Santiago Roel Santos, partner at Parafi Capital, joins Sebastian Moonjava, Real Vision associate crypto editor, to discuss the growth in decentralized finance (DeFi), Parafi Capital's approach to investing in crypto, and network effects created by developer mindshare and composability. Santos explains that Parafi Capital invests in assets based on "where they are today" and not necessarily where they hope to be in the future, pointing to how some metrics such as the number of users and a project's fee generation structure demonstrate what already has traction. When judging the robustness of a developing project, Santos also considers the importance of strong network effects, stating that he believes team and community to be most salient while liquidity is transient. Confident that the DeFi sector possesses the potential to capture a significant portion of crypto's total market cap, he describes crypto investing as almost being a very liquid form of venture capital investing, making it significantly less risky than traditional VC investing. Filmed on January 6, 2021. Key Learnings: Network effects and moats can be very powerful in crypto—identifying whether a project has a strong team or a loyal community can make all of the difference in the outcome of an open source project. If a project has high liquidity— but no community—this might be of concern since liquidity is a transient network effect. Understanding how large of a user base a project has or how many fees have been generated, as opposed to making decisions based on future expectations, can help remove some of the guesswork in investments. Crypto also enables "liquid venture," which allows investors to manage risk better, compared to traditional venture investing, as crypto assets tend to be liquid as they are being built.