The State Of Crypto Lending | Membrane Labs
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I think we had sort of the worst in the last cycle, the worst type of centralization in the space, and I think it's better now. What I mean by that is you had players like FTX and Three Arrows. They were sort of put on a pedestal in the space where people didn't ask questions, and they're just like, oh, it's FTX or it's three three arrows. And so you had the worst type of centralization or counterparty risk in crypto where people saw them as, like, very credit worthy, and yet if you actually looked under the hood, there was kinda nothing there.
This episode is brought to you by ZK Sync. Join the Elastic Network today at zksync.i0/empire. Thanks to z k sync for making today's episode possible. Alright, everyone. Welcome back to Empire. We, very excited. First off, we have great guests, James and Carson. Welcome to the show. Thanks for having us. Yeah. But, not not as important as the guest, but this is our first official in person in our new studio at BlockWorks. So, hopefully, more of these. So we'll see how this one goes. This is a nice test run. It's
a great studio. Yeah.
Appreciate it. Okay. So this is, state of the union for, like, lend lending and borrowing and crypto leverage. And the reason I wanted to do this episode is last cycle was very it's like a leverage driven cycle, and I think we all a lot of us have kind of understand what Genesis and BlockFi and Celsius and FTX. I really have no idea what's going on with the lend and borrow market now and what it look what leverage looks like in this cycle. So that's what I wanna do with this episode. Maybe, James, I could throw it over to you to just, refresh my mind. Like, tell us about
20 You don't have PTSD? I
do. Which is why I need you to explain it, not me. Tell us what happened in 2020, '20 '20 '1, and then with the the blow up in '22. Like, how did this tell me about, like, the cycle from a leverage driven perspective.
Yeah. I think I mean, well, even now, I think most cycles or a lot of the cycles are driven by a lot of leverage. It's just a function of crypto. You have a significant amount of leverage taken on by retail and institutions. And so we see that in the wild fluctuations in prices on exchanges and kind of the market. So we see violent moves up and violent moves down. A lot of that is leveraging the system. But specifically to 2022, you know, Terra Luna, one of our favorites, you know, just really had an epic blow up with a loss of, credibility and a loss of, of, support for its stablecoin system.
off. Carson, you were running, I think, Tokamak at the time during this last cycle, and then now now obviously running Membrane. Who were the players in the game then? Like, talk to me about the interconnectedness between, like, a three arrows, a genesis, a BlockFi, a Gemini earn program. Like, how are all these players connect? You know, family offices, hedge funds, retail, how are they all connected?
Yeah. It's a great question. And I think just to layer on for a second to what James was saying, and this links to your question, three additional things that I think exacerbated the problem, were that all of these different, lenders in the space were effectively being run as, venture backed technology firms. So rather than being very focused on risk and underwriting standards, there is pressure from the board as well as their investors to just write more and more and more loans. So they were giving uncollateralized loans, to your point on kind of these players and how they interface with Thre
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