Gauntlet Network — a platform that provides risk modeling and performance optimization solutions for DeFi protocols — recently raised $23.8 million for a valuation of $1 billion.
On June 24, 2020, when Gauntlet Network’s CEO Tarun Chitra first came on The Scoop, the total value locked across all DeFi verticals was just over $1.5 billion. Today, less than two years later, that number has grown exponentially to over $211 billion.
In this episode, Chitra describes his company’s rise to unicorn status and explains how a project in DeFi can be successful. In his view, it’s not just replicating what exists in centralized finance and putting it on the blockchain:
“The products that do really well in DeFi are not just straight up, ‘take a centralized finance thing, make the closest clone you can, and then try to get people to use it…’ that pretty much never works in DeFi. It’s always something that’s somewhat adapted to the nuances of crypto systems and how people interact with crypto systems in a way that’s very different than traditional finance or even centralized crypto.”
Successful DeFi projects must handle what Chitra describes as the “degen ape,” referring to crypto power users. These market participants erratically move large sums of money into decentralized protocols without researching the protocol’s underlying fundamentals:
“And so what you find in DeFi in particular, is that there’s almost this gladiator like competition between these different protocols and the capital that’s getting allocated to them… If there is some truth to the fact that their mechanism works, you effectively should – whether or not it’s a really informed or perfectly rational investor putting their money into a protocol or whether it’s a degen ape – you should basically get the same outcome.”
DeFi protocols with billions in TVL currently rely on Gauntlet’s risk modeling for their operations, including Aave, a lending protocol whose founder and CEO Stani Kulechov recently shared with The Scoop how the protocol’s V3 upgrade is mitigating risk.
In time, Chitra believes increasingly more forms of contracts will fall under the purview of DeFi:
“I don’t think DeFi really revolutionizes finance per se. I think it revolutionizes lawyers. You just get rid of lawyers for a lot of transactions… Somehow in DeFi, you’re able to make these things like – the tokenization means that you can turn these things that were legal contracts into like exchange tradable assets.”
During this Episode, Chaparro and Chitra also discuss:
- The “Bridge Paradox”
- NFTs and risk modeling
- Crypto and the Scientific Method
This episode is brought to you by our sponsors Fireblocks, Coinbase Prime & Cross River
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