DeFi Gigabrain Tarun Chitra on staking and staking ETH and why ‘financial nihilism’ is a real consumer product

Crypto is a world built for autodidacts, a playground for polymaths. Tarun Chitra, founder of risk management, economic research and software optimization organization Gauntlet, is just one shining example. In a conversation with Chitra, this comes across. It seems there is no corner of cryptography he hasn’t examined.

Chitra, who often pauses before answering questions, will speak in Consensus 2024, May 29-31, in Austin, Texas.

CoinDesk has caught up with the true DeFi celebrity known for his colorful style (hair, cups It is clothes) to talk about new financial primitives in crypto, artificial wombs, and why he appreciates busybodies.

This interview has been lightly edited for brevity and clarity.

I thought maybe we could start with a quick round of overrated/underrated. You can skip any of them or clarify your statements if you prefer.

Clear.

Life extension?

I have a very rough classification in my head of passive versus active life extension. Passive is: I get healthier by eating better and maybe take some supplements. Active is: I get all kinds of esoteric experimental therapies and, like, injections. You know what I mean, one involves surgery and the other a simpler change of habits.

I was thinking more about the first one.

Probably overrated. I think the latter is classified correctly.

Yes. A healthy life is good.

But that’s why I wanted to separate them.

Artificial uteruses?

In fact, I think it is highly rated. Maybe a little underrated, actually. But not super underrated. I feel like they’re getting a lot of enthusiasm.

CLOBs [central limit order book exchanges].

Overestimated.

Could you say why?

I think we had the CLOB era as the only thing that worked. Then AMMs took off and CLOBs became crap. And then in the low-latency, perpetual blockchain worlds, everyone was like “CLOBs are better, CLOBs are better.” Not that we’ve seen a lot of people necessarily going back to CLOBs, but I feel like the tide has turned now. People are constantly shitting on AMMs. Then fine. But it seems like there’s always this cyclical thing between the two.

See too: What is an automated market maker?

Dutch auctions?

One shot Dutch auctions are overrated. Dutch multi-shot auctions are underrated.

Omnichains?

Can you define what you mean by omnichain in this context?

Honestly, not so much. It’s just a term I’ve seen popping up a lot recently and I can’t tell you what they are.

Yeah, well, it turns out it’s more of a marketing term than anything real, to be perfectly honest. So overrated that it seems like it’s not a real thing. It doesn’t refer to a single technical thing that I could write equations for and say, “here’s a guarantee you’re getting out of this.”

The story continues

That was the impression I got too. This is perhaps a cruel question, but Aave.

Refuse to respond.

Who are your intellectual heroes?

Paulo Dirac. John von Neumann. I’m trying to think of a more recent one. Boring is like Terence Taos of the world. Is there anyone who is not so famous? …Yes, keep them. These are the well-known ones, I think the others are very specific.

Fair. You wrote about DAO governance in 2021. I was wondering if you think we’ve learned anything since then? whether the governance of the DAO has improved in the following years?

I think there is something where the actual governance processes of many DAOs have gotten worse or better. Whether due to sclerosis or centralized purchasing or something else, there are many reasons for one or the other. I don’t think there have been many new engines that people have focused on because you don’t get rewarded for improving a DAO engine.

See too: Beware of DAOs: Neo-Imperialism is on the Rise

With Compound, I feel like because of the way they launched, they were actually rewarded as a team for improving DAO mechanisms when they decentralized governance in 2020. But since then, everyone who has innovated governance has generally been outside of DeFi. And they didn’t make it.

There’s still a lot of mechanistic innovation that hasn’t been done. And part of the reason it hasn’t been done is underfunding relative to other things, right? Like you could raise a lot more money to make another robot than you could ever raise for a new governance system.

When is it appropriate for crypto to embrace financial nihilism? Like, lean into it?

Good question. It looks like we’re getting closer. So I don’t know if this is an answer for when it’s appropriate – but hasn’t that already happened? The problem for me is that financial nihilism has a real consumer application. Most other things considered encryption for consumers, people think, are a scam, or a lie, or don’t really need encryption, would work fine as Web2 for me – I can go down the list.

Financial nihilism is a true consumer product. Like there’s no way around it. It’s hard to ignore the fact that they found a way to make Binance more fun for someone who doesn’t like looking at candles – and I think that’s why Bomb.fun exist. People love it because it’s the same thing, but it doesn’t feel like it and it’s a good consumer app.

This will disappoint all the people raising millions of dollars to make consumer crypto, but that’s exactly what it is.

Do you think Farcaster will ever fully replace Crypto Twitter and would it be a loss for Farcaster if CT was completely recreated on Farcaster?

Farcaster is like where the WAGMI refugees are [we are all gonna make it] movement of 2021 was. In the beginning, they were all people who were really genuine about being part of the cult of toxic positivity. I feel like those who were sincere about it went and created Farcaster. I just don’t feel like trader type people will mesh perfectly, so it doesn’t seem possible to completely recreate the “degen side”. Farcaster is much healthier.

Do you see the emergence of any interesting financial primitives that you think will become increasingly important?

I mean, in general, I think re-staking falls under this. But things that allow you to not know what network you are on, but offer the same security guarantees of that network; re-staking is a version of that, aggregation stuff that people are doing and ZK-land is a version of that. I think this is the key to making the user experience of the multi-chain world feel as good as something like Solana.

There are concerns that there is already too much ETH staked or that there will soon be too much ETH staked. Do you believe this argument? Is there an adequate amount?

It honestly depends. I don’t believe there is a static, fixed amount that will always be the right amount. It depends on the use. If it turns out that there is a lot of ETH usage in on-chain applications or on centralized exchanges, then it is kind of bad to have a lot of ETH staked because then there is no liquidity and you may face a supply crisis.

On the other hand, if there is very little ETH staked, then yes, of course, different types of attacks are possible. The biggest problem, in some respects, with proof of stake is that it is easy to calculate the monetary value of an attack. I can always take 1/3 of the amount bet and find out how expensive it is to attack.

See too: The Ultimate Investor’s Guide to Proof of Work

With proof of work, because people can come and go, it takes a while to figure out how expensive an attack is and you can’t figure it out as accurately. So the proof-of-work lower bound is actually harder to estimate, and actually harder to attack in some respects.

So I think it will always be dynamic. Some new technologies will help reduce how much you need to bet – that’s the goal of ZK and advanced cryptography, but it will never be constant. It really just depends on how much the applications want to use and whether the applications are using Ether a lot.

How many pairs of glasses do you own?

Probably about 10.

And lastly, is there anything in particular you’re looking forward to at Consensus?

Doing another live podcast.

I was there last time. It was good!

Yes, live podcasts are fun. Especially if you seem like a questioner to the public.

I’ll try to think of something clever to bother you.

Yes, well, thanks for stopping by.

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