“I heard that X protocol provides 2,000% APY, are they legit? Should I pay a $100 gas fee to withdraw my $2,000 from Yearn finance or wait? My friend said centralized lender BlockFi gives 8% APY on my USD, but do they even have collateral to cover if their traders have large losses? Should I move from Polygon to Avalanche to make the most APY?…”
If you have been on the Decentralized Finance (DeFi) bandwagon like us, you probably have asked at least one, if not all of these questions in the last few years. DeFi has been all the rage in the blockchain land as it promised to and bring about a more effective financial market for the masses. However, it remains hard to access to most retail investors due to significant complexity and prohibitively high transaction costs.
That’s why we, a team of blockchain, quantitative finance, and technology experts, came together to build Alpine — a DeFi protocol that harnesses the power of DeFi for all. Our goal is seemingly simple yet ambitious: We want to lower the barriers to investing in DeFi in order to help bring on the next 100M of users to the crypto world in order to expand economic opportunity for everyone.
What is DeFi and Why Does it Matter?
In the past two years, we have witnessed the meteoric rise of Decentralized Finance (DeFi) from a niche-application of the crypto world to a robust and viable alternative to our modern financial system. Today, nearly 4.1M users have contributed $250B to DeFi applications¹ making DeFi one of the most exciting and consequential applications in the crypto-based economy.
It has done so by reaching beyond many of the developments in “Fintech” which have primarily focused on innovating on user experience while ignoring (often for good reasons) decades old infrastructure like SWIFT and ACH payment networks which undergird our current financial system. Instead, DeFi is reimagining how we think about financial services by leveraging the unique benefits of trustless and decentralized blockchain technology that has the potential to create more efficient and accessible financial markets. Just to name a few, applications ranging from borrowing and lending services (eg. Compound) to exchanges (Uniswap) and prediction markets (Augur) exist in the DeFi world.
Why is DeFi Broken?
Indeed, while the merits remain noteworthy, DeFi remains hard to access to most retail investors. There are three key challenges that have made it difficult to fully capitalize on the DeFi boom:
- Owning Crypto: On-ramping remains one of the biggest friction point for retail investors to enter the world of crypto. You need to already have access to cryptocurrency — typically Ethereum — and knowledge of how to use that with things like a crypto-Wallet to invest in DeFi.
- Crypto Expertise: Even if you have crypto, new protocols emerge daily and rates move as quickly as capital flows around the system. This benefits more sophisticated investors who can keep up with the complexity and know where to move their funds.
- High Costs: Finally, even if you know where to move your funds, transaction costs are prohibitive for most. As a result, to date, most of the capital in DeFi comes from large holders typically called “whales”.
Taken together, While DeFi shows a lot of promise, we believe there is still a long way to go for this to live up to its promise of creating a more efficient and accessible alternative to our current financial system.
Opening the Door to DeFi investing
In many ways, the traditional financial markets have dealt with similar challenges to what our early DeFi system currently faces. Investors — if they even had access to the stock market — were often relegated to buying single stocks instead of being able to create a more robust portfolio since stocks had to be purchased though brokers. With the rise of Modern Portfolio Theory in the 1950s, diversification became a leading strategy that helped birth the mutual fund industry and eventually the ETF industry. Today, the ETF market is ~$9 trillion and passive vehicles like these hold more than 50% of U.S. publicly traded equity fund assets.
Such passive vehicles created massive amount of wealth for generations of retail investors, but this type of investing is scarce in DeFi world. Our goal at Alpine is to catalyze an “ETF-like” moment by allowing investors to overcome the limits of our current system. This means enabling users by:
- Removing Crypto as an Entry Requirement: Users will no longer be required to hold crypto before participating. We will make it easy to onboard money from your bank account directly into these investment portfolios. Of course, crypto-natives are still welcome!
- Expertise for All: By leveraging our community, we can create diversified portfolios that give you broad exposure to multiple protocols. If a certain underlying protocol underperforms as expected, your total holdings will be more insulated from a shock that could have material impact on your savings.
- Near-Zero Costs: By using our innovative cross chain, multi-layer solution, Alpine will make it affordable to gain exposure to multiple DeFi protocols at once.
When put together, we believe that we can help expand access to the DeFi ecosystem dramatically by making it easier and more cost effective.
We believe that this passive investment strategy represents the future of crypto earnings and can disrupt the market in a way that ETFs did for traditional finance. In the coming weeks, we will be sharing more about our vision and progress as we aim to expand economic opportunity for every investor.
: Data from Dune Analytics and DeFi Llama as of December 9, 2021. DeFi users represent unique addresses having interacted with DeFi protocols. Unique addresses do not correspond 1:1 with unique users as one user can control more than one address.