Join me as I dive deeper into the diverse 0x ecosystem and take a closer look at some of the interesting projects employing the open 0x protocol.

Last month, I was fortunate to have been able to travel to San Francisco and participate in SF Blockchain week. While the events of the week were certainly exciting, especially the ETHSF Hackathon, one of the highlights of my trip was having the opportunity to chat with Brendan Forster (@bpforster24), Head of Growth Operations at Dharma.



Similar to 0x, which was developed as an open standard to facilitate the frictionless global exchange of tokenized assets, Dharma is a open protocol that seeks to provide a common, secure infrastructure that will enable the “decentralized origination, underwriting, issuance, and administration of tokenized debt assets.” (Hollander, 2017) As someone who has always been interested in the concept of peer-to-peer (P2P) lending, Dharma immediately caught my attention. Having learned more about the project since then, and especially after my conversation with Brendan, it’s clear that P2P lending is just the tip of the iceberg. Dharma aims to disrupt many traditional debt-related use cases in the shorter-term, and even more exciting than that, will likely enable the creation of completely new ones in the future.



Date of interview: October 5, 2018

Who are you and what do you do at Dharma?

Brendan: My name is Brendan Forster and my role at Dharma is to manage the non-technical side of our business. I work on our community management, our marketing, business development, partnerships, and operations; basically keeping the lights on and getting Dharma into the hands of as many developers as possible.

Can you briefly share your background?

Brendan: I joined Dharma in December of 2017, so right as the bubble was starting to crescendo. One of my on-boarding assignments from Nadav [Nadav Hollander is the founder and CEO of Dharma] was to buy a CryptoKitty because he wanted me to experience what the new dApp world was like and how difficult it was to use, but also the power of owning a crypto-collectible that was my own.



I got connected with Nadav through a mentor of mine who invested in the company in our seed round. I fell in love with the idea — had a ton of respect for Nadav and what he had been able to do by himself, as well as his vision for the future. Between my financial education and my operational experience, and my passion for crypto currency, this was the middle of the Venn diagram for me — where it hit on a bunch of different things that I was really excited about. And so, I decided to make the move [to Dharma].



Before Dharma, I spent three years at Uber and three years before that at Microsoft. At Microsoft, the main role that I had was in the corporate strategy group, so basically it was an internal group of management consultants. And it was great. I learned a lot. But it was super ivory tower — our deliverable was a slide deck. After a couple of years I decided I wanted to get my hands dirtier. To use the phrase from my favorite play, the Hamilton soundtrack, I wanted to be in the room where it happens; I wanted to be in that decision-making room.



And so, I changed roles. I moved to Uber and joined the most operationally heavy, problem-solving team I could find. My primary role at Uber was as a launch manager for Uber Eats. I started in the New York City office; helped launch the Uber Eats product in New York. And then went up and down the East Coast for a couple of months launching Baltimore, Philadelphia, and two cities in Connecticut. And then moved overseas. I went to Latin America and launched a ton of cities across a bunch of countries in Latin America. I spent some time in Colombia, Brazil, Mexico, Costa Rica and Chile over the next year and a half. It was an intense experience. Uber definitely pushes you beyond what you thought you could do.



I would say the other interesting thing about having worked at Uber is that my perspective about regulations changed quite substantially. I learned how to evaluate the risks and trade-offs of compliance, and some good heuristics for how to navigate regulatory uncertainty. These were really relevant lessons from my Uber days.

What is Dharma and what problem(s) are you trying to solve?

Brendan: Dharma is an open source protocol for the borrowing and lending of crypto assets. Basically, we build the smart contract infrastructure and web developer tools that make it really easy to spin up lending applications of arbitrary complexity. It’s possible to build on top of Dharma, a peer-to-peer lending service… like [what] Kiva or Branch did in the original FinTech revolution, but using the Ethereum blockchain as the settlement layer for these loans, and smart contracts to administer them. You’re able to cut out intermediaries because the settlement layer for those applications [Kiva and Branch examples] are still brick-and-mortar banks. So, peer-to-peer micro lending, all the way to very crypto-native stuff like margin trading or lending of crypto-collectibles, like CryptoKitties or Gods Unchained cards.

Me: And what problem(s) are you trying to solve?

Brendan: I think Nadav has a really good way of putting this, which is,

“Getting a loan today is more akin to going to the DMV than it is [to] using Airbnb.”

Referring back to what I mentioned before around how the ultimate settlement layer for loans today are brick-and-mortar banks; what we do is leverage the automation and the advantages of the Ethereum blockchain to make several improvements on this process.



The first-order benefits are fourfold. The first one is efficiency gains — by using smart contracts to automate away previously required intermediaries, you’re able to cut out several important costs in a way that’s relatively trust-minimized because the code is audited on-chain… [it’s] open source… you can verify that we’re not going to take your money [and] we don’t need a third-party to hold your funds in escrow. We can do that using smart contracts. So, efficiency is the first.

Transparency is the second. We use the Ethereum blockchain. The Ethereum blockchain is transparent by design but also pseudonymised. What’s interesting here in terms of transparency is that you can have privacy at the personal layer but transparency at the systemic layer, and that’s really beneficial.



The third is what we call programmability. You can use Dharma to program any kind of loan, as I mentioned. What is really cool is that we use the emerging Ethereum finance standards, in particular, ERC20 and ERC721. So, any other application can natively plug into Dharma because we adhere to these standards. For instance, it’s really easy to trade a Dharma debt token using 0x v2 because they have native support for ERC721 exchange. So, now you can easily have a secondary market for loans on 0x. Another good example is a service called CDx that is being built right now, and could be used to get insurance on your loans. You could use Set Protocol to package up a hundred, a hundred thousand, or a million loans into a basket of loans, and invest not in a single person but in a cohort, or a state, or whatever specific asset class you want. This programmability / interoperability is another big component, which really is difficult to achieve in the legacy financial system.



The fourth thing is common to the decentralized finance industry; using Dharma is borderless and extremely accessible. Anywhere in the world that you have an internet connection, you can get a Dharma loan. So, these are the first-order benefits.



Really quick to cover the second-order benefits; all of these things together generate what we consider to be this decentralized pool of credit liquidity. And the benefit there is if you have this decentralized, borderless pool of credit liquidity, anyone in the world can spin up a new lending company or take [a] novel lending thesis and plug into this decentralized credit market and not have to go through the hoops of raising a huge debt facility. You can just test it out using this decentralized credit pool and then draw upon it when you’re successful. We think that this increases competition quite substantially and has the end result of creating better, and less expensive financial products for end consumers.

How many members currently on the team, and are they centralized or decentralized?

Brendan: We’ve just become eight people. Nadav is our founder and CEO. He started the company in April/May of 2017. I joined the company in December. We then hired three engineers in rapid succession earlier this year. We hired what we call a “protocol specialist” who’s a mix between a developer evangelist, an integration/customer support manager, and a deeply embedded protocol researcher. He’s able to pull out all of the new research that is coming out of the industry and help us integrate it into what we’re thinking about at Dharma. And recently we had a marketing manager start and we just hired a new engineer. [We are] looking at the fourth quarter of this year to add about three more engineers or so.



We have taken the approach right now that we want to be centralized in San Francisco. I wouldn’t say we’re dogmatic about it… we would definitely accept the right candidate if they were elsewhere, but there are real trade-offs. For company building, and [in] particular for the type of company that we are building, it’s just our opinion that there is a lot of collaboration that happens spontaneously when you sit next to each other.

The ability to assimilate cultures, deeply get to know each other and how each team member works, and laughs, and eats lunch, and works out, or gets into the office… these little nuances of being around each other in a physical space really do matter.

I would say that one of the reasons that we’ve been able to ship the quantity of code, at the quality that we’ve been able to achieve, is because we are co-located. And it’s something that we’ll have to navigate as we grow as a company, and for sure, we will not be a San Francisco-based company forever. But it’s our current plan to continue to build out the team in San Francisco until we’re maybe 15 to 20 people.

What makes your team special relative to other teams?

Brendan: It’s a good question. First of all, I would say we are a very grounded, very pragmatic team, and the engineers that we have hired all come from product backgrounds but are also talented infrastructure engineers. What we’ve tried to do is compile a team that’s capable of writing code throughout the Ethereum stack; all the way from high-level, front-end web design, down to APIs for web tools. And below that, smart contracts, and then below that, even thinking deeply about blockchain design. Now, we haven’t done any work there [blockchain design] but our team is pretty talented at thinking about these things.



And the other thing is, we take a traditional Silicon Valley company building approach to the blockchain industry. We try and ship quickly… responsibly but quickly… gather customer feedback, iterate, ship again, and build this flywheel of finding customer needs and then really addressing them. There had been numerous examples of companies who start with this really good idea but aren’t willing to take the first minimal step. Even if that minimal step is imperfect, they want to get to the crown jewel at the end directly. And we really think that that’s the wrong approach.

Excited about the weekend of Dharma and 0x hacking ahead — Brendan (left), Me (right)

What are your thoughts about 0x?

Brendan: First of all, I have a tremendous amount of respect for the 0x team. I think they are extremely strong in every level of company building. I think they are a really talented technical team… they have very solid operational talent… Will and Amir are really great founders. In large part, their project informed a lot of the way that Dharma has evolved. Originally, Nadav had conceived of Dharma as an on-chain system. After seeing 0x, he was like, “Wait, this is totally wrong. We need to re-architect — it’s going to be an off-chain relay, on-chain settlement system.” I think their technical talent and strategic talent… it’s super impressive.



In terms of the ecosystem at large, one of the things that I find extremely interesting is the turnover and the competition among 0x relayers. For instance, I thought it was really interesting that we’ve seen several different times now where the top relayer on 0x tracker has changed. And I find that really fascinating. It’s unanticipated, at least for me. Coming from traditional finance, “Liquidity begets liquidity.” So, if you’re a relayer and you have the most liquidity, you’d think that that would beget more liquidity. But I think we’ve seen regional leaders in the system, so you have Radar Relay and Paradex, and a dozen other American-based relayers; then you have DDEX that’s dominant in the 0x ecosystem in China; and then you have a Taiwan-based relayer [Star Bit Ex] now that’s pretty popular. I think the dynamism amongst relayer competition in 0x is really interesting.

How is Dharma using the 0x protocol?

Brendan: Dharma was originally built on top of 0x and was going to use the 0x protocol to distribute our Dharma debt tokens. Unfortunately, for technical reasons 0x v1 and Dharma v1 did not tightly align, so we had to build Dharma not on 0x. The primary way, at this point, that we are interactive with 0x, is now that they support ERC721 exchange natively in the protocol, Dharma debt tokens can be traded on 0x relayers really easily. This isn’t something that has been deployed yet, but it’s now pretty trivial. It’s a user experience problem now, not a smart contract or developer tool problem, to have a secondary market for Dharma debts.

And my guess is that as 0x continues to build, and Dharma continues to build, there will be additional layers of interoperability and interactivity between the two ecosystems.

Where do you see Dharma in the next three to five years?

Brendan: I’ll give my best guess. If you look at the user experience for dApps using crypto today, it’s still pretty difficult. I wouldn’t necessarily say there have been all that many usability improvements even in this year. There are some wallet UXs starting to get better, but I don’t know that I would say that buying a CryptoKitty today is all that much easier than it was when I did it in my onboarding experience. If you start with that assumption; that usability for crypto is going to continue to be pretty difficult for the next 18 to 36 months, then the use cases for crypto are going to be either extremely crypto-native or they’re going to be for extremely marginalized populations — what we call meatspace use cases; meatspace being the traditional world.



To give a few of the markets that we’re excited about… there’s a couple of applications of Dharma for layer 2 infrastructure on Ethereum — basically, buying risk and enabling scaling. To give examples…the first one is what we call plasma withdrawal bonds. One of the main drawbacks to plasma right now is that withdrawing your funds from plasma back to the main Ethereum blockchain requires a 7 to 14 day withdrawal period for various game theoretic, economic reasons. That’s terrible; that’s worse than the traditional financial system. But what you can do is you can use a Dharma debt to accelerate the time frame with which you can perform your withdrawal.



So, how does that work? Let’s say that I have some assets; let’s call it 100 ZRX tokens that are locked up in this plasma chain and I want to withdraw them. I can basically pay a small fee and place these 100 ZRX tokens as collateral and borrow money from somebody else. So, I’ll get 99.5 ZRX tokens immediately and then when my transfer is settled, the collateral, these 100 ZRX tokens will be transferable to the lender. For financially savvy readers, this is basically invoice factoring for plasma withdrawals. The beauty of this use case is that 1) it is a plasma enabler and it will help scale the Ethereum blockchain. And 2) it’s a fairly easy class of debt to underwrite because you don’t need to know anybody’s identity; you don’t need to know any sort of reputation.



Another one is a similar infrastructure use case. There are payment channels [utilized in Ethereum’s layer 2 scaling strategy and] for some of these channels, there’s a payments operator — basically a payments hub. And it is a requirement of the payments hub for game theoretic, economic reasons to maintain collateral equal to the transaction volume that they are handling. So, if you handle a million dollars of transactions a day, you have to have a million dollars of collateral. That’s really expensive and not all operators of these payments channels are going to have that much money. So, what they can do is borrow that — you can have payments hub bonds where fund holders can lend to the payments hubs so that they have appropriate collateral, and are able to charge a low interest rate because they’re very low risk loans. And so again, it is an enabler of Ethereum scaling… it is very low risk and easy to price the risk. This is really low-hanging fruit for us.



Another crypto-native use case that we’re excited about is the borrowing and lending of crypto-collectibles. I’ll give two examples here as well. First of all, you could use your expensive CryptoKitty as collateral to get a loan. Let’s say your expensive CryptoKitty sold for $100,000. You wouldn’t be able to borrow $100,000 because these things are hard to price… they’re illiquid… but you may be able to get a fifth of the value… $20,000. It’ll be up to the lender what they’re willing to wager. And basically that enables you to get some liquidity today and go out and buy that car, buy that house, speculate on more crypto assets, whatever you want to do with it. And if you pay [the lender] back, then you get your CryptoKitty back. If you don’t pay back, then the lender basically repossesses your CryptoKitty. So, that’s one obvious use case.



Another one that we’re excited about is a little bit different, but similar in the sense that you are collateralizing a crypto-collectible. Basically, the way that I frame it is “point-of-sale financing for crypto-collectibles.” So, Gods Unchained recently sold their one millionth card… it’s a trading card game where the cards are ERC721s [i.e. non-fungible tokens]… and you are basically the true owner of the card… the digital collectible. It’s really cool. Now you may want to buy a card but it’s expensive and you don’t have the funds right now.

Harkening back to my elementary school days, I am sure that there were [Magic the Gathering] cards that I wanted where I got a loan from my mom on my allowance. You could do that for Gods Unchained.

This could work in a couple of ways but let’s assume the seller is willing to be the lender — I’m selling it [a Gods Unchained card] for 10 ETH. You want to buy it. You pay me 2.7 ETH upfront and I put the crypto-collectible into a collateral contract. Then you make three more payments of 2.7 ETH and it’s yours. You’ve paid me in total, 10.8 ETH, so you paid an 8% interest rate. But that enabled you to lock up this card while you didn’t have the funds because otherwise somebody else might have purchased it. We’re really excited about that kind of use case as well.



The last crypto-collectible lending use case that I think is really cool… again, I’ll use Gods Unchained as a good example… is the lending and borrowing of cards themselves. Let’s say that I’m going into a tournament and you’re sitting this one out. But you have this card that would level up my deck, so I borrow the card from you. I post some ETH so I won’t run away with the card. Then, I use the card to help me perform well in this tournament and give it back to you with interest. It’s a way for crypto-collectible holders to make passive interest on their holdings in a trust-minimized way because I’m posting collateral.



Me: So, all of this within the next three to five years?



Brendan: Definitely, yeah. This is probably… I would say 12-ish months. Now talking a little bit longer term than that… I think within the next 18 to 24 months we’ll start to see some deployment of censorship-resistant, meatspace-lending use cases. If I had to bet on one, the one that I would bet on is inventory financing for cannabis companies.



And beyond that, I honestly wouldn’t say that I have such a lucid vision on. I think we will probably be back out of crypto winter and there will be far more users of crypto which will lead to far more normalization of crypto as a medium of exchange, and as a unit of account. And hopefully then we can start to take the initial steps towards borrowing and lending of cryptocurrencies for real use cases. There will probably be some sort of identity solution. I’d be really surprised if there’s nothing within the next five years. There will probably be competing reputation standards that have emerged that also help make these lending/underwriting decisions.

Where do you see the 0x ecosystem in three to five years?

Brendan: Going back to the interoperability of all of these projects; I think 0x will be [the] foundational layer of exchange for what I like to call DeFi — the decentralized finance movement.

I think 0x is the leading horse in the race to be the decentralized exchange protocol for exchange of everything.

I really do buy into the 0x vision of exchange for everything in a decentralized form. Maybe you want to invest in a basket of loans of cannabis companies based in Colorado? Well, you take Dharma loans, then you package them up into a Set and you trade them on 0x. Maybe the receivables themselves will be represented as ERC721s, and those will be traded on 0x.

I anticipate that you will be able to trade any title to any meatworld asset; package that up, trade it in a compliant manner or in a regulatory arbitrage manner. You will be able to package up New York real estate, or New York loans with California loans, or Mississippi loans, or wherever you’re bullish on, and then invest and trade it. You’ll then be able to get insurance on it, and all of that undergirded by exchange on 0x. I really do buy into their vision and think that they’re the prime candidates to capture that space.

Do you have any heroes within the blockchain space?

Brendan: Heroes is a strong word. People that I have a lot of respect for… and I don’t think they’re going to be any unusual suspects here… I think Vitalik and Vlad from the Ethereum community. I really respect how transparent they are about their thought process and how engaged they are with the decision-making that they do. I think both are tremendously smart and do a great job of explaining why they think the way that they think, where their values lie, and what follows from that. So, in terms of high-level thinkers, they’re some of the best.



I think Will and Amir are definitely role models for me and for our company in terms of building community, building software, building tooling, and [I] have a ton of respect for them. I also have a lot of respect for the senior leadership at Coinbase. They have had to make some really interesting trade-offs. They made the trade-off of being very compliant and that is definitely a trade-off.

What do you do when you’re not busy working?

Brendan: I like to be active, so I work out in the mornings. My girlfriend is a pretty successful triathlete; she has convinced me to become a triathlete myself. I have yet to swim more than a hundred meters without almost dying but I’m moving in that direction. I’m training for my first ironman, so that takes up a lot of time. I like to be outside, so other outdoor fitness activities… I like to run and bike.



I try and read a lot. In a contrarian approach… like the crypto space… I read almost no nonfiction. I find that nonfiction is generally well summarized by blog posts and I can get 70 or 80% of a nonfiction book out of a 10-minute blog post versus a one-week long book. So, I tend to read blog posts for nonfiction and fantasy/sci-fi novels, and other novels, in fiction.

Where can people go to learn more about Dharma?

Brendan: For a non-technical audience, Dharma.io and our blog. We’re pretty active there in terms of community updates, technical updates, and what we’re up to.



For a technical audience, go to developer.Dharma.io. That is where we have all of our developer resources from high-level conceptual overviews of how the protocol works, to developer tutorials and walkthroughs, and then very nitty-gritty API reference material.

And that wraps up the interview — thanks for your time Brendan!

To learn more about Dharma…

▶️️️ Visit the Dharma website

▶️ Read the Dharma whitepaper

▶️ Join the Dharma community on Telegram, Twitter, Reddit, GitHub, Medium

To learn more about 0x…

▶️️️ Visit the 0x website

▶️ Read the 0x whitepaper

▶️ Sign up for the bi-weekly Relayer Report

▶️ Join the 0x community on Rocket.Chat, Twitter, Reddit, GitHub, Medium, LinkedIn, Facebook