in the world fighting the same damn thing. I’ve never really understood what market pain feels like, in the slightest.

In many ways, this is worse. Coronavirus is a crisis of many facets. Public health, financial, geopolitical and economic. Each person is facing a different battle with coronavirus - and I’m one of the fortunate ones. So now that we are here in unprecedented times, what do we do?

First, observe. I’m taking my time to read, learn and understand what’s happening daily. You never really know when you’re in the eye of the storm. Second, is write. It’s a weird time to be writing but I think keeping a journal is beneficial not only for mental health but to keep records of what’s happening. And then lastly help out across communities. I’ve been amazed by the scientific collaboration, private sector coordination, Italian balcony singing and online camaraderie that is everywhere right now. It’s resilience and adaptation that allows us to move forward through all of this. This is a crisis, unlike anything the world has seen. I’m excited to see everyone on the other side of this - and until then making the most of these uncertain times.

Monthly Mood:

02 February | Financial statecraft & digital currencies

Notes from February 2020

February was an absolute blur. I was fortunate to spend some time traveling (both professionally and personally) and caught up with friends & family! I spend a lot of time in February reading about digital currencies, economic policy, and covid, of course.

What I’ve been reading:

Financial Statecraft & Digital Currencies

The econ nerd in me is really enjoying this read (h/t to Spencer Bogart) which explores the notion of financial statecraft. At a high level, financial statecraft is when a nation uses economic policies to specifically influence capital flows. For example, policies to prevent financing terrorism financing or impose sanctions on a country. The concept of financial statecraft is even more complex today given how quickly money moves across jurisdictions and countries. The authors argue the role of the U.S. dollar is one of the most powerful (and dangerous) tools our government has at its disposal in international markets. The reason I spent time thinking about this topic relates back to the notion of digital currencies.

Ever since digital currencies like Facebook’s Libra project or the Chinese DCEP were announced, the conversation around central bank-backed digital currencies (CBDC) has accelerated. The implications of a CBDC is outside the scope of this email, but one angle that has been interesting to consider is how money is used exert power on another nation. Take dollarization for example. Dollarization refers to a nation adopting other nations’ currency. U.S. dollarization has taken place in a number of nations historically, like Argentina or Ecuador. The notion of another country adopting the dollar typically occurs from a major catalyst such as the financial crisis or government collapse. Some governments fight back on this phenomenon by restricting the amount of cash that can enter the nation or be held by its citizens. Dollarization in a world with digital currencies, however, could make it even easier for citizens to independently acquire a U.S. dollar or other currency. If and when a digital currency from a major global power is launched, it is likely to threaten other major currencies, given how easily it could be circulated and disseminated. There’s a lot more to unpack with this topic, and it’s been a fascinating topic to think about. If you’re interested - I really enjoyed these two articles from Neha Narula and Nic Carter on the topic: here and here.

To IPO or not to IPO?

I’ve been devouring most of what Bryne Hobart has written lately - really enjoyed his latest piece on IPOs and when / why it makes sense for companies to stay private longer. We’ve seen a wave of companies take over a decade to IPO (e.g., Uber, Slack, Pinterest), IPO delays (e..g, Airbnb) and later-stage companies getting bought out (e.g., Credit Karma, Plaid). Bryne discusses how going public today is just that much more work. We have a stricter regulatory regime and the process can leave companies with a big hickey of bad press on them. Hot tech startups go from being the new cool freshman to jaded seniors in a matter of months. Of course, IPOs are critical liquidity events in the life of a company, for all invested parties. I’m not sure anything will actually change anytime soon, but market dynamics appear to be evolving over time, and IPOs may go from obvious to a tougher choice.

Other links I’m reading:

What I’ve been thinking about:

Living in a world of unbundling and re-bundling content

First music, then TV, and now online content. The era of unbundling great content and paying for it (newsletters & podcasts) is upon us. I’m a little bit frustrated by this world because I love to read all the things. In fact, the amount of things that I like to consume is far more than my willingness to pay. For example there are 5 newsletters off the top of my head that I would love to pay for the premium product (Femstreet, Farnam Street, Stratechery, Divinations, FinTech Today, Bryne Hobart to name a few). Although each individual newsletter is not that pricey, combined, it would cost me ~$787/year. $787!!! On one hand, everyone talks about the woes of paying for things they don’t use or read and wanting to pay for only what you want to read. On the other hand, a Spotify model for content feels like an inevitable ending to the newsletter content wars. (Side note: we all saw how that went for Medium). When I compare my potential newsletter spend to my TV content, I’m left rather aghast at the difference. I spend $275 a year (Amazon Prime and Netflix), and that includes ALL the other benefits of Amazon Prime. I genuinely can appreciate that these newsletters go above and beyond to provide excellent curation and analysis. But at the end of the day, I have a hard time justifying a total budget of $500+ for a handful of newsletters.

The caveat here is that many of these newsletters are doing a great job cultivating more of an online/offline community with their readership. FinTech Today has what I hear is a dope slack channel and Femstreet regularly puts on high-quality events in the U.S. and U.K. In these instances, you are paying for much more than simply a newsletter, but rather an informal professional network that you are able to self-select into and get the most value out of. Particularly as the online world feels oversaturated, the thing most people are willing to pay for is curation.

Of course, I do not miss the irony that I’m writing about this in a newsletter!!!

Monthly Mood

Loading more posts…