Part One: DeFi – Lessons and Insights from Zaki Manian

We recently sat down with Zaki Manian, former number two at Cosmos, to talk about the evolution of Tendermint/Cosmos and to learn some insights that Zaki gathered throughout his experiences developing and launching the platform.

Part One: DeFi – Lessons and Insights from Zaki Manian

08-31-2020

We write about Tendermint Cosmos quite a bit, primarily because together the Tendermint protocol and Cosmos SDK offer one of the most sophisticated and developer-friendly blockchain solutions in the market today. Tendermint also hosts many promising DeFi projects, and many other prominent blockchains are now looking to Tendermint’s interoperable BFT system design as a more reliable and secure model for supporting globally scalable DeFi use cases.

With so much excitement around DeFi recently, we’ve been hearing this question a lot, “Is DeFi a sign of real adoption to come or is it just another manic craze?” Finding the answer requires us to take a closer look at how far the blockchain space has come over the last few years. More specifically, how might the evolutions we’ve seen in recent years offer a more sustainable environment for DeFi use cases to finally take off?

We sat down with Zaki Manian to talk about the evolution of Tendermint/Cosmos to learn about the insights that Zaki has gathered throughout his experiences developing and launching the Tendermint Cosmos platform, and to apply those insights to the state of the DeFi space today.

Incremental [Engineering] Improvements

Zaki believes there will always be manias and bubbles with new technologies, especially with those where you can experiment with regulation arbitrage. He sees the real progress in the industry though, not coming from these manic moments where mainstream media coverage soars, but instead from incremental improvements that take place slowly over time.

So then, is DeFi the result of incremental improvements? In some ways, DeFi projects represent some of the first real attempts to apply blockchain systems to truly decentralized use cases. From this perspective, DeFi is a result of slow improvements over time. Zaki believes that the core ideas of how to build a blockchain system are established. Consensus algorithms for example are more or less “figured out”. While this is a big step forward for blockchain technology in general, there are still a lot of engineering pain points to solve.

DeFi products need more than a strong core, they also need a sophisticated infrastructure of engineering tools and resources so that a blockchain core can integrate and perform properly in a real-world scenario. Models for things like fee markets and transaction routing within peer-to-peer networks represent pieces of that engineering infrastructure that must be solved in order for us to have successful DeFi products, but they aren’t commonly discussed. The way Zaki sees it, we have a lot of Lego blocks and now we need to put them into a coherent system that actually solves a problem. Certainly though, the emergence of many early DeFi products will help to highlight which engineering problems are highest priority to solve.

So, while all of the pieces may not be in place to support a thriving industry of DeFi products, that doesn’t mean that certain products cannot and will not thrive, it just means that teams may have to roll up their sleeves and put some of those Lego blocks into place.

When considering how DeFi products might survive or even thrive within the current landscape, it’s important to also look at how the organizations behind those products fit into the picture. In the part of this series, we'll take a closer look at the dynamics between DeFi products and the organizations that govern them.

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