Rhythm NEXT | Dialogue between Alpha and Pendle, a new era under the DeFi stack

On January 12, the eighth phase of the "2021 NEXT" series of activities launched by Rhythm and KuCoin has been successfully carried out. The guests of this issue are Tascha, the head of the DeFi project Alpha Finance, and the Pendle agreement Team leader TN Lee. The host of this event is Mable, a partner of Multicoin Capital.

The following is the text version of this live broadcast:

Mable: Welcome everyone to watch the eighth program of Rhythm NEXT. As the host, I am very happy to be able to join Tascha from Alpha Finance Lab and TN from Pendle (formerly Benchmark) with two excellent project team leaders Be a guest in Rhythm Live, chat about their project team and their unique insights into the DeFi stack.

Before entering the question-and-answer session, let me briefly introduce two projects:

Alpha Finance Lab (Alpha) is a project focused on building cross-chain DeFi ecosystem products, which will capture unresolved issues in DeFi in an innovative and user-friendly way demand. Alpha currently launches two products "Alpha Lending" and "Alpha Homora". Alpha Lending is   Alpha's first product, built on Binance Smart Chain (BSC). The main function of Alpha Lending is to provide perpetual loans. After users deposit their assets into the system as collateral, they can obtain loans and obtain liquidity. Alpha Homora is the second product launched by  Alpha. Through the  Alpha Homora protocol, users can use leverage when participating in liquidity mining.

Pendle made it clear that its goal is to focus on two things: 1. Focus on tokenizing revenue; 2. .is an AMA that trades tokenized returns and other time-decaying assets. These two functions allow users to lock in the benefits of lending assets, and traders can estimate changes in earnings. Pendle means that information on the chain can be traded across time ranges, creating new profits and maximizing the return rate of protected assets through a revenue strategy similar to Yearn Vaults. In addition, Pendle is also an agreement that can be freely traded across time latitudes on the chain. It can create a forward yield curve through tokens, thereby bringing greater development visibility and efficiency to the lending market.

Mable: I just briefly introduced these two projects, let’s start Before, why not invite the two project leaders to introduce their project to our audience and tell us more about the story behind the project name?

Tascha:No problem. So let me tell you about myself first, I studied economics at UC Berkeley. I started my career in a more traditional investment banking finance background. I worked in investment banking for several years, mainly in San Francisco and London, and then I joined Tencent's Thailand branch as a product manager. After I left Tencent I joined the oracle project Band protocol as a strategy director to help expand the use cases of their oracle system.

After I entered the DeFi field, I found that there are many gaps to be solved, and then I can tell You more about the gaps we're working on and what our funding is going for. After that, I left Band protocol to start our Alpha Homora protocol with my co-founders. The above is some introduction about myself and the project name.

This is an interesting question . I would say I will find myself. Alpha Homora represents the return on investment you will get, and it will perform from the market reaction. That's what we want to achieve. So we want to bring the greatest return to our users. But it also helps users minimize downside risk while maximizing returns. Taken as a whole, it just gives you a sense of maximum reward. At the same time, there is also a feeling that we are not only developing one product, we are developing DeFi products, many different DeFi products. So we position ourselves as a DeFi Lab. That's why we also added the word lab to the project name. We want to feel that way. That's the story behind the name.

TN Lee: Hello everyone, I'm TN Lee, and I probably came into the encryption field in 2015 or 2016. My turning point was joining the Kyber project in 2017 as a member of the founding team as Chief Commercial Officer. I played a key role in helping the team become the largest liquidity ecosystem in the industry. The main thing that helps Kyber is to work with different types of protocols to enhance the user experience on their respective platforms. I have been working with Kyber until the end of 2018.

Then I found a group of people I work with now to do some consulting projects. We are engaged in mining related work and develop mining software. We then gradually moved to consulting for different observation protocols. We also worked with Band Protocol. As for the project itself, we think the benchmark is mainly focused on two things. The first thing is to focus on tokenizing future earnings and then allowing users to trade their future earnings.

Basically, combined, when you put those two things together, the future yield token ( Future Yield Token) holders can lock in interest rates, and traders can also predict their future earnings. As for the name issue, we actually called ourselves Benchmark at first, and eventually, we decided to change the name to find a more representative name. Pendle is the spelling variant of pendulum in several European languages. When considering the name itself, we consider some of the more unique characteristics of our product.

When we look at those AMMs, we see them stand out in terms of time, importance and facility, These three criteria are also considerations in designing our own AMM.

Now, coincidentally, when we list these three elements, we find that this is the same as the pendulum There are similarities. These are some of the phenomena that are common in pendulums, and we want to use Pendle to represent that our projects are all-encompassing. This is where our name comes from.

Mable: What was your inspiration for this project? You What is the (industry) pain point you want to solve?

Tascha:I think when we started, my inspiration came from our realization that a lot of DeFi projects didn't adapt quickly enough to market needs. This has basically become our basic work purpose: to respond quickly to market needs. We think we have to work differently than other projects, and at the same time, we have to think differently because often we only see one project doing this one thing. It's a product that's focused on one area, so they can go deep into that area, right? But even though it's a good area, it limits a lot of possibilities because the market changes over time And change.

In our view, the way we really solve this problem is how we create a series of DeFi products can develop along with the development of the DeFi market. This boils down to how there are two strategies that work. First of all, we must fully understand the definition of this market and understand the current problems in this market. In this way we can know how to implement a solution based on our knowledge to solve the current problem. Not just solving their problems, but finding a way to solve them and capture that need.

Because if you think of a problem, there are many ways to solve it . For example, if you study the law of improvement, you can build a new AMM with a flatter curve, or you can choose to hedge longs, calls and puts, or you can do something completely different. It's not just about solving the problem, it's a matter of how to solve the problem. We think our way to solve this problem is to go to the root of this exposed problem. So what we really need is to understand the market, but also understand the users, and make sure it's something that's easy to use, not something that only a few people know how to do.

TN Lee: For us, I think all (user) education started during the period from July to September (2020), relying on different types of liquidity mining growth. Then we started to develop different products, and we started to see people becoming more familiar with the lending platform. For example, Compound, TVL has really increased. Then everyone found that the benefits of various types of liquidity mining are being integrated. All these different types of products, because liquidity mining is gathered together, they are more familiar with this product. Whenever people participate in this yield mining yield, they have different types of yield mining yield tokens.

Now the user’s liquidity mining income has a floating rate, these 14 interest rates , even if they are not negative. I think they also create an element of volatility and uncertainty. So you have to get in fast and get out fast. Otherwise you lose the opportunity to cash out. That means people have to monitor APY every minute very, very frequently.

Over time we tell ourselves that if there is a method allows people to lock in interest rates, then I think we can help people reduce the pressure of transactions. This actually provides a different suggestion for farmers involved in liquidity mining. So I think that becomes a cornerstone of how we think about problem statements. We generally think that fixed rate products, they will play an important role in DeFi entering the next stage. So putting those things together, it's these things that motivate us to work and build a track to the future.

Mable: This question is for Tascha, what's new in Alpha Homora v2, in v2 What are some things in v1 that cannot be achieved in v1? Who do you cooperate with?

Tascha: Before I answer this Before the question, let me briefly explain why we built this part in the first place. Because it also has to do with the way we're building V2 now. When we were building a V1, we clearly felt two huge gaps. The first one is that we found that many currency holders have very little income, so can we give them a way to maximize income while minimizing risk? It's just purely lending revenue and then we can capture the huge market demand.

This is the first one, right? The second one is also from USDT liquidity mining farmers. They are also looking to earn higher yields. So, how to get more income without depending on the project? Then we can enable this leverage function. When we find these two market gaps, we can match the two problems together to solve them, and then there will be Alpha. When it grows significantly in a short period of time, we will transfer our framework work to liquidity mining Here comes the matter of leveraged income.

This means that most of the AMMs we work with already have an edge and if they are looking for leverage then they Will be obtained by going to Alpha. We're also scaling Alpha in the process, but in addition to the framing work to scale volumes, we need to do a lot of homework to address some of the risks that may arise that when people use leverage, they get exposed to short positions.

Not everyone is comfortable with this exposure, so in V 2 we also allow users Select the tokens they want to borrow and leverage. So they can also borrow stablecoins like USDC and other tokens that can be used as leverage. I think it will expand not only the partnership, but also the use of users, because everyone has different risks, which is how we think about Alpha Homora v2. Another risk comes from the fact that the product platform itself is being leveraged. The way they want to minimize is going to be on Alpha x, and I can tell you more about how we think about building synergy to the whole ecosystem.

In general, if you compare Alpha Homora v1 and Alpha Homora v1, there are still many differences. As I mentioned, We allow the leverage function of the fund pool, supporting Uniswap, Sushiswap, Curve and Balancer, basically covering most AMMs.

Second, you can take advantage of stable currencies and Many other assets, depending on what assets you have, what tokens, what tokens you like, you can use them for leverage.

Third, you can make your fluidity Mining becomes very flexible. So it's easy to manage. That's the first part of the question. The second part is the partners we are looking for. For example, Andre Cronje has worked with Alpha Homora before. This is the partner we will be working closely with. At the same time, we also work with a lot of partners I sometimes say, sometimes to make sure that they really use Alpha Homora as a tool that can be leveraged.

Mable: I want to ask TN Lee this question. There are many projects in the market trying to provide a "fixed rate" product , how do you think Pendle abstracts its mission as "revenue tokenization" from all other projects?

TN Lee: That's a good question. So our project focuses on three main points about the design. First, Pendle has built an AMM that allows people to quickly trade yields on Uniswap, and we believe it is important to bring liquidity together through an AMM because it will allow us as a platform to take advantage of the flexibility of launching liquidity. The fact that with AMMs we effectively get everything on-chain makes our protocol more compatible as different schemes are used to bring order books together. When we talk about interest-earning token projects, we think they are more like a compound with fixed interest rates. The difference between us and these projects lies in the target liquidity providers and the types of assets we may support.

In other interest-bearing tokens In the case of providing liquidity, they will need to attract liquidity from existing protocols such as others and the Compound concept to build the ecosystem. Because they target very similar types of users to provide liquidity. Now, in contrast, we build on our existing products, like Compound, and we focus on interest-bearing tokens. This means that if you are a liquidity provider on Aave or Compound, and you have A tokens and C tokens, then you are also providing liquidity to our protocol. So I think this kind of energy is how we intend to attract these liquidity mining user bases and give users more opportunities to use their assets. The third point is the types of assets we can support. Our design is designed to be suitable for different kinds of interest

 token. Fundamentally, the technology is still in its infancy. We will support interest-bearing tokens and other tokens from Compound.

Now I think it will get more and more interesting as we develop it. Because like after Compound, the next platform we're working on is Harvest Finance. Harvest Finance is a liquidity mining aggregation platform. I think that when we support protocols such as Harvest Finance, we are actually allowing people to mine liquidity Speculation and hedging of mine earnings. I think this is the way we can evolve. Basically, these three core principles that guide our product design are very different from other protocols.

Mable: Then I would like to ask what is the roadmap for the second quarter of your two projects?

Tascha:Ok everyone As we all know, Alpha Homora V2 was launched in January. Alpha X and Alpha Homora V2 are next. When will it come, I think you can divide them into two parts. The first part, allows our Alpha Homora to hedge their leveraged positions. For example, if you were using leverage on Alpha Homora V1 and didn't want to expose your short position, you could open the opposite, large long position on Alpha X. When we release Alpha x, we can give you a very convenient way to do this. This is the first part of Alpha X.

But at the same time, if it is not only limited to Alpha Homora use, but expands the entire DeFi user base, it will allow Those who want to have a directional view of any asset. What sets us apart from other products is that what we call in this space "perpetual swap" (perpetual swap), we hide the complexity from the user, so technically, the professional function is not the same as the financing rate or rebalancing concept related. We hide all the complexity. When users enter Alpha X, they can open and close positions knowing the entry price and exit price, which is very simple like traditional trading methods.

We have also tokenized leverage multiples, and you can trade these tokens in the secondary market, such as On Uniswap or Sushiswap. That is to say, users can buy these tokens in the secondary market based on the judgment of the market direction. This is the practical use that Alpha brings to Alpha Homora and even the entire product ecosystem, and it also attracts a large number of users. We are now in the process of building our third product. This isn't public yet, but it's a work in progress. We are also monitoring developments on this front.

TN Lee:For us , The more direct roadmap goal allows the product to be tested and released as soon as possible. As mentioned earlier, when Pendle launches, the platform will support our other revenue streams. Then we will try to integrate more products, Harvest and some other products, to provide users with more products.

Now I think when we integrate enough, all we have to do is expect the complexity of it. Because from a user point of view, I think the most primitive form of the panel is not very suitable for most users, because it involves users taking these income channels to get a new token, and then going to Pendle to try to lock their income. When we combine our individual approaches, we actually become platforms that exist on top of different platforms. All we can do is abstract the complexity away and make it fun for the user. We can find the best way to lock the price on behalf of the user through the integrated platform. I think when we abstract this complexity away, we can improve the user experience, and we can potentially increase user adoption as well.

Another product we're working on that I'm personally excited about is an official interest-bearing token because We have officially launched the new product, and it is not far away for us to put different types of your tokens into baskets and allow traders to speculate on such assets. I think when we have that, it will be interesting for traders.

Mable: What do you think is the biggest change and progress of DeFi in 2021? You can talk about all projects and ecological development, not necessarily limited for your own project.

Tascha: I think derivatives are really Interestingly, 2021 is the year of derivatives in my opinion. Because in 2020, many foundations have been broken, such as decentralized exchanges, such as Uniswap, Sushiswap, Curve and so on. Then they also made synthetic assets. I think the foundations of a lot of things that have been financed to some extent have been established and used many times. 1 year, 5 years is a long time, so I think people are now looking at the second layer in that light, like derivatives, perpetual swaps, options and so on. I think from my observations in the space and talking to a lot of builders, people also want to be in derivatives because it expands more options.

Not only does it not limit you to holding tokens, it also allows you to get more leverage than margin trade. So I thought it was interesting. And it will be interesting to see how it plays out, because the way we implemented it, as I said before, is very different from other ways.

So I think this is a turning point for Alpha as well. We must not only seize this opportunity, but also any products in DeFi that want to be traded. I don’t know if anyone has tried or implemented it before. But as far as our facts are concerned, we are contradictory. We're going to make things simple, and that's going to be fun.

Another thing in 2021 is L2, especially the current gas cost is very high, in 2021, there will be Many solutions will work. I think synthetics makes a good example of this, and I'll try that as well. Many other DeFi products will follow this path and will go far beyond L2. For Alpha, we have communicated with many L2 protocols, looking for a way to leverage. I'm a bit tricky for Alpha because our interaction is several times that of other products on Ethereum, we are trying to communicate with multiple players, looking for more than two players to come together to find the best way to execute. Because we don't want to lose the interoperable products that we've been able to get.

TN Lee:Yes. So for me, I think I agree that L2 will be one of the bigger stories this year. So it's clearly a product development side of things in my opinion. Like having the ability to populate the blockchain itself, can improve user experience across many platforms.

But from the perspective of product development, the consideration of gas has always been one of the first considerations. I think when we can solve this problem and provide people with better ways to optimize gas or reduce gas costs, I think we will likely see more interesting innovations that they can come out of.

I am also interested in the development of the money market. Because it is one of the main cornerstones of the entire DeFi system. It's exciting because right now, when people want to borrow money, most of the time they're overcollateralized. This is not an efficient use of capital. I think if we can provide this kind of product to users, we can improve the efficiency of the entire network. Logically, this should help improve fluidity and the fluidity of the experience system as a whole. That's something I'm very, very looking forward to.

Mable: Can you share with our audience what the DeFi or general crypto scene looks like in your region? Alpha in Thailand, how is the local environment? And what about Singapore, where the Pendle team primarily works?

Tascha:Yes, so If you look at it from the perspective of the general population, there are still a lot of people who don’t have the awareness to trade cryptocurrencies or DeFi. But I think it's a good start. Now in Thailand, many people are eager to learn more about DeFi, and there are many conferences and presentations in Thailand. Then there are projects like ours where we also employ more local people to help spread the knowledge. In terms of projects, some blockchain projects have also been born in Thailand. Although it is wrong, we still have construction in the blockchain field.

One of the largest commercial banks in Thailand, they also have their own venture capital department, and they also have experience in the DeFi field as. Then go to the highest level, such as the government level. You'll see that governments have started issuing bonds on the blockchain, which is interesting. But I'm sure (accepting the blockchain concept) it will take a few years, but at least they are making some progress.

TN Lee: I think Singapore Very interesting because in this area. Singapore has traditionally been known as a crypto hub, with an influx of projects and talent pouring into the city. I think with the recent search for interest in crypto, we're also starting to see more and more retail investors, like most people who don't understand crypto, start looking at the technology itself. I think to a large extent, the awareness itself is driven by the price spike.

Given the density of financial talent in the City, people will soon start paying attention and even start trading this type of asset. So, I think, with the infrastructure in place. Some centralized companies will start active blockchain talent recruitment efforts. In the near future, we can expect a number of other companies looking to expand outside of their home country to do the same. Then build regional jobs in Singapore, as the job opportunities will make Singapore quite competitive in terms of talent pool. Then the rate offered to those who work in this tree will go up accordingly. Not so long ago, DBS Bank announced that they will be launching a crypto exchange. As one of the largest banks in the region, that could happen soon. I think these are very exciting developments that we're seeing in Singapore. It's all good development.

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