Aaron Lammer on Yield Farming and Trading in the World of DeFi

Joe Weisenthal (0:11)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

Tracy Alloway (0:17)

And I'm Tracy Alloway.

Joe Weisenthal (0:19)

You know, there's probably, like, let's be honest, there's probably some connection between the fact that we've been doing a bunch of crypto episodes lately and the big sell-off that we have in crypto today. Like, that's just always how it works. It's like you get to something, and by the time you start talking about it a bunch, it's probably the top.

Tracy Alloway (0:38)

You think it was our fault and not Elon Musk?

Joe Weisenthal (0:41)

No, I don't think it's like our fault, per se, but maybe it's just like, you know, it's just how timing works. By the time the mainstream media is focused on something, the mainstream media like the Odd Lots podcast, it's like coming in, it's like, all right, final chapter.

Tracy Alloway (0:55)

This is the curse of the magazine cover, right? Like as soon as it hits the cover of Barron's or The Economist or whatever, it's time to sell and get out.

Joe Weisenthal (1:06)

So we are recording this May 13th and last night Elon Musk tweeted that due to the electricity consumption of Bitcoin, they would no longer, they're going to still hold it, but they're not going to be involved in transacting it anymore. I don't really know what the real reason is. I mean, that's what he says.

And he, you know, all the coins are falling, but you know, there's volatility in this space, but all the coins are falling today. Even the ones that aren't mined with lots of electricity, a little bit of a mini crypto bear market.

Tracy Alloway (1:40)

They're definitely falling, and Bitcoin and other cryptocurrencies have always been volatile. That's true. But I do think, you know, people talk about crypto as this decentralized idea, something that works as an inflation hedge, something that's sort of beyond the ability of governments and central bankers to manipulate.

And so it's kind of ironic that one tweet from a CEO can cause this kind of mayhem in the market.

Joe Weisenthal (2:09)

Yeah, totally right. And, you know, I have to say like earlier in my career, I would have said something like, oh, this is the top, the bubble burst or whatever, but I no longer think that. I mean, I don't know like cycles come and go, but this is all as a phenomenon, as a thing. I mean, you know, Elon can tweet whatever he wants.

It's clearly not going away anytime soon as a phenomenon, as a part of the world and maybe a part of the finance world.

Tracy Alloway (2:38)

Yeah, I agree. We've learned our lesson about calling bubbles in Bitcoin. We're not going to do that anymore, but what we are going to do is talk about some of the things that are helping crypto, I guess, become more widely adopted or more entrenched.

One of the reasons why it's not going away.

Joe Weisenthal (2:56)

Yeah, so listeners may recall a couple of weeks ago, we did an episode on decentralized exchanges. So, a centralized exchange like Coinbase, you send them fiat currency and then you can trade cryptocurrencies like Bitcoin or Ethereum.

On decentralized exchanges, they don't hold your money.

You don't even need to start an account or anything like that. In fact, you can't start an account and all the trading is done on the blockchain itself. We talked to Hayden Adams, the developer of the UniSwap protocol, which is behind the exchange, UniSwap, and I talked about automated market making and so forth. And it was super fascinating, but I still need to learn more. I'm only maybe 25% of the way there in terms of getting how this all works. Maybe just 10%.

Tracy Alloway (3:44)

Same here. And for those of our listeners who actually listened to the very end of that podcast, you might have heard us say that we wanted to record an episode on yield farming, which is this phenomenon that has come about because of DeFi. So the DeFi system has basically allowed this to happen.

I know absolutely nothing about this space other than it's a way to earn money or interest on your cryptocurrency. I'm very, very interested in learning more.

Joe Weisenthal (4:16)

Right. So, and again, people should probably listen to that episode, but the premise of this automated market making model is yes, you can trade one coin versus another, like any exchange, but you can also stake your coins. You can put coins that you hold into a liquidity pool as you have your coin staked there. You can earn interest, yield, you can farm yield. There's all kinds of crazy stuff you can do.