Dragonfly Capital’s Haseeb Qureshi Discusses DeFi, NFTs, The Metaverse And More
Featured prominently throughout Chinese and Japanese culture, the dragonfly is a creature symbolizing change, transformation, adaptability, and self-realization. No other technological innovation embodies change more than the crypto industry, as crypto projects and startups attempt to transform individuals’ relationships with their finances, incumbent institutions, online communities, and digital identities.
Dragonfly Capital aspires to be a steward for this societal and technological change, supporting nascent projects bringing crypto to the masses. First launched in 2018 with a $100 million fund, Dragonfly launched a second $250 million fund and continues to grow. Dragonfly has invested in some of the industry’s leading DeFi protocols, layer one smart contract platforms, and infrastructure providers. Dragonfly was an early stage investor in Compound, MakerDAO, Avalanche, 1inch, Amber, Matrixport, Anchorage, BitGo, and Coinbase, amongst other portfolio companies.
Haseeb Qureshi is the Fund’s Managing Partner, and just one conversation with him demonstrates how deeply he thinks about the space and its development. Haseeb has a background as a professional poker player, which he pursued for five years until the age of 21 before learning how to code and becoming a software engineer at Airbnb.
While working at Airbnb, Haseeb quickly discovered a passion for crypto and subsequently worked at Earn.com which was later acquired by Coinbase. At that point, Haseeb met notable investor and technology thought leader Naval Ravikant, joining Metastable Capital as General Partner en route to launching Dragonfly Capital.
In fact, Naval has now become an Advisor to Dragonfly, noting “Haseeb is a rare independent, first-principles investor. He's technical, insightful, and assembles his own uniquely pragmatic view of where the space is headed. He's one of my first calls when I'm trying to understand a new project, and I'd back him in anything he does.”
Beyond the financial freedom and incorruptible non-state digital monies offered by cryptocurrencies like Bitcoin and Ethereum, Haseeb sees tremendous value in mainstream crypto use cases spanning NFTs, DeFi, blockchain gaming, and the metaverse.
“Profile picture NFTs are the first digital-native way for people to flex their wealth, which is a big part of the human experience,” said Haseeb. “Before NFTs, the only way someone could flex online would be to post a picture of their Tesla. But NFTs are so much larger than just this initial use case. NFTs are a system for global property rights, in a way that is open and transparent. It is like the world’s biggest instance of Minecraft where everyone can bring their collective imagination to build something new.”
All asset managers in the crypto space must decide whether their investment mandate covers equity, tokens, or both. Each presents its own challenges that fund managers must consider. Equity possesses little to no liquidity until an IPO or exit but confers stronger investor rights and protections, whereas tokens have a much faster timeline to liquidity but must be managed as volatile public market positions. Furthermore, token investments are subject to the cyclical nature of the market as the majority of crypto assets have historically exhibited strong correlation to Bitcoin’s halving cycle, with higher market beta.
“Most tokens back in 2017 added more friction and made things worse, but in 2021 we have arrived at a better way of using tokens as an accelerant for growth,” commented Haseeb. “We are now beginning to understand quantitatively how to use tokens to align user incentives and optimize growth, similar to how early stage tech companies approach growth marketing.”
Compound was the first DeFi protocol to popularize “yield farming” (also known as liquidity mining) in which protocols programmed additional rewards for users into their supply schedules as a user acquisition strategy. Other protocols quickly followed suit.
“Early on, protocols would shoot out 10,000% APYs for two weeks, with their tokens rising in price rapidly but then quickly collapsing,” said Haseeb. “Uniswap had a proposal for yield farming incentives, but the proposal was shot down as the community determined the program would not materially change liquidity or impact net demand relative to the next best platform. Aave did a similar analysis and launched only a limited program for liquidity mining.”
Haseeb views the novel Play-to-Earn blockchain gaming model as a similar user incentive mechanism to liquidity mining. Axie Infinity is the first blockchain game that implemented Play-to-Earn as an incentive model where users own their in-game assets and earn financial rewards for playing the game. Axie Infinity has generated over $185 million in the last 30 days, second only to the ethereum protocol itself and beating out all other EVM compatible platforms such as OpenSea, dYdX, Metamask, Aave, MakerDAO, and others.
“Play-to-Earn is similar to liquidity mining but it appeals to a very different user. The vast majority of users are in developing countries where they are using these games to fund their lives, doing it as a job,” said Haseeb. “In gaming, power laws dominate, where a small portion of users spend the vast majority of the money. The most successful games will find high value customers.”
Gaming, NFTs, and crypto networks are core components of the quickly emerging metaverse. The metaverse is an enigmatic topic, and there is a lot of debate over what the metaverse ultimately will look like. As users interact with virtual worlds, communicating, playing video games, producing creative collaborative content or corporate work, the metaverse will be communal hubs for borderless coordination.
In Haseeb’s view, the metaverse is a “loose confederation of open virtual ecosystems that connect to each other and are freely traversable. Using NFTs, all digital assets and items will be ownable in the metaverse.” Companies like Facebook announced major plans to develop the metaverse, understanding this is a big trend they want to get ahead of.
NFTs, DeFi, gaming, and the metaverse are all key domains the crypto economy is actively growing. Dragonfly Capital aims to play a role in accelerating these ecosystems as well as stay ahead of newer emerging trends within crypto.Source