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Derek Walkush - Joining Variant

Derek Walkush

I couldn’t be more excited to announce that I’ve joined Variant as an investment partner. I’ll be working alongside Jesse, Li, Spencer, Medha, and Geoff, and collaborating with our network of venture partners and founders. At the conclusion of this semester, I’ll be joining the team full-time in June and going on leave from university.

After being briefly introduced to Bitcoin in high school, I grew interested in crypto around DeFi summer in late 2020. I then applied to intern at Accolade Partners, one of the top crypto fund of funds. The experience completely changed my view of the industry. Watching capital swarm the sector, talent flood in, and the ecosystem’s rapid growth made it hard to ignore what seemed to be occurring: a once-in-a-lifetime technological transformation. Accolade also invested in early-stage consumer and enterprise tech funds (the other hottest segments of the VC market), yet the developments in crypto dwarfed that activity.

I started spending my nights and weekends teaching myself the basics of distributed systems and low-level computing while beginning to experiment with on-chain DeFi apps. My conviction and interest only seemed to grow. To get more involved in the on-chain world, I joined Index Coop as a part-time contributor to help with some BD work; I also became a core contributor at AladdinDAO, developing a content strategy for their yield farming research. Around the same time, I started writing for Spencer’s newsletter, OurNetwork, to become more familiar with on-chain analytics and DeFi fundamentals, teaching myself SQL to query data on Dune. 

While at Accolade, the extremely thesis-driven funds, with investors proudly wielding contrarian, independent thinking always stood out. Of those, Variant’s ownership economy thesis seemed most powerful: growing up through the highly centralized, “walled garden” era of the internet, the flaws of a small group of often quite personalistic companies controlling the consumer web experience became increasingly apparent. Ownership through token networks introduces an entirely new design space for web applications; to me, it offers a multitude of new attack vectors - including airdrops, vampire attacks, and others - for challenging seemingly invincible incumbents, creating an opening for a new generation of highly innovative tech startups. 

Looking to learn more about web3 and VC, I applied to join the Variant team in early January as an intern, initially assisting mostly with OurNetwork, and then dove more into supporting investment research and diligence. Interfacing with top entrepreneurs only furthered my conviction; their stories and determination inspire me. Watching the space evolve for just over a year, I realized I was facing a generational opportunity, and couldn’t miss out on it. I couldn’t be more excited to start this next chapter of my career at Variant.

My primary research interests are on-chain data analytics and token distribution. Public ledgers unlock unparalleled availability of real-time data for any protocol. Unlike TradFi, where the market gets four quarterly snapshots of a company’s fundamentals-based health, protocols can be constantly monitored. At scale, these data flows can be more efficient and reduce the need for a “guessing game” of key indicators each quarter. I also grew fascinated by token design as an economics and math student. The scholarship coming out of centers like the Research Institute for Cryptoeconomics in Vienna, especially that of Sherman Voshmgir and Michael Zargham, fascinated me; I quickly sought to learn more about the topic. Token engineering is one of the most exciting greenfields in economics, with unparalleled applications and importance for the entire field. 

At Variant, I will primarily be focusing on DeFi investing. Even with limited experience at TradFi startups - covering solar investing and income share agreements - during the pandemic, the unlocks of DeFi’s composability and trustlessness became apparent; taking classes on the history of the financial system at Georgetown, it became easy to contextualize DeFi and realize that smart contract-based finance represents one of the greatest advances in modern economic history. Broadly, two themes excite me: consumer adoption and token distribution innovation. 

First, more consumer-facing, retail adoption is a necessary step in DeFi’s path to mainstream adoption. 2021 was a record year for crypto-asset allocations, and for part of the year, the majority of DeFi transactions were from institutional investors. Retail adoption, however, is lagging. The entire sector has only seen about 4m unique wallets, about 1/80th of the DAU of Snapchat. Despite small user numbers, equating TVL to assets would rank DeFi as the US’s ~17th largest bank. I believe projects building smooth, user-friendly onboarding experiences are poised for massive expansion; these kinds of products include wallets/fiat on-ramps for new crypto investors, abstractions to access DeFi yields through easy bank account integrations, and user-friendly mobile apps.

Second, token distribution design seems to be having a “wake-up” moment. Many projects understandably prioritized security, smart contract optimization, scaling, and other technical features for their initial launches, with token design taking a backseat. Even just the past few months have seen new, highly experimental distribution mechanisms, utilizing lockups and new programmable auctions. These innovations can be used to transform token distribution from primarily ensuring secondary market liquidity to better aligning the long-term incentives of network participants. Founders ideating net new, experimental token designs that translate to novel game-theoretic mechanisms interest me most; like ownership, token-based incentivization creates an entirely new design space. 

DeFi still feels like an experiment; a distributed, global community is currently building an alternative financial system that’s decentralized and permissionless. In other words, anyone can participate or build; the same composability of open source code now applies to finance, creating an entirely new opportunity set of products and strategies. It’s certainly a lofty mission, but I couldn’t be more excited to play a part.

Here are a few categories that I’ve been tracking:

  • Marketplaces for long-tail assets
  • Experiments with under-collateralized lending
  • Bringing RWAs on-chain to serve as collateral
  • Consumer-friendly DeFi apps for retail investors
  • Abstractions to help non-crypto-users access DeFi yields

If you’re working on something that sounds like a fit, reach out on twitter or by email at [email protected]