This is part of a series of interviews with founders and builders in the Web3 space called the Web3 Growth Handbook. The official handbook will be released in the coming months, but you can read all of the other available interviews here.
“We’ve developed internally the idea of environment management. I think when Web3 came up, there was this idea that you would only have a front end and set of smart contracts. The truth is, you need a backend that has the responsibility of reading data and state off the chain. You can’t go to the chain for everything, because it would make for an unusable app.”
Automated asset management is not a new concept, but decentralized and open finance have provided an easier path to access the benefits of automated asset management. Permissionless finance is the driving force behind the entire DeFi movement, and Set Protocol has been one of the biggest players. Their CTO, Alex Soong, understands that despite DeFi’s significant attention over the last year or so, there are problems that need to be overcome.
Set Protocol launched in November of 2017 and has since built out a suite of projects all geared towards moving DeFi forward. To date, the main customer-facing projects are TokenSets and Social Trader. TokenSet is the DeFi equivalent to index funds in traditional finance. By investing in a single asset, called a Set, the investor can have their money allocated across multiple financial products designed to provide the highest return without manually updating portfolio positions. Social Trader allows investors to match their investment strategy with the best traders on TokenSets. These products have helped Set Protocol secure a $2 million seed round in March of 2018.
We had the chance to sit down with Alex to talk about how Set Protocol manages the challenges of growing in Web3 while also making sure his company provides the right features for the existing customer base.
How do you define growth?
One of the questions we get asked all the time is what is your plan for decentralization. I think that type of question is tightly coupled with growth. How do we build in mechanisms as the contract layer and the dapp layer to behave correctly? Right now, we get some of the features of open finance but not necessarily decentralized finances. We have mechanisms in place that prevents us from changing some of the controls, but it’s not completely decentralized. Governance does not equal decentralization.
So growth for us is designing mechanisms such as social trading so that people are incentivized to promote us. They go out and build their own following and promote us. Growth to us moving to be more decentralized.
What has been the most difficult part of growing your company so far?
It has to be the fact that there are problems in this space that are definitely under-appreciated in solving. People take for granted how difficult it is to build up a node network. You’re asking other people to run nodes for you. There isn’t a cron system on Ethereum, so it requires other people running nodes for you to process the data you need.
Liquidity is the other big second. Liquidity is not always there. Market makers will follow the money, but without enough precedent, they have no incentive to put their money on chain. That’s the main reason we built TokenSets, to bootstrap the network. We thought we could just put code out there and people would just build on top of us. But we had to provide a bootstrapping mechanism. Now we have people who are willing to be traders on the platform.
What tools do you wish were there to help you grow?
We’ve developed internally the idea of environment management. I think when Web3 came up, there was this idea that you would only have a front end and set of smart contracts. The truth is, you need a backend that has the responsibility of reading data and state off the chain. You can’t go to the chain for everything, because it would make for an unusable app.
Internally, we have three environments. We have a matrix of staging environments rather than just two environments like you’d see in Web2. If you don’t want to spend real gas, you’d use and environment dedicated to that. Tools that help with environment management would be helpful.
What are your predictions for Web3/Blockchain growth in 2020?
For 2020, I think we’ve made great strides in terms of UX. Teams like Zerion had made it really easy to parse information that’s on chain. We need to bridge the gap for fiat to crypto on-ramp. Wyre is tackling that. If we can solve that combined with the UX improvements, growth can explode. We will be a lot closer to being on par with Web2. Can we cut out the step of having to go on Coinbase and then move that money to a wallet to use the apps? If so, we will see a boom in usage.
Set Protocol is innovating and powering the DeFi space. If you are an investor that wants to see their money earning the best rate at any given time, you should look into Set Protocol.