What I Read This Week (March 23, 2025)

Onchain credit, misaligned incentives, The democrats reckoning, and COVID lies.

After publishing 2 weeks ago, I think every other week is the right cadence.

On onchain Uncollateralized Lending (X, Wildcat Finance)

I've spent much of my career working on RWAs. At TrueFi, we unfortunately labeled what we did as "uncollateralized lending" when we should have simply called it "credit” (we were never very good at marketing)

There's important context here: in 2020, we launched with a focus on extending on-chain, decentralized credit where borrowers staked (metaphorically, not in the literal crypto staking sense) their reputation to secure loans. Alameda was our first borrower—at that time, they were considered a healthy credit risk at 12-15%. I think Wintermute or Grapefruit followed as our second borrower, also leveraging their established reputation. You can see many of the borrower introductions here: https://forum.truefi.io/c/borrower-requests/5 — A personal favorite of mine was Folkvang’s post. Besides just having a strong Twitter presence, borrowers could also leverage metrics like their position on Bitmex or FTX’s public leaderboard.

The challenge emerged when credit-worthy borrowers without established reputations (Nibio, Folkvang, etc.) sought loans. This quickly revealed the need for underwriters to vouch for lesser-known borrowers. At TrueFi, we experimented with different ways to go about doing this, but at the end of the day, nothing worked better than having a seasoned credit professional who could get to know the borrower’s, their financials, legal setups, etc. and make case-by-case underwriting decisions.

Looking at the landscape today, of all the protocols that pioneered lending to market makers, only Maple Finance continues to operate at scale—and they've largely moved towards collateralization with hard assets. No other protocol in this space is truly thriving as is demonstrated by the fact that TrueFi (which has not done substantial loan in nearly 2.5 years, yet is still so high in the “league tables”.

My conclusion from spending a lot (too much? lol) of my career in this part of the market is that blockchain adds minimal benefit to credit creation. Credit fundamentally remains a business of experienced professionals making careful assessments. It's a low-upside, high-downside business defined by legal agreements and priority stacks—considerations most crypto participants aren't equipped to evaluate. While credit creation is essential for healthy markets, it should be difficult to obtain in size and managed by lenders with comprehensive insight into borrowers' full financial pictures and liabilities.

If AAVE Launches a New Token (X, Theia Research)

Summary (thanks Grok): Aave’s founding company (now called: Avara) propose Horizon to the AAVE DAO, aimed at bringing real-world assets like tokenized money market funds into Aave’s DeFi ecosystem. As a part of the proposal, they would consider launching a new governance token and give AAVE DAO a small % of the token. Some in the Aave DAO worried it would dilute $AAVE’s value, confuse its valuation, and unfairly cut revenue shares, while others saw potential for growth. On March 17, 2025, Stani Kulechov confirmed no new token would be created, per DAO consensus, keeping $AAVE as the sole governance and utility token.

RR: Crypto fundamentally operates on incentives, dating back to Bitcoin's POW mechanism. The tension between Labs companies and their DAOs remains a significant challenge, with Uniswap being perhaps the most notable offender. I'm somewhat sympathetic to Avara's position—their financial incentives naturally push them to maximize upside for shareholders and employees. This becomes extremely difficult when your company is essentially a services organization with a single client, and your team lacks meaningful ownership of the underlying valuable asset (AAVE tokens). The fixed supply tokenomics model creates a structural problem: with AAVE's token origination in 2017, it's likely few current Avara employees have significant AAVE-related upside beyond the founders. Even for founders like Stani who've been building for nearly a decade, it's reasonable to assume they've substantially exited their token positions by now.

CNN Poll: Democratic Party’s favorability drops to a record low

Democrats Need to Face Why Trump Won (NYT)

Summary: Recent CNN polling shows Democratic Party favorability has plummeted to 29%, a record low since 1992, with declining support even among their own base. In a parallel NYT interview, data scientist David Shor analyzes the 2024 election defeat, revealing Democrats have experienced dramatic losses among working-class voters, immigrants, and young men specifically, with crucial swing voters prioritizing economic concerns over democracy issues.

RR: What fascinates me about these analyses is how data validates what many saw happening on the ground. The party's most consistent support now comes from highly educated voters who consume traditional media, but they've hemorrhaged working-class voters across racial lines - with Hispanic voters showing the most dramatic shift (81% support in 2016 down to 58% in 2024).

Behind Shor's data lurks a deeper revelation: the Democratic coalition has become dominated by highly engaged information consumers who've moved leftward while the rest of the country shifted right. This educational and class realignment transcends American politics, appearing across Western democracies as traditional liberal messaging loses resonance with working-class voters, including immigrant communities that swung dramatically toward Trump. The Democrats' challenge isn't merely messaging but a fundamental disconnect between their most influential voices and the economic concerns of voters they need to win.

We Were Badly Misled About the Event That Changed Our Lives (NYT)

Summary: Five years after COVID-19, Tufekci reveals how scientists and officials hid crucial facts and orchestrated campaigns to dismiss the lab leak theory, despite many privately believing it plausible. Recent developments show the Wuhan Institute of Virology continues similar risky research with insufficient safety protocols, while intelligence agencies including the CIA now assess a lab leak as the likely pandemic origin.

RR: That scientists strategically concealed their genuine concerns about a lab leak demonstrates a critical failure in scientific transparency. Institutional credibility is dead and this was the final nail in the coffin that killed it. That people were censored, shunned, and removed from society and those who committed those acts have still not been head to trial is a disgrace.