[TFIP-4] Wallfacer Labs 2023 Funding Request

Proposals
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TL/DR:

Announcing Wallfacer Labs, a crypto research and development company that will support and provide development services to the TrueFi protocol.

State of TrueFi:

The past 6 months have been a roller coaster for TrueFi, the crypto lending markets, and the broader crypto market. Our team has remained heads down, continuing to build out and improve the protocol.

You can find our contributions from Q4’2022 here and our Q1 recap will be coming out next month.

Summary:

Wallfacer Labs seeks to scale up its contributions to TrueFi, with an aim to grow the protocol through product, engineering, and business development tasks

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Introduction:

In September of 2022, we took a small step in the process of decentralizing development activities of the TrueFi protocol when 5 key contributors exited TrustToken (now Archblock) to begin working directly for the TrueFi DAO.

After learning some (mostly operational and logistical) lessons, we have incorporated Wallfacer Labs to more directly contribute to TrueFi protocol growth and core development.

Proposal:

We request a total of 1.5mm USDC and 32mm TRU to fund the development and maintenance of the TrueFi protocol for the next 9 months. (Prior to this request, we also returned funds to the treasury that were not spent during our previous 6-month budget, as detailed below.)

If approved, our engagement will formally begin on April 1, 2023, and last until December 31, 2023.

We propose a payment schedule of 50% at the start of the engagement with the remainder streamed over the engagement period. If this vote is approved, we will queue the 50% transfer immediately and begin the stream on June 1, 2023.

More details:

Of our previously approved 6-month budget of 900,000 USDC and 6,671,875 TRU, we spent roughly half (440,491 USDC and 3,669,491 TRU) of the budget and have foregone the remainder.

We returned excess funds to the DAO treasury via two transactions (USDC, TRU) and we chose not to withdraw a large portion of allocated funds from the treasury, meaning that we have foregone 459,509 USDC and 3,002,384 TRU from our originally approved budget.

(For further clarification: we returned a total of 159,000 USDC and 1,000,822 TRU that was sent to us, plus we chose not to draw down the additionally allocated 300,509 USDC and 2,001,563 TRU from the treasury.)

Rationale:

2023 is focused on growth.

This means growing business relations and importantly, responding to the product needs of users.

One could argue that in the current market conditions, we might want to ‘take our foot off the gas’ and wait for better times to return.

While we do believe there is truth to the notion that “we are waiting for the next wave to come” we need to “be active in the water” and we need to be creating waves ourselves.

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We can position TrueFi as the leader in this market once again by continuing to build best-in-class products. A good example of this is our recent development on Asset Vaults (details to come soon), an emergent opportunity to build a new standard for RWA vaults on-chain. This need was only discovered based on the close relationship with users and our constant iterations and improvements on our existing products.

For our existing products (like Structured Credit Vaults) we are confident we have “tranching” correct, and we believe it is the best implementation of Structured Products in the industry. It opens an opportunity to offer sustainable high yields to risk-seeking capital, while simultaneously providing sufficient guarantees for senior lenders (e.g. all our structured products enforce senior-to-subordinate rations on the smart contract level, not overridable by the Manager).

We understand the problems that lenders are facing right now and we would like to continue to solve these problems for them.

Who We Are:

Wallfacer Labs is a new and independent company, incorporated in the Cayman Islands, that develops and governs crypto protocols.

Under the Wallfacer Labs brand, you can see that we have begun to get involved with other protocols, such as AAVE.

The Wallfacer team has been active contributors and participants in TrueFi governance, as detailed in our recent delegate platform here.

Wallfacer Labs is independent of Archblock (formerly TrustToken) and the two organizations have no direct financial ties. Wallfacer and Archblock will continue collaborating on developing the protocol to fulfill customer needs.

Team:

Wallfacer Labs is a full-stack team of 12+ experienced individuals with business, engineering, and product experience, capable of building and bringing products to market. In addition to this, the budget will cover other overhead expenses such as office space for our in-person team, conference attendance to represent TrueFi, legal costs, and gas fees associated with smart contract development.

Out of Scope:

  • Smart contract audits
  • TrueFi DAO/Foundation legal, compliance, and accounting expenses
  • Large marketing (e.g., conference sponsorships) or PR expenses
  • Core services used by TrueFi DAO like hosting services, Github, Infura, etc

Reporting Expectations:

Wallfacer will post quarterly updates to the TrueFi forum, as done for Q4 2022. Additionally, we have created a Telegram group, “Wallfacer Labs / TrueFi” that anyone can join and gives direct access to members of the Wallfacer Labs team. We will also remain active in Discord.

We have created a page here that community members can use to view information on our work and to communicate with us.

Next steps:

We plan to move to a Tally vote on Tuesday, March 21, 2023.

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? March 21st, 2023

We plan to move to a Tally vote on Tuesday, February 21, 2023.

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Correct, March 21st, it’s a typo :slight_smile:

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Ah, good catch. Fixed

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Avoiding Coordination Neglect
Thanks for this proposal, Wallfacer. After a bit of experience with DAOs, I wanted to offer a few thoughts for consideration as a TrueFi community member. DAOs often face the challenge of coordination neglect. Since they are decentralized, teams can underestimate the challenge of moving disparate units together to achieve a mission.

To help with coordination, general strategic objectives can be established first in order to provide an evaluation framework. Once a framework is in place, evaluation on merits is possible. The most successful DAOs are presently moving toward establishing high level objectives and project-based budgeting, rather than more open-ended responsibilities. Project-based budgeting does two things. First, it improves transparency. Second, it helps to manage DAO spend. Each budget line item is tied to concrete outputs (measurable) and products tied to an objective (impactful). In short, this format connects the “How”, “What”, and “Why”.

Please forgive the elementary nature of my example below and the fact I may have failed to interpret the information correctly. I just wanted to offer some thoughts that could help strengthen the proposal.

By clarifying what Wallfacer will deliver, it would become evident why Wallfacer is the best contractor for the job. Wallfacer’s proposal delivers value well above and beyond its cost.

Hierarchy: Objective – Strategy – Tactic
In the task list provided, there appears to be a list of various objectives, strategies, and tactics intermingled with other responsibilities. The list doesn’t yet have a division or hierarchy to help organize and frame each piece of information. The flat nature of the list makes it difficult to parse how each line item relates to each other line item.

I took a shot at organizing a couple of the items. The table is missing some concrete details that would help to clarify what is being done, for example, the headcount on each line item, the deliverable(s) due, the duration, and the projected cost for each (if available).

By providing this information, it helps to immediately determine the relative value and costs of each initiative. It also establishes the defined scope (temporal and product) as well as the costs for the services. In short, Wallfacer is delivering tons of value to the DAO, and we want to ensure both sides are showcasing it as best we can.

Confusion Breeds Conflict; Clarity Avoids Confusion
Most conflict arises from confusion. Confusion often comes from mismet expectations. One way to avoid conflict is to concretize and clearly define arrangements with a funder. Usually it best to agree in advance of starting work. Defining deliverables eliminates the space for “he said/ she said/ they said.” Right now there is a rough scope of work and an “out of scope of work” but one would have a hard time “checking the box” for some of the in scope items proposed above.

Here is a modest attempt at an example.

Strategic Objective: Grow Adapt3r-like Customer Pipeline (Asset Vaults).

Strategy One: Develop Asset Vaults Product to Enable Customer Onramp

  • Tactic/Task 1: Define Specifications of Asset Vaults
    Deliverable(s): Q2 2023; XYZ ,Q3 2023;
    FTE Equivalent:
    Projected Time/ Cost:

  • Tactic/Task 2: Development of Asset Vaults,
    Deliverable(s): Q2 2023;
    FTE Equivalent:
    Projected Time/ Cost:

  • Tactic/Task 3: Security Evaulation of Asset Vaults,
    Deliverable: Q3 2023;
    FTE Equivalent:
    Projected Time/ Cost:

Strategy Two: Redefine Customer Experience To Achieve PMF for Asset Vaults

  • Tactic/Task 1: Qualitative Interviews with Current and Future Customers
    Deliverable(s): Q1 2023;
    FTE Equivalent:
    Projected Time/ Cost:

  • Tactic/Task 2: Revamp TrueFi Application Based on Interviews
    Deliverable(s): Q1 2023;
    FTE Equivalent:
    Projected Time/ Cost:

Ongoing Responsibilities for Asset Vaults:
• Technical and business support for teams developing on or integrating TrueFi (Customer Support)
• Wallfacer will be the point of contact for teams looking to integrate (Customer Onramp)

Here is a quick shot of what the new data could look like on the task list.

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@nicole_maffeo Do you have any OKR or KPI best practices from FAANG you would want to add here?

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Hi Sanctus,

Thank you for the detailed reply. Happy to incorporate some of this into our presentation format going forward.

We recognize a problem of “coordination neglect” and potential coordination failures. Fortunately, Wallfacer is a fairly small, very integrated team that has been working together for more than a year at this point. @kaimi on our team is extremely experienced in delivering products within crypto and has accelerated our shipping time already on most initiatives. He has successfully implemented several strategic planning and goal settings frameworks in previous organizations he worked for, including OKRs and V2MOMs. We’re consciously choosing not to overcomplicate this proposal to allow for some leeway in terms of adding additional items to our work backlog along the way.

In terms of the format here, it largely comes from (what I thought was) an excellent format proposed by BGD Labs in their contributor agreement for AAVE. Aave <> Bored Ghosts Developing (BGD) - Governance - Aave

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Appreciate the reply, R.

tldr; Documenting deliverables raises the bar for DAO participation and showcases all the valuable work Wallfacer will deliver, on a fixed scope, at a fixed fee, on a fixed timeline, on its own equipment, at its own discretion (as a contractor).

I agree it is unlikely Wallfacer will have any issues with coordination in the near term. I suppose the point was more general when looking at the final goal of decentralization (multiple units and 50-100+ DAO contributors).

At some other projects, we saw when the DAO was in “primordial soup” phase, structure in proposals disproportionally benefitted the community and spurred engagement.

BGD Proposal Example
I reviewed the BGD table you shared. I see where you got the inspiration from. Your proposal is in fact more detailed than theirs. Their proposal would possibly benefit from more context and even more concrete deliverables.

Generally, I try to treat a proposal like a sales pitch. As a community member or funder, you want to be able to read it with minimal prior knowledge, understand what the problems are, how you are solving them, and what will be done.

I would say a concern around the BGD proposal is that it presents unclear deliverables and tasks, along with an evaluation criteria that still leaves room for interpretation. Since they were some of the original AAVE architects, they do not include the context that would be expected of a third party proposal.

Clarifying Deliverables
For example they [BGD] say “Create and improve tooling to monitor governance proposals and their general correctness.” Yet, they do not define what the tooling is, what the current issues are, what they will deliver, etc.

It would be safe to say the BGD group were not funded based on the contents of the proposal as written. Instead, they are being funded based on their past contributions and existing relationship to AAVE. I am unsure if we want to emulate that standard when TrueFi is able to raise the bar: to clearly document the work to be done, the timeline, the cost, and the significant value Wallfacer brings.

When we document our work to the same standards expected of a new contractor, we establish a high quality barrier of entry to participation as a paid DAO contributor.

Thanks for the read.

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Thanks for the proposal, Ryan et al.

I want to start with a brief analysis of the independent team’s previous work period. The original plan was to:

  1. Launch new products: Credit Vaults are ready for production use
  2. Improve existing products via
    a. ERC 4626 implementation: Complete
    b. The ability for the protocol and portfolio managers to charge fees that accrue over time: Complete
    c. The ability for portfolios to lend to other portfolios (fund of funds model): Incomplete
  3. Build with TRU stakeholders in mind by
    a. Deliver the next iteration of TrueFi DAO pools and turn fee streams back on from DAO pools: Incomplete
    b. Grow TrueFi’s economic activity by creating adoption for TrueFi Lines of Credit, starting with the dYdX borrower pool : Unsuccessful
    c. Improve TRU emissions sustainability: Complete

Not everything planned was completed, but I know plans change, especially with startups trying to gain traction. There have been additional accomplishments, such as a few governance changes and app UI improvements.

By Wallfacer’s account, this has cost the DAO 440k USDC and 3.7M TRU, which works out pro rata to 880k USDC and 7.4M TRU (~$600k present-day value) annually.

This proposal seeks 1.5M USDC and 32M TRU, which works out pro rata to 2M USDC and 42.7M TRU (~$3.5M present-day value) annually. With present-day values, this is a 3.7x increase in funding requested.

We must ask ourselves, is this burn rate sustainable, and if so, is it the best use of our funds? Does the team’s performance justify the increase in funding? How will this change the existing ownership structure?

I have opinions and information about the above questions, but before I get into that, I have some questions and comments about Wallfacer’s task list.

The task list has 22 items. Some are standard and expected by any organization, such as adapting to user feedback or responding to issues. Some tasks overlap what may be being done by various other DAO members (also highlighted by @Sanctus), including myself, who the DAO is not directly compensating. Some tasks are pre-mature, such as exploring cross-chain expansion. More importantly, resource allocation is unclear. How much time and money will be allocated to each item?

Overall, I see a lack of direction. The most important question is left unanswered (and unasked): what’s the single most crucial problem TrueFi faces today? The answer is cash flow. Cash flow generates revenue that’s needed to fund operations. While our competitors have grown their cash flows, ours is nearly non-existent. Why? How do we improve this?

With all of the outsiders I’ve spoken to about TrueFi, we have a cash flow problem not because we’re not on more chains; it’s not because we lack decentralization (while important, most people don’t care); it’s not because we don’t have a dedicated market maker; it’s not because of our treasury; it’s not because our user experience is lacking (it’s not); it’s not because we don’t have enough analytics dashboards (although vital for measuring performance).

Right now, TrueFi is at a standstill. We’ve lost nearly all traction. The regulatory environment Archblock has been trying to expand into is hostile to crypto. Aggressive growth right now is unwise. Growth isn’t always good - sometimes, it can kill us. I think this proposal needs work.

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Agree with this wholly. I am not envious of the level of coordination required to manage a DAO like MakerDAO.

That is fair. Even though many of us (myself, Bartek, Tyler) have been with and worked on TrueFi since before it had a name, we certainly would not want to rest on that, nor think anyone should fund on based on prior work (which is why we try to focus very much on future work).

This is a great point. I will endeavor to increase our level of both transparency and setting strong timelines if this post if approved.

We proposed this Notion page (Notion – The all-in-one workspace for your notes, tasks, wikis, and databases.) as a place where we can updated, but very happy to use a different format as well if that’s better for people.

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Thanks. This notion is a great start and is frankly more transparency than I see in most DAOs. I guess the question is regarding alignment and how to determine the prioritization of each aspect (e.g. Do we pursue the critical item of governance prior to the critical item of treasury diversification?)

I think TylerEther raised an interesting point which helped me triangulate the initial questions on this proposal. If TrueFi were to establish a set of clear strategic objectives, would this organizational frame help us understand our strategies and in turn which tasks are to be prioritized? To borrow from Rumi, would it help separate the wheat from chaff priority-wise ?

I imagine you and Wallfacer already have a strong understanding of what you want to achieve, and an implicit prioritization. As someone not as close to the project, this is a little less clear to me. If the objectives and their associated strategies were explicitly included in the funding proposal it would probably allay some of the above concerns.

While a strategic overview of TrueFi is well above my pay-grade (and present knowledge), I would be happy to offer structural feedback on a document or any time where I can be of assistance. Something like this presents a great opportunity for community collaboration and would set the standard for subsequent TrueFi proposals. It is quite possibly worth the investment of energy from all parties.

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Establishing new relationships and negotiating new agreements can be a daunting and incredibly time-consuming task.

Requesting budget estimates for both time and cost is a challenge without first understanding the stage at which Wallfacer is/was in relation to potential investors, ecosystem participants, contributors, other DAOs, etc.

To gain a clearer understanding of Wallfacer Labs’ current position and direction in terms of forging future connections, could you kindly provide some details by answering the same question for each of the following situations?

  1. Solicit forum proposals to bring on a new market maker for TrueFi DAO

Has a condensed list been created based on past communications with market makers, or is this a completely new endeavor with fresh funding?

  1. Diversify Treasury via a strategic investor

Has a condensed list been created based on past communications with investors, or is this a completely new endeavor with fresh funding?

  1. Explore and propose TrueFi integrations with other protocols and ecoystem participants

Has a condensed list been created based on past communications with ecoystem participants, or is this a completely new endeavor with fresh funding?

  1. Coordination with other parties contributing to TrueFi

Has a condensed list been created based on past communications with other parties contributing to TrueFi, or is this a completely new endeavor with fresh funding?

  1. DAO to DAO integrations

Has a condensed list been created based on past communications with other DAOs, or is this a completely new endeavor with fresh funding?

  1. Re-launch a crypto/market maker lending strategy with a new portfolio manager on TrueFi

Has a condensed list been created based on past communications with new portfolio managers, or is this a completely new endeavor with fresh funding?

  1. Explore cross-chain expansion

Has a condensed list been created based on past communications regarding cross-chain expansion, or is this a completely new endeavor with fresh funding?

And lastly,

Can you share any thoughts on cash flow ideas you may have in mind ?

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I’m not sure this is the right question to ask. And I will respond to each of your questions line by line. But I would say that the employees of Wallfacer have fostered and own nearly all of TrueFi’s most important relationships. With that as the starting point, let’s dive in.

Relations are established. Wallfacer has lined up at least 2 interested MMs and we can shortly prompt them to make forum posts.

This needs work. We do have existing connections, but we have not formally approached anyone for treasury diversification via a strategic. We do have alternative options that include OTC sales of tokens or more sophisticated strategies using options.

We’ve done some work here in the past, but let’s consider this as starting fresh as we have not refreshed our “list” here in a while. That said, Wallfacer has existing connections (or is 1 hop from a connection) with most protocols.

I think the description in the task list describes this appropriately. There are a number of critical TrueFi vendors (like auditors) that Wallfacer will be the POC for.

Fresh endeavor.

We have one lead on a potential PM, but it’s early stage and needs a lot of work. If this manager were to not work out, we’d be starting completely fresh.

We call our specific names in the task list. No engineering work has been done though.

We need portfolio managers to make loans and lenders to participate in pools. That is how TrueFi, as a protocol, makes money.

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It would be really tough for me to vote against this proposition. The Wallfacer team is currently Truefi’s best chance of success IMO.

I can only hope that Wallfacer is not working on a part-time basis because nothing really gets accomplished that way.

With that said, you have my vote. #trust

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@TylerEther thanks for the thoughtful reply. If I can try and summarize your points, I’d boil them down to these questions:

  • Is the proposed burn rate sustainable and does Wallfacer’s existing work justify the current budget?
  • TrueFi has lost much of its traction and in the current regulatory environment, aiming for aggressive growth is not wise.
  • The proposal ignores the most pressing issue at TrueFi: lack of cash flow. This lack of cash flow is not due to a lack of decentralization, market makers, or analytics dashboards, but rather a lack of loans.

These are fair points and questions, and I’ll try to address them.

First, you point out a key thing – there is no silver bullet for finding traction.

But what’s the solution? If we stop building, we become irrelevant. We say TrueFi should adapt and iterate.

Even though the regulatory environment is tough, the “narrative” and broader market attention towards “on-chain” credit has never been stronger. There have been lots of industry reports covering credit/RWA protocols in recent months and more hype on twitter than I’ve seen before.

To us at Wallfacer, it’s clear that no protocol has “won” DeFi credit yet and even though TrueFi has been in a period of stagnation, we are very much still in the race.

Which competitors exactly? Today within credit/RWA, no one has “grown their cash flows”.

  • Maple is in a similar position to TrueFi, w/ similar loans out. Their core market (and ours) of lending to MMs has evaporated. The same goes for Clearpool, Atlendis, and Ribbon Lend.
  • Centrifuge only recently began to charge fees (more detail covering this in our post here) and even then, fees won’t apply to their existing pools (so, still no cash flow).
  • Goldfinch TVL growth stalled and it’s on the cusp of running out of token incentives
  • Credix has good growth, but also no token and no governance.
  • Ondo is doing well, but as far as I can tell, all revenues go back to Ondo Company (not the protocol).

There isn’t a clear winner here. TrueFi has a chance and this is why we want to push. We want to do more than we’ve been capable of as just 5 contributors, and I’ll outline our strategy at Wallfacer below…

I think we could have done a better job making this clear in our initial post, but our objective for 2023 is to land a small number of “killer” use cases that define TrueFi as a leader in the space.

The honest answer is that today, WE DON’T KNOW WHAT THESE WILL BE. Thus, we’re going to try a bunch of different things through the end of the year. Sure, It’s not obvious that “cross-chain expansion” will be the thing that makes TrueFi win. But, most all managers we talk to today want or require KYC’d lenders, and maybe expanding to Base will actually unlock Coinbase’s KYC’d users? Maybe Avalanche’s subnets will. We don’t know, but we’re going to keep exploring until we feel confident in something.

We’re talking with lenders / managers / borrowers across crypto and RWA today, and learning → building → iterating fast to find what gets traction. Asset vaults are an example of this, and we’ve taken them from idea to a beta on testnet in just a few weeks.

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Thank you for the thoughtful post and replies Wallfacer team. I agree that it’s a difficult market right now and that we need to be experimenting with different things and positioning ourselves as well as possible for when new market opportunities emerge.

Excited to see Wallfacer continue to build and play a major role in the TrueFi ecosystem.

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So it sounds like there is a need to get closer to customers to help suss out the PMF and that Wallfacer is well on their way.

Based on the brief competitive analysis above, TrueFi actually looks to be in a great position with a solid foundation and the resources to explore and innovate.

Most importantly, TrueFi hasn’t overextended itself like some of its competitors have (WRT token incentives, etc.), while also in the process of properly decentralizing and establishing governance.

Excited to see what Wallfacer will bring to the table in the next 9 months.

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We have re-posted on Tally at the link below, TFIP-4. The previous tally proposal instance contains execution issues that would have caused the transaction to fail.

If you favor this funding request, please vote “FOR” TFIP-4 and feel free to ignore/disregard the proposal that does not include a TFIP.

Voting for TFIP-4 will begin on Sunday, Mar 26 at 2:43 am Pacific Time / 5:43 am EST.

Voting for TFIP-4 will conclude on Tuesday, March 28 at 20:29 pm Pacific Time / 23:39 pm EST

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Maybe Paycer could be considered :+1:t3:

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Has any thought been given by Wallfacer Labs on how AI could be implemented into the truefi protocol ?

Some thoughts to consider when potentially connecting to a AI specialist to discuss whats feasible and possible.

Artificial intelligence (AI) could potentially be implemented into the TrueFi protocol in several ways to improve the efficiency and accuracy of the lending and borrowing process. Here are some examples:

  1. Risk Assessment: TrueFi could use AI algorithms to analyze borrower profiles and assess their creditworthiness. Machine learning models could be trained on historical data to identify patterns and risk factors that could influence a borrower’s ability to repay a loan. This could help to automate the lending process and reduce the risk of default?:thinking:

  2. Automated Decision-Making: AI could also be used to automate the decision-making process for loan applications. Based on the risk assessment, an AI system could decide whether to approve or reject a loan application. This could reduce the time and resources required to process loan applications and improve the speed of the lending process?:thinking:

  3. Fraud Detection: TrueFi could use AI to detect and prevent fraudulent activities such as identity theft or loan stacking. Machine learning models could be trained to identify suspicious patterns in borrower behavior and flag potential cases of fraud?:thinking:

  4. Market Analysis: AI algorithms could be used to analyze market data and identify trends that could affect lending and borrowing activities on TrueFi. This could help users make informed decisions about when to lend or borrow, and at what interest rate?:thinking:

  5. Natural Language Processing: TrueFi could use natural language processing (NLP) techniques to extract relevant information from loan applications and other documents. This could help to automate the data entry process and reduce errors?:thinking:

Overall, implementing AI into the TrueFi protocol could help to improve the efficiency and accuracy of the lending and borrowing process, reduce the risk of default, and provide users with valuable insights and decision-making support

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I think LLMs have potential with natural language processing. It can answer questions about the protocol pretty well or at least point people to where to look. Perhaps spot issue in applications that could be addressed before a human looks over it.

Written by ChatGPT? :grinning:

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