DeFi
DeFi Gigabrain Tarun Chitra on ETH staking and re-staking and why “financial nihilism” is a real consumer product
Crypto is a world built for self-taught people, a playground for mathematicians. Tarun Chitra, founder of the risk management, economic research and software optimization organization Gauntlet, is just one shining example. In a conversation with Chitra, this comes through. There seems to be no corner of crypto that he hasn’t examined.
Chitra, who often takes her time to pause before answering questions, will speak at Consensus 2024, May 29-31, Austin, Texas.
CoinDesk caught up with the real DeFi celebrity known for his colorful style (hair, glasses And clothes) to talk about new financial primitives in crypto, artificial wombs and why he appreciates hecklers.
This interview has been lightly edited for brevity and clarity.
I thought maybe we could start with a quick overrated/underrated roundup. You can skip any of them or clarify your statements if you prefer.
Of course.
Extension of life?
I have a very rough classification in my head, like between passive and active life extension. The passive is: I’m getting healthier by eating better and maybe taking supplements. Active is: I get all kinds of esoteric experimental therapies and, like, injections. You know what I mean, one involves surgical procedures and the other involves simpler habit change.
I was thinking more about the first one.
Probably overrated. I think the latter is correctly noted.
Yeah. Healthy living is good.
But that’s why I wanted to separate them.
Artificial wombs?
Actually, I think it’s pretty well rated. Maybe slightly underrated, actually. But not super underrated. I feel like they get a lot of hype.
CLOB [central limit order book exchanges].
Overrated.
Could you say why?
I think we had the CLOB era as the only thing that worked. Then AMMs took off and CLOBs were like shit. And then, in the world of perpetual, low-latency blockchains, everyone was saying “CLOBs are better, CLOBs are better.” Not that we’ve necessarily seen a lot of people coming back to CLOBs, but I feel like the tide has changed at the moment. People talk about PAD all the time. So it’s good. But it feels like there’s always this cyclical thing between the two.
See also: What is an automated market maker?
Dutch auctions?
A shot Dutch auctions are overrated. Dutch multi-plane auctions are underestimated.
Omnichannels?
Can you define what you mean by omnichain for this context?
Honestly, not so much. It’s just a term I’ve seen pop up a lot recently, and I can’t say what it is.
Yeah, well, I found it to be more of a marketing term than anything real, to be completely honest. So overrated that it feels like it’s not real. This doesn’t refer to a single technical thing that I could write equations for and say, “That’s a guarantee you’re getting out of it.”
The story continues
That’s the impression I had too. It may be mean, but Aave.
Refuse to answer.
Who are your intellectual heroes?
Paul Dirac. John von Neumann. I’m trying to think of a more recent one. Boring is like Terence Taos of the world. Is there anyone who isn’t as famous? …Yeah, stick with it. These are the ones that are quite well known, I have the impression that the others are far too specialized.
Fair enough. You have written about DAO governance in 2021. I was wondering if you think we’ve learned anything since then? whether the governance of the DAO has improved in the years that followed?
I think there’s kind of a thing where the actual governance processes for many DAOs have gotten worse or better. Whether it’s because of sclerosis, or because of centralized buyout or something else, there are plenty of reasons for one or the other. I don’t think there have been many new mechanics that people have focused on because you don’t get rewarded for improving a DAO mechanic.
See also: Beware the DAO: Neo-Imperialism is on the Rise
With Compound, I feel like because of the way they launched, they were rewarded as a team for improving the DAO mechanics when they decentralized governance in 2020. But since then , everyone who has innovated in governance is generally outside of DeFi. And these did not succeed.
There are still many mechanistic innovations that have not been realized. And part of the reason it hasn’t been done is because it’s underfunded compared to other things, right? For example, you can raise a lot more money to make another robot than you could ever raise for a new governance system.
When is it appropriate for crypto to embrace financial nihilism? As in, lean into it?
Good question. I have the impression that we are currently considering this question. So I don’t know if that’s an answer to the question of when it’s appropriate – but hasn’t it already happened? The problem for me is that financial nihilism is a real consumer application. Most other things are considered crypto for consumers, people say it’s a scam or a lie, or that it doesn’t really need crypto at all, it would work fine as Web2 for me – I can browse the list.
Financial nihilism is a real consumer product. Like there’s no way around it. It’s hard to get around the fact that they found a way to make Binance more fun for someone who doesn’t like looking at candles – and I think that’s why Pompe.fun exist. People love it because it’s the same thing but it doesn’t seem like it and it’s a good consumer app.
This will disappoint anyone raising millions of dollars to do mainstream crypto, but that’s exactly what it is.
Do you think Farcaster will ever completely supplant Crypto Twitter and would it be a loss for Farcaster if CT was completely recreated on Farcaster?
Farcaster is like where WAGMI refugees [we are all gonna make it] the 2021 movement is gone. At first, they were all people who were really sincere about being part of the cult of toxic positivity. I feel like those who were serious about it went and created Farcaster. I just don’t feel like trader type people will ever fit in perfectly, so it doesn’t seem possible to fully recreate the “degenerate side”. Farcaster is so much healthier.
Do you see any interesting financial primitives emerging that you think will become increasingly important?
I mean, in general, I think restaking is part of it. But things that allow you not to know which network you are on, but which offer you the same security guarantees as this network; Re-staking is a version of that, aggregation stuff that people do and ZK-land is a version of that. I think this is the key to making the UX of the multi-chain world as good as something like Solana.
Some fear that there is already too much ETH staked or that there will soon be too much. Do you agree with this argument? Is there an appropriate amount?
Honestly, it depends. I don’t think there is a static, fixed quantity that will always be the right quantity. It depends on the usage. If it turns out that ETH is used a lot in on-chain applications or in centralized exchanges, then it’s pretty bad to have a lot of ETH staked, because then there’s no liquidity and you could find yourself in a supply crisis.
On the other hand, if there is too little ETH staked, then yes, of course, different types of attacks are possible. In some ways, the biggest problem with proof-of-stake is that it’s easy to calculate the monetary value of an attack. I can always take 1/3 times the amount bet and figure out how much an attack costs.
See also: The Definitive Investor’s Guide to Proof of Work
With proof of work, because people can join and leave, it takes a while to determine the cost of an attack and you can’t determine it as accurately. So the lower bound of proof of work is actually harder to estimate, and it’s actually harder to attack in some ways.
So I think it will always be dynamic. Some new technology will help reduce the amount you need to stake – that’s the whole point of ZK and advanced crypto, but it will never be constant. It really depends on how much apps you want to use and if the apps use a lot of ether.
How many pairs of glasses do you own?
Probably around 10.
And finally, is there anything in particular you’re looking forward to at Consensus?
Do another live podcast.
I was there last time. It was good!
Yes, live podcasts are fun. Especially if you act like a heckler.
I’ll try to find something intelligent to heckle.
Yeah, well, thanks for stopping by.