Why token emissions are key for investing in DeFi projects | Interview with Shane Molidor

I think, you know, I could talk your ear off about narratives and fundamental value. I think that probably the most underappreciated aspect of projects that can make or break their success once they make the transition from primary to secondary markets is token emission structures.

All right, we're here with Shane Mulder, who is the global head of business development at Ascendex. Appreciate you joining cointelegraph today. How are you?

Absolutely. Yeah, I'm doing well. Thanks so much for having me.

Yeah, excellent. Super excited to talk to you today about some of the latest evolutions at Ascendex. So I'm curious to know, like, what are some of the biggest challenges that you're facing as an exchange right now?

Yeah, absolutely. I would say for Sendex, probably the biggest challenge. And for any centralized exchange, it's probably the highly competitive landscape, especially with the emergence of decentralized exchanges. I think that these platforms need to fight tooth and nail in order to capture market share. So that means constantly staying on the cutting edge and trying to remain innovative in order to grow the business. We have roughly 1,000 centralized exchanges that a user can choose from and a growing cohort of decentralized exchanges. So I would say that the competitive landscape is definitely the biggest challenge that a centralized exchange faces.

And so what are some of your concerns regarding regulation? Do you feel like there needs to be more clarity? What are your thoughts about what we need, especially inside of the centralized exchange world?

Sure. So I am personally of the camp that regulation is a net positive for the cryptocurrency ecosystem. I think that's probably a consequence of having worked alongside the Winklevoss twins. And back at Gemini in 2015, I was always taught, ask permission rather than forgiveness. Cooperate with regulators in order to bring more clarity to the ecosystem. I think that that's a net positive just because that regulatory and compliance clarity will allow institutions to enter into the space. I think what we're seeing right now is an interesting intersection between a demand for more regulation, but a lack of clarity from a lot of regulators. And I think, especially with U.S. regulators. And I think the consequence of this is potentially that you will deter innovation from the US Because I think that we'll see a lot of entrepreneurs just potentially target other jurisdictions that are a little bit more crypto friendly. For example, we're seeing Singapore take a lot of steps in this space in order to offer clarity behind regulation. So Ascendex is a Singapore registered platform. We're working very closely with regulators there in order to become fully compliant and licensed in that jurisdiction.

So do you feel that regulation will also hit decentralized exchanges as well as centralized exchanges?

It's a great question. I think by nature decentralized exchanges are a little bit more isolated from this regulatory uncertainty. You know, having a decentralized organization, there's not necessarily a point person to for a regulator to contact. But obviously we're starting to see progress there with Uniswap Labs, for example, and the actions that are being taken there. I think what's always important within crypto is to understand that it is a global economy. So for example, nefarious actions that take place on even a decentralized platforms and can impact users of centralized regulated exchanges. For example, if assets are purchased via ill gotten gains on a decentralized platform, but the recipient of those assets then transfers them to a centralized exchange. Centralized exchanges, as I mentioned earlier, also have custody operations and they're commingled custody operations. So it is truly this notion that one rotten apple can spoil the barrel. So I think that regulators need to be conscious of not just centralized exchanges where they can offer more clarity, but understand again the global interconnected nature of the ecosystem as a whole.

So we see a lot of focus on defi on the Ethereum blockchain. How important will it be to start focusing that defi elements on the Bitcoin blockchain as well?

Yeah, absolutely. I think in addition to Ethereum, we're seeing a lot of growth in decentralized finance for Solana as well. And Solana's obviously seen a meteoric uprise in price action and widespread adoption. I think with Bitcoin sort of being the, you know, the store of value asset, people are hungry to see additional intrinsic value built on top of Bitcoin. I think that there are trade offs associated with each layer. One protocol with Bitcoin I think most notably is sort of speed, but of course it also has resilience and integrity. And that's obviously become a hot topic, especially after the performance degradation of the Solana ecosystem last week. So it remains to be seen, I think building on top of Bitcoin just as building on top of Ethereum and building on top of Solana or Polygon or any other layer one protocol and is a science experiment and we need to watch closely to see widespread adoption of not just project founders, but also retail and institutions. And once we see sort of that, that holy trifecta of adoption, I think that will show us a little bit more of an indication of which layer one will win in decentralized finance.

And so there's a Lot of uncertainty from an institutional standpoint about getting involved with DeFi because there's no clarity. What will that look like once there is clarity for institutions to start getting more and more involved into the DEFI space?

Absolutely. I think that why people are so bullish about institutional adoption is that in many ways the rising tide will lift all ships. If you think about a real buy side institution, or for example, a pension fund allocation of even 1 to 2% of total AUM to the cryptocurrency ecosystem could have a non trivial impact in terms of the total market capitalization. So you have that buy side imbalance in a relatively illiquid, esoteric asset class. It could be very exciting from a price action perspective. And we know that price action is a very powerful marketing tool in and of itself. So I think that institutional adoption could bring a lot of excitement as it relates to price and speculation. I think where it also helps is getting brighter minds involved in the space. I think we're seeing institutions dabble, getting spot exposure and also helping build infrastructure for things like Bitcoin and Ethereum. And having those thought leaders involved in the space has been a net positive. Getting more thought leaders involved in the science experiment that is decentralized finance, I think could be very helpful from just an innovation perspective as well.

And what do you think is stopping some of these bright minds from doing that?

Yeah, it's a great question. I don't have the right answer to that. I think, you know, if I had the clairvoyance on a lot of these questions, you know, I might be on a beach somewhere, you know, enjoying my gains. I think, you know, perhaps what might be stopping them, or at least making them a bit hesitant to get involved, is still lack of regulatory certainty. From a compliance perspective, I think that is a strong deterrent and I think that it's going to take a lot of cooperation between infrastructure players. So the major exchanges and custodians in the space and most innovative projects and regulators working hand in hand in order to offer a little bit more clarity and on regulatory uncertainty.

And so what areas of DEFI specifically is Ascendex maybe going to be getting into more of in the future?

Yeah, absolutely. I think what's important to note is that we're chain agnostic. We maintain a duty and obligation to bring our end users access to the most innovative new protocols and projects. So we search far and wide and work very closely with project teams and incubator funds. And in order to source out those most innovative opportunities and perform due diligence on them. I'm not quite sure what the winner will be, but what I can say is that we have a historical track record of success, of picking early stage innovative projects and protocols at the earliest opportunity in order to offer our users access to those projects. So I think recently we've been seeing lots of strides in the Solana ecosystem, widespread adoptions by VCs, retail and project founders. So I think that's where I place my bet, at least in the immediate term. At the same time, we're also seeing a lot of adoption in the Polygon ecosystem, especially out of emerging nations. So I wouldn't count them out either. But again, we're keeping our ear to the ground in order to get access to projects and protocols at the earliest possible stage.

And so from your perspective, what makes a particular project very, very sound to the point where you're willing to invest into that?

It's a great question. I think, you know, I could talk your ear off about narratives and fundamental value. I think that probably the most underappreciated aspect of projects that can make or break their success once they make the transition from primary to secondary markets is token emission structures. Understanding how tokens vest out into the secondary market and what the cost basis associated with those tokens are. And if you have a sound grasp of market microstructure and evolution of liquidity, you can really understand how price performance will be impacted by those token emission structures. So for example, we saw adoption widespread of things like liquidity mining, with decentralized finance, with highly inflationary token emission structures. So bootstrapping total locked value with free governance tokens. What you need to recognize is that what goes up must come down as you're spilling out free tokens into the marketplace. So at Ascendex, what we like to see is conserved token emission structures. We don't like to see very extreme discounts offered, to see seed stage and private stage investors that are just looking to flip and make a quick buck at the expense of the retail speculator. So we work very closely with project teams in order to adjust aspects of that token emission structure in order to position the project for success. So even though that might be a more boring response than saying things like the narrative or fundamental value, I think it's underappreciated and can make or break project and its price performance once it lists and makes that transition from primary to secondary markets.

And so is there like a holy Grail in defi? And if so, like, what does that look like?

Can you clarify what you mean by the Holy Grail.

Like, we're talking the evolution of yield farming into liquidity pools. Into what? Like, is there another evolution that continues to build out yields that were once not even a thing?

It's a great question. Again, there are probably smarter minds than me that know the right answer to it, but I can guarantee once someone does figure out that Holy Grail will be the first or amongst the first to list that project and support the protocol.

Fair enough. Where's your overall market sentiment right now? Where do you think things are heading here before the end of the year?

Yeah, absolutely. I think a lot of exciting things occurring with some of the new Layer one protocols in the space. I think my bet is on bitcoin having a pretty strong run here. We've seen a lot of excitement from price action perspective, from other protocols, and bitcoin has sort of been waiting in the wings. I wouldn't be shocked to see bitcoin close the year out around 60 to 70,000, which is very, very exciting from a price action perspective. So that's where my bet is currently on, but remains to be seen.

Excellent. This is Shane Molador of Sendex. He's the head of business development. We appreciate you joining Cointelegraph today.

Absolutely. Thanks so much for having me.

Yeah, thank you, man. Appreciate it.