BeinCrypto spoke to Lior Messika, Founder of the Venture Capital Fund Eden Block. He discusses Decentralized Finance (DeFi), its current hype, and the importance of responsibility in financial freedom.
There is no doubt that DeFi is booming. This is in no small part thanks to the funding flowing into the large variety of projects.
Messika is the founder of one such VC. It funds projects at their earlier pre-seed, seed and Series A phases.
“I spent most of my life as an investor. About five years ago, I became enamored with blockchain. Then, seeing institutional exposure into the space, I understood that there was no such thing. Nobody was offering that exposure. Long story short, we started Eden Block,” he explains.
“We’ve been really focused on funding overqualified and underfunded teams within the space. We’ve been building out a very interesting practice that focuses on blockchain and crypto innovation at the very earliest stages.”
Focusing on project infrastructure
As part of their work, Messika explains that they began by investing in extremely technical projects. This has laid the foundation for their goal of helping build the Web 3 decentralized world from the baseline up.
“What’s really interesting is we’ve always been infrastructure first. We’ve always been very deep students of what it’s going to take to build a truly decentralized world. What I really liked from the beginning about blockchains, about crypto, is the fact that there’s this one property that stands on top of everything else. There’s always been decentralization. Decentralization, as a property, enables you to build Web 3, enables you to break down barriers reduce friction,” he explains.
“I even tried to make the case that it’s a cultural movement. It’s something that we as a society have been understanding, and wanting to get to right. 3,000 years ago up until today, we’ve been trying to get to decentralization in various ways. So for us what has changed is just the applications that are enabled by this fundamental property by decentralization.”
The value system bridge of DeFi
Messika expands upon the idea that humans have been working towards this kind of decentralization over the years. He sees the DeFi space as being the “wild west,” as it is commonly called. However, he believes it still holds true to the underlying value systems societies are built upon.
“I’m seeing a lot of links between the real world, what I call the real world, and Web 3. A lot of them are actually based on values and the value systems that we’ve been able to create as a society throughout decades and something that we all understand today,” he says.
However, with the middlemen controlling Web 2 in its siloed form, he sees how people acknowledge that the underlying dream of decentralization is not being upheld.
“I think that even without the idea of decentralization, without the concept of blockchains and crypto, you can still get to the same fundamental understanding that there are some things that are just broken right in today’s systems.”
“Web 3 is the Wild West in the fact that there are different cultural, you could say, languages. There are different ideas and different ways of making those ideas come to come to light. But when you go back to the fundamentals of what we stand for, what are our values, and how do we want to solve the problem, it’s very much the same,” he explains.
Overcoming issues of social composability
However, Messika does acknowledge that Web 3 is currently almost as siloed as Web 2.
“This is something that we’re going to have to overcome. The lack of interoperability, the lack of composability. Even things that are on value systems today are not tangible like social capital. We understand that social capital has a lot of value in Web 3. We still don’t know how to quantify it just exactly, but we do understand that those value systems are going to have to be composable across different systems, across different protocols, across different identities.”
For Messika, the “social silo” relates to the lack of approachability in the DeFi space. For those who aren’t degen geeks, DeFi is complicated and difficult to understand. However, Messika explains that there is no way to garner mass adoption if people can’t understand what is happening.
“So I believe that the technical components of that lack of interoperability and those siloed systems are going to be solved way before the social and conversational aspects of the siloed systems occurs. We’re going to see that technically occur way earlier than we’re going to start seeing just run of the mill, everyday people, employing or leveraging or talking about DeFi in a way that makes sense. So that’s the biggest silo, the biggest walled garden, the biggest friction that I’m seeing right now,” he explains.
“I think there’s going to be a lot more to be done in terms of okay, how do leaders in the space communicate, values, communicate ideas, communicate products and vision to an entire ecosystem and not just to the 5,000 Discord members that obviously have a lot to gain from being there early.”
“Freedom without responsibility is a short tragedy”
More inclusivity and simple messaging could bring mass adoption. However, this still requires people to take control of their finances in ways they may not be used to.
For Messika, this is not a drawback but a benefit. It places the responsibility in the hands of every individual while protecting the system.
“A great guy, Vlad Zamfir, is a builder in the space. He once said, ‘freedom without responsibility is a short tragedy.’ And I completely agree with that because this idea of financial, personal freedom is inherently attached to the idea of responsibility,” he says.
“The great thing about decentralization is it doesn’t protect you. It protects the system. So, in my mind, DeFi protects you from everybody else who’s going to go and screw themselves over. It doesn’t protect the individual protects the system.”
“The way that I think about it is, you’re only going to be as free as you are responsible for yourself. That is the true meaning of decentralization because decentralization means individualism. I believe in the idea that there is no freedom without responsibility. There is no financial freedom without being able to be responsible for your own finances,” he says.
Acknowledging the gold rush in DeFi
However, Messika isn’t just an optimist, which is necessary if you’re on the investment side of this new world. Instead, he acknowledges the current gold rush without negating the space overall.
“There’s definitely a gold rush. Everybody’s claiming to build something. Everybody’s airdropping something. I mean, even now, we’re funding these companies at 10s of millions of dollars based on an idea because we know that that idea is going to be fundamentally important for the space. So, these two guys or girls can get together, dream of an idea, and be valued at $50 million or more, and you’re not going to find that anywhere else, and that’s a gold rush to me at least,” he says.
For Messika, this is part and parcel of the industry in its current phase. There are two sides to this spectrum. On one side, the projects with value, and on the other, those that are cashing in on the rush with no real substance.
“I’m not sure how long it’s gonna last. I hope it lasts as long as people would want it to be, and I hope it doesn’t hurt anybody on the way. But we’re definitely in a gold rush era, much more so than in 2016/2017 when I got into the space. It seems like it’s not slowing down, so I yeah I hope that everybody stays careful.”
Community is everything
In dealing with the vast number of projects, Messika says to look to their communities to find out whether there is true value.
“Community is everything. In Web 3, the community creates the community values, the community projects. So if you’re able to look at a decentralized network and say well, they’ve got a lot of usages, high volumes, and the graphics look good, but then you’ve got zero attention to the community or if you’ve got no active community, then there is no projection of future involvement.”
“If you don’t have a real community, you’ll have a very hard time valuing your network, with some of the softer intangible aspects of value. Something I’ve been finding more and more to be true is the networks that are able to curate and build communities around their value system around their mission around the core assets, which in many cases, a token or an entity or whatever, are going to go really far,” he says.