Crypto Sapiens - The Story of a Fintech Degen - Graadient and Gro Protocol

Primer: In traditional finance, saving accounts are protected by deposit insurance. However, this same feature does not exist in DeFi, until the arrival of Gro Protocol. Graadient, the founder of Gro Protocol, shares about how his project provides deposit protection and his plans to take the protocol further.

Background

• Went through the winding paths of Bitcoin many years ago into the DeFi smart contract world a couple of years ago

• Started working on Gro Protocol a year ago

• Before Gro Protocol, he was at Spotify for 8 years leading growth

• After Spotify, he went to work for Revolut, bringing mobile banking to more corners of the world

From Spotify To Revolut To Gro

• At a personal level, he had been an intrapreneur in various startups like Spotify and Revolut for the past 10 years

• Prior to that, he was an entrepreneur

• He missed the feeling of building something from the ground up

• In 2017, he started a hobby building a decentralized fund with a DAO type of approach to tokenized votes for due diligence, deal sourcing, and various service related to an investment fund

• Kept on being involved in the space. Saw the financial primitives being built

The Human Element In Crypto

• Jesse Walden had written a good piece on the ownership economy

• Shift from people being treated as products by the media to being builders and capturing value that’s being generated by these different platforms

• The zeitgeist on the nature of work is changing. Because of COVID, people find themselves working in places they didn't expect themselves to work in (e.g. home, coffee shop, mountain top, etc.)

What Led Up To Gro Protocol?

• When DeFi summer kicked off, there were some pretty spectacular yields that were available in the space

• When this is mentioned to people outside of crypto, they default to challenging the risks inherent in the high yield

• Some people felt that the yields were not really corresponding to the amount of risk involved

• They wanted to create a high yield savings account with deposit protection for the laymen

• Existing crypto insurance protocols only offer protection for a limited duration

• In TradFi, savings account come with deposit insurance. They wanted to create a protocol to replicate that in DeFi

“If you go to a bank, and you say, hey, I want to put in $1000 bucks, the bank doesn't say okay, for how long would you like to buy deposit insurance and please pay me the extra for deposit insurance. It’s just a built-in quality of the deposit. And so how can you replicate that type of experience in DeFi was the equivalent like a DeFi savings account with deposit protection.”

- Graadient

Their Strategies

• Currently, 7 strategies are live

• Strategies are generating yield through a number of different ways:

  • Lending income

  • Trading income

  • Governance token incentives

• The risk of those strategies is broken up into 2 products:

  • Higher risk, higher yield product (called Vault)

  • Lower risk, lower yield product (called PWRD)

• Both Vault and PWRD have the same strategies. The only difference is that tranching is used to break up the risks

What Is Tranching?

• The slicing up of risk

• Risk tranching is something that is done in TradFi (e.g. senior and junior tranches of debt)

• What Gro does is to create a portfolio of assets and a portfolio of yield sources

• With a portfolio, they are then able to divide up the risks

• Example:

  • $50 placed into Vault

  • $50 placed in PWRD

  • Total of $100 in the system

  • $20 of the portfolio is placed in USDT

  • If USDT goes to zero, Gro Protocol would not take $10 each from Vault and PWRD. They would take $20 from Vault

  • $30 remains in Vault

  • $50 remains in PWRD

How Does Balancing Between Stablecoins Get Done?

• Right now, the distribution is even:

  • 34% USDC

  • 33% DAI

  • 33% USDT

• There’s also a cap on PWRD. They cannot issue more PWRD than Vault because the latter needs to protect the former

How Does Their Risk Balancer Work?

• Risk balancer looks at the current distribution between different stable coins

• When someone deposits an asset that the protocol is overexposed to, it swaps it over to an underrepresented asset

• This allows the risk to be distributed in a balanced way automatically

Which Chains Are They On?

• Gro Protocol was first launched on Ethereum

• Users can access PWRD and Vault on the Argent app

• Argent recently integrated with zkSync. Users can now access Vault on zykSync through Argent wallet

Their Decision To Launch Labs On Avalanche

• The number one enquiry they received from their community is to go on more chains to drive down gas cost and increase transaction speed

• A lot of people expressed interest in Avalanche

• One of their partners, Alpha Finance, had launched on Avalanche

• Labs was launched to meet the demand of the market and to expand into a multi-chain world

Thoughts On Operating In A Multichain Ecosystem

• In the beginning, people were coming from Ethereum and trying out other chains

• Each of these chains experienced their own kind of mini DeFi summer

• After that stage, native communities are starting to grow on these various chains

• Innovation will spread from one chain to another due to EVM compatibility

Community Participation And Governance

• Started off with “emoji governance”, where they conduct preference polls within Discord

• The second request was to transform emoji governance to DAO governance

• In Q4 2021, they launched their DAO

• They have forums for discussion and proposals and Snapshot voting

• At the inception of their DAO, they created a temporary non-transferable ERC-20 token called xGRO for their community to vote with

• They discussed with the community what their tokenomics would look like. Subsequently, they created a vote on Snapshot that is linked to their multisig

• The community basically created the tokens for Gro Protocol with their vote

Challenges And Opportunities In DAO Governance

• They launched the protocol before the DAO

• Had an initial core community in their Discord and Telegram trying to get their DAO started

• When they launched the DAO, their token ended up acting as an aligning force for the community

• Their DAO have 2 types of contributors with special roles:

  • OGs — people who help out with answering questions in the community

  • G-Force — their decentralized marketing team. This includes broadcasters, content creators, and DAO ambassadors. They collaborate in small groups but also compete against one another on who can best build the DAO and the protocol

• Currently, they are discussing how they could allocate more deposits towards higher yielding strategies without compromising the protection for PWRD in their forum

Thoughts On Partnerships In The Space

• The nature of the DAO working world is that people are running across multiple communities with different degrees of engagement

• There will be an organic cultural overlap between communities

• Many of the protocols are still permissioned. The community helps bridge that and enables collaboration between different protocols

Current Market Conditions And Activity On Their Platform

• Turbulent or crabby markets are a good time to earn yield on stablecoins

• Their products can offer something in every type of market condition

• Currently, the majority of stablecoin use is for protocols’ own usage or for staking on Curve gauges. There’s billions of people who have not use stablecoins for their daily lives yet

Thoughts on CBDCs

• CBDCs have to compete with other stablecoins for utility within the ecosystem, unless there are government mandates for their adoption

• Will end up having two parallel ecosystems — CBDCs (a closed network) and DeFi (an open network)

All information presented above is for educational purposes only and should not be taken as investment advice. Summaries are prepared by The Reading Ape. While reasonable efforts are made to provide accurate content, any errors in interpreting and summarizing the source material are ours alone. We disclaim any liability associated with the use of our content.