DAOventures Analysis $DVG
Mission statement from Litepaper
“Our mission is to make DeFi simpler, more accessible, and inclusive.”
DVG seeks to improve user experience (UX) and remove barriers of entry to DeFi through by offering a simple user interface (UI) to optimally deploy user’s cryptocurrencies to liquidity pools (LP) with the highest yields.
Basically, DAOventures is a fund manager that executes algorithmic (algo) strategies to interact with smart contracts to pursue the highest yield on return.
The problem
Solution:
DAOventures seeks to enable users to inject liquidity into risk-categorized strategies that are determined by algos, informed by developer vetting and back testing strategies. Developer input refines the parameters of optimizing yield farming strategies over time. As the algo matures the more responsive smart contact algo strategies will become. Strategies are categorized through risk/reward analysis.
Roadmap:
$DVG recently completed an Initial DOT offering (IDO) whitelist sale and was over subscribed to a magnitude of 20. Simply meaning only 1 in 20 people were approved access to this sale. That’s a significant amount on interest registered for the value proposition.
Currently DAOventures is in the test phase. We can see there has been a rating assigned to the strategy that are contingent on a third-party review and audit outcomes. So far so good, there is currently one strategy available for testing. By depositing USDT from a user’s wallet into the smart contract it will pursue the highest yield strategies within Yearn’s vaults.
$DVG Tokenomics
Tokenomics are well distributed. Over three quarters of supply is locked up in the treasury deployer smart contract that allocates according to the distribution schedule. 30% of tokens allocated to team and community DAO staking pools over a 4 year vesting period is bullish to limit dumping on the market. Over time, the treasury deployer contract is “topped up” by fees applied to profits made from executing profitable strategies. There is incentive to hold $DVG to increase your share of yields from farming strategies. Further, $DVG gives holders a stake in community governance. The parameters of fee distribution could be altered over time through governance.
One concern could be the multi-sig approvals to alter treasury. Founders act as the gate-keepers that are required to approve nominations for proposals to be subject to a vote. While this may seem concerning on the surface, it is a totally transparent process. The team could decide not to allow a proposal to be put to a vote but that would be transparent for the rest of the community to see. They are motivated to do right by their DAO community members as their transparency and integrity will determine retention of long-term investors. While this is a great mechanism to motivate communal behaviors, it is a significant burden on the team to be constantly responsive and able to articulate their reasoning behind what proposals are allowed and not allowed to be put to a vote. Overall, I’m comfortable with the design. Not only because it is similar to Yearn Finance’s approach with multi-sig but that the team and project at large will be able to hold the team to account and engage in educating the community in the reasoning behind decisions made.
Team:
Quick review of LinkedIn:
Alvin Foo — Has been working with emerging technologies since 1995 in delivering and incubating start-ups through accelerator projects. Has worked at Google and spent a lot of time in the telecommunications sector. Seems that blockchain solutions was the logical next step in his pursuit of delivering innovative products.
Victor Lee — Back in 2002 Victor was involved in the banking and customer service sector as such he understands traditional finance. By 2012 became involved in the innovation sector while still having a foot in the world of traditional finance. In 2018 his knowledge of traditional finance with his passion for innovative solutions naturally gravitated toward pursuing blockchain solutions.
Soon Lai — Spent the last 4 years developing mobile phone apps and developing infrastructure for web applications
Hsiang — LinkedIn profile unavailable. Website description: Blockchain lead. Native blockchain and smart contract developer with more than 2 years of experience in DeFi, dApps using Solidity, and the latest frameworks.
Ravneet Kaur — 8 years of marketing experience. Based in Australia and has an understanding of the oceanic/south-east Asian market demographics. Ravneet is passionate about driving user adoption in cryptocurrencies through education and advising start ups on investment strategies.
Mir Rasel Ahmed — Since 2013 has been rallying and engaging with communities on various projects and digital start ups
Jessica Chuah — Background in law, Jessica specializes in auditing and risk management in capital markets. She has also spent some time as a business analyst in global banking markets as such has a sound understanding of the traditional finance system.
Fay Lee — Primarily involved in taking project leads with layer-2 technologies such as Loopring and High Performance Blockchain, as such understands the challenges in the DeFi ecosystem with rising gas fees and enhancing scalability.
Advisors — Have experience in advising KAVA and MATIC as well as project incubation.
Community engagement, partners and market sentiment
Telegram: 31,399 members, this is a large sized community by normal standards. This also reflects the amount of interest in the project if the IDO whitelisting was anything to go on. Community itself seems largely active, the sentiment within the group is positive — no FUD going on. Founders appear to host regular AMA (Ask Moderator Anything sessions). This is positive to strengthen community engagement.
Twitter: 41.7K followers demonstrates they already have a solid audience. They provide regular updates to the community on developments within the project. There is no presence as of yet on social media metric platform Lunarcrush. This is a reliable tool to gauge public sentiment but it’s absence is indicative of how recently the project has emerged into the space. It still retains a “hidden gem” status.
The companies listed all specialize in incubating, investing and facilitating start ups for blockchain projects. There does not appear to be any direct competition for market share of those looking to have a fund manager generate yields for investors.
Discussion
One of the biggest barriers to entry in DeFi is the sheer fact that users require a prerequisite level of knowledge of the cryptocurrency ecosystem and circumnavigating the inherent risks involved to make meaningful investment plays in the DeFi ecosystem. Not only that but the UI takes some getting used to leading to a poor UX. The optics of complexity scare away many possible participants in DeFi. As such it is not a simple proposition for someone that is completely green or new to cryptocurrencies to learn how to safely manage their assets in a decentralized environment.
Providing liquidity is a powerful concept that those new to the space take time to fully appreciate. One of the core tenets of what Satoshi achieved was to cut out the middleman and disrupt centralized institutions power they have long held over their user base. Essentially decentralization puts the power in the people’s hands. However, in the DeFi ecosystem those that were early adopters or are passionate enough to learn the ins and outs of this emerging proposition have an unfair advantage over new investors into the market.
DAOventures seeks to level the playing field. By simplifying the UX through a seamless and simple to use UI that can be installed on a mobile device, those that are new to cryptocurrencies need only know how to do three things. Firstly, how to buy cryptocurrencies. Secondly, how to safely open receive and secure the contents of their wallets. Finally, use their wallet to interact with smart contracts on DAOventures protocol that triggers a cascade of Automated Marketing Making (AMM) processes that seek out the best yields in the market.
Where DeFi Degens (those experienced in providing liquidity and chasing high-yield incentives) must accept the inherent risks that comes with their activities. You are not a true DeFi Degen if you have not experienced a rug-pull, contract exploit or impermanent loss (IL). These outcomes characterized many of the negative experiences that uninformed investors have had when they have put their faith into a project with developers that are unable to be held accountable. This is not always a bad thing when a team are anonymous, this also aligns with Satoshi’s vision that authorities can not intervene with a centralized entity to shut down a entire project or undertaking. Multi-sig is not 100% safe. While the team may have the purest of intentions, it’s not much good if for some reason those keys were to become compromised. That is a hyper-cautious observation on my part. However, this is the beauty of DAO (Decentralized Autonomous Organization) governance, if the team and community deem it fit then the system can transition closer to true decentralization. While many from the get-go may demand a project be purely decentralized, it is important to consider that a robust value proposition needs steady hands to guide them. Voter apathy borne from the perceived complexities of DeFi could limit not only community participation but their capacity to make collectively informed decisions. If future developments lead DAOventures down a road where their protocol could achieve total decentralization I would find myself bullish on the concept.
The community has a role to play. While the aforementioned limitations to reaching a truly informed consensus are ever-present, in the interim the team are charged with informing the parameters of yield farming strategies and forming partnerships cross-chain to expand the availability of liquidity pools. Their recent IDO whitelist sale on the Polkadot ecosystem demonstrates their intent to work toward this end of interoperability.
I have had the pleasure of having a conversation with co-founder Victor Lee. They seem well on the way to establishing cross-chain capabilities with a number of protocols. Ferrum network was announced as recently as today and there are strong indications that there will be presence in emerging blockchains with yield farming opportunities.
That brings us to the nuts and bolts.
When it comes to yield farming, liquidity providers are often incentivized with higher APY or LP token aggregated returns to fill up the pools that are lacking. There are many background processes such as arbitrage, routing and fee generation that feeds into the staked returns of a yield farming play. But by mostly high Annualised Percentage Yields (APYs) strategies are designed to ape users into providing liquidity where there are shortages within an ecosystem LP’s. As such, this often comes with a high level of risk for tokens with low existing liquidity and poor tokenomics.
While many will gravitate towards them in the pursuit of high rate of returns, having excessively high APY gains from yield farming does not instantly make it profitable.
There are a lot of moving parts to consider when we take a moment to think of a scenario where impermanent loss may occur when providing liquidity for a token that is quick to supply farmers with governance tokens for various DeFi protocols. Too little APY and users won’t feel compelled to provide liquidity, too high and whale investors can enter the market to quickly generate a return from the splashes they’ve created and then dump on the market.
These are just some of the standard considerations that a yield farmer must make prior to entering a position. Those that are data-focused can achieve wildly greater results than someone that is “just winging it” and trying to chase the dopamine rush from high staking returns. When it comes to compounding your gains there are a myriad of considerations such as when to harvest, whether to sell half of their staked returns to add into a liquidity pool to bolster their returns, or when to exit the pools when they are no longer viable in securing returns greater than the losses sustained through IL.
Borrowing and lending through LP provisions is a concept worthy of consideration also. Yield farmers will often catch onto a high APY% for a particular asset that is in high demand from borrowers. By allowing users to take out overcollateralized loans that are accessible to users that are engaging with borrowing and lending protocols creates further need for LP provisions within the DeFi ecosystem.
Moreover, the DeFi ecosystem continues to evolve as we march full steam ahead toward synthetic derivatives. This means that users can open leveraged positions and LP providers are rewarded with the proceeds from liquidations and arbitrage that exists within these protocols. These are additional considerations that must be considered for a Degen when weighing up their yield farming strategies. Not only do they have to factor in impermanent loss against their staked returns, but they must factor in the price action of the two currencies that are tied together in liquidity pairs. Volatility in leveraged markets can be a LP-providers best friend in this instance as over leveraged or poorly timed entries into the market stand to get wiped out by liquidation or stopped out of the market.
Front-running is also an exponentially increasing issue within DeFi protocols, particularly on the ETH mainnet where miners can identify transactions to allocate their GPU toward resolving before it reaches a natural consensus across the network. While this is not breaking the rules of settlement, it goes against the desire for consensus across a decentralized network and gives some miners an unfair advantage over the fees they can extract from the network compared to their fellow miners.
DAOventures seeks to simplify all the above considerations. Developers back test various strategies and review audit outcomes to determine the risk profile for a particular yield farming strategy. The potential risk/reward informs what strategies are considered low — high risk. Low risk strategies tend to involve stable coins. While the yields are typically lower, the risk of impermanent loss on single staking options offered by DAOventures is non-existent.
Better still, investors operate through Web 3.0 apps like Metamask. As such it’s non-custodial and has no KYC to preserve relative user anonymity.
For people starting out in cryptocurrencies one of the biggest appeals is the notion of a “passive income”. This is a powerful narrative that compels investment behaviors. Some of us are ambitious and want to 10x+ our way to making a cool $1M return. Others are more modest and seek to sustain a cash flow. The idea of the narrative is that users simply inject funds into the market to treat it like a savings account that dwarfs the possible interest returns that one can receive from a bank. The narrative is compelling, most currencies are looking at 0% interest rate or negative interest rate returns in the future to moderate the effects of excessive money printing. DAOventures seeks to release a product where all a user has to do is deposit their assets onto a smart contract that makes all the decisions for them in order to optimize their yield.
Their high-risk strategies are characterized by pursuing higher yield returns on riskier assets as previously described above. This creates an appeal not only for new users, but for Degens that would seek to not actively chase the market but let the market come to them as the strategic algorithm seeks out the most effective yield strategies.
Now all of this sounds great, but there are several points of contention that DAOventures face in delivering a working product.
Firstly, while they are in testing phase they appear a little behind on their roadmap regarding the roll out of various DeFi AMM manager products. My understanding is they have already begun to lay the groundwork for Q2 goals. On the surface many judge the efficacy of a project on their progress. However, given that the DeFi ecosystem continues to evolve and experiment with new yield farming strategies a roadmap that is set in stone does not allow a lot of flexibility to adapt as the opportunities present in the ecosystem grows faster than the rate you can implement or program a smart contract to seek these yields out. As such, many yield farming strategies to integrate into the algo smart contract are still under consideration and will continue to be included as new opportunities present themselves in the market.
Secondly, the DAOventures protocol is based on the ETH mainnet. There is no doubt that ETH itself is a robust ecosystem as indicated by its total market capitulation, but a well-known issue is that gas fees currently make it unviable for your average punter to participate in. The team are clearly aware of this and are working out ways around this by focusing on layer-2 solutions and developing greater interoperable capabilities.
Their recent IDO whitelist sale was to incentivize users that have invested in the Polkadot ecosystem, or specifically Polkastarter, to receive a greater distribution. This does signal an intent for Polkadot to be a main hub for executing smart contract interactions cross-chain. Further, there roadmap indicates a willingness to utilize layer-2 solutions to minimize loss in fees. Victor had indicated that there are partnership announcements pending regarding spreading the presence of $DVG beyond the ETH mainnet and to increase the reach of their algo driven yield farming strategies into liquidity pools cross-chain.
Thirdly, DAOventures has not reached true decentralization. The project requires a steady hand to guide it but yield farming strategies at this stage are informed by developers on the team doing their diligence in reviewing and analyzing projects. This is absolutely a necessity to create a baseline and to take accountability for allocating risk to yield farming strategies as they are released. But a clever and democratic method would be to incentivize the community of $DVG holders to communicate and share data from their individual yield farming experiences. Perhaps by providing a CSV history or enabling wallets to connect to share yield-farming data with decentralized data storage solutions for AI oracles to then inform algo smart contracts. To reach more DeFi ecosystems, a divide and conquer strategy could be a more effective approach to cover more ground particularly as new protocols appear to emerge daily. The problems of consolidating the burden of providing data to inform yield farming strategies to a limited team is gaining awareness of new opportunities emerging in the space. Incentivizing $DVG holders to provide data would certainly empower community DAO governance and achieve full decentralization. Is that $ALEPH and $OCEAN knocking at the door?
Fourth, the combined experience of the team is certainly formidable, but they are young. I am certainly not attempting to trigger an ageist argument; I am only just touching on 30 myself and have only spent 4 years dabbling with cryptocurrencies. The team is ambitious and have solid resumes, but many of the projects the team have been involved in are not widely known. Again, this is not an issue if ambition, resilience and expertise is present, but it becomes a matter of effective human resource allocation and public optics of ability to deliver on goals. It appears the team recognize this need for great human resource allocation as hiring contributors is an item on their roadmap. Onboarding team with experience delivering projects considered widely successful would be an advantage, but of course the nature of the ‘De’ in ‘DeFi’ is that it is often hard to identify developers and team members from decentralized protocols that have been wildly successful. Like Satoshi Nakamoto, there are many quiet achievers out there that do it for the love of it. The team at DAOventures do have sufficient investors backing them but would stand to benefit from more mainstream partnerships. Although, this is something that will come in time as cross-chain capabilities continue to develop to increase available yield farming options.
In conclusion, DAOventures are breaking down the barriers to entry by simplifying complex yield farming strategies by seeking to become the “fund of funds”. There is no doubt that UX is an issue that inhibits further user adoption of DeFi protocols in general, let alone being left to their own devices to pursue complex yield farming strategies.
Outside of cryptocurrencies, many are conditioned to relying on device applications to perform everyday tasks. From internet banking, to investing in CFDs, or even placing sport and racing bets — people are increasingly accustomed and drawn toward simple and portable UI to facilitate a desire or function. Investing money through a single app on your devices that makes all the complicated decisions for you is appealing on many levels. It is abundantly clear that those hearing stories from their yield farming friends of the insane gains and losses sustained from their activities would generate a lot of mixed responses such as complexity paralysis or FOMO. Where do I start? How do I get involved? What are the risks?
DAOventures seeks to solve a real-world problem that exists today — that is, participation.
Depending on the success of their integration with the Polkadot ecosystem and rollout of their mobile app we could see DAOventures emerge to be a big player not only in securing returns for users based on the yield farming strategies they choose but to allocating liquidity to DeFi protocols in a concentrated and laser-like fashion. The easier it is to participate in the DeFi ecosystem by streamlining the provision of liquidity, the greater the inflow from those retail investors that are unsure on how to proceed. Simplification will lead to greater benefits and growth within DeFi that will land yet another nail in the coffin of centralized finance.
