CoinGecko Podcast - Bitcoin & Cryptocurrency Insights

Chris Zaknun and Hatu Sheikh of DAO Maker Talks About Social Mining - Ep. 17

August 12, 2020 Bobby Ong & TM Lee Season 1 Episode 17
CoinGecko Podcast - Bitcoin & Cryptocurrency Insights
Chris Zaknun and Hatu Sheikh of DAO Maker Talks About Social Mining - Ep. 17
Chapters
CoinGecko Podcast - Bitcoin & Cryptocurrency Insights
Chris Zaknun and Hatu Sheikh of DAO Maker Talks About Social Mining - Ep. 17
Aug 12, 2020 Season 1 Episode 17
Bobby Ong & TM Lee

In this episode, Bobby Ong, co-founder of CoinGecko is joined by Chris Zaknun, CEO of DAO Maker and Hatu Sheikh, CMO of DAO Maker. Bobby interviewed Chris and Hatu on DYCO, what it does, social mining, their thoughts on the market, and yield farming as well as DAO Maker’s plans for 2020 and beyond.

[00:00:02] Intro
[00:01:42]
What is DYCO?
[00:10:29]
Amount raised in ICO market
[00:12:17]
Thoughts on IEOs
[00:16:44]
Social mining
[00:18:16]
Thoughts on the market in 2020 and 2021
[00:25:15]
Thoughts on yield farming fad
[00:31:53]
DAO Maker’s plans for 2020 and beyond

Quotes from the episode:

“Now we have a lot of IEOs and so on but these things do not sustain. At the moment we have a hype, right? So everybody invests. Once this hype is over the whole thing will collapse again. The DYCO is designed to be a system that can work long term no matter the market conditions.” [00:03:16]

“Now there's a saying, a famous saying, like you can fool some people sometimes, but you can't fool all the people all the time, which means you can maybe pump up a coin for three months and keep the price stable by doing marketing and hoax and bullshit, which we see a lot in crypto, but you cannot do that for 12 or 16 months.” [00:06:32]

“The social mining started off as the idea of how can we make people more bonded to these clients and stop making them jump from coin A to coin B to coin C because this is a never ending cycle.” [00:17:47]

Links

DAO Maker - https://daomaker.com/
CoinGecko - https://www.coingecko.com/
DYCO - https://daomaker.com/dyco

Social Media

DAO Maker:
https://twitter.com/thedaomaker
https://t.me/daomaker

CoinGecko:
https://twitter.com/coingecko
https://t.me/coingecko



Show Notes Transcript

In this episode, Bobby Ong, co-founder of CoinGecko is joined by Chris Zaknun, CEO of DAO Maker and Hatu Sheikh, CMO of DAO Maker. Bobby interviewed Chris and Hatu on DYCO, what it does, social mining, their thoughts on the market, and yield farming as well as DAO Maker’s plans for 2020 and beyond.

[00:00:02] Intro
[00:01:42]
What is DYCO?
[00:10:29]
Amount raised in ICO market
[00:12:17]
Thoughts on IEOs
[00:16:44]
Social mining
[00:18:16]
Thoughts on the market in 2020 and 2021
[00:25:15]
Thoughts on yield farming fad
[00:31:53]
DAO Maker’s plans for 2020 and beyond

Quotes from the episode:

“Now we have a lot of IEOs and so on but these things do not sustain. At the moment we have a hype, right? So everybody invests. Once this hype is over the whole thing will collapse again. The DYCO is designed to be a system that can work long term no matter the market conditions.” [00:03:16]

“Now there's a saying, a famous saying, like you can fool some people sometimes, but you can't fool all the people all the time, which means you can maybe pump up a coin for three months and keep the price stable by doing marketing and hoax and bullshit, which we see a lot in crypto, but you cannot do that for 12 or 16 months.” [00:06:32]

“The social mining started off as the idea of how can we make people more bonded to these clients and stop making them jump from coin A to coin B to coin C because this is a never ending cycle.” [00:17:47]

Links

DAO Maker - https://daomaker.com/
CoinGecko - https://www.coingecko.com/
DYCO - https://daomaker.com/dyco

Social Media

DAO Maker:
https://twitter.com/thedaomaker
https://t.me/daomaker

CoinGecko:
https://twitter.com/coingecko
https://t.me/coingecko



Bobby Ong (00:02):
Welcome to the CoinGecko podcast. I'm your host Bobby Ong. Each week we will be interviewing someone from the blockchain industry to learn more about this fast moving crypto currency economy. If this is your first time listening, then thanks for coming. The CoinGecko podcast is produced each week to help you stay ahead of the curve. Show notes can be found at podcast.coingecko.com. I highly encourage you to join our newsletter where we send out top news in the crypto industry every Monday to Friday. Come back often and feel free to add the podcast to your favorite RSS feed or iTunes. You can also follow us on Twitter and Telegram at CoinGecko.

Bobby Ong (00:39):
Welcome to the CoinGecko Podcast. For today’s episode, we would love to welcome Chris Zaknun, the CEO of DAO Maker. So DAO Maker is a cryptocurrency-focused tech and strategy consultancy. The firm's technology products have been used by projects like NEM, AVA, and Elrond to create pluggable community hubs, whitelabel DAOs, dynamic token distribution curves, and more. Welcome to the show Chris.

Chris Zaknun (00:59):
Thanks. Thanks Bobby. Thanks for having me.

Bobby Ong (01:02):
Yeah, so I guess for a start maybe Chris like, do you want to give a short introduction of what you do, background and what do you do at DAO Maker?

Chris Zaknun (01:08):
So DAO Maker is basically one of the few strategic consultancies in crypto, who, which helps small clients, large clients move around the industry. I usually tell people who are non crypto. We're like the tour guide through the wild west. And we tell them, "Okay, this is a scammer. This is, you know, don't have to pay for this exchange". Strategic consulting, how to get them on Coinbase, how to get them on Binance, how to plug into Uniswap, etc. Right? The industry is moving extremely fast and we have people up to date all the time and that's why people come to us.

Bobby Ong (01:42):
So I think something interesting about DAO Maker, I think that I read up recently that you guys have this new form of ICO called DYCO, Dynamic Coin Offering. Maybe tell us a little bit about what DYCO is and some of the projects that have used this structure.

Chris Zaknun (01:57):
Sure. So the DYCO is the brainchild of Hatu and me, my partner. And then 2017, I was obsessed with the idea of the ICO and crowdfunding. However, obviously that failed. Equity crowdfunding equally fails. Considering that there's only been four or five positive exits from every single equity crowdfunding platform. So we knew that there's a good idea here, which is giving decentralizing VC funding but the execution has always been horrible. And the ICO is also horrible execution because the only reason why you would invest in ICO is the day one flip. Not because of any other reason, but because it designed this way. Because the asset is hyper liquid, meaning I can buy it today.

Chris Zaknun (02:38):
I can buy it in one month. And unless the value is fundamentally very undervalued on day one, it will most likely be lower at a lower price one month later. So there's no opportunity cost into buying it one month later. However, if I buy the coin one month later, the company doesn't get my money, right? Some other exchange and some trader gets my money. So if I'm here and I want to buy this company for the longterm, then I'm the right target market. But I would never give my money to the company itself. And that is the fundamental issue with ICO. DYCO is trying to solve this problem and build a protocol of framework that can be sustainable. Now we have a lot of IEOs and so on but these things do not sustain. At the moment we have a hype, right? So everybody invests. Once this hype is over the whole thing will collapse again. The DYCO is designed to be a system that can work longterm no matter the market conditions.

Bobby Ong (03:32):
I know that there was a project that launched recently, Orion protocol that uses the DYCO framework. And based on what I'm reading is basically some sort of a refundable mechanism where you, if the token price is below the ICO price, after nine months, 12 months and 16 months, you get to basically refund 80% of your investment in ICO. Is that, right?

Chris Zaknun (03:53):
Yeah. So there's a core, a few core aspects, which make a DYCO, not a refundable token sale. So every DYCO is refundable token sale, but not every refundable token sale is a DYCO. So what makes these two differences is in a DYCO, every single token that is sold is backed by real money. A refundable token sale is not a money-backed token sale. A DYCO is essentially if you take DAI and you mix it with an ICO. So in theory, DAIs should be stable and it is. In theory, a DYCO should be stapled at 0.8% or 80% of the original value. The reason is because every token, every single token that has been sold can be refunded at 80% of the value. So if the coin sales at $1, then each token can be refunded at 80 cents. Which means if I'm a DYCO investor and I have a wallet address and the price falls below the 80 cent Mark, I can buy it from like of the market, wait some time and make risk-free profits. Just like you can make risk-free profits in DAI and all these stable coins, how they work. So if it falls below 80 cents, then somebody else is giving away their real money back value to you so that you can make money on the way down. And the refundable token sale, you can not make money as [dope]. That's one of the core differences.

Bobby Ong (05:15):
Then basically what happens is during in a DYCO sale like 80% of the funds raised are locked in a Gemini custody and sell in USD. And the teams couldn't have access to this thing until up to nine months, in which case another 20% get locked. I guess unlocked.

Chris Zaknun (05:30):
Yes. Yes.

Bobby Ong (05:32):
After 12 months, another 30%. And then after 16 months the full 100% is unlocked. So I guess my question is, what happens after 16 months then? Like the team got all the money. They can do whatever they want and then the price can go down.

Chris Zaknun (05:43):
So let's say it this way. The DYCO is designed to be the solution between equity, which is I call equity accountability and liquidity. Liquidity is tokens. Equity is extremely illiquid. Tokens are extremely unaccountable. You take these two together, you have something better than what both of them were individually. The reason a DYCO is accountable but refundable token sale is not is because every single token that gets refunded a DYCO will be burned. For example, Algorand and a few other companies had refundable token sales, but these tokens are not get burned. They get back to the company, which means the money is in a different format, but it's still available. So even if the company fails, they don't lose anything. In DYCO, 100% of the sold supply, if people are not satisfied after 16 months gets burned. Now there's a saying, a famous saying, like you can fool some people sometimes, but you can't fool all the people all the time, which means you can maybe pump up a coin for three months and keep the price stable by doing marketing and hoax and bullshit, which we see a lot in crypto, but you cannot do that for 12 or 16 months.

Chris Zaknun (06:54):
You cannot fool all your investors for 16 months because they will see that you're not doing anything. You're just pretending to do something. So yes, you could potentially work for 16 months and make sure do a real product and then stop working after 16 months. But most people won't do that because people who have the intention of scamming will not even go with the DYCO because it's just too much work to actually have to work for 16 months to scam after 16 months. It's just not economic for them.

Bobby Ong (07:21):
And I know for the DYCO only ICO participants get to sell the tokens back to the team at 80% of the value. Why do you make it that way instead of opening up to anybody who trades in secondary market?

Chris Zaknun (07:35):
Yes. So we designed the DYCO again in a system, in a market, let's say February, March market. No funding happened at all completely dry. So the first problem that you have to fix in order to make crowdfunding work is that people actually give the money to the company and add the money to the exchange, right? There's an insane market where people like to buy tokens, new tokens, small caps on the market. However, the primary market is dead. So first of all, what we had to do is we'd have to transfer some of that funding from the secondary market back to the primary market. Otherwise the companies don't have any money. So if you invest in an ICO right now, you have the most risk because there's no price discovery. You could wait for the price discovery and the secondary markets. Can watch the company for two months work evaluated.

Chris Zaknun (08:27):
They have much less risk and they actually have a better deal because the company is now two months older and probably even have a lower price. If you buy at the ICO, you're the one who found who's giving the company the money. You're the founding members. You have more risk, no benefits whatsoever, but you're the one who gives the company the money. Without you they couldn't even start. So the DYCO changes this by giving the people who are giving the money, the company money, special benefits, benefits, nobody else will ever have because you were the ones which enabled this company to even exist. Such as the refundable sale, meaning you can make money on the way down such as your wallet address is whitelisted, improved stacking rewards for the rest of your life, which means in a DYCO even the wallet that you used to contribute will have value. It's almost like an NFT that you can now trade and give away for the future. Because you're one of the few people who believed in the company and you took increased risk, is price discovery.

Bobby Ong (09:27):
You may be biased but do you think this DYCO will be become more popular? Like, I mean, so far we've only seen Orion launching such mechanism.

Chris Zaknun (09:36):
At the moment we are back into 2017-like behavior, when everybody can raise money. It's also important to note that Binance as of right now, is making a raise of $3 million for Sandbox. So that's the highest average 3 million. The Orion sale with the DYCO raised among 3.5, which means if you are a serious company, you can still raise now more than Binance itself. You can easily raise 500, 600, maybe a million dollars without a DYCO. However, you're a serious company, unless the market does not even increase even more than it is right now, which is quite crazy at the moment, you will have better odds of raising more money with DYCO then no DYCO. And once the market goes back to normal or back to [debt], then I think we will see a lot more people adopting the DYCO model.

Bobby Ong (10:29):
So I'm curious to hear your thoughts right, now let's talk a little bit about the ICO market in general. So the peak of the ICO market was late 2017, early 2018, where it was common for people to raise $20 million raised, was kind of like the norm, average amount. And then like some raised up to a billion dollars, $2 billion. And then 2019 came by and then everybody was struggling to do ICO. How much is the average amount raised in ICO these days?

Chris Zaknun (10:53):
You mean, what's the time frame? Because this switch is so fast.

Bobby Ong (10:56):
Okay let's say, like what's the average amount raised last year, 2019? And what's the amount raised at the start of 2020? And then maybe more recent data in the past couple...

Chris Zaknun (11:06):
So 2019, especially like last quarter was, it was very bad for funding, right? We saw almost no funding. All the IEO stopped funding itself. We have a lot of connections to [inaudible] and so on and even Binance and they just didn't want to raise any. At that point in time, we were running 2key campaign and had also marginal success with raising. That was probably one of the reasons why we started working on the DYCO model because we know that once the hype is gone, people still need funding. I think at that point we had, like we saw about three, $4 million of total token sale funding in, it was in October. I remember that specifically, which was, I think 98%, less than a year before. So we really saw this whole industry dying off completely. Even though the camera industry didn't fall by 99%. So what we are seeing right now with the DeFi hype is, there's probably going to be short lived and that's why all the scams come out, push out their exchange, their sales and so on.

Bobby Ong (12:06):
I don't know how much 2key raised but I guess it was around three to $4 million for the average amount that can be raised these days?

Chris Zaknun (12:12):
Well, it was about, there was this amount over three years.

Bobby Ong (12:17):
Okay. And what do you think about IEOs? Do you think that's a reasonable way for projects to raise money these days or that's sort of like marketing gimmick by exchanges? It's sort of dead as well but it's coming back in 2020.

Chris Zaknun (12:30):
It's coming back now and it will go away right away because it's not a funding model at all. Because in order to sustain this model, you need to allocate funds for pumping the price. That's just how it is. It sounds a bit weird, but that's how it is. There's an escrow service, not the same for all IEOs but for many of them. And your money is in escrow. Unless you get a 2, 3X, which means you need to use the money that you just raised in order to pump your coin. And if you don't, then you don't want to get the money that was raised in the first place. So in order to raise the money, you need to spend 80% of the money. In our model, it's similar but in order to raise the money, you just have to keep that money in escrow. And if you're successful, you get the money continuously. So it's a similar model but more sustainable for long term.

Bobby Ong (13:15):
Cool. So also Hatu, the CMO of DAO Maker just joined the call as well. So it's probably a good time to introduce Hatu over here.

Hatu Sheikh (13:22):
So thanks for introducing. The main thing I want to say, I think like Chris said, is we've been in crypto for a while and we've seen a lot of funding methods come in. We've had, first was know the hype around 2017 and we started moving towards IEOs but it was kind of the same old. You'd have a quick uptake in price initially and everyone would be interested but they were kind of drop it off right away. I'm not sure if Chris had the opportunity to show this model where we kind of discussed how we have this [national] Cup and Handle chart in the space where initially projects come out, they don't have a lot of adoption and the price kind of kicks off. So people immediately like pull back because of the hyper liquidity in the market. Liquidity is one of the main drawing aspects that brings people to crypto.

Hatu Sheikh (14:14):
But it's also interesting to the point where it kind of throws off everyone when the price is not performing well. And it's the lack of performance that kind of begets lack of interest at the same time. So we kind of enter this kind of debt spiral with a lot of coins where they raise a lot of money, but as soon as the price kicked off, people lost interest in the product itself. So the main idea with a DYCO was not just that the money should be saved. It was also to make sure that the projects, especially if they have a longer time horizon, have this ability to keep people coming back. They need to see the milestones of projects keeping up with. So there's obviously a price for there, but as long as the community keeps coming back to see whether or not they should validate or invalidate the funds the project has. They have a reason to come checking up what's happening.

Hatu Sheikh (15:03):
So this get used to interest in the product and the, we gave a 16 month horizon for the first DYCO, Orion, which we felt was a good timeline for them to develop what kind of product they are, you know. A bridge between CeFi and Defi. It's an ambitious project. It's been in development since 2018, but we felt still 16 months is enough. People to realize, okay, the product is going to come out and do I still want to hold on to [inaudible]? I think it's a big move in the entire concept of VC because traditional idea has always been, you cannot enter a VC decision while still limiting your downside. In this case, you can stay invested for up to 16 months and you could still then decide in the end. "Okay, I've seen the products, I've seen the roadmap delivery rate, I've seen the adoption, and now I want to decide whether I'm going to stay in."

Hatu Sheikh (15:50):
So the main point with this was to make it exciting again because it had largely died down. And we saw that a lot of people were excited with the fact that they could actually stay invested and hold onto it and then see how it does after 16 months. It then just actually set up. The good part was that a lot of there was a huge supply side shortage on exchange order books, which kind of show that the people who are falling into the ones that we had made to them, which was hold onto it and see how it does in around 16 months. That's good. You know, you now have larger portion of people with a longterm mindset. They are willing to see actually how the products are. This, it's a model that's kind of befitting the new concept. Now, of course, we have this kind of DeFi hype phase. There's a lot of Uniswaps pumps and dumps. And as Chris said, this is likely not going to last very long because as soon as people start losing substantial amounts of money collectively [inaudible].

Bobby Ong (16:44):
Let's talk about the other product that you have. Social mining seems to me that it's sort of like an incentivize platform. Sort of like users get token air drops for doing particular task like making a video, writing a review of a project. Did I describe it correctly?

Chris Zaknun (16:59):
So social mining is essentially platform, which me and my co-founders, CTO of Design, start designing mid 2018. Once all the funding died off, in order to again, make people more bonded to that, to these coins, right? As Hatu just mentioned hyper liquidity is our biggest friend and enemy in this industry. Because yes, I like it when it pumps but I don't like when it dumps. So the whole concept of social mining is make people more engaged. If I know if I understand the project better, if I understand what they do, if I have more reasons to be a part of this community, then I'm not going to sell. And projects like this too.

Chris Zaknun (17:39):
Because if people don't sell them, the market cap will be higher. Then there's more marketing, there's more PR coverage, etc, etc, if there's more activity. The social mining started off as the idea of how can we make people more bonded to these clients and stop making them jump from coin A to coin B to coin C because this is a never ending cycle. So we had to be like, guys stick with one coin for like a year and choose the ones which actually do something positive because you're enabling the scammers. As long as you keep jumping from one scam to the next, there will be another scam and another scam. And that's how social mining started.

Bobby Ong (18:16):
So you guys are deeply involved in the crypto space and spot trends in market cycles pretty early. Just want to get your thoughts, where you think the market is heading in the second half of 2020 and how do you think 2021 come out, will shape out?

Hatu Sheikh (18:29):
Well, I'm pretty certain that we're going to see one major change. So, you know, in Q3, we have this huge excitement for early Uniswap listing or volume picks up. But yeah, you can only milk this concept so many times, where the whole concept is that regaining these huge APRs on, you know, deposited token with some ETH and you're going to get some tokens back. It's like a 2017 master nodes. I don't know if you were looking at those basically, you would buy this huge bag of tokens. The token would have no use case beside the fact that it gives you more tokens. And people quickly realize, "Wait, I'm just accumulating something that's worthless." And the whole point was the next guy hopefully will buy the more tokens that I got. So there's kind of a capacity that we saw this very quickly with the YFI forks. They have this huge peak and then immediate collapse because they realize that the token only has a usage based on other people wanting to buy it.

Hatu Sheikh (19:28):
And it's actually the same with a lot of the Uniswap LP programs, which are kind of based on "deposit the tokens. And we're going to give you more." We're going to triple your token back in by the end of the year, which is not going to even reach a year because people just want to sell it to someone else. YFI of course, kind of made squeezed in everything in a week. And it's forced made the mistake of often doing that too. People want immediate returns. Supply inflation was too fast. Uniswap is a bit slowed down version of that cause supply inflation is much lower. 300% if you're over the course of a year, versus you know, doing that over the course of a week is very different. But the model is going to be the same. It's just the concept of a masternodes applied to a whole new coin.

Hatu Sheikh (20:14):
Of course, the original YFI was different cause they had an underlying technology. It has a good earning potential, protocol itself, which is something else. But a lot of these Uniswap LP programs that a lot of new coins are shooting out, entirely for focusing on the same concept. We're going to give you a lot of tokens as long as you stay invested in. It becomes a game of chicken where the first guy, as long as everyone holds in, we're good, we're good, you know. But then eventually there's going to be this first guy to start selling it. And then you just enter the spiral towards the bottom. So this is gonna clearly [happen]. But crypto funding is not. We actually did a research paper a while ago, which is what drove us to make a DYCO, which was focused on these three kinds of crowd funding.

Hatu Sheikh (20:55):
You have product crowd funding in which the person who buys into the product - kickstarter, takes all the risk but has no upside. And good example is Oculus. You know, the funding was provided to Oculus. They had a large multi billion dollar exit where the people who took all the risks, they never got anything out of it except the product, which is a very odd system. So then that led up to equity crowdfunding. But the issue with equity crowd funding was that there was never an opportunity for exit or almost never. I think out of hundreds of equity crowd funding projects, only a handful. You can count on one hand, have listed and they've almost always had a negative list. And then came the token sales. Now I found out kind of sad that over the course of the first quarter and then you quickly, again, you know, as third and fourth quarter came in 2019, token sales kind of died off and it became apparent that the IEO craze won't come back.

Hatu Sheikh (21:52):
But I was certain that token sales are not going to go away. It needed a new framework, where people feel a bit more confidence because the main issue is people's lack of confidence. Token concept was already great. It just needed a new framework where people have lower risk associated with a typical problems with, you know, token sales, lack of credibility, no rights over the money and the factors, which make it a non-security. So there's a thing we have in internal team, which is the very fact that, you know, makes tokens viable, that you do not have to register them with the security and go through all the process. Also makes them a pain. And if ever, a team tries to associate those things, then they get labeled to security and they can't do it. So this was kind of a good sweet ground where as long as the funds stays escrow and we can utilize the social mining system to do with governance, whether or not the funds should be released or not on the deadlines where the project is given, like for the first nine, 12 and 16 months for performance, you basically are able to comply with the aspect that token holders can decide and validate the team's performance without turning into security.

Hatu Sheikh (23:04):
So I think more models like these are going to pop up more. I don't know if you've been keeping on recently but the cost of governance is becoming stronger and stronger. We've been working on it for since 2018 almost, but it's playing a bigger role into it because like, like I said, as funds again, dry up, more and more teams are going to be like, "Okay, we would like to give the token the power of governance." It doesn't turn into security but it allows, you know, the community to monitor the funds, insured release mechanisms and other factors like, you know, even inflation. And now back to social mining is we're kind of pulling all of these factors into that software. It's a very battle tested technology. It's already used by several top hundred coins, back several top 50 coins now. And its main purpose is that the community itself, as long as they're token holders, get more say in the project. For the time being, we initially started with them governing each other and community matters. It moved up.

Hatu Sheikh (24:02):
And now it's kind of focused towards the community managing inflation rate of the token and with the DYCO, it's community manage the inflation rate from staking rewards, plus also we're seeing whether enough fund should be released. It has this elevated status for the community on a consistent basis. But of course it's been gradual depending on how much both the teams and the community are willing to, the teams, how much are they willing to give up in terms of responsibilities, how much the communities willing to take? We are seeing a consistent trend where the average participant is getting more and more educated and they want more responsibility. And that [internationally] gives these tokens a huge new layer of value because initially the token did have value associated with the social mining because it would give them governance rights but it was limited. Now as they manage to plug more rights in tokens like release the funds. And on top of that, some of the staking releases. Community has associated [inaudible] token. And it's a [inaudible] where the community's tokens go up in value on the basis of them having strong governance over the ecosystem. The teams get, you know, give more responsibility to the community so they have less worries about whether or not the community will accept on certain decisions.

Bobby Ong (25:15):
What do you think about the yield farming fad that is going around? Like, I mean, people are talking about 10%, 20%, 50%, 100% APR and now we have YFI at 1000%. How long do you think this fad will last? Like do you think this is something that will be, we'll see some form of another surviving for the long haul or it's a short term thing that would die off very quickly.

Hatu Sheikh (25:36):
Well, I would say that YFI was kind of a unique scenario because the underlying protocol actually was generating a lot of money. That's not the case with the, with the forks of YFI because they actually make money to the underlying protocol. So you have a situation where you have a single protocol that makes this format of rapid distribution in a week and two weeks. And people get very excited and they all are gone but it's an important factor here that the underlying protocol was very successful and was making money. And now it's forks just make the underlying protocol for the first one money again. That's important. If you want to, it's important to recognize that [Andre] had a successful product. He could have sold the tokens directly and made a lot of money instead. He made it a community program and just give all the tokens. That's what made YFI so valuable that the guy could have instead of selling it, he just gave it off for free. Those tokens had value regardless of the APR system. The rest of the copies are just master nodes in the sense that people are trying to accumulate these tokens on the entire basis of having someone else to sell it to. It's a, you know, greater [fools they're able to] but squeeze into one week.

Hatu Sheikh (26:46):
As for the rest of them, I made a point on compound several times that basically our compound is giving away free subsidies without actually trying to grow the business. Essentially it's the same of ride sharing business, where the VCs fund you taking large subsidies on your right, which is good, you know, if you want people to actually get involved. But that's not the case with what's happening with compound. If people are taking the largest amount of borrowers on the platform, which is at the moment DAI, not going to be taken without those subsidies and something is completely wrong, which is currently the case. The reason is that they didn't have a business focus with those lendings. The reasoning I would say is they have a view of making DAI more valuable, which is not really business oriented mindset because the reality is we can see from all exchanged lending platforms, CeFI and even the larger ecosystems like Genesis trading, their biggest demand for the borrowers is either for stable coins, like Tether, which have high demand in exchanges because that's where the main volume pairs are, and Bitcoin.

Hatu Sheikh (27:52):
Bitcoin is the primary one. Now compound had this unique opportunity where they're giving these huge incentives every week. I don't know, worth a million dollars. But they can actually get people interested into tokenizing wrapping Bitcoin at rapid speed and then telling them deposit and get the subsidies for it. Now the huge largest portion of the business in the centralized market is often for borrowing Bitcoin. Compound could go over all around Bitcoin that makes it easy for the traders. And now they actually have a substantial market for that asset that's heavy in the mend. But they didn't do that. You know, they kind of separate the business purpose of this and they made it, "How can you just get in more users?", which is the wrong approach. Now you just have people who are there to form and they can leave as soon as it's done.

Hatu Sheikh (28:35):
The main point should have been, like what's the major portion of lending market. It's often either USDC, USDT or Bitcoin. That should have been the focus of this. Okay. We're going to use these massive subsidies in greater millions a week and use them to get people, to use our product almost in a sense, not even for free, but in a paid manner. So they get used to it and that what they would otherwise be borrowing from, say Celsius or [Block Fire], even Genesis trading on large volumes, they do it on our platform. That should have been the goal, but instead it's completely, I don't know, that it doesn't have a purpose at the moment. As for Balancer, which is the next one, I think it's tough to say. What's ironic is that this very little volume on Balancer, people are just using it to milk the airdrop, which is also deviating from the business goals.

Hatu Sheikh (29:30):
If the goal is to make the product a success. It shouldn't just be like people put money in and then claim those airdrops and then leave. They are trying to combat that now. They did accept that they didn't have a launch. They're improving this but I would still say that I think they need to have a pinpoint the business focus, which is from my understanding they want more volume as in that will drive the revenue for the protocol itself. They're not taking any asset deposits. In the long, long run, it will come from the trading fees but Balancer has an unnoticeable factor that as for the rest of the space that's coming out with huge yields. I don't think I haven't seen anything that's viable at the moment except maybe MTA. MTA, I'm not gonna jump on that. It's very controversial. It's basically the DeFi fans like curve and I used curve quite frequently.

Hatu Sheikh (30:20):
So I do like that. And then you have MTA fans who're kind of like, "Okay, is it VC-backed platform It's going to explode". I was not fan of that launch. It does have a high yield, but it's been drained out pretty fast instantly basically because it's a strong arbitrage, but MTA is kind of what we should be moving away from. It's a project that did a seed sale at a 95% discount just days before did a public sale. I mean, that's worse than the 2017 deals. I mean, 2017 they have VCs go to projects and tell them we're from this family office. And then teams would be like, "Wow, I want a family office associated with me. Cause he gives me great business growth". And then we give them like 80%, 70% deal, which would immediately after listing cause it's all going to collapse. I don't know if you remember those days where it token were listed and at 1X and it would immediately go to 0.1X. It's because there were enough people in the room who got it, that substantial of discount.

Hatu Sheikh (31:17):
And now you have a token has given a 95% discount to VCs and then the team has the nerve to go like, "Okay, I want the community to kind of come in now. We just realize you're very important for us." That's the thing that people should be stepping away from. And the teams, especially. They realize they want a team but they don't want to give the community the best deal. Andre is where he went the complete opposite way, which is why YFI took off so well. And there was no such thing as a VCC round or anything like this. It's just okay, everything's for the community. And that kind of made the project so successful and popular instantly. It was so drastically different from the norm.

Bobby Ong (31:53):
Alright. Very interesting explanation that you gave. I think we sort of running out of time. So maybe before you wrap it up, like maybe briefly explain the next couple of minutes what are DAO Maker's plans for 2020 and beyond?

Chris Zaknun (32:04):
So we've been quite successful raising other people's companies and incubating them. Now actually have quite a portfolio of companies we've worked help with. Elrond, Orion, LTO, some big names at this point. We are now moving forward to the next DYCO and something called the Hodler sale. The Hodler sale is something that we tested with Orion, where we allocate, allocations not like in Binance, on a system of two weeks holding, but on a meritocratic scale, which we developed for social mining. Social mining evaluate usecase and different indexes. We scan the Block Explorer. We look at the work and then we say, "Okay, this is good developers. This is good designers. This is good holders. This is script based developers", et cetera. And based on your indexes, you will now have access to further good sales that we do.

Chris Zaknun (32:55):
With every single sale that we did, we have, we build up a reputation of, you know, making people money. And this gets into a feedback loop because we give allocations people which we know are good community members. People we know do not sell. People we know that don't flip and this makes the whole ecosystem more valuable. So now it splits into DYCOs, which is essentially these 80% sales and these smaller cap raises. So smaller projects. There's a really good niche in this industry. You can build a small protocol which has utility and use case with smart. And you don't need much money like $2-300,000 and maybe a bit more. These would go to the hottest sales in DYCOs and we're currently designing and building a whole new platform for this ecosystem for fundraising, for secure fundraising directly to community, because that's where we think the future is and maybe Andre proved that there will, by now having the second most, not valuable coin, put the coin the second highest price. I'll say it this way.

Bobby Ong (33:57):
I mean at the end of the day, crypto is all about community, community, community. If you don't engage or get your community on board, then there's really no need for crypto project, right?

Hatu Sheikh (34:08):
It was a bit more, so we're not just thinking on the funding part, right? So we're kind of shifting the platform itself, social mining, and combining it with the DYCOs to make a system that in which you can, as soon as you have a proper launch office system, right? So you can get off with the token tip and then easily plug in the social mining platform, which now actually ties in as a, as one of the "Legos" i'd say, to DeFi. In the sense that it recognizes all the LP tokens you're making. Traditional staking only focused on holding the native token. We've made it such that it recognizes liquidity providers. We want to make sure the community actually takes a more active role in not just [biz and tech] development but also providing liquidity. It starts recognizing all the pools that people are participating in and considers that as a stake in the network.

Hatu Sheikh (35:04):
And then it builds a kind of like a bell curve out of how everyone is participating to kind of move native staking away from just a passive income. And instead, they're trying to get into more of a reward fragment. But yes, there will still remain in reward as passive income for just holding into it. But people who have to take a more active role and turn into a BizDev aid for the project. Which we've seen with LTO, for example. Social mining actually didn't manage that or started going major community growth across the world. It's something common in the NEM ecosystem for social mining. Or just want to provide liquidity which is a valuable asset to the project as a whole. And it's, you know, instead of just reducing circulating supply, do more. That's the whole point. And it builds this curve where from the mean value people who were completely passive, they fall at the bottom of the bell curve and release a skew of less than the mean staking rewards and whatever they receive less kind of pooled into a bonus for the ones who were active in the system.

Hatu Sheikh (36:08):
So it becomes like an autonomous system for distributing the staking rewards. Yet it can be governed by the community within itself. I think that's going to be more interesting because we haven't launched that phase in full format and it's going to be a new format for basically giving community the right to hold more than just, you know, govern each others activities.

Bobby Ong (36:34):
Alright. Cool guys, thanks a lot for taking the time to explain this thing. I think it's interesting talking about DYCO and some of the trends that you're seeing in the crypto space.

Hatu Sheikh (36:42):
Thank you so much, Bobby. Happy to be here.

Chris Zaknun (36:48):
Thanks. Yea, it was great. Thanks for having us.

Hatu Sheikh (36:48):
Bye bye.

Bobby Ong (36:48):
All right, that wraps up the show. Thank you for listening to the CoinGecko podcast with Bobby. If you like our show and want to know more, check out podcasts.coingecko.com or please leave us a review on iTunes. Do you have any feedback? Do drop us an email at hello@coingecko.com. Join us for more next week. See ya.

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