Ryan Rodenbaugh, contributor to TrueFi DAO, here. I want to provide updates on what we’ve been working on.
In addition to @barrutko , @tylerw , @jusbroni , and @kaimi , we’ve also been working with two engineering teams who – for the time being – are still employed by Archblock. As we continue to increase funding for the DAO, we intend to have them working directly with us and contributing directly to TrueFi (more on this at the end of the post).
Q4 was a tough quarter for the crypto credit markets. On top of all the chaos already in the market, Q4 included:
- Alameda/FTX exposed as a fraud which led to
- Genesis suspending customer withdrawals pushing the fate of Genesis/DCG into question
- BlockFi filed for Chapter 11
- Maple experiencing tens of millions of defaults where borrowers Auros and Orthogonal Trading were impacted by FTX
And we were not spared with TrueFi experiencing its second default by Invictus/NWH, and third default with Alameda Research also defaulting on their loans in their single-borrower pool. We remain optimistic on the potential for recourse and Archblock’s general counsel should be making a post in the next two weeks to share some additional detail on the process of recovering lender capital.
On a positive note (yes, you can still find positives in this market!), we believe there is a large opportunity in front of us for TrueFi to capture. Some of these are obvious, but I will restate them anyway:
- Trust in centralized institutions is at all-time lows
- Fact check: True!
- I was beyond shocked at what took place at FTX and find myself now using centralized exchanges far less (strictly on and off-ramp), never leaving funds.
- Additionally, the alleged mismanagement of Genesis has been deeply disappointing. From day 1 of working on TrueFi, I’ve always looked up to Genesis as the stalwart of the crypto lending space and to see them in their current state both saddens me, but also excites me at the opportunity TrueFi now has in front of itself to capture.
- Lenders want more transparency
- Fact check: True!
- This one feels as if it needs little explaining, but one of the issues (in my view) that CeFi lenders ran into was a classic duration mismatch.
- Depositors on an app like BlockFi had the ability to redeem their funds at any time and while I am sure many of BlockFi’s loans were open term (i.e,. recallable with a few days notice), they also entered into trades (e.g,. GBTC) that were far less liquid and over time became less lucrative.
- This came about as these firms went farther out on the risk curve (Celsius being prime example here) seeking to always deliver their stated yields.
- On TrueFi, lenders always knew the underlying borrowers and there was never an ability for PMs to stray from pure lending (i.e., couldn’t take funds and put into GBTC). Additionally, given that rates paid to lenders are adjusted dynamically, it’s not as if TrueFi would be in the hole to pay customers e.g,. 8% because that is the yield they started at.
- DeFi yields are lagging behind “real world finance” yields for things like US Treasuries and corporate bonds
- Fact check: True!
- As I’ve tweeted in the past, crypto markets live in an interest rate bubble. While rates in traditional markets are driven by the FED, crypto interest rate markets are more natural supply/demand-driven (because there is no central authority). Rates on BlockFi, AAVE, (TrueFi), etc. have come down while rates in the economy have gone up as the industry’s core borrowers are less interested in borrowing with less lucrative opportunities present.
- For many months now we’ve been onboarding 3rd party portfolio managers who lend to non-crypto strategies. These have been difficult to grow as the wider credit market has also sold off.
- Since September, we have been strategically working to bring on much more traditional asset exposure via portfolios (think treasuries) and hope to have announcements here as soon as next week.
Through everything that has happened over the past quarter, our product and engineering teams have been constantly working to improve TrueFi.
We released our biggest feature yet, Credit Vaults. I could speak a lot about them, but I suggest you watch the demo instead.
Thanks to @tylerw for the wonderful demo recording. We’ve had the chance to demo this recently with managers (who use competing platforms) and they’ve been very impressed. I can say confidently that from a tech perspective, credit vaults are the leading solution in the market for managers looking to underwrite credit on-chain.
We have also made significant progress in governance with multiple TFIP’s executed. We now have meaningful funds moved over to the DAO treasury along with more controls and ownership given to token holders.
Looking forward, success or failure in 2023 will be based solely on our ability to execute from a business perspective. We have all of the right product and tech in place and are primed to retake a leading role in the credit/RWA markets.
To start, we plan to do a massive website overhaul to better position ourselves for the real world asset (RWA) opportunity and more clearly tell our stories. With the DAO pools winding down and the focus now on independent portfolio managers, that needs to be front and center.
Regarding the DAO pools, we are also looking to launch Index Vaults which will allow managers to launch “fund of funds” on TrueFi. As we have more opportunities on TrueFi, we hope managers will be interested in raising funds via an index vault to deploy into other portfolios on TrueFi. That said, index vaults raised on TrueFi will be able to deploy capital into other protocols as well, so long as they are ERC4626 compliant. This broadens our scope out of pure credit/RWA and is the beginning of us dipping our toes into the broader ‘asset management’ space in DeFi.
Lastly, we plan to make improvements to credit vaults to better support the needs of managers that are underwriting RWA lending opportunities.
We also continue to work very closely with our managers and partners. Folks like Marcus from Adapt3r are long-term relationships that members of the DAO have been growing and cultivating going back as far as 2021. These long-term relationships ensure that when someone like Marcus decides it’s time to launch their on-chain strategy, TrueFi is their first choice!
As mentioned in our original post,
As it stands today, we will not be forming an entity to house these operations (such as BDG Labs:AAVE or Uniswap Foundation:Uniswap), we will be “contracting” directly with the DAO and the TrueFi Foundation. […] We may in the future choose to operate behind an entity (akin to BGD Labs).
After dealing with some of the operational hurdles of the past few months of contracting directly with the DAO, we have decided to set up a new independent entity (“Wallfacer Labs”) to house our continued contributions to TrueFi. We hope to have this fully stood up by the end of Jan/early Feb and will seek to void our individual contracts with the DAO and set up a new agreement directly between the DAO and our new entity.
Looking forward to a strong 2023 with you all.