Cyber Capital | DeFi Evolution - Viktor Santiago | ETHDam III - 2025

Welcome to East to E to E to E to E. Wonderful. Okay, up next we have Victor Santiago talking about the DeFi evolution. Thank you. Thank you.

All right, so as alluded I'm here to talk about the disconnect between utility and returns. Now the talk is mainly about DeFi but I think this is in general a theme which branches across all of crypto. So there's a bit of a widening kind of philosophical question involved in what we're going to talk about. So in crypto we chase the future but the marks the markets often reward fleeting trends things that are not lasting. And there's a lot of noise we can get into this, but I think the main question is and the one perhaps that we get most frustrated by as investors and as builders as well is why do the projects that may be the backbone of the ecosystem in particular often also struggle to produce returns over time?

Why don't they last? And it's a puzzle that I think affects every stakeholder in the industry. So, I think it's one that's important to talk about now that a bit of time has passed and we're beginning to see how things play out with data, which is something in the previous cycles we didn't have as much to shed a lens on. So, utility is crypto's foundation, but the returns are a fickle thing. We're drawn to progress that power ecosystems, for example, oracles, indexers, lending protocols.

Yet, the tokens often lag the hype. They're released, they go up for a while, and then to either a list of many things, which let's not get into as that's not the main focus, but to mention some tokconomics, memecoins, VC interest, pump and dump schemes, perverse incentives, different types of farming that just die out and don't last. So, it's about a a deeper mismatch here in the projects that I want to discuss and the broader picture, which I think is more important for the industry. And it's why do the projects that we can't live without not capture market value? Crypto was born to disrupt and not to speculate.

In the early days, we had a band of cipher punks and we had all these new ideas coming together. And I think the the way to invest was very simple. If you believe something was needed for crypto to work, you could invest in it given that other scammy kind of conditions weren't an issue. It was about is this use case really going to be here? Price feeds and oracles are something we're going to need, but how often has investing in an oracle actually played out very well over multiple cycles?

This is the issue we're trying to get to. So time and time again, as I mentioned, we've seen these technically vital projects not perform over time. I think what I just brought up with oracles is a good example that we can start with. Chainlink and Pyth together capture over 80% of the market share of oracles. Both of them have made increases to the revenue, fees, and technological progress as well as business development partnerships in the last few years.

Radium and Dexes across the space have hit all-time highs, making huge amounts of revenues and fees. However, these tokens still don't perform. Some of them even have decent value acral mechanisms. Of course, we could nitpick, but I think that's more nuance and not really the main picture here. I think what we need to do is take a step back as investors and stakeholders and think where in the value chain of the crypto space is the value.

Maybe those things we once believed in, which were use cases we thought would be around 5 years from now, are not necessarily places where the fattest margins lie. Perhaps the margins are so thin and competitive that in something like GRT, one of the largest indexers in the space, they make a million dollars a month. Now, that's sustainable and that's great. Well, some would say it's a big growth. However, that's what Dexes make in a day.

And without the indexers and these oracles, these Dexes wouldn't be able to function. So it makes us question our strategy. We have more data now. The tech is top tier. Adoption is not growing.

Why are these things struggling? I think if we look deeper at this, it lies in the trend that the space has evolved from what it once was when we started. And we're no longer in the place of this is crucial. This will be here in 5 years. So this is where I should put the money.

This is what I will invest in. And I think that's something that is difficult for many of us to deal with and accept or even learn from ourselves or identify in ourselves because I myself for one am very guilty of doing this as a fundamental investor. I'm a bit of a nerd in the sense um it's my job to research tech and how projects work, compare them against one another. So I can get excited about different use cases be like wow we really need this but as an investor that might not always align. And I think that conflict is something that in the last year or so we've seen grow much and much more.

It's a major disconnect and a flaw and it's something that we need to learn from. So what do we do with this? Invest in what endures, not just what's essential. Resilience has proven to beat utility. However, it's extremely difficult to find.

Even in the few outliers we have, take something like radium. One could largely attribute its only reason for making a new peak in the last cycle due to pump fund and a single integration which while innovative and unique and deserves its credit as it was given is not something that every comp every project in the industry can bank on as this is kind of a sign of a first mover advantage theme once again. So even now we don't know if these types of projects are in a position to last in the same way. So my major takeaway from all of this is that as investors, we may need to shift our lens and take a step back now that we've been given more information in recent times. Not just to chase what is critical, but to chase what is will last and has a future and not only currently captures value, but in the future will be the place where the value capture grows.

Because a lot of these use cases, while they may be around, may not be the place where things last. So I like to think of it as utility being a seed, but the returns are the harvest. And we need to be careful about where we plant the seeds when we look forward as these incentives grow further and further apart and it becomes harder to identify both true projects, real projects, but also where the real value over time will last and not just the utility lies for now and where those margins will grow to. Thank you. [Applause]