Jain is a big believer in the future of modular blockchains, but she is unsure about restaking
Kavita JainKavita Gupta is the founder and general partner of Delta Blockchain Fund. She has more than 18 years of investment experience via The World Bank, IFC and Eric Schmidt Family office and started one of the first blockchain early-stage funds, ConsenSys Ventures, and accelerator Tachyon.
In this discussion we look past the groundswell of excitement surrounding the spot bitcoin ETFs and dive into key emerging topics in the industry like liquid restaking and modular blockchains. We also cover why Gupta expects us to enter into another DeFi boom.
Forbes: What do you think the crypto tech stack will look like in the future?
Gupta: I strongly believe that modular blockchains are the future. If we want institutional adoption, modular blockchains are going to be the way. There will be a need for monolithic blockchains like Ethereum, but that will be more for crypto-native users. Even if you use modular blockchains, they will still employ different features of monolithic blockchains. For example, let’s consider Base (Coinbase’s new platform) as a modular blockchain. They use optimistic rollups for scalability, but the verification of the transactions is still happening at the Ethereum level.
Forbes: Where do you see overall value accruing if we're in this mix-and-match world of modular blockchains? How do you see it distributed between decentralized applications and the unified blockchain infrastructure underlying all this?
Gupta: Modular blockchains are going to be used less for infrastructure and more for applications over time. Right now, the application world is going, “Let's have a DeFi app on Ethereum, then I'll have it in Polygon, then I'll have it in Solana, then I’ll have it in Avalanche.” The same thing is happening with NFTs. Slowly those people will start building just one app. So I'll have one DeFi lending/borrowing app, which I can mix and match between my cost, scalability and security preferences between different modular blockchains so I don't have to go onto different ones. I'm not saying that's going to happen in a year or two, but over the next five years, we’ll see liquidity by app versus liquidity by chain.
Forbes: How important do you think interoperability protocols will be moving forward if we get to a world where every app has its own blockchain ?
Gupta: I feel that interoperability should exist irrespectively of dapps having their own chain, but the current state of interoperability is not very secure or friendly from a user experience perspective.
Forbes: What are your thoughts on restaking?
Gupta: It has been mixed, to be very honest. Restaking has suddenly become so big that we are seeing billions of dollars being locked and not only in a chain but so many products being built on top of that chain . Is this going to be a huge burden on Ethereum, like when the NFT craze happened without really adding much to it apart from people getting more yields in the bull cycle and the bear cycle? Or is it going to be a technology-driven platform that will add more security and value to the overall ecosystem? I'm not sure because it hasn't been tested yet. Billions of dollars are moving into the vertical without any proof or testing.
Forbes: How do you see liquid restaking protocols compared to liquid staking ones? Do you see them as a zero-sum game or is it potentially additive? Also, will we see another boom in DeFi speculation because of all this?
Gupta: We are going to see a big boom on DeFi. Puffer came into the market, and it's not even on mainnet, and it already has more than $200 million, and so does Ether.fi, which has been in the market. The valuations on products like these and Renzo's are over the top. There is a big yield play out here. Now, of course, at some point, which we also saw last year, there's going to be a lot of DeFi yield for six to eight months, and then there's going to be a time when there is not enough yield, and then liquidity is going to dry up.
Forbes: At some point, could these things grow to challenge Lido and other liquid staking protocols?
Gupta: Restaking protocols could be either positive or negative for liquid staking assets. I could definitely see in the next two years that they're going to be hugely profitable propositions, but a lot of them are relying on things that have not really come to the market. So we have to wait.
Forbes: What are your thoughts on the StarkNet airdrop and airdrops in general?
Gupta: Airdrops have become an interesting way for people to try products and then in a year or two years down the road, get tokens that will have some value. But the thing is, after the airdrops are done, we have consistently seen 80% or 85% of people dropping off of those platforms. So, the retention until the airdrop is high. The retention after the airdrop has not happened. But it's great to create a buzz. Regarding StarkNet, there was a lot of conversation on crypto Twitter that people were unhappy. They thought they got less than they imagined, but I'm sure the group has their own reasons to decide who gets what and on what basis. And we also have to remember that even though StarkNet has been there for a long time, the adoption hasn't been there. Now, with the tokens out, let's see if the adoption stays or, after the airdrop, it goes away.
Forbes: I would imagine as a VC that bitcoin’s halving doesn't have a big impact on your strategy. However, are there any other interesting plays in the Bitcoin ecosystem?
Gupta: This is not financial advice, but I am excited about rollups to start. I want to see how optimism, Polygon and zk-rollups are going to do. I'm excited about the data layers that are coming. Some Layer1s like Monad are doing EVM systems, and I'm excited to watch whether that takes Ethereum’s scalability to the next level. I'm watching to see whether this whole liquid restaking business will change how DeFi is done. Yield-bearing stablecoins, which can take DeFi institutional, is another field I’m excited about.
Forbes: What about anything specific to the Bitcoin ecosystem, like lightning, liquid, stacks or ordinals?
Gupta: Ordinals picked up, and then there was a pause because nothing much was happening. Then suddenly, the whole Bitcoin ecosystem picked up with everything happening in Bitcoin. People are discussing bridges between Ethereum and Bitcoin, Stacks and how to build restaking on Bitcoin, and yields on Bitcoin. Suddenly, there's a huge ecosystem. Babylon is there. And Bitcoin liquidity is the biggest, of course. But I have yet to see many bitcoin holders move their bitcoin around, apart from the currency or speculation. So, I want to see how this adoption is going to come.
Forbes: Do you have expectations for ether ETFs?
Gupta: I think a couple of years back–in 2017, 2018–somebody from a traditional world would say, I hold half a bitcoin or I hold one bitcoin just to experiment with it. But today, most people I meet, even from the traditional space, hold bitcoin and ether. The acceptance of ether has happened in a big way. There’s a huge demand for ether ETFs because it is holding something associated with a currency and a technical ecosystem that will grow. I think many people are looking to have it in their portfolio more from a technology perspective, an adoption perspective than just payment. I honestly feel that on the price value, it looks like a huge overall dollar amount for AUM for bitcoin, but I think ether ETFs will be bigger.
Forbes: Thank you.
