Hi all, I'm ELMimio - also seen in the TG group. I wrote a preliminary opinion piece on Octo and what it attempts to do and I'd like to get your feedback on it. Some things might be factually incorrect, some insights might be flawed. I care most about getting closer to the truth - So any feedback that helps sharpen the message is very welcome! If it proofs valuable enough I will finetune the writing and add illustrations to it for others to read. Let me know!
The magical potential of a little Defi Octopus
And how an anonymous, community owned defi aggregator platform could potentially evolve crypto to the next step
Hi all! I’m another guy, very likely like yourself, that got introduced to Bitcoin (BTC) and crypto in general during one of the previous bull market cycles. With a general background in marketing and economics and close to 0 technological knowledge I kept my eye on the space over the years, trying to wrap my head around what is going on and where all these developments in decentralised finance could be leading us. Because my lack of technological knowledge I try to make sense of thing without digging in the code. I believe a higher level approach can actually help keep a fresh perspective, which is exactly what I’m going to try to share with you here.
Feeling lazy, tired or just too busy? Here’s the tldr: Decentralised finance (DEFI) is a movement of projects that now enables us to interact with and utilise blockchain-like systems in a decentralised manner. But its fragmented landscape makes it too inaccessible to reach its full adoption potential. A clear entry point is needed, where investors can find the DEFI opportunities for their needs and DEFI projects can make themselves be find better when offering their solutions. In the end this entry point will most likely come in the form of one major DEFI aggregator that serves as a main access point to all DEFI. The vision, governance, code and development behind this aggregator should all be fully public and open for participation – to allow fairness, free access and prevent censorship. However, its core underlying value will come from its active users, which brings in more users bringing forth a snowball effect that captures the market. Octo.fi is the best bet I could find to capture this essential role in the crypto space.
Now on to the whole thing where I try to motivate the claims made in the tldr segment…
This cycle is all about ‘DEFI’ and after having ploughed through all the defi hype words and novel concepts I might be starting to get a sense of the bigger picture, which I’m happy to share and receive your feedback on as well.
First things first (3 conclusions):
1. Blockchain has always been decentralised, but the way we’ve been interacting with it has not.
Like the rest of you I had to verify myself with a registered business to be able to exchange the FIAT from my bank to being send BTC to my private wallet. I had full autonomy on owning this BTC, I could send it freely to any other BTC wallet at my own will, but if I wanted to trade it I had to rely on central exchanges (CEXs), and if I wanted to bring my BTC value to other (real world) assets I had to rely on the business I registered with in the first place again to do so. It felt like a highly lucrative, unregulated trade puppet show. Many involved did not actually believe this new decentralisation made sense.
The only thing I understood to be truly decentralised was BTC itself, as it existed solely based on the participants in its system, and no one could be forced or restricted to do so!
2. Through the development of the technology we are increasingly capable to interact with blockchain in a decentralised manner.
Fortunately the space has not been sitting still, and those that believed blockchain can bring us more than just an unregulated gambling market that dumps on retail investors hopes have started to create decentralised finance solutions (DEFI) which are currently popping up like crazy. DEFI seems to be the key-hype word of this market cycle, and just like the previous hype cycles it’s filled with copy-cat crap and scam projects which distract us from the true value that is being created. No hype cycle is truly thin air, it needs something of true value underneath to be inflated, often not yet properly understood. It seems to me that, amongst other things, the ability to govern without central authority (decentralised autonomous organisations or DAOs), provide and take loans without central mediation and the ability to trade on and provide liquidity to markets without central order books (DEXs) are truly revolutionary and here to stay. These DEFI development empower all to act with and exchange their value freely. But as the space is so young it’s still very fragmented, difficult to explore and make use of for a common person like me - and maybe yourself. Most of the DEFI development is happening on Ethereum or platforms interoperable with Ethereum’s solidity language. In that regard Ethereum took the platform pie. But apart from being able to explore all these new opportunities with my ETH wallet I still find myself struggling to find them, one at the time, and once found actually understand and use them. Which leads me to my third conclusion:
3. The DEFI solutions that make decentralised interaction possible are still too fragmented and difficult to interact with as a whole to reach its full adoption potential.
I, as likely you as well, am still ploughing through the opportunities out of genuine interest. But it’s difficult to do so! And I often feel poorly equipped or even incapable of catching opportunities or simply participating. Most people would have closed their laptops after the first error message and would have gone back to watching Netflix. It’s just not an intuitive enough experience yet to really reach adoption outside of the nerdy space that we take part off. Especially for DEFI (opposed to CEXs that offer a more familiar experience to investors for example).
So what could solve this and bring crypto and DEFI to the next step?
Through my explorations I came across octo.fi ‘Your all in one Defi platform’ developed by an anon team – with the promise of full transparency, public code, audits and community ownership. This project helped me to see the possible next step we need to take. ‘Don’t trust, verify’ seems to be their developers creed. Because I’m not capable of verifying code I trusted the technological opinion of others (which were positive) and focussed on answering the questions:
‘what does octo.fi attempt to bring us exactly, and why would we need it?’
In attempting to answer these questions I’ve started to realise that octo.fi might just be a viable attempt to bring us a solution to the fragmented and difficult nature of the DEFI space, and provide the much needed accessibility needed for DEFI to be fully adopted by you and me and maybe even our uncles and aunties. That would be a lot to hope for of an anon team with heavy meme focus on the side. Their playful nature made me disregard them many times before actually taking a deeper look. But hey, I’ve made that mistake many times before (ahum BTC whitepaper anyone?).
So first things first. let me share my brief view on some of our major current ‘crypto markets’ being CEX, DEX and DEFI, before explaining why I see a movement such as octo.fi possibly taking its viable place and bringing DEFI forward.
- Centralised exchanges (CEX)
Binance, Binance, Binance! It’s all Binance now! And the rest of the centralised exchanges can pick up the crumbles. Surely we don’t want to have our beloved crypto ambitions in the hands of one China based exchange, but Binance came very close to doing so – remember the scare of the proposed BTC rollback by CZ? That’s some freaky scary stuff, so how did we get to this point? There’s no need to get into the nitty and the gritty of the details of the past to share a general view on this. As Bitcoin (and other) crypto were born there were no infrastructures in place to exchange apart from the regular peer-to-peer transfer function. In order to bet on crypto speculatively early participants relied on OTC and peer-to-peer platforms or communities to exchange. Seeing the value in this exchange handy guys started setting up centralised trading platforms to capitalise on the speculative need in crypto. Because they are not very innovative (but more a copy of what we are used to from traditional markets) the appeal of these centralised exchanges is fairly homogenous in nature, meaning we – the users – are quite indifferent to which centralised exchange we actually use. The way it looks, the fees and speed of withdrawal don’t really matter all that much. We mainly use an exchange because others use it, the more users an exchange has the more liquid its markets are and the better we can buy and sell what we want. Projects seek out exchanges in the same way. And in this dynamic usage became the main unique selling point of a centralised exchange platform. As Binance pulled in more and more users all activity snowballed into the platform. This dynamic reminds of other platforms such as Facebook for social media, Amazon for home shopping delivery and booking.com for hotel bookings. It’s a kind of Pareto type distribution that occurs when platforms are homogenous enough for the users themselves to become the main valuable asset. Or simply put: When people and businesses use it because others use it. From that perspective its understandable that Binance achieved its top position and major influence on the market. But for the time being it’s also easy enough to conclude that although centralised exchanges process most of our (visible) trade volume, they are not the ultimate solution to our challenge of trading and exchanging crypto freely. As long as our exchange is centralised and under regulatory constraints the ambition remains a puppet show. Fortunately we’ve been introduced to decentralised exchanges, that I think are solving some of the problems we have with CEXs, but not all.
- Decentralised exhanges (DEX)
Uniswap, uniswap, uniswap… For now most liquidity on decentralised exchanges finds its way through this system. Why? … Well because it’s the first of its specific kind (not the first DEX in itself), and for that reason it accrued the most users and liquidity which in return brings the most appeal to new users. For the time being it kind of achieved the position of ‘Binance of the DEX’ market. And it solves some of the major concerns we have with Binance and the CEX market in general. No longer does a central party have to hold our coins when we want to trade, no longer we have to tolerate ambiguous order books and behind the scenes manipulation. All ERC based trades can be done much safer, more convenient and fully transparent now. But it’s not without its restrictions as of yet. As a compromise the trading experience has been heavily simplified, we’re missing many tools available to us on centralised exchanges such as stop losses or margin trades. And because all trades occur on-chain gas fees make the costs of executing a trade much more expensive than what we’re used to from centralised exchanges. DEXes are novel technology and not without their challenges. Because of this the DEX space seems more heavily reliant on innovation. On top of that I expect such innovation to bring forth new opportunities we have not even conceived yet. And therefore I suspect the DEX market to develop itself into a less homogenous market where user base is not the only deciding factor for our use. If that’s the case we cannot assume with full confidence that a pareto distribution of success will take shape here. Instead the DEX market might develop much more fragmented, and it only plays a role in the much bigger and even more fragmented DEFI market.
- Decentralised finance (DEFI)
Decentralised exchanges can be considered part of DEFI. But DEFI is much more than only exchange. There are many different projects in the DEFI space and they do much more than simply helping you exchange ‘X’ for ‘Y’. As of now you can use DEFI for loans, collateral, earning interest, insurances etc. Because of this diversity in offer the pareto distribution is not likely going to apply here: A DEFI platform that can help you with insurance simply can’t help you execute a trade and take part of the pie from the DEX market. It’s not what it does. So in that sense where the DEX market – being a part of the overall DEFI space – is likely to become a less homogenous market compared to the CEX market the DEFI space is likely to become not homogenous at all. That’s great for keeping the decentralised nature alive, but does bring practical problems for everyday users like me and yourself.
In a simplified analogy we could compare the DEFI space with the hospitality market, which in its development I can divide in 3 phase: At the first phase, long in the past, people had to visit/call each hotel by themselves to find out where they’d like to stay, seeing how cumbersome this was handy guys started to provide travel agencies and booking firms and taking hotels in their portfolio. This would bring forth the 2nd phase where they would have physical locations where you could visit and arrange the right hotel for your travelling needs (from the ones they offer). This was already much more efficient than finding and contacting all hotels in a foreign country by yourself. But because it was a service based on personal relations between agencies and hotels the agencies were limited in their offer. Which resulted in many different agencies, none off which could provide you with all options at once. At the third phase technology set in, and with the power of the internet (now) giants such as Booking.com managed to aggregate nearly all global travellers and hotels into one platform – instantly making physical travelling agencies near obsolete. Finding the right hotel for our travel needs is now easy as pie. And because of the user based dynamic (users bring more users) Booking.com took the biggest piece of the ‘hotel booking pie’.
I think, by comparison, that the DEFI space is somewhere between phase 1 and phase 2. Those of us that are interested in utilising the DEFI opportunities for our personal financial needs are forced to plough through many different websites and platforms to find them. We tend to seek out and rely on communities and influencers that went before us in this exploration and guide us towards the best opportunities. In that sense they function a little like the travelling agencies from phase 2. And just like traveling agencies many of these influencers are capitalising on our need to be guided to good opportunities, making it reasonable for us to question their motives – they might not have our best interest in mind. This is not ideal… So what we now need to bring the DEFI space to the next phase is a place where all users and opportunities are brought together, as we’ve seen happen in the hospitality market with aggregators such as Booking.com.
This is exactly what octo.fi attempts to do: It aggregates all DEFI opportunities for all participants in the space to access freely without restrictions and censorship. Octo.fi made some – at first glance seemingly confusing – unique choices in its approach. Most notably it’s anonymous developers, completely open source and transparent work and heavy meme focus/jokey communication style. But I’ve grown to understand that it’s exactly these unique choices that make octo.fi such a viable attempt to aggregate and unify the DEFI space. Let me explain one at the time:
- All developers and participants of Octo.fi are anonymous
This is the first red flag of many scam projects, so understandably I got a little nervous when I learned about the anon status of Octo.fi developers. But this was a very conscious choice by Octo.fi. Remember at the beginning I shared the only thing I understood to be truly decentralised being BTC, as it existed solely based on the participants in its system, and no one could be forced or restricted to do so. This was in great part due to the anonymity of its creator(s). No central head figures could be taken down or forced to comply with (discriminatory) regulations which created a sort of a headless snake that will continue its natural development no matter where you cut it. As long as participants keep seeing its value it will progress. True decentralised innovation requires such dynamic because the regulatory space does not accommodate for the changes DEFI brings – and even if so, there might very well be incentive for governments and regulators to restrict DEFI with new policies in favour of preserving the old financial systems. Too keep innovation flow without restrictions a DEFI aggregator is needed that does not suffer from regulatory constraints. This requires a decentralised approach which requires anonymity of all its participants. A centralised aggregator would merely become a kind of ‘Binance of DEFI’ puppet show and Octo.fi understood this. Some examples of things set up by Octo.fi that are not possible with a doxed team:
- Octo.fi has an automatic fee distribution to all of its OCTO holders, this is indiscriminate, al that is required to receive your stake of the Octo.fi platform fees is for you to hold OCTO in your private ETH wallet. Fees are collected and distributed in stablecoins (USDC/DAI). Although technology wise this is easy enough, if Octo.fi would not be an anonymous operation they would have to navigate a regulatory minefield to set up anything even remotely close to such a fair distribution. Global security laws simply don’t allow yet for such manners of value sharing. Therefor other projects that work with an underlying company and doxed team simply will not be able to incentivise their communities and decentralise their return in a similar matter!
- Octo.fi is, and will continue to be, freely accessible from all countries globally. Just like we are used from old file sharing websites like Piratebay there is no central prosecution possible to shut it down. And the Octo.fi website that gives access to all DEFI can be mirrored indefinitely to continue free access even after some (mirror) websites have been blocked.
Being convinced that Octo.fi with its anonymous approach has created for itself the liberty to innovate regardless of the regulatory space I consider the regulatory risk to be limited to its users – the (private) investors and DEFI projects that come together via the Octo.fi platform. My government cannot stop me from accessing and using Octo.fi, however it can tell me not to do so – do everything it can to make it more difficult for me to enter and exit the DEFI market and prosecute me when caught. This heavily resembles the dynamic of Bitcoin to me. Which was the first decentralised system that could not be taken down centrally, limiting regulators to the idea of restricting/prosecuting users instead (which turned out to be unfeasible). Regulators could not stop usage of Bitcoin, and I suspect they will not be able to stop usage of other decentralised systems either.
- Octo.fi operates completely open source and transparent
If no one is to be held accountable, for participants to be able to trust a system it needs to be 100% transparent. There is no legal system to safeguard us in case of malpractice. That’s why the Octo.fi team pushes for a ‘Don’t trust, verify’ mindset. For a decentralised system to work you should be able to see exactly what it does. It’s vision, governance, code and development should all be fully public and open for participation. But opening up all your code comes with copy-cat risk. If it would become so easy to fork away all of Octo.fi’s development, would that not lead to a heavy fragmentation of copy-based aggregators? I don’t think this is a valid concern for the same reason Bitcoin’s whitepaper publication and open source development did not lead to a heavy fragmentation of it’s underlying value. Yes, Bitcoin has seen many forks, some more successful than others, but they never really took away from Bitcoin itself as it kept its dominance. Why? Because you can copy the code, but you can’t copy the hash rate, you can’t copy the users. Digital coins are merely numbers it’s abstract – again homogenous amongst each other like the Booking website example before, just like that aggregators are fairly shapeless in themselves a well. Although Octo.fi (for good reason) focusses a lot on UI – how the website looks and feels, it’s true value will come from the established users. The more investors will find their DEFI opportunities through Octo.fi the more DEFI projects will actively persue being aggregated by Octo.fi and vice versa. That traction is something that – once it starts snowballing – can no longer be copied.
- Octo.fi is run by memelords
Sometimes I’m having a hard time taking ‘meme heavy projects’ serious. But that is actually a misunderstanding on my side because for example Dogecoin is a joke - but a much loved and very very expensive joke. It’s an indirect fork of Bitcoin so it does not hold any real innovative value on itself but because of its entertainment value and active community its brand awareness is still unprecedented in the crypto space. Just recently after the Wallstreetbets happenings Dogecoin was pumped like crazy which can be considered a big ‘fuck you’ to the established systems. Why has Dogecoin risen to such heights and kept its position as ‘unofficial crypto mascot’ over the years? I think it has to do with the type of people that form the core of crypto. Crypto enthusiasts are defiant, tech-savvy and heavy internet users. They recognise and enjoy the memes, and they like to push boundaries in their humour. Octo.fi seems to understand that community, participants and user base are going to be the main differentiator and key to success to whatever DEFI aggregator will eventually come out on top. All Octo.fi does is geared towards achieving rapid, yet organic and genuine growth. The first wave of participants will be the crypto memelords, and Octo.fi speaks their language.
In the end I believe a DEFI aggregator that serves as a main access point to all DEFI will come. If this will be Octo.fi? That remains to be seen. But as of now it’s the best bet I’ve found. Bitcoin, Ethereum, Octo – all of them have in common that their real value comes from their users. Users bring more users and eventually one of the alternatives snowballs to the top. I hold Bitcoin because it has reached the undeniable top position as main digital currency, I hold Ethereum because it has reached the top position as main base layer smart contract platform upon which the vast majority of DEFI innovation is build and I hold Octo as it could very well achieve the top position as main aggregator and access point to all of DEFI.