DeFi Visions: Kain Warwick

In DeFi Visions, a series of video interviews, the 1inch Network talks to the most prominent people in the DeFi space. The following post contains the main takeaways from a recent interview with Synthetix founder Kain Warwick.

Kain established Synthetix in 2018, having transformed his previous project, a stablecoin called Havven. Synthetix has since evolved into one of the leading derivatives liquidity protocols built on Ethereum. Today, it is a decentralized primitive, which provides exposure to DeFi trading in the form of on-chain synthetic assets (Synths) which track the value of assets in the real world.

While Synthetix is expanding, Kain says he is encouraged by the growing volumes reached through the takeoffs of atomic swaps and cross-asset swaps. He adds that he is also inspired by the rise of Perpetual Protocol.

“Also, the positive news is that our Perpetual Protocol running on Optimism started to grow, its volume is about $20 mln a day on both sides,” he says.

Commenting on the bear market’s impact, Kain notes that it might affect trading volume in different ways.

“The market downturn causes the loss of liquidity, which creates some issues for the networks and exchanges, like Synthetix: if the collateral volume goes down, you have fewer Synths around and less trading volume as a result. But, on the other hand, a bear market tends to be very volatile as well, which can increase the trading volume,” he elaborates.

Still, the bear market also has a silver lining, Kain observes, as it forces people to slow down and makes them appreciate the progress of project’s like Synthetix, while the bull run leaves people’s attention very fragmental.

After living through several bearish cycles since 2012, Kain claims that currently “we are in a risk-off environment.”

“Being a very speculative asset, BTC just created a bit of short-term pain. The real question is when the macro conditions shift, but I don’t think anyone knows that,” he adds.

According to Kain, crises like the recent Terra/Luna fiasco reveal some important things about stablecoins.

“The fundamental mechanism is overcollateralization,” he explains “[For instance,] Synths are backed by Synthetix Network Tokens (SNX) locked into an overcollateralized deposition. Other mechanisms like liquidation, incentives of stakers and claim windows are overlaid on top of overcollateralization to maintain its stability.”Meanwhile, Kain warns about the vulnerability of purely algorithmic stablecoins, since “ in volatile times they don’t hold up that well.”

Speaking about crypto regulation, Kain draws the example of Australia as a market where regulators have played a rather positive role:

“When it comes to promising projects rather than scams, the regulators are very permissive, which is why you can see a lot of innovation coming from Australia.”

According to Kain, certain factors still hinder mass adoption of DeFi projects. “We don’t have any scaling even today,” he says “And there are UX issues, with the most difficult limiting factor driving the cost of transactions.”

Kain brings up the impactful collaboration with 1inch, which “has reduced the cost of a number of our transactions.”

“But there is still a lot to be done,” he admits. “And I consider a bear market to be a perfect period for all the scheduled improvements.”

Kain says he is excited about the rollup-centric idea. He also assumes that the next 12 months will bring more solutions based on composability, combining different protocols.

Kain notes that timing of some upgrades depends on how long the current bear market might last. “There are going to be a bunch of improvements in governance and scaling that come out in about six months,” he says.

“In a bull market, you’ve got your feet on the gas trying to go as quickly as you can, which means things like good governance just go out the window,” he concludes “In a bear market, such decisions get revealed. This is always a time when good stuff happens.”

Watch the full interview with Kain Warwick on the 1inch Network’s YouTube channel.