Flipping the exchange: How we’re going to make profits with our users, not against them

Today’s exchanges are broken.

  • They list scam coins.
  • They advertise tokens that have peaked and will never return.
  • They run trading competitions offering ridiculous prizes that incentivise dangerous activity.

And, above all…

  • They don’t care whether their users make money, or even want them to

This is because exchanges are torn. They are forced to incentivise trading of all kinds of crap because trading fees are their lifeblood. 

This creates a vicious circle of ever-riskier assets and offerings. Effectively, the exchanges are geared towards their users losing money.

The most extreme version is derivatives trading, which in the cryptocurrency space is close to pure gambling. A recent study showed that 97% of day-traders lost money over 12 months. In fact, there is clear evidence that most people lose money when trying to trade for a living.

But we want to flip this on its head. We want to make profits with our users, not at their expense. 

This isn’t just good for business. It’s good for DeFi, too.

Right now, DeFi matters more than ever

 

At the time of writing this note, a war rages in Ukraine and the whole world’s attention is turned towards the horror of an unjustified assault on a democratic nation, happening in slow motion. 

Within this context, there is a stark reminder of why the free world needs to move away from traditional finance.

    1. The global context of inflation. Some economists are even suggesting it will remain high for decades.
    2. The weaponisation of finance by governments. In this case you can argue it is being weaponised for good reason. But the damage is being done not just to Putin and his comrades, but to the entire economy of Russia and all the individuals living there.
    3. The collapse of currencies. Not just the rouble, but many other nations’ currencies too (Turkey for example). 
    4. The need to help refugees. We need a simple, transparent way to provide aid to those who need it most.

Of course, these are not normal times. Whilst most of us in the West might be worrying about inflation, we don’t necessarily need to worry about our national currency tanking by 40%, or suddenly having to pack our bags and flee across our nearest border as a refugee. 

But these unique circumstances hit home. In fact, they make visible the very reasons why we are so passionate about DeFi.

DeFi represents freedom. Financial freedom for everyone, in every country. Independent of nation states, of background, gender, or politics. Regardless of rich or poor, of victim or victor. 

As exchanges, we should be trying to help unleash this freedom, not trying to rebuild the barriers of the old world.

So we need a new kind of exchange

 
Last month DeversiFi launched a new yield opportunity on the platform: supply USDT and start earning 19.5% yield instantly via the Anchor Protocol on the Terra blockchain. No withdrawal time, no friction.

This is a prime example of the passive income opportunities that are available to everyone on DeFi, if you know where to look. 

However, these sorts of passive income opportunities often require specialist knowledge and a deep understanding of the DeFi space.

That’s not what we’re about. 

 

We’ve built DeversiFi because we want people – ordinary people around the world – to be able to enjoy opportunities that they can’t currently access. 

As inflation goes up in the traditional world, all of us are going to feel the pinch. Savings accounts are offering meagre interest, wages are falling and the cost of living is going up.

For many people, financial freedom is a pipe dream under these circumstances. But DeFi can change that. 

We genuinely believe that the new opportunities being created can revolutionise the way that people save, spend, and think about money. In the process, they will birth entirely new possibilities for people who want to take control of their finances and their lives.

Let me be very clear: We aren’t here for the short term. We don’t care about derivatives gambling, or NFT flipping, or pump-and-dumps on token airdrops whose name no-one will remember in a few months’ time.

We don’t want to succeed at the expense of our users. We want to succeed when, and only when, our community succeeds.

This is a bold vision and something we haven’t seen articulated clearly in the DeFi space. It’s hard, too. But we want this to be the light that guides everything we do.

So how are we going to do this?


Today, like most exchanges, our revenue comes from trading fees. 

But we want to change this, and migrate towards a model where protocol revenues are related to the percentage of net profits made by users. 

This goes hand in hand with the drastic changes witnessed in DeFi over the past few months, notably the move towards multichain and cross-chain ecosystems.

Until now, our vision has been to make DeFi accessible so that more and more people can use it in their daily lives to obtain financial freedom. 

We’ve been striving to achieve this goal using innovative Ethereum Layer 2 technology, and we’ve succeeded in creating one of the first rollups in the world. Our exchange allows people to trade, swap and invest without paying gas fees, while always staying in control of their funds. 

But at our core, we’ve focused primarily on the DeFi that is available on Ethereum. 

So this year we want to come at things from a different direction. Not focus simply on what we can make possible on Ethereum Layer 2, but instead look at what our users really want, where the best opportunities are, and then select the right technologies to make that possible.

What we’ve already done to achieve our objectives

 
  1. First of all, we’ve set up governance to help decentralise the protocol, and involve our users. We’ve created the DVF token and distributed it to our community. As part of the distribution, we’ve launched a trading rewards programme to enable our most active users to play a bigger part in our story over time.
  2. We have also worked on completely trustless Layer 2 AMMs and launched the first stage. This has allowed us to add several AMM pools on L2 and given us another tool to help launch new assets off the main Ethereum blockchain, with good liquidity and prices. Roll-out is still ongoing, and so far we have only whitelisted pools where we are the sole liquidity provider. However we will soon open that up so that anyone can provide liquidity.

What have we learned from the roll-out so far?

First of all, we’ve learned that liquidity is expensive. 

We knew this of course – we see it everywhere. Building L2 AMMs leads to fragmented liquidity across the ecosystem. Optimism, Arbitrum and others are facing this same problem, and so it becomes difficult and expensive to compete on liquidity – especially against L1s! 

Some of the other on-chain projects like Avalanche have massive spending programs, with millions of dollars worth of their tokens used every day to incentivise liquidity. 

Originally this was our approach too. The community had voted on a spending program for liquidity mining, starting with 18 pairs and then expanding to hundreds, with DVF used to incentivise initial liquidity until they became large enough to be sustainable. 

But it’s important to consider whether this is the best and most efficient way to use DVF for this AMM launch. When competing directly with other L2s and L1s for liquidity, the cost is going up. 

So how can we, as a community, be smarter? How can we find better ways to do this, instead of going head to head with massive L1s like Avalanche which can pay more than we can?

This is where the next part of our vision comes in. For DeversiFi to be successful in our mission, we need to allow people to access tokens that aren’t just on Ethereum but are drawn from across the EVM ecosystem and beyond. 

A major part of our focus this year will be to expand what we can offer, so that from one simple interface you can buy tokens that are on L2 but also on many other chains. This will solve some of what we were trying to solve with AMMs, but in a more efficient way. 

As tokens become popular and are traded on the DeversiFi UI, it will clearly be worth creating a native L2 AMM pool to capture volume instead of routing it elsewhere, meaning those tokens will be cheaper for DeversiFi users to trade. 

AMMs can also be used as a tool to launch new markets quickly, capturing the latest opportunities for DeversiFi users. 

Moving forward: our approach to layer 2

 

Layer 2 is not quite ready for mainstream adoption yet. Each L2 project is a silo that needs a critical mass of users, developers, products, on-off ramps, bridges and infrastructure to compete with other layer 1 chains. 

At the same time, over the past two years we have seen the growth of competing specialised layer 1 chains and demand for a cross-chain experience. 

However, we firmly believe that layer 2 is the future. As well as inheriting the security guarantees of the main Ethereum chain, layer 2 reduces the cost of making transactions and deploying smart contracts – fulfilling the promise of DeFi, without compromise. 

So we want to make sure that our users can access the best of the multi-chain world, directly from the ease, convenience and privacy of their own layer 2 control centre. 

It shouldn’t take three years of DeFi exposure, dozens of failed transactions, hours of worry over ‘lost’ funds in bridges and stuck transactions to give people the confidence to seek out and access the best DeFi opportunities. 

Anyone should be able to connect their non-custodial wallet and access the best of DeFi, with confidence that their funds are always safe and that they are always in control. 

In a world where DeFi is filled with scams – short-term profit, and dumping – projects often collapse within three months. In this context, it’s worth asking: Why are we building this? Why do we think DeFi is important? It’s not for the short-term, or the NFT flipping, or the wash-traders. 

We are here because we genuinely believe that decentralised finance can provide a safe haven from inflation and from other very real issues people face in their lives, including authoritarian governments and war. 

The temptation may be to offer our services in a centralised manner. But in a world where censorship is becoming more common, and finance is becoming weaponised, we believe that the short term painpoints of self-custody are vastly compensated by the breadth and depth of opportunity and innovation. 

Having worked on layer 2 technology since 2018 (before Layer 2 was even ‘a thing’) the DeversiFi team has the skills to bring the best of Layer 2 to our users.

And now we’re going to take this focus even further

 

Below are just a few of the first-mover innovations we’ll be rolling out in the coming weeks:

  • Our newly launched Arbitrum bridge continues to scale, allowing you to transfer stablecoins between DeversiFi and Arbitrum quickly and cheaply. This complements the existing Polygon and Bitfinex bridges, meaning that DeversiFi is quickly becoming a Layer 2 hub. And these bridges are just the start…
  • New passive income opportunities will enable you to deploy your funds into long-term passive income opportunities whilst holding your favourite crypto tokens. 
  • A new AMM liquidity mining governance vote will enable the community to pitch a new, more concentrated liquidity mining program that is sustainable and offers value to DVF holders. With the community’s support we’ll launch the new programme, bringing even better liquidity and prices to our Layer 2 control centre. 
  • An MVP for cross-chain swapping will allow you to swap any token directly from your DeversiFi Layer 2 control centre cross-chain, marking the beginning of the end for fragmented DeFi.
  • Continuing UX improvements will make us an industry leader and give our users the best possible DeFi experience. 
  • Additional incentive programmes will launch. An MVP of our referral programme and changes to the existing Trading Rewards programme will reward users who hold xDVF, instead of those who just try to farm and dump at the expense of the DVF community. We want to incentivise true participation, not cynical profit-taking. 

So, to sum up…

 

Today’s exchanges are cheating the purpose of DeFi. They’re exploiting users, not empowering them. We want to change that, and the chaos in Eastern Europe has only increased our resolve.

Our mission is to make money when our users triumph, not when they fail. So we’re going to transform our revenue structure, explore exciting new opportunities such as AMMs and cross-chain, and ignore the short-term profit-grabs that many other exchanges pursue.

It’s time to flip the idea of an exchange on its head. LFG!

Share this post

Share on facebook
Share on twitter
Share on linkedin
Share on reddit

Latest Posts

Upcoming DLMsSign up to be the first to hear about the next token launch using a DLM.
Liquidity MiningEnter your email below to be the first to hear about our liquidity pools.
Referral ProgrammeEnter your email below to be the first to hear about our referral programme.
DeversiFi NewsletterEnter your email below to stay up to date with all things DeversiFi - our mission, latest updates on the platform and how to maximise on all the incentives and rewards we have to offer.

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

DeversiFi NewsletterEnter your email below to stay up to date with all things DeversiFi - our mission, latest updates on the platform and how to maximise on all the incentives and rewards we have to offer.
DeversiFi NewsletterEnter your email below to stay up to date with all things DeversiFi - our mission, latest updates on the platform and how to maximise on all the incentives and rewards we have to offer.

Earn 19% APY on your stablecoins