Reef Finance: Taking DeFi to a NEW LEVEL

Hey guys, and welcome back to Box Mining. So, you know, for the past year, decentralized finance has been blowing up everywhere. And today we're going to visit one of some of the core problems with decentralized finance and how Refinance is solving that. So we have the CEO of Refinance here. They're building the first DeFi operating system that's cross-chain on Polkadot. So lots of keywords up there. You got decentralized finance, we got Polkadot. And of course, recently, you can actually get some of Reef for absolutely free if you're on Binance Launchpool. So take that. We'll have some links at the end if you guys are interested. But I think first off, you know, when I saw this, there was a lot of big words. Denku, can you just explain a little bit about, you know, kind of what the key objectives, what the problem you're trying to solve here is? Sure. Sure. First of all, thanks. Thanks for having me, Michael. So basically, like we are trying to solve three main issues. And the first one is the liquidity problem. So basically, you have so many centralized exchanges and they're, you know, isolated silos and they're prone to hacks. While on the other side, you have decentralized exchanges, which have, you know, unstable liquidity. They're very expensive and hard to use due to the Ethereum's network congestion. And on top of that, neither of them really have like integrations with the DeFi ecosystem directly. So this is just one of the issues. The second one is the yield problem. So it has a very high technical barrier of entry. So when the new users come, for example, my friends, they don't know where they have to start from, what they have to learn. Like they don't know the names of the projects and for them, it's impossible basically to keep up with the best strategies and stay well diversified and understand. Right. I mean, everyone wants to make money, right? Everyone wants to make money. Everyone sees that, you know, people who understand how to do, I mean, I've been covering yield and yield farming and every, all of this stuff. Sure. 40%, 50%, 60% sounds great per annum, right? But how do you do it safely? Right. So you're trying to solve this problem as well. Exactly. Exactly. So we are trying to help the user augment their decision-making, basically understand the risks associated with the different DeFi instruments that they're getting in. And based on their risk tolerance, they're able to, you know, tweak their portfolio and get into the, you know, appropriate activities. And on top, we are allowing them through RIF basically to access multiple ecosystems at the same time. Got it. So it's bridging ecosystems. So it's a lot to unpack here, right? So we'll dissect it one by one, but it's solving quite a lot of the core problems in DeFi. So starting off, it's the exchange liquidity issue. So, I mean, 2017, we saw the rise of centralized exchanges like Binance, KuCoin, right? But this year we saw Uniswap becoming such a dominant force and you want to combine this, right? And the second key point is to do with yield farming. So this is where people in DeFi, they can save up cryptocurrencies and essentially make money passively on farms, right? But of course, now we have this fractured ecosystem. There's multiple, there's Ethereum farming. We saw recently ontology, there's a pool, there's Polkadot for sure that's coming up. So I guess these two problems are very fragmented. So let's tackle the exchange problem first. Like, what are you trying to do there? How would you even solve that problem with like centralized and decentralized exchanges and the liquidity on these two sides? Right. So we have something called a basket engine and this is like the mechanism through which the user gets invested. And the reason why we built it so we could abstract away the need to interact with like order books and interact with DEXs yourself. So this liquidity aggregator is like on-chain component, which when the user wants to get exposed to tokens, it flows through them. So something, you would say something similar to 1inch, except that we are adding some improvements on top. And in the basket engine, we are introducing also like centralized exchanges liquidity through integrations such as Binance brokerage as well as other prime brokers. Okay. Okay. So, so, so, so, so taking this way. So, so with this system, right? With what you're building here. So let's say they want to sell a particular coin or buy a particular coin. They'll be able to access multiple exchanges at the same time. So we've seen that with 1inch exchange where they go through, you know, they tap into Balancer, they tap into Uniswap. But here you're building on top of that, you're adding, say, not only can you say access Uniswap and trade and make those orders, but you also get Binance and you'll also get other exchanges. How is that even possible? How does that, is that one click and the users are done? Like let's say I want to buy the Uni token. It's listed on Binance. It's also listed on Uniswap. Is it just one click and done and I get the best rate? Yeah. Yeah. So basically, as we know, like the centralized exchanges require like, you know, KYC and having an account. But what happens is in 2017 and up to this day, a lot of exchanges still have like API keys. And this is something that we wanted to completely avoid. So we are not keeping the user's API key at all. So those exchanges started adding integrations similar to OAuth. So how when you log in with Facebook, now you will be able to like log in with your Binance account and link and give certain permissions to your account. So what happens is you can come, you can choose which exchanges you want to be plugged into. And then that's all you have to do. And then through the basket, you get the composition of different, you know, different activities and some of the instruments inside are direct token exposure. And then based on your order size, our engine will figure, okay, I think here, I should split the order between this centralistic change and that centralistic change and this decentralistic change. So basically with a single click, the goal is that you don't think how your position will be filled. So it's completely abstracted away. Your job is only to come to choose the type of the basket that you want to get exposed to. Our analytics engine is proposing based on your risk levels, what we think is optimal for you. And then with just one click, we are, you know, getting through the smart contracts, your funds routed and your position filled. So at the end of the day, it's actually, so the way it says, it seems to be making everything easier. It sounds hard, right? Because when I first saw this, you know, when I first heard about it too, it doesn't sound very easy, right? Because you're trying to connect exchanges up, you're trying to connect everything together. But at the end of the day, the experience is just simple, one click, but in the backend, it decides which exchanges to go on, right? Because right now, like if I'm trading, right, it's a lengthy process, right? I go on CoinGecko or some sort of, you know, CoinMarketCap and I see, okay, look, which exchanges are trading this coin? Okay, where do they have liquidity? Like, where can I buy it? And if I buy it, where can I get the best rates, right? So these are all decision points that I have to make. But with what you're trying to build here, it's basically, that's done automatically for me. You'll give me the best rate for everyone because you can split between both centralized and decentralized exchanges and then, of course, it's just funneling those funds as sunny as the funds through there and it's good to go and you can probably show me the savings just like one inch exchange, right? Pretty much. Correct, correct. Also, like the addition is when you get invested, the best, so you do not get all the outputs of the investment in your wallet because it's extremely hard to manage like your LP tokens and then something doesn't show up on another wallet. It's all like complicated. In our case, the basket engine itself, it's like the on-chain infrastructure is holding the position for you of all the outputs. Like maybe it's an entry into like a lending protocol and so on. So everything is held there under your address. So it's very easy to not just invest, but also to divest. So with one click, you're also out. And on top of that, when we discussed about the fragmentation problem, we have multiple ecosystems. So imagine if you want to participate in something on Kava and Avalanche and Polkadot, you need three different wallets. And not just three different wallets, then you look, okay, how do I top up this wallet? Like I have to buy something somewhere. Do I have to go on exchange and then withdraw Kava and then withdraw Avalanche? It's so hard. So we are building this like multi-ecosystem support wallet, which will automatically like go through the bridges for you. So if you're an Ethereum user, again, with one click, you will be able to get your Ether into like say a Kava bridge, which they will wrap the Ether. So your address will get, you know, wrapped Ether on Kava and then we'll further route that wrapped Ether. And this wallet is a piece of software that's installable similar to how the Trezor hardware wallet has the Trezor bridge process running. And you do not have to worry about generating different wallets, about crossing bridges yourself. You don't even have to know what your address is. It doesn't even matter. Right. But, but that also sounds so, it sounds so simple. It's scary, no? So you're making this decision much, you're making it much easier for everyone, right? Because now you can divest your portfolio. You basically can like one click become a master of crypto, right? So instead of saying, oh, look, I have no idea what I'm doing. I'm just going to trust someone else to do it. You still have full control. You're still doing it yourself, but then you're using this kind of automated kind of creation process to create both your wallets, to make the investments that you want and also divest as you want, right? But, okay, so in that case, right, I keep possession of it at the end and you said that, is it purely a software wallet or is there a hardware wallet component? Because, I mean, obviously security becomes a big issue if I'm trying to put a large portfolio on this, right? Yeah, it's a software wallet, but you will be able to connect your existing hardware wallet through this. Okay. Okay. So this is being built out and what's the technology behind it? So like, it sounds very ambitious, right? Because you're trying to bridge different platforms together. You mentioned Kava, you mentioned Ethereum. It sounds like it's got a lot of moving parts to this. So how do you make it kind of simpler and how do you make it so that's safe? Right. So there are three like, you know, main like big components. The first one is the actual wallet, the installable one. This is, you know, has to be like next level security similar to how the Trezor guys have it. The second is our analytics engine. This is the one that's monitoring the baskets. It's basically helping you to choose where you should get into. It proposes rebalancing, it proposes reallocation, strategies, and so on. And the third one is the whole on-chain infrastructure which helps basically with the whole product being fully non-custodial and you being fully in control. So this is like the liquidity aggregator component, then it's the basket engine, the whole integration between themselves and all the integrations for the existing important DeFi protocols. Right. So, I mean, you have three components and it sounds like it's a lot, right? It sounds like you're essentially combining all these things together because we've like, you know, frankly, we've seen in DeFi there's a lot. There's exchange aggregators, there's bridges between platforms, but you're kind of combining everything in one place. Now, one of the kind of issues that popped up this year was choosing the right strategies and making sure that these strategies are also safe, right? So in the concern of safety, right? Because over the past few months, we saw that DeFi took off like crazy, like to the moon, and then it kind of exploded in a spectacular fashion when various protocols got hacked and various strategies, right? Because they were making baskets too, right? And then they got basically attacked by flash loans or by various weaknesses in their programming. How do, you know, if you're trying to do everything, right? Because that's kind of what I see with the ambition of this project. How do you guarantee that there's safety of these funds? Because yet again, if users spend a lot of money here, how do you make sure it's safe? That's a great question. So one very important thing to understand about Reef is that we will never deploy financial primitives ourselves. So people are not going to make money on our own like instances of let's say pools or lending protocols or borrowing protocols. So Reef is all about, imagine it's like one layer above the current infrastructure. So if those protocols such as Balancer and Aave do not exist, we cannot build anything. So since we've seen how this landscape has progressed, you know, very rapidly this year, there is a need for something on top which would help the users consume this whole, you know, layer one, let's call it, of financial primitives in an easy manner. So what happens is you would, through Reef, you would still be able to get exposed to Wi-Fi vaults. You would still be able to, you know, go through some multi-hop strategies that someone built. We're just helping you decide in the whole DeFi landscape from all of these options which is the best for you and right now. So we are not, we are not going to build like, you know, our own Wi-Fi like vaults. We are not going to build our own like lending protocol. Basically, you are not investing in Reef, you are investing through Reef. Got it, got it. So it's like, it makes it simpler to get into. So it's a gateway to DeFi. So it's like, it allows you to have direct access to the powerful tools that are being built around DeFi but it's not necessarily, you're not building the tools yourself so you're not subjected to, so you're kind of relying on them. Now, with that, right, so you have this out, people can start investing. What have you integrated so far and kind of what's the status of the product? Right. So actually, we've demoed the product like a few weeks ago. We've done the first audit. We will do another audit and we want to launch it in January. That's our goal. So, so far, we have, initially, we have two types of baskets. The first basket is the volatile basket. This allows you to get into like, you know, different, get direct token exposure, get into like Uniswap pools, get into like some, some very simple multicop strategies. And then on the other side, you have, on the other side, you have the stable coin yield farming basket, which helps you get into multiple value vaults, Wi-Fi vaults at the same time. And, and that's, that's pretty much what the first version is. So is it like, is it like the user will select one vault and that's it? Or, do they get to customize each vault? It's customized. So basically each basket is a composition of different, of different, let's say, vaults, if it's the stable coin yield farming. And then you can tweak the exposure yourself, even though the analytics engine will propose you certain, you know, composition. Oh, this is the recommended one, but you can go like drag the bars and then correct. Okay. You can further customize it. And yeah. And what's really cool, what we are also working on, we know that a lot of users are already invested in DeFi. So we will make it easy for them, even if they're already into some activities, they will be able to wrap all of their position into a basket. And then the analytics engine will be able to propose certain optimizations on their existing positions. And this is one way how we can get onboard users who are already invested, you know, so not just new users, but existing users as well. And this will help us obviously, you know, grow the TVL that Refus has on the smart contracts. Yeah. So it's like an ultimate dashboard. You go on this dashboard, you see what you have, you see how you can optimize, you see what you can go in addition and you can load up and then just like one click go into all these currencies. Right. So it's like kind of, so that's why, you know, you described as a DeFi operating system. I thought that was a neat naming there. Okay. So, so that's cool. So basically that allows people to be able to generate passive income. That's super sexy this year. I think everyone's like, oh yeah, let's, let's do that. It's one of the biggest kind of, um, I would say, I would say this year, you know, with so much yield happening in decentralized finances, it's, it's a big, you know, draw, you know, it's a big carrot for anyone who wants to leave the current financial system because their exposure can still be in USDC, let's say, for example. So they still expose in fiat, but then they get a lot more rewards than say a bank would give them, right? Banks gives like less than 1% right now. Like here, you know, in DeFi, you can get 20, 30, 40, 60, depending on how much, you know, risk you want to expose yourself to. And, and, um, so, okay, so, so if that's the case, right? So if that's the case, you get, you get an easy entry into this. Um, what happens when DeFi goes all crazy? So one thing that we did see, right? So this is like, um, the new farms in DeFi are always better rewarding and then the older farms are not as great, right? So how, you know, how would you build your system around this? Do you, do you constantly have to update the, the parameters of the aggregator and the suggestor to suggest a new latest farms? Or do you want to play on a safe side? And how would you even configure this? Because like when I saw DeFi going crazy, it was like apeshit bananas crazy. Yeah. Great, great question. So, uh, actually like last year we've, we've spent the whole year. So now it's like almost two years building this analytics engine and, uh, our model was B2B. So we were providing metrics for like certain, certain funds. So they were, they were basing their decisions, their investment decisions based on those metrics. So what happens in the background is we have, uh, we collect three different, uh, types, uh, three different sources of data. The first one is on, on-chain traffic. Second is exchange data. And third is social media data. So what happens here is we extract metrics out of like all of those sources and, uh, all the, you know, metrics that, that we, we, we, we think are important. And then we combine those metrics into a single metric, which we call risk. And for example, when you said that the, like the older farms, like do not give the, like big yield, that's correct, but they're well established. The velocity of the funds that came into those funds, like took some time. It was not because some influencer like hyped it up on Twitter and then a hundred mil showed up in, uh, in, uh, 20 seconds. Exactly. So the smart contract, the smart contract has been deployed for some time. The smart contract has been verified. The, uh, the, the, the addresses, the number of funds that are into it are from, uh, many users. So it's not multiple whales that just build it up. So all of those metrics and that's how, how we base the decisions basically. Got it. Got it. Okay. So, so you already built this analytics engine. It's, uh, it's tracking that. And then, um, so, so in terms of the stuff you've already built, so you've already have that analytics engine. So you're saying you're next year looking to launch this platform. I think the last key to this, the last question from me here is, um, Polkadot, right? So you mentioned Polkadot in what you're doing. So is everything going to be based on Polkadot or are you going to be based on Ethereum? How's that going to work? Actually, the reason we chose Polkadot is for its interoperability layer. Our goal is, as I mentioned, to give users access to as many ecosystems as we can. So we will be present on all the Polkadot parachains that have different activities that the users are interested in. But obviously since we, since our, like, for example, the Solidity implementation allows for deployment on other ecosystems as well, we are soon also adding like support for Avalanche and we're also working on the Inc implementation of the whole basket engine. So it means that we will deploy our infrastructure like in multiple chains at the same time. And we are starting first with Ethereum. Okay. So it starts off with Ethereum and then once Polkadot's live, you're going to deploy on Polkadot and Polkadot's ecosystem and then kind of branch out from there. So how long will this roughly take? Like, okay, so from now, when will I be able to press that button and be like, okay, look, I want to just like, I have a, let's say, let's say I'm super well off. I'm just have a big chunk of USDC. When will I be able to press that button and boom, okay, now I'm getting yield and I'm like divested? Yeah. So Q1 next year is the answer. We are aiming early Q1, so somewhere late January, early February. We're currently just redesigning and going through the second audit and we will be releasing, you know, the first types of baskets. They've been actually ready and now are being tested. Okay, so that's Q1 of next year. You're going to be able to get that. How about, obviously, the dashboard, the previews are there, so we'll put a link down below, so if you guys are interested and check out the kind of previews of what they have already, that's going to be good. Now, I think the last thing is like, what's the current strategy? Because you do have a token associated with this and big congratulations on getting on the Binance launch pool. How is this all working out? How can people get into this ecosystem? currently, the farming on the launch pool is live, so people can go there, they can stake for the first time ever, you can stake dots, you can stake dots and then earn basically beef. So we would be the first Polkadot project on Binance. And besides farming with dots, you are able to also stake BNB as well as BUSD, and there is a distribution curve and over a month you would be farming and after that we will be releasing our own native reef farms that you can further continue with that. Okay, so right now if you have Polkadot dot, if you have Binance based BUSD and if you have BNB, then you can stake it into the stake pools and just pools and just get reef for free basically. It's a farming operation. So check that out on Binance, I'll just link that link down below. So that's a strategy and after the one month of this farming, once that's up, then they can still get more by on reef itself, right? Correct. And at that point, besides the farms, we will also open the baskets. That's the idea. So that people can start using the tokens that they farmed, they can start using them directly into the product. Okay, so that's how they get tokens. And what are the tokens used for? Great question. So actually the token is extremely important throughout the ecosystem. So what happens is it's integrated into the basket engine. So this is very important. So when the users get invested through the basket, let's assume that they have a position of 100 Ether. 10% profit and they profit is 10 Ether. So when they choose to liquidate their position, they will have to choose the payout ratio of their profits between RIF and Ether. And the minimum they can take is 10% has to be taken in RIF. So it's not really a fee. We're not charging a fee on performance, but they're taking a percent of their profits in RIF. And what this allows us to do, it means we keep the more liquid in these terms, Ether, the basket engine keeps this. And then the basket engine can either provide liquidity on Uniswap or buyback or eventually we are planning to introduce the RIF treasury and the DAO. So all the profits that are generated will be decided where they're spent throughout the RIF ecosystem. So that's the first one. This is like a big income stream for the ecosystem. The second is the... So it's forcing people. So if the strategy is successful, I mean, that's one big caveat obviously, but the successful strategies will have to profit and a portion of the profit must be taken out in terms of RIF. So the user must hold some RIF or eventually get some RIF. All right. And then... Okay, so that sounds cool and all, but obviously with DeFi moving so fast, what just prevents them from just straight away selling that I don't want to touch RIF, I don't want to be part of this ecosystem anymore. What kind of prevents someone from doing that? They can. They can do that. But what we are also adding is they can choose to lock the RIF directly into a farm for three to six months. And if they choose to lock it, they will get even better terms. So for example, if their profit was $100, if they choose to get it in RIF and lock the RIF, they will get $110. So that's 10% on top of the 10%. So they generate more profits through that. additionally, what happens is our analytics engine is monitoring all the baskets. And we can see all the paper profits that the users currently have. And we can assume that at least 10% of those profits will eventually flow through the Uniswap pool because our basket engine will just buy back. So we have something called projected price. So projected price means what would happen to the price if all the baskets get liquidated and 10% of these profits goes into the pool. So this is another incentive mechanism where people will be like, oh, look, I should better hold RIF and actually stake it even further because through staking RIF, I'm exposed to the revenue that the ecosystem will generate. It's kind of interesting because now it's like, okay, so it's exposure and it's also about optimizing yield. So by staking it, you have better yield and also it's almost like the exchange fees but in reverse. So it's like you get additional fees being charged because you're generating yield here, you just get additional yield, right? So that kind of mix. Correct. Okay. So people would be like, why don't I just, whatever I'm doing in DeFi right now, why don't I just go on RIF, click one button, wrap all my existing positions, get the utility of ease of access of my funds and, you know, monitoring from the analytics engine which will give me alerts. And Farm Reef on top. It's like, it's like a win-win. Like it's, why not? Right? There we go. There we go. Sounds great. So, okay. So we're expected to see this in Q1 of next year. So far, people can start already participating in the Binance in the Binance launch pools for this already. I think that's, so what's next then, I guess? I guess like, do you want people to join a telegram? You know, how do people know more about this project? Yeah, so we are building our community. Obviously, our product is, you know, B2C, so users are, you know, very precious for us. And our goal is to establish like feedback loops between us and the users and then, you know, deliver what the users actually want, not what we think they might want at this point. So, you know, that's very important for us to establish. So at this point, you know, people can come on our telegram group, they can ask additional questions. We have Twitter, we're adding, you know, daily like updates of what's going on. You know, we are posting on Medium like monthly and bi-weekly updates about our development. So, yeah, that's what we want from users to come and to see what we are up to and, you know, hopefully we can eventually get them as an active user. Awesome. Awesome. I'm very excited actually because I mean, right now I definitely farm quite a bit, a lot more actually because farming is coming back up. I'm looking more towards those opportunities and with DeFi being cleaned up a lot recently, I think I'm looking more forward to kind of like a 2021, which is much better in that sort of scene. So I'm very excited to follow up on this project. I definitely hope you guys can check out the links down below. And if you have questions, obviously ask them in the questions and comments back and just, yeah, be part of everything. So I hope to catch up with Denko very soon and see how the progress in the launches. So roughly in around a month, we can start seeing the pools and the projections there. So yeah, we'll see you in a month then, I guess. Awesome. Yeah, thanks. Thanks, Michael. Thanks, Michael.