The Chopping Block: Here’s What Was So Bad About Three Arrows Capital - Ep. 368

Welcome to The Chopping Block! Crypto insiders Haseeb Qureshi, Tom Schmidt, and Tarun Chitra chop it up about the latest news in the digital asset industry. In this episode, Taylor Monahan, matriarch of Metamask, joins the show to discuss the contagion of major crypto firms, the bear market, SBF saving crypto, and much more! Show topics:

• The importance of UX and security
• How Three Arrows Capital’s practice of borrowing to leverage their bets has caused a crisis for crypto lenders that rippled out to many customers
• How the GBTC arbitrage trade was part of 3AC’s undoing, and how that trade was one many other crypto trading institutions had previously abandoned
• How crypto lenders were being degens with customers funds
• Why SBF stepped in and made sure these BlockFi and Voyager didn’t default on customers’ deposits
• Whether this whole wind-down reflects a credit cycle
• How DeFi protocols were built to avoid these kinds of centralized finance problems 
• How the systemic issues caused by CeFi institutions like Celsius, BlockFi and Voyager are reminiscent of the Great Financial Crisis
• What are the similarities between this crypto meltdown, the Mt. Gox debacle, and the 1907 and 2008 financial crises
• What are the consequences of losing retail money vs. institutional money
• How surviving a credit cycle crisis creates the best risk managers
• The lessons to be learned from all these crises 
• How MakerDAO is trying to figure out what to do with its money
• What happened with Solend and why the DAO resorted to a centralized action
• Why DeFi needs more clauses about how to handle edge cases
• The difference between doing dumb things and wrong things
• Why Tarun is impressed with Solana’s DAO tooling
• Why Taylor is thankful for the bear market

Hosts

• Haseeb Qureshi, managing partner at Dragonfly Capital
• • https://twitter.com/hosseeb
• Tom Schmidt, general partner at Dragonfly Capital
• • https://twitter.com/tomhschmidt
• Tarun Chitra, managing partner at Robot Ventures
• • https://twitter.com/tarunchitra 
• Robert Leshner, founder of Compound 
• • https://twitter.com/rleshner 

 

Guest: Taylor Monahan

• Twitter: https://twitter.com/tayvano_
• Taylor’s thread on resources to learn about all things crypto: https://twitter.com/tayvano_/status/1509380091184246784?s=20&t=kNk8fJ7pJAWfEEVZQHwpvg

 

Episode Links

 

• Crypto Contagion
• • 3AC: https://blockworks.co/three-arrows-capital-brink-default-owes-voyager-657m/
  • Voyager
  • Celsius + Goldman buyout? https://www.protocol.com/bulletins/goldman-celsius-bankruptcy
  • BlockFi bailout: https://www.coindesk.com/business/2022/06/21/blockfi-receives-250m-credit-facility-from-ftx/
  • • Unchained newsletter on BlockFi’s bailout: https://unchainedpodcast.com/vitalik-says-this-deserves-mockery/
  • CoinFlex: https://www.bloomberg.com/news/articles/2022-06-27/crypto-exchange-coinflex-to-issue-tokens-after-withdrawal-freeze?sref=Q2SpVkJl
  • Babel: https://www.coindesk.com/business/2022/06/20/babel-finance-reaches-debt-agreement-with-counterparties-after-withdrawal-freeze/
  • Unchained Coverage: Why Possible Insolvencies by Celsius and 3AC Could Spell Disaster for Crypto: https://unchainedpodcast.com/why-possible-insolvencies-by-celsius-and-3ac-could-spell-disaster-for-crypto/
  • Solend DAO situation:
  • • Unchained Coverage: Solend and Bancor Drama: Did These DAOs Violate the Ethos of Crypto? – Ep. 366: https://unchainedpodcast.com/solend-and-bancor-drama-did-these-daos-violate-the-ethos-of-crypto-ep-366/
    • https://www.coindesk.com/tech/2022/06/19/solana-defi-platform-votes-to-control-whale-account-in-bid-to-avoid-liquidation-chaos/
    • Covered on Unchained Newsletter: https://unchainedpodcast.com/does-this-dao-deserve-emergency-power%e2%81%89%ef%b8%8f/
  • MakerDAO governance proposal: https://www.theblock.co/post/154515/maker-governance-is-voting-to-invest-500-million-in-us-treasury-bills