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May 19, 2021

Market Spotlight

The DeFi Alliance – Nurtuting Institutional Growth


Paul Gordon
Editor, Coinscrum Markets
Ajith Tripathi
Head of Institutional Business, Aave
Imran Khan
Lead Partner, Volt Capital

The explosion of innovation across DeFi in the past 2-3 years has been astounding but, whilst the technology offers huge amounts of promise, much of it in its current, a lot remains inaccessible to the broader institutional market – for now at least. The DeFi Alliance was formed by a group of established, traditional electronic trading firms that had started straddling the two worlds early on to create a platform where they could work directly with up and coming DeFi projects to mentor and advise them on the challenges they will need to tackle if they are to cross the chasm. Now expanding globally to ensure their advocacy role is coordinated across all legal jurisdictions, Ajit Tripathi, Head of Institutional Business, Aave and Imran Khan, Lead Partner, Volt Capital joined Paul Gordon, our host, to discuss the work of the Alliance.

How The DeFi Alliance Started

(01:10) The DeFi Alliance was launched in March 2020 at a point where DeFi protocols were looking to tap into institutional liquidity yet institutions did not understand the space. The Alliance was set up firstly to educate large institutions about what the power of DeFi can bring to the world of finance. Secondly, the alliance seeks to remove the barriers that would enable DeFi protocols to easily connect with the market makers and training firms to get product feedback and regulatory support. Finally, it’s to connect the community of members for who DeFi products are built.

Are Institutions Interested in This Collaboration?

DeFi is building the new architecture for financial services, Ajith said, and institutions are excited by its potential.

(03:45) “We are trying to create a transparent and automated infrastructure for financial services on the internet… We still make decisions using paper, behind closed walls and there is almost no transparency. The internet is taking over everything and the infrastructure of financial services also need to be networked,” Ajith said.

The DeFi Alliance also mentors new projects that are in the space and seeks to grow a range of startups that are tapping into the enormous growth opportunity of DeFi.

Within its six-week program, the accelerator of the alliance
helps startups break down the barriers to learning about the mental models of how market makers and training firms think about DeFi protocols and how they get onboarded.

What's Most Critical For Projects Developing DeFi Solutions

The expectations on the timelines of the impact of DeFi for mainstream influence would take time, but would eventually happen. There are three (3) main components for that to happen.

The first would be to set up the legal frameworks that make DeFi accessible. An example is the Wyoming DAO law that creates a firm legal basis for the dollar to be a limited liability entity.

The second is that because we cannot treat regulation as a constant, we should allow technology to play its role in innovation.

(13:02) “…technology starts then markets follow. NFTs weren’t anywhere some time back, crypto kitties were such an exotic pursuit and now eBay is selling NFT… so markets follow when technology creates opportunities and then law comes around” Ajith said.

The third is how we can leverage the power of the internet things like stablecoins that are truly cross-border.

Plans For Global Advocacy

The Alliance was initially set up in America and has since set up other chapters in Europe and now, China. The next chapters launches would be dependent on the existing interest of DeFi in such localities.

(15:52) “…future chapter launches are primarily driven by the folks in the region, where innovation is coming from as well as founders…DeFi protocols aren’t tackling their local consumers but they’re tackling a global audience and what best way to learn their global audience by learning about the different chapters within the accelerator program,” Imran stated.

The Alliance especially through its accelerator helps build a community of like-minded founders who are building in DeFi. For many founders, that is difficult to find.

(16:56) “Although DeFi as a sector is growing quickly, being able to find other founders that are building locally is hard to do aside from Twitter and Telegram pages. So within our program, we hope to connect DeFi startups that are looking to build in these regions with localized support and regulatory support. On top of that, they’re able to quickly scale up, build a product that they’re looking to build but also have a network to get a tighter feedback loop so they can have a faster product rollout,” Imram said.

As part of the alliance, projects like Aave that have become pivotal strongholds of the DeFi ecosystem have a lot to give to the crop of projects in the space and such knowledge giving is another benefit of the alliance.

“One of the main reasons we participated in the DeFi alliance from the beginning was to share our experience…there are now other communities that have modelled themselves after DeFi Alliance…that community creates opportunities for sharing of ideas and learning,” Ajith stated.

The Alliance’s approach to collaborating with regulators is one of education and learning.

“What we do is you know we inform, educate and learn on both sides. Then we come up with ideas as to how things can be done in a better way. By now I think we have spoken to every major regulator and they are very excited in a positive way about the potential of what DeFi can do in achieving the principles and objectives of regulation,” Ajith explained.

How To Get Involved.

People interested in joining the alliance can apply at Members of the alliance would be a part of its global community, get liquidity and get help from other founders building in DeFi.

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Paul Gordon
Following a 20+ year career in financial markets, Paul first became interested in Bitcoin in 2011 and helped to establish one of the world's first Bitcoin meetup groups, Coinscrum, in 2012 since when he has grown the community to over 6,500 members, hosting over 250 events and introducing many of the leading projects and thought leaders in the industry.  Paul currently produces the weekly Coinscrum Markets video podcast series and is an active investor and advisor to a number of crypto and blockchain related projects.

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