Unforkable Moats in DeFi

Disclaimer: Delphi Ventures holds a position in THORChain. For full disclosures, see our transparency page.

“Moat”, a term coined by Warren Buffett, refers to a business’s ability to maintain its competitive advantage as it grows. As the name indicates, a moat generally relies on keeping others out, leveraging proprietary technology, brand or relationships. While establishing a moat is difficult enough in traditional markets, the very idea of a moat seems impossible to the point of being paradoxical in DeFi as the open, permissionless and forkable nature of protocols makes it difficult to keep anyone out.

As I covered in past dailies here and here, this makes value capture significantly more difficult since any excess rent extraction will result in a cheaper fork coming to market. In fact, DeFi seems to fulfil most of the conditions of perfectly competitive markets, including commoditised products, low ba