James Davies

@or3573 What’s the use case for RWA perps that isn’t speculation? Ultimately the cleared portfolio needs mixed utility.

@jlldavies I think this is exactly where the RWA narrative needs to evolve: not only tokenizing assets, but creating real trading venues around them. That’s why Canborsa caught my attention, because an RWA perp DEX on Canton could make tokenized assets much more usable for active traders.

@stacy_muur Building a full QCCP DCO with bank engagement enabling promised collateral to be put to work.

If you're NOT building – another prediction market – another perp DEX – another neobank – another infra for AI agents Reply. Let's help VCs find something good in this market.

The CT VC response to this tweet has been inspiring, yet it also still speaks to the amazing consolidation in the industry. 38 QTs or replies from VCs that they are investing despite this tweet having over 600k views. Awesome to see, but 5,000+ in 2022 to <50!! If you are raising, please reach out to one of these fantastic investors (including us 😇). Marking this as the bottom of investible $ and allocators in the space.

@austincampbell We so very much need to talk. Point 3 is spot on it’s hard verging on impossible and doesn’t even address the complexity of assessing security. Clearing is what is needed but the experience to deliver it. That’s not in either tradfi or digital assets alone.

Some gross misrepresentations of my views in here. On purpose for drama, or on accident because nuance is lost? Either way, let's be as clear as possible: 1 - Securities have to have a record where ownership is known. 2 - They also need to have controls so that they can be frozen, clawed back, re-allocated, etc. to comply with current securities law without creating massive liability that makes putting them onchain non-viable either from an economic perspective (the concern at the root of SAB-121, malformed and broken as it was) or a legal one. 3 - Under current risk frameworks post D-F, you also cannot have a single point of failure for these things across systems, a point the OCC is more up to speed on than the current SEC, though the SEC is rapidly climbing the curve. What does this mean? I agree you can definitely record securities onchain on a public permissonless network! That part is not surprising to anyone. People do that right now. There are multiple licensed transfer agents (e.g. @Securitize, @SuperstateInc, etc.) all doing this right now. That's not the hard part from the public permissionless chain perspective. The question is doing anything with them after that. Right now, the answer is mostly, you can't. One way sends? Easy. Putting securities inside an AMM pool or borrow lend protocol? Net settlement and margining architecture? This is what I have been repeatedly saying does not work (and, in fact, the USD stablecoins inside these things in current DeFi are a ticking time bomb). Why? If you have a fully permissionless, undifferentiated pool, or you have 24/7 real-time trading of these assets, this means it's a matter of time until one of the following things happens: 1 - You have an OFAC issue, hack, or fraud problem causing you to have to freeze entire asset pools, including commingled funds (see: Tornado Cash). 2 - You have a fast enough hack that you don't react before the funds are gone, meaning that whichever regulated entity was the custodian or caretaker is now liable to users for the whole thing (catastrophic if large enough, and why SAB-121 required 100% capital for all exposures). 3 - You have funds transmitted in error that need to be reversed moving through some of these complex implementations. 4 - You have an issuer themselves get hacked, such that all the powers they have to control these things are now in the hands of the bad guys. You cannot rely solely on an issuer of a token to fix those problems. If you let securities or rwa tokens into the current version of DeFi, it's going to eventually be a death sentence for both the protocols tokens are in and the issuer (who will hold the bag on liability). The regulators seem to agree with me on this: look at what the SEC and OCC are not, in fact, allowing their registered entities to do. There's no easy fix here if you want to remain truly permissionless. Either you are going to need third parties deputized to have vast powers over a chain to halt these kinds of issues and remediate them, or you should probably not be combining RWA with smart contracts / complex implementations. At a bare minimum, DeFi needs a complete ground up redesign just to comply with basic things like being able to uniquely segregate funds if they don't want entire protocols nuked by a freeze order. Note that this doesn't mean you have to violate the immutable ledger properties: you can reverse transactions by force sending them back in a subsequent transaction, you can reverse hacks with targeted transactions to send flows back the other way, and so on. The ledger is immutable, but that doesn't mean you can't later send things back. However, the current chains take decentralization to the extreme, so when a thing like Drift happens, nobody acts. That won't be the case for long, with the new rules being implemented for Genius. People are going to have to start acting in ways that blow up the current system, or worse, breaks are going to happen so severe the entire edifice collapses. Disagree? Here's a thought experiment: what if North Korea gets ahold of Tether or Circle's smart contract keys? What happens to DeFi on Eth?

Game time. On set at @business

@shafu0x Worse after accounting costs the yield can be negative relative to risk free rates. And people wonder why the institutional money is only around the edges.

ok we seriously have a big problem in defi rn The risk for the yield you get does not fucking make sense. You have the risk of loose everything. And for what? An extra 40 bps or something. Does not make any sense. No circuit breakers, no protections, nothing. Which would be acceptable if you get more yield. But you don't. Why would I put my money in Morpho or Aave when I can just put it into t-bills. Dao drama, north korea and hacks everywhere... We need to grow up or accept that on-chain lending is for people that cannot off-ramp for different reasons. (You know the reason lol) The solution? I don't know tbh. I wish I knew. Circuit breakers on the corpo chains would make a ton of sense imo. But yeah tradfi will eat defi if we don't fix things. Would love to open up a discussion here. Something I don't see? Potential solutions? I love defi. I was building in defi for 4 years. But I'm seriously considering moving everything to my bank account. Which is crazy to think about.

@joeyreinberg_ From FTX to today trust in black box models has been crazy. If you don’t understand it don’t use it. General rule. If it has great reporting and regulation then this can be a proxy. If it has an unknown set of security auditors and anon founder then avoid.

at this point you’re basically trusting a team to run a fully onchain multi-strat hedge fund… packaged and sold to investors as a “stablecoin” what could go wrong?

@perkinscr97 Free market for gambling though. Years ago I met the only fans founders. They were dead set on wide usage but got pulled into the revenue stream. Will Kalshi be able to go institutional rather than retail gambling? Andy Ross is onboard but the temptation is strong.

Swaps are swaps. And they are federally regulated post Dodd Frank.

** Correction on key compromise ** A week ago, Drift moved to a new multisig, created by a signer from the old multisig. This signer did not add themselves to the new one. The exploiter also initiated the proposal in the old multisig to hand over admin control to this new wallet. Of the 5 signers on the new multisig, only 1 came from the previous setup; the other 4 were brand-new. The wallet was set with a 2/5 threshold and a 0-second timelock. ~Five hours ago, that sole carryover signer used the new multisig to propose changing Drift’s admin. One of the new signers co-signed a second later, instantly meeting the 2/5 threshold. With no timelock in place, the transaction was executed immediately. ** Note ** Some of the relevant Solana programs are not verified, which limits full analysis. We're continuing to dig into the onchain data and will publish a more thorough post-mortem covering the multisig migration, Solana DeFi contagion, and vault exposure in a follow-up.

Building and building. linkedin.com/newsletters/th…

@perkinscr97 Jelly. The passes handed out for manipulation seem to be everywhere. No consequences for running these platforms.

Exactly. Prediction markets don’t get a pass because they are prediction markets. Manipulation of markets is illegal.

Ran the numbers on 11 margin architectures. The speed problem is always the same. SIMM is fast. Full VaR repricing is accurate. Getting both without forcing members to rebuild is where everything breaks down. Full breakdown on LinkedIn: linkedin.com/posts/jlldavie…

Retail perp traders can't hedge the funding rate. No options on it. Can't short the carry. You just pay it every 8 hours. Whether you wanted the trade or not. That's not risk. That's a tax.

Ninety trillion a year in perps. Almost no independent clearing. Market makers posting collateral on every platform separately with no offset. Vertically integrated venues, risk models with multiple documented failures. The infrastructure hasn't kept up. Time to build it.

@andyyy Which ever one cracks HQLA collateral first.

If the tokenization thesis is correct and trillions of dollars of new assets move onchain in the coming years, which company will benefit the most?

@AGaryFlagler @FIAconnect @BMVMercados It has to change. It must change. We’ve built a full alternative ready to start.

𝐅𝐈𝐀 𝐁𝐨𝐜𝐚 𝟐𝟎𝟐𝟔 𝐟𝐞𝐥𝐭 𝐝𝐢𝐟𝐟𝐞𝐫𝐞𝐧𝐭. Across panels, hallway conversations, and private meetings, one theme kept emerging: 𝐭𝐡𝐞 𝐜𝐥𝐞𝐚𝐫𝐞𝐝 𝐝𝐞𝐫𝐢𝐯𝐚𝐭𝐢𝐯𝐞𝐬 𝐢𝐧𝐝𝐮𝐬𝐭𝐫𝐲 𝐦𝐚𝐲 𝐛𝐞 𝐨𝐧 𝐭𝐡𝐞 𝐯𝐞𝐫𝐠𝐞 𝐨𝐟 𝐚 𝐦𝐚𝐣𝐨𝐫 𝐞𝐯𝐨𝐥𝐮𝐭𝐢𝐨𝐧. From 𝐭𝐨𝐤𝐞𝐧𝐢𝐳𝐞𝐝 𝐜𝐨𝐥𝐥𝐚𝐭𝐞𝐫𝐚𝐥 to 𝐩𝐫𝐞𝐝𝐢𝐜𝐭𝐢𝐨𝐧 𝐦𝐚𝐫𝐤𝐞𝐭𝐬 and 𝟐𝟒/𝟕 𝐭𝐫𝐚𝐝𝐢𝐧𝐠, here are my 𝐤𝐞𝐲 𝐨𝐛𝐬𝐞𝐫𝐯𝐚𝐭𝐢𝐨𝐧𝐬 𝐟𝐫𝐨𝐦 𝐭𝐡𝐞 𝐜𝐨𝐧𝐟𝐞𝐫𝐞𝐧𝐜𝐞 hashtag#DerivativesMarkets hashtag#ClearedDerivatives hashtag#FIA hashtag#MarketStructure hashtag#FuturesIndustry hashtag#FinancialInnovation hashtag#MexDer_Asigna

@CarolineDPham "payment stablecoins" is a killer line that you won't find on many Stablecoin VC pitches, big market limiter.

Get ready 👀

CZ is totally right. For a while, my go-to answer to “Why do we need privacy?” was “because business will never be okay with anyone seeing their business activity.” I’ve recently switched to a much simpler one: “Ask the people being kidnapped in France ‘would they prefer privacy?’”

@DeanEigenmann @HyperliquidX It’s not a hedge if you can be auto deleveraged.

prediction markets start to get interesting when they move beyond basic betting and look like hedging products for insurances and other use cases huge untapped market that I see @HyperliquidX servicing best

Some absolute rockstars, Jeff (God level inclusion), Don, Terry, Craig. Walt is massively important. Personally I think they should also have Chris Giancarlo, Chris Perkins, Heath Tarbet and Tom Zschach