The DeFi exchange hack: The Fault does not lie with Ethereum

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The past week saw extreme volatility for certain markets and the resurgence of security concerns for open finance. According to Alexander Blum, crypto investment expert and Chief Operating Officer of fintech firm Two Prime, some of these concerns are unfounded whereas the others have serious implications for broader markets. Alex discusses the following topics this week, with full commentary below.

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Q1 2020 hedge fund letters, conferences and more

  • On the death of oil — what does this mean? Oil has typically been regarded by many as one of the most relevant stores of value outside precious metals. With this narrative now out of the window, where else should investors look to, in their search for safe haven assets?
  • On the DeFi exchange hack — what now? It is a popular belief that DeFi has serious security issues and that Ethereum as a protocol, by association, is unsafe and insecure. Is that really the case? What truth do such arguments hold?

On The Death of Oil:

“Last week was a really bizarre situation with oil prices moving below zero for oil futures. Nobody is traveling — no one is using gas as they’re not driving, flying, or on cruises — and oil prices were already in a bad place to begin with. While this is great for the environment, it’s not good for the oil business. Storing oil has been more expensive than the price at which it’s being sold, and hence, we saw the price crash. Oil has historically been one of the most reliable stores of value outside of precious metals. The price of oil has already been falling gradually, and the virus accelerated its plummet. If Bitcoin is likened to gold, Ethereum is more like oil. If Ethereum no longer had any technical use, there would be no utility for it. Oil and Ethereum both rely on some type of utility. Like gold, Bitcoin has little intrinsic value, but its simplicity is its strength, not its weakness. Sometimes simplicity can be a good thing, especially when markets are turbulent.”

On The DeFi Exchange Hack:

“The recent DeFi exchange hack seems to have created the impression that Etherum is unreliable, convoluted (in its codes and structures), and failing as a Protocol. In reality, the failure lies not with Ethereum itself, but with the companies and individuals implementing DeFi — by shipping untested products too quickly with high stakes money. Naturally, this places the entire DeFi ecosystem under greater scrutiny and oversight from regulators globally — but is ultimately, a much needed part for the birthing of a new class of financial products and a new way of delivering them outside of the banking system.”

About Alexander Blum, Chief Operating Officer of Two Prime

Alexander S. Blum, Chief Operating Officer and Co-founder of Two Prime, has worked across blockchain hedge funds, startups, and consulted in the space for over seven years. Prior to founding, Alex started digital investment group Atomic Capital, developed a cryptocurrency mining operation and AI-crypto hedge fund, and worked as a technology advisor for the Bill & Melinda Gates Foundation, The World Economic Forum, and an economic development specialist for the Peace Corps.

About Two Prime

Founded by Dr. Marc Fleury and Alexander S. Blum, Two Prime is a fintech firm that focuses on the financial application of crypto in the real economy and is rethinking the approach to crypto application. By bridging the best practices of traditional finance and crypto, Two Prime is applying traditional models and economic theory to the space and introducing a new asset class - the FF Macro Token. By leveraging the fund formation dynamics of crypto, along with the credibility and stability of traditional finance, the FF Token model will create stable value and real use application, reignite the crypto markets, and bring real value to purchasers.