Research and Development of Sustainable Defi Ecosystems

Transcript

foreign hello hi everyone thanks for coming to my talk today um just a quick introduction I am Windra and I lead strategy at element a lot of what strategy means is you know research and development into products design looking into the overall default ecosystem seeing how different protocols work and how they could integrate with us or how we could build on top of them and element Finance is a fixed rate protocol on ethereum we do effectively yield stripping on chain and we create a fixed income Market we are effectively a market for fixed income for users to come in and buy a

fixed rate and effectively of um Source yield in a fixed rate fashion so let me go ahead and talk a little bit about this topic research and development is a sustainable default ecosystems is something that we've been thinking about for the past two years we launched mainnet last year and at the moment we're currently building out version two and a lot of these different aspects were things that we consider to be extremely important when we built out and designed out our version two so just a really really quickly uh just wanted to talk about just the D5 ecosystem in general and D5 stack um it's it's always growing there's a lot of different ideas and protocols

that are being built on a daily basis and you know different versions of protocols that have been around the space for for many years there's a high degree of composability you know this enables a wide array of ecosystem developments and endless integration opportunities you know we've had conversations with various different D5 protocols where you know it was possible for us to build product on top of them and it was also possible for them to build products on top of us so because there's a high degree of transparency in terms of how these products are constructed they're easily replicated and we've seen you know this be something that is fairly common in in the D5 product development space which

you know you know at the end of the day it's it's great for end users but you see these products for example in traditional Finance where a principal protected product would take a 10 fee management fee from from the user and in in defy when products end up taking too big of a cut from us from a user a competitor could come in and look at the the construction of that product and figure out where the fees are being extracted from and effectively start over and offer a much more competitive yield product for the user and we've seen this you know yearn you know you know with with convex and with other yield aggregators just constantly competing with each other to offer the best rates for for the users you know

and of course there's there's this massive opportunity for simplification because there's still multiple layers of abstraction and complexities in in various different decentralized applications that make it really hard for users to interact with the pro with the protocol in the product and so we try to be mindful of that and try to remove a lot of those different layers and make it really easy for our users so just some of the aspects that we think about a lot when we started to map out our version 2 from everything that we've learned you know some of the core focused in in our research and development is the product you know and we constantly ask ourselves you know are are the incentives the actual product or is the usage of the product the incentive and what we

mean by that is you know there are there's been a lot of protocols out there where effectively the incentives and the rewards that were emitted by the product effectively became the product itself and became why the reason became the reason why the product was you know effectively being utilized to begin with and when we want to analyze on-chain data in terms of what the users are actually doing on their protocol to figure out what sticks and what doesn't and what's actually being utilized some of these rewards and how they're designed actually start to skew the data a little bit because all of a sudden you see all these actions that you know traditionally are not um natural or organic sequence of actions that the users are doing but

rather they're doing that to effectively leverage up on the rewards that are earned on the protocol and so when we talk about sustainability you know we think about how we can incentivize users to turn the product itself into an incentive so you want to use the product because you like it because you're earning yield you're earning interest you're making money off of it without actually having any form of external rewards that as effectively is necessary to keep the product afloat so this is something that we think about when we design out the product but also we kind of put ourselves in a situation or a scenario where you know what happens worst case in in D5 like what happens if the rates go too low or what happens if

we have will you end up having no incentives at all you know how do we create products that are still attractive to users and you know part of our version two one of the products that we were coming up with is you know because element is a is a yield shipping protocol we basically can allow users to take exposure to for example the supply rate of compound which is directly tied to the the borrow rate of compound but if you borrow from compound and you take on the supply apy interest you can effectively hedge your borrow position and effectively make it a fixed borrow and if you look at the supply rates on compound and Ave right now they're like one to two percent so what this enables us to do is take advantage

of the downturn and interest rates and allow users to be able to borrow at one to two percent on their usdc which is effectively a very enticing product for some of these users so those are things that we think about in terms of worst case scenarios for D5 or for the market you know how can we take advantage of that and create a product that users might be interested in you know and of course you know how is the current product being utilized right now you know so we we go out of our way to you know we'll talk about this in the next slide but we go out of our way to Source feedback you know we we look at on-chain data we look at trades we look at all the transactions that interact with our smart contracts figure out what aspects of the protocol are users technically

interested in you know because you know we we're naive to assume that maybe our protocol is being utilized for purchasing fixed rates but you know some of the early usage of the protocol was to leverage up on the variable side and basically just bootstrap the market on the liquidity so you know these are things that we currently think about when we develop out our product and kind of go into some of the user feedback you know we we consider user feedback and users in general as like something of a privilege or a luxury and not a commodity and what I mean by that is you know there's so many different optionalities in terms of products that you could use when you go when you go and interact with you know d5i protocols that are out there and you know it takes

a special amount of energy for a user to go into your protocol figure out how it works what they like what they don't like join your community and then tell you what they don't like about it I mean most user stages if they don't like your product they just leave you know and so we for for a user to come into our our community and and reach out to us and tell us what they don't like about the protocol you know we we value that that time and that energy very much so and so we we try to do our best to also understand you know what type of a user this person is you know we learn about you know are they somebody that is high net worth low you know low net worth do they typically like the trade what is

their level of sophistication in D5 you know these are all things that we try to ensure that all of our users that give us feedback know that their feedback is being heard because like I said there's so many protocols out there I would say 80 90 that you know they they just they don't know what's wrong with their product because nobody is taking the time and and the energy to go and tell them hey this is what I don't like about it and this is why nobody's using it and so for us you know when somebody goes out of their way to tell us these things we take it very seriously you know because ultimately you know we are building things for the majority and not the minority and the majority of the uh people of users that we want to attract into this space are

just not using crypto yet so we want to figure out what are some of those things that is required to to get the majority in and of course you know with an adoption focus in mind um we also try our best in terms of the core team to be active users of the ecosystem in terms of like other various D5 protocols because what we've learned is that sometimes what our team wants to build and sometimes what teams want to build in general it's not necessarily what users want to use you know because a lot of teams they want to build products that they think is super interesting or you know revolutionary or new but when a user interacts with it there's just so many different pain points that makes them a bit confused especially because the level of

sophistication with users is not very high and it kind of deters them from using the protocol to its full potential and so you know part of part of our initiative is to always ensure that the that the builders on our team the engineers uh get linked to the feedback that the users are giving in and letting them know what the what the users actually want you know if the users want an extremely simple way to buy fixed rates then we have to effectively remove every single you know different aspects that make the UI confusing and make things a lot more intuitive so you know we always keep that in mind and and I think having a team that understands and is super respect receptive of that feedback of what the users want is I

think extremely important and then of course you know we always ask the users as well as ourselves you know what are aspects of of protocols user experience or user interface that we find enjoyable and why you know I think that putting ourselves in this shoes of a user uh when interacting with not only our own protocol to kind of remove bias but also the other the protocols of others is extremely important because you you begin to naturally figure out what you like and why you like that specific aspect of a protocol or a product and you can kind of incorporate those little things into the design of your actual product and you know I think it starts with something extremely simple it's just maybe listing out you know your three

most used D5 protocols and why you know is it because it's easy to use because it's easy to understand you know the moment you line on the page your eyes know exactly where to look and it's extremely extremely simple those kind of things are are a lot of the things that we share internally to make sure that we develop our product the right way and of course you know building I think I believe is a lot more enjoyable when you when you live in know using your own products and you know the last thing that and this is a little bit more broad some of the things that we we kind of do is to really look forward uh look forward in terms of what our users will look like in a year from now you know we kind of look at what our users are now you know and that really

depends strongly on the market cycle but what will our users look like in a year from now you know what will our users look like in two years and five years from now because you know as crypto and the entire space continues to evolve you know the level of sophistication but also the the type of users that come into the space is going to change radically and as more people come in uh education might not necessarily keep up with that you know with that level of sophistication that's necessary but you know we look at different time Horizons and we try to capture these different time Horizon users like how do we capture users that are using V5 now but also develop products for users that are coming into the future you know where does the space go from here you know and and what's still missing you know for

for us um guaranteeing fixed rates and creating a product that Demands a lot of trust requires things such as insurance you know requires things such as custodial Solutions and you know these are some of the things that some of the big major common things that a lot of the big parties that are interested in using element are asking from us so you know currently you know the Insurance Solutions that are out there you know they address smart contract risk but there's things like DPAC risk you know there's a front end risk there's phishing risk yeah and and these are all things that are extremely important to any Institutional Investor because the insurance that they're used to covers all these different liabilities

so you know we have to think about all these things that are still missing and how do we kind of either figure out how to build around that or figure out the right Partners to build around those different things and of course the last thing is is how how the macroeconomics and the market Cycles play play a role in the user's you know necessity and wants and and this one is really important because this kind of goes into a little bit more of like behavioral economics you know if you think about the bull market which we've kind of been in for the past two years uh we look at some incentive designs for example like X Sushi where you could effectively stick your sushi and earn dividends and that wasn't really something that was successful in terms of a token model but as you can see now uh staking in like

GMX is extremely profitable and interesting for users because they're earning dividends and I think a lot of Behavioral economics when I talk about those kind of things is is what are users expecting right now given the market cycle and when when the market is you know all green all the time you know users are looking for Venture type returns they're looking for 5x they're looking for 50 apy and so how do we design incentives that match that need but also when when the market takes a downturn and people are just looking to survive you know and looking for like a constant flow of income via dividends like GMX you know how do we design incentive or a protocol that kind of caters to both sides of the market because as the markets change you know and the markets go up and down

um there's different aspects of your product that might not make sense or might not get as much traction and you know these are things that we have to be that we are definitely mindful about when we kind of design out the protocol we want to be able to look at the best case scenario but also the worst case scenario and really doctor in some of these Market Cycles so you know yeah these just you know these are just some of the core focuses that have been recurring in our version 2 research and development a lot of just user perspective stuff and things about and looking forward in terms of future development and where we think the space is going but yeah that's pretty much it um thank you for attending the talk and that was concise and brief but if you have any questions feel free to reach

out to me thank you [Applause] does anybody have questions yeah oh we can do that okay hello thanks for a great talk and I I'm just wondering that since that user base is pretty pretty important to know how how to maintain your your whole project being sustainable so I'm just wondering how to get these informations to just simply wait for the feedback or you you should like actively know how uh it's a little bit of both I think we've been

fortunate to have users that reach out to us and let them know how they feel about the product but we also have a pretty Lively Community where we have community members that are active including myself that actively actively reach out to the more active members that are using the protocol and we schedule calls you know we tell them hey we asked them hey we would love to hear your feedback in terms of how your experience has been using the product and then we kind of put them in a profile like we learn a little bit more about them first to figure out what bucket they fit in and then we take a lot of what their advice is and we try to not take it to Extremes in terms of what the feedback we get is but we try to aggregate a lot of the feedback we

get and if there's a common theme that everybody is looking for there's a if there's a a feature that they would really like to have in the protocol and we hear that all the time it's definitely something that we put under the top of our priority list to ensure that we have that incorporated right away and those are things that I think is really important because when you can show that you're actively listening to the people that are giving feedback they're more inclined to give you additional feedback in terms of how they feel about the product I get it because uh it's a little bit tricky that since sometimes we we can just let Community just guide us what to do and sometimes we have to be the one to guide the community so yeah it's quite complicated I just yeah we try to Source if there's like an overwhelming

feature that that the community wants as a whole then that makes sense but if there's like a strong opinion in terms of how things should be done you know then of course that you have to kind of be extremely discretionary about that and figure out okay this is more of a team decision this is how we want to move forward with this and yeah I think the the balance between what the community wants and what you can incorporate from that side and what the team feels confident in terms of executing is like the balance that you have to find thank you yeah hello winter um so I I wanted to ask sort of at what point so they we've launched a product um at what point do you sort of

essentially what what if the lack of use of a product is is not down to that the product's bad or the product has some flaws but it's more about lack of uh Business Development and marketing how do you sort of distinguish between that being the root cause of not having enough users versus they're actually being flaws with how the product is is constructed that's that's actually a really good question and something that we we struggled with early on as well because we had this we had extremely complex documents that made it 100 extremely difficult to understand what the product does and from our perspective it was extremely easy it was straightforward but um it was it will it took a lot of back and forth with our marketing and communication people to let them know

that hey maybe we need to take the perspective of what the users want in terms of document content to better understand how our product works rather than what we believe worked you know we we published multiple different medium articles about how element works and people were still confused and then instead of rather okay let's re-strategize in terms in terms of how we want to release our future content instead of doing that maybe we should just ask the community hey what are you looking for you know what type of examples are you looking for what do you struggle with which aspects of the product is confusing to you I think that everyone's gonna everyone typically gives every product a chance if they can you know if you're a new product and and people don't really fully understand what you're doing they're going to give

you a chance and but if it's if it's too confusing if it's too complicated then the amount of time they give you to fully understand how your product works is smaller and smaller so I think dumbing down the documents making things extremely under easy to understand is is important uh but you know as soon as you release a product it's all I believe it's all business development it's all you know user acquisition and just you might not necessarily be required to be to find power users at the start but you do need to find users that are at least interested in trying out the product and giving you feedback in terms of what they think about it why they like it or why they don't thank you