Defi Infrastructure 101 — Oversikt og markedslandskap

Decentralized Finance (DeFi) is redefining the future of finance. There is a major shift going on in the underlying infrastructure powering financial applications, and it’s changing the way we think about permission and control, transparency, and risks.

DeFi er en markedssektor i utvikling innenfor skjæringspunktet mellom blokkjedeteknologier, digitale eiendeler og finansielle tjenester. I følge DeFi-puls, the value of digital assets locked into Defi applications grew 10X from less than $1 billion in 2019 to over $10 billion in 2020, and over $80 billion at its peak thus far in 2021. Yet the DeFi applications and underlying infrastructure are still in its nascent stage of development.

The goal of this report is to provide an introduction of the new emerging area of DeFi infrastructure powering DeFi apps today. While it’s easy to get caught up in the hype and speculation within the space, I’ll focus on the key components of Defi applications, their key differentiation compared to traditional finance, potential risks, and longer-term implications these Defi apps are causing.

Major Structural Commonalities Across DeFi Apps

DeFi apps are financial applications with no central counterparties. In practice, this means there is no institution (e.g. banks) you are interfacing with to access these financial applications; instead users interface directly with the programs (e.g. smart contracts) on top of the protocol itself. For more of a DeFi 101 primer, I highly recommend denne rapporten.

De viktigste kategoriene av DeFi-apper inkluderer desentraliserte børser, utlånsplattformer, stablecoins, syntetiske eiendeler, forsikring, blant andre. Selv om de er forskjellige i omfang, deler alle disse DeFi-appene et stort sett med fellestrekk, inkludert:

1. Bruke underliggende blokkjeder som hovedbok
2. Åpen kildekode og gjennomsiktig som standard
3. Interoperabel og programmerbar (komposerbarhet)
4. Åpen og tilgjengelig for alle (uten tillatelse)

Bruke underliggende blokkjeder som hovedbok

Compared to traditional financial applications which use core banking systems (Fiserv, Jack Henry, FIS, etc.) as the underlying ledgers of record, Defi apps use blockchains as their underlying core ledger.

A few of the most prominent blockchains used to build Defi apps include Ethereum, Solana, and Binance Chain, etc. These underlying blockchains store the ledger state of what is deposited into the DeFi apps, what is stored within the smart contracts, all of the transactions, and withdrawals.

All of the core accounting functions to ensure matching inputs and outputs are handled by the blockchain itself, the Defi apps don’t need to create external systems to reconcile balances, because all of the transactions are queryable across the various block explorers.

I tillegg, sammenlignet med det tradisjonelle systemet er det ingen egen prosess for oppgjør og clearing av transaksjoner. Transaksjonsbehandlingen, avregningen og oppgjøret skjer samtidig når transaksjonen kringkastes. Selv om det er tilrådelig å vente rundt ~21 blokker eller mer for å sikre endelighet på selve blokkjeden.

Åpen kildekode og transparent som standard

Compared to traditional financial applications which are all closed-source and built on top of proprietary systems, Defi applications are typically entirely open-sourced and built on top of open underlying blockchains.

Dette forårsaker tre interessante egenskaper:

1. Sammenlignbarhet — Selve DeFi-appen kan forkledes, remikses og gjenbrukes i mange andre applikasjoner (mer om dette nedenfor).
2. Åpenhet — Siden DeFi-appen er åpen kildekode, er den fullstendig reviderbar for å vite nøyaktig hva den smarte kontrakten gjør når det gjelder funksjoner, brukertillatelser og brukerdata.
3. auditability — Siden den underliggende blokkjeden i seg selv er åpen kildekode, er hele strømmen av midler fullstendig reviderbar, inkludert sikkerhet i systemet, handelsvolum, mislighold osv.

I motsetning til det tradisjonelle finansielle systemet (som er ugjennomsiktig), kjører det på et brøkdel-reservesystem og er utsatt for markedssjokk - DeFi-systemet er fullstendig gjennomsiktig og overbelagt - som lar DeFi-selskaper klare nedgangstider mye mer effektivt.

Interoperabel og programmerbar

For at utviklere skal få tillit fra brukere, er flertallet av DeFi-appene helt åpen kildekode – inkludert frontend og selve smarte kontrakter. I tillegg, siden DeFi-apper alle kjører på toppen av en felles plattform (den underliggende blokkjeden), er disse DeFi-appene fullstendig interoperable med hverandre og kan programmeres til å fungere med alle andre DeFi-apper i økosystemet.

Dette blir ofte referert til som "penger legos"Eller"komposisjonsevne" aspekter ved DeFi. Alle disse DeFi-appene er som individuelle legobrikker som kan remikses for å fungere med andre legobrikker for å bygge noe nytt.

Sammenlign dette med det tradisjonelle finansielle systemet hvor;

• Fragmentering av infrastruktur — Tradisjonelle finansapper bygges ikke på toppen av felles infrastruktur.
• Siled applikasjoner — Tradisjonelle finansielle apper er vanligvis eiet av én bankinstitusjon. For eksempel fungerer alle Wells Fargos "fintech-apper" sammen, men ikke på tvers av forskjellige bankinstitusjoner.
• Utvikler uvennlig — Tradisjonelle økonomiske apper er ikke laget for andre utviklere å bygge tjenester på toppen av.

Det tradisjonelle finansielle systemet har felles standarder; Det er imidlertid ekstremt vanskelig å oppnå konsensus på tvers av markedsdeltakere fordi finansinstitusjoner ser på programvaren deres som deres konkurrerende vollgrav i stedet for å bruke produkter som en differensierende faktor.

En av de største grunnene til at vi har sett så mye innovasjon innenfor DeFi-området er fordi systemene er interoperable, det lar utviklerens økosystem få mer kreative uttrykk for produktene og tjenestene de lager. På toppen av dette trenger ikke utviklere å kaste bort tid på å finne opp hjulet på nytt, men kan heller bygge på vanlige rammer og fokusere på tingene som gjør produktene deres spesielle.

Åpent og tilgjengelig for alle

Med tradisjonelle økonomiske applikasjoner må nye brukere vanligvis gå gjennom en langvarig introduksjonsprosess, inntektsverifikasjoner, kredittsjekker eller til og med personlige møter – bare for å kunne bruke et gitt finansielt produkt.

På grunn av disse vilkårlige reglene satt av finansinstitusjoner, er disse innføringsprosessene utsatt for skjevhet herunder utlånsavgrensning, avslag på grunnleggende banktjenester, åpne kredittlinjer uten samtykke, å kreve ulovlige avgifterOsv

Med DeFi-applikasjoner trenger du bare en lommebokadresse for å samhandle med disse systemene. DeFi-apper ber ikke om inntektsbekreftelse, de trenger ikke kredittsjekk, og i de fleste tilfeller trenger de ikke engang å vite hvem du er utenfor lommebokadressen du bruker.

Dette blir ofte referert til som DeFi-apper tillatelsesløs. Hvis du har midlene i lommeboken for transaksjonen du vil gjøre, kan du gjøre det. Det er ingen institusjoner eller mellomledd som kan stoppe eller nekte tjenesten til deg. Det spiller ingen rolle hva bakgrunnen din er eller hvilket land du kommer fra, DeFi-apper diskriminerer ikke.

Dette er en av de mest undervurderte aspektene ved DeFi-produkter.

Traditional Fintech Architectures vs. DeFi Architecture

Her er et mer arkitektonisk diagram over de viktigste tekniske forskjellene mellom en tradisjonell fintech-app og DeFi-app (forenklet for korthets skyld):

Here is a more direct comparison chart on some of the key differences between centralized and decentralized financial applications:

DeFi Infrastructure — Market Map

Below is a market map of two different DeFi ecosystems, one built on the Solana ecosystem and the other built on the Ethereum ecosystem.

The reason why I am picking these two ecosystems to focus on is to show the breadth of DeFi apps being built across two different underlying protocols. I also believe Solana is the most interesting new layer one protocol because of its high transaction throughput (50K+ transactions per second), sub second latency & transaction confirmation times, and fast growing ecosystem of developers building DeFi apps on top of the Solana protocol.

While similar in structure, each underlying protocol has its own ecosystem built on top which is largely independent of the other. Below are some of the further explanations of each layer and the tradeoffs between them.

Base Layer (Layer One)

The base layer is the blockchain in which the core ledger itself sits. Ethereum is the most dominant layer one today, and Solana is the most promising new entrant with faster transaction speeds, more throughput, and cheaper transactions.

Node Infrastructure

A never ending amount of data needs to be queried about the underlying ledger (retrieving blocks, finding transactions, syncing data, writing transactions, etc). In the Ethereum ecosystem, a whole industry sprung up to solve this need (Infura, Alchemy, etc.).

Contrast this with Solana where the underlying ledger is fast enough and in sync enough that teams can just query Solana’s RPC nodes directly (this might not last forever though).

Lag to

On Ethereum, there are various layer two solutions primarily used for scaling since Etheruem itself cannot handle all of the transactions on itself. Two of the promising scaling solutions include Matic, Optimism, among others.

On Solana, since there is only one layer to build upon (no layer 2 scaling solution needed) there are no specialized integrations needed and no mismatches with the underlying ledger which is processing settlement.

Order Book Aggregation

Unique to Solana, there is an additional layer occupied by a DeFi project named Serum which provides a CLOB (Central limit order book) that is used by all of the DeFi projects built on top.

When new DeFi projects are built on top of Solana (DEX, AMM, Options, etc.), they can pull orders from Serum and push orders back into Serum, greatly reducing the cold start challenge most new financial applications face.

The best way to think about it is to think of it as “networked liquidity” and an “order management” system which is used by the majority of projects within the Solana ecosystem.

One of the more innovative examples of combining a CLOB (Serum) and an AMM is Raydium (very similar to Uniswap v3). The combining of these systems allows for passive LPs with active market making using Serum.

DeFi Toolset

There are a set of common tools needed to operate most of these DeFi apps, either from the perspective of developers or end users. These services don’t have direct traditional finance analogies but they include:

• Lommebøker — The main interface people use to store assets & interface with DeFi apps.
• Orakler — On-chain data feeds DeFi apps use to reference prices and execute transactions against (example: liquidations).
• Block Explorers & Analytics — Tools like Block Explorers were created to allow people to query the blockchain ledger itself directly. These are used most often when verifying transactions.
• Stablecoins — The two main assets used in DeFi ecosystems include the underlying native protocol token (ETH or SOL) and ideally on-chain stablecoins (USDC, Dai, or Pai).
• Front-Ends — A new emerging layer which creates easy to use front-end applications to interact with multiple DeFi projects at once, or to simplify transactions. This includes both Zapper.fi within the Ethereum Ecosystem or Step Finance within the Solana ecosystem.

DeFi-apper

The DeFi apps themselves are composed of all of the core financial applications which can be used directly, or embedded into other various apps within the crypto ecosystem.

Potential Missing Pieces of DeFi Infrastructure

When comparing and contrasting DeFi infrastructure with traditional financial infrastructure, there were a few pieces that don’t exist yet in the decentralized world that could be interesting to explore.

A few to highlight below:

• Forbrukerapplikasjoner — In the traditional financial world, consumers typically act with consumer apps (ex. Robinhood, Chime, Transferwise) not the underlying protocols themselves. The front-ends of the DeFi space could be greatly improved and intermediate much more of the total consumer experience. In general, the UI/UX of most DeFi apps are still very difficult to use from a consumer perspective.
• CRM — The DeFi space doesn’t really have a concept of customer relationship management nor typically collects any amount of consumer data. While great from a privacy perspective, there is great value in understanding the customer better.
• Påminnelser — Notifications or alerts don’t really exist at all in the DeFi space at all. On a more broader level there aren’t any great methods to communicate with users either.
• Produktanalyse — There are tools to measure blockchain activity, but not to measure engagement within DeFi applications.
• Sikkerhet - DeFi products do typically conduct security audits; however, none of the security audits guarantee the most common protections consumers are accustomed to in the traditional financial world. On top of this, the demand for security auditors outstrips the supply, so it’s a big bottleneck.
• Transaction Rollbacks — In traditional finance, if you make a mistake, a financial institution can initiate a rollback of the transaction. This does not yet exist in DeFi.
• varetekt — Right now, most DeFi projects need to be interacted with from an individual wallet perspective. None of the custodians allow you to interact with DeFi apps.
• Developer Platforms — Most of the developers in the crypto space are building right on top of the layer one protocol itself. There are no concepts of developer platforms or middleware just yet.
• Embeddable Wallets — Wallets are seen as these external services, there aren’t any offerings of white-label wallets to embed these directly into the DeFi apps themselves. There are several initiatives such as torus, but these are still in its infancy.
• Identitet — One of the biggest complaints from the traditional finance world about DeFi is the pseudonymity of users. Ideally there needs to be a way to keep out the bad actors while persevering consumer privacy.

Future of Financial Applications

After meeting hundreds of founders and seeing progress teams are making, one thing is very clear — the pace of innovation in DeFi is 10x faster vs. that of traditional fintech apps.

In traditional finance:

• The underlying ledgers are not open source nor developer friendly.
• There are a whole host of “banking as a service” applications just to wrap underlying partner banks in developer friendly platforms.
• Fintech apps are very challenging regulatory wise and typically take years of development before releasing a single product.

Contrast that to DeFi where:

• Everything is open source including the ledger itself.
• All of the transactions are public.
• Everything is built from the perspective of developers building applications on top of protocols.
• New DeFi apps are built and released in weeks, not years.

We at Race Capital believe that DeFi developers will forever change how the finance world works. We are incredibly bullish about the DeFi infrastructure stack and community.

If you are building the horizontal infrastructure layers of the new open source financial stack including: trading, lending, borrowing, and/or any horizontal tools all new DeFi projects will rely upon in the future, we want to chat with you. Send me a message > chris@race.capital

Takk!

A big thank you to Bartosz Lipinski, Kas Vardhanabhuti, George Harrap, Dylan Macalinao, Anmol Singh, Edith Yeung, and Kim McCann for helping to review and provide feedback on this post.

Disclaimer: I’m a proud seed investor in Solana Labs.