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March 22, 2021

Meet the Founders

Building the Thomson Reuters of DeFi With Toby Lewis From Novum Insights

Featuring

Toby Lewis, CEO at Novum Insights, joined Coinscrum host Oscar Hammond for the latest installment of the Meet the Founders Series. Novum Insights provides data-driven analytics and a dashboard focused on the DeFi space.

(1:57) Prior to founding Novum, Toby co-founded another startup that was an analyst firm for venture capital, whereby they examined how large corporations invested in startups and documented the strategies of firms like Google Ventures. That’s where he became very interested in the data science and data analytics side of things.

In 2016, he started Novum. During that time, Ethereum had just come out. The blockchain was very interesting to people, but not very many people understood it at all.

(3:36) “It was a very exciting area to begin trying to map and wrap our heads around. And I’m really glad I did it because the space was even more complicated and wild than I imagined,” said Toby.

Novum Insights is a team of data scientists and analysts. One of their advisors was on the founding team of Risk Metrics.

(5:32) Generally, I think we’ve been attracting some really great talent who see huge potential in the crypto and DeFi space…Our dream is to build what would be a Thomson Reuters of crypto and DeFi,” said Toby.

Enterprise Blockchain to DeFi

(6:50) When the team set up Novum, they thought the enterprise blockchain space and how the crypto world would intersect with it would be a good focus. What actually happened, however, is much of the exciting stuff was happening on the crypto side. The enterprise blockchain space, meanwhile, seemed like a classic vaporware area of the software space, noted Toby. Much of the technological innovation was happening in the crypto and DeFi space.

(8:05) “We were doubling down in this area. And I think trading data and signals is where we’re heading toward. We’re keen to look under the hood and do fundamental analysis and try to analyze what is actually going on in a particular project. But at the same time we’re looking for signals linked to movements in the underlying blockchain,” explained Toby.

The product they’ve built is called Momentum Pairs, and it’s doing pretty well. They examined 30,000 different pairs that are currently on Uniswap. Based on the ones that are trending the most and have the most momentum, they looked at 200-300 pairs over seven, 30, and 90-day periods. These tokens are interesting from an investor standpoint to have in a diversified portfolio, Toby noted, adding that they help people to answer questions like:

How widely held is the token?
What is the underlying blockchain activity for it?
How much potential does a particular project have?

(10:13) “The growth in DeFi is so astonishing that we want to use it as a beachhead to tackle the entire USD 2 trillion crypto industry,” Toby said.

Customer Profile

DeFi is more of an intelligent enthusiasts’ arena at the moment, Toby said. They are prepping for institutionalization. Effectively you can demo the Momentum product for GBP 1 for a week and just play around with it. And then you can have an annual subscription for GBP 300. It’s designed to be useful for anyone playing with upward of GBP 3,000 into the crypto market.

(12:38) “The thing about the Momentum Pairs as the first product, is those kinds of things, a lot of them are going up 50-100% in a week. And by definition, they may well go down 50%. But they could also return your money in two weeks. As a diversified portfolio, they’ve got some quite interesting characteristics as we peel back the onion and you get more signals and those kinds of things,” said Toby.

Novum offers Whatsapp and training groups where they all share ideas.

USD Strategy

(16:00) Novum is going to push DeFi trackers as USD. They’ve mapped Uniswap and all the data. They looked into the intellectual framework around liquidity provisioning as well, which you can see on the Novum website. They’ll be adding charts where it’s cost-effective to use staking and liquidity provisioning and these kinds of things and will provide an intelligent data marketplace for people to track the DeFi space.

17:45 “As a basic rule of thumb, that space will be the feeder to bigger exchanges — to FDX, to Binance, to Coinbase, to Kraken. So it should be at least an area where you can hunt for outsized returns. Then on the second point, there are all these interesting yield strategies where you can get 10-20% returns over the USD net of fees. So that’s also very, very interesting,” explained Lewis.

MATIC being listed on Coinbase is an example of a project where people can have bigger returns. Novum would love to build indices and other products so people can piggyback on them. There is also a DeFi calculator that’s free to use on the site. They are doing workshops and data software on one side and then on the other side building products to help people do that.

Binance Smart Chain (BSC)

Binance Smart Chain had an explosive start to the year and a huge amount of yield farming projects.

(22:22) Pancakeswap is more attractive to most people who are enthusiasts in the sense that the costs of Ethereum are painful currently. You need to almost be a significant whale to be playing around in the Ethereum space at scale and to do all the cool stuff that makes it interesting.

(23:08) “I would estimate that it’s only really worth doing LP contracts and those kinds of things on Uniswap or Curve or whatever when you’ve got USD 10K-plus to play around with. If not, you get crucified by the gas fees, which is most people” said Toby.

The feedback among clients has been that they have played around with MetaMask and Uniswap and it was devouring their capital. So they want to Binance Smart Chain, despite the fact that there are fewer projects to invest in there and a lot of speculative junk, Toby noted. Nonetheless, people would rather be on BSC. In the developer community, however, you’ll probably hear a different story.

Smaller Chains

In terms of adding other chains, Novum will do what makes sense based on the data. Polkadot has come up very strongly. On Uniswap, Polkastarter has been on a tear for ages, Toby noted. Many people have high hopes for Polkaswap. A lot of developers think things on Polkadot could do well, as is true of Avalanche, Fountain and others.

28:20 “I think it’s likely that Ethereum fixes some of the problems due to gas and people are able to more seamlessly transact on Layer 2 systems…But in the meantime, it’s a huge opportunity for chains like Polkadot” said Toby.

The key at the moment for smaller chains is to build a successful decentralized exchange or DEX. There are two things that need to happen: the chain needs to work, which for the most part many of them do, and they need a successful product on their chain, something like Pancakeswap.

(35:46) “The founders of Crypto Kitties, Dapper Labs, apparently their protocol that they’ve been developing is working quite well…It’s kind of almost like table stakes if the product works well and has low fees is great. But it actually needs a product to be built. It needs an avenue for people to do stuff on. Because you can have a faster blockchain if you’d like, but if there’s no utility on that, then it doesn’t really matter,” said Toby.

Dapper Labs is almost ahead of Polkadot, he added. But it’s still early innings in the industry. Some smart people think Ethereum Layer 2 solutions might well be where stuff happens, but we’ll see what Binance Smart Chain has to offer.

(37:19) “Arguably it’s a two-horse race between those two chains at the moment,” said Toby.

DeFi & Bitcoin

(38:30) At the end of the day, Bitcoin has the mindshare of the brand. So BlockStack and Lightning are potentially really exciting, said Toby. Yield solutions like BlockFi with a Bitcoin angle are great. Badger DAO is also very exciting, which is like a Bitcoin meets Ethereum project.

(39:54) “I do love the potential for smart contracts being built on Bitcoin. And I could see there being a bit of a seachange if BlockStack wins mindshare and people actually do stuff and you earn BTC for using it…And if Lightning could actually become user-friendly and people could actually do stuff with it,” said Toby, adding that every area of crypto is suboptimal but it’s so cool that it really doesn’t matter.

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Gerelyn Terzo
Gerelyn caught wind of bitcoin in mid-2017 and after learning about the peer-to-peer nature of Satoshi's creation has never looked back. Previously she covered institutional investing and fintech for several major trade publications. Gerelyn resides in Verona, N.J.

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