Delphi Digital’s far-reaching reports on all corners of the blockchain world have become essential research for builders, entrepreneurs, investors, and generalists alike over the past two years. The New York-based investment boutique and research firm has released landmark studies on Bitcoin, Ethereum, and De-Fi recently, and that’s not to mention the reach of the Chain Reaction podcast, hosted by Delphi Digital Co-Founder Tom Shaughnessy. With a background in traditional finance, the group provides critical research information that transcends industries and informs influential organizations and individuals in crypto and far, far beyond.

Alongside leaders in the blockchain space like Ethereum creator Vitalik Buterin, ConsenSys founder Joe Lubin, and leading figures from the Ethereum Foundation, Microsoft, Binance, and eToro, Tom Shaughnessy will be joined by fellow Delphi Digital Co-Founder Medio DeMarco in Israel for Ethereal Tel Aviv this September 15th to share insights on the current state of blockchain and decentralized finance. We spoke with the duo for their take on Ethereum progress in 2019, the ties between development and market movements, and what to expect from their talk at #EtherealTLV…

What is the extent of Delphi Digital’s current offerings?

Tom: Delphi Digital is a full service research boutique. We’re focused on institutional crypto research. We have a retail offering, an institutional offering, and then we focus a lot on consulting for crypto funds, institutions, banks, and traditional firms. We focus on cutting through the noise with a lot of our offerings, trying to simplify a lot of the space. This includes our weekly commentary and insights reports all the way up to our token reports, in which we focus on deep dives with full economic and token models and token economic models. We’re really focused on just trying to provide the best research in the space.

What trends of phenomena do you see defining the Ethereum space at the moment?

Medio: In terms of Ethereum, and I would say De-Fi is one of the largest, and then Layer Two scaling. Those are also the two most recent reports that Delphi Digital has released. Other topics like gaming and Web3 are of interest as well. In terms of markets, we focus from a macro perspective, especially with regard to Bitcoin, on a weekly basis and a monthly basis. We’re all over the map. We don’t just focus on just Ethereum and we’re definitely pretty broad in our focus.

Head to Etherealsummit.com to buy tickets to Ethereal Tel Aviv, September 15th!

Your reports just don’t focus on market events, there’s a lot about the processes underlying them…

Tom: For Ethereum, the team published a detailed report several months ago that covered a lot of aspects. There was a huge focus on what validator economics should be under ETH 2.0 before Danny Ryan upped the issuance. We take a more pragmatic approach to a lot of the metrics on Ethereum going forward.

Medio: It’s interesting. In that report, we criticized that the rewards for validators under ETH 2.0 was too low. That actually sparked conversation with Danny amongst the ETH 2.0 teams, and then a month later they ended up raising the reward anyway. So it was interesting to see our feedback, our research actually leading to a change for the Ethereum issuance policy.

What do you see driving the market at the moment?

Tom: Right now I would say that markets and development should be tied, but the market is irrational and not always tied to fundamentals. You can see a lot of solid development happening on Ethereum and projects built on top of it, but it doesn’t always relate to price movement with the actual token. Over time we expect that to change. Fundamentals will matter over the long-term. So from our perspective, we track the development, we track fundamentals. Over the short term, will they play out the way they should? Maybe not, maybe the market will stay irrational.

If Ethereum 2.0 launches on time and the developmental progress continues, I would say that goes hand-in-hand with price. We try to pick a long term perspective on our reports and our research and not so much: “Is ETH going to go up this month?’ That’s impossible to really tell. But if development keeps proceeding, if the team keep hitting targets, do we think ETH will succeed in the long term? The answer would be yes.

Watch highlights from Ethereal Summit NY

What do you attribute market irrationality to at the moment?

Medio: I think it’s mostly related to the makeup of the market right now. It’s a lot of retail investors. As institutions eventually move in and start investing in this space, we’ll see a more rational approach as they’ve brought to other asset classes in the past. I think that’ll be something that over time matures the market. I think we’ve seen that, over the past two years, a lot of stuff that used to fly doesn’t anymore. We’ve seen a lot of the pure scams filter out and seeing people focus on things that matter more. The maturity of the market has really started to develop. I think we’re trending in the right direction. I think the one thing that really ties development progress to price will be a more sophisticated investor class.

So what elements will begin to actually tie development and the market together?

Tom: It’s three things. The protocol side, which we just discussed. On the project side, there’s been explosive growth in the number of projects built on Ethereum. That’s akin to just the limitless experimentation and the composability between different projects. So we track everything from Maker to Set to Kyber to Uniswap — the whole nine yards — and how easy it is to build and experiment. The third thing on the institutional side is just how hard or easy is it for institutions to get involved to get invested in Ethereum.

There’s no better reference point than Andrew Keys and James Slazas’ fund for Ethereum — DARMA Capital — launched to accumulate more Ethereum over the long term. I think you’re seeing a maturity and funds launching that are focusing on investing in ETH or are focusing on investing in projects built on top of it (DeFi, Web3, Layer 2). The institutional build out, whether it be from Fidelity or Bakkt or other institutions to be able to buy Ethereum are definitely gaining momentum as well.

Head to Etherealsummit.com to buy tickets to Ethereal Tel Aviv, September 15th!

You’ve mentioned before that the biggest ‘moat’ Ethereum has is the amount of developers working on the platform. How does Ethereum maintain that lead?

Tom: The biggest things in my mind are: Making it easy to build on the platform is just a product of developer mindshare, composability, and leveraging what’s already been built. People are able to throw Uniswap or Kyber or Set or whatever the combination is, they can deploy faster and easier and thus can make more money and build new things that they want. So whether they want monetary gain by mixing and matching, or whether they want to actually just build something altruistically that didn’t exist before, I think that’s huge. But there are definitely risk factors from other platforms. Blockstack pays their developers $200k a month (Soon $1M) split between the top apps so they can focus on building and they don’t have to productize and monetize their projects earlier on. Ethereum doesn’t do that, so that’s a risk.

Medio: You’re not gonna want to reinvent the wheel and rebuild a whole ecosystem that already exists on another platform if you don’t have to. With that being said, with all the stuff being built today, if Ethereum ultimately doesn’t scale within a year or two: Does what’s happening today translate into future success? I think that’s the real big ‘if.’ So ultimately, for Ethereum to succeed, for all of this development to become valuable, it has to scale and it has to scale on time. There are a lot of competitors coming. With any further delays, I would have concerns. That’s what it all comes down to.

What will you be speaking about at Ethereal?

Medio: We all come from traditional finance backgrounds. I’ve worked banks, Tom was in equity research. My last role was in credit risk for hedge funds. A few of our most recent reports have been on the de-fi space: Uniswap, Set Protocol, MakerDAO, Kyber. De-fi has really been our bread and butter. At Ethereal, we’re planning on relating the current state of decentralized finance back to the legacy financial system, uh: How it improves upon it, what possibilities it opens up, why that development is happening on Ethereum versus other smart contract platforms. I think that’s one of the most prominent and interesting topics in Ethereum right now.