For many, 2020 was the year of DeFi. For others, 2021 saw a heightened DeFi awareness among the general public. However, for all the growth seen so far, it is interesting to note that only ~4M people have ever used DeFi.
There are somewhere around 200M to 300M potential users worldwide by most estimates. Comparing these two estimates would put DeFi penetration below 2% at this moment.
The sustainability of DeFi has been a hot topic of debate among speculators. Surely DeFi is not about to die on the vine if the statistics compress. The promise and scale of innovation is way too large for that, however, there are some issues that need immediate remedies.
The DeFi landscape is fragmented
The majority of DeFi protocols today are advanced, regularly audited, and professionally run, but they have complex interfaces and execution strategies approachable only to sophisticated users.
Assets are synthed, wrapped, and split across multiple chains and protocols. This has made something as straightforward as following your own portfolio a complex endeavor involving multiple dApps and APIs to monitor holdings across AMMs, DEXs, and wallets.
Need to lend or borrow? Users can choose between various protocols such as AAVE, Compound and Maker. What about exchanging assets? Again, users may need to pivot between exchanges such as Uniswap, ParaSwap and Curve. Then, to make matters even more complicated, we have an additional level of structured products and derivatives, as well as multiple layers on top of primitives.
Unless you’re a DeFi native, managing assets can get complicated — quick.
And with high gas fees, multiple transaction costs and the risk of malicious actors or hacks, navigating the space can be cumbersome and frustrating.
This is not where the future of DeFi is headed.
Moving beyond asset aggregation
Innovation in DeFi has led to a proliferation in yield generation and enhancement opportunities. Today, the sheer size of these investment opportunities requires diversification, allocation, insight, and to a large extent, automation.
Onboarding institutions, corporations and investors will require deep-rooted, ingrained, and efficient tracking systems, especially asset management infrastructures that serve as flexible, cohesive, and efficient gateways to organically optimized yields. This is part of what Enzyme has delivered to date.
But this is only the first step. Aggregation on its own is not enough.
Asset managers, DAOs and corporate treasury managers also require a range of personalized tools to service their needs. This includes, but is not limited to, programmable risk management policies, 24/7 NAV reporting, ability to trustlessly delegate trading to one (or more) person and access to composable on-chain strategies.
With Enzyme’s v4 Sulu, this is what we have strived to achieve.
Evolving the infrastructure of on-chain asset management
Clearly, DeFi and on-chain asset management can help a variety of users, but the infrastructure needs to evolve to continue to meet new demands.
Aggregating hundreds of tokens and dozens of protocols onto one platform was a significant first step, but now it’s time to raise the bar and deliver the tools and experiences that professional asset managers, corporations, DAOs and investors expect.
Below we explore some of the various ways that we can support these audiences and deliver on their needs.
Decentralized asset management dramatically reduces the cost of starting a fund — in terms of monetary value, legal requirements and endless red tape. At Enzyme, we’re seeking to reimagine how asset managers can build, launch and manage a fund.
In our latest Sulu release, asset managers can select from pre-built vault ‘helper templates’ to suggest the right configuration according to their use case. These templates have varying levels of trust mechanisms, which, alongside customizable settings such as defining exit fees, relaying gas costs and enabling transferrable vault shares, offers a greater level of control and administration.
In today’s macro-economic climate, corporations are in desperate need of low-risk, high-yield investments that can turn static capital into consistent gains. With on-chain asset management, liquid assets can be converted to earn yield on stablecoins (zero volatility), which offer significantly greater returns than traditional low-interest savings accounts.
Enzyme can help corporations maximize their idle cash reserves by putting this to work in DeFi. Most importantly, though, these funds are non-custodial, which means that a company does not need to trust a third-party — rather, investment decisions can be delegated to an internal stakeholder by leveraging Enzyme’s custom risk management and trading delegation policies.
Likewise, a DAO treasury needs to ensure that it can fund itself in perpetuity. But keeping all of its treasury funds in native governance tokens may kill that goal Enzyme helps DAOs achieve this goal by turning otherwise idle treasuries into strategic resources.
With Enzyme’s programmable risk management features, DAO treasuries can delegate trading to a single member (or several members) of their team to make operations much more efficient. This is a big leap for DAOs, since Enzyme’s risk management policies guarantee efficiency, transparency and security in one platform, making it possible for DAO token holders to trust that the organization is being managed professionally.
For investors, on-chain asset management offers several advantages to the traditional finance (TradFi) world. Transparency is a big plus, given that all transactions are logged and recorded in real-time on the blockchain for anyone to see. Moreover, it democratizes access to funds that retail investors simply wouldn’t be able to access in the TradFi space.
To drive greater adoption, however, on-chain asset management needs to design a user experience that mirrors and builds on functionality in the TradFi world.
Enzyme’s redesigned UI seeks to solve this problem. Better segmentation of the vaults depicted in long-term alpha generation pipelines displays the most consistent and trusted managers to ensure full oversight to investors and aid in decision making.
Do we have a catalyst for mass adoption?
By focusing on reducing friction, lowering barriers to entry and solving complexity, on-chain asset management can take a step closer towards mainstream adoption.
The aggregation of hundreds of assets and dozens of protocols in one platform was a major shift in the history of DeFi asset management, but the future will be determined by those that can address a broad range of blockers for retail, corporate and institutional investors by delivering enterprise-grade infrastructure and tooling.
That is where the future of DeFi is headed.
At Avantgarde Finance, we’re excited to help a range of clients launch their own DeFi strategies with Sulu. Here’s a quick summary of how we can help:
- DAO’s: Avantgarde helps you manage your crypto balance sheet in a safe and transparent manner while still taking full advantage of the rapid pace of innovation and iteration of new financial primitives.
- Treasury Management: Give us a mandate and we will help you earn yield transparently and in line with your DeFi philosophy and investment policies.
- Asset Managers: From investor management to strategy automation, Avantgarde provide tools and services to optimize your on-chain asset management experience.
Click here to register your interest and a member of our team will be happy to reach out.