Eric Chen, CEO of Injective Labs, on Institutionalized DeFi, Tokenized RWAs, and Revolutionizing On-chain Trading | Ep. 347
Cryptonews Podcast Matt Zahab recently sat down for another exclusive interview with Eric Chen, the CEO and co-founder of Injective Labs, the core contributor to Injective, an open, interoperable smart contracts layer-one blockchain network optimized for decentralized finance applications.
Chen discussed institutionalized DeFi, the convergence of DeFi and TradFi, and the “highly attractive” yields in both industries.
Also, he has predicted that DeFi will be seen as mature and institutionalized by the end of this decade.
Additionally, he touched upon the burn mechanism of the INJ token, comparing the system to Ethereum.
The DeFi-TradFi Convergence and Highly Attractive Yields
Discussing the current state of DeFi, Chen remarked that, for the past year, “the general theme has been institutionalized DeFi.”
The industry has seen more integrations, adoptions, and “extremely large financial institutions” with huge assets under management “peeking into the space.” They are looking at utilities, deployments, and other details.
Interestingly, there will be effects of the institutional interest “bleeding over” into DeFi, which people may not attribute to institutions.
Projects are becoming “heavily institutionalized,” with the ideas of TradFi offerings becoming “more tightly integrated” with institutional rails.
This shift is beneficial for DeFi products.
Furthermore, the crypto industry is developing financial activities that allow everyone to aggregate resources and create synergy.
These are appealing to TradFi and are offered packaged as a TradFi product to be offered to general TradFi people, Chen noted.
: : Let's explore what is happening in the @injective Ecosystem
Written by @Steve_4PHere is Four Pillars' highlight on the @injective ecosystem.
Since injective is a blockchain built for finance, let's delve into DeFi sector first.
Liquid Staking@hydro_fi is the premier… pic.twitter.com/F9LuTnacPH
— Four Pillars (@FourPillarsFP) June 26, 2024
Furthermore, the above-mentioned integration with the fiat and institutional rails works to capture part of the high yield offered in the space.
Notably, though many high yields are unreasonable, that’s not always the case.
Most of the high-yield opportunities promising beyond 10%-20% of APY are “typically results of lack of incoming liquidity. So the yield is concentrated amongst early adopters or limited participation set,” the CEO said.
He added that as more institutions come in, “you’re probably going to see a lot of those highly attractive and sensible APYs going down over time.”
DeFi Will Be Seen as ‘Heavily Institutionalized’ in Five Years
Injective on its side is very active as well, producing a number of notable services for its current and incoming users. It is also working with a number of large institutions.
Chen remarked that a recent upgrade included a real-world asset (RWA) module with an optionality for full composability. It enables institutions to gain access and “create a bunch of structured products in a fully compliant way.”
Injective itself, as an ecosystem, is very much DeFi-centric, he said. And this means that composability and synergy amongst all the existing primitive is the most important aspect, Chen argued.
The team is already seeing “a lot more” RWA pairs across the Injective ecosystem.
The Injective Builder House in Brussels will feature some amazing Injective partners spanning institutions, infrastructure, RWAs, DeFi and more.
This is your chance to connect, learn, and innovate with the best in the industry!
🌟Register Today: https://t.co/8hxxJyHQMb pic.twitter.com/lN5gCZXxQN
— Injective 🥷 (@injective) June 27, 2024
All this said, the RWA developments will push DeFi further toward mainstream adoption.
Therefore, Chen opined, TradFi adoption and institutionalization of DeFi and the sector as a whole is going to happen “a lot faster than people think.”
He added that,
“I would put roughly four to five years when it reaches that type of maturity scale where most people consider crypto or DeFi to be heavily institutionalized, to be heavily mature, and to be well integrated within the global financial ecosystem.”
Importantly, the sector will retain its “cyberpunk rebel” nature because it’s not this ecosystem that’s joining the traditional financial ecosystem but rather the other way around.
Five years may seem far, but the process is gradual, though exponential, Chen stated.
It starts with “small promises,” companies moving to RWAs, participating in various DeFi activities, moving deeper into the ecosystem, and generally, with time, participating in a lot of DeFi mechanisms.
And then, “within a matter of months, everyone starts rushing in, and the market gets crazy.”
Burn, Token, Burn
The injective team has surpassed 6 million native INJ tokens burned.
Chen discussed the relevance of the token mechanism, saying it’s the result of the entire ecosystem coming together and aligning in terms of value and economic incentives.
Gas fees, he argued, work for “generalized environments,” such as Ethereum. But Ethereum will eventually converge towards a sensible gas ecosystem, with user and developer behavior changing accordingly.
Meanwhile, Injective has many modules that are “basically these optimized layers that allow users to forever, regardless of new technologies that come out […] to always have the efficiency and cost advantage over others.”
This is because the chain itself has built-in “biases” towards financial-specific applications.
The Injective $INJ burn auction growth visualized.
Injnomics pic.twitter.com/ZKoFve8Ngd
— Injective 🥷 (@injective) June 28, 2024
Furthermore, when it comes to the chains like Ethereum, the economic activity doesn’t necessarily happen through the demand for computation but rather through the competition of arbitrage or trading opportunities, Eric Chen argued.
It allows gas to be a proxy for the value of economic activity.
In Injective’s case, “the more direct way” is to simply burn the tokens. Its burn mechanism is “kind of like a nice marriage between Ethereum’s native mechanism and the more utility-centric or sector-specific mechanism that allows for a more direct process,” Chen concluded.
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That’s not all.
In this interview, Chen also discussed:
- the focus on building the fastest L1 blockchain for DeFi;
- tokenized RWAs – tokenizing real-world assets for the masses;
- the reality of high yields, whether they are sensible, and when TradFi might offer them;
- Injective’s many executed and incoming updates and accomplishments, including Helix 2.0;
- plans and predictions for the second half of this year, including the exciting developments on the institutional adoption side;
- the evolution of crypto conferences globally.
You can watch the full podcast episode here.
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About Eric Chen
Eric Chen is the CEO and co-founder of Injective Labs, the core contributor to Injective.
Before founding Injective, Chen worked as a cryptography researcher and trader at Innovating Capital, where he led market-neutral trading efforts in the blockchain space and invested in prominent companies such as 0x, Chainlink, and Cosmos.
He possesses extensive knowledge of blockchain protocols and traditional finance, along with a deep understanding of both Eastern and Western blockchain-based protocols and communities.
Chen was featured in Forbes 30 Under 30 in 2023 for his significant work with Injective.
He studied finance and computer science at NYU.
