Why DeFi?
A study on the commercial success factors of Decentralized Finance
Author: David Peters
Student number: 14067994
Final version - 24/06/2022
Study program: MSc. in Business Administration – Digital Business Track
Institution: Universiteit van Amsterdam (UvA)
EBEC approval number: 20220624050635
Thesis supervisor: Somendra Narayan
Second reader: Fatemeh Masihkhah
Statement of originality
This document is written by Student David Peters, with student number 14067994, who declares
to take full responsibility for the contents of this document.
I declare that the text and the work presented in this document is original and that no sources
other than those mentioned in the text and its references have been used in creating it.
The Faculty of Economics and Business is responsible solely for the supervision of completion
of the work, not for the contents.
David Peters
24/06/2022
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Table of contents
Abstract ……………………………………………………………………………... 5
1. Introduction ………………………………………………………………………… 6
2. Literature review …………………………………………………………………… 8
2.1 The basis of DeFi ………………………………………………………………… 8
2.2 Products and services in the DeFi ecosystem ……………………………………. 9
2.3 What can be learned from fintech? ……………………………………………… 11
2.3.1 Macro enabling factors ……………………………………………… 12
2.3.2 Rookie halo ………………………………………………………….. 13
2.3.3 Fintech success factors ………………………………………………. 13
2.4 Conceptual model ………………………………………………………………... 17
3. Methodology ………………………………………………………………………… 18
3.1 Research Design …………………………………………………………………. 18
3.2 Data collection methods …………………………………………………………. 20
3.2.1 Interview data collection methods …………………………………... 20
3.2.2 Survey data collection methods ……………………………………... 20
3.3 Data analysis ……………………………………………………………………... 22
3.3.1 Interview data analysis ………………………………………………. 22
3.3.2 Survey data analysis …………………………………………………. 22
4. Results …………………………………………………………………….…………. 24
4.1 Interview results ………………………………………………………………….. 24
4.1.1 Crypto aspects ……………………………………………………….. 25
4.1.2Technical aspects …………………………………………………….. 26
4.1.3 Economic aspects ……………………………………………………. 28
4.1.4 User aspects ………………………………………………………….. 29
4.1.5 Business aspects ……………………………………………………... 30
4.1.6 Additional influential aspects ………………………………………... 31
4.1.7 Main findings ………………………………………………………... 32
4.2 Survey results ……………………………………………………………………. 32
4.2.1 Sample ………………………………………………………………. 32
4.2.2 Descriptive analysis …………………………………………………. 33
5. Discussion ……………………………………………………………….…………... 38
5.1 Summary and comparison of interview results and survey data ………………… 38
5.2 Theoretical implications and future research ……………………………………. 40
5.3 Strengths and limitations ………………………………………………………… 40
6. Conclusion ……………………………………………………………….………….. 42
References ……………………………………………………………….………….. 43
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Appendix ……………………………………………………………….…………… 45
A.1 Interview protocol ………………………………………………………………. 45
A.2 Interview transcripts …………………………………………………………….. 47
A.2.1 Interview SundaeSwap Labs, Inc. …………………………………... 47
A.2.2 Interview Greenfield Yield …………………………………………. 66
A.2.3 Interview OpenOcean.finance ………………………………………. 73
A.3 Survey protocol …………………………………………………………………. 88
A.4 Additional surveys statics ……………………………………………………….. 89
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Abstract
Along with the rise of cryptocurrencies, a new category in fintech was born, namely DeFi, which
rose in popularity over the last four years. Unfortunately, little scientific research is available
about what drives the rapid adoption of DeFi applications and what factors influence its
commercial success. The goal of this research is to gain insight into this topic and determine the
factors that most significantly influence the sustainable commercial success of DeFi applications
in the current market. This paper compares DeFi to fintech in general and analyzes its
commercial success through the lens of DeFi industry insiders and DeFi users. After analyzing
literature, interview results, and survey data, eight aspects have been derived that significantly
influence the commercial success of DeFi applications. This research is of explorative nature and
concludes by providing a recommendation for future research that could test and validate
findings from this paper. Furthermore, this research will create a better understanding of what
moves users, which is helpful for investors and developers of DeFi applications. Recognizing
future trends also allows society, regulators, and financial institutions to prepare for future
scenarios.
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1. Introduction
DeFi is part of the cryptocurrency ecosystem, which runs on blockchains. Significant
characteristics of cryptocurrencies are that they do not belong to any centralized register, definite
bank, or economy of a country; instead, the currencies are issued on a blockchain which is a
network that is maintained by multiple parties or, in some cases, the network users themselves,
making the network decentralized (Stepanova & Eriņš, 2021). In contrast to Centralized
networks, decentralized networks do not have a single entity which runs or oversees the network.
In most cases, these decentralized networks on which DeFi applications are developed are
existing third-party blockchains, for example, Ethereum or Solana. The use of open code in most
protocols creates an ecosystem where new applications are developed at rapid speeds because it
is possible to see and replicate the code of existing applications.
Traditional financial institutions, services and fintech companies are centralized, meaning
that there is a single entity on which the network relies that manages users' funds and enables
transactions between users (Stepanova & Eriņš, 2021). In contrast, the services provided by DeFi
applications (dApps) do not rely on a single entity. They have no centralized control but instead
use a distributed blockchain on which transactions are stored, enabling automated financial
services comparable to those provided by centralized finance companies. However, users do not
interact through an intermediary but directly with the application. It must be noted that some
DeFi applications are only decentralized in name, meaning that they present themselves as being
decentralized finance (DeFi), but in reality, they are not decentralized.
Decentralized Finance (DeFi) has been gaining popularity over the last four years. The
Total Value Locked (TVL) in the DeFi market increased from less than one billion dollars in
April 2020 to a peak of over one hundred billion dollars in October 2021 (Statista, 2022). Not
only has the amount of money within DeFi increased fast, but the amount of DeFi applications
has also grown fast. These DeFi applications have created a new competitive market where users
have many choices on what protocol they want to use. This research aims to determine the
driving factors behind DeFi applications' success, creating an understanding of why users choose
one DeFi application over another. Gaining insight into this topic is essential because it provides
a view of what can be expected for the future of DeFi and if it is valued similarly to fintech
applications. Furthermore, this research will create a better understanding of what attracts DeFi
6
users to a specific application, which is helpful to investors and developers of DeFi applications.
As mentioned in the abstract, recognizing future trends also allows society, regulators, and
financial institutions to prepare for future scenarios. Currently, a very limited amount of research
is available on Defi, especially on non-technical subjects. This research aims to close this gap by
answering the following research question:
What are the most important factors for the sustainable commercial success of DeFi
applications in the current market?
The above-stated research question has been answered through the use of an explorative research
strategy, which consists of a literature study, interviews, and a survey. Sub-questions have been
used to guide the interviews and surveys. In chapter 2, a review of existing literature can be
found. Based on the findings from the literature review, the methodology for the interviews and
survey has been designed, which has been covered in chapter 3. Analysis of the interview results
and survey data are presented in chapter 4, where the sub-questions have been answered as well.
Chapters 5 and 6 cover the discussion and conclusion, in which results from the interviews and
surveys have been compared and reviewed, and the main research question has been answered.
Sub-questions:
1. What are the most important factors in determining the sustainable commercial
success of DeFi applications from an industry perspective?
2. What aspects of DeFi applications are most important according to DeFi users?
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2. Literature review
2.1 The basis of DeFi
To further understand DeFi, it is essential to understand what smart contracts are since these
form the basis of DeFi. Smart contracts are automated contracts in the form of computer
protocols that ensure the automatic execution of a contract between two parties without
intermediaries (Stepanova & Eriņš, 2021). Conditions and acts can be pre-registered in a smart
contract, and a contract will keep track of the conditions and ensure the acts that should follow
when the predetermined conditions are met, thus acting as a digital execution agent. Therefore, a
smart contract is able to control financial transactions in a network and replace traditional
financial intermediaries. This makes it possible to create a coequal, person-to-person (P2P)
market, which is a market where all users have equal rights and can communicate directly with
each other without the interference of an intermediary. Jinasena et al. (2020) specify the concept
of DeFi applications as an arrangement of consumer-facing smart contracts, which execute
predefined business logic within the transparent and deterministic computational environment
provided by permissionless blockchain technology. So, DeFi applications use standardized smart
contracts that automate financial services by using game-theoretic consensus mechanisms
(Jinasena et al., 2020). Often these DeFi applications function through the issuance of an
application's native token. Base assets are created in the asset layer through basic financial
functions and standardized smart contracts. In the application layer, these base assets are utilized
for more complex financial instruments through more sophisticated smart contracts.
Traditionally, DeFi has been developed with three idealistic principles to which applications
should adhere. These concepts are digitalization, decentralization, and democratization.
Stepanova and Eriņš (2021) have named these the three concepts of sustainable development tor
DeFi. These three concepts can be defined as follows:
Digitalization: This is the use of digital technologies which influence work, communication,
economic spheres, and everyday life in general (Stepanova & Eriņš, 2021). Digitalization is the
transitioning to digital processes, services, products, and activities.
8
Decentralization: This makes control and power distributed by taking it away from large
financial institutions and dividing it among the wider public, often among users of the network or
product itself (Stepanova & Eriņš, 2021). Decentralization reduces the costs of financial
transactions and makes it possible for benefits from network effects to be distributed among
network participants instead of one centralized entity.
Democratization: This creates equal rights and voting rights for all users. Creating equal
opportunities for all, no matter their social status, financial status, or geographical location,
makes financial services more broadly accessible (Stepanova & Eriņš, 2021). One only needs
access to an Internet connection and a computer or mobile device. By giving participants of the
network voting rights, decisions can be made democratically.
2.2 Products and services in the DeFi ecosystem
DeFi users can move digital assets between platforms enabling them to use any service in the
DeFi ecosystem at the best rates available for each specific use case. Products and services
provided through DeFi include digital assets, payments and transfers, (P2P) lending and
borrowing, trading, derivatives, and asset management (Jinasena et al., 2020) (Stepanova &
Eriņš, 2021). Each of these decentralized services will be explained in the text below.
Digital assets: Digital assets allow complete control and ownership over personal digital assets
(Stepanova & Eriņš, 2021). DeFi enables several use cases and services for these digital assets
without the owner losing control of those personal assets. It is possible to digitally represent and
ascribe value to any belonging of any individual. This creates new market opportunities in the
world of finance. Digital assets include:
-
Crypto asset: An intangible, digital, personal property that is not backed by a
tangible asset, e.g. gold or physical dollars (Stepanova & Eriņš, 2021). Crypto
assets can serve as a means of exchange in both the decentralized and centralized
electronic environment. The value of/price at which crypto assets trade is
dependent on the supply and demand for that particular crypto asset and therefore
fluctuates in a dynamic market.
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-
Stable coin: A digital asset that is supposed to have a stable value, which is tied to
another asset and is supposed to always trades for the value of the asset to which
it is tied (Stepanova & Eriņš, 2021). Stable coins' value is often tied to traditional
monetary instruments like the market price of gold or fiat money (Chohan, 2019).
Stable coins allow individuals to use digital services with digital assets while
guarding themselves against the price volatility of regular crypto assets. There are
two major categories of stable coins: algorithmic stable coins and collateralized
stable coins. An algorithmic stable coin keeps its value equal to the value of the
asset to which it is tied through the use of an algorithm. Collateralize stable coin
keeps its value equal to the value of the asset to which it is tied by being partly or
fully collateralized with the asset to which it is tied.
-
Non-Fungible Token (NFT): A digital asset/token that is cryptographically
unique, indivisible, irreplicable, and verifiable and represents a digital or physical
asset on a blockchain (Valeonti et al., 2021).
Decentralized payments and transfers: This is the basis of the DeFi ecosystem that allows
payments and transfers of digital assets without the need or possibility of interference by a
centralized party (Stepanova & Eriņš, 2021). This makes it possible to create a more open
economic system that allows people to participate regardless of their social or financial status,
geographical location, or the political system they are in.
Decentralized lending and borrowing: This allows anyone to use digital assets as collateral to
receive a loan and to gain profit by investing digital assets in the credit resources of a
decentralized lending and borrowing protocol. This has been among the most popular ways to
earn yields and gain a passive income through DeFi (Stepanova & Eriņš, 2021). In most
decentralized lending protocols, the interest rates are floating, meaning they are automatically
adjusted depending on the supply and demand for a particular asset. Interest rates are paid(out)
automatically. Entry to the ecosystem is easy since there is no credit score check and
decentralized lending and borrowing remain anonymous. Participants can interact directly with
each other via smart contracts without third-party interference.
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Decentralized exchanges (DEX): These protocols enable trading in a decentralized environment,
offering an alternative to centralized trading platforms (Stepanova & Eriņš, 2021). DEX'es offer
trading platforms with the basic functions of traditional centralized stock exchanges. For
example, traders can buy, sell, or exchange available digital assets on that DEX without inputting
and outputting funds to third parties. This increases the speed of the process and reduces
transaction costs. Funds can be moved around conveniently in search of the DEX that offers the
desired trading pair of digital assets.
Decentralized derivative: This gives investors the possibility to guard themselves against future
price fluctuations by signing a contract, a smart contract in this case, on the future purchase of an
asset on a predefined date for a predefined price (Stepanova & Eriņš, 2021). This derived
financial instrument allows two parties to create a predefined agreement for exchanging one
asset for another. Different derivatives allow traders to create advanced trading strategies and
gain profit from price fluctuations.
Asset management: This is the management of assets aimed at gaining profit for investors
through smart contracts or an asset manager (Stepanova & Eriņš, 2021). The transparency of
DeFi and blockchains give users of asset management protocols more insight into how their
assets are managed and where related fees, losses and profits come from.
2.3 What can be learned from fintech?
DeFi can be categorized as a form of fintech. Therefore, it makes sense to create an
understanding of previous fintech research, especially since there is a lot more previous research
available on fintech in general than there is on DeFi. There are several definitions for fintech,
which differ in criteria to categorize something as fintech. In the broad sense, fintech can be
defined as a product or organization that combines financial services with innovative
technologies (Fosso Wamba et al., 2019). A somewhat more strict definition of fintech is a
financial innovation enabled by technology that facilitates new business models, products,
processes, and applications that could have a material effect on financial institutions, the
provision of financial services, and financial markets (Jinasena et al., 2020) (Chen et al., 2020).
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In many cases, fintech provides a new business model that competes with the business
models of more traditional finance companies that do not use technology-enabled financial
innovations. Fintech organizations try to create a competitive advantage in financial markets and
attract clients by supplying a more user-friendly, transparent, efficient, and automated experience
(Lee & Shin, 2018) (Zavolokina et al., 2017) (Mirchandani et al., 2020). The most common
business models in fintech are based on the following products or services: payments, wealth
management, lending, capital market and insurance services. The products and services provided
through fintech are very similar to the earlier displayed products and services that are common in
DeFi.
2.3.1 Macro enabling factors
Traditional finance has shown issues in the past. Before the rise of fintech, processes like lending
from banks were complex, and many individuals and small businesses had difficulty doing it
(Mirchandani et al., 2020). The fintech industry has solved this and many other problems by
exploiting technological innovations. The rapid growth of the fintech sector has been catalyzed
by the growing support of venture capital firms for the fintech sector. Furthermore, there has
been a general increase in demand for digital products caused by the worldwide increase in
telecom provision and mobile phone penetration. According to Mirchandani et al. (2020), the
number of people globally who are connected to mobile services is over 5 billion. This number is
expected to keep growing over the coming years. The significant increase in connectivity and
mobile phone penetration has allowed the rise of mobile wallets, with worldwide adoption
growing steep. Apple Pay and Samsung Pay are examples of these mobile wallets, which provide
a fast, easy, and secure way to make payments. Developing markets account for 3.7 billion of the
total 5 billion people who are connected to mobile services. This is an essential detail since other
factors significantly influencing fintech successes are fragmented financial service markets and
weak regulatory approaches. Gaps in regulation allow fintech to grow fast and thrive
(Mirchandani et al., 2020).
However, the above-stated factors only explain the success of the fintech industry as a
whole and do not give us insight into what directly creates commercial success for individual
fintech applications. There are reasons why people choose one application over a similar
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competing one. The text below analyses the most influential factors that enable growth in
fintech.
2.3.2 Rookie halo
Directly after the launch of fintech applications, the importance of factors weighs different than
in later stages of fintech applications' existence. This is so because in the initial period after the
launch of a fintech application, there is often a promotion period in which a lot of money is spent
on commercial promotion, subsidizing investors and borrowers, or providing extra interest rates,
to attract attention from investors and the market (Chen et al., 2020). This can also be found in
the early stages of operations of DeFi applications in the form of subsidized, high yields for
staking, for example. During this promotion period, investors often tend to relax their other
demands and criteria that they have for fintech applications, resulting in higher net cash inflows
during the early stages of operations. This initial success period has been called the "rookie halo"
by Chen et al. (2020). They explain that the net cash inflow rates of many fintech applications
form a positive U-shaped graph when plotted against the applications' time of existence, meaning
that cash inflow rates are high in the initial period after the application launch; the "rookie halo".
Hereafter, fintech applications will usually enter a period with lower net cash inflows, showing
that there is less interest from investors and users. However, gradually the interest from investors
and users will return, and net cash inflows will climb back up, caused by the reputation and trust
accumulated by the application and its continuous stable operations.
2.3.3 Fintech success factors
Fintech applications must satisfy investors' and users' demands and criteria to achieve long-term
success after the promotion period. Factors that have been found to be most influential are
transparency, personal interaction, access to the relevant products, brand name, convenience,
users' experience, easy access from other financial institutions, timely and efficient experience,
integration with the social world, time of existence & reputation, quality of services, synergies,
and security and fraud protection. An analysis and explanation of these factors follow in the text
below.
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Transparency: In many fintech applications transparency is an important topic since, in
numerous cases, all the transactions are public, and networks are open. Especially in the case of
earlier explained smart contracts and blockchains, which ensure transparency and allow selfexecuting transactions without an intermediary (Wright & De Filippi, 2015) (Mirchandani et al.,
2020) (Stepanova & Eriņš, 2021). According to Mirchandani et al. (2020), transparency was one
of the most influential factors in fintech success.
Personal interaction: Interaction with other users and a form of customer care allow users to
make more informed personal financial decisions.
Access to the relevant products: Some services have not been provided by financial institutions
and thus made it possible for fintech applications to tap into unutilized markets. Examples of
these services are the offering of small business loans (<$50.000) and peer-to-peer (P2P) lending
(Mills & McCarthy, 2014). Fintech platforms that were able to provide these services often
attracted customers that had not been served in existing markets. P2P lending made it possible
for many lenders to finance loans for borrowers who can easily apply for loans without providing
the extensive documentation needed by traditional financial institutions.
Brand name: As in many other industries, customers can have a trusted relationship with a brand.
Examples where brand names have positively impacted the success of fintech applications can be
found in mobile wallets, where Apple and Samsung have seen quick adoption. According to
Mirchandani et al. (2020), brand names played a considerable role in the success of fintech.
Convenience: According to Mirchandani et al. (2020), convenience was a significant factor in
the adoption of fintech. Fintech products allow customers to perform all their payments
comfortably whenever and wherever they want in a quick and straightforward manner. For
example, instead of going to a bank or going through a lengthy online process, fintech
applications made many financial processes more convenient, and users appear to favour the
most convenient applications.
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Users’ experience: Users prefer applications with the most simple and transparent fee structures
and processes (Mirchandani et al., 2020). Fintech applications must enhance users' experience
and focus on end customers. According to Mirchandani et al. (2020), users' experience is the
most influential external factor in fintech success.
Easy access from other financial institutions: Fintech has allowed people to access financial
services through channels other than the financial institutions they have been tied to.
Traditionally, in many countries, only banks were allowed to lend out money to individuals and
businesses (Mirchandani et al., 2020). However, fintech opened this market up by giving access
to lending and other services.
Timely and efficient experience: Fintech offers services that are faster and more efficient than
they are with traditional financial institutions. This also is an essential factor in which fintech
applications compete with each other. According to Mirchandani et al. (2020), a timely and
efficient experience is one of the most influential factors for fintech success.
Integration with the social world: Investing advice from banks and financial advisors has been a
vital aspect of retail finance. Fintech provides a promising alternative through social trading. The
low trust in financial institutions after the 2008 financial crisis has damaged investors' trust in
financial institutions, which increased the adoption of social trading alternatives where investors
can follow the trades of experienced traders (Gottschlich & Hinz, 2014) (Mirchandani et al.,
2020).
Time of existence and reputation: Research by Chen et al. (2020) shows that the time an
application exists and the reputation it has built during its existence are important factors of
fintech applications' success. The researchers describe these factors as key aspects of attracting
funds and explain that the longer an application has been successfully online, the better its
reputation will get. In practice, a good reputation brings in more users and volume to a platform.
Investors trust long-established platforms and applications more because they find that they have
proven themselves with long-lasting stable operations. This, however, may not hold true for new
15
entrants to fintech since they can profit from their initial hype. More about this is explained
earlier in this research under sub-heading 2.3.2.
Quality of services: Traditional financial institutions have strong comparative advantages and
easier accessible financial recourses than fintech companies, especially in the start-up phase
(Mirchandani et al., 2020). The quality of services financial institutions provide is often not
pleasing enough for customers. This leaves room for improvement and a gap that can be filled by
fintech applications, forming a strong driver for fintech adoption. Customers often migrate to
applications that offer the highest quality services. The lower the quality of the existing service
is, the easier it is for fintech applications to be successful when providing a better replacement of
that service.
Synergies: Traditional financial institutions have shifted their attitude from seeing fintech as a
threat to seeing it as a potential partner that can help them to increase their operational efficiency
and respond to customer demands, who otherwise might leave them for one of the fintech
alternatives (Mirchandani et al., 2020). These partnerships allow financial institutions to gain
insights into technological developments. Fintech companies also gain from these partnerships
since they often provide them with easy access to funding, access to existing customer
relationships and customer data, and increased customer awareness and trust. These synergies
allow both parties to better their products and services, which increases their customer
experience. Furthermore, it allows them to stay at the forefront of technological development and
finance. The main products targeted through these kinds of synergies with banks are in the fields
of payments, finance, investments, and financial consulting. Similar synergies are possible with
telecom companies as well.
Security and fraud protection: Customers often have concerns about data security, fraud
protection, and fraud prevention (Mirchandani et al., 2020). Secure and non-fraudulent
applications are not only preferred by customers but also by regulators. Users cannot always see
security measures on the surface layer of applications. However, authentication and signing
solutions through, for example, biometric verification (e.g. face-id) can increase perceived
security.
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2.4 Conceptual model
The insights gained from the literature study and the primary research question serve as the
foundation for the conceptual model, which is displayed in figure 1. The primary research
question of this study is: What are the most important factors for the sustainable commercial
success of DeFi applications in the current market?
Figure 1: Conceptual model
Figure 1 shows the concepts that have been researched in this study and how they are
related. On the left side of the diagram, "commercial success in DeFi" is displayed, which has
formed the starting point of this research. In the middle of the diagram, concepts are displayed
that have been researched to create an understanding of the "DeFi success factors", which is the
concept displayed on the right side of the diagram. An understanding of the DeFi success factors
will answer the primary research question of this study.
17
3. Methodology
After having conducted the literature study the most significant success factors for fintech have
been determined. Furthermore, insight has been created into fundamental aspects of DeFi. This
has created the basis for this research. In the methodology part, further research steps will be
mapped out. The research design will be discussed in chapter 3.1, the data collection process will
be discussed in chapter 3.2, and the data analysis strategy will be discussed in chapter 3.3.
3.1 Research Design
Since there is limited research on DeFi, a significant part of the literature research has been
focused on fintech-related studies. The goal of this was to create an understanding of the factors
that are influential in the success of fintech applications. These insights have been used later in
the research, and it has been determined if they have the same influence in the DeFi space. In
addition, a part of the literature research has been dedicated to the available research on DeFi, of
which the focus was to get a better understanding of what DeFi is.
The limited amount of available research on DeFi, and the fact that the causation of DeFi
success has not been determined yet make this research have an exploratory character. This
means that new insights about a phenomenon have been created to find causal relationships
between the phenomenon of increasing DeFi popularity and applications’ commercial success.
However, the literature study of this research is of explanatory nature, where the goal was to find
the success factors of fintech. As shown in the research model, displayed in figure 2, these
success factors have formed a starting point on which the exploratory part of the study could be
expanded. Furthermore, observations and new data from interviews and surveys were used to
find preferences and patterns that can be generalized into relationships between the variables and
answer what the commercial success factors for DeFi applications are. This makes it inductive
research.
The data that were used are survey data and interview data. Qualitative methods have
been used to conduct the interviews, where the goal was to get a better understanding of what
drives the success of DeFi applications according to developers and entrepreneurs from within
the DeFi industry. This has created a general understanding of the DeFi industry and its
commercial success factors. Qualitative data analysis helped compare the differences and
18
similarities between fintech and DeFi, and develop an initial understanding based on empirical
data (Flick, 2013). This basic understanding was created through interviews because, as
mentioned in the text above, there is a lack of literature on the topic of DeFi.
After gaining this initial understanding, surveys have been used to verify, refine and
validate interview findings. Through the use of surveys, the developed theory could be tested and
enforced; thus, surveys helped create a stricter understanding of what factors are most important
for commercial success in DeFi. Retail consumers who have already used DeFi were targeted to
participate in the surveys since the goal is to find out why users choose specific applications over
others, thus why certain applications get more commercial success than others.
The combination and comparison of findings from interview and survey data will be used
to answer the research question, answering what the most critical factors for commercial success
in DeFi are. The initial theory, which answers the research question, will be grounded in the data,
which means that the research strategy used here is grounded theory. A grounded theory is a
theory that is discovered, developed and verified through systematic data collection and analysis
of data relating to a particular phenomenon, in this case, DeFi success (Corbin & Strauss, 2015).
Figure 2: Research model
19
3.2 Data collection methods
3.2.1 Interview data collection methods
Three interviews have been conducted with (co-)founders of DeFi platforms. These platforms are
SundaeSwap, a decentralized exchange(dex) on the Cardano blockchain; OpenOcean.finance, a
dex aggregator which is active on multiple blockchains; and Greenfield Yield, an investment
fund that uses a variety of DeFi applications to generate yield.
The number of three interviews makes it possible to use triangulation to verify insights
from the interviews. While realizing that a larger amount would be desirable, this was not
realistic considering time constraints and the need to devote time to gather and analyze survey
data. Furthermore, the primary purpose of the interviews was to build an initial understanding of
the topic, after which this understanding was built upon through surveys. Purposive sampling has
been used to select interviewees. Probability sampling was not possible since there were too
specific requirements for the interviewees. Unfortunately, the subjective judgement of nonprobability sampling brings ambiguity to the research. While this is not ideal, it is the best-suited
selection method for this research, and survey data helped mitigate ambiguity. The four
interviews were mainly semi-structured since the research is explanatory. Unstructured methods
have not been used since the targeted insights of the interviews were specific, and it was predetermined what aspects needed to be answered. The interviews had a length of approximately
60 minutes.
3.2.2 Survey data collection methods
The survey was based on the DeFi application selection process of DeFi users, which is
displayed in figure 3. The goal of the survey was to determine the factors influencing users'
decisions when deciding what DeFi application to use. The survey consisted of 18 aspects which
have had significant importance in determining fintech success and potential high importance in
determining DeFi success (table 1). These aspects were selected based on insights from the
literature study and interviews. For each aspect, respondents were asked to indicate the degree of
importance of DeFi applications on a five-point scale that ranged from 1 (not important) to 5
(very important). This resulted in an average importance score for each of the 18 aspects tested
in the survey.
20
Figure 3: Process model - DeFi application selection
An online survey was used, which allowed targeting a large population. The sampling
technique used for the surveys of this research was volunteer sampling through self-selection,
which is a convenience sampling method. This is a form of non-probability sampling. The
sampling method allowed to target a large and varied population with potential responders from
a wide variety of backgrounds, cultures, and age groups. It must be noted that since the survey
was in English, only English-speaking participants could take part. Respondents have been
targeted through comments on crypto-related Twitter accounts, crypto-related Telegram groups,
and crypto-related Discord groups, where an invite to take part in the survey had been posted
over 40 times. Crypto-related accounts and groups have been used because the goal was to
determine what current and previous users of DeFi applications value and what they base their
decision on when choosing what DeFi application to use. The survey also contained a selective
question, namely: "Have you ever used a DeFi application?" which has been used to filter out
responses of participants who have never used a DeFi application.
Some biases must be taken into account in the survey results. Non-response bias can be
expected to be present in this study because random sampling was used. However, since no
individuals were targeted directly, it is impossible to incorporate measures against this bias into
the analysis of the results. Furthermore, common method bias can be expected to be present in
this study since all survey data were collected using a single questionnaire.
21
3.3 Data analysis
3.3.1 Interview data analysis
The purpose is to produce findings from the massive amount of interview data. The findings are,
however, not the final finding of this thesis but will be used to create an initial understanding of
what factors are most influential for commercial DeFi success, as explained in chapter 3.1. After
creating a rough understanding, findings have been tested and refined using survey data.
Therefore, the analysis of the interviews is less in-depth than in research that uses interviews as
its single and primary data source. As mentioned above, the research strategy used in this
research is grounded theory; therefore, grounded theory analysis was used to analyze the
interview data.
The data analysis of the interviews starts with transcribing all interviews into text.
Hereafter, the transcripts have been coded and examined line by line. Each code has been
merged into conceptual units to create a conceptual framework, whereafter categories were
developed (Corbin & Strauss, 2015). Through constant comparative analysis, categories have
been reviewed constantly to see whether integration within categories or a merge between
categories into a bigger category was possible. This process resulted in the creation of a 'core
integrating category', from which an initial understanding could be formed of the most influential
success factors for commercial DeFi success.
In the analysis of the interview results, the names of the platforms will be used
instead of the interviewees' own names since this was preferred by some of the interviewees.
3.3.2 Survey data analysis
The data extracted from the surveys, which measure the importance of aspects of DeFi
applications, is nominal. As mentioned in chapter 3.2, numbers ranging from 1 (not important) to
5 (very important) describe the importance of each of the aspects that have been researched.
Since the survey consists of just the 18 aspects that had to be rated on importance, the data
analysis is relatively simple, and the coherence between answers to multiple questions would not
add any value to this research. This was a design choice which fits the exploratory character of
this research.
22
The data has been analyzed using descriptive statistics, including frequency and
percentage response distributions, the mean of the importance score with which each aspect has
been rated, and dispersion measures such as the variance, range, and standard deviation, which
describe how close the values of each aspect are to their mean. In order to filter the data on
validity, the response time has been analyzed, and outliers have been eliminated. Furthermore, a
captcha was used in the survey to eliminate bots. No outlier analysis has been conducted since
answers may vary a lot between respondents.
23
4. Results
4.1 Interview results
Interviews have been conducted to create a better understanding of the DeFi space and the
factors that have the most significant influence on commercial success within the space. Using
interviews, a foundation was laid, and an initial understanding was created, which has been
tested and extended through the use of survey results later in this research. The sub-question that
has been answered through the interviews is:
What are the most important factors in determining the sustainable commercial success
of DeFi applications from an industry perspective?
A part of all interviews was concerned with getting a better understanding of the DeFi
space, where topics like macro enabling factors and the comparison between DeFi and fintech
were discussed. However, the main part of the interviews was focused on getting an
understanding of DeFi success factors. This analysis will focus on DeFi success factors, which
have been coded under seven selective codes. These codes have been used to structure the text
below, where they function as subheadings. For all aspects discussed under subheadings 4.1.2
until 4.1.5, interviewees have been asked to rate their importance in influencing the commercial
success of DeFi applications. Interviewees were asked to rate these aspects from 1 (not
important) to 5(very important). Furthermore, interviewees were asked to rate the importance of
all aspects with a time horizon of 3 to 5 years in mind, so after any initial hype, promotion
period, and the rookie halo which might occur during the early stages of operations (see
subheading 2.3.2). For all aspects, the interviewees have also been asked to explain their
opinions. Subheading 4.1.6 consists of additional aspects that are less notable by users of DeFi
applications and thus will not be included in the surveys. Under subheading 4.1.7, a summary of
the main learnings from the interviews can be found.
As mentioned in the methodology part under subheading 3.3.1, the names of the
platforms will be used instead of the interviewees' own names in the analysis of the interview
results, since this was preferred by some of the interviewees.
24
4.1.1 Crypto aspects
All three interviewees stated that digitalization, decentralization, and democratization are highly
important in DeFi and that these aspects form the basis of DeFi's existence, which is reflected in
its name (Decentralized Finance). SundaeSwap mentioned that decentralization might be one of
the most important things for any DeFi protocol since it makes a protocol resilient against
potential upcoming regulations. However, all three interviewees recognize that the value of
digitalization, decentralization, and democratization is not always reflected in the market.
Greenfield Yield explains that many people seem to choose convenience over idealistic aspects
like decentralization and thus choose to use the most convenient option, which often is a
centralized exchange. He continues that people within DeFi, who are already using it, often seem
to prefer decentralized DeFi options over less decentralized options. Therefore, he thinks
decentralized protocols have a higher chance of commercial success. The other two interviewees
contradict this stance and explain that they think the aspects are not very influential when it
comes to the commercial success of a DeFi protocol.
"I think if for like the success of a protocol, clearly, it is not that important. There is a lot of
volume on projects that are not really decentralized." - (SundaeSwap)
OpenOcean.finance explains that people talk a lot about the importance of decentralization on
social media, but when it comes to using a protocol, most people still seem to find other aspects
more important. He continues by giving examples of projects on the blockchains Solana and
Binance Smart Chain (BSC).
"The people are asking for decentralization, but when you see, when you look at the user
numbers, look at BSC, look at Solana, then it seems like they choose, where are the good
projects? Where can I make money?" - (OpenOcean.finace)
When it comes to democratization SundaeSwap explained that a project can only classify as DeFi
if the profits that the platform generates, of fees, for example, are split among the users of that
platform.
25
4.1.2Technical aspects
The interview results show that technical aspects are the most important aspects when it comes
to the influence on DeFi's success. From all reviewed aspects, all interviewees rated
security, transparency, the blockchain on which an application is built, and easy access as the
four most important ones.
All interviewees explained that security is an important topic. Greenfield Yield also noted
that security might seem less important for the initial phase after the launch of DeFi applications
because people chase the money that can be made from an initial hype. However, when looking
at a longer time frame, people often start feeling uncomfortable if they are not sure of the
security of an application, which eventually makes people leave applications. Therefore, security
is critical, Greenfield Yield explains.
All three interviewees also rate the importance of transparency very
high. OpenOcean.Finance explains that a blockchain is usually transparent already, so for any
application, it is also essential to be transparent from the start.
"Transparency is a big topic because otherwise you will see someone deep-diving into the
blockchain explorer, and the people will find out things you don't want to have public. So, you
need to play fair anyway." - (OpenOcean.finance)
Because of the above-quoted reasoning, OpenOcean.finance explains that it is essential for a
protocol to be open on all aspects in order to create trust with its (potential) users. The other
interviewees have similar stands about transparency. SundaeSwap adds a vital statement in
which he explains that real transparency is different from perceived transparency and that
commercial success is often created within DeFi, by making users think that a protocol is
transparent while it actually is not transparent. Therefore, the perception of transparency is
probably more important than real transparency, according to SundaeSwap.
Easy access to a DeFi application and to the blockchain on which an application is built
are also essential topics, according to all interviewees.
"Bridging and connecting a wallet to an application is pretty important. That is about, yeah. If
people cannot figure out how to connect to your dex, then you have a problem." - (SundaeSwap)
26
"Bridging is super important. If you have, if you don't have a smooth bridge, your chain will
never get traction." - (OpenOcean.finance)
Accessibility of a DeFi application is heavily dependent on the blockchain on which it is built.
For this reason, and numerous others, all interviewees rate the blockchain on which a DeFi
application is built as one of the most important reasons for commercial success. All
interviewees gave a similar explanation, in which they reason that the blockchain on which an
application is built can be the single reason for an application's commercial success or its
downfall.
"If the chain is never getting any traction, no matter how good your product is, you will just not
get what you deserve" - (OpenOcean.finance)
"Yes, the blockchain can just really make a difference to whether you are going to survive or not
… for the long term, if there is just no money on the chain, then there is no way to succeed" (Greenfield Yield)
SundaeSwap gave a similar explanation and used his own project as an example.
"The biggest indicator of growth in any project is how well the L1 is doing in the market. We
had the biggest growth when, um, ADA was pumping to three dollars." – (SundaeSwap)
According to Greenfield Yield, many more influential factors are tied to the blockchain on which
an application is built. He explains that there are significant differences between blockchains,
such as costs and speed. He continues that all blockchains have preconditions which must be
suitable for a specific DeFi protocol. Furthermore, an application's users must be on the
blockchain that is used as well.
27
4.1.3 Economic aspects
While still being rated as significantly important, economic aspects seem to be slightly less
critical for the commercial success of DeFi applications than technical aspects, according to the
interview results. The three interviewees also did not give such uniform answers regarding these
aspects as they did about technical aspects.
Greenfield Yield and OpenOcean.finance both rate the importance of yield percentages
and tokenomics reasonably high. Their stands are similar, and they both explain that high yield
percentages are significant to attracting new users and getting much liquidity to a DeFi platform.
However, high yields are often not unlimited, so a DeFi product has to offer more than just high
yields for the users to stick with the platform for a prolonged period.
"High yield is like the initial starting point, right. Where people think about coming to the
chain…" – (OpenOcean.finance)
"If you launch as a protocol on a chain that's hot and has a lot of incentives and you launch your
DeFi protocol there, you get users quickly, and in a short time, you gain a huge TVL (Total
Value Locked)" – (Greenfield Yield)
For long-term commercial success, the tokenomics of a protocols native token have a critical role
according to Greenfield Yield and OpenOcean.finance. They both explain that tokenomics is
especially important because it can determine how revenue is created. Greenfield Yield further
explained that tokenomics function as the business model of DeFi applications, and he
emphasized the importance of revenue creation through a solid business model and thus the
importance of tokenomics. OpenOcean.finance gave a similar explanation but emphasized the
importance of creating revenue for a platform's users.
"People tell you that they are around just for the tech, but then, in the end, they still want to earn
some money from that. And if your tokens are not bringing any revenue or incentive, or
something like this, then you would suffer in the long run." - (OpenOcean.finance)
28
In contrast to the other two interviewees, SundaeSwap rated both aspects (tokenomics and yield
percentages) with mediocre importance regarding their influence on commercial success. He
explained that both aspects could help attract people to a DeFi application, but in
SundaeSwap's opinion, other aspects are more important and have a more substantial influence
on commercial success.
4.1.4 User aspects
The aspects that have been categorized as user aspects seem to vary a lot in importance. All
interviewees have assigned high importance ratings to convenience and users' experience.
Greenfield Yield explained that the importance of these aspects could be very high for
commercial success, especially over more extended time frames. However, in the current market,
he does not see much difference between protocols regarding convenience and users' experience.
OpenOcean.finance answered in a similar direction and also explained that the aspects
mentioned above will be highly important to attract new users into DeFi, which is needed to
achieve long-term success. SundaeSwap confirmed these views and rated both aspects with
maximum importance for commercial success as well.
"For example, Curve [a DeFi application] has a horrible UI since the beginning, but it has so
much liquidity that people just go there because it is working … But to attract like the new
people, and especially people that are not in DeFi yet, it needs to be convenient, right. Without
much explanation … It needs to be easy to use it." – (OpenOcean.finance)
Other user aspects that have been discussed in the interviews were timely and efficient
experience, personal interaction, access to multiple relevant services, and integration with the
social world. According to the interviewees, these aspects have mediocre to no influence on the
commercial success of DeFi applications.
The interviewees explained that it is hard to differentiate an application from others when
it comes to creating a timely and efficient experience and personal interaction. According to the
interviewees, these are basic aspects which do not differ much between DeFi applications.
SundaeSwap expects personal interaction, especially customer care to increase in importance in
the future when new users enter the DeFi space.
29
All interviewees rated the aspects of access to multiple relevant services and integration
with the social world as not essential factors to achieve long-term commercial success in DeFi.
"Pretty clear, at least on Ethereum, that like the more complex ones [DeFi applications] that have
like so many revenue streams that you can make money of … are not the ones that are bringing
the TVL up. It is the simple ones that are like easy to use, like UniSwap." – (SundaeSwap)
"For the hype, it is good if they say they are working on an NFT marketplace, for example. But,
for later phases, it does not really matter." – (Greenfield Yield)
4.1.5 Business aspects
According to the interviewees, business aspects seem to be somewhat important. The aspects that
were discussed are the team of a DeFi application, brand name and marketing, and time of
existence.
SundaeSwap and OpenOcean.finance rate the team behind a DeFi application as being
very important to achieve commercial success in DeFi. They explained that having a good team
is crucial to creating a good product and thus commercial success.
"I mean, the team is everything, uh, from, uh, building trust, from, uh, being motivated, no
matter if the market goes up or down, I mean, the team needs to stay where it is." –
(OpenOcean.finance)
The perception users have of a team and whether a team is doxed or not is less important,
according to OpenOcean.finance and Greenfield Yield.
"You can set it [a DeFi protocol] up properly. For example, by using a multi-sig wallet and a side
blog. That way, everyone can see it when something goes wrong. That way, without credibility
and without having a doxed team, you can still make it very reliable and secure through the use
of a smart contract." – (Greenfield Yield)
30
Brand name and marketing are very important to achieve commercial success, according to
SundaeSwap and OpenOcean.finance. They explain that marketing moves people and that it is
crucial to build a brand in order to succeed in the DeFi space. However, OpenOcean.finance also
identified that if a product is good enough, users will come automatically, and that marketing
will not be needed. Greenfield Yield has a very different opinion from the other two interviewees
and explains that brand name and marketing are not important at all for long-term commercial
success.
"A well-known name like SushiSwap does create trust, but I do not think that people are loyal to
a brand in DeFi." – (Greenfield Yield)
All three interviewees agree that time of existence is fairly meaningful to attract users to a
platform. They explained that people expect applications that exist for a relatively long time to
function well and fair.
4.1.6 Additional influential aspects
As explained in the literature review, synergies with banks are very meaningful for the success of
fintech applications. The interviewees expect similar synergies to be important within DeFi, but
with centralized exchanges instead of banks. An example of such synergy can be found between
Pancakeswap and Binance, according to Greenfield Yield and OpenOcean.finance.
Another aspect that influences the commercial success of DeFi applications is
innovativeness, according to the interviewees. OpenOcean.finance explained that users need to
be entertained with new products. The first-mover advantage is of significant importance in DeFi
as well, according to SundaeSwap.
"People go to where the most innovation is happening. People go where there is like first-mover
advantage ... So, for example, on Ethereum, UniSwap was the first dex, and they have also got
the most liquidity." – (SundaeSwap)
31
A final aspect that will be a very influential factor for commercial success in DeFi is compliance
with future regulations according to OpenOcean.finance and SundaeSwap. They explain that
large investors will choose only to enter the protocols that comply with regulations.
4.1.7 Main findings
By using triangulation, the most validly important learnings can be filtered out of the interview
data. This shows that, from an industry perspective, the most critical aspects to achieve
commercial success in DeFi are security, transparency, the blockchain on which an application is
built, easy access, convenience, and users' experience. All three interviewees gave unequivocal
answers and rated these aspects as being very important for commercial success.
4.2 Survey results
The interview results have been used to create an overview of the essential aspects of the DeFi
sector. Insights gained through the interviews helped in creating the survey and analyzing the
survey data. The goal of the surveys was to examine the most critical factors for commercial
success in DeFi from a user's perspective. Furthermore, the survey was used to test and extend
the findings derived from the interviews. The sub-question that has been answered by analyzing
survey data is:
What aspects of DeFi applications are most important according to DeFi users?
Descriptive analysis has been used to analyze the survey data. The survey was not
complex enough to use more extensive analysis methods. However, this is also not necessary
since this research aims to create an initial understanding of the matter.
4.2.1 Sample
Seventy-five respondents filled out the survey. Out of these 75 respondents, 68 provided valid
results. The results of 4 respondents who had never used DeFi before and 3 respondents who had
not answered the survey properly were excluded. A captcha was used to filter out bots, meaning
that the survey sample consists of 68 respondents who have used DeFi before. No other
properties or characteristics of the respondents were asked in the survey; therefore, no analysis
32
has been conducted on the correlation between answers and the personal characteristics of the
respondents.
4.2.2 Descriptive analysis
The ratings of the importance of all aspects included in the survey have a mean value between
3.25 and 4.29 (see table 1). The standard deviation for all aspects lies between 0.75 and 1.24,
with the average standard deviation being 0.97. The average standard deviation of 0.97 is
relatively high considering that the scale on which respondents could rate aspects ranged from 1
to 5, meaning that the standard deviation is nearly one-fifth of the range.
Field
Minimum
Maximum
Mean
Mean-3
Security
2
5
4.29
1.29
Std
Deviation
0.96
Transparency
2
5
4.18
1.18
Users' experience
3
5
4.16
Easy access (bridge
& connecting
wallet)
Decentralization
2
5
1
Team behind it
Variance
Count
0.91
68
0.97
0.94
68
1.16
0.85
0.72
68
4.07
1.07
0.86
0.74
68
5
3.99
0.99
0.92
0.84
68
2
5
3.97
0.97
0.98
0.97
68
Convenience
1
5
3.96
0.96
0.93
0.87
68
Blockchain on
which it is built
Timely and
efficient
experience
Tokenomics
2
5
3.94
0.94
0.8
0.64
68
1
5
3.94
0.94
0.94
0.88
68
1
5
3.79
0.79
1.04
1.08
68
Time of existence
(track record)
Access to multiple
relevant services
Automatization
1
5
3.76
0.76
1
1
68
2
5
3.76
0.76
0.91
0.83
68
2
5
3.71
0.71
0.75
0.56
68
Yield percentages
1
5
3.66
0.66
1.02
1.05
68
Personal
interaction
Democratization
1
5
3.65
0.65
1.08
1.17
68
1
5
3.57
0.57
1.12
1.24
68
Brand name
1
5
3.41
0.41
1.15
1.33
68
Integration with
the social world
1
5
3.25
0.25
1.24
1.54
68
Table 1: Descriptive statistics
33
The distribution of importance score ratings for each aspect is displayed in table 2 and graph 1.
Here it can be seen that nine out of eighteen aspects have at least one vote for every importance
score, meaning that respondents rated the importance of those nine aspects over the whole
spectrum of the importance score ranging from 1 to 5. Seventeen out of eighteen aspects have at
least one vote for importance scores ranging from 2 to 5. Only the aspect "users' experience" was
rated with an importance score of 3 or higher by all users. For all aspects, at least nine
respondents gave an importance score of 5, which indicates maximum importance. However,
there are significant clusters in the data around particular importance scores for every aspect,
especially for the three aspects with the highest mean values, which all have significantly more
votes for importance score 5 (see graph 1).
Importance Score
1
2
3
4
5
Total
Security
0.00%
0
7.35%
5
13.24%
9
22.06%
15
57.35%
39
68
Transparency
0.00%
0
8.82%
6
13.24%
9
29.41%
20
48.53%
33
68
Users' experience
0.00%
0
0.00%
0
29.41%
20
25.00%
17
45.59%
31
68
Easy access
(bridge &
connecting
wallet)
Decentralization
0.00%
0
7.35%
5
11.76%
8
47.06%
32
33.82%
23
68
1.47%
1
5.88%
4
16.18%
11
45.59%
31
30.88%
21
68
Team behind it
0.00%
0
11.76%
8
14.71%
10
38.24%
26
35.29%
24
68
Convenience
1.47%
1
4.41%
3
23.53%
16
38.24%
26
32.35%
22
68
Blockchain on
which it is built
Timely and
efficient
experience
Tokenomics
0.00%
0
2.94%
2
26.47%
18
44.12%
30
26.47%
18
68
1.47%
1
4.41%
3
25.00%
17
36.76%
25
32.35%
22
68
1.47%
1
11.76%
8
22.06%
15
35.29%
24
29.41%
20
68
Time of existence
(track record)
Access to
multiple relevant
services
Automatization
1.47%
1
10.29%
7
25.00%
17
36.76%
25
26.47%
18
68
0.00%
0
11.76%
8
20.59%
14
47.06%
32
20.59%
14
68
0.00%
0
4.41%
3
33.82%
23
48.53%
33
13.24%
9
68
Yield percentages
2.94%
2
10.29%
7
26.47%
18
38.24%
26
22.06%
15
68
Personal
interaction
Democratization
2.94%
2
13.24%
9
25.00%
17
33.82%
23
25.00%
17
68
2.94%
2
16.18%
11
26.47%
18
29.41%
20
25.00%
17
68
Brand name
5.88%
4
16.18%
11
29.41%
20
27.94%
19
20.59%
14
68
13.24%
9
11.76%
8
27.94%
19
30.88%
21
16.18%
11
68
Integration with
the social world
Table 2: Distribution of importance score ratings
34
Number Of Votes Per Importance Score For Each
Aspect
40
39
35
33
32
31
30
30
26
25
24
23
Number of votes
25
23
20
15
11
10
9
5
4
0
21
20
19
20
19
18
17
16
15
14
2
1
0
1
17
15
11
10
9
8
9
8
7
6
5
4
3
2
0
2
33
31
24
23
22
21
20
18
17
15
14
11
9
3
4
5
Automatization
Decentralization
Democratization
Transparency
Personal interaction
Access to multiple relevant services
Brand name
Convenience
Users' experience
Easy access (bridge & connecting wallet)
Yield percentages
Timely and efficient experience
Integration with the social world
Security
Team behind it
Tokenomics
Blockchain on which it is built
Time of existence (track record)
Graph 1: Distribution of importance score ratings – Visual representation
35
The mean value of the importance score of all aspects lies between 3.25 and 4.29 (see table 1). It
is striking that none of the aspects' mean value lies between 1 and 3.25, and the distribution of
values does not range over the whole spectrum, ranging from 1 to 5. Two potential explanations
for this are the following:
1. Participants might find all aspects somewhat important and therefore did not assign an
importance score of 1 or 2 to many aspects since these values indicate the aspects as
being unimportant. This might have resulted in all mean values being above 3, which
indicates mediocre importance. As presented in graph 1, the highest amount of votes for
each aspect is for either importance score 3 or 4, except for the aspects security,
transparency, and users' experience, for which importance score 5 has the highest amount
of votes.
2. Another plausible reason for the notable distribution in the data could be that several
participants have voted randomly, dragging the mean values of all aspects to the middle
of the spectrum.
In order to counter this low distribution of data and to present the data more clearly and
comprehensively, the decision has been made to subtract a value of 3 of all mean values,
bringing the lowest value down to 0.25 for the aspect integration with the social world, and the
highest value to 1.29 for the aspect security. Hereby, a more obvious overview is created of the
distribution of data and the differences in the importance of the aspects that respondents have
rated. The mean-value-subtracted-with-3 of every aspect can be found in table 1, and a visual
representation of these values is presented in graph 2.
36
Mean-3 Of Importance Score
Integration with the social world
Brand name
Democratization
Personal interaction
Yield percentages
Automatization
Access to multiple relevant services
Time of existence (track record)
Tokenomics
Timely and efficient experience
Blockchain on which it is built
Convenience
Team behind it
Decentralization
Easy access (bridge & connecting wallet)
Users' experience
Transparency
Security
0
0.2
0.4
0.6
0.8
1
1.2
1.4
Mean-3
Graph 2: Visual representation of mean-value-subtracted-with-3
The survey results clearly show that security, transparency, and users' experience are the three
most important aspects of DeFi applications, according to DeFi users. These three aspects have
the highest mean values for their importance score and have significantly more votes for
importance score 5, as can be seen in table 2 and graph 1. The mean-3 values of the importance
scores of each aspect show that security is the most important aspect with a value of 1.29 (see
table 1 and graph 2), followed by transparency with a value of 1.18, and users' experience with a
value of 1.16. The fourth most important aspect, according to the survey results, is easy access,
this aspect is less distinguishable than the top three scoring aspects when looking at the number
of votes for importance score 5, but it has a significantly high mean-3 value of 1.07.
Five more aspects have less substantial but still distinguishable higher values for the
mean-3 of their importance scores than other aspects. These values range from 0.94 to 0.99 (see
table 1 and graph 2). These aspects are decentralization (0.99), team behind it (0.97),
convenience (0.96), blockchain on which an application is built (0.94), and timely and efficient
experience (0.94). All other aspects have mean-3 values of their importance score below 0.79
and are therefore classified as less critical for commercial success in DeFi, according to DeFi
users.
37
5. Discussion
5.1 Summary and comparison of interview results and survey data
Findings that can be learned from the interview results and survey data show many similarities.
For the most part, the survey results confirm the initial learnings that were derived from the
interview results. Under subheading 4.1.7, triangulation was used to validly determine the most
critical success factors from the interview data, which turned out to be security, transparency, the
blockchain on which an application is built, easy access, convenience, and users' experience. All
three interviewees gave unequivocal answers and rated these aspects as being very important for
sustainable commercial success in DeFi.
As shown in the analysis under subheading 4.2.1, the survey results indicate that DeFi
users find security to be the most important aspect of DeFi applications. The second and third
most important aspects were transparency and users' experience. These aspects show a clear
division from all other reviewed aspects and have significantly more votes for importance score
5. The following six aspects show a less clear division, but they still show to be significantly
important according to the survey results. These aspects are easy access, decentralization, team
behind it, convenience, blockchain on which an application is built, and timely and efficient
experience. All other aspects show to be of less significant importance.
Similar findings have been derived from the interview results and survey data. Both analyses
show that security, transparency, users' experience, the blockchain on which an application is
built, easy access, and convenience are critical aspects of DeFi applications' success. The
analyses differ with regard to three aspects. The survey analysis shows that decentralization, the
team behind an application, and a timely and efficient experience are aspects that have
significant importance for DeFi applications' success. This has not been concluded after
analyzing the interview results. In the text below, these differences will be reviewed.
The survey results show that decentralization is the fifth most important aspect of DeFi
applications. Decentralization was also rated as being very important by the interviewees'
personal opinions and their expectations for the future sustainability of DeFi protocols. However,
all interviewees also explained that they do not see the importance of decentralization being
reflected in the market. According OpenOcean.finance, Greenfield Yield, and SundaeSwap DeFi
38
users express that they find decentralization important, but this is not reflected in their behaviour.
According to the interviewees, people seem to choose convenience over decentralization.
However, Greenfield Yield also explained that people within DeFi seem to prefer decentralized
DeFi options over less decentralized ones. The survey results confirm this statement and show
that DeFi users value decentralization. However, it could be the case that DeFi users express that
decentralization is important but that this opinion is not reflected in their behaviour, thus making
decentralization less critical for commercial success. This has not been tested in this research,
and therefore the choice has been made to trust the results of the surveys. When combining the
interviewee's opinions with the survey data, it can be concluded that decentralization is an
important factor for commercial success in DeFi.
The team behind an application was rated to be a very important aspect by
OpenOcean.finance and SundaeSwap. However, Greenfield Yield rated this aspect as being of
mediocre importance. According to triangulation principles, the importance of this aspect could
not be guaranteed, and therefore it was excluded from the initial learnings of the interviews.
However, survey data show that users find the team behind an application to be an important
aspect. This functions as a third source that confirms the importance of this aspect, and therefore
it will be included in the conclusion.
A third aspect that must be reviewed after comparing the interview results and survey
data is the aspect: timely and efficient experience. The analysis of survey data concludes that this
aspect is of significant importance. However, the significance is minimal since the value of the
mean importance scores of this aspect lies just on the edge of being significant. Furthermore, the
interview results cannot confirm its importance since interviewees ranked it as of mediocre
importance. Therefore, this aspect will not be classified as one of the most important commercial
success factors of DeFi-applications.
Interview results and survey data both show that all other reviewed aspects are of less significant
importance for the commercial success of DeFi-applications. These aspects are: tokenomics,
time of existence, access to multiple relevant services, automatization, yield percentages,
personal interaction, democratization, brand name, and integration with the social world.
39
5.2 Theoretical implications and future research
This research adds to the theoretical knowledge about the success factors of fintech. Previous
research by Mirchandani et al. (2020) has shown what factors are most important for commercial
success in fintech and what factors attract customers to fintech applications. Findings from this
research are specified in one category within fintech, namely DeFi. The findings from this
research have tested if claims from previous research apply to DeFi, and what should be added to
previous theories when applying them to DeFi. Findings show that existing theories about fintech
fit partially to the DeFi sector. However, the importance of aspects is weighted differently within
DeFi compared to fintech, and several aspects are shown to be important within DeFi that have
not been discussed in previous research focused on fintech. It has been found that DeFi differs
from fintech in general and that fintech theories about success factors are not entirely applicable
to DeFi. Therefore, a new theory that focuses purely on DeFi success factors should be
developed. Future research could focus on the development of this new theory. This research
could be used as a starting point for that future research since it shows which factors are of
significant importance for the commercial success of DeFi applications. Furthermore, future
research could focus on quantitively testing the findings from this research. It would be of added
value if opinions that have led to the findings in this research would be backed by quantitative
data like user count and cash flows of DeFi platforms.
5.3 Strengths and limitations
Because of the exploratory nature of this research, the choice was made to keep the research
broad and combine the views of DeFi industry insiders with those of DeFi users by using a
mixed methodology. However, this made the research less specific and less in-depth. Because of
time constraints, the mixed method of combining interviews with surveys resulted in fewer
interviews and fewer survey responses than what would have been ideal. Three interviews have
been conducted, which is the minimum to use triangulation to verify insights. Nonetheless, more
interviews would have made it possible to use triangulation more extensively and formulate
more rigid findings. A total of 68 valid responses were collected for the survey. This sample is
somewhat small, making it less generalizable to the whole population of DeFi users. However,
the combination of interviews and surveys allowed to compare findings and test their validity,
40
resulting in reliable final results. Furthermore, the use of mixed methods eliminated the
common-method bias, which further enforces the reliability of the results.
As explained under subheading 3.2.1, convenience sampling was used for the surveys,
which is a form of non-probability sampling. Convenience sampling was the most suitable
sampling method for this research because it allowed the collection of a relatively large amount
of data in a short period of time. However, convenience sampling has certain biases when using
this sampling technique. The most significant of these biases is the volunteer bias, which means
that the opinions and answers of those who volunteer might differ from those who choose not to
answer the survey. To reduce this bias, a large population has been targeted by posting survey
invites over 40 times on social media in a diverse set of places.
Furthermore, the timeline in which data has been collected limits the reliability of the
data. Because of the relatively short period (2 months) in which data was collected, the opinions
of respondents and interviewees were prone to be influenced by recent events (e.g., movements
in crypto prices).
41
6. Conclusion
This research aimed to determine the factors that most significantly influence the sustainable
commercial success of DeFi applications in the current market. An analysis of previous research
has been conducted that focused on factors that influence the commercial success of fintech
applications in general. Furthermore, interviews and surveys were conducted to determine the
most important aspects of DeFi applications from an industry perspective and a user's
perspective. The study's results show that DeFi industry insiders and DeFi users value the
importance of eight aspects of DeFi significantly more than others. These eight aspects are
expected to significantly influence the sustainable commercial success of DeFi-applications in
the current market. These aspects are security, transparency, users' experience, easy access,
decentralization, team behind it, convenience, and the blockchain on which an application is
built. The importance of all other analyzed aspects is valued significantly less by DeFi industry
insiders and DeFi users.
This research was of exploratory nature and was conducted to create an initial
understanding of the subject. Furthermore, this research can be used to determine why certain
DeFi applications have better commercial success than others or as a guide to predict what DeFi
applications will be commercially successful in the future. Finally, future research could use the
findings from this study as a basis and test findings from this study by using quantitative
methods to analyze the growth of DeFi applications.
42
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Appendix
A.1 Interview protocol
Do you mind if I record? Do you want to be anonymous?
What I study…
I research what factors are determining fintech applications’ commercial success. The goal of my research
is to find out if these factors can be extrapolated in to DeFi, and if not, what the most prominent success
factors are.
The purpose of this interview is to get a better understanding of success factors for DeFi are (expected to
be) from a DeFi “company” point of view.
Do you have any questions for me?
Application related:
What would you say are the most important drivers of *APPLICATION* adoption/use over similar DeFi
applications or fintech?
Have you noticed any change in use after a certain change of the application or business practices?
DeFi aspects:
What would you describe as the main differences between DeFi and traditional Fintech?
How important are Digitalization (automatization), Decentralization, and Democratization for DeFi?
And do you think this is being reflected in the market? How?
Could you rate these factors from 1 to 5 on importance in current time, and in near future, and elaborate
why this score (1 not important and 5 very important) (longer time horizon)
- Transparency
- Personal interaction (costumer care)
- Access to multiple relevant services
- Brand name/marketing
- Convenience
- Users’ experience
- Easy access (ease of bridge & ease of connecting wallet)
- Timely and efficient experience
- Integration with the social world (follow other traders, not really present in DeFi yet)
- Yield percentages
- Security
- Team behind it
- Tokenomics
- Blockchain on which it is built& ecosystem
- Time of existence (track record)
45
Anything to add?
What would you say are the most important success factors for DeFi?
Do you think these factors and their importance will change over time to eventually be weighted the same
as in traditional fintech?
Fintech comparison:
How will DeFi compete with fintech and traditional finance? And will DeFi become the dominant
technology type (for what reasons)?
Banks and fintech have a synergy. How would you say DeFi compares to this and does DeFi compete
with both?
Does DeFi have a similar synergy, and is this important to have?
What Macro enabling factors are essential for DeFi to succeed?
Business models: (extra)
How important is a solid business model (making profit) for DeFi applications?
Anything to add?
Anyone else you could link me to interview?
46
A.2 Interview transcripts
Company/platform:
Interviewee name:
Interviewee role:
Date:
SundaeSwap Labs, Inc.
Artem Wright
Co-founder & COO
19-05-2022
Researcher: I'm glad you, uh, you accepted my invite
Interviewee: Of course
Researcher: yeah, really, uh, really will help me with my research. Um, do you mind if I record
the meeting?
Interviewee: No. No, not at all. Uh, do you, what is the, um, just so I can, I can start mentally
preparing myself. What are you like, what are you trying to get out of this?
Uh, because I see that you're a master's student. Um, I'm assuming that if you, if you're asking
about a, you know, what makes a, like a defi project or a crypto project or as some crypto
company in general, uh, successful, then you're at least part way interested in starting your own
maybe sometime down the line or is this just sort of a yeah, well, like how can I be the most
helpful, um,
Researcher: I've been investing in crypto myself. And, uh, I was wondering, um, what really
makes a good defect project, um, first from an investor type of standpoint, but I would also like
to get a job in DeFi or crypto in general, late later on. So, um, that's definitely why I'm interested
in it. Um, but the, the main reason why I'm doing this research is of course, because we have to,
uh, in the Netherlands, we have to do a master's thesis where we research, uh, uh, and we'll do
our own research. Uh, so therefore I'm doing this research,
Interviewee: Makes sense
Researcher: And the main objective here is to find out why people invest in defi and why one
protocol over another. Um, yeah, well, because I had a feeling, um, and it might be because
people are chasing the highest yields. Uh, and I wanted to know if that's correct. There are other
reasons why, uh, why protocols get chosen over others?
Um, so I don't know how you are, you are thinking about that, but
Interviewee: yeah, I have, uh, I have, I, yeah, I can, I can talk about, I can talk about that for a
while. Um, so do you just want me to, uh, do you have like a list of questions prepared that I, you
just go down or do you want me to just start off, like give you all my thoughts about what makes
a good project and then we'll take it like a conversation.
47
Researcher: I have a list of questions, um, but I'm definitely also interested in what you, uh, what
you would have to say yourself about what a good project is. Uh, I would say we, we could read
the questions first and then afterwards. Um, of course I will ask you if you, if you have anything
to add and, um, if that's okay.
Interviewee: Right. Yeah, that's good.
Researcher: Um, yeah, so, like I said, what the main objective is, is to find out the, the, the, um,
success factors or defi. Um,
uh, yeah. And
what would you say why people, um, use Sundaeswap over other Defi applications?
Interviewee: So why, why do people use Defi? Uh, so I think like that is going to be the, the
answer kind of, uh, it differs between people, I think.
Uh, so obviously like the there's the, there's the people that are just kind of a, for lack of a better
term, you know, uh, just defi degens that are just chasing the yields, trying to make as much
money as possible. Um, for me, the way, the reason that I got into it was just because I was
curious, um, you know, Like I have, I've never thrown tens of thousands of dollars at a DeFi
project.
Uh, in fact, I've probably lost a good amount of money and do fine, just like getting hacked and,
you know, I'll be like, I put money in a tiny man that got hacked. He got my money stolen. Um,
you know, that like that just, it just happens to me so much more commonly than other people I
think. But, um, so I've lost a good amount of it, but I, I am curious, like, um, uh, I was always
curious about how, like what, what can you do with your crypto sort of, and I think at some
level, like various people that are, that are like that, um, then there's also people that kind of don't
want to keep their money on an exchange and also want to keep their money, you know, like a
hardware wallet or something.
And. I don't want to move around, but also want to still have a diverse set of tokens. Right. And
DeFi is obviously like, if you think about, um, the way that I think about is that if, you know,
we're probably like two, three years in maybe into defi. Um, and if you do equate, uh, traditional
finance and crypto, um, and I related to cars, uh, the early cars are modeled after model T's, you
know, horse carriages.
Um, and in defi right now, we've got a lot of, uh, emulation of traditional finance where like, you
know, the, every defi project is kind of like just porting over traditional finance concepts and to,
and to crypto. So like exchanges, you know, there's the, uh, treadmill element. And then there's
lending protocols are encrypted the trout violence.
So all that is to say that, um, There's people that are interested in what the concepts can evolve
into and are, um, trying to, uh, kind of get in early before the real innovation kind of takes off
48
because there's, let's be honest. There's not a whole lot of innovation. It's kind of just people
copying each other right now.
Maybe I'm a hypocrite, but, um, so why do people use SundaeSwap ? Um, I think that, let me, let
me think about how best to answer this. Um, so let me answer that in a different way. Um, I
think the reason that people use any project is probably not so different than, uh, any other, you
know, startup or business in general.
Like nobody uses VRVO. Everybody uses Airbnb for good reason, right? Like they were the
first, like they're the most well-known brand. They have the best marketing, et cetera, et cetera.
That's user experience or know network effects. And it's probably the same for defi as well. Like
people go where the most liquidity is.
People go to where the most innovation is happening. People go where there is like first-mover
advantage. Um, you know, you can take a look in it and there's also some UX UI, UI UX
elements to that too. So like, you can see. So, for example, on Ethereum, UniSwap was the first
dex, and they have also got the most liquidity.
And so people trade on UniSwap for, for good reason. Well, curve hasn't missed liquidity now,
but they're, you know, apples and oranges, I think. Um, and then on avalanche people use, even
though, uh, trader Joe, wasn't the first Dax on. Um, pangolin was, and pangolin still has a good
amount of liquidity, but not nearly the amount that trader Joe's has.
And the reason was in my opinion, I think because of, um, trader Joe just has a nicer UI. Um,
and on car nano, I think the thing that people are there's like, like the space is still so new and
nobody really knows who the winner is going to be yet. Like people have, um, um, what's it
called? Uh, like an idea, I think.
Yeah. People, yeah. People have predictions of who it's going to be, but like there's still Tim
Harrison, I think put out a chart that was like 950 project building on crunch time. That's that
number is probably slightly inflated just because like, yeah, you can say that you're going to
build a project, but are you actually in their Elisa type thing, you know?
Um, but like we can cut that down. 50 solid projects, probably even if you, if you take out all the
fluff and you know, all the, all the, like the, not so serious ones, you can probably put that down
to like a solid 50 serious projects. Um, and today we have, let's see, we got like three or so and a
few marketplaces, three dexes, no four dexes, but three AMMS and then we've got, so that that's
about 40 or more legitimate projects that are still building that haven't launched yet.
And. So that means a under 20 there that we haven't even seen a 20% of the market just yet. Um,
and so there's a lot of development that still needs to happen in a lot more innovation, because
right now everybody's still doing the thing where like they're copying from Ethereum and
importing it over to for example Cardano
but then there's also stuff that people can build. Like, um, you know, later this year, somebody
who's going to come out with, um, like a deck sec can run on Hydra or something, right? So like,
49
are you, nobody's going to be arguing that Mint swap, SundaeSwap, or wing riders are going to
be the top dexes. If someone comes out of the blue with a Dex on hydro, nobody's going to use
an L1 dex anymore.
People are going to use an L 2 because it's just gonna be so much faster congestion is not even
going to be a thing, et cetera, et cetera, fees are going to be cheap. Um, so, um,
that was a long-winded way of saying. That. So that's one part like people go where most people
are, the network effects, liquidity, et cetera. But then there's also like the marketing element, um,
in the us. And this is like, this is something that we've had a lot of trouble with. Um, is that like
the marketing that you have to do is very precise and we have to be a little bit more careful with
how we structure things.
Um, a lot of projects can that are not even, even the ones inside the U.S. to be honest, that I've
just aren't as careful as us can, um, kind of just like shoot by the hip and say whatever they want.
And we have to, like, we have to carefully plot out what we want people to think, because if I'll
give you one example, like you can advertise your.
But you can't advertise the yield, you know, because the marks as an investment as an
investment advice. And you can see a lot of projects that tiptoe these lines and are, uh, in like,
like with, on that front, like you have one arm tied behind your back. If you're in the U.S.
because Qamar did the same things that other people do.
So those people can market towards Defi degens more than, than you can attract more liquidity.
Um, the other part of that is building a brand, which is probably the harder thing to do. Um, if
you're constantly advertising to a particular group, I mean, you probably know this by now, but
like, um, you know, the way, the way you present yourself kind of builds your own brand around
it, that goes for people and companies.
And so I'll just give you the, the way that we did it. Our, our idea was. I like starting off, we were
just kind of trying to be like the pancake of Cardano .PancakeSwap, SundaeSwap, yeah. Um, and
then that kind of, like, we kind of thought a little bit and we were like, man, we are not attracting
the right people to use this.
Like the people that are, um, interested in SundaeSwap and I'm speaking back to like last
summer and, you know, early September, the people that are interested in the SundaeSwap are
not the people that we think that are going to stick around for a couple of years and still provide
liquidity and stuff.
Uh, and so we, we had to switch our, like our, our way of thinking, um, before we were really
pushing, uh, pushing it really hard that, um, this was like, we were, uh, how do you put it? We
were, we were just like, uh, like a playful, like gamified. Um, place that you tend like kind of
gamble your money, sort of like Pancake.
So it was like that there was a way that we were marketing and, um, and then w we saw that it
didn't like fit with the Cardona's theme, sort of, if that makes sense. Yeah. Got it. Yeah. A lot of
50
people in Cardona, like what they value is more so than other chains. I think it's like, well, Yeah,
more than like I have, like, I have some thoughts there that I can, I can probably talk about later,
but, um, they say that they are very interested in security and decentralization and education.
And so that's when we started like, okay, if there, we got a market towards the Cardona folks, not
the people outside of Cardano, maybe because the people inside Cardano are actually gonna be
using this thing. And so then we started pumping out like educational material and, uh, you
know, we got C-fund and the Charles Hoskinson backing.
And then, so we started like morphing ourselves from the pancake to like what I consider like a,
like a more unit swap style exchange, right. Where it's like, okay, we're actually, uh, you know,
we, we have people understanding that we're a business and we have, uh, economic interests in
mind and we are trying to build support for the ecosystem.
Not just like. I don't know, we're not just a Dex. Yeah. Right. It's like, kind of the idea of is that I
think people should be gravitating towards if they're trying to, um, at least build on Cardona.
Right. Cause I don't know. I don't know much about outside the ecosystem, how people react to
that.
Hopefully that all made sense.
Researcher: Yeah. Yeah. Yeah. That's for sure. Um, so, um, have you seen any like, um, with
any changes in the protocol or, uh, announcements or whatever, uh, have you seen any big
changes in, uh, user users or, uh, well, before you were released the product in, for example,
Twitter followers or something like that, like more attention after you changed something.
Interviewee: Yeah. Yeah. Uh, so there's, if you look at the social blade, uh, you can probably
correlate a pretty, you can like see some interesting trends, like first number one, the, the, um.
The biggest indicator of growth in any project is how well the L1 is doing in the market. We had
the biggest growth when, um, ADA was pumping to three dollars.
So like that tells, that tells you something pretty big there. Um, you can tell it yourself. Um, the
other stuff. Yeah, we had a good, a lot of early success. Um, I would see with, I don't know how
involved you are in Cardone, but if you are involved, I would say you probably know about the
ISO. We had a lot of success, success marketing that.
So, um, and then we saw a bunch of growth, um, after the Cardona summit and before, um, and
before launch, when the markets were still like kind of green and we were like busy pushing out
announcements pretty much every week. Um, We, uh, so we had, let me think, like the, the
timeline went pretty much. We announced C fund as their investor, and that was when, uh, C
fund was like still had a really positive, um, uh, market.
Uh, um, I forget the word, sorry. Um, when people still like, C fund, I guess. Uh, so we
announced C fund and then, we were like marketing the Testnet and we were talking about, um,
some of the challenges that we had, and then just pretty much like putting out a bunch of
educational content. Um, and that is when we saw a lot of growth, those two things.
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So like last summer when ADA was pumping, we had died. So, and then when would it be, um,
started pushing more towards like gearing up for launch and making people trust us.
Researcher: Yeah. All right. Clear, um, well, how important do you think because, um, in crypto
of course, major aspects are, um, decentralization and democraticization.
Um, so do you see these reflected in, uh, in the success of defi applications? Or would you say
that they are not prominent or what do you think?
Interviewee: Uh, so, um, I think they're incredibly important. Uh, you like, it's, it's literally in the
name, like decentralized finance. If you are not decentralized, you cannot be a Defi protocol.
Like, like you can have, you can have a KYC-less exchange using smart contracts. Right. But I
wouldn't call that DeFi if you were like the people, if you were like the. If you are the people
running it on the backend and making money off of it, you're not, you're not, that's not
decentralized. Like you have to like, it's, it's, you have to split the profits between people using
it.
Um, as you can tell, I feel very strongly about that. There's a, there's like a thing in, and
hopefully this, this comes with maturity of the ecosystem, but like people have a really tough
time distinguishing between like both of those things that I mentioned, like just operating the
thing and not checking KYC and, um, being like a completely permissionless, uh, system.
Um, I'll give you one example outside Cardano. Um, there's a D Y D X, um, which essentially
the way that maybe, maybe, you know, maybe you don't the, essentially the way that they work.
Is, uh, the way that they're able to make their Ethereum sheet and fees so cheap is that they
essentially run like essentially what we do like off, off chain batches
um, and that's how, uh, things, for instance, run so smoothly on Ethereum for DYD X, they, they
burst the transactions and they do it themselves off-chain. Um, so they can run a Ethereum order
book. Um, you just, they, uh, run their own batches and they make money off. Um, they make
money off the exchange with, uh, through the company.
Like, I think it's called DYD X trading LLC or something you UniSwap on the other hand, uh, I
think the fees going that, you know, sort of charges that go directly to the UniSwap treasury and
the dao has to vote how those funds are being are going to be used. Um, those are two examples
on the on Ethereum, uh, in Cardano.
Um, the biggest thing is, uh, running your own batcher, similar to DYDX or, um, uh, outsourcing
it to other stake pool operators. And that's indicted. My opinion makes you is like probably one
of the ones that makes you decentralize or not. De-centralized um, because if you, if you are the
person if you are the only person that code, that means that you can, you can literally, you can
just take a step back, stop running it, and then like the thing just ceases to operate.
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Whereas if you outsource it to other people, it was those, you know, however, we have 30, if
only if, if 29 of those people just decide, like they're leaving Cardano for good, will that, that one
person can keep running it. Even if Sunday swap labs like goes bankrupt or something like the
dex can still operate.
Um, and that that's, that's, that's one important thing, I think, um, apart from like, you know,
taking money from people and then not understanding where the feed goes. Uh, so there's like
some ethics there. Um,
yeah, and I mean, there's the, I think if for like the success of a protocol, clearly, it is not that
important. There is a lot of volume on projects that are not really decentralized. Um, because
DYDX their volume is like any decentralized exchange, I think, um, and on Coronado people
don't really, frankly, give a shit, who was batching the transaction. They kind of just want this
smoothest UX possible, which yeah.
Researcher: Makes sense. Yeah. Yeah. All right. So you do think it's important, but you don't see
it reflected in the markets?
Interviewee: Uh, yeah, I think it's, I think it's probably one of the most important things, because
especially if you're in the U S and they speak from a us mindset, uh, maybe, maybe any Western
country, because you know, you guys in Europe are probably going to take, um, take some, some
advice from us.
I hate to say it, but yeah. Um, like if you're, if you're not focused on decentralizing, like your
protocol in, in, in a reasonable timeframe, regulations are going to catch up eventually and you're
going to get into some serious deep water. Uh, so I think it's important. Uh, but the market
doesn't seem to think so.
Researcher: Yeah. All right. Clear. Um, so I have a bunch of, um, uh, success factors from, uh,
uh, previous research, which indicates that. Uh, fintech success and also added some, uh, which I
think are important for defi. And I'd like to hear from you, um, on a scale from one to five, how
important it is and why, if you, if that's okay with you.
Interviewee: Sure.
Researcher: Uh, so transparency,
Interviewee: if there were, if there was like, um, if there was like an asterisk there, which is like,
uh, transparency and perceived transparency, those would be two different ones. Um, but like
transparency as a whole, uh, let me put that at a, at a three let's just, yeah, three. Um, if people
think you're transparent and you're actually transparent, those are two different things. .
Researcher: Yeah. So I would choose, how would you rate it if it was, um
Interviewee: If it was, if it was like, if it was the way I wanted it, it would be, um, transparency.
One or zero and perceived transparency five. All right. Yeah. Um,
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Researcher: uh, yeah, so with FinTech one, one important success factor is a personal interaction.
So some kind of a customer care of course, that's way different with, um, defi would you see this
becoming more important or, um, would you say it's, uh, it would add value right now?
Interviewee: Yeah I put that that um, let's see. And put that at a four. Um,
Researcher: And and why, why four?,
Interviewee: Uh, so I'm like I'm in between four and five. I'm trying not to use decimal places
because I think that's stupid. Um, but so I would say I would, the only reason I would say not. It's
because I'm trying to think of DeFi as a whole.
Um, and it's Ethereum and Solana and Avalanche, well, maybe not avalanche because they've
got their whole C chain key chain X chain thing, which is kind of confusing. Um, but like defi as
a whole, uh, like it's probably less important because it's just not as confusing. I think if you kind
of just press the swap button sign transaction, and your transaction goes through with Cardano,
it's a little bit different because just like UTXO and everything kind of just did it's hard.
And that ecosystem is still so new. Like transactions still fail. And like, people are people
wonder why things are happening still on a Ethereum. It will know, like my friends actually went
through, but I paid like $300 in gas fees because like, but they know the reason why, I mean,
cause like it's Ethereum prices are so high, et cetera.
But, uh, and so like at this point, people are, people are using it Ethereum or using defi. You kind
of already know the deal, and there's so many, so many resources on YouTube for people to
learn. It's like once you're, once you're familiar with signing, or once you go through the process
of using a smart contract once and a few, you kind of know how to do it with everything else.
Um, on Cardano it's a little bit different, which is why I've put it at a, at a four, not at a five. And
I wasn't talking about the entire ecosystem, but I still think that in the future, um, like as the
ecosystem matures and, you know, like, like more money flows in, I think people are going to
start having customer support and stuff.
Researcher: All right. Yeah. So you would, you would think it would develop to that?
Interviewee: Yeah, I think, I think that just like the people that are using it right now, Already
technically savvy. Yeah. You know, like they, they're already interested in crypto and stuff and
they're out the people that are going to need this tech support.
It's going to be the people that come in later and it's going to evolve over time, I think. Yeah.
Yeah, sure. Um,
Researcher: uh, the access to multiple relevant services. So for example, uh, uh, dex combined
with, um, yeah, of course often it's combined with staking and farming, but for example, also it
lending, um, so the access to multiple services, is that important?
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Interviewee: Um, let me say two, uh, I think that, I think that, uh, if you look like, like your, your
knee-jerk reaction is to say yes, of course. Um, but if you look at like the successes of some of
these, um, defi protocol, Pretty clear, at least on Ethereum that like the more complex ones that
have like so many revenue streams that you can make money off of.
Like they, aren't the ones that are bringing the TVL up. It's the simple ones that it's like easy to
use UniSwap, curve. Like you provide liquidity and you make money. And then like these ones
that are like, oh, like you use steak, your ease and you like lend it out and you can do it all at the
touch of a button.
And it's like, you have to read a 40 page white paper to understand how everything works. I don't
think that those are, I mean, it's pretty, I mean, proof is in the pudding. Like they're not the ones
that have the most TVL, if it was important, then they would have the most TVL.
Researcher: Yeah. All right. Um, brand name and marketing.
Interviewee: Oh, that's a five.
Researcher: Mm. Yeah, you already kind of elaborate on that. So, yeah. Um, convenience. So the
ease of use.
Interviewee: , uh, five,
Researcher: um, you users experience.
Interviewee: Well that's yeah, I would put that with the ease of use UX five
Researcher: Easy excess. So, um, it's easy to bridge towards the chain it's on. Uh, and, um, it's
easy to connect a wallet, those kind of things.
Interviewee: Yeah. So, so like multi, I think like that splits into two things. If you're talking
about like bridging to your chain and like interoperate interoperability with, you know, multiple
different chains. I think that's a, that's probably a one or two maybe. Um, I I'll, I can elaborate on
that if you want. I think like the tooling of the ecosystems to like, uh, connecting to wallets and
stuff.
Um, that is, that is pretty important. Bridging and connecting a wallet to an application is pretty
important. That is about, yeah. If people cannot figure out how to connect to your dex, then you
have a problem.
Researcher: All right. Um, yeah, so integration with the social worlds, um, which is not really
present now, but, um, it's, it's an important factor in, um, in FinTech. So, um, for example, these
platforms where you can see how other traders trade, um, and copyright rates, stuff like that,
Interviewee: the interaction with the social world. Oh, I see what you mean.
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Um, like a one. Yeah. Um,
Researcher: Yield percentages?
Interviewee: I'd put that at a, like a. Probably a three it's it's important, but there are other more
important things. It's it's it shouldn't if you're, if you're trying to make successful perfectly, it's it
shouldn't be your number one priority. All right.
Researcher: Uh, security
Interviewee: five, um
Researcher: , Team?
Interviewee: Yeah. Yeah. That's a five. Yeah.
Yeah. That's with any startup though. Like if you have a bunch of pardon my language, if you
have a bunch of fucking idiots on your team, then you're not going to get whatever you get, you
know, you gotta have some strong people.
Researcher: Yeah. But then, um, um, also not only, um, the team as in building the project, but
also what, what people think about a team. So is a team doxed, um,
yeah,
Interviewee: that's, that's like one of those, uh, the perception thing is there transparency things
it's like. If people all let people need to think. Is that, is that, um, is that your smart? Let me, uh,
actually I've uh, you can ask the next question. I have a awesome image that like perfectly
explains what I'm talking about here.
Researcher: Alright. Um, tokenomics,
Interviewee: uh, yeah, the token and the project are two different things. Um, if you want your
token to do well, I guess that's a five. I actually put that at a three, I think at some level, like the
token does matter to attracting people. So that, that image perfectly encapsulates what I'm trying
to say.
Like, if you, you can spend all your time on Twitter and social media, like bragging about how
smart you are. Um, but if you don't actually produce anything. Like nobody's ever gonna know
where you fucked up.
Researcher: Yeah. Yeah. Um, that makes it clearer. Yeah. Um, then the, the blockchain, on
which it's built and the ecosystem,
Interviewee: uh, five, definetley,
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Researcher: all right um, and why would you say that it's five.
Interviewee: Uh, because take a look at the moon river ecosystem, um, and tell me, which
projects there are, uh, would you consider doing well? Cause I can't name a single one. I think
I'm like the one, like Rune DAO is probably the, the one that I was, I was like, I I know it was
just, it was just a fork.
It was a Ponzi scheme and it crashed and now, like, I don't know where that ecosystem is now. I
don't think anybody's using it. if nobody uses it, you get a system that your project has a done is
naturally. Unfortunately, yeah. You can put in all the work, but it doesn't matter,
Researcher: Yeah, um, time of existence and a track record,
Interviewee: what was that
Researcher: time of existence and a threat record.
So,
Interviewee: uh, yeah, that's pretty important. I think I would say a four.
Researcher: Yeah. Alright. Um, and liquidity.
Interviewee: Uh, that's that's pro... success. Isn't isn't success of a project kind of, measured in
liquidity
Researcher: yeah. Well, so. That's true. Indeed. Can, can leave that one out.
Interviewee: You, you could, uh, you could talk about like social, like, like community size and
things like that, but I think those things kind of correlate anyway.
Researcher: Yeah.
Yeah. That's true. Um, all right, so those are the aspects, uh, for this question, um, by the way, I
see that, uh, I got a notification that is meeting, um, what every five minutes. Um, I don't know
why that is because usually you can have a meeting as long as you want with two people, maybe
because I'm recording, um, but, would it be okay if I, if it ends, I sent you a new link?
Uh,
Interviewee: yeah. Well, there there's a Google meets and the calendar invite that you sent me, so
we can just join that.
Researcher: All right. If it, perfect. Thank you. Um, so the next, the next question would be, if
you have any factors to add to this, to this list and, um, that you think really.
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Interviewee: I think the most, I think like in order of the most important, uh, in order to like build
a successful community and it's like, you have to look competent, you know, you have to look
like, you know, what you're doing, um, it doesn't matter if you actually do it.
You just have people have to think of. Um, and, uh, I guess that kind of comes along with like
perceived intelligence and stuff, uh, prescription of experience. So lump those all into one. Um,
and then you just have, you have to be good at marketing, uh, like, and, and kind of like building
your personal brand, um, make to, yeah.
To make it a successful project. You kind of have, you have to build the brand. And since crypto
is so social media focus that comes along with, um, like you gotta be comfortable. Building
under, under stress and pressure and like under a microscope, because every single thing that you
do is going to be evaluated by thousands of people on Twitter.
And one person at least is going to be smart enough to, um, like, like dig into the nitty-gritty
details. Uh, and that all that is to say, um, that goes out the door while you're building. If, uh, if
you aren't launching anything, then nobody can ever figure out that you're making stuff up.
Yeah. Unfortunately.
And that's, that's how scams happen.
Researcher: Yeah. Yeah, sure. Um,
okay. Um, yeah. So do, do you think these factors will change over time and when defi
progresses, uh, would you say it will shift.
Interviewee: I think, um,
that's an interesting question.
I don't think so. And the reason I say that is because crypto, I think is always going to be social
media focused. I mean, there's just no way that the new won't be, I think like it's, it's pretty
ingrained into the culture now. Um, I don't think it's going to change. Uh, and it, it, it started
online, right?
Like all these, like, like Bitcoin talk forums, that's how people got into it. Um, so it's in the
culture and, um, and at a certain, I think that, I think that, um, like looking competent is going to
look is going to be a lot more important later on like right now, uh, a couple, a bunch of projects
that being started with like, Self-admittedly by college students and young people.
Um, and that's like, that's like, that's a, that's a pro and a con, right. Because if you're, if you're
young, then you have all this energy, like, uh, you know, building Sundae swap, we, I was
pulling like, like we were sleeping in shifts at some points, right? Like during crunch crunch time
and 50 year olds can't do that.
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That's how that's, that's how it's moving so fast. Um, but later on, like, and you can see it in
startups to a tech startup used to be like, like there was a, the, um, like the mythology, you know,
like Marcus, the Zuckerbergs and like the Larry Pages, that would like started it into also the Bill
Gates is that started out of college dorms.
Right. But that doesn't really happen anymore. Um, like most startups that are being funded now
are, um, like the, the owners are like PhDs and MBAs. If you look at the stats. Um, and so that
like college kid thing, like starting a company out of your dorm is kind of going out the window.
Um, but in crypto it's still new, but I think at the same thing is going to happen.
It's going to probably evolve the same way and it already sort of is. Yeah. Yeah.
Researcher: Interesting points you are. You're saying here.
Hello, welcome thanks for joining back. Um, yeah, so I think that's a, actually a very interesting
point you're saying there. I didn't think about it that way, but, um, yeah, I would say it's through
indeed. Um, as the, as a sector matures, that it will be harder to, uh, you have to be successful
with, uh, with more people entering the space.
Interviewee: I mean like, think about the last, who is the last, uh, like tech guru that came out of,
um, like Stanford and like started a company like you heard of, um, like Evan Spiegel from
Snapchat, I think. And that was probably like what, 10 years ago. And since then, nobody, you
know, it's, it's very boring. Like people don't want to root for.
Uh, 45 year old starting a business. Right. Cause it's just like every, I don't know, like it's just
doesn't seem as interesting. Right? Cause they, it seems like they were kind of desperate to see
success. But if you look at like startups funded and like the statistics of successful startups, like
most businesses that are being started now that are successful and actually over time has been by
educated older people.
And that makes sense. Right? Cause like more experienced breeds, you know, like experience,
breeds success. Like if you have no idea what you're doing starting out, then it's going to be
harder to get there, you'll trip over your own shoelaces before you can pick it out. And those
people have already done that.
Yeah. Sure.
Researcher: Um, all right. So, um, uh, Yes. So how would you say a defi compressed with
traditional finance?
Interviewee: Um, I think, uh, it's a lot more community focused and, uh, like I said earlier, you
know, like you have to be comfortable building, you have to be comfortable having everything
you do be under a microscope. Uh, I've been personally, I've been very careful about doing that.
You know, that's why my Twitter is private and everything. Um, cause I want everything that I
do to be like reflective of the company, uh, on not nescesery myself. Um, but every, but w
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whatever the case may be, um, like your, your, I guess it doesn't matter. It's for all startups, like
you're like, like the company is kind of extension of yourself.
Um, that sounds cheesy to say, but it's true. Like, you know, you've put so much effort in. So
much blood, sweat, and tears, literally that, uh, it's impossible not to just attach yourself to it, but
then there's also like an added point of it is that now you have to manage a discord, uh, yeah. Or
in a Twitter of, in some cases, in our case, uh, hundreds of thousands of people that are, you
know, breathing down your neck and wanting to know what's next.
And you kind of have to mix that you have to mix like being a community manager with, uh,
running a business. Um, you know, if people, for example, if, if people want to know what's on
the roadmap, do you know what's on Apple's roadmap? No, it's because like, th they're probably
constantly missing deadlines internally.
And if they're like, you know, um, like we want to make a self recharging iPhone, for example.
And it's like, okay, well, the self recharging iPhone is probably on track five years. Um, but it's
been delayed so many times if they, if they went out and said like, oh, we're making a self
recharging iPhone in 2015, nowadays people would be like making fun of them.
It's like a duplicate, it's taken seven years, whereas my self Iphone . So that's like one thing that
we've learned. It's like, uh, if you, if you announce things before and you're going to pay this
debt to these people that have direct access to your DM's, which you don't have with other
companies, like you can email their support team, but you're not getting in contact with the
owners of the company.
And that's, what's different in crypto.
Researcher: Yeah. Yeah, sure. Um, and then in FinTech, there are, um, three categories of, of,
um, um, well innovation or not innovation, but stuff they do that. It can be a disruptive
technology. It can optimize, uh, an existing technology or embrace an existing technology. Uh,
often with uh, serves services banks already deliver.
Um, um, Um, so with defi, its of course, mostly disruptive technologies. Well now it's often also
copying, uh, other technologies, but the whole DeFi space as a whole would, would still be
categorized as disruptive, I would say. Uh, do you see, um, any change in that? So it moving
towards um, um, also, um, synergy with banks, for example, with other, uh,
uh, applications.
Interviewee: Yeah, of course that was, uh, that is actually something that, uh, last year we
wanted to, um, get on our internal roadmap was because eventually if you think about it in the U
S like, uh, uh, regulation will be coming imminently. Right. And at some level, like you can
think about a regulation comes, like, what, what does that mean?
Okay, well, if regulation comes there, people are probably not going to be okay with this case.
That when I say people, regulators, I should say are probably not going to be okay with the way
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that, uh, defi in its traditional case has been moving, which is like, you know, it's probably in the
future going to be against the law to release an, uh, an unaudited project to U S investors like you
should probably be blocking IP's.
That's probably one thing that they're going to say. Um, and they're probably going to have
standards of what's, uh, what an audited product is and things like that. And like, probably if
you're an auditing company, you probably have to be certified in the U S to, you know, these are
things that you can probably think of .
But another thing is, uh, if you want to be, if you want to have access to even more money, right?
Because like the defi right now is still pretty small. Um, you know, um, if you want to have
access to even more money, you're probably going to at some level have to KYC people because.
Big money, big banks, big hedge funds, big prop trading firms.
Um, they need to know who they're trading against. That's why they trade on the stock market
because they know exactly what they're trading. It's like you have to put in all of the financial
info or all your personal info to be able to trade the markets. And so they know that they're not
training against some OFAC, um, and person or a terrorist.
So defi doesn't give them that security right now. Um, if you are able to implement some form
of, uh, decentralized identity on your dex, right? Where like, you know, to get decentralized
identity, you have to KYC yourself, but nobody else can see it. But if you import some like, um,
some ball that people can't get into SundaeSwap, Before they have a decentralized identity.
Okay. Well then that means that everybody who comes in through SundaeSwap , even though it's
completely de-centralized and anonymous, they can still use SundaeSwap , but you have
assurance that everybody who you're trading against is a good person and pays their taxes and is
not in Afghanistan, manufacturing, weapons.
Um, and so with that assurance, then banks and prop trading firms will come in. And so at that
level, yes, uh, people have to integrate with financial institutions that they would want, you
know, more liquidity and more access to resources because of course these banks have have
many, many more resources than your crypto startup.
Researcher: Um, so would you say those aspects will also, um, be more important in determining
success of defi applications later on?
Interviewee: Yeah, absolutely. I think, um, you're already kind of starting to see it. Like the
wares are just going to get bigger and. And, uh, eventually you're just going to see people like
crypto startups die off, like, um, like in the early dot-com boom, you know, you've probably
researched this a little bit yourself.
Like, um, you know, the, the winners just keep getting bigger and bigger. Like Amazon started
in the early nineties, uh, by the time the dot-com boom hit. Like they were already huge. If
you're starting a company trying to compete with Amazon eight years later in 2001, uh, like you
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already lost, you know? And so if you're trying, if you're trying to compete with, let's say, I'll just
give an example.
Cause you know, UniSwap, I really admire what they're doing. You're trying to compete with
UniSwap in 10 years, you already lost, you know, like there's, there's not going to be room for
another, uh, AMM on Ethereum when you know, swap already has partnerships with Stripe and
all these big banks and stuff.
Researcher: Well you also have the example of of course, Yahoo and Google.
Interviewee: Yeah. Yeah. But Google, in that, in their case, they had something special to offer,
like, like their, their search engine was just so much better. Um, and at a certain level, like if, um,
I don't know, at a certain level of luck plays a lot of success into it too, like, uh, we certainly got
lucky, um, you know, there's, there was at one point like 25 dex'es or something building on
Cardano.
How many of those have launched? Three. So we got lucky. Yeah.
Researcher: All right. Um, yeah, I've kind of answered this already a bit, but, um, would you see,
um, like you said, you would see, um, some, um, embracement of traditional finance in defi, but
would you also see a, um, like a synergy. Um, where if, if FinTech, you have a FinTech
applications that need banks, um, and also, um, get something out of it and banks also get
something out of it. Uh, uh, from their, uh, um, yeah. Synergy with the FinTech applications.
Would you see something like this happening in DeFi or would you say, um, DeFi would be like
a standalone? Um,
Interviewee: um, no, there's, there's going to be some, um, they're going to get something out of
it. I mean, banks always find a way to make money.
Um, one thing I can think of just off the top of my head. Um, so before SundaeSwap and before,
like we decided to build Sundaeswap, so me and my co-founder, um, we were decided, or we
were thinking about building like a Celsius clone, which was, it was essentially going to be like,
you provide, you, give us your money, we deposit it into compound or of a, or like some of these
other dex'es
and, um, we like provide liquidity and yield farm for you. It would be like an automated
program, obviously it would be like on your phone. And, um, we would take a cut of that and
you just, uh, you, you would not have to have a crypto. It would just be like connect to your bank
to the thing. Um, and so I can probably imagine like the same thing, uh, happening with the bank
and by the way, um, you know, future, uh, just for your reference, um, there's like dozens of
companies doing that now.
So it's, it's not actually anything special. In fact, like a couple of them were doing it, an anchor,
and now these companies are blow it up because the Luna collapsed. Yeah. Um, so, uh, yeah, not
a great innovative idea. Um, but, uh, yeah, so like you could probably imagine banks doing like a
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similar thing. Um, they already, I mean, the way that they provide you interest on your savings
account is by loaning your money out and trading the markets with it and stuff.
So I'm sure that they could probably find something in, uh, in defi.
Yeah. But
Researcher: I mean more, more like, um, uh, I don't know about us, but here we have, for
example, um, FinTech apps, where with which you can, um, um, scan a QR or someone else's
phone and transfer money from your bank account, which doesn't go to the bank, um, the bank's
app, but through a separate FinTech app application.
Uh, so more like a consumer that the bank directly uses, uses the service, but, um, consumers,
users, and both parties get something out of it. Would you see something like that happening in
DeFi?
Um, but
Interviewee: I mean, yeah, of course. I mean, I would, I would never rule it out because I can't
see the future.
Uh, I can't off the top of my head. I can't think of any, but I've made, maybe I'm just not creative
enough now. Yeah. I'm like, like someone's going to come up with something at some point.
Researcher: Yeah, for sure.
And then what more on the macro um, side would enable, uh, uh, would be important for the
success of the defi. Would you say?
Interviewee: Uh, dude, um, like maturity of the space we got to get, uh, maybe I'm being, um,
maybe I'm dreaming here, but, uh, like
if you like, like people are not, uh, like people are irrational and generally in mind and, and uh, if
like, if you're making a decision, like you're probably doing it for a reason. Um, so when I see
people not understand, like why, uh, let me scratch everything I just said. Cause I'm, I'm
beginning to realize that that it's not just a crypto thing.
Um, what I was gonna say was that like, And people are always confused with like decisions that
projects do. Um, and they don't typically get why, and then they get mad. Um, but then I realized
like that, that happens with, with big business all the time. People don't understand why, why
Amazon or Walmart or, or whatever, do some certain things.
And it doesn't really matter because, um, end of the day they have no say. Um, so yeah, I mean
just maturity of the ecosystem. Like we got to stop getting fucking hacked all the time and
people need to stop losing millions of dollars other people's money. Um, people need to get
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audited. Like there needs to be, uh, like, like criteria, um, for auditing mean, you know, you need
to be able to say that you are level one or level two or level three audited.
You know, you have to be able to say whether it was just a code audit, um, and or code and
formal verification or design review code review, and formal verification. Uh, and people need
to know what those things mean and be able to save their money. Um, people also need to like,
like, uh, regulation needs to happen.
You know, that there may be weird for me to say since I'm building a defi protocol, but it needs
to happen. Um, there needs to stop being like,
like that. I'm not going, I'm not gonna get too deep into the weeds, but there is a lot of investor
fraud, uh, not, not, um, not retail investor fraud. Well that too, but it two different things like,
um, there is a accredited investor fraud, like where, you know, VC is give money to projects.
And then those projects like just are dead in the water because of founders like cut and run and
they don't explain why.
Um, and there's a lot of, there's a lot of that stuff and people don't talk about it because it only
happens to like accredited investors, you know, they can afford to lose money. Um, uh, but a lot
of that stuff happens. Um, so there needs to be some oversight there, uh, people, um, I think, I
think like, along with the regulation, I think one thing that'll that'll hopefully happen is that if
people are allowed to launch tokens, there needs to be like some sort of like some sort of set in
stone investing schedule for people.
Um, because what happens now is that a lot of projects, even well-known projects, you know,
like one's in top 100 in mark cap, um, they give everybody like a three month vesting schedule
and then they just dump on retail and that, that needs to stop happening. Um, I don't know. It just
honestly, yeah.
Regulation is the same thing and you can, you can take that wherever I've just seen too much.
Uh, I've seen too much bad stuff happened where it's like, man, like if, if, if the good guys came
in and put a stop to that, It would make everyone just so much better off.
Researcher: Yeah. It's like the wild west right now, right?
Interviewee: Yeah, exactly. Man. At some, some level it's good, because you know, that, like,
that, that allows for, I'm going to pat myself on the back , because creative individuals, such as
myself, that can build a community very well. Um, and, and do that quickly. But then like there's
also like the, the people that can do that, uh, that can have similar skillsets or get lucky and, um,
use that for nefarious purposes, uh, do the same thing.
Cause there's like, there's some very charismatic people in the space and, uh, and uh, people,
people get tricked, man. It's unfortunate. Say regulation is the number one regulation needs to
happen. Like in that, that kind of, yeah. Like we need some like some fucking trust for these
stable coins too
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like I, are there any anymore.
Yeah.
Researcher: Yeah. Um, all right, then I'm getting to the last two questions. Um, so would you say
a, like, um, of course defi applications are, uh, like you said, already supposed to run, um,
without people taking profit out of it, um, like the profit to be shared with the community. Right.
So would you say a, um, a business model which makes profit is important?
Interviewee: Um, I mean, yeah, of course. I mean, if you're a business you have to make profit. I
just think that, um, I think that like the way that the, the, the I'm very biased, uh, but I think the
way that we're planning on doing it is the right way, um, like make it protocol and then just build
services on top of it. Uh, so you could make like a subscription service to like, I don't know, I'll
just throw something out, like get half off the top of your fees or something like that.
Like services on top of it. Um, where you could build a, a pro version where, uh, again, I'm
gonna, I'm gonna like where everybody that you trade against is KYC and you have access to tax
services, you know, make it easy to do your taxes on defi using defi protocols, stuff like that.
Instead of just being like a smooth brain and going for the easiest route to make money at, which
is launch a product and take fees from it, which at that point you're pretty, you're breaking. Like
if you're outside the us, maybe you don't give a shit, but if you're in the us, like you need to stop
doing that because you're breaking so many financial regulations, you're breaking the law, you
know, like it's illegal, don't do it. Ah,
Researcher: and do we see this reflected in the, in the current device space?
Like. Projects, we had a good business model being more successful so they can, for example,
reinvest or, uh, completely, uh,
Interviewee: uh, I mean at some level, um, yes. Uh, because those with a huge treasuries, um,
typically are like run by competent people and they have some sort of underlying business
model, right.
Because like, uh, you know, UniSwap they have, uh, they have services that they provide to
other people like workable services and things that they sell to businesses. Um, so yeah, I mean
like, like if you have a good business model and, you know, a good profit, uh, a good revenue
model, like you're not going to be a dud.
Um, you know, just by nature of things. Uh, it's more likely that like, but then there's also ones
that have bad, this. Uh, that are on top as well. Like, you know, your DYDX's that take the fees
from people trading, um, which not sustainable long-term and regulation heads, but for the short
term, like, yeah, I mean, it's a, it's a, it's a bad long-term model, but it's working short term.
Researcher: All right. Um, yeah. Well, I think that was it. Um, do we have anything to add what
you would say, like you said in the beginning, you,
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Company/platform:
Interviewee name:
Interviewee role:
Date:
Greenfield Yield
Mikel Palokaj
Co-founder
20-05-2022
Researcher: Ik zal kort vertellen wat ik aan het onderzoeken ben. Ik prober de belangrijkste
factoren te bepalen voor defi success. En daarbij vergelijk ik het met de meest invloedrijke
factoren voor fintech success.
Dat is wat ik doe en zou je mij kort kunnen vertellen wat GreenFieldYield doe ten waar jij je
mee bezig houdt?
Interviewee: Nou we proberen yield te genereren voor andere mensen, maar dan wel op een
rustige manier. Zonder te veel zorgen over schommelingen.
Ik zit zelf al in crypto sinds 2015 en ongeveer 2 jaar actief binnen DeFi. Dus ik heb er zelf al
winst mee gemaakt en toen dachten we van hoe kunnen we dat voor anderen doen. En toen
hebben we besloten om dat te doen met alleen stable coins via defi protocollen. En we hebben nu
15 klanten en we verwachten dat er natuurlijk steeds meer bij komen. Dat is wat we doen met
GreenFieldYield en dan hebben we nog GreenFieldGrowth wat we een aantal weken geleden pas
opgezet hebben, en daarmee geven we advies aan DeFi startups.
Researcher: Is er iets waardoor jullie klanten hard zijn toegenomen na een bepaalde handeling?
Interviewee: Nou wij zijn een besloten fonds, dus mensen kunnen niet hun investering onderling
verkopen, maar alleen aan ons terug verkopen dus de klanten veranderen niet heel snel.
Researcher: Dan heb ik een aantal vragen over DeFi zelf. Hoe belangrijk zou jij zeggen dat
democratization en decentralization zijn, en zie je dat gereflecteerd worden in de markt?
Interviewee: Nou, Ik zelf vind dat heel belangrijk daarom zit ik crypto en daarom ben ik er zo
fan van. Gewoon een stukje fuck the midle man, fuck the big players en power tot he people. Dat
vind ik heerlijk aan crypto. Door crypto met finance te kopplen heb je die middle man niet nodig
en dat vind ik gewoon top. Maar, een puntje is wel dat je toch vaak ziet dat gemak voor veel
mensen toch boven privacy en decentralization staat. Dus je ziet dat centrelized exchanges toch
meer volume hebben dan dex’es, en dat is denk ik omdat mensen gewoon handelen uit gemak en
werken met een eigen wallet en dex’es gewoon meer werk is.
Dus er is nog veel te halen op het gebied van mensen makkelijker naar defi krijgen zegmaar.
Maar binnen defi zelf zie je wel dat mensen toch wel de voorkeur geven aan decentralized
protocollen, over meer gecentraliseerde defi protocollen.
Wat heel moeilijk is binnen decentrale systemen, en daarom vinden wij tokenomics zo leuk,
want veel mensen willen gewoon veel geld verdienen, maar als je een defi protocol bouwt voor
de lange termijn en je wilt dat het over 10 of 20 jaar nog bestaat, dan is het gewoon heel lastig
om het protocol zo in te richten dat mensen ook over de lange termijn ook gewoon long gevity
zien en dat over quick gains plaatsen.
Researcher: Sorry, dus je zou zeggen dat mensen over de lange termijn decentralization
belangrijker gaan vinden?
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Interviewee: Ik hoop het! Dit is een beetje de evolutie van DeFi, want in 2014, 2015 waren
mensen in crypto alleen computer nerds en cyber punks, maar over de jaren heen komt er
natuurlijk steeds meer geld bij en die mensen die er voor het geld komen hebben misschien niet
dat sterke sentiment van fuck the middle man en power to the people.
Nu zie je steeds meer grote investeerders en VC’s invloed hebben in defi en dat heeft niks met
dat sentiment van power to the people te maken. Want er is maar een klein clubje die daar van
profiteert en jij en ik hebben daar niks aan.
Researcher: Dus om dat te concluderen, zou je zeggen dat decentralization en democratization
wel belangrijke factoren zijn om succes te voorspellen of denk je dat dat niet heel zwaar mee
weegt?
Interviewee: Uhhm. Ik denk dat veel mensen toch wel decentralized protocollen een grotere
slagings kans geven.
Researcher: Dan heb ik nog een rijtje met anderen factoren die ik in mijn literature study heb
gevonden die vaak success van fintech applicaties voorspellen. En dan heb ik er ook een paar
zelf toegevoegd en dan zou ik graag willen dat jij ze rate op hoe belangrijk ze zijn van 1 tot 5 en
dan is 1 niet belangrijk en 5 heel belangrijk.
Interviewee: Oke duidelijk.
Researcher: Oke de eerste is transperency.
Interviewee: 4
Researcher: En waarom 4?
Interviewee: Haha. Ja jij hebt het natuurlijk over success van defi protocollen. En je hebt een
beetje 3 stages voor defi. 1 opbouw/lounch, 2 hype bubble, 3 overleven. En voor een beetje het begin is
transparantie niet zo belangrijk want al er genoeg hype is dan haal je het wel. Maar dan vanaf het moment
van lancering en je die eerste hype echt nodig hebt dan willen mensen meer weten over het protocol.
Ik heb natuurlijk zelf ook wel eens een protocol gebruikt puur om geld te verdienen aan de eerste hype en
dan is transparantie niet echt belangrijk. Maar als ik een product echt langer wil gaan gebruiken dan wordt
zoiets als transparantie natuurlijk belangrijker. Dus voor fase 2 wordt het belangrijk en voor fase 3 wordt
het heel belangrijk. En voor grote spelers zie je dat het daar in elke fase belangrijk is, die gaan vaak
alleen in een protocol als het geverified en geaudit is, anders doen ze het niet.
Researcher: Oke duidelijk, dus het ligt echt aan die stages hoe zwaar het mee weegt naar jouw
mening. Zou je die stages nog eens kunnen herhalen?
Interviewee: Ja dus je hebt meestal Fundraising en launch, dat is 1. Dan als het gelanceerd is heb
je een soort van hype buble van een paar weken, dat is 2. Dat gaat heel snel in defi en crypto. En
dan daarna heb je pas dat de user retention in kickt, dat is 3.
En wat er dan nog bij komt is dat je als protocol ook echt heel erg afhankelijk bent op welke
chain je lanceert. En vaak beweegt geld een beetje naar welke chain heet is. Want eerst was DeFi
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alleen op Ethereum, maar dat was behoorlijk duur voor veel mensen en toen gingen mensen naar
binance smart chain en daarna solana enzo en nu is het een beetje aan het uitsmeren.
Researcher: Ja je had zegmaar zon money bal die door de chains heen bewoog toch?
Interviewee: Ja, ja, ja, ja. En als jij dan dus als protocol op een chain lanceert die heet is met
allemaal incentives en je lanceert daar je defi protocol, dan krijg je snel gebruikers en in een
korte tijd honderde miljoenen, misschien wel miljarden in TVL. En dan twee maanden later
verlaat misschien idereen die chain weer en dan is er niet veel van de gebruikers meer over op
jouw product. Dus dan zit je met de gebakken peren.
Researcher: Oke ja duidelijk. Ik had er nog niet naar gekken met die life stages. Maar dat is
eigenlijk wel een interessant perspectief. Dus dan zou ik je eigenlijk willen vragen om te kijken
naar de volgende aspecten en ze apart te beoordelen voor de verschillende fases die jij
opnoemde. Als dat niet te complex is haha.
Interviewee: Nou nee we gaan het gewoon proberen.
Researcher: Oke wat zou je voor transparency dan zeggen voor de 3 fases?
Interviewee: Ik zou dan zeggen 2, 3, 4.
Researcher: Oke personal interaction is de volgende. Dat zie je nu niet echt in crypto, maar in
fintech is dat wel een belangrijke.
Interviewee: Ja klopt. Hmmm. Nou ik zou misschien, als je een telegram groep bijvoorbeeld telt
als persoonlijk contact, dan zou ik wel 3, 2, 2 zeggen. Dus vooral de fundraising stage en voordat
ze naar de markt toe gaan dan hebben mensen veel vragen. En dan hebben mensen veel vragen
ook met AMA’s. Maar ik moet zeggen dat de antwoorden dan niet eens goed hoeven te zijn.
Maar zolang mensen vragen kunnen stellen zijn ze vaak al tevreden.
Maar bijna alle DeFi protocollen werken het zelfde dus vaak komen mensen er zelf toch al wel
uit.
Researcher: Ja ik snap wat je bedoelt. Oke. En dan “access to multiple relevan services”.
Bijvoorbeeld op TraderJoe kan je vanales doen van NFT’s tot staken. Hoe belangrijk is dat denk
je dat je meerdere services hebt op één platform?
Interviewee: Goede vraag. Ik weet het niet zeker. Voor nummer 1 niet heel belangrijk, want je
lanceert gewoon een product. Voor de hype willen mensen vanales horen, maar eigenlijk gaat het
er niet echt om wat ze allemaal echt hebben. Voor de hype is het goed als ze zeggen dat ze
bijvoorbeeld aan een NFT market place werken. Voor fase 2 maakt het ook niet zo veel uit. Dan
denk ik eigenlijk 3, 1, 1.
Researcher: Oke helder. Brand name en marketing?
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Interviewee: Nou brand name helemaal niks, 0. En marketing voor de sale heel belangrijk en
voor de initial lounch iets minder en voor long jevity bijna niks denk ik. Gaat er vooral om dat
het een goed protocol is en dat het goed werkt. Maar verder de brand name… Naja voor
samenwerkingen als je bijvoorbeeld een feature met SushiSwap ziet dan weet je wel bijna zeker
dat het een goede feature is en dan vertrouwen mensen daar ook wel op, maar dus niet perse dat
ze dan dat geen bij Sushi willen doen, maar meer voor vertrouwe dat het goed is. Maar ik heb
niet het gevoel dat mensen loyaal zijn aan een brand.
Researcher: Oke helder. Convenience?
Interviewee: Ik zou willen zeggen wel hoog. Maar eigenlijk omdat alles in defi een beetje het
zelfde is zou ik zeggen dat het niet veel verschil is tussen protocollen. Wel verschil tussen de
chains, maar daar kan het protocol niet veel aan doen. Eigenlijk wel heel belangrijk, maar in defi
is er gewoon niet zo veel verschil.
Researcher: Ja oke. En easy acces? Dus is het makkelijk om te bridgen en is het makkelijk om
bijvoorbeeld je wallet te connecten en dat soort dingen.
Interviewee: Ja heel belangrijk.
Researcher: Oke zou je daar dan dus een 4 of 5 neerzetten?
Interviewee: Ja naja voor nummer 1 niet heel belangrijk, daar zou ik misschien wel 1 zetten en
voor nummer 2 wel een 4 en voor nummer 3 een 4 of 5 zelfs. Het is wel heel belangrijk.
Researcher: Oke duidelijk, um, timely and efficient experience?
Interviewee: Ja dat is wel belangrijkj. Eigenlijk werkt alles wel heel goed in defi. En het lijkt
veel op elkaar. Maar als je het voor elkaar krijgt om het niet goed te krijgen, dan gaan mensen
het ook niet gebruiken.
Researcher: Ja oke, dus ook een 4 of?
Interviewee: Ja, ja ook een 4.
Researcher: Yield percentages?
Interviewee: Ja ook 5, 5, 5. Laat maar zeggen.
Researcher: Oke, en dan security. In een eerder interview zei iemand al dat er een verschil is
tussen of percieved securety, dus of mensen denken dat het veilig is en of het echt veilig is. Maar
laten we dan zeggen percieved security zeggen. Dus of mensen verwchten en denken dat het
veilig is.
Interviewee: Ja, ja, 2, 3, 4 zou ik dan zeggen hoor. Vaak is het zo dat in de fase 1 mensen in
telegram en als ze denken dat het niet veilig is maar ze denken er geld mee te kunnen verdienen
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dan doen mensen het vaak toch. Miss met minder geld maar mensen zijn vaak banger om geld te
missen dan om geld te verliezen. Helaas, want het zou goed zijn als mensen er iets meer mee
bezig zijn.
En hoe langer het door gaat, hoe belangrijker mensen het gaan vinden. Op het begin willen
mensen gewoon dat het project groeit en maakt het niet zo veel uit. Maar op een gegeven
moment voelen mensen zich er niet meer comfortabel bij en er is iets niet duidelijk en mensen
gaan er naar vragen en ze hebben geen plausibele verklaring, ja dan stappen mensen gewoon uit
het protocol.
Researcher: Oke duidelijk. Dan hebben we team?
Interviewee: Hmm. Ja het kan heel belangrijk zijn. Als er een team is, dan kan je het als voordeel
gebruiken. Maar er zijn ook veel voorbeelden van protocollen zonder bekend team en die het ook
goed doen. Dus ik vind dat een beetje een moeilijke eigenlijk.
En soms als mensen bijvoorbeeld weten dat iemand al eerdere projecten heeft gedaan dan is dat
ook positief, dan hoeven namen niet eens bekend te zijn.
En hoe langer een project bestaat, hoe minder belangrijk team wordt.
Researcher: Oke en zou je dan dus zeggen of het verschil belangrijk is tussen gedoxte teams en
niet gedoxte teams?
Interviewee: Naja, dat is het leuke aan defi. Je kan het goed inrichten. En als je dat gewoon goed
doet met bijvoorbeeld een multi sig wallet. En als er dan ook nog een sideblog op de multi sig
zit, dan kan gewoon iedereen zien als er iets fout gaat. Dus ja. Op die manier kan je zonder
credibility en een gedoxed team te hebben het alsnog heel betrouwbaar en veilig maken door
middel van een smart contract.
Researcher: Oke ja duidelijk. En dan Tokenomics?
Interviewee: Ja, 3, 2, 4.
Researcher: Oke en dan de blockchain en het ecosystem waar het op is gebouwt?
Interviewee: Ja de blockchain kan gewoon echt een verschil maken voor of je gaat overleven of
niet. En voor de initial hype ook. Maar voor de lange termijn, als er gewoon geen geld op de
chain zit dan houdt het op. Dat is punt 1. En punt 2, heel veel protocollen lijken op elkaar maar
er is een groot verschil tussen bijvoorbeeld Ethereum main net en andere chains. Ook in kosten.
Dus die chains hebben rand voorwaarden en die moeten voor jouw protocol geschik zijn en jouw
users moeten op die chain zitten. Dus dat zijn wel belangrijke dingen.
Researcher: Oke en als je het dan weer zou moeten raten in die 3 fases?
Interviewee: Ja, uhm, 3, 4, 4 mischien wel hoor.
Researcher: Oke, en time of existence? Stel iets bestaat al een paar maanden en het werkt
nogsteeds, gaan mensen het dan meer vertrouwen? Is dat belangrijk?
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Interviewee: Ja opsich belangrijk. Wel een goede indicatie of het goed werkt. Maar, wat je vaak
wel ziet is dat als een protocol langer bestaat en leeg begint te lopen dan is het vaak niet meer te
redden. Dus op nieuwe protocollen heb je wel kans dat die money bal daar nog komt. Maar op
oude protocollen die dat al gehad hebben heb je niet vaak dat die money bal nog terug komt.
Maar als je kijkt naar een UniSwap of SushiSwap of Aave ofzo kijkt, dat zijn natuurlijk super
veteranen van defi, ja dan zit het gewoon wel goed. Die zijn begonnen op main net en die hebben
meer chains er bij gepakt. En
Researcher: Oke. Uhm, even kijken. Ja wat je bij fintech vaak ziet is dat er een synergy is tussen
fintech en banken. En daar is success vaak ook aan afhankelijk. Dus met hoeveel banken werkt
een fintech app en hoe soepel werkt het met die banken. En ze hebben er allebei voordelen aan
om samen te werken, bijvoorbeeld zoals met tikkie.
Zie jij ook zoiets met DeFi? Zon soort synergy?
Interviewee: Nou dat is eigenlijk wel een leuke vraag. Als je hier banken vervangt met
exchanges en fintech met defi. Dan heb je wel een goede stelling. Dus bijvoorbeeld zoals
PancakeSwap en Binance.
Vaak is het lastig om je geld van een dex en je wallet naar een exchange te krijgen. Vooral met
nieuwe chains, dan kan je vaak moeilijk bridge enzo. Het werkt dan eigenlijk helemaal niet zo
chill. Terwijl op binance smart chain dan kan je gewoon een coin tegen BSC er uit trekken en dat
werkt gewoon heel goed. En dan is die user experience gewoon heel chill. Dus die synergy
tussen exchanges en chains en dan defi die daar ook mee werkt, dat is heel belangrijk. Zeker.
Researcher: Ja sommige van die dingen kunnen veranderen in belang in de toekamst natuurlijk.
Zou jij zeggen dat de factoren en hun belang ook gaan veranderen over de komende 5 jaar of
denk je dat het wel redelijk het zelfde blijft? Is misschien een moeilijke vraag, maar heb jij er een
idee over.
Interviewee: Ja, misschien wel ja. Ik geef ook crypto workshops. En het grappige vind ik dat
mensen altijd alles willen weten van hoe werkt een blockchain en dit en dat. Maar als je dan aan
ze vraagt van, als jij een WhatsApp berich verstuurt, wat geneurt er dan precies? Dan zeggen ze
“geen idee”. Maar bij block chain moeten ze het allemaal precies weten terwijl het eigenlijk niet
zo veel uit maakt of je het weet.
En blockchain is eigenlijk een infrastructuur waar mensen steeds meer gebruik van zullen gaan
maken en nu al gebruik van maken zonder dat ze het weten. En het is dan aan de projecten en
defi protocollen om dat gewoon goed en verstandig op de markt te zetten. Fintech apps die al
bestaan kunnen het ook gaan adopteren, dat doet Stripe volgens mij al. Dus mensen kunnen het
gewoon gaan gebruiken en de defi app brengt dan je geld van a naar b. Zonder dat mensen
precies weten hoe het werkt. Dus er is nog veel ruimte voor adoptie. Dus ik denk dat het
belangrijk is hoe defi zich gaat positioneren.
Dus op een gegeven moment kan je dan in een webshop met crypto betalen en dat soort dingen.
Researcher: Oke duidelijk. Nou ik ben eigenlijk door mijn vragen heen. Heb jij nog iets toe te
voegen? Of iets wat je denkt waar ik rekening mee moet houden?
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Interviewee: Uhm. Ja ik denk dat de succes factoren op de lange termijn zijn dat 1 het project
moet gewoon goed zijn. En 2 de tokenomics moeten gewoon goed zijn en voor de lange termijn
en ingericht zijn dat het voor de lange termijn kan blijven bestaan. En als die twee voorwaarden
goed zijn dan heb je veel slagingskans.
Het mooiste als je nog b to b er in kan zetten. Bijvoorbeeld 1inch doet dat, of je exchange laten
gebruiken door anderen en pancakeswap doet da took die laten panterswap bijvoorbeeld hun
exchange inbouwen in panterswap. Tijdens de Binance Smart Cain hype lanceerde er heel veel
dex’es die allemaal eigenlijk gewoon de router van PancakeSwap gebruikte. En dan zat aan de
achterkant van die dex’es eigenlijk gewoon al die liquidity op PancakeSwap. Dus de dex van
PancakeSwap kreeg eigenlijk gewoon die rewards van die dex’es.
Researcher: Oke dus het is eigenlijk belangrijk dat ze ook andere revenue streams krijgen van
anderen bronnen dan alleen retail?
Interviewee: Ja precies. Maar je kan dus ook zien als manieren om indirect meer retail money te
krijgen via anderen bedrijven.
Researcher: Oke en hoe belangrijk zou je zeggen dat een goed businessmodel is?
Interviewee: Ja businessmodel zie ik als tokenomics.
En het is misschien goed om nog even aan te kaarten dat er een verschil is tussen tokenomics en
tokenmetrics, daar is niet echt concent over. Maar volgens mij is tokenmetrics de verdeling is
van de tokens, dat zijn dus die pie-charts die je vaak ziet. En tokenomics is eigenlijk hoe de
token zich gedraagd binnen het ecosysteem dat iemand heeft gebouwd. En die tokenomics kan je
dus gebruiken als tool om een goed businessmodel te maken.
Researcher: Oke, makes sense ja. Heb je verder nog iets toe te voegen?
Interviewee: Naja ik kan er nog een paar uur over door praten, maar ik denk dat we in het kader
van jouw onderzoek het belangrijkste wel gehad hebben ja. Ik vond het een interessant gesprek.
Researcher: Oke top, ik vond het ook zeker een interessant en leerzaam gesprek. Heel erg
bedankt!
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Company/platform:
Interviewee name:
Interviewee role:
Date:
OpenOcean.finance
Janis Otte
Head of DeFi Growth
23-05-2022
Researcher: What would you say the most important drivers are for people to use, um, uh,
OpenOcean.Finance and DeFi in general? Because open, OpenOcean.Finances is of course, uh,
yeah, like, uh, uh, using multiple Dexes. So why would you say people use decentralized
exchanges and OpenOcean.Finance.
Interviewee: So for me and my, my personal interest and in general, in general, the interest I see
is, um, the, the, the profits that people think they can make. Right. So I would say there are two
types of users. One user is just buying de-centralized tokens. And of course, it's very charming
that you don't have to do any KYC. For example. Um, several centralized exchanges blocking
some countries, right? So will you serve up from the us cannot go on binance.com and use it. So
there's always like a barrier to enter group, um, several, some coins to buy some tokens.
So if you are a us American, you can deposit it to your decentralized wallet then from there to do
whatever you like. Yeah. So I will say. Different definitely different components, right? On the
warm side, people are absolutely for decentralization. They don't want to have their data stored
on, on a centralized exchange where they have to look the way I see.
Right. So that it's super easy tracker book. You have these part of people that just can't access
centralized exchanges to buy tokens. This part of people. Then you have. The people that are in
to buy some meme tokens, for example. Yeah. What we see at the DeFi segment is, I mean, there
are a lot of old and serious projects, but you always see some meme tokens that do some, I don't
know, an X 10 within a day or something like this.
So you'll have the people chasing that. And on the other side, you have people just chasing the
yield, right. For example, You can deposit your stable coins. You can take USCC, USDT and
just deposit it into a protocol and you will get your 10%, 50% APY depending on the protocol, of
course, but for several people, that's much better than a bank account.
So I would say that the motivation from people is a very wide range. We could make them, like I
said, these three points, maybe some are chasing the, the profit. Some are chasing the yield and
some people in a country like the U.S., I mean, they can use Biden's us for example, but
everything only was KYC. Right. Onboarding on a decentralized wallet. This is pretty simple,
right? You just need to ask your friends, Hey, can you send me some, some, some tokens over it.
I give you cash. I mean, this transaction is not like, like trackable or traceable. Um, but of course,
I don't know exactly is, uh, the, the, the main purpose for I guess the people are here, for profits,
right? To, to earn quick money overnight. I mean, That's not going to happen in most cases, but I
think this is like a, like a driver, right? Like, like a motivation driver. Like you go to the, you go
online on Twitter, you will see people telling you, oh, I just made it 10 X last night and people
are looking to repeat that.
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Researcher: Yeah. So you would say, um, not like with FinTech because FinTech has multiple,
of course, many, a reasons to use FinTech, but with DFI it's still mostly profit driven and a way
to make money without necessarily, uh, having to
Interviewee: Yeah, but to be honest, I absolutely don't want that. It sounds like the people are
avoiding KYC or something.
So I'm, I'm a KYC everywhere, no matter what exchange to take, I KYC'd everywhere. So. If I
withdraw from a centralized exchange on to my, my de-centralized wallet. It's trackable. So I
don't have any issues with that. So it's not that I definitely don't want, it sounds like I don't want
to leave any traces or something like this, but I guess a few people prefer that.
Researcher: Yeah. So, yeah. All right there,
Interviewee: I will add one last point. If you have a centralized exchange account that is KYC
and you withdrawal to meta mask. I mean, there is nothing you can hide here. Right? It's visible
at the blockchain. So it's not like you, you withdraw from a centralized exchange on to a
decentralized wallet, and then you are like untracable right.
I mean, this is absolutely not going to happen. Yeah.
Researcher: Yeah. Clear. Um, well, and have you, uh, in the, uh, How long is a
OpenOcean.finance online now?
Interviewee: Um, should be one and a half years now, I guess, close to two years already. Well,
one and a half sorry, sorry. One and a half. The tool launched one year ago and the platform one
and a half years, but the development started a little bit earlier, right.
Researcher: Yeah. All right. And have you seen in that period, seen any significant changes in a
users like, uh, big moves that, uh, in a user growth because of, um, yeah. And for what reason
was that? If you have seen such a thing?
Interviewee: What I see, um, let me know if it's a little bit too technical or too, I don't know, too
deep, but what, what we see is that.
I mean, we are alive on several blockchains, right? Yeah. And we always see these trends and
this is pretty much showing that the people are chasing the profit here or the moon, right? Like,
like they call it on Twitter, so one day you have, let's say the blockchain, avalanche. So even if
we start a little bit earlier, so OpenOcean launched on Ethereum now. I mean like, like the old
school DeFi chain. At some point Solano started to take off and everyone wants to earn yield on
Solano. So of course the interest is absolutely exploded. The people are looking, what wallet do I
need for Solana.
What is the exchanges on Solana. So the token went from, I don't know, two, $3 to $200. Of
course this is because of people are chasing. Right. They want the next big, big thing on the
chain, the chain, and then it's totally cooling down. And then avalanche was the big topic. Yeah.
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TraderJoe, Pangolin. Um, you name it, Platapus. All these guys suddenly. Everyone was like,
okay, there's a new chain. Let's say not new, but it's a chain that it's like, un-hyped yet. Let's try
to create an hype on here. Right? You see these chase launching an ecosystem fund to, to, uh,
motivate developers, to come to the chain, and then you see it's not super slow and that the
people are bridging and moving their money to Avalacche.
So what, what I saw in the last one and a half years, You have this cycles of chains, right? So
you have Ethereum. I mean, there is always huge volume and the big user base on the Ethereum
that you had Binance smart chain started all that hype a little bit. Then you have the so-called on
Twitter. They call it the Solano summer. And then after that you had avalanche. That's right now,
what I can see on Twitter is that a lot of people are looking a little bit left and right then. That
they are waiting for the next chain. Let's say it that way. And it always takes a few months and a
few weeks. And then you see the capita absolutely outflow from one chain into another chain.
Now. So if that answers a little bit...
Researcher: Yeah of course.
Interviewee: What else I, uh, So in the last, in the last, uh, um, month over the one in the last one
and a half years. So, um, I mean our user base is growing since launch. So it's growing all the
time and every week we see new wallets, that means someone made a new wallet or it's really a
new user.
Difficult to track that, but our numbers are growing and, um, yeah, there was, there was always,
uh, the people are chasing the, the new tokens and they come to our discord and ask, oh, can you
guys list this? And this token, uh, when can I buy it in something like this? So, um, yes, in
general, it's, the people are getting more interested and, uh, Yeah, more and more demand to get
rich quick. I would say.
Researcher: So, um, like you explained now, it's mostly, I think, um, the, the users within the
Defi changing their, uh, um, behavior to different chains. But is there something in your own, uh,
like, um, when you started doing more marketing or like, of course all that would increase users,
but, um, yeah. When you added something to the, to the application or it would, or removed
something, is, is a some event like that that made a big impact on users.
Interviewee: Um, I mean, we always try to. Um, listen to all communities. So if our community
says, oh, guys, please have, look at Fantom. That chain is growing right now. I mean, of course
we are having a look into the history of the last weeks. And if it makes sense, we are integrating
that as well as the dex aggregator and what, what we see that. Of course is, uh, is, uh, inflow of
new users.
Researcher: All right, clear. Um, well then then three, uh, aspects of course that are very
important in a DeFi are, uh, digitalization. So ultimization decentralization and
democraticization. Um, and do you see, uh, do you see that the importance of these aspects is
reflected in the market. And do you think yourself that these are very important or is that like
over-hyped and are other aspects more important?
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Interviewee: Can you repeat the aspects please?
Researcher: Uh, digitalization, decentralization and democraticization,
Interviewee: and want to hear my personal opinion,
Researcher: firstly, of your personal opinion. And then after that,
Start coding
Interviewee: So, I mean, I'm not from the tech side directly, right? Yeah. Everyone on Twitter is
saying Solana is super centralized chain because if, if the node is going down or some nodes are
going down, the chain is stopping to work. But so in terms of decentralization, this chain is, is
not decentralized, but the people are going there for the low fees. And the super high speed of the
chain. So, yes the people are always, uh, pre, uh, talking about decentralization, but when it
really comes to, oh, only use, um, decentralized protocols, then, um, the people don't care that
much about it. Right. Then they follow the money. Um, they follow the money flow. They
follow the hype, they follow the trend that okay. And forget everything about decentralization or
is it decentralized or not? Right. If you go for BNB, Binance Smart Chain BSC, um, it is, it has
like 12 nodes or 20 nodes. So it's absolutely centralized centralized chain.
But if you see the user numbers that are, I think they have several million transactions per day.
So yes, The people are asking for decentralization, but when you see, when you look at the user
numbers, look at BSC, look at Solana, then it seems like they choose, where are the good
projects? Where can I make money?Where are the NFT's, where can I make quick profit? What
is the community? Uh, using right now. So I think the people putting the profit over
decentralization.
Researcher: Yeah. All right. All right clear.
Interviewee: I, my personal opinion is very similar, so I was a big fan of Solano and I'm still a
big fan of Solano. I mean, this is like super personal, right. And I, if you used it once and you'll
see the speed, then you are like, oh my God. I want to stay here. I don't think you have in your
mind that, uh, is it really decentralized? How many nodes does it add and stuff like this? You
know what I mean? Then you are just like, oh my God, it's fast, easy, nice wallet. The fees are
super cheap. I like a lot of people are using that. There is some profit to make, I want to stay
here. You know what I mean? This is my, how I approach that.
Researcher: Um, yeah. Yeah. I kind of agree with you. Uh, next question off, which I would like
you to, um, rate, I have several aspects and I would like you to rate them, uh, from one to five on
importance. Um, and then maybe for some elaborate, why you rate them that way. Um, so the
first aspect is transparency. How important would you say that is on a scale from one to five?
Interviewee: Um, what do you mean exactly? I mean, at the end, everything is transparent on the
chain. Do you mean it related to approval? Um,
Researcher: I mean, it's a no, I mean, it's, these are more related to DeFi projects, so not per se to
the chain.
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Interviewee: Oh, that's super important. I mean, in general, the chain itself is transparant, right?
To just be on the blockchain Explorer and you can see exactly what was happening there . If it
comes to protocols directly, I think it's very important that you, you gain some trust from the
users. I mean, everyone can find out who is it? What is the team wallet here? For example,
everyone can see the transactions from the team wallet. So, uh, the, that the, that the people
having some, some trust here and say, Okay. I trust the team. They don't sell too much tokens or
they don't sell them too early so that the team is transparent on all this.
What are they spending money on? I mean, you'll see that in a lot of dao's, right? Where, um, re
really people, people managing the money and they say, okay, We make a vote; should we pay
this developer $5,000 or not? The people can vote, they see, okay, this is the budget. This is
going to this developer, this is going to a market, um, marketing agency to a designer. So, um, in
general, that it's, that, uh, um, protocol is transparent on, um, what are they, what are the fees.
What are they earning? What happens with the tokens of the tokens locked off for two years or
they not locked and stuff like this? Um, yes.
Uh, I should say a number instead of the 10 minutes answer. What was the most important?
Five?
Researcher: Yeah, haha. Five is most important. One is not important.
Interviewee: All right give it four. Three to four, some, some somewhere around that. It's still
depends a little bit on the, on the protocol, right? We as OpenOcean for example, we don't tell
any one where we spend money on?
So, The people can see all the stuff on chain, but it's not like in the super, super detailed, um,
because we are not a dao, right? People are not voting for them. So, yeah. Transparency is a big
topic because otherwise you will see someone deep-diving into the blockchain explorer, and the
people will find out things you don't want to have public. So, you need to play fair anyway. Yes,
I would suggest and, uh, give it as advice to a project if they don't want to get burned on Twitter.
Um, they should be as transparent as possible.
Researcher: Yeah. Yeah. All clear. And, uh, by the way, um, these aspects, I would like you to
think for the longest time, like, uh, my previous interview, the guy, he explained that, um, there's
a big importance in importance for many of these aspects. When you look at, um, success as. Uh,
a hype for a few months or in, for a longer time horizon. Um,
Interviewee: Yeah that's true as well. I mean, if you wanna, if you want to have a hype for two
months then you can do whatever you like, , then if you plan to be in this industry for three
years, with one project its different, he has a point to here. Yeah. I mean, if you want to make the
quick money and enjoy it for a month. Then it's not that important, but if you want the years
longer than a time, it's important.
Researcher: So I would like you to rate them for a longer time, like, uh, alright. If that's alright.
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Interviewee: Yes sure.
Researcher: Personal interaction. So that's an important point in, in traditional FinTech
applications like a customer customer care or whatever. Uh, do we think this will be important
for DeFi?
Interviewee: Uh, for me, I guess a question about the community would come as well. Right? So,
um, I, personally , I'm not expecting any customer service service when I'm using a defi protocol.
I mean, you go to the Discord and you ask a question and someone is answering that or not. So,
uh,
Researcher: So does it matter it has a discord or not?
Interviewee: But yeah. Yeah. I mean that you have these extra communication tools such as, uh,
Telegram, uh, and discord. Yeah, I would absolutely say, um, it's yeah. It's I mean, there was no
project without a discourse. Right. So, um, that the people that have met these, um, how to hold a
job. Give it a three, maybe a little bit usual. So, I mean, I mean, we have several users coming in
our discord and asking technical questions because they, they, they, they, they have some things
they don't understand, but, uh, if you take a project like a TraderJoe uh, there is no much to
understand, right. You just go there and you exchange, and then you are fine. So th the, this
whole discourse thing, I mean the people that are spending hours, they are, they are vibing. They
are they're listening music together and stuff like this. So if it comes to community part later, I
guess then I would rank that very high.
Researcher: All right, clear um, access to multiple relevant service. So, uh, not only a Dex, but
also for staking or a lending or stuff like that.
Interviewee: Mm. Oh, sorry. Can w how do you exactly define that? I mean, that you can stake a
token to the protocol, how important that is for the protocol, et cetera.
Researcher: I mean, I mean, access to multiple or relevant services. So for example, TraderJoe,
you see, they try to implement as much different services as possible with even NFT's, I think.
Interviewee: Yeah they have some crazy, they cover the cover of money market. They cover dex.
They have a launch pad. For the long term success in general. I would say it's always good to
innovate a little bit, right? I mean, you can even see that in super, let's say. OG or old school
project, like, uh, like a UniSwap or SushiSwap that they do stop like a launch pad on SushiSwap
its misu I think they have a launch pad. So even those protocols existing for a few years, still
trying to offer something more than they did at the beginning. To keep the users entertained to
bring in more users to bring, especially in one important thing, to bring revenue to the protocol,
because if you want to survive in the long term, you need revenue for your protocol.
Researcher: So, uh, what would you say is what would you rate it as access to multiple relevant
servers?
Interviewee: Um, well, the for the long term I give it a four.
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Researcher: Alright. Clear explanation. And, um, well then the next aspect would be brand name
and marketing.
Interviewee: Um, uh, these are some tricky questions I have to say. With brand name, you mean
the name itself or the standing in the industry?
Researcher: Yeah, the standing in the industry. Or wheter it is linked to a brand name?
Interviewee: This is pulled together from, from, uh, how fancy is the protocol? How much fun
would you have with the protocol and stuff like this? Right. Um, so it's pretty important. I would
say good marketing, good marketing moves. Can, can bring you a ton of users. Yeah. So, um,
there are only a few ways, right? You're making the most fancy protocol that the people would
come automatically so I mean, I'm at several TG groups, my friends just sending me stuff if they
like it.
So it's, the protocol is trash, but they give away a Tesla. I mean, I would still not use it. So it is
very tricky to answer with just one number. Now if it's a good protocol. I will get, I would see it
anyways because. I'm in that place. I'm on Twitter. I'm following several people. I have a group
of friends. They have directly highlighting something if it's, um, if it's good. So, um....
Researcher: Yeah, well, if you, if you don't like your explain the explanations also pretty clear.
So if you, if you, if it's hard to link a number to it, uh, like you explained it depends on the
situation. It's also fine. Like, uh,
Interviewee: Yeah I mean. Like, for example, I don't think TraderJoe . I mean, we can take
whatever protocol you want.
For example, I don't think TraderJoe did any public typical classic marketing stuff, like, uh,
adding some banners somewhere or making Twitter ads or something like this. I don't think they
did that. So TraderJoe's built because they are shipping products every few weeks, then they are
announcing something new. This is their marketing, right? It's I mean, somehow it's not directly
a marketing, but they are still interested interesting for the, for the industry and for the people
that are in this market. Right. So it's a protocol can be super successful without spending any
cents on Twitter advertisement or on, uh, but they spend money on giveaways . Um, Or some
competitions or something like this. So, um, yeah, maybe I'm very neutral here general, but
maybe give it a four as well. So. It depends a little bit for us. For example, for us, for the longterm marketing is pretty important that we have banners out there that people get to know what is
a dex aggravated doing.
Cause we need a lot of educating the education to people. So, uh, TraderJoe doesn't need to pay
money for a YouTube video where someone is explaining how TraderJoe works. So we need to
educate the people; why should we use it the dex aggregator? So we are spending money on ads,
and we will spend more in the next years. So for us it's super important.
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Researcher: . So yeah, I understand. Yeah. Yeah. But I'm for, for example, TraderJoe, a brand
name is also important. Like I would say people come back to names that they already know.
Right. Um, or, yeah, so. Yeah, we'll have,
Interviewee: I mean, if you, if you, if you, if you jump into the TraderJoe community, for
example, um, then, then you are in the community, right. And if you are, I mean, TraderJoe is on
avalanche. So if you are a community user of avalanche and to trade a lot on avalanche, then, I
mean, you don't even think that much, right. You just open TraderJoe and you're fine with that
because you are already part of the community. You are in the hype together with them and stuff
like this.
Yeah. And if you get used to a UI at some point, then you're staying there.
Researcher: Yeah. Yeah. All right. So the next aspect is convenience. Uh, yeah. Convenience or
ease of use.
Interviewee: Thats super high, five.
Researcher: Yeah, a five?
Interviewee: Yes. So few, few ideas. A few, if you would take Curve, do you know Curve?
Researcher: Yes.
Interviewee: I mean, it for example, Curve has a horrible UI since the beginning, but it has so
much liquidity that people just go there because it is working, but it's not for the, “wow. That
looks good. That's super smooth”. But to attract like the new people, and especially people that
are not in DeFi yet, it needs to be convenient, right. Without much explanation. I think how those
Solana guys are doing, um, protocols. Um, nice UI. The buttons are nice. Everything works
smooth, some nice colors, people that think about the brand identity. So, um, to address the more
new people. It needs to be easy to use it, right. Without much explanation without, okay. Then
you click here, then you click there. It needs to, um, yeah, easy to use it. If you go, if you go on
to curve, it's not that you say, wow, that looks good. Let me try that. Yeah, but they still have
tons of volume because it works, but I'm not sure if this will attrect. If I tell that someone outside
of DeFi, Hey, could you put the Curve? They will ask me like, uh, that looks like, I don't know,
first website in 1999 or something like that. You know what I mean? If I sent them to Saber.so
from Solana, they will be like, oh my God, that looks fancy. That is easy. One-click everything is
done. Super self explaining. So to onboard you people, we need. Easy onboarding.
Researcher: All right. All right. clear explanation. Um, and then easy, excess, uh, would that, I
would mean the ease of bridging, for example, to a chain and, uh, ease of connecting a wallet.
Uh, well, I guess you're actually fixing that issue, uh, kind of right with the OpenO cean or, or
am I missing that?
Interviewee: Um, as well. So bridging is super important. If you have, if you don't have a smooth
bridge, your chain will never get traction. So I would count that a little bit in this whole
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onboarding process. Right? If you, if you want to have users use your protocol or your chain.
You need to enable these people to use it, right? So you need to have a, uh, a bridge, like
Wormhole. You need a bridge, like AnySwap that works, that works smooth. So, um, yeah, I
mean, if you want to have, if you want people coming on your chain to have some fun with DeFi
protocols you need a bridge. .
Researcher: So how important would you say it is? Uh, on a scale from one to five.
Interviewee: Five.
Researcher: All right.
Yeah. And then also connecting a wallet in the indeed. Um, well then the next, the next aspect is
a timely and efficient experience. So how long does a transaction, a take. Yeah. And is it, uh, do
we have to take a lot of steps or wait a long time before your transactions go trough. How
important is that what you say?
Interviewee: Hm. I mean, all chains are fast right, nearly all. And the fees are, um, some, some
have like 10 cents fees. Some has 3 cents fees. So. I don't know. So I personally don't really care
if it's 1 cent or 10 cent. So, but of course I absolutely enjoy if it works smooth and it's like of like
a fast execution.
Researcher: Yeah. Yeah. And then I'm also talking about the DeFi protocol itself. I'm not really
sure if there are, if there is a lot of difference, uh, in those with how tight, how efficient and there
are, but if that's the case, is it important?
Interviewee: Uh, it's depending on the chain and right. Yeah. So it's pretty much...
Researcher: All right. Um, okay. Um, then yield percentages, how important is that?
Interviewee: Yeah, I mean, that's, uh, uh, in the, that is a good big driver to bring TVL. High
yield is like the initial starting point, right. Where people think about coming to the chain and if
you keep these high, the people would stay there. So, yes, I mean, it's, I mean, we all know the
yields are not unlimited, but if you have the option as a protocol and you don't have too much
side effects and yes, try, try to keep the yields up in order to bring the people first to your chain,
bring the people to your protocol and then let them stay in that protocol for as long as possible,
right?
Researcher: Yeah. Yeah. All right. Um, well then an aspect which, uh, is important then has been
important in FinTech, but, uh, I don't really see it yet in DeFi, but maybe you have an opinion
about how important it can be in the future and its integration in social worlds.
So can you follow other traders their trades and stuff like that? Like you have on some
centralized platforms.
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Interviewee: Um, there is copy trading on DeFi already. And I know a few protocols developing
that maybe they already launched I'm a 100% sure, but that could be very big.
Researcher: Yeah, allright. Yeah. Um, yeah, it's maybe also a bit, uh, a hard aspect because it's
kind of related to what you expect from the future. So, um...
Interviewee: well, copy trading, this is a thing where I can tell you that it would become bigger .
Researcher: All right. Um, then another aspect is security. How important is that for DeFi
protocols?
Interviewee: Yeah, uhm tank it five.
Researcher: Then we have team, uh, the team of a DeFi application, how would you rate the
importance of that?
Interviewee: That's five . Yeah. I mean, the team is everything, uh, from, uh, building trust, from,
uh, being motivated, no matter if the market goes up or down, I mean, the team needs to stay
where it is. Right. Uh, and all that. Yeah. Yeah. The team members are super important.
Researcher: And what would you say for, uh, like the perception of, of people, um, of course for
the, for the development of the application, but do you also see it reflected in a market that, uh,
for example, applications where a doxed team, uh, do better than applications…
Interviewee: I would, I would not say that.
Researcher: Alright, um, Tokenomics if a DeFi application has its own token.
Interviewee: So for the long run. Absolutely important, I would rank that really high. If the, if the
product is good, but the tokenonomics are not good. I mean, you will upset a lot of community
members. You will. I mean, people tell you that they are around just for the tech, but then, in the
end, they still want to earn some money from that. And if your tokens are not bringing any
revenue or incentive, or something like this, then you would suffer in the long run. I would add
that very high.
Researcher: Okay, um blockchain on which, which the application is built? Well, you are, you're
doing multiple blockchains, uh, yourself. So,
Interviewee: uh, um, to be honest, these questions are very, um, It's very difficult. I don't want to
say like difficult to answer, but, um, think about it if you are well, Avalanche right now, and
Avalanche is going to zero because there is no demand from other communities. Um, or the
ecosystem, the, the, the chain team, et cetera, is not doing a good job in terms of marketing, in
terms of bringing new users. Then if you choose to deploy your project on Avalanche, I mean,
I'm just taking an example, right? If you deploy, you're talking off Avalanche, but the whole
chain is not taking off. Then you will have a problem, no matter what kind of product you ship,
you can build the best product. If there are no. No new users coming to the chain because of
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general marketing things like having crypto conferences, ecosystem grants. I mean, if a team of a
chain it's not offering all this and if the chain is never getting any traction, no matter how good
your product is, you will just not get what you deserve, right. So the choice of the chain is, is
like. In the building process. I think a lot of teams have this as a very basic discussion. It's like,
okay, what kind of product will, first of all, maybe they start with should we be doxed or not.
Then it's what kind of protocol should we build and then, okay, what chain should we go? So it's
very early and important decision. For the long run. Super important. Might be the reason for
success or not. Yeah.
Researcher: But you kind of worked around that, uh, risk of like a chain not doing good. Because
you have your open ocean is on the. Multiple chains right.
Interviewee: So, yeah, I mean, for us it's, I mean, I mean, we have just a dex aggregator right?
But if you take a, um, I mean, we can take whatever example, if you, if TraderJoe has the best
dex that is existing in this whole DeFi space, but they are only on Avalanche. And for example
Avalanche is not doing good. They can make whatever product they want, it can be, it can be
never seen before, and it would be difficult to get traction here. So, and for us, um, we are an
aggregator, right. We aggregate the liquidity that is existing. So if let's say, I mean, it's just
always examples, right? I mean, for us, it's not that big of a problem. So let's say polygon is, is
suffering a lot of users the next six months is for us. Yeah. Okay. Our volume will decrease a
little bit, but it's okay. If you bid your project on Polygon only you will have huge issues. And if
you want to deep dive into some details, ask the Terra projects.
So it, it is, it is very important. Yeah. But you, but you don't have, uh, so you need to make the
choice, but you don't have the power to, to really influence it. You just choose your chain and
you pray. Its a super importnat decision, but you can't influence what is the chain is doing.
Researcher: Yeah, yeah. Uh, so the next point is a time of existence and a track record. Would
you say that is important for a DeFi success? Yeah, of course. If you're talking about long run,
uh, success than they always have a track record. Um, but do you see like, like....
Interviewee: Um, yeah, at some point I personally would say people are not even questioning if
the product is it's like serious or not, or if it's in for the long run, I mean, you can just see when
they start the build and if they are still in the space, right. You can take all these examples, uh,
Curve UniSwap, SushiSwap, um, uh, what Yearn finance. I mean, there are these super OG, I it's
difficult to call them old, but like long long-term and longtime existing. And no one is
questioning if they are doing good job or not. Right. Because most people would say like, uh,
okay, they are good for three years now. Um, they need to do something good here, so that, yeah.
As long as you're here. Its more trusted in general. Yes. Yeah.
Researcher: All right. What, what factors would you say yourself are most important for a DeFi
success? Um, can be any one that we already discussed or, uh, any new one, just what you, what
you're thinking of right now.
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Interviewee: To be honest, it absolutely needs to be a mix of different things. If you want a bet,
the most successful, if you find a protocol right now, you need a, you need to go on a chain that
is having traction so that it's like trending, right.
Then you need to offer a protocol that has something new. Or something you haven't seen
before. And then if you have a good backing, like some VCs supporting you and then the pro
protocol is getting a good community and printing some money for the community. I mean, then
you, that you made it, this is the whole process of making them. A good protocol, I would say.
And when I, as an example, I would take the Platypus guys on Avalanche, for example. So I
don't know if you wrote about them or if you, if you know them.
Researcher: No, I don't. I don't know them.
Interviewee: This would be some success stories that were coming to my mind right now where I
think, oh, that matched well together, like they, they launched on Avalanche with Avalanche
absolutely peak. And everyone was looking at them. They built something. I don't know if this
was existing before, so it was a single site.
So they built something unique. So they had a good time and they picked the, the, the, the, the
trending chain. They built something unique. They had a strong backing from some VC's. Some
of the big players. So this is bringing subtraction anyways, right? Because this will spread on
social media and, and stuff like this. Um, then they built their tokenomics for the long run and
then they build a good community around that. And so everyone was earning money, having fun
in the community. So I don't know how to summarize that.
There are a few things that you can match together from timing, change, decision protocol,
design. How, how much fanboys do you get? How active is your community? So if that answers
that.
Researcher: Yeah, so do you think, uh, if you look for the coming five years that, uh, these
factors will change, and go more to a similar type as FinTech has, or do you think they will
mostly stay the same?
Interviewee: Five years is a, is a super long type time. I, if it's only my personal opinion, um. I
mean, we already have some institutional, um, companies looking into DeFi protocols now and.
We already saw, um, one big protocol. What was it? Was it Aave? I think Aave got some
certification that big capital players can deposit money in there. Yeah. So right now the space
itself is not that, uh, that, um, I don't know what you have in Netherlands ; Rabobank? I mean,
it's not that, uh, Rabobank can just go on a TraderJoe, and make a deposit, right? There are so
many regulations. So the big players are not even here yet. Right? So, and I saw Aave. They got
some certifications now that in theory, institutional players could slowly move a little bit money
over there. And this is another important, um, Yeah, factor. I see here, if, if we are getting more,
um, I mean the last day there was a lot of European regulations. If we get the stuff for a little bit
more, if the industry is a little bit more regulated, if we, if we can comfort the bank to deposit
Euro's into a protocol because it's super safe and existing since years. I mean, these are game
changers, right? If there is one big bang telling you that Aave got certified, Um, then it's secure
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to use. Okay. Let's put, let's put some billions in there. I mean, that will be, that will be a game
changer and would change the space forever.
But, overall to say how it looks like in five years is like, like super difficult.
Researcher: So that, that kind of brings me to my, to a, to another question I wanted to ask.
About what macro enabling factors need to happen for DeFi to be successful and for
applications, uh, to be successful. So you're already kind of answered that regulation, uh, maybe,
and they need to get regulated themselves. Uh, are there are things, uh, on the macro scale that
need to happen?
Interviewee: Um, I don't, I don't, I don't know. Can you maybe rephrase the question or, I mean,
yeah. Regulation is a big topic. I mean, don't want lot, no one wants them to happen because of
all that. Oh, I want to stay anonymous stuff like this, but on the other side, everyone is. Oh my
God, we need to be regulated to bring the big players.
So it is an interest conflict here anyways, right? I mean, um, if the, what I see if you want to put
that into macro I mean, if the interest rates in banks staying that low, if we have a combination of
low interest rates in the bank and, um, Getting the regulated DeFi space. I mean, that, that, that
could be like a catalyst as well. Right. So I have, for example, I have several friends from all
kinds of industries. They are working in. They have never used MetaMask in their lives. They
have absolutely no idea how all that works, but I often use a question like “my bank account
absolutely sucks. I get 0.03% . You're doing this crypto stuff, right? Uh, can I give you some
money and you put it somewhere and then it's 5% per year” So yeah. I see there are some people
having this interests already, but they absolutely have no idea where to start. And so education is
one thing and I mean, I will not take the money. Because I will be responsible for it, but I, so
maybe, maybe, maybe a combination of regulation and education. To make it safe and to make it
easy with a few clicks.
I mean, then you have this inflation topic, if that is increasing over the years, I mean, people will
always look for alternatives. Right. So, and what is the alternative right now? I mean, there are
people that absolutely got getting destroyed, um, that, that invested in tech stocks the last five
years. So there, there are some factors, it, in the macro environment, that can catalist all that.
Um, and now a lot of people are like, oh, maybe I need an alternative investment, um, idea. Or
maybe I should diversify a little bit more. Maybe I put a small percentage in crypto. So yeah,
there's, there's a lot happening out there the last days and weeks that, um, could be good for
crypto and DeFi.
Researcher: Yeah. So to rephrase that, you would say that performance of other markets is also
could be a catalyst for a DeFi success?
Interviewee: Yes. Yeah, that's a good summary. Like. Development of inflation, uh, success or
failing of, um, out of other markets, stock markets, um, regulation, education.
Yeah. All right. So I, I, to be honest, I, I, I mean, I'm, I'm 36 and, uh, all my friends are from the
tech or it industry. And. How they, how should they start? If I don't tell them, I mean, it's sort of
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meta mask. Do you think you will join another universe? Right. So this needs to be one, click,
two clicks, easy understanding. How does it work? Where does the money goes? Yeah. So you
see what Binance is doing. For example, the port FTX is to it all the exchanges right now are
doing education, trying to make a learn and earn campaigns. So I think all, all of them
understand that there's so many people out there having absolutely no idea where to start and
how on start and where to click.
Researcher: Yeah, yeah. Clear. So, um, another question I was having is that, uh, in the FinTech
space, you see that, uh, it's very important for FinTech applications to have a kind of synergy
with banks, uh, of which they both profit. So if a bank has a partnership, uh, with, with some
FinTech applications, it's good for the bank and for the FinTech applications, uh, in DeFi, we
don't really see this. There are some examples, of course. Um, do you think this is important and
the importance of this will increase? Or do we think DeFi will just be a standalone?
Interviewee: I mean, where I see there is a link already right now, or synergy. I mean, there are,
there are payment processors, like. Ram Ram network or Moon pay where you can directly, um,
buy crypto with your credit cards. And it is, they send some funds to your meter mask. So it, I
mean, it's not really decentralized or anonymous or whatever. Right. But, um, This onboarding,
it's a, it's a big, big topic. Right? So, um, but I think the, the space or the banks are very cautious.
. There have been some issues with centralized exchanges and bank accounts. Right? And I think
slowly, the banks are a little bit more willing to cooperate here. So I think that's definitely a plus
for the, for the space.
So. Um, yeah, I mean, banks will definitely, um, I don't know if it's needed that banks cooperate
directly with the DeFi protocol. I mean, I see that as a very difficult task here now, but if the
general topic, if banks becoming a little bit more friendly, um, making onboarding easier, I
mean, we see that in the us every, every few weeks that banks plan to. Um, offered ETF for, um,
their, their customers. And I don't see the link between DeFi and the bank account directly yet,
but in general, maybe that's better for the, for the question before, like yes. Onboarding in
general or, um, giving, giving people access to that. So, but then. Then we are coworking with
the bank directly as an example, I don't see that as the as something that would happened. And I
don't see that as a topic that would bring us value.
Researcher: Well, another interview I had, uh, uh, when I asked this question said that maybe it's
important to have synergies with, um, exchanges. Uh, what do you think of.
Interviewee: Yeah. I mean, we all know those, the exchanges are the magnet of the users, right.
And the centralized exchange space is, is where the volume is. So these synergies are definitely
making sense. I don't know if you saw it, but, uh, for example, PancakeSwap is integrated in the
Binance app. That enables millions of new users using PancakeSwap. So for them it's like, oh,
I'm in the Binance app. I can just click on the pancakes app. So here's the huge synergy, right?
So. In general, this is in something that would, that would definitely help to onboard the people.
Right? Because for a lot of people is that, oh, the centralized exchange is my safe heaven.
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Nothing will ever happen with my funds here, but at the second you withdraw onto your
MetaMask wallet, or whatever, it's like, okay, I'm on my own. Now. I am responsible for this. So
to, to give the users a safe environment like Binance is doing right now is absolutely smart and a
good move, right. That to maybe create a little bit, Ce- DeFi here, like centralized, decentralized
finance combined together.
Yeah. But that's, that's definitely good point.
Researcher: Yeah. All right. Um, well that brings me to my last question. Um, How important do
you think a good business model is, uh, in DeFi, of course, it's important to earn, to have a
sustainable business, but do you see this reflected in the markets?
Interviewee: Um, I think it's, uh, it depends on who the, on what kind of protocol you are, right?
If you have VCs, if the fund that you with a few millions, I mean, your protocol can run for two
years. You don't need to earn any dollar. If you are self funded. And you don't have any VC
backing, I mean, you need to generate profit from the first minute.
So, um, what was the question? Yeah.
Researcher: How important is a good business model for the, for a DeFi app?
Interviewee: Yeah. I mean, like, like I said, if it's a self funded protocol, you need to be good at
to try to earn money ASAP, right? Yeah. Yeah. And so yeah, the business model, um, yeah, it, it,
it, it's, it's super important. I mean, I would add that into, for me, it's like the section of
tokenomics a little bit, or like income streams, revenue. So, um, especially for example, if you
reward token holders as well, is it's a part of a business model that keeps users holding the token
or interested in staking and stuff like this.
So, um, yeah, the business model is important.
Researcher: Uh, all right. Um, do you have any, any other things to add, which you think I
missed or you think would be important for my research?
Interviewee: Um, I haven't joined these, um, uh, researches too often yet. So, yeah, I think that's,
that's pretty much it. I mean, you already have a lot to write.
Researcher: Yeah, I do. For sure. All right.
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A.3 Survey protocol
88
A.4 Additional surveys statics
Mean Of Importance Score
Integration with the social world
Brand name
Democratization
Personal interaction
Yield percentages
Automatization
Access to multiple relevant services
Time of existence (track record)
Tokenomics
Timely and efficient experience
Blockchain on which it is built
Convenience
Team behind it
Decentralization
Easy access (bridge & connecting wallet)
Users' experience
Transparency
Security
0
0.5
1
Mean
89
1.5
2
2.5
3
3.5
4
4.5
5