How DeFi 2.0 is changing crypto trading | Interview with HXRO co-founder

Foreign. What's up everyone? It's Giovanni here from Lisbon. We are at the Breakpoint Solana conference. Today I have the pleasure to be joined by Dan Ganzberg, the CEO and co founder of Hero, a decentralized exchange. How are you doing today, Dan?

I'm doing great. Thanks for having me, Giovanni.

So I would like to know first about your thoughts on the trading sphere. So early in January you wrote a piece for Cointelegraph where you were saying that 2020 was the best year ever for crypto traders. So how has been 2021 comparing? Is it even better?

Absolutely. I think that in 2020 I didn't quite know what 2021 would bring. And I think kind of the evolution of DeFi 1.0 into DeFi 2.0 has really launched a whole new paradigm of trading and how, you know, how markets interact with the rest of the financial world and with decentralization overall. And I think the crossover between kind of the decentralized and crypto world with the traditional finance world is starting to happen in really 2021. We started to see more than that, more of that than ever. And so I think that's really kind of perpetuated a lot of the growth and volume that we've seen the last year.

And you mentioned this transition from DeFi 1 to DeFi 2. So can you explain what you mean by this transition? Like what are the characteristics that we started seeing in the DeFi 2?

Yeah, so DeFi 1.0, I really would say was really about lending and. And you saw some of the big, you know, early kind of, you know, the largest primitives and Ethereum and whatnot, like things like AAVE compound start to really come to the surface. And these lending protocols really kind of initially gave the kind of the initial launch of, of 1.0. And 2.0 has really become more about trading initially. You see these spot Dex start to start to launch everywhere now more than ever on Solana. And now I think we're kind of going to be moving into. And a lot of what Hero Network is about is moving into more of the derivatives side of the trading world. And so I think that's really what 2.0 is going to be about, is all about trading.

Talk about the market, the dynamics in the market right now. At what point of the price cycle of Bitcoin do you think we are at the moment? And how much Steam does the current bull market has when it's going to top more or less? And what's going to happen after if you can give us your predictions?

Sure. You know, I try not to predict too far into the future. I think I can tell you that in 2020, you definitely saw a lot of signs of the market cycling and which really kind of perpetuated the rallies that we've had. And, you know, crypto as a whole is really interesting because if you think across the context of more of the traditional markets, when you have something that pulls back 50, 60%, you would say, yeah, that was a pretty nasty bear market that you've been through. Right. And that may perpetuate over some. Some amount of time, but in crypto, it can happen. The entire market can reset 50%. The volatility in crypto overhaul overall is so high that, you know, a 50, 60% pullback is, you know, kind of par for the course. So I think that without a doubt, at any point, you can start to see the. The market cycle and kind of pull back and reset, maybe find value at lower prices. But, you know, that said, I don't think we've seen the end of this phase. I think that there's, you know, there's enough new projects and there's a. There's so much capital that's coming over from traditional finance. I think people in crypto really kind of underestimate the real size of how big the rest of the traditional finance world is. And when you cross over, you can just take derivatives as a way to compare it. The overall size of the derivatives market in traditional finance right now is slightly under $200 trillion. And so if you take crypto just as a whole, and obviously with derivatives, this will get compounded a little bit. But, you know, if we're at a $3 trillion market cap across all crypto assets, like, there's a lot of room for growth. And so you start introducing derivatives into that and more capital coming in. There's more capital coming in than I think is, you know, the market can almost handle at this point. Like, everybody wants in so bad into crypto at this point. And so now you start to see that push in, and you start to see it push into different protocols, different projects. And as new projects come up, there's, you know, kind of things will continue to move, and at some point, it'll kind of have a blow off top, I think. And I just don't think that time is right now. We may have. I think we have some, you know, a lot of interesting, exciting times ahead for the next. At least for the next year or two, and then we'll see what happens.

From There, okay, so you give, you give it one or two years more of continuous growth before the blow off top.

I just haven't seen the general signs that, you know, after being in crypto for a few years and being in, you know, in derivatives markets otherwise for 20 plus years, like I haven't seen any signs of a top at this point.

Talking about Ethereum and Solana. So we see that there is a lot of talking about the fact that Ethereum has some technical issues. It's difficult to scale, it has very high transaction fees. And we see that Solana is the hottest, probably the hottest cryptocurrency at the moment since it has proved to have the technical capabilities to compete with Ethereum. It's faster, it's cheaper still, it doesn't have the first mover advantage that Ethereum has. So how do you think that this kind of competition is gonna evolve in the long term period? Do you see potentially Solana replacing Ethereum as the main dominant protocol in defi? Do you see the two kind of coexisting together or do you see Ethereum keeping the dominance?

I think that we'll see them coexist and I think what you're going to see kind of in, you know, over the next couple years is more of an obfuscation away from the kind of the difficulties of dealing with kind of raw, decentralized protocols and at the application layer, you're going to start to see a lot more onboarding, you know, ways of kind of the rest of the world having more simplistic ways of interacting with, with these protocols. But, but you know, ultimately that, that to me is kind of what will continue to drive Solana. And do you think, you know, just kind of going back, you were talking about the technical aspects and like the fees, those are kind of, those are kind of the clear and obvious to me that, you know, the transaction transactions per second, block times, transaction fees, these are things that made things like we're building, like if you're building a, a defi, you know, risk margining, liquidity primitive, you cannot, it just doesn't, it's not sustainable on Ethereum because the costs are too high, the transaction times are way too slow and it just doesn't have the throughput capacity. And so Solana makes a ton of sense for that. And if you think about that in the context of what we're building, which is really kind of the underbelly or like the core protocols that will drive finance in the future, that it seems that it's happening organically, that is going to end up living on Solana. And I do think that you're going to have a multi chain world that will coexist where there's going to be certain things like Solana is for high transaction, high throughput, payment rails, things like that. There will be some, you know, there'll be some use cases for Ethereum that might be somewhat similar or somewhat tangential, but I think that you'll see that. I think you're going to end up seeing bridges that will tie everything together. And as time goes on there's going to be this again, this kind of move away from this kind of eth versus Solana or one versus the other and it's just going to coexist in the same way that there's seven continents in the world and there's North America, South America, Europe, Asia. Everybody coexists, everyone has their own culture, their own thing, their own advantages and disadvantages and ideally everything, you know, kind of grows together.

That's interesting. So basically if someone came in right now into the space and is a bit undecided, should I invest into Ethereum since the most established one, or into Solana, which is the hottest one, the one that is growing faster? From what I understand from what you say, they should kind of balance their portfolio in between having some Ethereum, have some Solana. So diversification, right?

I mean, look, I maybe have a slight lean towards Solana, but I also would never tell somebody to, you know, I would say do your own research before you make any investment decision. And especially something that's been up 12,000% in a year is kind of, you know, hard for most people to get their head around. But, but I actually think that it's very justified because there is actually useful applications being built on Solana that because of the way Solana is built, allows those applications to be useful. And so, and it's something that historically you really haven't seen in the crypto space, or at least I've been in it for six years now. This is really the first time where I've seen a blockchain that is actually has builders on it who are building applications that actually can cross over and have real impact in the traditional world.

Okay, thanks a lot, Dan. It was nice to talk to you.

Yeah, that was great.