DeFi has bubbles, but there are magic weapons for organic growth
Editor's Note: This article comes fromChain News ChainNews (ID: chainnewscom)Editor's Note: This article comes from
Chain News ChainNews (ID: chainnewscom)
Chain News ChainNews (ID: chainnewscom)
, Author: Vadym Nesterenko, Atomica Product Manager, Risk Transfer Protocol, Compiler: Perry Wang, Published with Authorization.
Since DeFi projects have widely introduced liquidity mining strategies, the total assets locked in DeFi agreements have grown rapidly, which shows that if these agreements want to cold start or expand liquidity, liquidity mining is an effective method in the short term. strategy. However, a high APY won’t last forever, making this growth a moot point: is it contributing to sustainable protocol development, improved feature design, and targeted customer acquisition? Needless to say, it is a great tool to increase initial liquidity and more importantly distribute governance tokens to users of the protocol, with the ultimate goal of giving token holders control over the future of the protocol.
In the traditional field, organic growth in product management and marketing refers to acquiring users without paid advertising. In the crypto space, this kind of paid advertising can be equivalent to liquidity mining. We need to take a good look at whether liquidity mining is a key method to stimulate the organic growth of DeFi. At the same time, I also hope to provide new entrants with a playbook so that they can build and expand great products based on the experience of the pioneers.
The question immediately arises: what is so special in the DeFi space? After all, there are countless materials on the growth of start-ups.
This question is very interesting. Let’s first clarify the inherent limitations of DeFi products:
In this market, it is not common to pay to attract users. First of all, when startups are verifying their products, need to scale up, and create a clear business model, it makes sense to pay for referrals. The DeFi we are currently discussing is not in these stages. Secondly, forced advertising is likely to bring more negative effects.
Composability
Decentralization means more responsibility for developers, which means that DeFi products experimenting with a quick minimum viable product (MVP) approach can lead to loss of user funds. However, "testing in production" is a perfectly acceptable approach, as long as the risks are transparent.
Composability
protocol layer
Furthermore, building in DeFi fits the lean startup concept, you can even deliver a product within a single design and validate it directly through the market. This makes a lot of sense because previously, due to the complexity and lack of users of decentralized protocols, you couldn't know if what you were building was valuable. The main reason for the increased opportunity to build products on Ethereum is the network effect.
The main task of the protocol is to be integrated by as many other decentralized applications (DApps) as possible, thus giving your protocol the best chance of exponential growth. The best examples are MakerDAO's Dai, but also Aave, Compound, and Uniswap. We can therefore observe a clear correlation between the number of protocol integrations and Total Value Locked (TVL)/Transaction Volume.
user-interface
Maker, Aave, and Compound rank among the top 7 TVL in the DeFi field, and Uniswap ranks first in terms of transaction volume. Source: DeFi Pulse, Dune Analytics
The previous article refers more to B2B use cases, but for end users, there is an urgent need to access DeFi protocols in an easy way. Zerion, Zapper, and Argent provide a better user experience to interact with dApps.Source
Monthly visitor numbers for Zerion and Zapper (based on data from the past three months)Source
aggregator
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The total number of new and accumulated Argent wallets per day.
aggregator
Even if you are confident about using DeFi, tracking the best quotes, lowest fees, and highest yields on various exchanges by yourself is complicated work. Aggregators came into being:
Decentralized exchange DEX aggregators: 1inch, Paraswap, Totle, DEX.ag, dex.blue
Yield aggregators: Yearn, RAY, Rari Capital, Idle
Automated trading: DefiZap, Furucombo
However, the outside world has very different views on the relationship between aggregators and long-term operations:
other major components
Data Lego: Dune Analytics, The Graph, Nansen
user experience
Comprehensive content processing: Defiprime, DefiPulse
The icing on the cake of composability is Flash Loans, which can offer zero-collateralized loans with the only condition—the borrower must repay in the same block as if it never happened. As you can also imagine, flash loans could lead to arbitrage opportunities that didn't exist before, and more importantly help to test the protocol to see if it can be executed at scale.
user experience
User experience and scalability are the biggest challenges for decentralized protocols, preventing them from achieving mass adoption. Ordinary users don’t want to memorize the mnemonic words of encrypted wallets, and any operation may cost 5-20 US dollars or the funds cannot be guaranteed to be safe, which will bring a bad user experience.
Dharma's smart wallet also provides similar functions, allowing users to avoid mnemonic words and Gas handling fees.
trend
Another example of dealing with gas costs is 1inch's integration of CHI tokens, and Loopring's implementation of zkRollup. The Matcha project also uses meta transactions and gas fee tokens.
There is still huge room for user experience improvement in the DeFi field. In the DeFi user survey, what factors most hinder the promotion of DeFi. The answers of the respondents mainly revolved around security and insurance. Crypto-native FDIC insurance products are closely related to lending products and applications, mainly for non-DeFi users.
Keeping up with trends is nothing new or unique, but implementing new features that the market demands right away is commendable, especially given the complexity of setting up a test environment when dealing with various protocols. Rapid response to market demand can bring rapid growth of users.
Top honors in this range should go to Team Zapper. As the yield farming trend emerges, Zapper is the first portfolio tracker to list all relevant new assets, liquidity. This enables DeFi users to monitor full portfolio balances and manage them efficiently.
1inch USD denominated daily trading volume. Source: Dune Analytics
YAM TVL。Source
community ownership
The pinnacle of yield farming came with the launch of the YAM protocol. The project started out as a social experiment to achieve decentralized control over the project through a fair distribution of governance tokens. The protocol, built in just 10 days without auditing and SSL certificates, locked in a TVL of $500 million in 24 hours.
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community ownership
Community is always the main building block of any open source project. However, only through the collaboration of DeFi and decentralized organization DAO can it be possible to enhance community capabilities and economically incentivize the community to actively participate in decision-making.
There are three components to the success of a crypto project:
Find product/market fit
Distribute tokens to incentivize community participation
Ultimately ownership of the project through tokenization
Yearn.finance is a prime example of community-driven protocol development. Why?
Community builds data dashboards, tools, discord and telegram chats
Actively participate in designated governance proposalsSource
Endorsements from a large number of heavyweights in the DeFi community
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Cashing in on one of these is quite an achievement, and if your project has all of the above, you're definitely doing something right.
Summarize
What if a project is just launching and cannot provide a high APY to incentivize early adopters? With funding from the new DAO VC type funds, this is not a problem. Don't hesitate to reach out to MolochDAO, Metacartel DAO/Ventures and LAO, they can help with initial idea validation and community building.
On the other hand, you can also choose the route of fair release, leading to the deployment of a new encrypted network acquired, owned and managed by the community from the beginning.
Summarize
