State of DeFi Report 2023 | Chris Bradbury | ETHDam 2023

foreign [Music] all right thank you and welcome everybody to day two of Ethan um very excited for everyone to be here and all the content that's going to be this morning and also all the hackathon stuff that's going to happen from two o'clock this afternoon so I do hope that everyone here and also on the live stream will stick around all day because the hackers have been working tirelessly through the night to try and make the best of their projects and very excited to submit their projects at 2PM um first up we're going to be having a update on the state of D5 so we're very excited for that so if we can all give a round of applause for our first keynote of the day thank you can you hear me yeah cool is that gonna but yeah thank you all for coming uh like to the uh yeah the graveyard shift uh ultimately but uh yeah I thank you very much I'm gonna uh yeah talk to you today about the state of defy report uh 2023 that we carried out the end of last year just one caveat is it should be uh probably a better word for this it's a state of D5 users really um but uh yeah we'll get into that in in a second so obviously defies emerge is one of the most promising use cases um like for cryptocurrencies right providing real utility and demonstrating substantial growth ever since kind of 2017-2018 uh and kind of like boomed out really in 2020 and so on and we're all familiar with the kind of TBL kind of chart right where we like we've got we get super excited since it hits new like all-time highs and tvl and so on and then kind of come back down again we hit that reality uh and so on but like most of the time we're not always asking ourselves why or like who's using it or what are they actually doing with it and so on and that's what we're trying to do with the state of D5 report this is the first one we've ever done uh and hopefully it will become an annual annual thing and we'll see kind of more improvements along the way so although adoption has been strong to truly unlock d5's potential and achieve the critical mass that we've kind of got today in like early users in a way we have to create products and experiences that users not only love but also consider indispensable so they have to be able to love your products but they've got to they've got a need to use it as well um and ultimately we believe in bridging that gap for users ultimately lies in understanding them deeply and that's incredibly important and that again is why we've done this survey so it happened late last year and we're going to look at some of the some of the kind of like hot takes and so on uh in a minute from it um but one one caveat we've got to take from this is that we carried this out in kind of December and January uh December last year January this year when the markets were at an all-time low right and a lot of users like ordinary retail users had had left we managed to get about 330 people in total uh to fill this in so it's a little bit lower than we were hoping for but hopefully we're going to grow that every year and crucially this is the only achievable uh kind of thanks to like over 30 partners that actually helped us kind of spread this spread this out there get their users to fill it in and so on so hopefully we've got a really diverse User Group uh of of people that provided feedback to this and we're going to touch today on just 17 highlights from the state of defy report the full report actually contains over 100 and it's downloadable on the state of d5.org as of yesterday you some of you may have seen as well uh that you've actually got the kind of little uh booklets on your chairs like they're the exact same highlights we're going to talk about today I'm just going to talk a little bit more about some of them and some of the really important points but yeah 17 highlights so where do we start really it's a tale of two user profiles and this was really kind of highlights the the market that we had in December and January really the two primary user groups that filled in this survey for us were crypto Natives and crypto enthusiasts what we termed both of them very active users in the ecosystem and but the real difference here is crypto natives have a large amount of crypto in in their opinion and crypto enthusiasts have a small amount of crypto but again both user groups here are are very active users in the space so as we kind of expected and as we kind of knew like kind of almost from the sum like last summer really we started to lose the retail users again they got burnt pretty hard the ones that invested kind of 2021 start 2022 like kind of at the height and so on they lost they lost a lot of money and they they a lot of them left the space and I think for anybody here that's Builders or has a defy apple or whatever or nfts anything on web3 knows that those users left and nothing was more evident than on the ethereum gas price for that right where it kind of it almost went down to single digits at times um in GUI so yeah crucially these they how those two profiles differ is I've got a lot of crypto and I don't have much crypto and it's just important to keep that in mind as we look at kind of these insights because these are not your everyday retail users uh that are using it um we need to find other ways to try and get to them and understand what they want to do and how they want to use D5 so what is the first kind of fascinating thing I don't know how easily you can see this but the crypto natives on the far kind of right hand side over a third of the crypto natives have over 85 of their total wealth in crypto which is like crypto natives are the ones that said they have a lot of crypto and over 85 of their wealth that is a huge amount of money and for all of the builders and like kind of products managers or whatever in the space that's something really important to keep an eye on right because you have such an important job to do as a as a builder as a developer as a as a product manager as a marketer and so on they are trusting you with so much of their money in this space and we all know how difficult like D5 can be as well to keep yourself protected and so on but there's a lot of money at stake here and for a lot of users a lot of a lot of a lot of their wealth at risk and we've all heard the stories of people kind of completely getting wrecked through through scams through hacks or whatnot so security and Trust here is incredibly important and we're going to see more of that in a second or we ask these users and again kind of both those primary groups really what are their primary kind of composition their portfolios I think the expectation here with BTC and eth would dominate but that isn't the case at the moment right D5 tokens still take a large proportion of all of their kind of like non-nft tokens here they're kind of financial tokens and so on BTC and ethers is quite high and then eth is is like even Higher One caveat here is users could select more than one response which is why we've kind of got this weird kind of like percentages there as well so when we asked them like what do you value most when holding your asset this is this is ultimately what they said and you can see here the top results security control trust decentralization risk privacy these are all words that we throw around loads and they ultimately all come down to the same sort of thing right and this is what users are ultimately telling us like security control trust these are all the same the same thing in some ways right like can I can I trust you do I have control of my assets is the security good enough that I can trust you and through security comes control and so on and also decentralization we have a habit like to like dismiss decentralization and defy quite a lot where we say nobody cares about decentralization like nobody cares and that might be right for like all of the future retail users coming in but I don't think we we're yet to actually know that for sure we have a lot of assumptions a lot of hypotheses and so on but where we've spoken to the actual users using defy today security control and trust is is absolutely key to them and decentralization is very very high up on that list so we shouldn't just dismiss decentralization like like we sometimes have a habit of doing um when it when it suits Us in in the industry and when building products so again which of the following phrases best represent you uh on here again we just talked about decentralization being quite High uh over 60 of respondents said like decentralization is important when asked for the like the phrase that best represents them so again we're talking here about the active users the very active users probably weekly active users on on defy but decentralization to them is still very important and we shouldn't just get rid of decentralization or or say that decentralization isn't important when when all of the users that we we know are using the products today are saying it is the next one is a really really important one as well particularly on the back of 2022 with like FTX and so on like I want to be the only person in control of my money and crypto gives me that power that is what almost half of the respondents said is a is a really important phrase that best represents them and again they could pick multiple of these around like kind of what what kind of best matches you but there's control there's like self-custody like nature like we all say that like seed phrases are not scalable nobody really wants self-custody and so on um but it is what the current users of today want and if we get rid of some of these things too quickly kind of striving for Mass adoption we won't actually reap much adoption because we'll lose the first set of users that we've we've actually got and so on so we've got to take kind of baby steps uh that and obviously have plant abstraction that someone is gonna is gonna help with that and new ways for wallets and so on how do you stay up to date most with defy I think these are all pretty obvious ones right but again this mainly is about sometimes saying hey this is what I think and this is actually the evidence that we now have one caveat for the Twitter one is obviously this was dispersed like this report was shared on Twitter probably the most out of all all channels so most people discovered this report on Twitter so there's definitely here going to be a bias uh towards Twitter but I don't think there's any surprises in this right but it's just reaffirming exactly what we what we think and what we expect from that so Twitter Discord blogs the newsletters podcasts and then Telegram one interesting bit is Reddit at seven percent at the bottom I think obviously in 2017 Reddit was the primary probably the primary place for crypto right this is where every everybody was sharing information everybody kind of was 2018 kind of Twitter started to take over uh on there now Twitter is the dominant Force for kind of any crypto related news uh really how did you first discover crypto though like this is another like kind of quite interesting one so we've got we've got 36 here found it on Twitter for the first time but 20 of the people in our in all of the respondents said that they actually found or D5 or crypto for the first time through a friend so word of mouth is incredibly important and that's again where it comes down to the importance of looking after our users giving them the best experience and actually making sure that we we build them products that they want to share they want to like shout about they want to show their friends on their their friends or whatever it's amazing when you kind of come to any of these conferences and stand outside like in the in their like networking areas and so on and the amount of people are showing each other their phones on their apps and so on now we obviously we're predominantly in all Builders and so I write or like working working on the projects but we need our users to be able to do exactly the same thing showing showing their friends and so on um yeah Reddit YouTube conferences and stuff down at 13 but the two primary areas Twitter and from a friend and these are these are the ones we we ultimately need to focus on in the report we asked them a lot as well kind of what sort of D5 platforms they use what protocols they use if they use any products on top of those protocols and so on and we asked them like from the products they've selected and and they use what problems do they solve for most now again I don't think it's particularly a huge amount of surprisingness but it's just reaffirming the kind of things we need to build upon they're seeking yield and leverage uh swapping tokens without going through centralized exchanges avoiding centralized exchanges accessibility and convenience portfolio management exposure to Exotic tokens and then learning and experimenting as well but these are all kind of key key points where we all come up and try and like say oh D5 is going to be the next like X4 for y or something like that right or we're building a new product on crypto and so on but these are the core things people are looking for at the moment and I don't think these are necessarily going to be that much different from the next set of users that are going to be coming in as well unclear risks and Trust are the main adoption uh the main adoption barriers we've got here so when we ask people why do they use the products one of the most important things as well to ask and discover is why like did they not use the products or what held them back from using the products in the in the early days or so on and one thing that was quite interesting here was the the top one that came up which is unclear risks everybody knows in D5 that there are risks involved in defy although if you go to almost any D5 application on there probably like nine out of ten or so on almost none of them will refer to the risks involved when using that protocol or that platform some of them will talk about the liquidation risk but the the actual risks the risk of of governance or decentralization or the oracles or the protocol just failing or or they're being a hack if they've only had one order and that audit was 18 months ago and they've made 15 upgrades since a lot of people use defy uh what they're or what they're telling us here is is they'll they'll use D5 because they trust the protocol but they want to be told about the risks and these unclear risks are the things that hold those users back more often than not especially the second one the ability to trust the underlying protocol so unclear risks and the ability to trust are some of the biggest barriers there and they're two really really key points right there's some other ones as well like unclear tax implications and so on that we can all do a better job in doing but it being a global products and a kind of global user base that's obviously a really really hard hard one to solve but risks and trusts are are so important building user confidence so like when you are still considering like X product or whatever like what held you back the most um again the educational content seeing real-time activity of others are all things that help the user or would help the users use that product more but the biggest one is experimenting with a small amount first so my background was in maker as well and we made one or maker made one crucial decision after launching MCD where they put the dust limit the kind of minimum debt limit up from like started off at twenty dollars it went to like 100 500 all the way up to around five or six thousand at one point for the smallest fault and that stopped any order and reuser coming in for the first time and trying to vote with a with a very small amount of money and we look here at almost kind of 70 of users so almost two-thirds of our users or just over two-thirds of our users here saying that like when they were considering using a preschool for the first time they want to experiment with a small amount first so sometimes that's really important even if your target user is a 50k user 100K user a million dollar user or whatever allowing them to actually be able to use a small amount first even relative to their to their portfolio right use a small amount first you will likely on board many many more users uh in that in that time so what are the five high priorities in our opinion uh yeah for seamless D5 onboarding really better education and resources I think we talked a little bit about that yesterday as around education particularly also around regulators and so on yesterday as well like how do we almost onboard Regulators to understand crypto better well the same applies to ordering users as well how do we how do we onboard those what improvements do we have to make take better educational resources we need to improve the ux of crypto right the ux and crypto it's it's always been kind of engineering first which is entirely right but now is the time to focus on on user experience some users want to see historical logs and detailed analytics again let's caveat that with these are crypto native and crypto enthusiastic uh users right these are heavy crypto users so there's an ordinary retail user want to see historical logs and detailed analytics like you'll need to we'll need to understand that one a little bit more integration with Fiat currencies it is the only way to want board users uh obviously from like kind of the majority of wealth that exists today into into D5 and then again better insights into gas prices and transaction costs again these are like big crypto users like weekly crypto users in reality let's read more into that okay and and look at that and say we need to abstract away gas prices and so on or just make transaction costs more transparent as well everyone knows there's a cost to doing anything on D5 again many platforms will hide that away particularly if you're using a hardware wallet or so on and then what are four keys to D5 feature uh Delight so if we can take away some action points from from kind of the things we learned in this and again these are just kind of 17 17 hot takes really uh and again there's like over 104 report if you want to download that but actually one is in pre-feature Clarity so create like create videos explaining how this works to users create step-by-step guides far too many times we just ask them to connect their wallet uh and and like kind of discover this for yourself increase risk transparency so we talked quite one of the earlier slides about how how everybody knows there were risks in D5 like it's it's like the most known thing but nobody out there mentions or talks about the risks that are there to users any fintech app we use will say like this product like you you risk losing all your money in this product or whatever like they have to put that on there from a regulation point of view but we can also just take a first step and add risks to the platform as well the UI like we can inform users what are the risks because they know there are risks like let's just be transparent with that we can boost user control like allow users to tailor features to their needs again far too many times and we're getting much better over this over the last year or so but we just exposed the protocol in a UI and we don't really build the features that let the user control exactly what they want to do or build the features for them we say hey this is a feature on the on the smart contracts here's the button to interact with that feature let's boost that kind of control and customization to build them the features that they actually want and then we can build confidence through data like data driven insights and so on so kind of coming to the end uh now but again have you ever used an L2 obviously l2s have been a big big discussion point in particular over the last year gas prices are starting to pick up again and l2s are kind of coming to the Forefront of of where users can can use your products uh in a in a cheap way and 93 of all of our users that we spoke to have used an L2 again these are not retail predominantly not retail users these are crypto like active crypto users so to be entirely expected but l2s are being used and we believe more than just airdrop hunting as well because when we ask them like what are they hoping to achieve on l2s and back in December when they talked about what they couldn't achieve previously um but again on LTS what they're looking for is complex D5 strategies um basic swaps borrowing lending sending receiving everything you can do on layer one now we don't need to reinvent the wheel we just need to move it over to a more cost efficient platform for for users to be able to use it and one final question uh at the very end of the survey centered around game-changing features and these answers uh yeah yielded yielded yielded this so what do users like if you were given a wish for any game changing feature in D5 what would it be and again these are active like crypto active users right weekly active users so like these are not the retail units this isn't the solution to like onboarding 10 million users but this is a solution to keeping your existing users happy it will they'll tend that tell their friends speak about their conferences and get it get it more into the wider world just automation risk management yield optimization cross-chain functionality tax optimization unified front ends and then security and infrastructure improvements so this is kind of like almost like a cheat sheet in a way to say what do we need to focus on as a as a community as an industry right now like this is the sort of things that people are are asking for so yeah that was the 17 hot takes I don't know why 17 if I'm honest with you but uh 17 hot takes from the state of defy uh report there's over 100 in the actual report you can find it there you can also find it at the state of defy.org uh and yeah that that kind of concludes it really we will be running this hopefully every single year um if you want to be a partner you saw those dirty Partners uh at the front we would love to have more Partners help us with this ultimately just with distribution it doesn't cost anything other than asking you to distribute a handful of times throughout kind of four to six week period And by being a partner you'll also get access to all of the raw data as well so all 30 kind of companies and partners up there will have access to all of the raw data to ultimately go through and create your own insights and uh findings but yeah thank you very much cool thank you thank you one very quick question um is you mentioned risk as a barrier to adoption and kind of mentioned risk disclosures do you have any ideas of what the actual implementation of that might look like uh yeah I think it's just disclosing risks on on the websites on the on the on the products uh again just even a section like what are the risks with this with this product so what what risks come with it is it oracles like the hack risk where we have it all it did when was the last time you had it audited and so on but it's it's more it's more disclosing those risks um which which creates that trust so risks and trusts were right at the very top and the trust comes ultimately of being honest and transparent of the users yeah preach cool thank you very much thank you and um yeah another round of applause