Embarking on the Impossible Finance Journey
Crypto should not be “build and users will come”, but rather “provide better-than-now solutions, and they will come”. Today, CeFi offers many comforts that attracted the 2017 wave of users, with traditional features like an email log-in, customer service, or custody. But just because these features were needed in 2017, doesn’t mean they are needed forever. In 2020, we saw Uniswap, built by just a few contributors, surpass Coinbase’s volume (despite their 2000+ employees) with no email log in & no customer service as a non-custodial exchange. Users graduate beyond training wheels and naturally shift to a product that suits their needs. Tech evolves, and it’s our job as technologists to build ever-better experiences.
In 2020, defi saw a Cambrian explosion of money legos, innovating upon TradFi products. With defi being open-source, there’s no more Newton vs. Leibniz or competing scientists building in silo, instead inviting smart people to create value on top of existing work. Defi allows builders to be conductors: instead of mastering the violin, cello, & oboe, just pick up a baton to orchestrate masterpieces. The holy grail of defi is to aggregate liquidity and talent together, not build in isolation.
When Compound launched, users could deposit/withdraw instantly, not within business days. Its UI/UX was smooth enough to not require customer support. Soon, even the centralised Dharma.io pivoted to funnel deposits into Compound. But the road for defi products wasn’t always easy. Aave (prev. EthLend) and Synthetix (prev. Havven) both continually revamped their products in order to become top projects. Aave transformed from a sparsely-used P2P market to a fast follower of Compound’s lending pools. Synthetix grew from a black-swan-prone stablecoin to introducing Uniswap SETH/WETH LP pools to keep its synthetic assets on-peg. They both reinvented themselves by cleverly employing other’s money legos.
TVL, oft-used to measure protocols, is actually a fleeting “symptom” of parasitic yield farming that masquerades as adoption, rather than organic growth. To build sustainable protocols, we must build pareto-efficient outcomes for users. In the 2020 yield farming craze, there were two central tenets:
1. Having users is valuable - hence why fair launches & retroactive airdrops incentivised usage
2. Users want to have autonomy and ownership in the communities they build
Give and Thou Shalt Receive: In fair launches & airdrops, the “endowment effect” was on full display. Users held their no-cost-basis assets if the token was scarce and captured value. Retroactive airdrops created crypto’s “Stanford Marshmallow Experiment”: find users and PMF first, tokenize later.
Whitewashing fences: In Tom Sawyer, Tom tricks his friends to do his chore: whitewashing fences, and even collects fees for the permission to help, turning a liability into an asset. Startup boot-strapping too became a community exercise, as users captured value while whitewashing together. Endowment effects were clear, as supporters who wanted to own the fence asset earned tokens for their time in the farms, which demonstrates the power of openly building together. 3 years ago, fair launches were impossible. But a centralised lending product giving up and ceding room for Compound seemed impossible too.
In late 2019, Aave added leading defi assets like SNX, LINK, YFI, and UNI, & added flash loans en route to reaching $5 billion USD TVL without token incentives. With its innovative tech, Aave often sees “negative interest spreads” due to flashloan fees, becoming the first example of Impossible Finance. No bank can “buy high & sell low”, or borrow high & lend lower. This business model was enabled by the interoperability & transparency of smart contracts. With “impossible” economics, it’s easy to capture TVL sustainably.
This brings us to what we’re trying to build today. End users shouldn’t even need to know how defi works or what chain it is on - just like how emails can be sent from Yahoo to a Gmail, or you can call others on a different phone network; it should just work. As defi power users, we’ve absorbed lessons from defi trailblazers. We’ve built our “Google search” - a decentralized AMM currently on BSC - and will continue to revamp it, but the vision is to continue learning and building the Alphabet of defi, with two core tokens, IF and IDIA. Today, it’s time for us to graduate from our centralised institutions and build the next “Impossible Finance” products.
The first release of Impossible Finance products tackle crypto’s best killer app: fundraising. In the wake of 2017 ICO scams, Vitalik posited DAICOs, (DAO + ICOs), where project teams could raise smart- contract vested funds, provided they achieve certain milestones. Governors determined whether the team was still building, or else refund investors. However, 2018 lacked robust governance and voting portals (i.e.snapshot.page), let alone real products to invest in. Via the Impossible Launchpad, projects will be able to launch to targeted, engaged audiences, powered by our onchain staking, whitelisting, and KYC features in our launchpad contracts.
Taking from the lessons learned in the tenets of 2020 yield farming, the next suite of Impossible Finance products revolve around yield; Versus TradFi’s low yields, defi yield protocols have been a killer app, but impermanent loss still looms large. Instead, focusing on low-IL asset pools such as EUR and JPY stablecoins, where central banks have negative interest rates, or non-dividend yielding synthetics (hint: high growth stocks don’t have dividends) like synthetic TSLA, we propose the first wave of “Impossible Yield” products powered by our stablecoin swap. Taking a page out of Aave & Synthetix’ playbook, this also encourages us to integrate many synthetic assets, lending protocols, and cross-chain solutions to aggregate liquidity. This yield generated from stable EUR, JPY, or TSLA pools is unbeatable by TradFi, at least until the ECB changes policies, the Japanese population pyramid inverts, or Elon Musk changes his website’s FAQ.
In early 2021, we saw Wall Street Bets clash with Robinhood & hedge funds, putting emphasis on addressing retail users’ needs without sacrificing user autonomy. Why would you ever accept dividendless holdings when defi can give you yield? That’s Impossible Finance: we’re hellbent on providing better financial accessibility for the world, via both unprecedented access into top tier investments via our launchpad, and sustainable products for healthy yields via our AMM.
In the future, a combination of the above two products can create the concept of self-sustaining initial-dex-offerings (SSIDOs); with the power of yield from our AMMs and partner protocols, a team that raises $10M with a $2M burn rate can be self-sustaining with just 20% APY, creating a new “raise once, build forever” model. The Andre’s of the world can find capital & liquidity and no longer need to rely on cexes and rent-seeking private investment funds to pay the bills. Meanwhile, vesting stable LP tokens from the fundraise stay within our AMM, which creates sticky TVL. Teams that raise via this system get automatically transparent treasury services while traders get access to steady liquidity, anti-rugpull peace of mind. Our mission at Impossible Finance will be to continue finding win-wins for traders, investors, projects, and protocols alike, and can’t wait to show you what’s next in our “Google Suite”. 2020 was the year of defi, but with you, 2021 will be the year of Impossible Finance.