Crypto markets are a confusing, opaque place for beginners. Ethereum has often been called “The Dark Forest”. This moniker is understandable — life on-chain necessitates an understanding of many complex concepts and procedures. Getting into DeFi only further complicates matters for novices, introducing concepts like flash loans, collateralization ratios, liquidations, and impermanent loss that are difficult to conceptualize without experience (often through trial-and-error).
DeFi is complicated. Even experienced users regularly suffer technological ‘whiplash’ due to the pace of innovation: it is undeniably tough to keep up and generate profit with new concepts, trends and exploits arising daily. These issues hinder DeFi adoption amongst potential new entrants.
Plexus will cut through the noise, making DeFi participation easy for novices and veterans alike. Instead of making profitability a wild goose chase across chains, yield farms and liquidity pools, Plexus will make it as easy as a few clicks of a mouse.
The State of DeFi So Far
Often cited in mainstream media and casual conversations as a paradigm shift, Decentralized Finance has been a hot topic since its inception. Protocols such as Aave and Uniswap, which hold billions of real assets in TVL, and provide significant economic value, are still displaced by ghost chains and memecoins.
Although Crypto has sold the promise of a new economic regime, DeFi is surprisingly far from dominating the crypto landscape. Even during the heat of the bull run in April, estimates for the market cap of DeFi as a whole only totaled about $128B, with active users estimated to be around 1 million. [source] Since then, DeFi’s market cap has seen a significant reduction with the market as a whole pulling back — CoinGecko estimates the market cap of DeFi at around $62.7B as of June 26th with a total value locked (TVL) of about $85B. This equates to 4.6% DeFi dominance vs. the global crypto market — for a sector that is spoken of as a leading crypto-specific industry, this certainly isn’t very large.
We attribute this disparity in growth between DeFi and the rest of the space to various self-contained issues that can be found in decentralized finance.
Currently, there is no proper way to aggregate the most important data and tools in the space, leaving everyone either sitting content in Aave with minimal returns and wasted capital, or scrambling for ‘alpha’ in hopes of finding the next 5-digit% APR degen yield farm. Plexus will streamline user experience by targeting three key issues:
- Liquidity fragmentation
- Lack of capital efficiency
- Confusing user experience
If you’re new to the space, we understand that some of these terms sound complex and foreign. Below, we’ll break down what they mean and how we plan to solve them.
Liquidity Fragmentation
One of the main causes of market inefficiency is liquidity fragmentation. With so little of the total crypto market cap in DeFi, the opportunity cost of capital is significant. There are a number of major protocols such as Aave, Compound, Yearn, and Uniswap, and these protocols tend to be very “sticky” — their models have been proven to be effective and relatively foolproof, so liquidity tends to stay locked within these popular protocols. People are often hesitant to remove their money from them and shift it elsewhere, even if other protocols might sometimes be better choices for maximizing their yields.
If you’re an experienced yield hunter, you probably already know that the smaller the liquidity pool of a token, the higher the price impact of a buy or sell is on the token price. Consider liquidity fragmentation the same: there are a bunch of ‘pools’ (i.e. money markets/yield aggregators) out there for various different tokens, and although you may want to sell one token and move to another, you are unable to because of the time and costs involved.
By offering a dashboard that pieces together these shards of liquidity, Plexus will help bridge together protocols and unlock boundless liquidity flows throughout DeFi.
Capital Efficiency
Capital efficiency is the name of the game. It is how players in the financial ecosystem allocate their funds in order to maximize utility, resulting in maximized returns. You can only do so much with $1. This is twice as true in DeFi, where protocols are generally strongly siloed and tend to provide attractive retention incentives.
In a traditional landscape, anybody with enough money in their savings account could take out a loan, making their savings ‘liquid’ whilst still generating interest on them. Even this, until recently, was something we wouldn’t even consider viable in DeFi.
Plexus will stretch your money for all its worth, milking every last drop of utility available to it in the market. Providing liquidity to Uniswap? Odds are your fee returns will be eaten away, and you will soon lose money to “Impermanent Loss”. Plexus will help you find where you can collateralize that position in order to maximize capital efficiency, creating more liquid and interoperable markets.
Confusing User Experience
DeFi veterans, be honest: the first time you tried using Compound or Aave, did you truly understand every aspect of what you were doing? While those who answered yes deserve a gold star and a pat on the back, not all new entrants have the patience to figure out how to interact with these intricate platforms. There is an incredible range of options and strategies available in the DeFi space, and it can be very difficult for new participants to understand which ones are best for them.
This is perhaps the most important factor in growing DeFi adoption: an easier, clearer interface that won’t have you second guessing your liquidation price or interest earned. Not everybody wants to manage a spreadsheet with all of this information. Even advanced users have demanded a more streamlined experience.
Plexus will provide you with the easiest, most intuitive experience you’ve had managing your finances. Think of it as tidying up your work desk.
DeFi for Everyone with Plexus
In the coming weeks, we’ll be releasing a number of additional articles and tools that will help explain our vision for the future of DeFi. We love the dynamic and innovative nature of the DeFi space, and our goal is to help simplify entry to make it accessible and profitable for everyone. Keep an eye on our Twitter and Medium to find out exactly how we plan to do this, and be sure to join our Discord! We are always excited to get the chance to talk about our vision with the community.
Down the DeFi Rabbit Hole. 🕳🐇
